February 15, 2012

A Bloomberg editorial states:

Should European leaders fail in this endeavor, the danger is that they will be blamed if the austerity medicine fails, regardless of whether many of Greece’s troubles are self- inflicted. Already, hyperbolic analogies between Nazi and current Germany are creeping into public discussion. The politics of anger can quickly overtake rational economic debate. How that would unfold is impossible to predict, but it is unwise to assume that Greeks would never decide to roll the dice on a euro exit, putting to the test assurances that contagion won’t follow.

I’m a lot more concerned about analogies between Weimar Germany and current Greece.

One difficulty is that the gun held to Europe’s head might not be loaded:

Greece said that Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the 17-nation euro area as talks over a second aid program ran into new obstacles.

Finance Minister Evangelos Venizelos leveled the accusation after a decision slated for tonight on aid totaling 130 billion euros ($171 billion) was postponed until at least Feb. 20 and possibly until after a full-time Greek government emerges from elections later in the year.

“We are continually faced with new terms,” Venizelos told reporters in Athens today. “In the euro area, there are plenty who don’t want us anymore. There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great.”

For example, here’s some tough talk:

The chief executive of one of Germany’s most respected manufacturers and an advisor to Chancellor Angela Merkel has called for Greece to be kicked out of the European Union because it is an “unbearable” burden.

“This state with its phantom pensioners and rich people that don’t pay taxes, a state without a functioning administration, has no place in the European Union,” Bosch CEO Franz Fehrenbach told Manager Magazin, according to a transcript of an interview to be published on Friday.

He is the latest in a number of senior German business figures to lash out at Greece over its role in the EU and a second eurozone bailout. A survey of over 300 managers in the magazine shows roughly 57% want Greece to drop out of the euro and reintroduce the drachma.

And things are getting a little testy:

Greek President Karolos Papoulias slammed Germany’s finance minister for recent comments about his country as stalled bailout talks stoked tensions between Greece and the northern European countries funding its rescue.

“I don’t accept insults to my country by Mr. Schaeuble,” Papoulias, who fought in the resistance against the Nazis during World War II, said in a speech today. “I don’t accept it as a Greek. Who is Mr. Schaeuble to ridicule Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not just our own freedom, not just our own country, but the freedom of all of Europe.”

As far as I can tell, though, he will accept a welfare cheque.

But don’t worry! Europe is saved!

China is ready to be more involved in resolving the crisis through the European Financial Stability Facility and European Stability Mechanism, said People’s Bank of China Governor Zhou Xiaochuan in a speech, echoing comments made yesterday by Premier Wen Jiabao.

Oh, and by the way … that human rights stuff is getting pretty old, you know? And the Dalai Lama should be arrested.

Canada – the land where investors are so smart, they never lose money:

Investors who were caught up in the asset-backed commercial paper freeze in 2007 may be in line for a big cheque, as regulators are hoping to distribute as much as $60-million they collected from banks who sold the money market paper.

The Investment Industry Regulatory Organization of Canada and the Ontario Securities Commission will apply to the judge who oversaw the restructuring of the ABCP for permission to distribute the money, which would go to individual and institutional investors who were affected. An announcement is expected as early as Thursday morning, said two people familiar with the plan.

Whoosh! Another nasty day for the Canadian preferred share market, with PerpetualPremiums down 25bp, FixedResets off 11bp and DeemedRetractibles losing 34bp. Lots of volatility, heavily skewed towards losers. Volume was high.

PerpetualDiscounts now yield 4.98%, equivalent to 6.47% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.5%, so the pre-tax interest-equivalent spread (which in this context is the Seniority Spread) is now about 195bp, a sharp increase from the 165 bp reported February 8.

