PrefBlog

The SEC is approving a scheme by the NYSE that will discriminate between orders based on who you are:

A Retail Order would be an agency order that originated from a natural person and not a trading algorithm or any other computerized methodology. A Retail Order would be an immediate or cancel order. The Retail Member Organization submitting the order would not be able to alter the terms of such order with respect to price or side of the market. A Retail Order could be submitted in a round lot, odd lot, or partial round lot amounts.
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Under the proposal, a Retail Member Organization submitting a Retail Order could choose one of three ways for the Retail Order to interact with available contra-side interest. First, a Retail Order could interact only with available contra-side Retail Price Improvement Orders. The Exchange would label this a Type 1 Retail Order and such orders would not interact with other available contra-side interest in Exchange systems or route to other markets. Portions of a Type 1 Retail Order that are not executed would be cancelled.

Regrettably, there are no provisions according special status to orders placed by black jewish lesbians. I trust that this oversight will be addressed forthwith.

San Bernardino’s going bust:

San Bernardino’s City Council voted to become the third California municipality this year to seek bankruptcy protection after officials learned they might not have enough cash to pay workers.
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A filing by San Bernardino would follow ones by Stockton, a community of 292,000 east of San Francisco, which on June 28 became the biggest U.S. city to go into bankruptcy. Mammoth Lakes, a mountain resort of 8,200, filed for protection from creditors July 3 saying it can’t afford to pay a $43 million legal judgment, more than twice its general-fund spending for the year.
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Taxable Build America Bonds sold by the San Bernardino Joint Powers Financing Authority in December 2010 and maturing in 2030 traded today at a record average yield of about 11 percent, up from 7 percent yesterday, data compiled by Bloomberg show. General-obligation debt from state and local California issuers yielded an additional 1.04 percentage points above top- grade securities on average as of yesterday, matching the most since Jan. 12, according to Bloomberg Fair Value index data.
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Confronting a $45 million shortfall, San Bernardino is facing insolvency because of accounting errors, deficit spending, pension and debt costs, and lack of revenue growth, according to a June 26 budget analysis posted on the city’s website. Officials have declared fiscal emergencies, negotiated for concessions from employees and reduced the workforce by 20 percent in four years.

I confess to being most interested in the pension section of the city’s tale of woe, which I will not reproduce here because the bastards scanned the report instead of producing something more web-friendly. Basically, retirement costs were 9% of the budget in 2006/7 and are projected to increase to 15% of the budget by 2015/16.

It was an unevenly positive day for the Canadian preferred share market, with PerpetualPremiums winning 21bp, FixedResets up 4bp and DeemedRetractibles gaining 2bp. Two PerpetualPremiums made it on to the three-entry Performance Highlights table. Volume was low.

PerpetualDiscounts now yield 4.94%, equivalent to 6.42% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.3%, so the pre-tax interest-equivalent spread is now about 210bp, a tightening from the 220bp reported June 20.

Nothing happened today.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets down 14 bp and DeemedRetractibles up 9bp. The Performance Highlights table includes only the perpetually volatile IAG.PR.A – by the HIMIPref™ measure of volatility with respect to the Flat Bid Price, this is the third most volatile issue in the HIMIPref™ universe, and the most volatile index-included issue. The HIMIPref™ measure of volatility considers only those movements of the adjusted bid value that are contrary to the current trend (which is currently slightly negative). Volume was slightly below average.

Bloomberg’s Jonathan Weil points out that the Barclays rate fixing scandal was reported over four years ago.

Barclays was clearly naughty, and there are some tales of twopenny-halfpenny corruption that indicate a few people need to get taken out to the toolshed. But it seems clear to me that the regulators knew all about it but, as I’ve said before, were either willfully blind or grossly negligent. In hindsight, Barclays should have resigned from the BBA panel – but that’s hindsight.

The BoE’s Paul Tucker denies doing anything bad. I’m glad that’s settled!

