Category: Market Action

RBC is defending its capital markets exposure:

Frustrated with a recent ratings downgrade and worried by the imminent possibility of another, Royal Bank of Canada is intent on proving that its capital markets arm poses no real threat to its future.
…
Facing another blow, RBC lashed out, arguing that its inclusion in a review of too-big-to-fail firms was “unwarranted,” in part because its capital markets business represented less than 25 per cent of the bank’s bottom line.

Building on this argument, RBC put together a special presentation for analysts and investors on Friday that focused solely on its capital markets business. The bank did not come out and say that the presentation was designed to prove Moody’s wrong, but the potential downgrade was hinted at many times.
…
RBC also devoted a lot of time to risk management practices, another of Moody’s concerns. In February, the rating agency noted that “rapidly changing risk positions expose these firms to unexpected losses that can overwhelm the resources of even the largest, most diversified groups.” RBC noted that of the roughly 1,000 people added since 2008, the majority have been in the back office, where divisions such as risk management are housed.

Divisions such as compliance are also housed in the back office. The RBC Presentation proudly states that the Capital Market division is:

Strategically extending our loan book to deepen client relationships

• Modest sized loan book representing 13% of RBC’s total outstanding loans and acceptances
• Since 2009, increased the number of lending clients by 30% to over 1,200

… but I’m not sure if that’s a good thing for either the bank or society, despite all their protestations regarding diversification, exposure limits and profitability. The lending makes it difficult, if not impossible, for non-bank dealers to compete; and the dual purpose of the lending (to make a lending profit and to make a trading profit) makes these loans somewhat more suceptible to jiggery-pokery at approval time.

The OSC has a new policy:

Staff of the Compliance and Registrant Regulation Branch of the Ontario Securities Commission (the OSC) is sending this email to firms that are registered under the Securities Act (Ontario) (the Act) in the categories of exempt market dealer, scholarship plan dealer, or portfolio manager, to advise such firms of a new approach OSC staff will be adopting when performing compliance reviews under section 20 of the Act. Specifically, OSC staff will now contact clients of registered firms as a routine part of its compliance review process.

While OSC staff have historically not contacted clients of a registered firm as part of the compliance review process, we have done so in a number of exceptional cases and have found that client contact is a valuable method of assessing the firm’s compliance with Ontario securities law. Accordingly, we will be expanding our use of this important tool and will be contacting clients in the normal course of compliance reviews. Clients may be asked a variety of questions regarding their experience with their registered firm and representative, including such things as the accuracy of know-your-client information the firm has about them and investment recommendations and advice provided to them.

Unless OSC staff have reason to believe that regulatory action against a firm may be warranted, clients who are contacted by OSC staff will be informed that they are being contacted in the normal course of a compliance review of the firm, and that the call to them should not be interpreted as a sign of any misconduct by the firm. Clients will also be informed that they are not required to speak with OSC staff should they choose not to, and that their participation in the compliance review process is entirely voluntary.

The Globe has a very interesting piece on housing affordability:

Where things get weird is in how they calculate the average house price. What they’ve done is set the price at $144,600 in 1990, which is simply the average resale price at the time as calculated by the Canadian Real Estate Association (CREA). From that point, the Bank of Canada estimates the change in the average house price by averaging out gains as reported by Statistics Canada’s New House Price index (NHPI), and by Royal Lepage (i.e. CREA).

The issue here is that the NHPI is a quality-adjusted index, which means it seeks to measure the change in a comparable dwelling over time. This is a very important concept when it comes to tracking true inflation over time as you need an apples-to-apples comparison.
…
We know that the average size of new dwellings has risen in Canada, with the average new house being just under 2,000 square feet, according to data from the Canadian Home Builders Association. This is up markedly since the 1970s when the average house size in Canada was under 1,100 square feet. So as a society, we’ve changed our expectations for what constitutes a “normal sized” house. The problem is that as we’ve demanded larger and larger homes with better amenities and have been willing to stretch the household budget further to get those, the NHPI has been busy factoring out these changes.

The end result is that by pegging 50 per cent of the growth in house prices to the NHPI, the average house price used in the Bank of Canada affordability index has significantly underperformed other measures of house price appreciation. The chart above illustrates the change in value of the average house used in the Bank of Canada affordability index. If you believe that the average house in Canada is $260,000, I can see how you’d think that there was no problem with affordability in Canada.

The full piece is well-worth reading and is a good companion to the recent RBC quarterly report on the topic.

Henry Paulson has joined the fray on new US MMF rules:

Former Treasury Secretary Henry Paulson is backing U.S. Securities and Exchange Commission Chairman Mary Schapiro’s effort to impose new rules on money- market funds.

In a letter that the SEC published May 30 on its website, Paulson highlights excerpts of his 2010 book, “On the Brink,” which provides his account of the financial crisis. Paulson’s letter covered the period between Sept. 16 and Sept. 19, 2008 when Bank of New York Mellon Corp., BlackRock Inc. (BLK) and Northern Trust Corp. (NTRS) reported requests for “billions in redemptions” from their money funds. Such requests exacerbated a credit crisis that began earlier that month, he wrote.
…
Schapiro initially proposed requiring money-market firms float their $1 net asset value along with mandating more capital and preventing customers from withdrawing all of their funds for 30 days. The so-called holdback provision has been particularly controversial in the industry and Schapiro is said to be open to replacing it with a fee that would be imposed on customers who take out their money during a liquidity crisis.

Money-market firms have also fought the effort to move the industry to a floating net asset value. Paulson’s letter highlights a passage in his book that supports the floating value.

How is one to square the circle? MMFs invest in risky assets – corporate paper. No amount of rules will eliminate the credit risk. Only capital will do that – all MMFs must have either a second class of securities that will take the first loss following a credit event or a credible guarantee from their sponsors … nothing else will do. All together folks … MMFs ARE BANKS IN FUNDS’ CLOTHING! They should be regulated as such! And – importantly – since they are banks, they should hold more capital against holdings of bank paper – any bank paper, from any bank – than should be the case for non-bank paper!

It was a rotten day for the Canadian preferred share market, with PerpetualPremiums off 16bp, FixedResets down 26bp and DeemedRetractibles losing 41bp. To make things more interesting, Floaters got whacked for 431bp, so it is not enough to speak glibly about ‘rising interest rates’! A very lengthy list of losers in the Performance Highlights table was comprised almost entirely of insurance issues. Volume was below 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	-4.3077 %	2,331.9
FixedFloater	4.49 %	3.87 %	29,476	17.58	1	0.1420 %	3,511.4
Floater	3.10 %	3.12 %	77,012	19.37	3	-4.3077 %	2,517.8
OpRet	4.81 %	2.55 %	38,967	1.04	5	0.0155 %	2,498.8
SplitShare	5.28 %	-5.32 %	50,745	0.54	4	0.6061 %	2,713.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0155 %	2,285.0
Perpetual-Premium	5.46 %	3.31 %	78,569	0.60	26	-0.1590 %	2,223.4
Perpetual-Discount	5.04 %	5.07 %	137,290	15.30	7	-0.2184 %	2,441.7
FixedReset	5.08 %	3.25 %	191,552	7.90	70	-0.2570 %	2,378.2
Deemed-Retractible	5.04 %	3.92 %	155,934	3.17	45	-0.4091 %	2,294.1

