July 20, 2011

European banks will need lots of capital:

Banks in the European Union could face fines of up to 10 percent of turnover if they fail to comply with tougher capital and liquidity rules, the bloc’s financial services chief said on Wednesday.

Michel Barnier, the EU’s internal market commissioner, unveiled draft laws in Brussels to implement the new global Basel III accord, which will force 8,200 banks in the EU to hold more and better quality capital over six years from 2013 in a bid to shield taxpayers in a future financial crisis.

Banks will have to raise 460 billion euros of extra capital to fully comply by the start of 2019, which Barnier said would hit economic growth by 0.1 percent for every 1 percent increase in capital and cut the risk of a big banking crisis by 70 percent.

One of the most amazing things about arithmetic is that ownership of a company will always total 100%:

For the second time in less than a month, a fund manager has crossed the 10 per cent ownership threshold in Sino-Forest Corp. (TRE-T4.900.6214.49%)

The latest buyer is Singapore-based Richard Chandler Corp. On Wednesday the fund manager announced that it purchased another 2.5 million shares, bringing its total ownership to 26.7 million shares, or 10.9 per cent of the company (hence the new disclosure).

This is something new: Google’s in the malware detection game:

Google Inc. has detected a “large number” of Windows-based computers infected with a specific type of malicious software, and the company behind the world’s largest search engine is warning Web users they might be affected.

“This is important,” Matt Cutts, the software engineer who leads the company’s Webspam team, wrote in a post on Tuesday night.

“If you go to Google and do a search (any word will do) right now, check to see whether you get a “Your computer appears to be infected” warning at the top of the search results,” he said in comments last edited at 8:22 p.m. ET.

Google security engineer Damian Menscher explained in a post to the Google blog this particular type of malware causes infected computers to reroute traffic sent to the Google homepage through a small group of intermediary or “proxy” servers.

The widespread infection was recently discovered during a routine maintenance check and confirmed by security engineers at several companies, he said.

A great source of cheap entertainment during the current drought is to wander around looking at all the neatly trimmed brown lawns – nobody wants to water their lawns any more since the city is gouging on the water rates. A neighbor tells me that a friend of hers has put down astroturf – which sounds bizarre to me, but she tells me it’s getting more popular – which stands out now, looking more like a Saharan oasis than a front lawn. So anyway, I found a reasonable-looking source for North American water rates:

The Circle of Blue survey includes data on water rates and water usage from the 20 largest U.S. cities, according to the 2000 Census, and ten regionally representative cities to gain a broad view of urban water pricing. The survey comes as municipal water departments and their customers across the country contend with the ironic and unintended consequence of the economic recession and water conservation. In most major cities water use is declining while rates charged to residential customers are rising.

The effect of the crossing trends is less severe in Chicago, Detroit and Milwaukee, where municipal water is supplied by the lakes and prices range from $24.12 to $28.36.

“The reason why rates are so low in the Great Lakes region is proximity to abundant water,” said Nick Schroeck, executive director of the Great Lakes Environmental Law Center in Detroit. “Moving water takes an extraordinary amount of energy. Energy costs are higher in arid regions where water has to be brought from far away. For us, you look at the larger cities, and they are right on one of the lakes. It’s easy to get water to the population centers.”

The city tells me that I use about 100 gallons per day (which I think is a gross exaggeration. Half a ton per day? I don’t see it.) and recently charged me about $30/month, of which about 40% is for water. So call it $12/month for 100 gallons per day of water; or, if I was four people using water at the same per capita rate, call it roughly $50 month.

Now look at the comparative figures:Chicago, $24. New York, $42; Detroit, $28. Looks like we’re getting gouged all right! Typically, the Water Department’s budget document compares Toronto’s water rates to little rinky dink neighbors that are not right on the lake, and provides no comparable figures for cities that are actually comparable (Chicago, Detroit, Cleveland …).

It was a mixed day on the Canadian preferred shares market, with PerpetualDiscounts losing 13bp, FixedResets gaining 7bp and DeemedRetractibles up 6bp. Volatility was quiet. Volume was very high.

PerpetualDiscounts now yield 5.51%, equivalent to 7.16% at the standard equivalency factor of 1.3x. Long corporates now yield about 5.2% (a little under, maybe?) so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 200bp, a widening from the 190bp reported on July 13, as yields have increased on PerpetualDiscounts and stayed put for corporates.

