Canadas efforts to join the Banksgiving Moneyday rescues have now commenced implementation. The results of the first mortgage reverse-auction have been announced:
Auction Date: October 16, 2008
Settlement Date: October 23, 2008
Maturity Date: October 15, 2013
Amount: $5 billion
High Yield: 4.679%
Low Yield: 4.041%
Average Yield: 4.241%
There are rumours that old What-Debt? is going to have to run a deficit:
While his Oct. 14 victory left him with more Conservative Party seats in Parliament, the deepening global financial crisis may force him to backpedal on both pledges.
Harper yesterday said his first move may be a taxpayer- funded package to keep financial institutions competitive amid bailouts in the U.S. and Europe. With the budget surplus shrinking and Harper lacking a parliamentary majority, he’ll also probably end up spending more than he wants because he’ll need help passing legislation from opposition parties that want to expand social programs.
Geez … having cut taxes and run the structural budget balance to zero in order to goose an already over-stimulated economy, we now find that bad times may require a deficit. What a surprise. What an absolutely incredible surprise.
On the bright side US inflation is moderating, although the headline number is still scary looking:
Prices increased 4.9 percent in the 12 months to September after a year-over-year gain of 5.4 percent in August. The core rate increased 2.5 percent from September 2007, the same as the year-over-year increase in the prior month.
Via Dealbreaker comes news that Iceland’s Glitnir Bank has defaulted on a $750-million FRN.
And the Fed’s discount window is wide open:
The Federal Reserve’s direct loans to commercial banks rose to a record $101.9 billion yesterday versus $98.1 billion a week earlier as still-high money market rates encouraged more borrowing from the lender of last resort.
Borrowing by securities firms through the Fed’s Primary Dealer Credit Facility totaled $133.9 billion, up from $123 billion, the central bank said today in its weekly report.
“The ability to borrow 90-day funds at 1.75 percent is a good deal for a lot of banks,” said Michael Feroli, economist at JPMorgan Chase & Co. “The stigma of borrowing from the Fed is declining.”
Borrowing 90-day funds at 1.75 is a very good deal for a lot of banks. I have no objections to the facility itself, but the discount rate is set way too low, in defiance of Bagehot.
Closed off the ‘performers’ table at +/- 2% today. Volatility continues high, liquidity continues dry.
| 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 | 5.42% | 5.66% | 75,071 | 14.67 | 6 | -0.6734% | 953.4 |
| Floater | 6.61% | 6.69% | 47,386 | 12.95 | 2 | -2.1863% | 548.4 |
| Op. Retract | 5.41% | 6.47% | 124,750 | 4.04 | 14 | -0.0754% | 976.4 |
| Split-Share | 6.39% | 10.98% | 58,719 | 3.99 | 12 | +1.1844% | 913.3 |
| Interest Bearing | 7.88% | 13.10% | 49,045 | 3.34 | 3 | -3.7209% | 886.0 |
| Perpetual-Premium | 6.66% | 6.73% | 50,402 | 12.86 | 1 | -2.2917% | 931.4 |
| Perpetual-Discount | 6.80% | 6.87% | 173,478 | 12.75 | 70 | +0.4681% | 794.6 |
