The TMX / Maple deal is still alive:
The group of 13 financial institutions that’s seeking to buy the TMX Group Inc. … plans to extend its offer today, according to sources.
All 13 members of the so-called Maple Group are expected to remain in the consortium at this time, these sources said.
The decision follows on the heels of weeks of uncertainty, during which some members of the group were considering abandoning the effort. The group had become increasingly discouraged by its long quest to win over the Competition Bureau, and until late last week a number of members said it looked like there was a good chance the deal would not succeed.
But the group subsequently received an update from the Bureau that was interpreted as a signal that the deal once again has a better chance of success.
The Bureau said last year that it had “serious concerns” with the offer. Late last week it suggested that its concerns could be “substantially mitigated” by rules that the Ontario Securities Commission is considering applying to the merged company if the deal goes through.
Isn’t that great? An enormous, bank-controlled, tightly-regulated company that will perforce employ a large number of ex-regulators. A perfect solution … for some.
In fact, I suspect that the group has got a nod-and-wink go-ahead:
The bidding consortium, known as Maple Group Acquisition Corp., has struck agreements to acquire the competing Alpha trading system, TMX’s largest rival, as well as the trade clearing institution CDS Group. Those deals came together over the weekend, according to sources.
Just as importantly, Maple has also received assurances that regulators, including the Competition Bureau, will finish considering its offer within a reasonable time frame.
The Europeans aren’t the only ones facing higher borrowing costs:
Illinois’s last general-obligation sale was on March 13 for $575 million, with 10-year securities priced to yield 1.51 percentage points above benchmark tax-exempts, according to data compiled by Bloomberg. That’s 0.34 percentage points below tomorrow’s tentative pricing plan, or a difference of 22.5 percent.
The state has the lowest-funded pension in the U.S., with assets equal to 45.5 percent of projected obligations, Bloomberg data show. Its backlog of unpaid bills to vendors and Medicaid obligations is more than $9 billion.
The Bank of Canada has released a working paper by Eleonora Granziera & Sharon Kozicki titled House Price Dynamics: Fundamentals and Expectations:
We investigate whether expectations that are not fully rational have the potential to explain the evolution of house prices and the price-to-rent ratio in the United States. First, a Lucas type asset-pricing model solved under rational expectations is used to derive a fundamental value for house prices and the price-rent ratio. Although the model can explain the sample average of the price-rent ratio, it does not generate the volatility and persistence observed in the data. Then, we consider an intrinsic bubble model and two models of extrapolative expectations developed by Lansing (2006, 2010) in applications to stock prices: one that features a constant extrapolation parameter and one in which the extrapolation coefficient depends on the dividend growth process. We show that these last two models are equally good at matching sample moments of the data. However, a counterfactual experiment shows that only the extrapolative expectation model with time-varying extrapolation coefficient is consistent with the run up in house prices observed over the 2000-2006 period and the subsequent sharp downturn.
Mr Vítor Constâncio, Vice-President of the European Central Bank, gave a speech titled “Towards better regulation of the shadow banking system” at the European Commission Conference in Brussels, 27 April 2012, which lauded central clearing:
During the crisis, the volume of repos declined with the exception of a few market segments. The reduction in outstanding repo values was however less pronounced for CCP-cleared repos than for other repo segments. It is well known that some CCPs actually saw an increase in their business at a time when counterparty-risk adverse market participants turned to safer avenues.
The good performance of CCPs could be explained by the fact that it addresses effectively most of the vulnerabilities which affected repo markets during the 2008 crisis. When cash lenders withdrew from the market due to misperceptions of the credit and liquidity risk, CCP-cleared repos were significantly less affected. Amidst a general decline of repo market trading at the peak of the crisis, some euro area CCPs actually saw an increase of volumes.
This happened because CCPs provide effective protection against counterparty risk by interposing themselves between the original repo parties. From a financial stability perspective, properly supervised and overseen CCPs act as a firewall against the propagation of default shocks and can mitigate counterparty credit risk, enhance market transparency, facilitate collateral liquidation, and foster standardisation of repo terms and eligible collateral. There is also the advantage that policy makers can monitor the cleared repo markets since CCPs are regulated institutions.
Therefore, moving repo clearing to CCP seems to be the appropriate solution which by the way is already gaining ground in Europe, having already attained half of the market.
He did not address the question of single-point failure.
Stocks and commodities fell, while the euro weakened for a third day against the yen, as reports showed Spain entered its second recession since 2009 and U.S. business activity cooled. Treasuries and German bunds advanced.
