Category: Market Action

Market Action

December 2, 2009

Looks like the UK government is doing all it can to make the Royal Bank of Scotland a casualty in the holy war against bonuses:

Royal Bank of Scotland Group Plc, recipient of the world’s biggest bank bailout, said the British government’s “very restrictive” control over 2009 bonuses risks driving employees away.
…
The RBS board has had legal advice that they would have to resign if the government blocked bonuses they regarded as essential for the bank’s competitiveness, according to Robert Peston, the British Broadcasting Corp.’s business editor.
…
“It’s a headhunters dream at the moment,” said Shaun Springer, chief executive officer of Square Mile Services Ltd., which advises London financial firms on pay. “They are going to lose people and then have to pay to replace them which is so very short sighted. RBS is getting hammered every which way.”

On a different regulatory topic, there are estimates that CDS regulation could cost JPM $3-billion in revenue:

Revenue at JPMorgan Chase & Co., the second-largest U.S. bank, may drop by as much as $3 billion should most derivatives trades be moved to exchanges, a Sanford C. Bernstein & Co. analyst said.
…
JPMorgan “sees the largest risk from legislation mandating that all derivatives be traded on an exchange as opposed to through the OTC market, limiting the company’s ability to create customized products,” [Bernstein analyst John] McDonald wrote, referring to the over- the-counter market. He declined to comment beyond the note.

Parallels to TRACE and Corporate Bond Transparency are clear … it seems to me that the following scenario is most likely:

Increased transparency brings lower spreads
lower spreads bring lower profits
lower profits bring lower capital allocation
lower capital allocation brings lower liquidity

But who needs capital market liquidity in the middle of a holy war? The important things in life are:

make it look like the politicians know what they’re doing
ensure that moronic portfolio managers don’t suffer the consequences of their actions

Next crisis, coming right up! To make a decent return on capital, the dealers will have to find a new way to exploit the stupid (and whoever can figure out how to replace $3-billion in revenue will probably get a bonus – oh, the horror!).

OSFI has announced Stress Testing Guidelines.

A quiet day on the Canadian preferred share market, with PerpetualDiscounts squeaking out a gain of less than 1bp and FixedResets gaining 7bp. Volume was pretty quiet and there are only two entries in the performance highlights table!

PerpetualDiscounts now yield 5.87%, equivalent to 8.22% interest at the standard equivalency factor of 1.4x. Long Corporates continue to yield about 5.9%, so the pre-tax interest-equivalent spread is now n the 230-235bp range, a slight widening from the 225bp reported on November 30.

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	-0.4166 %	1,498.8
FixedFloater	6.05 %	4.16 %	40,805	18.58	1	-0.2221 %	2,574.5
Floater	2.60 %	3.04 %	94,534	19.55	3	-0.4166 %	1,872.4
OpRet	4.86 %	-4.80 %	145,544	0.08	15	0.0077 %	2,309.1
SplitShare	6.35 %	-8.45 %	288,421	0.08	2	-0.0875 %	2,116.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0077 %	2,111.4
Perpetual-Premium	5.86 %	5.62 %	64,092	2.16	7	0.3068 %	1,884.1
Perpetual-Discount	5.81 %	5.87 %	186,582	14.08	67	0.0085 %	1,787.3
FixedReset	5.43 %	3.77 %	373,685	3.92	41	0.0726 %	2,151.1

Performance Highlights
Issue	Index	Change	Notes
BMO.PR.H	Perpetual-Discount	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 22.64 Evaluated at bid price : 23.41 Bid-YTW : 5.66 %
ELF.PR.F	Perpetual-Discount	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 6.61 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.P	Perpetual-Discount	208,590	Nesbitt crossed 200,000 at 23.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 23.27 Evaluated at bid price : 23.45 Bid-YTW : 5.66 %
CM.PR.R	OpRet	133,825	RBC crossed three blocks, all at 26.32, of 24,600 shares, 68,400 and 31,500. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-01 Maturity Price : 25.60 Evaluated at bid price : 26.26 Bid-YTW : -19.97 %
IGM.PR.A	OpRet	63,194	YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-01 Maturity Price : 26.00 Evaluated at bid price : 26.00 Bid-YTW : 0.18 %
RY.PR.R	FixedReset	49,434	Nesbit bought 15,000 from RBC at 27.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.67 Bid-YTW : 3.64 %
TD.PR.Q	Perpetual-Discount	46,300	Nesbitt crossed two blocks of 20,000 each at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 24.60 Evaluated at bid price : 24.82 Bid-YTW : 5.70 %
ACO.PR.A	OpRet	36,910	CIBC crossed 35,000 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-01 Maturity Price : 25.50 Evaluated at bid price : 25.95 Bid-YTW : -14.90 %
There were 26 other index-included issues trading in excess of 10,000 shares.

Market Action

December 1, 2009

The market-timing fiasco (in which trades were executed at stale prices) is heating up again. As far as I am aware, there has been no admission of guilt by anybody; and nobody lost their license due to facilitation of the scheme; or was personally named.

