Portugal’s downgrade is contagious:
Portugal’s downgrade to junk may stifle corporate bond sales in Europe, killing off a mini- revival in issuance spurred by investor optimism about Greece’s efforts to avoid default.
“The primary window has almost slammed shut just as spectacularly as it had flung open,” said Suki Mann, senior credit strategist at Societe Generale SA in London.
Notes sold by Enel SpA (ENEL), Italy’s largest power operator, and Fiat SpA (F) fell in their first day of trading today, while two issuers pulled deals. Enel and Fiat led 5.4 billion euros ($7.7 billion) of company bond sales in Europe this week, the biggest round of issuance by non-financial borrowers since May, according to data compiled by Bloomberg.
Ireland’s credit rating may be cut to junk by Moody’s Investors Service after Portugal yesterday lost its investment grade rating, according to analysts.
Moody, which slashed Portugal to Ba2 from Baa1, in April lowered Ireland’s credit rating to the lowest investment grade Baa3 and left country’s outlook on negative.
The ratings company cut Portugal’s rating in part because the nation may not be able to return to debt markets in the second half of 2013. Ireland has been locked out of markets since September, and the yield on 10-year Irish bonds climbed to 12.44 percent today, a euro-area record for the country that agreed to a rescue package with the European Union and International Monetary Fund last November.
Synthetic ETFs are really getting a working-over:
U.K. fraud prosecutors are reviewing how exchange-traded funds are marketed and whether they have the proper tools to prosecute any wrongdoing in the industry, a person directly involved with the probe said.
The Serious Fraud Office, which prosecutes white collar crime, hired a consultant to interview bankers and lawyers to determine whether there is a risk that sales of the products may involve criminal conduct in the future. The Financial Services Authority and the Bank of England’s Financial Policy Committee have warned of a lack of transparency in the ETF market.
…
“From the investor’s point of view, I think there are question marks over whether synthetic ETFs really are appropriate for all types of the retail marketplace,” FSA Chief Executive Officer Hector Sants said June 24.
Concerns about synthetic ETFs were last discussed on PrefBlog when the BoE June 2011 Financial Stability Report focussed on them.
It was a mixed day for the Canadian preferred share market, as PerpetualDiscounts gained 20bp, FixedResets were up 4bp and DeemedRetractibles lost 8bp. Volatility was quite good. Volume was average; Nesbitt scored a shut-out on the highlights table.
PerpetualDiscounts now yield 5.44%, equivalent to 7.07% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 5.35% so the pre-tax interest-equivalent spread is now about 175bp, a narrowing from the 185bp reported on June 29 due to a decline of PerpetualDiscount yields.
| 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 | 1.6939 % | 2,457.4 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.6939 % | 3,695.9 |
| Floater | 2.46 % | 2.23 % | 43,728 | 21.69 | 4 | 1.6939 % | 2,653.4 |
| OpRet | 4.87 % | 1.73 % | 64,046 | 0.23 | 9 | 0.1290 % | 2,443.8 |
| SplitShare | 5.23 % | 1.32 % | 55,913 | 0.64 | 6 | 0.3256 % | 2,515.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1290 % | 2,234.6 |
| Perpetual-Premium | 5.70 % | 5.26 % | 142,980 | 1.27 | 13 | -0.0226 % | 2,084.9 |
| Perpetual-Discount | 5.46 % | 5.44 % | 114,233 | 14.68 | 17 | 0.2042 % | 2,191.6 |
| FixedReset | 5.17 % | 3.17 % | 217,935 | 2.69 | 57 | 0.0442 % | 2,316.4 |
| Deemed-Retractible | 5.10 % | 4.84 % | 275,383 | 8.13 | 47 | -0.0787 % | 2,155.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.N | FixedReset | -4.50 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 4.31 % |
| CIU.PR.C | FixedReset | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 23.02 Evaluated at bid price : 24.58 Bid-YTW : 3.63 % |
| TDS.PR.C | SplitShare | 1.07 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2011-11-15 Maturity Price : 10.00 Evaluated at bid price : 10.42 Bid-YTW : -4.84 % |
| NA.PR.N | FixedReset | 1.09 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-15 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 2.75 % |
| NA.PR.O | FixedReset | 1.31 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 27.70 Bid-YTW : 2.06 % |
| FTS.PR.E | OpRet | 1.75 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 27.33 Bid-YTW : 1.73 % |
| TRI.PR.B | Floater | 2.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 23.62 Evaluated at bid price : 23.89 Bid-YTW : 2.18 % |
| PWF.PR.A | Floater | 2.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 23.14 Evaluated at bid price : 23.40 Bid-YTW : 2.23 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.J | Deemed-Retractible | 114,655 | Nesbitt crossed 100,000 at 24.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 4.73 % |
| CM.PR.H | Deemed-Retractible | 106,596 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-08-05 Maturity Price : 25.75 Evaluated at bid price : 25.71 Bid-YTW : 2.69 % |
| BMO.PR.M | FixedReset | 63,259 | Nesbitt crossed 60,000 at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 26.21 Bid-YTW : 2.94 % |
| RY.PR.R | FixedReset | 38,365 | Nesbitt crossed 25,000 at 27.23. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 27.21 Bid-YTW : 3.04 % |
| TD.PR.G | FixedReset | 33,933 | Nesbitt crossed 25,000 at 27.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.10 Bid-YTW : 2.97 % |
| POW.PR.B | Perpetual-Discount | 28,719 | Nesbitt crossed 25,000 at 24.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-06 Maturity Price : 24.03 Evaluated at bid price : 24.28 Bid-YTW : 5.52 % |
| There were 31 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.N | FixedReset | Quote: 23.55 – 24.65 Spot Rate : 1.1000 Average : 0.6456 YTW SCENARIO |
| BAM.PR.O | OpRet | Quote: 25.64 – 26.29 Spot Rate : 0.6500 Average : 0.4564 YTW SCENARIO |
| FTS.PR.G | FixedReset | Quote: 25.76 – 26.23 Spot Rate : 0.4700 Average : 0.3494 YTW SCENARIO |
| PWF.PR.M | FixedReset | Quote: 26.78 – 27.20 Spot Rate : 0.4200 Average : 0.3096 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 25.25 – 25.55 Spot Rate : 0.3000 Average : 0.1987 YTW SCENARIO |
| BAM.PR.J | OpRet | Quote: 27.16 – 27.51 Spot Rate : 0.3500 Average : 0.2562 YTW SCENARIO |