November 7, 2008

The Fed’s balance sheet continues to grow, with the latest H.4.1 release showing an increase of about $100-billion in Commercial Paper assets, funded by deposits – mainly from banks. However, LIBOR is now well below the Fed’s yield on paper:

The London interbank offered rate, or Libor, that banks say they charge one another for loans fell 10 basis points to 2.29 percent today, the lowest level since November 2004, the British Bankers’ Association said. The overnight rate held at a record low of 0.33 percent and the TED spread, a gauge of bank cash availability, dropped under 200 basis points for the first time since the day before Lehman Brothers Holdings Inc. collapsed.

The CPFF rate is now 1.54%, but there is a 100bp surcharge on top of that..

Today’s jobs number was icky:

The jobless rate rose to 6.5 percent in October from 6.1 percent the previous month, the Labor Department reported today in Washington. Employers cut 240,000 workers after a loss of 284,000 in September, the biggest two-month slide since 2001.

Econbrowser‘s James Hamilton provides a graph (which doesn’t look so good when re-sized for PrefBlog, so read the original post!):

The next battleground for do-over whining is GMAC SmartNotes:

Chuck Woodall, 66, who lives with his wife in Columbus, Ohio, amassed $200,000 of SmartNotes starting eight years ago, and they now equal about 25 percent of his investments. At the time, the securities were rated investment-grade and they paid more interest than government bonds or certificates of deposit. They also were backed by Detroit-based GM, the biggest U.S. automaker.

Woodall, a former owner of apparel stores and a pet-supply business, holds SmartNotes due in 2018 that he says have lost about 80 percent of their value. He said his Merrill broker told him that in more than 20 years, no client had lost money on bonds.

Sadly, the Bloomberg reporter didn’t ask ‘What the hell are you doing putting 25% of your entire portfolio in a single name?’

GM is in a bad way:

General Motors Corp., seeking federal aid to avoid collapse, said it may not have enough cash to keep operating this year and will fall “significantly short” of the amount needed by the end of June unless the auto market improves or it raises more capital.

GM’s $3 billion of 8.375 percent bonds due in 2033 tumbled about 4 cents to 24.4 cents on the dollar as of 11:46 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 34 percent, or about 30 percentage points more than similar- maturity Treasuries, Trace data show.

One-year credit-default swaps were quoted at a mid-price of 51 percentage points upfront, compared with 50 percentage points yesterday, CMA data show. That means it would cost $5.1 million initially in addition to $500,000 over one year to protect $10 million of GM bonds. The contracts reached as high as 52 percentage points upfront on Oct. 16.

I am certain that we are going to see a reprise of the Oshawa shuffle … Why should we subsidize them? Because they’re good jobs. Why are they good jobs? Because they’re subsidized.

A solid day for PerpetualDiscounts, up 20bp on the day to yield 6.85% pre-tax dividend, equivalent to 9.59% pre-tax interest at the standard 1.4x factor. Long corporates now yield about 7.55%, so the spread is 204bp.

