Category: Market Action

The SEC has released its Study on Investment Advisers and Broker-Dealers:

This Study outlines the Staff’s findings and makes recommendations to the Commission for potential new rulemaking, guidance, and other policy changes. These recommendations are intended to make consistent the standards of conduct applying when retail customers receive personalized investment advice about securities from broker-dealers or investment advisers. The Staff therefore recommends establishing a uniform fiduciary standard for investment advisers and broker-dealers when providing investment advice about securities to retail customers that is consistent with the standard that currently applies to investment advisers. The recommendations also include suggestions for considering harmonization of the broker-dealer and investment adviser regulatory regimes, with a view toward enhancing their effectiveness in the retail marketplace.

I think it’s nuts. Stockbrokers are salesmen. Their job is to sell new issues – full stop. The only regulatory change required is a requirement that the only title allowable for those with a license is “Salesman”, and that this title – and no other – be displayed on all communications beside the salesman’s name.

Two Commissioners basically agree with me:

Two examples from the Study illustrate its shortcomings.

First, a basic premise of the Study’s recommendation to impose a uniform fiduciary duty on broker-dealers and investment advisers is concern that investors are confused about the differences between a broker-dealer and an investment adviser and the duties owed by each. Such confusion is a serious matter. However, the practical consequences resulting from that confusion for those very investors have not been sufficiently studied or documented. Moreover, the Study does not address the possibility that the Study’s own recommendations will not resolve or eliminate investor confusion and may in fact create new sources of confusion.

Second, the Study, in our view, does not appropriately account for the potential overall cost of the recommended regulatory actions for broker-dealers, investment advisers, and retail investors. The Study unduly discounts the risk that, as a result of the regulatory burdens imposed by the recommendations on financial professionals, investors may have fewer broker-dealers and investment advisers to choose from, may have access to fewer products and services, and may have to pay more for the services and advice they do receive. Any such results are not in the best interests of investors; nor do they serve to protect them.

The EFSF may morph into the European Fix-Everything Fund:

European Central Bank Executive Board member Juergen Stark said measures to strengthen the region’s rescue fund could include purchases of government bonds or injecting cash into commercial banks.

“I could imagine the” European Financial Stability Facility “recapitalizing banks or buying sovereign debt,” Stark said in an interview with Dutch newspaper Het Financieele Dagblad published today, according to an e-mailed transcript from the Frankfurt-based central bank. “But this issue has to be decided at the political level.”

Spanish Cajas need a lot of money:

Spain said Monday its banks will need €20-billion ($27-billion U.S.) in new capital to meet new reserve requirements aimed at strengthening their finances.

Finance Minister Elena Salgado said a government fund that has been pouring money into mergers among troubled cajas, or savings banks, might eventually buy stakes in the entities that cannot meet the new criteria by raising capital on the open market.

European banks are issuing samurais:

Debt sold in Japan by overseas issuers yield an average 90 basis points more than government debt, while euro-denominated financial company notes yield 236 more than benchmark German securities, according to indexes compiled by Nomura Securities Co. and Bank of America Merrill Lynch. It costs 315 basis points less in yield for lenders to sell debt in Japan than in Europe, the biggest difference since the gap reached 319 in March 2009.

Barclays Plc and Credit Suisse Group AG led European lenders that raised a record 835.5 billion yen ($10.1 billion) from Samurai bonds last year, according to data compiled by Bloomberg. The growing advantage to issuing bonds in Japan may help Europe’s financial companies refinance 765 billion euros ($1.04 trillion) of debt Barclays estimates matures this year.

“Europe’s top banks may need to pay more spread than last year to sell Samurai bonds, but there’s a difference between investors in Japan and Europe,” said Yasuhiro Matsumoto, head of credit research at Shinsei Securities Co. in Tokyo. While European investors are increasingly cautious amid their region’s financial crisis, for Japanese investors “Samurai bonds are the only option” to get yield, he said.

Econbrowser’s James Hamilton discusses The Fed’s new policy tools:

Let me begin with a little background. Prior to the fall of 2008, the focus of monetary policy was to choose a target for the fed funds rate, which is the interest rate banks charge each other for overnight loans of Federal Reserve deposits. In normal times, this rate was extremely sensitive to the quantity of those deposits created by the Fed, enabling the Fed to achieve its target for the fed funds rate with relatively modest additions or withdrawals of reserves. But by the end of 2008, the Fed had driven the fed funds rate essentially to zero and began paying interest on reserves. Since then, banks have been content to hold an arbitrarily large amount of excess reserves, and the overnight rate has been as low as it could go. In other words, the traditional tools of monetary policy have become completely irrelevant in the current setting.

Meanwhile, Jim Hamilton’s World of Securities Regulation contrasts the differences between US and EU proposals for winding down failed banks:

The proposed EU legislation and the Dodd-Frank Act both provide for a resolution framework for systemic institutions at group level. Both the EU and the US are accordingly working to develop mechanisms which should be capable of resolving or winding down failing financial institutions. The US approach intends to address systemic risk by taking failing institutions into receivership by the FDIC, under which their business will be transferred or wound down and the failed institution will be liquidated.

The EU framework would also allow authorities to put firms into an orderly resolution in which their essential services could be preserved while the failed institution itself was ultimately wound down. However, in the cases where an institution is too large, complex or interconnected to be wound down in an orderly manner, the Commission is also considering equipping authorities with ambitious additional tools which would, under stringent conditions, allow a troubled firm to continue as a going concern, through write down of its debt, in order to preserve its economically important functions and buy time for authorities to sell or wind down its business in an orderly manner. In order to prevent moral hazard, there would need to be strict conditions accompanying any such approach, including the dilution of shareholders, changes to management, haircutting of creditors, and re-structuring so as to ensure that the surviving entity was viable.
…
A key power for regulators under this regime would be to write down debt. The consultation seeks views on two broad approaches to achieving this objective. The first approach would involve a broad statutory power for authorities to write down or convert unsecured debt, including senior debt, subject to possible exclusions for classes of senior debt that may be necessary to preserve the proper functioning of credit markets. It is not envisaged that such a power would apply to existing debt that is currently in issue, as that could be disruptive. The second approach would require financial firms to issue a fixed amount of “bail-in’’ debt that could be written off or converted into equity on a specified trigger linked to the firm’s failure. This requirement would be phased in over an appropriate period and, again, it is not envisaged that any existing debt already in issue would be subject to write down.

The Irish government has collapsed, but the budget might pass anyway:

Finance Minister Brian Lenihan will meet today lawmakers from the Green Party, which withdraw from the coalition yesterday, and opposition parties in Dublin to discuss a timetable for passing the Finance Bill. The plan would enact 6 billion euros ($8.2 billion) of tax increases and spending cuts.
…
James Reilly, deputy leader of Fine Gael said yesterday the bill can be passed this week. The Labour Party said it will table a confidence motion this week if the government doesn’t commit to passing the law by Jan. 28.

Bank valuations are still low:

Valuations for U.S. financial stocks have fallen so far, it’s like the rebound from the worst crisis since the 1930s never happened.

Banks, insurers and asset managers in the Standard & Poor’s 500 Index trade at 12.3 times estimated earnings, close to the lowest level since the bull market began in March 2009, according to data compiled by Bloomberg. The group is the second-cheapest among 10 industries in the gauge even as analysts say profits will rise 18 percent this year, exceeding the S&P 500, data compiled by Bloomberg show.

