{"id":13222,"date":"2010-12-03T01:50:54","date_gmt":"2010-12-03T05:50:54","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=13222"},"modified":"2010-12-03T01:50:54","modified_gmt":"2010-12-03T05:50:54","slug":"december-2-2010","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=13222","title":{"rendered":"December 2, 2010"},"content":{"rendered":"

The European emergency measures is being extended<\/a>:<\/p>\n

Under pressure from investors to lead the charge against the spreading sovereign debt crisis, Trichet said the ECB will keep offering banks as much cash as they want through the first quarter over periods of up to three months at a fixed interest rate. As he spoke, ECB staff embarked upon a new wave of purchases, triggering a surge in Irish and Portuguese bonds.
…<\/b>
While the ECB chose not to deploy new crisis-fighting tools, Trichet managed to avoid sparking another market selloff four days after traders gave a vote of no-confidence to a bailout of Ireland. He kept up pressure on governments to fight the crisis by saying that \u201cbenign neglect\u201d is not enough and indicated they could expand Europe\u2019s rescue fund amid concern it\u2019s not large enough to finance any bailout of Spain.
…<\/b>
The yield on Portuguese 10-year bonds dropped 50 basis points to 6.13 percent and Irish yields fell 37 basis points to 8.76 percent. The Spanish 10-year yield declined 22 basis points to 5.07 percent. The euro traded at $1.3228 at 5:41 p.m. in London compared with $1.3152 before Trichet started talking.
…<\/b>
Signaling disagreement within the 22-member council, Trichet said an \u201coverwhelming majority\u201d of officials backed the ECB\u2019s Securities Market Program and that a \u201cconsensus\u201d supported maintaining the status quo on providing liquidity. Bond purchases will continue to be offset to keep the money supply unchanged, in contrast to the Federal Reserve and the Bank of England, he said.<\/p>\n

\u201cIt\u2019s not quantitative easing, we\u2019re withdrawing all the liquidity,\u201d he said.<\/p><\/blockquote>\n

The future seniority of ESM debt to public sovereign debt is cited as a potential trigger for a Greek downgrade<\/a>:<\/p>\n

Greece\u2019s \u2018BB+\u2019 long-term sovereign rating was placed on \u201cCreditWatch\u201d with negative implications, Standard & Poor\u2019s Ratings Services said in a statement today from Madrid. S&P said it is assessing credit implications of the so-called European Stability Mechanism that may govern European Union sovereign bonds beginning in July 2013.<\/p>\n

\u201cAssigning \u2018preferred creditor\u2019 status to future official lending via the ESM could be detrimental to the ability of non- official holders of sovereign debt to be repaid,\u201d S&P said.
…<\/b>
The EU in October agreed on the need to set up the ESM as a permanent crisis mechanism to safeguard the financial stability of the euro area as a whole. The Eurogroup, comprising the finance ministers of the 16 nations sharing the euro, said in a statement on Nov. 28 that \u201can ESM loan will enjoy preferred creditor status, junior only\u201d to the loan from the International Monetary Fund.<\/p>\n

Greece in May got a three-year aid package of 110 billion euros ($145 billion) from the euro area and the IMF to prevent a debt default.<\/p><\/blockquote>\n

The Icelandic model<\/a> is being touted:<\/p>\n

While analysts expect Iceland\u2019s recession to extend into next year, the nation\u2019s exporters are benefiting from a 28 percent drop in the krona against the dollar since September 2008. The decline may help the nation of 320,000 people rebalance its economy faster than Ireland, whose euro membership rules out a currency devaluation. With Iceland\u2019s OMX share index up 17 percent this year, the third-biggest gain in Europe after Denmark and Sweden, Nobel Prize-winning economist Paul Krugman says Iceland may be an example of \u201cbankrupting yourself to recovery.\u201d<\/p>\n

\u201cThe difference is that in Iceland we allowed the banks to fail,\u201d Iceland President Olafur R. Grimsson said in a Nov. 26 interview with Bloomberg Television\u2019s Mark Barton. \u201cThese were private banks and we didn\u2019t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.\u201d<\/p><\/blockquote>\n

The insolvency was highly unpopular at the time<\/a> – but a lot better for the world than the pretend sort-of insolvencies being touted by politicians.<\/p>\n

In the meantime, it appears that the US still isn’t taking its fiscal deficit seriously enough<\/a>:<\/p>\n

