Category: Market Action

Jim Kelsoe, proud portfolio manager of the worst bond fund in the history of the universe (so far), was last mentioned on PrefBlog on April 7, 2010. Now he’s been barred from the industry:

According to the SEC’s order, through his actions Kelsoe fraudulently prevented a reduction in the NAVs of the funds that should otherwise have occurred as a result of the deterioration in the subprime securities market in 2007. His misconduct occurred in the context of a nearly complete failure by Morgan Keegan to employ the fair valuation policies and procedures adopted by the funds’ boards of directors to fair value the funds’ portfolio securities.

Under the settlement, Morgan Keegan is required to pay $25 million in disgorgement and interest and a $75 million penalty to the SEC to be placed into a Fair Fund for the benefit of investors harmed by the violations. Morgan Keegan will pay $100 million into a state fund that also will be distributed to investors. The firms are additionally required to abstain from involvement in valuing fair valued securities on behalf of investment companies for three years. Kelsoe agreed to pay $500,000 in penalties and be barred from the securities industry by the SEC, and Weller agreed to pay a penalty of $50,000.

The Fed is going to maintain an easy monetary policy:

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipate that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The TMX-LSE deal has been sweetened:

A week before the London Stock Exchange and TMX Group Inc. ask shareholders to bless their planned marriage, the pair sweetened the pot Wednesday with a $4 per share special dividend for TMX shareholders.

London exchange shareholders will also receive a special dividend of 84.1 pence per ordinary share, payable on closing.

In the face of a rival hostile bid from Maple Group, a consortium of Canadian financial firms, the exchange partners said they also intend to increase the regular post-merger dividend “to be consistent with the [higher] current regular dividend of TMX Group.”

Here’s an interesting legal point – I know that some will misconstrue my interest and I’ll get into all kinds of trouble about this, but what the hell – regarding Galliano’s anti-semitic rant:

Under sentencing rules for hate speech, Galliano faces a maximum 22,500-euro ($32,500) fine and six months in prison if found guilty. His lawyer, Aurelien Hamelle, has said similar cases “most often” result in fines rather than jail time.

Geraldine Bloch, who filed a complaint over the February incident, testified that Jewish “was one of the terms said the most” in Galliano’s slurs against her. “I don’t know if he was drunk. He was a bit bizarre. He sweated a lot.”

Galliano’s addictions can’t excuse his statements, Eric Zerbib, a lawyer for LICRA, an international organization opposed to racism and anti-Semitism, said before today’s testimony.

It doesn’t explain and it doesn’t excuse anything,” said Zerbib. “In vino, veritas. In wine, the truth. Wine has a liberating effect which allows one to know an individual’s real personality, and given that the deeds were repeated several times, thus we know John Galliano’s personality.”

OK, so I don’t know the law here, but it’s rather an interesting point: Will Galliano be in trouble for having a shitty personality (which is exposed by drunkenness, yay! Or he may simply have reached in to the bag of tricks for the most offensive things he could think of.) or for expressing his personality (in which case drunkenness may be considered a mitigating factor)?

It was a good day on the Canadian preferred share market with PerpetualDiscounts up 15bp, FixedResets winning 11bp and DeemedRetractibles gaining 13bp. Volatility was up a bit. Volume was very good.

PerpetualDiscounts now yield 5.53%, equivalent to 7.19% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 5.25% (!) so the pre-tax interest equivalent spread is now about 195bp, a significant widening from the 185bp reported on June 15 as yields have gone in opposite directions.

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	-0.1634 %	2,465.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.1634 %	3,708.1
Floater	2.46 %	2.22 %	38,190	21.74	4	-0.1634 %	2,662.1
OpRet	4.88 %	3.22 %	65,062	0.91	9	-0.2057 %	2,433.4
SplitShare	5.25 %	-0.48 %	62,674	0.48	6	0.0833 %	2,505.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.2057 %	2,225.2
Perpetual-Premium	5.66 %	5.20 %	143,364	1.37	12	0.0016 %	2,076.2
Perpetual-Discount	5.47 %	5.53 %	121,211	14.58	18	0.1455 %	2,182.1
FixedReset	5.16 %	3.34 %	209,697	2.79	57	0.1148 %	2,310.0
Deemed-Retractible	5.08 %	4.89 %	287,247	8.18	47	0.1299 %	2,153.6

Performance Highlights
Issue	Index	Change	Notes
IAG.PR.E	Deemed-Retractible	-1.01 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 5.66 %
BMO.PR.H	Deemed-Retractible	1.10 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-03-27 Maturity Price : 25.00 Evaluated at bid price : 25.81 Bid-YTW : 3.63 %
GWO.PR.G	Deemed-Retractible	1.32 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.57 Bid-YTW : 5.44 %
ELF.PR.F	Perpetual-Discount	2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-22 Maturity Price : 22.76 Evaluated at bid price : 23.01 Bid-YTW : 5.86 %
GWO.PR.J	FixedReset	2.59 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.52 Bid-YTW : 3.51 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.E	Perpetual-Premium	134,455	Nesbitt crossed 100,000 at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.34 Bid-YTW : 5.20 %
NEW.PR.C	SplitShare	106,500	Nesbitt sold two blocks of 10,000 each to TD at 14.20, and six blocks of 10,000 each to anonymous, all at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-26 Maturity Price : 13.70 Evaluated at bid price : 14.14 Bid-YTW : -26.56 %
RY.PR.B	Deemed-Retractible	68,825	Desjardins bought two blocks of 10,000 each from anonymous, both at 24.77. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 4.89 %
BNS.PR.L	Deemed-Retractible	60,305	TD crossed 25,000 at 24.54. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.60 Bid-YTW : 4.80 %
GWO.PR.N	FixedReset	52,534	Desjardins crossed 41,200 at 24.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 3.78 %
BNS.PR.P	FixedReset	50,892	RBC crossed blocks of 25,000 and 20,000, both at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.10 Bid-YTW : 2.94 %
There were 48 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PR.P	Deemed-Retractible	Quote: 25.91 – 26.33 Spot Rate : 0.4200 Average : 0.2624 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.91 Bid-YTW : 4.67 %
GWO.PR.M	Deemed-Retractible	Quote: 25.30 – 25.75 Spot Rate : 0.4500 Average : 0.3058 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.63 %
PWF.PR.A	Floater	Quote: 23.51 – 23.99 Spot Rate : 0.4800 Average : 0.3592 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-22 Maturity Price : 23.21 Evaluated at bid price : 23.51 Bid-YTW : 2.21 %
TD.PR.R	Deemed-Retractible	Quote: 26.33 – 26.68 Spot Rate : 0.3500 Average : 0.2307 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-05-30 Maturity Price : 25.00 Evaluated at bid price : 26.33 Bid-YTW : 4.75 %
PWF.PR.O	Perpetual-Premium	Quote: 25.35 – 25.66 Spot Rate : 0.3100 Average : 0.2277 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 5.75 %
SLF.PR.G	FixedReset	Quote: 25.33 – 25.60 Spot Rate : 0.2700 Average : 0.1882 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.33 Bid-YTW : 3.70 %

More Sino-Forest news:

Mr. Paulson and his firm, Paulson & Co., best known for prescient calls on the global financial crisis and the price of gold, controlled 14 per cent of Sino-Forest’s stock or about 34.7 million shares until recently. Paulson & Co. sold all of those shares by last Friday, according to a filing late yesterday with Canadian securities regulators.

“Due to the uncertainty over Sino-Forest’s public disclosures and financial statements, we have sold our stock and await the results of the independent committee’s investigation,” the firm said in a statement released through a public relations agency.

Fitch downgraded Sino-Forest:

The “complexities” of Sino-Forest’s corporate structure prompted Fitch Ratings to downgrade its long-term foreign- currency issuer default rating and senior unsecured debt rating to BB- from BB+, Fitch said yesterday in a statement. Ratings may be cut further if the “issues” aren’t resolved, it said.

Sino-Forest shares fell C$1.19, or 44 percent, to C$1.54 at 11:08 a.m. in Toronto trading.

Paulson, the biggest shareholder in Hong Kong-based Sino- Forest until the selloff, probably reduced losses by paring the stake before the Muddy Waters report. The hedge fund told clients in a June 3 letter that its total investment in Sino- Forest represented about 2 percent of the Advantage and Advantage Plus funds as of June 2. The funds have $18 billion in assets, a person with knowledge of the firm said at the time. The letter suggests the firm had cut its stake by about 30 percent by June 2, when Sino-Forest shares lost 64 percent.

The intellectual bankruptcy of the market was illustrated in the fact that a transparent hoax affected the market:

Shares of forestry company Sino-Forest Corp. tumbled another 17 per cent in early trading Tuesday as one of its largest stakeholders reportedly sold its holdings in the company and social media sites were aflutter with an apparent SEC news release hoax.

The company’s stock was down 48 cents to $2.25 in morning trading on the Toronto Stock Exchange.

The shift came as a representative for the U.S. Securities and Exchange Commission denied issuing a news release accusing research and investment firm Muddy Waters of being involved in a “stock manipulation ring.”

“We have issued no such litigation release,” said SEC spokeswoman Judith Burns in a phone interview with The Canadian Press.

Whenever I read anything of interest published by anybody regarding a SEC release, I check it. Not usually so much to check its existence, but to check the actual words used and their context. http://www.sec.gov. What’s hard about that? Anybody who took market action influenced by this rumour deserves to go bankrupt immediately – monetarily, that is, in addition to their pre-existing intellectual bankruptcy. (More here. Say what you like about the SEC, I can’t remember ever faulting them on grammar. Carson Block and his associates approaches several large hedge funds, indeed!)

