{"id":2385,"date":"2008-07-14T22:08:21","date_gmt":"2008-07-15T02:08:21","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=2385"},"modified":"2008-07-14T22:08:21","modified_gmt":"2008-07-15T02:08:21","slug":"july-14-2008","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=2385","title":{"rendered":"July 14, 2008"},"content":{"rendered":"

The implicit guarantee of the GSE will – probably – shortly become explicit<\/a>.<\/p>\n

James Hamilton of Econbrowser<\/i> reviews the situation<\/a> and approves of the plan<\/a>:<\/p>\n

The first thing I like about this plan is the fact that the ultimate determination of the level of risks to be absorbed by the federal government is being left to Congress.
…<\/b>
The second thing I like about the plan is that such action by Congress would take the form of a dollar limit– here’s how much we’re willing to stake, and no more– with residual losses presumably laid on the GSE creditors.<\/p><\/blockquote>\n

Accrued Interest<\/i> mourns bad decisions of the past<\/a>:<\/p>\n

its a sad day for free markets. I see the Treasury as between a rock and a Depression, and has selected the rock. I’d have done the same. I don’t blame Treasury so much as I lament that its come to this. Exactly who to blame for this or what could have been done differently in the past is a discussion for another time.<\/p><\/blockquote>\n

The WSJ Economics Blog collected some opinion from Street economists<\/a> – mostly neutral and a bit bewildered, but with one interesting observation that it made shorting the stock a riskier proposition than otherwise. Jim Rogers and George Soros hate it<\/a>. Naked Capitalism<\/i> supplies further clippings<\/a>.<\/p>\n

From the Interesting Factoid department comes an estimate of Canadian banks’ exposure to the US<\/a>:<\/p>\n

BMO had the highest loan exposure at $51 billion, while TD’s exposure was estimated to be $46 billion. The two Canadian banks have focused their U.S. banking businesses on different regions – Chicago and the Midwest in the case of Bank of Montreal and the U.S. Northeast in the case of Toronto-Dominion.<\/p>\n

Commercial loans to real estate and financial services companies made up about 43 per cent of the total amount at both banks.<\/p>\n

[Blackmont Capital analyst Brad] Smith also noted that Royal Bank (TSX: RY.TO) only had a “modest exposure” worth $25 billion or 10 per cent of the outstanding loans, “surprisingly, given its well-established U.S. retail banking and global capital markets business.”<\/p>\n

The least at risk were CIBC (TSX: CM.TO) and Scotiabank (TSX: BNS.TO), both with single-digit exposure.<\/p><\/blockquote>\n

He concludes … :<\/p>\n

[TD & BMO] could see their earnings per share decline as much as seven per cent next year<\/p><\/blockquote>\n

Wow, earnings down as much as 7%, eh? Holy smokes! There’s a little perspective for you! Stockbrokers, I’m sorry to say, are busily attempting to convince clients that preferred dividends from banks in Canada are at risk. I’ll start paying attention when I hear a little less “could” and “might” and a few more numbers.<\/p>\n

This market is getting surreal. PerpetualDiscounts are now yielding 6.49%, equivalent to 9.09% interest at a conversion factor of 1.4x. Long corporates continue to yield 6.1%, so the Pre-tax Interest-Equivalent spread is now just a hair under 300bp.<\/p>\n

In the volume leaders, only two blocks were traded – both by CIBC and both 60,000 shares, so there’s even a possibility they’re related.<\/p>\n

