PrefBlog

Econbrowser‘s James Hamilton discusses Negative real interest rates:

In terms of the Fed’s policy objectives at the moment, one of the problems with deflation is that it guarantees a positive real return just from stuffing cash under your mattress. A primary purpose of the Fed’s contemplated QE2 is to prevent this and spur consumers and firms to invest funds productively rather than hoard cash. Insofar as the recent moves in TIPS and other yields represent the market already pricing in the Fed’s next steps, one might conclude from the latest TIPS readings that this aspect of the Fed’s strategy is already working.

He attaches a good graph:

Click for Big

Although this appears to be the first time that newly issued TIPS have locked in a negative real return, that’s because TIPS have only been offered to U.S. investors since 1997. You can get a longer time series by comparing the yield on a 6-month T-bill at any date with what the CPI inflation rate actually turned out to be over the subsequent 6 months for which investors held that bill, a magnitude sometimes described as the “ex-post real interest rate.” That series is plotted below. We’ve actually been in a period for several years in which short-term loans to the government were a losing proposition in real terms, and the longer-term real yields such as the 5-year TIPS are only now coming down to join them. The recent era of negative real yields was briefly (if spectacularly) interrupted in the fall of 2008, when a sharp deflation in the CPI made short-term loans to the government an excellent deal for the lender in ex-post real terms.

The Canadian preferred share market continued its recent (boring) pattern with a good day on elevated, if somewhat lower than recent norms, volume. PerpetualDiscounts gained 10bp and FixedResets squeaked out a win of 2bp. It should be noted that, given about 250 trading days in a year, a daily win of just over 1bp is expected.

Forbes has an unusual perspective on the flash-crash:

In a talk at Columbia University’s sociology department, renowned social scientist Donald MacKenzie gave some words of warning and advice about the financial markets. MacKenzie, a professor of science and technological studies at the University of Edinburgh, compared the flash crash with Black Monday crisis of October 19, 1987.
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“Computer systems don’t have a sense of morality,” exclaims MacKenzie, noting the take-one-for-the-team role played by floor specialists in keeping an orderly market–a role that’s been marginalized with trading so widely dispersed. A specialist’s duty was to keep price continuity and to intervene when they found imbalances, “and they did so at a certain risk to themselves,” remembered MacKenzie, “In ’87, on aggregate these specialists lost about two-thirds of their capital” to save the markets, he says. The intervention of specialists becomes harder today because high-frequency trading algorithms are extremely explicit and are largely devoid of such considerations of civic duty.

I haven’t met a trader yet with a sense of civic duty, quite frankly, but what I found most interesting was the claim that specialists took large losses in the Crash of ’87. I don’t have any such recollection, and I would very much like to see MacKenzie’s source for this statement.

There is this, from the Brady Report:

According to a rough survey conducted by the NYSE, specialists’ buying power fell by more than 60 percent from $2,308 million at the close of business on October 16 to $852 million at the close of business on October 19. Whatever the cause for the reduced extent of specialist intervention later on October 19, the road picture that emerges from the analysis of half hourly activity is one of significant intervention to support the market early in the day, net sales during the midday decline and much less extensive (and less effective) support of the market in the sharp decline in the last hour of trading.

However, loss of buying power is not equivalent to loss of capital – it simply means that a good chunk of their capital was committed. However, one point in favour of the specialist system is that the figures mean they were willing to hold their position overnight (although, as the report shows, they squared their books the next day).

So here’s yet another idea for a MBA thesis, assuming those guys have theses: is there any way of telling how much hot money is out there? I mean, really really hot money, for which “overnight” is a lengthy hold. Has this amount increased or decreased (relative to market value, or even relative to market fluctuations) since the Crash of ’87. We can be sure that the amount of formal market-maker capital has decreased, but how about hedge funds and HFT?

My guess is that the total capital has increased, but the amount of capital prepared to hold a position overnight has decreased. Prove me wrong!

Meanwhile, emerging markets are choosing survival over altruism:

Finance chiefs from South Korea to South Africa signaled they may act to slow gains in their currencies, just four days after the Group of 20 vowed to soothe trade tensions in the $4 trillion-a-day foreign-exchange market.

Asian currencies fell to a one-week low after Bank of Korea Governor Kim Choong Soo said today that measures to mitigate capital flows could be “useful.” Hours later, the rand dropped as South African Finance Minister Pravin Gordhan said his government will use part of higher-than-expected tax revenue to build foreign reserves as it attempts to weaken the currency.