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-4.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.12 %
BAM.PR.B	Floater	-4.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 17.01 Evaluated at bid price : 17.01 Bid-YTW : 3.12 %
BAM.PR.C	Floater	-3.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 16.86 Evaluated at bid price : 16.86 Bid-YTW : 3.14 %
BAM.PF.A	FixedReset	-2.74 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 22.92 Evaluated at bid price : 24.51 Bid-YTW : 4.22 %
SLF.PR.D	Deemed-Retractible	-2.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.45 Bid-YTW : 6.44 %
MFC.PR.F	FixedReset	-2.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.54 Bid-YTW : 4.00 %
SLF.PR.C	Deemed-Retractible	-2.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.45 Bid-YTW : 6.44 %
SLF.PR.E	Deemed-Retractible	-2.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.60 Bid-YTW : 6.40 %
SLF.PR.B	Deemed-Retractible	-1.89 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.89 Bid-YTW : 5.95 %
MFC.PR.B	Deemed-Retractible	-1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 6.13 %
MFC.PR.G	FixedReset	-1.56 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.60 Bid-YTW : 4.41 %
SLF.PR.A	Deemed-Retractible	-1.55 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.90 Bid-YTW : 5.89 %
POW.PR.A	Perpetual-Premium	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 24.89 Evaluated at bid price : 25.12 Bid-YTW : 5.65 %
MFC.PR.C	Deemed-Retractible	-1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.07 Bid-YTW : 6.13 %
MFC.PR.D	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 4.13 %
PWF.PR.L	Perpetual-Premium	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 24.48 Evaluated at bid price : 24.76 Bid-YTW : 5.20 %
SLF.PR.H	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.90 %
SLF.PR.G	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.34 %
IAG.PR.E	Deemed-Retractible	-1.08 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.70 Bid-YTW : 5.52 %
SLF.PR.F	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.82 Bid-YTW : 4.15 %
BAM.PR.R	FixedReset	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 23.59 Evaluated at bid price : 26.20 Bid-YTW : 3.49 %
BNA.PR.E	SplitShare	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 5.04 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IAG.PR.G	FixedReset	97,915	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 4.12 %
BNS.PR.Z	FixedReset	78,166	TD sold 10,000 to Scotia at 25.00 and crossed 40,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 3.04 %
ELF.PR.H	Perpetual-Premium	65,698	Scotia bought 11,900 from anonymous at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 24.68 Evaluated at bid price : 25.08 Bid-YTW : 5.56 %
SLF.PR.A	Deemed-Retractible	52,793	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.90 Bid-YTW : 5.89 %
ENB.PR.D	FixedReset	43,087	Desjardins crossed 40,000 at 25.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 23.19 Evaluated at bid price : 25.22 Bid-YTW : 3.44 %
ENB.PR.H	FixedReset	42,965	Scotia crossed 28,700 at 25.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 23.13 Evaluated at bid price : 25.10 Bid-YTW : 3.33 %
There were 24 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.O	OpRet	Quote: 25.95 – 26.88 Spot Rate : 0.9300 Average : 0.5744 YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 2.24 %
FTS.PR.E	OpRet	Quote: 26.32 – 26.99 Spot Rate : 0.6700 Average : 0.4400 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.32 Bid-YTW : 2.55 %
POW.PR.A	Perpetual-Premium	Quote: 25.12 – 25.70 Spot Rate : 0.5800 Average : 0.3632 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 24.89 Evaluated at bid price : 25.12 Bid-YTW : 5.65 %
BAM.PF.A	FixedReset	Quote: 24.51 – 25.00 Spot Rate : 0.4900 Average : 0.2928 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-04 Maturity Price : 22.92 Evaluated at bid price : 24.51 Bid-YTW : 4.22 %
TCA.PR.X	Perpetual-Premium	Quote: 51.80 – 52.50 Spot Rate : 0.7000 Average : 0.5387 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-15 Maturity Price : 50.00 Evaluated at bid price : 51.80 Bid-YTW : 3.31 %
MFC.PR.F	FixedReset	Quote: 23.54 – 23.99 Spot Rate : 0.4500 Average : 0.3145 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.54 Bid-YTW : 4.00 %

Berlusconi is hardly considered an elder statesman, but he’s indicative of the mood:

Former Premier Silvio Berlusconi said Italy should say “ciao, euro” if the European Central Bank doesn’t start printing money to tackle the debt crisis and Germany should quit the single currency if it won’t back a bolder role for ECB.

“The economic crisis can’t be solved” in Italy, Berlusconi said in comments posted on his party’s website today. He called on Prime Minister Mario Monti to “change his political line” and lobby European leaders to back a money- printing campaign by the Frankfurt-based ECB. If the central bank doesn’t become a “lender of last resort,” Italy should say “ciao, euro,” the former premier said.

The malaise may spread to America:

U.S. stocks tumbled, erasing the 2012 advance in the Dow Jones Industrial Average, as employers added the fewest workers in a year, the unemployment rate rose while manufacturing output shrank in Europe and slowed in China.
…
Equities slumped as American employers in May added the fewest workers in a year and the unemployment rate unexpectedly increased as job-seekers re-entered the workforce. Payrolls climbed by 69,000 last month, less than the most-pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.

The Treasury market was pleased:

The benchmark 10-year yield fell nine basis points, or 0.09 percentage point, to 1.47 percent in New York time, according to Bloomberg Bond Traders prices. Thirty-year bond yields declined nine basis points to 2.55 percent, reaching 2.5089 percent, below the record 2.5090 percent on Dec. 18, 2008, according to Federal Reserve figures beginning in 1953.

Things are going the other way in Spain:

Spain’s campaign to cajole the European Central Bank into buying its bonds is backfiring.

The nation’s 10-year borrowing cost has jumped more than half a point to 6.62 percent since Jaime Garcia-Legaz, the deputy minister for trade, became the country’s first official to urge the ECB to support its bonds on April 13. Yield increases accelerated after May 24 when Prime Minister Mariano Rajoy signalled that Spain’s debt sustainability may be in danger, and peaked at 6.70 percent on May 30, moving closer to the 7 percent level that forced Greece, Portugal and Ireland to seek outside aid.

The morons at the Toronto Water department have given the city another black eye:

Subway service around Toronto’s Union Station remains suspended Friday evening after an apparent sewer back-up or break sent water gushing into Canada’s busiest rail hub.
…
The flooding has spread to the PATH system, closing the portion of the underground retail concourse south of Wellington Street, Mr. Ross added.

The scene around Union Station Friday was chaotic. Toronto police cars with lights flashing shut down the section of Front Street from York to Yonge streets.

Will wonders never cease? There’s a prominent Republican speaking halfway reasonably:

Former Florida Governor Jeb Bush, in a break with his party, said he could support tax increases to help reduce the federal government’s budget deficit.

The brother of former President George W. Bush told a congressional panel in Washington today that he could back a theoretical deficit-reduction package that would include $1 in tax increases for every $10 in spending cuts.

Fortunately, there are other Republicans maintaining the party’s reputation by supporting Al-Qaeda’s thesis that there’s some kind of religious war going on:

The opponents of the Tennessee mosque have fought for two years to stop construction. During lengthy hearings in 2010, they presented testimony that in effect put Islam on trial. A string of witnesses questioned whether Islam is a legitimate religion and promoted a theory that American Muslims want to replace the Constitution with extremist Islamic law and the mosque was a part of that plot.
…
The mosque also became an issue in a local congressional race, with Republican candidate Lou Ann Zelenik calling it a threat to the state’s moral and political foundation.

