PrefBlog

Well, let’s all be happy that day’s done, shall we?

Canadian equities are now down on the year, notwithstanding a monster rally that took it up almost 400 points from the lows.

A record 708.1 million shares changed hands in trading on Toronto today, surpassing the previous record of 499.8 million set on July 12, according to an e-mailed statement. The number of trades was 996,311, exceeding the 707,853 made Aug. 10.

Similarly:

NYSE Euronext (NYSE Euronext: NYX), the world’s largest and most liquid exchange group, today reported record transaction volume in its U.S. cash equities trading operations on NYSE Group exchanges with 5.73 billion shares traded, based on preliminary results.  Additionally, the NYSE also achieved new records in orders, trades and quotes.

So far this month, trading volume on NYSE Group U.S. cash equities markets in August 2007 is 110% higher than August 2006.

as US Equities plunged, then rocketted to close slightly up on the day.

Moody’s warned that a LTCM-like collapse is not entirely out of bounds, and a Wall Street type warned that Moody’s isn’t invited to his next birthday party:

“To see Moody’s make forward-looking negative statements about hedge funds, who may well be suffering in large part as a result of their reliance on Moody’s now evidently worthless ratings, is to witness the height of chutzpah.”

He’s not alone, as Sarkozy wants an investigation into Moody’s. There is, as yet, no indication as to whether Sarkozy will be investigating asset managers who underperformed their benchmarks; Sarkozy’s track record was not disclosed. I am willing to bet that Gary Jenkins will also be relieved that he will not necessarily be investigated:

“Rating agencies should be regulated and they should be paid by the investor — not by the issuer, not by the structurer,” said Gary Jenkins, a partner at London-based hedge fund Synapse Investment Management, which manages $650 million of debt assets. “It’s so obvious, so simple that it’s the one thing that probably won’t happen. They shouldn’t be paid by the people selling the bonds.”

There are others who have the maturity and personal integrity to resist the temptation to blame the rating agencies: they blame the Fed:

The result: a crisis of confidence among investors who say Bernanke must abandon his focus on inflation and prevent a deeper slide in markets that endangers economic growth.

To restore my limited faith in humanity, there is at least one other person arguing, in effect: ‘Sure, the financial markets are risky. That’s what they’re for.’

All the money the Fed has pumped in seems to be going into T-Bills, which wasn’t quite what they had in mind.

The yield on the three-month Treasury bill tumbled 0.48 percentage point today to 3.62 percent, after falling 0.54 percentage point yesterday.

The money certainly didn’t go into the Commercial Paper market, which shrank significantly. About time – have a look at the actual Fed data, particularly the “Outstandings”. It would be a mistake to draw any conclusions from data without investigating further … but boy, it sure looks as if reliance on short-term funding in the US has increased a lot over the past five years!

Amidst all the equity fear and flight to safety, Treasuries had a monster day, and the 2-10 spread widened slightly to 45bp from 44bp yesterday. Given a gappy day like today, though, a lousy beep doesn’t mean too much. Canadas were much more restrained, with more steepening, the 2-10 spread increasing from 14bp to 17bp. Actual corporate bonds are still extremely illiquid.

The Yen did well, on what is presumed to be carry-trade unwinding; outlook for the USD is still probably grim.

There was cheering in the streets early on, as banking executives from all walks of life celebrated what I think must the demise of a competitor … er, I mean, they were happy that investors aren’t being wiped out in the restructuring of the Coventry funds. The commercial paper will be converted into floating rate notes with a maturity matching that of the underlying assets; if you want to pick up a little money-market yield by investing in Asset Backed paper in the future, you are now much more likely to purchase a rock-solid security, issued by a rock-solid trust. One that’s run by, um, a bank.

Given the events of the day – corporates in general not seeing much action; stocks getting hit; retail assuming that a preferred share is simply an equity that hasn’t gone down yet – it should be no surprise that the pref market did not do very well. As has often been the case lately, the Pfd-3(high) & lower issues took a hammering [which makes more sense than the higher issues getting hurt, anyway!]: NTL.PR.G, -5.33%; DW.PR.A, -5.27%; CCS.PR.C, -4.42%; STQ.E, -4.30%; YLD.PR.B, -3.81%; WN.PR.C, -3.61%; BBD.PR.C, -3.30%; BBD.PR.B, -3.18%; WN.PR.E, -2.56%; BBD.PR.D, -2.38%; NTL.PR.F, -1.81%; CGQ.E, -1.56%; WN.PR.D, -1.53%; BPO.PR.K, -1.47%; YPG.PR.A, -1.02%.

I’m not trying to pick on the junky stuff, there are lots of investment grade issues listed below! There was one junky gainer, IQW.PR.D, +1.92%.

Lets have another look at the junky-but-not-quite-junk sampler:

There were eleven other $25-equivalent index-included issues trading over 10,000 shares today.

This entry was posted on Thursday, August 16th, 2007 at 11:40 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.