July 15, 2008

The concept of credit protection on the United States of America has captured imaginations all around, with Accrued Interest referring to it as a “chaos trade” – defining this as “positions designed to produce big returns if all hell breaks loose” and Naked Capitalism comparing US Treasuries to senior debt of the GSEs. Certainly the greenback continues to sink against the Euro.

Equities did very poorly today, with General Motors suspending its dividend.

Cheyne Finance, last mentioned on October 22 and November 13, is having a $6-billion fire sale:

The first auction of assets by a structured investment vehicle drove Moody’s Investors Service to downgrade the Cheyne Finance Plc SIV by five levels, describing it as a “fire sale.”

The $6 billion SIV set up by London-based Cheyne Capital Management (UK) LLP is scheduled to auction its assets this week or transfer them to a new company under a reorganization by receivers Deloitte & Touche LLP and Goldman Sachs Group Inc. Moody’s said it cut the SIV’s senior debt to Ca, its second- lowest grade, in a report today.

And Willem Buiter fulminates on the real meaning of the GSE bailout:

The Treasury has taken another big step on the road to Utter Fiscal Obfuscation. It is doing everything it can to disguise the fact that it is entering in commitments that create potentially massive contingent liabilities for the US tax payer. Even if the purpose served by this increase in contingent liabilities is worth the cost, the manner in which it is done is designed to avoid fiscal accountability. This is as welcome to the Executive as it is to the Congress.

Note to all aspiring politicians: guarantees are not a cost-free method of accomplishing social goals. They will be called in at the most inopportune time.

Here’s an interesting factoid:

The S&P 500 Financials Index dropped 3 percent, capping its steepest-ever five-day retreat and giving the industry a smaller market value than health care for the first time since 1992, S&P data show.

Amidst all this gloom, I will remind readers that Bombardier first halved, then suspended its common dividend a few years back – the common dividend has only recently been reinstated. But the preferreds kept on paying through the period. First loss protection is not just a theoretical construct!

What a life! If anything, the panic is spreading … the price-movers list is longer today than it was, there were a number of block trades in the volume highlights and the PerpetualDiscount index was down more than a point for the second day running, to yield 6.58% … 9.21% interest-equivalent, long corporates +311bp. On the other hand, a few CM issues were up significantly on the day … which could imply the emergence of bottom fishers, it could be a dead-cat bounce, or it might mean absolutely nothing at all. I’ll let you know when it’s all over.

