Category: Market Action

The FOMC statement was pretty gloomy:

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

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

Of perhaps more interest was the voting:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Europeans are furious with Papandreou:

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

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

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

The European royalty is talking tough:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.8581 %	2,094.1
FixedFloater	4.88 %	4.60 %	23,864	17.18	1	1.0390 %	3,155.1
Floater	3.44 %	3.44 %	155,094	18.65	2	0.8581 %	2,261.0
OpRet	4.97 %	1.81 %	50,783	1.51	7	0.2703 %	2,467.7
SplitShare	5.77 %	6.40 %	61,386	5.16	3	0.2391 %	2,507.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2703 %	2,256.5
Perpetual-Premium	5.58 %	2.42 %	106,332	0.10	13	0.2394 %	2,144.2
Perpetual-Discount	5.36 %	5.44 %	110,078	14.76	17	0.0953 %	2,271.2
FixedReset	5.12 %	3.08 %	210,336	2.45	62	0.1540 %	2,345.2
Deemed-Retractible	5.05 %	4.45 %	219,543	3.92	46	0.1364 %	2,213.3

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A new charity scam has come to light:

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

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

Golly, what a surprise!

It was an unevenly good day for the Canadian preferred share market, with PerpetualDiscounts winning 32bp, FixedResets gaining 12bp, and DeemedRetractibles up 3bp. Good volatility, with all issues on the Performance Highlights table being in the black. Volume was a shade on the light side of average.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.7649 %	2,076.2
FixedFloater	0.00 %	0.00 %	0	0.00	1	0.7649 %	3,122.6
Floater	3.47 %	3.47 %	156,308	18.58	2	0.7649 %	2,241.8
OpRet	4.98 %	3.06 %	51,642	1.52	7	0.0129 %	2,461.0
SplitShare	5.78 %	6.48 %	62,117	5.16	3	0.0704 %	2,501.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0129 %	2,250.4
Perpetual-Premium	5.59 %	3.60 %	108,546	0.49	13	0.0738 %	2,139.1
Perpetual-Discount	5.37 %	5.44 %	109,762	14.76	17	0.3186 %	2,269.1
FixedReset	5.13 %	3.10 %	212,200	2.45	61	0.1241 %	2,341.6
Deemed-Retractible	5.06 %	4.45 %	217,488	4.04	46	0.0332 %	2,210.2

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

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

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

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

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

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

The Greek referendum will be fascinating:

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

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

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

The Bank of Japan has major losses:

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

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

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

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

TMX supports the Maple deal:

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

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

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

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

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

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

Speculation has done in MF Global:

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

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

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

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

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

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

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

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

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

But, mortgaging the future is good politics:

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

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

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

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

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

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

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

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 20bp, FixedResets up 14bp and DeemedRetractibles gaining 8bp. Lots of good performers on the positive side of the Performance Highlights table. Volume was average.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.9738 %	2,060.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.9738 %	3,098.9
Floater	3.49 %	3.47 %	157,036	18.58	2	0.9738 %	2,224.8
OpRet	4.83 %	2.61 %	63,736	1.52	8	0.0581 %	2,460.7
SplitShare	5.36 %	3.10 %	55,878	0.33	4	0.0546 %	2,499.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0581 %	2,250.1
Perpetual-Premium	5.66 %	3.67 %	110,197	0.49	13	0.1360 %	2,137.5
Perpetual-Discount	5.34 %	5.37 %	105,366	14.69	17	0.1987 %	2,261.9
FixedReset	5.14 %	3.11 %	210,405	2.46	61	0.1425 %	2,338.7
Deemed-Retractible	5.06 %	4.47 %	210,755	4.05	46	0.0831 %	2,209.5

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

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

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

Italy managed to sell some ten year paper:

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

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

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

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

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

So is it a credit event?:

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

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

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

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

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

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

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

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

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-1.4234 %	2,040.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.4234 %	3,069.1
Floater	3.53 %	3.50 %	158,004	18.51	2	-1.4234 %	2,203.3
OpRet	4.83 %	2.63 %	64,050	1.53	8	0.1261 %	2,459.3
SplitShare	5.37 %	2.88 %	57,975	0.33	4	0.0311 %	2,498.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1261 %	2,248.8
Perpetual-Premium	5.67 %	3.78 %	108,446	1.86	13	0.1922 %	2,134.6
Perpetual-Discount	5.35 %	5.44 %	106,775	14.75	17	-0.0049 %	2,257.4
FixedReset	5.15 %	3.15 %	206,978	2.46	61	0.0691 %	2,335.3
Deemed-Retractible	5.06 %	4.49 %	211,182	3.93	46	-0.0032 %	2,207.7

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

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

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

BAM is starting a Dubai property fund:

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

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

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

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

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

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

The Americans aren’t learning anything from all this:

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

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

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

But the Irish are paying close attention:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

There’s also a hopeful thought:

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

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

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

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

It was a mostly-up day for the Canadian preferred share market, with PerpetualDiscounts down 4bp, FixedResets up 10bp and DeemedRetractibles gaining 12bp. Plenty of skew in those results, with all entries on the Performance Highlights table being positive! Volume was well above average.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.8008 %	2,070.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.8008 %	3,113.4
Floater	3.48 %	3.49 %	158,172	18.54	2	0.8008 %	2,235.1
OpRet	4.84 %	2.56 %	66,278	1.53	8	0.0243 %	2,456.2
SplitShare	5.37 %	1.71 %	58,784	0.34	4	-0.1332 %	2,497.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0243 %	2,246.0
Perpetual-Premium	5.68 %	4.00 %	107,788	1.86	13	0.0151 %	2,130.5
Perpetual-Discount	5.35 %	5.45 %	107,999	14.71	17	-0.0392 %	2,257.5
FixedReset	5.14 %	3.11 %	204,146	2.45	61	0.1049 %	2,333.7
Deemed-Retractible	5.06 %	4.44 %	213,363	4.07	46	0.1199 %	2,207.7

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

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

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

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

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

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

Maybe the Chinese will take the loss!

