Category: Market Action

Europeans want a rating agency that follows political instructions:

Europe’s leaders are accusing the world’s largest credit-rating agencies of bias in assessing the debt of troubled countries, renewing calls for the creation of a European rating agency.

The complaints were sparked after Moody’s downgraded Portugal by four notches Tuesday to “junk” status, and Standard & Poor’s warned Monday it would consider it a “selective default” if banks and insurers roll over about $42-billion of Greek debt – a move that could derail efforts to restructure Greece’s debt.

German Finance Minister Wolfgang Schaeuble said Wednesday he was surprised by the decision to downgrade Portugal, saying he “can’t decipher” the basis for the evaluation.

“We need to break the oligopoly of rating agencies,” he told reporters in Berlin.

Meanwhile Satyajit Das has a nice piece in the Globe, unsuccessfully attempting to make the numbers add up:

Under the sketchy proposal, for every €100 of maturing bonds, the banks will subscribe to new 30-year securities, but only equal to €70 (70 per cent). The banks will keep €50 and invest the other €20 in 30-year high-quality zero-coupon bonds (via a special purpose vehicle) to secure repayment of the new bonds. The new 30-year Greek debt will carry an interest rate of 5.5 per cent per annum with a bonus element linked to Greek growth of up to an additional 2.5 per cent.

Of the €340-billion in outstanding Greek bonds, banks hold 27 per cent, institutional and retail investors hold 43 per cent and the International Monetary Fund and European Central Bank hold 30 per cent. It is not clear whether non-bank investors are willing to participate in the arrangements. The ECB has previously resisted any debt restructuring, including maturity extension.

The French plan assumes holders of bonds would agree to roll over 50 per cent of their holdings to provide Greece net funding of €30-billion ($41-billion). But under the French banking federation’s own figures, this would be impossible unless all the €60.5-billion (excluding central bank holdings) maturing by mid-2014 is rolled over. This is inconsistent with the proposal’s assumption of investor acceptance of 80 per cent.
…
Greece must find €50 for every €100 debt exchanged under the proposal. Given it has no access to commercial funding, this would have to come from the EU, IMF, EFSF or ECB.

Greece’s cost would be between 7.7 per cent and 11.20 per cent per annum, as it only receives €50 of the €70 face value of the new bonds. Assuming the remaining funding is at 6 per cent, then Greece’s blended rate for every €100 of finance would be 6.85-8.60 per cent per annum, compared to the 7-8 per cent per annum considered sustainable by markets.

Most importantly, the overall level of debt, considered unsustainable, of Greece would remain unchanged.

Speaking of numbers that don’t add up, there’s more Sino-Forest related news:

John Paulson lost 11 percent in his biggest fund in June, according to an investor, as the firm sold off Sino-Forest Corp. (TRE) after a short-seller’s allegations.

The drop left Paulson’s Advantage Plus Fund, which uses strategies designed to profit from corporate events such as takeovers and bankruptcies, down 18 percent this year, said the client, who asked not to be named because the information is private. The fund’s gold-denominated share class declined 11 percent in June and 12 percent in 2011.

The crows are feasting on Nortel’s unexpectedly fat corpse:

Two and half years on, the breakup of Nortel Networks Corp. is all but complete save for one last but significant obstacle — how to allocate an unexpectedly large pile of cash of more than US$10-billion.

That job falls on the shoulders of Ontario Chief Justice Warren Winkler, who Wednesday was appointed mediator for all outstanding claims, which could swell in light of the colossal sum raised through last week’s US$4.5-billion patent sale to a consortium of technology giants.
…
Unsecured holders of Nortel’s suddenly hot bonds will also expect to be paid out at 100¢ on the dollar. Bonds maturing in 2013 and 2016 carry coupons of more 10% and are trading well above par. Each class of bond is up more than 650% since hitting bottom in February 2009.

JPMorgan was naughty:

Typically, when investors purchase municipal securities, the municipalities temporarily invest the proceeds of the sales in municipal reinvestment products until the money is used for the intended purposes. Under relevant Internal Revenue Service (IRS) regulations, the proceeds of tax-exempt municipal securities generally must be invested at fair market value. The most common way of establishing fair market value is through a competitive bidding process in which bidding agents search for the appropriate investment vehicle for a municipality.

The SEC alleges that from 1997 through 2005, JPMS’s fraudulent practices, misrepresentations and omissions undermined the competitive bidding process, affected the prices that municipalities paid for reinvestment products, and deprived certain municipalities of a conclusive presumption that the reinvestment instruments had been purchased at fair market value. JPMS’s fraudulent conduct also jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted. The employees involved in the alleged misconduct are no longer with the company.

According to the SEC’s complaint filed in U.S. District Court for the District of New Jersey, JPMS, acting as the agent for its affiliated commercial bank, JPMorgan Chase Bank, N.A., at times won bids because it obtained information from the bidding agents about competing bids, a practice known as “last looks.” In other instances, it won bids set up in advance for JPMS to win (“set-ups”) because the bidding agent deliberately obtained non-winning bids from other providers, and it facilitated bids rigged for others to win by deliberately submitting non-winning bids.

Dan Hallett has another nice piece in the Globe, How rising rates may affect bond portfolios.

RBC may be going into the ETF business:

Royal Bank of Canada (RY-T54.57-0.24-0.44%), which owns Canada’s largest mutual fund player, is the second domestic bank to jump into the fast-growing exchange traded fund (ETF) business.

Its fund arm, RBC Global Asset Management, has filed a preliminary prospectus to list eight, target-date maturity corporate bond ETFs on the Toronto Stock Exchange. These ETFs wind up in a specified year ranging from 2013 to 2020, and the cash is distributed to unitholders.

Jonathan Chevreau comments:

The entry of Canada’s largest bank, RBC, into exchange-traded funds is bound to legitimize the fast-growing ETF industry, just as the banks made mutual funds a household name in the late 1980s.

Yes, sir, that’s what ETFs need! Legitimacy!

Canada nestled deeper into Israel’s pocket:

The committee recommends that police forces across Canada be better trained to deal with anti-Semitism; that universities host conferences to counter events such as “Israeli Apartheid Week”; and that there should be a clear definition of what anti-Semitism entails.
…
The CPCCA countered that it did not want to limit reasonable criticism of Israel. But it also explained that “anti-Semitism is being manifested in a manner which has never been dealt with before. … This problem is especially prevalent on campuses where Jewish students are ridiculed and intimidated for any deemed support for the ‘Nazi’ and ‘apartheid’ State of Israel, which is claimed to have no right to exist.”

Don’t engage in vigorous debate! Not in Canada! The people with whom you vehemently disagree might be fwightened! Some of us believe that criticism of Israel, no matter how vociferous and ignorant, is not anti-Semitism – but perhaps the CPCCA considers that at anti-Semitic viewpoint. At least we can all be joyful that the CPCCA does not want to limit what it deems to be reasonable criticism of Israel. Golly, thanks guys!

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts losing 15bp, FixedResets winning 10bp, and DeemedRetractibles up 1bp. Volatility was good. Volume was fair.

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	-0.7155 %	2,439.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.7155 %	3,669.5
Floater	2.48 %	2.24 %	43,047	21.71	4	-0.7155 %	2,634.4
OpRet	4.87 %	1.89 %	63,540	0.23	9	0.0214 %	2,444.3
SplitShare	5.23 %	1.33 %	53,750	0.64	6	-0.0598 %	2,513.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0214 %	2,235.1
Perpetual-Premium	5.70 %	5.25 %	137,842	0.80	13	0.0734 %	2,086.4
Perpetual-Discount	5.47 %	5.47 %	117,853	14.70	17	-0.1546 %	2,188.2
FixedReset	5.17 %	3.21 %	220,429	2.69	57	0.1010 %	2,318.8
Deemed-Retractible	5.09 %	4.86 %	272,791	8.12	47	0.0121 %	2,155.5

Performance Highlights
Issue	Index	Change	Notes
TRI.PR.B	Floater	-2.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-07 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 2.24 %
SLF.PR.A	Deemed-Retractible	-1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.01 Bid-YTW : 5.81 %
POW.PR.D	Perpetual-Discount	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-07 Maturity Price : 23.11 Evaluated at bid price : 23.46 Bid-YTW : 5.33 %
SLF.PR.B	Deemed-Retractible	-1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.14 Bid-YTW : 5.80 %
PWF.PR.E	Perpetual-Discount	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-07 Maturity Price : 24.20 Evaluated at bid price : 24.50 Bid-YTW : 5.61 %
GWO.PR.N	FixedReset	5.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.84 Bid-YTW : 3.69 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.A	OpRet	113,354	TD crossed 100,000 at 25.55. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.67 %
CM.PR.L	FixedReset	106,138	TD crossed 100,000 at 27.36. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.35 Bid-YTW : 2.86 %
HSB.PR.E	FixedReset	51,113	RBC crossed 48,500 at 27.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 27.50 Bid-YTW : 3.13 %
TRP.PR.C	FixedReset	49,799	Scotia crossed 45,000 at 25.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-07 Maturity Price : 23.38 Evaluated at bid price : 25.60 Bid-YTW : 3.67 %
CU.PR.B	Perpetual-Premium	26,433	National crossed 25,000 at 25.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-08-06 Maturity Price : 25.25 Evaluated at bid price : 25.45 Bid-YTW : 3.42 %
RY.PR.G	Deemed-Retractible	23,975	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 4.92 %
There were 31 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRI.PR.B	Floater	Quote: 23.25 – 24.25 Spot Rate : 1.0000 Average : 0.6787 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-07 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 2.24 %
IAG.PR.E	Deemed-Retractible	Quote: 25.76 – 26.32 Spot Rate : 0.5600 Average : 0.3566 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 5.56 %
NEW.PR.C	SplitShare	Quote: 14.25 – 14.77 Spot Rate : 0.5200 Average : 0.3188 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-06-26 Maturity Price : 13.70 Evaluated at bid price : 14.25 Bid-YTW : 2.02 %
HSB.PR.C	Deemed-Retractible	Quote: 24.80 – 25.20 Spot Rate : 0.4000 Average : 0.3201 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 5.24 %
POW.PR.D	Perpetual-Discount	Quote: 23.46 – 23.75 Spot Rate : 0.2900 Average : 0.2120 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-07 Maturity Price : 23.11 Evaluated at bid price : 23.46 Bid-YTW : 5.33 %
TD.PR.I	FixedReset	Quote: 27.25 – 27.49 Spot Rate : 0.2400 Average : 0.1622 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.25 Bid-YTW : 3.03 %

Portugal’s downgrade is contagious:

Portugal’s downgrade to junk may stifle corporate bond sales in Europe, killing off a mini- revival in issuance spurred by investor optimism about Greece’s efforts to avoid default.

