Golly, what a surprise:
Bank of England officials told currency traders it wasn’t improper to share impending customer orders with counterparts at other firms, a practice at the heart of a widening probe into alleged market manipulation, according to a person who has seen notes turned over to regulators.
A senior trader gave his notes from a private April 2012 meeting of currency dealers and two central bank staff members to the Financial Conduct Authority about six weeks ago because of mounting media coverage of the investigation, said the person, who asked not to be named while probes are under way.
Traders representing some of the world’s biggest banks told officials at the meeting that they shared information about aggregate orders before currency benchmarks were set, three people with knowledge of the discussion said. The officials said there wasn’t a policy on such communications and that banks should make their own rules, according to the people.
I don’t see anything wrong with sharing this information, anyway. To me, it’s all part of the ‘beat bankers up’ hysteria, led by people who act as if they do not understand what it is that institutional desks do – though I’m quite sure this is disingenuous.
It will be interesting to see how Danish mortgages turn out:
Denmark, which in 2010 became the first European nation to pass a law preventing bank bailouts, is now signaling it will take an equally hard line with its mortgage industry. The stance comes from a country whose $550 billion home-loan market — the world’s biggest per capita — is more than 1 1/2 times gross domestic product.
About a third of Danish mortgages are refinanced annually in bond auctions. The government has proposed a law that seeks to address refinancing risks by forcing bond investors to accept 12-month maturity extensions if an auction fails or if interest rates jump more than 5 percentage points.
The Danish mortgage industry’s size and systemic importance this week led Standard & Poor’s to conclude that the government would have to step in should auctions fail. According to the rating company, Denmark’s economy will already be in a crisis warranting some form of intervention if mortgage banks can’t sell their bonds.
From an investor’s perspective, the law brings a lot of wrong-way risk with it (i.e., bad news is correlated). What effect will this have on mortgage rates?
Crumby jobs number in the US:
Payrolls rose less than projected in January and the jobless rate unexpectedly dropped to the lowest level in more than five years, clouding the outlook for the U.S. economy and Federal Reserve.
The 113,000 gain in hiring fell short of the 180,000 advance that was the median forecast of economists surveyed by Bloomberg and followed a 75,000 increase the prior month, Labor Department data showed today in Washington. Unemployment declined to 6.6 percent, the least since October 2008, from 6.7 percent in December.
Contrariwise, the the Canadian number looked OK…
The Canadian economy added 29,400 jobs in January after a month-earlier drop, led by gains in self employment and in the public sector.
The employment gain and a drop in the number of people looking for work sent country’s jobless rate down two notches to 7 per cent in January. The increase comes after employers shed 44,000 positions in December, Statistics Canada said Friday.
… but has been criticized:
“The January Canadian jobs report was good on the headline but weak in the details,” said senior economist Krishen Rangasamy of National Bank Financial.
“The job gains were driven by self-employment and the number of paid jobs grew a meagre 1,000 as gains in government offset further declines in the private sector,” he added, referring to a loss of 14,000 jobs among corporations.
“After the weather wreaked havoc in the prior month, causing a massive 44,000 drop, employment bounced back in affected sectors such as agriculture, construction, and accommodation services.”
He cited the “more reliable” six-month moving average, which shows employment up 15,000 a month since August, with 12,000 of them in the private sector.
That, he added, is “not a bad performance, and consistent with the pick-up in economic growth in the second half of 2013.”
Meanwhile, the Toronto Exchange is losing subscribers:
TMX Group Inc. disclosed on Wednesday that there was an 8 per cent slump “in the average number of professional and equivalent real-time market data subscriptions to Toronto Stock Exchange and TSX Venture Exchange products.” That is by far the steepest drop in the past eight years, and takes the number down to 139,939 from 151,799 in 2012.
Maybe they’ll cut the price to increase subscriptions. Ha-ha.
The hot new topic is flexible exchange rates:
In October 2001, [Fed vice-governor nominee] Stanley Fischer traveled to the London School of Economics to speak on the lessons of his seven years battling turmoil in emerging markets as the International Monetary Fund’s No. 2 official.
Lecturing in the Old Theatre at the university where he studied in the 1960s, Fischer posed a question: What would he have done differently to thwart the Asian financial crisis of 1997-1998? Among his answers: Pushing harder for exchange-rate flexibility.
…
Emerging-market stocks and exchange rates have had the worst start to a year since 2010. Even so, said Dominic Wilson, chief markets economist at Goldman Sachs Group Inc. in New York, “currency weakness itself is unlikely to be as sharply disruptive as it was in the late 1990s.”That’s when Asian nations including South Korea and Thailand spent reserves trying to defend exchange-rate pegs, only to eventually devalue and seek IMF bailouts. As one currency after another became delinked from the U.S. dollar, investors attacked in waves that would culminate in Russia’s debt default and the collapse of Long Term Capital Management.
…
Following Fischer’s prescriptions, emerging markets have made other changes to ensure they are less vulnerable than they were in the late 1990s, [former IMF economist Eswar] Prasad said. Their external debt as a share of exports has fallen to 70 percent from about 160 percent in 1998; interest payments on foreign debt have declined to less than 3 percent of exports from 8 percent; and reserves as a percentage of total debt have doubled to more than 100 percent, according to Goldman Sachs.