The SEC has achieved another milestone in its programme of regulatory extortion, nailing JPMorgan for acting as a broker. However, they did helpfully publish a list of buy-side firms that may now be suspected of incompetence:

• Thrivent Financial for Lutherans, a faith-based non-profit membership organization in Minneapolis.
• Security Benefit Corporation, a Topeka, Kan.-based company that provides insurance and retirement products.
• General Motors Asset Management, a New York-based asset manager for General Motors pension plans.
• Financial institutions in East Asia including Tokyo Star Bank, Far Glory Life Insurance Company Ltd., Taiwan Life Insurance Company Ltd., and East Asia Asset Management Ltd

Investors considering placing funds with these firms are urged to exercise caution, gain a complete view of historical performance and demand to learn the rationale for the investment.

On a more uplifting note, Fabulous Fab is gaining some popular support:

Those hoping for a measure of justice for the Wall Street executives who brought us the financial crisis won’t be finding it anytime soon in the downtown Manhattan federal courtroom of Judge Barbara S. Jones.

What you’ll find there instead is the continuation of the Securities and Exchange Commission’s ridiculous civil lawsuit against Fabrice Tourre, the Goldman Sachs Group Inc. (GS) executive director who, at 28, shepherded to market in April 2007 Goldman’s infamous Abacus 2007-AC1 synthetic collateralized debt obligation. The deal was done at the behest of hedge fund manager John Paulson (who made a bundle) and a pair of foolish European banks (who lost one).

Jones should have thrown out the case against “Fabulous Fab” when she had the chance last week, because it is beyond absurd to single out for punishment one member of the Goldman team for putting together a deal for several highly sophisticated investors on the grounds that they weren’t sufficiently informed that some of them would make money while others would lose money. In every trade, there is a winner and a loser. That is the very nature of a market.

Is real-estate becoming a portable asset?

In the Miami area, Brazilians bought 9 percent of homes and apartments sold to international buyers in the 12 months through March 2010, behind only Canadians and Venezuelans, according to the Miami Association of Realtors. Since then, “anecdotal evidence certainly points to a significant increase,” said Lynda Fernandez, a spokeswoman for the group. In May, international clients bought about 60 percent of existing houses and condos and 90 percent of newly built homes, the association reported today.

The Bank of Canada has released a supplement to its latest Review, titled Paying with Polymer, about the new plastic bills.

PrefBlog has strenuously opposed the Maple bid for the TMX on general grounds. Rowland Fleming has specifics:

As the TSE CEO during the Bre-X crisis, I look with horror at the prospect that less than two decades later, successors at some of the same firms whose own conflicts helped to push the old Toronto Stock Exchange so close to the edge are proposing a return to those same bad old days. During my time, approximately 16 member-firm committees dictated on most operating and policy decisions. To be fair, most committee activities and decisions were quite appropriate, but the processes to placate and find consensus-driven decisions on the matters at hand were cumbersome, time consuming and certainly not sensitive to domestic or global competition from other exchanges and alternative trading systems.

I see The Maple Group, the elite consortium that includes TD Bank, CIBC, Scotiabank, National Bank, CPPIB and the Caisse de Dépôt, among others, as little more than a modern version of the old boys’ club that controlled the TSE before demutualization.

Julie Dickson of OSFI gave a speech titled A Canadian Perspective on the Global Insurance Industry. Nothing of import was said, but she did mention longevity insurance, a topic I find fascinating.

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts winning 18bp, FixedResets down 8bp and DeemedRetractibles gaining 7bp. Volatility was muted. Volume was good.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.0350 %	2,469.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.0350 %	3,714.1
Floater	2.45 %	2.22 %	39,756	21.74	4	-0.0350 %	2,666.4
OpRet	4.86 %	2.72 %	65,702	0.35	9	0.3139 %	2,438.5
SplitShare	5.25 %	-0.47 %	61,981	0.48	6	0.0465 %	2,502.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.3139 %	2,229.7
Perpetual-Premium	5.66 %	5.25 %	141,960	1.37	12	-0.0558 %	2,076.1
Perpetual-Discount	5.48 %	5.53 %	122,362	14.56	18	0.1849 %	2,178.9
FixedReset	5.17 %	3.35 %	197,726	2.80	57	-0.0776 %	2,307.4
Deemed-Retractible	5.08 %	4.89 %	288,974	8.18	47	0.0698 %	2,150.8

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.J	FixedReset	-3.54 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 4.57 %
GWO.PR.G	Deemed-Retractible	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 5.60 %
FTS.PR.E	OpRet	1.21 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-07-01 Maturity Price : 25.75 Evaluated at bid price : 26.85 Bid-YTW : 2.72 %
NEW.PR.C	SplitShare	1.67 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-26 Maturity Price : 13.70 Evaluated at bid price : 14.11 Bid-YTW : -23.92 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CIU.PR.B	FixedReset	144,700	Nesbitt crossed blocks of 48,700 and 59,100, both at 27.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-01 Maturity Price : 25.00 Evaluated at bid price : 27.70 Bid-YTW : 3.10 %
BNS.PR.P	FixedReset	97,548	Nesbitt crossed 59,600 at 26.14. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.04 Bid-YTW : 3.06 %
BMO.PR.M	FixedReset	88,956	RBC crossed 19,700 at 26.24; Nesbitt crossed 50,000 at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-24 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 2.87 %
HSB.PR.E	FixedReset	86,290	RBC crossed 79,100 at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 27.45 Bid-YTW : 3.26 %
TD.PR.Q	Deemed-Retractible	56,101	RBC crossed 28,000 at 26.08. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.19 Bid-YTW : 4.83 %
BMO.PR.O	FixedReset	51,094	Nesbitt crossed 24,000 at 27.74; RBC crossed two blocks of 10,000 each at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-24 Maturity Price : 25.00 Evaluated at bid price : 27.66 Bid-YTW : 2.98 %
There were 42 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.J	FixedReset	Quote: 25.85 – 26.95 Spot Rate : 1.1000 Average : 0.8735 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 4.57 %
PWF.PR.M	FixedReset	Quote: 26.70 – 27.25 Spot Rate : 0.5500 Average : 0.3519 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.70 Bid-YTW : 3.68 %
PWF.PR.A	Floater	Quote: 23.55 – 23.93 Spot Rate : 0.3800 Average : 0.2267 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-21 Maturity Price : 23.25 Evaluated at bid price : 23.55 Bid-YTW : 2.21 %
ELF.PR.F	Perpetual-Discount	Quote: 22.46 – 23.09 Spot Rate : 0.6300 Average : 0.4911 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-21 Maturity Price : 22.15 Evaluated at bid price : 22.46 Bid-YTW : 6.00 %
POW.PR.D	Perpetual-Discount	Quote: 23.45 – 23.78 Spot Rate : 0.3300 Average : 0.2326 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-21 Maturity Price : 23.20 Evaluated at bid price : 23.45 Bid-YTW : 5.33 %
BAM.PR.J	OpRet	Quote: 27.06 – 27.49 Spot Rate : 0.4300 Average : 0.3364 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 26.00 Evaluated at bid price : 27.06 Bid-YTW : 3.66 %

In the best news I’ve heard all month UBS is mandating civilized values:

The Swiss bank now has a dress code.

Apparently a memo went out this morning to equity sales at UBS informing the team that “suits are now mandatory” at the office (“swaps and the quant desk already went to suits and equity trading is switching over in two weeks”). The reason for the rule (which “is coming from Switzerland”)? To “re-establish credibility and a sense of professionalism.”

Pressure on Greece is ramping up:

European governments failed to agree on releasing a loan payment to spare Greece from default, ramping up pressure on Prime Minister George Papandreou to first deliver budget cuts in the face of domestic opposition.

On the eve of a confidence vote that may bring down Papandreou’s government, euro-area finance ministers pushed Greece to pass laws to cut the deficit and sell state assets. They left open whether the country will get the full 12 billion euros ($17.1 billion) promised for July as part of last year’s 110 billion-euro lifeline.

“We forcefully reminded the Greek government that by the end of this month they have to see to it that we are all convinced that all the commitments they made are fulfilled,” Luxembourg Prime Minister Jean-Claude Juncker told reporters early today after chairing a euro-crisis meeting in Luxembourg.

Of course, Juncker’s a liar anyway, so this could all simply be choreographed theatre.

Remember Richard Kelertas? Analyst at Dundee Securities? On June 7 I reported:

Kelertas said that the Muddy Waters report was inaccurate and there’s nothing fraudulent about Sino-Forest “to the best of our knowledge.” He recommended buying Sino-Forest shares from September 2007 until June 3, when he put his rating on the company under review.

Dundee was among institutions that helped Sino-Forest sell shares in December 2009 and also in May 2009.
…

I haven’t heard such an impassioned defense of company from a dealer since Bre-X!

He went further:

A couple of analysts did come to Sino’s defence, most notably Dundee’s Richard Kelertas. In a remarkable conference call on Tuesday, he jumped way outside his mandate and accused Mr. Block of committing his own fraud, calling his research “a pile of crap.”