Senate Finance Committee Chairman Max Baucus, a Democrat, and incoming House Ways and Means Committee Chairman Dave Camp, a Republican, said today they will vote against the plan tomorrow. They join Representatives Paul Ryan, a Wisconsin Republican, and Jan Schakowsky, an Illinois Democrat, in opposition.<\/p>\n

The plan requires approval from 14 of the panel\u2019s 18 members to forward it to Congress, meaning five \u201cno\u201d votes would kill it. Texas Republican Jeb Hensarling said today he is leaning against the proposal.<\/p>\n

The recommendations are \u201cwrong for Montana and wrong for rural communities across the country,\u201d Baucus of Montana said in a statement. While reducing the deficit is \u201cimperative,\u201d he said, \u201cwe cannot cut the deficit at the expense of veterans, seniors, ranchers, farmers and hard-working families.\u201d<\/p><\/blockquote>\n

Ideally, of course, Baucus will be dead, retired, or gainfully employed by the time the shit hits the fan. ABC News reports<\/a> that it:<\/p>\n

has learned Andrew Stern will vote no on the deficit commission\u2019s plan to reduce the national deficit by nearly $4 trillion. Mr. Stern, the former president of the SEIU, has informed co-chairmen Erskine Bowles and Alan Simpson that he will be the fifth member voting no, ending the commission\u2019s hopes of officially passing the plan to Congress.<\/p><\/blockquote>\n

Two recent products to hit the Toronto market FFL \/ FFL.U<\/a> and SST \/ SST.U<\/a> are either craziness or genius. One or the other. The latter is the iPath\u00ae US Treasury Flattener Exchange Traded Note<\/a>, which:<\/p>\n

is linked inversely to the performance of the Barclays Capital US Treasury 2Y\/10Y Yield Curve Index\u2122. The index employs a strategy that seeks to capture returns that are potentially available from a “steepening” or “flattening”, as applicable, of the U.S. Treasury yield curve through a notional rolling investment in U.S. Treasury note futures contracts. The level of the index is designed to increase in response to a “steepening” of the yield curve and to decrease in response to a “flattening” of the yield curve. To accomplish this objective, the performance of the index tracks the returns of a notional investment in a weighted “long” position in relation to 2-year Treasury futures contracts and a weighted “short” position in relation to 10-year Treasury futures contracts, as traded on the Chicago Board of Trade.<\/p>\n

The iPath\u00ae US Treasury Flattener ETN employs an index multiplier that provides the investor at maturity or upon redemption a participation rate of $0.10 gain or loss per each 1.00 point decrease or increase, respectively, in the level of the index. For purposes of calculating the closing indicative note value on a given day, the index multiplier is multiplied by the daily index performance, which is added to the daily interest that accrued from a notional investment of the value of the ETN at the 28-day U.S. Treasury Bill rate, from which all applicable costs and fees are deducted.<\/p><\/blockquote>\n

On the one hand, this is a way for retail and small institutions to adjust their exposures without entering into costly trades. On the other hand, trading Treasuries is about the cheapest thing you can do in the capital markets. And retail’s lucky if it understands duration, let alone steepeners, flatteners and convexity. And there’s no related product to handle the 10-30 spread. On the other hand, I guess, if it sells, it sells.<\/p>\n

CIBC debt capital markets division is doing well<\/a>:<\/p>\n

Canadian Imperial Bank of Commerce ranks among the top three banks managing corporate bond sales in Canada for the first time since 2004, displacing Toronto- Dominion Bank as company issuance surges to a three-year high.<\/p>\n

The bank\u2019s CIBC World Markets unit ranks second this year after leading debt sales for companies such as Telus Corp. and BCE Inc. Royal Bank of Canada\u2019s RBC Capital Markets is first, extending its streak of more than a decade as the top arranger, according to data compiled by Bloomberg. Bank of Nova Scotia\u2019s Scotia Capital unit ranks third among Canada\u2019s six major banks.
…<\/b>
Companies have raised C$69.4 billion ($68.2 billion) in bond sales this year, up from C$57.2 billion in all of 2009 and the highest since 2007, according to Bloomberg data.
…<\/b>
The Toronto-based firm also raised about C$6.2 billion for its parent, Canadian Imperial Bank of Commerce, the country\u2019s fifth-biggest bank.<\/p>\n

By comparison, TD Securities had one C$1 billion debt sale this year for its parent, Toronto-Dominion Bank, Canada\u2019s second-biggest bank.<\/p>\n