The shifts suggest G-20 members will keep trying to defend their economies from the slide of the dollar and capital inflows even after the group promised Oct. 23 to refrain from “competitive devaluation” and to increasingly embrace market- determined currencies.

Gee … I suppose those guys take their responsibilities to their own citizens more seriously than their responsibilities to me! How odd! How thoroughly unmutual!

BIS has released a paper titled Calibrating regulatory minimum capital requirements and capital buffers: a topdown approach.

BIS has also released a working paper by Stefan Avdjiev and Nathan S Balke titled Stochastic Volatility, Long Run Risks, and Aggregate Stock Market Fluctuations:

What are the main drivers of ‡uctuations in the aggregate US stock market? In this paper, we attempt to resolve the long-lasting debate surrounding this question by designing and solving a consumption-based asset pricing model which incorporates stochastic volatility, long-run risks in consumption and dividends, and Epstein-Zin preferences. Utilizing Bayesian MCMC techniques, we estimate the model by …tting it to US data on the level of the aggregate US stock market, the short-term real risk-free interest rate, real consumption growth, and real dividend growth. Our results indicate that, over short and medium horizons, ‡uctuations in the level of the aggregate US stock market are mainly driven by changes in expected excess returns. Conversely, low frequency movements in the aggregate stock market are primarily driven by changes in the expected long-run growth rate of real dividends.

The SEC is planning to ban one-third of the market and encourage paid informers:

SEC commissioners will vote Nov. 3 on a rule that would require brokerages to implement risk controls to monitor client trades, the agency said today in a statement on its website. SEC officials first proposed the regulation in January, saying they were concerned that a computer malfunction or human error might trigger an order that could erode a firm’s capital.
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The proposed rule would “effectively prohibit broker dealers from providing” so-called naked-sponsored access, in which a customer bypasses pre-trade risk controls, according to the agency’s statement. Naked access accounts for about 38 percent of U.S. equities trading, according to a December study by Aite Group LLC.

Commissioners will also vote next week on a proposal to expand the SEC’s ability to reward whistleblowers who provide tips on fraud.

Ah, the good old paid informers! They made the Roman Empire, the Soviet Union and East Germany what they are today!

Julie Dickson gave a remarkably unimportant speech today, titled Changing Times: The Regulatory Future and Canada’s Banking Sector:

In sum, there is no silver bullet to achieving a safe and sound financial sector. Rather, it is multi-dimensional – all parties that touch the sector have a role – bank management and boards, regulators and supervisors, governments, central banks, markets (investors, analyst and rating agencies), and auditors. Emphasis cannot be placed on one area to the exclusion of others.

Human nature trumps all of these. In an effort to save us all from ourselves, policies aimed at our own weaknesses and biases may be the most important of all.

The Toronto Star advises that the federal government writes Credit Default Swaps with no documentation at all:

The federal government does not know how often the loan program is a victim of fraud. About $1 billion a year is lent in small business loans. The number of defaulted loans is steadily increasing. Last year, $106 million of taxpayers money was paid back to banks for defaulted loans. That’s up from $75 million a year in defaulted loans three years before.
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Under the Canada Small Business Financing Program, Industry Canada gives banks the job of approving applications

It only sees the paperwork if the loan goes into default.

One of the problems the Star uncovered is there is little incentive for the banks to conduct detailed background checks.

That’s because banks get a guarantee that the federal government will refund up to 85 per cent of the money to the banks if the loan goes into default. The banks typically also take a personal guarantee from the borrower for the remaining 15 per cent.

Just one of life’s little mysteries! I can’t cash a cheque for $1.98 without a rectal probe, but that does not apply to everyone!

Another day of good performance on the Canadian preferred share market today, on continued heavy volume. This is getting dull. PerpetualDiscounts gained 11bp while FixedResets eked out a 1bp win.

PerpetualDiscounts now yield 5.41%, equivalent to 7.57% interest at the standard 1.4x equivalency factor. Long Corporates jerked up to about 5.3% (maybe a little under) so the pre-tax interest-equivalent spread is now about 230bp, a significant decline from the 240bp reported on October 20.

