Europe’s back in the news:
A broad market selloff was triggered Wednesday morning by the crumbling of the centre-right government of Portuguese prime minister Pedro Passos Coelho, which has been rocked by the resignations of its finance and foreign ministers in the last two days.
The prospect of the outright collapse of his government has triggered a fresh political crisis in Portugal that is unnerving investors across the continent. The fear is that a political vacuum, followed by polls that could elect an anti-austerity government, or another shaky coalition government, would undermine the reforms and spending cuts agreed in 2011, when the European Union and the International Monetary Fund sponsored a €78-billion Portuguese bailout package.
Lisbon’s main market index, the PSI 20 was down about 5.5 per cent in early afternoon trading, European time though it had been down almost 7 per cent in the morning.
…
The government of Greek prime minister Antonis Samaras last month lost one of its two coalition partners in protest of Mr. Samaras’s unilateral decision to shut the national broadcaster, ERT, eliminating almost 3,000 jobs.In Italy, the government of prime minister Enrico Letta, in office since April, faces uncertainty because former prime minister Mario Monti is frustrated by the slow pace of economic reform and has threatened to withdraw his support.
There are some interesting changes coming in the US securities market:
U.S. securities regulators are set to vote next week to lift an 80-year-old rule that prohibits companies and private funds from advertising to raise capital outside of a public offering.
The Securities and Exchange Commission is required to remove the advertising ban under a 2012 law that sought to ease regulations on financing for startups and small businesses. In a nod to complaints from critics who say the change will open the door to more fraud, the SEC will also propose a separate rule during the July 10 meeting to add some investor protections and make it easier for the agency to monitor the change.
…
A third rule scheduled for a vote the same day would block felons and others found culpable of securities-law violations from marketing such deals, which are more lightly regulated than public offers of stock or debt.
Gotta have that third rule! What’s the point of being a big-shot regulator if you can’t indulge in a little extra-judicial punishment every now and then?
David Parkinson of the Globe reminds us that the economy is still shaky:
The ISM’s index, which indicates the pace of service-sector activity in the U.S. economy, slipped to 52.2 for June, its lowest level in more than three years. While any reading above 50 still indicates growth, the index indicates that the pace of growth has been in steady decline; it has fallen in three of the past four months, after hitting a one-year high of 56.0 in February.
Yet the stock market has been somewhere between dismissive and contemptuous toward this erosion in the services ISM. The S&P 500 was up slightly in mid-afternoon trading Monday; over the course of the services ISM’s four-month slide, the S&P 500 is up almost 8 per cent.
OSFI has published Capital Disclosure requirements.
It was another very nice recovery day for the Canadian preferred share market, with PerpetualDiscounts winning 40bp, FixedResets gaining 12bp and DeemedRetractibles up 24bp. There’s a very lengthy Performance Highlights table, but with no clear pattern to it. Volume was above average.
PerpetualDiscounts now yield 5.39%, equivalent to 7.01% interest at the standard conversion factor of 1.3x. Long Corporates now yield about 4.6%, so the pre-tax interest-equivalent spread is now about 240bp, down substantially from the 270bp reported June 26 but still above post-Crunch norms. Note that this week’s figure is not strictly comparable with last weeks figure due to the significant influx of former PerpetualPremiums into the PerpetualDiscount pool but, on a brighter note, is more comparable with older figures than has been the case recently.
