Dealbreaker has a surprisingly thoughtful piece on the US credit rating:
That’s probably the best way to interpret market reactions. Rates on the $10 trillion of publicly held Treasuries couldn’t be tighter, suggesting that there’s no real market worry about the U.S.’s ability to pay off its debts. But CDS notionals keep increasing (albeit in a still small and illiquid market) and CDS levels are wide of AA corporates because the U.S. is actually more likely to default than Colgate Palmolive is. Because it would not occur to anyone at Colgate Palmolive to just stop paying its debts. But we’re going to have to keep rasing the debt ceiling, and every time we do, half of Congress is going to say that they prefer to default.
The idiotic Federal Aviation Administration crisis is symptiomatic:
The U.S. House of Representatives and Senate finished voting on legislation this week and recessed for the month of August without extending the FAA’s funding authority, which expired at midnight July 22. That idled about 70,000 construction-related workers and furloughed 4,000 FAA employees. The FAA also is forgoing $28.6 million in aviation taxes each day the deadlock continues. That would add up to $1.3 billion by the time Congress resumes legislative business on Sept. 7.
…
Transportation Secretary Ray LaHood said legislators should return to Washington and pass an extension without cutting subsidies for flights to 13 rural airports. The cuts were in a House-passed bill to extend the FAA’s authority through Sept. 16 that was introduced by Representative John Mica, the Florida Republican who chairs the transportation committee in that body.Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday he was prepared to accept the House bill. Other Senate Democrats refused, said Adam Jentleson, a spokesman for Reid.
The FAA’s last multi-year funding bill expired in 2007. Congress has passed 20 limited extensions since then without adopting a new long-term authorization measure.
It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 21bp, FixedResets gaining 9bp and DeemedRetractibles up 14bp. Volatility was minimal. Volume was average.
Yellow Media reports on 11Q2 tomorrow before the opening, so YLO preferreds could have an interesting day!
| 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 | -0.0479 % | 2,410.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0479 % | 3,625.7 |
| Floater | 2.51 % | 2.33 % | 33,951 | 21.45 | 4 | -0.0479 % | 2,602.9 |
| OpRet | 4.84 % | 2.05 % | 54,382 | 0.16 | 9 | 0.1282 % | 2,455.9 |
| SplitShare | 5.26 % | 3.11 % | 69,186 | 0.56 | 4 | 0.0804 % | 2,515.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1282 % | 2,245.6 |
| Perpetual-Premium | 5.67 % | 4.95 % | 130,491 | 0.80 | 14 | 0.0169 % | 2,099.9 |
| Perpetual-Discount | 5.37 % | 5.42 % | 112,349 | 14.74 | 16 | 0.2132 % | 2,219.6 |
| FixedReset | 5.15 % | 3.14 % | 214,005 | 2.65 | 58 | 0.0934 % | 2,328.4 |
| Deemed-Retractible | 5.06 % | 4.64 % | 270,990 | 7.85 | 46 | 0.1383 % | 2,182.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.J | FixedReset | 1.50 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 27.00 Bid-YTW : 2.80 % |
| FTS.PR.F | Perpetual-Discount | 2.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-03 Maturity Price : 24.62 Evaluated at bid price : 24.91 Bid-YTW : 4.99 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.P | FixedReset | 107,561 | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 2.78 % |
| BMO.PR.P | FixedReset | 100,990 | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.95 Bid-YTW : 3.00 % |
| RY.PR.D | Deemed-Retractible | 71,606 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.64 Bid-YTW : 4.67 % |
| RY.PR.C | Deemed-Retractible | 60,318 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 4.63 % |
| TRP.PR.C | FixedReset | 36,712 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-08-03 Maturity Price : 23.46 Evaluated at bid price : 25.85 Bid-YTW : 3.24 % |
| RY.PR.R | FixedReset | 35,606 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.81 Bid-YTW : 3.16 % |
| There were 28 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| NA.PR.P | FixedReset | Quote: 26.92 – 27.43 Spot Rate : 0.5100 Average : 0.3699 YTW SCENARIO |
| FTS.PR.G | FixedReset | Quote: 26.25 – 26.56 Spot Rate : 0.3100 Average : 0.1859 YTW SCENARIO |
| PWF.PR.A | Floater | Quote: 22.25 – 23.60 Spot Rate : 1.3500 Average : 1.2412 YTW SCENARIO |
| FTS.PR.E | OpRet | Quote: 27.03 – 27.58 Spot Rate : 0.5500 Average : 0.4502 YTW SCENARIO |
| SLF.PR.A | Deemed-Retractible | Quote: 23.36 – 23.69 Spot Rate : 0.3300 Average : 0.2418 YTW SCENARIO |
| FTS.PR.H | FixedReset | Quote: 25.35 – 26.05 Spot Rate : 0.7000 Average : 0.6157 YTW SCENARIO |