Manuel López  


Este artículo ha sido marcado como molesto Deshacer
17:22 el 17 febrero 2012

Interesado en los mercados financieros

Actualización sobre preferentes y valoración de Coco´s

Buenas tardes,
Publicamos un artículo sobre preferentes preparado por Spectrum, filial de Principal Global investors.
IMPORTANTE: Existe un mercado de preferentes en USA, que no tiene nada que ver con el que se puede conocer en España o en EUROPA que tan mala fama tiene así que no son mercados comparables. No hay que caer en ese error.
Este artículo es a nivel informativo sobre la evolución del mercado.
Principal global investors gestiona más de 250 bl. Spectrum es la gestora más especializada del mundo en este tipo de activos.
Al final del mismo tienen un artículo bastante técnico sobre los Coco´s.
Pueden descargar todo el artículo en pdf  al final del texto.

Preferred Securities Market Update: January 2012

The content of this article was provided by Spectrum Asset Management, Inc., an affiliate of Principal Global Investors®. Spectrum is a leading manager of institutional and retail preferred securities portfolios.

Europe was in the headlines again in January, but the tone of the headlines was significantly improved. The central banks on both sides of the Atlantic did their parts in supporting asset prices through constructive policy measures and long-term signals for these initiatives to persist. Volatility declined by 17% down to 19.44 as measured by the stock market volatility index (VIX) while the Standard & Poor’s (S&P) rose another 55 to close up 4.4%. Financial equity (measured by the Financial Select Sector Standard and Poor’s Depository Receipts (SPDR) Fund) rose a full point to $14.02 to close the month up 7.7%. Against this backdrop, hybrid preferred securities closed up $3.97 at $99.65 for a current yield of 7.21 by the end of January. The 10yr U.S. Treasury (UST) note closed up $0.67 and the 30yr U.S. Treasury bond closed down $0.88. The marginal (mixed) performance in UST yields versus the decline in hybrid yields combined to tighten the yield spread by 19 basis points (bps) relative to the UST10 note (+541 bps) and by 32 bps relative to the UST30 bond (+427 bps). The retail ($25 par) hybrid market did very well yet it slightly underperformed the institutional hybrid market (Tier1 capital securities). The sector average price on $25 par paper rose by $4.19 (on a $100 par basis) for a total return of 4.04% according to the Bank of America Merrill Lynch U.S. Preferred Stock, Fixed Rate (p0p1) Index. The sector average price on Tier1 paper, measured by the Barclay’s Capital Securities Tier1 Index, increased by $3.76 and returned 4.59% for the period. The institutional sector outperformed the retail sector because of its overweight in the foreign sector and its more discounted sector price. Hybrids closed January yielding 541 basis points more than similar duration (7-10 yr) U.S. Treasury notes. On a yield-to-worst basis, hybrid preferred securities yield 6.81% on average this is 234 basis points of additional yield compared to senior (5-7 yr) global financial debt. This cheaper funding of intermediate debt still indicates a positive general refunding incentive for banks to either tender for or call hybrids as we move closer to the phase-in requirements of Basel-3 in 2013.

The tone over in Europe is much improved since the European Central Bank (ECB) announced that it will be providing unlimited funding through its 3yr Long Term Repurchase Operation (LTRO). Senior financials rallied $3.87 this month alone after declining $4.11 last year. There is another round of LTRO becoming available at the end of this month. This is a rather unconventional means which achieves four objectives: 1) indirectly finance sovereigns by loaning the banks money to purchase sovereign debt; 2) drive down sovereign yields; 3) foster increased bank net interest margins from liquidity portfolios to assist in “kicking the can down the road” with carry profits; and 4) foster liquidity to facilitate liability management exercises to earn in non-recurring gains from financing activities. This should continue to have a positive impact on the European banks while policy makers continue to navigate the complex course of sovereign debt uncertainty.

