January 20, 2011

Banks have returned to dominance in credit market trading:

The average difference to buy and sell the 10 most actively-traded U.S. corporate credit-default swaps contracts ballooned to 24.2 basis points in the nine months after Lehman’s bankruptcy, from an average 4.5 basis points in the two years before the collapse, according to data compiled by Bloomberg and London-based CMA. That means a trader after the crisis could have earned an extra $19,700 on a $10 million trade.

“They made hay while the sun shined,” Lewis said. “The total compensation was great at the boutiques when the larger banks couldn’t compete.”

Those margins collapsed as the U.S. government and the Federal Reserve spent, lent or committed $12.8 trillion to unlock capital markets and bail out banks. The average gap between prices to buy and sell credit-default swaps narrowed to an average 7 basis points in 2010, CMA data show.

It was a day of mixed results on heavy volume for the Canadian preferred share market, with PerpetualDiscounts gaining 3bp and FixedResets losing 9bp.

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 -0.1462 % 2,334.0
FixedFloater 4.77 % 3.45 % 26,807 19.20 1 -0.3930 % 3,570.3
Floater 2.56 % 2.33 % 44,377 21.36 4 -0.1462 % 2,520.1
OpRet 4.81 % 3.25 % 66,553 2.29 8 -0.0818 % 2,391.7
SplitShare 5.31 % 1.69 % 472,783 0.88 4 -0.1150 % 2,462.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0818 % 2,187.0
Perpetual-Premium 5.64 % 5.10 % 140,005 5.18 20 0.1158 % 2,033.5
Perpetual-Discount 5.31 % 5.29 % 258,372 14.90 57 0.0341 % 2,083.2
FixedReset 5.23 % 3.45 % 288,639 3.05 52 -0.0864 % 2,274.0
Performance Highlights
Issue Index Change Notes
GWO.PR.G Perpetual-Discount -1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 23.72
Evaluated at bid price : 24.01
Bid-YTW : 5.46 %
GWO.PR.I Perpetual-Discount -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 22.29
Evaluated at bid price : 22.44
Bid-YTW : 5.05 %
IAG.PR.C FixedReset -1.32 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 26.89
Bid-YTW : 3.66 %
BAM.PR.J OpRet -1.08 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 26.53
Bid-YTW : 4.47 %
MFC.PR.C Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 21.54
Evaluated at bid price : 21.54
Bid-YTW : 5.29 %
GWO.PR.F Perpetual-Premium 1.19 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-10-30
Maturity Price : 25.25
Evaluated at bid price : 25.55
Bid-YTW : 4.72 %
ELF.PR.F Perpetual-Discount 5.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 22.00
Evaluated at bid price : 22.00
Bid-YTW : 6.07 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.I Perpetual-Discount 106,394 Nesbitt crossed 49,000 at 23.25; RBC crossed 12,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 23.03
Evaluated at bid price : 23.23
Bid-YTW : 5.07 %
SLF.PR.E Perpetual-Discount 48,879 Nesbitt crossed 26,800 at 21.70 and bought 10,000 from RBC at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 21.37
Evaluated at bid price : 21.65
Bid-YTW : 5.23 %
GWO.PR.N FixedReset 46,420 RBC crossed 36,000 at 24.81.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 24.80
Evaluated at bid price : 24.85
Bid-YTW : 3.86 %
BAM.PR.J OpRet 44,943 RBC crossed 38,700 at 26.80.
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 26.53
Bid-YTW : 4.47 %
PWF.PR.F Perpetual-Discount 43,350 Nesbitt crossed 15,800 at 24.00; RBC crosse 19,000 at 24.05.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 23.69
Evaluated at bid price : 24.00
Bid-YTW : 5.48 %
RY.PR.F Perpetual-Discount 43,200 CIBC sold 29,400 to anonymous at 23.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-01-20
Maturity Price : 22.82
Evaluated at bid price : 23.00
Bid-YTW : 4.90 %
There were 56 other index-included issues trading in excess of 10,000 shares.

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