Wholesale funding? Schmolesale funding!
Investors are ignoring criticism from Standard & Poor’s that Svenska Handelsbanken AB (SHBA) is too reliant on short-term funding as bonds sold by the European Union’s best-capitalized bank rally.
Since S&P’s July 19 warning, the yield on Handelsbanken’s 4.194 percent perpetual bond eased to its lowest since the middle of June.Five-year credit default swaps on its senior unsecured debt were unchanged at 65 basis points, a few basis points lower than contracts on the governments of Japan and France, suggesting a smaller risk of default. The bank’s shares have gained 5.5 percent since the end of last week, beating a 2.5 percent gain in the 40-member Bloomberg index of European banks.
…
S&P said last week it may downgrade Handelsbanken’s AA-issuer rating unless the bank takes steps to wean itself off short-term wholesale funding. Swedish banks in general rely too much on short borrowing compared with their peers in the rest of the world, the rating company said.
…
Sweden’s biggest banks have spent the past few years building bigger reserves than their competitors elsewhere. Handelsbanken is now the best-capitalized major bank in the EU, with a core Tier 1 capital ratio of risk-weighted assets of 17.8 percent at the end of June. It was also Europe’s strongest lender and No. 11 globally on a Bloomberg Markets ranking in May that looked at measures such as capital ratios, non-performing assets and deposit-to-funding ratios.
It doesn’t look as if we’ll be paying off the debt incurred during the Great Recession any time soon:
The federal government posted a $2.7-billion deficit over the first two months of the fiscal year, which begins April 1. That compares to a $1.8-billion deficit during the same two months – April and May – the year before.
A manager at Merrill Lynch has gotten into trouble by attempting to train his staff for the world as it is, rather than the world as it might be in some alternate universe:
Three women are suing Merrill Lynch for gender discrimination, alleging that a former manager tried to train them using a book titled Seducing the Boys Club: Uncensored Tactics From a Woman at the Top.
The 2008 book includes handy tips like stocking your desk with candy, bringing in games “like boggle and checkers,” playing on men’s “masculine pride and natural instincts to protect the weaker sex,” as well as constant, unremitting flattery. (“It was also important to reinforce his hunk status,” is one piece of advice.)
I find it rather peculiar that all the European money is flowing into London and not so much to North America:
Voracious investor demand for the best London real estate is approaching record levels that could trigger a price crash in popular areas such as upmarket Bond Street, property experts said this week.
The luxury shopping strip that is home to Prada, Louis Vuitton and Cartier has ultra-low yields that mark it out as the most in-demand stretch of real estate in Europe.
The price of commercial property is dictated by the yield, which is the annual rent expressed as a percentage of a property’s value. Yields fall as investor demand increases and push up real estate prices.
The 2.75 per cent yield on Bond Street properties should fall to 2.25 per cent by the end of the year and could hit the world-record low of 1.75 per cent in 18 months, says David Hutchings, of property consultant Cushman & Wakefield, adding that the record was set by Taipei, Taiwan, in 2011.
It was a rough day for the Canadian preferred share market, with PerpetualDiscounts losing 44bp, FixedResets off 11bp and DeemedRetractibles down 26bp. A lengthy Performance Highlights table is almost entirely comprised of losers, dominated by Straight Perpetuals of various kinds. 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 | -0.1543 % | 2,595.3 |
| FixedFloater | 4.11 % | 3.40 % | 36,101 | 18.58 | 1 | 0.0433 % | 4,041.2 |
| Floater | 2.70 % | 2.88 % | 85,991 | 20.02 | 4 | -0.1543 % | 2,802.2 |
| OpRet | 4.59 % | 3.21 % | 87,687 | 0.82 | 3 | -0.1145 % | 2,631.1 |
| SplitShare | 4.70 % | 4.62 % | 59,341 | 4.18 | 6 | -0.5630 % | 2,948.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1145 % | 2,405.9 |
| Perpetual-Premium | 5.63 % | 4.93 % | 105,127 | 0.74 | 12 | -0.0795 % | 2,283.0 |
| Perpetual-Discount | 5.38 % | 5.42 % | 138,962 | 14.68 | 26 | -0.4388 % | 2,393.1 |
| FixedReset | 4.99 % | 3.64 % | 237,170 | 4.20 | 84 | -0.1113 % | 2,466.6 |
| Deemed-Retractible | 5.09 % | 4.53 % | 199,444 | 6.87 | 43 | -0.2625 % | 2,372.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| FTS.PR.J | Perpetual-Discount | -4.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 21.83 Evaluated at bid price : 22.16 Bid-YTW : 5.43 % |
| GWO.PR.Q | Deemed-Retractible | -2.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 5.68 % |
| GWO.PR.I | Deemed-Retractible | -1.64 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.20 Bid-YTW : 5.93 % |
| PWF.PR.K | Perpetual-Discount | -1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 22.85 Evaluated at bid price : 23.25 Bid-YTW : 5.33 % |
| BNA.PR.E | SplitShare | -1.57 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 4.94 % |
| BAM.PR.M | Perpetual-Discount | -1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 21.45 Evaluated at bid price : 21.45 Bid-YTW : 5.60 % |
| SLF.PR.H | FixedReset | -1.38 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 3.91 % |
| PWF.PR.P | FixedReset | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 23.09 Evaluated at bid price : 24.08 Bid-YTW : 3.45 % |
| TRP.PR.C | FixedReset | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 22.72 Evaluated at bid price : 23.36 Bid-YTW : 3.53 % |
| PWF.PR.L | Perpetual-Discount | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 5.44 % |
| GWO.PR.F | Deemed-Retractible | -1.10 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : -0.19 % |
| MFC.PR.F | FixedReset | 2.59 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 3.96 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| POW.PR.C | Perpetual-Premium | 55,600 | RBC crossed 50,000 at 25.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 0.13 % |
| PWF.PR.M | FixedReset | 44,050 | TD bought 11,900 from Scotia at 25.20, then crossed 22,000 at 25.22. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 3.80 % |
| BMO.PR.O | FixedReset | 30,000 | Nesbitt crossed 11,100 at 26.03. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.03 Bid-YTW : 2.77 % |
| TRP.PR.B | FixedReset | 29,296 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 22.80 Evaluated at bid price : 23.15 Bid-YTW : 3.26 % |
| POW.PR.D | Perpetual-Discount | 27,480 | RBC crossed 10,000 at 23.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-07-26 Maturity Price : 23.39 Evaluated at bid price : 23.65 Bid-YTW : 5.32 % |
| BMO.PR.M | FixedReset | 24,000 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.42 % |
| There were 32 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.K | Perpetual-Discount | Quote: 23.25 – 23.73 Spot Rate : 0.4800 Average : 0.2897 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 22.16 – 22.75 Spot Rate : 0.5900 Average : 0.4137 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 24.56 – 25.09 Spot Rate : 0.5300 Average : 0.3586 YTW SCENARIO |
| FTS.PR.H | FixedReset | Quote: 22.83 – 23.25 Spot Rate : 0.4200 Average : 0.2535 YTW SCENARIO |
| GWO.PR.R | Deemed-Retractible | Quote: 24.00 – 24.48 Spot Rate : 0.4800 Average : 0.3192 YTW SCENARIO |
| PWF.PR.H | Perpetual-Premium | Quote: 25.24 – 25.67 Spot Rate : 0.4300 Average : 0.2719 YTW SCENARIO |