This is the sort of thing that usually corrects after a takeover or two, but somehow I think that a takeover of an undervalued, yet healthy, bank will not be particularly popular with the regulators these days.

Still, some have done all right anyway:

Paulson & Co., the $35.9 billion hedge fund run by John Paulson, told clients that it made more than $1 billion on its Citigroup Inc. investment in the last 18 months.

Citigroup was the fund’s most profitable bank holding last year, Paulson said in a letter to clients this month. The stock surged 43 percent in 2010.

But the banks aren’t out of the woods yet:

Bank of America Corp., the biggest U.S. lender, may book an $8.5 billion charge on costs to resolve disputes over faulty mortgages, a figure at the upper end of the range the company gave last week, according to Oppenheimer & Co.

The cost to settle demands from private investors on home loans could be as low as zero and the upper end is $7 billion to $10 billion, the firm said last week in a slide show. The bank may take a charge in this year’s fourth quarter, and costs may expand with lawyers “smelling blood in the water,” Christopher Kotowski, an Oppenheimer analyst, said yesterday in a note.

It would be interesting to take apart the projected earnings that give rise to the “low valuation” claim. Typically, such forecasts are based on analyst-defined ‘core business’, with special charges treated as a mere bagatelle.

National Bank has issued covered bonds:

The wait finally ended Monday morning with the launch of a $1-billion (U.S.) offering. The deal comes just a few weeks after rating agency DBRS assigned a provisional triple-A to the bank’s covered bonds. That rating was given on top of a cover pool worth $1.565-billion, with the vast majority of mortgages located in Quebec.

Barclays, Citi, Morgan Stanley and National Bank Financial are co-lead managers for the offering, which is still being priced near 35 basis points over mid-swaps.

DBRS has made a Quarterly Split Share Market Report available to subscribers.

As Assiduous Readers of the comments will know, I have been advised that La Presse had a piece recommending low-coupon bank preferreds about a month ago, on the grounds that the author believed Basel III will force redemption. I can’t find the link! Any help would be appreciated, acknowledged and rewarded.

The Canadian preferred share market declined slightly today, with PerpetualDiscounts down 4bp and FixedResets losing 9bp. Volume was very healthy.

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	0.5470 %	2,358.5
FixedFloater	4.78 %	3.47 %	27,989	19.17	1	0.1761 %	3,561.0
Floater	2.54 %	2.30 %	42,448	21.53	4	0.5470 %	2,546.6
OpRet	4.81 %	3.41 %	67,601	2.28	8	0.0096 %	2,389.5
SplitShare	5.30 %	1.49 %	449,275	0.87	4	0.1201 %	2,467.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0096 %	2,185.0
Perpetual-Premium	5.64 %	5.16 %	142,268	5.02	20	0.1557 %	2,035.0
Perpetual-Discount	5.32 %	5.29 %	257,160	14.97	57	-0.0410 %	2,080.6
FixedReset	5.25 %	3.44 %	283,419	3.04	52	-0.0895 %	2,271.9

Performance Highlights
Issue	Index	Change	Notes
CM.PR.K	FixedReset	-1.73 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.16 Bid-YTW : 3.91 %
IAG.PR.C	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.80 Bid-YTW : 3.80 %
PWF.PR.E	Perpetual-Discount	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-24 Maturity Price : 23.38 Evaluated at bid price : 24.55 Bid-YTW : 5.57 %
PWF.PR.I	Perpetual-Premium	1.15 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-02-23 Maturity Price : 25.50 Evaluated at bid price : 25.60 Bid-YTW : -0.46 %
GWO.PR.F	Perpetual-Premium	1.49 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-02-23 Maturity Price : 25.50 Evaluated at bid price : 25.86 Bid-YTW : -6.59 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.M	OpRet	77,455	Nesbitt crossed 50,000 at 25.77 and 25,000 at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-05-30 Maturity Price : 25.50 Evaluated at bid price : 25.69 Bid-YTW : 2.23 %
TRP.PR.C	FixedReset	56,128	Nesbitt crossed 30,000 at 25.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-29 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 4.07 %
TD.PR.C	FixedReset	55,900	Nesbitt crossed 50,000 at 26.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.61 Bid-YTW : 3.36 %
CM.PR.I	Perpetual-Discount	48,300	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-24 Maturity Price : 23.07 Evaluated at bid price : 23.27 Bid-YTW : 5.06 %
HSB.PR.E	FixedReset	43,440	RBC crossed 40,000 at 27.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 27.55 Bid-YTW : 3.70 %
CM.PR.H	Perpetual-Discount	31,645	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-24 Maturity Price : 23.56 Evaluated at bid price : 23.83 Bid-YTW : 5.05 %
There were 38 other index-included issues trading in excess of 10,000 shares.

The Financial Crisis Inquiry Commission is forecast to conclude “It’s complicated.”:

The federal commission that investigated the origins of the financial crisis is set to issue three competing conclusions next week.

The Financial Crisis Inquiry Commission’s main report, to be released Jan. 27, is backed only by the panel’s six Democratic appointees. The four Republicans have written two separate dissents, according to a blog post by one of them.
…
The Democrats’ final report cites a broad swath of failures for the crisis, according to three people who have been briefed on the report or have seen parts of it. They blame greedy bankers and mortgage brokers, lax derivatives oversight, bumbling credit-rating firms, predatory lending, a lack of risk management at banks and decades of deregulation, said the people who spoke on condition of anonymity because the report isn’t yet public.
…
Though he didn’t give details, Hennessey said he had signed on to a 27-page dissent along fellow Republicans Bill Thomas, the former California congressman who serves as the panel’s vice chairman, and Douglas Holtz-Eakin.

The dissent will “supersede” the preliminary paper that came out last month, Hennessey said on his blog.
…
Wallison’s report will focus mainly on the government’s housing policy as the cause of the crisis, they said. He also takes aim at how the commission was run, putting blame on the management of its Democratic chairman, Phil Angelides, and not the committee staff, the people added. Wallison’s dissent also criticizes the administrations of Presidents Bill Clinton and George W. Bush for their housing policies, the people said.

The FCIC preliminary dissent was discussed on December 16. The whole thing is just a Rorschach test.

Government Motors is planning to double its subsidy sucking capacity:

After exploring its options, the team settled on doubling capacity for the Volt next year, they said. GM is still evaluating the Volt’s technology for other models.
…
GM should be able to sell all of its Volt production as long as the government’s $7,500 tax incentive is in place, Hall said. The incentive expires after GM sells 200,000 of the car.

Which makes an interesting juxtaposition with school funding:

U.S. governors and legislatures facing deficits of more than $140 billion are slashing local school budgets, cuts that may mean jammed classrooms, fewer teachers and libraries without librarians.

The Texas Legislature is considering a 13 percent reduction in education funding and South Dakota Governor Dennis Daugaard recommended taking 10 percent out of per-pupil spending. Cuts proposed in those states, and in Kansas, Washington, Ohio and Iowa, come after New Jersey Governor Chris Christie took $820 million away from schools in his current $29.4 billion budget.

and:

Utah Representative Jason Chaffetz said Republicans have contacted bankruptcy attorneys to discuss ways to change the law to allow states to restructure financial obligations such as debts to retirees. He said it hasn’t been decided whether that would mean allowing states to file for bankruptcy.

