Category: Market Action

Another small step in the decline of the West:

Hong Kong companies are issuing a record amount of bonds in Singapore dollars as Europe’s debt crisis boosts relative yields on securities denominated in the U.S. currency, enhancing the city-state’s appeal as a rival financial center.

Singapore-dollar bond sales by borrowers from Hong Kong have risen to $2 billion this year, from $671 million in all of 2010, according to data compiled by Bloomberg. Developers including Henderson Land Development Co. accounted for at least 96 percent of the total. At the same time, Hong Kong companies’ offerings of U.S. dollar notes have shrunk to $1.8 billion from $7 billion in 2010.

Hong Kong borrowers are turning to Singapore as Europe’s deepening debt crisis has driven relative yields on Asian U.S. dollar debt higher. Singapore’s currency market, Asia’s biggest by trading volume, is an additional attraction, enabling efficient conversion to other regional denominations.

To the astonishment of regulators everywhere some banks are bailing out of southern Europe:

BNP Paribas, France’s biggest bank, booked a loss of 812 million euros ($1 billion) in the past four months from reducing its holdings of European sovereign debt, while Commerzbank took losses as it cut its Greek, Irish, Italian, Portuguese and Spanish bonds by 22 percent to 13 billion euros this year.

Banks are selling debt of southern European nations as investors punish companies with large holdings and regulators demand higher reserves to shoulder possible losses. The European Banking Authority is requiring lenders to boost capital by 106 billion euros after marking their government debt to market values. The trend may undermine European leaders’ efforts to lower borrowing costs for countries such as Greece and Italy while generating larger writedowns and capital shortfalls.

Greece might have a new government soon:

Papandreou and Antonis Samaras, leader of New Democracy, “made progress in talks” yesterday “to name a head of a national unity government,” Elias Mosialos, a Greek government spokesman, said in an e-mailed statement. The two men spoke by phone a number of times yesterday, said a Greek government official who declined to be named. Talks will resume in Athens today, the official said.
…
The unity government’s mission will be implementing the European summit decision from Oct. 26 on a second Greek financing package of 130 billion euros ($179 billion) before leading the country to elections, according to an e-mailed statement from the premier’s office. Papandreou, who has agreed to step aside for a new prime minister, spoke yesterday with German Chancellor Angela Merkel; Jean-Claude Juncker, who heads the group of euro area finance ministers; and European Commission President Jose Barroso.

Not much point talking to Juncker, because he’s a liar. Anyway, it’s lovely that the unity government will be implementing the borrowing part of the plan, but it’s unclear to me whether they will be able to deliver on the paying-back part of the plan. Capital flight is becoming a big problem:

Unsparing in its criticism of Greece, Bild launches another broadside against its favourite target: “Greeks stash 200 billion euros in Swiss bank accounts!” headlines the Berlin tabloid, whose influence on the Chancellorship is an open secret. “While Europe struggles to help Greece with multi-billion euro bailout plans, more and more Greeks are transferring their money out of the country” to avoid the consequences of a crash in the national economy, announces Bild. “Stop the capital flight!” insists the tabloid’s editorial, which lambasts the Greek elite for refusing to introduce a tax on money transfers or penalties for tax evasion.

The Globe & Mail reports:

That disenchantment has also been reflected in the flight of capital from the country in recent weeks. The New York Times, citing banking sources in Athens, estimated that €10-billion to €20-billion were whisked away to safer countries in September and October, escalating a trend that saw €46-billion in deposits leave Greek banks since January 2010.

The wealthy have reportedly been paying cash for homes in London, while those with more modest incomes are stuffing euro notes into safe-deposit boxes.

I’m sure that human flight is a problem, too, although I confess I have no evidence to support this. But come on! If you were Greek, aged under, say, 35, and were trained in an actual skill (doctors and nurses, for instance, have highly transportable skills) wouldn’t you be thinking that maybe France, Germany, or the UK would be better places to make a living?

And let’s not even mention Italy, it’s too depressing. Oh, all right, we’ll talk about Italy:

Italy’s cost of borrowing money soared to its highest point since the euro zone was formed, signalling a growing conviction the sovereign debt crisis is about to get worse as the currency union’s third-largest economy creeps closer to a financial cliff.

The yield on 10-year Italian bonds hit 6.68 per cent – a 14-year high – on Monday before narrowing to 6.45 per cent, amid reports that embattled Prime Minister Silvio Berlusconi was about to resign. Greece, Ireland and Portugal each were forced to seek bailouts soon after their bond yields climbed past 7 per cent.

As long as we’re talking about Europe, DBRS has some interesting things to say about Belgian mortgages:

Firstly, according to data from obtained by DBRS, Belgium has owner-occupation levels that are higher than neighbouring European countries at 71%, compared to 55% for France and 53% for the Netherlands. This is partly as a result of the house price growth over the last decade outstripping the commensurate growth in rental return. It is also infl uenced by the fact that Belgium has very high property purchase transaction costs (both buying and selling property) relative to other European jurisdictions. DBRS understands that purchase costs are routinely in the range of 10-20% of the property cost. Both these factors combined have meant that investment in property for speculative purposes is relatively unattractive as the rental yield is, comparative to other European jurisdictions, low, and day one cash outlay is high.
…
In Belgium fi xed rate mortgages represent the majority of the market and the majority of the loans have a fixed rate of interest for 10 years or more or for the entire term of the loan. Variable rate loans also feature and differ from the completely variable rate loans found in other jurisdictions in that their variability is restricted by caps and fl oors in the interest rate. Rate caps offer borrowers some protection from spikes in interest rates by limiting the potential mortgage payments due by borrowers regardless of prevailing interest rates.

As part of the continuing campaign to make it impossible for Bad People to do business by making it impossible for anybody to do business, the federal government has issued a Consultation Paper on Proposed Amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations on Ascertaining Identity. Naturally, no attempt is made to justify the proposed revisions to protocol in terms of actual results; it is sufficient to pick objectives out of the air, say ‘This makes sense!’ and then enforce it.

BIS has issued a working paper by Michael Brei, Leonardo Gambacorta and Goetz von Peter titled Rescue packages and bank lending:

This paper examines whether the rescue measures adopted during the global financial crisis helped to sustain the supply of bank lending. The analysis proposes a setup that allows testing for structural shifts in the bank lending equation, and employs a novel dataset covering large international banks headquartered in 14 major advanced economies for the period 1995–2010. While stronger capitalisation sustains loan growth in normal times, banks during a crisis can turn additional capital into greater lending only once their capitalisation exceeds a critical threshold. This suggests that recapitalisations may not translate into greater credit supply until bank balance sheets are sufficiently strengthened.

A scandal regarding Olympus has been simmering for a while and has now come to a boil – Olympus was naughty:

Olympus Corp. (7733) said it hid losses by paying inflated fees to advisers on the 2008 acquisition of Gyrus Group Plc, the first admission of wrongdoing from the Japanese camera and medical-equipment maker since accusations from its former chief executive officer surfaced four weeks ago.

The stock plunged by the daily limit after the company said it also used three other acquisitions to help hide the losses on investments from the 1990s. Allegations by Michael C. Woodford after he was axed as CEO on Oct. 14 had wiped more than half the value from the company’s stock before today.

Prohibition is drying up in the States:

U.S. states that have kept a tight rein on alcohol sales since the Prohibition era may be loosening their grip.

Lawmakers in Utah, where even high-alcohol beer is sold through state liquor stores, were urged by an advisory panel this year to put the business in private hands. Pennsylvania, Virginia and North Carolina have considered privatizing state liquor outlets. Tomorrow in Washington, votes will be counted on a ballot measure backed by Costco Wholesale Corp. (COST) that would end state control of liquor retailing.

Budget deficits forecast to reach $103 billion this fiscal year are making states more willing to open the taps, to the dismay of some public-health advocates who warn it may exacerbate social ills. Companies including Costco, bourbon maker Beam Inc. and Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), which owns food and alcohol distributor McLane Co., may gain a larger share of the $8.5 billion in gross sales last year in the 18 states where liquor is still controlled.

One wonders if Ontario will ever follow!

There was a defense of milkfare in Saturday’s Globe:

[Federal Agriculture Minister Gerry Ritz] noted the Americans approved $450-million (U.S.) last year to backstop their dairy industry.

How much did Ottawa spend on backstopping Canadian dairy farmers?

“Zip,” Mr. Ritz said.

Oh, and how much did consumers pay directly to subsidize the bucolic lifestyle of the favoured few?

Every year the distortions caused by the system grow larger. Canadians may not realize it when they go to the grocery store, but they’re paying twice the world average for dairy products – and up to three times what Americans pay. That’s a hidden $3-billion a year tax on all of us.

Roughly half the money flows back to dairy farmers, making them richer than other farmers, who work just as hard. Bloated government agencies and marketing boards soak up a significant chunk of the rest.

I’d rather make my donation directly, assuming that I have to make one at all. But maybe that’s just me.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 5bp, FixedResets down 9bp and DeemedRetractibles losing 21bp. Good volatility, all losers, with Sun Life notable again for its losses. 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	-0.0967 %	2,123.5
FixedFloater	4.88 %	4.60 %	24,479	17.17	1	0.0000 %	3,155.1
Floater	3.39 %	3.41 %	69,476	18.70	2	-0.0967 %	2,292.8
OpRet	4.94 %	0.95 %	50,756	1.50	7	-0.0984 %	2,481.8
SplitShare	5.75 %	6.41 %	59,861	5.14	3	-0.3903 %	2,514.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0984 %	2,269.4
Perpetual-Premium	5.56 %	3.30 %	107,007	0.47	13	0.0779 %	2,151.3
Perpetual-Discount	5.33 %	5.40 %	108,518	14.74	17	0.0510 %	2,283.8
FixedReset	5.12 %	3.01 %	207,994	2.51	62	-0.0855 %	2,343.4
Deemed-Retractible	5.06 %	4.45 %	211,431	3.82	46	-0.2119 %	2,210.6

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.F	FixedReset	-1.80 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.16 Bid-YTW : 4.41 %
SLF.PR.A	Deemed-Retractible	-1.71 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.37 Bid-YTW : 6.26 %
IAG.PR.A	Deemed-Retractible	-1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.28 Bid-YTW : 6.15 %
BAM.PR.H	OpRet	-1.63 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-07 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -3.92 %
SLF.PR.B	Deemed-Retractible	-1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.62 Bid-YTW : 6.17 %
GWO.PR.J	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 4.02 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.G	Perpetual-Discount	75,245	Desjardins crossed 27,000 at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-07 Maturity Price : 24.58 Evaluated at bid price : 24.90 Bid-YTW : 5.45 %
BAM.PR.Z	FixedReset	35,160	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-07 Maturity Price : 23.11 Evaluated at bid price : 25.02 Bid-YTW : 4.38 %
BNS.PR.Z	FixedReset	33,500	Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 3.21 %
GWO.PR.J	FixedReset	30,964	Scotia crossed 14,000 at 26.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 4.02 %
RY.PR.W	Perpetual-Discount	28,355	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-07 Maturity Price : 24.40 Evaluated at bid price : 24.91 Bid-YTW : 4.90 %
BMO.PR.N	FixedReset	27,385	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-25 Maturity Price : 25.00 Evaluated at bid price : 27.17 Bid-YTW : 2.47 %
There were 25 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TCA.PR.Y	Perpetual-Premium	Quote: 52.62 – 53.34 Spot Rate : 0.7200 Average : 0.4623 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-05 Maturity Price : 50.00 Evaluated at bid price : 52.62 Bid-YTW : 3.30 %
SLF.PR.F	FixedReset	Quote: 26.16 – 26.90 Spot Rate : 0.7400 Average : 0.4972 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.16 Bid-YTW : 4.41 %
FTS.PR.C	OpRet	Quote: 26.40 – 26.95 Spot Rate : 0.5500 Average : 0.3634 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-07 Maturity Price : 25.50 Evaluated at bid price : 26.40 Bid-YTW : -23.58 %
HSB.PR.C	Deemed-Retractible	Quote: 25.15 – 25.56 Spot Rate : 0.4100 Average : 0.2875 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 5.11 %
IAG.PR.F	Deemed-Retractible	Quote: 25.70 – 26.20 Spot Rate : 0.5000 Average : 0.3802 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 5.66 %
CM.PR.P	Deemed-Retractible	Quote: 25.85 – 26.21 Spot Rate : 0.3600 Average : 0.2443 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-29 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 2.08 %

It would seem that nobody can make a decision about Greece:

World leaders failed to agree on increasing the resources of the International Monetary Fund, dashing the hopes of European governments keen to tap more foreign aid to buttress their crisis-fighting efforts.

Governments are awaiting further details of Europe’s week- old rescue package before they commit cash, German Chancellor Angela Merkel said today on the final day of a Group of 20 summit in Cannes, France.

The reluctance of the leaders of the world’s biggest economies to immediately channel funds to the euro area reflects frustration with Europe’s failure to end a crisis that sparked again this week, with Greece’s government lurching towards collapse and Italy facing intensifying pressure to restore fiscal order.

To be frank, I don’t know what is happening in Greece:

Prime Minister George Papandreou won a confidence vote after offering to form a government of national unity that may lead to him stepping down as he sought to reach an accord on European aid needed to avert default.

