Spain sold 10 billion euros ($13 billion) of bonds, twice the target for the sale, while Italy placed 12 billion euros of bills, easing concerns the countries would struggle to finance their debts and sending bonds higher.
Spain sold a new benchmark three-year note due July 2015 to yield 3.384 percent, the Bank of Spain said in Madrid. That compared with 5.187 percent the last time similar maturity debt was sold in December. Italy’s Treasury sold one-year bills at 2.735 percent, less than half the 5.952 percent paid on similar- maturity securities on Dec. 12.
Italian Prime Minister Mario Monti and Spanish premier Mariano Rajoy are imposing austerity measures to convince investors they can put their nations’ finances in order and avert being engulfed by the sovereign debt crisis. The European Central Banks lent 489 billion euros of three-year funds last month, a move that Madrid-based Banco Bilbao Vizcaya Argentaria SA said would allow banks to buy more government debt.
It’s not clear to me whether they’re doing the right thing or not. If it’s a liquidity crisis – fine. If it’s a solvency crisis – not so fine.
However, capitalism will soon collapse under the weight of its internal contradictions – at least in Europe:
Hedge funds in New York and London are trying to profit from trading Greek government bonds as European banks brace for losses from a debt swap.
Saba Capital Management LP, founded by former Deutsche Bank AG (DBK) credit trader Boaz Weinstein, York Capital Management LP, the $14 billion fund started by Jamie Dinan, and London-based CapeView Capital LLP are among managers that now hold Greek bonds, according to people with knowledge of the transactions who declined to be identified because they weren’t authorized to speak publicly about the trades. Officials at the three firms declined to comment.
They’ve amassed the stakes as the government lobbies investors to accept a swap that would cause losses of more than 50 percent for bondholders. For the deal to avoid triggering credit-default swaps that could cause losses for more of the region’s banks, the agreement has to be voluntary. Hedge funds may not agree to the deal.
And the pressure is ratchetting up in all directions:
Lawmakers from Chancellor Angela Merkel’s party are stepping up pressure on Greece as it struggles to meet the terms of its second bailout, saying that a Greek exit from the euro region would be manageable.
The comments by senior members of Merkel’s Christian Democratic Union, made before a meeting of the CDU leadership that begins today, keep the focus on the Greek government as it strives to reach a debt-swap deal with private creditors that Merkel has said must be struck to win more aid. They are also a challenge to the chancellor’s public stance as she steers European efforts to keep the 17-member single euro area intact.
Remember how obvious it was in 2006 that US housing was about to collapse? Remember thinking to yourself that the only thing keeping it up was evil bonus-seeking bankers? Remember 2006?:
Newly released transcripts of all the Federal Reserve policy meetings in 2006, Ben Bernanke’s first year as chairman, show that the Fed was getting increasingly dire signals about the housing market – right down to anecdotes of builders giving away cars to try to draw reluctant buyers. But the economists around the table were consumed by trying to estimate what (small) percentage of consumer spending that would affect, missing the tremendous structural upheaval that a housing price decline would go on to create, with banks failing, the financial system seizing and job losses soaring.
Brookfield Office Properties, proud issuer of BPO.PR.F, BPO.PR.H, BPO.PR.I, BPO.PR.J, BPO.PR.K, BPO.PR.L, BPO.PR.N, BPO.PR.P and BPO.PR.R, has issued five-year paper at 4.30%:
DBRS has today assigned a rating of BBB (high), with a Stable trend, to the $200 million 4.30% senior unsecured notes due January 17, 2017 (the Notes), issued by Brookfield Office Properties Inc. (Brookfield).
The Notes are direct senior unsecured obligations of Brookfield and rank equally and rateably with all other unsecured and unsubordinated indebtedness of Brookfield. Brookfield intends to use the proceeds from the Notes to repay indebtedness and for general corporate purposes.
S&P comments:
- We assigned our ‘BBB-‘ rating to Brookfield Office Properties Inc.’s C$200 million 4.30% senior unsecured notes due January 2017.
- The company intends to use proceeds from the offering to reduce existing debt.
- Our ratings on Brookfield acknowledge the company’s good-quality office portfolio, long-term leases, and in-place rents that are, on average, below current market rents.
… and 4.30% is pretty close to the Yield-to-Worst on most of those issues. Make of it what you will.
