There’s some hasty back-pedalling in Hungary:
“Any comparison with countries that have much higher credit default swap ratings than Hungary is unfortunate,” State Secretary Mihaly Varga told reporters today in Budapest. “The comments that have been made about this issue are exaggerated and if they come from colleagues that’s unfortunate.”
…
Prime Minister Viktor Orban, who took power a week ago, sought permission for a wider budget deficit from the European Union and the International Monetary Fund, which led the 20 billion-euro ($24 billion) bailout for Hungary. European Commission President Jose Manuel Barroso this week rebuffed Orban, urging him to continue fiscal consolidation.The government will aim to meet the deficit target of 3.8 percent of gross domestic product, which is “attainable” through changes to spending and revenue plans, Varga said today. Orban called a three-day emergency cabinet meeting to hammer out the action plan.
Kenneth A. Posner writes an interesting piece on Contingent Capital:
This idea has in fact been around for some time: in 1991, Tom Stanton suggested contingent capital for Fannie Mae and Freddie Mac (FRE, Fortune 500) — if people had listened then, the idea would have saved taxpayers untold billions today — the government’s bailout of the two mortgage agencies is unlimited, with the Congressional Budget Office estimating it could cost $373 billion by 2020.
The proposed global bank tax has been rejected:
Group of 20 nations failed to agree on a proposal to impose a global tax on banks that was aimed at making the financial industry shoulder the cost of bailouts, settling instead for a common set of guidelines.
G-20 finance ministers and central bank governors said in a statement in Busan, South Korea, that governments will take account of each nation’s “circumstances and options.” The result allows nations such as Canada, China and Brazil, whose banks suffered less during the global financial crisis, to skip introducing a tax. European countries and the U.S. have advocated the levy.
“If we’re living in an ideal world, a global financial tax would be a good idea but in reality, it is almost impossible to implement,” said Tomo Kinoshita, an economist at Nomura Holdings Inc. in Hong Kong. “There are too many obstacles.”
Yesterday’s statement leaves in place an initiative to seek tighter global standards for capital levels at banks, which is a “more practical” way to help reduce the risk of financial crises, Kinoshita said. Banks have opposed the effort, warning that the costs may curb credit expansion and economic growth.
It is my understanding that the Europeans are opposed to increased capitalization, since a greater proportion of their credit markets consists of bank loans.
PrefBlog was mentioned in Larry McDonald’s Canadian Business Online Blog post Round-up of financial blogs. Thanks, Larry!
The commission established by Congress to investigate the causes of the financial crisis issued a subpoena to Goldman Sachs on Monday for “failing to comply with a request for documents and interviews in a timely manner.”
…
A person briefed on the investigation said that Goldman had already provided more than 20 million pages of documents, and that the commission had begun interviewing witnesses, on a range of issued, including derivatives, the complex financial instruments that were at the heart of the crisis.
Goldman Sachs sent more than a billion pages of documents, FCIC Vice Chairman Bill Thomas said on a conference call with reporters today. Not all of the information is what the panel requested, and Goldman Sachs didn’t cooperate with requests to interview Chief Executive Officer Lloyd Blankfein, Chief Operating Officer Gary Cohn and Chief Financial Officer David Viniar, FCIC Chairman Phil Angelides said.
“We did not ask them to pull up a dump truck to our offices and dump a bunch of rubbish,” said Angelides, 56, who previously served as California’s treasurer. “This has been a very deliberate effort over time to run out the clock.”
Bank CDS levels in Europe show a certain amount of nervousness:
The cost of insuring against a default on financial-company bonds surged, with the Markit iTraxx Financial Index of credit- default swaps linked to the senior debt of 25 European banks and insurers climbing 6 basis points to 189, according to CMA DataVision in London, near the highest level since March 2009. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments fell 1.5 basis points to 167, compared with the record-high 174.4 reached on June 4.
It is my understanding that the recently issued and poorly received EMA.PR.A will be repriced and offered at 24.50.