But now he’s singing from a different hymnbook:

Richard Kelertas, an analyst at Dundee Securities, has had enough of Sino-Forest Corp. (TRE-T2.75-0.44-13.79%): He suspended coverage of the Chinese forestry company on Monday morning, after putting the stock “under review” on June 3
…
“Until such time as the company has made public the findings of the board-appointed independent committee together with the assistance of its external advisors, including legal council Osler Hoskin & Harcourt LLP and the accounting firm PricewaterhouseCoopers, and we have had time to review and analyze these findings, we are not in a position to comment on or otherwise speculate on matters as they relate to the business practice or valuation of Sino-Forest,” Mr. Kelertas said in a note.

Gee … I wonder what changed?

I continue to hold my view – held since I became sophisticated enough to read analyst reports closely – that sell side analysis should be viewed as being for entertainment purposes only. And I have to admit, Kelertas’ tergiversations are highly entertaining.

Today’s factoid:

On Monday, Canadian 30-year yields started the day below 3.4 per cent. Other than a few weeks last fall, these rates are the lowest Ottawa has seen since the mid-1950s, noted Bank of Montreal deputy chief economist Doug Porter.

Richard Fisher of the Dallas Fed reprised a funny line in his speech titled Containing (or restraining) systemic risk – the need to
not fail on “too big to fail”:

For example, some of you may recall the public letter written by 364 eminent economists predicting disastrous consequences that would result from Thatcher’s policy initiatives. That letter was published in the Times of London on March 30, 1981.[Footnote] The British economy began a recovery almost immediately afterward, in 1982; by 1983, inflation and mortgage rates were at their lowest levels in over a decade, while economic growth accelerated. The failure of the consensus view led Chancellor of the Exchequer Geoffrey Howe to define an economist as “a man who knows 364 ways of making love, but doesn’t know any women.”[Footnote]

YLO issues weren’t all that interesting today.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 3bp, FixedResets gaining 4bp and DeemedRetractibles down 10bp. Volatility picked up. Volume was a bit above average, with all highlighted issues being FixedResets. Nesbitt owned the board today.

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	0.0934 %	2,470.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0934 %	3,715.4
Floater	2.45 %	2.22 %	39,290	21.74	4	0.0934 %	2,667.4
OpRet	4.88 %	3.35 %	66,336	0.92	9	-0.0430 %	2,430.8
SplitShare	5.24 %	-2.46 %	62,172	0.49	6	0.1760 %	2,501.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0430 %	2,222.8
Perpetual-Premium	5.65 %	5.24 %	142,345	0.91	12	0.1052 %	2,077.3
Perpetual-Discount	5.47 %	5.57 %	117,741	14.45	18	0.0281 %	2,174.9
FixedReset	5.16 %	3.33 %	198,528	2.80	57	0.0391 %	2,309.2
Deemed-Retractible	5.09 %	4.91 %	293,183	8.18	47	-0.1041 %	2,149.3

Performance Highlights
Issue	Index	Change	Notes
ELF.PR.F	Perpetual-Discount	-1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-20 Maturity Price : 22.23 Evaluated at bid price : 22.58 Bid-YTW : 5.97 %
GWO.PR.N	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.75 %
BNS.PR.Y	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.39 %
FTS.PR.F	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-20 Maturity Price : 23.37 Evaluated at bid price : 23.60 Bid-YTW : 5.23 %
TDS.PR.C	SplitShare	1.17 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-15 Maturity Price : 10.00 Evaluated at bid price : 10.40 Bid-YTW : -2.46 %
GWO.PR.J	FixedReset	6.69 %	Meaningless bounce-back from June 17. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.80 Bid-YTW : 3.07 %

Volume Highlights
Issue	Index	Shares Traded	Notes
FTS.PR.H	FixedReset	127,043	Nesbitt crossed two blocks of 60,000 each at 25.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-20 Maturity Price : 25.30 Evaluated at bid price : 25.35 Bid-YTW : 3.65 %
BMO.PR.M	FixedReset	112,563	Nesbitt crossed 100,000 at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-24 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 2.87 %
BMO.PR.O	FixedReset	105,652	Nesbitt crossed 100,000 at 27.74. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-24 Maturity Price : 25.00 Evaluated at bid price : 27.74 Bid-YTW : 2.87 %
SLF.PR.G	FixedReset	63,738	Nesbitt crossed 47,500 at 25.15. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.81 %
BNS.PR.P	FixedReset	57,523	Nesbitt crossed 50,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.08 Bid-YTW : 2.98 %
TD.PR.Y	FixedReset	52,298	Nesbitt crossed 50,000 at 26.26. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-30 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 3.36 %
There were 34 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ELF.PR.F	Perpetual-Discount	Quote: 22.58 – 23.05 Spot Rate : 0.4700 Average : 0.3388 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-20 Maturity Price : 22.23 Evaluated at bid price : 22.58 Bid-YTW : 5.97 %
TD.PR.O	Deemed-Retractible	Quote: 25.11 – 25.45 Spot Rate : 0.3400 Average : 0.2230 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.11 Bid-YTW : 4.91 %
SLF.PR.F	FixedReset	Quote: 27.05 – 27.35 Spot Rate : 0.3000 Average : 0.2067 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 27.05 Bid-YTW : 3.17 %
TD.PR.Q	Deemed-Retractible	Quote: 26.09 – 26.39 Spot Rate : 0.3000 Average : 0.2267 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.09 Bid-YTW : 4.90 %
BMO.PR.L	Deemed-Retractible	Quote: 26.59 – 26.86 Spot Rate : 0.2700 Average : 0.1973 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-24 Maturity Price : 25.75 Evaluated at bid price : 26.59 Bid-YTW : 4.63 %
TCA.PR.X	Perpetual-Premium	Quote: 50.49 – 50.72 Spot Rate : 0.2300 Average : 0.1607 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-14 Maturity Price : 50.00 Evaluated at bid price : 50.49 Bid-YTW : 5.54 %

The IMF has released the Global Financial Stability Report for June 2011. To the disappointment of many, it did not include a centrefold, but I found one chart particularly interesting:

Ireland is going to allow some banks’ senior debt to default:

Irish Finance Minister Michael Noonan said Wednesday he has sought the support of the International Monetary Fund in Washington to bring a radical new plan to the European Union to impose significant losses on senior bond holders in Anglo Irish Bank Corp. and Irish Nationwide Building Society–the country’s two most troubled lenders.
…
Noonan told the IMF that Anglo Irish and Irish Nationwide are not “real” banks because the lenders are in the process of being wound down, and that senior bondholders should have to share in the losses of “speculative” investments with Irish taxpayers.
…
According to Irish central bank figures, at the end of March there were EUR3.15 billion unguaranteed senior bonds outstanding in Anglo Irish and only EUR601 million left in Irish Nationwide.

Analysts say savings from the proposed burden-sharing will therefore go nowhere near offsetting the EUR34.5 billion the Irish authorities have injected into Anglo Irish and Irish Nationwide, the two lenders at the heart of Ireland’s inter-linked banking and sovereign-debt crises. The cost of rescuing all six broken Irish lenders will likely top EUR70 billion when capitalizations are completed this year.

Noonan, appointed finance minister to the new coalition government in March, has in the past said he was prevented by the ECB from pushing burden sharing on senior bond holders in any of the broken Irish banks.

This puts Ireland on a collision course with the ECB:

For Mr. Noonan to get his way, he needs to persuade European Union leaders and the European Central Bank to break the great commandant since the onset of Europe’s debt crisis in 2008: thou shalt not burn senior bond holders in European banks.

The ECB has been particularly trenchant on the point. It told the new Irish government soon after it swept to power in mid-March (Thursday marked the administration’s first one hundred days) not to ever consider under any circumstance forcing losses on senior bond holders for fear of worsening Europe’s debt crisis.

This politicization of the bankruptcy process is going to be very harmful in the end. How? I don’t know how. It might be something subtle, like increasing European bank funding costs by X bp for the next thirty years. Or it could be more exciting. I don’t know. But I do know that 300 years of bankruptcy law exists for a reason and when you throw it out for reasons of temporary expediency, you’re almost certainly going to make matters worse.

Meanwhile:

Moody’s Investors Service Friday said it may cut Italy’s sovereign credit rating from Aa2, citing such challenges as reforming a rigid labour market while also facing the likelihood of rising interest rates.

It looks like the Canadian financial oligopoly may be losing influence! Glass-Lewis prefers the LSE-TMX deal over the boys’ club bid:

Influential shareholder-advisory firm Glass Lewis is advising TMX Group Inc.(X-T43.300.310.72%) shareholders to vote in favour of a plan to combine with London Stock Exchange Group Inc., saying it’s less risky than a competing takeover for TMX put forward by a consortium of Canadian financial institutions calling themselves Maple Group.
…
Glass Lewis’s opinion matters in takeovers because many investment firms rely on the firm’s research to aid in making decisions on shareholder votes. For that reason, the recommendation may sway some votes in LSE’s favour.

It’s a little odd – Glass Lewis is an international firm, lowering the chance that their recommendation is influenced by the Canadian requirement to cooperate with the bank/regulatory complex. On the other hand, they’re owned by Ontario Teachers, which is a member of the club in good standing.

More angst over capital rules:

Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan said excessive capital surcharges on the largest banks could limit lending and discourage investors from funding the industry.
…
The Basel Committee on Banking Supervision is considering a capital surcharge of as much as 3.5 percentage points on the largest banks if they get bigger, according to two people familiar with the talks.

