{"id":21196,"date":"2013-02-26T21:40:25","date_gmt":"2013-02-27T01:40:25","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=21196"},"modified":"2013-02-26T21:40:25","modified_gmt":"2013-02-27T01:40:25","slug":"february-26-2013","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=21196","title":{"rendered":"February 26, 2013"},"content":{"rendered":"

It’s an ill wind that blows nobody any good<\/a>:<\/p>\n

U.S. banks are looking to capitalize on a dearth of financing for Europe\u2019s commercial property market that\u2019s driven lending margins to five times the level prior to the 2008 crisis.<\/p>\n

Citigroup Inc. (C), Morgan Stanley (MS), Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) are following insurers and distressed investors allocating capital to the region as local banks, which overextended during the last boom, are forced to contract amid new regulations. Europe faces an $82 billion shortfall between the amount of real-estate debt maturing through this year and the funding available to replace it, according to real-estate broker DTZ.<\/p>\n

The scarcity of capital means lenders can charge as much as 3.75 percentage points over benchmarks for the safest pieces of commercial mortgage debt, about five times the spread in 2007, according to Alvarez & Marsal, an adviser on real estate transactions. Those margins will enable banks to revive the market for commercial mortgage-backed bonds, which parcel loans and slice them into securities of varying risk, after it largely shut in 2008.<\/p><\/blockquote>\n

Meanwhile, the Fed may find selling is harder than buying<\/a>:<\/p>\n

MSCI applied scenarios devised by the Fed itself for stress-testing the nation\u2019s 19 largest banks.<\/p>\n

MSCI sees the market value of Fed holdings shrinking by $547 billion over three years under an adverse scenario that includes an economic contraction and rising inflation. MSCI puts the Fed\u2019s mark-to-market loss at less than half that, or $216 billion, if the economy performs in line with consensus forecasts of gradually rising growth, inflation and interest rates.<\/p>\n

The potential losses are unprecedented in the Fed\u2019s 100- year history. Bernanke began describing in detail the risk of lower payments to taxpayers for the first time today in his monetary policy testimony before the Senate Banking Committee saying that \u201cremittances to the Treasury could be quite low for a time\u201d if interest rates \u201cwere to rise quickly.\u201d Bernanke didn\u2019t describe the overall interest-rate risk to the portfolio or potential mark-to-market losses. He said the Fed is \u201cconfident\u201d it has tools to tighten monetary policy.<\/p><\/blockquote>\n

But at least the money is going into something other than mortgages<\/a>:<\/p>\n

\n

Money is pouring into leveraged loan funds at an incredible pace. It\u2019s a natural home for investors who are leery of buying bonds at this point in the cycle, when rates could be on the rise, but who still want credit exposure. Leveraged loans are usually floating rate. And that means protection from higher interest rates, unlike bonds, which will fall in price as rates rise.
…<\/b>
Among the biggest users of the leveraged loan market are private equity firms who use the financing for buyouts. The leveraged loan boom will help refinance balance sheets of portfolio companies<\/a>, and fuel more new takeovers.<\/p><\/blockquote>\n

And the shadow trading sector is getting bigger<\/a>:<\/p>\n

Earlier today, JPMorgan Chase & Co. announced that it will reduce headcount in its consumer banking arm by 3,000 to 4,000 people this year.<\/p>\n

Morgan Stanley and Citigroup Inc. have also unveiled plans in recent months to shed staff. As early as this week, Goldman Sachs Group Inc. will begin its annual exercise to cull 5 per cent of its employees, with deeper cuts possible in equity trading, Reuters reported.
…<\/b>
But [Thomas DiNapoli, the comptroller of New York State] also noted that the industry employed 1,000 fewer people at the end of 2012 than it did a year earlier, adding that he believes \u201cthe industry will continue to restructure and downsize until a new business paradigm is established.\u201d<\/p>\n

If that doesn\u2019t sound like a lot of fun, that\u2019s probably an accurate assessment. Some traders have already decamped for hedge funds, where they don\u2019t have to contend with the same regulatory constraints or reduced appetite for risk.<\/p><\/blockquote>\n

Best wishes for Graham Beck, who started working at Burns Fry in 1985, moved to the the preferred share desk in 1991 and today announced his imminent retirement from BMO Nesbitt Burns. As he says: a lot has happened in 22 years; and I’ll add that that extends to the names of his employer as well as the preferred share market!<\/p>\n

