PrefBlog

IIROC has repealed the tick-test on short sales, effective 2012-9-1. But fear not, regulation fans! They will also be “enhancing monitoring of short sales and failed trades”, so there will still be plenty of paperwork.

Moody’s cut Greece:

Greece’s credit ratings were cut to “C” by Moody’s Investors Service after it negotiated the biggest sovereign debt restructuring ever.

Moody’s dropped Greece’s rating to the lowest level from Ca, saying in a statement today that investors who participate in the nation’s debt exchange will get about 70 percent less than the face value of their holdings. The deal constitutes “a distressed exchange, and hence a default,” the New York-based rating company said.

It was a relatively uneventful day for the Canadian preferred share market, with PerpetualPremiums unchanged, FixedResets up 9bp and DeemedRetractibles down 4bp; however the Performance Highlights table is fairly lengthy considering the lack of overall movement. Volume was below average – and surprisingly, only one of the recent new issues made the Volume Highlights list.

I found this ISDA ruling rather odd:

Default insurance on Greek debt won’t be paid out even after the nation negotiated the biggest sovereign-debt restructuring in history, the International Swaps & Derivatives Association ruled today.

The ECB’s exchange of Greek bonds for new securities that are exempt from losses being imposed on private investors hasn’t triggered $3.25 billion of outstanding credit-default swaps. ISDA’s determinations committee said the switch didn’t constitute subordination, one of the criteria for a payout under a restructuring credit event.

But actual implementation of (what I consider) the subordination may trigger payouts:

“The situation in the Hellenic Republic is still evolving” and today’s decisions “do not affect the right or ability to submit further questions,” ISDA said in a statement. The decision is not an expression of the committee’s “view as to whether a credit event could occur at a later date,” the association said.

A swaps payout may still happen if Greece uses collective action clauses on private investors who refuse to take so-called haircuts on their debt holdings, according to ISDA’s rules. Officials including former ECB President Jean-Claude Trichet have opposed triggering swaps because they’re concerned traders would be encouraged to bet against failing nations and worsen Europe’s debt crisis.
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It costs $7.3 million in advance and $100,000 annually to insure $10 million of Greek debt for five years, signaling a 95 percent probability of default within that time. Greek 10-year bonds slumped to a record 19.14 cents on the euro after the ruling.
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While Greece is negotiating the biggest ever debt restructuring, the volume of credit-default swaps on the line has tumbled. The net amount of debt protected is no more than for some companies and represents less than one percent of the nation’s bonds and loans outstanding.

Credit-default swaps on Greece now cover $3.25 billion of debt, down from about $6 billion last year, according to the Depository Trust & Clearing Corp. That compares with a swaps settlement of $5.2 billion on Lehman Brothers Holdings Inc. in 2008.

Leave it to the banks to find a cross-selling opportunity!

We all know economic times have been tough. But if you happen to have an extra $25 million that you are willing to let JPMorgan Chase manage for you, there is at least one perk you can expect to receive that you won’t find anywhere else: The J.P. Morgan Palladium Card.

The card has been around for three years — although us hoi polloi wouldn’t know it — and a couple thousand have been issued. The card itself is actually made with palladium and 23-karat gold — reportedly putting its cost in materials alone at about $1,000 — giving it real heft when you hold it in your hand. It was also the first U.S. card with a smart chip on the front, making it a breeze for international travel (swipe technology is so passé abroad), along with some form of J.P. Morgan’s (the man’s) signature embossed on the front and your own signature embossed on the back.

And, on another light note, this report has been highlighted by PrefBlog’s Stereotypes Exist for a Reason! Department:

Which sites Canadians visited depended largely on their household incomes.

Those with a household income above $60,000 spent more time on sites dedicated to politics, education, online trading, books and business news. Those under that threshold? Their focus is on sites about dating, travel, gambling, music and cars.

Visits to pornographic websites were not included in the report.

March came in like a lion for the Canadian preferred share market, with PerpetualPremiums up 28bp, FixedResets up 21bp and DeemedRetractibles winning 35bp. All entries on the Performance Highlights table are winners. Volume was on the low side of average.

This is US data, but more evidence that the western world is regulating itself to death:

Consumers pay about 21 percent more in fees for basic checking accounts than they did six years ago, according to a study released today.

An average consumer may pay about $7.72 a month in a combination of monthly and automated teller machine fees this year compared with about $6.36 in 2006, according to the study by Pleasanton, California-based Javelin Strategy & Research, which looked at fees on basic checking accounts offered by 30 financial institutions.

Fees have increased as regulations have curtailed some of banks’ related revenue sources, Javelin said. Rules requiring banks to get consumers’ consent for overdraft protection, and limiting what banks may charge merchants on debit transactions, have cost the industry about $12.2 billion annually, according to the study.

It was a good solid day for the Canadian preferred share market, with PerpetualPremiums gaining 10bp, FixedResets up 4bp and DeemedRetractibles winning 24bp. Good volatility, with Floaters notable among the losers and SLF dominating the winners. Volume was average.

I could not agree more with Stephen Gordon’s Ode to a High Exchange Rate:

Exports are costs. The goal of international trade is to import goods and services; exports are the price we pay in return. If a higher exchange rate allows Ontario to import more and export less, Ontarians are better off.

I’m perpetually astonished by political attitudes towards exchange rates and dumping. If some foreigner wants to sell me something cheap, I tell ’em “Fine! Back up the truck!”

There’s some interesting colour regarding pain in pension land:

General Electric Co. (GE), Boeing Co. (BA) and 3M Co. (MMM) will join big U.S. employers in making a record $100 billion in 2012 pension contributions, 67 percent more than two years ago, as low interest rates boost companies’ liabilities.