It was another very strong day on the Canadian preferred share market, with PerpetualDiscounts up 67bp and FixedResets gaining 15bp. Volume was elevated.
| 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 | 2.67 % | 2.72 % | 42,323 | 20.68 | 1 | 0.0000 % | 2,093.6 |
| FixedFloater | 5.18 % | 3.27 % | 28,327 | 19.96 | 1 | 0.1908 % | 3,090.8 |
| Floater | 2.41 % | 2.79 % | 91,149 | 20.19 | 3 | 0.0734 % | 2,240.9 |
| OpRet | 4.88 % | 3.79 % | 95,117 | 0.95 | 11 | 0.2128 % | 2,313.4 |
| SplitShare | 6.41 % | -0.05 % | 102,857 | 0.08 | 2 | 0.5331 % | 2,164.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2128 % | 2,115.4 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.6698 % | 1,861.0 |
| Perpetual-Discount | 6.09 % | 6.16 % | 205,412 | 13.70 | 77 | 0.6698 % | 1,761.6 |
| FixedReset | 5.45 % | 4.19 % | 415,259 | 3.51 | 45 | 0.1536 % | 2,166.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.B | FixedReset | -1.09 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-01 Maturity Price : 25.00 Evaluated at bid price : 27.30 Bid-YTW : 4.31 % |
| TCA.PR.X | Perpetual-Discount | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 45.45 Evaluated at bid price : 47.20 Bid-YTW : 5.97 % |
| TD.PR.O | Perpetual-Discount | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 5.90 % |
| POW.PR.B | Perpetual-Discount | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 21.46 Evaluated at bid price : 21.73 Bid-YTW : 6.25 % |
| IAG.PR.A | Perpetual-Discount | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 18.41 Evaluated at bid price : 18.41 Bid-YTW : 6.27 % |
| NA.PR.K | Perpetual-Discount | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 23.72 Evaluated at bid price : 24.02 Bid-YTW : 6.15 % |
| BNS.PR.O | Perpetual-Discount | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 23.58 Evaluated at bid price : 23.78 Bid-YTW : 5.97 % |
| TD.PR.R | Perpetual-Discount | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 23.53 Evaluated at bid price : 23.72 Bid-YTW : 5.98 % |
| HSB.PR.D | Perpetual-Discount | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 6.23 % |
| PWF.PR.K | Perpetual-Discount | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 20.04 Evaluated at bid price : 20.04 Bid-YTW : 6.27 % |
| SLF.PR.B | Perpetual-Discount | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 19.54 Evaluated at bid price : 19.54 Bid-YTW : 6.16 % |
| RY.PR.B | Perpetual-Discount | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 20.27 Evaluated at bid price : 20.27 Bid-YTW : 5.85 % |
| POW.PR.A | Perpetual-Discount | 1.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 22.66 Evaluated at bid price : 22.90 Bid-YTW : 6.21 % |
| PWF.PR.I | Perpetual-Discount | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 24.09 Evaluated at bid price : 24.47 Bid-YTW : 6.21 % |
| TD.PR.Q | Perpetual-Discount | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 23.54 Evaluated at bid price : 23.74 Bid-YTW : 5.98 % |
| NA.PR.M | Perpetual-Discount | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 24.63 Evaluated at bid price : 24.86 Bid-YTW : 6.10 % |
| GWO.PR.M | Perpetual-Discount | 1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 23.48 Evaluated at bid price : 23.65 Bid-YTW : 6.14 % |
| BMO.PR.H | Perpetual-Discount | 1.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 22.24 Evaluated at bid price : 22.66 Bid-YTW : 5.88 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.G | FixedReset | 62,015 | RBC crossed 16,000 at 24.35. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 24.45 Evaluated at bid price : 24.50 Bid-YTW : 4.16 % |
| IAG.PR.E | Perpetual-Discount | 56,100 | Desjardins crossed 19,800 at 24.14; TD crossed 17,700 at the ame price; TD sold 17,700 to Desjardins at the same price again. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 23.88 Evaluated at bid price : 24.07 Bid-YTW : 6.24 % |
| BNA.PR.C | SplitShare | 55,000 | RBC crossed 50,000 at 19.10. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 19.11 Bid-YTW : 8.28 % |
| TD.PR.G | FixedReset | 41,030 | TD crossed 25,000 at 27.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.10 Bid-YTW : 4.19 % |
| TD.PR.S | FixedReset | 39,673 | TD crossed 24,000 at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-30 Maturity Price : 25.00 Evaluated at bid price : 25.69 Bid-YTW : 4.21 % |
| CM.PR.I | Perpetual-Discount | 31,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-06-07 Maturity Price : 19.35 Evaluated at bid price : 19.35 Bid-YTW : 6.17 % |
| There were 41 other index-included issues trading in excess of 10,000 shares. | |||