September 18, 2009

European leaders continued to prefer talking about greedy bankers’ bonuses rather than their own regulatory, monetary and fiscal culpability for the Credit Crunch:

European Union leaders said the Group of 20 nations should agree on binding rules backed by national sanctions to curb bank bonuses, a week before a summit of the top industrial and emerging nations in Pittsburgh.

The EU agreement on the need for action failed to include details of how such curbs would be achieved, leaving any details to be negotiated at the G-20 summit. Leaders of the 27 EU states said voters would react with anger if bankers were allowed to award themselves large bonuses while relying on public money for their survival.

We’ve seen a fair number of CEOs trashing their employees in recent times. Today, Vikram Pandit joined their ranks:

Citigroup Inc. Chief Executive Officer Vikram Pandit said the bank will restructure its Phibro LLC energy-trading business as the bank faces what may be a $100 million payday for the unit’s chief, Andrew Hall.

“That business will be restructured and rationalized,” Pandit said yesterday at the 92nd Street Y in New York. When asked if $100 million was too much to pay, he replied, “Yes.”

Way to stand up for your employees, Mr. Pandit! Boy, don’t you sound like a wonderful person to work for.

The bankers’ bonus rules discussion is getting steadily more boring:

Global leaders meeting at the Group of 20 summit in Pittsburgh next week are moving toward a compromise on compensation rules that fall short of the political rhetoric branding banker pay a worldwide disgrace.

Pay caps, once pushed by French President Nicolas Sarkozy, were excluded from recommendations made by finance officials this month. European leaders may be willing to endorse linking bonuses to a bank’s capital level, moving closer to a U.S. position that avoids specific limits.

More interestingly, there’s some movement in the Money Market Fund world:

Fidelity Investments and Vanguard Group Inc. are among U.S. asset managers working on a proposal that would provide money-market mutual funds with an emergency pool of cash in the event of a run on deposits, according to two people who have been briefed on the plan.

Funds participating in the program would pay a fee to a bank, called the Liquidity Exchange Bank, to build a cash reserve that would help them handle investor withdrawals during a liquidity crisis like the one last September, the people said. The bank could also apply for emergency support from the Federal Reserve discount window.

The program won’t seek to insure money funds against losses from defaulted securities, as does the Treasury Department’s emergency program that expires today, one year after its inception. The Treasury’s Temporary Guarantee Program for Money Market Funds explicitly insured deposits in participating funds as of Sept. 19, 2008, and succeeded in halting last year’s investor flight.

The industry plan would have more in common with the Fed’s Money Market Fund Liquidity Facility, which lends money to banks that buy asset-backed commercial paper from money funds. That program, also begun last September, provided cash to help funds meet withdrawal demands. It will expire Feb. 1.

Encouraging, but not consequential. If they want to get bank lines, they can get them now; this is merely a method whereby they get to keep the fees for the line in-house. The implicit guarantee of the stable value is much more important.

The preferred share market regained some ground today, with PerpetualDiscounts up 19bp and FixedResets plugging away with a gain of 4bp. Volume was very healthy, with five of the six names in the volume highlights table being insurers.

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 0.4279 % 1,475.0
FixedFloater 5.72 % 3.98 % 54,325 18.62 1 0.0000 % 2,683.1
Floater 2.49 % 2.10 % 29,954 22.21 4 0.4279 % 1,842.7
OpRet 4.84 % -13.31 % 135,753 0.09 15 0.2370 % 2,295.8
SplitShare 6.41 % 6.68 % 926,636 4.03 2 -0.2207 % 2,061.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2370 % 2,099.3
Perpetual-Premium 5.75 % 5.61 % 149,437 2.55 12 0.2109 % 1,884.8
Perpetual-Discount 5.71 % 5.77 % 208,806 14.18 59 0.1876 % 1,799.7
FixedReset 5.48 % 4.00 % 459,912 4.07 40 0.0405 % 2,114.7
Performance Highlights
Issue Index Change Notes
PWF.PR.L Perpetual-Discount -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-09-18
Maturity Price : 22.17
Evaluated at bid price : 22.29
Bid-YTW : 5.81 %
HSB.PR.D Perpetual-Discount 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-09-18
Maturity Price : 22.03
Evaluated at bid price : 22.15
Bid-YTW : 5.66 %
ENB.PR.A Perpetual-Premium 1.22 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2009-10-18
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : -27.65 %
ELF.PR.G Perpetual-Discount 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-09-18
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.35 %
BAM.PR.I OpRet 1.57 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2009-10-18
Maturity Price : 25.75
Evaluated at bid price : 25.91
Bid-YTW : -4.30 %
BAM.PR.M Perpetual-Discount 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-09-18
Maturity Price : 18.60
Evaluated at bid price : 18.60
Bid-YTW : 6.42 %
Volume Highlights
Issue Index Shares
Traded
Notes
PWF.PR.J OpRet 179,817 Nesbitt crossed 100,000 shares at 26.30, then another 20,000 at the same price; then they crossed blocks of 30,100 and 17,000 shares at 26.30.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2009-10-18
Maturity Price : 25.75
Evaluated at bid price : 26.30
Bid-YTW : -13.31 %
PWF.PR.M FixedReset 160,180 Nesbitt crossed blocks of 50,000 and 100,000 shares, both at 27.10.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 27.12
Bid-YTW : 4.10 %
MFC.PR.D FixedReset 92,882 Desjardins crossed two blocks, of 35,100 and 39,900 shares, both at 28.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-19
Maturity Price : 25.00
Evaluated at bid price : 27.76
Bid-YTW : 4.11 %
GWO.PR.J FixedReset 86,275 Nesbitt crossed 75,000 shares at 26.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 26.95
Bid-YTW : 4.02 %
BNS.PR.M Perpetual-Discount 76,850 RBC crossed blocks of 20,000 and 19,900 shares at 20.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2039-09-18
Maturity Price : 20.44
Evaluated at bid price : 20.44
Bid-YTW : 5.59 %
MFC.PR.E FixedReset 71,200 Nesbitt crossed blocks of 25,000 and 34,900 shares at 26.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-19
Maturity Price : 25.00
Evaluated at bid price : 26.66
Bid-YTW : 4.17 %
There were 47 other index-included issues trading in excess of 10,000 shares.

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