{"id":2144,"date":"2008-05-12T21:21:18","date_gmt":"2008-05-13T01:21:18","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=2144"},"modified":"2008-05-12T21:21:18","modified_gmt":"2008-05-13T01:21:18","slug":"may-12-2008","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=2144","title":{"rendered":"May 12, 2008"},"content":{"rendered":"

Pundits are saying the money market shows the worst is over for credit<\/a>:<\/p>\n

The worst of the credit crisis that prompted banks to restrict lending and the Federal Reserve to rescue Bear Stearns Cos. may be over, short-term borrowing rates show.<\/p>\n

The difference between the yield on three-month Treasury bills and the rate on dollar-denominated loans in London, an indication of credit risk known as the TED spread, narrowed 7 basis points to 0.93 basis points, the smallest since Feb. 25. The gap reached 2 percentage points on March 19.<\/p><\/blockquote>\n

… but the visible effects may be just getting under weigh<\/a>:<\/p>\n

As the Fed’s latest loan survey makes clear, lenders have dropped the guillotine. With the usual delay, the poison is spreading from banks to the real world.<\/p>\n

Diane Vazza, S&P’s credit chief, says defaults are rising at almost twice the rate of past downturns. “Companies are heading into this recession with a much more toxic mix. Their margin for error is razor-thin,” she said.<\/p>\n

Two-thirds have a “speculative” rating, compared to 50pc before the dotcom bust, and 40pc in the early 1990s. The culprit is debt. “They ramped it up in the last 18 months of the credit boom. A lot of deals were funded that should not have been funded,” she said.<\/p>\n

Some 174 US companies are trading at “distress levels”. Spreads on their bonds have rocketed above 1,000 basis points. This does not cover the carnage among smaller firms outside the rating universe.<\/p><\/blockquote>\n

Meanwhile, some research is being done into the Equity premium in Victorian England<\/a>:<\/p>\n

The stock market experienced negative total returns in only four years between 1825 and 1870. Three of these years (1825, 1826 and 1847) had financial crashes after a period of promotional mania on the stock market. The negative returns in 1853 can be attributed to concerns over the impending Crimean war.
\nDespite the serious financial crisis of 1866 following the collapse of several banks, the market produced positive total returns in that year. <\/p><\/blockquote>\n

Those were the good old days, eh? The 1866 crisis was the collapse of Overend-Gurney, which I promised to discuss on March 31<\/a>, but is still … er … pending.<\/p>\n

I have updated the post on the BoE Financial Stability Report<\/a> to acknowledge Willem Buiter’s objections<\/a> to the BoE methodology in forecasting ultimate sub-prime losses.<\/p>\n

MBIA, whose delays in transferring $1.1-billion from the parent to the insurance subsidiary was reported on May 7<\/a> has (as passed on by Naked Capitalism<\/i><\/a>) finally made a move<\/a>:<\/p>\n

MBIA Inc., the ailing bond insurer, rose in New York Stock Exchange trading after saying it will pump $900 million into its insurance unit and reporting a first-quarter loss that was narrower than some analysts’ estimates.<\/p><\/blockquote>\n

Those who have been taking the Clear Channel takeover as a template for the unfolding of the BCE \/ Teachers’ deal will no doubt be highly interested in rumours of funding at a reduced price<\/a>:<\/p>\n

Clear Channel Communications Inc. surged as much as 18 percent on reports of settlement talks with six banks on a proposal to finance the radio broadcaster’s acquisition by two buyout firms at a reduced price.<\/p>\n

Citigroup Inc. and five other banks may fund the buyout for $36 a share as part of a settlement of lawsuits pending in New York and Texas state courts, the Wall Street Journal reported, without saying where it got the information. That’s below the $39.20 price buyout firms agreed to pay last year and more than an intraday high of $35.30 in New York Stock Exchange trading.<\/p><\/blockquote>\n

Yet another day with a mysterious discontinuity in the TXPR index:<\/p>\n

<\/div>\n

The jump was probably partly due to BAM.PR.K, which traded 300 shares at $19.40 at 9:30am, then 100 shares at $20.32 at 2:37pm. Ain’t it wonderful! Closing quotation was 19.58-20.49, 1×5. This issue comprises 1.46% of CPD<\/a> (which can be assumed to be a reasonable proxy for the index<\/a>, so this 4.74% jump in trading price translates to 6.9bp on the index, or about one-seventh of the total jump. Analysis of the other elements of the discontinuity is left as an exercise for the student.<\/p>\n

