Discussions about Greece are at a familiar stage – nobody wants to take the loss:
European Union talks with banks on bondholder losses as part of a second Greek bailout were deadlocked, an EU official said, dimming the chances for a comprehensive crisis-fighting strategy at tonight’s summit.
German Chancellor Angela Merkel doused expectations of a breakthrough, saying on the way into the meeting at EU headquarters in Brussels that “work’s not been done yet, but everyone’s coming here today with the goal to progress quite a bit.”
Maybe the Chinese will take the loss!
French President Nicolas Sarkozy plans to call Chinese leader Hu Jintao tomorrow to discuss China contributing to a fund European leaders may set up to bolster its debt-crisis fight, said a person familiar with the matter.
The investment vehicle was one of the options being considered by European leaders at a summit tonight to expand the reach of its 440 billion-euro ($612 billion) European Financial Stability Facility.
Sarkozy’s plea to his Chinese counterpart would come the day before a planned visit to Beijing by Klaus Regling, chief executive officer of the EFSF, to court investors.
Italy’s beginning to get serious:
Prime Minister Silvio Berlusconi vowed to raise 5 billion euros ($8 billion) annually from asset sales, increase the retirement age and relax labor laws to convince European leaders Italy can reach its budget goals.
“We are aware of the need to present a comprehensive plan of reforms,” Berlusconi said in the letter that he presented to European Union leaders at a summit in Brussels. “We are aware that our debt is too high and our growth too limited.” The asset-sales plan will be completed by Nov. 30, he said.
The letter of intent fell short of the comprehensive plan European leaders had sought. Bickering within his Cabinet this week over pensions and other issues prevented the premier from complying with EU requests to deliver a blueprint to boost growth and tackle the euro-region’s second largest debt at the Brussels summit.
Just as this update goes to the server, there is some breaking news:
French President Nicolas Sarkozy estimates the euro region’s bailout fund will be worth $1.4 trillion after European governments agreed on steps to leverage existing guarantees by as much as five times. He spoke to reporters after a summit of European leaders in Brussels.
There are also rumours of a 50% write-down on Greek debt. And, at last minute before I wrap this up:
European leaders persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the rescue fund to 1 trillion euros ($1.4 trillion), responding to global pressure to step up the fight against the financial crisis.
Ten hours of brinkmanship at the second crisis summit in four days delivered measures that the euro area’s stewards said point the way out of the debt quagmire, even if key details are lacking. Last-ditch talks with bank representatives led to the debt-relief accord, in an effort to quarantine Greece and prevent speculation against Italy and France from ravaging the euro zone and wreaking global economic havoc.
SJR.PR.A was confirmed at Pfd-3 by DBRS:
DBRS has today confirmed its ratings on Shaw Communications Inc. (Shaw or the Company) at BBB and Pfd-3.
…
In terms of Shaw’s financial risk profile, while the acquisition of a restructured Canwest in early F2011 weakened its credit metrics initially, they returned to reasonable levels by the end of F2011, with gross debt-to-EBITDA at 2.67 times, EBITDA interest coverage above 6.0 times and cash flow-to-debt at 0.25 times. This, along with growth in cash flow from operations (expected to cover higher capex and dividend levels in F2012 with free cash flow generation (including on a fully-taxed basis)), should give Shaw the flexibility to make small to medium-sized investments and/or to reduce its leverage to strengthen its financial risk profile within its current rating category.DBRS believes that Shaw’s business risk profile remains manageable, even though the Company is now battling telcos that are able to compete service-for-service in fixed-line, in addition to offering wireless services. It would likely take a material deterioration in Shaw’s competitive position for DBRS to alter this view. Also, while Shaw retains a financial risk profile that is adequate for the ratings, the Company is currently weaker on this front than some of its peers. Any material changes in Shaw’s business or financial risk profile could result in pressure on the ratings.
LB.PR.D and LB.PR.E were confirmed by DBRS at Pfd-3(low):
DBRS has today confirmed all ratings of Laurentian Bank of Canada (Laurentian or the Bank), including the deposits and senior debt at BBB (high) and the short-term instruments at R-1 (low); all trends remain Stable.
The ratings are supported by Laurentian’s overall business risk profile, which is conservative relative to the larger banks in Canada, with a focus on retail lending funded by retail deposits and an absence of significant involvement in higher-risk wholesale or international strategies. Laurentian’s underlying asset quality profile has strengthened over the past several years as the loan mix shifted to a greater proportion of secured lending. Limitations on the ratings include a modest return on equity and high cost structure. Regional concentration in Québec, while still a potential rating challenge, was beneficial through the downturn as the economic performance of the province was resilient.
