{"id":27272,"date":"2014-12-24T19:40:40","date_gmt":"2014-12-25T00:40:40","guid":{"rendered":"http:\/\/prefblog.com\/?p=27272"},"modified":"2014-12-24T19:40:40","modified_gmt":"2014-12-25T00:40:40","slug":"december-24-2014","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=27272","title":{"rendered":"December 24, 2014"},"content":{"rendered":"

S&P has Russia on Watch-Negative<\/a>:<\/p>\n

S&P said in its statement that there\u2019s at least a 50 percent chance that Russia\u2019s rating will be lowered to junk within 90 days as it put the country on negative credit watch. Moody\u2019s Investors Service and Fitch Ratings rank Russia one step higher than S&P, which lowered its rating one level in April to BBB-.<\/p>\n

The move \u201cstems from what we view as a rapid deterioration of Russia\u2019s monetary flexibility and the impact of the weakening economy on its financial system,\u201d S&P said. The ratings company expects to conclude its review in mid-January. The ruble held its gains after the S&P announcement yesterday, suggesting investors have already priced in the possibility of credit downgrades.
…<\/b>
Gross domestic product may shrink as much as 4.7 percent next year, the most since 2009, should a \u201cstress scenario\u201d eventuate where oil averages $60 a barrel, the central bank said Dec. 15. Net capital outflows may have more than doubled this year to $134 billion.<\/p>\n

In October, Moody\u2019s cut Russia\u2019s credit rating by one level to its second-lowest investment grade, citing concerns over the impact of sanctions on the economy. The continued erosion of Russia\u2019s foreign-exchange reserves because of capital flight, low oil prices and borrowers\u2019 lack of access to credit were also cited by Moody\u2019s.<\/p><\/blockquote>\n

Christmas came early for Canadian preferred share investors, the market rocketed upwards with PerpetualDiscounts winning 70bp, FixedResets gained 37bp and DeemedRetractibles were up 50bp in a session that was foreshortened so that members of the highest paid profession on earth could stand around complaining about the inferior work ethic of minimum wage waiters and shop clerks. The Performance Highlights table is suitably gigantic; volume, however, was quite low.<\/p>\n

PerpetualDiscounts now yield 5.05%, equivalent to 6.56% interest at the standard equivalency factor of 1.3x. Long corporates<\/a> now yield about 4.1% so the pre-tax interest-equivalent spread (in this context, the Seniority Spread) is now about 245bp, a very sharp narrowing from the 270bp reported December 17<\/a>.<\/p>\n

For as long as the FixedReset market is so violently unsettled, I\u2019ll keep publishing updates of the more interesting and meaningful series of FixedResets\u2019 Implied Volatilities. This doesn\u2019t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.<\/p>\n

Remember that all rich \/cheap assessments are:<\/p>\n