PrefBlog

Worries regarding Greek debt are affecting Argentina:

Argentine bonds tumbled last week, with the yield on 7 percent dollar bonds due in 2015 soaring 2.36 percentage points in three days, amid concern that Greece’s financial crisis would spread across Europe. The debt rallied since European leaders unveiled an almost $1 trillion bailout plan, climbing for a third day today as yields fell 17 basis points, or 0.17 percentage point, to 12.55 percent.

[Economy Minister Amado] Boudou, in New York to meet with creditors ahead of tomorrow’s deadline for institutional investors to tender their defaulted bonds without penalty, said the government is convinced the proposal for restructuring $20 billion of defaulted debt held out of a 2005 settlement is “the last opportunity” for investors.
…
Argentina hasn’t tapped international credit markets since defaulting on $95 billion of debt in 2001.
…
Argentina’s offer included securities due in 2033 worth 33.7 cents on the dollar, warrants linked to gross domestic product and past due interest with the 2017 bonds. The government didn’t offer to include past-due payments on the GDP warrants, and said it was considering a concurrent sale of $1 billion in additional 2017 bonds as part of the exchange.

Argentina’s offer — as measured in net-present value terms — is worth about 45.5 cents on the dollar for institutional investors, according to RBS Securities Inc. debt strategist Siobhan Morden. The value of the 2005 exchange was 59.63 cents on the dollar, Credit Suisse Group AG said.

Investigators of the May 6 Bungee Jump have identified a candidate trigger point:

Regulators examining the causes of the brief stock market free fall last Thursday are looking closely at heavy selling in the market for stock-index futures by a single trader, beginning 10 minutes before stock prices began to plummet.

Gary Gensler, the chairman of the Commodity Futures Trading Commission, said at a Congressional hearing on Tuesday that during that crucial time period, the futures trader, whom he would not identify, accounted for about 9 percent of trading volume in the most actively traded stock-index derivative contract, known as the 500 e-mini futures contract.

All of the trader’s orders were to sell, Mr. Gensler said, while most of the other 250 traders who were active in the same market that day were both buying and selling securities.
…
The identity of the trader remained unclear. Terrence A. Duffy, executive chairman of the CME Group, which operates the Chicago exchange, said on Tuesday: “We obviously won’t divulge that market information. We are in contact with the folks that did the trade. There is no question that it is a bona fide hedger” and not someone intending to disrupt the markets.

There have been previous reports that the proximate cause was a $7.5-million options trade.

SEC Commissioner Luis Aguilar has released statement on fiduciary responsibility which aims to “clarify” earlier remarks (discussed on PrefBlog on April 30:

Currently, investors are receiving investment advice from broker-dealers who are not fiduciaries. This has serious and real consequences for investors who may not receive advice that is in their best interest. Moreover, investors may not be told that the broker-dealer registered representative sitting across from them may receive undisclosed compensation from the investment option he or she just recommended.

The big problem I have is his earlier insistence that institutional investors need the protection of a fiduciary relationship – which simply adds another layer to costs. Retail investors, as well, should be allowed to invest for themselves (if they’re not fiduciary to themselves, who is?) if they want to; or choose a fiduciary relationship.

I highlighted the savage effects of credible action in Greece on April 30. Moody’s is expecting credit effects to be severe:

Moody’s Investors Service lowered 22 billion euros ($28 billion) of Greek bonds backed by loans to consumers and companies as the country adopts austerity measures to qualify for European aid, leaving the notes under review for further downgrades.

The cuts “were prompted by Moody’s expectations of significant pool performance deterioration due to the stressed economic environment in Greece as well as increased operational risk due to the weakened financial strength of Greek banks,” the New York-based ratings company said today in a statement.

The securities, which are part of 23 transactions, included 10.7 billion euro of notes backed by residential mortgages, 3.9 billion euro of collateralized loan obligations, and an additional 7.2 billion euro of other asset-backed debt, according to the statement. The bonds appear less creditworthy considering “Greece’s austerity package and the resulting impact on the Greek economy and collateral performance,” Moody’s said.

Continued heavy volume today and, wonder of wonders, PerpetualDiscounts gained 11bp, while FixedResets gained 29bp. Volatility was high.