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

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

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

Italy’s beginning to get serious:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.4020 %	2,053.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.4020 %	3,088.6
Floater	3.50 %	3.50 %	159,411	18.51	2	0.4020 %	2,217.4
OpRet	4.84 %	2.70 %	65,494	1.53	8	-0.0291 %	2,455.6
SplitShare	5.36 %	1.95 %	58,492	0.34	4	0.3118 %	2,500.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0291 %	2,245.4
Perpetual-Premium	5.68 %	3.60 %	108,366	0.50	13	0.1759 %	2,130.2
Perpetual-Discount	5.34 %	5.44 %	108,880	14.74	17	0.0491 %	2,258.4
FixedReset	5.15 %	3.20 %	203,544	2.45	61	0.0239 %	2,331.3
Deemed-Retractible	5.06 %	4.40 %	214,740	4.13	46	0.0814 %	2,205.1

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

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.D	Perpetual-Premium	943,623	Nesbitt crossed blocks of 811,000 and 100,000, both at 25.00. Nice tickets! YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 5.66 %
RY.PR.E	Deemed-Retractible	104,826	Nesbitt crossed 97,300 at 25.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-24 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.49 %
TD.PR.G	FixedReset	87,851	Desjardins crossed 21,100 at 27.05; RBC crossed blocks of 15,000 shares, 10,000 and 35,000, all at 27.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.03 Bid-YTW : 2.85 %
RY.PR.X	FixedReset	83,303	Scotia crossed blocks of 25,000 and 50,000, both at 27.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.92 Bid-YTW : 3.23 %
BNS.PR.O	Deemed-Retractible	60,301	Nesbitt crossed 50,000 at 26.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-26 Maturity Price : 26.00 Evaluated at bid price : 26.45 Bid-YTW : 4.14 %
MFC.PR.A	OpRet	54,011	Scotia bought 22.20 from anonymous at 25.00, then crossed 20,000 at 25.25. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 4.02 %
There were 44 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.J	FixedReset	Quote: 26.23 – 26.76 Spot Rate : 0.5300 Average : 0.3443 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 3.86 %
TCA.PR.X	Perpetual-Premium	Quote: 52.12 – 52.58 Spot Rate : 0.4600 Average : 0.3211 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-15 Maturity Price : 50.00 Evaluated at bid price : 52.12 Bid-YTW : 3.34 %
GWO.PR.M	Deemed-Retractible	Quote: 25.45 – 25.75 Spot Rate : 0.3000 Average : 0.2012 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 5.61 %
NA.PR.M	Deemed-Retractible	Quote: 26.62 – 26.95 Spot Rate : 0.3300 Average : 0.2340 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-15 Maturity Price : 26.00 Evaluated at bid price : 26.62 Bid-YTW : 3.97 %
BMO.PR.H	Deemed-Retractible	Quote: 25.68 – 25.92 Spot Rate : 0.2400 Average : 0.1510 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.68 Bid-YTW : 3.90 %
MFC.PR.B	Deemed-Retractible	Quote: 22.11 – 22.34 Spot Rate : 0.2300 Average : 0.1568 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.11 Bid-YTW : 6.29 %

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

… which is reasonable enough!

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

S&P affirmed Canada:

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

The BoC was full of cheery news:

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

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

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

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	2.2260 %	2,045.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	2.2260 %	3,076.3
Floater	3.52 %	3.53 %	159,494	18.46	2	2.2260 %	2,208.5
OpRet	4.84 %	2.61 %	64,363	1.53	8	-0.0678 %	2,456.3
SplitShare	5.38 %	0.62 %	54,167	0.34	4	0.5001 %	2,492.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0678 %	2,246.1
Perpetual-Premium	5.69 %	4.20 %	107,946	1.87	13	0.0303 %	2,126.4
Perpetual-Discount	5.35 %	5.43 %	109,050	14.74	17	0.1105 %	2,257.3
FixedReset	5.15 %	3.20 %	209,915	2.46	61	-0.0138 %	2,330.7
Deemed-Retractible	5.07 %	4.39 %	214,781	4.07	46	0.2555 %	2,203.3

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

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

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

Assiduous Reader BG sent me a link to a NYT article Bank’s Collapse in Europe Points to Global Risks:

Among Dexia’s biggest trading partners are several large United States institutions, including Morgan Stanley and Goldman Sachs, according to two people with direct knowledge of the matter. To limit damage from Dexia’s collapse, the bailout fashioned by the French and Belgian governments may make these banks and other creditors whole — that is, paid in full for potentially tens of billions of euros they are owed. This would enable Dexia’s creditors and trading partners to avoid losses they might otherwise suffer without the taxpayer rescue.

