{"id":25825,"date":"2014-07-16T22:38:20","date_gmt":"2014-07-17T03:38:20","guid":{"rendered":"http:\/\/prefblog.com\/?p=25825"},"modified":"2014-07-16T22:38:20","modified_gmt":"2014-07-17T03:38:20","slug":"july-16-2014","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=25825","title":{"rendered":"July 16, 2014"},"content":{"rendered":"

The regulators’ crack-down on European banks is having the intended effect<\/a>:<\/p>\n

Ignoring the rules has never been so pricey for European lenders, spurring them to hire more people to ferret out wrongdoing and offer salaries more in line with the bankers they police.<\/p>\n

\u201cIt\u2019s actually a very hot market right now,\u201d said Mike Roemer, who became head of compliance at London-based Barclays Plc (BARC) in January. Today the role is seen \u201cas an integral part of how companies manage the overall risk of the organization,\u201d he said.<\/p>\n

After the U.S. extracted almost $12 billion in fines in settlements with France\u2019s BNP Paribas SA (BNP) and Zurich-based Credit Suisse Group AG (CSGN) since May, European firms say they\u2019re overhauling culture and boosting pay for compliance staff faster than for revenue-earning bankers.
…<\/b>
The average annual salary for a compliance employee in London rose 12.9 percent to 80,538 pounds ($138,000) in 2013, according to a survey by London-based recruitment firm Astbury Marsden & Partners Ltd. That compares with a 6.1 percent increase to 90,669 pounds for a revenue-generating banker. <\/p><\/blockquote>\n

No real surprises in the BoC rate announcement<\/a>:<\/p>\n

Total CPI inflation has moved up to around the 2 per cent target in recent months, sooner than expected. Core inflation has also increased but remains below 2 per cent. Recent higher inflation is attributable to the temporary effects of higher energy prices, exchange rate pass-through and other sector-specific shocks, rather than to any change in domestic economic fundamentals.
…<\/b>
Given the downgrade to the global outlook, economic activity in Canada is now projected to be a little weaker than previously forecast.
…<\/b>
For the inflation target to be achieved on a sustained basis in 2016, the economy must reach and remain at full capacity. Closing the output gap over the time frame described above is reliant on continued stimulative monetary policy and hinges critically on stronger exports and business investment. Meanwhile, the risks associated with household imbalances, while evolving in a constructive way, are still elevated. Weighing these considerations within the Bank\u2019s risk-management framework, the monetary policy stance remains appropriate and the target for the overnight rate remains at 1 per cent. The Bank is neutral with respect to the timing and direction of the next change to the policy rate, which will depend on how new information influences the outlook and assessment of risks.<\/p><\/blockquote>\n

Today’s PrefBlog Wingnut of the Day Award goes to the authors of a new book<\/a>:<\/p>\n

In their new book, House of Debt, Atif Mian and Amir Sufi argue that out-of-control housing prices tend to inflict long-lasting pain on a country\u2019s economy, but much of that distress can be avoided. The key? Forcing banks and other lenders to share in the ups-and-downs of the real estate cycle by requiring them to bear part of the cost if a housing boom implodes.<\/p>\n

The authors, who teach at Princeton and the University of Chicago, respectively, are mostly concerned with the U.S. housing debacle, but their work deserves attention in any country that suspects it, too, may be suffering from real estate dementia.
…<\/b>
The two professors propose an idea with far more teeth. They suggest rewriting mortgage contracts so that a homeowner\u2019s payments and principal shrink if an index of local home prices declines. In effect, their system would shove part of the losses onto the shoulders of the mortgage holder. (Yes, in Canada that would be mostly you, Big Six banks.) In return, the lender would get a 5-per-cent slice of any capital gains on the house when it is sold or refinanced.<\/p><\/blockquote>\n

Wondderful. So my mortgage rate will go up if the bank figures the market will go down, and vice versa. Classic negative convexity, just for starters. I continue to advocate a gradual withdrawal of the government from mortgage insurance and countercyclical capital requirements when the proportion of mortgage assets to financial system assets deviates significantly from historical norms.<\/p>\n

There’s some cheerful news for those in the investment management business<\/a>:<\/p>\n

Net flows into U.S. investment accounts were just 1 percent last year. That could create problems when, inevitably, stocks cool off. And if a bear market comes along, managers of funds may face a true reckoning.<\/p>\n