All in all, though, it was a quiet day.<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30<\/strong><\/td>\n<\/tr>\n
Index<\/td>\nMean Current Yield (at bid)<\/td>\nMean YTW<\/td>\nMean Average Trading Value<\/td>\nMean Mod Dur (YTW)<\/td>\nIssues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n4.94%<\/td>\n4.97%<\/td>\n43,845<\/td>\n15.61<\/td>\n1<\/td>\n-0.7997%<\/td>\n1,083.2<\/td>\n<\/tr>\n
Fixed-Floater<\/td>\n4.68%<\/td>\n4.69%<\/td>\n61,190<\/td>\n15.95<\/td>\n7<\/td>\n+0.7567%<\/td>\n1,066.6<\/td>\n<\/tr>\n
Floater<\/td>\n4.18%<\/td>\n4.22%<\/td>\n61,441<\/td>\n16.93<\/td>\n2<\/td>\n+1.5967%<\/td>\n902.9<\/td>\n<\/tr>\n
Op. Retract<\/td>\n4.83%<\/td>\n3.15%<\/td>\n87,702<\/td>\n2.60<\/td>\n15<\/td>\n+0.0831%<\/td>\n1,054.5<\/td>\n<\/tr>\n
Split-Share<\/td>\n5.27%<\/td>\n5.55%<\/td>\n71,195<\/td>\n4.15<\/td>\n13<\/td>\n+0.0374%<\/td>\n1,050.9<\/td>\n<\/tr>\n
Interest Bearing<\/td>\n6.13%<\/td>\n6.06%<\/td>\n54,004<\/td>\n3.82<\/td>\n3<\/td>\n0.0000%<\/td>\n1,105.9<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.89%<\/td>\n5.66%<\/td>\n141,742<\/td>\n6.42<\/td>\n9<\/td>\n-0.0253%<\/td>\n1,020.8<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.69%<\/td>\n5.74%<\/td>\n307,011<\/td>\n14.28<\/td>\n63<\/td>\n-0.0336%<\/td>\n919.3<\/td>\n<\/tr>\n<\/table>\n<\/div>\n
\n\n\n\n\n\n\n\n\n\n\n\n
Major Price Changes<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
PWF.PR.E<\/td>\nPerpetualDiscount<\/td>\n-1.5422%<\/td>\nNow with a pre-tax bid-YTW of 5.65% based on a bid of 24.26 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
RY.PR.F<\/td>\nPerpetualDiscount<\/td>\n-1.3951%<\/td>\nNow with a pre-tax bid-YTW of 5.65% based on a bid of 19.78 and a limitMaturity.<\/td>\n<\/tr>\n
CIU.PR.A<\/td>\nPerpetualDiscount<\/td>\n-1.1707%<\/td>\nNow with a pre-tax bid-YTW of 5.69% based on a bid of 20.26 and a limitMaturity.<\/td>\n<\/tr>\n
FFN.PR.A<\/td>\nSplitShare<\/td>\n+1.1964%<\/td>\nAsset coverage of 2.0+:1 as of April 30, according to the company<\/a>. Now with a pre-tax bid-YTW of 5.04% based on a bid of 10.15 and a hardMaturity<\/a> 2014-12-1 at 10.00.<\/td>\n<\/tr>\n
FAL.PR.B<\/td>\nFixFloat<\/td>\n+1.2170%<\/td>\n <\/td>\n<\/tr>\n
BMO.PR.H<\/td>\nPerpetualDiscount<\/td>\n+1.9450%<\/td>\nNow with a pre-tax bid-YTW of 5.45% based on a bid of 24.11 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.K<\/td>\nFloater<\/td>\n+2.7822%<\/td>\n <\/td>\n<\/tr>\n
BCE.PR.G<\/td>\nFixFloat<\/td>\n+3.2120%<\/td>\n <\/td>\n<\/tr>\n<\/table>\n<\/div>\n
\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nVolume<\/td>\nNotes<\/td>\n<\/tr>\n
NTL.PR.G<\/td>\nScraps (Would be Ratchet, but there are credit concerns)<\/td>\n110,736<\/td>\n <\/td>\n<\/tr>\n
IGM.PR.A<\/td>\nOpRet<\/td>\n52,532<\/td>\nCIBC crossed 50,000 at 26.95. Now with a pre-tax bid-YTW of 3.32% based on a bid of 26.85 and a call 2009-7-30 at 26.00.<\/td>\n<\/tr>\n
RY.PR.K<\/td>\nOpRet<\/td>\n50,345<\/td>\nNow with a pre-tax bid-YTW of 1.03% based on a bid of 25.04 and a call 2008-6-11 at 25.00.<\/td>\n<\/tr>\n
PWF.PR.D<\/td>\nOpRet<\/td>\n45,100<\/td>\nCIBC crossed 45,100 at 26.00 in the only trade of the day. Now with a pre-tax bid-YTW of 4.29% based on a bid of 25.95 and a call 2008-11-30 at 25.80.<\/td>\n<\/tr>\n
CM.PR.A<\/td>\nOpRet<\/td>\n26,170<\/td>\nNesbitt bought 12,500 from RBC at 25.95. Now with a pre-tax bid-YTW of -2.18% based on a bid of 25.96 and a call 2008-6-11 at 25.75.<\/td>\n<\/tr>\n
TD.PR.P<\/td>\nPerpetualDiscount<\/td>\n25,693<\/td>\nDesjardins was buyer on the last ten trades, totalling 20,850, starting at 24.18, going as high as 24.50, ending with 24.30 (odd lot). Now with a pre-tax bid-YTW of 5.52% based on a bid of 23.94 and a limitMaturity.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

There were eleven other index-included $25-pv-equivalent issues trading over 10,000 shares today.<\/p>\n","protected":false},"excerpt":{"rendered":"

Pundits are saying the money market shows the worst is over for credit: The worst of the credit crisis that prompted banks to restrict lending and the Federal Reserve to rescue Bear Stearns Cos. may …<\/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-2144","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2144","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=2144"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2144\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}