Draft plans circulated before a meeting next week would subject banks to a sliding scale depending on their size and links to other lenders, said the people, who declined to be identified because the proposals aren’t public.

Interesting piece about the Sino-Forest takedown:

Four days after attacking Canada’s largest forestry firm, Carson Block finally faced investors and analysts on a conference call Monday.

One caller, who sounded very upset, asked an obvious question: In preparing his infamous report on Sino-Forest Corp., how much time did he spend speaking with the company?

Mr. Block wasn’t rattled. He calmly stated that he spoke with Sino’s investor relations executive for a maximum of two and a half hours, and that she seemed knowledgeable on the company.

If the line had been open to all callers, the gasp would have been audible as everyone absorbed the same information: This guy wiped out more than $3-billion of shareholder value from a company he spoke to for only a couple of hours.

Shocking. He actually went out and did field research instead of copying down what the company’s IR staff told him! Such things should not be allowed! The story is highly deficient in at least one respect:

According to experts, investors trusted Mr. Block for two reasons: Sino-Forest’s history of poor transparency that lent credibility to his claims, and the fact that whistle blowers are so often right in these situations. From Enron to Bernie Madoff (famously cited in the first line of Mr. Block’s report), the lone wolf in the wilderness is often correct.

It looks like the writer belongs to the Sell Side School of Analysis – but some people have been digging:

Muddy Waters Research, a firm specializing in finding Chinese companies it believes are frauds, shorts the firms’ shares and publicizes the charges on its website.

So far it has made money on its first five bets.
…
Muddy Waters’ track record is based on a Reuters analysis of the published research that is available on the firm’s website. It is not clear whether Muddy Waters or its director of research Carson Block have made other research calls or taken other positions.
…
Of the five companies Muddy Waters is known to have advised investors to sell, with all asserting some level of accounting irregularities, two have been delisted from the Nasdaq and one has not traded since April.

Of the two that continue to trade, neither has come anywhere close to approaching the levels they changed hands at before the reports.

I suggest that another reason some investors are considering the Muddy Waters analysis credible is because of his track record (which may be selective; but five take-downs is a pretty good career). But I’m not an expert.

Whether the Sino-Forest call is correct or not is something on which I have zero expertise (and, frankly, not really a lot of interest). But Mr. Block said it best:

Mr. Block, for his part, has no trouble explaining potential cracks in the financial system. He describes the capital markets as a “hot potato” where the various groups (auditors, bankers, lawyers, etc.) pass the blame to each other when the system suddenly fails. “The gatekeepers whom investors think are providing protection against fraudulent listings don’t function as they should,” he says.

Rob Carrick has a good article on fee-based accounts:

Investors are going to have to become familiar with fee-based accounts because they’re gradually taking over in the advice business. The analysis firm Investor Economics reports that the share of fee-based assets had grown to 48 per cent in the full-service brokerage business as of March 31 from 36 per cent five years ago.

I think fee-based accounts are a great thing, provided:

• The account manager is a fiduciary
• The account manager handles only fee based accounts and doesn’t get a dime from anybody for transactions
• The track record is published
• The advisor’s company accepts only fee-based accounts

Union Gas issued 30-year notes at 4.88%.

It was a yellow-letter day for some investors!

There’s a lot of weeping and wailing about the Vancouver riot, with questions being asked about what went wrong. I’ll answer them – society has gone wrong. We impose so ridiculous constraints on public conduct nowadays – right, Anthony Weiner? – that occasionally things blow up. A kid who has gotten into trouble at school – fairly serious trouble – for throwing a snowball at a wall (as has one kid I know) is going to long for a day of no rules. It’s exactly the same process that makes the Internet such a troll zone.

It was a poor day on the Canadian preferred share market, with PerpetualDiscounts down 15bp, FixedResets losing 13bp and DeemedRetractibles off 1bp. Volume was good.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.1516 %	2,468.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.1516 %	3,712.0
Floater	2.45 %	2.22 %	39,732	21.75	4	-0.1516 %	2,664.9
OpRet	4.88 %	2.88 %	67,102	0.92	9	0.1119 %	2,431.9
SplitShare	5.25 %	-0.07 %	62,040	0.49	6	0.0444 %	2,497.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1119 %	2,223.7
Perpetual-Premium	5.66 %	5.12 %	144,213	1.38	12	0.0674 %	2,075.1
Perpetual-Discount	5.47 %	5.60 %	119,218	14.40	18	-0.1544 %	2,174.3
FixedReset	5.16 %	3.31 %	198,584	2.84	57	-0.1325 %	2,308.3
Deemed-Retractible	5.08 %	4.89 %	297,058	8.17	47	-0.0120 %	2,151.6

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.J	FixedReset	-5.78 %	Meaningless. The issue traded 132,519 shares in a range of 26.81-00 before “lasting” at 25.12-27.00. Remember that given the shoddy data dissemination of the TMX, “lasting” is not necessarily the same as “closing” … but I haven’t checked, since “Trades & Quotes” isn’t updated ’till midnight. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 5.39 %
MFC.PR.C	Deemed-Retractible	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.04 Bid-YTW : 6.06 %
IAG.PR.E	Deemed-Retractible	1.01 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.01 Bid-YTW : 5.35 %

Volume Highlights
Issue	Index	Shares Traded	Notes
GWO.PR.J	FixedReset	132,519	Nesbitt crossed blocks of 30,000 and 100,000, both at 26.94. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 5.39 %
BNS.PR.P	FixedReset	104,360	Nesbitt crossed 90,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.14 Bid-YTW : 2.84 %
RY.PR.T	FixedReset	84,569	RBC crossed three blocks of 25,000 each, all at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.30 Bid-YTW : 3.40 %
RY.PR.C	Deemed-Retractible	77,590	Nesbitt crossed 30,000 at 24.42. RBC crossed blocks of 13,300 and 25,000, both at 24.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.44 Bid-YTW : 4.94 %
TRP.PR.B	FixedReset	66,360	National crossed blcoks of 20,000 and 35,000, both at 25.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-17 Maturity Price : 25.11 Evaluated at bid price : 25.16 Bid-YTW : 3.51 %
BNS.PR.Y	FixedReset	63,158	National crossed 45,000 at 25.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.29 %
There were 37 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.J	FixedReset	Quote: 25.12 – 27.00 Spot Rate : 1.8800 Average : 1.1461 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 5.39 %
POW.PR.A	Perpetual-Discount	Quote: 24.80 – 25.10 Spot Rate : 0.3000 Average : 0.1890 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-17 Maturity Price : 24.55 Evaluated at bid price : 24.80 Bid-YTW : 5.74 %
ALB.PR.B	SplitShare	Quote: 22.30 – 22.69 Spot Rate : 0.3900 Average : 0.2852 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-03-29 Maturity Price : 21.80 Evaluated at bid price : 22.30 Bid-YTW : 1.54 %
BAM.PR.O	OpRet	Quote: 25.91 – 26.33 Spot Rate : 0.4200 Average : 0.3165 YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.91 Bid-YTW : 3.07 %
CM.PR.I	Deemed-Retractible	Quote: 25.01 – 25.20 Spot Rate : 0.1900 Average : 0.1131 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 4.80 %
GWO.PR.M	Deemed-Retractible	Quote: 25.32 – 25.55 Spot Rate : 0.2300 Average : 0.1589 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : 5.61 %

Greek spreads are getting ridiculous:

The yield on Greece’s 2-year bond topped 30 percent for the first time and the cost of protecting Greece against default climbed 280 basis points to a record 2,050 basis points, according to prices compiled by CMA.

The US Senate did something sensible!:

The U.S. Senate voted to eliminate a tax credit and a tariff for ethanol production, providing the strongest signal yet that Congress will curtail subsidies for corn-based biofuel.

The 73-27 vote exceeded the 60-vote threshold needed to advance the measure as part of an economic development bill. Still, the legislation isn’t likely to become law, and the vote indicated that it will be difficult for ethanol supporters to extend the 45-cent-a-gallon tax break and the 54-cent-a-gallon tariff beyond their scheduled Dec. 31 expiration.

There must have been a blue moon recently because the House did something sensible, too:

The budget of the Commodity Futures Trading Commission would be cut by 15 percent, or $30 million, under a measure passed by the U.S. House.

The Republican spending bill approved today would reduce the agency’s budget to $172 million from its current level of $202 million. The CFTC is responsible for writing most of the new rules to govern derivatives trades made by banks including Goldman Sachs Group Inc. (GS) and Morgan Stanley. (MS)

Bank of Canada Governor Mark “Ban the Bond” Carney continued his crusade for Central Planning yesterday, with a speech titled Housing in Canada:

Since 2008, the federal government has taken a series of prudent and timely measures to tighten mortgage insurance requirements in order to support the long-term stability of the Canadian housing market. These will reduce the possibility that prices are further driven up simply through higher leverage.

No broad-brush policy making for Mr. Carney! Rationing is much preferable to the free market, since it makes the rationers more important. As the Globe noted:

Mr. Carney strongly suggested that the central bank continues to see narrow financial regulation, like steps taken by the Finance Department to make it harder for some Canadians to get a mortgage, as a more appropriate tool than rate hikes for taming the domestic side of the equation.

What should be done, if anything? I am fully prepared to concede that housing prices in Canada have the potential to become harmful; and, for the sake of an argument, am prepared to listen to anybody who cares to argue that we have now reached that point. Well, let’s take a look at another snippet from the speech:

A home purchase triggers the biggest liability most families will ever take on. The value of housing-related debt in Canada has nearly tripled over the past decade to $1.3 trillion. This debt is also the single largest exposure for Canadian financial institutions, with real estate loans making up more than 40 per cent of the assets of Canadian banks, up from about 30 per cent a decade ago (Chart 2).

