There’s a bit of a move forward with the Danish question:
Denmark’s biggest mortgage bank said about a fifth of covered bonds in the nation’s $550 billion market can be excluded from the top liquidity status, opening up for compromise in talks with Europe.
Nykredit Realkredit A/S said it would be willing to back down from earlier industry demands that all covered bonds be given the top liquidity designation as the Danish government talks with other European Union member states in an effort to reach an agreement.
…
The comments mark the first time industry representatives have shown willingness to accept a compromise after condemning a proposal last year by the European Banking Authority to give all covered bonds second-class liquidity status. Denmark is home to the world’s biggest mortgage-backed covered bond market per capita and its banks use the securities to meet more than 70 percent of their liquidity needs.The London-based EBA, which is made up of European regulatory heads, published a recommendation in December that would cap banks’ covered bond usage at 40 percent and force lenders to book the bonds at only 85 percent of their market value. It also said all government bonds should get the highest liquidity status, including debt sold by bailed out nations like Greece.
…
An empirical study by the EBA last year found that covered bonds sold in issues of 500 million euros ($689 million) or more in principle have the characteristics needed to have an “extremely high liquidity and credit quality.”
Danish covered bonds were last discussed on February 7.
Some welfare bums are whimpering that there’s not enough swill in the trough:
Chrysler Group LLC is withdrawing its request for funding from the federal and Ontario governments, but says it could begin making new investments for a new minivan assembly line at its Windsor, Ont. factory.
The auto giant had asked for some $700-million in public funds to expand its operations in the province, most crucially at a minivan plant in Windsor. Chrysler had been willing to sink $3.6-billion into Windsor and Brampton, Ont.
But the company has now walked away from that request.
“It is clear to us that our projects were being used as a political football, a process that, in our view apart from being unnecessary and ill-advised, will ultimately not benefit Chrysler,” the company said in a statement.
Some pension plans are getting smarter:
Canada has seen its first major deal for a company to outsource its pension plan risk by buying about $500-million worth of annuities from an insurer.
Pension consulting firm Towers Watson revealed the transaction Tuesday, saying Canada’s first “jumbo” pension annuity deal occurred in the fourth quarter of 2013 and involved a Towers Watson client firm.
…
While many U.S. and U.K. companies have been structuring deals for years to shift the risk of their pension obligations to a third-party insurer, the trend has been slow to come to Canada. But Towers Watson said 2013 was a record-breaking year for group annuity purchases by companies, suggesting deals may be picking up speed as firms look for ways to shift pension risk off their books.A total of $2.2-billion in group annuities were sold in Canada last year – including $1.3-billion in the fourth quarter alone – an increase from $1.05-billion in all of 2012.
Here’s a recent paper of interest by Ranadeb Chaudhuri, Zoran Ivkovich, Joshua Matthew Pollet and Charles Trzcinka :
Several hundred individuals who hold a Ph.D. in economics, finance, or others fields work for institutional money management companies. The gross performance of domestic equity investment products managed by individuals with a Ph.D. (Ph.D. products) is superior to the performance of non-Ph.D. products matched by objective, size, and past performance for one-year returns, Sharpe Ratios, alphas, information ratios, and the manipulation-proof measure MPPM. Fees for Ph.D. products are lower than those for non-Ph.D. products. Investment flows to Ph.D. products substantially exceed the flows to the matched non-Ph.D. products. Ph.D.s’ publications in leading economics and finance journals further enhance the performance gap.
…
The existing literature has explored some aspects of the link between managerial talent and both ability and education in the context of money management. For instance, Chevalier and Ellison (1999) find that mutual fund performance is related to certain educational characteristics of mutual fund managers. In particular, mutual fund managers graduating from undergraduate institutions with higher average SAT scores achieve higher raw fund returns. Similarly, Chevalier and Ellison (1999) also find that raw fund returns achieved by managers with an MBA outperform those without an MBA by 63 basis points per year. However, upon adjustments for risk, only the differential in risk-adjusted performance between the managers graduating from undergraduate institutions with higher average SAT scores and those graduating from undergraduate institutions with lower average SAT scores persists, whereas the risk-adjusted performance differential between funds managed by MBAs and non-MBAs disappears.
