Europeans are encountering Money Market angst:
Investors in Europe risk losing a haven as Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Morgan Stanley break a taboo that’s stopped 88 billion euros ($113 billion) of money-market funds from ever losing principal.
The banks are preparing to abandon the policy that investors get one euro back for every one they put in as government bond yields near record lows make it harder for the funds to generate returns.
A money-market fund failing to repay investors in full is said to “break the buck” and is forced to shut down. To avoid this, banks propose to change rules governing the investment vehicles so they can pass on losses to investors by reducing the number of shares outstanding in a fund, without closing.
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Benchmark German bond yields are close to record lows, with the rate on Germany’s two-year bond at minus 0.001 percent, up from minus 0.023 on March 28, data compiled by Bloomberg show. France’s two-year security is yielding 0.145 percent, up from a record-low 0.03 percent in December.Since the ECB cut the deposit rate to zero in July, money- market funds that are restricted to buying short-term debt generated almost no extra cash, putting pressure on their goal to provide a sanctuary for investors. The seven-day yield on funds that buy euro government securities was zero percent for the week ended March 22, according to research firm iMoneyNet Inc.
Prime funds, which take more risk and can also invest in bonds issued by the highest-rated banks and companies, made 0.02 percent. Since Jan. 4, euro money funds have seen assets under management fall by 7.1 billion euros to 87.9 billion euros, Westborough, Massachusetts-based iMoneyNet data show.
Here’s some good energy business news, amidst all the unhappy headlines:
Canada is pulling ahead of the U.S. in a contest to be the first exporter of liquefied natural gas from the North American shale bonanza to Asia’s $150 billion LNG market.
An LNG terminal being built at a cove north of Vancouver financed by a Houston private-equity firm is scheduled to begin shipping the fuel across the Pacific Ocean in mid-2015, eight months before the first continental U.S. plant is slated to start. Canada’s government has approved twice as much LNG export capacity as its southerly neighbor, evincing a friendlier attitude toward selling domestic gas to the highest bidder and positioning the nation as the go-to source of gas in North America for overseas buyers.
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After issuing the first permit to export continental U.S. gas to nations without free-trade agreements almost two years ago, the federal government suspended reviews of all other applications so it could study the potential impacts of overseas sales on domestic energy prices. There are now 19 proposed U.S. LNG projects awaiting export permits, with the longest on hold for 28 months.In contrast, Canada, which has seen a similar surge in gas production, issued its third LNG export license in February for a project led by Royal Dutch Shell Plc (RDSA) in British Columbia. All together, the trio of approved Canadian projects will have the capacity to ship 4.66 billion cubic feet of gas a day, more than double the 2.2 billion cubic feet of capacity that has been permitted in the U.S., according to data compiled by Bloomberg.
This is better than the usual story:
Canada stands to lose out on more than $50-billion over a three-year period because of oil pipeline constraints, one of the country’s major banks projected today as it urged President Barack Obama to approve the controversial Keystone XL project.
That figure from CIBC World Markets represents lost opportunities, in terms of producer revenues and government royalties.
Economist Peter Buchanan forecasts that this “money left on the table” will be about $20-billion this year, $15.2-billion in 2014 and $16.5-billion a year later.
DBRS updated its report on Husky, proud issuer of HSE.PR.A:
DBRS has today updated its report on Husky Energy Inc. (Husky or the Company). Husky’s credit quality is supported by its: (1) conservative financial profile, (2) integrated operations and (3) medium- to long-term exploration and production (E&P) growth potential.
Husky’s financial profile remained stable in 2012. Husky maintains debt-to-capital and debt-to-cash flow ratios below its targets of 25% and 1.5 times (x), respectively. Integrated operations provided a partial natural hedge against pricing volatility in North American upstream operations. A modest free cash flow deficit in 2012 was largely a result of increased capex spending. Similar free cash flow deficits are anticipated until 2014, when cash flow contributions from growth pillars – namely, the oil sands, Atlantic Canada and Asia-Pacific – commence. DBRS believes the Company’s current liquidity is sufficient to fund cash flow shortfalls over the near term, with minimal impact on credit metrics.
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DBRS also notes that the Company has updated its financial and operational targets from those initially set out in December 2010. DBRS believes that these targets are largely achievable, contingent upon Husky’s ability to execute its medium- to longer-term growth projects. DBRS expects that the Company will continue to manage its financial profile conservatively, in order to achieve the stated targets.
