November 24, 2011

Today’s cheerful credit news is about Japan:

Standard & Poor’s said Japanese Prime Minister Yoshihiko Noda’s administration hasn’t made progress in tackling the public debt burden, an indication it may be preparing to lower the nation’s sovereign grade.

“Japan’s finances are getting worse and worse every day, every second,” Takahira Ogawa, director of sovereign ratings at S&P in Singapore, said in an interview. Asked if that means he’s closer to cutting Japan, he said it “may be right in saying that we’re closer to a downgrade. But the deterioration has been gradual so far, and it’s not like we’re going to move today.”

Meanwhile, in Europe:

Stocks fell, Italian bonds declined and the cost of insuring European government debt against default rose to a record after German Chancellor Angela Merkel ruled out joint euro-area borrowing.

The yield on Italy’s 10-year bond climbed 14 basis points to 7.11 percent, while similar-maturity French debt yields rose three basis points to 3.72 percent.

Portugal’s bonds fell, with 10-year note yields climbing 90 basis points to 12.21 percent after Fitch Ratings cut the nation’s credit grade one step to BB+, the highest junk status.

Germany’s 10-year bond yield rose as much as 12 basis points to 2.26 percent before trading five basis points higher at 2.20 percent. Two-year note yields increased three basis points to 0.47 percent.

The Royal Canadian Mint’s gold receipt IPO appears to be going very well:

The Royal Canadian Mint raised C$600 million ($573 million) in an initial public offering of securities tied to its gold reserves, more than double its IPO target, according to two people familiar with the sale.

The mint initially sought to raise C$250 million from selling units in Canadian or U.S. dollars at C$20 or $19.29 each, the Ottawa-based firm said. Strong demand from institutional and individual investors drove up the size of the sale, said the people, who declined to be named because terms aren’t public.

Each exchange-traded receipt represents ownership in physical gold bullion held in custody of the Royal Canadian Mint. Proceeds from the sale will be used to buy gold, and the buyers of the receipts will own the metal rather than a stake in the mint, according to an Oct. 28 statement.

Huxley said “History is bunk.” Moody’s says Hungary is junk:

Hungary lost its investment-grade rating at Moody’s Investors Service after 15 years as the Cabinet seeks International Monetary Fund help to boost confidence in the European Union’s most-indebted eastern member.

The foreign- and local-currency bond ratings were cut one step to Ba1, the highest junk-level score, from Baa3, the company said today in a statement. Moody’s, which awarded Hungary its investment grade in 1996, assigned a negative outlook. The country is rated the lowest investment grade at Standard & Poor’s and Fitch Ratings.

The government has scrapped two debt sales and reduced the size of another eight auctions in the last three months as the euro region’s debt crisis deepened. Prime Minister Viktor Orban’s Cabinet on Nov. 17 asked for IMF “insurance” that doesn’t entail a loan and doesn’t impose conditions.

It was a rough day for the Canadian preferred share market, with PerpetualDiscounts losing 24bp, FixedResets down 13bp and DeemedRetractibles off 8bp. Not much volatility. Volume was very light – not unexpectedly, what with the US turkeys.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.0964 % 2,131.1
FixedFloater 4.80 % 4.51 % 28,451 17.25 1 2.3785 % 3,211.9
Floater 3.38 % 3.41 % 66,017 18.68 2 -0.0964 % 2,301.0
OpRet 4.97 % 1.66 % 51,439 1.47 7 -0.0275 % 2,475.8
SplitShare 5.81 % 6.58 % 59,294 5.16 3 -0.2115 % 2,525.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0275 % 2,263.9
Perpetual-Premium 5.59 % 2.84 % 102,058 0.43 13 -0.1562 % 2,149.9
Perpetual-Discount 5.32 % 5.19 % 101,069 14.68 17 -0.2366 % 2,291.7
FixedReset 5.10 % 3.04 % 218,480 2.48 64 -0.1273 % 2,343.7
Deemed-Retractible 5.05 % 4.39 % 202,643 3.86 46 -0.0777 % 2,216.3
Performance Highlights
Issue Index Change Notes
PWF.PR.E Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-24
Maturity Price : 23.85
Evaluated at bid price : 25.01
Bid-YTW : 5.50 %
POW.PR.B Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-24
Maturity Price : 24.53
Evaluated at bid price : 24.78
Bid-YTW : 5.46 %
BAM.PR.G FixedFloater 2.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-24
Maturity Price : 25.00
Evaluated at bid price : 19.80
Bid-YTW : 4.51 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.D FixedReset 91,050 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-24
Maturity Price : 23.13
Evaluated at bid price : 25.10
Bid-YTW : 3.67 %
SLF.PR.H FixedReset 66,200 TD crossed 46,400 at 23.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.30
Bid-YTW : 4.54 %
CIU.PR.B FixedReset 51,600 Nesbitt crossed 50,000 at 27.45.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.09
Bid-YTW : 3.20 %
RY.PR.E Deemed-Retractible 46,681 TD crossed 34,100 at 25.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.51 %
CM.PR.G Perpetual-Discount 45,402 Desjardins crossed 25,000 at 24.91.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-24
Maturity Price : 24.57
Evaluated at bid price : 24.90
Bid-YTW : 5.46 %
BNS.PR.Z FixedReset 36,021 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.96
Bid-YTW : 3.20 %
There were 16 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSB.PR.E FixedReset Quote: 27.06 – 27.50
Spot Rate : 0.4400
Average : 0.2850

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 27.06
Bid-YTW : 3.69 %

PWF.PR.E Perpetual-Discount Quote: 25.01 – 25.50
Spot Rate : 0.4900
Average : 0.3533

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-24
Maturity Price : 23.85
Evaluated at bid price : 25.01
Bid-YTW : 5.50 %

GWO.PR.M Deemed-Retractible Quote: 26.10 – 26.60
Spot Rate : 0.5000
Average : 0.3992

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 5.38 %

CIU.PR.B FixedReset Quote: 27.09 – 27.55
Spot Rate : 0.4600
Average : 0.3620

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.09
Bid-YTW : 3.20 %

IAG.PR.A Deemed-Retractible Quote: 22.65 – 23.00
Spot Rate : 0.3500
Average : 0.2610

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 5.81 %

BAM.PR.O OpRet Quote: 25.76 – 26.10
Spot Rate : 0.3400
Average : 0.2513

YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : 3.54 %

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