The Kansas City Fed Stress Index for July was below its long term average … but whether that holds up in August is another matter!
It’s beginning to look as if European prudence is veering into panic:
Societe Generale SA, France’s second-largest bank, issued a blanket denial of “all market rumors” after speculation that France’s creditworthiness was in doubt sent the shares down the most in more than 2 1/2 years.
The bank “categorically denies all market rumors,” Emmanuelle Renaudat, a spokeswoman for the Paris-based lender, said in an interview today. She declined to be more specific. Societe Generale led European bank stocks to the lowest since the aftermath of the credit crisis, tumbling 15 percent to 22.18 euros in Paris, the biggest drop since Oct. 27, 2008.
France’s top credit rating was affirmed by all three major rating companies as speculation Europe’s debt crisis would spread to the region’s second-biggest economy pushed the cost of insuring its government debt against default to a record.
A defense attorney, fresh from defending a little guy accused of mortgage-fraud, makes an interesting point on justice (and, I would say, regulation in general):
In the 1980s, Operation Greylord exposed rampant corruption and bribery in Chicago’s state criminal courts. One side effect of this corruption was that criminal defendants who didn’t pay bribes were given maximum prison time so that the corrupt judges could appear to be tough on crime. A similar thing is happening now in the cleanup of the mortgage mess. The politically powerless are getting clobbered to make it appear that the government is serious about cracking down on fraud.
It’s easy for prosecutors to win convictions by going after the little guys. But this strategy does nothing to punish those most responsible for bad mortgages; nor will it deter future incidents of fraud.
The Hong Kong Exchange was hacked:
Hong Kong Exchanges & Clearing Ltd., the world’s biggest bourse operator by market value, said it suspended trading for companies including HSBC Holdings Plc (HSBA) after its website was hacked.
Europe’s largest bank by market capitalization, Cathay Pacific Airways Ltd. (293) and five other stocks were halted after a “malicious attack” on the exchange’s website for corporate filings, Chief Executive Officer Charles Li said yesterday. The website was partially disabled as companies including Hong Kong Exchanges reported earnings.
This is why it’s good to have central clearing: it makes it easier to take down the entire system.
US equities did not have a jolly time:
Stocks slid, dragging the Dow Jones Industrial Average to the lowest level since September 2010, and Treasuries rose for a third day amid concern the European sovereign debt crisis is worsening. The dollar climbed versus 13 of 16 major peers, with the euro losing 1.3 percent to $1.4190. Gold futures surged to a record above $1,800 an ounce.
The Dow sank 519.83 points, or 4.6 percent, to 10,719.94 at the 4 p.m. close in New York. The Standard & Poor’s 500 Index sank 4.4 percent to 1,120.76 following its biggest jump in more than two years yesterday, when it rebounded from its worst loss since 2008. The Stoxx Europe 600 Index plunged 3.8 percent as Societe Generale SA sank 15 percent. Ten-year Treasury yields, which touched an all-time low yesterday, fell 16 basis points to 2.09 percent after an auction drew a record-low yield. Costs to protect French debt reached a record.
A rally in Canadian government 10-year bonds pushed the yield to 2.31 percent, the lowest level since at least 1989.
…
Government 10-year note yields dropped 12 basis points, or 0.12 percentage point, to 2.33 percent after touching the record low. The price of the 3.25 percent security due in June 2021 increased C$1.11 to C$108.05.Canada sold C$3 billion ($3 billion) of three-year debt, drawing an average yield of 0.965 percent. The government received bids of C$6.55 billion for the 2.25 percent securities maturing in August 2014, according to a statement today on the Bank of Canada’s website.
Toronto did all right, on the back of greasy rocks:
The S&P/TSX composite index gained 89.63 points, or 0.74%, to 12,198.89. Only four of the 10 sub-indexes advanced but among those were two of the three heavyweights — materials, which rose 3.41%, and energy, up 1.02%. Bank stocks, which led the previous day’s advance, fell on Wednesday, dragging the financials sector down 1.05%.
A US$3.59 jump in the price of oil, to US$82.89 a barrel, combined with another new record price for gold, which closed at US$1,784.30 an ounce, a gain of $41.30, drove the TSX increases on a day when U.S. markets continued to decline.
Gold producers saw significant gains on Wednesday — Barrick Gold Corp. rose 6.15% to $49.72, Goldcorp advanced 6.99% to $50.54, and Kinross Gold saw its share price gain 4.55%, to $16.31.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 16bp, FixedResets up 6bp and DeemedRetractibles down 15bp. Volatility was quite good; volume was average.
PerpetualDiscounts now yield 5.55%, equivalent to 7.22% interest at the standard equivalency factor of 1.3x. Long Corporates now yield a little over 4.8% (!) so the pre-tax interest-equivalent spread is now about 240bp, a sharp increase from the 215bp reported on August 4. Yields have gone in opposite directions over the week … go figure!
