The penny just dropped on US Financial Reform:
Bank of America Corp. led financial stocks lower after saying U.S. curbs on debit-card fees may trigger a $10 billion charge, spurring speculation that rival banks have underestimated their own costs.
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The slide began after Bank of America said rules in the financial industry overhaul, including the Durbin amendment’s curbs on debit-card fees, may prompt the charge and trim annual revenue by $2.3 billion, more than some of the most pessimistic estimates. JPMorgan Chase & Co., ranked second by assets in the U.S., dropped as much as 3.6 percent.
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Moody’s Investors Service said in June that Bank of America, Wells Fargo and JPMorgan, the three biggest U.S. debit-card issuers, may face $1.38 billion in annual lost revenue from the proposed cap on “swipe” fees. DBRS Inc., the Toronto-based ratings firm had said the impact just for Bank of America could be $1.9 billion.Bank of America’s debit-card revenue could shrink by $1.8 billion to $2.3 billion starting in the third quarter of next year because of restrictions on fees merchants can charge for each swipe of a debit card, Chief Executive Brian Moynihan said in a presentation today.
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The bank also expects a goodwill charge of $7 billion to $10 billion in the third quarter tied to the value of the business after President Barack Obama signs the regulatory reform law approved by Congress this week, Chief Financial Officer Charles Noski said on a conference call.
Note that it looks like the Credit Rating Agencies got it wrong! It must be because they’re corrupt! They’re paid by the issuers, you know! Quick, make them a public utility, so they can be run as efficiently as the Toronto Transit Commission!
Speaking of the CRAs, DBRS has announced a GREAT LEAP FORWARD!!!
The International Organization of Securities Commissions (IOSCO) Code of Conduct Fundamentals for CRAs (IOSCO Code) requires that SF ratings be differentiated from corporate bond ratings, preferably through a different rating symbology.*
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Currently, DBRS press releases specify the type of rating being published, such as whether it is an SF rating, a Financial Institutions rating or a Public Finance rating (the PR Notation). Effective August 16, 2010, the PR Notation on all DBRS press releases will no longer be used.For its SF modifier, DBRS will use the symbol “(sf)” next to the rating category for ratings that meet the requested criteria in its public press releases and rating reports. The “(sf)” symbol will only indicate that the security is an SF instrument and will not change the meaning or definition of the rating in any other way nor will it change the risk of any particular SF instrument. DBRS’s expectation of the performance of each rated SF instrument is not adjusted in any way by the SF modifier.
Isn’t that convenient? Investors will no longer have to read the prospectus to discover deeply hidden facts like such-and-such is a structured investment, it will be right there in the rating! No need for any thought at all! Thank you, IOSCO!
Another strong day on high volume for the Canadian preferred share market, with PerpetualDiscounts up 24bp and FixedResets up 16bp, taking the median weighted average Yield-to-Worst of the latter class down to 3.57%. The all-time low yield for that index is 3.31% on March 26.
| 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 | 2.81 % | 2.89 % | 23,676 | 20.29 | 1 | 0.0000 % | 2,078.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0652 % | 3,151.0 |
| Floater | 2.28 % | 1.96 % | 41,290 | 22.47 | 4 | -0.0652 % | 2,245.9 |
| OpRet | 4.88 % | 1.59 % | 101,758 | 0.29 | 11 | -0.0247 % | 2,341.3 |
| SplitShare | 6.30 % | 6.17 % | 77,477 | 3.43 | 2 | 0.0435 % | 2,201.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0247 % | 2,140.9 |
| Perpetual-Premium | 5.93 % | 5.33 % | 110,226 | 1.83 | 4 | 0.1777 % | 1,934.0 |
| Perpetual-Discount | 5.85 % | 5.92 % | 184,665 | 14.00 | 73 | 0.2413 % | 1,847.6 |
| FixedReset | 5.31 % | 3.57 % | 330,742 | 3.47 | 47 | 0.1550 % | 2,221.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.C | Perpetual-Discount | -2.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 6.09 % |
| PWF.PR.K | Perpetual-Discount | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 6.12 % |
| BNS.PR.P | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.17 Bid-YTW : 3.19 % |
| CM.PR.J | Perpetual-Discount | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 19.32 Evaluated at bid price : 19.32 Bid-YTW : 5.85 % |
| RY.PR.H | Perpetual-Discount | 1.07 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-23 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 5.55 % |
| MFC.PR.D | FixedReset | 1.09 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.91 Bid-YTW : 3.64 % |
| ELF.PR.F | Perpetual-Discount | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 20.44 Evaluated at bid price : 20.44 Bid-YTW : 6.53 % |
| TD.PR.R | Perpetual-Discount | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 24.28 Evaluated at bid price : 24.50 Bid-YTW : 5.73 % |
| SLF.PR.F | FixedReset | 1.17 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 27.62 Bid-YTW : 3.32 % |
| GWO.PR.L | Perpetual-Discount | 1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 23.87 Evaluated at bid price : 24.06 Bid-YTW : 5.92 % |
| POW.PR.D | Perpetual-Discount | 1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 20.96 Evaluated at bid price : 20.96 Bid-YTW : 6.01 % |
| RY.PR.D | Perpetual-Discount | 1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 20.72 Evaluated at bid price : 20.72 Bid-YTW : 5.52 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BAM.PR.J | OpRet | 199,920 | Dropped from TXPR as of the opening Monday 19th, which means selling pressure from CPD, from other indexers & closet-indexers, and possibly speculators. We shall see how the three-month rebalancing period unfolds! Nesbitt crossed blocks of 50,000 and 122,200, both at 25.75. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 4.90 % |
| TRP.PR.B | FixedReset | 82,430 | Added to TXPR. Nesbitt crossed three blocks of 25,000 each at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 24.73 Evaluated at bid price : 24.78 Bid-YTW : 3.87 % |
| TD.PR.R | Perpetual-Discount | 57,163 | Added to TXPR. RBC bought 11,000 from National at 24.33. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 24.28 Evaluated at bid price : 24.50 Bid-YTW : 5.73 % |
| CM.PR.G | Perpetual-Discount | 55,413 | Added to TXPR. TD crossed 38,100 at 23.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 22.96 Evaluated at bid price : 23.18 Bid-YTW : 5.84 % |
| TRP.PR.A | FixedReset | 49,614 | TD crossed 25,700 at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 4.08 % |
| SLF.PR.A | Perpetual-Discount | 44,835 | RBC crossed 26,500 at 19.93. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-16 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 6.01 % |
| There were 42 other index-included issues trading in excess of 10,000 shares. | |||