July 3, 2015

July 4th, 2015

There’s another reason not to hire a ‘star manager’ to run your mutual fund:

Aston Hill Financial Inc. has lost a key portfolio manager, the latest in a series of setbacks for the embattled asset manager. Late Tuesday, the company announced that Jeffrey Burchell, who had been with the company since 2010 and was also its co-chief investment officer, had resigned.

Mr. Burchell carved out a niche at Aston Hill running mutual funds with a dollop of hedge-fund style investing. A portion of the assets in Aston Hill Capital Growth Fund are sold short – a rarity in the mutual fund industry.

Most mutual funds use a long-only strategy. The firm also used Mr. Burchell prominently in marketing materials to sell its funds.

Riots in France have targeted Uber:

Uber Technologies Inc. suspended its UberPop share-a-ride service in France amid difficulties in the country including clashes with taxi drivers, tensions with the government and arrests of top executives.

The UberPop service is to be suspended from 8:00 p.m. local time to protect drivers and calm tensions with the French government, according to Uber France spokesman Thomas Meister.

Uber is awaiting a ruling from the French constitutional court in September on the Thevenoud law, which regulates services to transport passengers, Meister said.

This followed a protest staged last week by taxi drivers against the low-cost service UberPop. French President Francois Hollande said at the time that UberPop “must be dismantled and made illegal.”

The protest even caught up American rock singer Courtney Love, who said on her verified Twitter account that she escaped Roissy Charles de Gaulle airport on a motorcycle after rock-throwing protesters bashed her chauffeured car with metal bats and slashed its tires. She said she felt she’d be be safer in Baghdad.

The vested interests were not so lucky in Toronto:

An Ontario Superior Court judge has dismissed the City of Toronto’s attempt to shut down ride-sharing company Uber.

After a month of deliberating, Justice Sean Dunphy delivered his ruling Friday, saying the city failed to prove that Uber has broken any bylaws or that it is operating an illegal taxicab company.

There is a move in the States towards benefits over cash wages:

In lieu of higher salaries, employers are offering plusher benefits packages to attract and retain talent, a new survey suggests.

In a report on more than 450 employers surveyed by the Society of Human Resource Management, 35 percent cited bigger benefits packages, compared to 28 percent the year before. A small chunk of those asked—7 percent—noted a reduction, but that’s down from 9 percent the year earlier. The survey also noted the rise of such new benefits as company-provided fitness trackers, egg-freezing, group fitness, and student loan repayment programs.

The more attractive vacation and wellness offerings come at the expense of salary increases, as wages remain stagnant. The survey suggested that employees are promoting that trend. “Research has shown that many job seekers frequently place greater importance on health care coverage, flexible work schedules and other benefits rather than on their base salaries,” the report said.

The focus on benefits packages has less to do with changing employee preferences than health insurance trends. As health care costs have risen over the last 10 years, health benefits have eaten up an ever-growing share of total employee compensation. Between 2003 and 2013, health insurance premiums rose 60 percent with only an 11 percent increase in income during that same time period, per a Commonwealth Funds study. In the last few years, employers have started shoving even more of those costs on employees, without raising wages, according to the Center for American Progress. That falls in line with SHRM’s survey, which found 43 percent of employers now offer health-savings accounts, in which people put away tax free money to pay for their own medical costs, up from 38 percent five years ago. The report also found an increased focus on preventative focus health plans, with the hopes of decreased spending.

Those who are getting their insurance through Obamacare are in a good position to explain why health benefits are desirable:

Health insurance companies around the country are seeking rate increases of 20 percent to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected. Federal officials say they are determined to see that the requests are scaled back.

Blue Cross and Blue Shield plans — market leaders in many states — are seeking rate increases that average 23 percent in Illinois, 25 percent in North Carolina, 31 percent in Oklahoma, 36 percent in Tennessee and 54 percent in Minnesota, according to documents posted online by the federal government and state insurance commissioners and interviews with insurance executives.

A study of 11 cities in different states by the Kaiser Family Foundation found that consumers would see relatively modest increases in premiums if they were willing to switch plans. But if they switch plans, consumers would have no guarantee that they can keep their doctors. And to get low premiums, they sometimes need to accept a more limited choice of doctors and hospitals.

Sylvia Mathews Burwell, the secretary of health and human services, said that federal subsidies would soften the impact of any rate increases. Of the 10.2 million people who obtained coverage through federal and state marketplaces this year, 85 percent receive subsidies in the form of tax credits to help pay premiums.

