{"id":2370,"date":"2008-07-09T22:19:41","date_gmt":"2008-07-10T02:19:41","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=2370"},"modified":"2008-07-09T22:19:41","modified_gmt":"2008-07-10T02:19:41","slug":"july-9-2008","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=2370","title":{"rendered":"July 9, 2008"},"content":{"rendered":"

Times are tough! European banks are paying a spread of 542bp for Innovative Tier 1 Capital<\/a>:<\/p>\n

European banks are having to pay the highest costs in at least a decade to raise capital reserves required by regulators.<\/p>\n

Investors now demand 542 basis points of extra yield over government debt to buy so-called Tier 1 securities, which regulators demand banks hold to buffer depositors and senior bondholders against losses, according to Merrill Lynch & Co.’s Euro Sub-Debt Tier 1 Index. The index started the year at 284 basis points.
…<\/b>
Regulators consider Tier 1 securities as close to equity because in some circumstances issuers can defer interest payments. Instead of a fixed due date, the bonds often give the issuer the option of redeeming them after five or 10 years and inflict higher interest payments if that doesn’t happen.<\/p>\n

As financing costs increase banks may no longer view a higher coupon as penalizing them, meaning investors risk holding bonds that may never mature, said Simon Adamson, an analyst at debt research firm CreditSights Inc. in London.<\/p><\/blockquote>\n

I don’t know the details of the “Euro Sub-Debt Tier 1 Index”, but the spread probably relates to 10-year governments; the so-called bonds will (probably!) have a call and step-up provision at that time so the salesmen can pretend it’s 10-year money.<\/p>\n

By way of comparison, we know from yesterday<\/a> that PerpetualDiscounts are trading to yield 265bp over long corporates, and long corporates are trading about 200bp over Canadas. As a further comparison, the NBC CaPS II, 7.447% until the pretend-maturity 2020-6-30 (after which it’s BAs + 409bp), are quoted at 370bp over the Canada 2018s.<\/p>\n

No prizes will be awarded for guessing which direction the market took today! This is getting awfully depressing, you know? But there’s no way of telling when this trend will reverse … and in the meantime, there are some awfully juicy swaps popping up often enough to make life interesting for a fully invested portfolio that isn’t afraid of trading.<\/p>\n

