August 2, 2011

Christophe Chamley, a professor of economics at Boston University, writes an interesting piece on Bloomberg about the Spanish default of 1575:

At that time of costly communications, periodic commercial fairs were essential events for the economic activity throughout Europe. Credit was rolled over from fair to fair by bankers, and lending agreements were renegotiated. With the Spanish commercial credit market frozen, the fairs couldn’t be held. Indeed, the main fair that was held twice a year at Medina del Campo was canceled. In short, the default caused a banking collapse, which led to a severe recession.

After two years, in November 1577, the cities caved, agreeing to a very large tax increase. The king resumed debt payments to the bankers. As the king explained in the settlement agreement, called Medio General, the bankers were joined in their demands “by the petition of the delegates of the cities with particular urgency about the same business.” In other words, the cities were begging the king to restore the business of trade. The fairs at Medina del Campo resumed late in the next year, but they had lost their preeminence forever.

It was a quiet day on the Canadian preferred share market, with PerpetualDiscounts up 1bp, FixedResets winning 3bp and DeemedRetractibles flat. Volatility was minimal. Volume was pathetic.

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 -0.3697 % 2,411.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.3697 % 3,627.4
Floater 2.51 % 2.34 % 34,103 21.41 4 -0.3697 % 2,604.2
OpRet 4.85 % 2.29 % 55,107 0.16 9 -0.0726 % 2,452.7
SplitShare 5.26 % 4.16 % 72,058 0.56 4 0.0287 % 2,513.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0726 % 2,242.8
Perpetual-Premium 5.67 % 4.87 % 132,069 0.80 14 0.1653 % 2,099.6
Perpetual-Discount 5.38 % 5.42 % 110,486 14.76 16 0.0079 % 2,214.8
FixedReset 5.15 % 3.13 % 215,758 2.62 58 0.0307 % 2,326.2
Deemed-Retractible 5.06 % 4.71 % 274,049 7.86 46 0.0035 % 2,179.2
Performance Highlights
Issue Index Change Notes
GWO.PR.J FixedReset -1.52 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 3.47 %
RY.PR.F Deemed-Retractible 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 4.69 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.D FixedReset 57,847 RBC crossed 50,000 at 27.39.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 27.36
Bid-YTW : 3.45 %
BNS.PR.Q FixedReset 52,106 Nesbitt crossed 24,000 at 26.06.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-25
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.09 %
BNS.PR.L Deemed-Retractible 44,727 RBC crossed 25,000 at 24.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.98
Bid-YTW : 4.54 %
BNS.PR.P FixedReset 42,475 RBC bought 24,800 from anonymous and 12,300 from Nesbitt, all at 25.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 2.89 %
GWO.PR.N FixedReset 38,467 RBC crossed 37,800 at 24.80.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.78
Bid-YTW : 3.49 %
BNS.PR.T FixedReset 38,278 Desjardins crossed 10,000 at 27.25; RBC crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 27.20
Bid-YTW : 2.92 %
There were 15 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.A Floater Quote: 22.11 – 23.60
Spot Rate : 1.4900
Average : 1.1218

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-08-02
Maturity Price : 21.87
Evaluated at bid price : 22.11
Bid-YTW : 2.34 %

FTS.PR.F Perpetual-Discount Quote: 24.26 – 24.96
Spot Rate : 0.7000
Average : 0.4801

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-08-02
Maturity Price : 23.98
Evaluated at bid price : 24.26
Bid-YTW : 5.12 %

GWO.PR.J FixedReset Quote: 26.60 – 27.21
Spot Rate : 0.6100
Average : 0.3922

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 3.47 %

FTS.PR.H FixedReset Quote: 25.35 – 26.00
Spot Rate : 0.6500
Average : 0.5233

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-08-02
Maturity Price : 23.38
Evaluated at bid price : 25.35
Bid-YTW : 3.24 %

RY.PR.P FixedReset Quote: 26.98 – 27.33
Spot Rate : 0.3500
Average : 0.2254

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.98
Bid-YTW : 2.89 %

CIU.PR.C FixedReset Quote: 25.00 – 25.90
Spot Rate : 0.9000
Average : 0.7784

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-08-02
Maturity Price : 23.17
Evaluated at bid price : 25.00
Bid-YTW : 3.17 %

2 Responses to “August 2, 2011”

  1. highgamma says:

    The end of the “Siglo de Oro” – Century of Gold, where Spain lived off its gold from the New World and England lived off of trade and naval might. Spain’s naval defeat in 1588 was the grand finale. I hope we are not living off of gold (debt) from the new world.

  2. jiHymas says:

    The latest indication that that is exactly what we are doing comes from Montreal:

    The precarious state of Montreal’s road network is giving rise to a form of disaster tourism: On Monday, visitors snapped photos and gawked in disbelief at the city’s latest scene of urban ruin, the Ville Marie expressway.

    A massive slab of concrete lay in broken chunks across four lanes of highway in downtown Montreal, the latest example of the city’s growing difficulty keeping its bridges, roads and various support structures intact and standing.

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