Archive for April, 2010

Newcastle Building Society Issues Contingent Capital

Sunday, April 25th, 2010

The Newcastle Building Society has announced a conversion of some capital instruments into contingent capital:

Newcastle Building Society (the “Society”) today announces that it has reached an agreement with holders of certain classes of the Society’s existing subordinated debt and permanent interest bearing shares (“PIBS”) which will lead to a material strengthening of the Society’s capital position (the “Capital Agreement”).

The Capital Agreement reflects a proactive initiative by the Society to underpin its financial strength and further enhance its standing as a marketcounterparty. Under the Capital Agreement, the Society has agreed with holders of certain classes of its subordinated debt and PIBS to add, in return for an uplift in coupon, a conversion feature such that those instruments would convert into profit participating deferred shares (“PPDS”), a core tier 1 capital instrument, should the Society’s core tier 1 capital ratio fall below 5%. The Capital Agreement applies to £46 million in total of the Society’s subordinated debt and PIBS.

As a result of the Capital Agreement therefore, in addition to the £179 million of core tier 1 capital held by the Society as at 31 December 2009, the Society will also have £46 million of contingent core tier 1 capital (such contingent core tier 1 capital being equivalent to 2.2% of the Society’s risk weighted assets). As at 31 December 2009, the Society had a core tier 1 capital ratio of 8.7% (up from 7.8% at the prior year end). The Capital Agreement will therefore further strengthen the Society’s capital position, providing 2.2% of contingent core tier 1 capital in addition to the existing 8.7% core tier 1 capital ratio as at 31 December 2009.

Additionally, the Society has introduced an innovative feature which means that the relevant instruments would cease to be convertible and the coupon uplift would fall away if the Society’s core tier 1 capital ratio exceeds 12%. This feature has helped minimise the level of coupon uplift necessary to secure the agreement of the investors who are a party to the Capital Agreement.

Assiduous Readers will remember that I consider conversion triggers based on Regulatory Capital Ratios to be completely insane. What if the rules change? How do you price it?

IIROC Defends the Incompetent

Saturday, April 24th, 2010

The Investment Industry Regulatory Organization of Canada is defending the fundamental human right of lazy and incompetent traders to avoid punishment, in a Request for Comments titled Provisions Respecting Market Maker, Odd Lot and Other Marketplace Trading Obligations:

Under clause (d) of Part 1 of Policy 2.1, a Participant or Access Person may not when trading a security on a marketplace that is subject to Market Maker Obligations, intentionally enter on that marketplace on a particular trading day two or more orders which would impose an obligation on the Market Maker to:
  • execute with one or more of the orders, or
  • purchase at a higher price or sell at a lower price with one or more of the orders

in accordance with the Market Maker Obligations that would not be imposed on the Market Maker if the orders had been entered on the marketplace as a single order or entered at the same time. In essence, this provision stipulates that an order can not be “shredded” to intentionally trigger a market maker’s obligation to fill the “shredded portions” of the order.

IIROC would note that the examples listed in Policy 2.1 are not exclusive. IIROC is of the opinion that the intentional “shredding” of orders through the entry of multiple odd lot orders on a marketplace that has compulsory obligations on members, users or subscribers to execute against “odd-lot” orders is contrary to Rule 2.1.

So, in other words, if a market maker posts a bad price, he can only be punished by those not regulated by IIROC, not by other Participant or Access Persons – in other words, IIROC is seeking to continue the current practice of maintaining a heterogeneous market.

Rule 2.2 provides more protection for incompetent traders:

In addition, a Participant or Access Person shall not, directly or indirectly, enter an order or execute a trade on a marketplace if the Participant or Access Person knows or ought reasonably to know that the entry of the order or the execution of the trade will create or could reasonably be expected to create:
  • a false or misleading appearance of trading activity in or interest in the purchase or sale of the security; or
  • an artificial ask price, bid price or sale price for the security or a related security.

The new proposed rules will confirm these intrusive regulations:

The following is a summary of the most significant impacts of the adoption of the Proposed Amendments:
  • confirm that the “abuse” of an odd-lot dealer is a violation of the requirement to conduct trading openly and fairly;
  • confirm that Participants with contractual odd-lot arrangements are able to rely on various exemptions in UMIR principally related to short selling, client priority and trading during certain securities transactions; and
  • provide marketplaces with more flexibility in structuring their market making systems by:
    • allowing Exchanges and QTRSs to have Marketplace Rules that provide for an obligation to maintain reasonably continuous two-sided market and/or a guarantee of execution of orders which are less than a minimum number of units, or
      o allowing marketplaces (including an Exchange or QTRS) to provide for an oddlot arrangement by a contract.

It should be apparent that the main intent of these proposals is to give the regulators some more authority, so they can ensure they get proper respect from the regulated. It is in the interest of a fair and efficient market that bad prices be punished as quickly and effectively as possible – but then IIROC would have a little less power. Never mind that the bad price will, for the period of its existence, provide a false and misleading signal to observers regarding the potential for transacting at that price.

We’ve all seen situations where a security is quoted at, say, 19.10-15, with the offering only 100 shares and the next offer at 19.50 or more. If the Market Maker – or anybody else – wants to defend that level, let him; but if it’s a bogus level, then make it cost him money.

A problem might arise when the original market is, in fact, fairly quoted at 19.10-50. Then Sharp Traders Inc. comes along and posts an offer for 100 shares at 19.15, then shreds a buy order for 10,000 shares into 101 odd-lots. I don’t see a problem with this … if the Market Maker is not prepared to defend an offer of 19.15, then he can input an algorithm so that if he gets lifted for 99 shares, he lifts the board lot offer that he’s defending.

Better yet, have the Market-Maker input the prices he will defend, and allow the odd-lot market orders to execute directly against the board-lot limits within that spread.

Best of all, don’t give any special treatment to odd-lot orders. Why should one class of marketplace participants be favoured over other classes? If Granny wants to play with the big boys, well and good – but there shouldn’t be any special rules giving her special treatment.

The trouble with favouratism is that it leads to a tangled web of rules and regulations that serve no legitimate purpose other than the employment of regulatory personnel.

And what about the poor old board lot offerer, who legitimately offered 100 shares at 19.15 and got filled for 99? Well … boohoohoo. In this new era of $10 commissions and book-based holdings, it’s no disaster to be left with an odd-lot. Annoying at worst. The guys paying $100 minimums at full service brokers will be hurt – but then, they should be hurt! It’s all part of the joys of entering limit orders. If the full-service broker wants to offer guaranteed fills – or order types that convert to market at a certain time if partially filled about a preset minimum – let them.

Comments are due by 2010-6-24.

Update: It occurs to me … the regulatory distaste for trader games that have the effect of masking intentions (very common in the bond world) has probably been a major factor behind the development of dark pools. Every regulation has an unforseen consequence … which leads to another regulation …

Update: And anyway, the Market-Making rules should be strictly a matter between the Exchanges / ATSs and their members; I find it very difficult to understand why it should be a matter of regulation.

Update: If the full-service broker wants to offer guaranteed fills – or order types that convert to market at a certain time if partially filled about a preset minimum – let them. Perhaps the best solution of all! They know their clients, they can restrict the service to orders for all shares in custodial accounts only – no problem. The trades can be crossed on the exchange of their choice. This is an opportunity for brokerages to differentiate themselves, while at the same time eliminating a few layers of rules.

