January 13, 2010

The Fed’s reintermediation has been good business:

The Federal Reserve paid a record $46.1 billion to the U.S. Treasury last year as aggressive bond purchases and lending to fight the financial crisis swelled its net income by 46.8 percent.

The Fed’s payment represents an increase of $14.4 billion over its 2008 contribution and was the largest since the U.S. central bank was launched in 1914. Its 2009 net income of $52.1 billion also was a record.

The SEC wants to take a more paternalistic approach to investors:

The Securities and Exchange Commission voted to propose banning a practice in which brokers provide investors with unsupervised access to an exchange or alternative trading system.

Chairman Mary Schapiro said so-called naked sponsored access, in which a customer bypasses the pre-trade controls of their brokers and access markets directly, may expose the market and firms that offer the service to too much risk.

Aite Group LLC, a financial services research firm in Boston, said in a December report that sponsored access represents about half of U.S. equities trading, with unfiltered access accounting for 38 percent.

Comrade Peace-Prize wants the banks to pay for the carmaker bail-out:

The fees, expected to be spread over as many as 10 years, will be based on the leverage or amount of liability each firm has, said the official, who spoke on the condition of anonymity.

Obama will outline his proposal to raise as much as $120 billion at an event at the White House tomorrow, according to the official who spoke on the condition of anonymity.

The final cost of the fees will be based on total losses from the Troubled Asset Relief Program, or TARP, which administration officials expect to drop from the current Treasury estimate of $120 billion. The White House declined to provide a list of banks that would be targeted.

The U.S. is unlikely to recoup its investment in insurer American International Group Inc. or automakers General Motors Corp. and Chrysler Group LLC. Those losses and money spent to stem mortgage foreclosures are estimated to be about $120 billion.

According to the latest TARP report:

To date, Treasury-OFS has provided approximately $76 billion in loans and equity investments to GM , Chrysler, and their respective financing entities.

According to Table 7 of the report, the total cost of TARP is now estimated to be $68.5-billion, of which $30.4-billion is the “Automotive Industry Financing Program” and $27.1-billion is the “Home Affordable Modification Program” (HAMP has been previously mocked on PrefBlog). If you add in the Fed’s reintermediation profits, aid to the financial system has been zero. I think, if anything, the financial industry should get a medal, or at least a large bonus: the whole point of recessions is to point out who’s been doing things wrong and the big finger points at the carmakers.

Why should we subsidize them? Because they’re good jobs. Why are they good jobs? Because they’re subsidized.

Philip Angelides, head of the Financial Crisis Inquiry Commission and recently treasuror of the financially troubled state of California, said today that portfolio managers are stupid and must have their trades approved by sell-side smiley-boys:

Lloyd Blankfein, the head of Goldman Sachs Group Inc., failed to own up to his firm’s role in selling mortgage securities that helped trigger the global credit crisis, said the chairman of the panel investigating the financial meltdown.

“Mr. Blankfein himself never admitted that there was any responsibility of Goldman Sachs to make sure the products themselves were good products,” Philip Angelides, chairman of the Financial Crisis Inquiry Commission, told reporters after a hearing in Washington today. “That’s very troublesome.”

I find it very troublesome that morons like Angelides are permitted to walk around without a keeper. What’s next? Fining securities firms for selling commercial paper that defaults? Or for selling auction rate securities that suddenly (surprise!) become illiquid? It’s ridiculous.

The market had another down day, with PerpetualDiscounts giving up 4bp total return and FixedResets losing 14bp, on good volume

PerpetualDiscounts now yield 5.75%, equivalent to 8.05% interest at the standard equivalency factor of 1.4x. Long Corporates continue to yield near-as-dammit to 6.0%, so the Pre-Tax Interest-Equivalent spread (also called the Seniority Spread) is now about 205bp, a slow (albeit appreciated!) tightening from the January 6 level of 212bp.

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 -0.6241 % 1,692.1
FixedFloater 5.91 % 3.97 % 36,064 19.06 1 -3.2545 % 2,675.0
Floater 2.32 % 2.65 % 109,449 20.67 3 -0.6241 % 2,113.9
OpRet 4.85 % -0.72 % 118,997 0.09 13 -0.1474 % 2,317.8
SplitShare 6.38 % 1.04 % 188,974 0.08 2 -0.3070 % 2,106.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1474 % 2,119.4
Perpetual-Premium 5.78 % 5.65 % 144,786 2.26 12 -0.1712 % 1,898.4
Perpetual-Discount 5.72 % 5.75 % 182,645 14.28 63 -0.0403 % 1,834.9
FixedReset 5.41 % 3.59 % 326,700 3.86 41 -0.1433 % 2,176.5
Performance Highlights
Issue Index Change Notes
BAM.PR.G FixedFloater -3.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-01-13
Maturity Price : 25.00
Evaluated at bid price : 18.40
Bid-YTW : 3.97 %
BAM.PR.B Floater -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-01-13
Maturity Price : 14.75
Evaluated at bid price : 14.75
Bid-YTW : 2.68 %
PWF.PR.L Perpetual-Discount -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-01-13
Maturity Price : 21.37
Evaluated at bid price : 21.67
Bid-YTW : 5.89 %
GWO.PR.J FixedReset -1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 27.26
Bid-YTW : 3.64 %
BMO.PR.J Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-01-13
Maturity Price : 21.22
Evaluated at bid price : 21.22
Bid-YTW : 5.38 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.L FixedReset 69,406 RBC crossed 49,600 at 28.00; TD crossed 15,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 28.00
Bid-YTW : 3.50 %
BAM.PR.B Floater 47,714 Nesbitt crossed 10,000 at 14.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-01-13
Maturity Price : 14.75
Evaluated at bid price : 14.75
Bid-YTW : 2.68 %
TD.PR.Q Perpetual-Premium 45,840 RBC crossed 14,100 at 24.85.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-01-13
Maturity Price : 24.61
Evaluated at bid price : 24.84
Bid-YTW : 5.65 %
RY.PR.X FixedReset 40,550 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 28.14
Bid-YTW : 3.58 %
TRP.PR.A FixedReset 39,005 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.91
Bid-YTW : 3.85 %
RY.PR.T FixedReset 38,695 TD crossed 20,200 at 28.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 28.11
Bid-YTW : 3.59 %
There were 40 other index-included issues trading in excess of 10,000 shares.

2 Responses to “January 13, 2010”

  1. […] PrefBlog Canadian Preferred Shares – Data and Discussion « January 13, 2010 […]

  2. […] discussed yesterday, the bulk of TARP costs have been for carmakers and individuals, but since when have facts […]

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