April 27, 2010

Nomura is finding out that rainmakers are mobile:

Nomura has been hitting turbulence. At least 12 senior former Lehman managers, including Nomura’s deputy investment banking chief, have defected since the firm began paying out guaranteed bonuses last month, casting doubt on Watanabe’s efforts to bridge cultural gaps. Japan’s largest brokerage is struggling to match a rebound in profit at Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc.

“Investment banking is ferociously competitive,” said Giorgio Questa, a finance professor at London’s Cass Business School. “I strongly doubt Nomura can develop a strong international investment banking business” because it will struggle to integrate Lehman’s culture, he said.

In shocking news, it appears that Goldman personnel discussed which asset management firms might have wanted to sell what other clients wanted to buy:

Newly disclosed Goldman Sachs Group Inc. internal e-mails cast light on how the investment bank devised collateralized debt obligations called Abacus, including one at the center of a U.S. Securities and Exchange Commission fraud lawsuit.

The e-mails show employees discussed which outside firms would be “easiest” to work with while creating Abacus CDOs to bet against the housing market.

The e-mails were released yesterday by Senator Carl Levin, the Michigan Democrat who leads the Senate’s Permanent Subcommittee on Investigations, as the panel prepares to question Goldman Sachs executives today. In one message, a Goldman Sachs worker asked which outside firm would most likely approve assets that hedge fund Paulson & Co. wanted to include in a CDO and bet against.

“The way I look at it, the easiest manager to work with should be used for our own axes,” the author wrote in December 2006, using industry jargon that can refer the firm’s financial interest in a deal. The writer also expressed concern that two firms being considered weren’t likely to sign off on Paulson’s suggested assets. “They will never agree to the type of names [P]aulson want to use[.]”

Even more horrifically, Senator Levin has learned that Goldman was acting as principal:

In another December 2006 e-mail, Tourre discussed other business opportunities for Abacus, outlining a strategy in which Goldman Sachs would “‘rent’ our Abacus platform to counterparties” that wanted to short the market. The messages show “Goldman repeatedly put its own interest and profit ahead of the interests of its clients,” Levin said.

Can you imagine? Putting a trade in front of an asset manager, just as if they were adults? The mind boggles!

In the actual hearing, Senator Levin stated that in the future, institutional clients will not be allowed to take views on the market that are contrary to those of their broker’s research department:

“Goldman Sachs didn’t just make money, it profited by taking advantage of its clients’ reasonable expectation that it would not sell products that it did not want to succeed and that there was no conflict of economic interest between the firm and its customers,” Levin said today in his opening remarks. “Its conduct brings into question the whole conduct of Wall Street.”

The political rhetoric is getting a little wearisome. Senator Levin is, I am quite confident, a knowledgable and intelligent man with a knowledgable and intelligent staff and access to knowledgable and intelligent Treasury / Fed / private analysts. So I can only find solace in the idea that it’s just political breast-beating with the aim of passing his favoured legislation and extorting a little fuck-off money from Goldman to highlight in his next re-election brochures.

There’s nothing on the the company website, no press releases I can find and nothing on SEDAR … but Canadian Banc Recovery Corp. had a footer ad on the front page of the Globe & Mail Report on Business today touting their “Attractive Distribution” … and the PrefBlog Forecasting Department thinks this means that a treasury offering will be forthcoming soon for BK and BK.PR.A.

Another rough day for the Canadian preferred share market, with PerpetualDiscounts down 21bp while FixedResets lost 27bp. Volume continued heavy.

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 2.53 % 2.57 % 53,293 21.00 1 1.3182 % 2,185.6
FixedFloater 4.90 % 2.97 % 46,093 20.42 1 0.4525 % 3,267.4
Floater 1.92 % 1.67 % 47,355 23.44 4 -0.2069 % 2,404.4
OpRet 4.90 % 3.79 % 100,035 0.50 10 0.1484 % 2,304.9
SplitShare 6.40 % 6.53 % 137,778 3.57 2 0.0000 % 2,131.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1484 % 2,107.7
Perpetual-Premium 5.92 % 4.77 % 28,392 15.86 2 -0.1024 % 1,821.3
Perpetual-Discount 6.27 % 6.31 % 215,424 13.45 76 -0.2137 % 1,700.4
FixedReset 5.54 % 4.49 % 516,713 3.61 44 -0.2694 % 2,133.6
Performance Highlights
Issue Index Change Notes
GWO.PR.H Perpetual-Discount -1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-27
Maturity Price : 18.82
Evaluated at bid price : 18.82
Bid-YTW : 6.53 %
PWF.PR.H Perpetual-Discount -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-27
Maturity Price : 21.63
Evaluated at bid price : 22.05
Bid-YTW : 6.55 %
BMO.PR.P FixedReset -1.32 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-27
Maturity Price : 25.00
Evaluated at bid price : 26.25
Bid-YTW : 4.49 %
RY.PR.X FixedReset -1.26 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 26.56
Bid-YTW : 4.64 %
BMO.PR.K Perpetual-Discount -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-27
Maturity Price : 21.39
Evaluated at bid price : 21.71
Bid-YTW : 6.15 %
TD.PR.I FixedReset -1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.56
Bid-YTW : 4.67 %
BAM.PR.J OpRet -1.01 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 5.24 %
BAM.PR.O OpRet 1.01 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 3.79 %
HSB.PR.C Perpetual-Discount 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-27
Maturity Price : 20.23
Evaluated at bid price : 20.23
Bid-YTW : 6.39 %
CM.PR.K FixedReset 1.17 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.50 %
BAM.PR.E Ratchet 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-27
Maturity Price : 22.53
Evaluated at bid price : 22.29
Bid-YTW : 2.57 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.L FixedReset 122,657 RBC bought blocks of 15,000 and 20,000 from Scotia, both at 26.62, then crossed 50,000 at 26.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 26.73
Bid-YTW : 4.69 %
CM.PR.A OpRet 114,200 Nesbitt crossed 110,000 at 25.55.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-05-27
Maturity Price : 25.25
Evaluated at bid price : 25.50
Bid-YTW : -7.15 %
RY.PR.H Perpetual-Discount 96,275 Nesbitt crossed 60,000 at 23.35; National crossed 20,000 at 23.32.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-27
Maturity Price : 23.08
Evaluated at bid price : 23.25
Bid-YTW : 6.08 %
BNS.PR.T FixedReset 88,650 National crossed 49,600 at 26.89.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 26.85
Bid-YTW : 4.33 %
MFC.PR.D FixedReset 87,149 National crossed 30,000 at 26.85; RBC crossed 35,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-19
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 4.96 %
SLF.PR.B Perpetual-Discount 67,680 RBC crossed 48,800 at 18.75.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-27
Maturity Price : 18.71
Evaluated at bid price : 18.71
Bid-YTW : 6.50 %
There were 57 other index-included issues trading in excess of 10,000 shares.

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