Chaffetz said he proposed legislation to oppose federal bailouts of pensions.

Goldman sold some 30-year paper:

Goldman Sachs Group Inc. sold $2.5 billion of 30-year debt in its first sale of the securities in more than three years, as investors accept the lowest premiums since April for bank bonds with similar credit grades.

The 6.25 percent notes from the fifth-biggest U.S. bank by assets pay 170 basis points, or 1.7 percentage points, more than similar-maturity Treasuries, according to data compiled by Bloomberg.

The Canadian preferred share market eased off a little on heavy volume, with PerpetualDiscounts down 8bp and FixedResets basically flat.

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	0.5011 %	2,345.7
FixedFloater	4.79 %	3.48 %	27,089	19.17	1	-0.4384 %	3,554.7
Floater	2.55 %	2.32 %	44,079	21.47	4	0.5011 %	2,532.8
OpRet	4.81 %	3.39 %	65,669	2.29	8	-0.1011 %	2,389.3
SplitShare	5.30 %	1.70 %	465,131	0.88	4	0.0801 %	2,464.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1011 %	2,184.7
Perpetual-Premium	5.64 %	5.00 %	138,510	5.30	20	-0.0824 %	2,031.8
Perpetual-Discount	5.31 %	5.30 %	256,691	14.96	57	-0.0835 %	2,081.4
FixedReset	5.23 %	3.38 %	284,976	3.04	52	-0.0022 %	2,273.9

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.I	Perpetual-Discount	-1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-21 Maturity Price : 21.69 Evaluated at bid price : 22.04 Bid-YTW : 5.13 %
GWO.PR.H	Perpetual-Discount	-1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-21 Maturity Price : 22.85 Evaluated at bid price : 23.06 Bid-YTW : 5.30 %
TRP.PR.B	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-21 Maturity Price : 24.92 Evaluated at bid price : 24.97 Bid-YTW : 3.88 %
GWO.PR.G	Perpetual-Discount	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-21 Maturity Price : 23.43 Evaluated at bid price : 23.71 Bid-YTW : 5.53 %
BAM.PR.H	OpRet	-1.02 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2012-03-30 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 5.37 %
IAG.PR.C	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 27.19 Bid-YTW : 3.26 %
BAM.PR.K	Floater	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-21 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 2.81 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.C	FixedReset	93,594	Nesbitt crossed 55,000 at 25.60; RBC crossed 17,600 at 25.48. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-29 Maturity Price : 25.00 Evaluated at bid price : 25.47 Bid-YTW : 3.97 %
RY.PR.F	Perpetual-Discount	87,356	Nesbitt crossed blocks of 30,000 and 50,000, both at 23.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-21 Maturity Price : 22.82 Evaluated at bid price : 23.00 Bid-YTW : 4.90 %
FTS.PR.H	FixedReset	80,752	TD crossed 15,000 at 25.75; Nesbitt crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 3.66 %
BMO.PR.P	FixedReset	78,839	Nesbitt crossed 60,000 at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-27 Maturity Price : 25.00 Evaluated at bid price : 27.20 Bid-YTW : 3.34 %
TRP.PR.B	FixedReset	73,454	National crossed 13,000 at 25.27; RBC crossed 16,600 at 26.07. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-21 Maturity Price : 24.92 Evaluated at bid price : 24.97 Bid-YTW : 3.88 %
MFC.PR.A	OpRet	68,509	Nesbitt crossed 60,000 at 25.80. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.72 Bid-YTW : 3.56 %
There were 60 other index-included issues trading in excess of 10,000 shares.

Banks have returned to dominance in credit market trading:

The average difference to buy and sell the 10 most actively-traded U.S. corporate credit-default swaps contracts ballooned to 24.2 basis points in the nine months after Lehman’s bankruptcy, from an average 4.5 basis points in the two years before the collapse, according to data compiled by Bloomberg and London-based CMA. That means a trader after the crisis could have earned an extra $19,700 on a $10 million trade.

“They made hay while the sun shined,” Lewis said. “The total compensation was great at the boutiques when the larger banks couldn’t compete.”

Those margins collapsed as the U.S. government and the Federal Reserve spent, lent or committed $12.8 trillion to unlock capital markets and bail out banks. The average gap between prices to buy and sell credit-default swaps narrowed to an average 7 basis points in 2010, CMA data show.

It was a day of mixed results on heavy volume for the Canadian preferred share market, with PerpetualDiscounts gaining 3bp and FixedResets losing 9bp.

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	-0.1462 %	2,334.0
FixedFloater	4.77 %	3.45 %	26,807	19.20	1	-0.3930 %	3,570.3
Floater	2.56 %	2.33 %	44,377	21.36	4	-0.1462 %	2,520.1
OpRet	4.81 %	3.25 %	66,553	2.29	8	-0.0818 %	2,391.7
SplitShare	5.31 %	1.69 %	472,783	0.88	4	-0.1150 %	2,462.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0818 %	2,187.0
Perpetual-Premium	5.64 %	5.10 %	140,005	5.18	20	0.1158 %	2,033.5
Perpetual-Discount	5.31 %	5.29 %	258,372	14.90	57	0.0341 %	2,083.2
FixedReset	5.23 %	3.45 %	288,639	3.05	52	-0.0864 %	2,274.0

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.G	Perpetual-Discount	-1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 23.72 Evaluated at bid price : 24.01 Bid-YTW : 5.46 %
GWO.PR.I	Perpetual-Discount	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 22.29 Evaluated at bid price : 22.44 Bid-YTW : 5.05 %
IAG.PR.C	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.89 Bid-YTW : 3.66 %
BAM.PR.J	OpRet	-1.08 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.53 Bid-YTW : 4.47 %
MFC.PR.C	Perpetual-Discount	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 21.54 Evaluated at bid price : 21.54 Bid-YTW : 5.29 %
GWO.PR.F	Perpetual-Premium	1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-10-30 Maturity Price : 25.25 Evaluated at bid price : 25.55 Bid-YTW : 4.72 %
ELF.PR.F	Perpetual-Discount	5.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 22.00 Evaluated at bid price : 22.00 Bid-YTW : 6.07 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.I	Perpetual-Discount	106,394	Nesbitt crossed 49,000 at 23.25; RBC crossed 12,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 23.03 Evaluated at bid price : 23.23 Bid-YTW : 5.07 %
SLF.PR.E	Perpetual-Discount	48,879	Nesbitt crossed 26,800 at 21.70 and bought 10,000 from RBC at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 21.37 Evaluated at bid price : 21.65 Bid-YTW : 5.23 %
GWO.PR.N	FixedReset	46,420	RBC crossed 36,000 at 24.81. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 24.80 Evaluated at bid price : 24.85 Bid-YTW : 3.86 %
BAM.PR.J	OpRet	44,943	RBC crossed 38,700 at 26.80. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.53 Bid-YTW : 4.47 %
PWF.PR.F	Perpetual-Discount	43,350	Nesbitt crossed 15,800 at 24.00; RBC crosse 19,000 at 24.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 23.69 Evaluated at bid price : 24.00 Bid-YTW : 5.48 %
RY.PR.F	Perpetual-Discount	43,200	CIBC sold 29,400 to anonymous at 23.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-20 Maturity Price : 22.82 Evaluated at bid price : 23.00 Bid-YTW : 4.90 %
There were 56 other index-included issues trading in excess of 10,000 shares.

