{"id":10465,"date":"2010-04-13T22:29:08","date_gmt":"2010-04-14T02:29:08","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=10465"},"modified":"2010-04-13T22:29:08","modified_gmt":"2010-04-14T02:29:08","slug":"april-13-2010","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=10465","title":{"rendered":"April 13, 2010"},"content":{"rendered":"

Citigroup’s liquidity guarantees are attracting scrutiny<\/a>:<\/p>\n

Financial Crisis Inquiry Commission investigators may conclude a primary cause of Citigroup\u2019s 2008 bailout was the use of \u201cliquidity puts\u201d by traders to bolster sales, Chairman Phil Angelides said in an interview yesterday. Those puts allowed customers to sell debt securities back to the bank at face value if credit markets froze, something that Citigroup\u2019s traders bet would never happen, according to Angelides.
…<\/b>
To raise money to buy the assets, Citigroup sold commercial paper, with the assets pledged as collateral. Commercial paper is a type of debt that matures in less than a year and was popular with money-market funds and corporate treasurers who want to invest their surplus cash in readily redeemable funds while earning higher yields.<\/p>\n

Liquidity puts were added to \u201cfacilitate\u201d the sales of the commercial paper, [Citigroup CDO boss Nestor] Dominguez said; investors could \u201cput back\u201d the commercial paper to Citigroup if the market went cold. Dominguez described this as a \u201csignificant widening in credit spreads or a temporary inability to issue commercial paper.\u201d Widening credit spreads, or the gap between a bond\u2019s yield and benchmark rates, indicate slackening investor demand.
…<\/b>
Citigroup used the liquidity puts partly because they required less capital support than backup credit lines that bank\u2019s typically offer, Georgiou said.<\/p>\n

The liquidity puts were subject to a 0.8 percent capital charge, [commission member Byron] Georgiou said. Put another way, the bank had to set aside $1 of capital for every $125 of commercial paper. That compares with Citigroup\u2019s overall ratio of $1 for every $14.50 of loans, securities and other investments as of Dec. 31.<\/p><\/blockquote>\n

The International Monetary Fund has released<\/a> the April 2010 Global Financial Stability Report. I haven’t had a chance to do much besides skim it, but the big news<\/a> is that they’re recommending capital charges on “systemically important” banks based on regulatory fiat, rather than any kind of formula:<\/p>\n

Regulators may find it necessary to weigh \u201cdirect preemptive measures,\u201d including constraining the size of certain activities to limit the emergence of \u201csystemically important\u201d firms, the Washington-based IMF said today in its bi-annual Global Financial Stability Report.<\/p>\n

The report precedes an April 23 meeting of the Group of 20 nations in Washington, where the IMF plans to detail for finance chiefs ways that financial firms may help pay for the costs of bailouts. Since the start of the credit crisis, governments and central banks have spent more than $11 trillion to support the financial industry, according to the Paris-based Organization for Economic Cooperation and Development.<\/p>\n

The capital surcharge would be \u201ca buffer\u201d designed to increase \u201cthe resiliency of the institution to sustain different shocks,\u201d Juan Sole, one of the report\u2019s authors, told reporters in Washington today.<\/p>\n

Political momentum to overhaul financial regulations in some countries may be weakening as economic growth returns, IMF Managing Director Dominique Strauss-Kahn said in an interview in Kenya last month.<\/p>\n

Parts of the financial industry have gone \u201cback to practices of risk taking, which is probably not the most appropriate to have a stable financial system at the global level,\u201d he said.<\/p><\/blockquote>\n

Now, more than ever, it is important for large banks to offer cushy jobs to ex-regulators!<\/p>\n