PerpetualDiscounts now yield 6.40%, equivalent to 8.96% interest at the standard equivalency factor of 1.4x. Long corporates now yield about 5.7%, so the pre-tax interest-equivalent spread is now about 325bp, a mild (and perhaps spurious) decline from the 330bp reported on May 5.

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	2.62 %	2.77 %	44,700	20.86	1	0.0000 %	2,112.6
FixedFloater	5.09 %	3.16 %	42,229	20.15	1	-1.7487 %	3,142.3
Floater	2.11 %	2.39 %	102,274	21.33	3	-1.4763 %	2,305.0
OpRet	4.92 %	4.02 %	91,863	2.88	11	0.1570 %	2,296.5
SplitShare	6.46 %	6.61 %	125,177	3.53	2	0.5599 %	2,113.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1570 %	2,099.9
Perpetual-Premium	5.53 %	4.77 %	24,637	15.82	1	0.0000 %	1,824.2
Perpetual-Discount	6.32 %	6.40 %	218,567	13.31	77	0.1078 %	1,691.2
FixedReset	5.51 %	4.29 %	521,629	3.58	44	0.2910 %	2,149.5

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-2.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 16.57 Evaluated at bid price : 16.57 Bid-YTW : 2.39 %
BAM.PR.B	Floater	-2.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 16.44 Evaluated at bid price : 16.44 Bid-YTW : 2.41 %
BAM.PR.G	FixedFloater	-1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 25.00 Evaluated at bid price : 21.35 Bid-YTW : 3.16 %
PWF.PR.L	Perpetual-Discount	-1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 19.32 Evaluated at bid price : 19.32 Bid-YTW : 6.67 %
PWF.PR.K	Perpetual-Discount	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 18.78 Evaluated at bid price : 18.78 Bid-YTW : 6.66 %
MFC.PR.C	Perpetual-Discount	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 18.04 Evaluated at bid price : 18.04 Bid-YTW : 6.35 %
PWF.PR.F	Perpetual-Discount	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 19.89 Evaluated at bid price : 19.89 Bid-YTW : 6.67 %
RY.PR.T	FixedReset	1.04 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.13 Bid-YTW : 4.10 %
ELF.PR.G	Perpetual-Discount	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 16.80 Evaluated at bid price : 16.80 Bid-YTW : 7.17 %
PWF.PR.O	Perpetual-Discount	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 22.63 Evaluated at bid price : 22.75 Bid-YTW : 6.43 %
CL.PR.B	Perpetual-Discount	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 24.26 Evaluated at bid price : 24.57 Bid-YTW : 6.45 %
RY.PR.N	FixedReset	1.36 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 26.91 Bid-YTW : 4.06 %
PWF.PR.I	Perpetual-Discount	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 22.93 Evaluated at bid price : 23.22 Bid-YTW : 6.51 %
IAG.PR.A	Perpetual-Discount	1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 17.92 Evaluated at bid price : 17.92 Bid-YTW : 6.52 %
IAG.PR.F	Perpetual-Discount	2.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 22.91 Evaluated at bid price : 23.05 Bid-YTW : 6.54 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.D	OpRet	238,038	TD crossed 33,500 at 25.71; RBC crossed 50,000 at the same price. Nesbit crossed 89,600 and RBC crossed 62,000, both at 25.71. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-06-11 Maturity Price : 25.60 Evaluated at bid price : 25.70 Bid-YTW : 2.35 %
RY.PR.A	Perpetual-Discount	138,484	Nesbitt crossed blocks of 32,000 and 75,000 at 18.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 5.98 %
CM.PR.M	FixedReset	104,290	RBC crossed 25,000 and TD crossed 20,000, both at 27.10. TD crossed 50,000 at 27.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.15 Bid-YTW : 4.38 %
GWL.PR.O	Perpetual-Premium	102,400	Nesbitt crossed 100,000 at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-05-12 Maturity Price : 24.66 Evaluated at bid price : 25.09 Bid-YTW : 4.77 %
PWF.PR.J	OpRet	101,380	Nesbitt crossed 100,000 at 25.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-05-30 Maturity Price : 25.25 Evaluated at bid price : 25.52 Bid-YTW : 3.78 %
TD.PR.E	FixedReset	84,545	Nesbitt crossed 75,000 at 27.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 26.92 Bid-YTW : 4.30 %
There were 53 other index-included issues trading in excess of 10,000 shares.

This entry was posted on Wednesday, May 12th, 2010 at 10:58 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.