The premier said he’ll meet with President Karolos Papoulias to discuss his proposal to create a unity government. Main opposition leader Antonis Samaras rejected the offer and called for elections.

Lapdog Carney got his reward:

Mark Carney, governor of the Bank of Canada, has been confirmed as new chairman of the Financial Stability Board, the G20’s global banking watchdog.

Mr. Carney serves as an inspiration to yes-men and sycophants everywhere.

Interesting paper by Rui Zhu, Utpal M. Dholaki, Xinlei Chen and René Algesheimer: Does Online Community Participation Foster Risky Financial Behavior?:

Although consumers increasingly use online communities for various activities, little is known regarding how participation in them affects individuals’ decision making strategies. Through a series of field and laboratory studies, we demonstrate that participation in an online community increases risk seeking tendency of individuals in financial decisions and behaviors. Our results reveal that participation in an online community leads consumers to perceive support from other members, that is they believe they will be helped by other community members should difficulties arise. Such a perception leads online community members to make riskier financial decisions than non-participants. We also discover a boundary condition to the effect: online community members are more risk seeking only when they have relatively strong ties with other members; when ties are weak, they exhibit similar risk preferences as non-members.

As I have suspected all along, it appears that the ‘MF Global Missing Funds’ hysteria was ramped up by the regulators and trustee to serve their own purposes:

Customer funds missing from bankrupt brokerage MF Global Inc. have been located in a custodial account at JPMorgan Chase & Co. (JPM), according to two people with knowledge of the matter.

An MF Global custodial account at JPMorgan contained about $658.8 million of client funds as of Oct. 31, according to one of the people, who declined to be identified because they weren’t authorized to speak publicly.

MF Global’s customer funds had a shortfall of $633 million, or more than 11 percent, out of a segregated fund requirement of about $5.4 billion, regulators said yesterday.

Does anybody think this hasn’t been known all along? But this way, we can praise the extraordinary detective work of the trustee and regulatory authorities, whose hard work, dedication, and extraordinary forensic auditing ability led them to ask the question: “Where’s the $600-million?” and pierce through all the layers of evasions and ambiguity to uncover the truth behind the answer “At JPMorgan. Why?”.

On November 2 I mentioned some projections that some banks would meet their new capital requirements by backing away from non-core lending. Commerzbank steps up to illustrate:

Germany’s second-largest lender Commerzbank AG will refuse loans which don’t help Germany or Poland, as the euro zone crisis makes European banks more protectionist in choosing between writing new business and meeting stringent capital requirements.

“We are not doing business which is not to the benefit of Germany or Poland,” chief financial officer Eric Strutz told analysts on a conference call discussing third-quarter earnings on Friday. “We have to focus on supporting the German economy as other banks pull out.”
…
Commerzbank, which is 25 per cent owned by the state, is accelerating the pullback from euro zone nations and cutting risky assets to avoid another state bailout after a €798-million ($1.10-billion U.S.) impairment on Greek assets pushed it to a third-quarter operating loss.

Having cut exposure to indebted euro zone countries by more than 20 per cent to €13-billion, including a 52 per cent haircut on Greek debt, the Frankfurt-based lender said it would continue reducing its public sector debt in Portugal, Italy, Spain, Ireland and Greece, mirroring a similar move made by French rival BNP Paribas SA.
…
Commerzbank said it had a core Tier One ratio of 9.4 per cent at the end of September and needs to raise €2.9-billion to meet tougher capital requirements set out by the European bank regulators.

“We can meet the required capital ratio by, for example, reducing risk assets in non-core areas, selling non-strategic assets or by means of retained earnings and we do not intend to tap new state funds,” Commerzbank said.

Commerzbank will keep its Eastern European BRE Bank unit and its online arm comdirect but may sell other units as it seeks to cut risky assets by a further €30-billion. Its property financing unit Eurohypo will also stop taking new business, the bank said.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts winning 10bp, FixedResets down 5bp and DeemedRetractibles losing 8bp. Lots of volatility, with SLF issues notable amonst the losers. Volume was on the light side of 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	-0.0644 %	2,125.6
FixedFloater	4.88 %	4.60 %	24,383	17.18	1	-0.5115 %	3,155.1
Floater	3.38 %	3.41 %	72,188	18.71	2	-0.0644 %	2,295.1
OpRet	4.93 %	0.95 %	50,640	1.51	7	0.2465 %	2,484.3
SplitShare	5.73 %	6.24 %	59,903	5.16	3	0.2235 %	2,523.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2465 %	2,271.6
Perpetual-Premium	5.57 %	0.75 %	106,680	0.10	13	-0.0240 %	2,149.7
Perpetual-Discount	5.34 %	5.43 %	108,686	14.74	17	0.1021 %	2,282.7
FixedReset	5.12 %	3.03 %	210,542	2.44	62	-0.0486 %	2,345.4
Deemed-Retractible	5.04 %	4.40 %	214,101	3.91	46	-0.0836 %	2,215.3

Performance Highlights
Issue	Index	Change	Notes
CM.PR.K	FixedReset	-1.83 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.47 %
SLF.PR.E	Deemed-Retractible	-1.74 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.40 Bid-YTW : 6.55 %
SLF.PR.C	Deemed-Retractible	-1.71 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.21 Bid-YTW : 6.60 %
SLF.PR.F	FixedReset	-1.66 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.64 Bid-YTW : 3.65 %
SLF.PR.D	Deemed-Retractible	-1.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.20 Bid-YTW : 6.61 %
SLF.PR.G	FixedReset	-1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.78 %
MFC.PR.C	Deemed-Retractible	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.16 Bid-YTW : 6.71 %
BAM.PR.J	OpRet	1.02 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.80 Bid-YTW : 4.09 %
BAM.PR.X	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-04 Maturity Price : 22.89 Evaluated at bid price : 24.35 Bid-YTW : 3.79 %
BAM.PR.H	OpRet	1.46 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-04 Maturity Price : 25.00 Evaluated at bid price : 25.77 Bid-YTW : -23.09 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.E	Perpetual-Discount	652,815	Nesbitt crossed blocks of 250,000 shares, 45,600 shares, 20,000 and 100,000, all at 25.00. TD crossed 100,000 at the same price. Nesbitt sold 24,500 to anonymous at 25.01. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-04 Maturity Price : 24.69 Evaluated at bid price : 24.99 Bid-YTW : 5.63 %
TD.PR.K	FixedReset	92,643	TD crossed blocks of 54,400 and 32,000, both at 27.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.36 Bid-YTW : 2.70 %
BAM.PR.Z	FixedReset	89,395	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-04 Maturity Price : 23.11 Evaluated at bid price : 25.03 Bid-YTW : 4.56 %
ENB.PR.B	FixedReset	68,480	RBC crossed 20,000 at 25.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 3.54 %
SLF.PR.H	FixedReset	55,370	Anonymous crossed (?) 10,100 at 24.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.35 Bid-YTW : 4.30 %
BMO.PR.J	Deemed-Retractible	47,497	TD crossed 37,700 at 25.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 4.09 %
There were 29 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.H	OpRet	Quote: 25.77 – 27.47 Spot Rate : 1.7000 Average : 1.0127 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-04 Maturity Price : 25.00 Evaluated at bid price : 25.77 Bid-YTW : -23.09 %
CM.PR.K	FixedReset	Quote: 26.25 – 26.76 Spot Rate : 0.5100 Average : 0.3292 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.47 %
CM.PR.M	FixedReset	Quote: 27.48 – 27.84 Spot Rate : 0.3600 Average : 0.2471 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.48 Bid-YTW : 2.76 %
MFC.PR.C	Deemed-Retractible	Quote: 21.16 – 21.50 Spot Rate : 0.3400 Average : 0.2524 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.16 Bid-YTW : 6.71 %
TRP.PR.C	FixedReset	Quote: 25.60 – 25.84 Spot Rate : 0.2400 Average : 0.1555 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-04 Maturity Price : 23.41 Evaluated at bid price : 25.60 Bid-YTW : 3.18 %
TD.PR.Y	FixedReset	Quote: 26.15 – 26.37 Spot Rate : 0.2200 Average : 0.1389 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 2.75 %

There was possible insider trading in MF Global bonds:

The U.S. Securities and Exchange Commission is reviewing trades in MF Global Holdings Ltd. (MF) convertible bonds to determine whether some investors sold the debt based on confidential information before the firm’s demise, according to two people with direct knowledge of the matter.

Investigators are in part focusing on trades that were made ahead of announcements that the firm’s credit rating had been downgraded, the people said, speaking on condition of anonymity because the matter isn’t public.

It’s not clear whether or not a Greek referendum is planned:

Just hours after saying Greeks need to decide on whether their future is in the euro, Papandreou said the country belongs in the currency bloc. He welcomed support shown by the main opposition New Democracy party for last week’s rescue pact agreed with European Union leaders in Brussels. Finance Minister Evangelos Venizelos said Greece won’t hold a referendum.

“We had a dilemma: either real consensus or referendum,” Papandreou told ministers, according to an e-mailed transcript of his statements. “As I said yesterday, coming out of the meeting, if there were consensus we wouldn’t need a referendum. I said if the opposition comes to the table to agree on the loan, there’s no need for a referendum.”

Some say no:

Greek Finance Minister Evangelos Venizelos, speaking to party lawmakers in Parliament in Athens today, said the nation won’t hold a referendum. Just hours after saying Greeks need to decide on whether their future is in the euro, Papandreou said the country belongs in the currency bloc.

“Papandreou absolutely blinked in this game of chicken,” Michael Holland, chairman and founder of New York-based Holland & Co., said in a telephone interview. His firm oversees more than $4 billion. “The interesting thing is that it took him so long to blink. The world’s markets told him he was wrong and he still persisted for an extended period of time. It was insane.”

It’s not clear to me whether the world’s markets get any say in the matter. The question is: can he simultaneously meet the EU requirements and reduce the incidence of riots and national strikes to a dull roar? I suggest he’s between a rock and a hard place; and if the Greek government pledges to meet the demands, the Greek population will make it impossible. Remember, we’re not talking about some professional snivellers snivelling about shooting the hippo – we’re talking about a dramatic and broadly based reduction in living standards.

Speaking of snivelling, we may be in for a new round of the HFT debate:

Estimates vary, but some traders say that as much as 35 per cent of volume on Canadian stock markets is now generated by high frequency trading firms that are jumping in and out of markets with buy and sell orders in hopes of profiting from tiny inefficiencies. In the U.S., some estimates place the amount of volume generated by HFTs at 60 per cent of all trading.
…
Canadian regulators are grappling with what to do about dark pools. Who should be allowed to trade on them, and on what terms? While dark pools do allow money managers to avoid high frequency traders, they can also sap volume from stock markets, eroding their value as a place for others to trade. Too many dark pools is most definitely not a good thing. In the U.S., so much trading takes place away from stock markets that what’s left on the public markets like NYSE and Nasdaq is “the exhaust,” as [LiquidNet CEO] Mr. [Seth] Merrin puts it.
…
The implication is that dark pools shouldn’t allow small orders, and shouldn’t be just ways for brokerages to avoid fees on their order flow. They should be reserved truly for orders that can’t be efficiently traded in light markets.

That’s right – make sure that retail doesn’t get any cut of the efficiencies! That’s what pays regulators’ salaries!

S&P confirmed MFC:

• Manulife Financial Corp. reported third-quarter net losses driven by equity-market and interest rate declines and net charges from its annual review of actuarial methods and assumptions.
• We are affirming our ‘A-‘ long-term counterparty credit rating on Manulife and our ratings on its subsidiaries.The company’s Canadian fair-value accounting framework is considerably more volatile, for comparable risks, than the relatively
  book-value-focused U.S. accounting framework.

• We expect Manulife to sustain its extensive global competitive advantages and its favorable capitalization.

TMX DataLinx seems to have resolved their networking problems – the quotes listed today are official.

It was a day of uneven strength for the Canadian preferred share market, with PerpetualDiscounts winning 40bp, FixedResets up 6bp and DeemedRetractibles gaining 18bp. There was a long list of Performance Highlights, heavily skewed towards winners. Volume was quite good.

