August 18, 2010

The Barclays settlement of allegations they did business with bad people and covered it up was criticized here yesterday. I am pleased to see it has hit a roadblock:

A federal judge refused to endorse a settlement between the U.S. and a bank for a third time in a year, calling a proposed $298 million fine of Barclays Plc for trading with Iran, Cuba and Sudan “a sweetheart deal.”

U.S. District Judge Emmet Sullivan in Washington scheduled a hearing for today to address the question he asked prosecutors yesterday: “Why isn’t the government getting tough with the banks?” U.S. District Judge Ellen Huvelle in Washington on Aug. 16 likewise held up a $75 million settlement between the Securities and Exchange Commission and Citigroup Inc., lawyers in the case said.

“Courts are wrestling with what they see as a disparity between the way in which the conduct is being characterized as serious and the penalties that are being imposed,” said James Doty, former SEC general counsel who is now a partner at Baker Botts LLP in Washington.

U.S. agencies and prosecutors, taking note of the decisions, will begin trying harder to deliver the executives responsible for misconduct, Doty said.

I’ll believe it when I see it. Imposing fines on the shareholders is an accepted part of the game, but going after individuals will be a threat to the regulators’ club membership.

And at the same time, New Jersey is in the spotlight:

New Jersey settled claims that it misled investors in $26 billion of municipal bonds by masking underfunding of its two biggest pension plans, in the first Securities and Exchange Commission case to target a state.

New Jersey agreed to settle the SEC case without admitting or denying the agency’s findings. The state consented to a cease-and-desist order, and wasn’t required to pay any civil fines or penalties.

So what did happen? The SEC explains:

The SEC’s order requires the State of New Jersey to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933. New Jersey consented to the issuance of the order without admitting or denying the findings. In determining to accept New Jersey’s offer to settle this matter, the Commission considered the cooperation afforded the SEC’s staff during the investigation and certain remedial acts taken by the state.

So basically it was a bureaucrats cuddle-fest. Fabulous Fabio … eat your heart out.

Inflationistas will be pleased to see that UK inflation exceeded 3.1% in July, which the BoE attributes to tax increases, oil prices and the decline of Sterling. HM Treasury has promised to tighten the fiscal screws further. The BoE’s views on inflation were last discussed August 11.

There was continued heavy volume in the Canadian preferred share market today, with PerpetualDiscounts gaining 34bp, while FixedResets lost 4bp.

PerpetualDiscounts now yield 5.79%, equivalent to 8.11% interest at the standard conversion factor of 1.4x. Long Corporates are now pretty close to 5.35%, so the pre-tax interest equivalent spread (also called the Seniority Spread) is about 270bp, down marginally – and perhaps spuriously – from the 275bp reported August 11.

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 0.00 % 0.00 % 0 0.00 0 0.1057 % 2,058.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1057 % 3,118.0
Floater 2.54 % 2.16 % 36,886 21.96 4 0.1057 % 2,222.3
OpRet 4.91 % 0.54 % 107,960 0.20 9 -0.2365 % 2,345.8
SplitShare 6.06 % -21.87 % 69,600 0.09 2 0.9031 % 2,324.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2365 % 2,145.1
Perpetual-Premium 5.77 % 5.23 % 92,482 5.58 7 0.3045 % 1,961.1
Perpetual-Discount 5.75 % 5.79 % 185,976 14.08 71 0.3352 % 1,886.2
FixedReset 5.30 % 3.32 % 295,966 3.38 47 -0.0362 % 2,239.9
Performance Highlights
Issue Index Change Notes
SLF.PR.F FixedReset -3.70 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.78
Bid-YTW : 4.27 %
BAM.PR.O OpRet -2.13 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 4.23 %
HSB.PR.D Perpetual-Discount 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 21.57
Evaluated at bid price : 21.87
Bid-YTW : 5.79 %
BNS.PR.M Perpetual-Discount 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 5.51 %
RY.PR.B Perpetual-Discount 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 5.51 %
BNA.PR.D SplitShare 1.25 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-09-17
Maturity Price : 26.00
Evaluated at bid price : 26.55
Bid-YTW : -21.87 %
BMO.PR.L Perpetual-Premium 1.25 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-24
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 5.19 %
RY.PR.F Perpetual-Discount 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 5.46 %
MFC.PR.B Perpetual-Discount 1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 6.19 %
NA.PR.L Perpetual-Discount 1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 21.71
Evaluated at bid price : 21.71
Bid-YTW : 5.63 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.Y FixedReset 81,526 TD crossed blocks of 30,000 and 40,000, both at 27.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 27.93
Bid-YTW : 3.20 %
BAM.PR.J OpRet 70,300 Nesbitt crossed blocks of 40,000 and 27,300, both at 26.15.
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 4.88 %
BMO.PR.M FixedReset 56,245 Nesbitt crossed 19,800 at 26.60. TD crossed two blocks of 10,000 each at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-09-24
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 2.73 %
HSB.PR.E FixedReset 54,579 TD crossed 40,000 at 27.98.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.94
Bid-YTW : 3.67 %
CM.PR.H Perpetual-Discount 51,766 RBC crossed 24,000 at 21.13.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 21.17
Evaluated at bid price : 21.17
Bid-YTW : 5.73 %
MFC.PR.C Perpetual-Discount 45,093 TD crossed 15,300 at 18.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-08-18
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 6.21 %
There were 57 other index-included issues trading in excess of 10,000 shares.

One Response to “August 18, 2010”

  1. […] PerpetualDiscounts now yield 5.77%, equivalent to 8.08% interest at the standard 1.4x equivalency factor. Long corporates now yield about 5.3% (!), so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 275bp, up marginally – and perhaps spuriously – from the 270bp reported on August 18. […]

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