“The primary window has almost slammed shut just as spectacularly as it had flung open,” said Suki Mann, senior credit strategist at Societe Generale SA in London.

Notes sold by Enel SpA (ENEL), Italy’s largest power operator, and Fiat SpA (F) fell in their first day of trading today, while two issuers pulled deals. Enel and Fiat led 5.4 billion euros ($7.7 billion) of company bond sales in Europe this week, the biggest round of issuance by non-financial borrowers since May, according to data compiled by Bloomberg.

Ireland may be next!

Ireland’s credit rating may be cut to junk by Moody’s Investors Service after Portugal yesterday lost its investment grade rating, according to analysts.

Moody, which slashed Portugal to Ba2 from Baa1, in April lowered Ireland’s credit rating to the lowest investment grade Baa3 and left country’s outlook on negative.

The ratings company cut Portugal’s rating in part because the nation may not be able to return to debt markets in the second half of 2013. Ireland has been locked out of markets since September, and the yield on 10-year Irish bonds climbed to 12.44 percent today, a euro-area record for the country that agreed to a rescue package with the European Union and International Monetary Fund last November.

Synthetic ETFs are really getting a working-over:

U.K. fraud prosecutors are reviewing how exchange-traded funds are marketed and whether they have the proper tools to prosecute any wrongdoing in the industry, a person directly involved with the probe said.

The Serious Fraud Office, which prosecutes white collar crime, hired a consultant to interview bankers and lawyers to determine whether there is a risk that sales of the products may involve criminal conduct in the future. The Financial Services Authority and the Bank of England’s Financial Policy Committee have warned of a lack of transparency in the ETF market.
…
“From the investor’s point of view, I think there are question marks over whether synthetic ETFs really are appropriate for all types of the retail marketplace,” FSA Chief Executive Officer Hector Sants said June 24.

Concerns about synthetic ETFs were last discussed on PrefBlog when the BoE June 2011 Financial Stability Report focussed on them.

It was a mixed day for the Canadian preferred share market, as PerpetualDiscounts gained 20bp, FixedResets were up 4bp and DeemedRetractibles lost 8bp. Volatility was quite good. Volume was average; Nesbitt scored a shut-out on the highlights table.

PerpetualDiscounts now yield 5.44%, equivalent to 7.07% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 5.35% so the pre-tax interest-equivalent spread is now about 175bp, a narrowing from the 185bp reported on June 29 due to a decline of PerpetualDiscount yields.

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	1.6939 %	2,457.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.6939 %	3,695.9
Floater	2.46 %	2.23 %	43,728	21.69	4	1.6939 %	2,653.4
OpRet	4.87 %	1.73 %	64,046	0.23	9	0.1290 %	2,443.8
SplitShare	5.23 %	1.32 %	55,913	0.64	6	0.3256 %	2,515.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1290 %	2,234.6
Perpetual-Premium	5.70 %	5.26 %	142,980	1.27	13	-0.0226 %	2,084.9
Perpetual-Discount	5.46 %	5.44 %	114,233	14.68	17	0.2042 %	2,191.6
FixedReset	5.17 %	3.17 %	217,935	2.69	57	0.0442 %	2,316.4
Deemed-Retractible	5.10 %	4.84 %	275,383	8.13	47	-0.0787 %	2,155.3

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.N	FixedReset	-4.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 4.31 %
CIU.PR.C	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 23.02 Evaluated at bid price : 24.58 Bid-YTW : 3.63 %
TDS.PR.C	SplitShare	1.07 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-11-15 Maturity Price : 10.00 Evaluated at bid price : 10.42 Bid-YTW : -4.84 %
NA.PR.N	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-15 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 2.75 %
NA.PR.O	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 27.70 Bid-YTW : 2.06 %
FTS.PR.E	OpRet	1.75 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 27.33 Bid-YTW : 1.73 %
TRI.PR.B	Floater	2.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 23.62 Evaluated at bid price : 23.89 Bid-YTW : 2.18 %
PWF.PR.A	Floater	2.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 23.14 Evaluated at bid price : 23.40 Bid-YTW : 2.23 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.J	Deemed-Retractible	114,655	Nesbitt crossed 100,000 at 24.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 4.73 %
CM.PR.H	Deemed-Retractible	106,596	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-08-05 Maturity Price : 25.75 Evaluated at bid price : 25.71 Bid-YTW : 2.69 %
BMO.PR.M	FixedReset	63,259	Nesbitt crossed 60,000 at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.21 Bid-YTW : 2.94 %
RY.PR.R	FixedReset	38,365	Nesbitt crossed 25,000 at 27.23. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 27.21 Bid-YTW : 3.04 %
TD.PR.G	FixedReset	33,933	Nesbitt crossed 25,000 at 27.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.10 Bid-YTW : 2.97 %
POW.PR.B	Perpetual-Discount	28,719	Nesbitt crossed 25,000 at 24.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 24.03 Evaluated at bid price : 24.28 Bid-YTW : 5.52 %
There were 31 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.N	FixedReset	Quote: 23.55 – 24.65 Spot Rate : 1.1000 Average : 0.6456 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 4.31 %
BAM.PR.O	OpRet	Quote: 25.64 – 26.29 Spot Rate : 0.6500 Average : 0.4564 YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.64 Bid-YTW : 3.72 %
FTS.PR.G	FixedReset	Quote: 25.76 – 26.23 Spot Rate : 0.4700 Average : 0.3494 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 4.03 %
PWF.PR.M	FixedReset	Quote: 26.78 – 27.20 Spot Rate : 0.4200 Average : 0.3096 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.78 Bid-YTW : 2.95 %
SLF.PR.G	FixedReset	Quote: 25.25 – 25.55 Spot Rate : 0.3000 Average : 0.1987 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 3.84 %
BAM.PR.J	OpRet	Quote: 27.16 – 27.51 Spot Rate : 0.3500 Average : 0.2562 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 27.16 Bid-YTW : 3.52 %

FixedResets and new issuers got some ink in the Globe:

BCE Inc. (BCE-T38.220.230.61%), which has long history with these shares, is one of the latest firms to tap into this demand, closing a $345-million offering on Tuesday. These shares pay a fixed yield of 4.15 per cent for the first five years, and then investors have the choice to either take a rate equal to the Government of Canada 5-year yield plus 1.88 per cent, or a floating three-month T-bill rate plus 1.88 per cent.

Yet BCE isn’t alone. Intact Financial also just sold $225-million of these securities, as did Canaccord Financial. These two issues were a bit more surprising because both deals were the first time these firms offered this type of security.

Still, it makes a lot of sense. Much like Intact and Canaccord, firms such as GMP Capital and Bell Alliant also recently sold their first issue of rate reset preferred shares. If sales continue to be strong, don’t be surprised if more first-time issuers jump on the bandwagon.

Moody’s says Portugal is junk after a four-notch downgrade:

Moody’s Investors Service on Tuesday cut Portugal’s credit rating by four levels to Ba2, two notches into junk territory, saying there is great risk the country will need a second round of official financing before it can return to capital markets.

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts down 4bp, FixedResets winning 15bp and DeemedRetractibles gaining 5bp. Volatility was muted. Volume was average and dominated by FixedResets – perhaps due to portfolio reshuffling with the closing of the BCE.PR.K new issue.