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	1.5707 %	2,126.9
FixedFloater	4.86 %	4.57 %	24,128	17.22	1	0.5141 %	3,171.3
Floater	3.38 %	3.40 %	162,561	18.73	2	1.5707 %	2,296.5
OpRet	4.94 %	0.66 %	50,622	1.52	7	0.4236 %	2,478.1
SplitShare	5.75 %	6.24 %	60,720	5.16	3	0.4350 %	2,518.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.4236 %	2,266.0
Perpetual-Premium	5.56 %	-0.21 %	106,268	0.10	13	0.2778 %	2,150.2
Perpetual-Discount	5.34 %	5.43 %	108,907	14.73	17	0.4003 %	2,280.3
FixedReset	5.12 %	2.95 %	209,051	2.45	62	0.0591 %	2,346.6
Deemed-Retractible	5.04 %	4.40 %	216,707	3.91	46	0.1763 %	2,217.2

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.H	FixedReset	-2.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.17 Bid-YTW : 4.39 %
CU.PR.C	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 3.75 %
ELF.PR.F	Perpetual-Discount	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-03 Maturity Price : 22.30 Evaluated at bid price : 22.58 Bid-YTW : 5.91 %
BAM.PR.B	Floater	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-03 Maturity Price : 15.54 Evaluated at bid price : 15.54 Bid-YTW : 3.40 %
CM.PR.P	Deemed-Retractible	1.09 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-29 Maturity Price : 25.00 Evaluated at bid price : 25.88 Bid-YTW : 1.93 %
BAM.PR.M	Perpetual-Discount	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-03 Maturity Price : 22.46 Evaluated at bid price : 22.81 Bid-YTW : 5.25 %
GWO.PR.L	Deemed-Retractible	1.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 5.50 %
GWO.PR.F	Deemed-Retractible	1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-03 Maturity Price : 25.25 Evaluated at bid price : 25.46 Bid-YTW : 2.33 %
GWO.PR.G	Deemed-Retractible	1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.30 %
PWF.PR.F	Perpetual-Discount	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-03 Maturity Price : 24.65 Evaluated at bid price : 24.91 Bid-YTW : 5.29 %
FTS.PR.E	OpRet	1.77 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 27.62 Bid-YTW : 0.66 %
BAM.PR.K	Floater	2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-03 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.41 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PR.Z	FixedReset	221,540	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-03 Maturity Price : 23.09 Evaluated at bid price : 24.95 Bid-YTW : 4.58 %
IAG.PR.C	FixedReset	120,532	Nesbit sold blocks of 24,000 and 15,000 to RBC, both at 26.50. Desjardins crossed 20,000 at the same price. RBC crossed blocks of 10,000 and 25,000 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.50 Bid-YTW : 3.59 %
CM.PR.E	Perpetual-Discount	107,455	Desjardins crossed 62,600 at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-03 Maturity Price : 24.69 Evaluated at bid price : 25.00 Bid-YTW : 5.63 %
MFC.PR.F	FixedReset	107,300	RBC crossed 80,300 at 24.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.36 Bid-YTW : 4.00 %
BMO.PR.Q	FixedReset	92,435	Nesbitt crossed 75,000 at 25.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.52 Bid-YTW : 3.09 %
ENB.PR.B	FixedReset	62,250	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 3.57 %
There were 39 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
HSB.PR.D	Deemed-Retractible	Quote: 25.07 – 25.49 Spot Rate : 0.4200 Average : 0.2497 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 5.05 %
BAM.PR.H	OpRet	Quote: 25.40 – 25.82 Spot Rate : 0.4200 Average : 0.2592 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-03 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : -7.00 %
MFC.PR.F	FixedReset	Quote: 24.36 – 24.74 Spot Rate : 0.3800 Average : 0.2466 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.36 Bid-YTW : 4.00 %
SLF.PR.H	FixedReset	Quote: 24.17 – 24.45 Spot Rate : 0.2800 Average : 0.1702 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.17 Bid-YTW : 4.39 %
TD.PR.O	Deemed-Retractible	Quote: 25.51 – 25.75 Spot Rate : 0.2400 Average : 0.1650 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-31 Maturity Price : 25.25 Evaluated at bid price : 25.51 Bid-YTW : 4.30 %
MFC.PR.D	FixedReset	Quote: 26.87 – 27.10 Spot Rate : 0.2300 Average : 0.1624 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.87 Bid-YTW : 3.94 %

The FOMC statement was pretty gloomy:

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013

Of perhaps more interest was the voting:

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.

I reported on October 13 that Kocherlakota was decrying Opertation Twist, and extracted a big piece of Fisher’s dissent on September 27. This time, however, the dissenter wants looser policy. Uh-oh.

Speaking of Central Banks, Lapdog Carney’s opening statement to the House of Commons Standing Committee on Finance discussed the inflation target:

At the time of the last renewal, the Bank committed to continue its research into potential improvements that might build on the success of the current framework. A concerted and ambitious research agenda focused on evaluating whether two specific changes – targeting a lower rate of inflation or a path for the level of prices – could provide significant net benefits to the Canadian economy and Canadian households. Subsequently, the experience of the global financial and economic crisis prompted the Bank to add a third item to its research agenda – asking to what extent monetary policy should take account of financial stability considerations.

Allow me to highlight just some of the initiatives and work undertaken by the Bank over the past five years. Since 2008, we have had three major conferences for our staff and other researchers to present work on inflation targeting and the monetary policy framework. The most important of these research papers have been published in three special issues of the Bank of Canada Review – Winter 2007–08, Spring 2009 and Summer 2010. As well, Governing Council members have spoken regularly and publicly about the issues.

The research he mentions is basically with respect to Price Level Targetting, which has been discussed on PrefBlog and which I favour. What makes this interesting, however, is that there was no mention of the rumoured move to a dual mandate:

In an all-party vote on Thursday, members of the House of Commons finance committee decided they will hold at least one hearing on whether the bank’s mandate should be changed to include targets beyond inflation, such as full employment or nominal gross domestic product.

However such large-scale changes appear to be off the table.

“The Governor and I have discussed this [inflation targeting mandate renewal] at some length and I think we are understanding each other. We are … in line with each other on this,” Mr. Flaherty said. “So we’re not talking about a new policy or a new mandate for the Bank of Canada. What we are talking about is being more explicit about what the mandate of the Bank of Canada is.”

Mr. Flaherty’s comments are in line with a report by The Globe and Mail on Monday that the 2-per-cent target is expected to be renewed with a more forceful assertion of what the bank calls “flexible inflation targeting,” or the governor’s right to take longer than usual to bring inflation to the 2-per-cent target.

BIS has released a Consultative Document: Capitalisation of bank exposures to central counterparties:

CCPs can improve the safety and soundness of OTC derivatives markets through the multilateral netting of exposures, the enforcement of robust risk management standards, including mandatory posting of initial margin, and the mutualisation of losses should a clearing member fail.

Gee, mutualisation of losses is really working out well with respect to Greek debt in Europe, isn’t it? The banks have decided they’re in the business of making a profit:

The European Union’s plan for recapitalizing banks has “serious problems” that will hurt economic growth and make it harder for some nations to borrow, the Institute of International Finance said.

There is a “clear need” to restore confidence in Europe’s banks, IIF Managing Director Charles Dallara said today in a letter to the Group of 20 nations on the eve of a summit in Cannes, France. Yet the extra capital requirements at the center of the EU’s strategy will come with “considerable cost” because of a flawed scope and approach, he said.
…
Banks are likely to decide that the costs of raising capital are “prohibitive,” Dallara said in his letter to the G-20. Rather than accept forced injections, banks are more likely to sell risky assets and cut back on lending, which will make it harder for countries on Europe’s periphery to access capital markets.

“The market value of the debt of the countries most under scrutiny is likely to decline further as banks unload sovereign bonds,” Dallara said. “This is contrary to the goal of stabilizing and underpinning the outlook for sovereign debt in Europe.”

If banks acted to meet the new requirements relying only on retained earnings and a reduction in credit supply, “overall credit exposure to the euro-area private sector would need to decline by at least 5 percent,” he said. “It is essential that the higher European capital requirements are a temporary measure as intended, not sustained over time and not seen as a new standard to be imposed more widely.”

The Europeans are furious with Papandreou:

Crisis talks were under way in the French resort of Cannes on the eve of a Group of 20 summit after Papandreou was summoned by European counterparts to explain his call for a referendum that risks delaying aid the country needs to avert default. In Athens, Greek lawmakers debated a confidence motion that could bring down his government.

The stewards of the euro “won’t accept” a break from last week’s agreement, Luxembourg Prime Minister Jean-Claude Juncker told reporters in Cannes. German Chancellor Angela Merkel said “we have to get to the point where we know exactly what comes next.”
…
European Commission President Jose Barroso said the referendum may hold up Greece receiving 8 billion euros ($11 billion) of already delayed support. “In the European Union, we have agreed on far-reaching measures to support Greece,” he said in a statement. “But for those measures to be implemented it is critically important to have stability in the country.”

Europe’s woes are returning G-20 leaders to the crisis footing they adopted three years ago after the collapse of Lehman Brothers Holdings Inc. Australian Prime Minister Julia Gillard said in Cannes that Europe faces questions that “need to be answered and answered quickly,” while Chinese President Hu Jintao told Lagarde the crisis must be “prevented from spreading further.”

The European royalty is talking tough:

The euro declined, trading 0.7 percent from a three-week low against the dollar, as European leaders said Greece will hold a referendum next month to determine whether it will stay in the 17-nation currency.

The euro dropped against most of its 16 major counterparts as French President Nicolas Sarkozy said Greece won’t receive a “single cent” in aid without holding to its bailout agreement’s terms.
…
Crisis talks ended in the French resort of Cannes with German Chancellor Angela Merkel and Sarkozy withholding 8 billion euros ($11 billion) of assistance to Greece and warning it will surrender all European aid if the nation votes against a bailout package agreed last week.

The hardball tactics open the door for the first time for a country to leave the 12-year-old currency bloc that its founders declared was “irrevocable.”

Remember all that leverage that was going to save the world?:

Market turmoil has got the best of Europe’s big bailout fund, forcing it to pull its latest bond issue.

On Wednesday the European Financial Stability Facility confirmed that its €3-billion ($4.12-billion U.S.) bond offering, intended to finance the next bailout loan to Ireland, has been postponed because of “market conditions,” according to the group’s spokesperson.

The earliest the deal could come back is next week, and the new timeline could cause trouble. Ireland has €4.4-billion worth of debt coming due on Nov. 11, according to FT Alphaville.

OSFI has released a letter regarding the Financial Stability Board Principles on Mortgage Lending. They note that they expect to see a LOT MORE paperwork and cover-your-ass bullshit in the future. My idea, that OSFI should surcharge risk-weightings for mortgage exposure – or any other kind of exposure, for that matter – when this exposure greatly exceeds historical norms (as it does, er, now) has not yet been mentioned. The FSB document is titled Consultation Paper: FSB Principles for Sound Residential Mortgage Underwriting Practices:

As the global crisis demonstrated, the consequences of weak residential mortgage underwriting practices in one country can be transferred globally through securitisation of mortgages underwritten to weak standards. As such, it is important to have sound underwriting practices at the point at which a mortgage loan is originally made.

In other words, caveat vendor. Gee, what a wonderful world it will be when we finally have enough rules, eh?

Regardless of whether or not there actually is money missing from segregated accounts at MF Global, their sloppy bookkeeping cost them a deal:

Corzine, 64, steered MF Global into bankruptcy proceedings on Oct. 31 after increasing risk-taking at the firm, including investments in European sovereign debt that roiled markets. Discrepancies over the missing funds that were used to back futures trades sent Interactive Brokers Group Inc. (IBKR) fleeing from a potential acquisition that may have averted the filing, according to a board member at the Greenwich, Connecticut, firm.

“The board certainly considered that purchase and stepped away from it at a point where it became clear there were lots of uncertainties about the accounts and segregated funds,” Hans Stoll, an Interactive Brokers director and a professor of finance at Vanderbilt University in Nashville, Tennessee, said yesterday in a telephone interview.

When your contemplating doing a big deal on 48 hours notice, the last thing you want is uncertainty over the bookkeeping! However, everything is highly unclear at the moment, at least to the public:

.MF Global Holdings Ltd. (MF) customers may have to wait years to get their money back if the futures broker is sued, according to Frederick Grede, the liquidation trustee overseeing the bankruptcy of Sentinel Management Group Inc.

“People should expect that the money on deposit with MF Global will be tied up for some time,” Grede said in a telephone interview today. Grede, a former chief executive officer of the Hong Kong Futures Exchange, has sought to recover about $600 million of customer money from Sentinel, the futures broker that filed for bankruptcy in 2007. “If litigation is involved it well could be years” for MF Global customers, he said.

The day it filed the eighth-largest U.S. bankruptcy on Oct. 31, New York-based MF Global disclosed a shortfall in customer accounts that people with knowledge of the matter said may be about $700 million. CME Group Inc., which has the authority to audit those accounts, said yesterday it didn’t know how much client money was missing.

Grede said it was likely that the client funds won’t be released until the bankruptcy court approves the decision. “To move the money out of MF Global, they have to get the trustee to agree, and I believe the trustee will want the court to agree as well,” he said.

Experience suggests to me that the actual players know very well what the answer to the segregated account mystery is, but are posturing for political purposes. However, the accusations are getting more specific:

MF Global Holdings Ltd. (MF) may have transferred customer money last week following an audit by CME Group Inc. (CME), which has regulatory authority over the futures broker.

The transfer “may have been designed to avoid detection in so far as MF Global did not disclose or report such transfers” to the Commodity Futures Trading Commission or CME Group, the Chicago-based exchange owner said today an e-mailed statement.
…
All MF Global customer positions held at CME Group, and not third-party custodians such as banks, are accounted for, the company said in the statement. “MF Global’s customer positions on CME Group exchanges were and continue to be substantially over-collateralized,” CME Group said. The “apparent shortfall” was in accounts held by MF Global, CME Group said.

In other words, if you had an account with MF Global with $100,000 cash, and your contracts actually required $75,000 of exchange collateral, that part would have been posted OK, but – it is alleged – they were naughty with the remaining $25,000. Even more specific is the claim:

MF Global Inc.’s commodity customer funds have a shortfall of $633 million, or about 11.6 percent, out of a segregated fund requirement of about $5.4 billion, the Commodity Futures Trading Commission said.

