{"id":15247,"date":"2011-06-06T22:33:31","date_gmt":"2011-06-07T02:33:31","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=15247"},"modified":"2011-06-06T22:33:31","modified_gmt":"2011-06-07T02:33:31","slug":"june-6-2011","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=15247","title":{"rendered":"June 6, 2011"},"content":{"rendered":"

This is old, but Laurie Carver wrote a good piece on Credit Rating Agencies titled Losing Credit<\/a>:<\/p>\n

Brooks says the NAIC decided to move to the new methodology because of rating agencies\u2019 failure to accurately capture the risk of severity of loss in structured credit (and consequently its flipside \u2013 recovery). \u201cUnder the old regime, ratings were a kind of blunt tool for determining the risk-based capital, whereas now we\u2019re doing a more detailed analysis of each security held by the insurer.\u201d<\/p>\n

He sees the old rating-based RBC charges as creating \u2018cliff risk\u2019, because their focus on the first dollar of loss in the whole structure caused sudden downgrades to be assigned to tranches that were actually likely to recoup or profit. For instance, under the old regime, AAA securities would carry a capital charge of just 0.4%, compared to 23% for a CCC security. \u201cThis very sharp change in the RBC charge can happen without a material effect on the actual return on the insurer\u2019s investment,\u201d says Brooks.<\/p>\n

\u201cThe rating agencies\u2019 methodology is binary \u2013 they take account of the probability of default but not the severity of loss to the insurer\u2019s specific position. Just because there\u2019s a default, doesn\u2019t mean that the security held by the insurer is going to experience 100% loss.\u201d<\/p><\/blockquote>\n

Trichet has figured out that maybe the EU should have paid attention when Greece announced it was cooking its books<\/a>:<\/p>\n

The economic crisis in Europe is not a crisis of the euro currency or of the monetary union, says the president of the European Central Bank.<\/p>\n

\u201cThe current crisis stems rather from insufficient monitoring of economic policies in a number of member states,\u201d Jean-Claude Trichet said in a speech at the Conference of Montreal. \u201cToday, it’s not the monetary pillar of economic and monetary union that is at stake but the economic pillar,\u201d he said.<\/p><\/blockquote>\n

Gee, and I thought it was all Goldman Sachs’ fault, as mocked 2010-4-19<\/a>.<\/p>\n