The obvious answer to this problem – assuming that careful study confirms that this is a problem, which I rather suspect it would – is not to ration credit to those using it for proper purposes, but to introduce counter-cyclical capital requirements on banks. Currently, a mortgage attracts a 35% Risk-Weight for bank capital calculation purposes. OK, keep that, but then say … ‘if your bank has more than 35% real-estate exposure, the Risk-Weight on the amount over 35% is 40%. And the Risk-Weight on the amount over 40% is 45%. This is infinitely preferable to micro-managing banks’ credit decisions and creating a morrass of complex rules to be applied (or ignored, if you’re good friends with the loan officer) at the retail level.

BIS has often warned about the tsunami of maturities soon to be experienced by global banks. So is Moody’s:

Of the the roughly US$11-trillion in long-term bank debt outstanding globally, nearly half will come due between now and the end of 2014, according to Moody’s.

The sudden rise in maturing debt “leaves the banking system exposed to refinancing risk” as the current low-interest rate environment is not expected to continue indefinitely, the rating agency said in a report on Thursday.

According to Moody’s, about US$3.4-trillion, or 33%, will come due by the end of 2012, and $4.9-trillion (45%) by the end of 2013.
…
Moody’s said the most likely scenario as banks deal with the challenge is higher funding costs and lower profitability.

New book idea: “The Statement of Dorian Yellow”, in which an investor shows the world the statment of most of his invetments, with YLO issues being kept secret.

It was a downish day on the Canadian preferred share market, with PerpetualDiscounts flat, FixedResets flat and DeemedRetractibles down 7bp. There were no performance highlights, but volume was really good, with quite a few issues trading in good size.

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	-0.0816 %	2,471.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.0816 %	3,717.6
Floater	2.45 %	2.22 %	41,353	21.75	4	-0.0816 %	2,668.9
OpRet	4.88 %	3.07 %	65,537	0.37	9	0.0646 %	2,429.2
SplitShare	5.25 %	-0.07 %	64,611	0.49	6	-0.0513 %	2,496.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0646 %	2,221.2
Perpetual-Premium	5.66 %	5.13 %	145,861	0.92	12	-0.0230 %	2,073.7
Perpetual-Discount	5.46 %	5.58 %	118,468	14.44	18	-0.0047 %	2,177.6
FixedReset	5.16 %	3.32 %	204,097	2.81	57	0.0040 %	2,311.3
Deemed-Retractible	5.08 %	4.90 %	294,001	8.19	47	-0.0748 %	2,151.8

Performance Highlights
Issue	Index	Change	Notes
No individual gains or losses exceeding 1%!

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.M	OpRet	426,000	Nesbitt crossed 423,000 at 25.70. Nice ticket! YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-16 Maturity Price : 25.50 Evaluated at bid price : 25.70 Bid-YTW : 2.27 %
TD.PR.Y	FixedReset	211,600	Nesbitt crossed blocks of 105,000 and 100,000, both at 26.26. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-30 Maturity Price : 25.00 Evaluated at bid price : 26.24 Bid-YTW : 3.28 %
TRI.PR.B	Floater	152,985	Nesbitt crossed 150,000 at 23.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-16 Maturity Price : 22.99 Evaluated at bid price : 23.26 Bid-YTW : 2.22 %
TD.PR.I	FixedReset	129,300	Nesbitt crossed 120,000 at 27.48. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.43 Bid-YTW : 3.32 %
BNS.PR.X	FixedReset	119,013	Nesbitt crossed 100,000 at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.40 Bid-YTW : 3.16 %
BNS.PR.P	FixedReset	115,151	Nesbitt crossed blocks of 20,000 atnd 65,000 at 26.15. RBC crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.12 Bid-YTW : 2.88 %
TD.PR.K	FixedReset	110,885	Nesbitt crossed 100,000 at 27.52. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.43 Bid-YTW : 3.32 %
TD.PR.E	FixedReset	108,020	Nesbitt crossed 100,000 at 27.42. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.32 Bid-YTW : 3.26 %
TRP.PR.A	FixedReset	101,276	Nesbitt crossed 80,000 at 25.89. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 3.68 %
There were 48 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.F	Perpetual-Discount	Quote: 23.30 – 23.95 Spot Rate : 0.6500 Average : 0.4102 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-16 Maturity Price : 23.09 Evaluated at bid price : 23.30 Bid-YTW : 5.29 %
GWO.PR.F	Deemed-Retractible	Quote: 25.31 – 25.78 Spot Rate : 0.4700 Average : 0.3425 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-10-30 Maturity Price : 25.25 Evaluated at bid price : 25.31 Bid-YTW : 4.59 %
SLF.PR.E	Deemed-Retractible	Quote: 22.60 – 22.87 Spot Rate : 0.2700 Average : 0.1708 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 5.73 %
BAM.PR.J	OpRet	Quote: 26.60 – 26.97 Spot Rate : 0.3700 Average : 0.2895 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 26.00 Evaluated at bid price : 26.60 Bid-YTW : 4.29 %
RY.PR.I	FixedReset	Quote: 26.06 – 26.32 Spot Rate : 0.2600 Average : 0.1811 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 3.43 %
BAM.PR.M	Perpetual-Discount	Quote: 21.30 – 21.53 Spot Rate : 0.2300 Average : 0.1604 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-16 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 5.60 %

Greece is teetering:

Greek economic prospects darkened as European bickering risked delaying the next rescue payment and defections weakened Prime Minister George Papandreou’s majority.

An emergency session of euro finance chiefs in Brussels yesterday failed to break a deadlock on how to enroll investors in a second bailout without triggering a default, casting doubt on funds due from the International Monetary Fund next month.

“enroll investors without triggering a default”! Having thrown out bankruptcy law, the politicians are now working on commercial law!

The FRB-Kansas City has published a paper by Edward S. Knotek II and Shujaat Khan titled How Do Households Respond to Uncertainty Shocks? (they don’t):

Uncertainty surged during the financial crisis in 2008 and remained high through a considerable portion of the recovery into 2010. Since then, uncertainty has risen again due to the recent oil price spikes and the March 11, 2011, earthquake and tsunami in Japan. This heightened uncertainty raises the question: How does it affect economic activity?

This article focuses on how households respond to uncertainty shocks—sudden, unexpected events that raise the possibility of extreme future outcomes, either good or bad. Economic theory predicts that household purchases would decline immediately following an uncertainty shock because households would find a value in waiting to make big, irreversible purchases to see how the uncertain environment plays out.

The empirical results, however, suggest that uncertainty shocks tend to curtail household spending only modestly. In some cases, these responses manifest themselves only after a considerable period. In addition, uncertainty shocks account for only a small portion of the total fluctuations in household spending. These results suggest that commonly used measures of uncertainty shocks do not appear to be a key factor driving households’ spending decisions and, in turn, economic weakness.

Speaking of uncertainty in the stock market…:

U.S. investors last week pulled the most money from domestic stock funds in six months after equities fell on concerns that the economic recovery may be faltering.

Funds that invest in U.S. stocks lost $5.46 billion in the week ended June 8, the biggest redemptions since the week ended Dec. 8, when investors withdrew $7.6 billion, according to the Washington-based Investment Company Institute. Funds that invest in international equities had $291 million in withdrawals last week, the ICI said today in an e-mail.

There is no word as to whether the authorities are still blaming equity mutual fund outflows on the flash crash of 2010-5-6.

The Yellow Badge of Damage was prominent today:

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts down 9bp, FixedResets losing 9bp and DeemedRetractibles getting hit for 16bp. Not much volatility, volume was again above average.

PerpetualDiscounts now yield 5.51%, equivalent to 7.16% interest at the standard equivalency factor of 1.3x. Long Corporates yield about 5.3%, so the pre-tax interest-equivalent spread is now about 185bp, unchanged from June 1.

