November 11, 2009

To my embarassment, I must correct the November 9 mention of the G-20 and the proposed Tobin tax. A Reuters story quotes a somewhat irritated Gordon Brown on the controversy:

“I think if you read my speech on Saturday, what I was talking about was the social responsibility of financial institutions,” Brown said at his regular news conference.

The actual speech:

But what we need to consider is whether in fact we need to go further in recognising the social and economic responsibility of the financial system not least in mitigating the risks to the rest of society.

So I believe we should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society.

There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial transactions levy.

Any measures we consider would have to be set against four core principles.

First, they would have to be global: to reflect the existence of the world’s first truly global sector and thereby create a level playing field for its operation.

Second, they would have to be non-distortionary to avoid damaging reductions in liquidity, inefficient allocation of capital and the temptation of avoidance.

Third, any measures should complement – and reinforce – the action we are already taking to enhance the stability of the international financial system and the global economy.

Fourth the contribution we ask the global financial services sector to make must be fair, measured and enable financial services to make their necessary contribution to future economic growth.

*sigh* That’s what I get for trusting a reporter instead of going straight to source documents.

The Dodd banking bill, briefly mentioned yesterday in the context of regulatory / monetary policy separation (I don’t believe arguments for either separation or combination are compelling, although I lean towards separation on the grounds that no institution should have too much power), also undermines Fed independence:

The financial-regulation overhaul proposed yesterday by Senator Christopher Dodd would strip the Fed of its role as a bank supervisor and give Congress a greater voice in naming the officials who set interest rates. The measure opens the door to interference from politicians who might disagree with any move by the Fed to raise rates from record lows, former central bank officials said.

Under the proposal, commercial banks would lose their power to appoint directors of the 12 regional Fed banks. Instead, directors would be chosen by the Fed’s Senate-confirmed governors, and each board chairman would be subject to Senate approval. Currently, two-thirds of directors are chosen by private-sector banks and one-third by the Washington-based governors.

Robert Benmosche of AIG, last mentioned on PrefBlog on August 31, is just about the only super-CEO who’s coming through the post-crisis recriminations with a good reputation. That reputation was burnished today:

American International Group Inc. Chief Executive Officer Robert Benmosche told the insurer’s board of directors that he may quit because of government limits on what the company can pay employees, according to a person familiar with the matter.

Benmosche made the comments at a board meeting last week, about three months after joining the company, said the person, who declined to be identified because the meeting was private. The CEO’s remarks were an expression of frustration, and Benmosche, 65, hasn’t acted on his declaration, the person said.

Can you imagine that? A CEO who actually stands up for his guys! Incredible, isn’t it?

Mark Pengelly of Risk Magazine has some interesting technical notes on the CIT CDS Recovery auction in CIT auction not likely to be heavily bid.

BIS has released its Regular OTC Derivatives Statistics:

Key developments:

  • •notional amounts of all types of OTC contracts rebounded somewhat to stand at $605 trillion at the end of June 2009, 10% above the level six months before,
  • •gross market values decreased by 21% to $25 trillion,
  • •gross credit exposures fell by 18% from an end-2008 peak of $4.5 trillion to $3.7 trillion,
  • •notional amounts of CDS contracts continued to decline, albeit at a slower pace than in the second half of 2008 and
  • •CDS gross market values shrank by 42%, following an increase of 60% during the previous six-month period.

More gains for Canadian preferreds today, as PerpetualDiscounts were up 13bp while FixedResets advanced 2bp, on thin volume. There were no losers in the Performance Highlights table.

PerpetualDiscounts now yield an average 5.95%, equivalent to 8.33% interest at the standard equivalency factor of 1.4x. Long Corporates continue to yield about 6.0%, so the pre-tax interest-equivalent spread (also referred to as the Seniority Spread) is about 235bp, slightly tighter than the 240bp reported on November 4.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.4451 % 1,489.2
FixedFloater 6.21 % 4.31 % 45,434 18.42 1 0.0571 % 2,508.6
Floater 2.62 % 3.10 % 93,865 19.43 3 0.4451 % 1,860.5
OpRet 4.80 % -5.92 % 117,476 0.09 14 -0.0027 % 2,308.3
SplitShare 6.32 % 3.40 % 370,141 0.08 2 0.2840 % 2,093.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0027 % 2,110.8
Perpetual-Premium 5.88 % 5.54 % 70,447 1.16 4 0.0595 % 1,862.3
Perpetual-Discount 5.90 % 5.95 % 185,887 13.93 70 0.1342 % 1,756.9
FixedReset 5.49 % 4.09 % 398,087 3.96 41 0.0154 % 2,125.7
Performance Highlights
Issue Index Change Notes
RY.PR.D Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 5.68 %
TRI.PR.B Floater 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 2.02 %
MFC.PR.C Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 19.46
Evaluated at bid price : 19.46
Bid-YTW : 5.88 %
IAG.PR.A Perpetual-Discount 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 6.10 %
ELF.PR.F Perpetual-Discount 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 19.65
Evaluated at bid price : 19.65
Bid-YTW : 6.84 %
Volume Highlights
Issue Index Shares
TRP.PR.A FixedReset 48,450 RBC crossed 25,000 at 25.43.
Maturity Type : Call
Maturity Date : 2015-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.42
Bid-YTW : 4.37 %
RY.PR.A Perpetual-Discount 30,682 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 19.52
Evaluated at bid price : 19.52
Bid-YTW : 5.73 %
ELF.PR.G Perpetual-Discount 27,375 RBC crossed 25,000 at 17.65.
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 17.62
Evaluated at bid price : 17.62
Bid-YTW : 6.83 %
GWO.PR.E OpRet 26,569 RBC crossed 11,700 at 25.81.
Maturity Type : Call
Maturity Date : 2009-12-11
Maturity Price : 25.50
Evaluated at bid price : 25.81
Bid-YTW : -3.67 %
RY.PR.X FixedReset 24,144 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.56
Bid-YTW : 3.94 %
PWF.PR.I Perpetual-Discount 21,200 RBC crossed 20,000 at 24.67.
Maturity Type : Limit Maturity
Maturity Date : 2039-11-11
Maturity Price : 24.40
Evaluated at bid price : 24.72
Bid-YTW : 6.11 %
There were 16 other index-included issues trading in excess of 10,000 shares.

2 Responses to “November 11, 2009”

  1. […] (also called the Seniority Spread) is about 240bp. This is a shade wider than the 235bp reported on November 11, but the market seems to have found a new level … at least, until it […]

  2. […] noted on November 11, Gordon Brown mentioned the idea, but not in a manner to indicate either support or […]

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