August 29, 2012

There’s a chance that Apple might have shot itself in the foot by winning the patent case with Samsung. A post-secondary friend tells me that she’s hearing a lot of people saying ‘If the iPhone and the Galaxy are the same thing … why pay more?’

I saw this one coming … now that Lapdog Carney has successfully floated the trial balloon, Spend-Every-Penny is urging companies to piss away the nest-egg:

Stimulating the economy ultimately falls on the heads of the private sector, Finance Minister Jim Flaherty said Monday.

“We’ve done a lot through the tax system to encourage Canadian executives, business people, to start utilizing some of the capital they have on their balance sheets,” said Mr. Flaherty.

“At a certain point, it’s not up to the government to stimulate the economy, it’s up to the private sector, and they have lots of capital.”

This is the man who has turned the federal surplus into a structural deficit. He needn’t be taken seriously. However, his use of the central bank governor as a spokesman – a junior minister – for the government is a disgrace and Carney has disgraced himself for allowing central bank independence to be compromised. This politicization of what should be among the most technocratic arms of the civil service will end in tears – but probably not before the next election, which is all that counts.

How wise are pension fund managers? Not much!

The SEC alleges that Fabrizio Neves conducted the scheme while working at LatAm Investments LLC, a broker-dealer that is no longer in business. He was assisted by Jose Luna. The pair defrauded two Brazilian public pension funds and a Colombian institutional investor that purchased from LatAm the structured notes issued by major commercial banks. To conceal the excessive markups that Neves charged customers, Neves directed Luna to alter the banks’ structured note term sheets in half of the transactions by either whiting out or electronically cutting and pasting the markup amounts over the actual price and trade information, and then sending the forged documents to customers. Neves and Luna further concealed the egregious markups in most transactions by first purchasing the notes into accounts in the name of nominee entities they controlled in the British Virgin Islands.

According to the SEC’s complaint against Neves and Luna filed in U.S. District Court for the Southern District of Florida, Neves negotiated with several U.S. and European commercial banks to structure 12 notes on his customers’ behalf from 2006 to 2009. But instead of purchasing the notes for his customers’ accounts for prices around the banks’ issuance amounts – which totaled approximately $70 million – in most transactions Neves first traded the notes with one or more accounts in the name of offshore nominee entities that he and Luna controlled. Neves then sold the notes to his customers with undisclosed markups as high as 67 percent.

Clearly, the wise investors bought whatever their friendly salesman told them to buy.

Scotia is buying ING Bank Canada:

Bank of Nova Scotia, Canada’s third- largest lender, agreed to buy ING Bank of Canada for C$3.13 billion ($3.16 billion) in its largest takeover to add to its retail deposits.

Scotiabank will buy the ING Groep NV (INGA) unit in a cash deal, the Toronto-based bank said today in a statement. It will sell 29 million shares at C$52 each in a bought deal, for gross proceeds of C$1.51 billion to fund the takeover.

DBRS confirmed BBBD:

DBRS has today confirmed the Issuer Rating and the Senior Unsecured Debentures rating of Bombardier Inc. (BBD or the Company) at BB with a Stable trend. BBD’s Preferred Shares have also been confirmed at Pfd-4 with a Stable trend. The confirmation reflects our expectation that the Company’s financial measures, while acceptable for the current rating, are unlikely to materially improve in the next two to three years because of high capex requirements, continued demand uncertainty in the Company’s aerospace division (BA, accounting for about half of total EBIDTA in the first half of 2012) and softening of economic conditions in Europe and Asia Pacific, two of BBD’s key geographic markets. BBD is a leading global manufacturer of transportation equipment, including a broad range of business and commercial aircraft as well as rail transportation equipment.

It was a mildly positive day for the Canadian preferred share market, with PerpetualPremiums flat, FixedResets gaining 3bp and DeemedRetractibles up 7bp. Volatility was minimal. Volume had its bright spots, but retail is still on holiday.

PerpetualDiscounts now yield 4.96%, equivalent to 6.45% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.3%, so the pre-tax interest-equivalent spread is now about 215bp, a widening from the 205bp reported August 22 as corporates have improved over the past week while PerpetualDiscounts have been flattish.

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 0.1732 % 2,405.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1732 % 3,597.9
Floater 3.03 % 3.07 % 58,727 19.48 3 0.1732 % 2,597.0
OpRet 4.77 % 3.30 % 27,877 0.81 5 0.1540 % 2,544.9
SplitShare 5.49 % 4.94 % 71,084 4.64 3 -0.1199 % 2,796.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1540 % 2,327.1
Perpetual-Premium 5.29 % 3.40 % 94,194 0.38 28 0.0000 % 2,278.2
Perpetual-Discount 4.95 % 4.96 % 99,665 15.46 3 0.0278 % 2,526.5
FixedReset 5.00 % 3.02 % 171,729 3.97 71 0.0317 % 2,427.8
Deemed-Retractible 4.94 % 3.13 % 120,701 0.73 46 0.0734 % 2,368.7
Performance Highlights
Issue Index Change Notes
BAM.PR.C Floater 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-08-29
Maturity Price : 17.23
Evaluated at bid price : 17.23
Bid-YTW : 3.07 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.K Deemed-Retractible 749,060 Very active, with all trades at 26.40. National crossed blocks of 125,000 and 50,000. RBC crossed 50,000 and 49,700. Desjardins crossed 50,000 and 100,000. Nesbitt crossed 100,000 and 65,000. TD crossed 149,500.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-11-25
Maturity Price : 26.00
Evaluated at bid price : 26.38
Bid-YTW : -0.78 %
SLF.PR.B Deemed-Retractible 204,526 Nesbitt crossed 200,000 at 24.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.37
Bid-YTW : 5.12 %
BNS.PR.Y FixedReset 112,240 Nesbitt crossed 100,000 at 25.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.29
Bid-YTW : 2.71 %
TD.PR.K FixedReset 103,081 Scotia crossed 100,000 at 26.90.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.91
Bid-YTW : 2.44 %
FTS.PR.H FixedReset 63,200 National crossed 62,000 at 25.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-08-29
Maturity Price : 23.60
Evaluated at bid price : 25.55
Bid-YTW : 2.76 %
SLF.PR.A Deemed-Retractible 57,521 Nesbitt crossed 50,000 at 24.05.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 5.21 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.G Perpetual-Discount Quote: 23.45 – 23.88
Spot Rate : 0.4300
Average : 0.2595

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-08-29
Maturity Price : 23.16
Evaluated at bid price : 23.45
Bid-YTW : 5.12 %

PWF.PR.F Perpetual-Premium Quote: 25.19 – 25.55
Spot Rate : 0.3600
Average : 0.2590

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-09-28
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : 1.07 %

TRP.PR.C FixedReset Quote: 25.73 – 25.99
Spot Rate : 0.2600
Average : 0.1614

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-08-29
Maturity Price : 23.55
Evaluated at bid price : 25.73
Bid-YTW : 2.88 %

CIU.PR.B FixedReset Quote: 26.87 – 27.14
Spot Rate : 0.2700
Average : 0.1757

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.87
Bid-YTW : 2.33 %

SLF.PR.G FixedReset Quote: 24.70 – 24.95
Spot Rate : 0.2500
Average : 0.1569

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 3.38 %

GWO.PR.L Deemed-Retractible Quote: 26.00 – 26.30
Spot Rate : 0.3000
Average : 0.2137

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 4.85 %

One Response to “August 29, 2012”

  1. […] PerpetualDiscounts – all three of them – now yield 4.95%, equivalent to 6.44% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.3%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 215bp, unchanged from August 29. […]

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