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	-0.4394 %	2,416.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4394 %	3,634.4
Floater	2.51 %	2.29 %	41,405	21.50	4	-0.4394 %	2,609.2
OpRet	4.86 %	2.54 %	64,684	0.24	9	0.2017 %	2,440.7
SplitShare	5.24 %	1.95 %	55,062	0.64	6	-0.0400 %	2,507.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2017 %	2,231.7
Perpetual-Premium	5.67 %	5.17 %	140,058	2.14	13	0.0777 %	2,085.3
Perpetual-Discount	5.45 %	5.47 %	114,563	14.65	17	-0.0423 %	2,187.1
FixedReset	5.16 %	3.20 %	218,541	2.69	57	0.1547 %	2,315.4
Deemed-Retractible	5.08 %	4.86 %	276,298	8.15	47	0.0482 %	2,157.0

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.B	Floater	-1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-05 Maturity Price : 18.84 Evaluated at bid price : 18.84 Bid-YTW : 2.80 %
PWF.PR.P	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.01 Bid-YTW : 3.64 %
HSB.PR.D	Deemed-Retractible	1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 5.09 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.D	FixedReset	237,393	RBC crossed blocks of 149,900 and 79,900, both at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 27.22 Bid-YTW : 3.54 %
TD.PR.S	FixedReset	212,291	RBC crossed blocks of 150,000 shares, 30,000 and 25,000, all at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 3.15 %
RY.PR.Y	FixedReset	106,996	Nesbitt crossed 100,000 at 27.57. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 27.52 Bid-YTW : 3.18 %
RY.PR.I	FixedReset	106,463	Nesbitt crossed 100,000 at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.17 Bid-YTW : 3.37 %
BNS.PR.P	FixedReset	105,784	TD crossed blocks of 23,900 and 75,000, both at 25.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.88 Bid-YTW : 2.81 %
MFC.PR.A	OpRet	85,929	TD crossed 75,000 at 25.40. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 3.66 %
There were 31 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.A	Floater	Quote: 22.75 – 23.60 Spot Rate : 0.8500 Average : 0.6469 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-05 Maturity Price : 22.49 Evaluated at bid price : 22.75 Bid-YTW : 2.29 %
FTS.PR.F	Perpetual-Discount	Quote: 24.00 – 24.59 Spot Rate : 0.5900 Average : 0.3873 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-05 Maturity Price : 23.52 Evaluated at bid price : 24.00 Bid-YTW : 5.14 %
POW.PR.D	Perpetual-Discount	Quote: 23.76 – 24.08 Spot Rate : 0.3200 Average : 0.2103 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-05 Maturity Price : 23.31 Evaluated at bid price : 23.76 Bid-YTW : 5.26 %
BAM.PR.N	Perpetual-Discount	Quote: 21.63 – 21.93 Spot Rate : 0.3000 Average : 0.2008 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-05 Maturity Price : 21.63 Evaluated at bid price : 21.63 Bid-YTW : 5.53 %
BAM.PR.H	OpRet	Quote: 25.21 – 25.44 Spot Rate : 0.2300 Average : 0.1608 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.21 Bid-YTW : 2.54 %
BNS.PR.Z	FixedReset	Quote: 24.88 – 25.50 Spot Rate : 0.6200 Average : 0.5526 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.88 Bid-YTW : 3.68 %

Nortel’s carcass is worth big bucks:

Apple Inc. (AAPL) joined with rivals Microsoft Corp. (MSFT) and Research in Motion Ltd. (RIM) to outbid Google Inc. (GOOG) for a patent portfolio from Nortel Networks Corp. and gain rights to technologies for mobile phones and tablet computers.

The group, which also includes Sony Corp. (6758), Ericsson AB and EMC Corp., agreed to pay $4.5 billion in cash for the assets, Ontario-based Nortel said in a statement. The companies aim to complete the sale this quarter pending approval from U.S. and Canadian courts, it said.

The purchase will give Apple, RIM and their bidding partners control over more than 6,000 patents and applications that cover wireless and Internet technologies. The winning offer came after several rounds of bidding and was five times the $900 million Google had offered before the auction for Nortel’s remaining intellectual property.
…
Nortel, which filed for bankruptcy in 2009, fetched more for the patents than the $3 billion it had previously raised by selling almost all its businesses. RIM, maker of the BlackBerry smartphone, will pay about $770 million for its share of the patents, the Waterloo, Ontario-based company said in a statement. Ericsson will pay $340 million, the Stockholm-based networking-equipment maker said. Steve Dowling, a spokesman for Apple, declined to comment beyond the Nortel statement.

The Greek problem has been papered over – at least for now:

The euro area approved its share of a 12 billion-euro ($17.4 billion) aid payment for Greece and pledged to complete work in the coming weeks on a second rescue package for the cash-strapped nation to prevent a default and contagion.

Finance ministers agreed to disburse 8.7 billion euros of loans under last year’s 110 billion-euro bailout, rewarding Greek Premier George Papandreou for pushing an extra austerity plan through parliament. The International Monetary Fund is due to provide the rest of the July aid installment, the fifth under the 2010 package.

The spotlight now turns to a second bailout to which banks and insurers plan to contribute following German demands for taxpayer relief. Euro-area governments and investors will provide 70 percent of new aid that may total as much as 85 billion euros, with the IMF offering the rest, Thomas Wieser, an Austrian Finance Ministry official, said on June 30.

S&P will likely label a Greek term extension as a selective default:

In summary, the growing risk that the Hellenic Republic might engage in a distressed debt restructuring was one of the reasons we lowered its rating on June 13 (see, “Long-term Sovereign Rating On Greece Cut To ‘CCC’; Outlook
Negative”). While we would likely view the FBF proposal, if it proceeds in its current form, as an effective default, we recognize that it is just one of a number of proposals attempting to address the Greek government’s 2011-2014 financing needs and the sustainability of its future debt burden. We
understand that the FBF proposal may change, and it is possible that it could take a form that results in a different rating outcome. Regardless of whether the current FBF proposal is implemented, however, we continue to believe the Hellenic Republic’s uncertain ability to implement the revised EU/IMF program
is a key risk weighing on its credit standing.

This has European shorts in a knot:

That may leave the European Central Bank unable to accept Greek government debt as collateral, impairing the lifeline it has provided the country’s banks.

“It sends all the officials and banks back to drawing board to think something new,” said Christoph Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt. “The ECB is saying it won’t accept debt in a default. Someone needs to give in — either Germany or the ratings agencies or the ECB. One of three will have to compromise.”

Despite all this, Greek notes had a good day:

Greek two-year note yield dropped below 26 percent for the first time since June 14.
…
Greek two-year yields slid 73 points to 26.11 percent, at one point dipping to 25.76 percent. The cost of insuring Greek debt against default rose four basis points to 1,865, signaling 80 percent odds the country will miss a bond payment in five years. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed four basis points to 222. The euro slipped 0.1 percent against the dollar and the yen.

There’s a new chapter in the Sino-Forest saga:

Sino-Forest Corp. (TRE), the Chinese tree- plantation operator accused by a short seller of overstating timber holdings, climbed in Toronto after Wellington Management Co. said it owned 11.5 percent of the company.

Sino-Forest rose as much as 56 percent after the Boston- based investment firm said in a regulatory filing it held 28.3 million shares as of June 30. Wellington, which manages $663 billion, held 79,700 Sino-Forest shares, or 0.03 percent, as of Dec. 31, according to data compiled by Bloomberg.

I just finished reading The Taste of Conquest by Michael Krondl. Excellent, and a worthy companion to William Bernstein’s A Splendid Exchange.

After our beloved mayor turned down a chance to say hello to umpteen thousand tourists with deep pockets, another councillor suggested cutting off funds for the city’s #2 tourist event – even if it means #1 will become collateral damage. Meanwhile, crappy pseudo-festivals organized by the well-connected get megabucks. Just what exactly do we need to do in this city to get a competent, pro-business administration?

The month – and the quarter – started off on an upbeat for the Canadian preferred share market, with PerpetualDiscounts gaining 4bp, FixedResets up 11bp and DeemedRetractibeswinning 21bp. Decent volatility, volume was average. RBC had a nice day.

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	-0.7310 %	2,427.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.7310 %	3,650.4
Floater	2.49 %	2.29 %	41,234	21.50	4	-0.7310 %	2,620.7
OpRet	4.87 %	2.80 %	65,221	1.82	9	0.1762 %	2,435.7
SplitShare	5.24 %	1.94 %	55,392	0.64	6	0.0579 %	2,508.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1762 %	2,227.3
Perpetual-Premium	5.68 %	5.08 %	140,533	1.28	13	0.1922 %	2,083.7
Perpetual-Discount	5.45 %	5.47 %	118,489	14.66	17	0.0398 %	2,188.0
FixedReset	5.17 %	3.26 %	217,727	2.69	57	0.1090 %	2,311.8
Deemed-Retractible	5.08 %	4.86 %	277,383	8.14	47	0.2105 %	2,155.9

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.A	Floater	-2.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-04 Maturity Price : 22.49 Evaluated at bid price : 22.75 Bid-YTW : 2.29 %
IGM.PR.B	Perpetual-Premium	1.03 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 5.57 %
BAM.PR.O	OpRet	1.06 %	YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.77 Bid-YTW : 3.44 %
CM.PR.I	Deemed-Retractible	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.88 Bid-YTW : 4.74 %
BAM.PR.R	FixedReset	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-04 Maturity Price : 23.42 Evaluated at bid price : 25.85 Bid-YTW : 4.48 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.S	FixedReset	355,342	RBC crossed four blocks: 275,000 shares, 25,000 shares, 30,000 and 20,000, all at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.12 Bid-YTW : 3.21 %
TD.PR.Q	Deemed-Retractible	246,500	RBC crossed 240,000 at 26.29. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-01-31 Maturity Price : 25.25 Evaluated at bid price : 26.40 Bid-YTW : 4.69 %
BNS.PR.T	FixedReset	130,550	RBC crossed four blocks: two of 50,000 each, 15,000 shares and 10,000, all at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 27.19 Bid-YTW : 2.84 %
MFC.PR.D	FixedReset	101,202	RBC crossed 99,900 at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 27.12 Bid-YTW : 3.68 %
RY.PR.R	FixedReset	83,900	TD crossed 69,900 at 27.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 27.20 Bid-YTW : 3.05 %
SLF.PR.F	FixedReset	79,600	RBC bought 25,000 from Scotia at 26.90, then crossed 41,900 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.80 Bid-YTW : 3.49 %
There were 31 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.A	Floater	Quote: 22.75 – 23.40 Spot Rate : 0.6500 Average : 0.4243 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-04 Maturity Price : 22.49 Evaluated at bid price : 22.75 Bid-YTW : 2.29 %
BNS.PR.Z	FixedReset	Quote: 24.85 – 25.50 Spot Rate : 0.6500 Average : 0.4787 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 3.69 %
SLF.PR.F	FixedReset	Quote: 26.80 – 27.24 Spot Rate : 0.4400 Average : 0.3017 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.80 Bid-YTW : 3.49 %
TRP.PR.B	FixedReset	Quote: 25.18 – 25.51 Spot Rate : 0.3300 Average : 0.1928 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-04 Maturity Price : 23.31 Evaluated at bid price : 25.18 Bid-YTW : 3.46 %
TRP.PR.C	FixedReset	Quote: 25.50 – 25.88 Spot Rate : 0.3800 Average : 0.2549 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-04 Maturity Price : 23.35 Evaluated at bid price : 25.50 Bid-YTW : 3.68 %
TCA.PR.Y	Perpetual-Premium	Quote: 50.10 – 50.39 Spot Rate : 0.2900 Average : 0.1941 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-05 Maturity Price : 50.00 Evaluated at bid price : 50.10 Bid-YTW : 5.37 %

