Thursday! The day when the US Commercial Paper Outstandings get reported! The Fed reports that ABCP outstanding declined by $29.5-billion, a marked increase in pace over the past month, as deleveraging is quickly becoming a major issue in the States. Bloomberg provides a review.
Bernanke is clearly a reader of PrefBlog – his testimony to the Joint Economic Committe echoed what I’ve been saying about Super-Conduit:
So … if it works properly I think it would speed up the recognition of values in part because it would remove some of the risk of fire sales, of rapid drawing down of assets in some of these vehicles and allow the market to stabilize and begin to make a better longer term valuation of what these assets are worth.”
He added, “If that’s the way it works, and again it depends on execution, it would remove some overhang from the market, it would create a stable financing source for those assets and it ought not to be inconsistent with the price discovery process.”
Mainly, though, he just told the politicians on the committee to mind their own bees-wax. Good for him! He may have enough to worry about soon enough – there’s at least one analyst raising the spectre of 5% headline inflation as the Ghost of Christmas Present!
Despite this horrifying projection (noting that, gee, the projection for core inflation isn’t quite so bad), Treasuries were up on expectations of a Fed cut, as early indications point to a lousy Christmas for retailers.
In SIV news that I missed yesterday … one of the SIVs affected by Moody’s mass review was Links Finance … proudly owned and operated by our very own Bank of Montreal:
Links Finance Corporation (US$1.9 billion of debt securities affected)
Mezzanine Capital Notes
New Rating: Aa2 on review for possible downgrade
Previous Rating: Aa2
Standard Capital Notes
New Rating: A3 on review for possible downgrade
Previous Rating: A3
Links Finance’s net asset value declined to 83% from 94% since Moody’s last review on September 5th. Moody’s review will focus on the potential for further market value deterioration.
Cheery, eh? There’s more:
Managers of structured investment vehicles don’t expect their business model to survive as the value of assets shrinks and the companies struggle to borrow, Moody’s Investors Service analysts said today.
Sic transit gloria mundi.
Apropos of nothing, I ran across a Ministry of Finance puff-piece today, which made the claim:
The World Economic Forum’s Global Competitiveness Report for 2001-2002 ranked Canadian banks among the soundest financial institutions in the world (see Chart 5). The soundness of the Canadian banking industry has been demonstrated many times over the past several years. Canadian banks weathered the debt difficulties of the less developed countries in the early 1980s, the decline in real estate values a decade later, and the Asian crisis in the late 1990s without experiencing any systemic problems.
… which was kind of cool. Our second place finish has been repeated in the 2007-2008 Report, although you have to poke around a bit to verify that. (hint: Country Analysis / Balance Sheet).
And, as far as preferreds go … another day of entirely reasonable volume but disappointing returns. The long corporates index is now yielding just a hair under 5.8%. So let me think about this. You can get the same pre-tax yield with better quality owning GWO.PR.H, at the closing bid. Potential tax benefits – or potential capital gains when others recognize the potential tax benefits – are merely icing on the cake. If this makes sense to anybody, please let me know.
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30 | |||||||
| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | 4.88% | 4.87% | 195,800 | 15.69 | 2 | -0.1019% | 1,046.0 |
| Fixed-Floater | 4.82% | 4.82% | 84,428 | 15.80 | 8 | -0.0450% | 1,046.7 |
| Floater | 4.50% | 4.53% | 65,177 | 16.29 | 3 | +0.0274% | 1,044.9 |
| Op. Retract | 4.87% | 4.01% | 75,816 | 3.44 | 16 | -0.1091% | 1,029.2 |
| Split-Share | 5.22% | 5.23% | 87,953 | 3.93 | 15 | -0.3404% | 1,033.1 |
| Interest Bearing | 6.28% | 6.50% | 61,326 | 3.55 | 4 | -0.3540% | 1,053.3 |
| Perpetual-Premium | 5.83% | 5.44% | 81,078 | 5.20 | 11 | -0.1211% | 1,011.3 |
| Perpetual-Discount | 5.53% | 5.57% | 328,877 | 14.32 | 55 | -0.1159% | 913.0 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| HSB.PR.C | PerpetualDiscount | -2.2634% | Now with a pre-tax bid-YTW of 5.43% based on a bid of 23.75 and a limitMaturity. |
| NA.PR.L | PerpetualDiscount | -1.7746% | Now with a pre-tax bid-YTW of 5.96% based on a bid of 20.48 and a limitMaturity. |
| BAM.PR.N | PerpetualDiscount | -1.4462% | Now with a pre-tax bid-YTW of 6.56% based on a bid of 18.40 and a limitMaturity. |
| PIC.PR.A | SplitShare | -1.1726% | Asset coverage of over 1.7:1 as of October 31 according to Mulvihill. Now with a pre-tax bid-YTW of 5.41% based on a bid of 15.17 and a hardMaturity 2010-11-1 at 15.00. OK, boys, over 7.50% interest-equivalent for well-secured three year paper. Whatever you say. |
| GWO.PR.H | PerpetualDiscount | -1.1693% | Now with a pre-tax bid-YTW of 5.82% based on a bid of 21.13 and a limitMaturity. |
| BNA.PR.C | SplitShare | -1.1471% | Asset coverage of over 3.8:1 as of July 31, according to the company. Now with a pre-tax bid-YTW of 7.22% based on a bid of 19.82 and a hardMaturity 2019-1-10 at 25.00. At an interest-equivalency factor of 1.4, this has now cracked the magic 10% interest-equivalent mark! |
| ELF.PR.F | PerpetualDiscount | -1.0346% | Now with a pre-tax bid-YTW of 6.09% based on a bid of 22.00 and a limitMaturity. |
| ACO.PR.A | OpRet | -1.0101% | Now with a pre-tax bid-YTW of 3.65% based on a bid of 26.40 and a call 2008-12-31 at 26.00. |
| SLF.PR.E | PerpetualDiscount | +1.0194% | Now with a pre-tax bid-YTW of 5.48% based on a bid of 20.81 and a limitMaturity. |
| RY.PR.A | PerpetualDiscount | +1.5085% | Now with a pre-tax bid-YTW of 5.35% based on a bid of 20.86 and a limitMaturity. |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| SLF.PR.C | PerpetualDiscount | 62,215 | Now with a pre-tax bid-YTW of 5.46% based on a bid of 20.66 and a limitMaturity. |
| CM.PR.H | PerpetualDiscount | 44,290 | Now with a pre-tax bid-YTW of 5.53% based on a bid of 21.80 and a limitMaturity. |
| BAM.PR.N | PerpetualDiscount | 23,850 | On the one hand, I’m pleased to see good volume on this thing. On the other hand, why did it go down? BAM.A was up today, so it’s not necessarily a question of a sudden reassessment of credit quality. Or maybe these BAM.PR.Ns have been used as an equity substitute and people are now switching to the real thing? That’s way too sophisticated! Now with a pre-tax bid-YTW of 6.56% based on a bid of 18.40 and a limitMaturity. |
| BNS.PR.M | PerpetualDiscount | 23,477 | Now with a pre-tax bid-YTW of 5.40% based on a bid of 21.00 and a limitMaturity. |
| RY.PR.G | PerpetualDiscount | 23,145 | Now with a pre-tax bid-YTW of 5.41% based on a bid of 20.88 and a limitMaturity. |
There were twenty-three other index-included $25.00-equivalent issues trading over 10,000 shares today.
Update, 2007-11-09 Holy smokes! Yesterday I titled this “October 8” and have now changed it to, er, the right month. I had the day and year right! I must have been feeling nostalgic …