Well, it looks like the party’s over in the Canadian preferred share market, with whoever it was who has been doing all that buying in the past week having achieved his desired position. PerpetualDiscounts were down 9bp, FixedResets off 3bp and DeemedRetractibles lost 19bp. There was significant volatility, with the insurance issues that have done so well lately featuring on the bad side of the Performance Highlights table. Volume was average.
| 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 | 0.9471 % | 2,298.8 |
| FixedFloater | 4.75 % | 4.12 % | 40,974 | 17.22 | 1 | 0.0000 % | 3,282.8 |
| Floater | 2.90 % | 3.06 % | 67,418 | 19.60 | 3 | 0.9471 % | 2,482.1 |
| OpRet | 4.94 % | 1.62 % | 65,848 | 1.34 | 7 | 0.2251 % | 2,499.3 |
| SplitShare | 5.39 % | 1.21 % | 69,837 | 0.91 | 4 | 0.1936 % | 2,594.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2251 % | 2,285.4 |
| Perpetual-Premium | 5.43 % | -0.68 % | 86,683 | 0.09 | 23 | -0.1625 % | 2,202.9 |
| Perpetual-Discount | 5.05 % | 4.87 % | 147,022 | 15.52 | 7 | -0.0946 % | 2,400.3 |
| FixedReset | 5.05 % | 2.77 % | 208,044 | 2.38 | 64 | -0.0315 % | 2,377.0 |
| Deemed-Retractible | 4.92 % | 3.51 % | 196,635 | 1.72 | 46 | -0.1936 % | 2,290.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.A | Deemed-Retractible | -2.27 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 5.70 % |
| SLF.PR.B | Deemed-Retractible | -1.68 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.38 Bid-YTW : 5.71 % |
| GWO.PR.G | Deemed-Retractible | -1.68 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.19 Bid-YTW : 4.91 % |
| MFC.PR.B | Deemed-Retractible | -1.66 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.08 Bid-YTW : 5.74 % |
| FTS.PR.F | Perpetual-Premium | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-12 Maturity Price : 24.90 Evaluated at bid price : 25.20 Bid-YTW : 4.91 % |
| BMO.PR.P | FixedReset | -1.06 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 27.06 Bid-YTW : 2.88 % |
| MFC.PR.F | FixedReset | 1.18 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 3.49 % |
| CIU.PR.A | Perpetual-Discount | 1.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-12 Maturity Price : 24.49 Evaluated at bid price : 25.00 Bid-YTW : 4.63 % |
| SLF.PR.G | FixedReset | 2.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.44 Bid-YTW : 4.08 % |
| PWF.PR.A | Floater | 2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-12 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 2.64 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.D | FixedReset | 99,655 | Nesbitt crossed 75,000 at 25.34. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-12 Maturity Price : 23.21 Evaluated at bid price : 25.32 Bid-YTW : 3.56 % |
| BMO.PR.O | FixedReset | 98,957 | RBC crossed 89,000 at 27.56. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.57 Bid-YTW : 2.39 % |
| RY.PR.L | FixedReset | 83,190 | RBC crossed blocks of 14,900 and 26,500 at 26.52, while selling 12,900 to TD at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.52 Bid-YTW : 3.00 % |
| BMO.PR.J | Deemed-Retractible | 82,445 | RBC crossed 68,700 at 26.39. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-02-25 Maturity Price : 26.00 Evaluated at bid price : 26.27 Bid-YTW : 0.42 % |
| SLF.PR.A | Deemed-Retractible | 77,685 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 5.70 % |
| NA.PR.M | Deemed-Retractible | 73,400 | RBC crossed 64,800 at 27.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-15 Maturity Price : 26.00 Evaluated at bid price : 27.25 Bid-YTW : 1.72 % |
| There were 35 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TCA.PR.Y | Perpetual-Premium | Quote: 52.05 – 52.60 Spot Rate : 0.5500 Average : 0.3872 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 26.00 – 26.41 Spot Rate : 0.4100 Average : 0.2552 YTW SCENARIO |
| GWO.PR.G | Deemed-Retractible | Quote: 25.19 – 25.56 Spot Rate : 0.3700 Average : 0.2298 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 25.55 – 25.96 Spot Rate : 0.4100 Average : 0.2716 YTW SCENARIO |
| BMO.PR.P | FixedReset | Quote: 27.06 – 27.35 Spot Rate : 0.2900 Average : 0.2116 YTW SCENARIO |
| MFC.PR.G | FixedReset | Quote: 24.51 – 24.74 Spot Rate : 0.2300 Average : 0.1549 YTW SCENARIO |