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.32% 3.44% 42,815 0.08 1 +0.000% 1,122.4
Fixed-Floater 4.67% 4.40% 70,381 16.33 6 -0.2778% 1,087.9
Floater 4.12% 4.15% 50,967 17.13 3 +0.0994% 893.8
Op. Retract 4.98% 4.29% 154,599 2.69 17 -0.1586% 1,042.4
Split-Share 5.46% 6.82% 63,940 4.10 14 -0.0244% 1,012.8
Interest Bearing 6.15% 5.89% 42,997 1.96 3 -0.1345% 1,119.8
Perpetual-Premium 6.13% 6.05% 66,605 10.70 4 -0.7817% 983.8
Perpetual-Discount 6.52% 6.58% 238,263 13.12 67 -1.2556% 811.6
Major Price Changes
Issue Index Change Notes
POW.PR.B PerpetualDiscount -4.2800% Now with a pre-tax bid-YTW of 7.10% based on a bid of 19.01 and a limitMaturity.
RY.PR.W PerpetualDiscount -4.2584% Now with a pre-tax bid-YTW of 6.23% based on a bid of 20.01 and a limitMaturity.
CM.PR.P PerpetualDiscount -4.2317% Now with a pre-tax bid-YTW of 7.28% based on a bid of 19.01 and a limitMaturity.
PWF.PR.E PerpetualDiscount -3.9981% Now with a pre-tax bid-YTW of 7.02% based on a bid of 19.69 and a limitMaturity.
CM.PR.E PerpetualDiscount -3.7975% Now with a pre-tax bid-YTW of 7.41% based on a bid of 19.00 and a limitMaturity.
PWF.PR.L PerpetualDiscount -3.7968% Now with a pre-tax bid-YTW of 6.83% based on a bid of 18.75 and a limitMaturity.
TD.PR.P PerpetualDiscount -3.1789% Now with a pre-tax bid-YTW of 6.18% based on a bid of 21.32 and a limitMaturity.
BMO.PR.J PerpetualDiscount -3.1781% Now with a pre-tax bid-YTW of 6.48% based on a bid of 17.67 and a limitMaturity.
ENB.PR.A PerpetualDiscount -2.9361% Now with a pre-tax bid-YTW of 6.20% based on a bid of 22.48 and a limitMaturity.
BMO.PR.K PerpetualDiscount -2.8425% Now with a pre-tax bid-YTW of 6.41% based on a bid of 20.85 and a limitMaturity.
GWO.PR.G PerpetualDiscount -2.6368% Now with a pre-tax bid-YTW of 6.72% based on a bid of 19.57 and a limitMaturity.
NA.PR.L PerpetualDiscount -2.5041% Now with a pre-tax bid-YTW of 6.78% based on a bid of 17.91 and a limitMaturity.
CU.PR.A PerpetualDiscount -2.4161% Now with a pre-tax bid-YTW of 6.17% based on a bid of 23.83 and a limitMaturity.
HSB.PR.C PerpetualDiscount -2.3158% Now with a pre-tax bid-YTW of 6.95% based on a bid of 18.56 and a limitMaturity.
POW.PR.C PerpetualDiscount -2.2606% Now with a pre-tax bid-YTW of 6.61% based on a bid of 22.05 and a limitMaturity.
PWF.PR.F PerpetualDiscount -2.1662% Now with a pre-tax bid-YTW of 6.79% based on a bid of 19.42 and a limitMaturity.
W.PR.J PerpetualDiscount -2.0930% Now with a pre-tax bid-YTW of 6.70% based on a bid of 21.05 and a limitMaturity.
CIU.PR.A PerpetualDiscount -2.0635% Now with a pre-tax bid-YTW of 6.32% based on a bid of 18.51 and a limitMaturity.
CU.PR.B PerpetualDiscount -2.0000% Now with a pre-tax bid-YTW of 6.34% based on a bid of 24.01 and a limitMaturity.
SLF.PR.A PerpetualDiscount -1.9434% Now with a pre-tax bid-YTW of 6.80% based on a bid of 17.66 and a limitMaturity.
PWF.PR.K PerpetualDiscount -1.9191% Now with a pre-tax bid-YTW of 6.58% based on a bid of 18.91 and a limitMaturity.
ELF.PR.G PerpetualDiscount -1.8080% Now with a pre-tax bid-YTW of 7.61% based on a bid of 15.75 and a limitMaturity.
RY.PR.D PerpetualDiscount -1.7602% Now with a pre-tax bid-YTW of 6.42% based on a bid of 17.86 and a limitMaturity.
RY.PR.H PerpetualDiscount -1.6243% Now with a pre-tax bid-YTW of 6.11% based on a bid of 23.62 and a limitMaturity.
FBS.PR.B SplitShare -1.5625% Asset coverage of 1.5+:1 as of July 10 according to TD Securities. Now with a pre-tax bid-YTW of 6.76% based on a bid of 9.45 and a hardMaturity 2011-12-15 at 10.00.
CM.PR.G PerpetualDiscount -1.5544% Now with a pre-tax bid-YTW of 7.15% based on a bid of 19.00 and a limitMaturity.
RY.PR.A PerpetualDiscount -1.5504% Now with a pre-tax bid-YTW of 6.37% based on a bid of 17.78 and a limitMaturity.
