Sorry, folks! Not much today!
The average yield over similar-duration Treasuries on AAA securities backed by subprime or second mortgages was at 6.23 percentage points yesterday, the highest since the last week of April, according to Lehman index data. The spread rose as high as 7.52 percentage points on May 9, according to the New York-based securities firm’s index.
Renewed investor demand remains strong for the types of AAA rated subprime-mortgage bonds that are the first to be repaid with principal returned from the underlying loans, “with little price discovery in other tranche types,” according to a report yesterday from Countrywide Financial Corp. analysts including Anand Bhattacharya and Bill Berliner.
The ABX-HE-AAA 07-2 subprime index fell as low as 50.67 in March, according to administrator Markit Group Ltd. New ABX indexes created last month and tied to the second-to-last-to-be- repaid AAA classes have fallen to record lows for each six-month ABX series, with the latest declining from a high of 70 to 57.72.
There are rumours of a cosmetic change in rating indicators:
Regulators’ plans to add a letter to credit ratings of asset-backed debt may constrict the $4.6 trillion market and choke off consumer credit at a time when Federal Reserve Chairman Ben Bernanke wants more lending to bolster the economy.
The U.S. Securities and Exchange Commission may recommend this week that Moody’s Investors Service, Standard & Poor’s and Fitch Ratings include a new designation to the scale created by John Moody in 1909, according to people familiar with the plans.
The sad part is that some people actually think it matters.
Central Banks of all descriptions, not just the Bank of Canada, have remembered inflation.
The BoC’s decision not to move KILLED the front end of the market today, with DEX reporting 2-Years +31bp to 3.30%, 5s +23bp to 3.52%, 7s +18bp to 3.62% and 10s +12bp to 3.84%. Long corporates are still in the 6.05% neighborhood (about 190bp over Canadas); Interest-equivalent Perpetual Discounts are now about at 8.12% so spreads are about +207bp … a modest widening.
| 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 | 4.15% | 4.16% | 53,542 | 17.1 | 1 | -0.0394% | 1,112.8 |
| Fixed-Floater | 4.92% | 4.68% | 61,693 | 16.04 | 7 | -0.0361% | 1,016.6 |
| Floater | 4.04% | 4.10% | 64,425 | 17.13 | 2 | -0.2269% | 934.0 |
| Op. Retract | 4.83% | 1.98% | 87,145 | 2.84 | 15 | -0.0742% | 1,057.8 |
| Split-Share | 5.27% | 5.50% | 70,603 | 4.19 | 15 | +0.0844% | 1,054.4 |
| Interest Bearing | 6.08% | 6.06% | 47,763 | 3.79 | 3 | -0.3304% | 1,120.1 |
| Perpetual-Premium | 5.85% | 5.77% | 399,530 | 10.65 | 13 | -0.0503% | 1,023.4 |
| Perpetual-Discount | 5.73% | 5.80% | 224,725 | 14.17 | 59 | -0.5862% | 913.9 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| GWO.PR.I | PerpetualDiscount | -2.8627% | Now with a pre-tax bid-YTW of 5.63% based on a bid of 20.02 and a limitMaturity. |
| IAG.PR.A | PerpetualDiscount | -2.7282% | Now with a pre-tax bid-YTW of 5.88% based on a bid of 19.61 and a limitMaturity. |
| BNS.PR.M | PerpetualDiscount | -1.9560% | Now with a pre-tax bid-YTW of 5.70% based on a bid of 20.05 and a limitMaturity. |
| BNS.PR.L | PerpetualDiscount | -1.8618% | Now with a pre-tax bid-YTW of 5.70% based on a bid of 20.03 and a limitMaturity. |
| CM.PR.J | PerpetualDiscount | -1.7653% | Now with a pre-tax bid-YTW of 6.04% based on a bid of 18.92 and a limitMaturity. |
| GWO.PR.G | PerpetualDiscount | -1.7582% | Now with a pre-tax bid-YTW of 5.83% based on a bid of 22.35 and a limitMaturity. |
| BCE.PR.Z | FixFloat | -1.7023% | |
| RY.PR.A | PerpetualDiscount | -1.6288% | Now with a pre-tax bid-YTW of 5.64% based on a bid of 19.93 and a limitMaturity. |
| PWF.PR.L | PerpetualDiscount | -1.5625% | Now with a pre-tax bid-YTW of 5.87% based on a bid of 22.05 and a limitMaturity. |
| BAM.PR.B | Floater | -1.4762% | |
| SLF.PR.C | PerpetualDiscount | -1.2994% | Now with a pre-tax bid-YTW of 5.65% based on a bid of 19.75 and a limitMaturity. |
| BMO.PR.J | PerpetualDiscount | -1.2438% | Now with a pre-tax bid-YTW of 5.72% based on a bid of 19.85 and a limitMaturity. |
| POW.PR.D | PerpetualDiscount | -1.1457% | Now with a pre-tax bid-YTW of 5.88% based on a bid of 21.57 and a limitMaturity. |
| SLF.PR.E | PerpetualDiscount | -1.0521% | Now with a pre-tax bid-YTW of 5.71% based on a bid of 19.75 and a limitMaturity. |
| BAM.PR.K | Floater | +1.0396% | |
| MFC.PR.C | PerpetualDiscount | +1.2107% | Now with a pre-tax bid-YTW of 5.41% based on a bid of 20.90 and a limitMaturity. |
| BCE.PR.G | FixFloat | +1.3423% | |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| BAM.PR.K | Floater | 185,303 | TD crossed 40,000 at 20.50. |
| RY.PR.A | PerpetualDiscount | 141,347 | Now with a pre-tax bid-YTW of 5.64% based on a bid of 19.93 and a limitMaturity. |
| CM.PR.H | PerpetualDiscount | 74,707 | Now with a pre-tax bid-YTW of 5.94% based on a bid of 20.52 and a limitMaturity. |
| RY.PR.W | PerpetualDiscount | 69,215 | Now with a pre-tax bid-YTW of 5.60% based on a bid of 22.08 and a limitMaturity. |
| CM.PR.I | PerpetualDiscount | 65,765 | Now with a pre-tax bid-YTW of 6.03% based on a bid of 19.80 and a limitMaturity. |
There were twenty-six other index-included $25-pv-equivalent issues trading over 10,000 shares today.
[…] started off slowly in June, but two bursts of activity from June 10-13 (when spreads started widening) and June 27-30 brought portfolio turnover up to about […]