The Boston Fed has released a Public Policy Discussion Paper by Oz Shy titled Person-to-Person Electronic Funds Transfers: Recent Developments and Policy Issues:
The paper investigates the reasons why person-to-person electronic funds transfers are still not very common in the United States compared with practices in many other countries. The paper also describes recent enhancements to online and mobile banking that provide account holders with low-cost interfaces to manage person-to-person electronic funds transfers via automated clearing house (ACH). On the theoretical side, the paper characterizes the critical mass levels needed for payment instruments to become widely adopted. Given the Fed’s long-term heavy involvement in check clearing, the paper concludes with policy discussions of whether intervention is needed.
One thing I found particularly fascinating was:
This paper provides international evidence on the use of online P2P fund transfers. P2P electronic funds transfers dominate some European countries where checkbooks are not used by households. For example, it is very common for a schoolteacher in Germany to collect money for a certain school activity (such as an end-of-year class trip) via this system. The teacher simply provides parents with her own bank account information, and parents use their Web access to their bank account to transfer any amount of money at no cost to them, adding a note stating the student’s name and the purpose of the transfer. Most bills in Germany (such as payments made to dentists, daycare centers, and landlords) are also paid via account-to-account electronic transfers because most people do not have a checkbook. Thus, in Germany, merchants and consumers view electronic transfers of this sort as the most practical and least costly alternative to cash and plastic card transactions (see Litan and Baily 2009).
I had no idea! Frankly, the idea terrifies me. Just another security nightmare, as far as I’m concerned … but then, I’m a Luddite. I don’t even have a debit card – when they came out, I couldn’t figure out why I would want to pay a transaction charge, when I could use cash or credit for free.
A bit like the scuffle I had with a custodian once. They hated our paper confirms that got faxed to them. ‘Why not use electronic files?’ they wanted to know ‘It will be easier!’ Then they told us that there would be a charge for electronics, vs. the free faxes. I’ve never been quite sure whether they were genuinely stupid, or whether they assumed that since it was only client’s money that we wouldn’t care. The latter is usually the case … but why were faxes (which they had to keypunch into their system) free, and the electronics expensive? I’ll never understand this world …
Hedge funds have made millions betting against helpless sovereigns … now it appears that Italy’s made bllions betting against hedge funds:
Italy’s Treasury earned 8.1 billion euros ($10.9 billion) from interest-rate and currency swap operations since 1998 in an eight-year winning streak.
The Rome-based Finance Ministry lost 392 million euros in 2008 and 337 million euros in 2007 in the transactions, according to 1998-2008 figures supplied by Eurostat, the European Union’s statistics office. Until then, the government had made money on the operations.
The Bloomberg story doesn’t make it clear whether this was speculation, or hedges that they were awfully, awfully glad they had in place.
I’m going to start trying to restrain myself; nobody’s said anything, but I suspect that PrefBlog is becoming a little too angry and may be perceived as bitter. Really, I’m going to try. But when one considers Greece’s excuse for its fiscal woes, isn’t calmness a sign of mental disease?
On Tuesday a German state finance minister said Greece had to help itself out of its precarious fiscal situation and cannot expect Germany or the European Union to bail it out.
Pangalos criticised Germany’s attitude towards the Greek crisis, saying Athens had never received compensation for the economic impact of the Nazi occupation during World War Two.
“They took away the Greek gold that was at the Bank of Greece, they took away the Greek money and they never gave it back. This is an issue that has to be faced sometime in the future,” he said.
“I don’t say they have to give back the money necessarily but they have at least to say ‘thanks’,” he said. “And they shouldn’t complain so much about stealing and not being very specific about economic dealings.”
Honestly! Doesn’t it remind you of a 45-year old woman complaining her life is a mess because her Mum wouldn’t let her go on dates until she was sixteen? Kick ’em out of the EU and let in Macedonia, that’s what I say!
I was in Commerce Court West yesterday attempting to transact some business … but GWL Realty Advisors has decided it’s a HIGH PROFILE TARGET FOR TERRORISTS and has installed security choke-points at the entrance to the elevators, complete with officious dolts who demand to know your itinerary if you don’t have a pass card. In the absence of any knowledge of a specific threat, I must conclude that GWLRA are a pack of hysterical old women; the terrorists I read about prefer high profile offices (such as the Parliament buildings … I don’t mind security there) and massacre of randomly chosen innocents.
The food court in the basement of the building is at far greater risk than any of the offices on the upper floors – but that doesn’t matter to self-aggrandizing security officers, does it? They must be doing a good job, they’re visible! And there must be what? Three, four bombs going off every day in Toronto, eh? Still, it makes the security guys feel important and – best of all – it makes the terrorists feel important, too. I suggest that all readers of PrefBlog who are terrorists write GWLRA a thank you note for their achievement. And, for God’s sake, if you’re planning an operation at Commerce Court West, make an appointment with somebody.
