Category: Market Action

Not quite so many links as has been the case lately, thank heavens, but those that I am going to put up are of exceptional interest … so read carefully!

Coventree was able to roll $600-million worth of paper today, which is good news, but noted:

“This ABCP was purchased primarily by investors who elected to renew or roll over their ABCP that matured (Tuesday),” Coventree stated.

I suspect there’s something of Mexican standoff implicit in the above remarks … if Coventree had to enter CCAA Protection it would be worse for both the company and the creditors.

There was a hint that much the same thing might be happening in the States, with Countrywide Financial stock plunging when Merrill Lynch changed its recommendation from “Buy” to “Sell” based on liquidity concerns. The analyst’s track-record was not disclosed. As in many such cases, this accellerated concerns to the point of becoming a self-fulfilling prophecy:

Countrywide credit-default swaps soared 225 basis points to 600 basis points, according to broker Phoenix Partners Group. That means it costs $600,000 a year to protect $10 million of Countrywide bonds from default for five years. The contracts have risen more than sixfold in the past month.  

The rout intensified after CNBC reported that Countrywide’s 30-day asset-backed commercial paper was being quoted by dealers at a 12.54 percent yield. The company previously borrowed at 15 basis points, or 0.15 percentage point, over the London interbank offered rate, which currently is about 5.57 percent for 30-day borrowings, the cable-television network reported

Even one of the bond market’s golden boys is affected, though admittedly the damage is largely self-inflicted: Nestle lost its triple-A status:

Nestle’s was cut one level to AA+ by Fitch and to Aa1 by Moody’s after the Vevey, Switzerland-based company said it plans to repurchase 25 billion Swiss francs ($21 billion) of stock, its biggest-ever share buyback. The downgrade leaves only Johnson & Johnson, Toyota Motor Corp. and Exxon Mobil Corp. holding AAA ratings from both Moody’s and Standard & Poor’s as well as Fitch.

In late news that might broil the markets tomorrow:

Australia’s Rams Home Loans Group Ltd. has been unable to refinance A$6.17 billion ($5 billion) of short-term U.S. loans because of a “lack of market liquidity” caused by the global credit rout.

Rams cited the “tightening of the global credit markets” for failing to sell the so-called extendable commercial paper, the company’s largest source of funding for its loans, it said in a statement today.

The lender has been given temporary funding of A$1 billion by two of its providers, Rams said.

In turn, both American and Canadian equities tanked. Today’s fearless prediction: pundits in tomorrow’s paper will note that the Canadian index is now more than 10% off its peak, meeting the generally accepted definition of a “correction”.

Reminds me of my back-office days back in 1987. I was asked quite seriously if I thought the 502-point drop in the Dow was a “crash” or a “correction”. I said I thought it meant the Dow was down 502 points, which wasn’t considered a particularly penetrating answer.

All the angst got the central banks moving. The Bank of Canada lowered its standards for repurchase agreements and the current month Fed Futures are now showing an expectation of an average Fed Funds rate for August (this month! August!) of 4.99%, twenty-six bps below target. This follows disclosure that the dollar-weighted average of actual Fed Funds transactions yesterday was 4.54%, with a low of half a point. We can be thankful that inflation numbers were benign and were met with cheers. A Fed governor, Poole, reminded the markets not to take anything for granted – the Fed cares about the real economy, not bit of Wall Street paper.

Given the de facto easing, it is not surpising that Treasuries had a really good day, with the two-year yield declining six basis points, although the spoil-sports trading ten-years took yield up 1bp, for a marked steeping. Canadas did not behave in anywhere near so dramatic a fashion, but 2-10 still steepened 2.3bp.

Rotten day in the preferred market, with all but one of the indices down on the day – and that one (FixFloat) was due to exceptional performance by BCE.PR.T, which accomplished this feat on zero volume. It’s very tempting to try to read something into this performance; but then again, in such a retail dominated market, strange things can happen.