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets off 1bp and DeemedRetractibles up 15bp. Volatility was minimal. Volume was extremely high.<\/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>\n0.6332 %<\/td>\n2,615.8<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.10 %<\/td>\n3.43 %<\/td>\n24,539<\/td>\n18.43<\/td>\n1<\/td>\n0.7829 %<\/td>\n3,966.5<\/td>\n<\/tr>\n
Floater<\/td>\n2.54 %<\/td>\n2.85 %<\/td>\n84,540<\/td>\n20.04<\/td>\n5<\/td>\n0.6332 %<\/td>\n2,824.4<\/td>\n<\/tr>\n
OpRet<\/td>\n4.81 %<\/td>\n3.37 %<\/td>\n45,674<\/td>\n0.33<\/td>\n5<\/td>\n-0.1701 %<\/td>\n2,591.1<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.59 %<\/td>\n4.37 %<\/td>\n43,142<\/td>\n4.26<\/td>\n2<\/td>\n-0.3979 %<\/td>\n2,932.2<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1701 %<\/td>\n2,369.3<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.25 %<\/td>\n-0.20 %<\/td>\n91,892<\/td>\n0.09<\/td>\n29<\/td>\n0.0407 %<\/td>\n2,351.9<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n4.84 %<\/td>\n4.91 %<\/td>\n130,597<\/td>\n15.59<\/td>\n4<\/td>\n0.0406 %<\/td>\n2,649.3<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.91 %<\/td>\n2.76 %<\/td>\n280,102<\/td>\n3.36<\/td>\n78<\/td>\n-0.0093 %<\/td>\n2,496.5<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.88 %<\/td>\n2.88 %<\/td>\n140,017<\/td>\n0.66<\/td>\n44<\/td>\n0.1470 %<\/td>\n2,437.1<\/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
BAM.PR.K<\/td>\nFloater<\/td>\n1.59 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-02-26
\nMaturity Price : 18.48
\nEvaluated at bid price : 18.48
\nBid-YTW : 2.86 %<\/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
IAG.PR.A<\/td>\nDeemed-Retractible<\/td>\n203,763<\/td>\nTD crossed 200,000 at 25.18.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.10
\nBid-YTW : 4.67 %<\/td>\n<\/tr>\n
RY.PR.G<\/td>\nDeemed-Retractible<\/td>\n157,510<\/td>\nDesjardins crossed 10,000 at 25.90 and 143,200 at 25.83.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-05-24
\nMaturity Price : 25.75
\nEvaluated at bid price : 25.86
\nBid-YTW : 2.67 %<\/td>\n<\/tr>\n
BNS.PR.P<\/td>\nFixedReset<\/td>\n137,462<\/td>\nDesjardins crossed 96,400 at 25.13.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.12
\nBid-YTW : 3.43 %<\/td>\n<\/tr>\n
HSE.PR.A<\/td>\nFixedReset<\/td>\n134,034<\/td>\nNational crossed blocks of 45,000 and 52,000, both at 26.72.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-03-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.60
\nBid-YTW : 2.53 %<\/td>\n<\/tr>\n
BNS.PR.L<\/td>\nDeemed-Retractible<\/td>\n79,987<\/td>\nNesbitt crossed 70,000 at 26.00.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-04-26
\nMaturity Price : 25.75
\nEvaluated at bid price : 25.90
\nBid-YTW : 2.61 %<\/td>\n<\/tr>\n
CU.PR.E<\/td>\nPerpetual-Premium<\/td>\n77,736<\/td>\nNesbitt crossed blocks of 40,000 and 25,400, both at 26.40.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-09-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.36
\nBid-YTW : 4.15 %<\/td>\n<\/tr>\n
There were 81 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
HSE.PR.A<\/td>\nFixedReset<\/td>\nQuote: 26.60 – 27.12
\nSpot Rate : 0.5200
\nAverage : 0.3053<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-03-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.60
\nBid-YTW : 2.53 %<\/td>\n<\/tr>\n

PWF.PR.E<\/td>\nPerpetual-Premium<\/td>\nQuote: 25.45 – 25.99
\nSpot Rate : 0.5400
\nAverage : 0.3551<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-03-28
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.45
\nBid-YTW : -11.34 %<\/td>\n<\/tr>\n

RY.PR.H<\/td>\nDeemed-Retractible<\/td>\nQuote: 26.40 – 26.71
\nSpot Rate : 0.3100
\nAverage : 0.1954<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-05-24
\nMaturity Price : 26.00
\nEvaluated at bid price : 26.40
\nBid-YTW : -0.89 %<\/td>\n<\/tr>\n

CIU.PR.C<\/td>\nFixedReset<\/td>\nQuote: 24.66 – 24.94
\nSpot Rate : 0.2800
\nAverage : 0.1760<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-02-26
\nMaturity Price : 23.22
\nEvaluated at bid price : 24.66
\nBid-YTW : 2.80 %<\/td>\n<\/tr>\n

BNA.PR.E<\/td>\nSplitShare<\/td>\nQuote: 25.51 – 25.99
\nSpot Rate : 0.4800
\nAverage : 0.3787<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2017-12-10
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.51
\nBid-YTW : 4.37 %<\/td>\n<\/tr>\n

RY.PR.T<\/td>\nFixedReset<\/td>\nQuote: 26.47 – 26.74
\nSpot Rate : 0.2700
\nAverage : 0.1705<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-08-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.47
\nBid-YTW : 2.28 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

It’s an ill wind that blows nobody any good: U.S. banks are looking to capitalize on a dearth of financing for Europe\u2019s commercial property market that\u2019s driven lending margins to five times the level prior …<\/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-21196","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21196","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=21196"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21196\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}