May 29, 2012

Too soon to call it a trend … but there are interesting goings-on in the credit rating agency world:

The response to the Moody’s Investors Service downgrade of the biggest Nordic banks was rising bond and share prices.

The reaction is the latest sign that investors are paying less attention to the views of rating companies and relying more on their own analysis to determine whether to buy or sell.

Denmark, which is bringing its proposals to the European Parliament, says ratings often don’t reflect credit risks. Measures to improve the industry include a plan to cut reliance on ratings for both investors and within financial regulation, the Business Ministry in Copenhagen said May 21. The intention is also to make it easier for investors and issuers to demand compensation from ratings companies that fail to do their job properly, the ministry said.

In Denmark, banks have started firing Moody’s after winning assurances from some of the country’s biggest investors that the opinions of ratings companies hold limited value. Nykredit A/S, Denmark’s biggest mortgage lender and Europe’s largest issuer of covered bonds backed by home loans, terminated its contract with Moody’s in April, citing its “volatile” views.

There’s nothing in the article about the potential for investors and issuers to demand compensation from investment managers that fail to do their job properly – what a surprise! Assurances from large investors that opinions of ratings companies hold limited value hold limited value – what else are they going to say?

In Greek news:

The New Democracy party in Greece, which supports the austerity measures imposed by the European Union, came first in all six opinion polls published on May 26 as campaigning continued for the country’s general election on June 17.

Party leader Antonis Samaras sought to illustrate the consequences of a euro exit, saying Greek incomes, bank deposits and property values would lose at least half their value within days, while food prices would rise by a quarter.

Hmmm … maybe it will help him win. Maybe. And maybe it will also accellerate the bank run. Maybe.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets off 2bp and DeemedRetractibles down 6bp. Volatility was average. Volume remained light.

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 0.0000 % 2,473.6
FixedFloater 4.50 % 3.86 % 30,406 17.55 1 -0.0474 % 3,501.5
Floater 2.92 % 2.94 % 67,033 19.82 3 0.0000 % 2,670.8
OpRet 4.80 % 2.83 % 41,115 1.05 5 -0.0155 % 2,500.4
SplitShare 5.25 % -2.59 % 50,770 0.55 4 0.2582 % 2,719.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0155 % 2,286.4
Perpetual-Premium 5.45 % 1.77 % 73,681 0.62 25 0.0352 % 2,228.1
Perpetual-Discount 5.09 % 5.09 % 80,884 15.15 8 0.1395 % 2,437.8
FixedReset 5.06 % 3.18 % 197,610 4.54 69 -0.0152 % 2,391.9
Deemed-Retractible 4.99 % 3.75 % 158,876 1.89 45 -0.0649 % 2,310.7
Performance Highlights
Issue Index Change Notes
MFC.PR.H FixedReset -1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : 4.57 %
BNS.PR.N Deemed-Retractible -1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.48
Bid-YTW : 2.89 %
BAM.PR.N Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 22.97
Evaluated at bid price : 23.40
Bid-YTW : 5.13 %
IGM.PR.B Perpetual-Premium 1.36 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 5.18 %
NA.PR.P FixedReset 1.49 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 2.91 %
FBS.PR.C SplitShare 1.86 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-15
Maturity Price : 10.00
Evaluated at bid price : 10.95
Bid-YTW : -10.09 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.C FixedReset 58,255 National crossed 50,000 at 25.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.53
Evaluated at bid price : 25.80
Bid-YTW : 2.85 %
MFC.PR.I FixedReset 44,400 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.88
Bid-YTW : 4.40 %
ENB.PR.H FixedReset 39,515 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.19
Evaluated at bid price : 25.30
Bid-YTW : 3.45 %
BNS.PR.N Deemed-Retractible 36,425 RBC crossed 25,000 at 26.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.48
Bid-YTW : 2.89 %
TRP.PR.B FixedReset 33,135 National crossed 25,000 at 25.34.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.46
Evaluated at bid price : 25.27
Bid-YTW : 2.58 %
SLF.PR.D Deemed-Retractible 27,623 RBC bought 16,900 from anonymous at 16,900.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.35
Bid-YTW : 6.04 %
There were 18 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FBS.PR.C SplitShare Quote: 10.95 – 11.44
Spot Rate : 0.4900
Average : 0.3570

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-15
Maturity Price : 10.00
Evaluated at bid price : 10.95
Bid-YTW : -10.09 %

BAM.PR.M Perpetual-Discount Quote: 23.36 – 23.70
Spot Rate : 0.3400
Average : 0.2343

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.11
Evaluated at bid price : 23.36
Bid-YTW : 5.15 %

IAG.PR.F Deemed-Retractible Quote: 25.90 – 26.30
Spot Rate : 0.4000
Average : 0.2982

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 5.39 %

BAM.PR.G FixedFloater Quote: 21.10 – 21.48
Spot Rate : 0.3800
Average : 0.2967

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 21.82
Evaluated at bid price : 21.10
Bid-YTW : 3.86 %

TRP.PR.A FixedReset Quote: 25.55 – 25.76
Spot Rate : 0.2100
Average : 0.1398

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.64
Evaluated at bid price : 25.55
Bid-YTW : 3.18 %

MFC.PR.F FixedReset Quote: 24.30 – 24.49
Spot Rate : 0.1900
Average : 0.1272

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 3.71 %

Leave a Reply

You must be logged in to post a comment.