Again, lack of interest in the lower rated credits was noticable, with the following performance stand-outs: YLD.PR.B, -4.55%; IQW.PR.D, -4.43%; HPF.PR.B, -4.26%; STQ.E, -3.01%; IQW.PR.C, -2.83%; DC.PR.A, -2.29%; GT.PR.A, -2.15%; NTL.PR.F, -2.07%; BBD.PR.C, -1.40%; BBD.PR.B, -1.32%; BPO.PR.J, -1.22%; and YPG.PR.A, -1.09%. Some of the lower rated credits bounced, but not many: WN.PR.C, +1.06%; WN.PR.D, +1.41%.

Just for fun, I’ll update the ‘Junky but not quite junk’ list (and remember, this is not representative! While the selections were not entirely random, they’re not entirely representative, either!).

There were fifteen other $25-equivalent index-included issues trading over 10,000 shares today.

I have another barrage of links for you today, so brace yourselves.

First, the obligatory Canadian news: Peter MacKay is no longer the Minister in Charge of Signing Agreements and is now the Minister in Charge of Shooting Off. What his dog thinks of the change was not disclosed.

BCE has filed its proxy statement and disclosed that financing for the takeover is coming from Citigroup, Deutsche Bank, The Royal Bank of Scotland and the Toronto-Dominion Bank. Now, it’s very nice to have financing committments, but they don’t necessarily mean anything. The Sallie Mae takeover is in trouble, with the borrowing buyers attempting to use an escape clause and the salivating sellers trying to slam it shut. Years of litigation ahead on that one, I’ll bet.

One of the financing consortium, Citigroup was in the news today.

Citigroup Inc., the biggest U.S. bank by assets, may forfeit as much as $1 billion of third- quarter profit because of the credit crunch in mortgages and high-yield debt, according to analysts at Sanford C. Bernstein & Co. LLC.
…
“The key question is how the market absorbs deals coming in September, when spreads may widen out to July levels or worse, or may renormalize, with spreads coming in to June levels,” the analysts wrote.

Mason and Howard said mark-to-market losses on leveraged loans in July could have been 15 percent to 20 percent. Lending spreads have tightened so far in August, they said.

Citigroup is the third-ranked provider of leveraged loans in the U.S. this year, behind JPMorgan Chase & Co. and Bank of America Corp., according to data compiled by Bloomberg.

Conventree is claiming that back-up liquidity providers for its commercial paper programme are refusing to provide back-up liquidity … lawsuits ahead there!

European Central Bank intervention eased off amid hopes that conditions are adjusting. Robert Eisenbeis thinks the ECB was too easy on the market.

It is being argued that central banks should actually make markets in instruments that have suddenly become illiquid … I don’t buy it. That’s the private sector’s job … central banks, as I said yesterday, can and should ensure that the biggest, best capitalized financial market intermediaries can make their decisions without having to get particularly nervous about their financing.

I also don’t buy recommendations that the ceiling on mortgage insurance be increased. The maximum mortgage that the agencies can buy is USD 417,000. Sorry! Anybody who’s taking out a mortgage in excess of USD 417,000 doesn’t need government help, implicit or otherwise. Insuring or providing loans of that size to individuals should be strictly private sector.

There was a comment reported by Bloomberg:

“Something that’s triple-A clearly shouldn’t be this volatile,” David Watts, an analyst at bond research firm CreditSights Inc. in London, said.

It may be that the Bloomberg reporter wrote the story to imply deprecation of the AAA ratings, but I hope the explanation for that remark is that he was deprecating the market. I agree with the other guy:

Ratings are “a measure of risk on a buy-and-hold basis and say nothing about the pricing volatility of an investment,” said Gareth Levington, a senior analyst at Moody’s in London. “The market level isn’t hugely relevant for the rating.”