The sloppiness of the market is well illustrated by the fact that the market did not appear to notice that National Bank went ex-Dividend today.<\/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>\n4.29%<\/td>\n-0.48%<\/td>\n50,270<\/td>\n0.08<\/td>\n1<\/td>\n+0.2358%<\/td>\n1,122.4<\/td>\n<\/tr>\n
Fixed-Floater<\/td>\n4.64%<\/td>\n4.37%<\/td>\n71,686<\/td>\n16.38<\/td>\n6<\/td>\n-0.1151%<\/td>\n1,092.5<\/td>\n<\/tr>\n
Floater<\/td>\n4.03%<\/td>\n4.05%<\/td>\n50,894<\/td>\n17.34<\/td>\n3<\/td>\n-0.2713%<\/td>\n914.3<\/td>\n<\/tr>\n
Op. Retract<\/td>\n4.96%<\/td>\n3.78%<\/td>\n169,146<\/td>\n2.54<\/td>\n17<\/td>\n-0.0276%<\/td>\n1,045.7<\/td>\n<\/tr>\n
Split-Share<\/td>\n5.37%<\/td>\n6.35%<\/td>\n64,972<\/td>\n4.13<\/td>\n14<\/td>\n-0.0279%<\/td>\n1,029.4<\/td>\n<\/tr>\n
Interest Bearing<\/td>\n6.13%<\/td>\n5.41%<\/td>\n45,516<\/td>\n1.99<\/td>\n3<\/td>\n+0.4059%<\/td>\n1,123.6<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n6.03%<\/td>\n5.94%<\/td>\n65,096<\/td>\n10.91<\/td>\n4<\/td>\n-0.6692%<\/td>\n999.5<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n6.23%<\/td>\n6.28%<\/td>\n243,672<\/td>\n13.53<\/td>\n67<\/td>\n-0.4592%<\/td>\n847.7<\/td>\n<\/tr>\n<\/table>\n<\/div>\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\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
SLF.PR.D<\/td>\nPerpetualDiscount<\/td>\n-2.9917%<\/td>\nNow with a pre-tax bid-YTW of 6.42% based on a bid of 17.51 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
ELF.PR.F<\/td>\nPerpetualDiscount<\/td>\n-2.5789%<\/td>\nNow with a pre-tax bid-YTW of 7.21% based on a bid of 18.51 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.J<\/td>\nOpRet<\/td>\n-2.5652%<\/td>\nNow with a pre-tax bid-YTW of 6.95% based on a bid of 22.41 and a softMaturity<\/a> 2018-3-30 at 25.00. Compare with BAM.PR.H (5.41% to 2012-3-30), BAM.PR.I (5.99% to 2013-12-30) and BAM.PR.O (6.27% to 2013-6-30).<\/td>\n<\/tr>\n
PWF.PR.I<\/td>\nPerpetualDiscount<\/td>\n-2.4777%<\/td>\nNow with a pre-tax bid-YTW of 6.25% based on a bid of 24.01 and a limitMaturity.<\/td>\n<\/tr>\n
SLF.PR.E<\/td>\nPerpetualDiscount<\/td>\n-2.4658%<\/td>\nNow with a pre-tax bid-YTW of 6.38% based on a bid of 17.80 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.D<\/td>\nPerpetualDiscount<\/td>\n-2.1304%<\/td>\nNow with a pre-tax bid-YTW of 6.40% based on a bid of 22.51 and a limitMaturity.<\/td>\n<\/tr>\n
MFC.PR.B<\/td>\nPerpetualDiscount<\/td>\n-2.1233%<\/td>\nNow with a pre-tax bid-YTW of 6.22% based on a bid of 18.90 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.I<\/td>\nPerpetualDiscount<\/td>\n-2.1229%<\/td>\nNow with a pre-tax bid-YTW of 6.73% based on a bid of 17.52 and a limitMaturity.<\/td>\n<\/tr>\n
SLF.PR.B<\/td>\nPerpetualDiscount<\/td>\n-2.0908%<\/td>\nNow with a pre-tax bid-YTW of 6.31% based on a bid of 19.20 and a limitMaturity.<\/td>\n<\/tr>\n
IAG.PR.A<\/td>\nPerpetualDiscount<\/td>\n-2.0430%<\/td>\nNow with a pre-tax bid-YTW of 6.37% based on a bid of 18.22 and a limitMaturity.<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nPerpetualDiscount<\/td>\n-1.9391%<\/td>\nNow with a pre-tax bid-YTW of 6.42% based on a bid of 17.70 and a limitMaturity.<\/td>\n<\/tr>\n
HSB.PR.D<\/td>\nPerpetualDiscount<\/td>\n-1.8687%<\/td>\nNow with a pre-tax bid-YTW of 6.50% based on a bid of 19.43 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.L<\/td>\nPerpetualDiscount<\/td>\n-1.7500%<\/td>\nNow with a pre-tax bid-YTW of 6.51% based on a bid of 19.65 and a limitMaturity.<\/td>\n<\/tr>\n