Later, a dump truck on the site was burned in what federal officials determined was arson.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 10bp, FixedResets up 3bp and DeemedRetractibles down 14bp. Volatility was good. Volume was light.

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	-1.4095 %	2,436.9
FixedFloater	4.50 %	3.85 %	30,692	17.56	1	-0.5647 %	3,506.4
Floater	2.96 %	2.97 %	74,275	19.74	3	-1.4095 %	2,631.2
OpRet	4.81 %	3.04 %	40,525	1.04	5	-0.2623 %	2,498.5
SplitShare	5.31 %	-1.44 %	49,629	0.54	4	-0.1700 %	2,697.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.2623 %	2,284.6
Perpetual-Premium	5.46 %	2.95 %	75,295	0.61	25	0.0972 %	2,226.9
Perpetual-Discount	5.07 %	5.09 %	78,300	15.26	8	0.3507 %	2,447.1
FixedReset	5.07 %	3.31 %	192,932	7.83	70	0.0320 %	2,384.3
Deemed-Retractible	5.02 %	3.87 %	158,304	2.99	45	-0.1418 %	2,303.5

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.C	Floater	-2.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-01 Maturity Price : 17.48 Evaluated at bid price : 17.48 Bid-YTW : 3.03 %
SLF.PR.E	Deemed-Retractible	-1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.05 Bid-YTW : 6.12 %
SLF.PR.D	Deemed-Retractible	-1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.04 Bid-YTW : 6.07 %
FTS.PR.E	OpRet	-1.05 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.32 Bid-YTW : 2.53 %
BAM.PR.R	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-01 Maturity Price : 23.65 Evaluated at bid price : 26.48 Bid-YTW : 3.61 %
BAM.PR.M	Perpetual-Discount	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-01 Maturity Price : 23.37 Evaluated at bid price : 23.77 Bid-YTW : 5.06 %
IAG.PR.A	Deemed-Retractible	1.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.57 Bid-YTW : 5.35 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IAG.PR.G	FixedReset	353,936	New issue settled today. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 4.24 %
RY.PR.F	Deemed-Retractible	54,400	RBC crossed 49,700 at 25.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 3.83 %
BMO.PR.N	FixedReset	52,700	National crossed 50,000 at 26.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.46 Bid-YTW : 3.11 %
IFC.PR.A	FixedReset	50,000	TD crossed 49,400 at 25.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.63 %
RY.PR.B	Deemed-Retractible	42,615	Desjardins crossed 34,700 at 25.76. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 3.70 %
CM.PR.L	FixedReset	41,935	Nesbitt crossed 40,000 at 26.68. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.62 Bid-YTW : 3.30 %
There were 18 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ENB.PR.A	Perpetual-Premium	Quote: 25.52 – 25.85 Spot Rate : 0.3300 Average : 0.2195 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.52 Bid-YTW : -18.65 %
TCA.PR.X	Perpetual-Premium	Quote: 52.03 – 52.49 Spot Rate : 0.4600 Average : 0.3619 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-15 Maturity Price : 50.00 Evaluated at bid price : 52.03 Bid-YTW : 2.95 %
FTS.PR.E	OpRet	Quote: 26.32 – 26.60 Spot Rate : 0.2800 Average : 0.1878 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.32 Bid-YTW : 2.53 %
BAM.PR.O	OpRet	Quote: 25.73 – 26.00 Spot Rate : 0.2700 Average : 0.1844 YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : 3.04 %
BNA.PR.E	SplitShare	Quote: 24.52 – 24.90 Spot Rate : 0.3800 Average : 0.2959 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 5.27 %
HSB.PR.C	Deemed-Retractible	Quote: 25.65 – 25.90 Spot Rate : 0.2500 Average : 0.1701 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-30 Maturity Price : 25.25 Evaluated at bid price : 25.65 Bid-YTW : 4.37 %

It would appear that it is the banks who shave the Spanish barber:

Bankia group risks dragging the rest of Spain into its vortex

As Spain’s third-biggest bank asks Prime Minister Mariano Rajoy’s government for 19 billion euros ($24 billion), international investors are tallying the potential cost for the rest of the industry and betting he won’t be able to foot the bill. With foreign investors shunning Spanish debt, leaving national banks to fund the government, the nation’s 10-year borrowing costs compared with Germany’s are near a record.

Spain needs to bail out lenders still reeling from the collapse of the real-estate boom while its own access to funding increasingly depends on domestic banks being kept afloat by the European Central Bank’s refinancing operations. Rising borrowing costs are putting pressure on Rajoy’s five month-old government to join Greece, Portugal and Ireland in seeking a rescue that would be the European Union’s biggest.

There’s capital flight in Spain:

More than €97-billion in capital fled Spain in the first quarter of the year as the country’s crisis escalated along with the troubles of the euro zone.

That stunning number, published today by the country’s central bank and reported in The Financial Times, represents almost 10 per cent of Spain’s gross domestic product.

I recall William Shirer stressed capital flight as a destabilizing factor of the French Third Republic. But that’s just panic.

There is NO PANIC. Let me repeat that: there is NO PANIC! There is absolutely NO PANIC anywhere and anybody who might panic will be shot, not that anybody would panic:

The International Monetary Fund said it is not preparing financial aid for Spain and the country denied any talks about a bailout even as its borrowing costs approach euro-era records.

“There’s been no request for financial assistance from Spain and the IMF is not making plans for financial assistance to Spain,” Gerry Rice, the IMF’s director of external relations, told reporters in Washington today.

Hate your neighbors? Want to take revenge for that time their cat peed on your lawn? The good folks of the federal government are offering a new way to denounce your neighbors!

The Copyright Board of Canada has, for the first time, decided to charge fees to anyone who uses recorded music as part of a public event. That means anyone who plans on using tunes to get the party started will need to dig a little deeper before hitting play on the iPod.

The new rules include any event in which music is played – weddings, ice shows, street parties, circuses, parades and karaoke bars are all named in the official notice from the country’s copyright board.
…
Re:Sound does employ inspectors, but would only undertake an inspection if complaints were received.

Denounce your neighbor today and help to bring back Stalinism!

S&P affirmed CSE.PR.A:

• We are affirming our ratings, including our ‘BB+’ long-term corporate credit rating, on Capstone Infrastructure Corp.
• In addition, we are removing the ratings from CreditWatch with developing implications.
• The affirmation and CreditWatch removal reflects our view of the progress that the company has made in regard to the various initiatives to address its liquidity.
• The stable outlook reflects our view that Capstone benefits from contracted revenue and insulation from electricity demand and price risks
  provided by power purchase agreements with investment-grade off-takers.

We could raise the ratings if the company takes steps to improve its liquidity (for example, through a reduction in its common share dividend) such that it is consistent with our criteria description of “adequate” and demonstrates concrete steps in recontracting the expiring PPAs while maintaining or improving its significant financial risk profile. We expect the company to continue to focus its growth strategy on assets with cash-flow predictability supported by either favorable contracts or regulation.

We could consider lowering the ratings should Capstone’s overall cash flow quality weaken materially from its moderate level of stability. This could come from major operational disruptions in its generation facilities or acquisition of assets with materially higher cash flow variability. In addition, we could consider a negative rating action if we expect the company’s cash-flow coverage measures to weaken materially, with partially consolidated cash flow to interest falling below 2.7x or partially consolidated cash flow to total recourse debt falling below 20% on a sustained basis, in accordance with our criteria for project developers. This could happen if it increases its reliance on debt financing to support its growth initiatives or its distribution. In addition, failure to renew expiring PPAs or replace them with acquisitions of other contracted assets could also lead to a downgrade in the medium term.