CZP issues got hammered again today, continuing their fall after DBRS warned of a possible 3-notch downgrade and S&P was less explicit, but just as gloomy.
| CZP Issues 2011-10-25 to 2011-10-26 |
|||||
| Ticker | Quote 10/25 |
Quote 10/26 |
Bid YTW 10/26 |
YTW Scenario 10/26 |
Performance 10/25 – 10/26 (bid/bid) |
| CZP.PR.A | 15.31-80 | 13.50-95 | 9.15% | Limit Maturity | -11.82% |
| CZP.PR.B | 20.10-74 | 19.00-40 | 8.16% | Limit Maturity | -5.47% |
It was a modestly good day for the Canadian preferred share market, with PerpetualDiscounts up 5bp, FixedResets gaining 2bp and DeemedRetractibles winning 8bp. Volatility was good and all to the upside. Volume was heavy – Nesbitt wrote a very nice ticket for CM.PR.D!
PerpetualDiscounts now yield 5.44%, equivalent to 7.07% interest at the standard equivalency factor of 1.3x. Long corporates are now at 5.0% (OK, maybe a little over), so the pre-tax interest-equivalent spread is now about 205bp, unchanged from the figure reported October 19.
| 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 | 0.4020 % | 2,053.6 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4020 % | 3,088.6 |
| Floater | 3.50 % | 3.50 % | 159,411 | 18.51 | 2 | 0.4020 % | 2,217.4 |
| OpRet | 4.84 % | 2.70 % | 65,494 | 1.53 | 8 | -0.0291 % | 2,455.6 |
| SplitShare | 5.36 % | 1.95 % | 58,492 | 0.34 | 4 | 0.3118 % | 2,500.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0291 % | 2,245.4 |
| Perpetual-Premium | 5.68 % | 3.60 % | 108,366 | 0.50 | 13 | 0.1759 % | 2,130.2 |
| Perpetual-Discount | 5.34 % | 5.44 % | 108,880 | 14.74 | 17 | 0.0491 % | 2,258.4 |
| FixedReset | 5.15 % | 3.20 % | 203,544 | 2.45 | 61 | 0.0239 % | 2,331.3 |
| Deemed-Retractible | 5.06 % | 4.40 % | 214,740 | 4.13 | 46 | 0.0814 % | 2,205.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.T | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-26 Maturity Price : 22.88 Evaluated at bid price : 24.31 Bid-YTW : 4.15 % |
| BNA.PR.E | SplitShare | 1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 6.38 % |
| GWO.PR.N | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.48 Bid-YTW : 3.54 % |
| GWO.PR.L | Deemed-Retractible | 1.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.59 % |
| IGM.PR.B | Perpetual-Premium | 1.26 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.74 Bid-YTW : 5.42 % |
| IAG.PR.F | Deemed-Retractible | 1.35 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 5.38 % |
| TD.PR.P | Deemed-Retractible | 1.45 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-01 Maturity Price : 26.00 Evaluated at bid price : 26.56 Bid-YTW : 2.82 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.D | Perpetual-Premium | 943,623 | Nesbitt crossed blocks of 811,000 and 100,000, both at 25.00. Nice tickets! YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 5.66 % |
| RY.PR.E | Deemed-Retractible | 104,826 | Nesbitt crossed 97,300 at 25.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-24 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.49 % |
| TD.PR.G | FixedReset | 87,851 | Desjardins crossed 21,100 at 27.05; RBC crossed blocks of 15,000 shares, 10,000 and 35,000, all at 27.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.03 Bid-YTW : 2.85 % |
| RY.PR.X | FixedReset | 83,303 | Scotia crossed blocks of 25,000 and 50,000, both at 27.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.92 Bid-YTW : 3.23 % |
| BNS.PR.O | Deemed-Retractible | 60,301 | Nesbitt crossed 50,000 at 26.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-26 Maturity Price : 26.00 Evaluated at bid price : 26.45 Bid-YTW : 4.14 % |
| MFC.PR.A | OpRet | 54,011 | Scotia bought 22.20 from anonymous at 25.00, then crossed 20,000 at 25.25. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 4.02 % |
| There were 44 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.J | FixedReset | Quote: 26.23 – 26.76 Spot Rate : 0.5300 Average : 0.3443 YTW SCENARIO |
| TCA.PR.X | Perpetual-Premium | Quote: 52.12 – 52.58 Spot Rate : 0.4600 Average : 0.3211 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 25.45 – 25.75 Spot Rate : 0.3000 Average : 0.2012 YTW SCENARIO |
| NA.PR.M | Deemed-Retractible | Quote: 26.62 – 26.95 Spot Rate : 0.3300 Average : 0.2340 YTW SCENARIO |
| BMO.PR.H | Deemed-Retractible | Quote: 25.68 – 25.92 Spot Rate : 0.2400 Average : 0.1510 YTW SCENARIO |
| MFC.PR.B | Deemed-Retractible | Quote: 22.11 – 22.34 Spot Rate : 0.2300 Average : 0.1568 YTW SCENARIO |
[…] PerpetualDiscounts now yield 5.44%, equivalent to 7.07% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.95%, so the pre-tax interest equivalency spread (also called the Seniority Spread) is now about 210bp, a slight widening from the 205bp reported on October 26. […]