The rebound in the market continued today on heavy volume, with PerpetualDiscounts up 26bp while FixedResets lost 4bp … taking the yield on the latter index within striking distance of 4%!<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n2.60 %<\/td>\n2.71 %<\/td>\n55,414<\/td>\n20.88<\/td>\n1<\/td>\n-0.2764 %<\/td>\n2,122.8<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.94 %<\/td>\n3.01 %<\/td>\n47,480<\/td>\n20.39<\/td>\n1<\/td>\n0.3238 %<\/td>\n3,237.9<\/td>\n<\/tr>\n
Floater<\/td>\n1.90 %<\/td>\n1.65 %<\/td>\n42,088<\/td>\n23.46<\/td>\n4<\/td>\n0.3755 %<\/td>\n2,427.3<\/td>\n<\/tr>\n
OpRet<\/td>\n4.88 %<\/td>\n3.48 %<\/td>\n107,376<\/td>\n0.29<\/td>\n10<\/td>\n-0.0350 %<\/td>\n2,313.7<\/td>\n<\/tr>\n
SplitShare<\/td>\n6.34 %<\/td>\n-1.27 %<\/td>\n136,202<\/td>\n0.08<\/td>\n2<\/td>\n0.0438 %<\/td>\n2,151.7<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0350 %<\/td>\n2,115.6<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.82 %<\/td>\n3.86 %<\/td>\n34,650<\/td>\n0.62<\/td>\n2<\/td>\n0.4654 %<\/td>\n1,853.8<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n6.14 %<\/td>\n6.20 %<\/td>\n197,668<\/td>\n13.65<\/td>\n76<\/td>\n0.2626 %<\/td>\n1,733.0<\/td>\n<\/tr>\n
FixedReset<\/td>\n5.43 %<\/td>\n3.93 %<\/td>\n479,541<\/td>\n3.66<\/td>\n44<\/td>\n-0.0373 %<\/td>\n2,173.7<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
MFC.PR.C<\/td>\nPerpetual-Discount<\/td>\n-2.22 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 18.09
\nEvaluated at bid price : 18.09
\nBid-YTW : 6.30 %<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nPerpetual-Discount<\/td>\n-1.03 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 18.21
\nEvaluated at bid price : 18.21
\nBid-YTW : 6.24 %<\/td>\n<\/tr>\n
RY.PR.B<\/td>\nPerpetual-Discount<\/td>\n1.00 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 20.11
\nEvaluated at bid price : 20.11
\nBid-YTW : 5.94 %<\/td>\n<\/tr>\n
SLF.PR.D<\/td>\nPerpetual-Discount<\/td>\n1.12 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 18.01
\nEvaluated at bid price : 18.01
\nBid-YTW : 6.24 %<\/td>\n<\/tr>\n
POW.PR.B<\/td>\nPerpetual-Discount<\/td>\n1.67 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 21.35
\nEvaluated at bid price : 21.35
\nBid-YTW : 6.31 %<\/td>\n<\/tr>\n
POW.PR.D<\/td>\nPerpetual-Discount<\/td>\n1.83 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 20.07
\nEvaluated at bid price : 20.07
\nBid-YTW : 6.27 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
BNS.PR.Y<\/td>\nFixedReset<\/td>\n92,850<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 24.35
\nEvaluated at bid price : 24.40
\nBid-YTW : 3.95 %<\/td>\n<\/tr>\n
RY.PR.R<\/td>\nFixedReset<\/td>\n70,460<\/td>\nNational crossed 55,000 at 27.61.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-03-26
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.57
\nBid-YTW : 3.75 %<\/td>\n<\/tr>\n
BNS.PR.T<\/td>\nFixedReset<\/td>\n58,045<\/td>\nNational crossed 50,000 at 27.44.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.37
\nBid-YTW : 3.75 %<\/td>\n<\/tr>\n
TD.PR.G<\/td>\nFixedReset<\/td>\n53,818<\/td>\nRBC crossed 13,700 at 27.41; Nesbitt bought 10,000 from anonymous at 27.40.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.31
\nBid-YTW : 3.82 %<\/td>\n<\/tr>\n
SLF.PR.D<\/td>\nPerpetual-Discount<\/td>\n44,253<\/td>\nRBC bought 10,000 from National at 18.20.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-04-13
\nMaturity Price : 18.01
\nEvaluated at bid price : 18.01
\nBid-YTW : 6.24 %<\/td>\n<\/tr>\n
MFC.PR.E<\/td>\nFixedReset<\/td>\n44,214<\/td>\nNational crossed 25,000 at 26.79.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-10-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.68
\nBid-YTW : 4.10 %<\/td>\n<\/tr>\n
There were 61 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Citigroup’s liquidity guarantees are attracting scrutiny: Financial Crisis Inquiry Commission investigators may conclude a primary cause of Citigroup\u2019s 2008 bailout was the use of \u201cliquidity puts\u201d by traders to bolster sales, Chairman Phil Angelides said …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-10465","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/10465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10465"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/10465\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}