Whether this sets a precedent if Europe needs to bail out other banks will be closely watched.

This highlights my single largest complaint about the Basel I, II, and III rules: interbank loans are risk-weighted according to the credit rating of the sovereign; the only way this makes sense is if the regulators have taken an explicit view that inter-bank bail-outs will happen.

Note that the regulators’ moronic desire to see centralized clearing for derivatives will simply make matters worse.

Interbank loans should be risk-weighted according to the credit quality of the bank – or the collateral posted – not according to the sovereign. And, what’s more, the regulators should stop their pretense at surprise when this is what happens.

Dexia is also suffering losses on about 11 billion euros ($15.3 billion) in credit insurance it has written on mortgage-related securities, the same instruments that felled A.I.G., echoing that insurer’s troubles. In this business, too, Dexia’s problems have been worsened by aggressive demands by some trading partners for additional collateral. According to a person briefed on the transactions, Goldman Sachs, one of Dexia’s biggest trading partners, has asked for collateral equal to nearly twice the decline in market value of its deals. As was the case with A.I.G., Dexia must provide the collateral when the prices of the underlying securities fall, even if they have not defaulted.

Lucas van Praag, a spokesman for Goldman, said “we have no reason to believe that Dexia will not continue to meet its contractual obligations after it is restructured.”

As for the aggressive collateral calls by Goldman, Mr. van Praag said: “Our dealings with Dexia have been perfectly normal. In an environment of widening credit spreads and increased volatility, collateral calls are to be expected.” The suggestion that Goldman has been more aggressive than Dexia’s other trading partners is “quite odd,” he said, adding: “If collateral is owed, we ask for it.”

This looks like AIG: The Sequel for Lucas van Praag, World’s Greatest Corporate Spokesman. First, Goldman was vilified for needing a bail-out when AIG went bust. Then, when they proved to the Congressional Committe that they had no exposure to AIG because they (a) were collaterallized on most of the deals and (b) had purchased CDS protection on their uncollateralized exposure, they were vilified for creating a cash drain at AIG.

As far as I can tell, Goldman is the only financial institution in the world that behaves as if somebody, somewhere, is thinking about what they’re doing.

Assiduous Reader BG points out:

….problem is the contracts called for double in collateral for the amounts that the fixed interest rate borrow cost went offside when interest rates declined so much. So, while Dexia might have successfully hedged its net interest income spread over a 10-year term, the posting of collateral in the short term seems to have destroyed the bank.

Quite right, but it all seems somewhat peculiar. If Dexia is still solvent, but the overcollateralization has made it illiquid, then this is a classic study in central banking: the ECB should give them a loan at a punitive rate. But my question is: why double collateral? That’s a pretty fierce haircut! So my guess – and it’s only a guess, I haven’t been following the Dexia story closely – is that the collateral is no damn good; that the “double collateral” being talked about is computed according to the face value of the collateral, and that when the collateral is marked to market you arrive at a much more sensible figure. Any commentary from readers more familiar with the saga than I am would be appreciated!

Sadly, the Solvency Fairy did not arrive on the weekend:

Spanish and Italian government bonds fell as Europe’s leaders struggled to convince investors they can craft an effective response to the region’s debt crisis.
…
“The main disappointment was that there was no agreement on increasing the size” of the European bailout fund, said Alessandro Giansanti, a senior interest-rates strategist at ING Groep NV in Amsterdam. “Spreads will continue to widen ahead of the upcoming supply from Italy.”

Italy’s 10-year yield increased six basis points, or 0.06 percentage point, to 5.95 percent as of 4:56 p.m. in London. The 4.75 percent security due September 2021 lost 0.380, or 3.80 euros per 1,000-euro ($1,387) face amount, to 91.75. Rates on similar-maturity Spanish securities increased seven basis points to 5.55 percent.

… and tempers are fraying:

David Cameron has begun a week of intense political infighting over Europe by becoming embroiled in a furious row with Nicolas Sarkozy over Britain’s role in talks to solve the crisis enveloping the euro.

The bust-up between Cameron and Sarkozy held up the conclusion of the EU-27 summit for almost two hours, with the French president expressing rage at the constant criticism and lectures from UK ministers.

Sarkozy bluntly told Cameron: “You have lost a good opportunity to shut up.” He added: “We are sick of you criticising us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings.”

Being whined at by a petulant Frenchman isn’t going to do Cameron any harm:

Mr. Cameron is in the midst of a potentially destructive political meltdown within his Tory party, whose more right-wing backbenchers are adamantly opposed to Britain’s membership in the 27-member European Union.

On Monday, Mr. Cameron is facing a private members’ bill, proposed by one of his Tory backbenchers, that would ask the government to hold a referendum asking citizens if they want Britain to withdraw from Europe.

This, the Prime Minister knows, would be disastrous: A poll this week shows that almost half of Britons would vote positively in such a vote (the EU has never been popular in Britain).