At a hearing today in U.S. Bankruptcy Court in Manhattan, lawyers for the CFTC said the trustee for the bankrupt broker- dealer may recover the shortfall.
…
“It now appears that the firm made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection,” as the transactions weren’t reported to regulators until Oct. 31, it said.

However, it’s still unclear to me just what has happened, or is claimed to have happened. The truth will out, but, as is always the case, the nature of that truth will only be reported after a few years have passed. The company is represented in court by the trustee – not by lawyers appointed by former management – and the trustee has an interest in painting as black a picture as possible in order to maximize his fee income.

I have noticed not just one, but two interesting juxtapositions in the press recently. The first is some weeping and wailing over smoking in hospitals, reflecting the usual arrogant mindset of the medical profession:

As an emerging standard for Canadian hospitals, smoke-free property is intended to reduce exposure to second-hand smoke, communicate denormalization messages about smoking and enhance tobacco cessation.

However, noncompliance and inadequate treatment for tobacco dependence appear to be the norm. Enhancing appropriate health care for patients who use tobacco to include consistent and effective treatment for the symptoms of withdrawal may improve this problem. Reframing tobacco use as an addiction may be an important root strategy to shift practise norms. People who smoke will have symptoms of withdrawal during a stay in a hospital with a smoke-free policy. With the advent of these policies, abstinence support with effective management of withdrawal symptoms for patients in hospital is imperative.

Harm reduction, as defended by the Supreme Court, is given short shrift in the study – mentioned, but very briefly and not in so many words.

The other juxtapositon involved great alarm over string attached to Chinese funding of US universities:

The Confucius Institute at North Carolina State University made its feelings known after the Dalai Lama accepted an invitation to speak in 2009 on the Raleigh campus. China’s military took over Tibet in 1959, exiling the spiritual leader considered a traitor in China for advocating Tibetan self-rule.

Confucius Institute director Bailian Li told North Carolina State provost Warwick Arden that a visit by the Lama could disrupt “some of the strong relationships we were developing with China,” Arden said. Besides the institute, joint programs include student exchanges, summer research and faculty collaboration.

And this was published on the same day as a piece about US de-funding of UNESCO:

A day after the Palestinians won full membership in the UN group with 107 votes in favor and 14 against, the U.S. cut off its funding, almost a quarter of the agency’s budget. Moreover, swing votes the Palestinians need to bolster their support on the Security Council for full UN membership have evaporated.

Today’s numbers are all provisional (although probably pretty good) as TMX DataLinx continues to experience networking problems.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts up 10bp, FixedResets winning 15bp and DeemedRetractibles gaining 14bp. There were only three issues in the Performance Highlights table, but all three were positive. Volume was a little light.

PerpetualDiscounts now yield 5.44%, equivalent to 7.07% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.95%, so the pre-tax interest equivalency spread (also called the Seniority Spread) is now about 210bp, a slight widening from the 205bp reported on October 26.

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	0.8581 %	2,094.1
FixedFloater	4.88 %	4.60 %	23,864	17.18	1	1.0390 %	3,155.1
Floater	3.44 %	3.44 %	155,094	18.65	2	0.8581 %	2,261.0
OpRet	4.97 %	1.81 %	50,783	1.51	7	0.2703 %	2,467.7
SplitShare	5.77 %	6.40 %	61,386	5.16	3	0.2391 %	2,507.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2703 %	2,256.5
Perpetual-Premium	5.58 %	2.42 %	106,332	0.10	13	0.2394 %	2,144.2
Perpetual-Discount	5.36 %	5.44 %	110,078	14.76	17	0.0953 %	2,271.2
FixedReset	5.12 %	3.08 %	210,336	2.45	62	0.1540 %	2,345.2
Deemed-Retractible	5.05 %	4.45 %	219,543	3.92	46	0.1364 %	2,213.3

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.N	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 3.41 %
BAM.PR.G	FixedFloater	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-02 Maturity Price : 25.00 Evaluated at bid price : 19.45 Bid-YTW : 4.60 %
BAM.PR.M	Perpetual-Discount	1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-02 Maturity Price : 22.20 Evaluated at bid price : 22.56 Bid-YTW : 5.31 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PR.Z	FixedReset	506,476	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-02 Maturity Price : 23.10 Evaluated at bid price : 25.00 Bid-YTW : 4.57 %
HSE.PR.A	FixedReset	93,687	Anonymous sold 16,700 to TD and blocks of 10,000 and 15,100 to RBC, all at 25.40. RBC crossed 35,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-02 Maturity Price : 23.34 Evaluated at bid price : 25.43 Bid-YTW : 3.42 %
IFC.PR.A	FixedReset	58,435	Nesbitt crossed 44,000 at 25.15. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.92 %
CM.PR.E	Perpetual-Discount	55,532	Desjardins crossed 25,000 at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-02 Maturity Price : 24.69 Evaluated at bid price : 25.00 Bid-YTW : 5.62 %
BNS.PR.Z	FixedReset	38,483	Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 3.34 %
MFC.PR.E	FixedReset	37,341	Scotia crossed 16,000 at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-19 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 4.30 %
There were 27 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNA.PR.E	SplitShare	Quote: 23.30 – 23.80 Spot Rate : 0.5000 Average : 0.4035 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 6.40 %
GWO.PR.L	Deemed-Retractible	Quote: 25.20 – 25.59 Spot Rate : 0.3900 Average : 0.2983 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 5.65 %
TD.PR.I	FixedReset	Quote: 27.33 – 27.56 Spot Rate : 0.2300 Average : 0.1497 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.33 Bid-YTW : 2.74 %
ELF.PR.F	Perpetual-Discount	Quote: 22.35 – 22.73 Spot Rate : 0.3800 Average : 0.3006 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-02 Maturity Price : 22.06 Evaluated at bid price : 22.35 Bid-YTW : 5.97 %
MFC.PR.B	Deemed-Retractible	Quote: 21.95 – 22.29 Spot Rate : 0.3400 Average : 0.2616 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.95 Bid-YTW : 6.40 %
MFC.PR.E	FixedReset	Quote: 26.06 – 26.29 Spot Rate : 0.2300 Average : 0.1554 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-19 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 4.30 %

It’s still unclear, but MF Global may have been naughty as well as stupid:

MF Global Holdings Ltd. (MF), under investigation by U.S. regulators after filing for bankruptcy protection, violated requirements that it keep clients’ collateral separate from its own accounts, the head of the world’s largest futures exchange said.
…
MF Global, the holding company for the futures broker run by former New Jersey Governor and ex-Goldman Sachs Group Inc. Co-Chairman Jon Corzine, is being investigated by regulators for hundreds of millions of dollars that may be missing from client accounts, according to two people with knowledge of the matter.
…
The missing funds were reported yesterday by the New York Times. As much as $950 million was thought to be missing at first, and that figure fell to less than $700 million as the firm reviewed its accounting, the Times said today, citing people briefed on the matter. More funds may show up in coming days, the report said.

I’ll be cautious before condemning them. Regulators love to jump on accounting sloppiness and pump it up into something terrible, simply as a way of gaining a negotiating advantage. So we’ll just wait for more details to emerge.

I suspect that the whole thing was regulatory self-importance and hysteria:

“To the best knowledge of management, there is no shortfall,” [MF Global lawyer Kenneth] Ziman told U.S. Bankruptcy judge Martin Glenn in Manhattan, who inquired about whether a shortfall in customer accounts would affect the case, citing media reports that hundreds of millions of dollars were missing. Most of MF Global’s U.S. assets are held at its brokerage unit, Ziman said.

Europe’s new royalty are outraged that the Greek sans-culottes are being asked their opinion:

German Chancellor Angela Merkel and French President Nicolas Sarkozy held emergency talks on Greece today and called on Europe to implement the package of measures thrashed out in Brussels last week.

The plan, designed to aid Greece and stem the wider debt crisis, is “more necessary than ever today,” they said in a joint statement issued in Berlin and Paris. Germany and France “are convinced that this agreement allows Greece to return to lasting growth” and want to draw up a road map for locking in the second Greek bailout.

I don’t often agree with Lapdog Carney, but he got this one right:

Speaking to the House of Commons Finance Committee Tuesday morning, Mr. Carney notes that it is “imperative that there is widespread support” for tough decisions to implement major fiscal austerity measures, because they will unfold over a long period.

The referendum plan is being blamed for the equity hit today, but I don’t think the Greek government has a lot of real choice.

One way or another, Greeks have to get back to work – riots and national strikes don’t do any good for anybody. I suspect that the ability to vote on the deal will diminish the appeal of civil disobedience and, if the vote is affirmative, destroy the credibility of those who continue to push for it. And, of course, if the Greeks wish to cut their own throats and vote no, that’s their business.

So, presumably after discussing with aides the likely reaction of PrefBlog, Papandreou will press on.

A new charity scam has come to light:

A $22 billion disease-fighting fund backed by Microsoft Corp. (MSFT) founder Bill Gates found that money intended for people with life-threatening illnesses was used for home renovations in India and diverted to a person linked with money laundering and so-called blood diamonds in Nigeria.

The Global Fund to Fight AIDS, Tuberculosis and Malaria is seeking to recover as much as $19.2 million from grants in eight countries, the Geneva-based organization said in a set of reports today. As much as $1.3 million was misused by the head of a non-governmental AIDS organization in India to buy a car and renovate his apartment, one report said. In Nigeria, money was siphoned to a person arrested in 2003 for money-laundering and smuggling diamonds that are mined and sold to support war.

Golly, what a surprise!

It was an unevenly good day for the Canadian preferred share market, with PerpetualDiscounts winning 32bp, FixedResets gaining 12bp, and DeemedRetractibles up 3bp. Good volatility, with all issues on the Performance Highlights table being in the black. Volume was a shade on the light side of 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	0.7649 %	2,076.2
FixedFloater	0.00 %	0.00 %	0	0.00	1	0.7649 %	3,122.6
Floater	3.47 %	3.47 %	156,308	18.58	2	0.7649 %	2,241.8
OpRet	4.98 %	3.06 %	51,642	1.52	7	0.0129 %	2,461.0
SplitShare	5.78 %	6.48 %	62,117	5.16	3	0.0704 %	2,501.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0129 %	2,250.4
Perpetual-Premium	5.59 %	3.60 %	108,546	0.49	13	0.0738 %	2,139.1
Perpetual-Discount	5.37 %	5.44 %	109,762	14.76	17	0.3186 %	2,269.1
FixedReset	5.13 %	3.10 %	212,200	2.45	61	0.1241 %	2,341.6
Deemed-Retractible	5.06 %	4.45 %	217,488	4.04	46	0.0332 %	2,210.2

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.I	Deemed-Retractible	1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.85 Bid-YTW : 5.70 %
BMO.PR.H	Deemed-Retractible	1.22 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.63 Bid-YTW : 3.08 %
BMO.PR.J	Deemed-Retractible	1.27 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.25 Evaluated at bid price : 25.57 Bid-YTW : 3.97 %
BAM.PR.T	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-01 Maturity Price : 23.03 Evaluated at bid price : 24.70 Bid-YTW : 4.08 %
BAM.PR.R	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-01 Maturity Price : 23.48 Evaluated at bid price : 26.00 Bid-YTW : 3.99 %
BAM.PR.K	Floater	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-01 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 3.51 %
CIU.PR.A	Perpetual-Discount	2.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-01 Maturity Price : 24.51 Evaluated at bid price : 25.01 Bid-YTW : 4.64 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.M	Deemed-Retractible	103,004	Desjardins crossed blocks of 25,000 and 75,000, both at 26.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-15 Maturity Price : 26.00 Evaluated at bid price : 26.64 Bid-YTW : 3.97 %
IAG.PR.C	FixedReset	60,814	Nesbitt sold 10,000 to Desjardin at 26.50, then 25,000 to RBC at the same price. RBC crossed 24,900 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.53 Bid-YTW : 3.53 %
RY.PR.A	Deemed-Retractible	59,106	RBC crossed 38,200 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 4.45 %
CM.PR.G	Perpetual-Discount	49,107	RBC crossed two blocks of 10,000 each, both at 24.94. Desjardins crossed 16,400 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-01 Maturity Price : 24.58 Evaluated at bid price : 24.90 Bid-YTW : 5.44 %
TD.PR.E	FixedReset	46,569	Nesbitt bought 35,900 from TD at 27.14. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.10 Bid-YTW : 2.76 %
BNS.PR.P	FixedReset	40,915	TD crossed 17,500 at 25.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.77 Bid-YTW : 2.87 %
There were 29 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CIU.PR.A	Perpetual-Discount	Quote: 25.01 – 25.89 Spot Rate : 0.8800 Average : 0.6672 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-01 Maturity Price : 24.51 Evaluated at bid price : 25.01 Bid-YTW : 4.64 %
SLF.PR.G	FixedReset	Quote: 25.05 – 25.40 Spot Rate : 0.3500 Average : 0.2471 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.58 %
GWO.PR.L	Deemed-Retractible	Quote: 25.20 – 25.50 Spot Rate : 0.3000 Average : 0.1977 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 5.65 %
SLF.PR.F	FixedReset	Quote: 26.85 – 27.33 Spot Rate : 0.4800 Average : 0.3837 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.85 Bid-YTW : 3.31 %
FTS.PR.C	OpRet	Quote: 26.05 – 26.28 Spot Rate : 0.2300 Average : 0.1459 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-01 Maturity Price : 25.50 Evaluated at bid price : 26.05 Bid-YTW : -9.64 %
TD.PR.P	Deemed-Retractible	Quote: 26.34 – 26.69 Spot Rate : 0.3500 Average : 0.2707 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-01 Maturity Price : 26.00 Evaluated at bid price : 26.34 Bid-YTW : 3.73 %

The bailout doesn’t seem to be doing Italy and Spain much good:

Italian and Spanish bonds fell, while stocks retreated from an almost three-month high, on concern European leaders will struggle to raise funds to contain the region’s debt crisis. The yen sank from a post-World War II record against the dollar after Japan intervened in the market.

