I always take heart from evidence that governments don’t really control economies:
When Argentina decided last week to ease limits on dollar purchases, it became the latest emerging-market nation to acknowledge that capital controls usually fail in masking an economy’s flaws.
Argentina allowed the peso to plunge 15 percent after the central bank began scaling back interventions in the foreign-exchange market on Jan. 22, spurring price increases of as much as 30 percent on consumer goods as international reserves fell to a seven-year low. The black-market price in Argentina rose last week to a record 12.75 pesos per dollar, compared with the official rate of about 8, according to Buenos Aires newspaper Ambito.
…
Restrictions on capital flows, ranging from Argentina’s tax on vacations abroad to Malaysia’s stabilizing the ringgit after the 1997 Asian crisis, have had mixed results in boosting investor confidence in a country’s economy. Capital outflow restrictions can be effective “if they are sufficiently comprehensive to slow a sudden ‘rush to the exit,’” according to a report by four International Monetary Fund researchers released this month.
…
In Venezuela, a decade of currency controls is fueling the world’s fastest inflation among the 114 economies tracked by Bloomberg and shortages of basic goods.The official rate of 6.3 bolivars per dollar compares with the 75-bolivar rate on the black market. Official dollars therefore are the most profitable assets in the country, allowing people who have access to them enjoy a lifestyle far beyond the reach of an average Venezuelan.
The referenced paper by Christian Saborowski, Sarah Sanya, Hans Weisfeld and Juan Yepez has the abstract:
This paper examines the effectiveness of capital outflow restrictions in a sample of 37 emerging market economies during the period 1995-2010, using a panel vector autoregression approach with interaction terms. Specifically, it examines whether a tightening of outflow restrictions helps reduce net capital outflows. We find that such tightening is effective if it is supported by strong macroeconomic fundamentals or good institutions, or if existing restrictions are already fairly comprehensive. When none of these three conditions is fulfilled, a tightening of restrictions fails to reduce net outflows as it provokes a sizeable decline in gross inflows, mainly driven by foreign investors.
Turkey’s done a lot of catching up!
Turkey’s central bank more than doubled its main interest rate at an emergency meeting, reversing years of policy after the lira slid to a record low.
The bank in Ankara raised the benchmark repo rate to 10 percent from 4.5 percent, according to a statement posted on its website at midnight. It also raised the overnight lending rate to 12 percent from 7.75 percent, and the overnight borrowing rate to 8 percent from 3.5 percent.
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While most investors advocate higher rates to bolster the lira, Prime Minister Recep Tayyip Erdogan has repeatedly railed against an “interest-rate lobby,” blaming it for a series of blows to his government, including last year’s wave of protests and the graft probe implicating his ministers.
Ignoring reality only makes it hit harder. But politicians never learn.
Sheila Bair has achieved the regulatory end-game:
Sheila Bair, the Federal Deposit Insurance Corp.’s chairman from 2006 to 2011, has been hired for a new gig as a board member at the Spanish lender Banco Santander SA. This seems to have gotten some people upset, even riled.
…
The general rule in banking is that it’s OK to become a regulator, put in a few years playing nice with the industry, then take a cushy board seat. Bair didn’t follow that path exactly. Now and then she made some remarks criticizing the way huge banks were run. But she never said anything so piercing or harsh that it distracted them from blowing up the financial system while she was FDIC chairman. She didn’t interfere with anybody’s bailout checks. She kept the FDIC’s bank-financed insurance fund woefully undercapitalized for years. It’s hard to see why “many in the banking world” are upset with her.
It was an unevenly good day for the Canadian preferred share market, with PerpetualDiscounts up 28bp, FixedResets flat and DeemedRetractibles gaining 9bp. Volatility was minimal. Volume was above 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 | -0.1337 % | 2,481.2 |
| FixedFloater | 4.46 % | 3.71 % | 28,931 | 17.99 | 1 | 0.0000 % | 3,801.4 |
| Floater | 3.01 % | 3.02 % | 70,092 | 19.66 | 3 | -0.1337 % | 2,679.1 |
| OpRet | 4.61 % | -0.17 % | 77,978 | 0.17 | 3 | 0.0256 % | 2,679.0 |
| SplitShare | 4.86 % | 5.02 % | 60,085 | 4.38 | 5 | 0.0804 % | 3,015.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0256 % | 2,449.7 |
| Perpetual-Premium | 5.61 % | 1.22 % | 118,023 | 0.09 | 13 | 0.1329 % | 2,335.6 |
| Perpetual-Discount | 5.56 % | 5.63 % | 170,858 | 14.44 | 25 | 0.2796 % | 2,388.9 |
| FixedReset | 4.93 % | 3.66 % | 219,998 | 4.19 | 83 | -0.0029 % | 2,489.8 |
| Deemed-Retractible | 5.13 % | 4.12 % | 177,753 | 1.98 | 42 | 0.0890 % | 2,414.6 |
| FloatingReset | 2.66 % | 2.51 % | 198,468 | 4.28 | 6 | -0.1464 % | 2,450.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.C | FixedReset | -1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-28 Maturity Price : 21.22 Evaluated at bid price : 21.22 Bid-YTW : 3.67 % |
| FTS.PR.J | Perpetual-Discount | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-28 Maturity Price : 22.43 Evaluated at bid price : 22.78 Bid-YTW : 5.28 % |
| MFC.PR.F | FixedReset | 1.29 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.79 Bid-YTW : 4.40 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.I | FixedReset | 81,652 | Will reset at 3.52%. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 3.69 % |
| CM.PR.L | FixedReset | 81,375 | Nesbitt crossed 30,000 at 25.28; Desjardins crossed 45,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.27 Bid-YTW : 2.05 % |
| BNS.PR.X | FixedReset | 80,700 | RBC crossed 75,000 at 25.24. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.22 Bid-YTW : 2.26 % |
| BMO.PR.R | FloatingReset | 80,134 | TD crossed 60,000 at 25.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 2.51 % |
| TD.PR.E | FixedReset | 73,855 | Nesbitt crossed 65,500 at 25.24. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : 2.31 % |
| TD.PR.T | FloatingReset | 68,220 | TD crossed 60,000 at 25.02. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 2.37 % |
| There were 42 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.C | FixedReset | Quote: 21.22 – 21.60 Spot Rate : 0.3800 Average : 0.2535 YTW SCENARIO |
| IAG.PR.F | Deemed-Retractible | Quote: 25.49 – 25.83 Spot Rate : 0.3400 Average : 0.2435 YTW SCENARIO |
| BNS.PR.B | FloatingReset | Quote: 24.78 – 25.01 Spot Rate : 0.2300 Average : 0.1622 YTW SCENARIO |
| TD.PR.Y | FixedReset | Quote: 24.91 – 25.15 Spot Rate : 0.2400 Average : 0.1798 YTW SCENARIO |
| BAM.PR.J | OpRet | Quote: 26.41 – 26.60 Spot Rate : 0.1900 Average : 0.1361 YTW SCENARIO |
| ELF.PR.F | Perpetual-Discount | Quote: 23.10 – 23.35 Spot Rate : 0.2500 Average : 0.1964 YTW SCENARIO |