DBRS affirmed DGS.PR.A at Pfd-3:

DBRS has today confirmed the rating of the Preferred Shares of Dividend Growth Split Corp. (the Company) at Pfd-3. In December 2007, the Company issued approximately 1.5 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). The scheduled redemption date for both classes of shares issued is November 30, 2014.
…
Since the rating was last confirmed in May 2011, following the completion of a merger of the Company with Brompton Equity Split Corp., the net asset value (NAV) of the Company has remained fairly stable, with downside protection fluctuating between 38% and 47%. The current downside protection (as of April 26, 2012) is approximately 42%. Based on the current yields of the underlying securities in the Portfolio, the dividend coverage ratio is approximately 1.43 times as of April 30, 2012, so the dividends received on the Portfolio fully cover the Preferred Share distributions.

The Canadian preferred share market closed the month with a mildly negative day, with PerpetualPremiums flat, FixedResets off 4bp and DeemedRetractibles down 6bp. Volatility was good. 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	-0.2405 %	2,471.7
FixedFloater	4.47 %	3.85 %	30,929	17.62	1	-1.1628 %	3,526.4
Floater	2.92 %	2.94 %	69,922	19.82	3	-0.2405 %	2,668.8
OpRet	4.79 %	2.18 %	38,998	1.05	5	0.4106 %	2,505.0
SplitShare	5.30 %	-3.50 %	51,679	0.55	4	-0.6212 %	2,701.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.4106 %	2,290.6
Perpetual-Premium	5.46 %	2.87 %	77,772	0.61	25	-0.0024 %	2,224.7
Perpetual-Discount	5.09 %	5.10 %	79,491	15.24	8	0.1705 %	2,438.5
FixedReset	5.08 %	3.33 %	194,827	7.68	69	-0.0359 %	2,383.6
Deemed-Retractible	5.01 %	3.84 %	159,547	2.92	45	-0.0616 %	2,306.8

Performance Highlights
Issue	Index	Change	Notes
FBS.PR.C	SplitShare	-2.86 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-12-15 Maturity Price : 10.00 Evaluated at bid price : 10.52 Bid-YTW : -4.99 %
GWO.PR.J	FixedReset	-1.73 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 4.26 %
MFC.PR.B	Deemed-Retractible	-1.60 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.70 Bid-YTW : 5.91 %
BAM.PR.G	FixedFloater	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-31 Maturity Price : 22.14 Evaluated at bid price : 21.25 Bid-YTW : 3.85 %
PWF.PR.M	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 3.35 %
IAG.PR.A	Deemed-Retractible	1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 5.52 %
BAM.PR.O	OpRet	1.09 %	YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.96 Bid-YTW : 2.18 %
FTS.PR.E	OpRet	1.10 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.60 Bid-YTW : 1.44 %
BAM.PR.N	Perpetual-Discount	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-31 Maturity Price : 23.19 Evaluated at bid price : 23.65 Bid-YTW : 5.08 %
RY.PR.Y	FixedReset	7.36 %	Reversing yesterday’s nonsense. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 3.79 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.M	FixedReset	184,805	Desjardins crossed 181,000 at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 3.35 %
BMO.PR.N	FixedReset	115,282	National crossed 106,100 at 26.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.47 Bid-YTW : 3.08 %
RY.PR.N	FixedReset	97,205	National crossed blocks of 68,600 and 25,000, both at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.35 %
PWF.PR.L	Perpetual-Premium	85,324	Nesbitt crossed 83,900 at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-31 Maturity Price : 24.75 Evaluated at bid price : 25.08 Bid-YTW : 5.13 %
MFC.PR.A	OpRet	65,760	Desjardins crossed 60,000 at 25.20. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.87 %
CM.PR.L	FixedReset	53,170	TD crossed 40,000 at 26.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.50 Bid-YTW : 3.55 %
There were 35 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.J	FixedReset	Quote: 25.55 – 26.05 Spot Rate : 0.5000 Average : 0.3051 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 4.26 %
MFC.PR.A	OpRet	Quote: 25.15 – 25.49 Spot Rate : 0.3400 Average : 0.2256 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.87 %
W.PR.H	Perpetual-Premium	Quote: 25.53 – 25.87 Spot Rate : 0.3400 Average : 0.2258 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-15 Maturity Price : 25.00 Evaluated at bid price : 25.53 Bid-YTW : 3.19 %
MFC.PR.D	FixedReset	Quote: 26.45 – 26.69 Spot Rate : 0.2400 Average : 0.1368 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.45 Bid-YTW : 3.51 %
MFC.PR.F	FixedReset	Quote: 24.11 – 24.46 Spot Rate : 0.3500 Average : 0.2494 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.11 Bid-YTW : 3.81 %
GWO.PR.H	Deemed-Retractible	Quote: 24.30 – 24.57 Spot Rate : 0.2700 Average : 0.1766 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.20 %

Spain is cutting off welfare recipients:

Spanish renewable-energy companies that once got Europe’s biggest subsidies are deserting the nation after the government shut off aid, pushing project developers and equipment-makers to work abroad or perish.

From wind-turbine maker Gamesa Corp. Tecnologica SA (GAM) to solar park developer T-Solar Global SA, companies are locked out of their home market for new business. These are the same suppliers that spearheaded more than $69 billion of wind and solar projects since 2004 that today supply more than 50 percent of Spain’s power demand on the most breezy and sunny days.

But fear not, subsidy fans! Germany’s still got lots of money!

Germany’s power-transmission companies have tabled plans to build four electricity Autobahns to link wind turbines off the north coast with manufacturing centres in the south – a boost for Angela Merkel after criticism from industry that Berlin has done little since announcing an accelerated nuclear phase-out a year ago.

Tennet, Amprion, 50 Hertz and Transnet BW said that building 3,800km high-voltage electricity lines – at a cost of around €20-billion – over the next decade was possible if politicians and public rallied behind the so-called energy transformation.

German two-year notes yield zero:

German two-year government notes advanced, sending the yield to zero for the first time.

The rate was at 0.002 percent at 4:36 p.m. London time.

Other countries yield a little more:

Signs of stress multiplied in financial markets today. Italy missed its target in a bond auction, driving its 10-year yields up to 6.01 percent at one point, the highest since Jan. 31. The yield was at 5.93 percent at 5:26 p.m. in Brussels. Doubts over the health of Spain’s banks pushed up Spanish 10- year yields to 6.70 percent, the highest since Nov. 28. That yield was last at 6.63 percent.

But … there’s never an ill wind …:

U.S. 5-year government bonds have also reached a new low of 0.6967 per cent, lower than the 0.7045 per cent they hit in early February, and 30-year Treasuries have also dropped to 2.72 per cent – though the low for these bonds was around 2.5 per cent in December 2008.

It was a sharply negative day for the Canadian preferred share market, with PerpetualPremiums down 15bp, FixedResets losing 31bp (about one-third of this was due to the evaporation of the bid in RY.PR.Y and may be regarded as ficticious and transient) and DeemedRetractibles off 11bp. The Performance Highlights table is longer than usual and dominated by losers. Volume was on the light side.

PerpetualDiscounts now yield 5.15%, equivalent to 6.70% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.4%, so the pre-tax interest-equivalent spread is now about 230bp, unchanged from the figure reported May 23.

