Rumours are floating about specific bank capital surcharges:
Citigroup Inc. (C), JPMorgan Chase & Co., BNP Paribas SA, Royal Bank of Scotland Group Plc, and HSBC Holdings Plc (HSBA) may face top capital surcharges of 2.5 percentage points, according to a provisional list prepared by global regulators and obtained by Bloomberg News.
The list was drawn up as part of plans by the Group of 20 nations to force banks whose failure could damage the global economy to boost their reserves by 1 to 2.5 percentage points above minimum levels agreed on by international regulators. Bank of America Corp. (BAC), Barclays Plc (BARC) and Germany’s biggest bank Deutsche Bank AG (DBK) may face surcharges of 2 percentage points, according to the list.
At least one ECB council member is objecting to the piggy-bank paradigm:
European Central Bank council member Jens Weidmann said the ECB cannot bail out governments by printing money.
“One of the severest forms of monetary policy being roped in for fiscal purposes is monetary financing, in colloquial terms also known as the financing of public debt via the money printing press,” Weidmann, who heads Germany’s Bundesbank, said in a speech in Berlin today. The prohibition of monetary financing in the euro area “is one of the most important achievements in central banking” and “specifically for Germany, it is also a key lesson from the experience of hyperinflation after World War I,” he said.
The ECB is under pressure to ramp up its bond purchases to cap soaring yields in Italy as governments fail to contain the two-year-old sovereign debt crisis. Weidmann also rejected proposals to use Bundesbank currency and gold reserves to help finance purchases by a special fund, saying this is another form of monetary financing.
Pierre Trudeau was a visionary! First in Greece, now in Italy, the slogan is “Elect me and I’ll quit!
Prime Minister Silvio Berlusconi offered to resign as soon as Parliament approves austerity measures in a vote next week, after defections from his ruling party left him without a majority.
“Once that task has been achieved, the prime minister will tender his resignation to the President,” who will then begin consultations with all political parties, President Giorgio Napolitano said tonight in an e-mailed statement after meeting Berlusconi in Rome.
The resignation offer came after Berlusconi failed to muster an absolute majority on a routine parliamentary ballot, obtaining only 308 votes in the 630-seat Chamber of Deputies today.
…
The yield on Italy’s benchmark 10-year bond jumped 11 basis points today to 6.77 percent, the most since the euro’s introduction in 1999 and near the 7 percent level that drove Greece, Ireland and Portugal to seek international bailouts. The extra premium investors demand to hold the debt instead of German bunds widened to a record 497 basis points.
The desperation of European politicians is leading them down some awfully stupid and dangerous pathways:
Bank regulators may get more powers to enforce a European Union plan to recapitalize lenders, including the ability to ban weaker banks from paying bonuses, under a proposal from the European Commission.
The commission, the EU’s executive arm, will propose the law “in the coming days,” Michel Barnier, the EU’s financial services chief said today.
Europe’s banks will need to raise 106 billion euros ($146 billion) in fresh capital under tougher rules being introduced in response to the euro area’s sovereign-debt crisis, the European Banking Authority said last month.
…
Policy makers want banks to use funds from withholding bonuses and dividends to reach the capital target, rather than reducing the size of their balance sheets.The EBA will “ensure that there isn’t deleveraging, and in particular also that there isn’t deleveraging in host countries in which trans-national groups operate as a result of the need to achieve certain capital levels,” Polish Finance Minister Jacek Rostowski said in a speech in Brussels.
Well, if they’re trying to increase capital flight, that’s a really good way to do it! It’s getting to the point where I’m not sure I understand why anybody would entrust any money at all to European bank – whether as equity or insured deposit.
What-Debt? and Spend-Every-Penny (the guys who turned a structural surplus into a structural deficit) are now bringing us Europe: the sequel:
The Harper government will take longer to erase the deficit, won’t raise Employment Insurance premiums as high and will extend a temporary work-sharing program in response to a worsening Canadian economy.
Finance Minister Jim Flaherty released his fall economic update Tuesday, providing the first clear examples of the “flexibility” his government has promised in the face of slower-than-expected economic growth.
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These assumptions for slower growth mean Ottawa is now projecting Canada will not produce a fiscal surplus until 2015-16 or 2016-17, depending on the success of a previously-announced plan to find $4-billion a year in spending cuts.Prime Minister Stephen Harper had promised during the 2011 election campaign that Canada would be in surplus by 2014-15.
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The size of the federal debt is now projected to rise from $550.3-billion in 2010-11 to $640.6-billion by 2015-16.
I have no problem with deficit spending, as long as it is accompanied by a plan showing how it will paid for through the cycle. Unfortunately, the Junior Republicans can’t be bothered to think so far ahead.
