Yep. In order, depositors, bondholders, shareholders. I don't recommend holding bank shares at this time. That's why shareholders are so eager for bailouts and why they try to scare everyone(depositors) into thinking they will lose their money if the bank goes broke.
The Covered bond. Is there no end to the govt.'s betrayal of its people. Been disgusted/discussed befoooooreyawwwwwwwwwwwn http://www.sfgate.com/cgi-bin/artic...30/bloomberg_articlesLY8YLF6KLVR401-LYN4Y.DTL
Are you sure about that? I remember the Pyramid Building Society when it went belly up in Victoria. The depositors got their money back - eventually. From memory some had to wait several years. So much for those that wanted a new car, house or extended holiday etc at the time. Also in Argentina, you could only withdraw a nominal sum per week. Say the equivalent of circa $50 which was barely enough to eek an existence for most.
From http://www.treasury.gov.au/documents/2126/PDF/jon_lonsdale.pdf As you would be aware, Australian banking law includes the longstanding concept of depositor preference. That is, if bank is wound up, all of its assets in Australia are available to meet the claims of depositors, who are given priority over all other unsecured creditors. This preference, together with APRA's prudential standards, has historically provided depositors with confidence when they deposit money in a bank, credit union or building society. However, the issuance of covered bonds does muddy the waters somewhat. Because covered bonds are a form of secured borrowing where the investor has a priority claim over certain ADI assets, this is inconsistent with the historical concept of depositor preference. ..... the Government plans to place an eight per cent cap on the value of assets a bank can pledge to covered bond investors.
the Government plans... Now that's a rich one! The Vampire Squid plans, to maximise the gov't bailout of depositors funds with taxpayer money. Whilst getting the gravy first.
.. .however the writing IS on the wall ... CBA pays price as move on covered bonds backfires * From: Bloomberg * February 01, 2012 12:00AM AUSTRALIA'S attempt to lower borrowing costs for the nation's largest lenders is backfiring as higher-than-anticipated relative yields on covered bonds roil the market for other bank debt. The gap in yields between financial debt and the swap rate rose to an almost three-year high after the Commonwealth Bank sold $3.5 billion of notes secured by mortgages and guaranteed by the issuer two weeks ago. The lender paid the widest spread on record to investors for a local financial offering. "The high spread at which the covered bonds were issued effectively means investors in all other bank securities need to be paid a greater premium," Andrew Gordon, director of fixed-income research at FIIG Securities said. "We had clients holding senior unsecured and subordinated paper who sold and bought the covered bonds." Parliament passed legislation in October allowing local banks to sell covered bonds, which are typically rated AAA because they are backed by a pool of mortgages that stay on a lender's balance sheet and can be sold in a default. The full digital experience The change was designed to help Australian banks raise wholesale funding at a lower cost than unsecured debt. Premiums on five-year senior unsecured notes sold by the four largest banks increased to 185 basis points more than the swap rate on January 17, the most since March 2009, from 157 basis points at the end of last year, according to a National Australia Bank index. Relative yields on European financial debt fell 62 to 279, while spreads on similar US bonds narrowed 43 to 281, Bank of America Merrill Lynch indexes show. The rising costs will exacerbate funding pressures for the Commonwealth Bank, NAB Westpac and ANZ, which have an average of $6.9bn of debt maturing each month this year, according to Citigroup. Fitch Ratings said this week it may downgrade the four banks by one level because their credit rankings did not reflect their "weaker funding profile". The long-term issuer default rating on CBA, Westpac and NAB, rated AA, as well as ANZ, set at AA-, have been placed on "rating watch negative", Fitch said. The lenders were downgraded by Moody's in May last year and by Standard & Poor's last month, partly because of their reliance on offshore funding markets. The banks and their units sold a combined $22.8bn of senior unsecured bonds in their home market last year, down from $28.2bn in 2010, data compiled by Bloomberg show. CBA's covered bond sale was the biggest offering of debt in Australian dollar terms. It priced $2bn of fixed-rate notes and $1.5bn of floating-rate securities at 175 basis points more than swap rates. The spreads were higher than any paid by the big four to investors on benchmark domestic senior bonds in data compiled by Bloomberg since 1991. "The deal came with a new issue premium," Simon Maidment, CBA's head of group funding, said. Westpac priced $1.7bn of 5.75 per cent notes and $1.4bn of floating-rate debt to yield 165 basis points more than swap rates on January 24. The yield premium on Westpac's 7.25 per cent senior, unsecured notes due in November 2016 increased 19 basis points to 179 basis points this year.
