PrefBlog

The first exception to Comrade Peace-Prize’s vengeful tax on banks will probably be short-term funding through repos:

The administration wants to recover government fees spent during the financial crisis through a levy on banks, which is projected to recoup at least $90 billion over 10 years. The fee, proposed as a 15-basis-point tax on liabilities other than insured deposits, could make repo transactions money losers for firms because profit margins on trades may be less than the fee.

“One of the modifications I expect would be to exclude Treasury repo, in part because the Fed wants to drain reserves using the repo market,” said Joseph Abate, a money market strategist in New York at Barclays Plc, one of the 18 primary dealers that trade with the central bank. “The 15 basis points fee would obviously make the banks less willing to participate in those transactions.”
…
Government policy makers have acted to shield the repo market in the past. The House of Representatives passed a financial overhaul bill in December that would penalize fully secured creditors if a systemically important financial firm failed, after carving out an exemption for trades involving Treasury securities.

Bernanke’s appointment to a second term was confirmed by the senate, 70-30.

As a public service, The Toronto Star and the Toronto Police came together this week to illustrate for the man in the street the realities of regulation:

• A statistical blip is dressed up as a trend in order to sell newspapers
• Regulators take stern action to Show Who’s Boss
• Things get back to normal

I know one ETF that’s going to show a rather large tracking error this month …. on the month-to-date, the TXPR Total Return Index Value is -0.32%, while CPD is -0.53%. Allowing 4bp for their fees, that means that their execution of the index rebalancing cost them about 17bp. Given $393-million under management, that comes to about $668,000.

It wasn’t much of day for the Canadian preferred share market, with PerpetualDiscounts down 5bp on the day while FixedResets gained 2bp. There are only three entries on the Performance Highlights table, so individual issues were reasonably well behaved, while volume remained at reasonably normal levels.

This entry was posted on Thursday, January 28th, 2010 at 10:18 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.