March 31, 2011

Europe’s on credit watch:

Moody’s Investors Service said it can’t rule out further credit downgrades for euro-region nations because the agreement on a permanent bailout fund, the European Stability Mechanism, doesn’t go far enough.

European Union leaders met March 25 and set out new rules on bailout loans. Their failure so far to provide a permanent system whereby stronger nations support the finances of their weaker counterparts leaves bondholders at risk, Moody’s said.

“The absence of a fiscal-transfer mechanism and the conditions under which assistance will prospectively be made available leave downside risk to private creditors,” the rating agency said in an e-mailed report today. “Consequently, further rating downgrades cannot be ruled out.”

… so the ECB is suspending credit quality requirements:

The European Central Bank said it will accept all debt instruments backed by the Irish government as collateral against ECB loans as the country attempts to shore up its banking industry.

The Frankfurt-based ECB said Ireland’s commitment to recapitalize its banks and comply with a consolidation program prescribed by the European Union and International Monetary Fund must be assessed “positively.” The suspension of the minimum credit-rating threshold is based on “this positive assessment of the program,” a capital increase for Ireland’s four banks and the decision to “deleverage and downsize the banking sector,” the ECB said.

It is not the first time the ECB has loosened its collateral rules to help a euro-area member state in distress. In May last year, the ECB announced it would accept all Greek government debt as collateral when lending to banks, suspending minimum credit-rating thresholds to support a 110 billion-euro bailout of the debt-strapped nation. Ireland was the second of the now 17 euro-area members to receive a bailout last year.

The ECB “deems debt instruments issued or guaranteed by the Irish government to fulfill the credit standards required for collateral in Eurosystem credit operations,” the bank said. “The relevant risk control measures will be reviewed on a continuous basis.”

It was a good day to end the month in the Canadian preferred share market, with PerpetualDiscounts gaining 10bp, FixedResets exactly flat and DeemedRetractibles winning 13bp. Volatility was muted, with only two entries on the Performance Highlights table. Volume was 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 0.1310 % 2,408.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1310 % 3,623.0
Floater 2.50 % 2.28 % 39,750 21.55 4 0.1310 % 2,601.0
OpRet 4.86 % 3.11 % 59,062 1.12 9 -0.0942 % 2,411.2
SplitShare 5.08 % 2.69 % 119,760 0.97 5 0.1427 % 2,489.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0942 % 2,204.8
Perpetual-Premium 5.74 % 5.61 % 132,829 2.77 10 0.0020 % 2,041.3
Perpetual-Discount 5.50 % 5.54 % 131,014 14.46 14 0.0970 % 2,139.3
FixedReset 5.15 % 3.42 % 230,853 2.93 57 0.0000 % 2,290.2
Deemed-Retractible 5.20 % 5.11 % 305,763 8.23 53 0.1315 % 2,095.7
Performance Highlights
Issue Index Change Notes
HSB.PR.D Deemed-Retractible -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 5.50 %
GWO.PR.I Deemed-Retractible 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.01
Bid-YTW : 6.05 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.A Deemed-Retractible 72,495 Nesbitt crossed 50,000 at 22.80.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 5.89 %
GWO.PR.G Deemed-Retractible 46,163 Nesbitt sold 11,100 to anonymous at 24.70, then crossed 20,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.69
Bid-YTW : 5.38 %
BMO.PR.Q FixedReset 41,995 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 3.87 %
RY.PR.Y FixedReset 32,614 Scotia crossed 27,800 at 27.45.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 27.45
Bid-YTW : 3.52 %
TD.PR.Q Deemed-Retractible 28,315 TD crossed 25,000 at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-02
Maturity Price : 25.00
Evaluated at bid price : 25.94
Bid-YTW : 5.07 %
IAG.PR.F Deemed-Retractible 27,635 Desjardins crossed 25,000 at 25.39.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 5.57 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRI.PR.B Floater Quote: 23.05 – 23.75
Spot Rate : 0.7000
Average : 0.4898

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-31
Maturity Price : 22.77
Evaluated at bid price : 23.05
Bid-YTW : 2.24 %

BNS.PR.Z FixedReset Quote: 24.50 – 25.00
Spot Rate : 0.5000
Average : 0.3613

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 4.14 %

ELF.PR.G Deemed-Retractible Quote: 20.31 – 20.73
Spot Rate : 0.4200
Average : 0.3014

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.31
Bid-YTW : 7.30 %

HSB.PR.D Deemed-Retractible Quote: 24.05 – 24.44
Spot Rate : 0.3900
Average : 0.2745

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 5.50 %

BNS.PR.O Deemed-Retractible Quote: 26.12 – 26.49
Spot Rate : 0.3700
Average : 0.2559

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-05-26
Maturity Price : 25.00
Evaluated at bid price : 26.12
Bid-YTW : 4.96 %

SLF.PR.F FixedReset Quote: 27.00 – 27.35
Spot Rate : 0.3500
Average : 0.2510

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.00
Bid-YTW : 3.49 %

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