Category: Market Action

Yellow Media has announced:

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

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

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

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

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

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

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

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

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

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

The Greek austerity plan passed:

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

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

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

German banks are cooperating with the Greek plans:

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

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

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

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

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

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

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

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

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

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

Canadian inflation popped up:

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

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

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.4479 %	2,434.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4479 %	3,661.7
Floater	2.49 %	2.23 %	42,854	21.70	4	-0.4479 %	2,628.8
OpRet	4.87 %	2.78 %	63,030	0.25	9	-0.0944 %	2,434.2
SplitShare	5.25 %	1.97 %	58,121	0.66	6	-0.0959 %	2,503.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0944 %	2,225.8
Perpetual-Premium	5.69 %	5.34 %	151,538	1.29	12	0.0397 %	2,077.3
Perpetual-Discount	5.47 %	5.52 %	121,225	14.59	18	-0.1943 %	2,183.0
FixedReset	5.18 %	3.31 %	211,247	2.71	57	0.0093 %	2,305.6
Deemed-Retractible	5.09 %	4.90 %	284,776	8.15	47	-0.0457 %	2,148.3

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

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

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

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

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

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

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

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

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

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

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

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

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

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 23bp, FixedResets down 10bp and DeemedRetractibles losing 13bp. Volatility picked up – but it was all on the downside. Volume was average.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.4342 %	2,445.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4342 %	3,678.2
Floater	2.48 %	2.23 %	42,181	21.70	4	-0.4342 %	2,640.6
OpRet	4.87 %	2.53 %	62,618	0.25	9	-0.0386 %	2,436.5
SplitShare	5.25 %	1.96 %	56,478	0.66	6	0.1236 %	2,505.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0386 %	2,227.9
Perpetual-Premium	5.69 %	5.21 %	140,346	0.90	12	-0.0037 %	2,076.5
Perpetual-Discount	5.46 %	5.52 %	121,641	14.61	18	0.2328 %	2,187.2
FixedReset	5.18 %	3.33 %	208,451	2.71	57	-0.0993 %	2,305.4
Deemed-Retractible	5.09 %	4.91 %	279,230	8.16	47	-0.1309 %	2,149.3

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

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

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

A deal on Greece may have been reached:

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

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

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

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

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

How ’bout that Yellow Media, eh?:

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

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

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

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

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

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts gaining 14bp, FixedResets down 1bp and DeemedRetractibles up 2bp. Not much volatility (surprisingly, confined to bad days for BAM and related issues) and volume was average.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.5602 %	2,456.3
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.5602 %	3,694.2
Floater	2.46 %	2.23 %	42,127	21.70	4	-0.5602 %	2,652.1
OpRet	4.87 %	2.43 %	64,964	0.26	9	-0.0214 %	2,437.4
SplitShare	5.25 %	1.95 %	58,484	0.66	6	-0.1189 %	2,502.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0214 %	2,228.8
Perpetual-Premium	5.67 %	5.18 %	140,340	1.30	12	0.0742 %	2,076.5
Perpetual-Discount	5.47 %	5.53 %	123,263	14.62	18	0.1408 %	2,182.1
FixedReset	5.17 %	3.29 %	208,028	2.71	57	-0.0080 %	2,307.7
Deemed-Retractible	5.08 %	4.93 %	279,818	8.17	47	0.0181 %	2,152.1

