Assiduous Readers will remember that I am rather curious about the social benefits of increasing bank capital. It is all very well to say that more capital is good, but in a world of limited resources, socking away huge amounts of capital and taking it away from productive investment elsewhere is going to have costs as well as benefits. I haven’t seen any econometric analysis of those costs, but JP Morgan is starting the conversation:
Top banks will need an extra $221 billion (139.6 billion pounds) of capital and see annual profits slump by $110 billion if all proposed regulations to reform the industry are brought in, leading analysts said on Wednesday.
If all the initiatives from regulators are implemented it would cut the average return on equity to 5.4 percent from 13.3 percent next year, hurt economic growth and raise costs for bank services, JPMorgan analysts warned.“The cumulative impact of all the proposed regulation suggests that there is a real risk that we may move from a system that was under regulated to one that is over regulated and that that could cause a significant increase in lending costs and a negative impact on the economy,” Nick O’Donohue, head of research at JPMorgan, said in a research note.
KPMG has issued a TaxNewsFlash titled CRA Narrows GST-Exempt Financial Services; one of the items is:
Investment dealers’ trailer fees
In this example, an investment dealer who arranges to purchase units of a mutual fund for an investor receives a “trailer commission or fee” from the fund manager. The prospectus describes these fees as being paid in recognition of investment advice and ongoing administrative services provided by the dealer to the investors.In this situation, the CRA says the services provided by the investment dealer including advice, arranging for the purchase of the units and ongoing administrative services are GST-taxable.
Volume picked up again today, but prices were off by a hair, with both PerpetualDiscounts and FixedResets losing 2bp on the day. The day was enlivened by the announcement of a new IAG 5.90% Straight after the close.
PerpetualDiscounts now yield 5.85%, equivalent to 8.19% at the standard equivalency factor of 1.4x. Long Corporates have eased of to a yield of about 5.9% so the pre-tax interest equivalent spread (also called the Seniority Spread) is now about 230bp, coming in a bit from the 240bp reported February 10.
| 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 | 2.98 % | 3.59 % | 28,592 | 20.29 | 1 | 1.0638 % | 1,854.7 |
| FixedFloater | 5.71 % | 3.78 % | 38,454 | 19.23 | 1 | 0.0000 % | 2,769.5 |
| Floater | 1.99 % | 1.72 % | 46,787 | 23.23 | 4 | 0.8537 % | 2,310.3 |
| OpRet | 4.83 % | -1.63 % | 106,142 | 0.09 | 13 | 0.0737 % | 2,326.9 |
| SplitShare | 6.29 % | -2.17 % | 131,713 | 0.08 | 2 | 0.0000 % | 2,134.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0737 % | 2,127.7 |
| Perpetual-Premium | 5.75 % | 5.33 % | 85,383 | 1.98 | 7 | 0.2999 % | 1,902.7 |
| Perpetual-Discount | 5.82 % | 5.85 % | 167,909 | 14.10 | 69 | -0.0241 % | 1,811.0 |
| FixedReset | 5.41 % | 3.57 % | 305,994 | 3.76 | 42 | -0.0218 % | 2,187.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| ELF.PR.G | Perpetual-Discount | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-17 Maturity Price : 17.82 Evaluated at bid price : 17.82 Bid-YTW : 6.77 % |
| POW.PR.D | Perpetual-Discount | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-17 Maturity Price : 20.92 Evaluated at bid price : 20.92 Bid-YTW : 6.06 % |
| BAM.PR.E | Ratchet | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-17 Maturity Price : 25.00 Evaluated at bid price : 19.00 Bid-YTW : 3.59 % |
| RY.PR.H | Perpetual-Premium | 1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-17 Maturity Price : 24.65 Evaluated at bid price : 24.88 Bid-YTW : 5.70 % |
| TRI.PR.B | Floater | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-17 Maturity Price : 22.28 Evaluated at bid price : 22.55 Bid-YTW : 1.72 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.D | FixedReset | 113,474 | Desjardins crossed 100,000 at 28.19. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 28.16 Bid-YTW : 3.79 % |
| PWF.PR.M | FixedReset | 105,385 | National crossed 100,000 at 27.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 27.28 Bid-YTW : 3.62 % |
| TRP.PR.A | FixedReset | 100,435 | National crossed blocks of 25,000 and 15,000, both at 26.09. RBC crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.04 Bid-YTW : 3.81 % |
| TD.PR.M | OpRet | 100,341 | RBC crossed 98,000 at 26.24. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-03-19 Maturity Price : 26.00 Evaluated at bid price : 26.23 Bid-YTW : -3.78 % |
| TD.PR.N | OpRet | 92,000 | RBC crossed 90,000 at 26.21. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-03-19 Maturity Price : 26.00 Evaluated at bid price : 26.18 Bid-YTW : -1.63 % |
| TD.PR.I | FixedReset | 71,600 | TD crossed 25,000 at 27.85. National crossed 25,000 at 27.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.82 Bid-YTW : 3.64 % |
| There were 44 other index-included issues trading in excess of 10,000 shares. | |||
[…] PerpetualDiscounts now yield 5.90%, equivalent to 8.26% interest at the standard 1.4x equivalency factor. Long Corporates now yield about 5.9% – maybe a little under – so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 235bp, a modest (and perhaps spurious) tightening from the 240bp reported February 17. […]