…
Spain’s gross domestic product fell 0.3 percent in the first quarter, the government said today as it struggles to narrow a budget deficit by 3.2 percentage points of GDP. U.S. consumer spending rose 0.3 percent in March, according to Commerce Department data, while an Institute for Supply Management-Chicago Inc. report showed business activity expanded in April (SPX) at the slowest pace since 2009.
The Canadian preferred share market ended the month on a strong note, with PerpetualPremiums up 13bp, FixedResets gaining 3bp and DeemedRetractibles winning 17bp. Volatility picked up a little, with PerpetualDiscounts dominating the winners. Volume was average.
PerpetualDiscounts now yield 5.08%, equivalent to 6.60% interest at the standard conversion factor of 1.3x. Long corporates now yield about 4.6% – oh, all right, maybe a hairsbreadth under – so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 200bp, a sharp tightening from the 220bp reported April 25.
| 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 | 0.4383 % | 2,521.2 |
| FixedFloater | 4.44 % | 3.80 % | 32,256 | 17.76 | 1 | -0.4651 % | 3,551.2 |
| Floater | 2.86 % | 2.89 % | 45,017 | 19.99 | 3 | 0.4383 % | 2,722.3 |
| OpRet | 4.74 % | 2.74 % | 54,175 | 1.13 | 5 | 0.1760 % | 2,513.1 |
| SplitShare | 5.25 % | 5.11 % | 67,655 | 2.00 | 4 | -0.0198 % | 2,692.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1760 % | 2,298.0 |
| Perpetual-Premium | 5.46 % | 0.67 % | 76,277 | 0.09 | 23 | 0.1292 % | 2,225.4 |
| Perpetual-Discount | 5.13 % | 5.08 % | 148,060 | 15.31 | 10 | 0.5611 % | 2,430.4 |
| FixedReset | 5.02 % | 3.07 % | 195,152 | 2.17 | 67 | 0.0252 % | 2,401.1 |
| Deemed-Retractible | 4.96 % | 3.69 % | 188,454 | 1.59 | 46 | 0.1703 % | 2,317.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.F | Deemed-Retractible | -1.23 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.69 Bid-YTW : 5.54 % |
| BAM.PR.N | Perpetual-Discount | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-30 Maturity Price : 23.01 Evaluated at bid price : 23.45 Bid-YTW : 5.10 % |
| BAM.PR.C | Floater | 1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-30 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 2.89 % |
| ELF.PR.G | Perpetual-Discount | 1.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-30 Maturity Price : 22.41 Evaluated at bid price : 22.75 Bid-YTW : 5.25 % |
| BAM.PR.M | Perpetual-Discount | 2.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-30 Maturity Price : 23.29 Evaluated at bid price : 23.56 Bid-YTW : 5.08 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.Z | FixedReset | 47,161 | TD crossed 30,000 at 25.15. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.21 % |
| RY.PR.A | Deemed-Retractible | 43,581 | Nesbitt crossed 27,700 at 25.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-06-23 Maturity Price : 25.75 Evaluated at bid price : 25.75 Bid-YTW : 2.41 % |
| CM.PR.E | Perpetual-Premium | 39,400 | Desjardins crossed 29,400 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-05-30 Maturity Price : 25.25 Evaluated at bid price : 25.90 Bid-YTW : -23.86 % |
| MFC.PR.G | FixedReset | 32,954 | Nesbitt crossed 26,700 at 25.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 4.00 % |
| CM.PR.K | FixedReset | 32,069 | Scotia crossed 25,000 at 26.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 3.06 % |
| ENB.PR.F | FixedReset | 29,393 | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 3.56 % |
| There were 33 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.G | FixedFloater | Quote: 21.40 – 22.00 Spot Rate : 0.6000 Average : 0.4262 YTW SCENARIO |
| IAG.PR.F | Deemed-Retractible | Quote: 25.69 – 26.44 Spot Rate : 0.7500 Average : 0.6025 YTW SCENARIO |
| W.PR.H | Perpetual-Premium | Quote: 25.35 – 25.73 Spot Rate : 0.3800 Average : 0.2366 YTW SCENARIO |
| IAG.PR.E | Deemed-Retractible | Quote: 26.10 – 26.50 Spot Rate : 0.4000 Average : 0.2900 YTW SCENARIO |
| BMO.PR.J | Deemed-Retractible | Quote: 25.71 – 25.93 Spot Rate : 0.2200 Average : 0.1470 YTW SCENARIO |
| GWO.PR.H | Deemed-Retractible | Quote: 24.72 – 24.99 Spot Rate : 0.2700 Average : 0.1973 YTW SCENARIO |
[…] PerpetualDiscounts now yield 5.04%, equivalent to 6.55% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.45%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 210bp, a slight widening from the 200bp reported April 30. […]