February 27, 2014

Good old regulators! Keeping the world safe for you, me and, of course, themselves:

Forget hiring a top hedge fund to manage your portfolio. Your better bet might be an employee at the Securities and Exchange Commission, according to a new report suggesting that regulators are trading on inside information relating to investigations and upcoming enforcement actions.

In the report titled “The Stock Picking Skills of SEC Employees,” researchers found that SEC employees’ stock purchases look like your average person’s. But when these employees sell their stocks, they appear to systematically beat the market by making sales within weeks of costly enforcement actions by the agency.

“These results suggest that SEC employees potentially trade profitably under the new rules, and that at least some of their profits potentially stem from trading ahead of costly SEC sanctions and on privileged non-public information,” write Shivaram Rajgopal, a professor of accounting at Emory University, and Roger M. White, a doctoral student in accounting at Georgia State University. “In short, it appears that SEC employees continue to take advantage of non-public information to trade profitably in stocks under their regulatory purview.”

But fear not, regulatory weenies! There’s another benchmark fixing scandal shock horror!

The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.

Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper.

The paper is the first to raise the possibility that the five banks overseeing the century-old rate — Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA (GLE) — may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing.

I really have no comprehension regarding the fuss. If I don’t like a price, I don’t trade – although that, of course, is an incredibly sophisticated trading strategy. If I’ve used it for valuation purposes, then any difference between the benchmark and the “true” price is just a timing difference. Who cares?

Yellen is taking a steady as she goes view on tapering:

Federal Reserve Chair Janet Yellen said the central bank is likely to keep trimming asset purchases, even as policy makers monitor data to determine if recent weakness in the economy is temporary.

“Unseasonably cold weather has played some role,” she said in response to a question today from the Senate Banking Committee. “What we need to do, and will be doing in the weeks ahead, is to try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook.”

Yellen repeated the Fed’s statements that the central bank intends to reduce asset purchases at a “measured” pace, and she said in response to a separate question that the bond-buying program is likely to end in the fall. At the same time, “if there’s a significant change in the outlook, certainly we would be open to reconsidering,” she said.

It was another positive day for the Canadian preferred share market, with PerpetualDiscounts up 7bp, FixedResets gaining 4bp amd DeemedRetractibles winning 18bp. Volatility was muted. Volume was on the high side of average, with some nice tickets written for a few issues.

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 -0.2845 % 2,416.5
FixedFloater 4.73 % 4.31 % 29,077 17.75 1 0.7014 % 3,590.6
Floater 3.00 % 3.12 % 54,521 19.36 4 -0.2845 % 2,609.1
OpRet 4.62 % -0.32 % 68,937 0.26 3 -0.1409 % 2,692.5
SplitShare 4.86 % 4.44 % 57,347 4.36 5 0.1689 % 3,049.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1409 % 2,462.0
Perpetual-Premium 5.65 % 1.47 % 97,192 0.08 12 0.0758 % 2,343.6
Perpetual-Discount 5.51 % 5.57 % 143,442 14.50 26 0.0674 % 2,406.1
FixedReset 4.71 % 3.54 % 223,432 4.56 77 0.0431 % 2,505.0
Deemed-Retractible 5.10 % 3.60 % 166,575 1.20 42 0.1790 % 2,446.5
FloatingReset 2.65 % 2.66 % 151,997 7.13 6 -0.0402 % 2,438.1
Performance Highlights
Issue Index Change Notes
GWO.PR.F Deemed-Retractible -1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-29
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : -9.57 %
SLF.PR.B Deemed-Retractible 1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.51
Bid-YTW : 6.04 %
SLF.PR.D Deemed-Retractible 1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.31
Bid-YTW : 6.32 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.L FixedReset 1,248,387 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 4.23 %
TRP.PR.C FixedReset 393,018 Nesbitt crossed three blocks, of 135,000 shares, 100,000 and 50,000, all at 22.20. RBC crossed 99,900 at the same price. Nice tickets!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-02-27
Maturity Price : 21.72
Evaluated at bid price : 22.18
Bid-YTW : 3.78 %
TRP.PR.B FixedReset 215,626 Nesbitt crossed blocks of 100,000 and 107,000, both at 20.20. More nice tickets!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-02-27
Maturity Price : 20.18
Evaluated at bid price : 20.18
Bid-YTW : 3.77 %
SLF.PR.A Deemed-Retractible 123,852 Nesbitt crossed 100,000 at 22.38.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.32
Bid-YTW : 6.09 %
TRP.PR.E FixedReset 109,920 RBC crossed 47,800 at 25.06; TD crossed 35,000 at 25.07.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-02-27
Maturity Price : 23.15
Evaluated at bid price : 25.07
Bid-YTW : 4.01 %
CU.PR.F Perpetual-Discount 96,750 Nesbitt crossed 90,000 at 21.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-02-27
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 5.36 %
There were 39 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
W.PR.H Perpetual-Discount Quote: 24.55 – 24.95
Spot Rate : 0.4000
Average : 0.2579

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-02-27
Maturity Price : 24.25
Evaluated at bid price : 24.55
Bid-YTW : 5.67 %

GWO.PR.N FixedReset Quote: 21.75 – 22.17
Spot Rate : 0.4200
Average : 0.2845

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 4.64 %

CIU.PR.C FixedReset Quote: 21.28 – 21.69
Spot Rate : 0.4100
Average : 0.2873

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-02-27
Maturity Price : 21.28
Evaluated at bid price : 21.28
Bid-YTW : 3.72 %

CIU.PR.A Perpetual-Discount Quote: 21.46 – 21.89
Spot Rate : 0.4300
Average : 0.3354

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-02-27
Maturity Price : 21.46
Evaluated at bid price : 21.46
Bid-YTW : 5.39 %

CIU.PR.B FixedReset Quote: 25.28 – 25.52
Spot Rate : 0.2400
Average : 0.1619

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.28
Bid-YTW : 2.19 %

BMO.PR.P FixedReset Quote: 25.90 – 26.09
Spot Rate : 0.1900
Average : 0.1179

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-25
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 1.79 %

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