The Bank of Canada has published the January 2011 Monetary Policy Report:

Underlying pressures affecting prices remain subdued, reflecting the considerable
slack in the Canadian economy. Core inflation is projected to edge gradually up to 2 per cent by the end of 2012, as excess supply in the economy is slowly absorbed. Inflation expectations remain well anchored. Total CPI inflation is being boosted temporarily by the effects of provincial indirect taxes, but is expected to converge to the 2 per cent target by the end of 2012.

There are two main upside risks to inflation, relating to higher commodity prices and the possibility of greater-than-projected momentum in the Canadian household sector:

• The global economy could be stronger than currently anticipated, particularly if measures to moderate demand in emerging-market economies prove insufficient. This could boost commodity prices, which would increase incomes in Canada and support stronger investment activity and household spending.
• There could be stronger-than-expected momentum in household expenditures in Canada. With exceptionally stimulative financing conditions, borrowing could continue to grow faster than income.

Volume picked up a little as performance slipped on the Canadian preferred share market, with PerpetualDiscounts down 22bp and FixedResets losing 13bp.

PerpetualDiscounts now yield 5.29%, equivalent to 7.41% interest at the standard equivalency factor of 1.4x. As I write this, however, the Canadian Bond Indices website has collywobbles, so you’ll just have to wait for this week’s evaluation of the Seniority Spread.

Update: Long Corporates now yield about 5.5%, so the pre-tax interest-equivalent spread is now about 190bp, down sharply from the 205bp reported January 12.

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	-0.0852 %	2,337.4
FixedFloater	4.75 %	3.43 %	26,377	19.23	1	0.3946 %	3,584.4
Floater	2.56 %	2.35 %	41,074	21.33	4	-0.0852 %	2,523.8
OpRet	4.80 %	3.39 %	65,847	2.29	8	0.1542 %	2,393.6
SplitShare	5.30 %	1.80 %	489,288	0.88	4	-0.2046 %	2,465.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1542 %	2,188.7
Perpetual-Premium	5.64 %	5.22 %	141,826	5.31	20	0.0196 %	2,031.1
Perpetual-Discount	5.31 %	5.29 %	262,772	14.98	57	-0.2239 %	2,082.4
FixedReset	5.23 %	3.42 %	283,343	3.05	52	-0.1294 %	2,275.9

Performance Highlights
Issue	Index	Change	Notes
ELF.PR.F	Perpetual-Discount	-5.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 20.91 Evaluated at bid price : 20.91 Bid-YTW : 6.39 %
PWF.PR.P	FixedReset	-1.47 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 4.03 %
NA.PR.M	Perpetual-Premium	-1.21 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.39 Bid-YTW : 5.67 %
BAM.PR.P	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 27.50 Bid-YTW : 4.25 %
TRP.PR.C	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-29 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.94 %
SLF.PR.D	Perpetual-Discount	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 21.27 Evaluated at bid price : 21.27 Bid-YTW : 5.28 %
BAM.PR.O	OpRet	1.09 %	YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.89 Bid-YTW : 3.60 %
CIU.PR.A	Perpetual-Discount	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 22.35 Evaluated at bid price : 22.50 Bid-YTW : 5.18 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PR.B	Floater	202,576	TD crossed 175,000 at 18.78 and sold 11,300 to Nesbitt at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 18.71 Evaluated at bid price : 18.71 Bid-YTW : 2.82 %
SLF.PR.B	Perpetual-Discount	92,046	TD crossed 80,000 at 23.12. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 22.90 Evaluated at bid price : 23.12 Bid-YTW : 5.23 %
CM.PR.I	Perpetual-Discount	91,353	TD crossed 69,700 at 23.08. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 22.90 Evaluated at bid price : 23.09 Bid-YTW : 5.10 %
BNS.PR.M	Perpetual-Discount	72,700	TD crossed 25,000 at 23.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 22.92 Evaluated at bid price : 23.10 Bid-YTW : 4.88 %
BAM.PR.T	FixedReset	70,050	Scotia crossed 25,000 at 25.00. TD crossed 15,000 at 24.97. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-19 Maturity Price : 23.05 Evaluated at bid price : 24.85 Bid-YTW : 4.69 %
TRP.PR.B	FixedReset	65,813	Nesbitt crossed 60,000 at 25.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-07-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.66 %
There were 49 other index-included issues trading in excess of 10,000 shares.

Brookfield is doubling-up on General Growth.

It was another good day on good volume for the Canadian preferred share market, with PerpetualDiscounts up 13bp and FixedResets gaining 4bp.

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	0.4278 %	2,339.4
FixedFloater	4.77 %	3.45 %	25,848	19.21	1	0.0000 %	3,570.3
Floater	2.56 %	2.33 %	40,727	21.37	4	0.4278 %	2,526.0
OpRet	4.81 %	3.38 %	65,007	2.29	8	-0.0482 %	2,389.9
SplitShare	5.29 %	1.24 %	506,655	0.89	4	0.2903 %	2,470.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0482 %	2,185.4
Perpetual-Premium	5.64 %	5.31 %	140,837	5.32	20	0.0118 %	2,030.7
Perpetual-Discount	5.30 %	5.29 %	260,890	14.97	57	0.1317 %	2,087.1
FixedReset	5.22 %	3.37 %	281,764	3.05	52	0.0431 %	2,278.9

Performance Highlights
Issue	Index	Change	Notes
CM.PR.D	Perpetual-Premium	1.14 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-02-17 Maturity Price : 25.50 Evaluated at bid price : 25.62 Bid-YTW : -2.69 %
NA.PR.N	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-14 Maturity Price : 25.00 Evaluated at bid price : 26.65 Bid-YTW : 2.58 %
BNA.PR.C	SplitShare	1.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 22.76 Bid-YTW : 5.89 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.A	FixedReset	107,675	Nesbitt crossed 100,000 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.98 Bid-YTW : 3.62 %
TD.PR.Q	Perpetual-Premium	105,300	Scotia crossed 28,000 at 25.75. Desjardins crossed blocks of 31,000 at 25.75 and 45,000 at 25.71. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-02 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 5.09 %
BAM.PR.T	FixedReset	102,405	Nebitt crossed 10,000 at 24.98. RBC bought 16,300 from Scotia at 24.99. RBC crossed 21,900 at 25.00, and sold blocks of 11,800 and 12,800 to TD at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 4.65 %
BNS.PR.T	FixedReset	99,900	TD bought two blocks of 10,000 shares each from Nesbitt at 27.28. Nesbitt crossed 25,000 at 27.28; TD crossed 35,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.24 Bid-YTW : 3.40 %
BMO.PR.M	FixedReset	75,260	TD crossed 58,300 at 26.56. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-24 Maturity Price : 25.00 Evaluated at bid price : 26.65 Bid-YTW : 2.67 %
IAG.PR.F	Perpetual-Premium	74,916	Desjardins crossed 68,500 at 25.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 5.68 %
There were 44 other index-included issues trading in excess of 10,000 shares.