A strong day, with PerpetualDiscounts up 13bp and FixedResets gaining 7bp, on relatively heavy 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	-0.1751 %	1,505.1
FixedFloater	6.04 %	4.15 %	41,363	18.60	1	0.2784 %	2,580.2
Floater	2.59 %	3.02 %	90,338	19.61	3	-0.1751 %	1,880.3
OpRet	4.86 %	-6.32 %	134,847	0.08	15	-0.0016 %	2,308.9
SplitShare	6.34 %	-8.23 %	300,176	0.08	2	0.0876 %	2,118.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0016 %	2,111.3
Perpetual-Premium	5.87 %	5.61 %	62,883	2.38	7	-0.1190 %	1,878.3
Perpetual-Discount	5.81 %	5.89 %	185,347	14.04	67	0.1318 %	1,787.1
FixedReset	5.44 %	3.79 %	375,728	3.93	41	0.0695 %	2,149.6

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.L	Perpetual-Discount	-1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-01 Maturity Price : 23.39 Evaluated at bid price : 23.55 Bid-YTW : 6.11 %
CU.PR.B	Perpetual-Premium	-1.60 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 5.61 %
GWO.PR.I	Perpetual-Discount	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-01 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 5.84 %
CM.PR.G	Perpetual-Discount	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-01 Maturity Price : 22.86 Evaluated at bid price : 23.06 Bid-YTW : 5.92 %
CM.PR.E	Perpetual-Discount	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-01 Maturity Price : 23.58 Evaluated at bid price : 23.87 Bid-YTW : 5.93 %
MFC.PR.C	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-01 Maturity Price : 19.18 Evaluated at bid price : 19.18 Bid-YTW : 5.89 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.J	OpRet	275,129	RBC crossed 100,000 at 26.13; Scotia bought 17,900 from TD at 26.15; TD crossed 20,000 at 26.13; RBC crossed 75,000 at 26.13; Scotia bought two blocks of 25,000 from RBC at 26.13. YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-31 Maturity Price : 25.75 Evaluated at bid price : 26.11 Bid-YTW : -7.52 %
TRP.PR.A	FixedReset	231,602	Nesbitt crossed blocks of 155,000 and 20,000 at 25.52. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-01 Maturity Price : 25.47 Evaluated at bid price : 25.52 Bid-YTW : 4.25 %
GWO.PR.X	OpRet	98,891	Desjardins crossed 40,200 at 25.98; RBC bought 10,000 from Nesbitt at 25.95; Nesbitt sold 14,000 more to Desjardins at 25.95 and 13,100 to anonymous at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-31 Maturity Price : 26.00 Evaluated at bid price : 25.94 Bid-YTW : 2.83 %
RY.PR.N	FixedReset	89,810	RBC crossed blocks of 75,000 and 10,000 at 27.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.51 Bid-YTW : 3.74 %
RY.PR.P	FixedReset	81,561	Desjardins crossed 73,900 at 27.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.67 Bid-YTW : 3.62 %
CM.PR.E	Perpetual-Discount	78,909	Scotia bought 10,000 from anonymous at 24.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-01 Maturity Price : 23.58 Evaluated at bid price : 23.87 Bid-YTW : 5.93 %
There were 46 other index-included issues trading in excess of 10,000 shares.

Market Action

November 30, 2009

CIT Group has slightly amended its bankruptcy terms.

Willem Buiter is frequently quoted on PrefBlog … and now he’s got a new job!:

Citigroup Inc. hired former Bank of England policy maker Willem Buiter as its chief economist to fill the position left vacant by Lewis Alexander’s move to the U.S. Treasury eight months ago.

The appointment by the bank, which is 34 percent owned by the U.S. government, puts an academic known for his outspokenness in its most senior economics position. In 2008, Buiter told the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, that the central bank pays too much heed to the concerns of Wall Street.

The Tobin Tax idea seems to be getting some press attention:

U.K. Prime Minister Gordon Brown said on Nov. 7 that a transaction tax might compensate for the billions of dollars that the public has spent on bank bailouts. Government officials in France, Germany and Austria have voiced their backing. U.S. Treasury Secretary Timothy Geithner answered Brown a day later, saying the tax was not something the U.S. would support. House Speaker Nancy Pelosi, on the other hand, says the idea has “substantial currency” among congressional Democrats.

As noted on November 11, Gordon Brown mentioned the idea, but not in a manner to indicate either support or opposition.

Canadian Bond Indices is now offering live quotes on selected bonds. The link has been added to the “Canadian Fixed Income Data” category on the right hand panel of PrefBlog.

The Canadian preferred share market closed the month on a high note, with PerpetualDiscounts up 9bp and FixedResets gaining 5bp, on moderate volume. PerpetualDiscounts now yield 5.82%, equivalent to 8.15% interest at the standard equivalency factor of 1.4x. Long Corporates now yield about 5.9%, so the pre-tax interest-equivalent spread (also called the Seniority Spread, around here, anyway) is now about 225bp, a 10bp tightening from the 235bp reported on November 25.

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	0.0219 %	1,507.7
FixedFloater	6.06 %	4.17 %	41,287	18.58	1	-0.4986 %	2,573.0
Floater	2.59 %	3.03 %	88,613	19.58	3	0.0219 %	1,883.6
OpRet	4.80 %	-3.27 %	132,285	0.09	14	-0.1716 %	2,308.9
SplitShare	6.35 %	-9.34 %	303,043	0.08	2	-0.5660 %	2,116.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1716 %	2,111.3
Perpetual-Premium	5.85 %	4.74 %	126,357	0.57	4	0.1874 %	1,880.5
Perpetual-Discount	5.82 %	5.90 %	185,407	14.03	70	0.0943 %	1,784.8
FixedReset	5.44 %	3.81 %	372,610	3.92	41	0.0538 %	2,148.1