It was a slow drift upwards for the Canadian preferred share market, with both PerpetualPremiums and FixedResets gaining 3bp and DeemedRetractibles up 4bp. Volatility was low. Volume was a hair below average, with low-Issue Reset Spread BNS FixedResets seeing a fair bit of shuffling.
PerpetualDiscounts now yield 4.86%, equivalent to 6.32% interest at the standard equivalency factor of 1.3x. Long Corporates now yield a bit below 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 210bp, a slight (and perhaps spurious) increase from the 205bp reported March 27.
| 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 | -0.2652 % | 2,617.6 |
| FixedFloater | 4.13 % | 3.48 % | 28,618 | 18.29 | 1 | 0.0435 % | 3,939.2 |
| Floater | 2.66 % | 2.85 % | 77,940 | 20.13 | 4 | -0.2652 % | 2,826.3 |
| OpRet | 4.80 % | 0.81 % | 53,775 | 0.21 | 5 | 0.2399 % | 2,612.3 |
| SplitShare | 4.81 % | 4.00 % | 134,508 | 4.16 | 5 | 0.0079 % | 2,954.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2399 % | 2,388.7 |
| Perpetual-Premium | 5.18 % | 1.63 % | 86,091 | 0.57 | 32 | 0.0272 % | 2,373.9 |
| Perpetual-Discount | 4.88 % | 4.86 % | 169,505 | 15.72 | 4 | -0.2852 % | 2,667.1 |
| FixedReset | 4.89 % | 2.62 % | 288,788 | 3.26 | 80 | 0.0307 % | 2,517.3 |
| Deemed-Retractible | 4.85 % | 2.69 % | 128,183 | 0.39 | 44 | 0.0387 % | 2,456.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| HSE.PR.A | FixedReset | -1.13 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.30 Bid-YTW : 2.65 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.Y | FixedReset | 146,697 | Nesbitt crossed 34,600 at 24.35. TD crossed blocks of 10,000 shares, 17,000 shares, 18,000 and 12,000, all at 24.29. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.28 Bid-YTW : 2.92 % |
| BNS.PR.Z | FixedReset | 118,567 | National bought 16,100 from TD at 24.85, then another 14,700 at 24.97 and crossed 25,000 at 24.86. TD crossed 16,600 at 24.80. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 3.00 % |
| BAM.PR.T | FixedReset | 66,500 | Nesbitt crossed 57,500 at 26.18. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.17 Bid-YTW : 3.26 % |
| BMO.PR.Q | FixedReset | 56,870 | Nesbitt crossed 45,200 at 25.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 2.83 % |
| BNS.PR.T | FixedReset | 53,430 | Nesbitt crossed 50,000 at 26.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 1.97 % |
| PWF.PR.S | Perpetual-Premium | 51,296 | TD crossed 11,700 at 25.29. YTW SCENARIO Maturity Type : Call Maturity Date : 2022-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.29 Bid-YTW : 4.62 % |
| There were 28 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| VNR.PR.A | FixedReset | Quote: 27.03 – 27.93 Spot Rate : 0.9000 Average : 0.6574 YTW SCENARIO |
| ABK.PR.C | SplitShare | Quote: 32.10 – 32.34 Spot Rate : 0.2400 Average : 0.1506 YTW SCENARIO |
| SLF.PR.F | FixedReset | Quote: 26.27 – 26.49 Spot Rate : 0.2200 Average : 0.1404 YTW SCENARIO |
| PWF.PR.E | Perpetual-Premium | Quote: 25.87 – 26.16 Spot Rate : 0.2900 Average : 0.2134 YTW SCENARIO |
| BAM.PR.O | OpRet | Quote: 25.14 – 25.44 Spot Rate : 0.3000 Average : 0.2294 YTW SCENARIO |
| RY.PR.Y | FixedReset | Quote: 26.73 – 26.99 Spot Rate : 0.2600 Average : 0.1998 YTW SCENARIO |
[…] PerpetualDiscounts now yield 4.82%, equivalent to 6.27% interest at the standard equivalency factor of 1.3x. Long Corporates now yield a little under 4.1%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 220bp, a significant widening from the 210bp reported April 3. […]