January 9, 2012

Another negative bill rate for the textbooks:

Germany sold six-month treasury bills at a negative yield for the first time amid demand for the debt securities of Europe’s biggest economy as a haven from the sovereign debt crisis roiling the region.

The government auctioned 3.9 billion euros ($4.98 billion) of securities maturing in July at an average yield of minus 0.0122 percent, the Federal Finance Agency said in an e-mailed statement today. It was the first time it sold the securities at a negative yield, Joerg Mueller, a spokesman in Frankfurt, said in a telephone interview. The Netherlands sold 107-day bills at minus 0.007 percent on Dec. 12.

Merkozy wants to eliminate trading in the EU:

French President Nicolas Sarkozy won the backing of German Chancellor Angela Merkel for a tax on financial transactions, a levy that Britain maintains won’t work unless it’s applied worldwide.

The French government, long a proponent of the tax, stepped up its campaign last week, going so far as to suggest that France would impose the levy even if others didn’t. At a joint press conference in Berlin with Sarkozy today, Merkel threw her weight behind the tax.

“Personally, I’m in favor of thinking about such a tax in the euro zone,” Merkel said. “Germany and France both equally view the financial transaction tax as a correct response.”

The European Commission in September suggested a tax of 0.1 percent on equity and bond transactions, and 0.01 percent on derivatives, which it said could raise 55 billion euros ($71 billion) a year. European Union finance ministers are due to discuss the levy in March.

All the trading will move to London … or Geneva … or Dubai … or Singapore. If they try to apply it to settlement, they’ll lose all their settlement business as well.

It was another strong day for the Canadian preferred share market, with PerpetualDiscounts winning 37bp, FixedResets flat and DeemedRetractibles gaining 30bp. The Bozo Spread (Current Yield PerpetualDiscounts less Current Yield FixedResets) is now at a mere 2bp! There was a good amount of volatility, with insurers again being notable among the winners. Volume remained very light. Enbridge issues were very active, presumably due to portfolio shuffling inspired by the new issue.

It’s not clear to me what has caused this burst of good performance, but it would not surprise me to learn that a decision has been made to apply the NVCC rules to insurers and insurance holding companies, and that word of this decision has been leaked. Pure speculation of course – and I strongly advise against anybody taking a position based on the thought – but … interesting.

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 0.8880 % 2,210.0
FixedFloater 4.78 % 4.52 % 34,819 17.15 1 -0.1508 % 3,223.2
Floater 3.01 % 3.20 % 67,478 19.26 3 0.8880 % 2,386.2
OpRet 4.97 % 1.72 % 65,312 1.35 7 0.1764 % 2,487.8
SplitShare 5.39 % 0.99 % 70,381 0.91 4 0.1886 % 2,593.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1764 % 2,274.8
Perpetual-Premium 5.43 % 0.74 % 85,060 0.09 23 -0.0271 % 2,203.5
Perpetual-Discount 5.10 % 5.02 % 146,206 15.42 7 0.3666 % 2,373.1
FixedReset 5.08 % 2.77 % 191,381 2.39 64 0.0042 % 2,365.1
Deemed-Retractible 4.94 % 3.70 % 185,463 2.89 46 0.3018 % 2,278.3
Performance Highlights
Issue Index Change Notes
ENB.PR.B FixedReset -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 23.25
Evaluated at bid price : 25.35
Bid-YTW : 3.60 %
TRP.PR.B FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 23.41
Evaluated at bid price : 25.31
Bid-YTW : 2.55 %
TRP.PR.C FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 23.41
Evaluated at bid price : 25.53
Bid-YTW : 2.83 %
RY.PR.H Deemed-Retractible 1.10 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 27.45
Bid-YTW : 1.80 %
FTS.PR.C OpRet 1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-08
Maturity Price : 25.50
Evaluated at bid price : 26.19
Bid-YTW : -19.29 %
ELF.PR.F Perpetual-Discount 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 22.94
Evaluated at bid price : 23.33
Bid-YTW : 5.69 %
SLF.PR.B Deemed-Retractible 1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.46
Bid-YTW : 5.66 %
BAM.PR.K Floater 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 16.26
Evaluated at bid price : 16.26
Bid-YTW : 3.24 %
SLF.PR.H FixedReset 1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 4.75 %
MFC.PR.B Deemed-Retractible 1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 5.89 %
BAM.PR.R FixedReset 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 23.64
Evaluated at bid price : 26.60
Bid-YTW : 3.51 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.D FixedReset 387,560 Anonymous crossed 20,000 at 25.30. TD sold 16,900 to RBC at 25.25, and another 20,000 to Nesbitt at the same price. RBC crossed 37,200 at 25.25 and TD crossed 25,000 at the same price again.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 23.19
Evaluated at bid price : 25.26
Bid-YTW : 3.57 %
GWO.PR.N FixedReset 130,400 RBC crossed blocks of 64,100 shares, 40,000 and 20,000, al at 23.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.48
Bid-YTW : 3.76 %
ENB.PR.B FixedReset 91,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 23.25
Evaluated at bid price : 25.35
Bid-YTW : 3.60 %
TD.PR.O Deemed-Retractible 83,186 National sold 60,600 to anonymous at 25.88.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-08
Maturity Price : 25.75
Evaluated at bid price : 25.97
Bid-YTW : -9.05 %
SLF.PR.G FixedReset 81,250 Nesbitt crossed blocks of 30,000 and 19,300, both at 22.60.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.60
Bid-YTW : 4.52 %
NA.PR.M Deemed-Retractible 80,000 TD crossed blocks of 50,000 and 11,900, both at 27.28.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-15
Maturity Price : 26.00
Evaluated at bid price : 27.30
Bid-YTW : 2.63 %
There were 23 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: 19.50 – 20.34
Spot Rate : 0.8400
Average : 0.6308

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 2.71 %

ELF.PR.G Perpetual-Discount Quote: 21.41 – 21.98
Spot Rate : 0.5700
Average : 0.4303

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-09
Maturity Price : 21.41
Evaluated at bid price : 21.41
Bid-YTW : 5.58 %

MFC.PR.G FixedReset Quote: 24.15 – 24.47
Spot Rate : 0.3200
Average : 0.1950

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 4.79 %

ENB.PR.A Perpetual-Premium Quote: 26.29 – 26.63
Spot Rate : 0.3400
Average : 0.2541

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-08
Maturity Price : 25.00
Evaluated at bid price : 26.29
Bid-YTW : -43.20 %

PWF.PR.F Perpetual-Premium Quote: 25.01 – 25.25
Spot Rate : 0.2400
Average : 0.1620

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-08
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 0.74 %

TD.PR.R Deemed-Retractible Quote: 27.08 – 27.30
Spot Rate : 0.2200
Average : 0.1467

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-30
Maturity Price : 26.00
Evaluated at bid price : 27.08
Bid-YTW : 1.89 %

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