April 28, 2010

Spain’s been downgraded:

Spain had its credit rating cut one step by Standard & Poor’s to AA, putting it on a par with Slovenia, as contagion from Greece’s debt crisis spreads through the euro region.

S&P said in a statement today that the outlook on Spain is negative, reflecting the chance of a possible further downgrade if the “budgetary position underperforms to a greater extent than we currently anticipate.” Spain was last cut by S&P in January 2009.

The risk premium investors demand to hold Spanish bonds surged to the highest in more than a year today and the price of insuring Spanish bonds against default reached a record as doubts about Greece’s ability to pay its debt spilled over into Spanish and Portuguese markets.

… and S&P is making recovery-on-default estimates for Greece:

The ratings firm yesterday cut Greece three steps to BB+, or below investment grade, and said bondholders may recover only 30 percent to 50 percent of their investments if the nation fails to make debt payments. Europe’s most-indebted country relative to the size of its economy has about 296 billion euros of bonds outstanding, according to data compiled by Bloomberg.

OSFI’s Assia Billig gave a presentation on the Canada Pension Plan. Real returns on the fund’s portfolio are estimated to be 4.2% +/- 1.5% with 95% confidence. It won’t be holding a lot of government bonds!

Senator Levin is doing some more grandstanding:

Levin, who questioned Goldman Sachs executives during a hearing in Washington yesterday, said the regulatory reform bill being weighed in the Senate will address conflicts where companies have undisclosed interest in betting against clients.

Today’s FOMC statement was encouraging for fixed-income investors:

Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Another day of poor performance on high volume for the Canadian preferred share market, as PerpetualDiscounts lost 16bp while FixedResets were down 12bp.

PerpetualDiscounts now yield 6.35%, equivalent to 8.89% interest at the standard equivalency factor of 1.4x. Long corporates (which are up 0.70% on the month-to-date and +5.76% year-to-date) now yield about 5.7% (edging towards 5.6%!) so the pre-tax interest-equivalent spread is now about 320bp, a significant widening from the 305bp reported April 22, above the recent high of +310bp reported April 7 and a big move wider than the +285bp reported on March 31.

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 2.53 % 2.57 % 52,850 21.05 1 0.0309 % 2,186.3
FixedFloater 4.92 % 2.99 % 45,873 20.39 1 -0.4504 % 3,252.7
Floater 1.92 % 1.67 % 47,982 23.43 4 -0.0488 % 2,403.2
OpRet 4.90 % 3.87 % 137,138 1.20 10 0.0507 % 2,306.1
SplitShare 6.43 % 6.75 % 138,950 3.57 2 -0.4857 % 2,121.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0507 % 2,108.7
Perpetual-Premium 5.92 % 4.77 % 27,264 15.86 2 -0.0615 % 1,820.2
Perpetual-Discount 6.28 % 6.35 % 215,937 13.41 76 -0.1609 % 1,697.6
FixedReset 5.55 % 4.49 % 517,506 3.61 44 -0.1169 % 2,131.1
Performance Highlights
Issue Index Change Notes
GWO.PR.M Perpetual-Discount -2.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 23.01
Evaluated at bid price : 23.15
Bid-YTW : 6.38 %
CM.PR.D Perpetual-Discount -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 22.46
Evaluated at bid price : 22.75
Bid-YTW : 6.35 %
POW.PR.D Perpetual-Discount -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 19.25
Evaluated at bid price : 19.25
Bid-YTW : 6.56 %
BMO.PR.N FixedReset -1.24 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-27
Maturity Price : 25.00
Evaluated at bid price : 27.01
Bid-YTW : 4.60 %
IAG.PR.F Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 23.13
Evaluated at bid price : 23.28
Bid-YTW : 6.46 %
GWO.PR.I Perpetual-Discount -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 17.62
Evaluated at bid price : 17.62
Bid-YTW : 6.47 %
CM.PR.G Perpetual-Discount -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 21.37
Evaluated at bid price : 21.37
Bid-YTW : 6.36 %
ELF.PR.G Perpetual-Discount 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 7.02 %
Volume Highlights
Issue Index Shares
Traded
Notes
HSB.PR.E FixedReset 144,405 RBC crossed blocks of 50,000 and 82,000, both at 27.10.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.05
Bid-YTW : 4.68 %
PWF.PR.J OpRet 125,828 RBC crossed blocks of 91,500 and 30,000, both at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-05-30
Maturity Price : 25.25
Evaluated at bid price : 25.47
Bid-YTW : 3.83 %
BNS.PR.O Perpetual-Discount 125,080 Nesbitt crossed blocks of 70,000 and 40,000, both at 23.10.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 22.89
Evaluated at bid price : 23.05
Bid-YTW : 6.11 %
BNS.PR.M Perpetual-Discount 78,874 Nesbitt crossed 60,000 at 18.58.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-04-28
Maturity Price : 18.56
Evaluated at bid price : 18.56
Bid-YTW : 6.11 %
TD.PR.N OpRet 78,430 RBC crossed blocks of 50,000 and 25,000, both at 25.78.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-05-30
Maturity Price : 25.75
Evaluated at bid price : 25.77
Bid-YTW : 3.32 %
RY.PR.X FixedReset 54,830 TD bought 10,000 from Scotia at 26.56 and crossed 25,000 at 26.62.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 26.59
Bid-YTW : 4.62 %
There were 51 other index-included issues trading in excess of 10,000 shares.

One Response to “April 28, 2010”

  1. [...] spread (also called the Seniority Spread) about 320bp, about the same as was reported April 28 and a massive jump higher than the +285 bp reported March [...]

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