{"id":3114,"date":"2008-09-22T22:27:39","date_gmt":"2008-09-23T02:27:39","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=3114"},"modified":"2008-09-22T22:27:39","modified_gmt":"2008-09-23T02:27:39","slug":"september-22-2008","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=3114","title":{"rendered":"September 22, 2008"},"content":{"rendered":"

Morgan Stanley and Goldman Sachs are turning into banks<\/a>; on September 16<\/a> I said:<\/p>\n

I suspect that all this will change; in ten years, says I, all the global Large Complex Financial Institutions will be banks with access to multiple discount windows.<\/p><\/blockquote>\n

Sometimes things move faster than you think! The Bank of England published a list of their selected LCFIs<\/a> … all banks now, or bust, every one. Although some of those players might no longer qualify as sufficiently large for the A list!<\/p>\n

Accrued Interest<\/i> calls for more regulation<\/a> of CDSs, repeating his call for exchange trading<\/a>, standardizing contracts and increasing margin requirements. While I agree that margin requirements are in order – with the regulators demanding that such-and-such margin be put up, or the equivalent is deducted from capital – I’m not entirely sure he’s right about the implications:<\/p>\n

Increasing collateral requirements would force protection buyers to be more judicious about which names they short. <\/p><\/blockquote>\n

Now, it seems to me that if I buy protection with a five-year CDS at 500bp, my maximum loss is 25% of notional, and that’s in gross dollars, not present value. If I sell protection, my maximum loss is 100% of notional. It seems to me that any rational margining requirement is going to force protection sellers to be more judicious about which names they go long<\/i>; the same will also work out relative to current reality, since a large part of the problem is that protection buyers have been relatively powerless hedge funds, while sellers have been insurers – who were enabled to put on massive leverage due the their policy of not doing the deal if they had to put up collateral.<\/p>\n

Naked Capitalism<\/i> reprints a report<\/a> that New York State is moving into CDS regulation, presumably in an effort to drive all the business to London or Dubai.<\/p>\n

A quiet day, although there were a few violent price moves. PerpetualDiscounts eked out a small gain.<\/p>\n