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	-0.2441 %	2,473.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.2441 %	3,720.7
Floater	2.45 %	2.21 %	41,281	21.78	4	-0.2441 %	2,671.1
OpRet	4.89 %	3.44 %	66,390	0.93	9	-0.2062 %	2,427.6
SplitShare	5.25 %	-0.26 %	64,856	0.50	6	-0.0546 %	2,497.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.2062 %	2,219.8
Perpetual-Premium	5.66 %	4.77 %	149,401	0.77	12	-0.0493 %	2,074.2
Perpetual-Discount	5.46 %	5.51 %	119,966	14.45	18	-0.0935 %	2,177.7
FixedReset	5.16 %	3.29 %	190,006	2.81	57	-0.0920 %	2,311.2
Deemed-Retractible	5.08 %	4.91 %	297,267	8.17	47	-0.1588 %	2,153.4

Performance Highlights
Issue	Index	Change	Notes
RY.PR.H	Deemed-Retractible	-1.36 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-23 Maturity Price : 25.00 Evaluated at bid price : 26.10 Bid-YTW : 4.90 %
HSB.PR.D	Deemed-Retractible	-1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.72 Bid-YTW : 5.14 %
GWO.PR.N	FixedReset	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 : 3.58 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.N	OpRet	348,775	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-05-30 Maturity Price : 25.25 Evaluated at bid price : 25.66 Bid-YTW : 3.44 %
BNS.PR.P	FixedReset	312,485	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.14 Bid-YTW : 2.83 %
TD.PR.Y	FixedReset	305,440	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-30 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.26 %
TD.PR.M	OpRet	166,700	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-05-30 Maturity Price : 25.25 Evaluated at bid price : 25.65 Bid-YTW : 3.60 %
BMO.PR.M	FixedReset	108,380	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-24 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 2.73 %
CM.PR.I	Deemed-Retractible	76,550	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.17 Bid-YTW : 4.70 %
There were 43 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
HSB.PR.D	Deemed-Retractible	Quote: 24.72 – 25.05 Spot Rate : 0.3300 Average : 0.2238 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.72 Bid-YTW : 5.14 %
IAG.PR.F	Deemed-Retractible	Quote: 25.60 – 25.89 Spot Rate : 0.2900 Average : 0.1850 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 5.52 %
ELF.PR.F	Perpetual-Discount	Quote: 23.01 – 23.36 Spot Rate : 0.3500 Average : 0.2465 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-15 Maturity Price : 22.76 Evaluated at bid price : 23.01 Bid-YTW : 5.85 %
MFC.PR.D	FixedReset	Quote: 27.07 – 27.40 Spot Rate : 0.3300 Average : 0.2323 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.07 Bid-YTW : 3.75 %
PWF.PR.F	Perpetual-Discount	Quote: 24.31 – 24.64 Spot Rate : 0.3300 Average : 0.2327 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-15 Maturity Price : 24.06 Evaluated at bid price : 24.31 Bid-YTW : 5.47 %
NA.PR.P	FixedReset	Quote: 27.61 – 27.90 Spot Rate : 0.2900 Average : 0.2017 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-17 Maturity Price : 25.00 Evaluated at bid price : 27.61 Bid-YTW : 2.88 %

OSFI’s revolving door revolved again, with the departure of the Assistant Croupier:

I am writing to announce the departure from OSFI of Mark White, Assistant Superintendent, Regulation Sector, effective October 31, 2011. Mark has accepted a position with a federally regulated financial institution and will assume his new role on November 1, 2011.

You can’t see the Sino-Forest for the trees:

Horsley, Chief Executive Officer Allen Chan, and director William Ardell held a 68-minute conference call with investors and analysts yesterday to refute assertions from Block’s Muddy Waters LLC that Sino-Forest overstated its timber holdings. Sino-Forest slumped 33 percent yesterday after the company’s earnings missed analysts’ estimates.

Paulson may have lost about C$515.5 million ($532.4 million) since June 1, the day before the Muddy Waters report on Sino-Forest was released.
…
“Because Muddy Waters never approached the company before it issued the report, it came as a total surprise to us,” Chan said. “Had Muddy Waters approached us before the release of the report, definitely we would have had lots of opportunity to explain to them, to show them all the errors that they have made in the report.”

The company has established an independent committee to investigate Muddy Waters’ allegations and appointed PricewaterhouseCoopers LLP to assist. The probe won’t be finished for two to three months, slowing the pace of timberland acquisitions, Sino-Forest said yesterday in its earnings statement.

From the last two paragraphs, I’m not sure whether refuting the allegations is supposed to be easy or hard!

Time for some yellow journalism!

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 15bp, FixedResets losing 1bp and DeemedRetractibles gaining 11bp. Volume was good.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.1771 %	2,479.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.1771 %	3,729.8
Floater	2.44 %	2.20 %	41,145	21.79	4	0.1771 %	2,677.6
OpRet	4.88 %	2.61 %	67,419	0.37	9	0.0903 %	2,432.6
SplitShare	5.25 %	-0.26 %	63,878	0.50	6	-0.0179 %	2,498.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0903 %	2,224.4
Perpetual-Premium	5.66 %	4.75 %	151,549	0.77	12	-0.0378 %	2,075.2
Perpetual-Discount	5.46 %	5.54 %	120,633	14.45	18	0.1475 %	2,179.8
FixedReset	5.15 %	3.28 %	192,360	2.82	57	-0.0053 %	2,313.4
Deemed-Retractible	5.07 %	4.88 %	294,447	6.32	47	0.1134 %	2,156.8

Performance Highlights
Issue	Index	Change	Notes
HSB.PR.C	Deemed-Retractible	1.01 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.05 %
GWO.PR.I	Deemed-Retractible	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.79 Bid-YTW : 5.62 %
HSB.PR.D	Deemed-Retractible	1.21 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.96 %
POW.PR.B	Perpetual-Discount	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-14 Maturity Price : 24.10 Evaluated at bid price : 24.36 Bid-YTW : 5.58 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.D	FixedReset	83,257	RBC crossed two blocks of 25,000 each, both at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.23 Bid-YTW : 3.54 %
NA.PR.L	Deemed-Retractible	74,976	Desjardins crossed 37.400 at 25.10. TD crossed 24,100 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 4.88 %
FTS.PR.C	OpRet	52,087	RBC crossed 50,000 at 25.83. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-14 Maturity Price : 25.50 Evaluated at bid price : 25.83 Bid-YTW : -7.86 %
BMO.PR.H	Deemed-Retractible	51,117	RBC crossed 40,000 at 25.48. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-03-27 Maturity Price : 25.00 Evaluated at bid price : 25.38 Bid-YTW : 4.58 %
RY.PR.P	FixedReset	48,005	TD crossed 25,000 at 27.16. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.16 Bid-YTW : 3.13 %
NA.PR.K	Deemed-Retractible	34,220	TD crossed 24,900 at 25.61. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-14 Maturity Price : 25.25 Evaluated at bid price : 25.58 Bid-YTW : -4.23 %
There were 43 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.O	Perpetual-Premium	Quote: 25.50 – 25.88 Spot Rate : 0.3800 Average : 0.2419 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 5.63 %
IAG.PR.C	FixedReset	Quote: 26.70 – 27.00 Spot Rate : 0.3000 Average : 0.2144 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.70 Bid-YTW : 3.39 %
BAM.PR.O	OpRet	Quote: 26.00 – 26.45 Spot Rate : 0.4500 Average : 0.3674 YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 2.88 %
BNA.PR.E	SplitShare	Quote: 24.20 – 24.58 Spot Rate : 0.3800 Average : 0.3062 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.49 %
MFC.PR.E	FixedReset	Quote: 26.56 – 26.79 Spot Rate : 0.2300 Average : 0.1673 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-19 Maturity Price : 25.00 Evaluated at bid price : 26.56 Bid-YTW : 3.59 %
GWO.PR.N	FixedReset	Quote: 24.50 – 24.84 Spot Rate : 0.3400 Average : 0.2776 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.76 %

Everything old is new again! Treasury STRIPS are popular:

Demand for zero-coupon bonds is rising so fast that Wall Street banks created $205.2 billion of them as of May, the most in three years and just $3.6 billion away from levels last seen at the beginning of 2000, according to the Treasury Department.
…
Zero-coupon securities due in 30 years had their best and worst months in more than two decades during the last recession. The debt returned 26.7 percent in December 2008, a month after the consumer price index plunged 1.8 percent, the biggest drop in history, according to Bank of America Merrill Lynch index data. A month later, the securities lost 24 percent.

S&P downgrades Greece:

Greece had its credit rating cut three levels by Standard & Poor’s, which branded the nation with the world’s lowest debt grade and said a restructuring looks “increasingly likely.”

The move to CCC from B reflects “our view that there is a significantly higher likelihood of one or more defaults,” S&P said in a statement today. “Risks for the implementation of Greece’s EU/IMF borrowing program are rising, given Greece’s increased financing needs and ongoing internal political disagreements surrounding the policy conditions required.”

The downgrade follows Moody’s Investors Service’s decision this month to grade Greece only one level higher and may intensify pressure on European governments to stem the region’s sovereign-debt crisis. Credit-default swaps on Greece, Ireland and Portugal surged to records today on concern governments’ struggles to resolve the turmoil will threaten their ability to pay off their debts.

US housing remains nasty:

Southern California home prices fell 8.2 percent … as unemployment remained high and mortgages were hard to obtain, DataQuick said.

The median paid in the six-county region was $280,000, down from $305,000 a year earlier and unchanged from April, the San Diego-based data seller said today in a statement. Sales fell 17 percent from May 2010 to a total of 18,394 new and resale houses and condominiums, the 11th straight year-over-year decline.

DBRS confirmed SLF:

In recent years, the requirement for additional regulatory capital at its operating subsidiaries has resulted in an increase in the Company’s consolidated financial leverage as measured by the ratio of debt plus preferred shares to total capitalization. The Company is currently operating with this ratio at greater than 30%, which, while an increase from less than 25% which it reported five years ago, is no higher than its peers. Given the Company’s relative conservatism from a business risk perspective, DBRS believes that this level is still acceptable for the Company’s current ratings, especially given that several points of the recent increase in the debt ratio reflects the reduction in shareholders’ equity related to the $1.7 billion writedown in goodwill following the implementation of IFRS. However, since higher leverage combined with weaker earnings has resulted in lower expected fixed charge coverage ratio, the Company does not have a lot of excess financial flexibility. Fortunately, the Company has excellent sources of liquidity as represented by excess regulatory capital, a highly liquid asset portfolio and about $800 million in cash on hand at the holding company level, which is available to reduce financial leverage.