UBS is is projecting another massive loss for MFC:

Ongoing low interest rates are making things increasingly difficult for life insurance companies which rely heavily on fixed income investments such as government bonds to cover future policy holder liabilities.

In a note to clients this morning UBS analyst Peter Rozenberg predicted Manulife Financial Corp. will be hardest hit, putting it on track for a loss in the third quarter of $1.48-billion.

CFTC Commissioner Bart Chilton has demonstrated his complete ignorance of the market:

Bart Chilton, a commissioner with the futures regulator, said “mini-flash crashes occur all too often” following a surge in high-frequency trading.
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“They don’t cause as much of a disruption as that of May 6, but more than once this year, runaway algos have disrupted markets. By that I mean, cost people money,” Chilton said in prepared remarks for an energy conference in Las Vegas.

“We should explore ways to hold those who set off runaway robotic trades accountable,” he said.

At least one algorithm is know to have disrupted the oil markets this year. Infinium Capital Management said in August it was the company at the center of a six-month probe by CME Group Inc into why a new trading
program malfunctioned, racking up a million-dollar loss in about a second on February 3.

Some might think that Infinium Capital Management was fined a million bucks by the markets – which went directly into the pockets of the not-so-dumb traders – and that that’s accountability enough. But then the regulators wouldn’t have anything to do.

OSFI’s in a little difficulty:

Auditor General Sheila Fraser said in a report that the Office of the Superintendent of Financial Institutions (OSFI) adequately supervised the banks at present.

“However, the growing volume and complexity of its work is increasing the demands on its human resources,” she wrote, noting an ever larger number of complex financial products.

“This challenge, combined with pressures on training and compensation, could affect the office’s ability to attract and retain qualified staff to maintain its capacity and competency to carry out its supervisory mandate.”
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Ms. Fraser said that, as of March 10 this year, 10% of positions on large bank supervisory teams and 12% of jobs on the specialist groups that support the teams were vacant. Half the positions have been open for a year.

She cited OSFI as saying there “was little flexibility to address unexpected events” and said the time taken to dealing with documents resulted in less time available for detecting and analyzing risks.

A good day overall in the Canadian preferred share market on continued strong volume, with PerpetualDiscounts gaining 13bp, while FixedResets lost 2bp.

A lot of corporate debt is being called for redemption:

Not since 2004 have borrowers had as much incentive to tender for their bonds, prompting companies from mining firm Rio Tinto Plc in London to New York-based television network CBS Corp. to redeem debt.

Companies tendered for $30.5 billion of bonds last month, the most since April, and are on pace to buy an additional $24.3 billion this month, according to data compiled by Bloomberg.
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A measure of company bond yields that takes into account the risk that the debt will be redeemed — the so-called yield- to-worst — has dropped to an average 3.44 percent from 4.49 percent a year ago, according to Bank of America Merrill Lynch index data. During that time, the average bond coupon has declined to 5.25 percent from 5.46 percent. The difference between yields and coupons reached as much as 191 basis points on Oct. 11.

“There’s quite an incentive to retire outstanding debt and replace it with lower-coupon newly issued bonds to reduce the cost of debt capital,” said John Lonski, chief economist at Moody’s Capital Markets Group in New York. “The effect of refinancing has been overwhelmingly positive for corporate credit.”

A bit more discussion of the flash crash:

More importantly, in the case of the fateful trade it was not actually Waddell’s own algorithm that executed the trade, as implied by the SEC-CFTC report, but that of its broker, Barclay’s Capital. Further complicating matters, researchers and people close to the trade are disagreeing with the report’s characterization of the algorithm that executed the trade, pointing out that it has been many times for much larger trades with no similar fallout.

“Based on our data, this was actually a very good algorithm,” says Nanex founder Eric Hunsader, who has analyzed the trade data. “It’s portrayed [in the report] as a very simple algorithm, but you can clearly see that it did take into account things like price—if it hadn’t, you could have really seen a market collapse…What really caused the collapse was firms re-selling these contracts incredibly quickly and just drying up all the liquidity.”