Assiduous Reader BG also sends me a link to The Little State With a Big Mess:

After decades of drift, denial and inaction, Rhode Island’s $14.8 billion pension system is in crisis. Ten cents of every state tax dollar now goes to retired public workers. Before long, Ms. Raimondo has been cautioning in whistle-stops here and across the state, that figure will climb perilously toward 20 cents. But the scary thing is that no one really knows. The Providence Journal recently tried to count all the municipal pension plans outside the state system and stopped at 155, conceding that it might have missed some. Even the Securities and Exchange Commission is asking questions, including the big one: Are these numbers for real?
…
Analysts also took a close look at the projected long-term investment return for the pension system: 8.25 percent. Everything rested on hitting that target, but the state’s actuary said there was less than a 30 percent chance that would happen over the next 20 years. The board voted to lower the assumption to 7.5 percent. (Given the recent run in the financial markets, even that figure may seem optimistic.)

As a result of that change, the state’s pension shortfall instantly rose to $9 billion from $7 billion. The unions said Ms. Raimondo had manufactured a crisis.
…
Then, as if on cue, Central Falls declared bankruptcy. The city’s pension fund wasn’t just underfunded. It was completely out of money. A receiver for the city sought court permission to reduce by as much as half the base pensions of retired police officers and firefighters.

Suddenly the pension crisis wasn’t an abstraction any more. The unthinkable had happened, and the odds were that it would happen again unless the state acted quickly.

Feeling smug? Don’t. Here in Toronto, we like to pretend that a garbageman can lead a nice middle class existence ($22 / hour + pension + benefits, which is not much less than a Registered Nurse gets).

The US Treasury is contemplating floating-rate or reset bonds:

The U.S., seeking to attract investors who might otherwise avoid Treasuries amid a $1.3 trillion budget deficit, is considering the sale of floating- rate notes in what would be its first new security since it began offering inflation-linked debt 14 years ago.

The Treasury Department said this month it asked Wall Street’s biggest bond dealers for recommendations on structuring securities with coupons that rise or fall with benchmark rates. Officials are scheduled to gather with the 22 primary dealers, who include Goldman Sachs Group Inc. and JPMorgan Chase & Co., on Oct. 28 as it decides whether to go further during their regular meeting that precedes each quarterly refunding.

PWF was confirmed at Pfd-1(low) by DBRS:

DBRS has today confirmed the ratings on the Senior Debt and Preferred Shares of Power Financial Corporation (PWF or the Company) at AA (low) and Pfd-1 (low), respectively. The rating trends remain Stable.
…
Given an uncertain economic environment that could limit organic growth, DBRS expects that PWF will take advantage of its strong financial position to pursue small tactical acquisitions in the financial services arena. Pressures on regulatory capital adequacy could conceivably encourage a number of financial institutions to sell certain business lines at opportunistic prices, which would complement and leverage those of the Company. Achieving additional scale in Putnam through the acquisition of incremental AUM with a shared distribution channel, for example, would bring its financial results closer in line with the Company’s original targets for Putnam, while supporting broader growth initiatives. That PWF retains the ability to consider such value-added acquisitions in the current environment is a testament to its conservative financial profile and its long-term perspective.
…
With a 16.9% total unconsolidated debt ratio at the end of June 2011, the Company’s capitalization remains conservative, with only modest double leverage, exercised through the use of perpetual preferred shares. If such shares are treated as permanent equity, double leverage is close to non-existent. Debt service coverage ratios are strong at over 15 times on an earnings basis and just under 8.5 times on a cash flow basis. Liquidity is also not a source of concern, with close to $525 million in cash and short-term securities at the holding company pro forma the November 1, 2011, dividend payment of close to $250 million and additional stores of liquidity at both GWO and IGM. Such retention of liquid assets in the current uncertain economic environment reflects a unified and consistent approach to risk management across the organization. Financial flexibility is additionally enhanced by the proven access by the Company and its investee companies to capital-market funding should the Company require funding for an opportunistic acquisition.

If they want to make opportunistic acquisitions, they may find themselves bidding against the banks:

Phones are ringing steadily in the offices of Canada’s big banks as capital-starved European lenders seek buyers for assets.
…
For companies like Royal Bank of Canada and Canadian Imperial Bank of Commerce, which want to get bigger in the asset management business, there are plenty of tasty morsels on offer.
…
And there’s a belief in some of Bay Street’s bank towers that better deals will come to those who wait – that European banks have not cut their prices as much as they will be forced to do, by the time the euro zone mess is cleaned up.

Barrie McKenna has a good piece on milkfare in today’s Globe, All farmers are equal – but some are more equal than others.

It was a day of contrasts in the Canadian preferred share market, with PerpetualDiscounts losing 3bp, FixedResets gaining 11bp and DeemedRetractibles winning 27bp. Volatility was good and skewed to the upside. Volume was heavy.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	1.2483 %	2,000.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.2483 %	3,009.3
Floater	3.60 %	3.60 %	158,814	18.28	2	1.2483 %	2,160.4
OpRet	4.83 %	2.67 %	64,163	1.54	8	0.3940 %	2,458.0
SplitShare	5.41 %	1.41 %	53,858	0.34	4	0.1212 %	2,480.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.3940 %	2,247.6
Perpetual-Premium	5.69 %	4.81 %	106,557	0.51	13	0.0729 %	2,125.8
Perpetual-Discount	5.35 %	5.43 %	108,444	14.77	17	-0.0328 %	2,254.8
FixedReset	5.15 %	3.23 %	201,450	2.47	61	0.1140 %	2,331.0
Deemed-Retractible	5.08 %	4.45 %	217,284	4.42	46	0.2728 %	2,197.7

