Where’s all those US dollars pulled out of Europe by MMFs gone? Canada and Japan:
The latest survey from Fitch Ratings found U.S. money market exposures to Canadian and Japanese banks in May increased to more than 22 per cent of the $638-billion (U.S.) of assets under management. A year ago, they represented just 13 per cent, and in 2008, less than 5 per cent. Canada’s Bank of Nova Scotia and National Australia Bank made Fitch’s top three list of banks that drink deepest from the money market pool. In 2010, France’s BNP Paribas and Credit Agricole topped the bill, while U.S. behemoths Citigroup and JPMorgan led the rankings in 2007.
It’s possible Europe will get a supranational bank regulator:
Bank supervision in the European Union would be shifted to a European supervisor and government would seek approval from other countries to run budget deficits, according to a broad outline of the plan prepared by European Council president Herman Van Rompuy.
His seven-page report, titled Towards a Genuine Economic and Monetary Union, presents a new design that could prevent another crisis for the euro zone, the embattled 17-member monetary union.
There’s more advocacy of inflation as panacea:
As Mr. Krugman says in his New York Times blog: “What to do? One answer is fiscal policy: let governments temporarily run big enough deficits to maintain more or less full employment, while the private sector repairs its balance sheets. The other answer is unconventional monetary policy to get around the problem of the zero lower bound: maybe unconventional asset purchases, but the obvious answer is to try to create expected inflation, so as to reduce real rates.”
Meanwhile, the Spanish barber is getting a very close shave:
Spain is poised for a downgrade to junk by Moody’s Investors Service, according to investors who sent the cost of default insurance for the nation’s biggest banks and companies close to record highs.
Credit-default swaps on Banco Santander SA (SAN), the country’s biggest bank, jumped 23 percent this quarter to 454 basis points, compared with an all-time high of 474 in November. Banco Bilbao Vizcaya Argentaria SA (BBVA) rose 26 percent to 477, approaching May’s record 516, while phone company Telefonica SA (TEF) surged 70 percent to a record 540 basis points.
Moody’s downgraded 28 Spanish banks yesterday including a two-step cut for Banco Santander and a three-level reduction for BBVA, a week after it lowered Spain’s rating to Baa3, on the cusp of junk. The country remains on review for another cut by New York-based Moody’s after it sought a 100 billion-euro ($125 billion) international bailout for its banks and on speculation losses from its real estate industry will worsen.
Prop traders continue to form hedge funds:
Former Royal Bank of Canada and Bank of America Corp. proprietary traders plan to start a mortgage hedge fund at New York-based Tandem Global Management LP next month, joining at least half-a-dozen money managers wagering that home-loan bonds will rise in value.
Stuart Lippman, 40, chief investment officer of the Tandem Mortgage Opportunity Fund, was formerly a managing director and senior portfolio manager in the non-agency mortgage credit business of Royal Bank of Canada’s proprietary trading group, according to a presentation dated May 25 that was obtained by Bloomberg News. David Liu, 43, chief strategist and portfolio manager at the new fund, managed portfolios in the global proprietary trading group at Bank of America.
Canadian banks didn’t get into much trouble during the Credit Crunch, but they’re working on it:
Bank of Montreal is laying the groundwork for more expansion in the United States, signalling to investors that it may buy more lenders south of the border and build additional branches to feed its massive North American growth spurt.
…
Much as TD has, BMO turned to the U.S. in search of growth as competition for profits in the Canadian market continues to grind away at margins for the country’s biggest lenders.BMO now has roughly 650 branches in the U.S. to go with about 900 locations in Canada. It has more locations in Milwaukee than in Montreal, and more branches in Chicago than Toronto.
Soon Canada will have the same bank-assets-to-GDP ratio that Iceland had!
I understand a city is building a ferris wheel on its waterfront. What kind of dumb-ass mayor would build a ferris wheel on the waterfront?
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets up 1bp and DeemedRetractibles off 10bp. Volatility was negligible. Volume was average.
| 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 | 0.3824 % | 2,304.0 |
| FixedFloater | 4.55 % | 3.92 % | 20,823 | 17.40 | 1 | 0.5775 % | 3,468.3 |
| Floater | 3.16 % | 3.15 % | 70,136 | 19.33 | 3 | 0.3824 % | 2,487.7 |
| OpRet | 4.80 % | 2.51 % | 35,491 | 0.99 | 5 | 0.0154 % | 2,515.1 |
| SplitShare | 5.26 % | -7.57 % | 43,145 | 0.48 | 4 | 0.2287 % | 2,722.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0154 % | 2,299.9 |
| Perpetual-Premium | 5.42 % | 3.67 % | 84,924 | 0.55 | 27 | 0.0415 % | 2,240.0 |
| Perpetual-Discount | 5.05 % | 5.04 % | 117,261 | 15.41 | 7 | 0.1007 % | 2,453.0 |
| FixedReset | 5.04 % | 3.10 % | 192,323 | 4.23 | 71 | 0.0118 % | 2,399.4 |
| Deemed-Retractible | 5.01 % | 3.83 % | 143,003 | 2.64 | 45 | -0.0964 % | 2,308.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.T | FixedReset | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-26 Maturity Price : 23.26 Evaluated at bid price : 25.26 Bid-YTW : 3.59 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNA.PR.C | SplitShare | 115,450 | Nesbitt crossed 102,600 at 22.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 6.32 % |
| IAG.PR.G | FixedReset | 95,252 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.08 Bid-YTW : 4.22 % |
| RY.PR.B | Deemed-Retractible | 88,400 | Desjardins crossed 51,300 at 25.71 and 26,000 at 25.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.83 Bid-YTW : 3.74 % |
| TD.PR.O | Deemed-Retractible | 66,074 | Desjardins crossed 38,900 at 25.88; TD crossed 24,700 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-31 Maturity Price : 25.50 Evaluated at bid price : 25.83 Bid-YTW : 3.15 % |
| CM.PR.G | Perpetual-Premium | 65,199 | TD crossed 50,000 at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-26 Maturity Price : 25.50 Evaluated at bid price : 25.55 Bid-YTW : -3.07 % |
| RY.PR.P | FixedReset | 56,560 | National crossed 55,000 at 26.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.45 Bid-YTW : 3.01 % |
| There were 29 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| HSB.PR.D | Deemed-Retractible | Quote: 25.37 – 25.72 Spot Rate : 0.3500 Average : 0.2368 YTW SCENARIO |
| CM.PR.M | FixedReset | Quote: 26.73 – 27.04 Spot Rate : 0.3100 Average : 0.2000 YTW SCENARIO |
| W.PR.J | Perpetual-Premium | Quote: 25.45 – 25.75 Spot Rate : 0.3000 Average : 0.1973 YTW SCENARIO |
| BAM.PR.R | FixedReset | Quote: 25.83 – 26.39 Spot Rate : 0.5600 Average : 0.4638 YTW SCENARIO |
| CIU.PR.B | FixedReset | Quote: 26.80 – 27.10 Spot Rate : 0.3000 Average : 0.2068 YTW SCENARIO |
| CM.PR.K | FixedReset | Quote: 26.21 – 26.45 Spot Rate : 0.2400 Average : 0.1560 YTW SCENARIO |