RY.PR.G PerpetualDiscount -1.5487% Now with a pre-tax bid-YTW of 6.44% based on a bid of 17.80 and a limitMaturity.
BMO.PR.H PerpetualDiscount -1.4464% Now with a pre-tax bid-YTW of 6.83% based on a bid of 19.76 and a limitMaturity.
GWO.PR.I PerpetualDiscount -1.4451% Now with a pre-tax bid-YTW of 6.67% based on a bid of 17.05 and a limitMaturity.
BNS.PR.M PerpetualDiscount -1.4317% Now with a pre-tax bid-YTW of 6.32% based on a bid of 17.90 and a limitMaturity.
HSB.PR.D PerpetualDiscount -1.3506% Now with a pre-tax bid-YTW of 6.66% based on a bid of 18.99 and a limitMaturity.
BCE.PR.Y FixFloat -1.3339%  
BNS.PR.N PerpetualDiscount -1.2195% Now with a pre-tax bid-YTW of 6.26% based on a bid of 21.06 and a limitMaturity.
BAM.PR.H OpRet -1.1858% Now with a pre-tax bid-YTW of 5.86% based on a bid of 25.00 and a softMaturity 2012-3-30 at 25.00. Compare with BAM.PR.I (6.29% to 2013-12-30), BAM.PR.B (7.16% to 2018-3-30) and BAM.PR.O (6.44% to 2013-6-30).
CM.PR.J PerpetualDiscount -1.1236% Now with a pre-tax bid-YTW of 7.14% based on a bid of 15.84 and a limitMaturity.
BAM.PR.J OpRet -1.1186% See BAM.PR.H, above.
TD.PR.Q PerpetualDiscount -1.1173% Now with a pre-tax bid-YTW of 6.10% based on a bid of 23.01 and a limitMaturity.
RY.PR.F PerpetualDiscount -1.0857% Now with a pre-tax bid-YTW of 6.55% based on a bid of 17.31 and a limitMaturity.
PWF.PR.H PerpetualDiscount -1.0738% Now with a pre-tax bid-YTW of 6.52% based on a bid of 22.11 and a limitMaturity.
CM.PR.D PerpetualDiscount -1.0476% Now with a pre-tax bid-YTW of 6.96% based on a bid of 20.78 and a limitMaturity.
NA.PR.M PerpetualDiscount -1.0215% Now with a pre-tax bid-YTW of 6.24% based on a bid of 24.05 and a limitMaturity.
GWO.PR.H PerpetualDiscount -1.0215% Now with a pre-tax bid-YTW of 6.66% based on a bid of 18.41 and a limitMaturity.
CM.PR.H PerpetualDiscount +1.6149% Now with a pre-tax bid-YTW of 7.38% based on a bid of 16.36 and a limitMaturity.
LFE.PR.A SplitShare +1.0476% Asset coverage of just under 2.2:1 as of June 30 according to the company. Now with a pre-tax bid-YTW of 5.67% based on a bid of 9.87 and a hardMaturity 2012-12-1 at 10.00.
CM.PR.I PerpetualDiscount +2.4375% Now with a pre-tax bid-YTW of 7.21% based on a bid of 16.39 and a limitMaturity.
ELF.PR.F PerpetualDiscount +3.2000% Now with a pre-tax bid-YTW of 7.40% based on a bid of 18.06 and a limitMaturity.
Volume Highlights
Issue Index Volume Notes
BCE.PR.Y Scraps (would be FixFloat but there are volume concerns) 139,998 CIBC crossed 99,900 at 24.45, then another 36,600 at the same price.
BNS.PR.K PerpetualDiscount 138,300 Nesbitt crossed 50,000 at 19.70, then another 25,000 at the same price and TD crossed 50,000 at the same price again. Now with a pre-tax bid-YTW of 6.16% based on a bid of 19.57 and a limitMaturity.
BNS.PR.M PerpetualDiscount 112,200 Nesbitt crossed 50,000 at 17.85, then CIBC crossed 44,200 at 17.95. Now with a pre-tax bid-YTW of 6.32% based on a bid of 17.90 and a limitMaturity.
GWO.PR.I PerpetualDiscount 57,550 CIBC crossed 45,000 at 17.05. Now with a pre-tax bid-YTW of 6.67% based on a bid of 17.05 and a limitMaturity.
MFC.PR.A OpRet 55,287 Nesbitt crossed two lots of 25,000 each at 25.18. Now with a pre-tax bid-YTW of 4.03% based on a bid of 25.21 and a softMaturity 2015-12-18 at 25.00.
BMO.PR.I OpRet 34,350 CIBC crossed 30,000 at 25.20. Now with a pre-tax bid-YTW of 3.41% based on a bid of 25.19 and a call 2008-8-14 at 25.00.

There were thirty other index-included $25-pv-equivalent issues trading over 10,000 shares today.

One Response to “July 15, 2008”

  1. […] Capitalism reports that the auction of Cheyne Finance’s assets, mentioned July 15 realized forty-four cents on the dollar. It remains to be seen how many of these assets will […]

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