BNS.PR.O<\/td>\nPerpetualDiscount<\/td>\n-1.6082%<\/td>\nNow with a pre-tax bid-YTW of 5.88% based on a bid of 23.86 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.E<\/td>\nPerpetualDiscount<\/td>\n-1.5712%<\/td>\nNow with a pre-tax bid-YTW of 6.48% based on a bid of 21.30 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.4126%<\/td>\nNow with a pre-tax bid-YTW of 6.70% based on a bid of 20.24 and a limitMaturity.<\/td>\n<\/tr>\n
W.PR.J<\/td>\nPerpetualDiscount<\/td>\n-1.4053%<\/td>\nNow with a pre-tax bid-YTW of 6.47% based on a bid of 21.75 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.K<\/td>\nPerpetualDiscount<\/td>\n-1.3326%<\/td>\nNow with a pre-tax bid-YTW of 6.45% based on a bid of 19.25 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.J<\/td>\nPerpetualDiscount<\/td>\n-1.2873%<\/td>\nNow with a pre-tax bid-YTW of 6.70% based on a bid of 16.87 and a limitMaturity.<\/td>\n<\/tr>\n
W.PR.H<\/td>\nPerpetualDiscount<\/td>\n-1.1152%<\/td>\nNow with a pre-tax bid-YTW of 6.50% based on a bid of 21.28 and a limitMaturity.<\/td>\n<\/tr>\n
GWO.PR.H<\/td>\nPerpetualDiscount<\/td>\n-1.0791%<\/td>\nNow with a pre-tax bid-YTW of 6.36% based on a bid of 19.25 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.0352%<\/td>\nNow with a pre-tax bid-YTW of 6.71% based on a bid of 17.96 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.I<\/td>\nOpRet<\/td>\n+1.0305%<\/td>\nSee BAM.PR.J, above.<\/td>\n<\/tr>\n
NA.PR.M<\/td>\nPerpetualDiscount<\/td>\n+1.1838%<\/td>\nEx-Dividend today<\/a> but nobody noticed. Now with a pre-tax bid-YTW of 6.08% based on a bid of 24.65 and a limitMaturity.<\/td>\n<\/tr>\n
NA.PR.K<\/td>\nPerpetualDiscount<\/td>\n+1.3546%<\/td>\nEx-Dividend today<\/a> but nobody noticed. Now with a pre-tax bid-YTW of 6.28% based on a bid of 23.25 and a limitMaturity.<\/td>\n<\/tr>\n
POW.PR.D<\/td>\nPerpetualDiscount<\/td>\n+1.4129%<\/td>\nNow with a pre-tax bid-YTW of 6.49% based on a bid of 19.38 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.O<\/td>\nOpRet<\/td>\n+2.1505%<\/td>\nSee BAM.PR.J, above.<\/td>\n<\/tr>\n<\/table>\n<\/div>\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
MFC.PR.B<\/td>\nPerpetualDiscount<\/td>\n214,850<\/td>\nCIBC crossed 150,000 at 19.25, then Nesbitt crossed 50,000 at the same price. Now with a pre-tax bid-YTW of 6.22% based on a bid of 18.90 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.A<\/td>\nOpRet<\/td>\n53,600<\/td>\nCIBC crossed 50,000 at 25.85. Now with a pre-tax bid-YTW of -0.48% based on a bid of 25.80 and a call 2008-8-8 at 25.75.<\/td>\n<\/tr>\n
TD.PR.P<\/td>\nPerpetualDiscount<\/td>\n33,798<\/td>\nNesbitt crossed 29,300 at 22.30. Now with a pre-tax bid-YTW of 5.85% based on a bid of 22.46 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.E<\/td>\nPerpetualDiscount<\/td>\n33,100<\/td>\nNesbitt crossed 30,000 at 21.35. Now with a pre-tax bid-YTW of 6.48% based on a bid of 21.30 and a limitMaturity.<\/td>\n<\/tr>\n
TD.PR.O<\/td>\nPerpetualDiscount<\/td>\n30,986<\/td>\nNow with a pre-tax bid-YTW of 5.93% based on a bid of 20.50 and a limitMaturity.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

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

Times are tough! European banks are paying a spread of 542bp for Innovative Tier 1 Capital: European banks are having to pay the highest costs in at least a decade to raise capital reserves required …<\/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-2370","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2370","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=2370"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2370\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}