Great news! At long last, high-earning Britons will pay their fair share:
U.K. Prime Minister David Cameron said his government will announce additional measures to increase taxes on the rich, while ruling out a so-called mansion tax wanted by his Liberal Democrat coalition partners.
“We are going to take further action to make sure that the richest people in our country pay their fair share towards deficit reduction,” Cameron told the BBC’s “Andrew Marr Show” today as his Conservative Party began its annual conference in Birmingham, central England. He said he didn’t believe that people who saved and bought large houses should be hit “every year with a massive great tax. That’s not going to happen.”
…
The leader of the opposition Labour Party, Ed Miliband, last week used his own keynote conference speech to accuse Cameron of “writing a check to each and every millionaire in Britain for 40,000 pounds” and pledged to keep the income-tax rate at 50 percent if Labour takes power in 2015. He said Labour is now the party best able to represent people of all backgrounds and incomes.Two polls published today showed Labour extending its lead following its conference. A YouGov Plc (YOU) poll in the Sunday Times found 45 percent of respondents saying they would vote for Labour, 31 percent favoring the Conservatives and 8 percent backing the Liberal Democrats.
Detroit – a new IT hub?
General Motors Co. says it will hire as many as 1,500 workers to staff a new computer technology centre in the Detroit suburb of Warren, Mich.
GM is shifting computer work into the company from outside firms and plans to open four new technology centers in the U.S. Last month the company announced it would hire 500 people for a center in Austin, Tex.
S&P’s (and Egon Jones’) downgrade of the US is looking more justifiable all the time:
A polarised Washington that cannot find a way around the looming “fiscal cliff” is compounding economic uncertainty, freezing business investment and threatening growth, the IMF’s No. 2 official and its top-ranking American said on Monday.
In an interview with Reuters in Tokyo, IMF First Deputy Managing Director David Lipton said the United States needs to do more to show it is trying to address the expiring tax cuts and automatic spending reductions that will hit early next year unless Congress acts.
…
If nothing is done, U.S. tax increases and spending cuts worth $600-billion (U.S.), equivalent to 4 per cent of U.S. GDP, will take effect in fiscal 2013, Fitch Ratings has estimated.Taxes would rise in 2013 by an average of $3,500 per household for 90 per cent of Americans, the U.S. Tax Policy Center has said.
The IMF also warns of a potentially massive sale of bank assets:
The International Monetary Fund said European banks may need to sell as much as $4.5 trillion in assets through 2013 if policy makers fall short of pledges to stem the fiscal crisis, up 18 percent from its April estimate.
Failure to implement fiscal tightening or set up a single supervisory system in the timing agreed could force 58 European Union banks from UniCredit SpA (UCG) to Deutsche Bank AG (DBK) to shrink assets, the IMF said. That would hurt credit and crimp growth by 4 percentage points next year in Greece, Cyprus, Ireland, Italy, Portugal and Spain, Europe’s periphery.
They’re mulling over inflation linked debt in Singapore:
Singapore is considering issuing bonds that protect against inflation after price gains sent the cost of a public-housing apartment to a record S$1 million ($813,000) last month and made cars as expensive as U.S. homes.
Singapore’s consumer price index rose 3.9 percent in August from the year before, more than double the 1.7 percent rate in the U.S., the world’s biggest economy. Inflation in the island state averaged 5 percent for the past year. With the nation home to world’s highest proportion of millionaire households, the central bank is studying the feasibility of securities to help savers protect their funds from rising costs.
There’s a new wrinkle on crowding-out:
U.S. debt has shrunk to a six-year low relative to the size of the economy as homeowners, cities and companies cut borrowing, undermining rating companies’ downgrading of the nation’s credit rating.
Total indebtedness including that of federal and state governments and consumers has fallen to 3.29 times gross domestic product, the least since 2006, from a peak of 3.59 four years ago, according to data compiled by Bloomberg. Private- sector borrowing is down by $4 trillion to $40.2 trillion.