Performance Highlights
Issue	Index	Change	Notes
IAG.PR.C	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.41 Bid-YTW : 3.71 %
IAG.PR.A	Deemed-Retractible	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.16 Bid-YTW : 6.19 %
NA.PR.M	Deemed-Retractible	1.09 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-15 Maturity Price : 26.00 Evaluated at bid price : 26.94 Bid-YTW : 3.15 %
MFC.PR.B	Deemed-Retractible	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.93 Bid-YTW : 6.40 %
RY.PR.B	Deemed-Retractible	1.16 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 4.27 %
SLF.PR.F	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.28 Bid-YTW : 4.16 %
FTS.PR.H	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-24 Maturity Price : 23.50 Evaluated at bid price : 25.66 Bid-YTW : 3.05 %
BAM.PR.B	Floater	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-24 Maturity Price : 14.67 Evaluated at bid price : 14.67 Bid-YTW : 3.60 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.N	Deemed-Retractible	234,859	RBC crossed five blocks: 33,000, two of 60,000 each, 28,200 and 20,000, all at 25.77. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-01-27 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 4.52 %
GWO.PR.H	Deemed-Retractible	205,521	TD crossed 99,600 at 23.47 and 98,800 at 23.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.26 Bid-YTW : 5.84 %
BMO.PR.M	FixedReset	93,795	Nesbitt crossed 75,000 at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 2.98 %
POW.PR.C	Perpetual-Premium	92,701	Desjardins crossed 24,900 at 24.97; Nesbitt crossed 34,100 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-24 Maturity Price : 24.69 Evaluated at bid price : 24.95 Bid-YTW : 5.85 %
BMO.PR.P	FixedReset	79,978	TD crossed blocks of 50,000 and 25,000, both at 26.94. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.94 Bid-YTW : 3.23 %
CM.PR.D	Perpetual-Premium	62,319	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 5.60 %
There were 45 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: 25.85 – 26.59 Spot Rate : 0.7400 Average : 0.4682 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 5.55 %
ELF.PR.G	Perpetual-Discount	Quote: 20.70 – 21.24 Spot Rate : 0.5400 Average : 0.3627 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-24 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 5.78 %
BAM.PR.N	Perpetual-Discount	Quote: 22.01 – 22.52 Spot Rate : 0.5100 Average : 0.3418 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-24 Maturity Price : 21.65 Evaluated at bid price : 22.01 Bid-YTW : 5.43 %
ENB.PR.A	Perpetual-Premium	Quote: 25.62 – 26.08 Spot Rate : 0.4600 Average : 0.3042 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-11-23 Maturity Price : 25.00 Evaluated at bid price : 25.62 Bid-YTW : -14.18 %
IAG.PR.C	FixedReset	Quote: 26.41 – 26.74 Spot Rate : 0.3300 Average : 0.2176 YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.41 Bid-YTW : 3.71 %
SLF.PR.G	FixedReset	Quote: 24.37 – 24.75 Spot Rate : 0.3800 Average : 0.2681 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.37 Bid-YTW : 3.89 %

The FRB-Boston has released Public Policy Discussion Paper that will be of interest to the “Occupy” mob – Quantifying the Role of Federal and State Taxes in Mitigating Income Inequality:

Income inequality has risen dramatically in the United States since at least 1980. This paper quantifies the role that the tax policies of the federal and state governments have played in mitigating this income inequality. The analysis, which isolates the contribution of federal taxes and state taxes separately, employs two approaches. First, cross-sectional estimates compare before-tax and after-tax inequality across the 50 states and the District of Columbia. Second, inequality estimates across time are calculated to assess the evolution of the effects of tax policies. The results from the first approach indicate that the tax code reduces income inequality substantially in all states, with most of the compression of the income distribution attributable to federal taxes. Nevertheless, there is substantial cross-state variation in the extent to which state tax policies compress the income distribution attributable to federal taxes. Cross-state differences in gasoline taxes have a surprisingly large impact on income compression, as do sales tax exemptions for food and clothing. The results of the second approach indicate that there has been little change since the early 1980s in the impact of tax policy on income inequality across almost all states.

Here’s a big surprise! Even bigger writedowns on Greek debt are being discussed:

European finance ministers grappled with an assessment that Greece’s economy is deteriorating as they began a six-day battle to stave off a default and shield banks from the fallout.

A review by European and International Monetary Fund experts showed Greek bond writedowns of 60 percent and more official aid would still leave the country with a debt load bigger than its annual economic output by 2020.
…
Europe’s international image is “disastrous,” Luxembourg Prime Minister Jean-Claude Juncker told reporters before the Brussels meeting. “We’re not really giving a great example of a high standing of state governance.”

It will be remembered that Jean-Claude Juncker is a liar with lying staff.

Yellen is talking about QE3:

Federal Reserve Vice Chairman Janet Yellen said a third round of large-scale securities purchases might become warranted if necessary to boost a U.S. economy challenged by unemployment and financial turmoil.

The central bank should also give “careful consideration” to Chicago Fed President Charles Evans’s proposal to tie the near-zero interest-rate pledge to specific levels of unemployment and inflation, Yellen said today in a speech in Denver.

The remarks signal Fed officials may be prepared to delve further into unprecedented monetary territory and take criticism inside and outside the central bank for expanding the balance sheet. Fed policy makers are struggling to lower unemployment that’s been stuck near 9 percent or higher for 30 months without boosting inflation that’s already close to the central bank’s long-run goal.