April 23, 2010

Friday, April 23rd, 2010

Greece has gone to the well:

Debt-stricken Greece appealed to its European partners and the IMF for emergency loans on Friday, yielding to overwhelming market pressure to set in motion the first financial rescue of a member of the euro zone.

Prime Minister George Papandreou requested the 45 billion euro ($60.5 billion) package after a months-long selloff by investors pushed borrowing costs to record levels and undermined Athens’ efforts to cut its 300 billion euro debt pile.

“This is the moment. The time that was not granted to us by the markets will be given to us by the support of the euro zone,” Papandreou said in a statement broadcast live from the remote, tiny Aegean island of Kastellorizo.

It appears that, at the very least, there was internal strife at Moody’s:

In September 2007, a manager at the New York-based ratings company resisted a plan to grade new collateralized debt obligations filled with mortgage bonds by including the assumption that Moody’s rankings on the underlying home-loan securities were no longer accurate, Eric Kolchinsky told the Senate Permanent Subcommittee on Investigations in prepared testimony today.

A more senior manager eventually agreed to allow the new policy, which Kolchinsky, who headed the company’s mortgage-bond CDO group, thought was needed after a meeting earlier that month where its home-loan securities analysts revealed that they planned to downgrade a large number of subprime notes, he said. The change was announced Sept. 21, 2007, and followed a similar shift at Standard & Poor’s announced in July.

“I believed that to assign new ratings based on assumptions which I knew to be wrong would constitute securities fraud,” said Kolchinsky, who said he was demoted as a result of his actions then and later suspended after complaining about “a nearly identical situation” in 2009.

An employee at hedge-fund firm Paulson & Co. said it had a chance to keep betting against subprime mortgages in January 2007 in part because companies including ratings firms had “incentives to keep the game going,” the Securities and Exchange Commission said April 16 in suing Goldman Sachs Group Inc. over a CDO that the agency alleged Paulson helped create.

An 18-month inquiry by the congressional panel, led by Senator Carl Levin, found that ratings companies “used outdated models and inadequate data, were too influenced by investment bankers, allowed chronic resource shortages to undermine ratings, and delayed downgrading investments,” according to a statement yesterday from the Michigan Democrat.

There’s some fascinating revelations about IKB, one of Goldman’s so-called victims:

Yesterday, I reported that IKB Deutsche Industriebank was not the sucker at the table that the SEC depicts in its lawsuit against Goldman. Indeed, its executives were wily and wealthy financiers who employed financial engineering shenanigans to escape the watchful of eye of regulators, shareholders, and auditors.

Now a document exclusively obtained by the Daily Beast demonstrates (view them here) that just a few months before it invested in the derivatives at the center of the SEC’s case, the German bank was touting its prowess as a sophisticated investor in those derivatives

In other words, IKB were not just sophisticated financial professionals. They were—or claimed to be—sophisticated and experienced when it came to exactly the kind of junky CDOs, dubbed Abacus, they bought from Goldman Sachs.

“Securitisation and CDO investments are an integral part of IKB AG’s business model,” the document—a marketing brochure for one of IKB’s off-balance sheet conduits—claims.

The brochure describes a man named Dr. Thomas Wolwer as the “Senior Portfolio Manager,” who has the “responsibility for investing in CDOs both cash and synthetic.” His qualifications include working for Dresdner Kleinwort, where he structured and sold various cash and synthetic CDOs. In short, this guy was as experienced in these black financial arts as you can get.

In short, according to me, this guy was just another sell-side bozo. I will never understand why people listen to track-recordless stockbrokers and institutional salesmen. But they do! Even their managers do! The financial crisis has shown that even people in a very good position to know otherwise somehow equate the ability to keep inventory turning over with regularity with an understanding of what it is.

It’s like hiring the best used-car salesman you can find as chief mechanic! It’s exactly the same thing as the Madoff fiasco … Funds of Funds were talking up their due diligence while stuffing money down the Madoff rat-hole. So-called due diligence is mostly just box-ticking by staff completely unable to do a proper job anyway.

One way or another, the marketting document obtained by The Daily Beast is in the very best tradition of investment sales … experience of everybody on the team is meticulously recorded and there’s not a word about performance.

However, the whole thing has become a political issue:

U.S. Securities and Exchange Commission Chairman Mary Schapiro may face an investigation into whether politics drove the agency’s decision to sue Goldman Sachs Group Inc. for fraud.

Representative Darrell Issa, a California Republican, asked SEC Inspector General H. David Kotz to determine whether the agency’s April 16 lawsuit was timed to bolster the Obama administration’s push to overhaul U.S. financial rules. Schapiro, a political independent, said on April 21 that neither the White House nor Congress have any influence on SEC enforcement actions.

The IMF’s bank tax is not a slam-dunk:

Group of 20 finance ministers and central bank governors pushed a debate over a global bank tax to June, saying more study is needed on how best to ensure banks, rather than taxpayers, pick up the cost of future bailouts.

“We call on the IMF for further work on options to ensure domestic financial institutions bear the burden of any extraordinary government interventions where they occur, address their excessive risk-taking and help promote a level playing field, taking into consideration individual countries’ circumstances,” the G20 said in a statement at the conclusion of the meeting.

Britain, Germany, France and the United States – among the world’s most powerful nations – all have been supportive of a global bank tax. The decision to order the IMF back to the drawing board suggests that Mr. Flaherty, who was the co-chair of the meeting, was successful in rallying countries such as Australia and Russia to resist the push for a global levy. For weeks, Mr. Flaherty has mounted a vocal stand against the pro-tax lobby, saying it would unfairly punish countries such as Canada that avoided multi-billion dollar bank rescues during the financial crisis.

Canadian inflation declined:

Statistics Canada reported Friday that Canada’s annual inflation rate slipped by two-tenths of a point to 1.4 per cent, and the closely watched Bank of Canada core rate fell even further – by four-tenths of a point to 1.7 per cent in March.

The agency said the big reason for the drops in both annual indexes was that the price-distorting Olympics ceased being a major contributor to inflation with the conclusion of the Winter Games at the end of February.

Prices for traveller accommodation soared 16 per cent in February – 64.1 per cent in British Columbia – but in March they dropped back to earth to a more tame 2.8-per-cent increase from March, 2009.