Italian five-year yields rose 19 basis points to 5.94 percent, the highest since 1997, at 9:32 a.m. in New York. German bunds and U.S. Treasuries advanced.
…
China can’t play the role of “savior,” the official Xinhua news agency said yesterday after European leaders agreed last week to boost their bailout fund. U.S. equities rallied Oct. 26 amid speculation China might invest in the fund. Japanese Finance Minister Jun Azumi said today the government took unilateral steps to weaken the yen.

The Greek referendum will be fascinating:

The Greek government will hold a referendum on a new EU aid package, calling on voters to say whether they want to adopt it or not, Prime Minister George Papandreou said on Monday.

“We trust citizens, we believe in their judgment, we believe in their decision,” he told ruling socialist party law makers.

Nearly 60 per cent of Greeks view Thursday’s EU summit agreement on a new €130-billion ($180-billion) bailout package as negative or probably negative, a survey showed on Saturday.

The Bank of Japan has major losses:

The Bank of Japan has lost more than 22.4 billion yen ($281.7 million) purchasing exchange-traded funds as the Topix Index approaches a 27-year low.

The central bank’s stock holdings have fallen about 4 percent since buying began on Dec. 15, 2010, according to estimates calculated by Bloomberg using government filings. Losses climbed above 67.6 billion yen in September as equities plunged amid concern Europe’s debt crisis would trigger a global recession, the data show.

The purchases are part of a 20 trillion yen BOJ plan to stimulate economic growth and boost investor confidence by buying securities, such as government debt, commercial paper and real estate investment trusts. The central bank expanded the program last week by 5 trillion yen after the country’s currency reached a postwar record against the dollar, threatening the export-led economy.

It will be interesting to see how this is resolved, since we may assume the European Central Bank will be in the same boat in short order, for the same reaons. Ah, say the politicians, it’s all very well thought out: banks = central banks = piggy-banks.

TMX supports the Maple deal:

TMX Group Inc., the owner of the Toronto Stock Exchange, recommended shareholders accept a C$3.73 billion ($3.72 billion) bid from a group of Canadian banks and pension funds, turning an unsolicited offer into a friendly bid.

Maple plans to buy 70 percent to 80 percent of TMX shares at C$50 a share in cash, and the rest of the stock with Maple shares, according to a statement.
…
Maple, which made an initial unsolicited bid for TMX on May 13, needs 70 percent of the shares of the Toronto-based exchange owner by the offer expiry Jan. 31 for the transaction to succeed. The statement noted that the offer could be extended until April 30 to gain regulatory approvals.

Today’s Interesting Fact concernsrelative returns of bonds and equities (emphasis added):

The biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War.

Fixed-income investments advanced 6.25 percent this year, almost triple the 2.18 percent rise in the Standard & Poor’s 500 Index through last week, according to Bank of America Merrill Lynch indexes. Debt markets are on track to return 7.63 percent this year, the most since 2002, the data show. Long-term government bonds have gained 11.5 percent a year on average over the past three decades, beating the 10.8 percent increase in the S&P 500, said Jim Bianco, president of Bianco Research in Chicago.

The bolded sentence shows that that the reporter must have been getting his opinions from a stockbroker, since it appears to be a straight line extrapolation of bond YTD returns to the full year and only a stockbroker would be stupid enough to do that.

Speculation has done in MF Global:

MF Global Holdings Ltd., the holding company for the broker-dealer run by former New Jersey governor and Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy after making bets on European sovereign debt.
…
MF Global’s board had met through the weekend in New York to consider options including a sale to avert failure, according to a person with direct knowledge of the situation. Following a record loss, MF Global was suspended today from doing new business with the New York Federal Reserve, according to a statement on the regulator’s website. Trading in MF Global’s stock was also halted.

MF Global declined 67 percent last week and its bonds started trading at distressed levels amid its disclosures of bets on European sovereign-debt. MF Global held talks with five potential buyers for all or parts of the company, including banks, private-equity firms and brokers, said the person, who asked not to be identified because the talks were private.

It doesn’t reflect well on Corzine – or the board who hired him (as republished in the G&M):

It was the kind of gutsy trade that helped make Mr. Corzine a star at Goldman in the 1990s. “If it was a good trade for $100, he wanted to make it $1,000 or $1-million”, a former colleague recalled

Too bad. He didn’t have too long until retirement anyway, and could have spent all his time talking about about how smart he was. Now we all know he was just another lucky clown, chanting that if one is good then two is better.

We can gasp and laugh about European debt ratios all we like – but here in North America, we have infrastructure debt:

The disrepair of U.S. surface-transportation systems cost businesses and households about $130 billion last year, according to the American Society of Civil Engineers, based in Reston, Virginia. Of that, $32 billion is related to travel delays, it said in a report issued in July.

The average U.S. bridge is 43 years old, while the average useful life is generally about 50 years, according to the highway agency. The agency said in 2006 that it would cost $140 billion to immediately repair every deficient bridge in the U.S. That’s more than three times what the U.S. government receives in taxes annually to pay for road, mass transit and bridge projects.

Trouble is, maintenance isn’t sexy, so no politician anywhere is going to advocate spending money on it until problems get critical. Infrastructure, to a politician, is simply a magic money-hole dicussed only when unemployment becomes an issue. I have no problem with accelerating spending during recessions, when more skilled works and specialized equipment becomes available, but a state of good repair must be maintained at all times.

But, mortgaging the future is good politics:

The elderly will likely be the most vulnerable Americans in Washington’s future budget fights. Right now, their grandchildren may be among the biggest casualties.

With Democrats and the 37 million-member AARP seniors’ lobby working to protect Medicare and Social Security, and Republicans opposing tax increases to curb the deficit, programs for young people may be disproportionate targets if negotiators can’t reach a budget deal and automatic spending cuts kick in.

That’s sparking concern that lawmakers are sacrificing the U.S.’s future investment in children, education, infrastructure and other programs.

Alberta Gas, proud issuer of ALA.PR.A, was confirmed at Pfd-3 by DBRS:

DBRS has today confirmed the ratings on the Medium-Term Notes (MTNs) and Preferred Shares – Cumulative of AltaGas Ltd. (AltaGas or the Company) at BBB and Pfd-3, respectively, both with Stable trends.

The rating actions follow the announcement today that AltaGas has offered to acquire all of the issued and outstanding shares of Pacific Northern Gas Ltd. (PNG; rated BBB (low) and Pfd-3 (low)) and that both parties have executed an Acquisition Agreement. The takeover offer of $36.75 per PNG share represents a 20% premium over the closing price of $30.50 per share on October 28, 2011. The proposed purchase price of approximately $230 million, including assumed debt of approximately $85 million and preferred shares of $5 million, represents approximately 1.2 times the regulated rate base of $174 million. The regulated assets earn an allowed rate of return of approximately 10.1% with a weighted average equity thickness of approximately 44%. The transaction value equates to approximately 9.6 times PNG’s EBITDA, which is reasonable. AltaGas expects the acquisition to be immediately accretive to earnings and cash flow. Closing is expected on or about December 16, 2011, subject to regulatory and PNG shareholder approvals.
…
DBRS expects moderate deterioration in the Company’s credit metrics as a result of the acquisition funding through existing credit facilities (plus assumed PNG debt). DBRS estimates that the Company’s total debt-to-capital ratio would rise from 47% to 52% and its cash flow-to-debt ratio would fall from 20% to 17% pro forma the acquisition as at September 30, 2011. As noted previously (see the DBRS press release dated October 4, 2011), DBRS expects some deterioration in the Company’s key credit metrics during its 2011 to 2014 growth phase, with recovery toward the end of the period as expected cash shortfalls are to be primarily funded by debt.

Index figures are very approximate today since TMX Datalinx continues to have serious problems with the concept of providing quote data within five hours of the market close.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 20bp, FixedResets up 14bp and DeemedRetractibles gaining 8bp. Lots of good performers on the positive side of the Performance Highlights table. 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	0.9738 %	2,060.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.9738 %	3,098.9
Floater	3.49 %	3.47 %	157,036	18.58	2	0.9738 %	2,224.8
OpRet	4.83 %	2.61 %	63,736	1.52	8	0.0581 %	2,460.7
SplitShare	5.36 %	3.10 %	55,878	0.33	4	0.0546 %	2,499.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0581 %	2,250.1
Perpetual-Premium	5.66 %	3.67 %	110,197	0.49	13	0.1360 %	2,137.5
Perpetual-Discount	5.34 %	5.37 %	105,366	14.69	17	0.1987 %	2,261.9
FixedReset	5.14 %	3.11 %	210,405	2.46	61	0.1425 %	2,338.7
Deemed-Retractible	5.06 %	4.47 %	210,755	4.05	46	0.0831 %	2,209.5

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.T	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 22.90 Evaluated at bid price : 24.36 Bid-YTW : 4.16 %
GWO.PR.H	Deemed-Retractible	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.74 Bid-YTW : 5.59 %
BAM.PR.K	Floater	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 14.82 Evaluated at bid price : 14.82 Bid-YTW : 3.57 %
SLF.PR.H	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.60 Bid-YTW : 4.17 %
GWO.PR.J	FixedReset	1.04 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.30 Bid-YTW : 3.75 %
IAG.PR.F	Deemed-Retractible	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 5.49 %
MFC.PR.D	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.87 Bid-YTW : 3.93 %
BAM.PR.N	Perpetual-Discount	1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 22.01 Evaluated at bid price : 22.35 Bid-YTW : 5.36 %
SLF.PR.F	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.78 Bid-YTW : 3.41 %
CIU.PR.A	Perpetual-Discount	1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 23.90 Evaluated at bid price : 24.39 Bid-YTW : 4.76 %
GWO.PR.N	FixedReset	1.64 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 3.43 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IAG.PR.C	FixedReset	101,318	Nesbitt crossed blocks of 50,000 and 45,800, both at 26.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 3.77 %
RY.PR.D	Deemed-Retractible	84,650	RBC sold 10,000 to Nesbitt at 25.03, then crossed 66,500 at 25.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 4.43 %
BNS.PR.Z	FixedReset	48,060	Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 3.35 %
CM.PR.E	Perpetual-Premium	39,110	Desjardins crossed 16,300 at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 24.68 Evaluated at bid price : 24.98 Bid-YTW : 5.63 %
ENB.PR.B	FixedReset	35,815	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.61 %
BNS.PR.X	FixedReset	31,845	RBC crossed 22,100 at 27.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.92 Bid-YTW : 3.03 %
There were 29 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.M	Deemed-Retractible	Quote: 25.74 – 28.58 Spot Rate : 2.8400 Average : 1.5438 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.74 Bid-YTW : 5.52 %
ELF.PR.G	Perpetual-Discount	Quote: 20.50 – 21.14 Spot Rate : 0.6400 Average : 0.4064 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 5.85 %
CM.PR.K	FixedReset	Quote: 26.25 – 26.75 Spot Rate : 0.5000 Average : 0.3334 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.45 %
PWF.PR.F	Perpetual-Discount	Quote: 24.60 – 25.04 Spot Rate : 0.4400 Average : 0.3096 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 24.29 Evaluated at bid price : 24.60 Bid-YTW : 5.35 %
MFC.PR.C	Deemed-Retractible	Quote: 21.31 – 21.69 Spot Rate : 0.3800 Average : 0.2592 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.31 Bid-YTW : 6.61 %
BAM.PR.T	FixedReset	Quote: 24.36 – 24.75 Spot Rate : 0.3900 Average : 0.2716 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-31 Maturity Price : 22.90 Evaluated at bid price : 24.36 Bid-YTW : 4.16 %

Italy managed to sell some ten year paper:

Italy paid the most since joining the single currency to sell new 10-year debt on Friday in the first euro zone bond auction after European leaders agreed new steps to tackle the debt crisis.

The auction yield on Italy’s March 2022 BTP bond rose to 6.06 percent from 5.86 percent a month ago.

The Treasury managed to sell 7.94 bln euros of medium and long term paper, versus a target range of between 5.25 billion and 8.5 billion euros.

As Assiduous Reader prefhound points out, the big question going forward is: who buys European government debt going forward? I, personally, would be staying away from the peripheral countries and paying extra attention to credit fundamentals; the whole process has been intensely politicized and (in the case of CDS swaps) gamed.