Performance Highlights
Issue	Index	Change	Notes
IGM.PR.A	OpRet	-2.29 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-30 Maturity Price : 26.00 Evaluated at bid price : 26.05 Bid-YTW : -2.51 %
POW.PR.D	Perpetual-Discount	-1.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-30 Maturity Price : 21.15 Evaluated at bid price : 21.15 Bid-YTW : 6.01 %
MFC.PR.A	OpRet	-1.78 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.89 Bid-YTW : 3.42 %
GWO.PR.F	Perpetual-Discount	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-30 Maturity Price : 24.88 Evaluated at bid price : 25.17 Bid-YTW : 5.96 %
HSB.PR.C	Perpetual-Discount	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-30 Maturity Price : 21.95 Evaluated at bid price : 22.08 Bid-YTW : 5.88 %
ELF.PR.G	Perpetual-Discount	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-30 Maturity Price : 18.10 Evaluated at bid price : 18.10 Bid-YTW : 6.68 %
MFC.PR.B	Perpetual-Discount	1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-30 Maturity Price : 19.73 Evaluated at bid price : 19.73 Bid-YTW : 5.91 %
BAM.PR.J	OpRet	1.86 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.78 Bid-YTW : 4.53 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.M	OpRet	285,030	TD crossed 149,700 at 26.30, then another 50,000 and then another 79,500, all at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-30 Maturity Price : 26.00 Evaluated at bid price : 26.36 Bid-YTW : -7.59 %
CM.PR.K	FixedReset	69,100	Nesbitt crossed 65,000 at 26.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.71 Bid-YTW : 3.84 %
TRP.PR.A	FixedReset	63,890	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-30 Maturity Price : 25.46 Evaluated at bid price : 25.51 Bid-YTW : 4.25 %
MFC.PR.D	FixedReset	58,553	RBC crossed 33,100 at 27.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.73 Bid-YTW : 3.96 %
RY.PR.I	FixedReset	40,210	RBC crossed 25,700 at 26.38. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 26.26 Bid-YTW : 3.72 %
IGM.PR.A	OpRet	26,959	YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-30 Maturity Price : 26.00 Evaluated at bid price : 26.05 Bid-YTW : -2.51 %
There were 35 other index-included issues trading in excess of 10,000 shares.

Market Action

November 27, 2009

Credit Default Swaps are proving to be less predictable than hoped:

Thomson provided the first test of the procedures for settling contracts triggered by a restructuring in Europe when it said in August it was deferring payments on $72.5 million of 6.05 percent private notes due this year.

The system for restructurings uses multiple auctions that set different payouts based on swap expiration dates. Dealers couldn’t settle the Thomson contracts with simpler failure-to- pay procedures that produce one recovery value because they were unable to prove the electronics company defaulted.

Asked in a July conference call with investors whether Thomson still owed the money, Chief Executive Officer Frederic Rose responded, “Since I am not a qualified lawyer, I prefer not to answer that question.” Marine Boulot, a Thomson spokeswoman in Paris, declined to comment.

To determine the size of the payouts on contracts covering $2 billion in debt, bonds and loans were split by maturity date ranges into three so-called buckets and sold at auction.

Contracts that expired on June 20, 2012 — the first bucket’s latest date — sold for 96.25 percent of the face amount, meaning swap holders received 3.75 percent of the amount covered. Swaps expiring a day later paid 34.875 percent because the debt in that bucket went for 65.125 percent.

Holders of June 20 swaps covering 10 million euros in debt got 375,000 euros, while those with June 21 contracts received almost 3.5 million euros. Swaps that terminated after Oct. 24, 2014, paid the most, 36.75 percent.

The disparity was a result of too few securities in the first bucket to settle swaps, according to Matthew Leeming, a London-based strategist at Barclays. “An imbalance of supply and demand for the deliverables can affect the recovery rate,” he said in a note.

Because they were part of industry indexes, swaps referencing the company “dwarfed the amount of Thomson debt,” said Teo Lasarte, an analyst at Bank of America-Merrill Lynch in London.

Canadian preferred shares had a good day, with PerpetualDiscounts gaining 9bp and FixedResets up 7bp. Volume was moderate.

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	-0.6957 %	1,507.4
FixedFloater	6.02 %	4.14 %	41,212	18.62	1	0.5011 %	2,585.9
Floater	2.59 %	3.01 %	92,164	19.65	3	-0.6957 %	1,883.2
OpRet	4.80 %	-6.69 %	122,560	0.09	14	0.0736 %	2,312.9
SplitShare	6.31 %	-18.14 %	315,272	0.09	2	-0.1304 %	2,128.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0736 %	2,114.9
Perpetual-Premium	5.86 %	5.01 %	126,482	2.39	4	0.0889 %	1,877.0
Perpetual-Discount	5.82 %	5.88 %	183,705	14.03	70	0.0924 %	1,783.1
FixedReset	5.44 %	3.83 %	366,170	3.92	41	0.0727 %	2,146.9