It was a fine day for the Canadian preferred share market, with PerpetualPremiums up 10bp, FixedResets gaining 7bp and DeemedRetractibles winning 13bp. Enbridge FixedResets got smacked down on news of today’s new issue: could it be that the market is tired of new issues paying 4%? These issues were also well-represented on the volume table; looks like a lot of swapping is going on! Volume overall was very low.

The ECB rate cut is having some immediate effects:

JPMorgan Chase & Co. (JPM), the biggest U.S. bank, closed five of its European money-market funds to new investments after the European Central Bank lowered deposit rates to zero.

JPMorgan notified clients yesterday that it won’t accept new investors or money in five euro-denominated money-market and liquidity funds because the rate cut might generate negative returns for investors, the New York-based company said in a notice to shareholders.

The ECB yesterday reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero, with President Mario Draghi saying the cuts may have only a “muted” economic impact.

The deposit rate cut “will almost certainly move cash bids in short-dated instruments into negative territory, and so we have taken the step to restrict subscriptions and switches into the funds in order to protect existing shareholders from yield dilution,” the company said on its website.

The more things change …:

As Europe struggles to contain its debt crisis, the name of an American dead for more than two centuries is being invoked by those who think euro area nations will have to trade some autonomy for fiscal stability.

Alexander Hamilton, the first U.S. Treasury secretary and the face on the ten-dollar bill, offered cash-strapped states in 1790 a deal they eventually couldn’t refuse: The federal government assumed their debts in return for more centralized power. The alternative risked consigning their creditworthiness to “burst and vanish,” and a breakup, Hamilton warned.

Another solution is asset sales:

Greek Prime Minister Antonis Samaras pledged to bring his country’s economic reform plan back on track, promising sweeping state-asset sales that will boost investment and jobs, and help break the country’s recessionary spiral.

“The first battle this government must give is the battle of the obvious, the self-evident,” Samaras told lawmakers in Athens today, at the start of three days of debate on a motion of confidence in his government. “This is a government that must tell the truth from the very first, such as the truth that, once again, the fiscal adjustment program has genuinely gone off track.”
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Asset sales not already agreed with international creditors, including rail transport and energy, will “bring investments, jobs and growth,” he said.

What about the Elgin Marbles?

Not much joy in US job numbers:

American employers added fewer workers to payrolls than forecast in June and the jobless rate stayed at 8.2 percent as the economic outlook dimmed.

The 80,000 gain in employment followed a 77,000 increase in May, Labor Department figures showed today in Washington. Economists projected a 100,000 rise, according to the median estimate in a Bloomberg News survey. Growth in private payrolls was the weakest in 10 months.

Canada did better – thanks to welfare:

Canadian employment increased by a net 7,300 positions in June and the jobless rate fell unexpectedly to 7.2 per cent, Statistics Canada said Friday in Ottawa.

The gain in jobs exceeded the forecasts of Bay Street analysts, who had also predicted that the unemployment rate would remain at 7.3 per cent. Average hourly wages for full-time workers rose 3.3 per cent from a year earlier, the fastest annual rate since the summer of 2009.

Still, while the June employment increase was fuelled by an impressive 29,000 new full-time positions, much of that hiring was in public-sector jobs in areas like education and health care.

Bankers in Dubai are among those who thank you for donating to UNICEF! There is capital flight in Afghanistan:

Afghan central bank inspector Fahim Satari stands in Kabul airport in front of a local businessman headed for Dubai, counting by hand the stack of $100 bills that police found the passenger carrying to the gate.

Satari declares the cash to be under the $20,000 limit imposed to stem the flood of money leaving through the terminal, which swelled to $4.6 billion in the year to March and equals almost one-fourth of the economy. While Satari’s team has slowed the airborne outflow, Kabul brokers who arrange informal transfers say business has jumped. In a country where only 7 percent of the population has a bank account and 15 percent of the economy depends on opium, cash is fleeing Afghanistan.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums up 10bp, FixedResets gaining 7 bp and DeemedRetractibles losing 16bp. Volatility was minor. Volume was quite low.