It was a good day for the Canadian preferred share market, with PerpetualDiscounts gaining 17bp, FixedResets up 4bp and DeemedRetractibles winning 25bp. SLF issues were again notable on the downside of the Performance Highlights table. Volume was 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 | 0.0968 % | 2,125.6 |
| FixedFloater | 4.82 % | 4.53 % | 25,353 | 17.26 | 1 | 1.2853 % | 3,195.6 |
| Floater | 3.38 % | 3.41 % | 162,401 | 18.70 | 2 | 0.0968 % | 2,295.1 |
| OpRet | 4.94 % | 0.94 % | 54,802 | 1.50 | 7 | -0.1258 % | 2,478.7 |
| SplitShare | 5.77 % | 6.60 % | 59,250 | 5.13 | 3 | -0.2379 % | 2,508.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1258 % | 2,266.5 |
| Perpetual-Premium | 5.57 % | 2.79 % | 105,708 | 0.16 | 13 | 0.0516 % | 2,152.4 |
| Perpetual-Discount | 5.33 % | 5.31 % | 109,499 | 14.74 | 17 | 0.1717 % | 2,287.7 |
| FixedReset | 5.12 % | 2.97 % | 209,150 | 2.51 | 62 | 0.0390 % | 2,344.3 |
| Deemed-Retractible | 5.04 % | 4.39 % | 208,499 | 3.82 | 46 | 0.2464 % | 2,216.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.I | Deemed-Retractible | -1.32 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 5.91 % |
| FTS.PR.C | OpRet | -1.14 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2011-12-08 Maturity Price : 25.50 Evaluated at bid price : 26.10 Bid-YTW : -10.67 % |
| SLF.PR.A | Deemed-Retractible | -1.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.12 Bid-YTW : 6.41 % |
| SLF.PR.B | Deemed-Retractible | -1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.37 Bid-YTW : 6.32 % |
| BMO.PR.Q | FixedReset | -1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : 3.09 % |
| FTS.PR.H | FixedReset | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-08 Maturity Price : 23.53 Evaluated at bid price : 25.75 Bid-YTW : 2.82 % |
| BAM.PR.N | Perpetual-Discount | 1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-08 Maturity Price : 22.62 Evaluated at bid price : 22.97 Bid-YTW : 5.22 % |
| BAM.PR.G | FixedFloater | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-08 Maturity Price : 25.00 Evaluated at bid price : 19.70 Bid-YTW : 4.53 % |
| TD.PR.O | Deemed-Retractible | 1.38 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-31 Maturity Price : 25.50 Evaluated at bid price : 25.78 Bid-YTW : 3.72 % |
| IAG.PR.A | Deemed-Retractible | 1.71 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.66 Bid-YTW : 5.93 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.F | FixedReset | 292,424 | RBC crossed blocks of 267,700 and 18,400, both at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 4.50 % |
| CM.PR.E | Perpetual-Discount | 246,600 | TD crossed blocks of 99,700 and 100,000, both at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-08 Maturity Price : 24.69 Evaluated at bid price : 24.99 Bid-YTW : 5.63 % |
| SLF.PR.G | FixedReset | 110,370 | RBC crossed blocks of 47,200 shares, 14,200 and 10,800, all at 24.50. Desjardins crossed 11,500 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.51 Bid-YTW : 3.68 % |
| CM.PR.G | Perpetual-Discount | 88,703 | Scotia crossed 50,000 at 24.95. Desjardins crossed 12,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-11-08 Maturity Price : 24.60 Evaluated at bid price : 24.92 Bid-YTW : 5.44 % |
| RY.PR.R | FixedReset | 81,875 | Scotia crossed blocks of 30,000 and 44,700, both at 26.93. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.90 Bid-YTW : 2.71 % |
| BAM.PR.O | OpRet | 50,900 | TD crossed 50,000 at 25.80. YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.58 Bid-YTW : 3.90 % |
| There were 38 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: 26.07 – 26.60 Spot Rate : 0.5300 Average : 0.3725 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 25.95 – 26.49 Spot Rate : 0.5400 Average : 0.3975 YTW SCENARIO |
| BNA.PR.E | SplitShare | Quote: 23.09 – 23.75 Spot Rate : 0.6600 Average : 0.5198 YTW SCENARIO |
| HSB.PR.C | Deemed-Retractible | Quote: 25.24 – 25.80 Spot Rate : 0.5600 Average : 0.4300 YTW SCENARIO |
| HSB.PR.D | Deemed-Retractible | Quote: 25.30 – 25.70 Spot Rate : 0.4000 Average : 0.2910 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 26.20 – 26.50 Spot Rate : 0.3000 Average : 0.2062 YTW SCENARIO |