The Irish government has fallen:
Amid calls for his immediate resignation from at least two MPs in his own Fianna Fail party and the withdrawal of support from coalition partners the Green Party, Prime Minister Brian Cowen was forced on Monday to announce the pending dissolution of his government.
“There will be a time for political accountability to the electorate,” Mr. Cowen said in a terse address Monday night in which he pleaded with MPs to keep his government afloat until the austerity budget passes in exchange for an election in January.
But contagion has set in:
German Chancellor Angela Merkel said the prospect of serial European bailouts was “exceptionally serious,” sending the euro to a three-month low as officials estimated saving Ireland will cost 85 billion euros ($114 billion).
Irish bonds dropped and the premium that investors demand to hold Spanish debt over German counterparts jumped to a euro- era record as the relief rallies triggered by Ireland’s Nov. 21 aid request evaporated. Traders are now betting the turmoil that started in Greece a year ago will spread to Portugal and Spain.
“The markets currently have virtually zero confidence that the bailout in Ireland will solve the European crisis,” Charles Diebel and David Page, fixed-income strategists at Lloyds TSB Corporate Markets in London, said in a note today. “With markets effectively in a position to dictate policy, the risk is that the credibility crisis shifts to more sizeable European Union countries and thereby poses a greater risk to the system as a whole.”
And S&P has downgraded Ireland:
S&P cut Ireland’s long-term sovereign rating to A from AA- and the short-term grade to A-1 from A-1+, today’s statement said.
Ireland’s banks are effectively up for sale, central bank Governor Patrick Honohan said on Tuesday as Dublin sought aid from the European Union and International Monetary Fund to prop up its lenders.
“They are for sale as far as I am concerned,” Honohan said. “I’ve been an advocate for a number of years for small countries to have foreign owners for their banks.”
MFC is not having a nice time:
Shares of Manulife Financial Corp. fell nearly 5% at one point on Monday after a downgrade at Citigroup. Analyst Colin Devine cut his rating to Sell from Buy and reduced his price target to US$14.50 from US$21 after a disappointing trip to the life insurance company’s Annual Investor Day on Friday.
Information provided at the meeting led Mr. Devine to estimate that roughly 35% of Manulife’s capital is tied up supporting three products at its U.S. John Hancock operations: living benefit variable annuities (VA), individual long-term care (LTC), and secondary guarantee universal life (SGUL). By the analyst’s count, each is responsible for losses of at least $1-billion since the beginning of 2009.
Yet the analyst pointed out that management only provided one slide and “did not devote even five minutes to discussing what had gone wrong with these products or what steps were available and a timetable to address them.”
Government Motors’ hybrids are a big hit!
President Barack Obama’s administration has bought almost a fourth of the Ford Motor Co. and General Motors Co. hybrid vehicles sold since he took office, accelerating federal purchases as consumer demand wanes.
Q: What happens when a draconian law hits reality? A: Regulators ursurp power:
The Securities and Exchange Commission extended the ability of asset-backed bond issuers to omit credit ratings from filings to comply with the Dodd-Frank financial reform act that became U.S. law in July.
Pending further notice, the SEC won’t recommend enforcement action if an asset-backed issuer doesn’t include the ratings disclosure required by the legislation, according to a letter today from Katherine Hsu, senior special counsel.
…
“Without this extension, the entire public securitization market would have closed in late January,” Tom Deutsch, executive director of the American Securitization Forum, said today in an e-mailed statement.
Well, sure. That’s what happens with every zero-tolerance law, right? Instead of a judicial process, you get a regulatory process, with selective reporting and private decisions.
Bank of Montreal is back in the market to redeem its second batch of trust capital securities, better known as BMO BOaTS.
This batch, Series B, totals $400-million and pays 6.64 per cent interest annually.
…
There are two factors at play here in BMO’s decision to redeem. For starters, as of year-end 2010, holders of these securities can exchange them into a series of preferred shares.But maybe more important now, under Basel III, these innovative securities will no longer count as Tier 1 capital. Starting in 2013, the amount that they contribute to Tier 1 capital will be phased out by 10 per cent each year, for 10 years.
The FDIC has released its Quarterly Banking Profile: 3Q10, with highlights:
- Year-over-Year Earnings Improve for Fifth Consecutive Quarter
- Net Income Totals $14.5 Billion, Up from $2 Billion a Year Earlier
- Lower Loan-Loss Provisions Remain Key to Earnings Gains
- Asset Quality Trends Continued to Improve
- Industry Assets Increase by $163 Billion
Concerned investors will be pleased to learn there is now a cool name for offshore yuan debt:
Chinese bonds sold in Hong Kong rallied more than debt from the biggest developing nations in the past three months as international investors snapped up the securities to benefit from expected appreciation of the yuan.