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	0.1668 %	2,477.7
FixedFloater	4.42 %	3.79 %	30,997	17.72	1	1.8957 %	3,567.8
Floater	2.91 %	2.94 %	64,707	19.82	3	0.1668 %	2,675.2
OpRet	4.81 %	3.21 %	39,537	1.05	5	-0.2242 %	2,494.8
SplitShare	5.27 %	-2.82 %	50,592	0.56	4	-0.0526 %	2,718.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.2242 %	2,281.3
Perpetual-Premium	5.46 %	1.65 %	78,857	0.62	25	-0.1479 %	2,224.8
Perpetual-Discount	5.10 %	5.15 %	79,846	15.16	8	-0.1393 %	2,434.4
FixedReset	5.08 %	3.26 %	195,818	7.34	69	-0.3120 %	2,384.4
Deemed-Retractible	5.01 %	3.78 %	159,862	2.93	45	-0.1094 %	2,308.2

Performance Highlights
Issue	Index	Change	Notes
RY.PR.Y	FixedReset	-8.18 %	Not a real loss – the issue traded 9,500 shares today in a range of 24.59-26.77. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.59 Bid-YTW : 5.91 %
GWO.PR.P	Deemed-Retractible	-1.61 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 5.28 %
FTS.PR.H	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-30 Maturity Price : 23.38 Evaluated at bid price : 25.01 Bid-YTW : 2.83 %
CU.PR.C	FixedReset	-1.47 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 3.53 %
IGM.PR.B	Perpetual-Premium	-1.34 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 5.44 %
CU.PR.B	Perpetual-Premium	-1.30 %	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 1.06 %
BAM.PR.G	FixedFloater	1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-30 Maturity Price : 22.30 Evaluated at bid price : 21.50 Bid-YTW : 3.79 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IFC.PR.A	FixedReset	99,400	TD crossed 87,800 at 25.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 3.61 %
CU.PR.A	Perpetual-Premium	90,015	TD crossed 80,300 at 25.38. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-06-29 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : -8.92 %
CU.PR.B	Perpetual-Premium	85,570	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 1.06 %
TD.PR.K	FixedReset	84,510	National crossed blocks of 54,400 and 24,400, both at 26.82. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.87 Bid-YTW : 2.94 %
POW.PR.D	Perpetual-Discount	62,705	TD crossed 60,400 at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-30 Maturity Price : 24.47 Evaluated at bid price : 24.80 Bid-YTW : 5.09 %
CIU.PR.B	FixedReset	54,800	RBC crossed 50,000 at 26.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 26.71 Bid-YTW : 3.17 %
There were 25 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
RY.PR.Y	FixedReset	Quote: 24.59 – 26.77 Spot Rate : 2.1800 Average : 1.1558 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.59 Bid-YTW : 5.91 %
PWF.PR.M	FixedReset	Quote: 25.94 – 26.30 Spot Rate : 0.3600 Average : 0.2154 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.94 Bid-YTW : 3.98 %
BNA.PR.E	SplitShare	Quote: 24.52 – 24.95 Spot Rate : 0.4300 Average : 0.3064 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 5.26 %
IGM.PR.B	Perpetual-Premium	Quote: 25.80 – 26.30 Spot Rate : 0.5000 Average : 0.3905 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 5.44 %
CM.PR.K	FixedReset	Quote: 26.12 – 26.49 Spot Rate : 0.3700 Average : 0.2662 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.12 Bid-YTW : 3.43 %
RY.PR.P	FixedReset	Quote: 26.11 – 26.35 Spot Rate : 0.2400 Average : 0.1637 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 3.67 %

Too soon to call it a trend … but there are interesting goings-on in the credit rating agency world:

The response to the Moody’s Investors Service downgrade of the biggest Nordic banks was rising bond and share prices.

The reaction is the latest sign that investors are paying less attention to the views of rating companies and relying more on their own analysis to determine whether to buy or sell.
…
Denmark, which is bringing its proposals to the European Parliament, says ratings often don’t reflect credit risks. Measures to improve the industry include a plan to cut reliance on ratings for both investors and within financial regulation, the Business Ministry in Copenhagen said May 21. The intention is also to make it easier for investors and issuers to demand compensation from ratings companies that fail to do their job properly, the ministry said.

In Denmark, banks have started firing Moody’s after winning assurances from some of the country’s biggest investors that the opinions of ratings companies hold limited value. Nykredit A/S, Denmark’s biggest mortgage lender and Europe’s largest issuer of covered bonds backed by home loans, terminated its contract with Moody’s in April, citing its “volatile” views.

There’s nothing in the article about the potential for investors and issuers to demand compensation from investment managers that fail to do their job properly – what a surprise! Assurances from large investors that opinions of ratings companies hold limited value hold limited value – what else are they going to say?

In Greek news:

The New Democracy party in Greece, which supports the austerity measures imposed by the European Union, came first in all six opinion polls published on May 26 as campaigning continued for the country’s general election on June 17.

Party leader Antonis Samaras sought to illustrate the consequences of a euro exit, saying Greek incomes, bank deposits and property values would lose at least half their value within days, while food prices would rise by a quarter.

Hmmm … maybe it will help him win. Maybe. And maybe it will also accellerate the bank run. Maybe.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets off 2bp and DeemedRetractibles down 6bp. Volatility was average. Volume remained light.

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	0.0000 %	2,473.6
FixedFloater	4.50 %	3.86 %	30,406	17.55	1	-0.0474 %	3,501.5
Floater	2.92 %	2.94 %	67,033	19.82	3	0.0000 %	2,670.8
OpRet	4.80 %	2.83 %	41,115	1.05	5	-0.0155 %	2,500.4
SplitShare	5.25 %	-2.59 %	50,770	0.55	4	0.2582 %	2,719.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0155 %	2,286.4
Perpetual-Premium	5.45 %	1.77 %	73,681	0.62	25	0.0352 %	2,228.1
Perpetual-Discount	5.09 %	5.09 %	80,884	15.15	8	0.1395 %	2,437.8
FixedReset	5.06 %	3.18 %	197,610	4.54	69	-0.0152 %	2,391.9
Deemed-Retractible	4.99 %	3.75 %	158,876	1.89	45	-0.0649 %	2,310.7

