Too soon to call it a trend … but there are interesting goings-on in the credit rating agency world:
The response to the Moody’s Investors Service downgrade of the biggest Nordic banks was rising bond and share prices.
The reaction is the latest sign that investors are paying less attention to the views of rating companies and relying more on their own analysis to determine whether to buy or sell.
…
Denmark, which is bringing its proposals to the European Parliament, says ratings often don’t reflect credit risks. Measures to improve the industry include a plan to cut reliance on ratings for both investors and within financial regulation, the Business Ministry in Copenhagen said May 21. The intention is also to make it easier for investors and issuers to demand compensation from ratings companies that fail to do their job properly, the ministry said.In Denmark, banks have started firing Moody’s after winning assurances from some of the country’s biggest investors that the opinions of ratings companies hold limited value. Nykredit A/S, Denmark’s biggest mortgage lender and Europe’s largest issuer of covered bonds backed by home loans, terminated its contract with Moody’s in April, citing its “volatile” views.
There’s nothing in the article about the potential for investors and issuers to demand compensation from investment managers that fail to do their job properly – what a surprise! Assurances from large investors that opinions of ratings companies hold limited value hold limited value – what else are they going to say?
In Greek news:
The New Democracy party in Greece, which supports the austerity measures imposed by the European Union, came first in all six opinion polls published on May 26 as campaigning continued for the country’s general election on June 17.
Party leader Antonis Samaras sought to illustrate the consequences of a euro exit, saying Greek incomes, bank deposits and property values would lose at least half their value within days, while food prices would rise by a quarter.
Hmmm … maybe it will help him win. Maybe. And maybe it will also accellerate the bank run. Maybe.
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets off 2bp and DeemedRetractibles down 6bp. Volatility was average. Volume remained light.
| 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 | 0.0000 % | 2,473.6 |
| FixedFloater | 4.50 % | 3.86 % | 30,406 | 17.55 | 1 | -0.0474 % | 3,501.5 |
| Floater | 2.92 % | 2.94 % | 67,033 | 19.82 | 3 | 0.0000 % | 2,670.8 |
| OpRet | 4.80 % | 2.83 % | 41,115 | 1.05 | 5 | -0.0155 % | 2,500.4 |
| SplitShare | 5.25 % | -2.59 % | 50,770 | 0.55 | 4 | 0.2582 % | 2,719.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0155 % | 2,286.4 |
| Perpetual-Premium | 5.45 % | 1.77 % | 73,681 | 0.62 | 25 | 0.0352 % | 2,228.1 |
| Perpetual-Discount | 5.09 % | 5.09 % | 80,884 | 15.15 | 8 | 0.1395 % | 2,437.8 |
| FixedReset | 5.06 % | 3.18 % | 197,610 | 4.54 | 69 | -0.0152 % | 2,391.9 |
| Deemed-Retractible | 4.99 % | 3.75 % | 158,876 | 1.89 | 45 | -0.0649 % | 2,310.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.H | FixedReset | -1.21 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 4.57 % |
| BNS.PR.N | Deemed-Retractible | -1.05 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-29 Maturity Price : 26.00 Evaluated at bid price : 26.48 Bid-YTW : 2.89 % |
| BAM.PR.N | Perpetual-Discount | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 22.97 Evaluated at bid price : 23.40 Bid-YTW : 5.13 % |
| IGM.PR.B | Perpetual-Premium | 1.36 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 5.18 % |
| NA.PR.P | FixedReset | 1.49 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 26.60 Bid-YTW : 2.91 % |
| FBS.PR.C | SplitShare | 1.86 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-12-15 Maturity Price : 10.00 Evaluated at bid price : 10.95 Bid-YTW : -10.09 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.C | FixedReset | 58,255 | National crossed 50,000 at 25.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.53 Evaluated at bid price : 25.80 Bid-YTW : 2.85 % |
| MFC.PR.I | FixedReset | 44,400 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.88 Bid-YTW : 4.40 % |
| ENB.PR.H | FixedReset | 39,515 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.19 Evaluated at bid price : 25.30 Bid-YTW : 3.45 % |
| BNS.PR.N | Deemed-Retractible | 36,425 | RBC crossed 25,000 at 26.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-29 Maturity Price : 26.00 Evaluated at bid price : 26.48 Bid-YTW : 2.89 % |
| TRP.PR.B | FixedReset | 33,135 | National crossed 25,000 at 25.34. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-29 Maturity Price : 23.46 Evaluated at bid price : 25.27 Bid-YTW : 2.58 % |
| SLF.PR.D | Deemed-Retractible | 27,623 | RBC bought 16,900 from anonymous at 16,900. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 6.04 % |
| There were 18 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| FBS.PR.C | SplitShare | Quote: 10.95 – 11.44 Spot Rate : 0.4900 Average : 0.3570 YTW SCENARIO |
| BAM.PR.M | Perpetual-Discount | Quote: 23.36 – 23.70 Spot Rate : 0.3400 Average : 0.2343 YTW SCENARIO |
| IAG.PR.F | Deemed-Retractible | Quote: 25.90 – 26.30 Spot Rate : 0.4000 Average : 0.2982 YTW SCENARIO |
| BAM.PR.G | FixedFloater | Quote: 21.10 – 21.48 Spot Rate : 0.3800 Average : 0.2967 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 25.55 – 25.76 Spot Rate : 0.2100 Average : 0.1398 YTW SCENARIO |
| MFC.PR.F | FixedReset | Quote: 24.30 – 24.49 Spot Rate : 0.1900 Average : 0.1272 YTW SCENARIO |