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

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.M	FixedReset	107,020	Nesbitt crossed 100,000 at 26.24. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.13 Bid-YTW : 3.06 %
CM.PR.K	FixedReset	59,303	RBC crossed 49,900 at 26.44. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.36 Bid-YTW : 3.33 %
TD.PR.C	FixedReset	41,650	RBC crossed 25,000 at 26.70, then bought 12,200 from National at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.70 Bid-YTW : 3.22 %
RY.PR.Y	FixedReset	41,234	RBC crossed 22,000 at 27.27. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 27.27 Bid-YTW : 3.45 %
TD.PR.M	OpRet	40,600	RBC crossed 39,500 at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-27 Maturity Price : 25.50 Evaluated at bid price : 25.75 Bid-YTW : 1.57 %
RY.PR.T	FixedReset	39,320	RBC crossed 15,000 at 27.30; Desjardins crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 27.30 Bid-YTW : 3.38 %
There were 30 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNA.PR.E	SplitShare	Quote: 24.12 – 24.58 Spot Rate : 0.4600 Average : 0.3138 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.12 Bid-YTW : 5.59 %
BAM.PR.J	OpRet	Quote: 26.78 – 27.10 Spot Rate : 0.3200 Average : 0.2185 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.78 Bid-YTW : 4.04 %
BAM.PR.R	FixedReset	Quote: 25.30 – 25.55 Spot Rate : 0.2500 Average : 0.1587 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-27 Maturity Price : 23.26 Evaluated at bid price : 25.30 Bid-YTW : 4.36 %
FTS.PR.F	Perpetual-Discount	Quote: 23.89 – 24.20 Spot Rate : 0.3100 Average : 0.2495 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-27 Maturity Price : 23.42 Evaluated at bid price : 23.89 Bid-YTW : 5.16 %
BMO.PR.K	Deemed-Retractible	Quote: 25.79 – 25.97 Spot Rate : 0.1800 Average : 0.1236 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-11-25 Maturity Price : 25.00 Evaluated at bid price : 25.79 Bid-YTW : 4.71 %
BAM.PR.K	Floater	Quote: 19.11 – 19.35 Spot Rate : 0.2400 Average : 0.1915 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-27 Maturity Price : 19.11 Evaluated at bid price : 19.11 Bid-YTW : 2.74 %

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

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

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

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

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

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

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

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

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

There are mutterings about another domino:

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

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

But the first domino’s quite enough:

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

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

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

Speaking of dominos and zombie banks…:

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

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

Nobody is yet seriously worried about US Treasuries:

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

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

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

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

ISS backed the TMX-LSE deal:

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

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

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

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

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

It must be fun doing business in Illinois:

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

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

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

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

What happened to Yellow this week?

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.2105 %	2,470.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.2105 %	3,715.0
Floater	2.45 %	2.22 %	42,189	21.73	4	0.2105 %	2,667.1
OpRet	4.87 %	3.17 %	62,945	0.91	9	-0.0086 %	2,437.9
SplitShare	5.25 %	-0.28 %	59,446	0.47	6	-0.0003 %	2,505.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0086 %	2,229.3
Perpetual-Premium	5.68 %	5.16 %	143,101	1.38	12	0.0121 %	2,075.0
Perpetual-Discount	5.47 %	5.55 %	123,586	14.60	18	0.0117 %	2,179.1
FixedReset	5.17 %	3.39 %	206,050	2.79	57	0.0151 %	2,307.9
Deemed-Retractible	5.08 %	4.92 %	283,037	8.15	47	-0.0955 %	2,151.8

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

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

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

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

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

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

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

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

Allied Irish has defaulted in the view of DBRS:

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

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

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

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

S&P put Encana on Outlook-Negative:

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.0234 %	2,464.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.0234 %	3,707.2
Floater	2.46 %	2.22 %	39,133	21.73	4	-0.0234 %	2,661.5
OpRet	4.87 %	3.02 %	65,082	0.91	9	0.1933 %	2,438.1
SplitShare	5.25 %	-0.28 %	61,806	0.47	6	0.0190 %	2,505.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1933 %	2,229.5
Perpetual-Premium	5.66 %	5.24 %	145,064	1.36	12	-0.0674 %	2,074.8
Perpetual-Discount	5.48 %	5.54 %	121,904	14.55	18	-0.1499 %	2,178.8
FixedReset	5.17 %	3.37 %	209,058	2.79	57	-0.1067 %	2,307.5
Deemed-Retractible	5.07 %	4.90 %	286,044	8.16	47	0.0095 %	2,153.8

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

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

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

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 %