Looks like the UK government is doing all it can to make the Royal Bank of Scotland a casualty in the holy war against bonuses:
Royal Bank of Scotland Group Plc, recipient of the world’s biggest bank bailout, said the British government’s “very restrictive” control over 2009 bonuses risks driving employees away.
…
The RBS board has had legal advice that they would have to resign if the government blocked bonuses they regarded as essential for the bank’s competitiveness, according to Robert Peston, the British Broadcasting Corp.’s business editor.
…
“It’s a headhunters dream at the moment,” said Shaun Springer, chief executive officer of Square Mile Services Ltd., which advises London financial firms on pay. “They are going to lose people and then have to pay to replace them which is so very short sighted. RBS is getting hammered every which way.”
On a different regulatory topic, there are estimates that CDS regulation could cost JPM $3-billion in revenue:
Revenue at JPMorgan Chase & Co., the second-largest U.S. bank, may drop by as much as $3 billion should most derivatives trades be moved to exchanges, a Sanford C. Bernstein & Co. analyst said.
…
JPMorgan “sees the largest risk from legislation mandating that all derivatives be traded on an exchange as opposed to through the OTC market, limiting the company’s ability to create customized products,” [Bernstein analyst John] McDonald wrote, referring to the over- the-counter market. He declined to comment beyond the note.
Parallels to TRACE and Corporate Bond Transparency are clear … it seems to me that the following scenario is most likely:
- Increased transparency brings lower spreads
- lower spreads bring lower profits
- lower profits bring lower capital allocation
- lower capital allocation brings lower liquidity
But who needs capital market liquidity in the middle of a holy war? The important things in life are:
- make it look like the politicians know what they’re doing
- ensure that moronic portfolio managers don’t suffer the consequences of their actions
Next crisis, coming right up! To make a decent return on capital, the dealers will have to find a new way to exploit the stupid (and whoever can figure out how to replace $3-billion in revenue will probably get a bonus – oh, the horror!).
OSFI has announced Stress Testing Guidelines.
A quiet day on the Canadian preferred share market, with PerpetualDiscounts squeaking out a gain of less than 1bp and FixedResets gaining 7bp. Volume was pretty quiet and there are only two entries in the performance highlights table!
PerpetualDiscounts now yield 5.87%, equivalent to 8.22% interest at the standard equivalency factor of 1.4x. Long Corporates continue to yield about 5.9%, so the pre-tax interest-equivalent spread is now n the 230-235bp range, a slight widening from the 225bp reported on November 30.
| 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 | -0.4166 % | 1,498.8 |
| FixedFloater | 6.05 % | 4.16 % | 40,805 | 18.58 | 1 | -0.2221 % | 2,574.5 |
| Floater | 2.60 % | 3.04 % | 94,534 | 19.55 | 3 | -0.4166 % | 1,872.4 |
| OpRet | 4.86 % | -4.80 % | 145,544 | 0.08 | 15 | 0.0077 % | 2,309.1 |
| SplitShare | 6.35 % | -8.45 % | 288,421 | 0.08 | 2 | -0.0875 % | 2,116.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0077 % | 2,111.4 |
| Perpetual-Premium | 5.86 % | 5.62 % | 64,092 | 2.16 | 7 | 0.3068 % | 1,884.1 |
| Perpetual-Discount | 5.81 % | 5.87 % | 186,582 | 14.08 | 67 | 0.0085 % | 1,787.3 |
| FixedReset | 5.43 % | 3.77 % | 373,685 | 3.92 | 41 | 0.0726 % | 2,151.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BMO.PR.H | Perpetual-Discount | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 22.64 Evaluated at bid price : 23.41 Bid-YTW : 5.66 % |
| ELF.PR.F | Perpetual-Discount | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 6.61 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PR.P | Perpetual-Discount | 208,590 | Nesbitt crossed 200,000 at 23.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 23.27 Evaluated at bid price : 23.45 Bid-YTW : 5.66 % |
| CM.PR.R | OpRet | 133,825 | RBC crossed three blocks, all at 26.32, of 24,600 shares, 68,400 and 31,500. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-01 Maturity Price : 25.60 Evaluated at bid price : 26.26 Bid-YTW : -19.97 % |
| IGM.PR.A | OpRet | 63,194 | YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-01 Maturity Price : 26.00 Evaluated at bid price : 26.00 Bid-YTW : 0.18 % |
| RY.PR.R | FixedReset | 49,434 | Nesbit bought 15,000 from RBC at 27.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.67 Bid-YTW : 3.64 % |
| TD.PR.Q | Perpetual-Discount | 46,300 | Nesbitt crossed two blocks of 20,000 each at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-02 Maturity Price : 24.60 Evaluated at bid price : 24.82 Bid-YTW : 5.70 % |
| ACO.PR.A | OpRet | 36,910 | CIBC crossed 35,000 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-01 Maturity Price : 25.50 Evaluated at bid price : 25.95 Bid-YTW : -14.90 % |
| There were 26 other index-included issues trading in excess of 10,000 shares. | |||