The CMHC Annual Report is out. Of particular interest is the table of 5-year financial highlights on page 98 of the PDF … in 2007, there was $345-billion of insurance in force; at the end of fiscal 2011, there is $567-billion. Thanks for inflating the bubble and subsidizing your pals at the banks, guys! To put the figure in perspective, consider this factoid from the Canadian Housing Observer 2011, Chapter 4:
With a contribution of about $330 billion to the Canadian economy, housing-related spending accounted for 20.3% of GDP in 2010, up from 20.1% in 2009.
Gee, it sure is a good thing we’re so much better regulated than those dumb old Americans, eh?
Meanwhile an unfootnoted citation by the G&M states:
CMHC estimates that roughly 25 per cent of condominiums in the Greater Toronto Area are sold but sitting vacant — shades of Miami at the height of its collapsed condo bubble in 2007. Other analysts say the 25 per cent figure may be too low.
Nope, no bubble at all, no sir! Not with Spend-Every-Penny keeping a firm hand at the tiller! For anecdotal support for the phenomenon, try driving along the Gardiner and looking at all the see-through condominiums that now line it. However, if you are driving, DO NOT make notes while discussing your findings on your cell ‘phone! Remember, Smokey the Bear says “Only you can prevent forest fires!”
Meanwhile, the political theatre in Greece continues:
Greece’s Syriza party leader Alexis Tsipras, charged with forming a government, told his pro-bailout counterparts they must renounce support for the European Union- led rescue if there is to be any chance of forging a coalition.
Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their pledges to implement austerity measures by the time he meets with them tomorrow to discuss forming a coalition. Samaras said he would not do so, and would support a minority government if necessary.
…
If Tsipras fails to build a working majority, the onus on forming a government will pass to Pasok. Each mandate can last for three days. If the process still fails to yield a coalition, President Papoulias must try to broker a government of national unity, the constitution says. If that fails, new elections will be held.“A Greek return to the polls in mid-June looks increasingly likely,” Malcolm Barr, an economist at JPMorgan Chase & Co, wrote in a note. “There is little doubt that the drop in support for New Democracy, Pasok has raised the probability of an eventual euro exit.”
Venizelos has also refused to sign:
Venizelos said Pasok’s proposal for a national unity government with the participation of all parties with a pro- European orientation was the only solution. Greece must remain “safely” within the euro while pursuing changes to the bailout accord to boost growth, he said.
The movement of talent from the banks to hedge funds continues:
The rest, earned by betting on companies from American International Group Inc. to MBIA Inc., was locked up in deferred stock and euros, according to people familiar with the matter, who asked not to be identified because they aren’t authorized to discuss compensation. In September, Silvetz, 37, jumped to hedge fund BlueCrest Capital Management LLP. He was the last of a trio of New York debt traders who departed after making $1 billion for the German lender in two years, the people said.
Wall Street’s biggest banks have lost almost two dozen of their most-profitable credit traders in the past 13 months as regulators limit the kind of risk-taking that amplified the housing crisis four years ago. As banks slash or defer pay and reduce the amount they’re willing to wager, the traders are seeing better opportunities at hedge funds and investment firms that seek to profit in markets lenders are retreating from.
Note that by “talent”, I mean the ability to make deals, which is not the same thing as asset management. Different business. This trend may be a good thing … it may be a bad thing. Nobody knows, nobody cares. The world’s regulators have decided to encourage the change without getting too fussed by details.
The downside? Hedge funds are intrinsically less stable than banks – investors are a lot more willing to redeem. The implication is that it may become easier for a market panic to lead to a lock-up in trading.
Husky Energy, proud issuer of HSE.PR.A, was confirmed at Pfd-2(low) by DBRS:
DBRS has today confirmed the Senior Unsecured Notes and Debentures and the Preferred Shares of Husky Energy Inc. (Husky or the Company) at A (low) and Pfd-2 (low), respectively, both with Stable trends. The rating actions are based on DBRS’s review of Husky’s progress to date on its long-term plans, which incorporate its major strategic growth initiatives, upstream operational targets and financial targets through 2015.