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.
The Fixed-Reset index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater index.
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet N/A N/A N/A N/A 0 N/A N/A
Fixed-Floater 5.13% 5.14% 71,771 15.44 6 +1.3756% 1,019.4
Floater 7.04% 7.15% 52,580 12.30 2 +1.5326% 495.9
Op. Retract 5.25% 5.83% 135,097 3.98 15 +0.6890% 1,006.5
Split-Share 6.28% 10.65% 58,010 3.97 12 +0.5225% 940.2
Interest Bearing 7.95% 13.61% 58,857 3.25 3 +1.9680% 892.6
Perpetual-Premium N/A N/A N/A N/A N/A N/A N/A
Perpetual-Discount 6.77% 6.85% 178,352 12.77 71 +0.2014% 804.8
Fixed-Reset 5.37% 5.14% 1,013,076 15.11 12 +0.3062% 1,084.3
Major Price Changes
Issue Index Change Notes
FFN.PR.A SplitShare -5.1316% Asset coverage of 1.6-:1 as of October 31 according to the company. Now with a pre-tax bid-YTW of 11.97% based on a bid of 7.21 and a hardMaturity 2014-12-1 at 10.00. Closing quote of 7.21-69, 5×5. Day’s range of 7.05-60.
POW.PR.C PerpetualDiscount -3.7209% Now with a pre-tax bid-YTW of 7.10% based on a bid of 20.70 and a limitMaturity. Closing quote 20.70-14, 2×2. Day’s range 20.93-22.03.
PWF.PR.L PerpetualDiscount -2.8947% Now with a pre-tax bid-YTW of 6.98% based on a bid of 18.45 and a limitMaturity. Closing Quote 18.45-84, 5×4. Day’s range of 18.45-00.
SBN.PR.A SplitShare +2.5946% Asset coverage of 1.9+:1 as of October 31 according to Mulvihill. Now with a pre-tax bid-YTW of 7.40% based on a bid of 9.01 and a hardMaturity 2014-12-1 at 10.00. Closing quote of 9.01-50, 3×5. No trades today.
SLF.PR.A PerpetualDiscount -2.0000% Now with a pre-tax bid-YTW of 7.25% based on a bid of 16.66 and a limitMaturity. Closing Quote 16.66-90, 24×24. Day’s range of 16.86-14.
CM.PR.H PerpetualDiscount +2.1199% Now with a pre-tax bid-YTW of 7.20% based on a bid of 16.86 and a limitMaturity. Closing Quote 16.86-94, 4×2. Day’s range of 16.53-95.
TD.PR.N OpRet +2.4580% Now with a pre-tax bid-YTW of 4.63% based on a bid of 25.01 and a softMaturity 2014-1-30 at 25.00. Closing quote of 25.01-26.14, 3×11. No trades today.
BMO.PR.H PerpetualDiscount +2.5428% Now with a pre-tax bid-YTW of 6.73% based on a bid of 19.76 and a limitMaturity. Closing Quote 19.76-95, 3×3. Day’s range of 19.51-98.
BSD.PR.A InterestBearing +2.6891% Asset coverage of 1.0+:1 as of October 31, according to Brookfield Funds. Now with a pre-tax bid-YTW of 16.39% based on a bid of 6.11 and a hardMaturity 2015-3-31 at 10.00. Closing quote of 6.11-21, 4×23. Day’s range of 6.17-21.
FIG.PR.A InterestBearing +3.1637% Asset coverage of 1.3+:1 based on Capital Units NAV of 4.56 on November 6 and 0.71 Capital Units per Preferred. Now with a pre-tax bid-YTW of 12.44% based on a bid of 7.50 and a hardMaturity 2014-12-31 at 10.00. Closing quote of 7.50-73, 29×30. Day’s range of 7.31-51.
BCE.PR.Y FixFloat +3.2184%  
BCE.PR.A FixFloat +3.3992%  
FTN.PR.A SplitShare +3.6269% Asset coverage of 1.9-:1 as of October 31, according to the company. Now with a pre-tax bid-YTW of 9.26% based on a bid of 8.00 and a hardMaturity 2015-12-1 at 10.00. Closing quote of 8.00-13, 39×3. Day’s range of 7.70-15.
MFC.PR.C PerpetualDiscount +3.9759% Now with a pre-tax bid-YTW of 6.64% based on a bid of 17.26 and a limitMaturity. Closing Quote 17.26-40, 3×8. Day’s range of 16.60-40.
BCE.PR.R FixFloat +4.6062%  
BNA.PR.C SplitShare +7.6864% Asset coverage of just under 2.8:1 as of September 30 according to the company. Coverage now of 2.1-:1 based on BAM.A at 21.38 and 2.4 BAM.A held per preferred. Now with a pre-tax bid-YTW of 12.20% based on a bid of 14.01 and a hardMaturity 2019-1-10 at 25.00. Compare with BNA.PR.A (17.46% to 2010-9-30) and BNA.PR.B (10.08% to 2016-3-25). Closing quote 14.01-94, 2×7. Day’s range 13.20-14.49.
Volume Highlights
Issue Index Volume Notes
CM.PR.I PerpetualDiscount 168,254 Nesbitt crossed 150,000 at 16.50. Now with a pre-tax bid-YTW of 7.13% based on a bid of 16.65 and a limitMaturity.
RY.PR.L Fixed-Reset 133,900 TD bought 10,300 from anonymous at 24.93; RBC bought 11,600 from Nesbitt at 24.95; TD bought 11,500 from National at 24.99. New Issue settled Nov. 3
TD.PR.C Fixed-Reset 54,450 New issue settled Nov. 5
BCE.PR.C FixFloat 43,600 TD crossed 19,400 at 22.10; CIBC crossed 20,000 at 22.50.
BMO.PR.M Fixed-Reset 37,240 Nesbitt crossed 25,000 at 23.60.

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

One Response to “November 7, 2008”

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