Payments may total $400 billion from 2011 through 2015 to ease underfunding at the 100 largest defined-benefit programs, according to consultant Milliman Inc., which estimated that assets in January were enough to cover less than three-fourths of projected payouts.

There was an excellent result in the latest Vikings vs. Pirates match:

The navy said its ship, the Absalon, had been tracking the pirate vessel for several days near the Somali coast. As the pirate ship tried to leave the coast, the warship called on it to stop, firing warning shots. When the pirate ship didn’t respond, the Danish warship opened fire, according to the statement. The vessel had been used as a base by the pirates for attacks in the region, the navy said.

The only thing I don’t understand is: why did they bother tracking it for several days? I hope this was for intelligence-gathering purposes, because ideally it would have been blown out of the water on sight.

It was another good day for the Canadian preferred share market, with PerpetualPremiums winning 17bp, FixedResets flat and DeemedRetractibles gaining 15bp. The good sized Performance Highlights table is highly skewed to the upside. Volume was below average.

There is a report that RBC may buy out the rest of RBC-Dexia:

Dexia SA chief executive Pierre Mariani said he hopes to conclude discussions with Royal Bank of Canada “shortly” regarding the sale of Dexia’s stake in joint venture company RBC Dexia Investor Services.
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On Thursday Dexia reported a loss of 11.6-billion euros, warning that unless a group of European countries come through with bailout funds that were promised when Dexia became the first victim of the EU debt crisis last year, it could go out of business.
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Ranked among the world’s top 10 global custody banks, RBC Dexia has about $2.74-trillion in client assets under administration. The company was formed in 2006, with both parents taking equal stakes.

Meanwhile, the Maple/TMX deal has been extended again:

A group of Canadian banks and pension funds extended their $3.73-billion offer for TMX Group Inc. until March 30, the fifth delay as it pursues regulatory approval for its agreement to purchase the nation’s main equities and derivatives markets.
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The Competition Bureau said Nov. 29 that it had “serious concerns” about the plan in connection with equities trading and clearing settlement, and yesterday said in a statement that it has “no new developments to report” on its review.

It looks like the Competition Bureau guys won’t be getting any plum job offers from the banks any time soon! But OMERS has a good idea:

OMERS CEO Michael Nobrega says he hopes the London Stock Exchange would make another play for the TMX Group if the Maple consortium’s bid doesn’t succeed.

OMERS did not join the Maple group, while a number of other major pension plans did.

“We supported the LSE,” Mr. Nobrega said. He didn’t join Maple because he felt it was a highly leveraged bid and was worried about its chances of success.

Everybody is dancing with everybody else!

National Bank of Canada (NA-T76.590.250.33%)is in talks to sell its Natcan asset management arm to Fiera Sceptre Inc. (FSZ-T7.200.304.35%)in return for a stake of approximately 30 per cent in the merged firm, sources said Friday. The deal could be announced as early as Monday.

Fiera Sceptre, a mainly institutional money manager, was formed in 2010 from the merger of Fiera Capital Inc., founded by Jean-Guy Desjardins, and Sceptre Investment Counsel Ltd.

This deal has been confirmed:

Fiera Sceptre Inc. (FSZ-T8.501.3018.06%) has struck a $310-million deal to buy National Bank of Canada’s asset management arm, a move that sets the stage for an ambitious expansion into the United States.

Fiera Capital, the new name for the merged entity, will have $54-billion in assets and overtake AGF Management Ltd. to become the third-largest Canadian publicly traded asset manager after IGM Financial Inc. and CI Financial Corp.

Under the stock-and-cash deal announced on Monday, the bank will get a 35-per-cent stake in Fiera Capital in exchange for giving up Natcan Investment Management.

And meanwhile, in Greek news:

Greece had its long-term sovereign credit ratings cut to selective default from CC by Standard & Poor’s Ratings Services, which cited an action by Greece’s government regarding its sovereign debt that began a “distressed debt restructuring.”

The downgrade was triggered after Greece retroactively inserted collective action clauses in the documentation of certain sovereign debt series last week, according to S&P.

ABK.PR.B was confirmed at Pfd-2(low) by DBRS:

Since the rating was last confirmed by DBRS in March 2011, the net asset value of the Company has remained fairly stable, fluctuating between $57 and $64. The current downside protection (as of February 16, 2012) is approximately 56.6%.

The confirmation of the Pfd-2 (low) rating of the Class B Preferred Shares is based primarily on the downside protection and dividend coverage available, as well as on the strong credit quality and consistency of dividend distributions of the Portfolio holdings.

ALB.PR.B was confirmed at Pfd-2(low) by DBRS:

The current yield on the Portfolio shares fully covers the Class B Preferred Share dividends, providing dividend coverage of approximately 1.76 times. The Class A Capital Shares receive all excess dividend income after the Class B Preferred Share distributions and other expenses of the Company have been paid. Current downside protection available to holders of the Preferred Shares is 52.0% as of February 16, 2012.

The Pfd-2 (low) rating of the Class B Preferred Shares is based primarily on the downside protection and dividend coverage available, as well as on the strong credit quality and consistency of dividend distributions of the Portfolio holdings.

It was a slightly positive day for the Canadian preferred share market, with PerpetualPremiums up 3bp, FixedResets gaining 2bp and DeemedRetractibles winning 4bp. Volatility was quite good, while volume was extremely low.

It was another positive day for the Canadian preferred share market, with PerpetualPremiums up 9bp, FixedResets gaining 9bp and DeemedRetractibles winning 33bp. PerpetualDiscounts – all four of them! – shot up 69bp to decrease the Bozo Spread (Current Yield PerpetualDiscounts less Current Yield FixedResets) to zero again. Not much volatility. Volume was average.