… and it was also Tiff Macklem’s swan-song:
Since 1995, the target has been to achieve an annual total rate of inflation of 2 per cent – the midpoint of our control range of 1 to 3 per cent – as measured by the consumer price index (CPI). The target is reviewed jointly with the federal government approximately every five years, and was last renewed in 2011.3
To achieve that target, an essential component of our monetary policy framework is a flexible exchange rate. The floating exchange rate is part of the monetary transmission mechanism. It allows the Bank to pursue its own “made-in-Canada” monetary policy that is directed at achieving 2 per cent inflation in Canada and stabilizing our economy. The flexible exchange rate also serves as a kind of shock absorber for the Canadian economy, helping it absorb and adjust to shifts in the global economy. [Conference reference]
In light of the recent depreciation of the Canadian dollar, it bears stressing that the Bank does not have a target for the exchange rate – it has an inflation target. The exchange rate is determined in markets, and we neither promote any specific value for the Canadian dollar, nor thwart its movements.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 2bp, FixedResets down 10bp and DeemedRetractibles gaining 5bp. Floaters bounced back after getting hit in the past few days and dominated the good part of the Performance Highlights table. Volume was below average, but the highlights were exclusively FixedResets – probably due to the new issue.
| 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 | 1.7038 % | 2,345.5 |
| FixedFloater | 4.60 % | 3.85 % | 28,619 | 17.74 | 1 | 0.0484 % | 3,692.4 |
| Floater | 3.09 % | 3.18 % | 56,180 | 19.26 | 4 | 1.7038 % | 2,532.5 |
| OpRet | 4.60 % | 0.70 % | 73,418 | 0.31 | 3 | 0.0128 % | 2,682.5 |
| SplitShare | 4.87 % | 4.98 % | 64,261 | 4.35 | 5 | -0.1286 % | 3,010.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0128 % | 2,452.8 |
| Perpetual-Premium | 5.66 % | -0.46 % | 102,171 | 0.08 | 12 | -0.0116 % | 2,335.5 |
| Perpetual-Discount | 5.54 % | 5.58 % | 153,680 | 14.51 | 26 | -0.0237 % | 2,392.7 |
| FixedReset | 4.91 % | 3.69 % | 214,152 | 6.93 | 82 | -0.1039 % | 2,481.8 |
| Deemed-Retractible | 5.13 % | 4.05 % | 168,072 | 1.95 | 42 | 0.0538 % | 2,416.0 |
| FloatingReset | 2.66 % | 2.62 % | 184,835 | 7.18 | 6 | 0.3293 % | 2,440.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.C | FixedReset | -2.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 20.17 Evaluated at bid price : 20.17 Bid-YTW : 3.73 % |
| BAM.PF.D | Perpetual-Discount | -1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 20.57 Evaluated at bid price : 20.57 Bid-YTW : 6.05 % |
| IFC.PR.A | FixedReset | -1.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.95 Bid-YTW : 4.18 % |
| BAM.PF.A | FixedReset | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 23.22 Evaluated at bid price : 25.10 Bid-YTW : 4.37 % |
| IAG.PR.A | Deemed-Retractible | 1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.55 Bid-YTW : 5.92 % |
| BAM.PR.C | Floater | 1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 3.21 % |
| BAM.PR.B | Floater | 1.90 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 16.65 Evaluated at bid price : 16.65 Bid-YTW : 3.18 % |
| BAM.PR.K | Floater | 2.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 3.21 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| NA.PR.S | FixedReset | 713,963 | New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 23.12 Evaluated at bid price : 24.94 Bid-YTW : 3.89 % |
| RY.PR.Z | FixedReset | 352,076 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-07 Maturity Price : 23.14 Evaluated at bid price : 25.00 Bid-YTW : 3.71 % |
| TD.PR.I | FixedReset | 155,805 | RBC crossed 100,000 at 25.50; TD crossed 40,000 at 25.48. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 2.74 % |
| CM.PR.L | FixedReset | 107,103 | RBC crossed 100,000 at 25.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 2.66 % |
| BMO.PR.O | FixedReset | 104,001 | RBC crossed 100,000 at 25.23. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.22 Bid-YTW : 2.39 % |
| BNS.PR.X | FixedReset | 102,250 | RBC crossed 100,000 at 25.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 1.98 % |
| There were 24 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.A | Floater | Quote: 18.40 – 18.85 Spot Rate : 0.4500 Average : 0.3827 YTW SCENARIO |
| TD.PR.Y | FixedReset | Quote: 24.94 – 25.14 Spot Rate : 0.2000 Average : 0.1404 YTW SCENARIO |
| MFC.PR.J | FixedReset | Quote: 25.40 – 25.62 Spot Rate : 0.2200 Average : 0.1637 YTW SCENARIO |
| W.PR.J | Perpetual-Discount | Quote: 24.60 – 24.86 Spot Rate : 0.2600 Average : 0.2040 YTW SCENARIO |
| BAM.PF.A | FixedReset | Quote: 25.10 – 25.28 Spot Rate : 0.1800 Average : 0.1254 YTW SCENARIO |
| HSB.PR.C | Deemed-Retractible | Quote: 25.25 – 25.54 Spot Rate : 0.2900 Average : 0.2355 YTW SCENARIO |