| 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 | -2.3613 % | 2,184.6 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -2.3613 % | 3,285.7 |
| Floater | 2.78 % | 2.59 % | 33,154 | 20.81 | 4 | -2.3613 % | 2,358.8 |
| OpRet | 4.91 % | 4.24 % | 56,251 | 0.86 | 9 | 0.1369 % | 2,428.6 |
| SplitShare | 5.42 % | 5.89 % | 62,691 | 2.58 | 4 | 0.3887 % | 2,442.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1369 % | 2,220.7 |
| Perpetual-Premium | 5.72 % | 5.44 % | 139,760 | 2.04 | 14 | 0.2923 % | 2,087.3 |
| Perpetual-Discount | 5.47 % | 5.55 % | 115,138 | 14.49 | 16 | 0.1622 % | 2,184.9 |
| FixedReset | 5.22 % | 3.42 % | 208,723 | 2.83 | 58 | 0.0572 % | 2,297.5 |
| Deemed-Retractible | 5.17 % | 5.00 % | 275,871 | 7.98 | 46 | -0.1518 % | 2,133.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.A | Floater | -8.37 % | Not entirely real. The issue traded 458 shares on the day in a range of 21.20-22.20 (now that’s a thin market!) before closing at 20.25-20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 2.59 % |
| GWO.PR.N | FixedReset | -2.86 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 3.79 % |
| MFC.PR.B | Deemed-Retractible | -2.57 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.26 Bid-YTW : 6.80 % |
| MFC.PR.C | Deemed-Retractible | -2.33 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.00 Bid-YTW : 6.78 % |
| RY.PR.H | Deemed-Retractible | -1.69 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-24 Maturity Price : 25.50 Evaluated at bid price : 26.20 Bid-YTW : 4.70 % |
| GWO.PR.I | Deemed-Retractible | -1.53 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.81 Bid-YTW : 6.28 % |
| BMO.PR.K | Deemed-Retractible | -1.21 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-25 Maturity Price : 25.25 Evaluated at bid price : 25.36 Bid-YTW : 5.06 % |
| CIU.PR.B | FixedReset | -1.18 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 26.88 Bid-YTW : 3.74 % |
| PWF.PR.F | Perpetual-Discount | -1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 23.97 Evaluated at bid price : 24.22 Bid-YTW : 5.45 % |
| TRP.PR.B | FixedReset | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 23.23 Evaluated at bid price : 24.91 Bid-YTW : 2.84 % |
| BAM.PR.X | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 22.73 Evaluated at bid price : 24.00 Bid-YTW : 3.73 % |
| NA.PR.P | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 26.82 Bid-YTW : 3.54 % |
| W.PR.H | Perpetual-Discount | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 23.67 Evaluated at bid price : 24.80 Bid-YTW : 5.55 % |
| PWF.PR.E | Perpetual-Discount | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 23.63 Evaluated at bid price : 24.73 Bid-YTW : 5.55 % |
| FTS.PR.H | FixedReset | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 23.34 Evaluated at bid price : 25.21 Bid-YTW : 2.94 % |
| RY.PR.T | FixedReset | 1.08 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 27.07 Bid-YTW : 3.31 % |
| W.PR.J | Perpetual-Discount | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 24.55 Evaluated at bid price : 24.80 Bid-YTW : 5.70 % |
| PWF.PR.H | Perpetual-Premium | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 24.73 Evaluated at bid price : 25.02 Bid-YTW : 5.78 % |
| FTS.PR.F | Perpetual-Discount | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-10 Maturity Price : 23.92 Evaluated at bid price : 24.20 Bid-YTW : 5.06 % |
| BAM.PR.P | FixedReset | 1.29 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.65 Bid-YTW : 5.02 % |
| CU.PR.A | Perpetual-Premium | 1.87 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 5.14 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.A | OpRet | 153,241 | RBC crossed blocks of 49,800 shares, 25,000 and 75,000, all at 25.15. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 4.25 % |
| BMO.PR.M | FixedReset | 104,205 | Nesbitt crossed 25,000 at 25.90; RBC crossed blocks of 23,000 and 52,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.81 Bid-YTW : 3.11 % |
| BNS.PR.Q | FixedReset | 77,206 | RBC crossed blocks of 25,000 and 50,000, both at 25.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.86 Bid-YTW : 3.18 % |
| TD.PR.Q | Deemed-Retractible | 63,813 | RBC crossed two blocks of 20,000 each and one of 15,000, all at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-31 Maturity Price : 25.50 Evaluated at bid price : 26.11 Bid-YTW : 4.81 % |
| RY.PR.I | FixedReset | 56,955 | Nesbitt crossed 50,000 at 25.80. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.74 Bid-YTW : 3.46 % |
| RY.PR.Y | FixedReset | 42,179 | Scotia crossed 36,500 at 27.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 26.90 Bid-YTW : 3.58 % |
| There were 34 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.C | FixedReset | Quote: 25.10 – 27.10 Spot Rate : 2.0000 Average : 1.5400 YTW SCENARIO |
| RY.PR.H | Deemed-Retractible | Quote: 26.20 – 26.99 Spot Rate : 0.7900 Average : 0.4561 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 23.80 – 24.50 Spot Rate : 0.7000 Average : 0.4515 YTW SCENARIO |
| GWO.PR.I | Deemed-Retractible | Quote: 21.81 – 22.47 Spot Rate : 0.6600 Average : 0.4404 YTW SCENARIO |
| CIU.PR.B | FixedReset | Quote: 26.88 – 27.50 Spot Rate : 0.6200 Average : 0.4327 YTW SCENARIO |
| BAM.PR.I | OpRet | Quote: 25.41 – 26.00 Spot Rate : 0.5900 Average : 0.4175 YTW SCENARIO |
[…] pre-tax interest-equivalent spread is not about 225bp, a good tightening from the 240bp reported on August 10 derived from movement in both […]