It was another good day for the Canadian preferred share market, with PerpetualDiscounts gaining 33bp and FixedResets up 3bp. Volume eased off, but only slightly.

Deeply discounted Straight Perpetuals were the star performers … again.

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	0.2574 %	2,329.5
FixedFloater	4.77 %	3.45 %	26,174	19.22	1	0.8846 %	3,570.3
Floater	2.57 %	2.35 %	40,114	21.34	4	0.2574 %	2,515.2
OpRet	4.81 %	3.38 %	65,033	2.29	8	0.0337 %	2,391.1
SplitShare	5.31 %	1.24 %	527,696	0.89	4	0.3365 %	2,463.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0337 %	2,186.4
Perpetual-Premium	5.64 %	5.23 %	137,580	5.32	20	0.0609 %	2,030.5
Perpetual-Discount	5.30 %	5.24 %	262,762	14.87	57	0.3312 %	2,084.4
FixedReset	5.22 %	3.36 %	284,906	3.06	52	0.0338 %	2,277.9

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.P	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 3.89 %
CM.PR.I	Perpetual-Discount	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 23.01 Evaluated at bid price : 23.20 Bid-YTW : 5.07 %
RY.PR.G	Perpetual-Discount	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.82 Evaluated at bid price : 23.00 Bid-YTW : 4.96 %
RY.PR.D	Perpetual-Discount	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.82 Evaluated at bid price : 23.00 Bid-YTW : 4.96 %
GWO.PR.I	Perpetual-Discount	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.68 Evaluated at bid price : 22.86 Bid-YTW : 4.95 %
POW.PR.D	Perpetual-Discount	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.92 Evaluated at bid price : 23.14 Bid-YTW : 5.43 %
RY.PR.N	FixedReset	1.57 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.83 Bid-YTW : 2.82 %
BAM.PR.R	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-30 Maturity Price : 25.00 Evaluated at bid price : 26.36 Bid-YTW : 4.34 %
SLF.PR.E	Perpetual-Discount	1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 21.36 Evaluated at bid price : 21.63 Bid-YTW : 5.23 %
CM.PR.J	Perpetual-Discount	1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.77 Evaluated at bid price : 22.95 Bid-YTW : 4.91 %
SLF.PR.A	Perpetual-Discount	1.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.56 Evaluated at bid price : 22.76 Bid-YTW : 5.26 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.K	Perpetual-Discount	208,521	Nesbitt crossed 12,400 at 22.81; RBC crossed 33,800 at 22.95. Nesbitt crossed blocks of 100,000 and 50,000, both at 22.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.56 Evaluated at bid price : 22.75 Bid-YTW : 5.45 %
SLF.PR.A	Perpetual-Discount	137,510	TD crossed 37,400 at 22.95; RBC crossed 77,700 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 22.56 Evaluated at bid price : 22.76 Bid-YTW : 5.26 %
GWO.PR.N	FixedReset	132,318	Nesbitt crossed 125,000 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-17 Maturity Price : 24.70 Evaluated at bid price : 24.75 Bid-YTW : 3.87 %
FTS.PR.E	OpRet	130,935	Nesbitt crossed 125,000 at 26.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-07-01 Maturity Price : 25.75 Evaluated at bid price : 26.75 Bid-YTW : 3.38 %
PWF.PR.O	Perpetual-Premium	120,805	RBC crossed 65,700 at 25.01; Nesbitt crossed 50,000 at 25.03. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 5.80 %
TD.PR.Q	Perpetual-Premium	108,295	Desjardins crossed 100,000 at 25.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-02 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 5.09 %
There were 37 other index-included issues trading in excess of 10,000 shares.

The housing bubble blame game continues:

The FOMC in June heard presentations from staff economists, with some raising alarms about housing markets, the transcript shows. Those warnings didn’t translate into a more aggressive policy. The committee raised the benchmark lending rate a quarter-point at that meeting and said “policy accommodation can be removed at a pace that is likely to be measured.”

“An estimated 4 percent of borrowers are highly leveraged and could lose all of their home equity if house prices were to fall 10 percent,” Andreas Lehnert, now the deputy director of the Office of Financial Stability Policy and Research at the Board, told the committee. “One might wonder if financial institutions and investors have, in the face of the continuing housing boom, dropped their defenses against the mortgage losses that would accompany a house-price bust.”

New York Fed researcher Richard Peach dismissed press reports describing a bubble in housing markets.

“Hardly a day goes by without another anecdote-laden article in the press claiming that the U.S. is experiencing a housing bubble that will soon burst, with disastrous consequences for the economy,” Peach told the committee.

“Housing-market activity has been quite robust for some time now, with starts and sales of single-family homes reaching all-time highs in recent months and home prices rising rapidly, particularly along the East and West coasts of the country,” he said. “But such activity could be the result of solid fundamentals.”

Greenspan followed the presentation with questions about the effect of underlying land prices in housing indexes, and the quality of data on whether home purchases were for investment or residences.

This question has been discussed extensively on PrefBlog and will be discussed extensively world-wide for the next hundred-odd years. Two posts of interest are Subprime! Problems forseeable in 2005? and FRBB: Bubbles Happen.

Manulife is redeeming some sub-debt at an operating subsidiary:

The Manufacturers Life Insurance Company (“Manulife”) today announced it has exercised its right to redeem, on February 16, 2011, all of the outstanding $550,000,000 principal amount of 6.24% Subordinated Debentures due February 16, 2016 (CUSIP No. 564835AB2) at par plus accrued and unpaid interest to the date fixed for redemption. Formal notice of redemption has been delivered to the registered holder of the Subordinated Debentures in accordance with the terms of the trust indenture made as of February 16, 2001.

Another day, another loss of freedom. Your family doctor is a paid informer:

“Alcohol dependence” is one of 16 specific medical conditions – including certain heart conditions, unstable mental illness and uncontrolled diabetes – that must be reported in most Canadian provinces if, in a doctor’s opinion, it “may make it dangerous for the person to operate a motor vehicle.”

Only Alberta, Nova Scotia and Quebec leave such reporting to physicians’ discretion.
…
The province’s mandatory reporting requirement under the Highway Traffic Act appears to date back to 1990, but the number of doctors actually doing it began to “steadily increase” only after the province’s health ministry began paying physicians to do it in 2006, Bob Nichols, senior media officer for the transport ministry, told The Globe in an e-mail.

The province pays doctors, who are protected by statute for what otherwise would be a breach of patient confidentiality, $36.25 for each report.

The older I get, the less surprised I am when I learn that many people in a position of trust are for sale. I do, however, sometimes get surprised at how cheap they are.

It was another day of startlingly good returns on the Canadian preferred share market, probably due to expectations that everything will get redeemed – which doesn’t explain why FixedResets did well, but since when has this market been either consistent or logical? PerpetualDiscounts gained 61bp (with a continued increase in implied volatility, as discussed yesterday) and FixedResets were up 21bp. Volume was high.

