March 31, 2010

Greek bonds are getting hammered:

Europe’s week-old rescue plan for Greece has so far failed to do what its leaders predicted: reduce borrowing costs for the region’s most indebted country.

The yield on 10-year Greek government bonds has increased 24 basis points to 6.522 percent since EU leaders agreed to the aid blueprint on March 25. That’s the highest in a month and more than double the rate paid by Germany. Seven-year bonds sold by Greece on March 29 fell for a second day today.

“What they were hoping for was to set up some sort of arrangement that never has to be used,” said Phyllis Reed, head of bond research in London at Kleinwort Benson, which manages about $32 billion. “The markets have sniffed that out and it seems like we’re heading back to square one.”

The Brookfield/General Growth affair is winding its way through court:

General Growth Properties Inc.’s proposal to exit bankruptcy with funding from Brookfield Asset Management Inc. has a clause that will give the company until the end of the year to complete a takeover deal with another party, according to two people with knowledge of the plan.

The provision would give Chicago-based General Growth time to explore a takeover bid from Simon Property Group Inc., whose $10 billion offer was turned down by its rival last month. Simon is preparing a new bid, according to a person with knowledge of that plan. Brookfield’s plan is subject to the approval of U.S. Bankruptcy Judge Allan Gropper, who gave General Growth an Aug. 26 deadline to control its case.

Citigroup has spent a lot of money upgrading its algorithmic trading software:

Citigroup Inc. is overhauling its platform of trading strategies in an attempt to grow its share of U.S. equities from 14 percent, according to Young Kang, global head of algorithmic products at the firm.

A global group of 20 quantitative analysts and more than 50 developers, overseen by Kang, built the algorithms and the technology supporting the new platform, which has been used on Citigroup’s cash equities and program trading desks. The strategies have been tested in recent months by some hedge funds and institutional clients.

Citigroup is also making changes to ColorBook, the smart router from Lava Trading, a unit within the broker, to execute orders faster. Smart routers are used by brokers to craft an execution strategy for the smaller orders generated once an algorithm or trading desk has decided how to transact a stock.

ColorBook currently executes orders in 700 microseconds, or 0.0007 second, Swanson said. The firm is trying to reduce that to 200 microseconds.

There is as yet no word on the take-up of the WFS warrants, which expired today out of the money, or regarding the SBN warrants, likewise.

Volume was highly elevated again today as the Canadian preferred share market staggered into quarter end. PerpetualDiscounts were down 35bp while FixedResets lost 38bp to take the yield on the latter index back above 3.50%, to 3.55%. The only winner in the performance highlights is W.PR.H, which is merely a dead-cat bounce from yesterday.

The yield on PerpetualDiscounts is now 6.16%, equivalent to 8.62% interest at the standard equivalency factor of 1.4x. Long Corporates now yield about 5.8%, having achieved a total return of +88bp on the month and +5.02% on the year-to-date, so the pre-tax interest-equivalent spread is now about 285bp, a sharp increase from the 265bp reported March 24 and getting very close to their one-year high in the low 290s.

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 2.56 % 2.61 % 57,956 20.98 1 0.2273 % 2,162.1
FixedFloater 4.93 % 3.05 % 49,216 20.11 1 0.2272 % 3,207.1
Floater 1.89 % 1.65 % 48,457 23.45 4 0.5562 % 2,436.5
OpRet 4.84 % 3.35 % 109,163 0.16 12 -0.0711 % 2,310.7
SplitShare 6.38 % 5.08 % 139,530 0.08 2 -0.2853 % 2,138.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0711 % 2,112.9
Perpetual-Premium 6.00 % 6.08 % 124,177 13.73 7 -0.1386 % 1,859.0
Perpetual-Discount 6.09 % 6.16 % 187,682 13.72 71 -0.3455 % 1,741.8
FixedReset 5.37 % 3.55 % 381,165 3.65 43 -0.3771 % 2,196.8
Performance Highlights
Issue Index Change Notes
IAG.PR.F Perpetual-Discount -1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 23.82
Evaluated at bid price : 24.00
Bid-YTW : 6.23 %
BNS.PR.K Perpetual-Discount -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 20.30
Evaluated at bid price : 20.30
Bid-YTW : 6.03 %
GWO.PR.G Perpetual-Discount -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 21.06
Evaluated at bid price : 21.06
Bid-YTW : 6.22 %
HSB.PR.C Perpetual-Discount -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 20.51
Evaluated at bid price : 20.51
Bid-YTW : 6.26 %
TD.PR.O Perpetual-Discount -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 20.90
Evaluated at bid price : 20.90
Bid-YTW : 5.91 %
BAM.PR.J OpRet -1.19 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 5.03 %
CM.PR.G Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 21.60
Evaluated at bid price : 21.60
Bid-YTW : 6.26 %
TD.PR.Y FixedReset -1.10 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-11-30
Maturity Price : 25.00
Evaluated at bid price : 26.07
Bid-YTW : 4.11 %
NA.PR.O FixedReset -1.06 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-17
Maturity Price : 25.00
Evaluated at bid price : 27.90
Bid-YTW : 3.71 %
GWO.PR.L Perpetual-Discount -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 23.20
Evaluated at bid price : 23.35
Bid-YTW : 6.09 %
W.PR.H Perpetual-Discount 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 21.29
Evaluated at bid price : 21.29
Bid-YTW : 6.49 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.E FixedReset 160,848 Nesbitt bought 10,000 from anonymous at 28.22; RBC bought three blocks of 10,000 each from TD at 28.05. RBC crossed 40,200 at 28.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 28.05
Bid-YTW : 3.42 %
HSB.PR.E FixedReset 119,398 RBC crossed 97,500 at 28.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.90
Bid-YTW : 3.75 %
BMO.PR.O FixedReset 104,645 Nesbitt bought blocks of 20,000 and 16,400 from TD at 28.50, then crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-24
Maturity Price : 25.00
Evaluated at bid price : 28.45
Bid-YTW : 3.22 %
TD.PR.G FixedReset 103,633 Nesbitt bought 10,000 each from National and anonymous at 28.25, followed by 10,000 from CIBC at 28.10. Desjardins bought 14,800 from TD at 26.30.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 28.05
Bid-YTW : 3.43 %
BNS.PR.T FixedReset 100,805 TD crossed 40,000 at 28.12, Nesbitt crossed 24,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 28.12
Bid-YTW : 3.34 %
PWF.PR.O Perpetual-Discount 78,300 Nesbitt crossed 37,500 at 23.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-03-31
Maturity Price : 23.13
Evaluated at bid price : 23.28
Bid-YTW : 6.35 %
There were 64 other index-included issues trading in excess of 10,000 shares.

3 Responses to “March 31, 2010”

  1. […] spread of PerpetualDiscounts over Long Corporates (which I also refer to as the Seniority Spread) ended the month at +285bp, a sharp increase from the +235bp recorded at February month-end. The decline in the […]

  2. […] the MAPF Portfolio Composition: March 2010 analysis(which is in excess of the 6.16% index yield on March 31). Given such reinvestment, the sustainable yield would be $10.2497 * 0.0630 = 0.6457 whereas […]

  3. […] I also refer to as the Seniority Spread) ended the month at +320bp, a sharp increase from +285bp at March month-end and +235bp recorded at February month-end. The decline in the PerpetualDiscount index was entirely […]

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