See? The Republicans may be on to something

Interesting competition for retail deposits in Europe:

The rate paid on new bank deposits for up to a year has climbed in Portugal to 4 percent from 2.56 percent in December and in Italy to 2.41 percent from 1.40 percent, according to data from the European Central Bank. Banco Espirito Santo SA (BES), Portugal’s biggest publicly traded bank, is offering a 4.83 percent average annual return on three-year deposits of more than 1,000 euros.

In September, Intesa Sanpaolo SpA (ISP), Italy’s second-largest bank, sold two-year bonds yielding 4.5 percent to customers transferring cash from competitors.

In Spain, the government acted in May to penalize banks that offered what it deemed to be overly aggressive deposit rates by requiring them to make extra contributions to deposit guarantee funds. Average rates for new bank deposits have held steady this year in Spain at about 2.6 percent.

That hasn’t stopped banks from competing to lure savings with products such as the commercial paper that Bankia is selling to retail clients to raise 1 billion euros. Governments, both national and regional, are in on the act after states including Catalonia and Andalusia offered bonds for sale.
…
Banco Espirito said in August that it trimmed lending by 3.1 percent from a year earlier and boosted customer funds by 23 percent to bring its loan-to-deposit ratio down to 155 percent from 198 percent a year earlier. A lower loan-to-deposit ratio is a sign the bank is less reliant on sources of funding such as bond sales to fund its business.

Santander expects lending at its Spanish branch network to shrink 3 percent a year through 2013 after it brought down the loan-to-deposit ratio at the unit to 134 percent from 159 percent in 2009.

Capital Power Corporation, proud issuer of CPX.PR.A has been confirmed at Pfd-3 by DBRS:

DBRS has historically assessed CPLP’s financial profile on a stand-alone basis and, as such, deconsolidated the results of its 29.2% ownership interest in Capital Power Income LP (CPILP; rated BBB (high), Under Review with Negative Implications). The strategic review process initiated by CPILP in the fall of 2010 resulted in an agreement (the Agreement) in which Atlantic Power Corporation (ATP) will acquire all the outstanding units of CPILP. Upon closing of the transaction in early November 2011, CPLP is expected to receive total consideration of approximately $320 million for its ownership interest in CPILP, in a mix of cash, ATP shares and assets. As part of the Agreement, CPILP will sell its Roxboro and Southport facilities, located in North Carolina, to CPLP for a purchase price of $121 million (forming a portion of combined consideration received).

The PPAs for CPILP’s North Carolina plants were finalized with Progress Energy Resources Corp. in June 2011 and DBRS expects their contribution to CPLP’s earnings to be modest, although they should also reduce uncertainty. Closing of the transaction is not expected to have any impact on the ratings of CPLP or CPC, given the modest cash contribution of CPILP to CPLP, and the consideration to be received.

It was a fairly uneventful day on the Canadian preferred share market, with PerpetualDiscounts down 3bp, FixedResets up 1bp and DeemedRetractibles gaining 4bp. There was a surprising amount of volatility for such a quiet day overall, with the majority of major changes in bid price being downwards. 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	-1.1652 %	1,976.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.1652 %	2,972.2
Floater	3.64 %	3.66 %	158,310	18.16	2	-1.1652 %	2,133.8
OpRet	4.85 %	2.63 %	62,814	1.54	8	0.0730 %	2,448.3
SplitShare	5.41 %	1.89 %	54,051	0.35	4	-0.0661 %	2,477.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0730 %	2,238.8
Perpetual-Premium	5.69 %	3.84 %	106,472	1.88	13	-0.1667 %	2,124.3
Perpetual-Discount	5.35 %	5.40 %	109,341	14.80	17	-0.0270 %	2,255.5
FixedReset	5.15 %	3.17 %	195,355	2.47	61	0.0144 %	2,328.4
Deemed-Retractible	5.08 %	4.60 %	219,805	5.82	46	0.0378 %	2,191.7

Performance Highlights
Issue	Index	Change	Notes
ELF.PR.F	Perpetual-Discount	-2.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-21 Maturity Price : 21.95 Evaluated at bid price : 21.95 Bid-YTW : 6.09 %
BAM.PR.B	Floater	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-21 Maturity Price : 14.43 Evaluated at bid price : 14.43 Bid-YTW : 3.66 %
POW.PR.C	Perpetual-Premium	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-21 Maturity Price : 24.58 Evaluated at bid price : 24.82 Bid-YTW : 5.88 %
PWF.PR.M	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.64 %
SLF.PR.G	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.81 %
BAM.PR.K	Floater	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-21 Maturity Price : 14.41 Evaluated at bid price : 14.41 Bid-YTW : 3.67 %
IFC.PR.A	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 3.77 %
IFC.PR.C	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.91 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.B	FixedReset	113,925	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.59 %
CM.PR.D	Perpetual-Premium	113,588	Desjardins crossed 50,000 at 25.11. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-21 Maturity Price : 24.70 Evaluated at bid price : 24.93 Bid-YTW : 5.78 %
CU.PR.C	FixedReset	100,500	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 3.60 %
IFC.PR.C	FixedReset	98,345	TD crossed 11,000 at 25.21. RBC crossed 30,000 at 25.21 and 10,500 at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.91 %
BNS.PR.N	Deemed-Retractible	89,842	RBC crossed 39,900 at 25.77. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-01-27 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 4.60 %
BNS.PR.Z	FixedReset	71,335	Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.43 %
There were 34 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
SLF.PR.H	FixedReset	Quote: 24.05 – 24.57 Spot Rate : 0.5200 Average : 0.3135 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 4.41 %
SLF.PR.F	FixedReset	Quote: 25.95 – 26.50 Spot Rate : 0.5500 Average : 0.3747 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 4.66 %
PWF.PR.O	Perpetual-Premium	Quote: 25.40 – 25.80 Spot Rate : 0.4000 Average : 0.2881 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 5.53 %
PWF.PR.M	FixedReset	Quote: 26.25 – 26.60 Spot Rate : 0.3500 Average : 0.2454 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.64 %
SLF.PR.G	FixedReset	Quote: 24.50 – 24.75 Spot Rate : 0.2500 Average : 0.1454 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.81 %
BMO.PR.K	Deemed-Retractible	Quote: 26.18 – 26.55 Spot Rate : 0.3700 Average : 0.2682 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-25 Maturity Price : 25.50 Evaluated at bid price : 26.18 Bid-YTW : 4.52 %