One problem, I think, is that the rates are cost-plus:

Federal officials have often highlighted a provision of the Affordable Care Act that caps insurers’ profits and requires them to spend at least 80 percent of premiums on medical care and related activities. “Because of the Affordable Care Act,” Mr. Obama told supporters in 2013, “insurance companies have to spend at least 80 percent of every dollar that you pay in premiums on your health care — not on overhead, not on profits, but on you.”

So why get tough on charges? If you pay $53 for a pair of gloves, you can justify $66 worth of premiums! Score!

But if you’re uninsured you’re pigeon pie:

Fifty hospitals in the United States are charging uninsured consumers more than 10 times the actual cost of patient care, according to research published Monday.

Topping the list is North Okaloosa Medical Center, a 110-bed facility in the Florida Panhandle about an hour outside of Pensacola. Uninsured patients are charged 12.6 times the actual cost of patient care.

By comparison, the researchers said, a typical U.S. hospital charges 3.4 times the cost of patient care.

Partners Value Split Corp., proud issuer of PVS.PR.A, PVS.PR.B, PVS.PR.C and PVS.PR.D, has been confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the Pfd-2 (low) ratings of the Class AA Preferred Shares, Series 1 (the Series 1 Preferred Shares), Class AA Preferred Shares, Series 3 (the Series 3 Preferred Shares), Class AA Preferred Shares, Series 5 (the Series 5 Preferred Shares) and the Class AA Preferred Shares, Series 6 (the Series 6 Preferred Shares; collectively, the Class AA Preferred Shares) issued by Partners Value Split Corp. (the Company).

The Company owns a portfolio (the Portfolio) of Class A Limited Voting Shares (the BAM Shares) of Brookfield Asset Management Inc. (BAM; rated A (low) by DBRS).

The downside protection available to the Class AA Preferred Shares is approximately 84%, based on the market value of the BAM Shares as of July 2, 2015. The current Class AA Preferred Share dividend coverage ratio is approximately 1.8 times. As a result, the Company continues to be able to fund the Class AA Preferred Shares distributions without relying on other methods for generating income or reverting to the sale of common shares in the Portfolio. In the event of a shortfall, the Company may sell some of the BAM Shares, engage in securities lending or write covered call options to generate sufficient income to satisfy its obligations to pay the Class AA Preferred Shares dividends.

The Pfd-2 (low) ratings of the Class AA Preferred Shares are primarily based on the downside protection and dividend coverage available to the Class AA Preferred Shares.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 27bp, FixedResets off 1bp and DeemedRetractibles flat. Floaters got hammered. The Performance Highlights table shows that volatility continues. There are not enough adjectives in the English language to describe how low the volume was, as all the hard-working PMs and advisors enjoyed the US holiday.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150703
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 20.01 to be $0.58 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.67 cheap at its bid price of 16.09.

impVol_MFC_150703
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 24.61 to be $0.40 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 22.80 to be $0.38 cheap.

impVol_BAM_150703
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.35 to be $0.75 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 23.50 and appears to be $0.42 rich.

impVol_FTS_150703
Click for Big

FTS.PR.G, with a spread of +213bp, and bid at 21.38, looks $0.39 cheap and resets 2018-9-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.41 and is $0.23 rich.

pairs_FR_150703
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.35%, including the outlier TRP.PR.A / TRP.PR.F at -0.03%. On the junk side there are three outliers: FFH.PR.E / FFH.PR.F at -0.58%; BRF.PR.A / BRF.PR.B at -0.68%; and AIM.PR.A / AIM.PR.B at -0.01%.