There are a number of things wrong with this analysis. First, the fact that the algorithm has been used before is not really a defense. If I’ve managed to cross the street with my eyes closed three times in succession, should this become an acceptable practice? Additionally, the fact that Barclays was the executing broker and algorithm supplier muddies the waters, but is not strictly relevant. Waddell Reed gave the instructions to use it and must have been – or should have been – comfortable with the embedded logic. Finally, it does not make much sense to exonerate Waddell Reed on the basis that their initial counterparties sold off the contracts “incredibly quickly”, although again that complicates matters. How was the stream of orders from WR to the ultimate (or, at least, end of day) buyers affected by passing through this layer? Did the presence of the “HFT Layer” accentuate or attenuate the price effect, or did it have no meaningful impact at all? Some might say it accentuated the effect due to the volume increase due to the “hot potato” trading, and that’s the end of the story … but is it? Nanex clearly considers the effect to be an accellerator:

The algorithm was very well behaved; it was careful not to impact the market by selling at the bid, for example. And when prices moved down sharply, it would stop completely.

The buyer of those contracts, however, was not so careful when it came to selling what they had accumulated. Rather than making sure the sale would not impact the market, they did quite the opposite: they slammed the market with 2,000 or more contracts as fast as they could. The sale was so furious, it would often clear out the entire 10 levels of depth before the offer price could adjust downward. As time passed, the aggressiveness only increased, with these violent selling events occurring more often, until finally the e-Mini circuit breaker kicked in and paused trading for 5 seconds, ending the market slide.

Assuming that we may accept Nanex’ analysis, it may be useful to consider the HFT effect to be – at least in this instance – as of an electrical capacitator, storing up contracts until the limit was reached, then discharging violently.

There was a very interesting TIPS auction today:

The Treasury sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Federal Reserve will be successful in sparking inflation.

The securities drew a yield of negative 0.55 percent, the same as the average forecast in a Bloomberg News survey of 7 of the Fed’s 18 primary dealers. The sale was a reopening of an $11 billion offering in April. Conventional Treasury notes erased gains amid speculation on the amount of debt the Fed may buy to spur the economy in a tactic called quantitative easing.

The US mortgage market gets more interesting by the day:

Home lenders are making it tougher to get loans as investors step up demands for refunds on defective mortgages, damaging the housing market, executives said today at an industry conference.

Already beset by billions of dollars in forced buybacks, originators have imposed standards on new loans that are stricter than those set by mortgage buyers and insurers, according to Todd Chamberlain, an executive vice president who oversees mortgage lending at Birmingham, Alabama-based Regions Financial Corp.
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Fannie Mae, Freddie Mac and bond insurers such as MBIA Inc. are pressing lenders including Bank of America Corp. to honor promises to buy back mortgages if they’re later found to be based on inaccurate data. Known as representations and warranties, the promises cover defects such as inflated appraisals or inaccurate data about a borrower’s job or income. Bank of America said last week it will resist paying claims.
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The industry needs to be “more united” in dealing with the demands, said William C. Emerson, Chief Executive Officer of Detroit-based Quicken Loans Inc., ranked as the 10th-largest lender in the first half of this year by newsletter Inside Mortgage Finance. Bankers have attributed mortgage defaults to the poor economy rather than defects in the loans.

“We all know we signed up for reps and warranties, but I don’t know if we thought we signed up to be an insurance company,” he said, speaking on the panel with Chamberlain and McCord.

Sorry Charlie! Finance is NOT A COOPERATIVE KIDDIE GAME. There is nothing unethical about jingle mail; there is nothing wrong with ultimate buyers exercising their put option. Next time, try reading the fine print on your own contract, rather than crying that the rules of the game are unfair halfway through.

Rob Ford was elected Toronto Mayor, which I attribute largely to PrefBlog’s endorsement (emphasis added):

Get set for a shakeup at City Hall that includes a tilt to the political right after seven years of Miller’s left-leaning reign, presuming the new mayor is able to heal campaign wounds and convince his council, rich with fresh faces, to approve key elements of his election blueprint.

Even better a good swath of incumbents got cut down, including my guy Saundercook, aka “Mr. Invisible”.

It was a good solid day on the Canadian preferred share market, with PerpetualDiscounts up 9bp and FixedResets gaining 3bp, with continued heavy volume.

The exodus of prop traders to hedge funds continues:

KKR & Co., the buyout firm founded by Henry Kravis and George Roberts, is close to hiring nine members of Goldman Sachs Group Inc.’s U.S. principal-strategies group for a new hedge fund.

Bob Howard, who heads the Goldman Sachs group in the U.S., will join as managing director and report to William Sonneborn, who heads KKR’s asset-management division, Kristi Huller, a spokeswoman for the New York-based firm, said today in a telephone interview. The hedge fund, which will be able to bet on rising and falling stock prices, is scheduled to start raising money next year.

