March 7, 2012

The voluntary ha-ha Greek debt swap might succeed:

Investors with 58 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll participate, putting the country on the verge of the biggest sovereign restructuring in history.

Greece’s largest banks, most of the country’s pension funds, and more than 30 European banks and insurers including BNP Paribas SA, Commerzbank AG (CBK) and Assicurazioni Generali SpA (G) have pledged to accept the offer. That brings the total so far to at least 120 billion euros ($157 billion), based on data compiled by Bloomberg from company reports and government statements.

CalPERS, the gigantic pension fund best known for not doing its own credit analysis, may lower its return expectations:

Actuary Alan Milligan recommended trimming the annual return estimate yesterday to 7.25 percent from 7.75 percent, potentially driving up what the fund, known as Calpers, requires from taxpayers to provide benefits for more than 1.6 million employees, retirees and their families.

Public funds have come under fire for using investment assumptions that hide the true size of shortfalls. The $238.1 billion fund last adjusted its rate of return in 2004, to 7.75 percent from 8.25 percent. The plan is to be considered by the Calpers board next week.

The pension fund estimates that it has about 75 percent of the money it needs to cover promised benefits. That differs from a Stanford University report that said Calpers was only 58 percent funded, based on a 6.2 percent annual return on assets.

Will wonders never cease? There’s price competition in the Canadian mortgage market:

Canada’s fourth-largest bank is bringing historic low rates back into the market, only a few weeks after it and several other lenders pulled similar discounts, amid concerns over collapsing profit margins. The bank lowered the rate on a five-year mortgage to 2.99 per cent, a drop of a half a percentage point. It also cut the rate on 10-year mortgages to just 3.99 per cent, a level that no Big Five bank has posted until now.

It was a modestly positive day for the Canadian preferred share market, with PerpetualPremiums winning 7bp, FixedResets up 6bp and DeemedRetractibles gaining 4bp. Volatility was nothing special. Volume remained at low levels.

PerpetualDiscounts (all seven of them!) now yield 5.08%, equivalent to 6.60% interest at the standard 1.3x equivalency factor. Long corporates now yield a little under 4.5% (!) so the pre-tax interest-equivalent spread (which, in this context, is the Seniority Spread) is now about 210bp, a meaningful widening from the 195bp reported on February 22.

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 0.0769 % 2,369.6
FixedFloater 4.51 % 3.89 % 43,410 17.47 1 1.2506 % 3,455.2
Floater 3.02 % 3.05 % 48,798 19.54 3 0.0769 % 2,558.5
OpRet 4.89 % 2.92 % 52,323 1.26 6 -0.1340 % 2,504.3
SplitShare 5.26 % -2.41 % 85,830 0.77 4 0.2240 % 2,684.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1340 % 2,289.9
Perpetual-Premium 5.39 % -0.45 % 106,313 0.09 25 0.0662 % 2,217.5
Perpetual-Discount 5.06 % 5.08 % 185,273 15.28 7 0.3759 % 2,433.9
FixedReset 5.05 % 2.85 % 206,364 2.24 66 0.0597 % 2,386.6
Deemed-Retractible 4.93 % 3.79 % 223,292 2.91 46 0.0383 % 2,311.6
Performance Highlights
Issue Index Change Notes
FTS.PR.E OpRet -1.46 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 27.01
Bid-YTW : 0.84 %
SLF.PR.G FixedReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 3.64 %
BNS.PR.O Deemed-Retractible 1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-26
Maturity Price : 26.00
Evaluated at bid price : 27.08
Bid-YTW : 2.13 %
BAM.PR.G FixedFloater 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-03-07
Maturity Price : 21.82
Evaluated at bid price : 21.05
Bid-YTW : 3.89 %
ELF.PR.G Perpetual-Discount 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-03-07
Maturity Price : 22.48
Evaluated at bid price : 22.87
Bid-YTW : 5.25 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PR.H OpRet 47,984 Called for redemption.
YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2012-04-06
Maturity Price : 25.00
Evaluated at bid price : 25.32
Bid-YTW : 2.86 %
ENB.PR.F FixedReset 46,182 Desjardins crossed 10,000 at 25.47; TD bought 24,200 from anonymous at 25.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-03-07
Maturity Price : 23.26
Evaluated at bid price : 25.53
Bid-YTW : 3.73 %
POW.PR.G Perpetual-Premium 38,177 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : 5.23 %
PWF.PR.R Perpetual-Premium 34,280 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.72
Bid-YTW : 5.16 %
CM.PR.E Perpetual-Premium 32,120 Desjardins crossed 22,000 at 25.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-04-06
Maturity Price : 25.25
Evaluated at bid price : 25.92
Bid-YTW : -18.97 %
RY.PR.Y FixedReset 30,740 Scotia crossed 30,000 at 27.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-24
Maturity Price : 25.00
Evaluated at bid price : 27.25
Bid-YTW : 2.74 %
There were 24 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PR.P Deemed-Retractible Quote: 26.32 – 26.75
Spot Rate : 0.4300
Average : 0.2986

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-11-01
Maturity Price : 26.00
Evaluated at bid price : 26.32
Bid-YTW : 3.92 %

FTS.PR.E OpRet Quote: 27.01 – 27.40
Spot Rate : 0.3900
Average : 0.2901

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 27.01
Bid-YTW : 0.84 %

MFC.PR.H FixedReset Quote: 25.21 – 25.45
Spot Rate : 0.2400
Average : 0.1500

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.21
Bid-YTW : 4.48 %

CM.PR.M FixedReset Quote: 27.30 – 27.54
Spot Rate : 0.2400
Average : 0.1657

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.30
Bid-YTW : 2.82 %

IAG.PR.C FixedReset Quote: 25.96 – 26.19
Spot Rate : 0.2300
Average : 0.1572

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.96
Bid-YTW : 3.78 %

GWO.PR.L Deemed-Retractible Quote: 25.95 – 26.19
Spot Rate : 0.2400
Average : 0.1698

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 4.95 %

One Response to “March 7, 2012”

  1. […] PerpetualDiscounts now yield 5.10%, equivalent to 6.63% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.60%, so the pre-tax interest-equivalent spread (which in this context is the Seniority Spread) is now about 205bp, a slight tightening from the 210bp reported March 7. […]

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