Hmmm interesting .... The legislation DID pass late in 2011, however there is no mention of the 8% cap on the value of assets a bank can pledge to covered bond investors. http://parlinfo.aph.gov.au/parlInfo...toc_pdf/11189b01.pdf;fileType=application/pdf
I'm guessing you read this article also? I think this was the most telling article I read all of 2011 and the absolute best graph I have ever seen depicting Aus housing prices (the one indexing against US prices). Scary http://www.whocrashedtheeconomy.com/blog/2011/08/real-house-price-index-update/
How have the real estate agent done this? We are brokers. That's it. It's the greedy BUYERS who have done this! It is important to note the difference between real estate agents and property investment spruikers. An agent sells property if the market is going up or down and he doesn't make excuses about it. The market is how it is to them. They do NOT give advice on property as an investment - its illegal as they do not have financial planning qualifications. The spruiker however wants you to believe property is the way to get rich...so after a buyer listens to the advice of a spruiker he sees an agent and buys a house. When silver rockets up and you missed the boat will you blame the dealers?! When your shares go down cos you bought a bad company do you blame etrade? What about when prices at the petrol station are up... Must be the big bad boogy woogy at the till who's at fault!
So your telling me that real estate agents don't participate in pouring copious amounts of poop out their mouth about the market? Maybe they have spruikers selling houses here. "the market is at the bottom of the cycle now. You either buy now or wait another 7 years". That was my serving of poop last weekend at an inspection.
CBA issued their covered pretty wide in order to guarantee themselves first go at funding this year. Westpac issued a covered a week later 10bps tighter.. and not the covered bonds are trading 30bps tighter than issue, meaning ANZ and NAB can fund even cheaper. Plus in the grand scheme of things.. CBA's covered bond added 1bp to their total funding cost... really not that significant
I took out most of the superfluous wording and this is what you are left with - a load of gobbledook nonsense CBA pays price as move on covered bonds backfires lower borrowing costs - largest lenders - anticipated relative yields - covered bonds roil -market - other bank debt - gap in yields - swap rate - notes secured by mortgages - guaranteed by the issuer - lender paid the widest spread - local financial offering - high spread -covered bonds - investors in all other bank securities - greater premium - holding senior unsecured and subordinated paper - local banks - sell covered bonds - backed by a pool of mortgages - lender's balance sheet - sold in a default - raise wholesale funding - lower cost than unsecured debt - premiums - senior unsecured notes -basis points - swap rate - relative yields - spreads on similar US bonds narrowed - rising costs - funding pressures- debt maturing - downgrade - credit rankings -"weaker funding profile" - long-term issuer default rating -"rating watch negative" - lenders - downgraded -reliance on offshore funding markets - banks and their units - senior unsecured bonds - home market - covered bond sale - biggest offering of debt - fixed-rate notes - floating-rate securities - swap rates - spreads higher- benchmark domestic senior bonds - new issue premium - priced per cent notes - floating-rate debt to yield - basis points - swap rates - yield premium - per cent senior, unsecured notes - increased basis points seriously, anyone talking this sort of claptrap jargon must be selling fiction - they may as well write their reports in Latin - but that would be too obvious ... but it seems so technical and proper so it must be true .... where do i sign ...
CBA pays price as move on covered bonds backfires in simple english would be closer to: the party is over -we are stuffed - money isnt worth a damn - lets hope we don't get caught
I was walking past an inspection recently and struck up a conversation with the agent on the door. He told me its a great time to buy. Then i said if its a great time to buy then it must be a sh-t time to sell. He gave me a funny look ......