Performance Highlights
Issue	Index	Change	Notes
TRI.PR.B	Floater	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-27 Maturity Price : 19.42 Evaluated at bid price : 19.42 Bid-YTW : 2.04 %
PWF.PR.E	Perpetual-Discount	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-27 Maturity Price : 22.69 Evaluated at bid price : 23.50 Bid-YTW : 5.88 %
RY.PR.Y	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-24 Maturity Price : 25.00 Evaluated at bid price : 27.55 Bid-YTW : 3.93 %
GWO.PR.F	Perpetual-Discount	1.35 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 5.61 %
GWO.PR.I	Perpetual-Discount	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-27 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 5.82 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.M	FixedReset	185,750	Desjardins crossed blocks of 15,000 and 25,000 at 27.82, and another one of 10,600 at 27.80. TD crossed 124,100 at 27.82. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.82 Bid-YTW : 4.03 %
BNS.PR.Q	FixedReset	123,750	TD crossed 120,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-24 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 3.99 %
BAM.PR.B	Floater	52,150	Nesbitt crossed 44,300 at 13.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-27 Maturity Price : 13.20 Evaluated at bid price : 13.20 Bid-YTW : 3.01 %
BMO.PR.J	Perpetual-Discount	29,999	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-27 Maturity Price : 20.13 Evaluated at bid price : 20.13 Bid-YTW : 5.63 %
TRP.PR.A	FixedReset	20,785	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 4.33 %
BMO.PR.K	Perpetual-Discount	20,100	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-27 Maturity Price : 22.93 Evaluated at bid price : 23.09 Bid-YTW : 5.72 %
There were 30 other index-included issues trading in excess of 10,000 shares.

Market Action

November 26, 2009

Apparently, having the world’s most intrusive bonus rules is a Good Thing:

U.K. banks face the toughest bonus regime in the world if proposals outlined in a government- commissioned report are accepted, according to its author, Morgan Stanley Senior Adviser David Walker.

Banks should delay bonus payments for as much as five years and have the power to “claw back” awards, Walker, 69, said in his final report on improvements to U.K. corporate governance released today. The government strongly supports Walker’s recommendations “and will take steps to implement them as soon as possible,” according to a statement from Chancellor of the Exchequer Alistair Darling.

Meanwhile, Andrew Willis of The Globe and Mail speculates that the nudge-and-wink Canadian version might lead to new independent dealers:

As this bonus season begins, there are enormous tensions within the ranks of the six largest and most profitable houses. The bank-owned firms had great years. Yet it’s not at all clear the wealth will be shared with employees the way it was in the past. Bonus cheques may be trimmed, even chopped.

Bank executives, and the folks in HR departments, are taking a New England Patriots approach to talent: They are concluding it’s the franchise, the massive machine, that earns the profits, not any one individual. This attitude does not sit well with the more self-assured of bankers and traders.

To a large extent this is true; investment banking is simply the latest area of investment activities to get hit. The banks can, if they wish, create good products run by superb staff, but it doesn’t matter. Since moving into brokerage and wealth management, they have found that they can make just as much money with barely acceptable products run by high school students, such is their franchise.

I’m not sure where this will end – and it might not end. An internal contradiction can last a long time and either degrade slowly or spectacularly. It’s interesting to speculate just what might trigger a spectacular paradigm shift, but I haven’t got any answers for that one. Bre-X didn’t do it. Nortel didn’t do it. And small shops sell out to big shops when the proprietors retire, which takes care of the slow pathway.

Ultimately, a reversal of the process will occur only when performance actually becomes a selling feature – which isn’t going to happen any time soon. Avner Mandelman had a good piece in Saturday’s Globe regarding what is actually being sold. One thing that would be good would be increased regulatory emphasis on performance: investment managers are required to state their experience in prospectuses, but not performance. Many trading rules in UMIR are designed to protect morons – simply rescinding those would be a great leap forward. But guess which segment of the industry has captured the regulators – nothing will happen.

Some might argue that the consequences of an incompetent culture have already been felt, in the shape of the Credit Crunch. Maybe. It is very hard to read the SEC Inspector-General’s report on Bear Stearns and not get the feeling that the smiley-boys had taken over management completely and that they deserved to fail.

Not much action in the preferred share market on American Thanksgiving, but up-days are always welcome! PerpetualDiscounts gained 4bp and FixedResets were up 6bp.

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	0.5684 %	1,518.0
FixedFloater	6.06 %	4.17 %	41,842	18.59	1	0.0557 %	2,573.0
Floater	2.57 %	2.99 %	92,188	19.69	3	0.5684 %	1,896.4
OpRet	4.80 %	-6.38 %	122,871	0.09	14	0.0734 %	2,311.2
SplitShare	6.30 %	-17.93 %	317,814	0.09	2	0.5245 %	2,131.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0734 %	2,113.4
Perpetual-Premium	5.86 %	5.17 %	125,238	2.40	4	0.2375 %	1,875.4
Perpetual-Discount	5.83 %	5.91 %	184,225	13.99	70	0.0366 %	1,781.4
FixedReset	5.45 %	3.86 %	377,573	3.92	41	0.0572 %	2,145.4