There’s also the question of … who buys European bank paper? The Europeans seem to regard their banks as their personal piggy-banks and the fall-out from a 50% nudge-wink-voluntary write-down remains to be determined.

So is it a credit event?:

European leaders’ agreement on a 50 percent haircut on Greek bonds may create an event of default if investors accept it, Fitch Ratings said in a statement today.

“The 50 percent nominal haircut on the proposed bond exchange would be viewed by the agency as a default event under its Distressed Debt Exchange criteria,” the statement said. While the accord is “a necessary step to put the Greek sovereign’s public finances on a more sustainable footing,” Greece will face “significant challenges” including ratios of government debt to gross domestic product at “well over 100 percent even in a positive scenario.”
…
“It’s highly likely that all three rating agencies will classify this restructuring as a technical default,” said Padhraic Garvey, head of developed debt-market strategy at ING Groep NV in Amsterdam. “Even if it’s voluntary, investors are left with a product that’s lower in value to what they originally agreed.”
…
Fitch said in a separate report the Greek debt exchange “would likely result in a post-default rating in the ‘B’ category or lower depending on private creditor participation.”

The International Swaps and Derivatives Association, whose market decisions are binding, hasn’t said whether the $3.7 billion of credit-default swaps linked to Greek government bonds should pay out, though it has indicated the decision hinges on whether investors accept losses voluntarily.

A credit event can be caused by a reduction in principal or interest, postponement or deferral of payments or a change in the ranking or currency of obligations, according to the New York-based trade group’s rules.

ING’S Garvey said Fitch’s announcement probably won’t trigger insurance contracts linked to the debt. “The indications are that ISDA won’t class it as a credit event,” he said.

One can only imagine what kind of pressures are being brought to bear on ISDA!

Feeling victimized by preferred share credit rating cuts? Consider MF Global!:

Bonds of MF Global Holdings Ltd. (MF) declined to as low as 35 cents on the dollar after the futures broker run by Jon Corzine drew on its credit lines and Moody’s Investors Service and Fitch Ratings cut the firm’s ratings to junk.

The company’s $325 million of 6.25 percent bonds, issued at par in August, fell 11.9 cents to 50 cents on the dollar as of 5:17 p.m. in New York, for a yield of 25.2 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The daily reporting for today will be greatly delayed, as the TSX is having a Disaster Recovery exercise, which may last until Sunday morning. I’ll update this post when I have the data.

Update, 2011-10-28: It took them long enough to get themselves organized, but Datalinx finally had Friday’s prices available late on Monday. No sign of Monday’s prices, though!

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	-1.4234 %	2,040.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.4234 %	3,069.1
Floater	3.53 %	3.50 %	158,004	18.51	2	-1.4234 %	2,203.3
OpRet	4.83 %	2.63 %	64,050	1.53	8	0.1261 %	2,459.3
SplitShare	5.37 %	2.88 %	57,975	0.33	4	0.0311 %	2,498.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1261 %	2,248.8
Perpetual-Premium	5.67 %	3.78 %	108,446	1.86	13	0.1922 %	2,134.6
Perpetual-Discount	5.35 %	5.44 %	106,775	14.75	17	-0.0049 %	2,257.4
FixedReset	5.15 %	3.15 %	206,978	2.46	61	0.0691 %	2,335.3
Deemed-Retractible	5.06 %	4.49 %	211,182	3.93	46	-0.0032 %	2,207.7

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-2.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-28 Maturity Price : 14.67 Evaluated at bid price : 14.67 Bid-YTW : 3.60 %
GWO.PR.J	FixedReset	-1.96 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.03 Bid-YTW : 4.25 %
CIU.PR.A	Perpetual-Discount	-1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-28 Maturity Price : 23.53 Evaluated at bid price : 24.00 Bid-YTW : 4.84 %
IAG.PR.F	Deemed-Retractible	-1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : 5.62 %
BMO.PR.Q	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.11 Bid-YTW : 3.27 %
IAG.PR.A	Deemed-Retractible	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.01 Bid-YTW : 5.71 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.D	Perpetual-Premium	222,291	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 5.23 %
BNS.PR.Z	FixedReset	134,884	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 3.37 %
FTS.PR.E	OpRet	100,300	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.95 Bid-YTW : 2.26 %
TRP.PR.C	FixedReset	60,100	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-28 Maturity Price : 23.35 Evaluated at bid price : 25.40 Bid-YTW : 3.20 %
TD.PR.E	FixedReset	57,976	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.02 Bid-YTW : 2.87 %
BMO.PR.P	FixedReset	51,090	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.83 Bid-YTW : 2.96 %
There were 34 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.K	Floater	Quote: 14.67 – 15.19 Spot Rate : 0.5200 Average : 0.3435 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-28 Maturity Price : 14.67 Evaluated at bid price : 14.67 Bid-YTW : 3.60 %
CIU.PR.A	Perpetual-Discount	Quote: 24.00 – 24.54 Spot Rate : 0.5400 Average : 0.3944 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-28 Maturity Price : 23.53 Evaluated at bid price : 24.00 Bid-YTW : 4.84 %
SLF.PR.F	FixedReset	Quote: 26.36 – 26.82 Spot Rate : 0.4600 Average : 0.3420 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.36 Bid-YTW : 4.05 %
RY.PR.T	FixedReset	Quote: 27.01 – 27.40 Spot Rate : 0.3900 Average : 0.2962 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 27.01 Bid-YTW : 3.11 %
GWO.PR.J	FixedReset	Quote: 26.03 – 26.50 Spot Rate : 0.4700 Average : 0.3765 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.03 Bid-YTW : 4.25 %
IFC.PR.A	FixedReset	Quote: 24.86 – 25.10 Spot Rate : 0.2400 Average : 0.1534 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.86 Bid-YTW : 4.03 %

BAM is starting a Dubai property fund:

Brookfield Asset Management Inc. and a Dubai government investment arm will start a $1 billion fund to buy real estate assets in the emirate after prices dropped by more than half since 2008.

The eight-to-10-year fund will be started with $100 million each from Toronto-based Brookfield and the Investment Corporation of Dubai, the companies said today in a statement. It will target a “wide class of assets in both freehold and non-freehold areas.” Local, regional and international investors will also be invited to join the fund that will be capped at $1 billion.

The Europeans are now faced with Job #2: persuading people to invest:

Europe’s banks will need to raise 106 billion euros ($147 billion) in fresh capital under tougher rules being introduced in response to the euro area’s sovereign debt crisis, the region’s top banking authority said.

Seventy banks were tested, the European Banking Authority said late yesterday, with Spanish banks needing 26.2 billion euros and Italian banks 14.8 billion euros in core tier 1 capital. The lenders have until Dec. 25 to submit their plans for raising the money to national supervisors. The extra reserves are needed to meet a temporary requirement for lenders to hold 9 percent in core reserves, after sovereign debt writedowns.
…
European leaders are meeting to hammer out an agreement on bolstering the region’s rescue fund, recapitalizing banks and relieving Greece to avoid contagion spreading to Italy and Spain. The summit is part of an attempt to solve the two-year- old sovereign-debt crisis that has pushed Greece closer to default, roiled global markets and dented confidence in the survival of the euro.

U.K. banks won’t be required to raise extra capital, according to the EBA figures, whereas German banks will have to find 5.2 billion euros.

The Americans aren’t learning anything from all this:

The congressional supercommittee seeking a long-term debt-reduction deal remains at an impasse with a deadline near, and the prospect of failure is prompting concern about further downgrades of the nation’s credit rating.

With the committee heading into what may be a make-or-break week for striking a deal over a package of at least $1.2 trillion in U.S. deficit cuts, members are deadlocked over Democrats’ insistence on tax increases, according to committee aides in Washington who spoke on condition of anonymity.

Senate Finance Committee Chairman Max Baucus proposed a deficit-reduction plan worth almost $3 trillion with about half comprised of tax increases, according to a congressional aide. The remainder would be spending cuts, including in Medicare and Medicaid, as well as fee increases, the aide said. Republicans rejected the plan, which Senate Democrats wanted to pair with extensions of a payroll tax break and jobless benefits scheduled to expire at the end of this year, the aide said.

But the Irish are paying close attention:

Greece’s difficulty paying its debts may turn out to be Ireland’s opportunity.

Greece’s failure to cut spending and boost revenue by enough to meet targets set by the European Union and International Monetary Fund prompted bondholders to accept a 50 percent loss on its debt. While Ireland won’t seek debt discounts, the government might pursue other relief given to Greece, including cheaper interest payments on aid and longer to repay it, according to a person familiar with the matter who declined to be identified as no final decision has been taken.

“There’s a political problem for the government,” said Gavin Blessing, a bond analyst at Collins Stewart Plc in Dublin. “The Greeks, who are seen to be behaving badly, get rewarded, whereas the Irish, the top boys in the class, get nothing.”

Ken Rogoff thinks the whole thing is just another band-aid:

European leaders’ agreement to expand a bailout fund to stem the region’s debt crisis only buys time as the problem worsens, Harvard University economist Kenneth Rogoff said.

“They don’t have any idea what the end game is here,” Rogoff said as a compensated speaker at the Bloomberg FX11 Summit in New York today. “It’s pretty darn clear the euro does not work.”

And there is some confusion regarding just what the plan might be:

A key component of the European program agreed in the wee hours in Brussels on Thursday is getting Greece’s debt down to a manageable 120 per cent of GDP. That effort involves Greek bondholders taking a 50 per cent loss on their investment, up from a previous agreement to take a haircut of 20 per cent.

This constitutes a default by any reasonable definition. But Europe’s leaders are trying very hard to frame these losses as voluntary, which would avoid triggering a broad Greek CDS redemption. The European plan says leaders will “invite” private investors to develop a “voluntary bond exchange with a nominal discount of 50 per cent on notional Greek debt held by private investors.”

So is it nudge-wink-voluntary or is it compulsory? If the former, there would appear to be some opportunity for non-European hedge funds to make a killing by buying Greek debt and refusing the invitation.

Here in Canada, we’re approaching a decision on the latest job creation scheme:

The Supreme Court of Canada appears close to releasing a much-awaited decision on whether the federal government has the authority to create a new national securities regulator.

The top court has asked parties involved in the case for permission to organize a media lock-up to release the ruling, according to information on the court’s web site. The electronic “docket” does not reveal a planned released date, but federal officials expect a decision by the middle of next month.

OSFI has released a NVCC roadshow. It is notable for the first defence I have seen from them for low-trigger contingent capital – indeed, the first acknowledgement from them that I know of that high-trigger contingent capital even exists:

The BCBS considered and rejected Co-Cos for the minimum capital requirements, buffers & Global systemically important bank (G-SIB) surcharge
– Key concern was the unreliability of early triggers
– Early trigger could exacerbate distress & hurt confidence
– Triggers can be subject to manipulation or arbitrage

It would be most interesting to see a full-fledged debate on this, but we won’t get one from the clowns at OSFI. The presentation is also notable for a bare-faced falsehood (emphasis added):

Existing instruments are akin to NVCC because:
– NVCC creates no new regulatory discretion.
– At non-viability, authorities are assessing how best to resolve the failed bank. NVCC is just a new resolution option in the toolkit:
– Liquidation, Assisted Purchase, Bridge Bank, Recapitalization (i.e. Bail-out), NVCC, and others.
– The NVCC triggers are very late and very remote. The decision point is the same as in existing securities, i.e. the PF, or PD, is the same or lower.
– NVCC instruments will likely behave similar to existing sub debt and preferred shares.
– Innovative Tier 1 instruments have similar regulatory triggers

They spout this bilge about “no new regulatory discretion” and then on the very next page they say Canadian authorities would only elect to trigger NVCC where there was a high level of confidence that the conversion plus additional measures would restore the viability of the failed FI. “Elect”. “confidence”. If that’s not discretion, I’d like to know what the hell is.

There’s one element of the presentation that is also a bit fishy (emphasis added):

Can OSFI pull the trigger too early?
– NVCC triggers narrowly defined by design to constrain authorities from acting prematurely
– Non-viability is an expectation of insolvency
– Backstop trigger designed to avoid Troubled Asset Relief Program (TARP) scenario – Viable FIs cannot be forced to accept a bail-out
– Triggers designed to permit authorities with flexibility to take certain actions (i.e. liquidity assistance) where an FI may require public sector support without triggering NVCC conversion
– Superintendent’s actions can be subject to legal challenge & judicial review
– Importantly, OSFI strongly believes the hierarchy must be respected – therefore, creditors should not be exposed to loss before non-viability

I’d like to see how they work that out: I read the advisory as granting the Superintendent full discretion … but perhaps the “can be subject” is just a weasel phrase. Gravity can be subject to challenge too, but you won’t get too far.

The Financial Stability Board has released a report titled Shadow Banking: Strengthening Oversight and Regulation. Lots of cool charts at the back.

The Globe published a long piece on YLO, How did Yellow Media’s stock go from $17 to 17 cents?. One part echoes my thoughts:

While his online competitors may be giants such as Google, Tellier claims he has a secret weapon: trust. Yellow Media’s bread and butter is still small business owners, many of whom are at a loss when it comes to arcane aspects of online advertising such as bidding on Google keywords. While many advertisers are realizing that Yellow’s books may no longer be the best place for their ads, that doesn’t mean they’ve soured on the company entirely. This is where its sales force comes in—a network of representatives that have established relationships with customers, something Google lacks. “Businesses would prefer to have a single point of contact to demystify this digital universe,” Tellier says. “We think the market dynamic is in our favour.”