Now for the really interesting stuff: Fed Funds. Truly one of the wildest and interesting sectors of the market, but not usually. Today Fed Funds Futures for the current month closed at 94.96, indicating that the market feels the average rate on Fed Funds for August will be 5.04%. Given that the Fed Funds target rate is 5.25%, this seems very strange indeed. But there are rumours that an emergency cut is imminent and there are more than just rumours. Federal Reserve Data indicates that the actual average rate so far in August has been about 5.17%; on 8/10 the Effective Rate was 4.68% and on 8/13 the ER was 4.81%. On both those days, the low for the day was 0%. So roll that up and smoke it … the interventions have had some effect! I found another primer on how this works, for those who are interested.

Potential cuts in the Fed Funds rate got a boost from mild US Inflation data which is projected by many to come inside the Fed’s comfort zone. Exports are up, which is logical since emerging nations are the only ones who have any money.

Sub-prime is even affecting national currencies … the Kiwi/Yen carry trade is losing popularity and funds are pouring into the US dollar.

With all this going on, Walmart’s profit warning ushered in every-day discounts on US Equities and financials led the crap-out in Canada.

There was continued flight to quality and curve-steepening in both Treasuries and Canadas. US Investment-Grade corporates narrowed in a little.

A lot of lower grade credits in the preferred share market got hit today: WN.PR.D, -3.49%; DW.PR.A, -2.46%; WN.PR.C, -1.72%; DC.PR.A, -1.55%; YPG.PR.B, -1.53%; STR.E, -1.35%; IQW.PR.D, -1.19%. This illustrates my theme of minimizing exposure to the Pfd-3-type credits!

Just for fun, I’ll update my recent comparable list:

There were six other $25-equivalent index-included issues trading over 10,000 shares today.

Link heaven today, since everybody’s talking about interesting stuff! You know things are getting weird when the words “Ruble” and “Safe Haven” are mentioned in the same sentence.

Things were going well until Coventree announced it wasn’t able to roll its commercial paper and was therefore extending the term of their extendible notes. As they explain in a very good promotional essay, written in 2002 and still on their website, Extendible Notes provide liquidity protection for issuers similar to that of having stand-by lines with major banks, while being much less costly to support. Whether or not anybody will be willing to buy these things after seeing all the damage an extension can do in practice, is something we will just have to wait and see.

After Coventree’s announcement, American and Canadian equities tanked, ruining what had been a pretty good day ’till that point. Equities had, until then, been able to laugh off a Goldman Sachs bail-out of one of their funds, to the tune of $3-billion.

The Global Equity fund has about $3.50 in borrowed money, or leverage, for each $1 of client money, down from $6 before the capital infusion announced today, Viniar said. The fund plans to keep leverage at the current level.

When you are levered 7:1, there isn’t much room for zig-zags in market prices! This, I think, is one of those occasions where patient money that isn’t marked to market every single day can find some good bargains. High-quality spread product has been suggested.

There was more central bank intervention on the day and some fast-money is betting that this will turn into rate cuts. I don’t buy that myself … but I can’t deny that the market is expecting cuts. Jim Hamilton wrote a great essay defining a liquidity event and attached a graph of Fed-Intervention-Sizes I can’t help reproducing here:

Wow! The WSJ posted a primer on the mechanics of this. My own homely example of a liquidity crunch is … say you have to sell me your house … maybe you’re moving or something. It’s worth $400,000 – we both agree on that. But I can’t get financing! All the bank is willing to lend me is $300,000! At that point, you might have to swallow hard and sell it to me for the latter figure … and I’ll have to keep my nose clean for the next while so the bank doesn’t foreclose on me.

The central banks are desperately afraid of this type of thing happening … it’s what happened in Japan in the late eighties, and we’ve seen how that story plays out. So they are lending the top-tier banks as much money as they want at the overnight rates, simply to ensure that these banks can then make business decisions based on expected returns relative to the overnight without having to worry about their own financing. With luck, this liquidity will trickle into the marketplace and – since everybody agrees your house is really worth $400,000 – I’ll be able to get financing for the original figure. I’ll have to, since if I don’t somebody else will. But a prolonged liquidity squeeze can lead to deflation – and fighting deflation is like trying to push a rope uphill.