Performance Highlights
Issue	Index	Change	Notes
RY.PR.Y	FixedReset	-1.59 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-24 Maturity Price : 25.00 Evaluated at bid price : 27.21 Bid-YTW : 4.21 %
PWF.PR.O	Perpetual-Discount	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-26 Maturity Price : 24.30 Evaluated at bid price : 24.50 Bid-YTW : 6.01 %
TRI.PR.B	Floater	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-26 Maturity Price : 19.65 Evaluated at bid price : 19.65 Bid-YTW : 2.02 %
ELF.PR.G	Perpetual-Discount	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-26 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 6.70 %
IGM.PR.A	OpRet	1.38 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-26 Maturity Price : 26.00 Evaluated at bid price : 26.81 Bid-YTW : -34.83 %
CU.PR.B	Perpetual-Premium	1.92 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 5.17 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.N	OpRet	139,190	TD crossed blocks of 52,900 and 40,400 and 35,000 shares, all at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-26 Maturity Price : 26.00 Evaluated at bid price : 26.24 Bid-YTW : -2.94 %
GWO.PR.E	OpRet	49,168	Nesbitt crossed 41,300 at 25.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-26 Maturity Price : 25.50 Evaluated at bid price : 25.81 Bid-YTW : -1.57 %
BMO.PR.J	Perpetual-Discount	41,700	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-26 Maturity Price : 20.15 Evaluated at bid price : 20.15 Bid-YTW : 5.62 %
MFC.PR.D	FixedReset	37,194	Nesbitt bought 10,200 from CIBC at 27.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.74 Bid-YTW : 3.95 %
BMO.PR.L	Perpetual-Discount	29,765	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-24 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 5.83 %
RY.PR.D	Perpetual-Discount	24,985	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-26 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 5.60 %
There were 19 other index-included issues trading in excess of 10,000 shares.

Market Action

November 25, 2009

Connecticut is claiming that its pension fund portfolio managers are a pack of incompetent time-servers:

Connecticut plans to join Ohio in suing Standard & Poor’s, Moody’s Corp. and Fitch Ratings for their “negligent, reckless and incompetent work” in grading investments made by state pension funds, according to Attorney General Richard Blumenthal.

Connecticut and “a number of other states” are preparing legal action against the credit-rating companies, Blumenthal said today in a Bloomberg Television interview. Ohio Attorney General Richard Cordray sued the debt raters this month on behalf of five Ohio public employee retirement and pension funds, saying “improper” ratings cost the funds more than $457 million.

Geez, you know, sometimes I think I’d like to be a portfolio manager at a big firm. Nothing to do all day but suck arse and pass the blame …

The PerpetualDiscount winning streak came to an end today, albeit just barely. Its last down day was October 28, as it then rose for nineteen consecutive days, gaining 2.99% as yields fell from 6.05% to 5.88% (quick check: 299bp total return with 6.05% yield for 27 days including weekends implies price change of 299-45 = 254bp, on 17bp yield change, implies Modified Duration of 14.94 years, which in turn implies a yield of 6.69%. Well … close enough. I’m ignoring convexity and discussing an index, after all).

Anyway, PerpetualDiscounts now yield 5.90%, equivalent to 8.26% interest at the standard equivalency factor of 1.4x. Long Corporates now yield about 5.9%, so the pre-tax interest-equivalent spread (also called the seniority spread, around here, anyway) is now about 235bp, a modest but welcome tightening from the 240bp reported on November 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	0.1094 %	1,509.4
FixedFloater	6.06 %	4.17 %	42,240	18.58	1	0.2793 %	2,571.6
Floater	2.58 %	3.02 %	92,864	19.63	3	0.1094 %	1,885.6
OpRet	4.80 %	-7.86 %	123,040	0.09	14	0.1337 %	2,309.5
SplitShare	6.34 %	-7.34 %	321,361	0.08	2	0.2190 %	2,119.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1337 %	2,111.8
Perpetual-Premium	5.88 %	5.55 %	124,199	2.39	4	0.0000 %	1,870.9
Perpetual-Discount	5.83 %	5.90 %	184,213	14.02	70	-0.0091 %	1,780.8
FixedReset	5.45 %	3.85 %	389,623	3.92	41	0.1007 %	2,144.1

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.E	FixedReset	-1.44 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-19 Maturity Price : 25.00 Evaluated at bid price : 26.61 Bid-YTW : 4.09 %
MFC.PR.C	Perpetual-Discount	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-25 Maturity Price : 18.92 Evaluated at bid price : 18.92 Bid-YTW : 5.96 %
SLF.PR.C	Perpetual-Discount	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-25 Maturity Price : 18.72 Evaluated at bid price : 18.72 Bid-YTW : 5.95 %
POW.PR.D	Perpetual-Discount	1.70 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-25 Maturity Price : 21.52 Evaluated at bid price : 21.52 Bid-YTW : 5.90 %
MFC.PR.A	OpRet	1.74 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2010-07-19 Maturity Price : 26.25 Evaluated at bid price : 26.35 Bid-YTW : 2.93 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.D	FixedReset	168,431	Nesbitt crossed 100,000 at 27.70; Scotia crossed 26,900 at the same price; TD crossed 11,000 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.70 Bid-YTW : 3.98 %
BNS.PR.N	Perpetual-Discount	82,790	RBC crossed 75,700 at 23.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-25 Maturity Price : 23.18 Evaluated at bid price : 23.35 Bid-YTW : 5.68 %
CM.PR.D	Perpetual-Discount	72,100	RBC crossed 63,300 at 24.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-25 Maturity Price : 23.96 Evaluated at bid price : 24.29 Bid-YTW : 5.97 %
TRP.PR.A	FixedReset	58,355	Nesbitt sold 10,000 to anonymous at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.79 Bid-YTW : 4.08 %
BMO.PR.J	Perpetual-Discount	53,395	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-25 Maturity Price : 20.14 Evaluated at bid price : 20.14 Bid-YTW : 5.62 %
ELF.PR.F	Perpetual-Discount	51,400	Scotia crossed 50,000 at 20.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-25 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 6.72 %
There were 36 other index-included issues trading in excess of 10,000 shares.