Volume continued heavy in the Canadian preferred share market today, as PerpetualDiscounts lost 6bp while FixedResets put in a gain of 27bp. FixedResets scored a shut-out on the volume table.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 2.61 % 2.73 % 53,079 20.85 1 0.0000 % 2,117.9
FixedFloater 4.90 % 2.97 % 46,073 20.43 1 -0.1350 % 3,267.4
Floater 1.92 % 1.66 % 47,564 23.47 4 0.1585 % 2,409.1
OpRet 4.91 % 4.24 % 138,609 1.07 10 0.2938 % 2,301.7
SplitShare 6.38 % 6.44 % 140,787 3.59 2 0.5535 % 2,137.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2938 % 2,104.7
Perpetual-Premium 5.92 % 4.76 % 30,789 15.87 2 0.0205 % 1,822.4
Perpetual-Discount 6.24 % 6.28 % 209,436 13.49 76 -0.0634 % 1,708.5
FixedReset 5.52 % 4.36 % 527,368 3.62 44 0.2726 % 2,140.2
Performance Highlights
Issue Index Change Notes
IAG.PR.A Perpetual-Discount -2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-23
Maturity Price : 18.26
Evaluated at bid price : 18.26
Bid-YTW : 6.38 %
CIU.PR.A Perpetual-Discount -1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-23
Maturity Price : 18.47
Evaluated at bid price : 18.47
Bid-YTW : 6.34 %
CU.PR.A Perpetual-Discount -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-23
Maturity Price : 23.39
Evaluated at bid price : 23.68
Bid-YTW : 6.22 %
PWF.PR.K Perpetual-Discount -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-23
Maturity Price : 19.06
Evaluated at bid price : 19.06
Bid-YTW : 6.54 %
W.PR.H Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-23
Maturity Price : 21.29
Evaluated at bid price : 21.29
Bid-YTW : 6.52 %
BMO.PR.P FixedReset 1.07 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-27
Maturity Price : 25.00
Evaluated at bid price : 26.53
Bid-YTW : 4.22 %
CM.PR.M FixedReset 1.09 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.00
Bid-YTW : 4.46 %
CL.PR.B Perpetual-Discount 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-23
Maturity Price : 24.19
Evaluated at bid price : 24.50
Bid-YTW : 6.44 %
BAM.PR.J OpRet 2.18 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 5.02 %
GWO.PR.L Perpetual-Discount 4.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-23
Maturity Price : 22.08
Evaluated at bid price : 22.17
Bid-YTW : 6.45 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.P FixedReset 202,800 Desjardins crossed 200,000 at 26.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 26.67
Bid-YTW : 4.30 %
RY.PR.X FixedReset 107,821 Nesbitt crossed 100,000 at 26.90.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 26.90
Bid-YTW : 4.29 %
PWF.PR.M FixedReset 75,500 Nesbitt crossed blocks of 25,000 and 50,000, both at 26.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.65
Bid-YTW : 4.13 %
RY.PR.N FixedReset 71,909 Nesbitt crossed 50,000 at 26.62.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 26.65
Bid-YTW : 4.29 %
RY.PR.Y FixedReset 70,090 TD crossed 10,000 at 26.57 and 15,000 at 26.70. RBC crossed 10,000 at 26.66.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 26.62
Bid-YTW : 4.49 %
BMO.PR.N FixedReset 66,350 Nesbitt bought 25,000 from anonymous at 27.60. National Bank crossed 20,000 at 27.47.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-27
Maturity Price : 25.00
Evaluated at bid price : 27.50
Bid-YTW : 4.05 %
There were 63 other index-included issues trading in excess of 10,000 shares.

April 22, 2010

Thursday, April 22nd, 2010

Moody’s has downgraded Greece one notch:

Greece had its credit rating cut one step by Moody’s Investors Service as the government’s debt servicing costs surge on concern that the country will struggle to reduce its budget deficit.

Moody’s lowered the rating to A3 from A2, four grades above junk, the company said in a statement today. Moody’s also put a “negative” outlook on Greek debt, indicating it’s more likely to cut it again than raise it or leave it unchanged.

“This decision is based on Moody’s view that there is a significant risk that debt may only stabilize at a higher and more costly level than previously estimated,” a team led by Pierre Cailleteau in London said in the statement.

The Bank of Canada has released its April 2010 Monetary Policy Report:

Core infl ation has been firmer than projected in January, the result of both transitory and more fundamental factors. Although core infl ation was expected to remain relatively stable over the near term, it rose from 1.5 per cent in November to 2.1 per cent in February (Chart 13). This upward movement partly refl ects transitory factors, such as the unusual pricing pattern for new passenger vehicles since the introduction of the 2010 models into the CPI in November, and the surge in the price of travel accommodation associated with the 2010 Winter Olympics in Vancouver.

More broadly, the firmness of core inflation over the past year, despite the large amount of excess supply in the economy, refl ects the resilience in the prices of some components of core services, including a significant rise income regulated prices (e.g., communications, tuition fees, and cable services). This resilience refl ects the slower-than-anticipated deceleration in wages, since labour costs represent a large portion of total production costs in core services. Shelter prices have also increased at a faster-than-expected rate, refl ecting the more rapid rebound in housing demand as households pulled forward some of their expenditures.

SEC boss Mary Schapiro has denied the Goldman charges are politically motivated:

“The SEC is an independent law enforcement agency. We do not coordinate our enforcement actions with the White House, Congress or political committees. We do not time our cases around political events or the legislative calendar.

“The fact is that regulatory reform has been pending for over a year. We have brought many cases related to the financial crisis over that period.

“On a personal level, I am disappointed by the rhetoric.

Goldman disagrees:

Yesterday, Lloyd Blankfein attacked the SEC’s fraud suit in calls to Goldman clients–describing it as a political hit job that will ultimately hurt the country.

He also brought up the exculpatory evidence that the SEC left out of its complaint, saying that a staffer of the supposedly swindled ACA knew that Paulson & Co. was planning to go short the Abacus CDO.

This case might even go to trial!

[The Financial Times] said that in conversations with private equity executives and others, Blankfein left clients with an impression he is eager to fight the case in court.

I hope so – it would be marvellous to see a rebuff of regulatory extortion. But given the highly unequal risks experienced by the two parties, a settlement of some kind seems more likely – that’s why regulatory extortion works in the first place, right?

Former (Republican) SEC boss Harvey Pitt thinks the SEC is taking a big risk:

this SEC litigation takes it places it hasn’t been before—

• challenging the premier firm of Goldman Sachs,
• about a synthetic derivative transaction,
• on which Goldman lost millions of dollars,
• where the parties were sophisticated and not in obvious need of SEC protection,
• after a year-and-a-half investigation,
• filed immediately after the President threatened vetoing financial reform legislation that doesn’t strongly regulate derivatives,
• and a few hours before release of the Inspector General’s Report on SEC inadequacies in attacking Alan Stanford’s Ponzi scheme,
• but apparently without giving Goldman advance notice of the filing,
• or exploring possible settlement, and
• splitting 3-2 along political lines in a major enforcement action.

What do I think? It can hardly have been something so overt as a call from Comrade Peace Prize ordering Schapiro to take down Goldman. That would be sufficiently unethical that neither party would have anything to do with such a thing (maybe). But a lot can be done with nods and winks … the SEC desperately needs a scalp … and Goldman – as the sole major investment bank to get through the crisis without blowing up – is the most luxuriant one out there.

There’s more commentary on the BNN Blog (hat tip: Assiduous Reader MS):

But after trillions of dollars in destroyed value, the near collapse of the global financial markets, millions in lost jobs and the deepest recession since the Second World War, is this the best the chief law enforcement agent on Wall Street can muster? That Goldman let a then little-known hedge fund pick some mortgage bonds and put them into a pedestrian-sized CDO?

It’s hardly the plot of an Oliver Stone movie. But it serves a purpose. Especially when the suit was filed four days before Goldman released its first quarter earnings, and published what it plans to set aside for bonuses.

It also doesn’t hurt if your objective is to gather support in Congress for a far-reaching financial services bill that was expected to hit the floor of the Senate this week.

Julie Dickson, Superintendent of Financial Institutions, has delivered a speech to the Empire Club. No new OSFI initiatives were announced, nor were there any hints regarding policy.