There is money around, so we needn’t all panic just yet. J&J just came out with a massive bond issue that was sharply increased in size once they realized how much demand there was for triple-A product. There are warnings that the same reception won’t be found by lesser credits, however.

As one might imagine, government bonds had an entirely reasonably good day, with Treasuries up a tad and Canadas up a tad more.

In continuing stories, there is argument that sub-prime is NOT Greenspan’s fault and, having made their point, China backed off the financial Armageddon thing.

The preferred share market was quiet, drifting slightly downward on not much volume.

There were five other $25-equivalent index-included issues trading over 10,000 shares today.

Well, that was a week-and-a-half, that was!

As proof, I offer up the TSX Press Release which states:

There were 707,441 trades today on Toronto Stock Exchange, a new historical high. The previous high was 704,261 trades on August 9, 2007.

I feel a bit sorry for August 9 – setting a new high and only getting one day in the sun! It’s a bit like breaking the world record for something at the Olympic Games, only to find you have to settle for silver.

The number of trades will be a function of the rise of Algorithmic Trading, which should not be confused with Quantitative Investing, which should most definitely not be confused with Technical Analysis.

Algorithmic trading is the practice of feeding a few simple rules into a simple computer programme and having the programme place orders into the market place as required. For instance, you can tell your programme that you want to sell X to buy Y at a take-out of $1.00, up to a limit of 50,000 shares, to stay on the offer and bid, respectively, to the extent that if you get filled on one side you can take market action on the other, as long as you stay within 1,000 shares of equal execution. Or something like that. Such a programme could lead to a huge number of orders, as it executed in pieces over the day. But who cares? It cost you two minutes to input these specifications, five minutes to check up on it through the day and five cents worth of electricity. The Financial Times did a series on it.

Quantitative Investing, on the other hand, is the practice of measuring investment characteristics and making investment decisions on the basis of these numbers. Anybody who has ever compared P/E ratios has invested quantitatively, at least to some extent. Practitioners of Quantitative Investing, known as Quants, make most, if not all, of their investment decision based on such numbers. The programmes used for Quant investing range from moronic six line spreadsheets to things like (cough, cough) HIMIPref™.

Technical Analysis is the practice of making an idiot of yourself through the creative use of graph paper, different colours of ink, sacrificed chickens and dirt taken from a graveyard at midnight. It is not suitable for discussion in polite society, such as, f’rinstance, in this blog. A slightly more favourable description of the process is at Investopedia.

Yeah, so anyway, the TSX had a huge day in terms of trade volume and I hope the tech guys are enjoying a relaxing beer at this point.

The day was wild, both in the US and Canada, as sub-prime worries struggled with confidence-boosting cash from the Central Banks for investors’ hearts and minds.

No hedge funds actually went bust today, as far as I know, but there are reports that Goldman’s Alpha Fund is now down 26% for 2007 to date. Deutsche Bank has disclosed that a fund with no sub-prime exposure has experienced 30% redemptions in August alone.

This scale of redemptions sucks up liquidity like crazy, which is one reason the central banks are stepping up. The CEO of Countrywide Credit thinks it will have a salutary effect on confidence (he’d better hope so!) and even the Bush administration has made a cheerleading effort, although not everybody buys what they’re selling. There’s much more confidence being expressed in the technocrats – e.g. Bernanke. Most comment is favourable.

The Treasury market stopped the panic buying as did Canadas, with the long-end continuing its weakness on fears all this money’s going to cause inflation.

The preferred market had a poor day, with all but one of the HIMIPref™ Preferred indices down on the day. But … that means yields are going up! In keeping with the “flight to quality” theme, there were quite a few lower rated (and non-index-included) issues down substantially on the day: BBD.PR.D, -4.15%; GT.PR.A, -2.93%; SPL.A, -2.87%; DC.PR.A, -2.64%; NTL.PR.F, -2.35%; WN.PR.A, -1.48%; DW.PR.A, -1.46%; WN.PR.E, -1.22%; BBD.PR.B, -1.06%; and finally IQW.PR.D, -1.00%. The two Mulvihill funds in that list, GT.PR.A and SPL.A are showing amazing yields … if they don’t default … which is not as likely as one might wish.