Market Action

November 24, 2009

A good solid day for preferred shares with both PerpetualDiscounts and FixedResets gaining 10bp on moderate 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	0.5059 %	1,507.7
FixedFloater	6.08 %	4.19 %	42,183	18.56	1	-0.4449 %	2,564.4
Floater	2.59 %	3.02 %	89,956	19.62	3	0.5059 %	1,883.6
OpRet	4.81 %	-5.94 %	121,126	0.09	14	0.0273 %	2,306.4
SplitShare	6.35 %	-3.04 %	325,499	0.08	2	0.0000 %	2,115.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0273 %	2,109.0
Perpetual-Premium	5.88 %	5.54 %	124,458	2.40	4	0.0000 %	1,870.9
Perpetual-Discount	5.83 %	5.88 %	184,808	14.04	70	0.1039 %	1,780.9
FixedReset	5.45 %	3.91 %	392,325	3.94	41	0.1035 %	2,142.0

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.C	Perpetual-Discount	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 18.95 Evaluated at bid price : 18.95 Bid-YTW : 5.87 %
MFC.PR.B	Perpetual-Discount	-1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 19.42 Evaluated at bid price : 19.42 Bid-YTW : 6.00 %
PWF.PR.G	Perpetual-Discount	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 24.64 Evaluated at bid price : 24.85 Bid-YTW : 6.00 %
RY.PR.Y	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-24 Maturity Price : 25.00 Evaluated at bid price : 27.42 Bid-YTW : 4.03 %
SLF.PR.F	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 26.95 Bid-YTW : 4.05 %
HSB.PR.C	Perpetual-Discount	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 22.35 Evaluated at bid price : 22.51 Bid-YTW : 5.76 %
ELF.PR.F	Perpetual-Discount	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 6.72 %
CM.PR.P	Perpetual-Discount	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 22.59 Evaluated at bid price : 23.26 Bid-YTW : 5.95 %
PWF.PR.F	Perpetual-Discount	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 22.14 Evaluated at bid price : 22.54 Bid-YTW : 5.87 %
PWF.PR.K	Perpetual-Discount	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 21.16 Evaluated at bid price : 21.16 Bid-YTW : 5.92 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.L	FixedReset	217,805	Nesbitt crossed 150,000 at 27.72; RBC crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.72 Bid-YTW : 4.00 %
HSB.PR.E	FixedReset	56,703	Nesbitt crossed 50,000 at 28.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 28.05 Bid-YTW : 4.02 %
RY.PR.X	FixedReset	56,061	Desjardins crossed blocks of 11,700 and 15,000 shares, both at 27.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.55 Bid-YTW : 3.97 %
ELF.PR.G	Perpetual-Discount	45,253	Scotia crossed 30,000 at 17.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 6.82 %
TD.PR.O	Perpetual-Discount	39,457	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 21.51 Evaluated at bid price : 21.51 Bid-YTW : 5.70 %
BMO.PR.J	Perpetual-Discount	36,759	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-24 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 5.58 %
There were 34 other index-included issues trading in excess of 10,000 shares.

Market Action

November 23, 2009

Themis Trading has published another “mini white paper” by Sal L. Arnuk and Joseph Saluzzi, Why Institutional Investors Should Be Concerned About High Frequency Traders. Their second so-called “problem” is actually a highly desirable feature:

2. HFT volume can generate false trading signals.

This can cause other investors to buy at a higher price, or sell at a lower price, than they would otherwise. A spike in HFT volume can cause an institutional algorithm order based on a percentage of volume to be too aggressive. A spike can attract momentum investors, further exaggerating price moves. Seeing such a spike, options traders can start to build positions, which, in turn, can attract risk arbitrage traders who believe there’s potential news that could affect the stock.

As a fundamental, value based investor, I say “Super!”. The more that securities are moved off their fundamental value, the more opportunities I will have to take advantage of the difference and make some money for my clients.

From a policy perspective, the underperformance of morons – who pretend sophisitication due to their use of algorithms, a four-syllable word, or who are attracted by momentum, or who care to bet that there’s news coming, implicitly accepting and trading on the efforts of insider traders – will assist their exit from the workforce. Which is a Good Thing, to the extent that underperformance has an actual effect on employment prospects.

Today’s 2-Year Treasury auction set two records:

Treasuries remained lower after the government sold a record-tying $44 billion of two-year debt at the lowest yield ever, the first of three note sales this week totaling a record $118 billion.

The securities drew a yield of 0.802 percent, compared to the forecast of 0.786 percent in a Bloomberg News survey of eight of the Federal Reserve’s 18 primary dealers and below the 0.922 percent drawn at an auction in December. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.16, compared to 3.63 at the previous auction. The average at the last 10 auctions was 2.92.

HSBC Canada is calling some sub-debt:

HSBC Bank Canada today announced its intention to redeem all $100,000,000 of its 4.39% subordinated debentures due 21 January 2015 (the “Debentures”). In accordance with their terms, the Debentures will be redeemed at 100% of their principal amount plus accrued interest to the redemption date. The redemption will occur on 21 January 2010 and will be financed out of the general corporate funds of HSBC Bank Canada.

These debs are described as:

The interest rate is fixed at 4.39 per cent until January 2010 and thereafter the rate reprices at the 90 day average bankers’ acceptance
rate plus 1.00 per cent.

