OSFI has released its annual performance assessment:
A total of 49 one-on-one interviews were conducted among Chief Executive Officers (CEOs), Chief Financial Officers (CFOs), Chief Risk Officers (CROs), Chief Compliance Officers (CCOs), other senior executives, auditors and lawyers of deposit-taking institutions regulated by OSFI.
The regulated profess that the regulator is doing a great job!
Maple bonds issues are picking up:
Maple issuance may accelerate to C$6 billion ($5.8 billion) to C$8 billion next year, according to Greg McDonald, vice president and director of debt capital markets at Toronto- Dominion Bank’s TD Securities unit. The rest of this year may see an additional C$1 billion to C$1.5 billion in the Canadian dollar-denominated foreign debt, adding to the C$2.4 billion raised since January, he said.
Sales of Maple bonds, nicknamed after the leaf on the Canadian flag, surpassed the C$1.37 billion raised in all of 2009 in April, according to data compiled by Bloomberg. There haven’t been any Maple sales since July, when National Australia Bank Ltd. and Nederlandse Waterschapsbank NV raised C$600 million from two issues, as concern of a global economic slowdown drove investors to the refuge of government debt.
Would you like to diversify your fixed income portfolio with some Maples? Tough. The regulators say you’re too damn stupid for them to allow such a thing.
Subsidies to solar power lobbyists are continuing:
Prices for photovoltaic panels that convert sunlight into electricity may fall about 10 percent next year, less than analysts forecast, as European demand increases.
First-quarter prices will drop to an average of $1.65 a watt compared with $1.50 in the previous median estimate of five analysts surveyed by Bloomberg News. Analysts who contributed to the surveys included John Hardy at Gleacher & Co. in Connecticut and Sanjay Shrestha at Lazard Capital Markets. This year, contracts may average $1.80 to $1.85 a watt, they forecast.
…
Developers have rushed to complete solar-energy projects ahead of planned declines in government incentives in Germany and Spain. At the same time, smaller markets expanded in France, the Czech Republic and the U.S. Increased orders will extend to 2011, when the analysts forecast sales to increase 20 percent.Demand growth in Europe and North America will outpace higher production in Asia, Hardy and Shrestha said.
Evidence of currently reduced supply can be found in inventories and in some order terms.
Julie Williams, Chief Counsel for the OCC testifed on covered bonds:
Another important component of a statutory covered bond program is the types of assets eligible to collateralize the covered bonds. Typically, in Europe, covered bonds are associated with high quality assets comprised of residential or commercial mortgage loans and public-sector debt. While some have advocated a broad statutory spectrum of U.S. asset types, including credit card, student, small business, and auto loans, more recent proposals have tended to narrow the eligible asset classes.
…
Various types of standards could be embodied in a covered bond regulatory framework. For example, all covered bonds, by asset class, should have minimum eligibility criteria setting asset quality standards to promote the inclusion of high quality assets in the cover pool. Most European jurisdictions prescribe asset quality criteria for the assets subject to the statutory covered bond program. Those standards in the U.S. could be set by statute or by the covered bond regulators through rulemaking. Given the likely detail involved, regulatory standards seem preferable.
…
Covered bond legislation could authorize the covered bond regulators to establish minimum overcollateralization requirements for covered bonds backed by different eligible asset classes. As a related standard, legislation also could set forth a framework requiring each cover pool to satisfy an asset coverage test that assesses whether the minimum overcollateralization requirements are met, and obligates the issuer and an independent “Asset Monitor” to confirm on a periodic basis whether the asset coverage test is satisfied.
…
Similar to the default situation approach, a statutory framework could create a
separate estate for the covered bond program similar to those in certain European jurisdictions. A recent legislative proposal creates a structure with the following general components when the FDIC is appointed as conservator or receiver for an insolvent issuer:
- Creation of a separate estate and provision to the FDIC of an exclusive right for 180 days to transfer the issuer’s covered bond program to another eligible issuer.
- A requirement that the FDIC as conservator or receiver, during the 180-day period, perform all monetary and nonmonetary obligations of the issuer until the FDIC completes the transfer of the covered bond program, the FDIC elects to repudiate its continuing obligations to perform, or the FDIC fails to cure a default (other than the issuer’s conservatorship or receivership).
US state pensions are in a bad way:
Less than half the 50 state retirement systems had assets to pay for 80 percent of promised benefits in their 2009 fiscal years, according to data compiled for the Cities and Debt Briefing hosted by Bloomberg Link in New York today. Two years earlier, only 19 missed the mark. Illinois covered just 50.6 percent of benefits last year, the lowest so-called funded ratio, which actuaries say shouldn’t be less than 80 percent.
Benefits paid by funds in at least 14 states equaled more than 10 percent of assets in the fiscal year, the figures show. In 2007, none exceeded the threshold. The growing burden prompted Colorado, Minnesota, Michigan and other states to trim benefits for millions of teachers and government workers. It also forced fund managers to keep money in short-term low-return investments to pay benefits, reducing chances pensions can earn their way back to financial health.
Expect to see more furious attacks on the reckless banks. Some misdirection is occurring already:
California sued Robert Rizzo, the ousted city manager of Bell who was paid almost $800,000 a year, and seven current and former officials, seeking the return of “excess salaries” and reductions in pension payouts.
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“We are filing our lawsuit on behalf of the public to recover the excess salaries that Bell officials awarded themselves and to ensure their future pensions are reduced to a reasonable amount,” state Attorney General Jerry Brown said in a statement.