It may well be that PhDs and ‘institutions with higher average SAT scores’ both correlate well with ‘not a salesman’. I would be interested to get data based on field of specialization, but it’s not there yet – and isn’t likely to be, as long as business school profs have specializations in finance, economics and other mumbo-jumbo.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 26bp, FixedResets off 13bp and DeemedRetractibles gaining 14bp. Volatility was average. Volume was on the high side of 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 | 0.1290 % | 2,408.5 |
| FixedFloater | 4.63 % | 3.90 % | 27,830 | 17.62 | 1 | 1.5339 % | 3,665.6 |
| Floater | 3.01 % | 3.15 % | 54,712 | 19.28 | 4 | 0.1290 % | 2,600.6 |
| OpRet | 4.62 % | -0.66 % | 68,557 | 0.24 | 3 | 0.0128 % | 2,691.5 |
| SplitShare | 4.86 % | 4.51 % | 55,168 | 4.35 | 5 | 0.0562 % | 3,050.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0128 % | 2,461.1 |
| Perpetual-Premium | 5.63 % | -1.45 % | 94,870 | 0.09 | 12 | 0.0987 % | 2,348.9 |
| Perpetual-Discount | 5.49 % | 5.58 % | 138,932 | 14.46 | 26 | 0.2573 % | 2,416.7 |
| FixedReset | 4.71 % | 3.54 % | 223,656 | 6.80 | 77 | -0.1266 % | 2,504.8 |
| Deemed-Retractible | 5.08 % | 3.59 % | 163,983 | 0.96 | 42 | 0.1366 % | 2,456.6 |
| FloatingReset | 2.59 % | 2.59 % | 199,161 | 7.13 | 5 | 0.0161 % | 2,441.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| ENB.PR.B | FixedReset | -1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-03-04 Maturity Price : 23.07 Evaluated at bid price : 24.29 Bid-YTW : 4.07 % |
| BAM.PF.C | Perpetual-Discount | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-03-04 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 5.92 % |
| PWF.PR.L | Perpetual-Discount | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-03-04 Maturity Price : 23.35 Evaluated at bid price : 23.85 Bid-YTW : 5.39 % |
| BAM.PR.G | FixedFloater | 1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-03-04 Maturity Price : 21.35 Evaluated at bid price : 20.52 Bid-YTW : 3.90 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.E | FixedReset | 149,196 | Scotia crossed 25,500 at 25.08. Nesbitt crossed a block of 50,000 shares and two of 25,000, all at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-03-04 Maturity Price : 23.15 Evaluated at bid price : 25.08 Bid-YTW : 3.95 % |
| CM.PR.G | Perpetual-Premium | 148,626 | Nesbitt crossed 100,000 at 25.33. RBC crossed 30,000 at 25.34. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-01 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : -1.45 % |
| CM.PR.E | Perpetual-Premium | 107,141 | Nesbitt crossed 100,000 at 25.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-03 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -5.16 % |
| RY.PR.T | FixedReset | 77,776 | Desjardins crossed 75,000 at 25.49. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 25.48 Bid-YTW : 2.54 % |
| BNS.PR.A | FloatingReset | 73,300 | Desjardins crossed 50,000 at 25.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.17 Bid-YTW : 2.64 % |
| SLF.PR.A | Deemed-Retractible | 66,916 | TD crossed 50,000 at 22.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.64 Bid-YTW : 5.93 % |
| There were 38 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CU.PR.D | Perpetual-Discount | Quote: 23.25 – 23.60 Spot Rate : 0.3500 Average : 0.2423 YTW SCENARIO |
| GWO.PR.I | Deemed-Retractible | Quote: 21.62 – 21.89 Spot Rate : 0.2700 Average : 0.1808 YTW SCENARIO |
| TRP.PR.D | FixedReset | Quote: 24.90 – 25.10 Spot Rate : 0.2000 Average : 0.1241 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 25.50 – 25.73 Spot Rate : 0.2300 Average : 0.1751 YTW SCENARIO |
| TD.PR.P | Deemed-Retractible | Quote: 26.03 – 26.15 Spot Rate : 0.1200 Average : 0.0735 YTW SCENARIO |
| CU.PR.E | Perpetual-Discount | Quote: 23.19 – 23.44 Spot Rate : 0.2500 Average : 0.2064 YTW SCENARIO |