\u201cWhen we look at things, excluding self-led deals, we see ourselves solidly in second place,\u201d Brad Saunders, vice president of debt syndication at TD Securities, said in an interview.<\/p><\/blockquote>\n

It was clobberin’ time in the Canadian preferred share market today, with PerpetualDiscounts losing 38bp and FixedResets being hammered for an unbelievable (semi-believable, at best) loss of 58bp. Volume was extremely heavy; so heavy that the market maker for GWO.PR.J had to take the afternoon off – which cost the FixedReset index about a third of its apparent loss.<\/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>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.0625 %<\/td>\n2,270.9<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.78 %<\/td>\n3.43 %<\/td>\n29,483<\/td>\n19.16<\/td>\n1<\/td>\n-0.6114 %<\/td>\n3,520.4<\/td>\n<\/tr>\n
Floater<\/td>\n2.62 %<\/td>\n2.36 %<\/td>\n53,048<\/td>\n21.36<\/td>\n4<\/td>\n0.0625 %<\/td>\n2,452.0<\/td>\n<\/tr>\n
OpRet<\/td>\n4.79 %<\/td>\n3.87 %<\/td>\n83,592<\/td>\n2.39<\/td>\n8<\/td>\n-0.1150 %<\/td>\n2,375.8<\/td>\n<\/tr>\n
SplitShare<\/td>\n5.47 %<\/td>\n1.28 %<\/td>\n121,853<\/td>\n1.01<\/td>\n3<\/td>\n-0.0937 %<\/td>\n2,458.9<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1150 %<\/td>\n2,172.4<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.70 %<\/td>\n5.50 %<\/td>\n156,073<\/td>\n5.40<\/td>\n27<\/td>\n0.0037 %<\/td>\n2,008.4<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.37 %<\/td>\n5.39 %<\/td>\n284,189<\/td>\n14.78<\/td>\n51<\/td>\n-0.3814 %<\/td>\n2,028.2<\/td>\n<\/tr>\n
FixedReset<\/td>\n5.24 %<\/td>\n3.42 %<\/td>\n355,418<\/td>\n3.20<\/td>\n52<\/td>\n-0.5792 %<\/td>\n2,257.5<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n\n\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
GWO.PR.J<\/td>\nFixedReset<\/td>\n-9.35 %<\/td>\nThis is just a stupid quote. The issue traded 2,831 shares in a range of 27.41-64 and the last of the eleven trades was at 3:33pm. The closing quote was 24.81-27.54, 4×9.<\/p>\n

There is no excuse for this crap. Market makers get numerous privileges but are nudge-wink obliged ha-ha to maintain orderly markets and reasonable snicker spreads hee-hee. The Toronto Exchange should be investigating this and issuing a statement explaining this apparent gross dereliction of duty; and perhaps stripping the market maker of his responsibilities for this issue; perhaps extending some sanctions to the individual’s other issues and to the rest of his firm. If he was legitimately busy, or had a heart attack or whatever … who cares? That’s what algorithms are for and they can call a market with a latency of somewhat less than half an hour.<\/p>\n

I have sent an email to the TMX (join in<\/a>!) inquiring about the circumstances and repercussions of this quote. Who knows … if I’m lucky I might get a note from a clerk six months out of B-School thanking me for my inquiry, which is being taken very seriously.<\/p>\n

Could we simply chalk this up to the vagaries of the capital markets? Could there be a good reason for this? Sure. Let’s hear it.<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 24.69
\nEvaluated at bid price : 24.81
\nBid-YTW : 5.52 %<\/td>\n<\/tr>\n