The International Monetary Fund has released the April 2010 Global Financial Stability Report, with chapters:

  • Resolving the Crisis Legacy and Meeting New Challenges to Financial Stability
  • Systemic Risk and the Redesign of Financial Regulation
  • Making Over-the-Counter Derivatives Safer: The Role of Central Counterparties
  • Global Liquidity Expansion: Effects on “Receiving” Economies and Policy Response Options

Continued heavy volume today saw PerpetualDiscounts getting wallopped for 41bp, while FixedResets were down a mere 4bp.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 2.61 % 2.73 % 53,239 20.85 1 0.0000 % 2,117.9
FixedFloater 4.89 % 2.96 % 46,707 20.44 1 0.0000 % 3,271.8
Floater 1.92 % 1.66 % 48,037 23.48 4 -0.2190 % 2,405.3
OpRet 4.92 % 3.84 % 100,104 1.07 10 -0.1447 % 2,295.0
SplitShare 6.42 % 6.66 % 142,435 3.58 2 -1.0731 % 2,125.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1447 % 2,098.5
Perpetual-Premium 5.92 % 4.79 % 30,884 15.82 2 -0.3268 % 1,822.0
Perpetual-Discount 6.24 % 6.28 % 205,776 13.51 76 -0.4106 % 1,709.6
FixedReset 5.54 % 4.42 % 521,682 3.62 44 -0.0363 % 2,134.3
Performance Highlights
Issue Index Change Notes
GWO.PR.L Perpetual-Discount -5.79 % Not a particularly “real” loss, as the issue traded 21,484 shares in a range of 22.31-71 before the bids disappeared and the issue closed at 21.30-22.49 (!), with the closing bid more than a buck below the last trade. Good job Mr. Market Maker!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 6.72 %
IAG.PR.E Perpetual-Discount -2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 23.83
Evaluated at bid price : 24.02
Bid-YTW : 6.31 %
GWO.PR.I Perpetual-Discount -1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 6.37 %
BNA.PR.D SplitShare -1.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2014-07-09
Maturity Price : 25.00
Evaluated at bid price : 25.81
Bid-YTW : 6.66 %
NA.PR.N FixedReset -1.84 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-09-14
Maturity Price : 25.00
Evaluated at bid price : 25.62
Bid-YTW : 4.46 %
PWF.PR.G Perpetual-Discount -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 22.57
Evaluated at bid price : 22.83
Bid-YTW : 6.49 %
GWO.PR.H Perpetual-Discount -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 19.16
Evaluated at bid price : 19.16
Bid-YTW : 6.41 %
BAM.PR.B Floater -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 17.55
Evaluated at bid price : 17.55
Bid-YTW : 2.25 %
PWF.PR.L Perpetual-Discount -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 6.48 %
PWF.PR.I Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 23.17
Evaluated at bid price : 23.46
Bid-YTW : 6.42 %
TD.PR.G FixedReset 1.09 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 26.89
Bid-YTW : 4.27 %
SLF.PR.F FixedReset 1.29 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.65
Bid-YTW : 4.44 %
IAG.PR.C FixedReset 1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 4.47 %
MFC.PR.E FixedReset 1.40 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-19
Maturity Price : 25.00
Evaluated at bid price : 26.01
Bid-YTW : 4.77 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.L FixedReset 301,451 TD crossed blocks of 18,800 and 50,000 at 26.58. RBC crossed blocks of 48,600 and 29,800 at 26.58. Nesbitt crossed 75,000 at 26.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 26.71
Bid-YTW : 4.69 %
CM.PR.M FixedReset 186,730 Nesbitt crossed 100,000 at 26.65, sold 27,600 to Desjardins at the same price and finished by crossing 17,000 at the same price again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.71
Bid-YTW : 4.75 %
HSB.PR.E FixedReset 84,498 TD crossed 14,200 at 26.70; Nesbitt crossed 50,000 at 26.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.85
Bid-YTW : 4.86 %
RY.PR.Y FixedReset 71,545 TD sold 15,000 to anonymous at 26.60, then crossed 10,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 26.52
Bid-YTW : 4.58 %
TRP.PR.B FixedReset 63,562 Nesbitt crossed 40,000 at 24.85.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-22
Maturity Price : 24.65
Evaluated at bid price : 24.70
Bid-YTW : 4.18 %
MFC.PR.E FixedReset 60,350 RBC crossed 24,900 at 26.09.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-19
Maturity Price : 25.00
Evaluated at bid price : 26.01
Bid-YTW : 4.77 %
There were 62 other index-included issues trading in excess of 10,000 shares.

April 21, 2010

Wednesday, April 21st, 2010

Goldman may be showing the same cut-throat ruthlessness in its personnel policy as it shows in its customer relations:

Goldman Sachs Group Inc. said the U.S. fraud case against the firm hinges on the actions of the employee it placed on paid leave this week.

Fabrice Tourre, the 31-year-old Goldman Sachs executive director who was accused of misleading investors about a mortgage-linked investment in 2007, will also be de-registered from the Financial Services Authority, a spokeswoman at the firm in London said yesterday.

“It’s all going to be a factual dispute about what he remembers and what the other folks remember on the other side,” Greg Palm, Goldman Sachs’s co-general counsel, said in a call with reporters yesterday, without naming Tourre. “If we had evidence that someone here was trying to mislead someone, that’s not something we’d condone at all and we’d be the first one to take action.”

By characterizing the case as a dispute involving a single employee, Goldman Sachs may be taking its first steps to publically distance itself from Tourre in the case, some lawyers said. That could reduce bad publicity and ultimately make it easier for the company to settle the case.

Very surprising, if true. Regulatory announcements and responses are generally well-orchestrated, with all parties concerned knowing what’s going to happen by the time an issue becomes public; but after two days of honourable conduct by management, it loos like Tourre’s being thrown to the wolves.

There are rumours that Tourre has agreed to testify to a US Senate panel; there is no word on whether anybody from, you know, the Selection Agent will be asked any questions like, f’rinstance: why did you agree to buy this stuff?

In the meantime, Rabobank has sued Merrill regarding similar allegations, which seems to me to be an admission that Rabobank is completely incapable of evaluating a potential investment.

Paulson has addressed investor concerns regarding the issue. In 2007, Paulson wasn’t seen as a member of the Savvy Investor Club (I presume they didn’t have enough employees from the right schools) and the Smart Money was more than happy to bet against them:

Mr. Paulson sent a letter to investors Tuesday night saying that in 2007 his firm wasn’t seen as an experienced mortgage investor, and that “many of the most sophisticated investors in the world” were “more than willing to bet against us.”

On the conference call, Mr. Paulson calmly explained the trade with Goldman, which involved a “short” bet on mortgage bonds. He said that the very nature of the transaction required both a “long” and “short” investor, suggesting that investors knew that a bearish investor had bet against the deal.

Mr. Paulson suggested to clients that the large investors who purchased the Goldman deal and others relied on rating firms, and didn’t do enough of their homework, investors say.

For those of you who don’t understand the whole Goldman / ACA / Paulson / Rabobank / Merrill / regulators / government thing, here’s a helpful graphic illustrating the financial world in mid-2007:

The spread on Greek bonds hit an all-time high:

The yield on the Greek 10-year bond surpassed 8 percent today, the highest in more than a decade and more than twice the comparable German rate. The spread, or difference between the security and bunds, Europe’s benchmark government securities, climbed to an all-time high of 521 basis points.

This is all happening as US debt issuance is cresting:

The U.S. Treasury may sell an unprecedented $128 billion in notes next week as expectations increase that the amount of securities auctioned by the government is peaking with the economy strengthening.

