It was a black day for Canadian capital markets:
Maple Group Acquisition Corp. has won control of TMX Group Inc., with 91 per cent of shares tendered to its takeover offer worth about $3.8 billion.
A new Maple board of directors has already been appointed.
And along similar lines … when is a bank not a bank? When it’s a money-market mutual fund:
The 10 biggest money-fund managers and the Investment Company Institute trade group reported combined lobbying spending of $16 million in the first half of 2012 and $31.6 million last year in disclosures that reference money-market mutual funds, according to a review of documents by Bloomberg News. That compares with $16.7 million in all of 2010.
The companies are seeking to block new rules championed by Securities and Exchange Commission Chairman Mary Schapiro that are headed for a vote before a divided commission as soon as this month. The proposal would force funds to abandon their fixed $1 share price or introduce withdrawal limits and capital buffers. Schapiro can count on only one supporting vote from the other four commissioners, even as Federal Reserve officials have said that failure to enact tougher rules will leave the $2.5 trillion industry vulnerable to investor runs and threaten global credit markets.
The FOMC statement was gloomy:
Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year. Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
This libel suit amuses me:
Daniels repeatedly questioned Molo about statements from the book that are alleged to be libelous, including Lewis’s comments that Chau had worked for “sleepy” insurance companies for much of his career before managing CDOs and that CDO managers didn’t work hard.
“Most of your argument is based on the implications of certain statements, not on the actual statements,” the judge told Molo. “There’s no proof you can offer to a jury whether an insurance company is ‘sleepy.’ That is hyperbole. That is opinion.”
…
Chau’s firm managed about $20 billion worth of CDOs in 2007, making it the fourth largest in that category, according to court papers. Investors in Harding’s CDOs included UBS AG and Deutsche Bank AG, according court filings. CDO sales collapsed in 2007 along with the subprime-mortgage market.
There are certainly very many portfolio managers out there who are totally unqualified. Usually they just underperform. Sometimes they get hired by enormous companies with equally incompetent advisors.
It was another good, solid day for the Canadian preferred share market, with PerpetualPremiums winning 12bp, FixedResets up 5bp and DeemedRetractibles gaining 9bp. Volatility was muted. Volume was pathetically low.
The PerpetualDiscount sub-index got cut in half with the July month-end rebalancing, losing CIU.PR.A to Scraps on volume concerns, while ELF.PR.F and PWF.PR.K migrated to the PerpetualPremium index. The remaining constituents are BAM.PR.M, BAM.PR.N and ELF.PR.G.
PerpetualDiscounts, all three of them, now yield 4.96%, equivalent to 6.45% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.25% (maybe a little more) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 220bp, unchanged from July 25.
| 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 | 0.0403 % | 2,296.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0403 % | 3,434.8 |
| Floater | 3.17 % | 3.20 % | 68,362 | 19.21 | 3 | 0.0403 % | 2,479.2 |
| OpRet | 4.76 % | 2.39 % | 35,292 | 0.89 | 5 | 0.0690 % | 2,536.7 |
| SplitShare | 5.47 % | 4.91 % | 66,307 | 4.66 | 3 | 0.0933 % | 2,764.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0690 % | 2,319.6 |
| Perpetual-Premium | 5.30 % | 3.98 % | 104,899 | 1.16 | 28 | 0.1177 % | 2,271.3 |
| Perpetual-Discount | 4.98 % | 4.96 % | 105,097 | 15.53 | 3 | 0.0140 % | 2,508.9 |
| FixedReset | 4.98 % | 3.00 % | 181,807 | 4.00 | 71 | 0.0499 % | 2,424.5 |
| Deemed-Retractible | 4.96 % | 3.19 % | 143,423 | 0.80 | 46 | 0.0861 % | 2,351.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| RY.PR.A | Deemed-Retractible | 1.09 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-08-31 Maturity Price : 25.75 Evaluated at bid price : 26.03 Bid-YTW : -11.80 % |
| HSE.PR.A | FixedReset | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-08-01 Maturity Price : 23.63 Evaluated at bid price : 26.15 Bid-YTW : 2.98 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| HSB.PR.D | Deemed-Retractible | 101,637 | Desjardins crossed 100,000 at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-12-31 Maturity Price : 25.50 Evaluated at bid price : 25.80 Bid-YTW : 3.09 % |
| ELF.PR.H | Perpetual-Premium | 73,840 | RBC crossed blocks of 25,000 at 26.12 and 45,100 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-17 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 5.02 % |
| GWO.PR.I | Deemed-Retractible | 67,849 | RBC crossed blocks of 32,500 and 28,000, both at 23.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 5.34 % |
| BNS.PR.T | FixedReset | 53,167 | TD crossed 50,000 at 26.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.68 Bid-YTW : 2.27 % |
| BMO.PR.O | FixedReset | 38,381 | RBC crossed 19,500 at 26.89. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.89 Bid-YTW : 2.00 % |
| BNS.PR.Q | FixedReset | 33,895 | CIBC sold 12,100 to anonymous at 25.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 3.14 % |
| There were 15 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.I | Deemed-Retractible | Quote: 23.60 – 24.11 Spot Rate : 0.5100 Average : 0.3097 YTW SCENARIO |
| RY.PR.N | FixedReset | Quote: 26.24 – 26.75 Spot Rate : 0.5100 Average : 0.3657 YTW SCENARIO |
| IAG.PR.E | Deemed-Retractible | Quote: 26.32 – 26.95 Spot Rate : 0.6300 Average : 0.4975 YTW SCENARIO |
| POW.PR.G | Perpetual-Premium | Quote: 26.26 – 26.60 Spot Rate : 0.3400 Average : 0.2288 YTW SCENARIO |
| PWF.PR.F | Perpetual-Premium | Quote: 25.24 – 25.60 Spot Rate : 0.3600 Average : 0.2510 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 25.91 – 26.30 Spot Rate : 0.3900 Average : 0.2827 YTW SCENARIO |
[…] PerpetualDiscounts (all three of them!) now yield 4.96%, equivalent to 6.45% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.35%, so the pre-tax interest equivalent spread (in this context, the “Seniority Spread”) is now about 210bp, a decent-enough narrowing from the 220bp reported August 1. […]