The hardest hit will likely be traditional active money managers. They\u2019re being underpriced by cheap passive strategies that hold stocks and bonds based on indexes in mutual funds or exchange-traded funds. Managers of mutual funds are also getting squeezed by a variety of new, more sophisticated strategies, which BCG calls \u201csolutions.\u201d These are options like target-date funds, income funds and global asset allocation funds that operate pretty much on autopilot.<\/p>\n

The result is that an elite group of big asset managers, who provide such alternatives, are winning the lion\u2019s share of new dollars. In the U.S., Vanguard Group, famous for its cheap index funds and ETFs, and BlackRock, the world’s largest money manager, together get two of every five new dollars that get invested in the U.S. BCG says the top 10 asset managers make up almost three-quarters of new investment flows.<\/p><\/blockquote>\n

Short selling is a dangerous game<\/a>:<\/p>\n

A Wall Street trader said Cynk Technology Corp.\u2019s (CYNK) 36,000 percent stock surge cost him his job, and he blames a short squeeze and regulators who didn\u2019t halt the shares before the company\u2019s value shot past $6 billion.<\/p>\n

Tom Laresca, a market-maker at Buckman Buckman & Reid Inc., said he was among traders who thought they spotted a scam as the shares jumped to $2.25 last month from pennies. He sold it short last week around $6 — which means selling stock you don\u2019t own with a plan to buy it cheaper soon, pocketing the difference. Laresca figured the Securities and Exchange Commission would suspend trading, sending the price toward zero. Cynk has said it\u2019s a social-network service with no revenue and one employee.<\/p>\n

\u201cThe stock looked worthless, if there\u2019s even a company behind it,\u201d Laresca said. \u201cMy 10-year-old knew it was a scam. It was a complete joke.\u201d<\/p>\n

Instead of falling, the price more than doubled the next day, July 9, starting the squeeze. Market-makers who had sold the shares short got nervous and scrambled to buy them to close their positions, driving the price even higher, Laresca said. The SEC stopped trading two days later, citing concerns about the accuracy of information in the marketplace and \u201cpotentially manipulative transactions.\u201d That was too late, Laresca said.
…<\/b>
Only 500,000 of those shares were authorized to trade publicly, according to Cynk\u2019s transfer agent, Pacific Stock Transfer. About $12 million of stock changed hands during the past month, according to data compiled by Bloomberg. The low volume meant that market-makers couldn\u2019t find shares to cover their short positions, Laresca said.
…<\/b>
Kevin Kelly, chief investment officer at Recon Capital Partners LLC, which manages about $150 million and issues exchange-traded funds, said Laresca took a risk by shorting Cynk even if he thought it was sketchy.<\/p>\n

\u201cHe should know that markets can stay irrational longer than you can stay solvent,\u201d Kelly said. \u201cHe\u2019s a professional.\u201d<\/p><\/blockquote>\n