The U.S. will sell $44 billion in two-year notes, $42 billion in five-year securities, $32 billion in debt maturing in seven years and $10 billion in five-year Treasury Inflation Protected Securities, according to the average estimate of nine primary dealers in a Bloomberg News survey. The $118 billion in nominal debt matches a record. The U.S. will announce the amounts tomorrow for the auctions conducted over four days beginning April 26.

Good interview on the Queers Against Israeli Apartheid thing that was mentioned yesterday; at best – at absolute best – this is a cat-fight between competing visions of the Pride Parade, in which city bureaucrats have been stupid enough to become involved. It’s strictly an internal matter for Pride. In fact, the Pride parade ceased to have much to do with Gay Pride years ago – nowadays it’s a celebration of sex, the kinkier the better. Ah, to be twenty again! Not that this little news-stream has much to do with finance, of course, but I reserve the right to go off on tangents occasionally whenever I find something particularly annoying.

It was a very rough day for the Canadian preferred share market, with PerpetualDiscounts losing 60bp and FixedResets down 83bp (!) bringing the median weighted average yield on the latter index up to 4.38%, a level not seen since the beginning of July, 2009. Volume was exceptionally high and the Volume Highlights table is split equally between FixedResets and PerpetualDiscounts.

PerpetualDiscounts now yield 6.26%, equivalent to 8.76% interest at the standard equivalency factor of 1.4x. Long Corporates now yield about 5.7% (maybe just a little more?) so the Pre-Tax Interest-Equivalent Spread (also called the Seniority Spread) is now about 305bp, up substantially from the 295bp reported April 14 and pushing the high of 310bp reported April 7.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 2.61 % 2.73 % 53,358 20.85 1 -1.3699 % 2,117.9
FixedFloater 4.89 % 2.96 % 48,529 20.44 1 0.0901 % 3,271.8
Floater 1.92 % 1.67 % 48,563 23.45 4 0.0832 % 2,410.6
OpRet 4.91 % 3.77 % 99,709 0.51 10 -0.3974 % 2,298.3
SplitShare 6.35 % 2.89 % 139,884 0.08 2 -0.1312 % 2,148.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3974 % 2,101.6
Perpetual-Premium 5.90 % 4.79 % 30,752 15.82 2 -0.7903 % 1,828.0
Perpetual-Discount 6.21 % 6.26 % 202,614 13.54 76 -0.6027 % 1,716.6
FixedReset 5.54 % 4.38 % 498,410 3.63 44 -0.8348 % 2,135.1
Performance Highlights
Issue Index Change Notes
MFC.PR.E FixedReset -3.57 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-19
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 5.13 %
IGM.PR.B Perpetual-Discount -2.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 23.10
Evaluated at bid price : 23.25
Bid-YTW : 6.38 %
IAG.PR.C FixedReset -2.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 26.25
Bid-YTW : 4.87 %
MFC.PR.B Perpetual-Discount -1.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.68
Evaluated at bid price : 18.68
Bid-YTW : 6.31 %
GWO.PR.H Perpetual-Discount -1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 19.41
Evaluated at bid price : 19.41
Bid-YTW : 6.32 %
HSB.PR.E FixedReset -1.91 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.69
Bid-YTW : 5.02 %
SLF.PR.F FixedReset -1.83 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.31
Bid-YTW : 4.79 %
POW.PR.D Perpetual-Discount -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 19.66
Evaluated at bid price : 19.66
Bid-YTW : 6.42 %
GWO.PR.J FixedReset -1.68 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : 4.49 %
CIU.PR.B FixedReset -1.61 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-01
Maturity Price : 25.00
Evaluated at bid price : 27.51
Bid-YTW : 4.38 %
HSB.PR.C Perpetual-Discount -1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 6.39 %
TD.PR.G FixedReset -1.55 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 4.57 %
RY.PR.B Perpetual-Discount -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 6.03 %
RY.PR.T FixedReset -1.48 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 26.65
Bid-YTW : 4.51 %
CM.PR.K FixedReset -1.42 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 25.67
Bid-YTW : 4.66 %
BAM.PR.M Perpetual-Discount -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 16.87
Evaluated at bid price : 16.87
Bid-YTW : 7.13 %
BAM.PR.E Ratchet -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 22.64
Evaluated at bid price : 21.60
Bid-YTW : 2.73 %
BAM.PR.N Perpetual-Discount -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 16.85
Evaluated at bid price : 16.85
Bid-YTW : 7.14 %
TD.PR.K FixedReset -1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 4.46 %
RY.PR.W Perpetual-Discount -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 20.14
Evaluated at bid price : 20.14
Bid-YTW : 6.09 %
RY.PR.P FixedReset -1.30 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 26.59
Bid-YTW : 4.38 %
GWO.PR.L Perpetual-Discount -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 22.50
Evaluated at bid price : 22.61
Bid-YTW : 6.32 %
TD.PR.I FixedReset -1.25 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.76
Bid-YTW : 4.45 %
RY.PR.R FixedReset -1.22 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 4.28 %
CM.PR.I Perpetual-Discount -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.87
Evaluated at bid price : 18.87
Bid-YTW : 6.26 %
NA.PR.M Perpetual-Premium -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 23.86
Evaluated at bid price : 24.06
Bid-YTW : 6.24 %
POW.PR.C Perpetual-Discount -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 22.51
Evaluated at bid price : 22.79
Bid-YTW : 6.41 %
PWF.PR.K Perpetual-Discount -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 19.49
Evaluated at bid price : 19.49
Bid-YTW : 6.39 %
BNS.PR.K Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 19.77
Evaluated at bid price : 19.77
Bid-YTW : 6.11 %
PWF.PR.M FixedReset -1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : 4.39 %
TD.PR.E FixedReset -1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 26.71
Bid-YTW : 4.46 %
IAG.PR.E Perpetual-Discount -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 24.34
Evaluated at bid price : 24.55
Bid-YTW : 6.17 %
TD.PR.Q Perpetual-Discount -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 22.94
Evaluated at bid price : 23.10
Bid-YTW : 6.09 %
RY.PR.A Perpetual-Discount -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.60
Evaluated at bid price : 18.60
Bid-YTW : 5.99 %
MFC.PR.C Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 6.34 %
CM.PR.J Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.12
Evaluated at bid price : 18.12
Bid-YTW : 6.25 %
POW.PR.A Perpetual-Discount -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 21.76
Evaluated at bid price : 22.01
Bid-YTW : 6.41 %
TRP.PR.A FixedReset -1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.14
Bid-YTW : 4.56 %
BAM.PR.J OpRet -1.02 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 5.29 %
IAG.PR.A Perpetual-Discount 1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.55
Evaluated at bid price : 18.55
Bid-YTW : 6.27 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.N FixedReset 83,710 Desjardins crossed 75,000 at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-09-14
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 3.86 %
BNS.PR.L Perpetual-Discount 72,395 National crossed blocks of 15,000 and 10,000, both at 18.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.71
Evaluated at bid price : 18.71
Bid-YTW : 6.05 %
BMO.PR.P FixedReset 70,335 National crossed 24,900 at 26.21.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-27
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 4.56 %
CM.PR.J Perpetual-Discount 59,426 Nesbitt crossed 40,000 at 18.12.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 18.12
Evaluated at bid price : 18.12
Bid-YTW : 6.25 %
PWF.PR.O Perpetual-Discount 57,445 TD crossed 43,900 at 22.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-21
Maturity Price : 22.58
Evaluated at bid price : 22.70
Bid-YTW : 6.42 %
TRP.PR.A FixedReset 39,897 Nesbitt bought 10,000 from RBC at 25.07.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.14
Bid-YTW : 4.56 %
There were 75 other index-included issues trading in excess of 10,000 shares.