…
Husky maintains a conservative financial profile. Its debt-to-capital and debt-to-cash flow ratios improved to 19% and 0.85 times, respectively, at March 31, 2012 from 22% and 1.39 times, respectively, at year-end 2010. Common and preferred share issuance totaling $2.2 billion (including dividends paid in shares) strengthened its key credit metrics and liquidity position, with $3.3 billion of bank facility availability and $2.7 billion of cash at March 31, 2012.DBRS expects Husky to maintain its conservative financial profile, with only modest weakening of its key credit metrics relative to year-end 2010 levels during the high capex period through 2015, as well as making significant progress on its upstream operational targets over the period in order to maintain the current ratings.
There was a slight downdraft in the Canadian preferred share market today, with PerpetualPremiums losing 6bp, while both FixedResets and DeemedRetractibles were off 3bp. Volatility was very low. Volume was well below average.
| 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 | -0.1825 % | 2,507.5 |
| FixedFloater | 4.45 % | 3.81 % | 29,228 | 17.72 | 1 | 0.7072 % | 3,544.6 |
| Floater | 2.88 % | 2.90 % | 55,549 | 19.97 | 3 | -0.1825 % | 2,707.4 |
| OpRet | 4.75 % | 2.47 % | 52,678 | 1.11 | 5 | 0.1837 % | 2,512.1 |
| SplitShare | 5.24 % | 5.18 % | 63,220 | 1.98 | 4 | -0.0396 % | 2,695.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1837 % | 2,297.1 |
| Perpetual-Premium | 5.44 % | 2.64 % | 76,695 | 0.09 | 25 | -0.0605 % | 2,229.6 |
| Perpetual-Discount | 5.08 % | 5.07 % | 158,992 | 15.30 | 8 | 0.2513 % | 2,442.3 |
| FixedReset | 5.04 % | 3.00 % | 185,523 | 2.15 | 68 | -0.0328 % | 2,402.3 |
| Deemed-Retractible | 4.94 % | 3.63 % | 179,409 | 1.56 | 45 | -0.0287 % | 2,330.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.M | Perpetual-Discount | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-08 Maturity Price : 23.32 Evaluated at bid price : 23.59 Bid-YTW : 5.08 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.Z | FixedReset | 103,568 | Desjardins crossed 30,000 at 25.10; TD crossed 40,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.12 % |
| CM.PR.M | FixedReset | 52,068 | Nesbitt crossed 50,000 at 27.09. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.09 Bid-YTW : 2.70 % |
| ENB.PR.D | FixedReset | 43,330 | Nesbitt crossed 38,000 at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 3.58 % |
| HSB.PR.C | Deemed-Retractible | 40,295 | Desjardins crossed 25,000 at 25.88; TD crossed 10,000 at 25.82. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-06-30 Maturity Price : 25.50 Evaluated at bid price : 25.75 Bid-YTW : 1.72 % |
| MFC.PR.B | Deemed-Retractible | 40,198 | Nesbitt crossed 25,000 at 24.02. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.29 % |
| RY.PR.T | FixedReset | 34,550 | Scotia crossed 25,000 at 26.74. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.71 Bid-YTW : 3.04 % |
| There were 19 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IAG.PR.E | Deemed-Retractible | Quote: 25.82 – 26.97 Spot Rate : 1.1500 Average : 0.8134 YTW SCENARIO |
| TCA.PR.Y | Perpetual-Premium | Quote: 52.41 – 52.74 Spot Rate : 0.3300 Average : 0.2436 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 24.60 – 24.95 Spot Rate : 0.3500 Average : 0.2650 YTW SCENARIO |
| BAM.PR.R | FixedReset | Quote: 25.92 – 26.18 Spot Rate : 0.2600 Average : 0.1781 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 22.79 – 23.08 Spot Rate : 0.2900 Average : 0.2249 YTW SCENARIO |
| BNS.PR.Q | FixedReset | Quote: 25.71 – 25.90 Spot Rate : 0.1900 Average : 0.1263 YTW SCENARIO |