Today’s top news is that Interactive Brokers thinks about what they’re doing:
Interactive Brokers Group Inc., the electronic market maker and securities firm, raised margin requirements to 100 percent for some Chinese stocks, because of “elevated risk concerns,” according to a statement on its website. Sina and Sohu were among more than 100 Chinese companies on the list. The increase went into effect June 6 in stages and will be completed by the end of this week, the brokerage said.
Given the fate of other brokerages that think about what they do (by which I mean Goldman Sachs and … and … probably lots and lots of others) we can expect the invective against IB to start pouring out any day now.
The Fed may have overestimated the market’s appetite for risk:
Federal Reserve auctions of mortgage securities that the central bank assumed in the rescue of American International Group Inc. are fueling a selloff in credit markets as Wall Street rushes to hedge against losses on stockpiled debt.
Declines in credit-default swaps indexes used to protect against losses on subprime housing debt and commercial mortgages accelerated this month, reaching almost 20 percent in the past five weeks as the cost of the insurance climbs, according to Markit Group Ltd. The plunge this week started infecting everything from junk bonds to the debt of financial companies.
The Fed has been selling the $31 billion Maiden Lane II portfolio piecemeal after rejecting a $15.7 billion bid from AIG for the entire pool in March.
…
Wall Street banks, which through May 25 increased their holdings of corporate and asset-backed debt to the highest level in 13 months, have been using both so-called Markit ABX and CMBX indexes to hedge against the deteriorating values of mortgage debt, said Christopher Sullivan, chief investment officer at United Nations Federal Credit Union in New York. That’s contributing to the drop in prices of the underlying bonds and helped push up relative yields on speculative-grade, or junk, corporate bonds to the widest level this year.
I have complained for a long time that we, as a continent, are not spending enough on infrastructure. Here’s another datapoint:
With its intricately interdependent and increasingly complex electronic components, the U.S. electric grid operates on an ever-shrinking margin for error. The larger and more interconnected the grid becomes, the more vulnerable it is to catastrophic cascading failures. A recent article in Scientific American (see note 1) estimates that there is a one in 20 chance of a solar super-storm in the next 15 years.
…
The House Energy and Commerce Committee unveiled the Grid Reliability and Infrastructure Defense Act on May 20, 2011. Among the draft bill’s provisions are requirements that the Federal Energy Regulatory Commission issue orders spelling out procedures and requirements for dealing with immediate and longer-term threats to the grid.Overview
- The U.S. electricity transmission grid is vulnerable to solar activity.
- Scientists estimate that there is a one in 20 chance over the next 15 years of a disabling solar storm.
- Grid operators are looking at ways to protect it from such events.
More harrassment today from volunteer organizations using automated dialers because their time is ever so much more valuable than mine. Hint to organizers: if you want something from me, don’t insult me before I’ve even picked up the ‘phone.
YLO was boring today, so there is no Yellow Fever Report.
It was another mixed day in the Canadian preferred share market, with PerpetualDiscounts gaining 9bp, FixedResets losing 8bp and DeemedRetractibles up 4bp. There were no entries in the Performance Highlights table. Volume continued to be very sluggish.
| 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 | -0.0695 % | 2,476.4 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0695 % | 3,724.4 |
| Floater | 2.43 % | 2.22 % | 42,400 | 21.68 | 4 | -0.0695 % | 2,673.8 |
| OpRet | 4.86 % | 2.50 % | 67,999 | 0.38 | 9 | 0.1200 % | 2,427.7 |
| SplitShare | 5.23 % | -0.63 % | 61,795 | 0.51 | 6 | 0.1650 % | 2,505.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1200 % | 2,219.9 |
| Perpetual-Premium | 5.65 % | 4.90 % | 152,214 | 1.40 | 12 | 0.0575 % | 2,078.9 |
| Perpetual-Discount | 5.43 % | 5.50 % | 119,904 | 14.53 | 18 | 0.0862 % | 2,185.7 |
| FixedReset | 5.14 % | 3.22 % | 183,990 | 2.82 | 57 | -0.0759 % | 2,315.5 |
| Deemed-Retractible | 5.07 % | 4.85 % | 282,263 | 8.12 | 47 | 0.0438 % | 2,155.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| No individual gains or losses exceeding 1%! | |||
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.H | Deemed-Retractible | 218,632 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-09 Maturity Price : 25.75 Evaluated at bid price : 25.95 Bid-YTW : 1.41 % |
| CM.PR.J | Deemed-Retractible | 211,872 | Desjardins crossed 50,000 at 25.00; Nesbitt crossed 100,000 at the same price; RBC crossed 50,000 at the same price again. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 4.59 % |
| BAM.PR.H | OpRet | 104,732 | RBC crossed two blocks of 50,000 each, both at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.59 Bid-YTW : 2.50 % |
| CM.PR.I | Deemed-Retractible | 75,280 | RBC crosse 48,400 at 25.18. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 4.69 % |
| BNS.PR.O | Deemed-Retractible | 69,000 | RBC crossed 65,000 at 26.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-05-26 Maturity Price : 25.00 Evaluated at bid price : 26.26 Bid-YTW : 4.78 % |
| BNS.PR.M | Deemed-Retractible | 67,280 | Desjardins crossed 30,000 at 24.88. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.91 Bid-YTW : 4.63 % |
| There were 26 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.F | Perpetual-Discount | Quote: 24.37 – 24.72 Spot Rate : 0.3500 Average : 0.2526 YTW SCENARIO |
| GWO.PR.J | FixedReset | Quote: 26.55 – 27.00 Spot Rate : 0.4500 Average : 0.3610 YTW SCENARIO |
| FTS.PR.F | Perpetual-Discount | Quote: 23.75 – 24.01 Spot Rate : 0.2600 Average : 0.1869 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 25.85 – 26.07 Spot Rate : 0.2200 Average : 0.1747 YTW SCENARIO |
| BNS.PR.O | Deemed-Retractible | Quote: 26.26 – 26.40 Spot Rate : 0.1400 Average : 0.1000 YTW SCENARIO |
| GWO.PR.H | Deemed-Retractible | Quote: 23.80 – 23.98 Spot Rate : 0.1800 Average : 0.1403 YTW SCENARIO |