How ’bout that London property market, eh?:
For equity-derivatives broker Andrew Adamson, it was a trade too good to pass up.
In October, he was offered 1,000 pounds ($1,700) per square foot for his London townhouse. Other homes in the area were going for about 30 percent less. Adamson accepted it immediately.
London’s housing market, having outperformed the rest of the U.K. with price gains of more than 50 percent in five years, is cooling as owners like Adamson cash out. They’re leaving the city for less costly suburban and country homes because they expect mortgage rates to rise and new lending rules to damp prices. London estate agents had the largest increase in instructions to sell homes in Britain in June and the biggest drop in people seeking to buy them, according to the Royal Institution of Chartered Surveyors.
“Now is the time people are cashing in,” said Adamson, 46, who used the 2 million pounds he raised from the sale to buy a country manor in Hampshire, southern England, for 400,000 pounds less.
IIROC answers the question: what is the purpose of regulatory requirements for advisors to take CSI courses?
CSI was created in 1970 by one of IIROC’s predecessor organizations, the Investment Dealers Association (IDA), and the Canadian stock exchanges to educate and test the proficiency of individuals entering the industry. In 2002, CSI converted to a for-profit corporation with the IDA as its sole shareholder. The IDA sold CSI to ONCAP II, LP (a private equity fund managed by ONCAP Management Partners) for net proceeds of approximately $57 million in 2005 following a targeted auction. $28.5 million of those proceeds were applied as a membership fee reduction distributed to the IDA membership over two years. $28 million of the proceeds were applied to fund the creation of the Investment Industry Association of Canada.
The document notes that over ten thousand people took the Canadian Securities Course in 2013 at an average price of over $900 a head – and that’s just the biggest bit. Nice work if you can get it! The new generation of regulators is trying to think up another way of extracting money from the industry, so they can be bold entrepreneurs, too.
There’s more news about corporate bond liquidity:
The $8.2 billion of risk-sharing securities sold in the last year by government-controlled Fannie Mae and Freddie Mac can shift their losses from homeowner defaults to bond buyers. One slice of a deal issued in May traded at 95.7 cents on the dollar yesterday, down from 99.7 cents at the end of last month, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
While JPMorgan Chase & Co. analysts say they fail to see “any fundamental reason” for the tumble, investors from CQS U.K. LLP to Calvert Investment Management Inc. are speculating that the drop is mainly about the growing amount of the debt running into limits created by new regulations on bond dealers’ ability to smooth trading by building up their inventories.
…
As a few holders continued selling the Fannie Mae and Freddie Mac securities without an immediate emergence of investor demand, most of the dealers active in trading the debt “disappeared,” said Vishal Khanduja, a money manager at Bethesda, Maryland-based Calvert, which oversees about $13 billion.Until recently, “everybody wanted to trade it: I think there were 10 to 12 dealers messaging me and looking to make markets,” Khanduja said in a telephone interview. “It’s partially indicative of the regulations’ impact on their balance sheets.”
Dealers have reduced their bond holdings in response to rules ranging from the international Basel III accord on banks’ capital to the U.S. Volcker Rule limiting their ability to make bets with their own money. An expansion of Finra’s Trace trade disclosures to more types of debt is also increasing risks and cutting into profits for market makers.
Inventories of corporate securities and other debt without government backing at the biggest dealers fell to $56 billion in March 2013 from as much as $235 billion in 2007, according to the last Federal Reserve data before a change in calculations.
I continue to think there’s an opportunity there for an actively managed fund to make a bit of money pretending to be a trading desk. Call it ‘HFT comes to the bond markets’. You could call these shops by some kind of special name … maybe “investment dealers” or something like that.
Don’t get me wrong! I’m not completely convinced that the new Volcker and capital rules are completely wrong, in and of themselves. What bothers me is that not a single person ever thought about the consequences and how these consequences might impact on the purpose of the capital markets – which is not “To be nice to granny”, by the way, but “To get money from investors to businesses”.
OK now, call it in the air, heads or tails? Risk-On or Risk-Off?
The Dow fell 317.06 points, or 1.9 percent, to 16,563.30 at 4 p.m. in New York, for the largest one-day retreat since Feb. 3. The Standard & Poor’s 500 Index slid 2 percent, the most since April 10, to 1,930.67. The gauge dropped 1.5 percent in July, its first monthly decline since January. The Nasdaq 100 Index lost 2.1 percent. The MSCI All-Country World Index tumbled 1.5 percent for its worst loss in almost six months.
…
Concern grew that the improving economy may force the Federal Reserve to raise interest rates sooner than expected.U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the central bank’s view that a first-quarter contraction was transitory. Data today showed fewer Americans filed applications for unemployment insurance benefits over the past month than at any time in more than eight years, signaling employers are hanging on to workers as demand improves.
Valener Inc., proud issuer of VNR.PR.A, was confirmed at Pfd-2(low) by DBRS:
DBRS has today confirmed Valener Inc.’s (Valener or the Company) Cumulative Rate Reset Preferred Shares, Series A rating at Pfd-2 (low), with a Stable trend. The rating is based on the credit quality of Valener’s 29%-owned Gaz Métro Limited Partnership (GMLP), which guarantees the First Mortgage Bonds and Senior Secured Notes (rated “A,” Stable) of Gaz Métro inc. (GMi), and Valener’s low non-consolidated leverage. GMi owns the remaining 71% of GMLP.
