Christine Harper of Bloomberg brings forward an interesting view on the effect of Basel III:
Investors such as Joshua Siegel, founder and managing principal at New York-based StoneCastle Partners LLC, see bigger changes at the other end of the spectrum. Small banks will seek mergers because their management teams are aging and new regulations are too costly to bear, he says.
“If you need one major overriding theme of the industry in the next three, five, seven, 10 years: massive consolidation, thousands of banks,” says Siegel, whose firm managed $5.1 billion as of the end of last year and invests in small banks. In the U.S., “I do see probably anywhere from 2,000 to 4,000 banks being swallowed up, and what you’ll see then is a more- concentrated system.”
JPMorgan’s Dimon, a critic of regulations he views as unnecessary or excessive, has recently touted the benefits. He told Citigroup analysts this month that new rules will help banks such as JPMorgan, the largest in the U.S., win market share from smaller competitors, the analysts wrote in a report.
In Dimon’s view, they wrote, the changes will “make it more expensive and tend to make it tougher for smaller players to enter the market, effectively widening JPM’s ‘moat.’”
The new rules, it turns out, may be doing more to shield banks from competition than to make them safer.
US state pension funds are getting desperate; some of them may start blowing their brains out on hedge funds:
South Carolina’s $27 billion pension dove into private equity and hedge funds in 2008, hoping to increase returns that were at the bottom tenth of public- employee retirement funds.
Five years and $1.2 billion in fees later, its annualized gain of 1.3 percent still trails the median among public pension-systems, according to data compiled by Wilshire Associates Inc. In neighboring Georgia, the $53.5 billion teachers’ pension buys only stocks and bonds. It paid money managers $119.5 million over the same period and its annualized returns of 2.95 percent were in the top quartile.
U.S. public pensions, confronting an $800 billion funding gap for promises to retirees and chasing 8 percent annual returns amid slow growth and historically low interest rates, have turned to riskier investments in private equity, hedge funds and real estate.
…
No state has rushed into the loosely regulated investment pools as South Carolina has. As of June 30, the pension had invested 56 percent of its portfolio with firms including Goldman Sachs Group Inc. (GS), Bridgewater Associates LP and Apollo Global Management LLC. (APO)
DBRS confirmed HSE.PR.A at Pfd-2(low) Stable:
Husky’s financial profile remained stable in 2012. Husky maintains debt-to-capital and debt-to-cash flow ratios below its targets of 25% and 1.5 times (x), respectively. Integrated operations provided a partial natural hedge against pricing volatility in North American upstream operations. A modest free cash flow deficit in 2012 was largely a result of increased capex spending. Similar free cash flow deficits are anticipated until 2014, when cash flow contributions from growth pillars – namely, the oil sands, Atlantic Canada and Asia-Pacific – commence. DBRS believes the Company’s current liquidity is sufficient to fund cash flow shortfalls over the near term with minimal impact on credit metrics.
Key challenges facing the Company include: (1) managing its high-cost, long-lead-time capital projects, as significant spending is anticipated to fund growth plans (Husky targets 5% to 8% production growth per year through 2017). Incremental cash flow from these projects is not expected in the near term, which could result in pressure on the balance sheet, particularly during periods of significant, prolonged pricing declines. (2) Production is highly weighted toward North American operations (97% at 2012), which subjects Husky to both volatile North American crude oil prices and continued depressed North American natural gas prices (31% of production in 2012). (3) Credit metrics at the high end of Husky’s target ranges are aggressive for the rating category. Should credit metrics deteriorate above 30% debt-to-capital and/or 2.0x debt-to-cash flow, either due to unsuccessful growth in production despite higher capital spending, or prolonged pricing declines, DBRS would consider taking negative rating action.
It was another mixed day for the Canadian preferred share market, with PerpetualPremiums off 2bp, FixedResets down 9bp and DeemedRetractibles gaining 5bp. Volatility was average. Volume was high.
And that’s a wrap for another month!
| 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 | 0.7800 % | 2,617.3 |
| FixedFloater | 4.08 % | 3.41 % | 24,272 | 18.48 | 1 | 0.0429 % | 3,990.5 |
| Floater | 2.54 % | 2.86 % | 81,170 | 20.04 | 5 | 0.7800 % | 2,826.0 |
| OpRet | 4.80 % | 2.19 % | 45,321 | 0.33 | 5 | 0.1391 % | 2,599.5 |
| SplitShare | 4.60 % | 4.49 % | 45,853 | 4.26 | 2 | -0.0998 % | 2,931.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1391 % | 2,377.0 |
| Perpetual-Premium | 5.25 % | 0.72 % | 88,944 | 0.09 | 29 | -0.0167 % | 2,352.7 |
| Perpetual-Discount | 4.83 % | 4.89 % | 130,263 | 15.59 | 5 | -0.1418 % | 2,649.8 |
| FixedReset | 4.91 % | 2.87 % | 282,685 | 3.71 | 78 | -0.0851 % | 2,493.2 |
| Deemed-Retractible | 4.87 % | 2.88 % | 142,660 | 0.24 | 44 | 0.0521 % | 2,442.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| VNR.PR.A | FixedReset | -1.05 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 26.47 Bid-YTW : 3.12 % |
| HSE.PR.A | FixedReset | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-28 Maturity Price : 23.73 Evaluated at bid price : 26.23 Bid-YTW : 2.97 % |
| BAM.PR.K | Floater | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-28 Maturity Price : 18.52 Evaluated at bid price : 18.52 Bid-YTW : 2.86 % |
| BAM.PR.C | Floater | 2.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-28 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 2.86 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| PWF.PR.S | Perpetual-Discount | 673,150 | New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-28 Maturity Price : 24.57 Evaluated at bid price : 24.96 Bid-YTW : 4.81 % |
| GWO.PR.N | FixedReset | 203,781 | National crossed blocks of 49,600 and 40,000 at 24.49; bought two blocks of 10,000 each from Nesbitt at 24.48; crossed 50,000 at the same price; and finally bought 10,000 from anonymous at the same price again. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 3.27 % |
| BNS.PR.L | Deemed-Retractible | 57,640 | Nesbitt crossed 49,000 at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-26 Maturity Price : 25.75 Evaluated at bid price : 26.10 Bid-YTW : -2.23 % |
| ENB.PR.A | Perpetual-Premium | 53,967 | National crossed 38,500 at 26.21. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.01 Bid-YTW : -38.62 % |
| ENB.PR.D | FixedReset | 35,350 | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.59 Bid-YTW : 3.49 % |
| MFC.PR.D | FixedReset | 32,696 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.35 Bid-YTW : 2.13 % |
| There were 43 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IAG.PR.G | FixedReset | Quote: 26.50 – 26.95 Spot Rate : 0.4500 Average : 0.2855 YTW SCENARIO |
| ENB.PR.H | FixedReset | Quote: 25.26 – 25.65 Spot Rate : 0.3900 Average : 0.2486 YTW SCENARIO |
| IAG.PR.E | Deemed-Retractible | Quote: 26.70 – 27.00 Spot Rate : 0.3000 Average : 0.2122 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 26.23 – 26.87 Spot Rate : 0.6400 Average : 0.5588 YTW SCENARIO |
| ENB.PR.A | Perpetual-Premium | Quote: 26.01 – 26.24 Spot Rate : 0.2300 Average : 0.1609 YTW SCENARIO |
| RY.PR.W | Perpetual-Premium | Quote: 25.44 – 25.68 Spot Rate : 0.2400 Average : 0.1715 YTW SCENARIO |