Astonishing! There is a continued Greek crisis:
In Athens, unions struck for the second time this week and police used tear gas to counter protesters. George Karatzaferis, who heads one of the three parties supporting interim Prime Minister Lucas Papademos, said he wouldn’t support austerity measures worked out for a rescue. He spoke hours after German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece was missing deficit targets.
“What has particularly bothered me is the humiliation of the country,” Karatzaferis, whose Laos party has 16 members in the 300-seat parliament, said in televised comments. “Clearly Greece can’t and shouldn’t do without the European Union but it could do without the German boot.”
…
“The Greek offer is not sufficient and they have to go away to come up with a revised plan,” Bertrand Benoit, a spokesman for the German Finance Ministry, said by telephone.
Assiduous Readers will be accustomed to my occasional rants about bond market structure and auction design – these are usually triggered by ignorant whining about exchange trading of bonds, but now the Fed has become involved:
The Federal Reserve secretly selected a handful of banks to bid for debt securities acquired by taxpayers in the U.S. bailout of American International Group Inc., and the rest of Wall Street is wondering what happened to the transparency the central bank said it was committed to upholding.
“The exclusivity by which the process has shut out smaller dealers is a little un-American,” said David Castillo, head of sales and trading at broker Further Lane Securities LP in San Francisco, who said he would have liked to participate. “It seems odd that if you want to get the best possible price that it wouldn’t be open to anyone who wants to put in the most competitive bid.”
After inviting more than 40 broker-dealers to take part in a series of auctions last year, the Federal Reserve Bank of New York asked only Goldman Sachs Group Inc. (GS), Credit Suisse Group AG (CSGN) and Barclays Plc (BARC) to bid on the full $13.2 billion of bonds offered in two sales over the past month. The central bank switched to a less open process after traders blamed the regular, more public disposals for damaging prices in 2011. This week, Goldman Sachs bought $6.2 billion of bonds in an auction.
…
“The purpose should be to get the best price for the taxpayer,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta who’s now chief monetary economist for Sarasota, Florida-based Cumberland Advisors. “Anybody knows the more bidders the better, so it’s a little hard to understand why they would essentially pick potential winners and losers. That smacks of crony capitalism.”
…
The New York Fed was criticized for damaging credit markets with the regular sales, and halted them in June after disposing of about $10 billion in face value of the assets.It resumed the sales on Jan. 19, when it unloaded about $7 billion of assets in one block to Credit Suisse, after receiving an unsolicited bid for the securities from Goldman Sachs. Only Barclays and Bank of America were invited to also participate in that auction. Goldman Sachs won the auction for $6.2 billion of bonds this week after Credit Suisse placed an unsolicited bid for the assets. Barclays, Morgan Stanley (MS) and RBS Securities Inc. were also included in that sale. Barclays presented the second- highest offer in both auctions this year, according to a person familiar with the process.
The New York Fed didn’t announce either auction until after they closed, and said the broker-dealers it included were chosen based on the strength of previous bids. The Wall Street firms, and their clients who wished to bid on the assets, were required to sign non-disclosure agreements forbidding them from discussing the offerings. At least one investor opted not to participate for that reason.
Now, I’m not going to state that the Fed did things in the best possible way. I’m not even going to state that the auction method they chose is better than a fully public process! But I will state that calling the process “un-American” or stating that “Anybody knows the more bidders the better” is just plain pig-ignorant.
The Canadian preferred share market took a thumping today, as the very attractive GWO 5.40% Straight issue announced – and later upsized – today sucked all the money out of the market. PerpetualPremiums were down 34bp, FixedResets off 10bp and DeemedRetractibles lost 59bp. There is a very lengthy list of losers – and no winners – in the Performance Highlights table, overwhelmingly comprised of insurance DeemedRetractibles. Volume was a little on the light side.