| Fixed-Reset | 5.23% | 5.05% | 937,200 | 15.30 | 10 | -0.0738% | 1,097.4 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| FIG.PR.A | InterestBearing | -7.1523% | Asset coverage of just under 1.4:1 as of October 15, according to Faircourt. Now with a pre-tax bid-YTW of 13.74% based on a bid of 7.01 and a hardMaturity 2014-12-31 at 10.00. Closing quote 7.01-78, 3×2. Day’s range of 7.25-79. |
| BNA.PR.C | SplitShare | -6.3396% | Asset coverage of 3.2+:1 as of August 31 according to the company. Coverage now of 2.2+:1 based on BAM.A at 22.98 and 2.4 BAM.A held per preferred. Now with a pre-tax bid-YTW of 13.87% based on a bid of 12.41 and a hardMaturity 2019-1-10 at 25.00. Compare with BNA.PR.A (18.16% to 2010-9-30) and BNA.PR.B (9.72% to 2016-3-25). Closing quote 12.41-24. Day’s range of 12.46-24. |
| BCE.PR.R | FixFloat | -4.3721% | |
| BMO.PR.H | PerpetualDiscount | -4.1814% | Now with a pre-tax bid-YTW of 7.11% based on a bid of 19.02 and a limitMaturity. Closing quote 19.02-99, 15×5; day’s range 18.77-20.00. |
| BAM.PR.K | Floater | -3.9474% | |
| BAM.PR.O | OpRet | -3.9474% | Now with a pre-tax bid-YTW of 13.00% based on a bid of 18.25 and optionCertainty 2013-6-30 at 25.00. Compare with BAM.PR.H (11.69% to 2012-3-30), BAM.PR.I (10.74% to 2013-12-30) and BAM.PR.J (11.33% to 2018-3-30). Closing quote 18.25-50, 5×6. Day’s range 18.00-75. |
| BSD.PR.A | InterestBearing | -3.1294% | Asset coverage of just under 1.3:1 as of October 3, according to Brookfield Funds. Now with a pre-tax bid-YTW of 13.87% (interest + cap gain) based on a bid of 6.81 and a hardMaturity 2015-3-31 at 10.00. Closing quote 6.81-7.50, 25×7. All 968 shares traded today were at 6.78 – looks like one order. |
| BMO.PR.K | PerpetualDiscount | -3.0025% | Now with a pre-tax bid-YTW of 7.02% based on a bid of 19.06 and a limitMaturity. Closing Quote 19.06-50, 3×20. Day’s range 19.05-65. |
| BMO.PR.J | PerpetualDiscount | -2.6393% | Now with a pre-tax bid-YTW of 6.91% based on a bid of 16.60 and a limitMaturity. Closing Quote 16.60-70, 15×5. Day’s range 16.70-10. |
| FTN.PR.A | SplitShare | -2.4752% | Asset coverage of 2.2+:1 as of September 30 according to the company. Now with a pre-tax bid-YTW of 9.54% based on a bid of 7.88 and a hardMaturity 2015-12-1 at 10.00. Closing quote of 7.88-09, 24×2. Day’s range 7.63-01. |
| CL.PR.B | PerpetualPremium (for now!) | -2.2917% | Now with a pre-tax bid-YTW of 6.73% based on a bid of 23.45 and a limitMaturity. Closing Quote 23.45-94, 3×2. Day’s range 23.50-39. |
| CM.PR.K | FixedReset | -2.0833% | Closing Quote 23.50-00, 9×3. Day’s range 23.50-00. |
| BNS.PR.R | FixedReset | -2.0408% | Closing Quote 24.00-39, 1×20. Day’s range 24.35-69. |
| RY.PR.A | PerpetualDiscount | +2.0290% | Now with a pre-tax bid-YTW of 6.44% based on a bid of 17.60 and a limitMaturity. Closing Quote 17.60-86, 6×8. Day’s range 17.46 (?) – 99. |
| NA.PR.L | PerpetualDiscount | +2.0710% | Now with a pre-tax bid-YTW of 7.04% based on a bid of 17.25 and a limitMaturity. Closing Quote 17.25-40, 16×15. Day’s range 17.25 (?) – 89 (?). |
| RY.PR.E | PerpetualDiscount | +2.1114% | Now with a pre-tax bid-YTW of 6.59% based on a bid of 17.41 and a limitMaturity. Closing Quote 17.41-49, 9×4. Day’s range 17.04-52. |
| PWF.PR.I | PerpetualDiscount | +2.1739% | Now with a pre-tax bid-YTW of 6.40% based on a bid of 23.50 and a limitMaturity. Closing Quote 23.50-60, 5×8. Day’s range 22.12-24.70 (!). |