If I was seeing any confirmation in the bond market that the world was about to end, I’d be taking this a lot more seriously. I wouldn’t necessarily agree with the bond market’s analysis, understand, but I would have to consider predictions of impending doom with a sharper eye to detail. But we’re not seeing any of that. Volume is light and there are incredible moves happening on featherweights! PerpetualDiscounts were down over 1% today! That’s a bad MONTH!<\/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>\n4.31%<\/td>\n1.96%<\/td>\n44,568<\/td>\n0.08<\/td>\n1<\/td>\n+0.000%<\/td>\n1,122.4<\/td>\n<\/tr>\n
Fixed-Floater<\/td>\n4.65%<\/td>\n4.38%<\/td>\n70,376<\/td>\n16.35<\/td>\n6<\/td>\n+0.2274%<\/td>\n1,090.9<\/td>\n<\/tr>\n
Floater<\/td>\n4.13%<\/td>\n4.15%<\/td>\n49,829<\/td>\n17.12<\/td>\n3<\/td>\n-0.4275%<\/td>\n893.0<\/td>\n<\/tr>\n
Op. Retract<\/td>\n4.97%<\/td>\n4.32%<\/td>\n156,392<\/td>\n2.60<\/td>\n17<\/td>\n+0.0096%<\/td>\n1,044.1<\/td>\n<\/tr>\n
Split-Share<\/td>\n5.46%<\/td>\n6.82%<\/td>\n63,891<\/td>\n4.10<\/td>\n14<\/td>\n-0.4848%<\/td>\n1,013.0<\/td>\n<\/tr>\n
Interest Bearing<\/td>\n6.14%<\/td>\n4.96%<\/td>\n43,441<\/td>\n1.96<\/td>\n3<\/td>\n+0.1687%<\/td>\n1,121.3<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n6.08%<\/td>\n6.00%<\/td>\n66,816<\/td>\n10.80<\/td>\n4<\/td>\n-0.6229%<\/td>\n991.6<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n6.43%<\/td>\n6.49%<\/td>\n238,416<\/td>\n13.23<\/td>\n67<\/td>\n-1.3425%<\/td>\n821.9<\/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\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
IAG.PR.A<\/td>\nPerpetualDiscount<\/td>\n-6.7706%<\/td>\nNow with a pre-tax bid-YTW of 6.70% based on a bid of 17.35 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
CM.PR.H<\/td>\nPerpetualDiscount<\/td>\n-6.1224%<\/td>\nNow with a pre-tax bid-YTW of 7.50% based on a bid of 16.10 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.I<\/td>\nPerpetualDiscount<\/td>\n-5.9377%<\/td>\nNow with a pre-tax bid-YTW of 7.39% based on a bid of 16.00 and a limitMaturity.<\/td>\n<\/tr>\n
SLF.PR.B<\/td>\nPerpetualDiscount<\/td>\n-5.6992%<\/td>\nNow with a pre-tax bid-YTW of 6.79% based on a bid of 17.87 and a limitMaturity.<\/td>\n<\/tr>\n
ELF.PR.G<\/td>\nPerpetualDiscount<\/td>\n-5.5915%<\/td>\nNow with a pre-tax bid-YTW of 7.47% based on a bid of 16.04 and a limitMaturity.<\/td>\n<\/tr>\n
SLF.PR.A<\/td>\nPerpetualDiscount<\/td>\n-5.2105%<\/td>\nNow with a pre-tax bid-YTW of 6.67% based on a bid of 18.01 and a limitMaturity.<\/td>\n<\/tr>\n
BMO.PR.H<\/td>\nPerpetualDiscount<\/td>\n-4.7958%<\/td>\nNow with a pre-tax bid-YTW of 6.73% based on a bid of 20.05 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.W<\/td>\nPerpetualDiscount<\/td>\n-3.9522%<\/td>\nNow with a pre-tax bid-YTW of 5.96% based on a bid of 20.90 and a limitMaturity.<\/td>\n<\/tr>\n
ELF.PR.F<\/td>\nPerpetualDiscount<\/td>\n-3.8990%<\/td>\nNow with a pre-tax bid-YTW of 7.64% based on a bid of 17.50 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.E<\/td>\nPerpetualDiscount<\/td>\n-2.9961%<\/td>\nNow with a pre-tax bid-YTW of 7.13% based on a bid of 19.75 and a limitMaturity.<\/td>\n<\/tr>\n
POW.PR.A<\/td>\nPerpetualDiscount<\/td>\n-2.9712%<\/td>\nNow with a pre-tax bid-YTW of 6.75% based on a bid of 20.90 and a limitMaturity.<\/td>\n<\/tr>\n
