Choose your partners! Now it looks like Deutsche Bourse will purchase Euronext:
Deutsche Boerse AG is in advanced talks to buy NYSE Euronext in an all-stock transaction that would create the world’s biggest exchange operator, accelerating a day of takeovers that began with London Stock Exchange Group Plc’s acquisition of TMX Group Inc.
NYSE and Deutsche Boerse said they will produce 300 million euros ($410 million) in cost savings, according to a statement. Duncan Niederauer, New York-based NYSE Euronext’s chief executive officer, will hold the same job at the combined company. Frankfurt-based Reto Francioni, CEO of Deutsche Boerse, will be chairman. Deutsche Boerse will own about 59 percent to 60 percent of the joined corporation.
A new generation of Goldman Sachs guys has learned a lesson:
Goldman Sachs was “buying more illiquid assets than we probably should have,” Viniar, 55, said today at a conference in Miami hosted by Credit Suisse Group AG, his eighth consecutive appearance at the annual event. “It was a good lesson learned.”
“Less liquid assets” increased at a 39 percent compound annual growth rate between the start of 2005 and the start of 2008, compared with 24 percent growth in liquid assets, according to a slide Viniar included in his presentation. Since the first quarter of 2008, the firm has reduced holdings of such investments at an 18 percent compound annual rate, while liquid assets are down 9 percent.
The assets included mortgage-backed and other asset-backed securities, loans, high-yield debt, emerging-market stocks and bonds and investments in funds and private equity, the slide showed. They totaled $172 billion in the first quarter of 2008, or 14 percent of the firm’s balance sheet, up from $65 billion, or 11 percent, three years earlier.
An IMF report titled IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004-07 bears the message:
This evaluation assesses the performance of IMF surveillance in the run-up to the global financial and economic crisis and offers recommendations on how to strengthen the IMF’s ability to discern risks and vulnerabilities and to warn the membership in the future. It finds that the IMF provided few clear warnings about the risks and vulnerabilities associated with the impending crisis before its outbreak. The banner message was one of continued optimism after more than a decade of benign economic conditions and low macroeconomic volatility. The IMF, in its bilateral surveillance of the United States and the United Kingdom, largely endorsed policies and financial practices that were seen as fostering rapid innovation and growth. The belief that financial markets were fundamentally sound and that large financial institutions could weather any likely problem lessened the sense of urgency to address risks or to worry about possible severe adverse outcomes. Surveillance also paid insufficient attention to risks of contagion or spillovers from a crisis in advanced economies. Advanced economies were not included in the Vulnerability Exercise launched after the Asian crisis, despite internal discussions and calls to this effect from Board members and others.
…
The IMF’s ability to detect important vulnerabilities and risks and alert the membership was undermined by a complex interaction of factors, many of which had been flagged before but had not been fully addressed. The IMF’s ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and inadequate analytical approaches. Weak internal governance, lack of incentives to work across units and raise contrarian views, and a review process that did not “connect the dots” or ensure follow-up also played an important role, while political constraints may have also had some impact.
There will doubtless be some who find it surprising that Holy Regulators are no less fallible than Evil Bonus-Hunters.
It was a mixed day in the Canadian preferred share market, with PerpetualDiscounts basically flat, FixedResets gaining 15bp and DeemedRetractibles down 1bp. Volume was heavy.
PerpetualDiscounts now yield 5.61%, equivalent to 7.99% interest at the standard equivalency factor of 1.4x. Long Corporates now yield 5.6%, so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 240bp. Note that this figure is not really comparable to anything that has ever been reported here before: it seems fair to speculate that recent figures have been pushed downwards by speculation that banks’ (and, perhaps, eventually, other regulated issuers) PerpetualDiscounts would have their call probability determined by other than economic factors – as has in fact happened. With the recent transfer of these issues to the DeemedRetractibles index, the PerpetualDiscount index has had its composition changed dramatically: it is now comprised of two layers of a single conglomerate (PWF and POW, 9 issues), utility-equivalents (W, CIU and FTS, 4 issues) and a thing-a-majig (BAM, 2 issues).
