There are tentative advances in exchange trading for corporate bonds:
Goldman Sachs Group Inc. (GS) will start an electronic trading system for corporate bonds this month as the fifth-biggest U.S. bank adapts to regulatory changes and competition, according to a person familiar with the plans.
The platform, called GSessions, has been under development for a year, said the person, who declined to be identified because the New York-based firm isn’t making details public yet. The Wall Street Journal reported the initiative late yesterday on its website.
The move comes three weeks after BlackRock Inc. (BLK), the world’s largest money manager, said it was planning its own bond-trading platform called Aladdin Trading Network that would allow clients to bypass Wall Street firms such as Goldman Sachs.
…
The profitability of Wall Street firms is being challenged by regulations requiring that they hold more capital as a buffer against potential losses from assets such as corporate debt. A U.S. law that seeks to prohibit federally insured banks from making bets with their own money may also hinder lenders’ ability to commit money to buy securities from clients, according to analysts including Brad Hintz at Sanford C. Bernstein & Co.
…
GSessions will start by offering two five-minute trading sessions a day, one in an investment-grade bond and another in a high-yield, high-risk security, the person said. Speculative- grade, or junk, bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.At the start of each session, Goldman Sachs will post a bid and offer price and notify clients of the maximum amount of liquidity the firm is willing to provide to fill orders, according to the person.
Rather than matching trades between clients, Goldman Sachs will act as the counterparty to all trades and collect the spread, or difference, between the bid and offer prices, the person said. That gap will be lower than what Goldman Sachs earns on non-computerized trades, the person said.
As I have said many, many times on this blog, exchange trading for corporate bonds will lead to tighter, more brittle markets and be bad for capital formation – to the extent that instruments are listed. In the States, especially, the action has moved into the private-placement and CDS markets, to avoid regulatory bullshit and get on with the job. However, the regulator who cares about the actual purpose of capital markets has not yet been born.
I have often criticized the entire concept of a B.Comm. degree (a guy with a B.Comm. is a guy who wanted to learn about business, so he went to school. Strike one.). Seems that others share my disdain:
Yahoo! Inc. (YHOO) is under pressure from Third Point LLC, one of its largest investors, to dismiss Chief Executive Officer Scott Thompson after his academic computer science credentials were misrepresented.
…
Martin McGovern, a spokesman for Stonehill in Easton, Massachusetts, said that Thompson received a bachelor’s of science in business administration, with a major in accounting on May 20, 1979. He declined to comment further.
…
Loeb said that Patti Hart, a Yahoo board member who chairs the search committee, inflated her degree too. Hart, who also serves as CEO of International Game Technology (IGT), is listed in filings as holding a “bachelor’s degree in marketing and economics” from Illinois State University, Loeb said. “However, we understand that Ms. Hart’s degree is in business administration. She received a degree in neither marketing nor economics.”
Today’s PrefBlog Precious Little Do-Gooder Zinger is about donating eye-glasses:
In a paper published in March in the journal Optometry and Vision Science, four researchers compare the full costs of delivering used glasses to the costs of instead delivering ready-made glasses in standard powers (like my drugstore readers, but for myopia as well). The authors find that recycled glasses cost nearly twice as much per usable pair.
Rob Carrick has a piece up titled Preferred shares: How to navigate rising rates, but I’m not quoted.
There was a slight pullback in the Canadian preferred share market today, with PerpetualDiscounts off 1bp, FixedResets down 7bp and DeemedRetractibles losing 8bp. Volatility was minimal. Volume was extremely low.