MFC.PR.B<\/td>\nPerpetualDiscount<\/td>\n-2.9641%<\/td>\nNow with a pre-tax bid-YTW of 6.31% based on a bid of 18.66 and a limitMaturity.<\/td>\n<\/tr>\n
POW.PR.B<\/td>\nPerpetualDiscount<\/td>\n-2.6948%<\/td>\nNow with a pre-tax bid-YTW of 6.79% based on a bid of 19.86 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.G<\/td>\nPerpetualDiscount<\/td>\n-2.6236%<\/td>\nNow with a pre-tax bid-YTW of 7.03% based on a bid of 19.30 and a limitMaturity.<\/td>\n<\/tr>\n
GWO.PR.H<\/td>\nPerpetualDiscount<\/td>\n-2.6178%<\/td>\nNow with a pre-tax bid-YTW of 6.59% based on a bid of 18.60 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.J<\/td>\nPerpetualDiscount<\/td>\n-2.4361%<\/td>\nNow with a pre-tax bid-YTW of 7.06% based on a bid of 16.02 and a limitMaturity.<\/td>\n<\/tr>\n
SBC.PR.A<\/td>\nSplitShare<\/td>\n-2.4341%<\/td>\nAsset coverage of 1.9+:1 as of July 10, according to Brompton Group<\/a>. Now with a pre-tax bid-YTW of 6.29% based on a bid of 9.62 and a hardMaturity<\/a> 2012-11-30 at 10.00.<\/td>\n<\/tr>\n
BNS.PR.N<\/td>\nPerpetualDiscount<\/td>\n-2.3810%<\/td>\nNow with a pre-tax bid-YTW of 6.18% based on a bid of 21.32 and a limitMaturity.<\/td>\n<\/tr>\n
HSB.PR.C<\/td>\nPerpetualDiscount<\/td>\n-2.3638%<\/td>\nNow with a pre-tax bid-YTW of 6.79% based on a bid of 19.00 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.E<\/td>\nPerpetualDiscount<\/td>\n-2.3333%<\/td>\nNow with a pre-tax bid-YTW of 6.74% based on a bid of 20.51 and a limitMaturity.<\/td>\n<\/tr>\n
SLF.PR.E<\/td>\nPerpetualDiscount<\/td>\n-2.2183%<\/td>\nNow with a pre-tax bid-YTW of 6.79% based on a bid of 16.75 and a limitMaturity.<\/td>\n<\/tr>\n
TD.PR.R<\/td>\nPerpetualDiscount<\/td>\n-2.2166%<\/td>\nNow with a pre-tax bid-YTW of 6.00% based on a bid of 23.38 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.D<\/td>\nPerpetualDiscount<\/td>\n-2.1891%<\/td>\nNow with a pre-tax bid-YTW of 6.88% based on a bid of 21.00 and a limitMaturity.<\/td>\n<\/tr>\n
FFN.PR.A<\/td>\nSplitShare<\/td>\n-2.1142%<\/td>\nAsset coverage of just under 1.8:1 as of June 30 according to the company<\/a>. Now with a pre-tax bid-YTW of 6.78% based on a bid of 9.26 and a hardMaturity 2014-12-1 at 10.00.<\/td>\n<\/tr>\n
CIU.PR.A<\/td>\nPerpetualDiscount<\/td>\n-1.9201%<\/td>\nNow with a pre-tax bid-YTW of 6.18% based on a bid of 18.90 and a limitMaturity.<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nPerpetualDiscount<\/td>\n-1.7045%<\/td>\nNow with a pre-tax bid-YTW of 6.57% based on a bid of 17.30 and a limitMaturity.<\/td>\n<\/tr>\n
SLF.PR.D<\/td>\nPerpetualDiscount<\/td>\n-1.5864%<\/td>\nNow with a pre-tax bid-YTW of 6.72% based on a bid of 16.75 and a limitMaturity.<\/td>\n<\/tr>\n
W.PR.H<\/td>\nPerpetualDiscount<\/td>\n-1.3770%<\/td>\nNow with a pre-tax bid-YTW of 6.67% based on a bid of 20.77 and a limitMaturity.<\/td>\n<\/tr>\n
BMO.PR.J<\/td>\nPerpetualDiscount<\/td>\n-1.3514%<\/td>\nNow with a pre-tax bid-YTW of 6.27% based on a bid of 18.25 and a limitMaturity.<\/td>\n<\/tr>\n
GWO.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.3255%<\/td>\nNow with a pre-tax bid-YTW of 6.54% based on a bid of 20.10 and a limitMaturity.<\/td>\n<\/tr>\n