The video interview<\/a> makes one thing clear: he’s got a great accent!<\/p>\n

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 14bp, FixedResets off 11bp and DeemedRetractibles gaining 4bp. Volatility was nothing special, but comprised entirely of FixedReset losers. Volume was below average.<\/p>\n\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>\n3.16 %<\/td>\n3.15 %<\/td>\n21,887<\/td>\n19.34<\/td>\n1<\/td>\n0.0000 %<\/td>\n2,516.0<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.17 %<\/td>\n3.39 %<\/td>\n29,402<\/td>\n18.66<\/td>\n1<\/td>\n0.0000 %<\/td>\n4,163.9<\/td>\n<\/tr>\n
Floater<\/td>\n2.84 %<\/td>\n2.93 %<\/td>\n45,714<\/td>\n19.92<\/td>\n4<\/td>\n0.1897 %<\/td>\n2,788.1<\/td>\n<\/tr>\n
OpRet<\/td>\n4.01 %<\/td>\n-5.66 %<\/td>\n79,751<\/td>\n0.08<\/td>\n1<\/td>\n-0.3124 %<\/td>\n2,723.2<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.26 %<\/td>\n3.97 %<\/td>\n46,694<\/td>\n4.03<\/td>\n6<\/td>\n-0.0067 %<\/td>\n3,112.4<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.3124 %<\/td>\n2,490.1<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.52 %<\/td>\n-3.89 %<\/td>\n78,949<\/td>\n0.09<\/td>\n17<\/td>\n0.0462 %<\/td>\n2,429.7<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.23 %<\/td>\n5.07 %<\/td>\n109,540<\/td>\n15.21<\/td>\n20<\/td>\n0.1364 %<\/td>\n2,583.2<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.38 %<\/td>\n3.59 %<\/td>\n197,727<\/td>\n4.75<\/td>\n76<\/td>\n-0.1062 %<\/td>\n2,563.4<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.97 %<\/td>\n0.12 %<\/td>\n124,614<\/td>\n0.09<\/td>\n43<\/td>\n0.0407 %<\/td>\n2,553.0<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.66 %<\/td>\n-0.95 %<\/td>\n96,187<\/td>\n0.09<\/td>\n6<\/td>\n0.0917 %<\/td>\n2,528.9<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
SLF.PR.I<\/td>\nFixedReset<\/td>\n-1.32 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.20
\nBid-YTW : 2.32 %<\/td>\n<\/tr>\n
MFC.PR.F<\/td>\nFixedReset<\/td>\n-1.19 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.29
\nBid-YTW : 4.04 %<\/td>\n<\/tr>\n
BAM.PR.X<\/td>\nFixedReset<\/td>\n-1.12 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-07-16
\nMaturity Price : 21.76
\nEvaluated at bid price : 22.01
\nBid-YTW : 4.01 %<\/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
CM.PR.M<\/td>\nFixedReset<\/td>\n100,633<\/td>\nCalled for redemption July 31<\/a>.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-08-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.98
\nBid-YTW : 5.18 %<\/td>\n<\/tr>\n
ENB.PR.F<\/td>\nFixedReset<\/td>\n65,318<\/td>\nRBC crossed 55,000 at 24.70.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-07-16
\nMaturity Price : 23.13
\nEvaluated at bid price : 24.63
\nBid-YTW : 4.04 %<\/td>\n<\/tr>\n
BMO.PR.S<\/td>\nFixedReset<\/td>\n61,067<\/td>\nTD crossed 35,000 at 25.72.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2019-05-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.72
\nBid-YTW : 3.57 %<\/td>\n<\/tr>\n
ENB.PR.Y<\/td>\nFixedReset<\/td>\n55,882<\/td>\nDesjardins crossed blocks of 17,500 and 32,500, both at 24.27.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-07-16
\nMaturity Price : 22.89
\nEvaluated at bid price : 24.28
\nBid-YTW : 4.00 %<\/td>\n<\/tr>\n
GWO.PR.S<\/td>\nDeemed-Retractible<\/td>\n48,590<\/td>\nScotia crossed 40,000 at 25.65.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.56
\nBid-YTW : 5.10 %<\/td>\n<\/tr>\n
BNA.PR.F<\/td>\nSplitShare<\/td>\n40,027<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2021-10-08
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.20
\nBid-YTW : 5.07 %<\/td>\n<\/tr>\n
There were 26 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.R<\/td>\nFixedReset<\/td>\nQuote: 25.56 – 25.78
\nSpot Rate : 0.2200
\nAverage : 0.1418<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-07-16
\nMaturity Price : 23.79
\nEvaluated at bid price : 25.56
\nBid-YTW : 3.79 %<\/td>\n<\/tr>\n

RY.PR.L<\/td>\nFixedReset<\/td>\nQuote: 26.51 – 26.75
\nSpot Rate : 0.2400
\nAverage : 0.1842<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2019-02-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.51
\nBid-YTW : 3.00 %<\/td>\n<\/tr>\n

IFC.PR.A<\/td>\nFixedReset<\/td>\nQuote: 24.20 – 24.42
\nSpot Rate : 0.2200
\nAverage : 0.1670<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.20
\nBid-YTW : 4.03 %<\/td>\n<\/tr>\n

SLF.PR.I<\/td>\nFixedReset<\/td>\nQuote: 26.20 – 26.45
\nSpot Rate : 0.2500
\nAverage : 0.2000<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.20
\nBid-YTW : 2.32 %<\/td>\n<\/tr>\n

RY.PR.H<\/td>\nFixedReset<\/td>\nQuote: 25.35 – 25.55
\nSpot Rate : 0.2000
\nAverage : 0.1510<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-07-16
\nMaturity Price : 23.27
\nEvaluated at bid price : 25.35
\nBid-YTW : 3.65 %<\/td>\n<\/tr>\n

GWO.PR.I<\/td>\nDeemed-Retractible<\/td>\nQuote: 22.81 – 23.00
\nSpot Rate : 0.1900
\nAverage : 0.1430<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.81
\nBid-YTW : 5.67 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

The regulators’ crack-down on European banks is having the intended effect: Ignoring the rules has never been so pricey for European lenders, spurring them to hire more people to ferret out wrongdoing and offer salaries …<\/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-25825","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/25825","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=25825"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/25825\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}