But this is funny:
Fannie Mae agreed to finance loans to homebuyers putting as little as $1,000 down without getting the approval of the U.S. agency in charge of minimizing the costs of the mortgage company’s bailout.
…
Fannie Mae is buying the Affordable Advantage loans from housing finance authorities in Massachusetts, Minnesota, Wisconsin and Idaho, Janis Smith, a spokeswoman, said today in a telephone interview. She declined to comment further.The state housing authorities last year created the loan product aimed at first-time buyers, the New York Times reported Sept. 5. The mortgages come with 30-year fixed rates, require homeownership counseling, and are available to people with credit scores of at least 680 or 720, the paper said.
I love the bit about homeownership counselling. People only do naughty things because they don’t know better! That’s the only reason!
What makes this even funnier is some research from FRB-Richmond by Andra C. Ghent and Marianna Kudlyak, titled Recourse and Residential Mortgage Default: Theory and Evidence from U.S. States with the abstract:
We analyze the impact of lender recourse on mortgage defaults theoretically and empirically across U.S. states. We study the effect of state laws regarding deficiency judgments in a model where lenders can use the threat of a deficiency judgment to deter default or to shorten the default process. Empirically, we find that recourse decreases the probability of default when there is a substantial likelihood that a borrower has negative home equity. We also find that, in states that allow deficiency judgments, defaults are more likely to occur through a lender-friendly procedure, such as a deed in lieu of foreclosure.
They classify Minnesota and Wisconsin, two of the states mentioned with respect to the $1,000-down programme, as being non-recourse!
Another day of good returns and good volume on the Canadian preferred share market, with PerpetualDiscounts gaining 21bp and FixedResets up 10bp. MFC issues continued to be prominently displayed in the volume and performance tables.
PerpetualDiscounts now yield 5.67%, equivalent to 7.94% interest at the standard equivalency actor of 1.4x. Long Corporates now yield 5.4%, so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 255bp, a sharp tightening from the 270bp reported on September 8.
| 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 | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.7245 % | 2,097.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.7245 % | 3,177.1 |
| Floater | 2.90 % | 3.38 % | 65,756 | 18.81 | 3 | 0.7245 % | 2,264.5 |
| OpRet | 4.87 % | -0.19 % | 87,062 | 0.21 | 9 | -0.0855 % | 2,376.9 |
| SplitShare | 5.95 % | -28.56 % | 63,679 | 0.09 | 2 | 0.0821 % | 2,366.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0855 % | 2,173.4 |
| Perpetual-Premium | 5.70 % | 5.36 % | 128,075 | 5.36 | 14 | 0.3258 % | 1,986.0 |
| Perpetual-Discount | 5.57 % | 5.67 % | 191,620 | 14.42 | 63 | 0.2078 % | 1,952.8 |
| FixedReset | 5.24 % | 3.04 % | 277,968 | 3.31 | 47 | 0.1021 % | 2,268.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.D | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.39 Bid-YTW : 3.92 % |
| POW.PR.D | Perpetual-Discount | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 22.49 Evaluated at bid price : 22.67 Bid-YTW : 5.61 % |
| BMO.PR.L | Perpetual-Premium | 1.17 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-24 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 5.15 % |
| MFC.PR.C | Perpetual-Discount | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 19.24 Evaluated at bid price : 19.24 Bid-YTW : 5.89 % |
| MFC.PR.B | Perpetual-Discount | 1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 19.89 Evaluated at bid price : 19.89 Bid-YTW : 5.88 % |
| BAM.PR.B | Floater | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 15.49 Evaluated at bid price : 15.49 Bid-YTW : 3.38 % |
| NA.PR.K | Perpetual-Premium | 1.38 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2011-06-14 Maturity Price : 25.25 Evaluated at bid price : 25.65 Bid-YTW : 4.34 % |
| BAM.PR.K | Floater | 1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 15.38 Evaluated at bid price : 15.38 Bid-YTW : 3.41 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.C | Perpetual-Discount | 102,758 | Nesbitt crossed 19,600 at 19.30; RBC crossed 45,000 at 19.31. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 19.24 Evaluated at bid price : 19.24 Bid-YTW : 5.89 % |
| TRP.PR.A | FixedReset | 81,248 | Nesbitt bought two blocks of 10,000 each from RBC, both at 26.14. Nesbitt crosed 40,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.13 Bid-YTW : 3.45 % |
| TD.PR.I | FixedReset | 74,405 | TD sold 10,000 to anonymous at 28.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 28.15 Bid-YTW : 3.08 % |
| MFC.PR.B | Perpetual-Discount | 74,092 | Nesbitt crossed 53,000 at 20.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 19.89 Evaluated at bid price : 19.89 Bid-YTW : 5.88 % |
| TD.PR.R | Perpetual-Premium | 70,130 | Nesbitt bought 15,000 from anonymous at 25.30 and crossed 25,000 at 25.31. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-05-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 5.47 % |
| TRP.PR.B | FixedReset | 66,165 | Nesbitt crossed 60,000 at 25.23. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-15 Maturity Price : 25.15 Evaluated at bid price : 25.20 Bid-YTW : 3.53 % |
| There were 42 other index-included issues trading in excess of 10,000 shares. | |||
[…] PerpetualDiscounts now yield 5.54%, equivalent to 7.76% interest at the standard equivalency factor of 1.4x. Long Corporates now yield about 5.3% so the pre-tax interest-equivalent spread (also called the Seniority Spread) now stands at about 245bp, a continued tightening from the 255bp reported September 15 […]