May 29, 2008

Accrued Interest opines on the future of CDOs.

Naked Capitalism collects some opinions on credit conditions.

Bloomberg reports on LIBOR reporting problems.

Bloomberg reports on how OIS is overtaking LIBOR as a measure.

Lou Crandall comments (a long time ago) on how LIBOR overtook US T-Bills as a measure.

Jeffrey Frankel defends his thesis that low real interest rates cause commodities to rise.

Standard & Poor’s points out that sub-prime borrowers bought cheap houses, which have less volatile prices than expensive ones … the mortgage carry quickly becomes comparable to renting, no matter how far underwater you are.

Standard & Poor’s Ratings Services’ current ratings on the 2006 subprime U.S. residential mortgage-backed securities (RMBS) vintage reflect, in part, an assumed loss severity of 45%. That assumption includes our estimate that, based on our views on the current housing market environment, foreclosure costs and market value declines account for losses of 26.3% and 18.7%, respectively, in the loan balances of these mortgages. We project a 19% aggregate loss for subprime mortgages backing U.S. RMBS sold in 2006 based on assumptions for foreclosure and loss severity. The 19% assumption is the product of projected foreclosures of approximately 42% and the assumed loss severity of 45%.

Standard & Poor’s current house price decline assumption is 33.4%, which is a 72% increase over the maximum price decline of 19.4% observed to date (see table 1). We believe this assumption appropriately protects against forecasted price declines through the housing downturn.

Dates have been set for the redemption of FAL.PR.A & FAL.PR.H; the post has been updated.

Plans – well, rumours of plans, anyway – are moving forward for a CDS Clearinghouse. I have updated my most recent post on the issue.

For those fascinated with all aspects of the David Berry affair, I’ve had a look at the career of Cecilia Williams, Scotia’s compliance officer, and have updated the most recent relevant post.

In case you missed the announcements amidst the Bank Capitalization posts, note that RY.PR.K has been called for redemption and TD has a new Fixed Reset, 5+160 … and the argument about the structure’s merits rages on. It takes two to make a market!

Good volume on the day, with some nice sized blocks going through for some Operating Retractibles. Prices were down … surely, people can’t be selling straights to buy fixed-resets?

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.33% 4.34% 50,628 16.3 1 -0.0786% 1,113.7
Fixed-Floater 4.83% 4.64% 64,513 16.07 7 +0.4845% 1,035.9
Floater 4.03% 4.07% 62,575 17.20 2 +1.3074% 937.7
Op. Retract 4.83% 2.50% 89,958 2.71 15 -0.0374% 1,056.3
Split-Share 5.27% 5.40% 69,117 4.15 13 -0.0021% 1,058.9
Interest Bearing 6.13% 6.12% 52,229 3.81 3 -0.0997% 1,112.2
Perpetual-Premium 5.89% 5.12% 128,420 3.49 9 +0.1534% 1,025.1
Perpetual-Discount 5.67% 5.71% 291,078 14.31 63 -0.2370% 925.6
Major Price Changes
Issue Index Change Notes
SLF.PR.E PerpetualDiscount -1.4119% Now with a pre-tax bid-YTW of 5.56% based on a bid of 20.25 and a limitMaturity.
GWO.PR.H PerpetualDiscount -1.3158% Now with a pre-tax bid-YTW of 5.38% based on a bid of 22.50 and a limitMaturity.
RY.PR.G PerpetualDiscount -1.2309% Now with a pre-tax bid-YTW of 5.65% based on a bid of 20.06 and a limitMaturity.
SLF.PR.E PerpetualDiscount -1.0120% Now with a pre-tax bid-YTW of 5.48% based on a bid of 20.54 and a limitMaturity.
TD.PR.O PerpetualDiscount +1.0989% Now with a pre-tax bid-YTW of 5.45% based on a bid of 22.50 and a limitMaturity.
HSB.PR.C PerpetualDiscount +1.1156% Now with a pre-tax bid-YTW of 5.72% based on a bid of 22.66 and a limitMaturity.
CL.PR.B PerpetualPremium +1.4805% Now with a pre-tax bid-YTW of 1.97% based on a bid of 25.70 and a call 2008-6-28 at 25.75.
BAM.PR.K Floater +3.0985%  
Volume Highlights
Issue Index Volume Notes
GWO.PR.I PerpetualDiscount 265,200 Nesbitt crossed 40,000 at 21.00, then another 213,800 at the same price. Now with a pre-tax bid-YTW of 5.38% based on a bid of 20.92 and a limitMaturity.
TD.PR.N OpRet 150,000 Desjardins crossed two lots of 75,000 each, both at 26.10. Now with a pre-tax bid-YTW of 3.89% based on a bid of 26.01 and a softMaturity 2014-1-30 at 25.00.
CM.PR.A OpRet 106,494 TD crossed 44,300 at 26.10, then Desjardins crossed 50,000 at the same price. Now with a pre-tax bid-YTW of -3.94% based on a bid of 26.06 and a call 2008-6-28 at 25.75.
CM.PR.R OpRet 104,510 Nesbitt crossed 100,000 at 26.20. Now with a pre-tax bid-YTW of -6.44% based on a bid of 26.10 and a call 2008-6-28 at 25.75.
TD.PR.R PerpetualDiscount (for now!) 61,904 Scotia crossed 25,000 at 25.14. Now with a pre-tax bid-YTW of 5.69% based on a bid of 25.10 and a limitMaturity.

There were thirty-one other index-included $25-pv-equivalent issues trading over 10,000 shares today.

One Response to “May 29, 2008”

  1. […] Accrued Interest’s speculations on the future of leveraged fixed income (linked on PrefBlog yesterday) comes news that Deutsche Bank is creating REMICs: Deutsche Bank AG’s asset management […]

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