Looks like some people think the LSE’s not a bad partner:

The biggest rally in three months for Nasdaq OMX Group Inc. (NDAQ) may be the clearest sign yet that investors expect the New York-based exchange operator to buy London Stock Exchange Group Plc. (LSE)

Nasdaq OMX gained 4.7 percent to $25.14 yesterday, climbing the most since April 1, after LSE dropped its offer for TMX Group Inc. (X), saying too few shareholders supported the C$3.32 billion ($3.4 billion) merger. The gain in Nasdaq OMX was the largest since the day it announced a plan to buy NYSE Euronext with IntercontinentalExchange Inc. (ICE), and signals speculation the company will expand with LSE, according to Capstone Holdings Group LLC and Aite Group LLC.

Julie Dickson gave a speech to to the Canadian Institute of Actuaries Annual Meeting 2011; there were two snippets of interest:

Regulators are increasingly considering the adequacy of group capital. This brings into question the risks entailed by non-regulated entities, concentration risk, fungibility of capital, liquidity risk, the impact of intra-group support measures, diversification of risk, etc. The list is lengthy. Again, the actuarial profession has the tools and expertise to consider these issues and to help provide solutions.

.. which may reflect a desire to regulate insurance companies at the holding company level. Or it may not.

The other snippet is:

One of the most troubling issues we face as a regulator is the manner of response from industry, as well as your profession, to regulatory requirements. Frequently, the response to our requirements appears to be driven only by the need to comply, rather than by using the exercise as a means of identifying and reporting on important aspects of the way in which organizations manage risks.

This response is troubling because it implies a mechanical response, which may be conducted as cost effectively as possible, but that is not connected to any real business or risk management practices employed by the organization.

Consider Enterprise Risk Management as an example. The need for sound ERM practices has never been more pressing and yet we find that our requests for demonstrations of sound risk management via Dynamic Capital Adequacy testing (DCAT), stress testing, governance practices, etc. are frequently completed as if they were just regulatory compliance exercises rather than important demonstrations of real life ERM.

In our view, this type of response is not in anyone’s best interests.

“We’re from the government and we’re here to help you!”

Preet Bannerjee writes an interesting piece in the Globe titled How is your fund manager performing?. He references a newletter from Research Affiliates:

The selection of active managers, whose philosophy and process are geared to produce market-beating results, is an exhaustive and time-consuming activity. Certainly, some can take a shortcut, relying on historical track records (such as the typical trailing five years of returns) to gauge skill but, as mutual fund advertisements proclaim, “past performance is no guarantee of future results.” Indeed, the goal of manager research is to determine if the manager and its strategy will be successful in the dark and unknowable future. And that requires separating the wheat from the chaff or, in this case, manager skill from pure luck. Unfortunately, this is easier said than done. Statistically speaking, it requires a track record of approximately 35 years to determine whether the average active manager has demonstrated skill.[footnote]

Footnote: Using a very optimistic 2% excess return at the typical 6% tracking error level, for an information ratio of 0.33. An information ratio of 0.50 would take 16 years to confirm statistical significance, while a 0.25 ratio would take 62 years!

Another paper referenced was by Fama & French, Luck Versus Skill in the Cross Section of Mutual Fund Returns:

The aggregate portfolio of U.S. equity mutual funds is close to the market portfolio, but the high costs of active management show up intact as lower returns to investors. Bootstrap simulations suggest that few funds produce benchmark adjusted expected returns sufficient to cover their costs. If we add back the costs in expense ratios, there is evidence of inferior and superior performance (non-zero true alpha) in the extreme tails of the cross section of mutual fund alpha estimates.

What happened to Yellow this week?

The Canadian preferred share market closed the half on a strong note, with PerpetualDiscounts winning 19bp, FixedResets up 16bp and DeemedRetractibles gaining 14bp. Volatility was reasonable, with BAM.PR.O continuing its slide (with a wide spread), but ELF.PR.F and ELF.PR.G reversing theirs. Volume was average-ish.

PerpetualDiscounts now yield 5.48%, equivalent to 7.12% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 5.4% (well … a little under) so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 170bp, a significant narrowing from the 185bp reported June 29.

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	0.4262 %	2,445.0
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.4262 %	3,677.3
Floater	2.48 %	2.22 %	41,438	21.71	4	0.4262 %	2,640.0
OpRet	4.88 %	2.78 %	65,478	0.25	9	-0.1116 %	2,431.5
SplitShare	5.24 %	1.98 %	57,684	0.65	6	0.1434 %	2,506.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1116 %	2,223.3
Perpetual-Premium	5.69 %	5.06 %	141,307	0.82	12	0.1174 %	2,079.7
Perpetual-Discount	5.47 %	5.48 %	120,340	14.63	18	0.1919 %	2,187.2
FixedReset	5.17 %	3.23 %	212,365	2.70	57	0.1595 %	2,309.3
Deemed-Retractible	5.09 %	4.89 %	286,691	8.15	47	0.1431 %	2,151.4

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.O	OpRet	-1.62 %	YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.98 %
ELF.PR.F	Perpetual-Discount	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-30 Maturity Price : 22.32 Evaluated at bid price : 22.68 Bid-YTW : 5.84 %
BNS.PR.Q	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-25 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 2.70 %
BAM.PR.N	Perpetual-Discount	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-30 Maturity Price : 21.42 Evaluated at bid price : 21.71 Bid-YTW : 5.49 %
ELF.PR.G	Perpetual-Discount	1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-30 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 5.68 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.M	FixedReset	70,936	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.09 Bid-YTW : 3.15 %
TD.PR.G	FixedReset	46,191	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.31 Bid-YTW : 3.20 %
TD.PR.C	FixedReset	38,393	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.72 Bid-YTW : 3.20 %
BNS.PR.Q	FixedReset	37,648	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-25 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 2.70 %
SLF.PR.D	Deemed-Retractible	37,557	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.03 Bid-YTW : 6.02 %
CU.PR.A	Perpetual-Premium	29,350	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.24 Bid-YTW : 5.06 %
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.O	OpRet	Quote: 25.50 – 26.00 Spot Rate : 0.5000 Average : 0.3381 YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.98 %
BAM.PR.P	FixedReset	Quote: 27.04 – 27.35 Spot Rate : 0.3100 Average : 0.2124 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 27.04 Bid-YTW : 4.32 %
SLF.PR.F	FixedReset	Quote: 26.77 – 27.00 Spot Rate : 0.2300 Average : 0.1501 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.77 Bid-YTW : 3.52 %
BNA.PR.E	SplitShare	Quote: 24.10 – 24.54 Spot Rate : 0.4400 Average : 0.3629 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 5.61 %
BMO.PR.L	Deemed-Retractible	Quote: 26.75 – 26.98 Spot Rate : 0.2300 Average : 0.1546 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.75 Evaluated at bid price : 26.75 Bid-YTW : 4.41 %
TD.PR.K	FixedReset	Quote: 27.44 – 27.69 Spot Rate : 0.2500 Average : 0.1748 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.44 Bid-YTW : 3.27 %

Yellow Media has announced:

that the Federal Minister of Industry, under the Investment Canada Act, has approved the sale of Trader Corporation to funds advised by Apax Partners. Completion of the sale remains subject to satisfaction of other customary conditions. Yellow Media Inc. currently expects the transaction to close by the end of July 2011.

This release – or perhaps some encouragement from the company – provoked DBRS to comment:

DBRS notes that the Trader sale is expected to accelerate the Company’s de-leveraging efforts. The decision to sell Trader remains a critical component in achieving improved leverage – to around 2.0 times debt-to-EBITDA from 2.74 times currently. As stated in our March 25, 2011, press release, DBRS believes that a stronger financial profile remains prudent given the uncertainty that the Company’s business risk profile faces with its multi-year transition from print to digital.

Despite Yellow Media’s leading position in the directories business, its principal segment following the sale of Trader, DBRS notes that this division continues to face significant risks as it transforms from a print-placement and listing organization into an online/digital media and marketing service provider.

While DBRS notes that the Company has achieved reasonable results through the early stages of this transition (as of Q1 2011, more than 25% of Directories revenue is digital) including relatively steady normalized EBITDA and cash flow from operations, DBRS is increasingly concerned (and will continue to monitor) the potential for weakening in Yellow Media’s future business risk profile as the digital transition continues. As such, as the digital component becomes an ever-larger portion of the Directories segment’s business profile, more meaningful evidence that additional challenges are being dealt with successfully will be required in order to maintain the present ratings.

For some reason known only to the elect, Yellow preferreds had an excellent day, returning from +6.76% (YLO.PR.A) to +9.96% (YLO.PR.C).