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	-0.0123 %	2,323.5
FixedFloater	4.81 %	3.49 %	26,460	19.17	1	0.0000 %	3,539.0
Floater	2.57 %	2.35 %	41,755	21.33	4	-0.0123 %	2,508.7
OpRet	4.81 %	3.33 %	66,067	2.30	8	0.0386 %	2,390.3
SplitShare	5.32 %	1.77 %	545,876	0.90	4	0.0603 %	2,454.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0386 %	2,185.7
Perpetual-Premium	5.65 %	5.26 %	134,087	5.32	20	0.0079 %	2,029.2
Perpetual-Discount	5.32 %	5.29 %	244,706	14.90	57	0.6071 %	2,077.5
FixedReset	5.23 %	3.39 %	289,133	3.07	52	0.2061 %	2,277.1

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.B	Perpetual-Discount	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 21.95 Evaluated at bid price : 22.30 Bid-YTW : 5.25 %
BNS.PR.M	Perpetual-Discount	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 22.78 Evaluated at bid price : 22.95 Bid-YTW : 4.91 %
BNS.PR.L	Perpetual-Discount	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 22.89 Evaluated at bid price : 23.07 Bid-YTW : 4.88 %
RY.PR.F	Perpetual-Discount	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 22.78 Evaluated at bid price : 22.95 Bid-YTW : 4.91 %
BNS.PR.N	Perpetual-Discount	1.21 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-02-26 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 5.17 %
PWF.PR.P	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.83 Bid-YTW : 3.65 %
GWO.PR.G	Perpetual-Discount	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 24.15 Evaluated at bid price : 24.45 Bid-YTW : 5.35 %
IAG.PR.A	Perpetual-Discount	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 21.56 Evaluated at bid price : 21.56 Bid-YTW : 5.38 %
CM.PR.J	Perpetual-Discount	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 22.36 Evaluated at bid price : 22.51 Bid-YTW : 5.01 %
SLF.PR.C	Perpetual-Discount	1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 21.31 Evaluated at bid price : 21.31 Bid-YTW : 5.27 %
BAM.PR.P	FixedReset	1.87 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 27.81 Bid-YTW : 3.89 %
SLF.PR.D	Perpetual-Discount	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 5.27 %
SLF.PR.B	Perpetual-Discount	2.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 22.80 Evaluated at bid price : 23.01 Bid-YTW : 5.25 %
GWO.PR.I	Perpetual-Discount	2.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 22.43 Evaluated at bid price : 22.60 Bid-YTW : 5.01 %
TRP.PR.C	FixedReset	2.40 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-29 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 3.50 %
MFC.PR.C	Perpetual-Discount	2.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 21.49 Evaluated at bid price : 21.76 Bid-YTW : 5.21 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.X	FixedReset	101,672	RBC crossed blocks of 30,000 and 56,600, both at 27.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.73 Bid-YTW : 3.40 %
MFC.PR.E	FixedReset	89,135	RBC crossed blocks of 50,000 and 36,500, both at 26.76. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-19 Maturity Price : 25.00 Evaluated at bid price : 26.73 Bid-YTW : 3.76 %
RY.PR.B	Perpetual-Discount	84,619	RBC crossed 39,900 at 23.39, a block of 16,700 at 23.41, and 13,500 at 23.46. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 23.25 Evaluated at bid price : 23.47 Bid-YTW : 5.07 %
BNS.PR.R	FixedReset	83,222	RBC crossed 70,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 3.34 %
CM.PR.I	Perpetual-Discount	81,072	RBC crossed blocks of 39,900 and 22,000, both at 22.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-14 Maturity Price : 22.79 Evaluated at bid price : 22.97 Bid-YTW : 5.12 %
TD.PR.E	FixedReset	77,510	Scotia crossed 65,000 at 27.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.16 Bid-YTW : 3.50 %
There were 42 other index-included issues trading in excess of 10,000 shares.

There’s a fundamental disagreement about the Citigroup bail-out:

“While there was consensus that Citigroup was too systemically significant to be allowed to fail, that consensus appeared to be based as much on gut instinct and fear of the unknown as on objective criteria,” according to a report today from Neil Barofsky, special inspector general for the Troubled Asset Relief Program. “The conclusion of the various government actors that Citigroup had to be saved was strikingly ad hoc.”
…
“It may have been ad hoc, but it worked,” said Michael Goldstein, professor of finance at Babson College in Massachusetts. “Fear of the unknown is a perfectly good reason to try to buy some time and not take the chance of the U.S. economy going into another Great Depression.”

Well, I’m no big fan of the regulators, but expecting a standard bureaucratic binder with plans regarding ‘What to do if the world melts down’ seems a bit much. Once they started concentrating on their jobs – the concentration being assisted by the prospect of hanging in the morning – they did all right. Like the man said, more or less, no plan survives contact with the enemy.

However, the US is eating its seed corn:

Now, as governments in China and India boost funding for expansion of their universities, Governor Jerry Brown’s proposed 16 percent cut in the higher-education budget jeopardizes the flow of talent that powers Google Inc., Apple Inc. and the rest of California’s knowledge-based economy. The elite University of California system may no longer be able to guarantee admission to the top 12.5 percent of the state’s high-school seniors. Annual tuition for residents, which was less than $4,500 a decade ago, is scheduled to rise to at least $11,124 in the next school year.

… but the current pace of innovation remains satisfactory:

Vivus Inc.’s experimental impotence drug Avanafil helped 80 percent of men achieve erections and two-thirds to have intercourse, Chief Executive Officer Leland Wilson said.
…
Because Avanafil is metabolized fairly rapidly, men may be able to use it safely twice a day, at the beginning and end of the day, Tam said.

News of the breakthrough got the Canadian preferred share market all excited today, with PerpetualDiscounts up 65bp while FixedResets gained 4bp on heavy volume.

It was the deep-discount issues that did particularly well, as will be seen on the Performance table, but let’s look at some specific:

Analysis of the data using the Straight Perpetual Implied Volatility Calculator produces the following table:

Plots are:

All this does not appear to be bond-related, by the way: long corporates did nothing all day, NUTHIN’.

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	0.0736 %	2,323.8
FixedFloater	4.81 %	3.49 %	27,535	19.18	1	-0.4403 %	3,539.0
Floater	2.57 %	2.36 %	43,466	21.32	4	0.0736 %	2,509.1
OpRet	4.81 %	3.35 %	66,739	2.31	8	0.0337 %	2,389.4
SplitShare	5.33 %	1.76 %	566,949	0.90	4	0.0201 %	2,453.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0337 %	2,184.9
Perpetual-Premium	5.65 %	5.25 %	132,278	5.19	20	0.1378 %	2,029.1
Perpetual-Discount	5.35 %	5.37 %	244,964	14.88	57	0.6525 %	2,065.0
FixedReset	5.24 %	3.41 %	291,015	3.07	52	0.0360 %	2,272.4

