Econbrowser has a guest-post touting the Wisconsin Foreclosure and Unemployment Relief Plan:
The WI-FUR plan (here for details) specifies that all unemployed receiving UI benefits also receive a housing voucher that can be used to pay the mortgage. The housing voucher would be computed such that, on average in each state, homeowners pay 30% of their UI benefits on their mortgage — the voucher would cover the balance. In Wisconsin, for example, we advocate for an average voucher of about $764. This would make up for the shortfall in a $1,200 mortgage payment if households pay 30% of their UI benefit ($436 = 0.30 × $1,452) towards their mortgage.
The supporting argument is good, but I would be more inclined to support the idea if the government was getting something for its largesse: say, a chunk of equity in the house – maybe even computed against the price of the house when the mortgage was taken out. So, for instance, if Joe Unemployed uses twelve vouchers for $1,000 each in order to maintain ownership of his $400,000 house, the government then owns 3% of the house as equity, to be recovered when the house is next sold, at latest.
In another part of the post, they reference Lehman’s ‘Housing Meltdown Scenario’ which has been … er … somewhat overtaken by events and has been discussed on PrefBlog.
Accrued Interest writes an interesting post that is almost evenly divided between debt monetization via Fed Agency buy-backs and the low level of American political debate:
I don’t have a problem with claims that the Fed is conducting de facto monetization through its QE efforts. I don’t agree. I think Quantitative Easing is a legitimate monetary policy tool. But I readily admit that the distance between QE and monetization is no more than three meters wide. I think the Fed is still on the correct side of that line, but it is a perfectly legitimate and important public policy debate. I’m open minded to the possibility that the Fed could cross that line at some point. I welcome rational and objective discussion aimed at convincing me and others that the line has already been crossed.
To be fair, I don’t read Zero Hedge, so I am loathe to generalize about the opinions held on that site. However its obvious that the author is of the opinion that the Fed has crossed the line. Fine. Let’s hear the case. But instead, Zero Hedge tries to link this particular buy back with debt monetization, when I’ve clearly shown above that this particular buy back doesn’t indicate anything either way. Zero Hedge is presenting non-evidence as evidence.
So one of two things must be going on. Either Zero Hedge is ignorant of all the above facts, or he’s intentionally ignoring the facts to make his argument more sensationalist.
He has a follow-up today answering complaints from those who feel quantitative easing is the same thing as monetization. And it is; it’s simply a question of the environment. Right now the former appellation is appropriate because there is a demonstrable risk of disinflation, if not full deflation. If they keep it up for long enough, then yes, it will be monetization.
Looks like Central Bankers are are moving towards a new world reserve currency:
Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.
Reuters claims that the CIT restructuring is in trouble:
CIT Group Inc is seeing little interest from bondholders in a debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely, sources familiar with the matter said.
…
CIT is now more likely to try a prepackaged bankruptcy, two people familiar with the matter said. They declined to be identified because the exchange offer is ongoing and information about its progress is private.
… and they’re losing their CEO:
Jeffrey M. Peek has informed the Board of Directors that he plans to resign as Chairman and Chief Executive Officer from CIT effective December 31, 2009. The Board is forming a Search Committee to oversee the recruitment process and ensure a smooth leadership transition at the Company.
“CIT’s recently launched restructuring plan is designed to enhance its capital levels, bolster liquidity and return the Company to profitability,” said Mr. Peek. “By strengthening CIT’s financial position, the Company will advance its bank-centric model and invigorate its market-leading franchises which support the small business and middle market sectors of the economy. Now is the appropriate time to focus on a transition of leadership, and I look forward to working closely with our Board during that process.”
Another down-day for PerpetualDiscounts, which lost 11bp on the day, in distinction to FixedResets, which gained 5bp. The day was enlivened by a new issue from EPP, which was downgraded by DBRS, thus simultaneously confirming three trends and predictions:
- New FixedResets from relatively low-quality companies
- New FixedResets following the jump in Canadian 5-year yields last Friday
- Downgrade of EPP
RBC did some nice crosses on the day, dominating the board.
| 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 | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -1.1842 % | 1,486.9 |
| FixedFloater | 5.80 % | 3.96 % | 44,800 | 18.91 | 1 | 1.8847 % | 2,686.2 |
| Floater | 2.62 % | 3.02 % | 101,403 | 19.69 | 3 | -1.1842 % | 1,857.6 |
| OpRet | 4.90 % | -0.58 % | 131,295 | 0.13 | 15 | 0.1391 % | 2,279.5 |
| SplitShare | 6.44 % | 6.49 % | 636,831 | 3.97 | 2 | 0.0666 % | 2,054.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1391 % | 2,084.4 |
| Perpetual-Premium | 5.92 % | 5.94 % | 148,419 | 13.97 | 11 | -0.2826 % | 1,846.2 |
| Perpetual-Discount | 5.92 % | 5.97 % | 217,229 | 13.96 | 62 | -0.1070 % | 1,747.7 |
| FixedReset | 5.51 % | 4.17 % | 454,928 | 4.03 | 41 | 0.0536 % | 2,107.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CM.PR.E | Perpetual-Discount | -2.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-13 Maturity Price : 22.55 Evaluated at bid price : 22.75 Bid-YTW : 6.17 % |
| BAM.PR.K | Floater | -1.89 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-13 Maturity Price : 12.95 Evaluated at bid price : 12.95 Bid-YTW : 3.06 % |
| BAM.PR.N | Perpetual-Discount | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-13 Maturity Price : 17.88 Evaluated at bid price : 17.88 Bid-YTW : 6.72 % |
| HSB.PR.C | Perpetual-Discount | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-13 Maturity Price : 21.46 Evaluated at bid price : 21.75 Bid-YTW : 5.90 % |
| SLF.PR.E | Perpetual-Discount | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-13 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 6.13 % |
| BAM.PR.G | FixedFloater | 1.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-13 Maturity Price : 25.00 Evaluated at bid price : 18.75 Bid-YTW : 3.96 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.T | FixedReset | 248,835 | RBC crossed 40,000 at 27.65; 40,000 at 27.70; 118,800 at 27.70; and finally another 40,000 at 27.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.58 Bid-YTW : 4.17 % |
| TRP.PR.A | FixedReset | 86,176 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.21 Bid-YTW : 4.48 % |
| RY.PR.Y | FixedReset | 70,042 | RBC crossed 25,000 at 27.60, then another 39,700 at 27.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-24 Maturity Price : 25.00 Evaluated at bid price : 27.55 Bid-YTW : 4.14 % |
| CM.PR.L | FixedReset | 67,541 | RBC crossed 40,000 at 27.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.26 Bid-YTW : 4.32 % |
| BAM.PR.P | FixedReset | 54,550 | RBC crossed 42,000 at 26.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 26.76 Bid-YTW : 5.50 % |
| RY.PR.P | FixedReset | 53,796 | RBC crossed 40,000 at 27.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.49 Bid-YTW : 4.02 % |
| There were 40 other index-included issues trading in excess of 10,000 shares. | |||