They also downgraded Anglo-Irish due to the government’s ursurpation of the proper role of bankruptcy court:

DBRS Inc. (DBRS) has today downgraded the non-guaranteed senior debt and deposit ratings of Anglo Irish Bank Corporation Limited (Anglo Irish or the Bank), including its Issuer Rating, to CCC from B (low). All non-government guaranteed ratings remain Under Review with Negative Implications, where they were placed on 10 September 2010. Today’s rating action does not impact the various Government guaranteed debt and deposits rating of Anglo Irish which remain at ‘A’ with a Negative trend.

As noted in DBRS’s press release on 4 April 2011, DBRS viewed non-guaranteed senior bondholders of Anglo Irish at an increased risk of adverse actions given the state of the Irish banking system and the wind-down mode of Anglo Irish. Today’s rating action reflects the recent statements by the Minister for Finance which, in DBRS’s opinion, firmly underline the Government’s intent to pursue burden sharing by senior bondholders of what the Irish Government defines as ‘non-going concern’ banks, such as Anglo Irish. As such, DBRS sees the probability of adverse actions towards senior bondholders as significantly increased.

DBRS notes that the Irish Government has stated that it will only pursue such actions should it receive approval from the European Central Bank (ECB). However, at this time the ECB and other E.U. members have been firm in their position that no such actions be taken towards senior bondholders of banks.

The Greek austerity plan passed:

Greek Prime Minister George Papandreou clinched enough votes to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for his debt-laden nation.

Papandreou won by 155 votes to 138, a wider margin than last week’s confidence ballot, as some opposition lawmakers abstained rather than oppose a package that is the condition for further rescue funds.
…
The yield on Greece’s two-year government bond dropped to 26.94 percent today from 28.54 percent yesterday. The euro traded at $1.4359 at 5:15 p.m. in Athens, compared with $1.4421 when the vote started.

Clouds of gas engulfed the square outside parliament as lawmakers voted on a package whose defeat could have led to the euro area’s first sovereign default. Greece needs to cover 6.6 billion euros of maturing bonds in August and government officials have said they may lack the money to pay wages and pensions by mid-July.

German banks are cooperating with the Greek plans:

German and French lenders are the biggest foreign holders of Greek debt and their participation is key to the European Union goal of getting banks to roll over at least 30 billion euros ($43 billion) of bonds. German firms and the finance ministry are discussing the idea of rolling over bonds maturing until 2020, and not just those running through 2014, as had been first envisaged, said the people, who declined to be identified because the talks are confidential.
…
“If Greece goes into default, then we would have a disruption in Europe that could more quickly impact other countries in a way that goes far beyond what Lehman Brothers meant for us,” said [Deutsche Bank CEO Josef] Ackermann, 63.
…
Ackermann, who is also chairman of the Institute of International Finance, which represents more than 400 financial companies, said they are “working around the clock” with special teams, rating companies and bodies overseeing credit- default swaps to test whether any agreement would trigger a credit event. He warned that any agreement is “highly complex” and could force investors to write down their Greek holdings by an estimated 30 percent to 45 percent if done incorrectly.

It’s a black day for Canadian capital market participants:

The proposed merger of TMX Group Inc. (X-T44.611.052.41%) with London Stock Exchange Group PLC is dead.

TMX said a majority of the votes cast by proxy before Wednesday’s deadline in fact supported the deal, but it was clear the two exchange operators wouldn’t get the two-thirds required in a vote scheduled for Thursday.

TMX Group chief executive officer Tom Kloet said the company will now focus on other alternatives, including a rival bid from Maple Group Acquisition Corp., a collection of Canadian financial institutions and pension funds. The bid by Maple, worth about $50 a share, had been conditional on the defeat of the TMX-LSE merger.

The oligarchs are again triumphant; I had been hoping for a little bit of competition in Canada. However, I can still cling to the hope that the Competition Bureau will take the obvious step of killing the Maple bid, leaving the TMX to have to scramble for a partner.

We learnt during the Panic of 2007 just how important US-domiciled Money Market Funds were to European bank financing. So this is interesting:

Institutions pulled out of U.S. prime money-market funds at the fastest pace in 15 months, shifting to funds that invest only in U.S. government-backed securities out of concern the European debt crisis would worsen.

Institutional funds eligible to buy corporate debt lost $39 billion to net withdrawals in the week ended June 28 and $75 billion in the past two weeks, falling to $1.04 trillion, according to data from research firm iMoneyNet in Westborough, Massachusetts. Institutional money funds that buy only U.S. government-backed securities gathered $27 billion in net deposits, rising to $599 billion.

Dan Hallett has a nice piece in the Globe titled Distribution rate does not equal yield.

Canadian inflation popped up:

Canadian inflation gave economists an unpleasant surprise Wednesday when data from May showed it shot up to its highest level in more than eight years, putting all eyes on the Bank of Canada ahead of its July interest-rate decision.

Annual inflation hit a higher-than-expected 3.7% for the month, and while gasoline was the main culprit, core inflation also jumped, from 1.6% in April to 1.8% in May. The core figure, which factors out volatile items like food and gas, came in well above the Bank of Canada’s 1.4% target for the second quarter.

There’s some criticism of Mayor Ford over his refusal to walk over and say hello at the Pride ceremonies … at the same time, Mayor Bloomberg is rubbing his hands with glee at the business that’s going to come with New York’s gay marriage law. Mayor Bloomberg seems to understand that cities are all about doing business – and is gunning for New York to grab market share away from Toronto.

It was a downish day in the Canadian preferred share market, with PerpetualDiscounts losing 19bp, FixedResets up 1bp and DeemedRetractibles down 5bp. Volatility picked up, all to the downside. Volume was fair-to-good.

PerpetualDiscounts now yield 5.52%, equivalent to 7.18% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 5.35%, having had a rough couple of days, and so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 185bp, a narrowing from the 195bp reported June 22 due to the move in long-term corporate yields.

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	-0.4479 %	2,434.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4479 %	3,661.7
Floater	2.49 %	2.23 %	42,854	21.70	4	-0.4479 %	2,628.8
OpRet	4.87 %	2.78 %	63,030	0.25	9	-0.0944 %	2,434.2
SplitShare	5.25 %	1.97 %	58,121	0.66	6	-0.0959 %	2,503.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0944 %	2,225.8
Perpetual-Premium	5.69 %	5.34 %	151,538	1.29	12	0.0397 %	2,077.3
Perpetual-Discount	5.47 %	5.52 %	121,225	14.59	18	-0.1943 %	2,183.0
FixedReset	5.18 %	3.31 %	211,247	2.71	57	0.0093 %	2,305.6
Deemed-Retractible	5.09 %	4.90 %	284,776	8.15	47	-0.0457 %	2,148.3

Performance Highlights
Issue	Index	Change	Notes
ELF.PR.F	Perpetual-Discount	-1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-29 Maturity Price : 22.37 Evaluated at bid price : 22.75 Bid-YTW : 5.93 %
HSB.PR.C	Deemed-Retractible	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.69 Bid-YTW : 5.28 %
GWO.PR.N	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.76 %
HSB.PR.D	Deemed-Retractible	-1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 5.28 %
BAM.PR.O	OpRet	-1.07 %	YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.92 Bid-YTW : 3.11 %
BAM.PR.K	Floater	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-29 Maturity Price : 18.91 Evaluated at bid price : 18.91 Bid-YTW : 2.77 %
ELF.PR.G	Perpetual-Discount	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-29 Maturity Price : 20.93 Evaluated at bid price : 20.93 Bid-YTW : 5.79 %
BMO.PR.H	Deemed-Retractible	1.06 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.77 Bid-YTW : 3.69 %

Volume Highlights
Issue	Index	Shares Traded	Notes
SLF.PR.A	Deemed-Retractible	151,474	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.20 Bid-YTW : 5.70 %
TD.PR.O	Deemed-Retractible	94,848	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 4.90 %
PWF.PR.I	Perpetual-Premium	62,250	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.75 %
BMO.PR.M	FixedReset	57,470	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 3.22 %
BMO.PR.P	FixedReset	46,400	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.87 Bid-YTW : 3.38 %
TD.PR.Y	FixedReset	44,375	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 3.38 %
There were 36 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BMO.PR.K	Deemed-Retractible	Quote: 25.76 – 26.47 Spot Rate : 0.7100 Average : 0.4344 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-11-25 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 4.74 %
BAM.PR.K	Floater	Quote: 18.91 – 19.50 Spot Rate : 0.5900 Average : 0.3746 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-29 Maturity Price : 18.91 Evaluated at bid price : 18.91 Bid-YTW : 2.77 %
GWO.PR.N	FixedReset	Quote: 24.31 – 24.73 Spot Rate : 0.4200 Average : 0.2850 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.76 %
NA.PR.L	Deemed-Retractible	Quote: 25.15 – 25.48 Spot Rate : 0.3300 Average : 0.2264 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 4.88 %
BNS.PR.Q	FixedReset	Quote: 26.20 – 26.49 Spot Rate : 0.2900 Average : 0.1870 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-25 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 3.24 %
MFC.PR.E	FixedReset	Quote: 26.31 – 26.59 Spot Rate : 0.2800 Average : 0.1798 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-19 Maturity Price : 25.00 Evaluated at bid price : 26.31 Bid-YTW : 3.93 %

Singapore is trying to use bank capitalization as a competitive tool:

Singapore said it will set capital levels for local lenders above the global minimum to solidify the city’s reputation as a financial hub after regulators tightened norms for the world’s largest banks.