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.I	Perpetual-Premium	-1.18 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-05-30 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 5.37 %
SLF.PR.E	Perpetual-Discount	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 21.12 Evaluated at bid price : 21.12 Bid-YTW : 5.38 %
GWO.PR.H	Perpetual-Discount	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 23.44 Evaluated at bid price : 23.69 Bid-YTW : 5.15 %
POW.PR.D	Perpetual-Discount	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.75 Evaluated at bid price : 22.95 Bid-YTW : 5.47 %
RY.PR.F	Perpetual-Discount	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.52 Evaluated at bid price : 22.68 Bid-YTW : 4.97 %
RY.PR.E	Perpetual-Discount	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.45 Evaluated at bid price : 22.61 Bid-YTW : 5.04 %
SLF.PR.B	Perpetual-Discount	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.34 Evaluated at bid price : 22.51 Bid-YTW : 5.37 %
TD.PR.O	Perpetual-Discount	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 23.92 Evaluated at bid price : 24.19 Bid-YTW : 5.01 %
SLF.PR.D	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 5.37 %
RY.PR.D	Perpetual-Discount	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.45 Evaluated at bid price : 22.61 Bid-YTW : 5.04 %
SLF.PR.A	Perpetual-Discount	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 21.96 Evaluated at bid price : 22.32 Bid-YTW : 5.35 %
CM.PR.I	Perpetual-Discount	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.58 Evaluated at bid price : 22.75 Bid-YTW : 5.17 %
SLF.PR.C	Perpetual-Discount	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 20.96 Evaluated at bid price : 20.96 Bid-YTW : 5.36 %
RY.PR.A	Perpetual-Discount	1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.67 Evaluated at bid price : 22.85 Bid-YTW : 4.93 %
BNS.PR.K	Perpetual-Discount	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 23.76 Evaluated at bid price : 24.04 Bid-YTW : 4.99 %
CM.PR.H	Perpetual-Discount	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.96 Evaluated at bid price : 23.19 Bid-YTW : 5.18 %
GWO.PR.I	Perpetual-Discount	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 21.95 Evaluated at bid price : 22.08 Bid-YTW : 5.13 %
MFC.PR.B	Perpetual-Discount	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 21.78 Evaluated at bid price : 22.07 Bid-YTW : 5.31 %
BNS.PR.M	Perpetual-Discount	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.54 Evaluated at bid price : 22.70 Bid-YTW : 4.96 %
BMO.PR.J	Perpetual-Discount	1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.87 Evaluated at bid price : 23.05 Bid-YTW : 4.94 %
MFC.PR.C	Perpetual-Discount	1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 5.37 %
CM.PR.J	Perpetual-Discount	1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.04 Evaluated at bid price : 22.17 Bid-YTW : 5.08 %
BNS.PR.L	Perpetual-Discount	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.63 Evaluated at bid price : 22.80 Bid-YTW : 4.94 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.A	OpRet	236,475	TD crossed 25,000 at 25.80; Nesbitt corssed 100,000 at the same price. Desjardins crossed 99,400 at the same price again. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.78 Bid-YTW : 3.49 %
BNS.PR.Y	FixedReset	114,220	Nesbitt crossed 50,000 at 25.00, then bought blocks o 14,200 and 30,000 from anonymous at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 24.91 Evaluated at bid price : 24.96 Bid-YTW : 3.55 %
BAM.PR.P	FixedReset	110,660	RBC crossed 100,000 at 27.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 27.30 Bid-YTW : 4.44 %
TRP.PR.A	FixedReset	106,579	RBC crossed 97,900 at 25.91. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 3.58 %
BAM.PR.R	FixedReset	104,350	RBC crossed 100,000 at 26.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-30 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 4.47 %
CM.PR.H	Perpetual-Discount	102,468	RBC crossed 20,600 at 23.21, then sold 10,000 to anonymous at 23.45. Desjardins crossed 20,000 at 23.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-13 Maturity Price : 22.96 Evaluated at bid price : 23.19 Bid-YTW : 5.18 %
There were 56 other index-included issues trading in excess of 10,000 shares.

Mark White of OSFI gave a speech titled Basel III: Balancing of Risk and Regulation, in which he said nothing at all.

There’s one one big problem with simple stock screens:

Claymore’s Canadian Dividend exchange-traded fund (CDZ-T …) is designed to track the S&P/TSX Canadian Dividend Aristocrats Index, which is composed of companies that have paid higher dividends for at least five consecutive calendar years.

It’s a great concept. Trouble is, the financial crisis prompted a lot of companies to conserve cash by cutting dividends or holding them steady, and that’s caused the index to shrink dramatically.
…
However, unlike the iShares ETF, the Claymore fund no longer has any Canadian banks or insurers.

Some are cheering the results of Portugal’s 10-year auction:

The markets heaved a hefty sigh of release today as Portugal pulled off a widely-watched auction of 10-year bonds, €599-million worth at a lower-than-expected yield of 6.716 per cent, below the key level of 7 per cent. It also sold four-year bonds, bringing the todal to €1.25-billion.
…
Together, Portugal, Ireland and Spain have needs this year of about €300-billion, a combination of maturing debt and additional funding needed to cover deficits, [Scotia economist] Mr. [Derek] Holt calculated.

It’s not apparent just how much yield the recent ECB purchases are worth:

The weekly amount compares with 164 million euros spent the previous week although the figures may not give the full picture as the ECB’s purchases take 2-3 days to be finalised.
…
The ECB threw Portugal a temporary lifeline on Monday by buying up its bonds, traders said, as market and peer pressure mounted for Lisbon to seek an international bailout soon.

Official disrespect for due process is reaching epidemic proportions:

Ten municipalities in the Lower Mainland have safety inspection programs that send inspectors armed with B.C. Hydro statistics on abnormal energy consumption into homes.
…
Critics say the safety inspections are a substitute for police raids of suspected grow-ops. Police cannot enter a home without reasonable grounds for believing that they will find illegal activity. However, safety inspectors can just go in and look around. If they find a grow-op, they call police, who are usually waiting at the curb.

And why? Here’s one potential answer:

Municipalities could end up reaping millions of dollars if given 50 per cent of assets seized under proceeds-of-crime legislation, Kevin Falcon said Tuesday.

“I think it’s a great opportunity to involve municipalities in a partnership way going after illegal criminal activity,” Mr. Falcon told reporters.

Mr. Falcon’s commitment is part of a 12-point crime platform released by the former health minister, who is seeking the leadership of the B.C. Liberals in a party vote Feb. 26 that will choose the province’s next premier.

It was a mixed day on above average volume for the Canadian preferred share market, with PerpetualDiscounts gaining 16bp and FixedResets losing 2bp. There was quite a bit of block trading done and not much volatility, with again only one entry in the Performance Highlights Table.

Block trading was dominated by Desjardins, which wrote some very nice-sized tickets. Note that this does not necessarily mean they earned good money on the crosses – some of them could have been internal crosses (with a single manager shuffling issues around his portfolios; not something that should cost a lot of money).

PerpetualDiscounts now yield 5.43%, equivalent to 7.60% interest at the standard equivalency factor of 1.4x. Long Corporates now yield about 5.5% (maybe a bit less) so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 210bp, with everything unchanged from the figures reported January 5.