FixedResets Getting Hammered

Wednesday, April 21st, 2010

I don’t usually provide mid-day comments on the market, but this is really interesting.

As of about 1pm, PerpetualDiscounts have lost 43bp and FixedResets are down 77bp, with three issues in the latter class down over 2% on the day so far: IAG.PR.C, MFC.PR.D and GWO.PR.J

There are many, many issues down between 1% and 2%.

Heinzl: Why preferreds are falling but corporate bonds aren't

Wednesday, April 21st, 2010

John Heinzl was kind enough to quote me in today’s Globe and Mail in his Investor Clinic:

I’m a retired and experienced investor. Some months ago I invested a sizable amount of money in preferred shares of major banks, the rationale being that it would be a safe haven for the cash and produce a steady stream of dividends. They have fallen sharply over the last few weeks. Why?

The facile explanation is that interest rates are rising, so straight preferred shares – which trade much like long-term bonds – are falling. But preferred share expert James Hymas of PrefLetter.com says the tumble in preferreds has more to do with emotion than interest rates.

Short-term rates are indeed rising – the Bank of Canada all but confirmed yesterday that it will hike its benchmark rate on June 1. But long-term corporate bond yields – which are far more important to the preferred share market – are not.

“Long corporate yields have been fairly steady. They have been bouncing around at basically 6 per cent to a little under for the all this year. So whatever concerns there might be about rising interest rates, they’re not being shared by the corporate bond market,” Mr. Hymas says.

So why are preferred shares falling while long corporate bonds are not?

The corporate bond market is large and dominated by institutional investors such as pension funds and insurance companies that take a long-term view. The preferred market, on the other hand, has a bigger retail presence and many issues are comparatively illiquid. This makes preferred prices more volatile, particularly when retail investors start getting nervous – like now.

April 20, 2010

Tuesday, April 20th, 2010

Yet more commentary on Goldman, which has been selected for SEC charges:

The case against Goldman Sachs Group Inc. may turn on the meaning of the word “selected.”

The Securities and Exchange Commission must prove that the most profitable company in Wall Street history defrauded investors by failing to disclose that a hedge-fund firm betting against them played a role in creating what they bought. It must also counter Goldman Sachs’s assertion that an independent asset manager, which the SEC said rejected more than half of the securities initially proposed by Paulson & Co. for a collateralized debt obligation, signed off on the selections.

“The question is whether Paulson’s undisclosed role in portfolio selection was material,” said Larry Ribstein, a law professor at the University of Illinois in Champaign who has written about 140 articles and 10 books on topics including securities law and professional ethics. “There’s no clear and well-defined definition of what you have to disclose in this type of transaction.”

“Selected” means whatever you want it to mean. Anybody who has been selected to receive a special mail-order offer knows that. In this particular case, I’d say that ACA’s role as portfolio manager was quite clear: ACA had full authority and full responsibility, full stop.

Meanwhile, politicians in the native land of Magna Charta displayed a lynch-mob mentality:

Goldman Sachs should be suspended from working for the Government until the outcome of a fraud case brought against the investment bank by US regulators is known, opposition politicians said yesterday.

The demand from the Tories and the Liberal Democrats came as the Financial Services Authority (FSA) began an investigation into the Wall Street giant’s operations in London. Goldman Sachs is on a rota of investment banks that advise the Treasury about debt issuance, which has risen dramatically as the budget deficit has escalated.

After Gordon Brown described the US bank as “morally bankrupt” at the weekend, Vince Cable, the Liberal Democrat Treasury spokesman, said yesterday: “The Government should not be paying for the services of a bank that is being investigated on both sides of the Atlantic. The allegations made against Goldman Sachs are extremely serious. Not a penny of taxpayers’ money should be paid while these allegations hang over [the bank].”

The Conservatives also questioned whether Goldman should still be on the roster of approved banks. Mark Hoban, the shadow Financial Secretary to the Treasury, said: “If Gordon Brown believes Goldman Sachs are ‘morally bankrupt’, why is he still using them as advisers? … He is lashing out at the people he was very happy to work with over the last 13 years as both Chancellor and Prime Minister.”

I’d remark on just who in this story has demonstrated moral bankruptcy, but those familiar with the elements of fundamental justice will know that already.

The UK hasn’t yet cut off its nose to spite its face:

“I don’t think you can stop doing business with a firm because an individual is accused of doing something,” [Chancellor of the Exchequer Alistair] Darling said in an interview as he traveled by train to Worcester, central England, today.

Britain’s Financial Services Authority said in a statement today it will formally investigate Goldman Sachs’s London units after the U.S. Securities and Exchange Commission sued the bank for fraud last week over its marketing of a collateralized debt obligation. A Goldman Sachs vice president named in the SEC case, Fabrice Tourre, works at the bank’s London office.

An element of Goldman’s defense has leaked out:

The company failed to disclose that hedge fund Paulson & Co. helped pick the underlying securities in a collateralized debt obligation and then bet against them, the SEC said in a lawsuit filed April 16. After being told in July 2009 that the SEC planned to bring a complaint, New York-based Goldman Sachs argued it had been compelled to keep Paulson’s role secret.

The SEC’s “proposed theory ignores the fact that, as a broker-dealer acting as an intermediary on behalf of a client, Goldman Sachs had a duty to keep information concerning its client’s (Paulson’s) trades, positions and trading strategy confidential,” the company said in a Sept. 10, 2009, document addressed to the agency.

Goldman also points out that such client confidentiality is normal practice. Deal Journal has an expanded version of Friday’s press release.

Beyond politics, there’s another proposed rationale for the SEC’s irrational lawsuit:

SEC Chairman Mary Schapiro, 54, is expanding protection of so-called sophisticated investors such as pension funds, insurance companies and banks after financial companies worldwide lost more than $1.78 trillion since the start of 2007 in the worst economic crisis since World War II.

“The days of ‘buyer beware’ may be changing,” said Todd Henderson, a law professor at the University of Chicago. “In light of the financial crisis and the fact that sophisticated investors aren’t just losing their own money but taxpayers’ money, the interest of regulators is higher.”

God save me from regulatory protection!

Meanwhile, in Toronto the Precious, using the words “Apartheid” and “Israel” in the same sentence is considered not just objectionable, but a major issue:

But, she said, the city has told them that Toronto Pride had contravened its anti-discrimination policy on the grounds that “those words make certain participants feel uncomfortable.”

Golly, it’s just terrible that some things some people say make other people uncomfortable, isn’t it? This rivals the Barenaked Ladies moronicity for sheer pointlessness. Perhaps I should write my local councillor – but which stamp should I use? The march comes with credible estimates of $125-million into the city, with additional spending by locals of about $89-million; despite the fact that (I’ll bet a nickel) I can find a lot more Torontonians offended by the whole idea of the march than might be made to “feel uncomfortable” at the sight of a few childish political slogans.

Still, at least we’re not as precious as Vancouver!

