May 27, 2009

The FDIC has issued a call for papers to be delivered at the 9th Annual Bank Research Conference. Guess what the focus is:

The on-going financial sector crisis has focused attention on compensation and governance practices. It has been alleged that compensation and governance systems reward management for risk taking and short term profits and the size and scope of corporate operations expanded at the expense of shareholders and taxpayers. In response to incentives, the management of many financial services firms pursued investment strategies that proved to be unsustainable despite extensive resources devoted to prudential oversight and financial stability monitoring. Recent events highlight the need to examine the management incentives and governance structures in place in the financial services industry, including the supervisory agencies and central banks that regulate and service the industry.

Treasuries got hammered today:

The so-called yield curve steepened to 2.75 percentage points, surpassing the previous record of 2.74 percentage points set on Aug. 13, 2003. Yields on 10-year notes have risen more than 100 basis points since Fed officials said in March they would buy up to $300 billion of U.S. debt over six months to drive consumer rates down and lift the economy from recession.

“The markets are starting to grapple with the issue of what happens when the Fed exits and the Treasury needs to continue at the same pace,” said David Greenlaw, the chief financial economist in New York at Morgan Stanley, one of the 16 primary dealers that trade with the Fed and are required to bid at government bond auctions.

U.S. 10-year notes have lost 8.7 percent this year, according to Merrill Lynch & Co. indexes, while 30-year bonds have lost 25.5 percent. Two-year notes have gained 0.3 percent.

Across the Curve reports that:

The yield on the 2 year note increased 2 basis points to 0.97 percent. The yield on the 3 year note climbed 3 basis points to 1,49 percent. The yield on the 5 year note soared 11 basis points to 2.41 percent. The yield on the 10 year note catapulted 17 basis points higher to 3.72 percent. The yield on the bond rocketed 14 basis points to 4.63.

The 2year/10 year spread is a record 275 basis points.

The 2year/30 year spread is 366 basis points. The record on that is 369 on October 05 1992 at about 1130 AM.

Continued heavy volume for preferred shares today; PerpetualDiscounts took a break from their ascent; BAM issues were (presumably) hurt by the new issue announcement.

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 0.6990 % 1,284.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.6990 % 2,077.3
Floater 2.93 % 3.41 % 83,860 18.66 3 0.6990 % 1,604.7
OpRet 5.04 % 3.78 % 128,152 2.57 15 -0.1268 % 2,158.6
SplitShare 5.93 % 5.83 % 53,806 4.29 3 -0.2463 % 1,834.0
Interest-Bearing 6.07 % 9.38 % 28,186 0.57 1 -1.2000 % 1,963.4
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.1045 % 1,717.7
Perpetual-Discount 6.37 % 6.40 % 156,312 13.32 71 -0.1045 % 1,581.9
FixedReset 5.74 % 5.04 % 488,110 4.47 37 -0.0378 % 1,976.9
Performance Highlights
Issue Index Change Notes
BAM.PR.M Perpetual-Discount -2.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 8.10 %
PWF.PR.I Perpetual-Discount -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 22.42
Evaluated at bid price : 22.61
Bid-YTW : 6.72 %
BAM.PR.J OpRet -1.38 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 21.51
Bid-YTW : 7.80 %
BNA.PR.C SplitShare -1.37 % Asset coverage of 1.8-:1 as of April 30 according to the company.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 14.40
Bid-YTW : 11.91 %
BAM.PR.N Perpetual-Discount -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 8.10 %
STW.PR.A Interest-Bearing -1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2009-12-31
Maturity Price : 10.00
Evaluated at bid price : 9.88
Bid-YTW : 9.38 %
BMO.PR.L Perpetual-Discount -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 23.10
Evaluated at bid price : 23.26
Bid-YTW : 6.28 %
CIU.PR.A Perpetual-Discount -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 6.08 %
BNS.PR.O Perpetual-Discount -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 22.95
Evaluated at bid price : 23.10
Bid-YTW : 6.13 %
PWF.PR.K Perpetual-Discount -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 18.62
Evaluated at bid price : 18.62
Bid-YTW : 6.74 %
BAM.PR.B Floater 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 11.64
Evaluated at bid price : 11.64
Bid-YTW : 3.41 %
TRI.PR.B Floater 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 2.30 %
RY.PR.I FixedReset 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 24.70
Evaluated at bid price : 24.75
Bid-YTW : 4.28 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PR.H OpRet 93,017 RBC sold two blocks, 15,900 and 25,000 shares, to (the same or different?) anonymous, both at 24.60. Nesbitt crossed 10,000 at 24.81.
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2012-03-30
Maturity Price : 25.00
Evaluated at bid price : 24.59
Bid-YTW : 6.79 %
BMO.PR.O FixedReset 65,910 Scotia bought two blocks of 10,000 each from RBC at 27.00; RBC crossed 10,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-24
Maturity Price : 25.00
Evaluated at bid price : 26.81
Bid-YTW : 5.18 %
SLF.PR.F FixedReset 51,871 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 25.77
Bid-YTW : 5.37 %
HSB.PR.E FixedReset 42,250 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.65
Bid-YTW : 5.41 %
BAM.PR.M Perpetual-Discount 40,636 Odlum bought 10,000 from Dundee at 15.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-05-27
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 8.10 %
RY.PR.Y FixedReset 36,120 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-24
Maturity Price : 25.00
Evaluated at bid price : 26.14
Bid-YTW : 5.28 %
There were 50 other index-included issues trading in excess of 10,000 shares.

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