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 0.9718 % 2,456.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.9718 % 3,693.8
Floater 2.46 % 2.26 % 40,225 21.57 4 0.9718 % 2,651.8
OpRet 4.85 % 2.39 % 62,926 0.20 9 0.1326 % 2,452.2
SplitShare 5.23 % 1.40 % 54,387 0.60 6 0.0266 % 2,515.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1326 % 2,242.3
Perpetual-Premium 5.68 % 4.90 % 138,314 0.76 13 0.1082 % 2,093.0
Perpetual-Discount 5.44 % 5.51 % 107,951 14.67 17 -0.1315 % 2,199.7
FixedReset 5.14 % 3.12 % 206,559 2.65 58 0.0671 % 2,324.2
Deemed-Retractible 5.07 % 4.78 % 257,740 8.09 47 0.0601 % 2,166.3
Performance Highlights
Issue Index Change Notes
FTS.PR.F Perpetual-Discount -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-07-20
Maturity Price : 23.93
Evaluated at bid price : 24.21
Bid-YTW : 5.12 %
PWF.PR.F Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-07-20
Maturity Price : 23.58
Evaluated at bid price : 23.85
Bid-YTW : 5.51 %
FTS.PR.C OpRet 1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-08-19
Maturity Price : 25.50
Evaluated at bid price : 26.12
Bid-YTW : -14.69 %
PWF.PR.A Floater 3.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-07-20
Maturity Price : 22.82
Evaluated at bid price : 23.10
Bid-YTW : 2.26 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.G Deemed-Retractible 144,245 Desjardins bought blocks of 13,800 and 13,200 from RBC at 24.60; RBC crossed 100,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 4.83 %
BAM.PR.R FixedReset 83,350 National crossed 68,100 at 25.87.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-07-20
Maturity Price : 23.41
Evaluated at bid price : 25.81
Bid-YTW : 4.28 %
GWO.PR.H Deemed-Retractible 80,221 Scotia crossed 23,400 at 23.43; National sold 13,500 to RBC at 23.35, then crossed 28,400 at 23.38.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.35
Bid-YTW : 5.76 %
HSB.PR.E FixedReset 66,608 National crossed 60,000 at 27.58.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 27.55
Bid-YTW : 3.11 %
TRP.PR.B FixedReset 61,420 National crossed 25,000 at 25.70, then 21,500 at 25.84.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-07-20
Maturity Price : 23.51
Evaluated at bid price : 25.84
Bid-YTW : 3.10 %
MFC.PR.C Deemed-Retractible 59,309 National sold 10,000 to anonymous at 22.10, then crossed 21,000 at 22.14.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.13
Bid-YTW : 6.07 %
There were 53 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BNS.PR.Z FixedReset Quote: 23.65 – 24.65
Spot Rate : 1.0000
Average : 0.7263

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.65
Bid-YTW : 4.13 %

PWF.PR.F Perpetual-Discount Quote: 23.85 – 24.49
Spot Rate : 0.6400
Average : 0.4361

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-07-20
Maturity Price : 23.58
Evaluated at bid price : 23.85
Bid-YTW : 5.51 %

HSB.PR.D Deemed-Retractible Quote: 24.75 – 25.10
Spot Rate : 0.3500
Average : 0.2557

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 5.19 %

GWO.PR.H Deemed-Retractible Quote: 23.35 – 23.68
Spot Rate : 0.3300
Average : 0.2468

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.35
Bid-YTW : 5.76 %

FTS.PR.C OpRet Quote: 26.12 – 26.50
Spot Rate : 0.3800
Average : 0.3118

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-08-19
Maturity Price : 25.50
Evaluated at bid price : 26.12
Bid-YTW : -14.69 %

BAM.PR.M Perpetual-Discount Quote: 22.13 – 22.37
Spot Rate : 0.2400
Average : 0.1726

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-07-20
Maturity Price : 21.86
Evaluated at bid price : 22.13
Bid-YTW : 5.40 %

One Response to “July 20, 2011”

  1. [...] the pre-tax interest-equivalent spread is now about 185bp, a tightening from the 200bp reported on July 20 as the PerpetualDiscounts played catch-up to the prior downward move in bond [...]

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