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 | -1.4780 % | 2,505.6 |
FixedFloater | 4.36 % | 3.72 % | 29,490 | 17.89 | 1 | -0.2288 % | 3,617.6 |
Floater | 2.88 % | 2.88 % | 56,038 | 20.02 | 3 | -1.4780 % | 2,705.4 |
OpRet | 4.75 % | 2.36 % | 52,294 | 1.12 | 5 | 0.0765 % | 2,511.1 |
SplitShare | 5.23 % | 4.04 % | 64,168 | 0.62 | 4 | -0.2119 % | 2,700.2 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0765 % | 2,296.2 |
Perpetual-Premium | 5.43 % | -1.15 % | 78,783 | 0.09 | 25 | -0.0078 % | 2,233.7 |
Perpetual-Discount | 5.06 % | 5.06 % | 89,733 | 15.20 | 8 | 0.0359 % | 2,446.7 |
FixedReset | 5.03 % | 3.04 % | 189,110 | 2.16 | 68 | -0.0715 % | 2,402.2 |
Deemed-Retractible | 4.95 % | 3.61 % | 181,430 | 1.43 | 45 | -0.0825 % | 2,329.6 |
Performance Highlights | |||
Issue | Index | Change | Notes |
BAM.PR.C | Floater | -2.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-04 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 2.95 % |
IAG.PR.E | Deemed-Retractible | -1.21 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 5.37 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
MFC.PR.G | FixedReset | 97,745 | TD crossed 12,300 at 25.60. Nesbitt corssed 74,800 at 25.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 4.12 % |
BNS.PR.Z | FixedReset | 71,310 | Desjardins crossed 50,000 at 25.14 and sold 16,500 to GMP at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.21 % |
BAM.PF.A | FixedReset | 52,005 | RBC crossed 50,000 at 25.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 4.32 % |
MFC.PR.H | FixedReset | 51,100 | RBC crossed 50,000 at 25.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 4.05 % |
ENB.PR.H | FixedReset | 22,495 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-04 Maturity Price : 23.27 Evaluated at bid price : 25.56 Bid-YTW : 3.58 % |
BAM.PR.B | Floater | 20,677 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-04 Maturity Price : 18.36 Evaluated at bid price : 18.36 Bid-YTW : 2.88 % |
There were 14 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
BAM.PR.C | Floater | Quote: 17.90 – 18.49 Spot Rate : 0.5900 Average : 0.3627 YTW SCENARIO |
BNS.PR.K | Deemed-Retractible | Quote: 25.66 – 26.06 Spot Rate : 0.4000 Average : 0.3044 YTW SCENARIO |
BAM.PR.X | FixedReset | Quote: 25.01 – 25.25 Spot Rate : 0.2400 Average : 0.1563 YTW SCENARIO |
IAG.PR.E | Deemed-Retractible | Quote: 26.06 – 26.39 Spot Rate : 0.3300 Average : 0.2516 YTW SCENARIO |
TCA.PR.X | Perpetual-Premium | Quote: 52.25 – 52.49 Spot Rate : 0.2400 Average : 0.1718 YTW SCENARIO |
HSE.PR.A | FixedReset | Quote: 26.09 – 26.30 Spot Rate : 0.2100 Average : 0.1420 YTW SCENARIO |
BCE.PR.F Secondary Offering
May 3rd, 2012I am advised by multiple authoritative sources that there is a secondary offering under way (or is it “under weigh”? You can find much furious discussion of this on the web) for 2-million shares of BCE.PR.F, offered at 23.75.
The issue closed today at 23.95-98, 12×177. This is a wonderful issue for analysis, because there are so many ways of looking at comparators, but the easiest is its Strong Pair BCE.PR.E, a RatchetRate preferred. The two issues are interconvertible on 2015-2-15 and every five years thereafter. Until then BCE.PR.F pays a fixed 4.541% of par. while BCE.PR.E pays 100% of Canadian Prime, although this may be reduced if the price goes above 25.00.
BCE.PR.E closed today at 22.40-50 on less than a board lot traded; we can use this price for comparison purposes since it is close to the other BCE RatchetRates. The Pairs Equivalency Calculator (quick method) tells us that given a price of 22.40 on BCE.PR.E and 23.75 on BCE.PR.F, Canada Prime should average 2.32% until the February, 2015, Exchange Date for the total return on the two issues to be equal.
Seeing as Canada Prime is now 3.00% and is forecast to rise, if anything, over the next three years, BCE.PR.F looks grossly expensive at 23.75. I suspect that it is trading on the basis of its Current Yield of 4.78% and that the market is, as usual, ignoring conversion and dividend reset probabilities.
BCE.PR.F was last mentioned on PrefBlog when there was a secondary offering three-odd months ago. BCE.PR.F is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.
Posted in Issue Comments | No Comments »