I discussed the Public/Private Investment Plan (PPIP) about a year ago … a year later, it certainly looks as if liquidity, not value, was the toxin in toxic assets:

A U.S. government program aimed at reviving the mortgage-backed securities market returned more than triple what stocks or bonds gained in the past year.

The eight funds created under the Public-Private Investment Program, or PPIP, reported net internal rates of return averaging 36 percent through Sept. 30, the Treasury Department said in a report this week.
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The Treasury is an equal equity partner in each of the funds and provided debt financing for the $29.4 billion program. The government has gotten $215 million of interest, dividend and other payments, and the funds have more than $1.5 billion in unrealized gains. Under the wider Troubled Asset Relief Program, or TARP, the government has earned $25.2 billion on its investment of $309 billion in banks and insurers, an 8.2 percent return over two years, according to data compiled by Bloomberg.

The OSC has released its 2010 Compliance and Registrant Regulation Branch Annual Report and its 2010 Investment Funds Branch Annual Report.

The Kansas City Fed has released the October 2010 edition of Economic Trends.

There are rumours of a Canadian bank making a US acquisition:

Wilmington Trust Corp., the Delaware bank founded by the du Pont family, has been contacting bigger lenders in recent weeks to gauge their interest in buying the company, said people with knowledge of the matter.

The bank has told potential buyers it is aiming to reach a deal by the end of the month, said the people, who spoke on condition of anonymity because the talks are private. Canada’s Bank of Montreal is among banks that have held talks with Wilmington Trust, and Toronto-Dominion Bank has also been approached, these people said. Lazard Ltd. is advising Wilmington Trust, the people said.
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The company has plunged 75 percent in the past three years, giving the bank a market value of $834.9 million. The 107-year- old lender has reported five straight quarterly losses, driven in part by soured commercial real estate loans and investments in pools of trust-preferred securities.

Meanwhile, RY is taking a loss to get out of US life & health insurance:

Royal Bank of Canada agreed to sell its U.S. life insurance business to an entity with ties to Apollo Global Management LLC for $628.1 million, taking a loss on a purchase the Canadian lender made a decade ago.

Royal Bank, Canada’s biggest bank, is exiting the U.S. life and health business by selling Liberty Life Insurance to Athene Holding Ltd., the Toronto-based bank said today in a statement. Royal Bank expects to complete the sale by early 2011 and record a loss of about $115 million under Canadian accounting rules, or $405 million under U.S. rules.

Ontario’s Eggfare bums are running a new advertising campaign, which appears aimed at the naifs who place “Farmers Feed Cities” posters in their windows. No purpose in sight at the moment, but when over a third of your gross revenue is a welfare cheque, you have to keep the feel-good drums working.

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It feeds into retail prices, too:

For eggs, the difference between prices in Montreal and prices in the United States for Grade A large eggs is 55%.

Toronto will be electing a new mayor on Monday as well as the usual crowd of non-entities. We are face with the dreary choice between an incompetent and a buffoon. Smitherman is incompetent: as health minister for over four years, he wears a great deal of the eHealth fiasco; perhaps not as much as Ford tries to make out, but he was responsible for the Health Ministry’s culture. Then, as energy minister, he decided that paying ten times market rate for solar power was a fine idea. What’s more, he wants to throw some city money down that rathole. He is now talking about tax freezes and cuts – but only since Ford made it fashionable to do so. His words would have more credibility if he had said them while he was the clear front-runner … but now? It’s mere fashion. Vote for Smitherman and you’re voting for whatever tomorrow’s fashion is, irrespective of what it might be.

Ford is simply a buffoon. Railing away at councillors’ expense budgets … it’s a trivial non-issue, considering Toronto’s spending mess. I don’t want them to steal the money, obviously, but the budgets are, if anything, skimpy considering the ideal work-load of a councillor and in any case cost me about a buck. I’m also worried about his oft-expressed unconditional support for the police – nobody ever deserves unconditional support, least of all the police after the G-20 abomination. Vote for Ford and you’re voting for a term of chaos, with contracting out garbage likely to be an extremely divisive flashpoint.