So I called my guy and told him to mail me the documents; I’m not going to perform as an extra in GWLRA’s Sergeant Rock fantasy.
The SEC has cemented its reputation as a panderer to politicians and upholder of feel-goodism by approving a new short-selling rule:
The alternative uptick rule (Rule 201) approved today imposes restrictions on short selling only when a stock has triggered a circuit breaker by experiencing a price decline of at least 10 percent in one day. At that point, short selling would be permitted if the price of the security is above the current national best bid.
Naturally, this rule will rarely be triggered and (as has been shown by extensive academic research) when triggered will do more harm than good. But the SEC not only gets a chance to Take Forthright And Decisive Action, but now there’s another gotcha in its bag of tricks. You don’t have procedures in place to enforce the rule? No written policy statements? No checklists? Gotcha!
Volume spiked upwards today but the market had no clear direction as both PerpetualDiscounts and FixedResets gained a little less than 1bp on the day.
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.
| 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 | 2.81 % | 3.02 % | 33,128 | 20.44 | 1 | 0.2332 % | 1,966.6 |
| FixedFloater | 5.30 % | 3.41 % | 44,044 | 19.70 | 1 | 1.4851 % | 2,980.3 |
| Floater | 1.95 % | 1.69 % | 44,020 | 23.33 | 4 | 0.5590 % | 2,362.8 |
| OpRet | 4.88 % | 1.15 % | 108,113 | 0.26 | 13 | -0.0742 % | 2,307.5 |
| SplitShare | 6.37 % | 4.94 % | 128,268 | 0.08 | 2 | -0.4158 % | 2,141.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0742 % | 2,110.0 |
| Perpetual-Premium | 5.77 % | 5.56 % | 82,437 | 5.89 | 7 | -0.1018 % | 1,896.1 |
| Perpetual-Discount | 5.87 % | 5.90 % | 175,251 | 14.07 | 69 | 0.0095 % | 1,800.8 |
| FixedReset | 5.41 % | 3.57 % | 318,064 | 3.74 | 42 | 0.0076 % | 2,187.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.A | Perpetual-Discount | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-24 Maturity Price : 20.14 Evaluated at bid price : 20.14 Bid-YTW : 5.74 % |
| TRP.PR.A | FixedReset | -1.07 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 4.05 % |
| IAG.PR.A | Perpetual-Discount | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-24 Maturity Price : 19.88 Evaluated at bid price : 19.88 Bid-YTW : 5.79 % |
| BAM.PR.G | FixedFloater | 1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-24 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 3.41 % |
| PWF.PR.A | Floater | 2.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-24 Maturity Price : 23.33 Evaluated at bid price : 23.61 Bid-YTW : 1.64 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| PWF.PR.M | FixedReset | 133,580 | Desjardins crossed 10,000 at 27.40, bought 12,000 from National at 27.35, then crossed another 10,000 at 27.40. They followed this up by crossing 16,000 at 27.39, buying 25,000 from National at the same price, then crossed another 25,000 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 27.39 Bid-YTW : 3.53 % |
| GWO.PR.E | OpRet | 101,068 | Called for redemption. Nesbitt crossed 97,700 at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.46 Bid-YTW : 3.74 % |
| CM.PR.A | OpRet | 90,160 | Nesbitt crossed 25,000 at 26.05, then bought 10,000 from Desjardins at 26.04. RBC crossed 49,000 at 26.05. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-03-26 Maturity Price : 25.25 Evaluated at bid price : 26.01 Bid-YTW : -25.14 % |
| RY.PR.W | Perpetual-Discount | 57,825 | TD crossed 50,000 at 21.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-02-24 Maturity Price : 21.68 Evaluated at bid price : 21.68 Bid-YTW : 5.69 % |
| TD.PR.G | FixedReset | 53,020 | National crossed 39,700 at 28.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.89 Bid-YTW : 3.48 % |
| TD.PR.C | FixedReset | 44,400 | Scotia crossed 35,000 at 26.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.87 Bid-YTW : 3.68 % |
| There were 52 other index-included issues trading in excess of 10,000 shares. | |||
[…] PerpetualDiscounts now yield 5.90%, equivalent to 8.26% interest at the standard equivalency factor of 1.4x. Long Corporates yield about 5.9%, so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 235bp, which is where it was on February 24. […]
[…] Person-to-Person Electronic Funds Transfers: Recent Developments and Policy Issues (highlighted February 24) […]
[…] a tenant has to make an appointment for you with security so you can get a pass – see the February 24, 2010 post for more details. It’s working out as expected: The four buildings and underground space […]