| 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 | 1.0068 % | 2,581.6 |
| FixedFloater | 4.13 % | 3.47 % | 43,585 | 18.33 | 1 | 2.1314 % | 3,977.8 |
| Floater | 2.72 % | 2.90 % | 79,320 | 20.01 | 4 | 1.0068 % | 2,787.5 |
| OpRet | 4.85 % | 3.45 % | 67,694 | 0.16 | 5 | 0.0313 % | 2,612.5 |
| SplitShare | 4.66 % | 4.14 % | 74,935 | 3.97 | 6 | 0.3915 % | 2,974.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0313 % | 2,388.9 |
| Perpetual-Premium | 5.60 % | 5.34 % | 104,897 | 3.78 | 12 | 0.2116 % | 2,280.0 |
| Perpetual-Discount | 5.35 % | 5.39 % | 143,639 | 14.68 | 26 | 0.3989 % | 2,400.9 |
| FixedReset | 4.95 % | 3.44 % | 242,688 | 3.59 | 83 | 0.1165 % | 2,484.9 |
| Deemed-Retractible | 5.04 % | 4.75 % | 179,108 | 6.94 | 44 | 0.2388 % | 2,394.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| HSE.PR.A | FixedReset | -1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 23.23 Evaluated at bid price : 24.50 Bid-YTW : 3.63 % |
| MFC.PR.F | FixedReset | -1.21 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.71 % |
| BAM.PF.C | Perpetual-Discount | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 21.34 Evaluated at bid price : 21.64 Bid-YTW : 5.63 % |
| POW.PR.A | Perpetual-Discount | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 24.50 Evaluated at bid price : 24.75 Bid-YTW : 5.67 % |
| GWO.PR.P | Deemed-Retractible | 1.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 5.25 % |
| MFC.PR.B | Deemed-Retractible | 1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 5.50 % |
| GWO.PR.I | Deemed-Retractible | 1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 5.45 % |
| BAM.PR.Z | FixedReset | 1.13 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 3.85 % |
| NA.PR.O | FixedReset | 1.20 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 2.48 % |
| W.PR.H | Perpetual-Discount | 1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 24.46 Evaluated at bid price : 24.70 Bid-YTW : 5.58 % |
| BAM.PR.K | Floater | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 17.82 Evaluated at bid price : 17.82 Bid-YTW : 2.96 % |
| BAM.PF.B | FixedReset | 1.50 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 4.18 % |
| TRI.PR.B | Floater | 1.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 2.21 % |
| IGM.PR.B | Perpetual-Premium | 1.56 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.47 Bid-YTW : 5.54 % |
| IFC.PR.A | FixedReset | 1.61 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 3.45 % |
| FTS.PR.J | Perpetual-Discount | 2.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 23.55 Evaluated at bid price : 23.89 Bid-YTW : 5.01 % |
| BAM.PR.G | FixedFloater | 2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 23.18 Evaluated at bid price : 23.00 Bid-YTW : 3.47 % |
| CIU.PR.C | FixedReset | 10.43 % | Not real, just a correction of yesterday’s nonsensical quote. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 23.14 Evaluated at bid price : 24.35 Bid-YTW : 3.24 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PR.S | FixedReset | 123,942 | Reset rate announced. Nesbitt crossed 25,000 at 25.11; RBC crossed 10,000 at 25.10; Scotia crossed 25,000 at 25.13. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.44 % |
| ENB.PR.Y | FixedReset | 47,505 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-03 Maturity Price : 23.07 Evaluated at bid price : 24.91 Bid-YTW : 4.03 % |
| TRP.PR.D | FixedReset | 39,800 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 3.91 % |
| BMO.PR.M | FixedReset | 29,211 | National crossed 25,000 at 25.20. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.18 Bid-YTW : 3.41 % |
| ENB.PR.T | FixedReset | 24,403 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 4.00 % |
| ENB.PR.N | FixedReset | 23,185 | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.84 % |
| There were 37 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| FTS.PR.E | OpRet | Quote: 25.95 – 26.51 Spot Rate : 0.5600 Average : 0.3727 YTW SCENARIO |
| PWF.PR.S | Perpetual-Discount | Quote: 23.64 – 24.07 Spot Rate : 0.4300 Average : 0.2608 YTW SCENARIO |
| MFC.PR.G | FixedReset | Quote: 25.55 – 26.00 Spot Rate : 0.4500 Average : 0.2995 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 24.50 – 25.00 Spot Rate : 0.5000 Average : 0.3612 YTW SCENARIO |
| PWF.PR.O | Perpetual-Premium | Quote: 25.81 – 26.21 Spot Rate : 0.4000 Average : 0.2706 YTW SCENARIO |
| FTS.PR.F | Perpetual-Discount | Quote: 23.94 – 24.45 Spot Rate : 0.5100 Average : 0.3878 YTW SCENARIO |
[…] PerpetualDiscounts now yield 5.41%, equivalent to 7.03% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.65%, so the pre-tax interest-equivalent spread (in this context, the Seniority Spread) is now about 240bp, unchanged from the figure reported July 3. […]