Germany is preparing for the inevitable:
Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.
The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government’s bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said.
Meanwhile, the ECB is losing credibility daily:
Juergen Stark resigned from the European Central Bank’s Executive Board after protesting the bank’s bond purchases on a conference call earlier this week, said a euro-area central bank official familiar with the meeting.
During the Sept. 4 call, Stark, 63, expressed his strong opposition to the program, which was expanded last month when the ECB started buying Italian and Spanish bonds, said the official, who spoke on condition of anonymity because the discussions are confidential. Stark was supported by the central banks of Austria and the Netherlands, the person said. The resignation of Stark, the ECB’s chief economist, is a blow to the bank, the official said, noting he is the second German ECB member after Axel Weber to leave over the bond program.
Stark’s resignation, less than two months before President Jean-Claude Trichet’s term ends, suggests policy makers are increasingly split over the best way to fight Europe’s debt crisis.
All in all, it was an interesting day:
Treasuries rallied, pushing 10-year note yields to a record low, as a surge in European bank and sovereign-credit risk to all-time highs on speculation Greece may default bolstered the refuge appeal of U.S. government debt.
…
Yields on 10-year notes dropped six basis points, or 0.06 percentage point, to 1.92 percent at 4:02 p.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent securities maturing in August 2021 gained 17/32, or $5.31 per $1,000 face amount, to 101 27/32.The Standard & Poor’s 500 Index tumbled 2.7 percent. The Stoxx Europe 600 Index fell 2.6 percent. Gold futures for December delivery gained 0.6 percent to $1,869.20 an ounce. Prices rose to a record $1,923.70 on Sept. 6.
The 10-year yields had a weekly drop of seven basis points after falling to 1.8942 percent, the lowest level on record in Federal Reserve data going back to 1953. The yields earlier advanced four basis points to 2.02 percent.
The WSJ opined on YLO.PR.A a few days ago:
From March to December 2012, Yellow Media has an option to convert the preferred stock to common stock. Importantly, Yellow Media gets to exchange the securities at a rate of C$2 per common share so long as the stock trades below that level. With the common stock now trading at about 84 Canadian cents, the company stands to issue common stock valued at just C$111 million, rather than paying C$264 million in cash.
The company said in early August that it still plans to purchase the preferred shares with cash. Unlike private equity, which typically enjoys outright control, Yellow Media’s shareholders can’t force the company to make preferred investors take the hit. But Yellow Media shouldn’t be scared to act itself.
YLO.PR.A was down $4.47 on the week (from 17.07 to 12.60), a drop of over 25%, presumably related to this opinion. The other issues were down as well, but less dramatically.
YLO has been deleted from the S&P/TSX 60 and is now merely a member of the Completion index.
YLO had no TMX-reported insider trading nor any SEDI-reported filings again today. I’m going to keep checking, but this will be the last negative report for a while, anyway.
DBRS confirmed CCS at Pfd-3(high).
It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 22bp, FixedResets up 5bp and DeemedRetractibles gaining 1bp. Volatility was good. Volume was below average.
| 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 | 0.1145 % | 2,154.5 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1145 % | 3,240.3 |
| Floater | 3.00 % | 3.36 % | 57,800 | 18.78 | 3 | 0.1145 % | 2,326.3 |
| OpRet | 4.81 % | 2.85 % | 65,434 | 1.66 | 8 | -0.1011 % | 2,452.6 |
| SplitShare | 5.37 % | 0.55 % | 53,958 | 0.47 | 4 | -0.1112 % | 2,498.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1011 % | 2,242.7 |
| Perpetual-Premium | 5.62 % | 3.87 % | 125,947 | 0.25 | 16 | -0.0577 % | 2,116.4 |
| Perpetual-Discount | 5.28 % | 5.34 % | 111,204 | 14.87 | 14 | 0.2185 % | 2,250.3 |
| FixedReset | 5.14 % | 3.05 % | 202,946 | 2.71 | 59 | 0.0514 % | 2,332.9 |
| Deemed-Retractible | 5.03 % | 4.59 % | 242,761 | 4.14 | 46 | 0.0061 % | 2,202.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.B | Floater | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-09 Maturity Price : 15.81 Evaluated at bid price : 15.81 Bid-YTW : 3.36 % |
| BAM.PR.O | OpRet | 1.13 % | YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.04 Bid-YTW : 3.19 % |
| MFC.PR.F | FixedReset | 1.18 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 3.48 % |
| ELF.PR.G | Perpetual-Discount | 1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-09 Maturity Price : 21.65 Evaluated at bid price : 21.65 Bid-YTW : 5.58 % |
| PWF.PR.A | Floater | 1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-09 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 2.52 % |
| FTS.PR.F | Perpetual-Discount | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-09 Maturity Price : 24.62 Evaluated at bid price : 24.91 Bid-YTW : 4.94 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| PWF.PR.M | FixedReset | 151,904 | Nesbitt crossed 100,000 at 27.10; TD crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 27.00 Bid-YTW : 2.81 % |
| RY.PR.G | Deemed-Retractible | 68,568 | RBC crossed 50,000 at 24.93. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.84 Bid-YTW : 4.63 % |
| BMO.PR.J | Deemed-Retractible | 59,990 | Anonymous bought 10,000 from RBC at 25.16. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 4.44 % |
| SLF.PR.H | FixedReset | 58,700 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.82 Bid-YTW : 3.85 % |
| BMO.PR.P | FixedReset | 54,354 | Nesbitt crossed 50,000 at 26.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.95 Bid-YTW : 3.09 % |
| MFC.PR.F | FixedReset | 52,435 | Anonymous bought 10,000 from Nesbitt at 24.95. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 3.48 % |
| There were 26 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BNA.PR.E | SplitShare | Quote: 23.06 – 23.61 Spot Rate : 0.5500 Average : 0.4231 YTW SCENARIO |
| BAM.PR.T | FixedReset | Quote: 24.90 – 25.20 Spot Rate : 0.3000 Average : 0.1848 YTW SCENARIO |
| NA.PR.P | FixedReset | Quote: 27.15 – 27.58 Spot Rate : 0.4300 Average : 0.3171 YTW SCENARIO |
| PWF.PR.I | Perpetual-Premium | Quote: 25.50 – 25.79 Spot Rate : 0.2900 Average : 0.1890 YTW SCENARIO |
| PWF.PR.L | Perpetual-Discount | Quote: 24.25 – 24.54 Spot Rate : 0.2900 Average : 0.1960 YTW SCENARIO |
| POW.PR.D | Perpetual-Discount | Quote: 24.15 – 24.55 Spot Rate : 0.4000 Average : 0.3197 YTW SCENARIO |