\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.
The Fixed-Reset<\/i> index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater<\/i> index.<\/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>\nN\/A<\/td>\nN\/A<\/td>\nN\/A<\/td>\nN\/A<\/td>\n0<\/td>\nN\/A<\/td>\nN\/A<\/td>\n<\/tr>\n
Fixed-Floater<\/td>\n4.69%<\/td>\n4.75%<\/td>\n76,525<\/td>\n15.79<\/td>\n6<\/td>\n+0.4252%<\/td>\n1,092.4<\/td>\n<\/tr>\n
Floater<\/td>\n4.93%<\/td>\n4.93%<\/td>\n47,936<\/td>\n15.62<\/td>\n2<\/td>\n-0.1479%<\/td>\n812.4<\/td>\n<\/tr>\n
Op. Retract<\/td>\n4.99%<\/td>\n4.74%<\/td>\n121,316<\/td>\n3.42<\/td>\n14<\/td>\n-0.1266%<\/td>\n1,046.7<\/td>\n<\/tr>\n
Split-Share<\/td>\n5.50%<\/td>\n6.64%<\/td>\n51,489<\/td>\n4.33<\/td>\n14<\/td>\n-0.6815%<\/td>\n1,018.2<\/td>\n<\/tr>\n
Interest Bearing<\/td>\n6.52%<\/td>\n7.35%<\/td>\n54,023<\/td>\n5.20<\/td>\n2<\/td>\n-0.3172%<\/td>\n1,092.8<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n6.24%<\/td>\n6.15%<\/td>\n57,941<\/td>\n2.18<\/td>\n1<\/td>\n+0.0000%<\/td>\n995.0<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n6.10%<\/td>\n6.17%<\/td>\n181,364<\/td>\n13.63<\/td>\n70<\/td>\n+0.0474%<\/td>\n875.2<\/td>\n<\/tr>\n
Fixed-Reset<\/td>\n5.07%<\/td>\n4.93%<\/td>\n1,392,623<\/td>\n14.26<\/td>\n9<\/td>\n+0.0402%<\/td>\n1,118.3<\/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
Major Price Changes<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
ELF.PR.F<\/td>\nPerpetualDiscount<\/td>\n-3.5676%<\/td>\nNow with a pre-tax bid-YTW of 7.50% based on a bid of 18.11 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
BMO.PR.H<\/td>\nPerpetualDiscount<\/td>\n-2.7778%<\/td>\nNow with a pre-tax bid-YTW of 6.29% based on a bid of 21.35 and a limitMaturity.<\/td>\n<\/tr>\n
FFN.PR.A<\/td>\nSplitShare<\/td>\n-2.3109%<\/td>\nAsset coverage of just under 1.8:1 as of September 15, according to the company<\/a>. Now with a pre-tax bid-YTW of 6.76% based on a bid of 9.30 and a hardMaturity 2014-12-1 at 10.00.<\/td>\n<\/tr>\n
WFS.PR.A<\/td>\nSplitShare<\/td>\n-2.1164%<\/td>\nAsset coverage of just under 1.6:1 as of September 11 according to Mulvihill<\/a>. Now with a pre-tax bid-YTW of 8.36% based on a bid of 9.25 and a hardMaturity 2011-6-30 at 10.00.<\/td>\n<\/tr>\n
LBS.PR.A<\/td>\nSplitShare<\/td>\n-1.5000%<\/td>\nAsset coverage of just under 2.0:1 as of September 18, according to Brompton Group<\/a>. Now with a pre-tax bid-YTW of 5.85% based on a bid of 9.85 and a hardMaturity 2013-11-29 at 10.00.<\/td>\n<\/tr>\n
ELF.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.4793%<\/td>\nNow with a pre-tax bid-YTW of 7.30% based on a bid of 16.95 and a limitMaturity.<\/td>\n<\/tr>\n
LFE.PR.A<\/td>\nSplitShare<\/td>\n-1.1964%<\/td>\nAsset coverage of 2.3+:1 as of September 15 according to the company<\/a>. Now with a pre-tax bid-YTW of 5.60% based on a bid of 9.91 and a hardMaturity 2012-12-1 at 10.00.<\/td>\n<\/tr>\n
BAM.PR.J<\/td>\nOpRet<\/td>\n-1.0526%<\/td>\nNow with a pre-tax bid-YTW of 6.27% based on a bid of 23.50 and a softMaturity<\/a> 2018-3-30 at 25.00. Compare with BAM.PR.H (6.73% to 2012-3-30), BAM.PR.I (5.89% to 2013-12-30) and BAM.PR.O (8.49% to 2013-6-30).<\/td>\n<\/tr>\n
DFN.PR.A<\/td>\nSplitShare<\/td>\n-1.0030%<\/td>\nAsset coverage of just under 2.3:1 as of September 15, according to the company<\/a>. Now with a pre-tax bid-YTW of 5.60% based on a bid of 9.87 and a hardMaturity 2014-12-1 at 10.00.<\/td>\n<\/tr>\n
PWF.PR.E<\/td>\nPerpetualDiscount<\/td>\n+1.1739%<\/td>\nNow with a pre-tax bid-YTW of 5.97% based on a bid of 23.27 and a limitMaturity.<\/td>\n<\/tr>\n
HSB.PR.C<\/td>\nPerpetualDiscount<\/td>\n+1.4349%<\/td>\nNow with a pre-tax bid-YTW of 6.26% based on a bid of 20.50 and a limitMaturity.<\/td>\n<\/tr>\n
CIU.PR.A<\/td>\nPerpetualDiscount<\/td>\n+2.3684%<\/td>\nNow with a pre-tax bid-YTW of 5.98% based on a bid of 19.45 and a limitMaturity.<\/td>\n<\/tr>\n
BCE.PR.Z<\/td>\nFixFloat<\/td>\n+2.8266%<\/td>\n <\/td>\n<\/tr>\n
IAG.PR.A<\/td>\nPerpetualDiscount<\/td>\n+5.0704%<\/td>\nNow with a pre-tax bid-YTW of 6.20% based on a bid of 18.65 and a limitMaturity. You know, in HIMIPref™ I calculate a value named flatBidPriceVolatility<\/a>. This issue has the highest such value of any index-included issue, second only to HPF.PR.B in the universe. I’d love to know who the market maker is, but the TSX keeps this information secret.<\/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.M<\/td>\nPerpetualDiscount<\/td>\n55,800<\/td>\nNational Bank crossed 50,000 at 19.77. Now with a pre-tax bid-YTW of 5.79% based on a bid of 19.76 and a limitMaturity.<\/td>\n<\/tr>\n
NA.PR.L<\/td>\nPerpetualDiscount<\/td>\n39,500<\/td>\nNational Bank crossed 20,000 at 20.10, then another 15,000 at 20.12. Now with a pre-tax bid-YTW of 6.14% based on a bid of 20.06 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.I<\/td>\nFixedReset<\/td>\n34,218<\/td>\n <\/td>\n<\/tr>\n
BNS.PR.R<\/td>\nFixedReset<\/td>\n29,660<\/td>\n <\/td>\n<\/tr>\n
BCE.PR.A<\/td>\nFixedFloater<\/td>\n22,655<\/td>\nCIBC crossed 20,400 at 24.76.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

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

Morgan Stanley and Goldman Sachs are turning into banks; on September 16 I said: I suspect that all this will change; in ten years, says I, all the global Large Complex Financial Institutions will be …<\/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-3114","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3114","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=3114"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3114\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3114"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3114"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3114"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}