TRP.PR.C<\/td>\nFixedReset<\/td>\n-2.20 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 25.30
\nEvaluated at bid price : 25.35
\nBid-YTW : 3.96 %<\/td>\n<\/tr>\n
CIU.PR.A<\/td>\nPerpetual-Discount<\/td>\n-1.83 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 21.50
\nEvaluated at bid price : 21.50
\nBid-YTW : 5.39 %<\/td>\n<\/tr>\n
BNS.PR.T<\/td>\nFixedReset<\/td>\n-1.66 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.29
\nBid-YTW : 3.65 %<\/td>\n<\/tr>\n
TD.PR.E<\/td>\nFixedReset<\/td>\n-1.59 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.30
\nBid-YTW : 3.65 %<\/td>\n<\/tr>\n
RY.PR.L<\/td>\nFixedReset<\/td>\n-1.49 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-03-26
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.45
\nBid-YTW : 3.74 %<\/td>\n<\/tr>\n
RY.PR.F<\/td>\nPerpetual-Discount<\/td>\n-1.47 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 22.00
\nEvaluated at bid price : 22.12
\nBid-YTW : 5.06 %<\/td>\n<\/tr>\n
BNS.PR.X<\/td>\nFixedReset<\/td>\n-1.44 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.36
\nBid-YTW : 3.59 %<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nPerpetual-Discount<\/td>\n-1.32 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 20.93
\nEvaluated at bid price : 20.93
\nBid-YTW : 5.38 %<\/td>\n<\/tr>\n
SLF.PR.G<\/td>\nFixedReset<\/td>\n-1.21 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 25.25
\nEvaluated at bid price : 25.30
\nBid-YTW : 3.80 %<\/td>\n<\/tr>\n
BMO.PR.N<\/td>\nFixedReset<\/td>\n-1.19 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-03-27
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.48
\nBid-YTW : 3.35 %<\/td>\n<\/tr>\n
MFC.PR.C<\/td>\nPerpetual-Discount<\/td>\n-1.17 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 20.21
\nEvaluated at bid price : 20.21
\nBid-YTW : 5.59 %<\/td>\n<\/tr>\n
BMO.PR.K<\/td>\nPerpetual-Discount<\/td>\n-1.09 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 24.28
\nEvaluated at bid price : 24.51
\nBid-YTW : 5.38 %<\/td>\n<\/tr>\n
FTS.PR.F<\/td>\nPerpetual-Discount<\/td>\n-1.08 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 22.68
\nEvaluated at bid price : 22.85
\nBid-YTW : 5.39 %<\/td>\n<\/tr>\n
RY.PR.A<\/td>\nPerpetual-Discount<\/td>\n-1.07 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 21.99
\nEvaluated at bid price : 22.12
\nBid-YTW : 5.06 %<\/td>\n<\/tr>\n
BAM.PR.T<\/td>\nFixedReset<\/td>\n1.22 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 23.06
\nEvaluated at bid price : 24.90
\nBid-YTW : 4.52 %<\/td>\n<\/tr>\n
MFC.PR.D<\/td>\nFixedReset<\/td>\n1.28 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-07-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.60
\nBid-YTW : 3.48 %<\/td>\n<\/tr>\n
BNS.PR.O<\/td>\nPerpetual-Premium<\/td>\n1.57 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-05-26
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.19
\nBid-YTW : 5.60 %<\/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
CM.PR.L<\/td>\nFixedReset<\/td>\n326,948<\/td>\nRBC crossed six blocks: 91,600 and 74,900 and 25,100 and 40,000 and 10,000 and 50,000, all at 27.90.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-05-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.90
\nBid-YTW : 3.18 %<\/td>\n<\/tr>\n
CIU.PR.C<\/td>\nFixedReset<\/td>\n294,500<\/td>\nNew issue settled today<\/a>.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2040-12-02
\nMaturity Price : 23.13
\nEvaluated at bid price : 25.00
\nBid-YTW : 3.56 %<\/td>\n<\/tr>\n
BNS.PR.Q<\/td>\nFixedReset<\/td>\n227,885<\/td>\nRBC bought 12,400 from anonymous at 26.18; Desjardins crossed two blocks of 100,000 each, both at 26.20.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-11-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.20
\nBid-YTW : 3.40 %<\/td>\n<\/tr>\n
CIU.PR.B<\/td>\nFixedReset<\/td>\n209,316<\/td>\nRBC crossed blocks of 132,400 and 74,400, both at 28.06.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-07-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.86
\nBid-YTW : 3.34 %<\/td>\n<\/tr>\n
NA.PR.N<\/td>\nFixedReset<\/td>\n104,100<\/td>\nRBC sold 19,600 to TD at 26.40, then crossed blocks of 60,800 and 19,000, both at 26.34.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-09-14
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.39
\nBid-YTW : 3.30 %<\/td>\n<\/tr>\n
BMO.PR.O<\/td>\nFixedReset<\/td>\n87,121<\/td>\nTD crossed 74,300 at 27.75.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-06-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.75
\nBid-YTW : 3.29 %<\/td>\n<\/tr>\n
There were 77 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

The European emergency measures is being extended: Under pressure from investors to lead the charge against the spreading sovereign debt crisis, Trichet said the ECB will keep offering banks as much cash as they want …<\/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-13222","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/13222","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=13222"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/13222\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13222"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13222"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13222"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}