| HSB.PR.D | PerpetualDiscount | +2.3151% | Now with a pre-tax bid-YTW of 6.98% based on a bid of 18.12 and a limitMaturity. Closing Quote 18.12-00, 2×31. Traded 100 shares at 19.00. |
| DFN.PR.A | SplitShare | +2.3810% | Asset coverage of 1.9+:1 as of October 16, according to some guy’s estimate. Now with a pre-tax bid-YTW of 8.32% based on a bid of 8.60 and a hardMaturity 2014-12-1 at 10.00. Closing quote 8.60-77, 20×2. Day’s range 8.35-57. |
| POW.PR.B | PerpetualDiscount | +2.4296% | Now with a pre-tax bid-YTW of 7.28% based on a bid of 18.55 and a limitMaturity. Closing Quote 18.55-89, 4×1. Day’s range 18.25-99. |
| POW.PR.D | PerpetualDiscount | +2.4670% | Now with a pre-tax bid-YTW of 7.06% based on a bid of 17.86 and a limitMaturity. Closing Quote 17.86-45, 7×7. Day’s range 17.79-45. |
| SLF.PR.B | PerpetualDiscount | +2.5419% | Now with a pre-tax bid-YTW of 6.84% based on a bid of 17.75 and a limitMaturity. Closing Quote 17.75-99, 17×4. Day’s range 17.51-33. |
| PWF.PR.K | PerpetualDiscount | +2.6417% | Now with a pre-tax bid-YTW of 6.67% based on a bid of 18.65 and a limitMaturity. Closing Quote 18.65-99, 4X2. Day’s range 18.01-99. |
| SLF.PR.D | PerpetualDiscount | +2.8894% | Now with a pre-tax bid-YTW of 6.87% based on a bid of 16.38 and a limitMaturity. Closing Quote 16.38-50, 5×10. Day’s range 16.16-50. |
| SLF.PR.C | PerpetualDiscount | +3.0568% | Now with a pre-tax bid-YTW of 6.81% based on a bid of 16.52 and a limitMaturity. Closing Quote 16.52-43, 3×11. Day’s range 15.93-90. |
| PWF.PR.F | PerpetualDiscount | +3.0769% | Now with a pre-tax bid-YTW of 6.56% based on a bid of 20.10 and a limitMaturity. Closing Quote 20.10-99, 10×5. Day’s range 20.15-29. |
| SBC.PR.A | SplitShare | +3.5496% | Asset coverage of just under 1.7:1 as of October 9 according to Brompton Group. Now with a pre-tax bid-YTW of 9.96% based on a bid of 8.46 and a hardMaturity 2012-11-30. Closing quote 8.46-85, 10×26. Day’s range 6.18-8.50 (!). |
| LBS.PR.A | SplitShare | +3.9239% | Asset coverage of just under 2.0:1 as of October 2, according to Brompton Group. Now with a pre-tax bid-YTW of 8.39% based on a bid of 8.74 and a hardMaturity 2013-11-29 at 10.00. Closing quote 8.74-24, 2×2. Day’s range, 8.74-24. |
| BAM.PR.I | OpRet | +6.5495% | See BAM.PR.O, above. |
| FFN.PR.A | SplitShare | +6.9900% | Asset coverage of 1.8+:1 as of September 30, according to the company. Now with a pre-tax bid-YTW of 11.13% based on a bid of 7.50 and a hardMaturity 2014-12-1 at 10.00. Closing quote of 7.50-68, 11×13. Day’s range of 7.50-60. |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| TD.PR.P | PerpetualDiscount | 84,503 | TD crossed 75,000 at 20.51. Now with a pre-tax bid-YTW of 6.43% based on a bid of 20.50 and a limitMaturity. |
| BMO.PR.J | PerpetualDiscount | 37,030 | Now with a pre-tax bid-YTW of 6.91% based on a bid of 16.60 and a limitMaturity. |
| BNS.PR.R | FixedReset | 31,800 | RBC bought two lots of 10,000 each from (possible different) anonymous(es). |
| RY.PR.E | PerpetualDiscount | 27,500 | CIBC bought 11,800 at 17.30 from CIBC. Now with a pre-tax bid-YTW of 6.59% based on a bid of 17.41 and a limitMaturity. |
| TD.PR.A | FixedReset | 23,000 | Nesbitt crossed 10,000 at 24.15. |
There were eleven other index-included $25-pv-equivalent issues trading over 10,000 shares today.