PrefBlog

The SEC has announced that facts don’t matter any more:

The U.S. Securities and Exchange Commission will weigh multiple rules to dictate when traders can bet shares will fall, after lawmakers and business groups said short-sellers fueled the financial crisis by targeting banks.
…
[SEC Chairman Mary] Schapiro said the SEC isn’t aware of any “empirical evidence” that shows the elimination of the uptick rule contributed to falling U.S. stock prices. Still, “many members of the public have come to associate short-selling with that volatility and with a loss of investor confidence,” she said.

… but it might simply be some more political grandstanding:

SEC Commissioner Kathleen Casey, a Republican, questioned whether the agency was pushing forward “merely in a political exercise.” If the SEC fails to justify its actions, the agency risked having any rule challenged and shot down by a federal court, she said.

“Empirical evidence must guide regulatory decisions,” said Casey, who said she supported soliciting public comment on the proposals. “If the commission forgets this principle, the D.C. Circuit stands ready to provide a reminder.”

Another day of good solid gains for preferreds, with PerpetualDiscounts gaining 0.35%, just a hairsbreadth better than Fixed Resets. The former asset class now has pre-tax bid-YTW of 7.06%, equivalent to 9.88% interest after application of the standard 1.4x conversion factor. Long corporates remain as near as dammit to 7.5%, so the pre-tax Interest Equivalent spread is now 238bp.

Volume was good today, dominated by the recent FixedReset issues; MFC.PR.D’s volume is picking up. It’s hard to tell what to think about this issue – the issue size was bumped and the underwriters exercised their greenshoe, but the issue has been trading sub-par since its issue with less volume than one might expect from an issue of this size. Could it be that the underwriters took a basketful into inventory?

For the first time in a while, we close a day without any new Fixed-Reset issues being marketted. It is, I suspect, a rather interesting conundrum; the banks – and insurers! – could probably use some more capital with a 5-year call; but market yields now suggest that a new issue should carry a coupon of less than the recent new issues. Who wants to be the first to try selling an issue with a reduced coupon? As far as I can readily recall, it would be a first for the sector.

This entry was posted on Wednesday, April 8th, 2009 at 7:11 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.