But maybe we need chaos. My girlfriend is a nurse who was seriously considering applying for a job driving a school bus – not out of any work satisfaction issues, but because the pay is so much better. Is there anybody other than city council members and school bus drivers who thinks this makes any sense at all? The city’s infrastructure is crumbling and gridlock … well, I won’t say it costs a whole pile of money because those calculations assume that time spent getting to work is paid and otherwise productive. I will say that gridlock is significantly detrimental to the quality of life in Toronto. Meanwhile the TTC can’t even figure out how to run a string of vending machines.

Incompetence costs a lot more money than any ideology. Vote Ford.

It was a strong day in the Canadian preferred share market, with PerpetualDiscounts gaining 16bp and FixedResets up 20bp. Volume was off its peak, but still quite high.

OSFI’s Jean-Claude Ménard, Chief Actuary, has given a presentation titled Actuarial Valuation of the Canada Pension Plan – Modeling Uncertainty and Properly Disclosing the Results. They’re estimating a real rate of return of 4.2%, but I would have liked to have seen more discussion of the valuation of private equity.

The BoC has released a working paper by Ali Dib titled Banks, Credit Market Frictions, and Business Cycles:

The author proposes a micro-founded framework that incorporates an active banking sector into a dynamic stochastic general-equilibrium model with a financial accelerator. He evaluates the role of the banking sector in the transmission and propagation of the real effects of aggregate shocks, and assesses the importance of financial shocks in U.S. business cycle fluctuations. The banking sector consists of two types of profit maximizing banks that offer different banking services and transact in an interbank market. Loans are produced using interbank borrowing and bank capital subject to a regulatory capital requirement. Banks have monopoly power, set nominal deposit and prime lending rates, choose their leverage ratio and their portfolio composition, and can endogenously default on a fraction of their interbank borrowing. Because it is costly to raise capital to satisfy the regulatory capital requirement, the banking sector attenuates the real effects of financial shocks, reduces macroeconomic volatilities, and helps stabilize the economy. The model also includes two unconventional monetary policies (quantitative and qualitative easing) that reduce the negative impacts of financial crises

Instinet has joined the crowd of SEC Flash Crash conclusion skeptics:

In our opinion, given the facts stated by both the SEC report and the CME, the sell order could not be the singular cause of the crash. However, the interconnection among markets, the order and the method with which it was executed likely served as a catalyst for the reduction in liquidity and the “erroneous” stock trades experienced seconds later.
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Had the market been less fragile or the futures algorithm less aggressive, the HFT method of transferring risk into stocks by offsetting futures purchases with SPY sales would have helped absorb this E-mini futures sale and moved liquidity between asset classes.
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Without circuit breakers in individual stocks and because the lateness of the day prevented market- wide circuit breakers from triggering, there was nothing to stem the tide of falling equity prices in these order-driven markets.
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While we don’t think that the initial E-mini order should be attributed as the singular force creating the sell-off, it is worth noting that the first “lesson learned” cited by the report could be read as a warning against using algorithms that send orders based only on volume without price controls. An algorithm that adjusts its aggressiveness based on price level and/or has a price limit provides an important layer of intelligence and protection. More advanced logic to address message traffic and short term price movements may have allowed detection of the “hot potato” volume situation referenced in the report, where HFTs traded more volume than usual with each other and could have signalled abnormal market conditions. If the algorithms contributing to the problem on May 6th had been more sensitive to market conditions and aware of the type of volume being traded, they would likely not have been so aggressive.

There was a good piece in the Globe by former HSBC economist Dr. David E. Bond titled How dairy farmers milk Canada’s taxpayers:

Canada’s government sanctioned National Dairy Policy offers just such a deal, and results in a wealth transfer of more than $2.4-billion annually from consumers and food processors to diary farmers. That’s more than $175,000 for each dairy farmer.

Because of this policy, consumers pay 60 cents more in Canada than in the United States for a one-litre carton of whole milk and 94 cents more for a pound of butter.

A farmer once started railing against welfare recipients in my hearing … I told him that each farmer costs me as much as half a dozen welfare bums, but my number might have been a little low. I eagerly await the next baffled speech from Spend-Every-Penny (or his lap-dog), wondering why Canadian productivity isn’t any higher.

It was a day of mixed results on continued heavy volume in the Canadian preferred share market today, with PerpetualDiscounts gaining 12bp, while FixedResets lost 12bp. Volatility continued to be relatively low, with only two entries on the performance highlights table.