The TSX’s record trade count didn’t get much help from preferreds, as volume was pretty low.

There were five other $25-equivalent index-included issues trading over 10,000 shares today.

The markets giveth and the markets taketh away.

The trouble started in Europe, when BNP Paribas halted redemptions on some hedge funds, due to an inability to find a bid on some of their holdings.

“The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating,” BNP Paribas said in a statement.

This caused panic – or, at least, a major recalculation of just how bad things actually are. Overnight LIBOR increased 53bp and the European Central Bank stepped up to flood the system with cash. There is, as yet, no word on whether they have started renting helicopters. Similarly, the Fed pumped in liquidity (albeit not so much) and the Bank of Canada proudly announced that its employees showed up for work today.

The stock market did not like being reminded of sub-prime and showed its displeasure in both the US and Canada. The market is so upset that it has been knocked back all the way to where it was on Monday at about 2pm:

As might be imagined, the bond markets did interesting things. The flood of short-term money from the central banks sent two-year Treasury yields sharply lower. Fears that this money might fuel inflation steepened the curve considerably, both in the US and Canada. It would be really, really nice to see a decent term premium again, y’know? The WSJ has a round-up of reactions to the liquidity pumping.

Thirty-day Fed-Fund Futures are now indicating a rate of 5.20% for August and 4.73% for next February, but it’s an open question about how reliable this predictor is. There’s a lot of arbitrage problems with this contract – it’s hard to short Treasury Bills – as well as segmentation problems.

In stories of continuing interest, Joseph Stiglitz blames the sub-prime mess on Greenspan & Bush and Brad Setser has some things to say about China’s Reserve Policy sabre-rattling.

The preferred share market saw increased volumes today – back to normal levels, perhaps even normal+, with three issues trading in excess of 100,000 shares without being internal crosses or dividend capture plays.

PerpetualDiscount managed to squeak out another daily gain, while perpetualPremiums fell a bit, but nothing too exciting.

In keeping with the “flight to quality” theme, a number of lower-rated issues not included in the indices performed poorly today: NTL.PR.G, -2.89%; HPF.PR.B, -1.71%; DC.PR.A, -1.66%; EPP.PR.A, -1.45%; NTL.PR.F, -1.16%; and our friend from yesterday, YPG.PR.B, -1.14%. I will note that DBRS rates HPF.PR.B as Pfd-2(low), but I don’t understand why.

There were twenty-six other $25-equivalent index-included issues trading over 10,000 shares today.

OK, everybody, we can relax now! George W. Bush has stated “I’m not an economist, but my hope is that the market, if it functions normally, will be able to yield a soft landing. That’s kind of what it looks like so far.”  The equity markets immediately responded with a huge advances, both in the US and in Canada.

Sub-prime is old news, as evidenced by the fact that the IMF is pontifficating on the subject. The Europeans say investors can take their lumps anyway. Of far greater interest is rumblings from China that they may be willing, under certain circumstances, to flex their treasury muscle and use their currency reserves as a political weapon. Bush says that this would be foolhardy, and it’s therefore surprising that anybody is still taking the threat seriously. But … there is some concern the Fed doesn’t have the same influence over longer-term rates that it used to. Tom Graff has some comments and I have previously noted the effect of Chinese investment on Treasuries. Their trade surplus rose again in July, so they’ve got plenty of ammunition.

Treasuries got thumped, and whether that’s a rebound of the flight to quality or a China Syndrome is a matter of taste. Canadas followed Treasuries, unnoticed by media and bloggers.

The Wall Street Murdoch is Magnificent Journal posted an interesting comparison of credit markets, now vs. the LCTM blow-up. Given the state of economic education, however, nobody will notice.

