May 7, 2012

France has a new president:

Francois Hollande defeated French President Nicolas Sarkozy as voters handed control of the second-biggest European economy to the Socialists for the first time in 17 years.

The 57-year-old Hollande got about 52 percent against about 48 percent for Sarkozy, according to estimates by four pollsters. The campaign isn’t over. France elects its lower house of parliament in five weeks, prompting calls from backers of both candidates to keep fighting.

While Socialists stand ready to dominate policy making for the first time since 1993 — holding both the presidency and the Cabinet — bond yields suggest Hollande may maintain market confidence. Ten-year French debt yields 124 basis points more than comparable German securities. That’s down from 145 basis points after he won the first round April 22 and lower than the 133 basis points at the start of the year.

Concern of a Franco-German cleavage undermining economic policy making in the euro region is “exaggerated,” Morgan Stanley chief economist Joachim Fels wrote in a note today.

Greek politics is a Gordian knot – and that’s scary!

New Democracy leader Antonis Samaras began trying to put together a government after a Greek election that raised fresh questions about the country’s euro membership and triggered the biggest stock-market rout in four years.

Samaras was given three days from today to put together a coalition from an assembly split down the middle on whether to renege on the terms of bailout agreements negotiated since May 2010. New Democracy and the socialist Pasok party, rivals until the country’s crisis threw them into a national government together this year, are two seats short of the 151 seats needed for a parliamentary majority.

New Democracy led in the election, receiving 19 percent of the vote and 108 seats in the 300-seat Parliament. Syriza got 17 percent to score 52 seats; Pasok came third with 13 percent and 41 seats.

Should Samaras fail to get the necessary number of seats, the onus on forming a government will fall to bailout opponent Syriza, a coalition of left parties, which has vowed to cancel the bailout terms. After that, Pasok takes the baton.

If the nine-day process fails to yield a coalition, President Papoulias may then try to broker a government of national unity. Should that process fail, new elections may be a possibility.

And, in fact, there is now a report that the baton has passed to the anti-austerity Syriza party:

Greek political leaders will meet for a second day today in a bid to form a government, with the mandate for the task being handed to the second-biggest party after New Democracy leader Antonis Samaras said he failed to forge agreement after an election that raised questions about the country’s euro membership.

Samaras gave up his bid after nearly six hours of talks in Athens yesterday. The attempt to form a government will pass to Alexis Tsipras, the head of Syriza, the second biggest party, which has vowed to cancel the bailout terms. Tsipras will see President Karolos Papoulias today at 2 p.m. Athens time.

As voters across Europe rebel against austerity measures imposed to stamp out the debt crisis, Citigroup Inc. said yesterday the risk of Greece leaving the euro by the end of 2013 has risen as high as 75 percent. The election on May 6 propelled into Parliament a party that wants to put land mines on the border with Turkey and another that wants Germany, the country’s biggest donor, to pay World War II reparations. The benchmark ASE Stock index plunged 6.7 percent in Athens yesterday, its biggest drop in six months.

YLO released its results a day early:

Yellow Media Inc. (YLO-T0.100.0111.11%) reported a first-quarter loss of $2.9-billion as the struggling directory publisher wrote down the value of its assets.

The company also cancelled its annual meeting planned for Tuesday in Montreal after it said the number of shareholder votes received would not be enough to reach quorum.

Farcical, but more to the point is that print revenues declined more than expected and digital substitution was lower than expected.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums losing 12bp, FixedResets up 3bp and DeemedRetractibles gaining 6bp. Volatility was minimal, with no themes apparent. Volume was quite low.

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 0.2561 % 2,512.1
FixedFloater 4.48 % 3.84 % 30,418 17.67 1 -2.7064 % 3,519.7
Floater 2.87 % 2.89 % 55,724 19.99 3 0.2561 % 2,712.4
OpRet 4.76 % 2.69 % 51,818 1.11 5 -0.1452 % 2,507.5
SplitShare 5.24 % 4.74 % 63,956 0.61 4 -0.1432 % 2,696.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1452 % 2,292.9
Perpetual-Premium 5.43 % -2.51 % 77,625 0.15 25 -0.1208 % 2,231.0
Perpetual-Discount 5.08 % 5.11 % 90,682 15.23 8 -0.4312 % 2,436.2
FixedReset 5.03 % 3.02 % 187,307 2.15 68 0.0349 % 2,403.1
Deemed-Retractible 4.94 % 3.53 % 180,410 1.42 45 0.0617 % 2,331.0
Performance Highlights
Issue Index Change Notes
BAM.PR.G FixedFloater -2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-07
Maturity Price : 22.12
Evaluated at bid price : 21.21
Bid-YTW : 3.84 %
W.PR.H Perpetual-Premium -1.55 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 3.64 %
BAM.PR.M Perpetual-Discount -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-07
Maturity Price : 22.86
Evaluated at bid price : 23.31
Bid-YTW : 5.13 %
BAM.PR.C Floater 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-07
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 2.90 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.X FixedReset 75,501 Desjardins crossed 75,000 at 26.64.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.63
Bid-YTW : 2.91 %
CM.PR.M FixedReset 62,600 TD crossed blocks of 35,000 and 23,600, both at 27.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.06
Bid-YTW : 2.75 %
RY.PR.Y FixedReset 60,301 RBC crossed 57,000 at 26.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-24
Maturity Price : 25.00
Evaluated at bid price : 26.81
Bid-YTW : 3.03 %
BNS.PR.Z FixedReset 54,673 Desjardins crossed 49,300 at 25.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 3.16 %
BMO.PR.Q FixedReset 50,101 Desjardins sold 47,900 to anonymous at 25.65.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.61
Bid-YTW : 2.91 %
GWO.PR.P Deemed-Retractible 47,915 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 5.08 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.A Deemed-Retractible Quote: 24.15 – 24.90
Spot Rate : 0.7500
Average : 0.4373

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 5.14 %

BAM.PR.G FixedFloater Quote: 21.21 – 21.86
Spot Rate : 0.6500
Average : 0.4013

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-07
Maturity Price : 22.12
Evaluated at bid price : 21.21
Bid-YTW : 3.84 %

IAG.PR.E Deemed-Retractible Quote: 25.85 – 26.47
Spot Rate : 0.6200
Average : 0.4443

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 5.53 %

W.PR.H Perpetual-Premium Quote: 25.40 – 25.75
Spot Rate : 0.3500
Average : 0.2300

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 3.64 %

BAM.PR.M Perpetual-Discount Quote: 23.31 – 23.64
Spot Rate : 0.3300
Average : 0.2147

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-07
Maturity Price : 22.86
Evaluated at bid price : 23.31
Bid-YTW : 5.13 %

CU.PR.B Perpetual-Premium Quote: 25.81 – 26.08
Spot Rate : 0.2700
Average : 0.1848

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-01
Maturity Price : 25.00
Evaluated at bid price : 25.81
Bid-YTW : -7.97 %

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