| 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 | -0.3689 % | 2,387.6 |
| FixedFloater | 4.79 % | 3.50 % | 21,295 | 19.08 | 1 | 0.0441 % | 3,554.7 |
| Floater | 2.51 % | 2.29 % | 44,473 | 21.53 | 4 | -0.3689 % | 2,578.0 |
| OpRet | 4.82 % | 3.72 % | 63,952 | 2.24 | 8 | 0.1673 % | 2,387.5 |
| SplitShare | 5.31 % | 1.58 % | 315,506 | 0.83 | 4 | -0.2349 % | 2,460.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1673 % | 2,183.1 |
| Perpetual-Premium | 5.74 % | 5.37 % | 118,288 | 1.10 | 9 | -0.0154 % | 2,033.5 |
| Perpetual-Discount | 5.55 % | 5.61 % | 131,446 | 14.40 | 15 | 0.0018 % | 2,108.6 |
| FixedReset | 5.24 % | 3.68 % | 173,133 | 3.05 | 54 | 0.1476 % | 2,263.8 |
| Deemed-Retractible | 5.22 % | 5.26 % | 417,687 | 8.29 | 53 | -0.0117 % | 2,074.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.A | Floater | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-02-09 Maturity Price : 22.99 Evaluated at bid price : 23.26 Bid-YTW : 2.22 % |
| GWO.PR.I | Deemed-Retractible | -1.36 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.46 Bid-YTW : 5.86 % |
| BMO.PR.O | FixedReset | -1.19 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-24 Maturity Price : 25.00 Evaluated at bid price : 27.29 Bid-YTW : 3.60 % |
| GWO.PR.H | Deemed-Retractible | -1.19 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.22 Bid-YTW : 5.84 % |
| BAM.PR.R | FixedReset | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-02-09 Maturity Price : 23.23 Evaluated at bid price : 25.32 Bid-YTW : 5.05 % |
| RY.PR.I | FixedReset | 1.08 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 26.10 Bid-YTW : 3.43 % |
| BNS.PR.Z | FixedReset | 2.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.39 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| NA.PR.N | FixedReset | 260,000 | Desjardins crossed 33,500 at 26.37 and 200,000 at 26.40. Desjardins bought 22,500 from Nesbitt at 26.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-14 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 3.06 % |
| CM.PR.I | Deemed-Retractible | 127,975 | TD crossed 25,000 at 23.90; Nesbitt crosse 22,800 at 23.95; RBC crossed 25,000 at 23.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.87 Bid-YTW : 5.30 % |
| CM.PR.L | FixedReset | 71,560 | Nesbitt crossed 49,000 at 27.49. Update: Desjardins also bought 200,000 from Nesbitt on Pure at 27.50 … I don’t get a feed from Pure. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.41 Bid-YTW : 3.53 % |
| BNS.PR.M | Deemed-Retractible | 63,152 | TD crossed 31,900 at 23.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 5.12 % |
| ELF.PR.F | Deemed-Retractible | 60,950 | Nesbitt crossed blocks of 20,000 and 23,000, both at 22.55. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.42 Bid-YTW : 6.73 % |
| BAM.PR.B | Floater | 51,933 | Desjardins crossed 25,000 at 18.88. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-02-09 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 2.82 % |
| There were 55 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.A | Floater | Quote: 23.26 – 23.85 Spot Rate : 0.5900 Average : 0.4533 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 24.65 – 25.00 Spot Rate : 0.3500 Average : 0.2443 YTW SCENARIO |
| BAM.PR.H | OpRet | Quote: 25.38 – 25.73 Spot Rate : 0.3500 Average : 0.2468 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 25.40 – 25.80 Spot Rate : 0.4000 Average : 0.3035 YTW SCENARIO |
| BMO.PR.O | FixedReset | Quote: 27.29 – 27.60 Spot Rate : 0.3100 Average : 0.2196 YTW SCENARIO |
| ELF.PR.F | Deemed-Retractible | Quote: 22.42 – 22.77 Spot Rate : 0.3500 Average : 0.2684 YTW SCENARIO |