The heroes of the SEC were able to extort $280-million from Citigroup:

The SEC alleges that Citigroup Global Markets structured and marketed a CDO called Class V Funding III and exercised significant influence over the selection of $500 million of the assets included in the CDO portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select.

The Basel Committee on Banking Supervision has released a Progress report on Basel III implementation. With respect to Basel III implementation, Canada reports:

Draft regulation expected in May 2012 and final guidance before the end of 2012 for implementation in Q1 2013. OSFI has issued a number of public communications concerning the implementation of Basel III.

Europe remains mired in wrangling:

German Chancellor Angela Merkel has canceled a planned speech to parliament in Berlin tomorrow because of a deadlock over proposals to leverage the European Financial Stability Facility to give it more firepower, three German lawmakers said.

“It’s a disappointing development but without any concrete proposal for increasing the efficiency of the fund the chancellor can’t present a complete set of proposals tomorrow,” Norbert Barthle the ranking member of Merkel’s Christian Democratic Union party on parliament’s budget committee, told reporters. Other lawmakers confirming cancelation of Merkel’s speech were opposition members Carsten Schneider and Priska Hinz.

“The French want more money from Germany than we are prepared to shoulder,” Otto Fricke, the budget spokesman for Merkel’s Free Democratic Party ally in parliament, told reporters today.

What’s on the table? Enormous credit lines:

Europe’s bailout fund may be authorized to provide credit lines of as much as 10 percent of a country’s economy, a draft document shows.

The enhanced fund, called the European Financial Stability Facility, may be able to offer loans to countries “before they face difficulties raising funds,” the draft guidelines obtained by Bloomberg News show. Credit lines for Spain and Italy, which required European Central Bank support, could reach 270 billion euros ($371 billion).

The guidelines prompted criticism from some German lawmakers who have opposed bailout aid as France and Germany wrangled over the role of the ECB in tackling Europe’s debt crisis. Finance ministers gather in Brussels tomorrow to set a common strategy, with leaders scheduled to meet Oct. 23.
…
France favors creating a bank out of the EFSF, boosting its financial clout with backing from the ECB, a proposal that Germany rejects, Finance Minister Wolfgang Schaeuble told lawmakers in Berlin this week. French Prime Minister Francois Fillon said today that the euro region should agree to use leverage to make the region’s financial support fund “massive.”

Monetizing the debt through the ECB would certainly be the easiest solution. Too bad it would also be the worst.

There’s a little bit more detail regarding Kweku Adoboli / UBS, but not much:

Prosecutors amended two of the four charges against Adoboli to indicate that records he allegedly falsified were on ETF trades. A London magistrates court today transferred the case against the 31-year-old to a criminal court where he will be expected to enter a plea on the accusations at a Nov. 22 hearing.
…
UBS questioned one of Adoboli’s trades in August this year, and he “provided a good and plausible explanation,” Williams said. The bank then asked him on Sept. 13 about further trades he’d made that could expose the bank to large losses, and whether he’d told the credit-risk department. He said he hadn’t.

The following day, UBS asked him to confirm “the exact identities of the counterparties” on the trades and he didn’t respond, Williams said at the hearing today. Adoboli left the office at lunchtime and went to his apartment in east London, where he e-mailed the bank about the positions.

“The bank was anxious to have him explain,” and he returned at 3:45 p.m. and cooperated with UBS managers, the prosecutor said. The bank called the police late that night and Adoboli was taken to Bishopsgate precinct, the closest one to UBS’s London headquarters. He was cautioned about his rights and interviewed and “made no admissions,” Williams said.
…
In addition to the departure of Gruebel and the co-heads of global equities, Francois Gouws and Yassine Bouhara, the bank has suspended “a number of front office staff” pending further disciplinary action, Carsten Kengeter, head of the investment bank, said in a memo to staff.

Sounds like just another case of shitty management at an investment bank keeping sloppy records. Yawn.

I hadn’t realized this before but OMERS is in the mutual fund business. Many municipal employees – particularly the 75% (?) of the populace whose objective is to think about financial planning as little as possible – would be well advised to participate.