…
Consumer debt declined to $11.4 trillion at the end of the second quarter, from a peak of $12.7 trillion in 2008. The market for commercial paper, a form of short-term corporate IOUs, has shrunk to $975 billion from a record $2.22 trillion in July 2007, central bank data show.Net U.S. taxable debt issuance, which includes corporate, mortgage and Treasury securities, is forecast to fall to $821 billion in 2012, the least since 2000 and less than half the record $2.28 trillion in 2007, according to Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York.
Canada’s outlook according to the IMF worsened:
The International Monetary Fund is taking a dimmer view of Canada, cutting its economic forecasts and warning of the threats from the housing market and swollen consumer debt levels.
“In Canada, the key priority is to ensure that risks from the housing sector and increases in household debt remain well contained and do not create financial sector vulnerabilities,” the IMF said today in updated global projections that, over all, paint a bleak picture of the world in the post-crisis era.
…
The IMF trimmed its forecasts for economic growth in Canada – to 1.9 per cent this year and 2 per cent next, down in each case by 0.2 from earlier projections – and warned unemployment will remain stubbornly at 7.3 per cent.
LIBOR is becoming very narrowly based:
After being rigged by some of the world’s biggest financial institutions, the London interbank offered rate, the benchmark for more than $300 trillion of securities and loans, is now increasingly being set by a smaller group of banks.
Bank of America Corp., Citigroup Inc. (C), Bank of Tokyo Mitsubishi UFJ Ltd., Royal Bank of Canada, Sumitomo Mitsui Financial Group Inc. and Lloyds Banking Group Plc (LLOY)’s submissions have been used in setting the rate on an almost daily basis in the past four months, data compiled by Bloomberg show. Two years ago, none of the 18 designated lenders made it into every fixing of the measure, which excludes outliers by stripping out the four highest and lowest contributions.
…
Unsecured lending between banks — the activity Libor is designed to reflect — has dried up as institutions increasingly demand collateral before money changes hands or go to central banks for funds. As a result, banks’ reported borrowing costs have diverged, meaning the same group of lenders is dominating the middle ground where the benchmark is set.The gap between the highest and lowest submissions has widened from before the scandal, reaching an average 0.32 percentage point in the past four months, compared with 0.1 percentage point in the same period of 2011, data compiled by Bloomberg show.
I don’t understand why any banks participate. What’s in it for them, other than liability?
On a sort-of related note, I would imagine CHF and DKK LIBORs are getting pretty boring:
Royal Bank of Canada is imposing negative interest rates on some customers who hold Danish kroner and Swiss francs, joining U.S. rivals in charging depositors who seek refuge from the crisis-stricken euro.
Royal Bank, Canada’s largest lender, cited recent market conditions for the policy, which reverses the traditional practice of paying customers who deposit funds at a bank. State Street Corp. (STT) and Bank of New York Mellon Corp., two of the world’s biggest custody banks, have already disclosed plans to offer negative interest rates on those currencies.
Denmark and Switzerland have cut interest rates close to or below zero to keep the krone and franc from rising as investors flee the euro for safer havens, reflecting concern that the currency may break up.
Amidst all this, the Kansas City Fed suggests financial stress is receding:
The Kansas City Financial Stress Index (KCFSI) measured -0.50 in September, down from -0.40 in August. The KCFSI has now decreased over four consecutive months. This series of declines places the index at its lowest level since May of 2011.
The second table on the following page describes the contribution of each of the eleven variables comprising the KCFSI. Yield spreads suggest subdued financial stress as all seven of the spread variables contributed negatively to the index. Together, declines in yield spreads deducted 0.11 point from the index. The behavior of asset prices had a minimal effect on the KCFSI. Each of the asset price variables added or subtracted 0.01 point or less. Collectively, however, these variables increased the index by 0.01 point.
The 2012 Nobel Prize in Physics has been announced:
Serge Haroche and David J. Wineland have independently invented and developed methods for measuring and manipulating individual particles while preserving their quantum-mechanical nature, in ways that were previously thought unattainable.