…
Valener’s rating is based on the following factors: (1) continually strong and predictable cash flow from GMLP to Valener. GMLP has made cash distributions to its partners in an amount of over 90% of its net income, excluding non-recurring items, for most of the last 20 years. (2) GMLP is expected to continue to maintain its distributions of at least 85% of its net income, excluding non-recurring items, as set out under the partnership agreement between Valener and GMLP (the Partnership Agreement). In the event that GMi, as general partner of GMLP, intends to distribute less than 85% of its net income, excluding non-recurring items, it would require the approval of at least 90% of GMi’s directors. (3) Valener’s non-consolidated debt-to-capital structure is expected to remain below 20%. If its non-consolidated debt leverage ratio is above 20%, Valener is expected to issue equity to bring the ratio back under the 20% threshold in a timely manner. (4) DBRS expects that the majority of Valener’s cash flow will be derived from GMLP. Any material investment carried out by Valener and not through GMLP could have a negative rating impact. (5) DBRS expects that Valener will maintain its 29% interest in GMLP and its pro rata representation on GMi’s board of directors.
Shaw Communications Inc., proud issuer of SJR.PR.A, was confirmed at Pfd-3 by DBRS:
DBRS has today confirmed Shaw Communications Inc.’s (Shaw or the Company) Issuer Rating at BBB, Senior Notes rating at BBB and Preferred Shares rating at Pfd-3. The confirmation follows the Company’s announcement to acquire ViaWest for USD 830 million, financed with approximately CAD 500 million of cash on hand and approximately CAD 400 million from Shaw’s existing credit facility. Shaw will also assume USD 370 million of borrowings under committed non-recourse debt financing at ViaWest. The purchase price of USD 1.2 billion represents a multiple of approximately 13.0x adjusted EBITDA annualized for the three months ended June 30, 2014, which is consistent with recent market transactions. The acquisition is expected to close in September 2014 and is subject to U.S. regulatory approval.
ViaWest is a privately held provider of data centre infrastructure, cloud technology and managed IT solutions. The company employs over 350 people and services more than 1,300 customers across seven states. ViaWest operates 27 data centers in Colorado, Utah, Oregon, Nevada, Texas, Minnesota and Arizona.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 13bp, FixedResets gaining 11bp and DeemedRetractibles off 4bp. Floaters got hammered, otherwise volatility was a yawn. 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 | 3.05 % | 3.04 % | 21,349 | 19.63 | 1 | 0.4090 % | 2,607.5 |
| FixedFloater | 4.17 % | 3.40 % | 27,217 | 18.63 | 1 | 0.0000 % | 4,163.9 |
| Floater | 2.94 % | 3.05 % | 44,990 | 19.58 | 4 | -2.2855 % | 2,696.3 |
| OpRet | 4.02 % | -0.86 % | 79,859 | 0.08 | 1 | -0.2741 % | 2,716.8 |
| SplitShare | 4.25 % | 3.78 % | 53,922 | 3.99 | 6 | -0.0265 % | 3,122.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2741 % | 2,484.3 |
| Perpetual-Premium | 5.52 % | -3.22 % | 82,318 | 0.08 | 17 | -0.0046 % | 2,432.2 |
| Perpetual-Discount | 5.22 % | 5.16 % | 101,771 | 15.22 | 20 | 0.1277 % | 2,586.3 |
| FixedReset | 4.34 % | 3.60 % | 198,032 | 6.66 | 79 | 0.1118 % | 2,559.4 |
| Deemed-Retractible | 4.99 % | -0.85 % | 116,925 | 0.15 | 42 | -0.0398 % | 2,555.4 |
| FloatingReset | 2.68 % | 2.18 % | 84,154 | 3.86 | 6 | -0.0132 % | 2,515.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.B | Floater | -3.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 17.04 Evaluated at bid price : 17.04 Bid-YTW : 3.10 % |
| BAM.PR.K | Floater | -3.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 17.06 Evaluated at bid price : 17.06 Bid-YTW : 3.10 % |
| BAM.PR.C | Floater | -3.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 3.05 % |
| TRP.PR.C | FixedReset | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 21.90 Evaluated at bid price : 22.45 Bid-YTW : 3.44 % |
| GWO.PR.H | Deemed-Retractible | 1.16 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 5.23 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.B | FixedReset | 1,012,592 | New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 23.18 Evaluated at bid price : 25.07 Bid-YTW : 3.63 % |
| BMO.PR.W | FixedReset | 488,035 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 23.14 Evaluated at bid price : 25.01 Bid-YTW : 3.60 % |
| ENB.PF.E | FixedReset | 97,047 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 23.10 Evaluated at bid price : 24.95 Bid-YTW : 4.13 % |
| TD.PF.A | FixedReset | 92,440 | Desjardins crossed blocks of 49,900 and 27,000, both at 25.38. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 23.27 Evaluated at bid price : 25.38 Bid-YTW : 3.60 % |
| BMO.PR.S | FixedReset | 46,468 | TD crossed 35,000 at 25.46. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 3.59 % |
| BAM.PR.X | FixedReset | 36,398 | TD crossed 23,900 at 21.93. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-31 Maturity Price : 21.53 Evaluated at bid price : 21.91 Bid-YTW : 3.98 % |
| There were 29 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRP.PR.C | FixedReset | Quote: 22.45 – 22.99 Spot Rate : 0.5400 Average : 0.3629 YTW SCENARIO |
| PWF.PR.F | Perpetual-Discount | Quote: 25.08 – 25.40 Spot Rate : 0.3200 Average : 0.2080 YTW SCENARIO |
| CM.PR.K | FixedReset | Quote: 24.99 – 25.25 Spot Rate : 0.2600 Average : 0.1540 YTW SCENARIO |
| RY.PR.Z | FixedReset | Quote: 25.58 – 25.91 Spot Rate : 0.3300 Average : 0.2293 YTW SCENARIO |
| SLF.PR.C | Deemed-Retractible | Quote: 22.48 – 22.76 Spot Rate : 0.2800 Average : 0.1830 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 24.24 – 24.60 Spot Rate : 0.3600 Average : 0.2697 YTW SCENARIO |