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.H	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 4.57 %
BNS.PR.N	Deemed-Retractible	-1.05 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-29 Maturity Price : 26.00 Evaluated at bid price : 26.48 Bid-YTW : 2.89 %
BAM.PR.N	Perpetual-Discount	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 22.97 Evaluated at bid price : 23.40 Bid-YTW : 5.13 %
IGM.PR.B	Perpetual-Premium	1.36 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 5.18 %
NA.PR.P	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 26.60 Bid-YTW : 2.91 %
FBS.PR.C	SplitShare	1.86 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-12-15 Maturity Price : 10.00 Evaluated at bid price : 10.95 Bid-YTW : -10.09 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.C	FixedReset	58,255	National crossed 50,000 at 25.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.53 Evaluated at bid price : 25.80 Bid-YTW : 2.85 %
MFC.PR.I	FixedReset	44,400	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.88 Bid-YTW : 4.40 %
ENB.PR.H	FixedReset	39,515	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.19 Evaluated at bid price : 25.30 Bid-YTW : 3.45 %
BNS.PR.N	Deemed-Retractible	36,425	RBC crossed 25,000 at 26.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-29 Maturity Price : 26.00 Evaluated at bid price : 26.48 Bid-YTW : 2.89 %
TRP.PR.B	FixedReset	33,135	National crossed 25,000 at 25.34. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.46 Evaluated at bid price : 25.27 Bid-YTW : 2.58 %
SLF.PR.D	Deemed-Retractible	27,623	RBC bought 16,900 from anonymous at 16,900. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 6.04 %
There were 18 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FBS.PR.C	SplitShare	Quote: 10.95 – 11.44 Spot Rate : 0.4900 Average : 0.3570 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-12-15 Maturity Price : 10.00 Evaluated at bid price : 10.95 Bid-YTW : -10.09 %
BAM.PR.M	Perpetual-Discount	Quote: 23.36 – 23.70 Spot Rate : 0.3400 Average : 0.2343 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.11 Evaluated at bid price : 23.36 Bid-YTW : 5.15 %
IAG.PR.F	Deemed-Retractible	Quote: 25.90 – 26.30 Spot Rate : 0.4000 Average : 0.2982 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 5.39 %
BAM.PR.G	FixedFloater	Quote: 21.10 – 21.48 Spot Rate : 0.3800 Average : 0.2967 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 21.82 Evaluated at bid price : 21.10 Bid-YTW : 3.86 %
TRP.PR.A	FixedReset	Quote: 25.55 – 25.76 Spot Rate : 0.2100 Average : 0.1398 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.64 Evaluated at bid price : 25.55 Bid-YTW : 3.18 %
MFC.PR.F	FixedReset	Quote: 24.30 – 24.49 Spot Rate : 0.1900 Average : 0.1272 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 3.71 %

Interesting commentary from Fitch about possible changes in the money market:

In particular, we believe further MMF reform will likely lead managers to expand their product offerings beyond MMFs, possibly resulting in one unintended consequence. A potential decrease in information transparency for short-term market participants and regulators could occur, should more cash be moved from highly regulated and transparent MMFs into other parts of the financial system.

For example, corporate investors may shift liquid funds into separately managed cash accounts (SPA) as an alternative to MMFs. SPAs are one way a corporate treasurer could choose to diversify cash management activities without relying on MMFs. SPAs are managed in line with customized investment strategies that are designed to meet the investment objectives of a specific client. Importantly, SPAs are generally designed to provide liquidity from maturing securities with only minimum reliance on secondary market liquidity, which could be could be constrained during times of market stress. In contrast to MMFs which offer same-day liquidity, SPAs require corporate treasurers to have a high degree of confidence in their cash needs and cash flow forecasts.

This comes after revelations that the Fed is offering investment advice:

The Federal Reserve has warned U.S. money market funds to cut their investments in Europe, a top official says.

“The Fed and regulators have tried to stress to money market funds to reduce their exposure to European financial institutions,” Charles Plosser, the president of the Reserve Bank of Philadelphia, told the Wall Street Journal.

However, the Fed has not yet begun to centrally micromanage the economy:

Federal Labour Minister Lisa Raitt tabled a back-to-work bill on Monday, ordering an end to the strike within days at Canadian Pacific Railway Ltd. …

Ms. Raitt’s move comes as the economic impact mounts from the six-day strike by 4,800 members of the Teamsters Canada Rail Conference.

It was a negative day for the Canadian preferred share market, with PerpetualDiscounts flat, FixedResets off 5bp and DeemedRetractibles losing 17bp. SLF DeemedRetractibles performed shockingly badly, with all of them down far more than would have been predicted from knowing that they went ex-Dividend today; otherwise the Performance Highlights table shows fair volatility. Volume was light; no surprise given that it was a US holiday.

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	0.3347 %	2,473.6
FixedFloater	4.50 %	3.86 %	29,726	17.56	1	-1.3551 %	3,503.1
Floater	2.92 %	2.94 %	67,892	19.82	3	0.3347 %	2,670.8
OpRet	4.80 %	2.57 %	42,764	1.05	5	-0.0155 %	2,500.8
SplitShare	5.26 %	-4.64 %	51,029	0.55	4	0.1243 %	2,712.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0155 %	2,286.7
Perpetual-Premium	5.46 %	2.39 %	71,500	0.62	25	-0.0016 %	2,227.3
Perpetual-Discount	5.10 %	5.19 %	81,823	15.06	8	0.4776 %	2,434.4
FixedReset	5.06 %	3.18 %	192,541	4.25	69	-0.0458 %	2,392.2
Deemed-Retractible	4.99 %	3.69 %	164,892	2.72	45	-0.1733 %	2,312.2

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.C	Deemed-Retractible	-1.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.29 Bid-YTW : 6.08 %
SLF.PR.D	Deemed-Retractible	-1.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.45 Bid-YTW : 5.98 %
SLF.PR.B	Deemed-Retractible	-1.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.51 Bid-YTW : 5.75 %
SLF.PR.E	Deemed-Retractible	-1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.53 Bid-YTW : 5.99 %
SLF.PR.A	Deemed-Retractible	-1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.41 Bid-YTW : 5.75 %
BAM.PR.G	FixedFloater	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-28 Maturity Price : 21.83 Evaluated at bid price : 21.11 Bid-YTW : 3.86 %
IAG.PR.E	Deemed-Retractible	-1.04 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.60 Bid-YTW : 5.58 %
CIU.PR.A	Perpetual-Discount	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-28 Maturity Price : 24.55 Evaluated at bid price : 24.85 Bid-YTW : 4.63 %
BAM.PR.N	Perpetual-Discount	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-28 Maturity Price : 22.76 Evaluated at bid price : 23.16 Bid-YTW : 5.19 %
BAM.PR.M	Perpetual-Discount	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-28 Maturity Price : 22.72 Evaluated at bid price : 23.15 Bid-YTW : 5.19 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.X	FixedReset	116,303	National crossed 90,800 at 26.63. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.62 Bid-YTW : 3.02 %
CIU.PR.B	FixedReset	95,500	RBC crossed blocks of 70,000 and 15,500, both at 26.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 26.70 Bid-YTW : 3.18 %
CM.PR.L	FixedReset	95,334	National crossed 76,000 at 26.76; RBC crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.76 Bid-YTW : 2.99 %
CU.PR.C	FixedReset	77,317	National crossed 35,000 at 25.95 and 33,000 at 25.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.81 Bid-YTW : 3.30 %
GWO.PR.G	Deemed-Retractible	66,064	Desjardins crossed 60,000 at 25.01. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 5.37 %
MFC.PR.I	FixedReset	57,840	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 4.46 %
There were 17 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IAG.PR.E	Deemed-Retractible	Quote: 25.60 – 26.30 Spot Rate : 0.7000 Average : 0.5416 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.60 Bid-YTW : 5.58 %
TCA.PR.X	Perpetual-Premium	Quote: 51.66 – 52.37 Spot Rate : 0.7100 Average : 0.5600 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-15 Maturity Price : 50.00 Evaluated at bid price : 51.66 Bid-YTW : 3.47 %
NA.PR.P	FixedReset	Quote: 26.21 – 26.74 Spot Rate : 0.5300 Average : 0.3841 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 26.21 Bid-YTW : 3.83 %
RY.PR.B	Deemed-Retractible	Quote: 25.66 – 26.00 Spot Rate : 0.3400 Average : 0.2153 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 3.87 %
BAM.PR.C	Floater	Quote: 17.91 – 18.34 Spot Rate : 0.4300 Average : 0.3176 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-28 Maturity Price : 17.91 Evaluated at bid price : 17.91 Bid-YTW : 2.96 %
IAG.PR.C	FixedReset	Quote: 25.90 – 26.18 Spot Rate : 0.2800 Average : 0.2029 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 3.52 %

Cheerful Greek thoughts from the Institute of International Finance (aka the Bankers’ Club):

The cost of Greece exiting the euro would be unmanageable and probably exceed the 1 trillion euros ($1.25 trillion) previously estimated by the Institute of International Finance, the group’s managing director said.

