Top 10 at 10: South Canterbury bonds sold at discount; California bankrupt; 'Working for longer'; Dilbert

Here's my top 10 links from around the Internet at 10am. I welcome your additions and comments in the comments below. If you have any 'must reads' you'd like included in tomorrow's Top 10 at 10 please email me at bernard.hickey@interest.co.nz . I am glad I'm not evil... 1. The Otago Daily Times points out that there has been exceptional secondary market trading activity in South Canterbury Finance bonds in recent weeks at levels well below par values. It cites comments from CEO Lachie Mcleod about the government guarantee. There's an awful lot of noise building around South Canterbury about its dairy exposure and related party lending to interests associated with Alan Hubbard. Not sure there's much in it, but curious.

When contacted, South Canterbury Finance chief executive Lachie McLeod said he was not concerned at the bonds' below par value of 92c as investors recognised their redemption fell outside the guarantee period. "Investors are waiting to see if the Government guarantee is extended. This [below par value] is the market at work," he said yesterday. He pointed out a third South Canterbury bond tranche, due for redemption a week before the Government guarantee ran out, was trading at par, or $1 face value. "There's your answer," Mr McLeod said of investor sentiment at present.

2. The Australian reports that the banking regulator there, APRA, is changing the way it wants banks to provision for loans to take into account the health of the economy and the sharemarket. It seems to be a large divergence from the way the Reserve Bank of New Zealand forces the New Zealand arms of the same Australian banks to provision for their losses here. We're due to see more from the Reserve Bank here this week on its policy for capital reserves for banks, so we'll see if there's much divergence. Here's a few of the details from the changes in Australia.

APRA's views, set out in a speech by its general manager, David Lewis, last week, are that banks should be required to make provisions for losses that might occur throughout the life of a loan. "A more forward-looking approach to reserving offers considerably more hope of better positioning bank balance sheets to cope with inevitable expansions and contractions in economic activity," Mr Lewis said. He suggested this would take account of "macro-prudential" indicators in the same way that life insurers did with their resilience reserves. These reserves are based on the sharemarket -- when markets are high, they must hold more in reserve. In the case of banks, reserves would be based on a number of indicators, such as credit growth and sharemarket levels.

3. This is an excellent little interactive chart done by the Economist on the long term problem of pensioners living longer and having fewer people of working age to support them.

4. The Economist also argues that virtually all of us will have to work longer and that's not such a bad thing.

Whether we like it or not, we are going back to the pre-Bismarckian world, where work had no formal stopping point. That reversion will not happen overnight, but preparations should start now"”to ensure that when the inevitable happens it is a change for the better. It should be for the better because it is being partly driven by a wonderful thing: people are living ever longer. Life expectancy has been rising by two or three years for every ten that pass, despite repeated forecasts that it was about to reach its limit. Centenarians used to be rarer than hens' teeth; now America alone has 100,000 of them. By the end of this century the age of 100 may have become the new three score and ten.

5. Alan Kohler at businessspectator has a nice ramble through the Chinese and Australian property markets, pointing out China's market is running too hot because lending was rampant, while Australia's was warning up again after coming off the boil.

In Australia the porridge is just right. If you look at all the various indices, house prices in this country have fallen 4-5 per cent in the year to March and have since started rising again. It's even possible that the Rismark RP Data numbers tomorrow will show that most, if not all, of the fall has been recovered. And even a relative economic pessimist like me can see that there is little reason in the short to medium term for house prices to start falling again: thanks to last year's big interest rate cuts, housing affordability is near a record high (that is, most affordable); population growth is the highest in 40 years; developers are having trouble getting finance, as well as land, so there is a shortage of supply. Against that, prices at the top end have fallen more than the medians and remain soft, and unemployment is likely to keep rising over the next 12 months at least, which is likely to restrict both finance and housing demand. So far, so good. But remember: Goldilocks' mistake was falling asleep in the just-right-bed, having eaten the just-right-porridge.

6. California is bankrupt and Arnie seems powerless. The state government in California will have no money from Wednesday and will start issuing IOUs to contractors such as prison food and IT services providers, FT.com reported. 7. US Treasury bond yields dropped overnight after China acknowledged it would be unable to change out of the US dollar as its main reserve currency for a long time, Bloomberg reported. This reassured investors that China's central bank would keep buying all these US bonds being issued to fund Barack Obama's deficit. This drop in longer term US yields should translate into lower long term interest rates globally...for now. 8. Tyler Durden at Zero Hedge has an interesting email from an advisor to the US Federal Reserve suggesting that AIG could have viably been allowed to collapse. So why didn't it?

It is critical to uncover just who had the most to gain from preventing AIG from failing, and just what were the considerations that were analyzed and resolved by Fed members before deciding to invest a total of over US$180 billion in taxpayer capital in bailing out a company which is at this point terminally broken and any cash invested in it will never be recovered.

Zerohedge has since been swamped with information from readers about insider trading etc. 9. Tim Geithner's PPiP plan to deal with toxic debt is in big trouble, WSJ.com reported

Markets initially rallied when Treasury Secretary Timothy Geithner announced in March a two-pronged plan to offer favorable government financing to entice investors to buy bad loans and toxic securities from banks. But that initiative -- called the Public-Private Investment Program, or PPIP -- has lost momentum. Big banks worried about having to sell at fire-sale prices while small banks feared they would be shut out. Potential buyers balked at the risk of doing business with the government, concerned that politicians might demonize them for making big profits. The program's problems threaten to stymie efforts by struggling smaller banks, in particular, to clean up their balance sheets. That in turn could hinder efforts to revive the nation's economy. A look at why the program has stumbled underscores how difficult it has been to solve one of the economy's biggest problems: Mountains of bad debt sitting on the books of the nation's banks. As those loans and securities lose value, they are saddling the banks with losses and constricting their ability to lend.

10. Mish at GlobalEconomicAnalysis points to a Congressional Budget Office report on the sustainability of America's budget deficits.

Under current law, CBO projects debt held by the public will rise from less than 40 percent of GDP before the economic crisis to nearly 100 percent by 2040 and 300 percent by 2083. If current policies are continued, CBO projects the debt will rise to 100 percent by the early 2020s, to 200 percent before 2040, and eventually to 750 percent. Ultimately, revenue increases and/or spending cuts will be necessary to prevent "a vicious cycle in which the government had to issue ever-larger amounts of debt in order to pay ever-higher interest charges."