Lenders incorporated in Singapore will need to meet a minimum common equity Tier 1 capital adequacy ratio of 6.5 percent from Jan. 1, 2015, the Monetary Authority of Singapore said in a statement yesterday. That’s 2 percentage points more than the so-called Basel III rules announced last year.
…
The more stringent standard “underlines Singapore’s status as a very solid and prudently managed financial center,” Gupta said. “Nevertheless, we hope the global regulators will continue to monitor transition arrangements across countries to ensure a level playing field and avoid regulatory arbitrage.”
…
Singapore plans to raise the Tier 1 capital adequacy ratio to 8 percent from 6 percent and introduce a capital conservation buffer of 2.5 percentage points.

“Each of the Singapore-incorporated banks is systemically important in Singapore and has a substantial retail presence,” the city-state’s central bank said in the statement. “The higher capital requirements will further strengthen their ability to operate under stress conditions.”

One wonders whether OSFI will deem the Canadian-incorporated banks to be systemically important in Canada.

Morgan Stanley has, apparently, lost some change on a TIPS / nominals box trade:

The bank’s interest-rates trading group lost at least tens of millions of dollars on the trade, which the firm has been unwinding, two of the people said, declining to be identified because the transaction isn’t public. Mary Claire Delaney, a Morgan Stanley spokeswoman, declined to comment.

Traders at the bank bet that inflation expectations for the next five years would rise in Treasury markets, while forecasts for the next 30 years would fall, according to two of the people. Such wagers on so-called breakeven rates involve paired purchases and short sales of Treasuries and Treasury Inflation Protected Securities, or TIPS, in both maturities.
…
Declining crude oil prices disproportionately hurt the value of TIPS maturing within five years because they have fewer remaining interest payments that can benefit from a rebound in prices. The five-year breakeven rate dropped to 1.88 percent yesterday from 2.04 percent at the end of May, indicating underperformance by five-year TIPS relative to nominals.

The 30-year breakeven rate climbed to 2.57 percent yesterday from 2.42 percent at the end of May, indicating outperformance by the 30-year TIPS relative to nominals.

Another unpleasant day for the Yellow preferreds, with the worst, YLO.PR.D, down 8.56% and the best, YLO.PR.A, down a mere 1.66%.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 23bp, FixedResets down 10bp and DeemedRetractibles losing 13bp. Volatility picked up – but it was all on the downside. 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	-0.4342 %	2,445.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4342 %	3,678.2
Floater	2.48 %	2.23 %	42,181	21.70	4	-0.4342 %	2,640.6
OpRet	4.87 %	2.53 %	62,618	0.25	9	-0.0386 %	2,436.5
SplitShare	5.25 %	1.96 %	56,478	0.66	6	0.1236 %	2,505.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0386 %	2,227.9
Perpetual-Premium	5.69 %	5.21 %	140,346	0.90	12	-0.0037 %	2,076.5
Perpetual-Discount	5.46 %	5.52 %	121,641	14.61	18	0.2328 %	2,187.2
FixedReset	5.18 %	3.33 %	208,451	2.71	57	-0.0993 %	2,305.4
Deemed-Retractible	5.09 %	4.91 %	279,230	8.16	47	-0.1309 %	2,149.3

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.I	Deemed-Retractible	-1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.40 Bid-YTW : 5.86 %
BMO.PR.H	Deemed-Retractible	-1.12 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 4.36 %
TRI.PR.B	Floater	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-28 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 2.22 %
TD.PR.O	Deemed-Retractible	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 4.91 %
CIU.PR.C	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-28 Maturity Price : 23.06 Evaluated at bid price : 24.70 Bid-YTW : 3.34 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.C	FixedReset	51,356	TD.PR.C crossed 40,000 at 26.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.73 Bid-YTW : 3.18 %
TD.PR.I	FixedReset	39,550	TD crossed 35,000 at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.43 Bid-YTW : 3.29 %
HSB.PR.D	Deemed-Retractible	39,279	RBC crossed 24,500 at 24.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.79 Bid-YTW : 5.13 %
SLF.PR.B	Deemed-Retractible	30,964	Desjardins crossed 25,000 at 23.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.45 Bid-YTW : 5.61 %
TD.PR.Q	Deemed-Retractible	28,918	TD crossed 26,500 at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-31 Maturity Price : 25.50 Evaluated at bid price : 26.24 Bid-YTW : 4.90 %
HSE.PR.A	FixedReset	27,019	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-28 Maturity Price : 23.36 Evaluated at bid price : 25.60 Bid-YTW : 3.61 %
There were 30 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNS.PR.Z	FixedReset	Quote: 25.00 – 25.50 Spot Rate : 0.5000 Average : 0.3390 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.56 %
BMO.PR.H	Deemed-Retractible	Quote: 25.50 – 25.86 Spot Rate : 0.3600 Average : 0.2151 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 4.36 %
TD.PR.O	Deemed-Retractible	Quote: 25.13 – 25.44 Spot Rate : 0.3100 Average : 0.1858 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 4.91 %
NA.PR.N	FixedReset	Quote: 26.35 – 26.65 Spot Rate : 0.3000 Average : 0.1964 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-15 Maturity Price : 25.00 Evaluated at bid price : 26.35 Bid-YTW : 3.07 %
GWO.PR.I	Deemed-Retractible	Quote: 22.40 – 22.75 Spot Rate : 0.3500 Average : 0.2479 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.40 Bid-YTW : 5.86 %
POW.PR.B	Perpetual-Discount	Quote: 24.21 – 24.48 Spot Rate : 0.2700 Average : 0.1879 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-28 Maturity Price : 23.96 Evaluated at bid price : 24.21 Bid-YTW : 5.53 %

A deal on Greece may have been reached:

Greek creditors may be headed toward an agreement to roll over 70 percent of their bonds into longer maturity debt to prevent a default and meet politicians’ calls that they contribute to Greece’s second rescue in as many years.
…
Under the French plan, 50 percent of the Greek debt held would be rolled over into 30-year bonds. The remaining 20 percent would go into a special purpose vehicle used to guarantee the 30-year debt, a person familiar with the plan said yesterday.

Thirty years will allow banks to slowly take reserves against their inevitable losses, while the current crop of politicians will have all retired by the time the bill comes due. Win-win!

A bit of good news on the TMX-LSE front:

TMX Group (X-T44.46-0.74-1.64%) and London Stock Exchange Group PLC got a big endorsement for their merger plan as a group of senior Canadian financial executives gave their support, saying the rival Maple Group plan to buy TMX would leave the capital markets too concentrated.

The 11-member group includes representatives of some large TMX shareholders, including Bill Holland, chairman of mutual fund company CI Financial Corp., as well as the heads of independent brokerages including Raymond James’ Canadian operations and Haywood Securities.

How ’bout that Yellow Media, eh?:

Yellow Media Inc. (YLO-T2.30-0.69-23.08%) was again being lambasted in trading, falling nearly 19 per cent in late morning trading on Monday. The stock has been suffering a lot recently, and this recent downturn seems connected to a change of opinion by Credit Suisse. Analysts there cut their recommendation to “underperform” from “neutral”, with a $2 price target, down from $5 previously.

18.2-million shares as of 2pm! Wow! Further details came available later:

“Our analysis suggests that print declines are accelerating while print conversion to digital remains gradual,” [Credit Suisse Canada analyst] Mr. [Colin] Moore wrote in the Monday note, titled “Raising a Yellow Flag”.
…
“We believe investors want to see a ‘de-risking’ of the story with respect to debt repayment and levels of [free cash flow] available after dividends,” analyst Drew McReynolds of RBC Dominion Securities said in a June 26 note to clients.

“We would not disagree, and we believe a more conservative capital structure and payout policy that provides greater financial flexibility and more certainty during the business transformation would go a long way toward achieving this end and ‘reflating’ both equity and debt values.”

The YLO prefs got hammmered again; losing between 8.21% at best (YLO.PR.B) and 14.21% at worst (YLO.PR.C).

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts gaining 14bp, FixedResets down 1bp and DeemedRetractibles up 2bp. Not much volatility (surprisingly, confined to bad days for BAM and related issues) and 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	-0.5602 %	2,456.3
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.5602 %	3,694.2
Floater	2.46 %	2.23 %	42,127	21.70	4	-0.5602 %	2,652.1
OpRet	4.87 %	2.43 %	64,964	0.26	9	-0.0214 %	2,437.4
SplitShare	5.25 %	1.95 %	58,484	0.66	6	-0.1189 %	2,502.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0214 %	2,228.8
Perpetual-Premium	5.67 %	5.18 %	140,340	1.30	12	0.0742 %	2,076.5
Perpetual-Discount	5.47 %	5.53 %	123,263	14.62	18	0.1408 %	2,182.1
FixedReset	5.17 %	3.29 %	208,028	2.71	57	-0.0080 %	2,307.7
Deemed-Retractible	5.08 %	4.93 %	279,818	8.17	47	0.0181 %	2,152.1

