Interesting news on the CDS market today … it isn’t as big as we thought:
The credit-default swap market, used to hedge against bond losses and speculate on corporate credit risk, shrank for the first time as efforts to eliminate duplicate trades cut contracts outstanding by 12 percent.
The volume of outstanding trades fell to $54.6 trillion from $62 trillion in the first half, the International Swaps and Derivatives Association said in a statement today. It was the first decline since ISDA started surveying traders in 2001.
…
After the March collapse of securities firm Bear Stearns Cos., 17 banks that handle about 90 percent of the trading in credit derivatives agreed to a list of initiatives to curb market risks. That included tearing up trades that offset each other, which cuts down on the day-to-day payments, paperwork and monitoring by bank staffs and reduces the potential for errors. It also may reduce the amount of capital that commercial banks are required to hold against the trades on their books.The first stage of compression, completed Aug. 27, with the participation of 14 dealers, reduced contracts submitted on North American telecommunications companies by 56 percent, Markit Group Ltd. and Creditex Group Inc., which are processing the tear-ups, said this month. The second stage, completed Sept. 4, with 15 dealers, cut contracts on European telecommunications companies by 53 percent.
Well, PerpetualDiscount yields were recently higher (6.22% on September 18), but today’s closing bid-YTW of 6.20% was otherwise last seen on August 11 (when falling) and July 7 (6.23%, when rising). A fair bit of sloppy action today, especially with BAM.PR.K falling out of bed!
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30. The Fixed-Reset index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater index. |
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| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | N/A | N/A | N/A | N/A | 0 | N/A | N/A |
| Fixed-Floater | 4.69% | 4.77% | 81,889 | 15.77 | 6 | +0.0023% | 1,090.7 |
| Floater | 5.29% | 5.30% | 49,671 | 15.00 | 2 | -5.1597% | 759.9 |
| Op. Retract | 5.00% | 4.90% | 126,977 | 3.60 | 14 | -0.2403% | 1,044.9 |
| Split-Share | 5.54% | 6.78% | 51,274 | 4.31 | 14 | -0.1431% | 1,012.0 |
| Interest Bearing | 6.58% | 7.53% | 52,674 | 5.18 | 2 | +0.1075% | 1,082.7 |
| Perpetual-Premium | 6.15% | 5.52% | 55,613 | 2.18 | 1 | +1.1952% | 1,008.9 |
| Perpetual-Discount | 6.12% | 6.20% | 179,642 | 13.60 | 70 | -0.2049% | 872.4 |
| Fixed-Reset | 5.07% | 4.94% | 1,326,864 | 14.25 | 10 | -0.0397% | 1,118.1 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| BAM.PR.K | Floater | -10.2353% | Whoosh! Definitely not a money market vehicle! Only two trades today, 700 at 17.00 and 200 at 17.01 (looks like it was the same order on one side) and closed at the Toronto Market Maker Special Deal of 15.26-16.94, 5×2. |
| MFC.PR.C | PerpetualDiscount | -2.7979% | Now with a pre-tax bid-YTW of 6.05% based on a bid of 18.76 and a limitMaturity. |
| IAG.PR.A | PerpetualDiscount | -2.4523% | Now with a pre-tax bid-YTW of 6.47% based on a bid of 17.90 and a limitMaturity. |
| ELF.PR.G | PerpetualDiscount | -2.1084% | Now with a pre-tax bid-YTW of 7.49% based on a bid of 16.25 and a limitMaturity. |
