Everything old is new again! Treasury STRIPS are popular:
Demand for zero-coupon bonds is rising so fast that Wall Street banks created $205.2 billion of them as of May, the most in three years and just $3.6 billion away from levels last seen at the beginning of 2000, according to the Treasury Department.
…
Zero-coupon securities due in 30 years had their best and worst months in more than two decades during the last recession. The debt returned 26.7 percent in December 2008, a month after the consumer price index plunged 1.8 percent, the biggest drop in history, according to Bank of America Merrill Lynch index data. A month later, the securities lost 24 percent.
Greece had its credit rating cut three levels by Standard & Poor’s, which branded the nation with the world’s lowest debt grade and said a restructuring looks “increasingly likely.”
The move to CCC from B reflects “our view that there is a significantly higher likelihood of one or more defaults,” S&P said in a statement today. “Risks for the implementation of Greece’s EU/IMF borrowing program are rising, given Greece’s increased financing needs and ongoing internal political disagreements surrounding the policy conditions required.”
The downgrade follows Moody’s Investors Service’s decision this month to grade Greece only one level higher and may intensify pressure on European governments to stem the region’s sovereign-debt crisis. Credit-default swaps on Greece, Ireland and Portugal surged to records today on concern governments’ struggles to resolve the turmoil will threaten their ability to pay off their debts.
Southern California home prices fell 8.2 percent … as unemployment remained high and mortgages were hard to obtain, DataQuick said.
The median paid in the six-county region was $280,000, down from $305,000 a year earlier and unchanged from April, the San Diego-based data seller said today in a statement. Sales fell 17 percent from May 2010 to a total of 18,394 new and resale houses and condominiums, the 11th straight year-over-year decline.
In recent years, the requirement for additional regulatory capital at its operating subsidiaries has resulted in an increase in the Company’s consolidated financial leverage as measured by the ratio of debt plus preferred shares to total capitalization. The Company is currently operating with this ratio at greater than 30%, which, while an increase from less than 25% which it reported five years ago, is no higher than its peers. Given the Company’s relative conservatism from a business risk perspective, DBRS believes that this level is still acceptable for the Company’s current ratings, especially given that several points of the recent increase in the debt ratio reflects the reduction in shareholders’ equity related to the $1.7 billion writedown in goodwill following the implementation of IFRS. However, since higher leverage combined with weaker earnings has resulted in lower expected fixed charge coverage ratio, the Company does not have a lot of excess financial flexibility. Fortunately, the Company has excellent sources of liquidity as represented by excess regulatory capital, a highly liquid asset portfolio and about $800 million in cash on hand at the holding company level, which is available to reduce financial leverage.
… but they downgraded the Bank of Ireland:
DBRS Inc. (DBRS) today has downgraded the ratings of all dated subordinated debt issued by The Governor and Company of the Bank of Ireland (Bank of Ireland) to “C” from CCC. Furthermore, DBRS has downgraded Bank of Ireland’s Primary Capital Notes to “C” from CCC (low), as well as the Perpetual Preferred Securities of various related entities to “C” from CC. Today’s downgrade follows the announcement by the Bank of Ireland that it has commenced an offer to exchange the aforementioned securities for cash or equity and a solicitation of consents in relation to the securities. Moreover, DBRS expects to downgrade the securities discussed above to “D” at completion of the buyback; as such, the securities remain Under Review with Negative Implications, where they were placed on 3 December 2010.
In DBRS’s view, the exchange offer, when completed, is tantamount to a default as defined by DBRS policy. DBRS views the proposed exchange offer as coercive as the offer affords investors in these instruments limited options. Should investors in these instruments reject the proposed offer, at a 80-90% discount if accepting the cash option, or a 60-80% discount if accepting the equity option, on the tendered securities, they risk receiving substantially less if the proposed consent amendments are ratified. Remaining investors in these instruments would then receive 0.001% of par value, should the consent to allow the “clean-up” of residual notes be accepted by tendering investors.