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-27 Maturity Price : 19.11 Evaluated at bid price : 19.11 Bid-YTW : 2.74 %
BAM.PR.J	OpRet	-1.18 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.78 Bid-YTW : 4.04 %
BNA.PR.E	SplitShare	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.12 Bid-YTW : 5.59 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.M	FixedReset	107,020	Nesbitt crossed 100,000 at 26.24. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.13 Bid-YTW : 3.06 %
CM.PR.K	FixedReset	59,303	RBC crossed 49,900 at 26.44. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.36 Bid-YTW : 3.33 %
TD.PR.C	FixedReset	41,650	RBC crossed 25,000 at 26.70, then bought 12,200 from National at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.70 Bid-YTW : 3.22 %
RY.PR.Y	FixedReset	41,234	RBC crossed 22,000 at 27.27. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 27.27 Bid-YTW : 3.45 %
TD.PR.M	OpRet	40,600	RBC crossed 39,500 at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-27 Maturity Price : 25.50 Evaluated at bid price : 25.75 Bid-YTW : 1.57 %
RY.PR.T	FixedReset	39,320	RBC crossed 15,000 at 27.30; Desjardins crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 27.30 Bid-YTW : 3.38 %
There were 30 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: 24.12 – 24.58 Spot Rate : 0.4600 Average : 0.3138 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.12 Bid-YTW : 5.59 %
BAM.PR.J	OpRet	Quote: 26.78 – 27.10 Spot Rate : 0.3200 Average : 0.2185 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.78 Bid-YTW : 4.04 %
BAM.PR.R	FixedReset	Quote: 25.30 – 25.55 Spot Rate : 0.2500 Average : 0.1587 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-27 Maturity Price : 23.26 Evaluated at bid price : 25.30 Bid-YTW : 4.36 %
FTS.PR.F	Perpetual-Discount	Quote: 23.89 – 24.20 Spot Rate : 0.3100 Average : 0.2495 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-27 Maturity Price : 23.42 Evaluated at bid price : 23.89 Bid-YTW : 5.16 %
BMO.PR.K	Deemed-Retractible	Quote: 25.79 – 25.97 Spot Rate : 0.1800 Average : 0.1236 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-11-25 Maturity Price : 25.00 Evaluated at bid price : 25.79 Bid-YTW : 4.71 %
BAM.PR.K	Floater	Quote: 19.11 – 19.35 Spot Rate : 0.2400 Average : 0.1915 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-27 Maturity Price : 19.11 Evaluated at bid price : 19.11 Bid-YTW : 2.74 %

The Europeans are tying themselves in knots while hairsplitting over Greece:

European Union leaders pledged to stabilize the euro-area economy, vowing to stave off a Greek default as long as Prime Minister George Papandreou pushes through a package of budget cuts next week.
…
Leaders of Europe’s six AAA rated countries have said the key ingredient of a second package must be a pledge by banks, insurance companies and asset managers to maintain their holdings of Greek bonds.

An EU statement spoke of the need for “informal and voluntary rollovers of existing Greek debt at maturity,” avoiding a coercive exchange that would lead credit-rating companies to declare Greece in default.

To make the rollover voluntary, talks with Greek bondholders must be held on a country-by-country basis, not organized from Brussels, an EU official told reporters yesterday. The EU wants national central banks and finance ministries to speak to financial institutions in their countries, the official said.

“We don’t see any way that investors are going to come out being paid on time and in full,” said Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania.

Voluntarily agree to an exchange or there will be a coercive exchange! It would be laughable if it wasn’t so disgusting. Moral suasion from the central banks and finance ministries, eh? I bet that helps a lot when you call your bond guy looking for a bid; I bet that’s a really thin market.

Surprise! The banks don’t like being the voluntary piggy-banks of the state:

German Finance Ministry officials rebuffed a bid by bondholders for a state guarantee of new Greek securities as Chancellor Angela Merkel’s government jostled with creditors over their share of a second rescue for Greece.

German banks and insurers including Deutsche Bank AG (DBK) and Allianz SE (ALV) signaled a willingness to roll over maturing Greek debt if governments offer incentives such as guarantees, said five people with knowledge of the talks. The Finance Ministry sees guarantees as a non-starter because they would undermine the aim of relieving the burden on taxpayers, a government official said.

There are mutterings about another domino:

Russia may face a debt crisis similar to the one gripping Greece by 2030 unless the government reduces spending, said Sergei Ulatov, the resident World Bank economist in Moscow.

“By 2030 the debt level would be unsustainable like in Greece” if nothing changes, Ulatov said in an interview during the Russia and CIS Capital Markets Forum organized by Euromoney in London today. “Right now, we are mostly helped by oil prices and not by a very prudent macroeconomic policy.”

But the first domino’s quite enough:

With default looking ever more likely, the great fear is that a major Greek credit event could imperil some large European banks, given the substantial cross-border sovereign debt held in the eurozone’s biggest economies.

“If there were a failure to resolve that situation it would pose threats to the European financial system, the global financial system, and to European political unity I would conjecture as well,” Federal Reserve chairman Ben Bernanke said Wednesday, underlining the exposure of European money market funds to Greek debt.

I suspect that the Europeans will treat their zombie banks the same way they treated their zombie countries: not by ignoring the problem, but by changing the rules so that there is no problem.

Speaking of dominos and zombie banks…:

Italian banks slumped in Milan trading amid concern the European debt crisis may spread just as lenders face scrutiny from regulators over capital levels.

UniCredit SpA (UCG), Italy’s biggest bank, and Intesa Sanpaolo SpA (ISP), the second-largest, led lenders lower, tumbling as much as 8.9 percent and 7.2 percent respectively. Both stocks were briefly suspended after breaching limits on intraday swings. Italian 10-year bonds fell, increasing the additional yield investors demand to hold the securities instead of benchmark German bunds to the most since the euro was introduced in 1999.
…
Moody’s Investors Service said yesterday it may downgrade 13 Italian banks because they are vulnerable to a cut in the government’s credit rating. The firm had said last week it may cut the sovereign rating because the turmoil in Europe could drive the country’s borrowing costs higher.

Nobody is yet seriously worried about US Treasuries:

Two-year yields slipped one basis point to 0.33 percent today compared with a low of 0.31 percent in November. Ten-year yields lost 4 basis points to 2.87 percent today, the lowest since November.

Asssiduous Reader GL brought to my attention a speech by Mike Lazaridis titled The Killam Annual Lecture 2010:

I just want to ask people in the audience to answer a question for me. What would you say is your most prized possession? Have you ever thought about this? [someone in the audience yells out Blackberry] Yes, the Blackberry definitely could be up on that list but I would put something even higher . . . your education! How many people in this room could honestly say that if they thought about it their most prized possession would be their education?

On a slightly more paranoid note, I’ve always liked the point that an education is the one thing that “they” can never take away from you.

ISS backed the TMX-LSE deal:

Institutional Shareholder Services (ISS) instead threw its support behind TMX Group Inc. (X-T45.16-0.14-0.31%)’s proposed merger with London Stock Exchange Group Plc. The recommendation is important because ISS recommendations influence the votes of a number of institutional investors – though on it own, it will not likely be enough to tilt to balance in the LSE’s favour.
…
But much of the cash to finance the Maple offer would be borrowed, using TMX’s balance sheet, a fact that both ISS and Glass Lewis, a smaller advisory firm, identified as a drawback. The two also found common ground on the risks that Maple’s proposal would not get past the Competition Bureau. Because ISS believes the barriers to getting this approval are higher than those that TSX-LSE must cross, it suggests shareholders support the LSE deal because it is a “bird in hand.”

In any other country, of course, a proposal to merge the #1 exchange with the #2 wouldn’t even get the time of day at the Competition Bureau – particularly given that places #3 through #37 are not awarded due to the small size of the also-rans. But this is Canada; bureaucrats and politicians have to think about where their next job’s going to come from, so it just means ‘higher barriers’.

However, the ISS endorsement is, I believe, more important that the Globe story makes out: there will be a lot of firms, particularly those with index funds, who will be very heavily influenced by these third party recommendations.

How much did Paulson lose on Sino-Forest? It depends on how you count:

Paulson & Co. held 31 million shares of Sino-Forest in May, or 12.5 percent of outstanding stock, the firm said in a letter to clients. It had sold the entire stake as of June 17. The net realized loss on the investment since Paulson started buying Sino-Forest in 2007 was C$106 million, according to the letter.
…
Sino-Forest’s shares have dropped 82 percent since June 2, when Carson Block’s Muddy Waters LLC said the company overstated its timber holdings. Sino-Forest has denied the allegations. Paulson’s fund had C$562 million in mark-to-market losses since Dec. 31 on the investment, the firm said in the letter.

It must be fun doing business in Illinois:

In Illinois, you’re never too big or too small to get stiffed by the state, which is $4 billion behind in its bills.
…
While states periodically fall behind in paying Medicaid providers or, in the case of California, rely on bank loans and IOUs, the Illinois backlog has been growing for three years. It’s forcing some vendors to fire workers, cut services and, if they can, obtain loans and lines of credit to keep their businesses going while the state takes months to pay.
…
“These are small businesses owed $1,100 to $1,500 and waiting six to nine months to get paid,” said Duane Marsh, executive director of the Illinois Funeral Directors Association. “It isn’t chump change.”

Delayed payments are also affecting hospitals, universities and public-school districts.

S&P has put Gaz Metro on watch-negative:

• •Quebec energy company Gaz Metro Inc. (GMI) has announced an offer to acquire Central Vermont Public Service Corp. (CVPS) for nearly US$500 million.
• •As a result, Standard & Poor’s is placing its ratings on GMI and subsidiary Gaz Metro L.P., including its ‘A-‘ long-term corporate credit and ‘A’ secured debt ratings, on CreditWatch with negative implications.
• •GMI’s offer includes the assumption of US$230 million of CVPS’s debt.•We plan to resolve the CreditWatch in a timely manner after further assessment of this deal and discussions with the company.

What happened to Yellow this week?

It was a relatively quiet day on the Canadian preferred share market, with PerpetualDiscounts up 1bp, FixedResets gaining 2bp and DeemedRetractibles losing 10bp. Volatility was minimal. Volume was anemic.