The Nobel Laureates have opened the door to a new era of experimentation with quantum physics by demonstrating the direct observation of individual quantum particles without destroying them. For single particles of light or matter the laws of classical physics cease to apply and quantum physics takes over. But single particles are not easily isolated from their surrounding environment and they lose their mysterious quantum properties as soon as they interact with the outside world. Thus many seemingly bizarre phenomena predicted by quantum physics could not be directly observed, and researchers could only carry out thought experiments that might in principle manifest these bizarre phenomena.
Through their ingenious laboratory methods Haroche and Wineland together with their research groups have managed to measure and control very fragile quantum states, which were previously thought inaccessible for direct observation. The new methods allow them to examine, control and count the particles.
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums down 9bp, FixedResets off 4bp and DeemedRetractibles gaining 7bp. There was very little volatility. Volume was below 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 | -0.4770 % | 2,428.1 |
| FixedFloater | 4.28 % | 3.66 % | 34,730 | 17.91 | 1 | 0.4525 % | 3,720.2 |
| Floater | 3.02 % | 3.04 % | 58,258 | 19.65 | 3 | -0.4770 % | 2,621.7 |
| OpRet | 4.63 % | -1.23 % | 62,506 | 0.64 | 4 | 0.3637 % | 2,568.3 |
| SplitShare | 5.43 % | 4.98 % | 73,276 | 4.52 | 3 | -0.0264 % | 2,825.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3637 % | 2,348.5 |
| Perpetual-Premium | 5.30 % | 1.98 % | 90,423 | 0.37 | 27 | -0.0921 % | 2,299.9 |
| Perpetual-Discount | 5.00 % | 4.88 % | 54,249 | 15.50 | 4 | -0.1225 % | 2,588.8 |
| FixedReset | 4.98 % | 3.05 % | 189,252 | 3.81 | 73 | -0.0392 % | 2,436.3 |
| Deemed-Retractible | 4.94 % | 3.45 % | 119,120 | 0.85 | 46 | 0.0671 % | 2,380.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.C | Floater | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-10-09 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 3.05 % |
| FTS.PR.E | OpRet | 1.59 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.88 Bid-YTW : -1.23 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CU.PR.C | FixedReset | 260,210 | National crossed 99,700 at 26.10; RBC crossed blocks of 75,000 and 74,600 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 3.18 % |
| BAM.PR.X | FixedReset | 119,558 | Nesbitt crossed 111,300 at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-10-09 Maturity Price : 23.24 Evaluated at bid price : 25.17 Bid-YTW : 3.30 % |
| TD.PR.I | FixedReset | 66,950 | TD crossed 58,800 at 26.73. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.70 Bid-YTW : 2.20 % |
| SLF.PR.F | FixedReset | 52,400 | RBC crossed 50,000 at 26.42. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.38 Bid-YTW : 2.82 % |
| ENB.PR.N | FixedReset | 38,267 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-10-09 Maturity Price : 23.21 Evaluated at bid price : 25.35 Bid-YTW : 3.86 % |
| BMO.PR.P | FixedReset | 38,200 | Scotia crossed 24,000 at 26.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.85 Bid-YTW : 2.48 % |
| There were 26 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IGM.PR.B | Perpetual-Premium | Quote: 26.77 – 28.70 Spot Rate : 1.9300 Average : 1.4183 YTW SCENARIO |
| BAM.PF.B | FixedReset | Quote: 25.20 – 25.40 Spot Rate : 0.2000 Average : 0.1237 YTW SCENARIO |
| HSB.PR.E | FixedReset | Quote: 26.72 – 26.95 Spot Rate : 0.2300 Average : 0.1581 YTW SCENARIO |
| RY.PR.A | Deemed-Retractible | Quote: 25.77 – 25.97 Spot Rate : 0.2000 Average : 0.1350 YTW SCENARIO |
| RY.PR.X | FixedReset | Quote: 26.97 – 27.19 Spot Rate : 0.2200 Average : 0.1592 YTW SCENARIO |
| ELF.PR.H | Perpetual-Premium | Quote: 25.55 – 25.85 Spot Rate : 0.3000 Average : 0.2401 YTW SCENARIO |