… but they downgraded the Bank of Ireland:

DBRS Inc. (DBRS) today has downgraded the ratings of all dated subordinated debt issued by The Governor and Company of the Bank of Ireland (Bank of Ireland) to “C” from CCC. Furthermore, DBRS has downgraded Bank of Ireland’s Primary Capital Notes to “C” from CCC (low), as well as the Perpetual Preferred Securities of various related entities to “C” from CC. Today’s downgrade follows the announcement by the Bank of Ireland that it has commenced an offer to exchange the aforementioned securities for cash or equity and a solicitation of consents in relation to the securities. Moreover, DBRS expects to downgrade the securities discussed above to “D” at completion of the buyback; as such, the securities remain Under Review with Negative Implications, where they were placed on 3 December 2010.

In DBRS’s view, the exchange offer, when completed, is tantamount to a default as defined by DBRS policy. DBRS views the proposed exchange offer as coercive as the offer affords investors in these instruments limited options. Should investors in these instruments reject the proposed offer, at a 80-90% discount if accepting the cash option, or a 60-80% discount if accepting the equity option, on the tendered securities, they risk receiving substantially less if the proposed consent amendments are ratified. Remaining investors in these instruments would then receive 0.001% of par value, should the consent to allow the “clean-up” of residual notes be accepted by tendering investors.

Mean Joe Green used to crash through offensive lines. Mean Joe Yellow offensively crashes through your portfolio.

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts getting whacked for 30bp, FixedResets losing 5bp and DeemedRetractibles gaining 1bp. BAM and BAM-related issuers dominated the Performance table (BAM itself was ex-dividend today) and volume was actually quite good.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.0339 %	2,475.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.0339 %	3,723.2
Floater	2.44 %	2.22 %	41,059	21.67	4	-0.0339 %	2,672.9
OpRet	4.88 %	2.67 %	68,092	0.38	9	0.1770 %	2,430.4
SplitShare	5.25 %	-0.07 %	62,733	0.50	6	-0.1408 %	2,499.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1770 %	2,222.4
Perpetual-Premium	5.66 %	4.94 %	151,228	1.39	12	0.0033 %	2,076.0
Perpetual-Discount	5.46 %	5.58 %	120,360	14.42	18	-0.2975 %	2,176.6
FixedReset	5.15 %	3.26 %	186,618	2.82	57	-0.0544 %	2,313.5
Deemed-Retractible	5.07 %	4.89 %	295,150	8.18	47	0.0130 %	2,154.4

Performance Highlights
Issue	Index	Change	Notes
FTS.PR.F	Perpetual-Discount	-1.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 23.03 Evaluated at bid price : 23.24 Bid-YTW : 5.30 %
POW.PR.B	Perpetual-Discount	-1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 23.74 Evaluated at bid price : 24.05 Bid-YTW : 5.65 %
BAM.PR.M	Perpetual-Discount	-1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 5.60 %
BAM.PR.N	Perpetual-Discount	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 21.26 Evaluated at bid price : 21.26 Bid-YTW : 5.61 %
BNA.PR.E	SplitShare	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.49 %
BAM.PR.O	OpRet	1.01 %	YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 2.78 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.J	Deemed-Retractible	84,525	Desjardins sold two blocks of 10,000 each to Nesbitt at 24.99, and crossed 45,000 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.61 %
BMO.PR.Q	FixedReset	64,577	Nesbitt crossed 50,400 at 25.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.46 Bid-YTW : 3.53 %
RY.PR.T	FixedReset	46,490	RBC crossed 25,000 at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.35 Bid-YTW : 3.33 %
BNS.PR.N	Deemed-Retractible	45,654	RBC crossed 30,000 at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-02-26 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 4.76 %
CM.PR.L	FixedReset	39,837	Nesbitt crossed 20,000 at 27.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.76 Bid-YTW : 2.89 %
TD.PR.G	FixedReset	39,347	TD crossed 24,900 at 27.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.38 Bid-YTW : 3.17 %
There were 40 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: 23.50 – 24.49 Spot Rate : 0.9900 Average : 0.6369 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 2.22 %
POW.PR.B	Perpetual-Discount	Quote: 24.05 – 24.60 Spot Rate : 0.5500 Average : 0.3618 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 23.74 Evaluated at bid price : 24.05 Bid-YTW : 5.65 %
FTS.PR.F	Perpetual-Discount	Quote: 23.24 – 23.72 Spot Rate : 0.4800 Average : 0.3085 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 23.03 Evaluated at bid price : 23.24 Bid-YTW : 5.30 %
MFC.PR.C	Deemed-Retractible	Quote: 22.41 – 22.69 Spot Rate : 0.2800 Average : 0.1803 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.41 Bid-YTW : 5.84 %
BAM.PR.R	FixedReset	Quote: 25.74 – 26.05 Spot Rate : 0.3100 Average : 0.2293 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 25.69 Evaluated at bid price : 25.74 Bid-YTW : 4.56 %
BNA.PR.E	SplitShare	Quote: 24.20 – 24.50 Spot Rate : 0.3000 Average : 0.2252 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.49 %

I find the US Municipal bond market of great interest, simply because the investor profile is so similar to that of Canadian preferred shares. I was recently looking for some estimates of holdings by investor group; now that I don’t need it any more, of course, I found it:

Citigroup Inc. analysts say there’s something missing from the Federal Reserve’s tally of the municipal-bond market’s size: more than $700 billion of the securities were bought directly by individual investors.

The Fed’s quarterly figures, released yesterday, put the market at $2.9 trillion, 37 percent of which the central bank says is owned by households. Citigroup’s analysts George Friedlander, Mikhail Foux and Vikram Rai say individuals play an even larger role, holding half of a $3.7 trillion market that has been whipsawed by speculation about municipal defaults that is now starting to ebb.

“The instability in the muni market in late 2010 was exacerbated by individual investors becoming overly concerned about the fiscal strength of state and local governments,” Rai said in an e-mail after Citigroup’s report on the market was published on June 3. “Unsurprisingly, as credit fears abated, it resulted in lower volatility and a rally in the tax-exempt and taxable market.”
…
Citigroup’s analysts didn’t challenge the Federal Reserve’s data on holdings by institutional investors such as mutual funds and insurance companies, which can be gleaned from corporate filings and other outside data sources. Without similar information on households, the analysts say, the Fed had to guess.

By underestimating the market, they’ve also diminished the extent to which individuals dominate it, they said. Citigroup estimates individuals they held $1.8 trillion, or half, of the municipal bonds outstanding at the end of 2010, compared with about $1.1 trillion estimated by the Federal Reserve.

“We always believed that the influence of retail investors in the municipal market was understated,” Rai said.

The Federal Reserve said it’s looking into the discrepancy, said Susan Stawick, a spokeswoman.

S&P Discusses Some Observations On Canada’s Consultation Paper For A Proposed Legislative Regime For Covered Bonds:

• On May 11, 2011, the Canadian Department of Finance released a consultation paper on its proposed covered bond legislation.
• We believe that, in general, the introduction of specific covered bond legislation would be positive, and would likely provide further assurances for investors.
• However, we note that the proposed codification of an overcollateralization cap may limit an issuer’s ability to manage and support its covered bond program by increasing the level of collateral and may, under our current analytical approach, potentially constrain the ability of issuers to achieve or maintain the highest potential ratings.

DBRS also commented:

One particular area of concern for DBRS is the proposed cap of 10% on the amount of overcollateralization that will be permitted for a Canadian covered bond program. In the event that additional overcollateralization is necessary to maintain a AAA rating on the covered bonds that have been issued, the 10% cap on overcollateralization may adversely affect the ratings on the existing covered bonds. However, DBRS notes that all of the existing Canadian covered bond programs rated by DBRS to date currently have required overcollateralization amounts that are less than 10%. Another area of concern for DBRS is the proposal to standardize asset valuation, particularly if an issuer is not permitted to issue covered bonds outside of the legislative framework, as the proposed asset valuation method may not be consistent with what is currently used in the Canadian covered bond programs that have been rated by DBRS to date.

Fabulous Fab is going to trial:

Fabrice Tourre, the Goldman Sachs Group Inc. (GS) trader accused of misleading investors in a collateralized debt obligation, failed to get a suit brought by the U.S. Securities and Exchange Commission dismissed.

While U.S. District Judge Barbara Jones in Manhattan did narrow some of the claims against him in her decision today, she said the SEC met its burden that Tourre violated a securities law designed to prevent fraudulent sales of securities and should stand trial on that claim.

The SEC initially sued the London-based trader in April 2010, saying he defrauded investors by not disclosing that hedge fund Paulson & Co. had helped pick the underlying securities for a CDO as Abacus and planned to bet against them. After reaching a $550 million settlement with New York-based Goldman Sachs, the SEC filed a new claim against Tourre, saying he gave the company “substantial assistance” as it misled investors.
…
Citing last year’s U.S. Supreme Court ruling in Morrison v. National Australia Bank, the judge threw out some claims involving Duesseldorf, Germany-based IKB Deutsche Industriebank AG, which allegedly lost almost all of its $150 million investment, and ABN Amro Bank NV, which assumed the credit risk associated with a portion of Abacus.
…
Jones let the case proceed on a claim against Tourre that he “knowingly, recklessly or negligently” made misrepresentations in the sale of securities to ACA Management LLC, IKB and ABN Amro.

Rhapsody in Yellow? A little cacaphonous today. The issues went ex-Dividend – good luck to anybody attempting to draw conclusions from the Dividend Drop Off Rate, which will be 100% if the total return is to be 0%.