Mean Joe Green used to crash through offensive lines. Mean Joe Yellow offensively crashes through your portfolio.
| YLO Issues, 2011-6-13 | |||||
| Ticker | Quote 6/10 |
Quote 6/13 |
Bid YTW 6/13 |
YTW Scenario 6/13 |
Performance 6/13 (bid/bid) |
| YLO.PR.A | 22.51-78 | 22.22-29 | 12.26% | Soft Maturity 2012-12-30 |
-1.29% |
| YLO.PR.B | 16.35-49 | 15.93-00 | 14.16% | Soft Maturity 2017-06-29 |
-2.57% |
| YLO.PR.C | 16.24-39 | 16.12-22 | 10.03% | Limit Maturity | -0.74% |
| YLO.PR.D | 16.75-80 | 16.25-40 | 10.16% | Limit Maturity | -2.99% |
It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts getting whacked for 30bp, FixedResets losing 5bp and DeemedRetractibles gaining 1bp. BAM and BAM-related issuers dominated the Performance table (BAM itself was ex-dividend today) and volume was actually quite good.
| 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 | -0.0339 % | 2,475.5 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0339 % | 3,723.2 |
| Floater | 2.44 % | 2.22 % | 41,059 | 21.67 | 4 | -0.0339 % | 2,672.9 |
| OpRet | 4.88 % | 2.67 % | 68,092 | 0.38 | 9 | 0.1770 % | 2,430.4 |
| SplitShare | 5.25 % | -0.07 % | 62,733 | 0.50 | 6 | -0.1408 % | 2,499.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1770 % | 2,222.4 |
| Perpetual-Premium | 5.66 % | 4.94 % | 151,228 | 1.39 | 12 | 0.0033 % | 2,076.0 |
| Perpetual-Discount | 5.46 % | 5.58 % | 120,360 | 14.42 | 18 | -0.2975 % | 2,176.6 |
| FixedReset | 5.15 % | 3.26 % | 186,618 | 2.82 | 57 | -0.0544 % | 2,313.5 |
| Deemed-Retractible | 5.07 % | 4.89 % | 295,150 | 8.18 | 47 | 0.0130 % | 2,154.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| FTS.PR.F | Perpetual-Discount | -1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 23.03 Evaluated at bid price : 23.24 Bid-YTW : 5.30 % |
| POW.PR.B | Perpetual-Discount | -1.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 23.74 Evaluated at bid price : 24.05 Bid-YTW : 5.65 % |
| BAM.PR.M | Perpetual-Discount | -1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 5.60 % |
| BAM.PR.N | Perpetual-Discount | -1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-06-13 Maturity Price : 21.26 Evaluated at bid price : 21.26 Bid-YTW : 5.61 % |
| BNA.PR.E | SplitShare | -1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.49 % |
| BAM.PR.O | OpRet | 1.01 % | YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 2.78 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.J | Deemed-Retractible | 84,525 | Desjardins sold two blocks of 10,000 each to Nesbitt at 24.99, and crossed 45,000 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.61 % |
| BMO.PR.Q | FixedReset | 64,577 | Nesbitt crossed 50,400 at 25.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.46 Bid-YTW : 3.53 % |
| RY.PR.T | FixedReset | 46,490 | RBC crossed 25,000 at 27.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.35 Bid-YTW : 3.33 % |
| BNS.PR.N | Deemed-Retractible | 45,654 | RBC crossed 30,000 at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-02-26 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 4.76 % |
| CM.PR.L | FixedReset | 39,837 | Nesbitt crossed 20,000 at 27.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.76 Bid-YTW : 2.89 % |
| TD.PR.G | FixedReset | 39,347 | TD crossed 24,900 at 27.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.38 Bid-YTW : 3.17 % |
| There were 40 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRI.PR.B | Floater | Quote: 23.50 – 24.49 Spot Rate : 0.9900 Average : 0.6369 YTW SCENARIO |
| POW.PR.B | Perpetual-Discount | Quote: 24.05 – 24.60 Spot Rate : 0.5500 Average : 0.3618 YTW SCENARIO |
| FTS.PR.F | Perpetual-Discount | Quote: 23.24 – 23.72 Spot Rate : 0.4800 Average : 0.3085 YTW SCENARIO |
| MFC.PR.C | Deemed-Retractible | Quote: 22.41 – 22.69 Spot Rate : 0.2800 Average : 0.1803 YTW SCENARIO |
| BAM.PR.R | FixedReset | Quote: 25.74 – 26.05 Spot Rate : 0.3100 Average : 0.2293 YTW SCENARIO |
| BNA.PR.E | SplitShare | Quote: 24.20 – 24.50 Spot Rate : 0.3000 Average : 0.2252 YTW SCENARIO |
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