The market edged up a little today – PerpetualDiscounts up 9bp and FixedResets down 2bp – on slighly lower 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	-0.8506 %	1,500.1
FixedFloater	6.05 %	4.16 %	41,630	18.59	1	-2.8108 %	2,575.9
Floater	2.60 %	3.04 %	90,413	19.57	3	-0.8506 %	1,874.1
OpRet	4.81 %	-4.28 %	119,128	0.09	14	-0.0736 %	2,305.8
SplitShare	6.35 %	-3.26 %	330,025	0.08	2	0.2635 %	2,115.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0736 %	2,108.4
Perpetual-Premium	5.88 %	5.54 %	125,290	2.40	4	0.1884 %	1,870.9
Perpetual-Discount	5.84 %	5.88 %	185,165	14.04	70	0.0918 %	1,779.1
FixedReset	5.46 %	3.90 %	391,330	3.94	41	-0.0238 %	2,139.8

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.G	FixedFloater	-2.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 25.00 Evaluated at bid price : 17.98 Bid-YTW : 4.16 %
CM.PR.P	Perpetual-Discount	-1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 22.41 Evaluated at bid price : 22.96 Bid-YTW : 6.03 %
TRI.PR.B	Floater	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 2.04 %
TD.PR.S	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.03 Bid-YTW : 3.87 %
CU.PR.B	Perpetual-Premium	1.00 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 5.57 %
PWF.PR.G	Perpetual-Discount	1.33 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2011-08-16 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 5.80 %
MFC.PR.C	Perpetual-Discount	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 5.85 %
SLF.PR.C	Perpetual-Discount	1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 19.31 Evaluated at bid price : 19.31 Bid-YTW : 5.76 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.D	FixedReset	213,718	Nesbitt crossed 200,000 at 27.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.60 Bid-YTW : 4.07 %
TD.PR.G	FixedReset	51,115	RBC crossed 30,000 at 27.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.66 Bid-YTW : 3.82 %
GWO.PR.X	OpRet	42,979	Dundee crossed 34,500 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-10-30 Maturity Price : 25.67 Evaluated at bid price : 26.17 Bid-YTW : 3.32 %
PWF.PR.D	OpRet	41,100	Nesbitt crossed 30,000 at 26.40; RBC crossed 10,600 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-23 Maturity Price : 25.60 Evaluated at bid price : 26.37 Bid-YTW : -25.38 %
BMO.PR.J	Perpetual-Discount	33,801	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 5.59 %
BAM.PR.N	Perpetual-Discount	32,092	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 17.52 Evaluated at bid price : 17.52 Bid-YTW : 6.92 %
There were 28 other index-included issues trading in excess of 10,000 shares.

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Market Action

November 20, 2009

Another nice day for Canadian Preferreds, with PerpetualDiscounts gaining 30bp while FixedResets were up 24bp, on moderate 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	0.7250 %	1,513.0
FixedFloater	5.88 %	4.01 %	41,842	18.80	1	1.3699 %	2,650.4
Floater	2.58 %	3.01 %	93,780	19.65	3	0.7250 %	1,890.2
OpRet	4.80 %	-6.65 %	120,645	0.09	14	0.0710 %	2,307.5
SplitShare	6.37 %	-2.57 %	332,820	0.08	2	-0.0658 %	2,109.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0710 %	2,110.0
Perpetual-Premium	5.89 %	3.51 %	126,418	0.19	4	0.1987 %	1,867.4
Perpetual-Discount	5.84 %	5.92 %	182,633	14.03	70	0.2966 %	1,777.5
FixedReset	5.46 %	3.90 %	387,829	3.94	41	0.2397 %	2,140.3

Performance Highlights
Issue	Index	Change	Notes
IAG.PR.E	Perpetual-Discount	-1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 24.31 Evaluated at bid price : 24.51 Bid-YTW : 6.20 %
RY.PR.W	Perpetual-Discount	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 22.20 Evaluated at bid price : 22.35 Bid-YTW : 5.51 %
IAG.PR.A	Perpetual-Discount	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 19.36 Evaluated at bid price : 19.36 Bid-YTW : 6.05 %
BNS.PR.K	Perpetual-Discount	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 21.56 Evaluated at bid price : 21.56 Bid-YTW : 5.63 %
TRI.PR.B	Floater	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 19.65 Evaluated at bid price : 19.65 Bid-YTW : 2.01 %
BAM.PR.G	FixedFloater	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 25.00 Evaluated at bid price : 18.50 Bid-YTW : 4.01 %
POW.PR.C	Perpetual-Discount	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 23.80 Evaluated at bid price : 24.16 Bid-YTW : 6.07 %
RY.PR.D	Perpetual-Discount	1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 20.32 Evaluated at bid price : 20.32 Bid-YTW : 5.57 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.T	FixedReset	136,230	RBC crossed blocks of 76,000 and 52,800, both at 27.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.80 Bid-YTW : 3.68 %
CM.PR.P	Perpetual-Discount	103,910	RBC crossed 59,000 at 23.35; TD crossed 41,600 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-20 Maturity Price : 22.61 Evaluated at bid price : 23.30 Bid-YTW : 5.93 %
BNS.PR.X	FixedReset	80,680	RBC crossed 76,000 at 27.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.75 Bid-YTW : 3.74 %
HSB.PR.E	FixedReset	77,110	RBC bought 13,400 from HSBC at 27.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 27.92 Bid-YTW : 4.13 %
TD.PR.G	FixedReset	52,230	RBC crossed blocks of 19,500 and 20,000, both at 27.57. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.60 Bid-YTW : 3.87 %
GWO.PR.E	OpRet	40,449	Anonymous bought blocks of 10,700 and 13,500 from National and HSBC, respectively, both at 25.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-04-30 Maturity Price : 25.25 Evaluated at bid price : 25.71 Bid-YTW : 2.03 %
There were 36 other index-included issues trading in excess of 10,000 shares.