It was an off day for the Canadian preferred share market, with PerpetualDiscounts losing 12bp, FixedResets down 3bp and DeemedRetractibles shrinking 5bp. Volatility was again muted, with no entries in the Performance Highlights table, but volume picked up and was only a little below average – RY DeemedRetractibles dominated the volume table.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,476.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0000 %	3,724.4
Floater	2.43 %	2.22 %	42,593	21.68	4	0.0000 %	2,673.8
OpRet	4.86 %	2.78 %	69,094	0.38	9	-0.0642 %	2,426.1
SplitShare	5.24 %	-0.07 %	61,254	0.51	6	-0.0899 %	2,502.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0642 %	2,218.5
Perpetual-Premium	5.66 %	4.91 %	151,976	1.40	12	-0.1460 %	2,075.9
Perpetual-Discount	5.44 %	5.53 %	120,203	14.49	18	-0.1187 %	2,183.1
FixedReset	5.14 %	3.22 %	183,838	2.82	57	-0.0337 %	2,314.7
Deemed-Retractible	5.07 %	4.87 %	304,904	8.09	47	-0.0455 %	2,154.1

Performance Highlights
Issue	Index	Change	Notes
No individual gains or losses exceeding 1%!

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.B	Deemed-Retractible	206,620	RBC crossed 198,200 at 24.95. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.89 Bid-YTW : 4.81 %
RY.PR.A	Deemed-Retractible	109,675	TD crossed 43,100 at 24.36 and 25,000 at 24.35. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 4.84 %
RY.PR.H	Deemed-Retractible	80,810	Nesbitt crossed 75,000 at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-23 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 4.78 %
RY.PR.E	Deemed-Retractible	58,400	TD crossed 50,000 at 24.38. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.34 Bid-YTW : 4.87 %
CM.PR.K	FixedReset	54,820	Nesbitt crossed 50,000 at 26.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.75 Bid-YTW : 3.26 %
BNS.PR.J	Deemed-Retractible	53,433	TD crossed blocks of 20,000 and 23,600, both at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-28 Maturity Price : 25.00 Evaluated at bid price : 25.54 Bid-YTW : 4.61 %
There were 29 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.B	Deemed-Retractible	Quote: 22.56 – 22.89 Spot Rate : 0.3300 Average : 0.2033 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.56 Bid-YTW : 5.92 %
NA.PR.P	FixedReset	Quote: 27.60 – 27.90 Spot Rate : 0.3000 Average : 0.2038 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-17 Maturity Price : 25.00 Evaluated at bid price : 27.60 Bid-YTW : 2.88 %
GWO.PR.M	Deemed-Retractible	Quote: 25.30 – 25.60 Spot Rate : 0.3000 Average : 0.2043 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.60 %
TD.PR.P	Deemed-Retractible	Quote: 25.80 – 26.04 Spot Rate : 0.2400 Average : 0.1490 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 4.73 %
IAG.PR.E	Deemed-Retractible	Quote: 25.80 – 26.09 Spot Rate : 0.2900 Average : 0.2073 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 5.47 %
FTS.PR.H	FixedReset	Quote: 25.58 – 25.85 Spot Rate : 0.2700 Average : 0.1991 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.58 Bid-YTW : 3.61 %

Today’s top news is that Interactive Brokers thinks about what they’re doing:

Interactive Brokers Group Inc., the electronic market maker and securities firm, raised margin requirements to 100 percent for some Chinese stocks, because of “elevated risk concerns,” according to a statement on its website. Sina and Sohu were among more than 100 Chinese companies on the list. The increase went into effect June 6 in stages and will be completed by the end of this week, the brokerage said.

Given the fate of other brokerages that think about what they do (by which I mean Goldman Sachs and … and … probably lots and lots of others) we can expect the invective against IB to start pouring out any day now.

The Fed may have overestimated the market’s appetite for risk:

Federal Reserve auctions of mortgage securities that the central bank assumed in the rescue of American International Group Inc. are fueling a selloff in credit markets as Wall Street rushes to hedge against losses on stockpiled debt.

Declines in credit-default swaps indexes used to protect against losses on subprime housing debt and commercial mortgages accelerated this month, reaching almost 20 percent in the past five weeks as the cost of the insurance climbs, according to Markit Group Ltd. The plunge this week started infecting everything from junk bonds to the debt of financial companies.

The Fed has been selling the $31 billion Maiden Lane II portfolio piecemeal after rejecting a $15.7 billion bid from AIG for the entire pool in March.
…
Wall Street banks, which through May 25 increased their holdings of corporate and asset-backed debt to the highest level in 13 months, have been using both so-called Markit ABX and CMBX indexes to hedge against the deteriorating values of mortgage debt, said Christopher Sullivan, chief investment officer at United Nations Federal Credit Union in New York. That’s contributing to the drop in prices of the underlying bonds and helped push up relative yields on speculative-grade, or junk, corporate bonds to the widest level this year.

I have complained for a long time that we, as a continent, are not spending enough on infrastructure. Here’s another datapoint:

With its intricately interdependent and increasingly complex electronic components, the U.S. electric grid operates on an ever-shrinking margin for error. The larger and more interconnected the grid becomes, the more vulnerable it is to catastrophic cascading failures. A recent article in Scientific American (see note 1) estimates that there is a one in 20 chance of a solar super-storm in the next 15 years.
…
The House Energy and Commerce Committee unveiled the Grid Reliability and Infrastructure Defense Act on May 20, 2011. Among the draft bill’s provisions are requirements that the Federal Energy Regulatory Commission issue orders spelling out procedures and requirements for dealing with immediate and longer-term threats to the grid.

Overview

• The U.S. electricity transmission grid is vulnerable to solar activity.
• Scientists estimate that there is a one in 20 chance over the next 15 years of a disabling solar storm.
• Grid operators are looking at ways to protect it from such events.

More harrassment today from volunteer organizations using automated dialers because their time is ever so much more valuable than mine. Hint to organizers: if you want something from me, don’t insult me before I’ve even picked up the ‘phone.

YLO was boring today, so there is no Yellow Fever Report.

It was another mixed day in the Canadian preferred share market, with PerpetualDiscounts gaining 9bp, FixedResets losing 8bp and DeemedRetractibles up 4bp. There were no entries in the Performance Highlights table. Volume continued to be very sluggish.

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	-0.0695 %	2,476.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.0695 %	3,724.4
Floater	2.43 %	2.22 %	42,400	21.68	4	-0.0695 %	2,673.8
OpRet	4.86 %	2.50 %	67,999	0.38	9	0.1200 %	2,427.7
SplitShare	5.23 %	-0.63 %	61,795	0.51	6	0.1650 %	2,505.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1200 %	2,219.9
Perpetual-Premium	5.65 %	4.90 %	152,214	1.40	12	0.0575 %	2,078.9
Perpetual-Discount	5.43 %	5.50 %	119,904	14.53	18	0.0862 %	2,185.7
FixedReset	5.14 %	3.22 %	183,990	2.82	57	-0.0759 %	2,315.5
Deemed-Retractible	5.07 %	4.85 %	282,263	8.12	47	0.0438 %	2,155.1

Performance Highlights
Issue	Index	Change	Notes
No individual gains or losses exceeding 1%!

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.H	Deemed-Retractible	218,632	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-09 Maturity Price : 25.75 Evaluated at bid price : 25.95 Bid-YTW : 1.41 %
CM.PR.J	Deemed-Retractible	211,872	Desjardins crossed 50,000 at 25.00; Nesbitt crossed 100,000 at the same price; RBC crossed 50,000 at the same price again. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 4.59 %
BAM.PR.H	OpRet	104,732	RBC crossed two blocks of 50,000 each, both at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.59 Bid-YTW : 2.50 %
CM.PR.I	Deemed-Retractible	75,280	RBC crosse 48,400 at 25.18. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 4.69 %
BNS.PR.O	Deemed-Retractible	69,000	RBC crossed 65,000 at 26.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-05-26 Maturity Price : 25.00 Evaluated at bid price : 26.26 Bid-YTW : 4.78 %
BNS.PR.M	Deemed-Retractible	67,280	Desjardins crossed 30,000 at 24.88. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.91 Bid-YTW : 4.63 %
There were 26 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.F	Perpetual-Discount	Quote: 24.37 – 24.72 Spot Rate : 0.3500 Average : 0.2526 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-09 Maturity Price : 24.12 Evaluated at bid price : 24.37 Bid-YTW : 5.45 %
GWO.PR.J	FixedReset	Quote: 26.55 – 27.00 Spot Rate : 0.4500 Average : 0.3610 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 3.41 %
FTS.PR.F	Perpetual-Discount	Quote: 23.75 – 24.01 Spot Rate : 0.2600 Average : 0.1869 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-09 Maturity Price : 23.52 Evaluated at bid price : 23.75 Bid-YTW : 5.18 %
TRP.PR.A	FixedReset	Quote: 25.85 – 26.07 Spot Rate : 0.2200 Average : 0.1747 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 3.54 %
BNS.PR.O	Deemed-Retractible	Quote: 26.26 – 26.40 Spot Rate : 0.1400 Average : 0.1000 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-05-26 Maturity Price : 25.00 Evaluated at bid price : 26.26 Bid-YTW : 4.78 %
GWO.PR.H	Deemed-Retractible	Quote: 23.80 – 23.98 Spot Rate : 0.1800 Average : 0.1403 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 5.45 %