There’s also a hopeful thought:

But after Yellow announced the new, more stringent credit agreement with the banks in late September, Tellier admitted the prospects for the company’s transition—whether digital businesses will be able to compensate for declining print revenues—are far from certain. The same might be said of his tenure as CEO.

I don’t have a lot of faith in the man’s competence. What the company needs is somebody with a little operational expertise.

YLO common has been active this week, going from $0.26 on October 21 to $0.495 yesterday to $0.39 today – total volume for the four days this week has been about 70-million shares. Seventy million! That’s more than 13% of the float! Even allowing for the fact that the day traders will have flipping like mad, it’s still impressive. Returns and volumes for the preferreds have been equally dramatic. YLO will report on 11Q3 on November 3.

Preferred shares from CZP, the latest ugly duckling, caught a bounce today – Assiduous Readers may insert the words “dead cat” if they wish, according to taste. All this comes from the DBRS warning of a possible 3-notch downgrade; S&P was less explicit, but just as gloomy. There will be more of this in future, as a few of those junky FixedReset chickens of the past few years come home to roost.

It was a mostly-up day for the Canadian preferred share market, with PerpetualDiscounts down 4bp, FixedResets up 10bp and DeemedRetractibles gaining 12bp. Plenty of skew in those results, with all entries on the Performance Highlights table being positive! Volume was well above 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	0.8008 %	2,070.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.8008 %	3,113.4
Floater	3.48 %	3.49 %	158,172	18.54	2	0.8008 %	2,235.1
OpRet	4.84 %	2.56 %	66,278	1.53	8	0.0243 %	2,456.2
SplitShare	5.37 %	1.71 %	58,784	0.34	4	-0.1332 %	2,497.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0243 %	2,246.0
Perpetual-Premium	5.68 %	4.00 %	107,788	1.86	13	0.0151 %	2,130.5
Perpetual-Discount	5.35 %	5.45 %	107,999	14.71	17	-0.0392 %	2,257.5
FixedReset	5.14 %	3.11 %	204,146	2.45	61	0.1049 %	2,333.7
Deemed-Retractible	5.06 %	4.44 %	213,363	4.07	46	0.1199 %	2,207.7

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-27 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 3.51 %
BAM.PR.R	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-27 Maturity Price : 23.43 Evaluated at bid price : 25.80 Bid-YTW : 4.01 %
GWO.PR.J	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 3.26 %
BMO.PR.H	Deemed-Retractible	1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 2.93 %
SLF.PR.B	Deemed-Retractible	1.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.95 Bid-YTW : 5.96 %
SLF.PR.D	Deemed-Retractible	1.36 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.68 Bid-YTW : 6.31 %
BAM.PR.X	FixedReset	1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-27 Maturity Price : 22.70 Evaluated at bid price : 23.90 Bid-YTW : 3.87 %
IAG.PR.A	Deemed-Retractible	2.75 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.77 Bid-YTW : 5.85 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.M	Deemed-Retractible	152,215	Desjardins crossed blocks of 124,900 at 26.80 and 24,300 at 26.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-15 Maturity Price : 26.00 Evaluated at bid price : 26.69 Bid-YTW : 3.80 %
BNS.PR.Z	FixedReset	55,811	Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.44 %
SLF.PR.G	FixedReset	51,404	Nesbitt bought blocks of 20,100 and 17,800 from Scotia, both at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 3.66 %
TD.PR.K	FixedReset	41,305	TD bought 10,000 from National at 27.10, then crossed 19,700 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.14 Bid-YTW : 2.99 %
BNS.PR.L	Deemed-Retractible	37,800	RBC crossed 16,800 at 25.19. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-04-27 Maturity Price : 25.00 Evaluated at bid price : 25.19 Bid-YTW : 4.32 %
GWO.PR.G	Deemed-Retractible	31,955	RBC crossed 21,200 at 24.75. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.77 Bid-YTW : 5.40 %
There were 43 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.F	Perpetual-Discount	Quote: 25.12 – 25.94 Spot Rate : 0.8200 Average : 0.4739 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-27 Maturity Price : 24.83 Evaluated at bid price : 25.12 Bid-YTW : 4.94 %
IAG.PR.A	Deemed-Retractible	Quote: 22.77 – 23.48 Spot Rate : 0.7100 Average : 0.4375 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.77 Bid-YTW : 5.85 %
BAM.PR.J	OpRet	Quote: 25.87 – 26.36 Spot Rate : 0.4900 Average : 0.3464 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 4.87 %
BAM.PR.N	Perpetual-Discount	Quote: 21.86 – 22.26 Spot Rate : 0.4000 Average : 0.2709 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-27 Maturity Price : 21.55 Evaluated at bid price : 21.86 Bid-YTW : 5.48 %
GWO.PR.N	FixedReset	Quote: 24.26 – 24.70 Spot Rate : 0.4400 Average : 0.3132 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.26 Bid-YTW : 3.65 %
GWO.PR.I	Deemed-Retractible	Quote: 22.37 – 22.70 Spot Rate : 0.3300 Average : 0.2236 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.37 Bid-YTW : 5.96 %

Discussions about Greece are at a familiar stage – nobody wants to take the loss:

European Union talks with banks on bondholder losses as part of a second Greek bailout were deadlocked, an EU official said, dimming the chances for a comprehensive crisis-fighting strategy at tonight’s summit.

German Chancellor Angela Merkel doused expectations of a breakthrough, saying on the way into the meeting at EU headquarters in Brussels that “work’s not been done yet, but everyone’s coming here today with the goal to progress quite a bit.”

Maybe the Chinese will take the loss!

French President Nicolas Sarkozy plans to call Chinese leader Hu Jintao tomorrow to discuss China contributing to a fund European leaders may set up to bolster its debt-crisis fight, said a person familiar with the matter.

The investment vehicle was one of the options being considered by European leaders at a summit tonight to expand the reach of its 440 billion-euro ($612 billion) European Financial Stability Facility.

Sarkozy’s plea to his Chinese counterpart would come the day before a planned visit to Beijing by Klaus Regling, chief executive officer of the EFSF, to court investors.

Italy’s beginning to get serious:

Prime Minister Silvio Berlusconi vowed to raise 5 billion euros ($8 billion) annually from asset sales, increase the retirement age and relax labor laws to convince European leaders Italy can reach its budget goals.

“We are aware of the need to present a comprehensive plan of reforms,” Berlusconi said in the letter that he presented to European Union leaders at a summit in Brussels. “We are aware that our debt is too high and our growth too limited.” The asset-sales plan will be completed by Nov. 30, he said.

The letter of intent fell short of the comprehensive plan European leaders had sought. Bickering within his Cabinet this week over pensions and other issues prevented the premier from complying with EU requests to deliver a blueprint to boost growth and tackle the euro-region’s second largest debt at the Brussels summit.

Just as this update goes to the server, there is some breaking news:

French President Nicolas Sarkozy estimates the euro region’s bailout fund will be worth $1.4 trillion after European governments agreed on steps to leverage existing guarantees by as much as five times. He spoke to reporters after a summit of European leaders in Brussels.

There are also rumours of a 50% write-down on Greek debt. And, at last minute before I wrap this up:

European leaders persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the rescue fund to 1 trillion euros ($1.4 trillion), responding to global pressure to step up the fight against the financial crisis.

Ten hours of brinkmanship at the second crisis summit in four days delivered measures that the euro area’s stewards said point the way out of the debt quagmire, even if key details are lacking. Last-ditch talks with bank representatives led to the debt-relief accord, in an effort to quarantine Greece and prevent speculation against Italy and France from ravaging the euro zone and wreaking global economic havoc.

SJR.PR.A was confirmed at Pfd-3 by DBRS:

DBRS has today confirmed its ratings on Shaw Communications Inc. (Shaw or the Company) at BBB and Pfd-3.
…
In terms of Shaw’s financial risk profile, while the acquisition of a restructured Canwest in early F2011 weakened its credit metrics initially, they returned to reasonable levels by the end of F2011, with gross debt-to-EBITDA at 2.67 times, EBITDA interest coverage above 6.0 times and cash flow-to-debt at 0.25 times. This, along with growth in cash flow from operations (expected to cover higher capex and dividend levels in F2012 with free cash flow generation (including on a fully-taxed basis)), should give Shaw the flexibility to make small to medium-sized investments and/or to reduce its leverage to strengthen its financial risk profile within its current rating category.

DBRS believes that Shaw’s business risk profile remains manageable, even though the Company is now battling telcos that are able to compete service-for-service in fixed-line, in addition to offering wireless services. It would likely take a material deterioration in Shaw’s competitive position for DBRS to alter this view. Also, while Shaw retains a financial risk profile that is adequate for the ratings, the Company is currently weaker on this front than some of its peers. Any material changes in Shaw’s business or financial risk profile could result in pressure on the ratings.

LB.PR.D and LB.PR.E were confirmed by DBRS at Pfd-3(low):

DBRS has today confirmed all ratings of Laurentian Bank of Canada (Laurentian or the Bank), including the deposits and senior debt at BBB (high) and the short-term instruments at R-1 (low); all trends remain Stable.

The ratings are supported by Laurentian’s overall business risk profile, which is conservative relative to the larger banks in Canada, with a focus on retail lending funded by retail deposits and an absence of significant involvement in higher-risk wholesale or international strategies. Laurentian’s underlying asset quality profile has strengthened over the past several years as the loan mix shifted to a greater proportion of secured lending. Limitations on the ratings include a modest return on equity and high cost structure. Regional concentration in Québec, while still a potential rating challenge, was beneficial through the downturn as the economic performance of the province was resilient.

CZP issues got hammered again today, continuing their fall after DBRS warned of a possible 3-notch downgrade and S&P was less explicit, but just as gloomy.

It was a modestly good day for the Canadian preferred share market, with PerpetualDiscounts up 5bp, FixedResets gaining 2bp and DeemedRetractibles winning 8bp. Volatility was good and all to the upside. Volume was heavy – Nesbitt wrote a very nice ticket for CM.PR.D!

PerpetualDiscounts now yield 5.44%, equivalent to 7.07% interest at the standard equivalency factor of 1.3x. Long corporates are now at 5.0% (OK, maybe a little over), so the pre-tax interest-equivalent spread is now about 205bp, unchanged from the figure reported October 19.

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	0.4020 %	2,053.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.4020 %	3,088.6
Floater	3.50 %	3.50 %	159,411	18.51	2	0.4020 %	2,217.4
OpRet	4.84 %	2.70 %	65,494	1.53	8	-0.0291 %	2,455.6
SplitShare	5.36 %	1.95 %	58,492	0.34	4	0.3118 %	2,500.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0291 %	2,245.4
Perpetual-Premium	5.68 %	3.60 %	108,366	0.50	13	0.1759 %	2,130.2
Perpetual-Discount	5.34 %	5.44 %	108,880	14.74	17	0.0491 %	2,258.4
FixedReset	5.15 %	3.20 %	203,544	2.45	61	0.0239 %	2,331.3
Deemed-Retractible	5.06 %	4.40 %	214,740	4.13	46	0.0814 %	2,205.1

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.T	FixedReset	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-26 Maturity Price : 22.88 Evaluated at bid price : 24.31 Bid-YTW : 4.15 %
BNA.PR.E	SplitShare	1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 6.38 %
GWO.PR.N	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.48 Bid-YTW : 3.54 %
GWO.PR.L	Deemed-Retractible	1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.59 %
IGM.PR.B	Perpetual-Premium	1.26 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.74 Bid-YTW : 5.42 %
IAG.PR.F	Deemed-Retractible	1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 5.38 %
TD.PR.P	Deemed-Retractible	1.45 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-01 Maturity Price : 26.00 Evaluated at bid price : 26.56 Bid-YTW : 2.82 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.D	Perpetual-Premium	943,623	Nesbitt crossed blocks of 811,000 and 100,000, both at 25.00. Nice tickets! YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 5.66 %
RY.PR.E	Deemed-Retractible	104,826	Nesbitt crossed 97,300 at 25.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-24 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.49 %
TD.PR.G	FixedReset	87,851	Desjardins crossed 21,100 at 27.05; RBC crossed blocks of 15,000 shares, 10,000 and 35,000, all at 27.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.03 Bid-YTW : 2.85 %
RY.PR.X	FixedReset	83,303	Scotia crossed blocks of 25,000 and 50,000, both at 27.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.92 Bid-YTW : 3.23 %
BNS.PR.O	Deemed-Retractible	60,301	Nesbitt crossed 50,000 at 26.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-26 Maturity Price : 26.00 Evaluated at bid price : 26.45 Bid-YTW : 4.14 %
MFC.PR.A	OpRet	54,011	Scotia bought 22.20 from anonymous at 25.00, then crossed 20,000 at 25.25. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 4.02 %
There were 44 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: 26.23 – 26.76 Spot Rate : 0.5300 Average : 0.3443 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 3.86 %
TCA.PR.X	Perpetual-Premium	Quote: 52.12 – 52.58 Spot Rate : 0.4600 Average : 0.3211 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-15 Maturity Price : 50.00 Evaluated at bid price : 52.12 Bid-YTW : 3.34 %
GWO.PR.M	Deemed-Retractible	Quote: 25.45 – 25.75 Spot Rate : 0.3000 Average : 0.2012 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 5.61 %
NA.PR.M	Deemed-Retractible	Quote: 26.62 – 26.95 Spot Rate : 0.3300 Average : 0.2340 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-15 Maturity Price : 26.00 Evaluated at bid price : 26.62 Bid-YTW : 3.97 %
BMO.PR.H	Deemed-Retractible	Quote: 25.68 – 25.92 Spot Rate : 0.2400 Average : 0.1510 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.68 Bid-YTW : 3.90 %
MFC.PR.B	Deemed-Retractible	Quote: 22.11 – 22.34 Spot Rate : 0.2300 Average : 0.1568 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.11 Bid-YTW : 6.29 %

The Europeans are still trying to square the circle, but at least they now seem to be downplaying the monetization idea:

Boosting the effectiveness of Europe’s bailout fund will require further talks with investors as German lawmakers prepare to vote on its new powers tomorrow, a European Union document showed.