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	-0.1102 %	2,322.1
FixedFloater	4.79 %	3.46 %	28,438	19.21	1	0.3575 %	3,554.7
Floater	2.58 %	2.36 %	45,159	21.32	4	-0.1102 %	2,507.2
OpRet	4.81 %	3.36 %	67,445	2.31	8	-0.1492 %	2,388.6
SplitShare	5.33 %	1.76 %	589,078	0.90	4	-0.1104 %	2,452.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1492 %	2,184.1
Perpetual-Premium	5.66 %	5.26 %	132,211	5.19	20	0.1340 %	2,026.3
Perpetual-Discount	5.39 %	5.43 %	238,474	14.80	57	0.1550 %	2,051.6
FixedReset	5.24 %	3.43 %	288,432	3.07	52	-0.0245 %	2,271.6

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.G	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-12 Maturity Price : 25.22 Evaluated at bid price : 25.27 Bid-YTW : 3.96 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.A	OpRet	705,931	Desjardins crossed 697,700 at 25.65. Nice ticket! YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.72 Bid-YTW : 3.54 %
TD.PR.M	OpRet	700,021	Desjardins crossed 694,800 at 25.56. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-05-30 Maturity Price : 25.50 Evaluated at bid price : 25.56 Bid-YTW : 3.40 %
TD.PR.N	OpRet	392,100	Desjardins crossed 389,700 at 25.56. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-05-30 Maturity Price : 25.50 Evaluated at bid price : 25.56 Bid-YTW : 3.32 %
BAM.PR.B	Floater	362,156	RBC crossed 35,000 at 18.63; Desjardins crossed 308,400 at 18.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-12 Maturity Price : 18.45 Evaluated at bid price : 18.45 Bid-YTW : 2.86 %
SLF.PR.D	Perpetual-Discount	156,169	Desjardins crossed 149,600 at 20.68. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-12 Maturity Price : 20.66 Evaluated at bid price : 20.66 Bid-YTW : 5.43 %
GWO.PR.I	Perpetual-Discount	143,382	TD crossed 10,000 at 21.70; Desjardins crossed 123,800 at 21.69. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-12 Maturity Price : 21.46 Evaluated at bid price : 21.73 Bid-YTW : 5.20 %
CM.PR.D	Perpetual-Premium	121,745	Nesbitt crossed blocks of 19,200 and 100,000, both at 25.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-05-30 Maturity Price : 25.25 Evaluated at bid price : 25.33 Bid-YTW : 4.13 %
TD.PR.I	FixedReset	120,496	Desjardins crossed blocks of 50,000 and 49,800, both at 27.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.31 Bid-YTW : 3.48 %
RY.PR.X	FixedReset	106,005	Scotia crossed 50,000 at 27.65. RBC crossed blocks of 23,100 and 25,000, both at 27.66. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.66 Bid-YTW : 3.47 %
TD.PR.A	FixedReset	103,815	Desjardins crossed blocks of 50,000 and 49,400, both at 26.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.32 Bid-YTW : 3.10 %
There were 34 other index-included issues trading in excess of 10,000 shares.

It had to come. Credit Suisse is starting a new Exchange targetting clients who are little girls:

The venue, Light Pool, will be the first U.S. electronic communications network to be started in five years. The ECN is aimed at institutional investors such as mutual funds, hedge funds, pensions and endowments. Unlike existing exchanges, Light Pool will employ a system to classify users by how they trade as a way to set prices and keep out unwanted speculators.
…
Development of Light Pool began a year ago as a hedge against potential regulatory restrictions on dark pools. The chief executive officers of exchange operators such as New York- based NYSE Euronext and Nasdaq OMX Group Inc. have urged the SEC to impose more requirements on dark pools, which grew to more than 12 percent of equities trading in November, from less than 9 percent two years earlier, data from Rosenblatt show.

As its regulatory concerns diminished in 2010, Credit Suisse switched its focus to creating a public displayed market for institutional investors worried they weren’t getting optimal executions on exchanges that cater to high-frequency firms.
…
The broker’s clients and firms accessing Light Pool directly will be automatically classified based on an initial period of trading behavior and placed in one of three categories: contributors, neutral users and opportunistic traders. The criteria for defining a firm will be automated and objective, “with no human intermediation,” as is required for public markets, Galinov said. The aim is to determine whether firms are systematically profiting from their trading activity in ways that could hurt institutional clients, he said.

Opportunistic firms, which Galinov says include some high- frequency trading companies, will be kicked off the platform and prevented from providing orders or executing against bids and offers directly through Light Pool. They’ll instead have to go through the Jersey City, New Jersey-based National Stock Exchange, where Light Pool will also publish its quotes.

Meanwhile, the UK is showing the world how to compete:

Chancellor of the Exchequer George Osborne said he’ll push Britain’s biggest banks to follow state- controlled Royal Bank of Scotland Group Plc in awarding lower bonuses in 2011 and left open the possibility of further action.
…
Prime Minister David Cameron’s coalition faces the same problem as the previous Labour administration after its 2008 rescue of the banks. The government needs lenders it has stakes in — such as RBS — to succeed, which means paying competitive salaries, while it can’t directly control the compensation paid by other banks — such as Barclays.

If you can’t beat ’em – legislate ’em!

Volume picked up to above average on a good day for the Canadian preferred share market. PerpetualDiscounts were up 18bp, while FixedResets gained 8bp. There was, again, only a lone entry in the Performance Table – and that’s the same issue as yesterday, reversing itself.

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	0.1964 %	2,324.6
FixedFloater	4.75 %	3.48 %	28,341	18.97	1	0.6593 %	3,542.0
Floater	2.57 %	2.37 %	45,277	21.28	4	0.1964 %	2,510.0
OpRet	4.81 %	3.35 %	67,349	2.31	8	0.0482 %	2,392.1
SplitShare	5.32 %	1.32 %	608,781	0.91	4	0.2365 %	2,455.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0482 %	2,187.4
Perpetual-Premium	5.66 %	5.30 %	133,542	5.20	20	-0.0335 %	2,023.6
Perpetual-Discount	5.40 %	5.43 %	238,951	14.78	57	0.1812 %	2,048.4
FixedReset	5.24 %	3.39 %	285,699	3.08	52	0.0801 %	2,272.2

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.I	OpRet	1.02 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-02-10 Maturity Price : 25.50 Evaluated at bid price : 25.71 Bid-YTW : -2.62 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.L	Perpetual-Premium	96,410	Nesbitt crossed 45,000 at 25.85; Desjardins crossed 11,000 at the same price. Nesbitt bought 19,500 from TD at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-24 Maturity Price : 25.00 Evaluated at bid price : 25.81 Bid-YTW : 5.38 %
TD.PR.C	FixedReset	93,517	Nesbitt crossed 50,000 at 26.75; Desjardins crossed 30,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 26.63 Bid-YTW : 3.28 %
TD.PR.Y	FixedReset	75,700	Nesbitt crossed 50,000 at 26.40; Desjardins crossed 19,400 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-30 Maturity Price : 25.00 Evaluated at bid price : 26.36 Bid-YTW : 2.95 %
CM.PR.D	Perpetual-Premium	74,781	Nesbitt crossed 60,000 at 25.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-05-30 Maturity Price : 25.00 Evaluated at bid price : 25.18 Bid-YTW : 5.01 %
CM.PR.H	Perpetual-Discount	70,160	Nesbitt cossed 60,000 at 22.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-11 Maturity Price : 22.60 Evaluated at bid price : 22.80 Bid-YTW : 5.27 %
BAM.PR.B	Floater	70,072	TD cossed 50,000 at 18.68; Desjardins crossed 15,000 at 18.63. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-01-11 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 2.84 %
There were 38 other index-included issues trading in excess of 10,000 shares.