The U.S. Federal Reserve Bank (Fed) is doing its best to support our own financial system by creating a financial repression by intending to keep the Federal Funds Rate near zero until late 2014. This extended intent put a very powerful tailwind into an already rapidly moving credit market in January due to the ECB measures. Interestingly, the Fed’s time line would match up the length of the U.S. recovery to the long run average of 5 years by that time. The move also ensures that the interest rate differential between the U.S. dollar and the Euro remains tight, thus helping to indirectly support the Euro. The Fed also trimmed its growth forecast for the U.S. economy by 0.2% to an average 2.5% and left open further quantitative easing to support the mortgage and housing markets. Right now the markets do not care about the long run


implications of these (global) measures which must be unwound at some time (e.g., the Fed has already expanded its balance sheet by $2.3 trillion while the ECB is just getting started) – for now, it’s just too far out in the future and there are more important immediate problems to solve first such as the failures of fiscal excess in the developed world and the resultant decline in its growth and employment.

Indeed, the hybrid market responded well to January’s supportive news by having its best month since July 2010. During that time, U.S. bank trust preferreds received a technical jolt from the Collins Amendment to the Dodd-Frank Bill and the European sector got a boost from a much easier stance by the Basel Committee in extending more time for banks to make the transition to new capital standards. The average hybrid price in July 2010 was $98.51 which is remarkably close to the $99.65 average price of hybrids today the big difference is spread as U.S. Treasury bond (and 10yr note) yields were 100 basis points higher in July 2010. A lot has happened over the past 18 months to cause Treasury yields to plummet mainly, two complete rounds of quantitative easing by the Fed. Another round may be coming if U.S. employment does not improve which means more than simply the “rate” of unemployment, but moreover, actual sequential improvements in overall payrolls. Ironically, the decline in payrolls is the predominant reason why corporate profits are up and the corrections in the S&P last year took the S&P measure all the back to July 2010 twice. The volatility of financial profits in the S&P has declined over the past two years, yet hybrids offer 23% more spread relative to the 10yr U.S. Treasury note and a Technical Trifecta that is still very much underway.

Memo: Our affiliate was published to the Word Academy of Science, Engineering and Technology Journal this month. In addition, their publication titled “Bail-in Capital: The New Box” was presented at the Academy’s conference in Dubai. The discussion was on Contingent Convertible Capital and how to price it. The link to the article follows:



The information in this document has been derived from sources believed to be accurate as of February 2012. Information derived from sources other than Principal Global Investors or its affiliates is believed to be reliable; however we do not independently verify or guarantee its accuracy or validity.

The information in this document contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. The general information it contains does not take account of any investor's investment objectives, particular needs or financial situation. Nor should it be relied upon in any way as forecast or guarantee of future events regarding a particular investment or the markets in general. All expressions of opinion and predictions in this document are subject to change without notice.

Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions in this document.

All figures shown in this document are in U.S. dollars unless otherwise noted.

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    EC2V 7JD, registered in England, No. 03819986, which has approved its contents, and which is authorised

    and regulated by the Financial Services Authority.

  • ?   SingaporebyPrincipalGlobalInvestors(Singapore)Limited(ACRAReg.No.199603735H),whichis

    regulated by the Monetary Authority of Singapore. In Singapore this document is directed exclusively at

    institutional investors [as defined by the Securities and Futures Act (Chapter 289)].

  • ?   HongKongbyPrincipalGlobalInvestors(HongKong)Limited,whichisregulatedbytheSecuritiesand

    Futures Commission.

  • ?   Australia by Principal Global Investors (Australia) Limited (ABN 45 102 488 068, AFS Licence No. 225385),

    which is regulated by the Australian Securities and Investments Commission.

    In the United Kingdom this document is directed exclusively at persons who are eligible counterparties or professional investors (as defined by the rules of the Financial Services Authority). In connection with its management of client portfolios, Principal Global Investors (Europe) Limited may delegate management authority to affiliates that are not authorised and regulated by the Financial Services Authority. In any such case, the client may not benefit from all protections afforded by rules and regulations enacted under the Financial Services and Markets Act 2000.

    Principal Global Investors is not a Brazilian financial institution and is not licensed to and does not operate as a financial institution in Brazil. Nothing in this document is, and shall not be considered as, an offer of financial products or services in Brazil.


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