Another day of startling relative returns in the Canadian Preferred Share market, with PerpetualDiscounts down 20bp and FixedResets losing 55bp to bring yields on the latter class up to 4.14%. One could argue that this type of flattening in the preferred share yield curve is a rational response to today’s BoC announcement, but such an argument has too high a level of rationality to it to be appealing. Volume picked up again and was quite heavy.

There are no winners on the performance highlights table, which is dominated by FixedResets; these issues also dominate the volume highlights (but that’s considerably more usual!).

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 2.57 % 2.65 % 53,160 20.92 1 0.4587 % 2,147.4
FixedFloater 4.90 % 2.96 % 47,517 20.44 1 0.7256 % 3,268.8
Floater 1.92 % 1.67 % 48,177 23.42 4 -0.4841 % 2,408.6
OpRet 4.89 % 3.48 % 97,293 0.27 10 0.0585 % 2,307.5
SplitShare 6.34 % 3.13 % 141,517 0.08 2 0.1095 % 2,151.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0585 % 2,110.0
Perpetual-Premium 5.85 % 4.77 % 31,196 15.86 2 0.2845 % 1,842.6
Perpetual-Discount 6.18 % 6.21 % 201,968 13.62 76 -0.1985 % 1,727.0
FixedReset 5.49 % 4.14 % 488,089 3.65 44 -0.5458 % 2,153.1
Performance Highlights
Issue Index Change Notes
BAM.PR.P FixedReset -2.27 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-30
Maturity Price : 25.00
Evaluated at bid price : 26.27
Bid-YTW : 5.86 %
BNS.PR.Q FixedReset -1.79 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-11-24
Maturity Price : 25.00
Evaluated at bid price : 25.29
Bid-YTW : 4.58 %
IAG.PR.A Perpetual-Discount -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-20
Maturity Price : 18.26
Evaluated at bid price : 18.26
Bid-YTW : 6.37 %
CM.PR.M FixedReset -1.21 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.88
Bid-YTW : 4.57 %
ELF.PR.F Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-20
Maturity Price : 19.12
Evaluated at bid price : 19.12
Bid-YTW : 6.99 %
CM.PR.L FixedReset -1.18 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 26.89
Bid-YTW : 4.50 %
SLF.PR.F FixedReset -1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 4.29 %
TRI.PR.B Floater -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-20
Maturity Price : 22.98
Evaluated at bid price : 23.25
Bid-YTW : 1.67 %
BNS.PR.Y FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-20
Maturity Price : 23.81
Evaluated at bid price : 23.85
Bid-YTW : 4.04 %
TD.PR.G FixedReset -1.03 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.02
Bid-YTW : 4.13 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.G FixedReset 123,747 RBC crossed two blocks of 50,000 each at 27.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.02
Bid-YTW : 4.13 %
BMO.PR.P FixedReset 83,700 Nesbitt crossed 25,000 at 26.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-27
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 4.60 %
CM.PR.L FixedReset 66,075 TD crossed 47,300 at 27.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 26.89
Bid-YTW : 4.50 %
GWO.PR.J FixedReset 57,000 TD crossed 50,000 at 27.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 26.85
Bid-YTW : 3.98 %
TD.PR.I FixedReset 51,700 Desjardins crossed 25,000 at 27.31.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.10
Bid-YTW : 4.12 %
TD.PR.M OpRet 51,100 National crossed 15,000 at 25.95; Nesbitt crossed 20,000 at 25.89.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-05-30
Maturity Price : 25.75
Evaluated at bid price : 25.75
Bid-YTW : 3.45 %
There were 64 other index-included issues trading in excess of 10,000 shares.

April 19, 2010

Monday, April 19th, 2010

TD has bought three failed US banks:

Toronto-Dominion added $3.1 billion in deposits to the $117 billion it holds in two other U.S. lenders, according to a company statement. The lender picked up 69 branches in yesterday’s purchases, bringing its total in Florida to 100.

Toronto-Dominion, which has about 1,000 U.S. branches, has spent more than $15 billion over five years buying Portland, Maine-based TD Banknorth and Cherry Hill, New Jersey-based Commerce Bancorp.

The Toronto-based lender acquired the Florida assets and deposits of Clement-based AmericanFirst Bank, First Federal Bank of North Florida in Palatka and Riverside National Bank of Florida of Fort Pierce.

The FDIC press release states:

As of December 31, 2009, AmericanFirst Bank had total assets of $90.5 million and total deposits of $81.9 million; First Federal Bank of North Florida had total assets of $393.3 million and total deposits of $324.2 million; and Riverside National Bank of Florida had total assets of $3.42 billion and total deposits of $2.76 billion. Besides assuming all the deposits from the three Florida institutions, TD Bank, N.A. will purchase virtually all their assets.

The FDIC and TD Bank, N.A. entered into a loss-share transaction on $2.20 billion of the failed institutions’ assets. Initially, TD Bank, N.A. and the FDIC will share in the losses on assets on a 50% – 50% basis.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for AmericanFirst Bank will be $10.5 million; for First Federal Bank of North Florida, $6.0 million; and for Riverside National Bank of Florida, 491.8 million.

DBRS comments:

This transaction has limited downside credit risk as there is a loss-sharing agreement in place (FDIC has a share in 50% of the loan losses up to certain thresholds and then 80% in excess of those thresholds). It also has no material impact on earnings and a minimal impact on capital. DBRS notes that TD purchased $3.8 billion in assets, including $2.1 billion in loss-covered loans, and assumed $3.1 billion in deposits.

Stories in Saturday’s Globe by Derek DeCloet and Boyd Erman failed to include any of the Goldman’s four critical points highlighted here on April 16. I guess reporting what the defendant has to say isn’t really exciting news.

Scribd has the marketting material, which shows that Goldman Sachs is the protection buyer; it would be expected in the normal course of events that this would be laid off to clients, rather than retained by the firm. The more I learn about this transaction, the more convinced I am that the SEC charges are a load of hooey. ACA, as the selection agent, can only buy what others want to sell. If there was any malfeasance, it has to be because ACA did not exercise due diligence in its purchases; not because they bought stuff from Goldman’s menu of available instruments without knowing who wrote the menu. ACA, by the way, did not have a meaningful track-record as PMs for this type of deal.

I mean, hey! If I’m running the Very Big Preferred Share Fund and I need to buy 100,000 PerpetualDiscounts to get my allocations where I want them, and I call Friendly Brokers Inc. to find some for me, and they do and it’s executed as a cross …. does it really matter to me who the client on the other side of the cross was? If the shares’ issuer goes bankrupt tomorrow, is the broker really liable because the seller was the Very Smart Preferred Share Fund and they didn’t tell me that because it was none of my business? Really?

Basically, what the SEC is saying in this lawsuit is that “Me too!” constitutes due diligence and safe harbour for Portfolio Managers.

But it’s all just politics:

“We must pass Wall Street reform to bring practices like these into the light of day and protect our economy,” Senate Banking Committee Chairman Christopher Dodd, the Connecticut Democrat who wrote the bill, said in a statement.

Senate Majority Leader Harry Reid, a Nevada Democrat, said the Goldman Sachs case reinforces the need to “pass strong Wall Street reform this year,” and urged Republicans to “stop obstructing our efforts to hold Wall Street accountable.”

and:

President Barack Obama’s political advisers are trying to harness the government’s case against Goldman Sachs Group Inc. to build support for a financial- markets overhaul pending in Congress.

