{"id":20268,"date":"2012-11-15T01:09:13","date_gmt":"2012-11-15T05:09:13","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=20268"},"modified":"2012-11-15T01:09:13","modified_gmt":"2012-11-15T05:09:13","slug":"november-14-2012","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=20268","title":{"rendered":"November 14, 2012"},"content":{"rendered":"

There’s an interesting straw in the wind for junk bonds<\/a>:<\/p>\n

Investors yanked a record volume of cash from BlackRock Inc.\u2019s exchange-traded fund that buys junk bonds as the notes lose value for the first month since May.<\/p>\n

The $16.3 billion fund reported an outflow of 2.4 million shares yesterday, equal to about $218.9 million, according to data compiled by Bloomberg. That\u2019s the biggest daily withdrawal in the five-year history of the iShares iBoxx High Yield Corporate Bond Fund, the largest of its kind.<\/p>\n

The five largest junk-bond ETFs, which allow investors to speculate on the securities without actually owning them, have lost $1.97 billion of assets since Sept. 20 as investors wager that a four-year rally in the debt is running out of steam. High-yield bonds in the U.S. are losing 0.14 percent this month after posting 12.9 percent returns this year through October, according to Bank of America Merrill Lynch index data.<\/p><\/blockquote>\n

Regulation is wonderful<\/a>:<\/p>\n

Since 1998, ABS [the non-profit American Bureau of Shipping] has hired four former Coast Guard admirals as executives. They include retired Admiral Robert Kramek, who led the Coast Guard as commandant from 1994 to 1998. It was Kramek who signed an agreement with ABS in 1995 that expanded the nonprofit\u2019s powers to inspect independently owned ships on the Coast Guard\u2019s behalf.<\/p>\n

In June 1998, three years after Kramek signed that inspection agreement, ABS hired him as president of its Americas division.<\/p>\n

Jack Devanney, a retired executive of companies that own ships that used ABS services, says this revolving door is bad for ship safety.<\/p>\n

\u201cWhen you give Kramek a nice job, you\u2019re sending a message to all the Coast Guard guys that they\u2019ve got a second career at ABS,\u201d says Devanney, who has a Ph.D. in management science from the Massachusetts Institute of Technology. \u201cIf you rock the boat, that opportunity\u2019s not going to be available to you.\u201d<\/p><\/blockquote>\n

S&P has released a fascinating report titled A Tale Of Two Countries: U.S. And Canadian Banks’ Contrasting Profitability Dynamics<\/a>:<\/p>\n

Profit dynamics for a company or an industry are highly sensitive to shifting operating and regulatory conditions and, as a result, are likely to change over time. Profits are important because they can be a significant generator of capital–for the companies that retain them in a meaningful amount. A careful review of bank profitability in both the U.S. and Canada indicates that Canadian banks have been more profitable than their U.S. counterparts in recent years. This gap has widened in the postcrisis years. This is partly because of Canadian banks’ higher leverage that largely arises from structural differences. We also note that the leverage ratio gap between the U.S. and Canada is sensitive to definition. Alternative definitions of leverage ratio for U.S. banks, for example using Standard & Poor’s adjusted common equity to adjusted assets, also show that U.S. banks have lower leverage than Canadian banks, but the gap is much smaller.
…<\/b>
As for Canada, the Office of the Superintendent of Financial Institutions (OSFI) will issue a new Basel III capital guideline before the end of 2012–for implementation in the first fiscal quarter of 2013. Of the 29 G-SIBs that the Financial Stability Board (FSB) identified in November 2011, none were Canadian banks. However, there are plans to identify domestic systemically important banks (D-SIBs) and recommend that a capital surcharge be applied to them. But Canadian banking regulators have not offered any detailed views on this yet. Therefore, we anticipate Canadian banks, on average, will continue to have higher leverage than U.S. banks, particularly the largest and most complex. We believe that at least part of the tolerance for higher leverage may be due to the accumulation of relatively low-risk weighted assets, like government-insured mortgages<\/p><\/blockquote>\n

\"\"<\/a>
Click for Big<\/i><\/div>\n

It was another mixed day for the Canadian preferred share market, with PerpetualPremiums up 3bp, FixedResets gaining 2bp and DeemedRetractibles off 1bp. Volatility was non-existent. Volume was low.<\/p>\n