DBRS confirmed PFR.UN at STA-2:

The main constraints to the rating are the interest rate risk of the Portfolio and the potential for capital losses and reductions in income resulting from underlying securities being called for redemption by their respective issuers.

Seems to me to be a virtual certainty that one or the other of those risks will be realized.

DBRS confirmed NA at Pfd-2:

While strong market shares in the home province remain a key strength of the Bank, the rating reflects the Bank’s regional concentration in Québec, which accounted for 68% of its revenues in 2010, up from an average of 64% over the previous four years. National’s revenue is diversified by business line: the Bank generated 48% of earnings for the first three quarters of 2011 (excluding the Other segment) from the personal and commercial banking unit, 39% of earnings from the financial markets business and 13% from its wealth management operations.

Dan Hallett writes an entertaining piece in the Globe titled BMO income fund sets yield bar unreachably high:

In his recent article, Mr. Heinzl points out that the fund’s hefty monthly cash payout – now equal to more than 9.5 per cent annualized net of fees – has been well above the fund’s longer-term returns.
…
Earlier this year, I tested the BMO Monthly Income’s distribution for sustainability. I found that since the managers would have to generate more than 17 per cent annually from its stock picks that the distribution would either need to be cut or risk further eating into the fund’s principal.
…
BMO insists the payout is sustainable, an assertion they base on the fund’s net inflows.

I love that last paragraph quoted – Madoff was saying the same thing.

When I think of all the agonizing that has gone into my estimates of sustainable income for MAPF, this kind of stuff drives me wild … but BMO can afford to hire more ex-regulators than I can, so I suppose it’s OK.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts winning 14bp, FixedResets up 1bp and DeemedRetractibles losing 7bp. Volatility was average, as was volume.

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	-0.9168 %	1,999.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.9168 %	3,007.2
Floater	3.60 %	3.61 %	155,589	18.27	2	-0.9168 %	2,158.9
OpRet	4.86 %	2.59 %	65,093	1.55	8	0.2881 %	2,446.5
SplitShare	5.41 %	0.73 %	54,755	0.36	4	0.3250 %	2,479.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2881 %	2,237.1
Perpetual-Premium	5.68 %	3.74 %	105,131	0.52	13	0.0455 %	2,127.8
Perpetual-Discount	5.35 %	5.40 %	110,744	14.80	17	0.1351 %	2,256.1
FixedReset	5.15 %	3.23 %	196,233	2.47	61	0.0107 %	2,328.1
Deemed-Retractible	5.08 %	4.56 %	210,053	7.64	46	-0.0738 %	2,190.9

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.H	FixedReset	-2.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 4.39 %
SLF.PR.B	Deemed-Retractible	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.24 Bid-YTW : 6.35 %
BAM.PR.M	Perpetual-Discount	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 21.91 Evaluated at bid price : 22.17 Bid-YTW : 5.40 %
FTS.PR.E	OpRet	1.06 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.80 Bid-YTW : 2.59 %
ELF.PR.F	Perpetual-Discount	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 22.11 Evaluated at bid price : 22.40 Bid-YTW : 5.95 %
BAM.PR.J	OpRet	2.15 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 4.65 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.G	FixedReset	158,232	Nesbitt crossed two blocks of 40,000 each, both at 26.95. TD crossed blocks of 25,000 and 50,000, both at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.94 Bid-YTW : 2.97 %
RY.PR.E	Deemed-Retractible	142,064	RBC crossed 130,600 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.61 %
BNS.PR.Z	FixedReset	99,030	Recent secondary offering. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.66 Bid-YTW : 3.44 %
IFC.PR.A	FixedReset	74,450	Nesbitt crossed 50,000 at 25.05; RBC crossed 18,700 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.94 %
CM.PR.G	Perpetual-Discount	72,112	Desjardins crossed 44,000 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 24.53 Evaluated at bid price : 24.85 Bid-YTW : 5.44 %
BMO.PR.M	FixedReset	64,840	RBC crossed two blocks of 30,000 each, both at 26.08. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 3.07 %
There were 32 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CIU.PR.A	Perpetual-Discount	Quote: 24.15 – 24.70 Spot Rate : 0.5500 Average : 0.3334 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 23.67 Evaluated at bid price : 24.15 Bid-YTW : 4.80 %
BMO.PR.K	Deemed-Retractible	Quote: 26.16 – 26.43 Spot Rate : 0.2700 Average : 0.1566 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-25 Maturity Price : 25.50 Evaluated at bid price : 26.16 Bid-YTW : 4.55 %
BAM.PR.X	FixedReset	Quote: 23.86 – 24.15 Spot Rate : 0.2900 Average : 0.2022 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 22.68 Evaluated at bid price : 23.86 Bid-YTW : 3.85 %
IAG.PR.F	Deemed-Retractible	Quote: 25.73 – 26.00 Spot Rate : 0.2700 Average : 0.1923 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : 5.61 %
TRP.PR.A	FixedReset	Quote: 25.80 – 26.05 Spot Rate : 0.2500 Average : 0.1727 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-20 Maturity Price : 23.60 Evaluated at bid price : 25.80 Bid-YTW : 3.44 %
ENB.PR.A	Perpetual-Premium	Quote: 25.37 – 25.63 Spot Rate : 0.2600 Average : 0.1920 YTW SCENARIO Maturity Type : Call Maturity Date : 2011-11-19 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : -3.46 %