March 14, 2011

He who pays the piper …:

Euro-area leaders rebuffed Irish Prime Minister Enda Kenny’s bid for easier bailout terms, demanding that Ireland raise tax rates in return, as they rewarded Greece with a cut in its rescue-loan costs.

“We weren’t really satisfied yet today with what Ireland pledged,” German Chancellor Angela Merkel said after a summit that ended about 1:30 a.m. in Brussels. “We can only offer the interest-rate cut when we have something in return.”

Kenny, arriving for his first summit as Ireland’s leader, refused to buckle under pressure from Merkel and French President Nicolas Sarkozy as he pushed for relief on the 5.8 percent interest rate the country pays on the 85 billion-euro ($115 billion) rescue package it received in November.

Ireland’s main corporate tax rate is 12.5 percent, compared with an EU average of about 23 percent and even higher rates in Germany and France, which it has used to lure companies such as Hewlett-Packard Co. to set up in the country.

“We’re not asking Ireland to put up their corporate taxes to the European average, but to make some effort,” Sarkozy said.

As for Greece, which now pays about 5 percent on loans in its 110 billion-euro rescue program, euro-area leaders agreed to cuts the rate by 1 percentage point and extend the maturity to 7 ½ from three years.

Greece has made major efforts, just look at the size of their privatization program,” Sarkozy said. “But you can’t ask others to contribute for you, when you won’t make an effort on your tax receipts.”

Remember the collateralization spread from the credit crunch, that meant that bonds that could be pledged to the central bank traded at a premium to bonds that couldn’t? This spread now has an Australian cousin:

Sales of bonds by top-rated overseas borrowers in Australia have evaporated following a record start to 2011 after the nation’s banking regulator ruled they don’t qualify under new international capital rules.

The World Bank, Germany’s Kreditanstalt fuer Wiederaufbau and other supranational and agency issuers have avoided the kangaroo bond market since the Australian Prudential Regulation Authority said Feb. 28 their notes can’t be considered liquid assets under Basel Committee on Banking Supervision rules. The AAA rated securities represented 27 percent of new bond sales in Australia in 2010, according to data compiled by Bloomberg.

APRA’s decision spurred the nation’s banks to purchase federal and state government securities that do qualify, pushing Australian sovereign yields to the lowest in two months. The 10- year government bond has fallen 5 basis points since the guidelines were announced, while the extra yield investors demand to own New South Wales state debt instead of government notes is at a record low.

Americans are shocked by high dairy prices:

Cheddar cheese in supermarkets averaged $5.143 a pound in January, the highest since at least 1984, while a half gallon of ice cream sold for $4.74, the most since 1980, according to data collected from about 26,000 retailers by the Bureau of Labor Statistics. Retail whole milk averaged $3.301 a gallon, 2 percent more than a year earlier.

We should be so lucky.

There was a downdraft in the Canadian preferred share market today, with PerpetualDiscounts down 9bp, FixedResets losing 7bp and DeemedRetractibles dropping 13bp. Volume returned to average levels.

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 -0.8447 % 2,383.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.8447 % 3,585.3
Floater 2.52 % 2.32 % 42,465 21.46 4 -0.8447 % 2,574.0
OpRet 4.90 % 3.70 % 54,058 1.17 9 0.0303 % 2,391.8
SplitShare 5.08 % 2.83 % 185,355 1.02 5 0.0639 % 2,488.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0303 % 2,187.1
Perpetual-Premium 5.75 % 5.56 % 134,204 6.23 10 -0.1112 % 2,031.1
Perpetual-Discount 5.54 % 5.62 % 123,375 14.40 14 -0.0945 % 2,110.1
FixedReset 5.19 % 3.64 % 223,459 2.97 56 -0.0695 % 2,275.6
Deemed-Retractible 5.26 % 5.34 % 353,672 8.29 53 -0.1348 % 2,070.3
Performance Highlights
Issue Index Change Notes
PWF.PR.A Floater -3.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-14
Maturity Price : 22.22
Evaluated at bid price : 22.50
Bid-YTW : 2.32 %
MFC.PR.B Deemed-Retractible -1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.95
Bid-YTW : 6.24 %
GWO.PR.G Deemed-Retractible -1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.22
Bid-YTW : 5.59 %
W.PR.J Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-14
Maturity Price : 23.92
Evaluated at bid price : 24.16
Bid-YTW : 5.89 %
BAM.PR.M Perpetual-Discount -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-14
Maturity Price : 20.86
Evaluated at bid price : 20.86
Bid-YTW : 5.71 %
IAG.PR.F Deemed-Retractible -1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 5.68 %
GWO.PR.L Deemed-Retractible 1.21 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 5.58 %
POW.PR.D Perpetual-Discount 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-14
Maturity Price : 22.90
Evaluated at bid price : 23.12
Bid-YTW : 5.49 %
BMO.PR.L Deemed-Retractible 1.47 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-24
Maturity Price : 25.00
Evaluated at bid price : 26.30
Bid-YTW : 4.92 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.F FixedReset 123,845 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.88
Bid-YTW : 4.17 %
BMO.PR.Q FixedReset 107,090 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.76
Bid-YTW : 3.94 %
TRP.PR.C FixedReset 81,001 RBC bought 22,600 from GMP at 25.32, then crossed 25,000 at 25.35. CIBC bought blocks of 10,600 and 10,900 from Desjardins at 25.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-14
Maturity Price : 25.28
Evaluated at bid price : 25.33
Bid-YTW : 4.16 %
NA.PR.P FixedReset 74,300 Issuer bid.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-17
Maturity Price : 25.00
Evaluated at bid price : 28.20
Bid-YTW : 2.41 %
TD.PR.S FixedReset 58,016 RBC crossed 50,000 at 26.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-30
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 3.65 %
HSB.PR.E FixedReset 52,081 RBC crossed 50,000 at 27.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.30
Bid-YTW : 3.66 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.P FixedReset Quote: 25.40 – 25.90
Spot Rate : 0.5000
Average : 0.3456

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-03-01
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 4.16 %

GWO.PR.M Deemed-Retractible Quote: 25.21 – 25.69
Spot Rate : 0.4800
Average : 0.3397

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.21
Bid-YTW : 5.67 %

W.PR.J Perpetual-Discount Quote: 24.16 – 24.49
Spot Rate : 0.3300
Average : 0.2020

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-14
Maturity Price : 23.92
Evaluated at bid price : 24.16
Bid-YTW : 5.89 %

BMO.PR.O FixedReset Quote: 27.56 – 27.89
Spot Rate : 0.3300
Average : 0.2067

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-24
Maturity Price : 25.00
Evaluated at bid price : 27.56
Bid-YTW : 3.36 %

CIU.PR.A Perpetual-Discount Quote: 22.74 – 23.00
Spot Rate : 0.2600
Average : 0.1647

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-03-14
Maturity Price : 22.58
Evaluated at bid price : 22.74
Bid-YTW : 5.09 %

BAM.PR.R FixedReset Quote: 25.82 – 26.19
Spot Rate : 0.3700
Average : 0.2827

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-07-30
Maturity Price : 25.00
Evaluated at bid price : 25.82
Bid-YTW : 4.66 %

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