PerpetualDiscounts now yield 4.91%, equivalent to 6.38% interest at the standard equivalency factor of 1.3x. Long corporates<\/a> now yield about 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 220bp, a slight (and perhaps spurious) increase from the 215bp reported November 7<\/a>.<\/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>\n0.0936 %<\/td>\n2,462.8<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.16 %<\/td>\n3.50 %<\/td>\n31,196<\/td>\n18.32<\/td>\n1<\/td>\n0.0000 %<\/td>\n3,870.3<\/td>\n<\/tr>\n
Floater<\/td>\n2.80 %<\/td>\n3.02 %<\/td>\n54,737<\/td>\n19.64<\/td>\n4<\/td>\n0.0936 %<\/td>\n2,659.2<\/td>\n<\/tr>\n
OpRet<\/td>\n4.59 %<\/td>\n2.47 %<\/td>\n67,811<\/td>\n1.32<\/td>\n4<\/td>\n0.2616 %<\/td>\n2,593.7<\/td>\n<\/tr>\n
SplitShare<\/td>\n5.34 %<\/td>\n4.45 %<\/td>\n53,945<\/td>\n4.44<\/td>\n3<\/td>\n0.1301 %<\/td>\n2,871.2<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.2616 %<\/td>\n2,371.7<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.26 %<\/td>\n2.32 %<\/td>\n74,375<\/td>\n0.28<\/td>\n30<\/td>\n0.0267 %<\/td>\n2,318.8<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n4.88 %<\/td>\n4.91 %<\/td>\n98,988<\/td>\n15.56<\/td>\n3<\/td>\n0.2334 %<\/td>\n2,607.8<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.98 %<\/td>\n2.97 %<\/td>\n207,506<\/td>\n3.91<\/td>\n75<\/td>\n0.0182 %<\/td>\n2,449.6<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.90 %<\/td>\n3.35 %<\/td>\n124,136<\/td>\n0.93<\/td>\n46<\/td>\n-0.0076 %<\/td>\n2,399.5<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
No individual gains or losses exceeding 1%!<\/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
FTS.PR.J<\/td>\nPerpetual-Premium<\/td>\n155,905<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-12-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.20
\nBid-YTW : 4.67 %<\/td>\n<\/tr>\n
NA.PR.Q<\/td>\nFixedReset<\/td>\n46,538<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-11-15
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.50
\nBid-YTW : 3.40 %<\/td>\n<\/tr>\n
SLF.PR.H<\/td>\nFixedReset<\/td>\n38,241<\/td>\nScotia crossed 29,600 at 25.05.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.00
\nBid-YTW : 3.72 %<\/td>\n<\/tr>\n
RY.PR.N<\/td>\nFixedReset<\/td>\n32,088<\/td>\nRBC sold 10,000 to anonymous at 26.30 and 19,500 to Desjardins at the same price.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-02-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.22
\nBid-YTW : 2.24 %<\/td>\n<\/tr>\n
GWO.PR.R<\/td>\nDeemed-Retractible<\/td>\n31,250<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.15
\nBid-YTW : 4.81 %<\/td>\n<\/tr>\n
POW.PR.C<\/td>\nPerpetual-Premium<\/td>\n29,550<\/td>\nTD crossed blocks of 13,000 and 16,000, both at 25.60
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2012-12-14
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.57
\nBid-YTW : -15.29 %<\/td>\n<\/tr>\n
There were 21 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
BAM.PR.B<\/td>\nFloater<\/td>\nQuote: 17.50 – 17.95
\nSpot Rate : 0.4500
\nAverage : 0.2834<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2042-11-14
\nMaturity Price : 17.50
\nEvaluated at bid price : 17.50
\nBid-YTW : 3.02 %<\/td>\n<\/tr>\n

BNA.PR.E<\/td>\nSplitShare<\/td>\nQuote: 25.71 – 26.18
\nSpot Rate : 0.4700
\nAverage : 0.3404<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2017-12-10
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.71
\nBid-YTW : 4.45 %<\/td>\n<\/tr>\n

MFC.PR.F<\/td>\nFixedReset<\/td>\nQuote: 24.23 – 24.51
\nSpot Rate : 0.2800
\nAverage : 0.1714<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.23
\nBid-YTW : 3.81 %<\/td>\n<\/tr>\n

ENB.PR.A<\/td>\nPerpetual-Premium<\/td>\nQuote: 25.62 – 25.97
\nSpot Rate : 0.3500
\nAverage : 0.2633<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2012-12-14
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.62
\nBid-YTW : -25.64 %<\/td>\n<\/tr>\n

GWO.PR.L<\/td>\nDeemed-Retractible<\/td>\nQuote: 26.66 – 26.86
\nSpot Rate : 0.2000
\nAverage : 0.1288<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-12-31
\nMaturity Price : 26.00
\nEvaluated at bid price : 26.66
\nBid-YTW : 4.54 %<\/td>\n<\/tr>\n

GWO.PR.N<\/td>\nFixedReset<\/td>\nQuote: 24.16 – 24.40
\nSpot Rate : 0.2400
\nAverage : 0.1728<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.16
\nBid-YTW : 3.48 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

There’s an interesting straw in the wind for junk bonds: Investors yanked a record volume of cash from BlackRock Inc.\u2019s exchange-traded fund that buys junk bonds as the notes lose value for the first month …<\/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-20268","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/20268","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=20268"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/20268\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20268"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20268"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20268"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}