BNS.PR.O<\/td>\nPerpetualDiscount<\/td>\n-1.3075%<\/td>\nNow with a pre-tax bid-YTW of 6.00% based on a bid of 23.40 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.I<\/td>\nPerpetualDiscount<\/td>\n-1.2371%<\/td>\nNow with a pre-tax bid-YTW of 6.28% based on a bid of 23.95 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.C<\/td>\nPerpetualDiscount<\/td>\n-1.1860%<\/td>\nNow with a pre-tax bid-YTW of 6.39% based on a bid of 18.33 and a limitMaturity.<\/td>\n<\/tr>\n
TD.PR.Q<\/td>\nPerpetualDiscount<\/td>\n-1.1470%<\/td>\nNow with a pre-tax bid-YTW of 6.03% based on a bid of 23.27 and a limitMaturity.<\/td>\n<\/tr>\n
BNS.PR.J<\/td>\nPerpetualDiscount<\/td>\n-1.0688%<\/td>\nNow with a pre-tax bid-YTW of 6.19% based on a bid of 21.29 and a limitMaturity.<\/td>\n<\/tr>\n
CU.PR.B<\/td>\nPerpetualDiscount<\/td>\n-1.0101%<\/td>\nNow with a pre-tax bid-YTW of 6.21% based on a bid of 24.50 and a limitMaturity.<\/td>\n<\/tr>\n
DF.PR.A<\/td>\nSplitShare<\/td>\n-1.0050%<\/td>\nAsset coverage of just under 2.0:1 as of June 30 according to the company<\/a>. Now with a pre-tax bid-YTW of 5.60% based on a bid of 9.85 and a hardMaturity 2014-12-1 at 10.00.<\/td>\n<\/tr>\n
BAM.PR.M<\/td>\nPerpetualDiscount<\/td>\n+1.0585%<\/td>\nNow with a pre-tax bid-YTW of 7.41% based on a bid of 16.23 and a limitMaturity.<\/td>\n<\/tr>\n
POW.PR.C<\/td>\nPerpetualDiscount<\/td>\n+1.1206%<\/td>\nNow with a pre-tax bid-YTW of 6.47% based on a bid of 22.56 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.N<\/td>\nPerpetualDiscount<\/td>\n+1.1905%<\/td>\nNow with a pre-tax bid-YTW of 7.44% based on a bid of 16.15 and a limitMaturity.<\/td>\n<\/tr>\n
PWF.PR.H<\/td>\nPerpetualDiscount<\/td>\n+2.0548%<\/td>\nNow with a pre-tax bid-YTW of 6.45% based on a bid of 22.35 and a limitMaturity.<\/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
BNS.PR.J<\/td>\nPerpetualDiscount<\/td>\n71,185<\/td>\nCIBC crossed 60,000 at 21.60. Now with a pre-tax bid-YTW of 6.19% based on a bid of 21.29 and a limitMaturity.<\/td>\n<\/tr>\n
BMO.PR.J<\/td>\nPerpetualDiscount<\/td>\n65,975<\/td>\nCIBC crossed 60,000 at 18.30. Now with a pre-tax bid-YTW of 6.27% based on a bid of 18.25 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.H<\/td>\nPerpetualDiscount<\/td>\n29,261<\/td>\nNow with a pre-tax bid-YTW of 7.50% based on a bid of 16.10 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.I<\/td>\nPerpetualDiscount<\/td>\n21,250<\/td>\nNow with a pre-tax bid-YTW of 7.39% based on a bid of 16.00 and a limitMaturity.<\/td>\n<\/tr>\n
BNS.PR.N<\/td>\nPerpetualDiscount<\/td>\n18,045<\/td>\nNow with a pre-tax bid-YTW of 6.18% based on a bid of 21.32 and a limitMaturity.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

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

The implicit guarantee of the GSE will – probably – shortly become explicit. James Hamilton of Econbrowser reviews the situation and approves of the plan: The first thing I like about this plan is the …<\/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-2385","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2385","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=2385"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2385\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}