It was a good day in pref-land, with volume picking up a bit and numerous “Scraps” issues (those not included in the indices due to either low volume or poor credit) gaining over 1% in price (bid / bid). The PerpetualDiscount index continued to shine and – who knows – might even make it back to its 2006-6-30 level of 1,000.00 before too long.

BAM had an interesting day, with two of its floating-rate issues and one of its perpetualDiscounts gaining over 1% (bid / bid). There seems to have been some pickup in activity in the BAM.PR.M / BAM.PR.N issues but whether this is meaningful remains to be seen. The fund has a position! An attractive yield, anyway – but I will confess I don’t know how many, if any, the underwriters of BAM.PR.N still have to unload. Certain the blow-out sale on EPP.PR.A I was told about has fizzled – the issue immediately started trading below the price I was told and has remained there since.

There were sixteen other $25-equivalent index-included issues trading over 10,000 shares today.

It was a day of mixed indicators, with frenzied traders choosing random bits of data and making bets on them! US equities rose again, continuing a huge rise from yesterday while all sensible people were on holiday, on the very good rationale that the Fed says the economy is growing enough that the main risk is inflation. It therefore makes all kinds of sense that Canadian equities fell on fears that the US Economy is slowing, doesn’t it? Is the glass half-empty or half-full? I guess it depends how far away you are from the glass.

The US Treasury market did homage to the Fed statement as well, falling a bit – not much – as traders appeared to take the view that the expected rate cut will take longer to arrive than expected. Torn between the domestic equity market and the Treasury market, Canadian bonds declined a bit, but nothing to write home about.

The knock-on effects of tighter credit in the wake of the sub-prime frenzy are showing amongst those firms attempting to finance share buy-backs in the bond market. Bear Stearns, which has been caught up in this debacle more than it would probably like to, has indicated it will not be buying back shares, has paid up big-time to get some five-year money to reduce dependence on the money-market, and gotten rid of a high-ranking executive. Sounds like they’re taking things seriously!

The Fed statement today was notable for more than the usual reasons. There was a rare mention of the global economy, and its role in buying American stuff rather than selling cheap stuff to Americans. There is some further comment to the effect that American productivity growth is slowing. Meanwhile, there are rumblings that maybe Greenspan should be blamed for sub-prime and that US officials think the market is always perfect.

All in all, an interesting day!

Not the most active of days in the preferred share market, but at least trading was more inspired than it was Friday. InterestBearing issues did well and the PerpetualDiscount index continued what has been a fairly steady grind upwards since mid-July.

A number of Pfd-3 and worse issues did horribly, with YPG.PR.B, for instance, hitting a new low. It can only be detected over long periods of time … but yes, the preferred market does eventually  reflect the bond market! YPG.PR.B now yields 6.48% based on a bid of 22.60 and a softMaturity 2017-6-29 at 25.00 … not bad! At a conversion factor of 1.4, that’s equivalent to interest of over 9% …. but it’s a Pfd-3(high). Suitable only in very sparing quantities!

There were twelve other $25-equivalent index-included issues trading over 10,000 shares today.

It turned out that the end of the world, previously thought to have been cancelled, was merely postponed; a few proponents of the Efficient Market Hypothesis (strong form) received bruises in the rush to the exits but, as they themselves noted, they probably would have got them anyway.

The day started well for fixed-income investors, with the Non-Farm Payrolls report showing that 92,000 jobs were created while unemployment crept up a fraction. James Hamilton at Econbrowser says it actually be worse than it looks, since it does not go far enough to contradict his other indicators. Other reactions have been compiled by the Wall Street Murdoch is Magnificent Journal.

The report was weak enough that even hawkish economists conceded a rate-increase might be further off than anticipated so Treasuries had a great day, closely followed by Canadas.

This exuberance does not extend to lending money to actual companies, however, especially not those involved in sourcing, packaging and selling mortgages. Employees of such firms hoping to get work processing redemptions from hedge funds were disappointed when another European fund halted redemptions.

