July 28, 2010

The migration from bank prop desks to hedge funds is continuing:

Citigroup Inc. may move a team of proprietary traders into its hedge-fund unit, one of at least three alternatives the U.S. bank is studying to comply with the Dodd-Frank Act, people briefed on the matter said.

Traders in the Citi Principal Strategies unit, led by Sutesh Sharma, would be reassigned to Citi Capital Advisors, which mostly oversees money for outside investors, said the people, speaking anonymously because the talks are preliminary. The bank would set up the traders as hedge-fund managers and seed their funds, then raise money from outside investors to redeem its stakes, the people said.

Good thing? Bad thing? Who knows? Who cares? This particular Volcker Rule is simply knee-jerk feel-goodism and the implications have never been studied.

Maybe the Citigroup guys can move to Singapore!

Singapore hedge fund startups are on the rise after the central bank approved new rules that didn’t impose a licensing requirement on most funds.

Seven new hedge funds set up in May and June, according to Eurekahedge Pte, after the Monetary Authority of Singapore said in April that small funds can keep operating without a license as part of its review.

“Singapore did not shoot itself in the foot by putting up proposals that will kill off the business,” said Kher Sheng Lee, a senior associate in the financial services group at Philadelphia-based law firm Dechert LLP in Hong Kong. “While some places are moving towards over-regulation with rigid rules and increase in compliance costs, Singapore has attempted to go for sensible regulation.”

Singapore is vying with Hong Kong for a slice of the global $1.7 trillion hedge-fund industry as the region’s growth leads the world. Singapore has made it easier for hedge funds to set up shop on the island than in other Asian cities such as Hong Kong, where hedge-fund managers face the same licensing requirements as mutual-fund managers.

Plans are being drawn up for Bernanke’s hagiography:

In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower this year.

In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation.

The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody’s Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years.

If the fiscal stimulus alone had been enacted, and not the financial measures, they concluded, real G.D.P. would have fallen 5 percent last year, with 12 million jobs lost. But if only the financial measures had been enacted, and not the stimulus, real G.D.P. would have fallen nearly 4 percent, with 10 million jobs lost.

The combined effects of both sets of policies cannot be directly compared with the sum of each in isolation, they found, “because the policies tend to reinforce each other.”

A day of moderate volume in the Canadian preferred share market, with the volume totally dominated by FixedResets. PerpetualDiscounts were up 4bp and FixedResets gained 11bp on the day, with little volatility.

Update, 2010-7-29: PerpetualDiscounts now yield 5.90%, equivalent to 8.26% interest at the standard equivalency factor of 1.4x. Long Corporates yield 5.6%, so the pre-tax interest-equivalent spread is now about 265bp, unchanged from the figure reported on July 21.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 2.87 % 2.95 % 22,859 20.18 1 0.2471 % 2,078.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.0914 % 3,151.3
Floater 2.51 % 2.15 % 39,515 21.98 4 -0.0914 % 2,246.1
OpRet 4.88 % 1.18 % 92,327 0.26 11 0.0885 % 2,340.9
SplitShare 6.22 % -2.21 % 71,193 0.08 2 0.4527 % 2,228.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0885 % 2,140.6
Perpetual-Premium 5.92 % 5.34 % 106,717 1.79 4 0.0319 % 1,943.0
Perpetual-Discount 5.82 % 5.90 % 181,411 14.01 73 0.0350 % 1,861.4
FixedReset 5.32 % 3.50 % 318,525 3.44 47 0.1056 % 2,225.4
Performance Highlights
Issue Index Change Notes
POW.PR.D Perpetual-Discount -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-07-28
Maturity Price : 21.09
Evaluated at bid price : 21.09
Bid-YTW : 5.99 %
HSB.PR.D Perpetual-Discount 2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-07-28
Maturity Price : 21.49
Evaluated at bid price : 21.77
Bid-YTW : 5.80 %
Volume Highlights
Issue Index Shares
BNS.PR.R FixedReset 123,076 Scotia crossed 75,000 at 26.30; TD crossed 24,400 at the same price.
Maturity Type : Call
Maturity Date : 2014-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 3.59 %
TD.PR.Y FixedReset 103,635 Desjardins bought 12,300 from National at 26.20; 50,000 from anonymous at the same price; and 35,500 from TD at the same price again.
Maturity Type : Call
Maturity Date : 2013-11-30
Maturity Price : 25.00
Evaluated at bid price : 26.19
Bid-YTW : 3.51 %
SLF.PR.F FixedReset 101,700 RBC crossed blocks of 78,500 and 18,000, both at 27.55.
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.50
Bid-YTW : 3.47 %
RY.PR.Y FixedReset 54,392 Scotia crossed 40,000 at 27.60.
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 27.55
Bid-YTW : 3.52 %
BNS.PR.Y FixedReset 36,347 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-07-28
Maturity Price : 24.59
Evaluated at bid price : 24.64
Bid-YTW : 3.59 %
TRP.PR.A FixedReset 32,470 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 3.95 %
There were 27 other index-included issues trading in excess of 10,000 shares.

One Response to “July 28, 2010”

  1. […] (also called the Seniority Spread) is now 275bp, a surprising increase from the 265bp recorded on July 28. Corporates have been on wheels! Click for […]

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