PrefBlog

Nothing happened today. Bloomberg has a nice piece on Chinese MMFs, but it’s not written in such a way that I can convey the gist by extracting a few paragraphs. It will be most interesting to see what, if any, mechanisms are introduced to forestall disruptive panic after a major default.

It was a negative day for the Canadian preferred share market, with PerpetualDiscounts off 3bp, FixedResets flat and DeemedRetractibles down 16bp. The Performance Highlights table is heavily skewed to the downside and notable for the presence of two TRP issues, hit with fallout from the new issue. Volume was high.

Today’s big news was a lousy US jobs number:

The 74,000 gain in payrolls, less than the most pessimistic projection in a Bloomberg survey, followed a revised 241,000 advance the prior month, Labor Department figures showed today in Washington. The median forecast of 90 economists called for an increase of 197,000. The unemployment rate dropped to 6.7 percent, the lowest since October 2008, as more people left the labor force.

It was even worse in Canada:

The Canadian economy unexpectedly shed 45,900 jobs in December, the steepest decline in nine months, led by a drop in full-time positions.

The country’s jobless rate rose to 7.2 per cent in December from 6.9 per cent, Statistics Canada said Friday, putting it at a five-month high.

Canada’s job growth slowed by year’s end as a string of companies, from Sears Canada Inc. to Potash Corp. of Saskatchewan Inc. and BlackBerry Ltd., announced job cuts while a wave of manufacturers, particularly in Central Canada, said they plan to close plants. Through 2013, job gains in Canada averaged 8,500 a month, a sharp drop from the average of 25,900 new positions per month in 2012.

December’s weak reading, which sent the Canadian dollar to a new four-year low, was far below expectations as the number of full-time positions tumbled by 60,000. Economists had forecast about 14,000 new jobs and an unchanged rate.

And Fischer got the White House nod for Fed vice-chair:

Stanley Fischer, former head of the Bank of Israel, will be nominated to serve as vice chairman of the Federal Reserve, the Obama administration said.

Fischer, 70, would replace Janet Yellen, who was approved by the Senate this week for the chairmanship of the U.S. central bank. Lael Brainard, formerly the U.S. Treasury Department’s top international official, will fill an empty seat on the board, and Jerome Powell is being nominated for a second term, according to a statement today from the White House.

DBRS confirmed DF.PR.A at Pfd-3(low):

Since the last rating confirmation in September 2013, the net asset value (NAV) of the Company has been increasing. As of December 31, 2013, the downside protection available to the Preferred Shares is approximately 40.2%, and the dividend coverage ratio is 0.82 times. The Pfd-3 (low) rating of the Preferred Shares is based primarily on the downside protection available and the additional protection provided by an asset coverage test, which does not permit any distributions to holders of the Class A Shares if the NAV of the Company falls below $15.

DBRS confirmed FTN.PR.A at Pfd-4(high):

Since the last rating confirmation in January 2013, the NAV of the Company has improved as U.S. and Canadian financial institutions outperformed the broader North American equity indices. Downside protection available to holders of the Preferred Shares rose to 41.6% as of December 31, 2013, from 32.8% on December 31, 2012. Despite the increased downside protection, the current dividend coverage ratio of around 0.65 and the reinstatement of Class A Share distributions result in an average grind of approximately 10% over the next two years. As a result, the rating has been confirmed at Pfd-4 (high).

And it was mostly good for the Canadian preferred share market today, although not as good as one might have thought, given an astonishing 13bp decline in the Ten-Year Canada yield, with PerpetualDiscounts off 1bp, FixedResets gaining 13bp and DeemedRetractibles up 15bp. The Performance Highlights table isn’t particularly lengthy but is uniformly positive and dominated by FixedResets. Volume was a little below average.

There’s a disturbing trend in the States:

New Jersey Governor Chris Christie called a news conference today after disclosures that an aide triggered a days-long traffic jam as political revenge, a revelation that threatens his national image and possible 2016 presidential run.
…
Christie aides ordered the shutdown of the Fort Lee approach lanes to the bridge during four days in September to punish a Democratic mayor, according to e-mails obtained yesterday.
…
An outline of the Christie administration’s link to the jams was contained in a cache of e-mails and text messages obtained yesterday by Bloomberg News.

“Time for some traffic problems in Fort Lee,” Bridget Anne Kelly, a deputy chief of staff for legislative and intergovernmental affairs, wrote to David Wildstein, a high school friend of Christie’s whom the governor appointed to the Port Authority.

“Got it,” Wildstein replied.

From Sept. 9 to 12, delays in crossing the George Washington Bridge that typically last about 30 minutes stretched to 4 hours or more. On the fifth day, officials on the New York side re-opened lanes on what the Port Authority calls the busiest bridge in the world, a key link for U.S. East Coast traffic on Interstate 95.

“We are appropriately going nuts,” Wildstein wrote to Kelly on Sept. 13, as traffic flowed. David Samson, Christie’s appointee as Port Authority chairman, was “helping us to retaliate” for the easing of the vehicular snarls.

This happened slightly prior to deliberate unnecessary inconvenience during the federal shut-down:

President Obama is not a bad poker player, but the man with all the chips always starts with the advantage (and he gets all the aces). He has closed Washington down as tight as he dares, emphasizing the trivial and the petty in making life as inconvenient as he can for the greatest number. It’s all in a noble cause, of course. Access to most of the memorials is limited, and often in curious ways. The Lincoln Memorial is easy to reach, with the streets around it remaining open. But the Martin Luther King Memorial is made difficult to reach, relegating it, you might say, to the back of the bus. Not very nice.

The Park Service appears to be closing streets on mere whim and caprice. The rangers even closed the parking lot at Mount Vernon, where the plantation home of George Washington is a favorite tourist destination. That was after they barred the new World War II Memorial on the Mall to veterans of World War II. But the government does not own Mount Vernon; it is privately owned by the Mount Vernon Ladies’ Association. The ladies bought it years ago to preserve it as a national memorial. The feds closed access to the parking lots this week, even though the lots are jointly owned with the Mount Vernon ladies. The rangers are from the government, and they’re only here to help.

This willingness to use government services as a political weapon has always been around, of course. But these examples are egregious.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 14bp, FixedResets down 6bp and DeemedRetractibles off 3bp. Volatility was average. Volume was average.

Nothing happened today.

It was another mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 1bp, FixedResets up 11bp and DeemedRetractibles down 12bp. The Performance Highlights table is short by standards of the past year. Volume was on the low side of average.

PerpetualDiscounts now yield 5.66%, equivalent to 7.36% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.8%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread” is now about 255bp, a slight (and perhaps spurious) narrowing from the 260bp reported December 27.