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	0.2105 %	2,470.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.2105 %	3,715.0
Floater	2.45 %	2.22 %	42,189	21.73	4	0.2105 %	2,667.1
OpRet	4.87 %	3.17 %	62,945	0.91	9	-0.0086 %	2,437.9
SplitShare	5.25 %	-0.28 %	59,446	0.47	6	-0.0003 %	2,505.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0086 %	2,229.3
Perpetual-Premium	5.68 %	5.16 %	143,101	1.38	12	0.0121 %	2,075.0
Perpetual-Discount	5.47 %	5.55 %	123,586	14.60	18	0.0117 %	2,179.1
FixedReset	5.17 %	3.39 %	206,050	2.79	57	0.0151 %	2,307.9
Deemed-Retractible	5.08 %	4.92 %	283,037	8.15	47	-0.0955 %	2,151.8

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.K	Perpetual-Discount	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-24 Maturity Price : 23.12 Evaluated at bid price : 23.36 Bid-YTW : 5.37 %
TRI.PR.B	Floater	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-24 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 2.20 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.H	Deemed-Retractible	319,454	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-24 Maturity Price : 25.75 Evaluated at bid price : 25.71 Bid-YTW : 0.81 %
CM.PR.J	Deemed-Retractible	121,194	RBC crossed 50,100 at 24.50; Nesbitt crossed blocks of 35,000 and 14,400 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 4.71 %
BNS.PR.X	FixedReset	56,364	Nesbitt crossed 50,000 at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.41 Bid-YTW : 3.17 %
BNS.PR.T	FixedReset	53,302	TD crossed 25,000 at 27.40; RBC did the same. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.38 Bid-YTW : 3.18 %
HSE.PR.A	FixedReset	34,419	RBC bought 13,100 from CIBC at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.87 %
BMO.PR.J	Deemed-Retractible	33,502	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.66 Bid-YTW : 4.73 %
There were 17 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IAG.PR.F	Deemed-Retractible	Quote: 25.50 – 25.98 Spot Rate : 0.4800 Average : 0.3325 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 5.61 %
CM.PR.L	FixedReset	Quote: 27.09 – 27.49 Spot Rate : 0.4000 Average : 0.2789 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.09 Bid-YTW : 3.28 %
CM.PR.P	Deemed-Retractible	Quote: 24.97 – 25.30 Spot Rate : 0.3300 Average : 0.2116 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-28 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 5.19 %
TCA.PR.Y	Perpetual-Premium	Quote: 50.52 – 50.90 Spot Rate : 0.3800 Average : 0.2719 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-04 Maturity Price : 50.00 Evaluated at bid price : 50.52 Bid-YTW : 5.54 %
FTS.PR.E	OpRet	Quote: 26.63 – 26.99 Spot Rate : 0.3600 Average : 0.2681 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-07-01 Maturity Price : 25.75 Evaluated at bid price : 26.63 Bid-YTW : 3.17 %
PWF.PR.K	Perpetual-Discount	Quote: 23.36 – 23.65 Spot Rate : 0.2900 Average : 0.2085 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-24 Maturity Price : 23.12 Evaluated at bid price : 23.36 Bid-YTW : 5.37 %

Moody’s will be making adjustments to some debt ratings:

A landmark Ontario court ruling bolstering the rights of pension plan members in bankruptcy cases could have an impact on credit ratings for companies with underfunded pension plans, according to a new report by debt rating agency Moody’s Investors Services Inc.

Moody’s said a review of 84 Canadian industrial companies it rates found two companies — Air Canada (AC.B-T2.250.073.21%) and Essar Steel Algoma Inc. — whose debt might be vulnerable to downgrade if the Ontario court decision is upheld by the Supreme Court of Canada. The report said the impact would likely be limited and would affect ratings of specific debt instruments rather than a company’s overall credit rating.
…
“The ruling does not change how we measure debt and other liabilities, but it does change the priority of claim and the relative ranking of liabilities, which is relevant when assessing individual debt-instrument ratings,” said Bill Wolfe, Moody’s vice-president and senior credit officer.

“On this basis, we expect that only instrument-level ratings will be affected by the ruling.”
…
Moody’s said it will not change any ratings until there is a decision from the Supreme Court and it is clear there is a final ruling in the case.

Presumably it is Loss Given Default that will be affected more than Probability of Default. The effect of the ruling appears to be similar to the intent of Bill C-501.

Allied Irish has defaulted in the view of DBRS:

DBRS Inc. (DBRS) today has downgraded the ratings of certain subordinated debt issued by Allied Irish Banks p.l.c. (AIB or the Group) to “D” from “C”. Today’s downgrade follows the execution of the Group’s note purchase offer.

Almost all of these instruments have been extinguished. The default status for the purchased and now-extinguished notes reflect DBRS’s view that bondholders were offered limited options, which is considered a default under DBRS policy, as discussed in DBRS’s press release dated 19 May 2011.

For AIB’s GBP 500 million Dated Subordinated Debt due 2025 and its EUR 500 million Dated Subordinated Debt due 2017, which are still outstanding due to the lack of consent for a clean up call, DBRS has downgraded their ratings to ‘D’. The downgrade reflects DBRS’s expectations that the interest payments of these outstanding subordinated instruments will be halted on the next payment date, as allowed by the Irish High Court. Further, the downgrade considers the extension of the final maturity dates, which are now extended to 2035. Given that bondholders are unlikely to receive interest as agreed upon and that the expected maturity has been extended, DBRS views these actions as disadvantageous to bondholders, which is considered a default under DBRS policy.

However, the rating of AIB’s GBP 368.253 million Dated Subordinated Debt due 2019, which is still outstanding, is unchanged at ‘C’, Under Review with Negative Implications. This rating considers that these notes have not yet been amended by AIB pursuant to the Subordinated Liabilities Order from the Irish High Court as a challenge in respect to these notes is ongoing before this Court.

S&P put Encana on Outlook-Negative:

• •On June 21, 2011, Encana Corp. announced that it had ended its C$5.4 billion Cutbank Ridge joint venture negotiations with PetroChina International Investment Co.
• •As a result, Standard & Poor’s is revising its outlook on Encana to negative from stable, and affirming its ‘BBB+’ long-term corporate credit and senior unsecured debt ratings on the company.
• •We are also lowering our Canada scale commercial paper rating on Encana to ‘A-2’ from ‘A-1(Low)’.
• •The negative outlook reflects our view that Encana’s adjusted debt to EBITDAX will remain above 2x through 2012, given weak natural gas prices and the company’s high capital expenditure plans, which we expect to outspend operating cash flow generated.

It was a mixed down day for the Canadian preferred share market, with PerpetualDiscounts losing 15bp, FixedResets of 11bp and DeemedRetractibles up 1bp. Volatility was muted; volume was quite good. Scotia had a good day..

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	-0.0234 %	2,464.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.0234 %	3,707.2
Floater	2.46 %	2.22 %	39,133	21.73	4	-0.0234 %	2,661.5
OpRet	4.87 %	3.02 %	65,082	0.91	9	0.1933 %	2,438.1
SplitShare	5.25 %	-0.28 %	61,806	0.47	6	0.0190 %	2,505.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1933 %	2,229.5
Perpetual-Premium	5.66 %	5.24 %	145,064	1.36	12	-0.0674 %	2,074.8
Perpetual-Discount	5.48 %	5.54 %	121,904	14.55	18	-0.1499 %	2,178.8
FixedReset	5.17 %	3.37 %	209,058	2.79	57	-0.1067 %	2,307.5
Deemed-Retractible	5.07 %	4.90 %	286,044	8.16	47	0.0095 %	2,153.8

Performance Highlights
Issue	Index	Change	Notes
BMO.PR.Q	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.06 Bid-YTW : 3.70 %
BAM.PR.O	OpRet	1.31 %	YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 2.42 %

Volume Highlights
Issue	Index	Shares Traded	Notes
SLF.PR.C	Deemed-Retractible	189,106	Scotia crossed blocks of 102,400 and 55,200 at 22.35; then another 20,000 at 22.37. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.32 Bid-YTW : 5.84 %
SLF.PR.A	Deemed-Retractible	83,247	Scotia crossed blocks of 33,000 and 42,000, both at 23.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 5.63 %
MFC.PR.D	FixedReset	78,213	Nesbitt crossed 50,000 at 27.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.11 Bid-YTW : 3.72 %
TD.PR.Q	Deemed-Retractible	49,779	RBC crossed blocks of 19,500 and 11,000, both at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.27 Bid-YTW : 4.77 %
CU.PR.A	Perpetual-Premium	47,225	TD crossed 26,100 at 25.24. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.22 Bid-YTW : 5.13 %
TD.PR.K	FixedReset	43,568	TD crossed 22,900 at 27.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.55 Bid-YTW : 3.19 %
There were 46 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.N	Perpetual-Discount	Quote: 21.28 – 21.85 Spot Rate : 0.5700 Average : 0.3178 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-23 Maturity Price : 21.28 Evaluated at bid price : 21.28 Bid-YTW : 5.61 %
IGM.PR.B	Perpetual-Premium	Quote: 25.57 – 25.94 Spot Rate : 0.3700 Average : 0.2234 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 5.71 %
ELF.PR.G	Perpetual-Discount	Quote: 21.12 – 21.46 Spot Rate : 0.3400 Average : 0.2209 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-23 Maturity Price : 21.12 Evaluated at bid price : 21.12 Bid-YTW : 5.74 %
NA.PR.N	FixedReset	Quote: 26.40 – 26.75 Spot Rate : 0.3500 Average : 0.2389 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-14 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 2.91 %
FTS.PR.F	Perpetual-Discount	Quote: 23.83 – 24.17 Spot Rate : 0.3400 Average : 0.2416 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-23 Maturity Price : 23.59 Evaluated at bid price : 23.83 Bid-YTW : 5.18 %
FTS.PR.G	FixedReset	Quote: 26.04 – 26.35 Spot Rate : 0.3100 Average : 0.2177 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-01 Maturity Price : 25.00 Evaluated at bid price : 26.04 Bid-YTW : 3.38 %