| 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 | -0.7057 % | 2,445.4 |
| FixedFloater | 4.55 % | 3.91 % | 39,241 | 17.48 | 1 | 0.7229 % | 3,430.6 |
| Floater | 2.73 % | 2.97 % | 63,110 | 19.77 | 3 | -0.7057 % | 2,640.4 |
| OpRet | 4.84 % | -0.06 % | 63,024 | 1.26 | 6 | -0.3279 % | 2,514.6 |
| SplitShare | 5.28 % | -0.41 % | 80,622 | 0.83 | 4 | -0.0597 % | 2,650.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3279 % | 2,299.4 |
| Perpetual-Premium | 5.33 % | -0.48 % | 117,923 | 0.12 | 26 | -0.3430 % | 2,223.2 |
| Perpetual-Discount | 5.03 % | 4.88 % | 196,096 | 15.66 | 4 | -0.2157 % | 2,457.3 |
| FixedReset | 5.02 % | 2.62 % | 217,705 | 2.30 | 65 | -0.1002 % | 2,395.5 |
| Deemed-Retractible | 4.89 % | 3.45 % | 225,376 | 1.64 | 45 | -0.5940 % | 2,314.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.L | Perpetual-Premium | -2.41 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 25.25 Evaluated at bid price : 25.47 Bid-YTW : 4.79 % |
| GWO.PR.I | Deemed-Retractible | -2.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.22 Bid-YTW : 4.99 % |
| SLF.PR.A | Deemed-Retractible | -2.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.88 Bid-YTW : 5.44 % |
| GWO.PR.G | Deemed-Retractible | -2.13 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : 4.92 % |
| SLF.PR.B | Deemed-Retractible | -2.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.01 Bid-YTW : 5.42 % |
| GWO.PR.H | Deemed-Retractible | -2.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.64 Bid-YTW : 5.14 % |
| BAM.PR.K | Floater | -1.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-02-10 Maturity Price : 17.39 Evaluated at bid price : 17.39 Bid-YTW : 3.04 % |
| SLF.PR.D | Deemed-Retractible | -1.82 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 5.46 % |
| PWF.PR.K | Perpetual-Premium | -1.74 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 4.38 % |
| GWO.PR.L | Deemed-Retractible | -1.70 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 5.06 % |
| SLF.PR.C | Deemed-Retractible | -1.69 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.22 Bid-YTW : 5.48 % |
| IAG.PR.A | Deemed-Retractible | -1.49 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.48 Bid-YTW : 4.96 % |
| FTS.PR.E | OpRet | -1.36 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 27.61 Bid-YTW : -0.06 % |
| SLF.PR.E | Deemed-Retractible | -1.31 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.40 Bid-YTW : 5.44 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| GWO.PR.I | Deemed-Retractible | 80,188 | Nesbitt crossed 30,000 at 24.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.22 Bid-YTW : 4.99 % |
| PWF.PR.F | Perpetual-Premium | 55,401 | TD crossed 50,000 at 25.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-03-11 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : -7.57 % |
| BNS.PR.K | Deemed-Retractible | 53,027 | Nesbitt crossed 50,000 at 26.04. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-03-11 Maturity Price : 25.75 Evaluated at bid price : 26.00 Bid-YTW : -5.64 % |
| ENB.PR.F | FixedReset | 39,861 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.47 Bid-YTW : 3.73 % |
| BNS.PR.N | Deemed-Retractible | 39,722 | RBC crossed 20,200 at 26.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-29 Maturity Price : 26.00 Evaluated at bid price : 26.72 Bid-YTW : 2.29 % |
| RY.PR.Y | FixedReset | 39,202 | RBC crossed 36,400 at 27.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 27.30 Bid-YTW : 2.60 % |
| There were 27 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BNS.PR.O | Deemed-Retractible | Quote: 27.13 – 27.48 Spot Rate : 0.3500 Average : 0.2316 YTW SCENARIO |
| TD.PR.O | Deemed-Retractible | Quote: 26.03 – 26.36 Spot Rate : 0.3300 Average : 0.2185 YTW SCENARIO |
| POW.PR.A | Perpetual-Premium | Quote: 25.40 – 25.70 Spot Rate : 0.3000 Average : 0.2185 YTW SCENARIO |
| TRP.PR.C | FixedReset | Quote: 26.15 – 26.38 Spot Rate : 0.2300 Average : 0.1500 YTW SCENARIO |
| PWF.PR.I | Perpetual-Premium | Quote: 25.51 – 25.75 Spot Rate : 0.2400 Average : 0.1614 YTW SCENARIO |
| BAM.PR.K | Floater | Quote: 17.39 – 17.70 Spot Rate : 0.3100 Average : 0.2356 YTW SCENARIO |