Australia has hiked the overnight right:
Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.25 percent from 3 percent in Sydney today. Only one of 20 economists surveyed by Bloomberg News forecast today’s move. The rest predicted no change.
The local currency jumped as Australia became the first Group of 20 nation to raise borrowing costs since the start of the global financial crisis more than a year ago. Rising job vacancies, retail sales and house prices, plus surging business and consumer confidence support Stevens’ view that the “basis for such a low interest rate setting has now passed.”
BIS has reported Bernanke’s most recent testimony. Not much new, but I was disappointed to see:
The current financial crisis has clearly demonstrated that risks to the financial system can arise not only in the banking sector, but also from the activities of other financial firms – such as investment banks or insurance companies – that traditionally have not been subject to the type of regulation and consolidated supervision applicable to bank holding companies. To close this important gap in our regulatory structure, legislative action is needed that would subject all systemically important financial institutions to the same framework for consolidated prudential supervision that currently applies to bank holding companies. Such action would prevent financial firms that do not own a bank, but that nonetheless pose risks to the overall financial system because of the size, risks, or interconnectedness of their financial activities, from avoiding comprehensive supervisory oversight.
Supervision should be narrowly focussed on banks, with an additional layer of less onerous restrictions on brokers. Interconnectedness is not a problem, as long as deals are adequately collateralized, either explicitly by the party ‘outside the wall’ of regulation, or by the bank inside the wall via capital charges.
To pretend that everything that moves can be regulated adequately will be incredibly expensive, stifling and, ultimately, ineffective.
Yet another poor day for preferreds, with PerpetualDiscounts down 33bp, although FixedResets gained 2bp. The declines were led by IAG.PR.A, possibly due to the new IAG straight 6% announced today. This issue now yields more than the new issue as well as having a more symetric risk/reward profile. The sellers will have to earn their 3%!
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | -0.5269 % | 1,495.2 |
| FixedFloater | 5.77 % | 4.01 % | 47,110 | 18.57 | 1 | 0.0531 % | 2,660.5 |
| Floater | 2.61 % | 3.00 % | 101,739 | 19.74 | 3 | -0.5269 % | 1,867.9 |
| OpRet | 4.90 % | -5.75 % | 125,338 | 0.09 | 15 | 0.0080 % | 2,279.0 |
| SplitShare | 6.41 % | 6.61 % | 687,817 | 3.99 | 2 | -0.2205 % | 2,063.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0080 % | 2,083.9 |
| Perpetual-Premium | 5.83 % | 5.84 % | 150,016 | 13.86 | 11 | -0.0434 % | 1,866.4 |
| Perpetual-Discount | 5.83 % | 5.87 % | 210,822 | 14.10 | 61 | -0.3284 % | 1,773.8 |
| FixedReset | 5.50 % | 4.07 % | 441,148 | 4.07 | 41 | 0.0223 % | 2,108.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Perpetual-Discount | -2.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 19.15 Evaluated at bid price : 19.15 Bid-YTW : 6.06 % |
| ELF.PR.F | Perpetual-Discount | -1.87 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 19.96 Evaluated at bid price : 19.96 Bid-YTW : 6.68 % |
| ELF.PR.G | Perpetual-Discount | -1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 18.02 Evaluated at bid price : 18.02 Bid-YTW : 6.63 % |
| IAG.PR.C | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 5.22 % |
| TRI.PR.B | Floater | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 2.08 % |
| CM.PR.E | Perpetual-Discount | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 23.44 Evaluated at bid price : 23.71 Bid-YTW : 5.90 % |
| BMO.PR.J | Perpetual-Discount | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 20.33 Evaluated at bid price : 20.33 Bid-YTW : 5.62 % |
| TD.PR.S | FixedReset | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 23.49 Evaluated at bid price : 25.75 Bid-YTW : 4.00 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.A | FixedReset | 123,443 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.22 Bid-YTW : 4.44 % |
| CM.PR.J | Perpetual-Discount | 120,075 | RBC crossed 97,400 at 19.11. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 19.08 Evaluated at bid price : 19.08 Bid-YTW : 5.91 % |
| TD.PR.G | FixedReset | 99,547 | Nesbitt crossed blocks of 24,300 and 50,700 shares at 27.40 each. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.50 Bid-YTW : 3.84 % |
| SLF.PR.D | Perpetual-Discount | 64,807 | Scotia crossed 25,000 at 18.60, then sold 20,000 to RBC at 18.63. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-06 Maturity Price : 18.65 Evaluated at bid price : 18.65 Bid-YTW : 6.02 % |
| BNS.PR.T | FixedReset | 61,946 | National crossed 20,000 at 27.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.55 Bid-YTW : 3.79 % |
| BMO.PR.O | FixedReset | 52,555 | Nesbitt crossed 40,000 at 28.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-24 Maturity Price : 25.00 Evaluated at bid price : 27.96 Bid-YTW : 3.96 % |
| There were 50 other index-included issues trading in excess of 10,000 shares. | |||