All this crushed US stocks, while Canada had to deal not only with the US news, but also the fact that it doesn’t look like we’ll be able to go work at Telus, either. So Canada got squashed.

Speaking of Telus, they released their quarterlies today, and noted:

TELUS in July continued its assessment of whether it should potentially make a competing offer for BCE. TELUS has concluded this assessment and it does not intend to submit a competing offer to acquire BCE.

I’m still not convinced that Teachers / BCE story is over yet. I have convinced myself, however, that the secret of happiness is putting oneself into a position of not caring. Which is to say, not holding BCE Prefs.

Meanwhile, the preferred share market simply continued not reacting much to anything at all, but there was one notable exception. The Argus Preferreds, AR.PR.B, are tracked by HIMIPref™ for the very good reason that about ten years ago they were in an index for ten minutes. They were down 63.69% today (bid/bid) on no volume, as the already pathetic bid vanished. To be perfectly frank, I don’t know off the top of my head who owns Argus. Is it the soon to be bankrupt Hollinger or the soon to be jailed Lord Black? Whatever … this issue hasn’t paid its dividend for over two years, so it will be of interest only to hedge funds and scrip collectors.

The post regarding Malachite’s recent performance has been updated with figures for DPS.UN and a joke, so read it again. Read it many times!

There were NO other $25-equivalent index-included issues trading over 10,000 shares today.

Zip. Zero. Zilch. There weren’t even enough issues trading in size to fill a table with five prime examples.

Much to investors’ relief, the previously scheduled end of the world was cancelled today, which was considered good news for both American and Canadian equities. A good day all ’round, in fact, as Treasuries rose, dutifully followed by Canadas.

It is entirely possible that this exuberance has been caused by reports that Stephen Harper said there had been a lot of easy credit internationally, suggesting the recent turmoil was a reassessment of risk. We shall all sleep better tonight provided, of course, that the cheques resulting from massive redemptions of US Junk Funds don’t bounce. Meanwhile, Flaherty says he’s from the government and he’s here to help us.

Sub-Prime had a bad day amongst some indications that credit standards spiralled downwards over the past few years:

It makes one feel at least a little bit more sympathetic to the ratings agencies criticized for over-optimism!

Fed Funds contracts are showing a Fed easing ahead, but this is not necessarily a logical conclusion, especially considering that Europe might tighten.

Rio Tinto’s financing of its Alcan takeover is reported to be doing well.

As far as prefs are concerned … BSN.PR.A has been removed from the HIMIPref™ universe, due to its redemption.

There were Ten other $25-equivalent index-included issues trading over 10,000 shares today.

A wild day for stocks, as American equities gained sharply in the last hour to record good performance on the day, while Canadian stocks … shoulda stood in bed.

Meanwhile, Treasuries fell sharply, which may be due to reallocation to equities, reduced hopes for a rate cut, or simply because they felt like it. Ask a priest.  Fitch cut ratings on a lot of sub-primes (which, I’ll bet, still doesn’t get the ratings in line with the prices) and clarified some of their rating processes. Canada still doesn’t have a dedicated bond blog or even any decent wire services (if I’m wrong, tell me!), so you’ll have to trust me again … Canadas did not have an exciting day. Flat-to-boring about sums it up.

Yesterday I highlighted a Bloomberg story claiming that some major brokerage bonds were trading as junk. Tom Graff says that’s a load of hooey, and provides some examples of bellwether junk bonds vs. the brokers of interest … broker spreads are wide, he says, but not actually junk!

Back to prefs … CM.PR.C has been redeemed and been removed from the “PerpetualPremium” index. To my shame, I confess that the HIMIPref™ Indices have not been rebalanced for July month-end and I will have to catch up at another time – hopefully tomorrow. The market had a good day – as suggested by the “Major Price Changes”, but beyond that, I’m afraid you’ll have to wait.

There were eleven other $25-equivalent index-included issues trading over 10,000 shares today.

Update, 2007-08-02