| BAM.PR.I | OpRet | -1.9592% | Now with a pre-tax bid-YTW of 6.41% based on a bid of 24.02 and softMaturity 2013-12-30 at 25.00. Compare with BAM.PR.H (6.75% to 2012-3-30), BAM.PR.J (6.28% to 2018-3-30) and BAM.PR.O (8.18% to 2013-6-30). |
| BMO.PR.J | PerpetualDiscount | -1.8240% | Now with a pre-tax bid-YTW of 6.23% based on a bid of 18.30 and a limitMaturity. |
| SLF.PR.E | PerpetualDiscount | -1.7838% | Now with a pre-tax bid-YTW of 6.23% based on a bid of 18.17 and a limitMaturity. |
| FTN.PR.A | SplitShare | -1.5152% | Asset coverage of just under 2.2:1 as of September 15 according to the company. Now with a pre-tax bid-YTW of 5.78% based on a bid of 9.75 and a limitMaturity. |
| CM.PR.A | OpRet | -1.5116% | Now with a pre-tax bid-YTW of 5.03% based on a bid of 25.41 and a softMaturity 2011-7-30 at 25.00. |
| BNA.PR.A | SplitShare | -1.3821% | Asset coverage of 3.2+:1 as of August 31 according to the company. Coverage now of 2.6+:1 based on BAM.A at 27.40 and 2.4 BAM.A held per preferred. Now with a pre-tax bid-YTW of 8.10% based on a bid of 24.26 and a hardMaturity 2010-9-30 at 25.00. Compare with BNA.PR.B (9.70% to 2016-3-25) and BNA.PR.C (10.57% to 2019-1-10). |
| SLF.PR.C | PerpetualDiscount | -1.2931% | Now with a pre-tax bid-YTW of 6.11% based on a bid of 18.32 and a limitMaturity. |
| SLF.PR.D | PerpetualDiscount | -1.2500% | Now with a pre-tax bid-YTW of 6.16% based on a bid of 18.17 and a limitMaturity. |
| TD.PR.O | PerpetualDiscount | -1.1893% | Now with a pre-tax bid-YTW of 5.94% based on a bid of 20.77 and a limitMaturity. |
| SLF.PR.A | PerpetualDiscount | -1.1651% | Now with a pre-tax bid-YTW of 6.13% based on a bid of 19.51 and a limitMaturity. |
| BNA.PR.C | SplitShare | -1.1465% | See BNA.PR.A, above. |
| SLF.PR.B | PerpetualDiscount | -1.1039% | Now with a pre-tax bid-YTW of 6.13% based on a bid of 19.71 and a limitMaturity. |
| BAM.PR.M | PerpetualDiscount | +1.8622% | Now with a pre-tax bid-YTW of 7.29% based on a bid of 16.41 and a limitMaturity. |
| FFN.PR.A | SplitShare | +2.0408% | Asset coverage of just under 1.8:1 as of September 15 according to the company. Now with a pre-tax bid-YTW of 6.35% based on a bid of 9.50 and a hardMaturity 2014-12-1 at 10.00. |
| CM.PR.P | PerpetualDiscount | +2.0659% | Now with a pre-tax bid-YTW of 6.76% based on a bid of 20.75 and a limitMaturity. |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| BAM.PR.O | SplitShare | 285,143 | CIBC crossed 213,600 at 21.90, bought 16,300 at that price from Nesbitt, then another 40,000 at the same price from anonymous. See BAM.PR.I, above. |
| RY.PR.B | PerpetualDiscount | 268,630 | Nesbitt crossed 260,000 at 19.45. Now with a pre-tax bid-YTW of 6.14% based on a bid of 19.40 and a limitMaturity. |
| GWO.PR.G | PerpetualDiscount | 205,750 | Nesbitt crossed 200,000 at 21.50. Now with a pre-tax bid-YTW of 6.09% based on a bid of 21.50 and a limitMaturity. |
| PWF.PR.G | PerpetualDiscount | 181,800 | TD crossed 180,000 at 24.50. Now with a pre-tax bid-YTW of 6.14% based on a bid of 24.40 and a limitMaturity. |
| NA.PR.K | PerpetualDiscount | 109,170 | Nesbitt crossed 107,000 at 23.75. Now with a pre-tax bid-YTW of 6.25% based on a bid of 23.71 and a limitMaturity. |
There were twenty-two other index-included $25-pv-equivalent issues trading over 10,000 shares today