Holy smokes, it’s been ten years!
The November 27, 2007 commentary on the Abu Dhabi – Citigroup deal is now looking a little dated:
Citigroup Inc. said the Abu Dhabi Investment Authority is seeking to end an agreement to buy the bank’s stock, or to receive more than $4 billion in damages.
Abu Dhabi Investment, one of the world’s top two sovereign wealth funds, filed a claim alleging “fraudulent misrepresentations” tied to its agreement to buy $7.5 billion of common stock, Citigroup said today in a statement.
In front-page news, the UK said something sensible about regulation:
The U.K. pushed back on European Union and U.S. proposals to trade standardized derivatives on exchanges and clearing houses, saying that other steps can reduce risks to the financial system instead.
While the U.K. broadly supports EU and U.S. objectives, the Treasury and Financial Services Authority said in a report today that they have concerns that the proposals could concentrate risk. The U.K. has 43 percent of the over-the-counter derivatives market, the paper said.
…
The U.K. paper mandated seven steps, including greater standardization of OTC derivatives contracts, consensus on global standards for CCPs, international agreement on what contracts can be backed by a clearinghouse and the registration of “relevant” trades in a data warehouse. The paper said that if these steps were followed, putting standardized derivatives on exchanges would be unnecessary.
Regulators are, in general, anxious to establish clearinghouses for two reasons: it will deflect attention from their negligence in not requiring collateral or capital for unsecured positions in the banks they regulate; and clearinghouses will be large financial establishments )charging fees to brokerages in a non-public manner) that will require a lot of ex-regulators on staff, just to ensure that it’s all done right.
In general, the idea makes the system as a whole vulnerable to a single point failure, something the rest of the world is moving away from.
The log-jam has burst and Wells Fargo has issued a CDO:
Banks may arrange as many as 100 collateralized debt obligations backed by high-yield, high-risk loans in 2010 following Wells Fargo & Co.’s “landmark” offering yesterday, according to Guggenheim Partners LLC.
Guggenheim was the main investor in the securities of Newstar Commercial Loan Trust 2009-1, a $250 million CLO arranged by Wells Fargo, said Scott Minerd, who helps supervise more than $100 billion as Guggenheim’s chief investment officer.
A good strong day for preferreds, with PerpetualDiscounts gaining 22bp and FixedResets squeaking out another gain of 1bp to take their median-weighted-average yield down to 3.68%. How low can they go? (I’m thinking of inventing a little dance to go with the chant.) Good volume, especially for Nesbitt.
PerpetualDiscounts now yield 5.83%, equivalent to 8.16% interest at the standard conversion factor of 1.4x. Long Corporates continue to yield about 6.0%, so the pre-tax interest-equivalent spread (a.k.a. the Seniority Spread) is now 215-220bp, a slight tightening from the 225bp reported December 9.
| 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 | 1.1270 % | 1,549.7 |
| FixedFloater | 5.69 % | 3.83 % | 41,433 | 18.99 | 1 | 0.5260 % | 2,737.8 |
| Floater | 2.53 % | 2.99 % | 97,260 | 19.77 | 3 | 1.1270 % | 1,936.0 |
| OpRet | 4.86 % | -2.97 % | 137,833 | 0.09 | 15 | 0.0332 % | 2,315.2 |
| SplitShare | 6.43 % | -4.88 % | 252,028 | 0.08 | 2 | -0.0222 % | 2,089.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0332 % | 2,117.0 |
| Perpetual-Premium | 5.86 % | 5.83 % | 82,238 | 5.99 | 7 | 0.1136 % | 1,881.1 |
| Perpetual-Discount | 5.78 % | 5.83 % | 198,067 | 14.06 | 68 | 0.2151 % | 1,800.6 |
| FixedReset | 5.41 % | 3.68 % | 353,408 | 3.87 | 41 | 0.0089 % | 2,162.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.A | Perpetual-Discount | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-16 Maturity Price : 19.76 Evaluated at bid price : 19.76 Bid-YTW : 5.88 % |
| NA.PR.P | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-17 Maturity Price : 25.00 Evaluated at bid price : 27.71 Bid-YTW : 4.01 % |
| W.PR.J | Perpetual-Discount | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-16 Maturity Price : 24.00 Evaluated at bid price : 24.25 Bid-YTW : 5.87 % |
| PWF.PR.O | Perpetual-Discount | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-16 Maturity Price : 24.61 Evaluated at bid price : 24.82 Bid-YTW : 5.95 % |
| GWO.PR.H | Perpetual-Discount | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-16 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 6.02 % |
| IGM.PR.B | Perpetual-Discount | 1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-16 Maturity Price : 24.69 Evaluated at bid price : 24.90 Bid-YTW : 5.97 % |
| TRI.PR.B | Floater | 1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-16 Maturity Price : 20.51 Evaluated at bid price : 20.51 Bid-YTW : 1.91 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.D | FixedReset | 254,807 | Nesbitt crossed 250,000 at 27.85. Nice ticket! YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.85 Bid-YTW : 3.90 % |
| BMO.PR.M | FixedReset | 194,375 | Nesbit crossed two blocks, of 150,000 and 38,300 shares, both at 26.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-09-24 Maturity Price : 25.00 Evaluated at bid price : 26.45 Bid-YTW : 3.40 % |
| TD.PR.S | FixedReset | 177,535 | Nesbitt crossed three blocks, of 40,000 shares, 100,000 and 30,000, all at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.27 Bid-YTW : 3.66 % |
| BAM.PR.P | FixedReset | 161,025 | Nesbitt crossed 150,000 at 26.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 27.06 Bid-YTW : 5.04 % |
| GWO.PR.J | FixedReset | 103,415 | Nesbitt crossed 100,000 at 27.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 27.15 Bid-YTW : 3.67 % |
| RY.PR.D | Perpetual-Discount | 77,345 | Anonymous crossed (?) 70,000 at 20.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-16 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 5.55 % |
| There were 39 other index-included issues trading in excess of 10,000 shares. | |||
[…] pre-tax interest-equivalent spread is now about 220bp, slightly tighter than the 225bp reported on December 16, but still wider than “Credit Crunch Normal” of 200bp and far above the long-term range […]
[…] spread (also called the Seniority Spread) is about 220bp, a slight tightening from the December 16 and November 30 figures of […]