The Yellen – Summers race is over:
Summers said that the storm around his possible nomination pointed to a difficult confirmation process that could hurt the President’s economic agenda and the institution, and decided to pull back.
“I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the administration or, ultimately, the interests of the nation’s ongoing economic recovery,” Summers said in a letter to Obama.
Initial reaction was positive:
Treasury futures rose the most in six weeks after former Treasury Secretary Lawrence Summers dropped out of contention to head the Federal Reserve, ending speculation his ascendancy to the post would lead to a faster exit from the central bank’s bond-buying policy.
Mohamed El-Erian, the chief executive and co-chief investment officer at Pacific Investment Management Co., said the decision increases the probability of policy continuity at the Fed. “This would be seen as being particularly supportive for the front end of the Treasury curve,” El-Erian wrote in a commentary posted on the Business Insider website.
The next governor – whoever it is – might have to rebuild Fed credibility:
Bond investors are losing confidence in the Federal Reserve’s pledge to keep benchmark interest rates at about zero into 2015 as the U.S. economy accelerates.
Concern the Fed will increase its target rate for overnight loans between banks next year is showing up in wider price swings for shorter-term securities. Volatility in five-year Treasuries rose above 10-year (USGG10YR) notes for the first time since 2011 and yields on two-year notes more than doubled in the past four months. Bill Gross, who manages the world’s biggest bond fund at Pacific Investment Management Co., reiterated today his recommendation to buy debt with short maturities.
While speculation the Fed will reduce its $85 billion of monthly bond purchases as soon as this week has left bond investors with the worst losses since 1994, JPMorgan Chase & Co. financial models show the end to the central bank’s zero-rate policy would have an even bigger impact.
I am pleased to see that at least one person agrees with me that settlements without admission of guilt are counterproductive:
SEC Chairman Mary Jo White, a former prosecutor, can demand only civil reparations, yet she holds a trump card: She can refuse to let JPMorgan settle cases without admitting or denying guilt. Then private litigants can piggyback off any SEC settlement, adding to the penalties.
Another example of single point failure in centralized systems:
Some U.S. options exchanges shut after reporting a malfunction with the industry data feed for disseminating prices, days after securities regulators told market operators to find ways to improve systems.
CBOE Holdings Inc. (CBOE), NYSE Euronext (NYX), Nasdaq OMX Group Inc. and Bats Global Markets Inc. all reported shutdowns on their websites. Exchanges said they were experiencing issues with the OPRA data feed. CBOE later said it had resumed transactions.
…
The Options Price Reporting Authority, or OPRA, administers the dissemination of trade and quote information to brokers, investors and market-data vendors such as Thomson Reuters Corp. and Bloomberg LP, the parent of Bloomberg News. It’s managed by U.S. options exchanges and charges users for its data.
Shared responsibility means no responsibility!
It was a very good day for the Canadian preferred share market, with PerpetualDiscounts up 35bp, FixedResets gaining 18bp and DeemedRetractibles winning 40bp. The Performance Highlights table is suitably lengthy. Volume was extremely high.
