Ireland looks like it’s heading for the debt trap:
Ireland will today try to sell as much as 1.5 billion euros ($1.96 billion) in bonds as the government tries to convince investors the country can avoid a European Union bailout.
One day after the premium on Irish 10-year debt over German equivalents rose to a record, the Dublin-based National Treasury Management Agency is offering between 1 billion euros and 1.5 billion euros of four- and eight-year bonds. The auction results will be announced after 10 a.m.
Investors’ concerns about the fiscal health of some euro nations are resurfacing four months after the EU announced an almost $1 trillion rescue package to stamp out contagion from Greece’s fiscal crisis. The spread on Irish debt over bunds yesterday exceeded 400 basis points as the government struggles to cap the cost of bailing out its banking system. In Portugal, the spread climbed as high as 399 basis points.
The Bank Act review cycle has started again:
The Honourable Jim Flaherty, Minister of Finance, today launched the scheduled review of legislation governing federally regulated financial institutions.
“The Government reviews the statutes that govern federally regulated financial institutions every five years to ensure Canada remains a global leader in financial services,” said Minister Flaherty. “This practice sets Canada apart from almost every other country in the world.”
…
“Some fine-tuning to the system may be required, but wholesale change is not necessary,” he said. “The Government would like to hear the views of all Canadians on how to improve our financial system.”
My wish-list includes greater clarity on the status of Bankers’ Acceptances in bankruptcy (are they covered bonds? Can investors look through the bank guarantee to the actual issuer of the paper?) and a requirement that the seniority of instruments within the “general” bucket be specified … if I own a BDN, is that more or less senior than a BA?
The FOMC Statement was gloomy:
Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.
and accordingly:
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.
This had an effect:
Gold rose to a record, Treasury two-year yields slid to an all-time low while the dollar weakened as the Federal Reserve said it’s willing to ease monetary policy further if needed to boost the economy. Most U.S. stocks fell.
Gold futures surged as much as 0.9 percent to $1,292.40 an ounce as of 4 p.m. in New York as the dollar depreciated against 15 of 16 major counterparts. The 10-year Treasury yield lost 13 basis points to 2.58 percent and the 2-year yield slid to a record low of 0.4155 percent.
Quadravest, purveyor of SplitShare funds, has announced:
Dividend Select 15 Corp. (“The Company”) is pleased to announce the filing of a preliminary prospectus dated September 17, 2010 for a proposed new offering of equity shares at $10.00 per share.
The Company has been created to provide investors with an opportunity to invest in a portfolio (the “Portfolio”) of 15 high quality Canadian companies (the “Portfolio Companies”) whose shares provide an attractive dividend yield, and which have shown solid earnings growth and have a history of capital appreciation. The Company will employ a covered call writing strategy to generate additional income to the Portfolio. The 15 Portfolio Companies will be selected from among the following 20 companies listed on the Toronto Stock Exchange: [Usual suspects – JH]
Interestingly, the prospectus makes the flat statement:
The Company will not borrow money or use leverage as part of its investment strategies.
In accordance with the usual state of affairs, the prospectus fully discloses the investment managers’ experience, but is completely silent regarding the investment managers’ performance.
The Canadian preferred share market continued to move from strength to strength on heavy volume today, with PerpetualDiscounts up 27bp and FixedResets gaining 18bp.
| 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 | 0.5688 % | 2,120.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5688 % | 3,211.7 |
| Floater | 2.87 % | 3.30 % | 74,074 | 18.98 | 3 | 0.5688 % | 2,289.1 |
| OpRet | 4.86 % | 0.83 % | 82,825 | 0.19 | 9 | 0.2522 % | 2,385.4 |
| SplitShare | 5.88 % | -30.85 % | 62,709 | 0.09 | 2 | -0.1012 % | 2,396.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2522 % | 2,181.2 |
| Perpetual-Premium | 5.67 % | 5.23 % | 149,005 | 5.35 | 14 | 0.2512 % | 1,997.1 |
| Perpetual-Discount | 5.50 % | 5.60 % | 197,520 | 14.51 | 63 | 0.2694 % | 1,979.4 |
| FixedReset | 5.21 % | 2.94 % | 292,739 | 3.30 | 47 | 0.1778 % | 2,280.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.K | Floater | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 15.70 Evaluated at bid price : 15.70 Bid-YTW : 3.34 % |
| NA.PR.M | Perpetual-Premium | 1.18 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-14 Maturity Price : 25.00 Evaluated at bid price : 26.51 Bid-YTW : 5.08 % |
| MFC.PR.B | Perpetual-Discount | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 5.78 % |
| SLF.PR.A | Perpetual-Discount | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 21.21 Evaluated at bid price : 21.21 Bid-YTW : 5.63 % |
| POW.PR.B | Perpetual-Discount | 1.69 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 23.74 Evaluated at bid price : 24.00 Bid-YTW : 5.67 % |
| MFC.PR.C | Perpetual-Discount | 1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 19.74 Evaluated at bid price : 19.74 Bid-YTW : 5.74 % |
| BAM.PR.I | OpRet | 1.70 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2010-10-21 Maturity Price : 25.50 Evaluated at bid price : 26.30 Bid-YTW : -31.13 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.I | Perpetual-Discount | 208,169 | RBC crossed blocks of 55,000 and 40,000, both at 22.35. Nesbitt crossed 23,600 at 22.40. RBC crossed 42,600 at 22.35. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 22.20 Evaluated at bid price : 22.33 Bid-YTW : 5.34 % |
| CM.PR.L | FixedReset | 159,704 | Desjardins crossed 119,000 at 28.40 and 25,000 at 28.41. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 28.36 Bid-YTW : 2.92 % |
| TD.PR.P | Perpetual-Discount | 151,890 | TD crossed 100,000 at 24.41; RBC crossed 40,000 at 24.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 24.25 Evaluated at bid price : 24.48 Bid-YTW : 5.44 % |
| TD.PR.O | Perpetual-Discount | 140,375 | RBC crossed blocks of 65,000 and 54,100, both at 23.35. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 23.12 Evaluated at bid price : 23.34 Bid-YTW : 5.26 % |
| BMO.PR.K | Perpetual-Discount | 139,631 | TD crossed blocks of 100,000 and 25,000, both at 24.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-21 Maturity Price : 24.35 Evaluated at bid price : 24.58 Bid-YTW : 5.39 % |
| BMO.PR.P | FixedReset | 85,232 | Desjardins crossed 50,000 at 27.92. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-27 Maturity Price : 25.00 Evaluated at bid price : 27.96 Bid-YTW : 2.66 % |
| There were 56 other index-included issues trading in excess of 10,000 shares. | |||