September 12, 2012

The Great Regulatory Job Creation Scheme is gathering steam:

U.S. regulators are set to choose the first non-bank companies likely to be branded potential risks to the financial system, according to two people with knowledge of the plans.

The Financial Stability Oversight Council intends to request confidential data from as many as five U.S. firms at a meeting this month, said the people, who declined to be identified because the plans aren’t public. The request is a step toward deciding whether the companies should be subject to Federal Reserve supervision, including stress tests, higher capital levels and tougher liquidity requirements.

So the Fed will have to hire more regulators to administer the expanded mandate and then more regulators to replace the old regulators who have been hired by the affected companies at fat salaries. It’s win-win!

Wow! The US Mortgage almost-agencies have a radical new business model!

Edward J. DeMarco, the overseer of taxpayer-supported Fannie Mae (FNMA) and Freddie Mac, said the firms need to increase the fees they charge to guarantee mortgages in states where it’s costlier for them to deal with bad debt.

Can you imagine? Charging for services based on expected costs? I think Mr. DeMarco should get the Nobel Prize in Economics.

It was another day of little movement for the Canadian preferred share market, with PerpetualPremiums down 3bp, FixedResets gaining 4bp and DeemedRetractibles off 2bp. Volatility was minimal. Volume was average – which is a huge improvement from recent levels, probably helped along by the BAM.PF.B new issue.

PerpetualDiscounts (all three of them!) now yield 4.92%, equivalent to 6.40% interest at the standard equivalency factor of 1.3x. Update Long Corporates now yield about 4.4%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 200bp, sharply tighter than the 215bp reported September 5.

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 0.1992 % 2,411.4
FixedFloater 4.52 % 3.87 % 35,092 17.52 1 0.0000 % 3,522.5
Floater 3.04 % 3.05 % 56,384 19.61 3 0.1992 % 2,603.6
OpRet 4.68 % 3.35 % 62,268 1.49 4 -0.2771 % 2,541.3
SplitShare 5.48 % 4.98 % 72,650 4.60 3 0.0400 % 2,800.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2771 % 2,323.8
Perpetual-Premium 5.29 % 3.10 % 85,844 0.34 28 -0.0340 % 2,278.7
Perpetual-Discount 4.95 % 4.92 % 95,267 15.65 3 0.0879 % 2,549.1
FixedReset 4.99 % 3.07 % 175,756 4.07 71 0.0411 % 2,422.9
Deemed-Retractible 4.95 % 3.54 % 120,696 1.85 46 -0.0152 % 2,365.3
Performance Highlights
Issue Index Change Notes
FTS.PR.E OpRet -1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.36
Bid-YTW : 1.66 %
HSB.PR.D Deemed-Retractible 1.22 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-31
Maturity Price : 25.50
Evaluated at bid price : 25.63
Bid-YTW : 2.42 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PF.B FixedReset 332,922 New issue settled today.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-12
Maturity Price : 23.08
Evaluated at bid price : 24.96
Bid-YTW : 3.95 %
BNS.PR.Y FixedReset 158,162 Nesbitt crossed 136,600 at 25.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : 2.78 %
MFC.PR.B Deemed-Retractible 74,298 Nesbitt crossed 50,000 at 23.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.82
Bid-YTW : 5.31 %
HSB.PR.D Deemed-Retractible 66,701 RBC crossed 59,700 at 25.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-31
Maturity Price : 25.50
Evaluated at bid price : 25.63
Bid-YTW : 2.42 %
GWO.PR.J FixedReset 60,719 RBC crossed 59,700 at 26.12.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 2.34 %
BNS.PR.K Deemed-Retractible 51,853 RBC crossed 50,000 at 25.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-28
Maturity Price : 25.25
Evaluated at bid price : 25.67
Bid-YTW : 3.01 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.E OpRet Quote: 26.36 – 26.80
Spot Rate : 0.4400
Average : 0.3055

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.36
Bid-YTW : 1.66 %

PWF.PR.O Perpetual-Premium Quote: 26.52 – 26.84
Spot Rate : 0.3200
Average : 0.1912

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.52
Bid-YTW : 4.81 %

GWO.PR.M Deemed-Retractible Quote: 26.26 – 26.60
Spot Rate : 0.3400
Average : 0.2216

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.26
Bid-YTW : 5.09 %

PWF.PR.K Perpetual-Premium Quote: 25.25 – 25.62
Spot Rate : 0.3700
Average : 0.2587

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.77 %

MFC.PR.D FixedReset Quote: 26.41 – 26.63
Spot Rate : 0.2200
Average : 0.1324

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.41
Bid-YTW : 3.26 %

SLF.PR.E Deemed-Retractible Quote: 23.26 – 23.45
Spot Rate : 0.1900
Average : 0.1137

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.26
Bid-YTW : 5.46 %

One Response to “September 12, 2012”

  1. […] spread (in this context, the “Seniority Spread”) is now about 200bp, unchanged from the September 12 […]

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