The Washington-based IIF’s projection from earlier this year is “a bit dated now” and “probably on the low side,” Charles Dallara said in an interview in Rome today. “Those who think that Europe, and more broadly the global economy, are really prepared for a Greek exit should think again.”

The European Central Bank’s exposure to Greek liabilities is more than twice as big as the ECB’s capital, said Dallara, who represented banks in their negotiations with the Greek government on its debt restructuring. As a result, he predicted the bank would be unable to provide liquidity and stabilize the euro-area financial sector.
…
For Greece, in its fifth year of recession, it may be more effective to offer extra money to help its battered economy recover, Dallara said. Because Greece’s economy has shrunk so much faster than expected, it may need more time to meet its budget targets and repay its international loans, he said.

Greece’s shrinking economy could be aided “at a cost” of an additional 10 billion euros. “We’re talking about very modest sums compared to what’s already on the table,” he said.

It was a mildly positive day for the Canadian preferred share market, with PerpetualPremiums gaining 1bp, FixedResets up 12bp and DeemedRetractibles winning 14bp. Volatility was muted. Volume was well below 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	-0.0372 %	2,465.3
FixedFloater	4.44 %	3.81 %	29,689	17.69	1	0.0000 %	3,551.2
Floater	2.93 %	2.95 %	68,910	19.80	3	-0.0372 %	2,661.9
OpRet	4.80 %	2.88 %	44,534	1.06	5	0.0000 %	2,501.2
SplitShare	5.27 %	-5.77 %	51,696	0.56	4	0.3742 %	2,709.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,287.1
Perpetual-Premium	5.46 %	2.36 %	72,175	0.63	25	0.0110 %	2,227.3
Perpetual-Discount	5.12 %	5.25 %	82,858	14.98	8	-0.4084 %	2,422.8
FixedReset	5.05 %	3.17 %	189,041	2.33	69	0.1248 %	2,393.3
Deemed-Retractible	4.98 %	3.52 %	170,986	1.90	45	0.1367 %	2,316.3

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.M	Perpetual-Discount	-1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-25 Maturity Price : 22.51 Evaluated at bid price : 22.90 Bid-YTW : 5.25 %
BAM.PR.N	Perpetual-Discount	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-25 Maturity Price : 22.54 Evaluated at bid price : 22.91 Bid-YTW : 5.25 %
HSE.PR.A	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-25 Maturity Price : 23.50 Evaluated at bid price : 25.75 Bid-YTW : 3.17 %
IAG.PR.A	Deemed-Retractible	3.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.01 Bid-YTW : 5.65 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.I	FixedReset	128,885	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 4.49 %
NA.PR.K	Deemed-Retractible	97,138	TD crossed 48,000 at 25.50; Desjardins crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-06-24 Maturity Price : 25.00 Evaluated at bid price : 25.46 Bid-YTW : -13.92 %
RY.PR.D	Deemed-Retractible	77,685	TD crossed blocks of 40,000 and 25,000, both at 25.67. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 3.76 %
SLF.PR.A	Deemed-Retractible	66,976	Nesbitt crossed 56,400 at 23.76. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.74 Bid-YTW : 5.56 %
SLF.PR.D	Deemed-Retractible	63,403	Nesbitt crossed 56,400 at 22.76. Gee, I wonder if that’s related to the cross in SLF.PR.A, above! YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.80 Bid-YTW : 5.77 %
TD.PR.G	FixedReset	59,665	National crossed 48,400 at 26.62. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.63 Bid-YTW : 2.99 %
There were 19 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IGM.PR.B	Perpetual-Premium	Quote: 25.78 – 26.30 Spot Rate : 0.5200 Average : 0.4548 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.78 Bid-YTW : 5.44 %
BAM.PR.T	FixedReset	Quote: 25.06 – 25.24 Spot Rate : 0.1800 Average : 0.1173 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-25 Maturity Price : 23.19 Evaluated at bid price : 25.06 Bid-YTW : 3.84 %
IAG.PR.E	Deemed-Retractible	Quote: 25.87 – 26.30 Spot Rate : 0.4300 Average : 0.3678 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 5.30 %
BNA.PR.C	SplitShare	Quote: 22.81 – 23.00 Spot Rate : 0.1900 Average : 0.1326 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 22.81 Bid-YTW : 5.97 %
RY.PR.I	FixedReset	Quote: 25.64 – 25.87 Spot Rate : 0.2300 Average : 0.1786 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.64 Bid-YTW : 3.39 %
GWO.PR.P	Deemed-Retractible	Quote: 25.95 – 26.09 Spot Rate : 0.1400 Average : 0.0986 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 5.11 %

I may be a little dense, but one point about housing prices has just struck me:

If you had to earn a living predicting home prices and could use just one indicator to do it, which would you choose?

I asked two top economists that question. Their answer was the same: housing affordability.
…
Affordability – a type of debt service ratio – gauges the average percentage of income needed to carry a mortgage. This is closely linked to how much homeowners can borrow.

It’s a rather paradoxical statistic. You would think, for instance, that with home prices doubling in the last 10 years, affordability would be getting worse.

Actually, national affordability is almost the same or better than 20 years ago, according to measures by the Bank of Canada and major economists.

For that, we can thank both falling interest rates and rising incomes. Discounted mortgage rates, for example, have dropped more than five percentage points in the last 20 years.

So, to the extent that affordability, as defined, is an accurate gauge of housing value, then once you strip out the relatively volatile interest rate denominator, you’re left with a linear dependence upon nominal incomes. Which will not only capture inflation but also capture productivity gains. And, what’s more, those aren’t just the productivity gains of the average person, but (in Toronto and Vancouver, anyway) are the productivity gains of professionals. Which have been awesome in the last twenty years and which I would expect will continue to be awesome.

Would anybody happen to have any data that tests this idea?

There are some interesting polls from Greece:

A Greek opinion poll showed the Syriza party, which is opposed to implementing Greece’s international financial rescue, building on its lead in voter support ahead of elections to be held on June 17.

Syriza got 30 percent support, compared with the 28 percent in a previous reading a week earlier, according to a Public Issue poll presented on Athens-based Skai TV today. That was ahead of pro-bailout party New Democracy which polled 26 percent compared to 24 percent a week earlier, according to the survey.
…
The poll showed 85 percent of Greeks wanted to keep the euro, compared with 12 percent who were opposed to keeping the currency.

There could be some bare-knuckle diplomacy coming if Syriza has the twin objectives of renegotiating the bail-out while staying in the Euro!

It was a negative day for the Canadian preferred share market, with PerpetualPremiums off 2bp, FixedResets down 7bp and DeemedRetractibles losing 24bp. There was a good amount of volatility with no clear pattern – although optimists might wish to assert that the IAG new issue prompted a revaluation of that issuer’s extant issues. Volume was quite low.