A Google Inc. search of “Goldman Sachs SEC” yields an advertisement entitled “Help Change Wall Street” that is sponsored by Organizing for America, Obama’s official political arm outside the White House.

“Help Pres. Obama Reform Wall Street and Create Jobs,” the ad says. “Families First!”

and:

The U.S. Securities and Exchange Commission split 3-2 along party lines to approve an enforcement case against Goldman Sachs Group Inc., according to two people with knowledge of the vote.

SEC Chairman Mary Schapiro sided with Democrats Luis Aguilar and Elisse Walter to approve the case, said the people, who declined to be identified because the vote wasn’t public. Republican commissioners Kathleen Casey and Troy Paredes voted against suing, the person said.

You know what I figure? I figure it’s the whole David Berry thing all over again. They spent untold hours, untold millions of dollars trying to nail the firm – and the best they could come up with is THAT? The guys at Goldman must be saints.

One commenter has suggested:

To make matters worse, Goldman Sachs is circling the wagons around Fabrice Tourre which I believe is a big mistake. The company should have simply issued a press release saying:

Goldman Sachs does not comment on any current litigation and will address any issues in court proceedings.

In addition, Goldman Sachs could have said that:

The company takes any allegations of impropriety seriously and is placing Fabrice Tourre on leave pending the outcome of the SEC litigation.

In any company, especially a company that is the size of Goldman Sachs, there are always some employees who bend the rules or break the law and end up getting a company in legal trouble. By circling the wagons around Fabrice Tourre, Goldman Sachs raised the ante from a single employee issue involving a certain corporate transaction to a corporate wide issue involving the entire company. A very dumb move!

In other words, that Mr. Tourre should be assumed guilty and thrown to the wolves; that management should not stand up for their staff in times of trouble. Let’s just say that I’m glad I don’t work for that blogger!

But the smarminess is spreading:

Prime Minister Gordon Brown today called for the Financial Services Authority to start an investigation, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.

Goldman has other problems: the EU wants to scapegoat them for Greece:

providing swaps to the Greek government to help reduce its budget deficit will be “profound and thorough,” EU Monetary Affairs Commissioner Olli Rehn said.

The investigation relates to “our relationship with Goldman Sachs,” Rehn said at a press conference in Madrid today after a meeting of EU finance chiefs and central bankers. “I have asked the Ecofin and Eurostat to conduct a profound and thorough investigation in which the Greek authorities are very well cooperating.”

As discussed on March 1, Eurostat explicitly endorsed the type of transaction Goldman facilitated (note the word “facilitated”, and note that they owed no duty to either Eurostat or the EU) at the time.

There was a bit of a switch in the preferred share market today, with PerpetualDiscounts losing 5bp, while FixedResets lost 19bp to take the median weighted average yield on the latter index up above 4%, territory last traversed in November 2009. Volume was down a bit from the peaks, but remains elevated (FixedResets dominating), while price volatility remains muted.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 2.59 % 2.67 % 55,218 20.90 1 0.0000 % 2,137.6
FixedFloater 4.93 % 3.00 % 49,069 20.40 1 0.1817 % 3,245.3
Floater 1.91 % 1.65 % 47,251 23.45 4 -0.1571 % 2,420.3
OpRet 4.90 % 3.53 % 97,630 1.08 10 -0.1790 % 2,306.1
SplitShare 6.35 % 2.43 % 139,177 0.08 2 -0.0219 % 2,149.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1790 % 2,108.7
Perpetual-Premium 5.87 % 4.77 % 31,633 15.87 2 0.0203 % 1,837.3
Perpetual-Discount 6.15 % 6.19 % 199,873 13.63 76 -0.0484 % 1,730.5
FixedReset 5.45 % 4.03 % 491,056 3.64 44 -0.1903 % 2,164.9
Performance Highlights
Issue Index Change Notes
PWF.PR.O Perpetual-Discount -1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 22.58
Evaluated at bid price : 22.70
Bid-YTW : 6.42 %
NA.PR.N FixedReset -1.41 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-09-14
Maturity Price : 25.00
Evaluated at bid price : 25.79
Bid-YTW : 4.24 %
PWF.PR.E Perpetual-Discount -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 21.60
Evaluated at bid price : 21.60
Bid-YTW : 6.40 %
GWO.PR.L Perpetual-Discount -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 22.91
Evaluated at bid price : 23.05
Bid-YTW : 6.19 %
MFC.PR.B Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 19.09
Evaluated at bid price : 19.09
Bid-YTW : 6.17 %
HSB.PR.C Perpetual-Discount 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 6.23 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.T FixedReset 320,960 RBC crossed blocks of 250,000 and 14,400, both at 27.65. Desjardins bought 13,500 from anonymous at 27.65; National crossed 20,000 at 27.69.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.65
Bid-YTW : 3.92 %
TD.PR.C FixedReset 105,564 RBC crossed 39,500 at 26.45; Nesbitt bought 19,600 from TD at the same price. RBC crossed 38,800 at the same price again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.37
Bid-YTW : 4.03 %
TD.PR.O Perpetual-Discount 83,919 National crossed 25,000 at 20.41.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-19
Maturity Price : 20.33
Evaluated at bid price : 20.33
Bid-YTW : 6.00 %
RY.PR.Y FixedReset 78,500 Nesbitt crossed 30,000 at 27.50; anonymous crossed (?) 19,500 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 27.45
Bid-YTW : 4.07 %
RY.PR.X FixedReset 69,923 Nesbitt crossed 50,000 at 27.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.64
Bid-YTW : 3.95 %
RY.PR.R FixedReset 63,828 Nebitt bought 11,900 from anonymous at 27.51; Desjardins crossed 30,300 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 27.50
Bid-YTW : 3.84 %
There were 45 other index-included issues trading in excess of 10,000 shares.

FIG.PR.A: Capital Unit Dividend Reinstated

Monday, April 19th, 2010

Faircourt Asset Management has announced:

that monthly distributions on the Trust Units (TSX: FIG.UN) will be reinstated. The initial annualized monthly distribution rate will be 4.1%, based on the April 16th closing price of the Trust Units, or $0.015 per month per Trust Unit ($0.18 per annum per Trust Unit). The Trust’s ability to continue variable distributions will depend on market conditions, the results of the annual redemption, and the Trust’s asset coverage levels and will be evaluated by the Manager on a monthly basis

Distributions were suspended in October 2008 in accordance with the terms of Trust Indenture governing the Preferred Securities dated November 17, 2004, which require the maintenance of a minimum 1.4 times asset coverage by the Trust. This announcement does not affect the quarterly distributions related to the Preferred Securities of the Trust (TSX: FIG.PR.A).

Faircourt Income & Growth Split Trust is designed to provide levered exposure to a portfolio comprised of Income Trusts, North American Dividend Paying Equities, Convertible Debentures, as well as other income generating securities.

Acuity Investment Management Inc. is the Investment Advisor for Faircourt Income & Growth Split Trust.

Faircourt’s attitude towards Investor Relations is quite amusing. There’s nothing about this on their website; the FIG.UN press release page stops after “2007 Press Releases” and that section includes a release from 2008. The fund manager, Acuity, has some degree of notoriety for its inclusion of Income Trusts in its Acuity Fixed Income Fund.

FIG.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-4(high) by DBRS. FIG.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.