PrefBlog

The bloom is off the ETF rose:

As more and more exchange-traded funds enter the market, appetites for new baskets of stocks seem to be diminishing – at least in the United States. According to the Financial Times and XTF, an ETF research firm, 79 per cent of the 190 ETFs launched in the first six months of 2011 failed to attract enough money to make the new funds economical and sufficiently liquid (defined as more than $30-million (U.S.) in assets under management).

And covered bonds are being swept up in the Greek tragedy:

Now National Bank of Greece has invited investors in for a haircut. The country’s biggest bank by assets has offered to buy back €1.5-billion of covered bonds and nearly €400-million of hybrid securities it issued over the past couple of years. It aims to turn debt into core equity capital. Any investors who do not accept the offer are gambling that Greece can manage its way out of its debt spiral.

Will indifference over earnings continue? NBG sold the covered bonds at full face value in 2009, but the market price had fallen to about 55 per cent. The bank is offering to buy the bonds back at 70 per cent. That looks generous: although the bonds are twice collateralized, the prospect that investors will be repaid in full when the bonds mature in 2016 looks remote given Greece’s dire financial and economic prognosis. Private-sector holders of Greek sovereign bonds face a 60 per cent writedown on their investments when (or if) another bail-out is agreed.

Lapdog Carney continues to reap the rewards of toeing the line:

Overseeing his first official meeting as head of the FSB in Basel, Switzerland, Mr. Carney said the FSB’s oversight would be expanded later this year to include big domestic banks and insurers, whose capital may have to be bolstered to protect them from the financial shocks that felled many financial institutions in the 2008 credit crunch.

“We’ve already focused on the big global banks,” Mr. Carney said in an interview after the FSB meetings. “Now we turn to everything else and we say, ‘Do we have institutions that are systemic domestically but don’t have these big global spillovers that would bring everybody else to the edge?’ And if we do have those, what type of approach should we have?”
…
Mr. Carney said there are no plans to publish the names of insurers that will be subject to deeper scrutiny. The insurers have argued that they are not the cause of the financial crisis and should not have to sustain expensive capital surcharges.

Hellzapoppin’ on the Canadian preferred share market today, with PerpetualDiscounts winning 78bp, FixedResets up 39bp and DeemedRetractibles gaining 51bp. There is a long list of issues in the Performance Highlights table, all winners, with insurer issues being notable by their preponderance at the high end of the table. Volume was very heavy.

The Bozo Spread (Current Yield PerpetualDiscounts less Current Yield FixedResets) has declined again and now stands at a mere 1bp … will it go negative? Now that the Lapdog’s yapping about insurance, we might see some indication of extension of the NVCC rules. Or we might not. But the last time the Bozo Spread went negative, we saw the NVCC rules introduced for banks shortly thereafter. What makes this even more fascinating is that all the insurance issues have been pulled out of the PerpetualDiscount index and are now sitting in DeemedRetractibles … so if history is repeating itself, it’s only because the PerpetualDiscounts are hanging onto the coat-tails of DeemedRetractibles.

This entry was posted on Tuesday, January 10th, 2012 at 10:30 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.