While the European Financial Stability Facility can be bolstered under two models that may be combined and implemented “quickly,” the extent to which the fund is leveraged can only be ascertained after discussions with investors and rating companies, the document provided to German lawmakers said.

The draft underscores the gaps remaining in European Union efforts to address the debt crisis as Chancellor Angela Merkel and fellow leaders prepare to return to Brussels tomorrow for a second summit in four days. Leaders are still jousting with banks over the size of losses they take on Greek bonds while deliberating over leveraging the fund after ruling out tapping the European Central Bank’s balance sheet.

Rumours continue to swirl about the possible output from the summit:

European leaders increased pressure on Italian Prime Minister Silvio Berlusconi to specify how he will reach budget-reduction targets as German lawmakers prepared to vote on a revamped euro-area bailout package that officials raced to complete before a summit tomorrow.

Italy needs to back up commitments with “specific actions” and come up with “clear timing,” European Commission spokesman Amadeu Altafaj said in Brussels today after a crisis cabinet meeting in Italy late yesterday failed to announce steps to spur growth.
…
While 27 EU leaders convene before the 17 chiefs of the 17 euro nations tomorrow, a meeting of the 27 EU finance ministers scheduled to precede them was cancelled with no explanation.

The elements of the revamped blueprint may include expanding the reach of the 440 billion-euro ($611 billion) European Financial Stability Facility by turning it into a bond insurer and setting up vehicles to raise outside funds, possibly alongside the International Monetary Fund, and a bank- recapitalization strategy.

At an Oct. 23 summit, the leaders excluded a forced restructuring of Greek debt, sticking with the tactic of enticing bondholders to accept losses to help restore the country’s finances, and ruled out tapping the balance sheet of the European Central Bank.

Euro-area leaders are counting on the ECB to continue buying troubled countries’ bonds, three people familiar with the deliberations said. They are debating how to obtain an ECB signal without appearing to give orders to the politically independent central bank, said the people. The central bank has bought 169.5 billion euros in bonds so far.

Super! Bond insurance! Loan guarantees! It worked out so well for Fannie Mae, Freddie Mac and all the monolines that it must be good! And doesn’t cost a cent!

I mentioned my fascination with longevity risk for pension plans on June 21. Swiss Re also considers it a fascinating topic:

A number of Canadian pension plans are not putting aside enough money to account for the risk that people will live longer than expected, says a new report to be released on Monday.
…
Swiss Re, which is hoping to convince pension plans and insurers to buy protection against this risk, clearly has an agenda in publishing the report, which it characterizes as the first comprehensive look at longevity risk in Canada. But the numbers are startling nonetheless. And if the company succeeds in creating an active market for longevity risks in this country, it might ultimately package those risks up into bonds or securities that are sold to investors. The report estimates that between $10-billion and $20-billion of longevity risk will be transferred from Canadian pensions and annuities to reinsurers and investors in the next decade.

Canada’s longevity risk, at roughly five per cent of the total global amount, is relatively high because of the quantity of defined benefit pensions in this country, says George Graziani, a senior vice-president at Swiss Re in Canada.

Elizabeth A Duke, Member of the Board of Governors of the Federal Reserve System, gave a speech titled The Federal Reserve System and individual financial planning:

The Federal Reserve Bank of Dallas offers a popular financial planning publication, Building Wealth. In it, individuals and families seeking help to develop a plan for building personal wealth will find an overview of personal asset-building strategies that includes setting financial goals, budgeting, saving and investing, managing debt, and understanding credit reports and credit scores. The Dallas Fed makes Building Wealth available online in both English and Spanish, and has created an interactive version of the publication, making it usable as a personal finance education resource for schools, nonprofit community organizations, and financial services providers.

Another valuable online resource is the Federal Reserve Bank of San Francisco’s Guide to Financial Literacy. This free publication explains what level of financial education is appropriate for a variety of age groups, offers guidance for consumers making key financial decisions at different stages of life, and includes a compendium of financial education resources that address these needs.

Footnotes: Building Wealth can be found at www.dallasfed.org/ca/wealth/index.cfm.

The Guide to Financial Literacy Resource can be found at www.frbsf.org/community/webresources/bankersguide.pdf

The books mentioned in the Resource Guide at the end of the Dallas Fed publication are fascinating:

• Getting Rich in America: 8 Simple Rules for Building a Fortune and a Satisfying Life
  Dwight R. Lee and Richard B. McKenzie 1999, Harper Business

• It’s About the Money! The Fourth Movement of the Freedom Symphony: How to Build Wealth, Get Access to Capital, and Achieve Your Financial Dreams
  Reverend Jesse L. Jackson, Sr. and Jesse L. Jackson, Jr. with Mary Gotschall 1999, Times Business/Random
  House

• The Millionaire Next Door: The Surprising Secrets of America’s Wealthy Thomas J. Stanley and William D. Danko 1996, Longstreet

I’ve heard of “The Millionaire Next Door”, although I’ve never read it. Many things come to mind when I hear the name “Reverend Jesse L. Jackson, Sr.”, but I’ll admit that Financial Planning advice isn’t one of them! But it’s listed because of a single quote:

Accumulating wealth—as distinct from just making a big income—is the key to your financial independence. It gives you control over assets, power to help shape the corporate and political landscape, and the ability to ensure a prosperous future for your children and their heirs….

… which is reasonable enough!

OSFI has released the Autumn 2011 edition of the OSFI Pillar. The new Assistant Superintendent is Mark Zelmer, a career civil servant.

S&P affirmed Canada:

• We are affirming our ‘AAA/A-1+’ long- and short-term sovereign credit ratings on Canada.
• In our view, Canada has a superior political and economic profile and strong flexibility and performance profile.
• The outlook is stable. Given Canada’s strong starting position, a combination of increased political uncertainty and weaker fiscal or external outcomes would be necessary for downward pressure to build on the rating.

The BoC was full of cheery news:

The global economy has slowed markedly as several downside risks to the projection outlined in the Bank’s July Monetary Policy Report (MPR) have been realized. Financial market volatility has increased and there has been a generalized retrenchment from risk-taking across global markets
…
The outlook for the Canadian economy has weakened since July, with the significantly less favourable external environment affecting Canada through financial, confidence and trade channels.
…
Overall, the Bank expects that growth in Canada will be slow through mid-2012 before picking up as the global economic environment improves, uncertainty dissipates and confidence increases. The Bank projects that the economy will expand by 2.1 per cent in 2011, 1.9 per cent in 2012, and 2.9 per cent in 2013.

The weaker economic outlook implies greater and more persistent economic slack than previously anticipated, with the Canadian economy now expected to return to full capacity by the end of 2013. As a result, core inflation is expected to be slightly softer than previously expected, declining through 2012 before returning to 2 percent by the end of 2013. The projection for total CPI inflation has also been revised down, reflecting the recent reversal of earlier sharp increases in world energy prices as well as modestly weaker core inflation. Total CPI inflation is expected to trough around 1 per cent by the middle of 2012 before rising with core inflation to the two per cent target by the end of 2013, as excess supply in the economy is slowly absorbed.

Several significant upside and downside risks are present in the inflation outlook for Canada. Overall, the Bank judges that these risks are roughly balanced over the projection horizon.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.

CZP issues have been hammered in the past two days, after DBRS warned of a possible 3-notch downgrade and S&P was less explicit, but just as gloomy.

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts gaining 11bp, FixedResets down 1bp and DeemedRetractibles winning 26bp. Volatility was quite good, with BAM issues prominent at both ends of the spectrum – FixedResets on the downside, probably reflecting the new issue. Volume was heavy; RBC scored a lock-out on the reported block trading.

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	2.2260 %	2,045.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	2.2260 %	3,076.3
Floater	3.52 %	3.53 %	159,494	18.46	2	2.2260 %	2,208.5
OpRet	4.84 %	2.61 %	64,363	1.53	8	-0.0678 %	2,456.3
SplitShare	5.38 %	0.62 %	54,167	0.34	4	0.5001 %	2,492.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0678 %	2,246.1
Perpetual-Premium	5.69 %	4.20 %	107,946	1.87	13	0.0303 %	2,126.4
Perpetual-Discount	5.35 %	5.43 %	109,050	14.74	17	0.1105 %	2,257.3
FixedReset	5.15 %	3.20 %	209,915	2.46	61	-0.0138 %	2,330.7
Deemed-Retractible	5.07 %	4.39 %	214,781	4.07	46	0.2555 %	2,203.3

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.T	FixedReset	-2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 22.78 Evaluated at bid price : 24.06 Bid-YTW : 4.20 %
BAM.PR.R	FixedReset	-1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 23.30 Evaluated at bid price : 25.35 Bid-YTW : 4.11 %
BAM.PR.P	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.83 Bid-YTW : 4.52 %
GWO.PR.L	Deemed-Retractible	-1.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.74 %
BAM.PR.M	Perpetual-Discount	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 21.72 Evaluated at bid price : 22.07 Bid-YTW : 5.42 %
POW.PR.D	Perpetual-Discount	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 23.94 Evaluated at bid price : 24.24 Bid-YTW : 5.18 %
GWO.PR.H	Deemed-Retractible	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 5.71 %
PWF.PR.K	Perpetual-Discount	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 24.00 Evaluated at bid price : 24.30 Bid-YTW : 5.10 %
ELF.PR.F	Perpetual-Discount	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 22.21 Evaluated at bid price : 22.21 Bid-YTW : 6.02 %
BNA.PR.E	SplitShare	1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 6.58 %
PWF.PR.L	Perpetual-Discount	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 24.00 Evaluated at bid price : 24.30 Bid-YTW : 5.26 %
RY.PR.G	Deemed-Retractible	1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.06 Bid-YTW : 4.37 %
SLF.PR.D	Deemed-Retractible	1.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.41 Bid-YTW : 6.46 %
SLF.PR.H	FixedReset	1.67 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 4.30 %
SLF.PR.G	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 3.68 %
BAM.PR.B	Floater	2.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 14.99 Evaluated at bid price : 14.99 Bid-YTW : 3.53 %
BAM.PR.K	Floater	2.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 14.86 Evaluated at bid price : 14.86 Bid-YTW : 3.56 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IFC.PR.A	FixedReset	184,263	RBC crossed blocks of 79,900 and 72,400, both at 25.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 3.81 %
BNS.PR.Z	FixedReset	174,181	Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.74 Bid-YTW : 3.42 %
ENB.PR.B	FixedReset	140,086	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 3.63 %
BNS.PR.R	FixedReset	128,495	RBC crossed blocks of 47,000 and 57,000, both at 25.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-26 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 3.36 %
TRP.PR.C	FixedReset	116,541	RBC crossed 100,000 at 25.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 23.32 Evaluated at bid price : 25.30 Bid-YTW : 3.22 %
TD.PR.M	OpRet	87,500	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.25 Evaluated at bid price : 25.49 Bid-YTW : 2.61 %
There were 43 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.R	FixedReset	Quote: 25.35 – 25.80 Spot Rate : 0.4500 Average : 0.3126 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 23.30 Evaluated at bid price : 25.35 Bid-YTW : 4.11 %
IAG.PR.F	Deemed-Retractible	Quote: 25.85 – 26.59 Spot Rate : 0.7400 Average : 0.6103 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 5.55 %
GWO.PR.N	FixedReset	Quote: 24.20 – 24.55 Spot Rate : 0.3500 Average : 0.2334 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.68 %
BAM.PR.T	FixedReset	Quote: 24.06 – 24.45 Spot Rate : 0.3900 Average : 0.2782 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 22.78 Evaluated at bid price : 24.06 Bid-YTW : 4.20 %
IGM.PR.B	Perpetual-Premium	Quote: 25.42 – 25.70 Spot Rate : 0.2800 Average : 0.1682 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.42 Bid-YTW : 5.63 %
BAM.PR.X	FixedReset	Quote: 23.75 – 24.17 Spot Rate : 0.4200 Average : 0.3102 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-25 Maturity Price : 22.63 Evaluated at bid price : 23.75 Bid-YTW : 3.90 %