PrefBlog

Everything is Morgan Stanley’s fault!

Institutional investors’ allocations to dollar-denominated bonds have dropped to the lowest level since 2007 as strategists at Morgan Stanley and JPMorgan Chase & Co. see a shift away from the debt that may fuel higher borrowing costs.

Holdings by investors from pensions to endowments fell to 26.2 percent of assets in the second quarter, from 30.1 percent in the corresponding period of 2012, according to the Wilshire Trust Universe Comparison Service, which tracks plans that oversee $3.46 trillion. Morgan Stanley’s $1.8 trillion wealth management unit has been advising clients to cut bond allocations to the lowest in more than five years, Chief Investment Strategist David Darst said.
…
Institutional investors such as corporate and public pensions have reduced their median allocation to U.S. bonds from 32 percent of their assets in the last three months of 2011, according to data compiled by Wilshire Associates Inc., whose Trust Universe Comparison Service tracks more than 1,700 plans.
The current proportion of dollar-denominated debt holdings is the least since the fourth quarter of 2007, Kim Shepherd, a spokeswoman for the firm, said in an e-mail.

“There is movement by institutional investors out of investment-grade bonds,” said Eileen Neill, a managing director in the consulting division of Wilshire, a Santa Monica, California-based financial advisory firm. “It’s not out of fear of bonds, it’s out of necessity because of the low yields. They’re moving to higher yielding bonds and emerging markets debt.”

Individual investors have been shifting to stocks from bonds as well. The gap between flows into bond mutual funds and exchange-traded funds and those focused on equities widened to $70 billion in June, the most ever, according to JPMorgan analysts led by Nikolaos Panigirtzoglou in London.

The bank-owned Toronto Stock Exchange is up to its usual tricks today. It sold me very expensive data indicating that the “last” quote for CIU.PR.C was 6.83-23.99. When I went to their website to check the last few trades, I was informed that the “last” quote was 24.41-23.99 … bid bigger than the ask. Not even the most cursory editor … so in despair, I have put it into HIMIPref™ as 22.99-23.99.

Wonder of wonders, it was mixed day for the Canadian preferred share market, with PerpetualDiscounts off 12bp, FixedResets down 16bp and DeemedRetractibles gaining 9bp. Lots of volatility, with FixedResets prominent on the down side. Volume was high.

Nothing happened today.

The Canadian preferred share market got smacked again, with PerpetualDiscounts losing 113bp, FixedResets down 34bp and DeemedRetractibles off 28bp. BAM issues were prominent on the very lengthy Performance Highlights list, and not on the good part of it either! Mind you, the good part wasn’t all that lengthy. Volume was quite high.

Nothing happened today.

It was another terrible day for the Canadian preferred share market, with PerpetualDiscounts losing 67bp, FixedResets off 32bp and DeemedRetractibles down 63bp. The Performance Highlights table is suitably enormous, with bank issues making a relatively rare ascent into prominence amongst the losers. Volume was above average.

I’ve just had a look at A Review of the Oncology Under-Dosing Incident by Jake J. Thiessen, Ph.D. … the report on the chemotherapy scandal in which neither hospitals nor purchasing agents made the slightest effort to determine just what it was they were buying or had bought.

What a whitewash.

The early days of the incident began with the discovery of a questionable MHS GEMCITABINE product on March 20, 2013 at the Peterborough Regional Health Centre.

This, of course, is bullshit. The early days of the incident began with the tendering of the contract to supply the drug. The contract was incompetently drafted and handling of the delivered materials was also incompetent. He didn’t address (or even acknowledge) the kickback negotiated as part of the contract.

As a former chemist, the part I like best is:

The clear difference factor in bulk reconstitution preparation lies in the overfill within the normal saline bags used in hospitals and by MHS. That is, although a bag may be nominally labeled to contain 100, 250, 500 or 1000 mL of 0.9% sodium chloride, the actual volume may be somewhat larger. Such overfill is widely known and is not limited to diluents. For example, Baxter had declared its overfill (shown in Appendix 4). Both the GPO and MHS were apparently aware of such overfills. The degree of overfill is not standardized; it becomes part of a manufacturer’s finished product specifications. The reason for this overfill is that the fluid bags are to some extent permeable to water. That is, water can move through the membrane and then evaporate from the outside surface. On storage, the contents of the bags can thereby decrease. The product’s shelf life is defined by the length of time it would normally take before the contents are reduced to the aforementioned nominal contents (e.g., 100 mL) on the label. Obviously, the rate of loss is determined by the permeability of the bag, fluid volume to surface ratio, and the storage conditions. This influences both the overfill variability used by a manufacturer and the contents determined at any point in time

So it is known that the concentration of active material in the bags will increase over time, but the clowndorks in charge of preparing medication for administration use the bags as a source of stock solution at the concentration shown on the label.

Don’t get sick in Ontari-ari-ari-o.

As a nod to the ostensible subject of this blog (Canadian preferred shares. Remember?) I’ll highlight Assiduous Reader adrian2‘s trip down memory lane to May, 2008, when we were all trying to figure out just what these funny new Fixed-Reset thingamajigs were all about.

It was another day of sickness in the Canadian preferred share market, with PerpetualDiscounts off 1bp, FixedResets down 16bp and DeemedRetractibles losing 19bp. The Performance Highlights table is again very lengthy, but with no obvious patterns. Volume was high.

Nothing happened today.

Another crushing day for the Canadian preferred share market, with PerpetualDiscounts losing 77bp, FixedResets off 8bp and DeemedRetractibles down 23bp. There is a suitably lengthy Performance Highlights table, suitably featuring PerpetualDiscount losers, but with an impressive number of FixedReset losers and a few winners to provide some variety. Volume was quite high.

PerpetualDiscounts now yield 5.64%, equivalent to 7.33% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.7%, so the pre-tax interest-equivalent spread is now about 265bp, an extremely sharp widening from the 240bp reported July 31.