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	0.2235 %	2,466.2
FixedFloater	4.44 %	3.81 %	29,855	17.70	1	0.6585 %	3,551.2
Floater	2.93 %	2.96 %	65,950	19.79	3	0.2235 %	2,662.9
OpRet	4.80 %	2.83 %	45,257	1.06	5	0.1625 %	2,501.2
SplitShare	5.29 %	-2.35 %	51,938	0.56	4	-0.3827 %	2,699.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1625 %	2,287.1
Perpetual-Premium	5.46 %	1.85 %	73,087	0.63	25	-0.0211 %	2,227.1
Perpetual-Discount	5.10 %	5.16 %	85,910	15.12	8	0.0673 %	2,432.7
FixedReset	5.06 %	3.22 %	188,247	2.19	69	-0.0669 %	2,390.4
Deemed-Retractible	4.99 %	3.67 %	170,712	1.91	45	-0.2361 %	2,313.1

Performance Highlights
Issue	Index	Change	Notes
IAG.PR.A	Deemed-Retractible	-4.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 6.09 %
BNA.PR.E	SplitShare	-1.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 5.22 %
IAG.PR.C	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 3.49 %
SLF.PR.D	Deemed-Retractible	-1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.61 Bid-YTW : 5.88 %
BAM.PR.R	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-24 Maturity Price : 23.57 Evaluated at bid price : 26.15 Bid-YTW : 3.78 %
IAG.PR.F	Deemed-Retractible	1.36 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 5.33 %
SLF.PR.I	FixedReset	1.65 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.21 Bid-YTW : 4.20 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.I	FixedReset	263,530	New issue settled today. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 4.51 %
BNS.PR.T	FixedReset	218,208	National sold 25,000 to RBC at 26.61, then crossed 187,400 at 26.57. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.58 Bid-YTW : 3.09 %
TD.PR.E	FixedReset	212,301	National crossed 170,700 at 26.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.64 Bid-YTW : 2.97 %
RY.PR.X	FixedReset	67,424	National crossed 23,200 at 26.65; RBC crossed 16,900 at 26.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.73 Bid-YTW : 3.07 %
RY.PR.Y	FixedReset	56,275	RBC crossed 50,000 at 26.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 26.82 Bid-YTW : 3.08 %
GWO.PR.H	Deemed-Retractible	51,748	TD crossed 50,000 at 24.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.35 Bid-YTW : 5.33 %
There were 17 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IAG.PR.A	Deemed-Retractible	Quote: 22.25 – 23.50 Spot Rate : 1.2500 Average : 0.6881 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 6.09 %
IAG.PR.E	Deemed-Retractible	Quote: 25.87 – 26.30 Spot Rate : 0.4300 Average : 0.2996 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 5.30 %
BAM.PR.N	Perpetual-Discount	Quote: 23.22 – 23.65 Spot Rate : 0.4300 Average : 0.3095 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-24 Maturity Price : 22.81 Evaluated at bid price : 23.22 Bid-YTW : 5.17 %
BNA.PR.E	SplitShare	Quote: 24.55 – 24.89 Spot Rate : 0.3400 Average : 0.2245 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 5.22 %
HSB.PR.D	Deemed-Retractible	Quote: 25.65 – 26.00 Spot Rate : 0.3500 Average : 0.2351 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.65 Bid-YTW : 4.41 %
BAM.PR.B	Floater	Quote: 18.00 – 18.34 Spot Rate : 0.3400 Average : 0.2451 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-24 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 2.94 %

I’m not sure what Spain’s debt maturity profile looks like – but there’s one good reason for issuing long-term debt:

Spain can’t continue much longer with its current high borrowing rates, the prime minister warned Wednesday as he urged a joint European response to keep the region’s debt problems from getting worse.

Mariano Rajoy and newly elected French President Francois Hollande, heading later in the evening to meet other European Union leaders, also stressed their commitment to keeping Greece in the euro despite its political uncertainty.

It was another mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 9bp, FixedResets off 3bp and DeemedRetractibles losing 16bp. Volatility was average. Volume was above average.

PerpetualDiscounts now yield 5.16%, equivalent to 6.71% interest at the standard equivalency factor of 1.3x. Long corporate yields … are delayed.

Update: Long corporates are at about 4.40% (maybe just a hairsbreadth over), so the pre-tax interest-equivalent spread (in this context, the Seniority Spread) is now about 230bp, a sharp widening from the 210bp reported May 9.

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	-0.2416 %	2,460.7
FixedFloater	4.47 %	3.84 %	30,239	17.64	1	-0.7470 %	3,528.0
Floater	2.93 %	2.96 %	66,711	19.79	3	-0.2416 %	2,656.9
OpRet	4.81 %	2.79 %	47,120	1.07	5	-0.0619 %	2,497.1
SplitShare	5.27 %	-3.03 %	52,037	0.56	4	-0.0596 %	2,709.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0619 %	2,283.4
Perpetual-Premium	5.45 %	2.03 %	73,256	0.64	25	0.0909 %	2,227.6
Perpetual-Discount	5.10 %	5.16 %	86,836	15.11	8	0.0518 %	2,431.1
FixedReset	5.07 %	3.19 %	187,535	2.19	68	-0.0291 %	2,392.0
Deemed-Retractible	4.98 %	3.62 %	168,457	2.73	45	-0.1621 %	2,318.6

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-23 Maturity Price : 17.78 Evaluated at bid price : 17.78 Bid-YTW : 2.98 %
SLF.PR.I	FixedReset	-1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-12-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 4.40 %
BAM.PR.M	Perpetual-Discount	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-23 Maturity Price : 22.74 Evaluated at bid price : 23.17 Bid-YTW : 5.18 %
BAM.PR.C	Floater	1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-23 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 2.96 %
BAM.PR.N	Perpetual-Discount	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-23 Maturity Price : 22.84 Evaluated at bid price : 23.25 Bid-YTW : 5.16 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.I	Perpetual-Premium	196,260	Nesbitt crossed blocks of 150,000 and 43,200, both at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-06-22 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : -13.11 %
PWF.PR.R	Perpetual-Premium	116,277	Nesbitt crossed 112,900 at 25.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 5.10 %
CM.PR.K	FixedReset	86,465	Nesbitt crossed 83,000 at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 3.19 %
TD.PR.Y	FixedReset	62,427	Desjardins crossed 39,800 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.89 Bid-YTW : 2.81 %
BMO.PR.P	FixedReset	61,741	Nesbitt crossed 49,800 at 26.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.66 Bid-YTW : 2.88 %
RY.PR.P	FixedReset	45,078	Scotia crossed 10,000 at 26.50; RBC crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.41 Bid-YTW : 2.94 %
There were 36 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IAG.PR.F	Deemed-Retractible	Quote: 25.65 – 26.37 Spot Rate : 0.7200 Average : 0.4752 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 5.38 %
MFC.PR.A	OpRet	Quote: 25.12 – 25.49 Spot Rate : 0.3700 Average : 0.2487 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.88 %
CIU.PR.A	Perpetual-Discount	Quote: 24.53 – 25.00 Spot Rate : 0.4700 Average : 0.3510 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-23 Maturity Price : 24.23 Evaluated at bid price : 24.53 Bid-YTW : 4.69 %
NA.PR.P	FixedReset	Quote: 26.33 – 26.70 Spot Rate : 0.3700 Average : 0.2623 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 26.33 Bid-YTW : 3.51 %
ENB.PR.D	FixedReset	Quote: 25.12 – 25.40 Spot Rate : 0.2800 Average : 0.1792 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-23 Maturity Price : 23.16 Evaluated at bid price : 25.12 Bid-YTW : 3.71 %
RY.PR.L	FixedReset	Quote: 26.04 – 26.34 Spot Rate : 0.3000 Average : 0.2181 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.04 Bid-YTW : 3.15 %