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Market Action

November 19, 2009

James Mackintosh of the Financial Times was kind enough to link to a PrefBlog post in his discussion of Contingent Capital, CoCo farming shows the true value of government guarantees. He suggests that just about all of a banks capital market financing be contingent capital – which is, after all, what happens in bankruptcy:

Banks should be forced to turn a big chunk of existing bank debt into CoCos, with a conversion trigger based on a minimum level of capital – the worst case scenario – *or* on the bank failing. In effect, this would be a bank resolution regime which automatically converts debt to equity, avoiding the need for government rescues. Debt would cost a lot more, but bondholders would also have a far bigger incentive to keep an eye on bank management. Perhaps only 50 per cent of debt, or some other very large amount, rather than 100 per cent, would need to be convertible – but it would have to be far more than the normal belief of what might be needed in order to deal with the “black swan” events which lead to the need for government intervention.

Increased bank regulation and pay-approvals is leading to a talent drain to hedge funds:

Meredith Whitney, the analyst who cut her rating on Goldman Sachs Group Inc. last month, said the bank has lost some of its top-performing employees as executives left to start their own investment companies.

“Goldman’s lost a tremendous amount of talent going to set up their own hedge funds,” Whitney, founder of Meredith Whitney Advisory Group, said today in an interview on Bloomberg Radio. “It became a scary prospect of having the government determine what you make,” said Whitney, who also said today that bank stocks are “grossly overvalued.”

The stock plunge today was pretty tame, as plunges go, but Bloomberg says they plunged … with something even more interesting going on:

U.S. stocks extended a global drop as concern grew that the rally has outpaced the prospects for economic growth. The yen and the dollar strengthened, oil tumbled and yields on Treasury three-month bills turned negative for the first time since financial markets froze last year.

They now quote 3-month US Bills at 1bp – count ’em, one.

The preferred share market continued its recent run, with PerpetualDiscounts gaining 14bp on the day, while FixedResets were down a negligible amount. The big news was that volume fell.

PerpetualDiscounts now yield 5.92%, equivalent to 8.30% interest at the standard equivalency factor of 1.4x. Long Corporates are about 5.9%, so the pre-tax interest-equivalent spread (also called the Seniority Spread) is about 240bp. This is a shade wider than the 235bp reported on November 11, but the market seems to have found a new level … at least, until it doesn’t.

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	-0.7414 %	1,502.1
FixedFloater	5.96 %	4.08 %	43,496	18.70	1	0.2747 %	2,614.6
Floater	2.60 %	3.03 %	97,223	19.62	3	-0.7414 %	1,876.6
OpRet	4.81 %	-4.85 %	121,164	0.09	14	-0.0818 %	2,305.9
SplitShare	6.36 %	-7.34 %	336,155	0.08	2	-0.1096 %	2,111.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0818 %	2,108.5
Perpetual-Premium	5.90 %	5.53 %	124,939	2.41	4	0.1592 %	1,863.7
Perpetual-Discount	5.85 %	5.92 %	186,338	14.00	70	0.1380 %	1,772.2
FixedReset	5.47 %	3.97 %	392,496	3.94	41	-0.0045 %	2,135.2

Performance Highlights
Issue	Index	Change	Notes
RY.PR.W	Perpetual-Discount	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 21.99 Evaluated at bid price : 22.12 Bid-YTW : 5.56 %
BAM.PR.B	Floater	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 13.12 Evaluated at bid price : 13.12 Bid-YTW : 3.03 %
MFC.PR.E	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-19 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 4.13 %
BAM.PR.K	Floater	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 13.00 Evaluated at bid price : 13.00 Bid-YTW : 3.05 %
SLF.PR.E	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 19.21 Evaluated at bid price : 19.21 Bid-YTW : 5.96 %
SLF.PR.A	Perpetual-Discount	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 20.38 Evaluated at bid price : 20.38 Bid-YTW : 5.93 %
SLF.PR.B	Perpetual-Discount	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 20.49 Evaluated at bid price : 20.49 Bid-YTW : 5.96 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.A	Perpetual-Discount	73,589	RBC crossed 19,400 at 19.70, then 20,000 at 19.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 19.84 Evaluated at bid price : 19.84 Bid-YTW : 5.64 %
BNS.PR.O	Perpetual-Discount	62,200	RBC crossed three blocks of 20,000 shares each at 24.87. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 24.53 Evaluated at bid price : 24.75 Bid-YTW : 5.71 %
CM.PR.D	Perpetual-Discount	42,350	RBC crossed 38,200 at 24.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 23.95 Evaluated at bid price : 24.28 Bid-YTW : 5.97 %
GWO.PR.L	Perpetual-Discount	40,200	RBC crossed 34,300 at 23.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 23.51 Evaluated at bid price : 23.67 Bid-YTW : 6.06 %
TRP.PR.A	FixedReset	37,125	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 4.28 %
RY.PR.B	Perpetual-Discount	35,135	RBC crossed 25,000 at 20.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-19 Maturity Price : 20.79 Evaluated at bid price : 20.79 Bid-YTW : 5.69 %
There were 26 other index-included issues trading in excess of 10,000 shares.

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