…
“There’s pent-up demand,” said Per Nordstrom, the head of euro medium term notes in Asia at London-based Standard Chartered Plc. “Investors are generally ‘buy and hold’ as supply is limited. The dim sum bond market is a frontier market and it is growing.”
Got Milk?:
Several studies have argued that the supply management system pushes up dairy prices for Canadian consumers. A recent study by the Conference Board of Canada estimated Canadians pay 60 cents more for a one litre carton of whole milk than Americans and $1.50 more for a one-pound package of butter than Australians, which has a deregulated dairy system. The OECD estimates dairy prices in Canada are more than double the world market.
…
An analysis by the Dairy Farmers of Ontario shows that New Zealand has the highest retail price, at $5.69, for a four-litre size package of milk. That was followed by Ontario at $4.66, Britain at $3.57 and the U.S. at $3.38.
Good old farmers … taking milk away from children to finance the bucolic lifestyle of the favoured few.
The market slid slightly lower today on continued heavy volume, with PerpetualDiscounts down 10bp and FixedResets losing 7bp, taking the median weighted average yield on the latter index to 3.14%.
| 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 | 0.2388 % | 2,261.5 |
| FixedFloater | 4.84 % | 3.48 % | 26,683 | 19.14 | 1 | 1.9991 % | 3,472.4 |
| Floater | 2.63 % | 2.35 % | 58,452 | 21.41 | 4 | 0.2388 % | 2,441.9 |
| OpRet | 4.75 % | 2.71 % | 61,296 | 2.42 | 8 | 0.0572 % | 2,393.6 |
| SplitShare | 5.41 % | -0.05 % | 120,460 | 1.04 | 3 | -0.1388 % | 2,487.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0572 % | 2,188.7 |
| Perpetual-Premium | 5.67 % | 5.32 % | 162,867 | 5.41 | 24 | -0.2382 % | 2,011.7 |
| Perpetual-Discount | 5.35 % | 5.38 % | 270,358 | 14.87 | 53 | -0.1030 % | 2,041.6 |
| FixedReset | 5.21 % | 3.14 % | 358,699 | 3.17 | 51 | -0.0717 % | 2,278.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.E | Perpetual-Premium | -2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 24.84 Evaluated at bid price : 25.06 Bid-YTW : 6.08 % |
| ELF.PR.F | Perpetual-Discount | -1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 22.52 Evaluated at bid price : 22.72 Bid-YTW : 5.90 % |
| IAG.PR.F | Perpetual-Premium | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 24.98 Evaluated at bid price : 25.20 Bid-YTW : 5.95 % |
| ELF.PR.G | Perpetual-Discount | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 20.51 Evaluated at bid price : 20.51 Bid-YTW : 5.87 % |
| BAM.PR.O | OpRet | -1.14 % | YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 3.70 % |
| BAM.PR.K | Floater | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 17.53 Evaluated at bid price : 17.53 Bid-YTW : 3.02 % |
| TRP.PR.C | FixedReset | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 23.41 Evaluated at bid price : 25.89 Bid-YTW : 3.69 % |
| BMO.PR.L | Perpetual-Premium | 1.19 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-24 Maturity Price : 25.00 Evaluated at bid price : 26.38 Bid-YTW : 4.84 % |
| BAM.PR.G | FixedFloater | 2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 25.00 Evaluated at bid price : 22.45 Bid-YTW : 3.48 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.L | Perpetual-Discount | 269,623 | Desjardins crossed three blocks: 40,000 at 22.65, then 100,000 and 101,200, both at 22.70. RBC crossed 20,000 at 22.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 22.47 Evaluated at bid price : 22.62 Bid-YTW : 5.02 % |
| GWO.PR.N | FixedReset | 110,585 | New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 24.60 Evaluated at bid price : 24.65 Bid-YTW : 3.67 % |
| CM.PR.E | Perpetual-Premium | 109,078 | RBC crossed three blocks of 50,000 shares, 20,000 and 22,100, all at 25.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.18 Bid-YTW : 5.43 % |
| BNS.PR.M | Perpetual-Discount | 107,909 | RBC crossed 95,000 at 22.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-11-23 Maturity Price : 22.46 Evaluated at bid price : 22.61 Bid-YTW : 5.02 % |
| GWO.PR.J | FixedReset | 71,485 | Anonymous sold 38,700 to Nesbitt and 11,000 to Desjardins, both at 27.50. Desjardins crossed 12,300 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 27.47 Bid-YTW : 3.04 % |
| BNS.PR.O | Perpetual-Premium | 59,919 | Nesbitt crossed 40,000 at 25.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-05-26 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 5.41 % |
| There were 50 other index-included issues trading in excess of 10,000 shares. | |||