I’m tired of YLO – bor-ring! I wish Sino-Forest had preferred shares.<\/p>\n

A mildly depressing day on the Canadian preferred share market, with PerpetualDiscounts down 8bp, FixedResets off 4bp and DeemedRetractibles losing 9bp. Volatility was muted. Volume was dead. D-E-D. Dead.<\/p>\n\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>\n-0.0349 %<\/td>\n2,464.0<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0349 %<\/td>\n3,705.9<\/td>\n<\/tr>\n
Floater<\/td>\n2.45 %<\/td>\n2.24 %<\/td>\n46,590<\/td>\n21.62<\/td>\n4<\/td>\n-0.0349 %<\/td>\n2,660.5<\/td>\n<\/tr>\n
OpRet<\/td>\n4.87 %<\/td>\n3.39 %<\/td>\n64,273<\/td>\n0.95<\/td>\n9<\/td>\n-0.1886 %<\/td>\n2,419.9<\/td>\n<\/tr>\n
SplitShare<\/td>\n5.24 %<\/td>\n0.12 %<\/td>\n60,345<\/td>\n0.52<\/td>\n6<\/td>\n-0.1168 %<\/td>\n2,504.4<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1886 %<\/td>\n2,212.8<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.65 %<\/td>\n4.99 %<\/td>\n156,258<\/td>\n1.41<\/td>\n12<\/td>\n0.1281 %<\/td>\n2,080.2<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.44 %<\/td>\n5.49 %<\/td>\n120,492<\/td>\n14.55<\/td>\n18<\/td>\n-0.0838 %<\/td>\n2,184.3<\/td>\n<\/tr>\n
FixedReset<\/td>\n5.14 %<\/td>\n3.19 %<\/td>\n193,408<\/td>\n2.83<\/td>\n57<\/td>\n-0.0383 %<\/td>\n2,314.7<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n5.07 %<\/td>\n4.88 %<\/td>\n293,927<\/td>\n8.13<\/td>\n47<\/td>\n-0.0875 %<\/td>\n2,155.7<\/td>\n<\/tr>\n<\/table>\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
FTS.PR.E<\/td>\nOpRet<\/td>\n-1.40 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-07-01
\nMaturity Price : 25.75
\nEvaluated at bid price : 26.69
\nBid-YTW : 2.97 %<\/td>\n<\/tr>\n
FTS.PR.G<\/td>\nFixedReset<\/td>\n-1.22 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-10-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.93
\nBid-YTW : 3.52 %<\/td>\n<\/tr>\n
POW.PR.D<\/td>\nPerpetual-Discount<\/td>\n-1.21 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2041-06-06
\nMaturity Price : 23.43
\nEvaluated at bid price : 23.69
\nBid-YTW : 5.35 %<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nDeemed-Retractible<\/td>\n1.33 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.90
\nBid-YTW : 5.55 %<\/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.H<\/td>\nDeemed-Retractible<\/td>\n29,368<\/td>\nCalled for redemption<\/a>.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2011-07-06
\nMaturity Price : 25.75
\nEvaluated at bid price : 25.93
\nBid-YTW : 1.89 %<\/td>\n<\/tr>\n
RY.PR.W<\/td>\nPerpetual-Discount<\/td>\n28,709<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2041-06-06
\nMaturity Price : 24.34
\nEvaluated at bid price : 24.65
\nBid-YTW : 4.99 %<\/td>\n<\/tr>\n
PWF.PR.A<\/td>\nFloater<\/td>\n24,800<\/td>\nDesjardins crossed 14,300 at 23.65.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2041-06-06
\nMaturity Price : 23.36
\nEvaluated at bid price : 23.65
\nBid-YTW : 2.20 %<\/td>\n<\/tr>\n
CM.PR.J<\/td>\nDeemed-Retractible<\/td>\n23,171<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.87
\nBid-YTW : 4.64 %<\/td>\n<\/tr>\n
BMO.PR.J<\/td>\nDeemed-Retractible<\/td>\n21,185<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.81
\nBid-YTW : 4.63 %<\/td>\n<\/tr>\n
BNS.PR.M<\/td>\nDeemed-Retractible<\/td>\n20,561<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.81
\nBid-YTW : 4.67 %<\/td>\n<\/tr>\n
There were 18 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Wide Spread Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nQuote Data and Yield Notes<\/td>\n<\/tr>\n
FTS.PR.E<\/td>\nOpRet<\/td>\nQuote: 26.69 – 27.24
\nSpot Rate : 0.5500
\nAverage : 0.3883<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-07-01
\nMaturity Price : 25.75
\nEvaluated at bid price : 26.69
\nBid-YTW : 2.97 %<\/td>\n<\/tr>\n

POW.PR.D<\/td>\nPerpetual-Discount<\/td>\nQuote: 23.69 – 24.12
\nSpot Rate : 0.4300
\nAverage : 0.2937<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2041-06-06
\nMaturity Price : 23.43
\nEvaluated at bid price : 23.69
\nBid-YTW : 5.35 %<\/td>\n<\/tr>\n

BMO.PR.K<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.53 – 25.90
\nSpot Rate : 0.3700
\nAverage : 0.2628<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-12-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.53
\nBid-YTW : 4.87 %<\/td>\n<\/tr>\n

MFC.PR.C<\/td>\nDeemed-Retractible<\/td>\nQuote: 22.66 – 22.94
\nSpot Rate : 0.2800
\nAverage : 0.1805<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.66
\nBid-YTW : 5.69 %<\/td>\n<\/tr>\n

PWF.PR.O<\/td>\nPerpetual-Premium<\/td>\nQuote: 25.45 – 25.86
\nSpot Rate : 0.4100
\nAverage : 0.3124<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-11-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.45
\nBid-YTW : 5.64 %<\/td>\n<\/tr>\n

TD.PR.S<\/td>\nFixedReset<\/td>\nQuote: 26.02 – 26.25
\nSpot Rate : 0.2300
\nAverage : 0.1432<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-08-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.02
\nBid-YTW : 3.35 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

This is old, but Laurie Carver wrote a good piece on Credit Rating Agencies titled Losing Credit: Brooks says the NAIC decided to move to the new methodology because of rating agencies\u2019 failure to accurately …<\/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-15247","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/15247","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=15247"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/15247\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15247"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15247"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15247"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}