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 -0.4663 % 2,442.8
FixedFloater 4.55 % 3.92 % 38,089 17.47 1 0.3362 % 3,428.9
Floater 2.73 % 3.00 % 62,070 19.70 3 -0.4663 % 2,637.6
OpRet 4.88 % 2.44 % 59,269 1.32 6 -0.3563 % 2,502.0
SplitShare 5.28 % -0.99 % 82,214 0.82 4 -0.2534 % 2,649.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3563 % 2,287.8
Perpetual-Premium 5.41 % 3.81 % 117,119 0.89 26 -0.2518 % 2,191.9
Perpetual-Discount 5.10 % 4.98 % 201,534 15.44 4 -0.6120 % 2,423.4
FixedReset 5.05 % 2.79 % 212,274 2.30 65 -0.1079 % 2,380.4
Deemed-Retractible 4.95 % 3.83 % 202,012 2.83 45 -0.3428 % 2,289.7
Performance Highlights
Issue Index Change Notes
POW.PR.D Perpetual-Premium -2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 23.75
Evaluated at bid price : 24.25
Bid-YTW : 5.19 %
FTS.PR.C OpRet -2.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-16
Maturity Price : 25.50
Evaluated at bid price : 25.66
Bid-YTW : -4.89 %
BAM.PR.M Perpetual-Discount -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 23.85
Evaluated at bid price : 24.14
Bid-YTW : 4.97 %
SLF.PR.C Deemed-Retractible -1.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.44
Bid-YTW : 5.93 %
BAM.PR.N Perpetual-Discount -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 23.58
Evaluated at bid price : 24.06
Bid-YTW : 4.98 %
IAG.PR.F Deemed-Retractible -1.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 5.41 %
GWO.PR.I Deemed-Retractible -1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.55
Bid-YTW : 5.36 %
POW.PR.B Perpetual-Premium -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 24.47
Evaluated at bid price : 24.71
Bid-YTW : 5.47 %
TD.PR.R Deemed-Retractible -1.13 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-30
Maturity Price : 26.00
Evaluated at bid price : 27.02
Bid-YTW : 2.25 %
FTS.PR.G FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 23.89
Evaluated at bid price : 25.50
Bid-YTW : 3.48 %
MFC.PR.E FixedReset 1.27 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-19
Maturity Price : 25.00
Evaluated at bid price : 26.24
Bid-YTW : 3.96 %
Volume Highlights
Issue Index Shares
Traded
Notes
FTS.PR.F Perpetual-Premium 111,000 Desjardins crossed 100,000 at 25.05.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 24.54
Evaluated at bid price : 25.03
Bid-YTW : 4.88 %
PWF.PR.I Perpetual-Premium 104,920 Nesbitt crossed 93,700 at 25.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.43
Bid-YTW : -1.23 %
BNS.PR.Z FixedReset 86,630 Desjardins bought blocks of 16,900 and 40,000 from anonymous, both at 25.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 3.16 %
TD.PR.G FixedReset 85,045 TD crossed 49,600 at 27.05; Scotia crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.06
Bid-YTW : 2.51 %
TD.PR.K FixedReset 76,406 National bought 13,300 from TD at 27.31; RBC crossed 50,000 at 27.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.26
Bid-YTW : 2.56 %
ENB.PR.D FixedReset 66,675 Nesbitt crossed 55,000 at 25.34.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 23.19
Evaluated at bid price : 25.26
Bid-YTW : 3.67 %
There were 42 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: 22.51 – 24.70
Spot Rate : 2.1900
Average : 1.7609

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 22.24
Evaluated at bid price : 22.51
Bid-YTW : 2.30 %

FTS.PR.C OpRet Quote: 25.66 – 26.20
Spot Rate : 0.5400
Average : 0.3080

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-16
Maturity Price : 25.50
Evaluated at bid price : 25.66
Bid-YTW : -4.89 %

IAG.PR.F Deemed-Retractible Quote: 26.20 – 26.62
Spot Rate : 0.4200
Average : 0.2846

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 5.41 %

SLF.PR.G FixedReset Quote: 24.26 – 24.65
Spot Rate : 0.3900
Average : 0.2731

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.26
Bid-YTW : 3.82 %

POW.PR.B Perpetual-Premium Quote: 24.71 – 25.01
Spot Rate : 0.3000
Average : 0.1899

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-02-15
Maturity Price : 24.47
Evaluated at bid price : 24.71
Bid-YTW : 5.47 %

RY.PR.G Deemed-Retractible Quote: 25.66 – 25.90
Spot Rate : 0.2400
Average : 0.1523

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.25
Evaluated at bid price : 25.66
Bid-YTW : 3.91 %

One Response to “February 15, 2012”

  1. [...] PerpetualDiscounts now yield 5.02%, equivalent to 6.53% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.6% (maybe just a hair lower) so the pre-tax interest-equivalent spread (which is in this context the Seniority Spread) is now about 195bp, unchanged from the figure reported February 15. [...]

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