| 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 | -0.1782 % | 2,596.6 |
| FixedFloater | 4.31 % | 3.62 % | 30,837 | 18.07 | 1 | 0.0909 % | 3,848.9 |
| Floater | 2.60 % | 2.87 % | 67,595 | 20.07 | 5 | -0.1782 % | 2,803.6 |
| OpRet | 4.61 % | 2.83 % | 70,639 | 0.69 | 3 | 0.3598 % | 2,648.0 |
| SplitShare | 4.75 % | 4.81 % | 57,249 | 4.08 | 6 | 0.2152 % | 2,946.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3598 % | 2,421.3 |
| Perpetual-Premium | 5.90 % | 5.91 % | 107,695 | 4.48 | 2 | 0.1988 % | 2,247.6 |
| Perpetual-Discount | 5.62 % | 5.72 % | 136,558 | 14.22 | 36 | 0.3494 % | 2,313.6 |
| FixedReset | 4.94 % | 3.79 % | 241,324 | 3.66 | 85 | 0.1823 % | 2,450.7 |
| Deemed-Retractible | 5.17 % | 4.83 % | 192,860 | 6.92 | 43 | 0.4015 % | 2,353.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.A | Floater | -1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 22.82 Evaluated at bid price : 23.10 Bid-YTW : 2.25 % |
| RY.PR.C | Deemed-Retractible | -1.39 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.74 Bid-YTW : 4.82 % |
| CIU.PR.C | FixedReset | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 21.83 Evaluated at bid price : 22.07 Bid-YTW : 3.93 % |
| MFC.PR.J | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.91 % |
| BNS.PR.M | Deemed-Retractible | 1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.27 Bid-YTW : 4.45 % |
| TD.PR.O | Deemed-Retractible | 1.07 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.42 Bid-YTW : 3.89 % |
| RY.PR.B | Deemed-Retractible | 1.16 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : 4.09 % |
| BNS.PR.Z | FixedReset | 1.23 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.82 Bid-YTW : 4.25 % |
| SLF.PR.H | FixedReset | 1.24 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : 3.54 % |
| TRP.PR.C | FixedReset | 1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 22.46 Evaluated at bid price : 22.90 Bid-YTW : 4.05 % |
| HSB.PR.D | Deemed-Retractible | 1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 5.03 % |
| MFC.PR.G | FixedReset | 1.46 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.67 Bid-YTW : 3.53 % |
| BAM.PR.J | OpRet | 1.59 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.82 Bid-YTW : -0.99 % |
| SLF.PR.A | Deemed-Retractible | 1.67 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.98 Bid-YTW : 6.27 % |
| TRP.PR.B | FixedReset | 1.69 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 20.42 Evaluated at bid price : 20.42 Bid-YTW : 4.16 % |
| CU.PR.E | Perpetual-Discount | 1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 22.66 Evaluated at bid price : 23.05 Bid-YTW : 5.34 % |
| GWO.PR.N | FixedReset | 1.96 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 4.64 % |
| FTS.PR.F | Perpetual-Discount | 3.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 22.27 Evaluated at bid price : 22.60 Bid-YTW : 5.45 % |
| FTS.PR.J | Perpetual-Discount | 3.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 22.20 Evaluated at bid price : 22.50 Bid-YTW : 5.31 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TCA.PR.X | Perpetual-Discount | 758,782 | Called for Redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-14 Maturity Price : 50.00 Evaluated at bid price : 50.51 Bid-YTW : 3.77 % |
| BMO.PR.R | FixedReset | 221,650 | RBC bought 15,000 from Desjardins at 25.08, crossed 25,000 at the same price, then crossed 166,400 at 25.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 2.54 % |
| TRP.PR.C | FixedReset | 216,016 | Nesbitt crossed two blocks of 100,000 each at 22.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 22.46 Evaluated at bid price : 22.90 Bid-YTW : 4.05 % |
| ENB.PR.T | FixedReset | 162,895 | TD sold 13,900 to Scotia at 23.70, then crossed blocks of 124,700 and 14,000 at 23.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-16 Maturity Price : 22.58 Evaluated at bid price : 23.65 Bid-YTW : 4.60 % |
| RY.PR.X | FixedReset | 145,600 | TD crossed 131,800 at 25.89. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.88 Bid-YTW : 2.88 % |
| BMO.PR.M | FixedReset | 58,177 | RBC crossed 42,100 at 24.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.58 Bid-YTW : 3.79 % |
| There were 67 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| RY.PR.C | Deemed-Retractible | Quote: 24.74 – 25.23 Spot Rate : 0.4900 Average : 0.2956 YTW SCENARIO |
| CIU.PR.C | FixedReset | Quote: 22.07 – 22.70 Spot Rate : 0.6300 Average : 0.4699 YTW SCENARIO |
| CU.PR.D | Perpetual-Discount | Quote: 22.76 – 23.18 Spot Rate : 0.4200 Average : 0.2622 YTW SCENARIO |
| PWF.PR.O | Perpetual-Discount | Quote: 25.01 – 25.44 Spot Rate : 0.4300 Average : 0.2959 YTW SCENARIO |
| POW.PR.G | Perpetual-Discount | Quote: 24.48 – 24.80 Spot Rate : 0.3200 Average : 0.1935 YTW SCENARIO |
| TD.PR.I | FixedReset | Quote: 25.95 – 26.24 Spot Rate : 0.2900 Average : 0.1754 YTW SCENARIO |