pairs_FR_150703
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 -1.4065 % 2,213.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.4065 % 3,869.8
Floater 3.50 % 3.51 % 61,195 18.53 3 -1.4065 % 2,352.8
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1071 % 2,771.4
SplitShare 4.59 % 4.94 % 65,595 3.24 3 -0.1071 % 3,248.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1071 % 2,534.2
Perpetual-Premium 5.46 % 3.87 % 66,390 0.08 13 0.0846 % 2,517.8
Perpetual-Discount 5.33 % 5.24 % 93,269 15.00 21 0.2689 % 2,680.7
FixedReset 4.51 % 3.78 % 217,156 16.19 88 -0.0071 % 2,328.1
Deemed-Retractible 5.02 % 4.76 % 107,882 0.80 34 -0.0047 % 2,620.6
FloatingReset 2.92 % 3.25 % 54,158 6.00 10 0.1567 % 2,327.1
Performance Highlights
Issue Index Change Notes
TD.PF.D FixedReset -3.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.73
Evaluated at bid price : 23.90
Bid-YTW : 3.84 %
ENB.PR.F FixedReset -2.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 17.91
Evaluated at bid price : 17.91
Bid-YTW : 4.96 %
BAM.PR.C Floater -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 14.00
Evaluated at bid price : 14.00
Bid-YTW : 3.58 %
BAM.PR.B Floater -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 3.46 %
CM.PR.O FixedReset -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.12
Evaluated at bid price : 22.65
Bid-YTW : 3.68 %
IFC.PR.A FixedReset -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.27
Bid-YTW : 6.41 %
IAG.PR.A Deemed-Retractible -1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.75
Bid-YTW : 5.88 %
BAM.PR.K Floater -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 14.26
Evaluated at bid price : 14.26
Bid-YTW : 3.51 %
ELF.PR.H Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 24.46
Evaluated at bid price : 24.95
Bid-YTW : 5.51 %
FTS.PR.F Perpetual-Discount 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 23.31
Evaluated at bid price : 23.60
Bid-YTW : 5.24 %
RY.PR.Z FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.57
Evaluated at bid price : 23.40
Bid-YTW : 3.48 %
SLF.PR.H FixedReset 1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.78
Bid-YTW : 5.51 %
ENB.PR.P FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 18.57
Evaluated at bid price : 18.57
Bid-YTW : 4.81 %
BAM.PF.D Perpetual-Discount 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 21.42
Evaluated at bid price : 21.75
Bid-YTW : 5.65 %
SLF.PR.G FixedReset 1.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.50
Bid-YTW : 7.31 %
TRP.PR.E FixedReset 1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.12
Evaluated at bid price : 22.67
Bid-YTW : 3.78 %
TD.PF.A FixedReset 2.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.38
Evaluated at bid price : 23.11
Bid-YTW : 3.57 %
SLF.PR.J FloatingReset 2.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.40
Bid-YTW : 7.39 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.L Deemed-Retractible 111,827 TD crossed 100,100 at 25.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-04-27
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 3.46 %
SLF.PR.I FixedReset 63,900 Nesbitt crossed 59,600 at 24.80.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 3.90 %
TD.PF.D FixedReset 41,300 Scotia crossed 25,000 at 24.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.73
Evaluated at bid price : 23.90
Bid-YTW : 3.84 %
BNS.PR.Z FixedReset 30,551 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.35
Bid-YTW : 3.53 %
SLF.PR.J FloatingReset 23,954 Recently listed following conversion.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.40
Bid-YTW : 7.39 %
ENB.PR.Y FixedReset 17,286 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 17.92
Evaluated at bid price : 17.92
Bid-YTW : 4.87 %
There were 6 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PF.D FixedReset Quote: 23.90 – 24.90
Spot Rate : 1.0000
Average : 0.5472

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.73
Evaluated at bid price : 23.90
Bid-YTW : 3.84 %

TRP.PR.H FloatingReset Quote: 14.35 – 20.09
Spot Rate : 5.7400
Average : 5.5474

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 3.83 %

CM.PR.O FixedReset Quote: 22.65 – 23.45
Spot Rate : 0.8000
Average : 0.6075

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 22.12
Evaluated at bid price : 22.65
Bid-YTW : 3.68 %

NA.PR.W FixedReset Quote: 22.40 – 22.89
Spot Rate : 0.4900
Average : 0.3094

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 21.93
Evaluated at bid price : 22.40
Bid-YTW : 3.66 %

ENB.PR.A Perpetual-Discount Quote: 24.78 – 25.26
Spot Rate : 0.4800
Average : 0.3123

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 24.53
Evaluated at bid price : 24.78
Bid-YTW : 5.61 %

ENB.PR.F FixedReset Quote: 17.91 – 18.32
Spot Rate : 0.4100
Average : 0.2442

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-03
Maturity Price : 17.91
Evaluated at bid price : 17.91
Bid-YTW : 4.96 %

EMA.PR.A To Be Extended

July 3rd, 2015

Emera Incorporated has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative 5-Year Rate Reset First Preferred Shares, Series A of the Company (the “Series A Shares”) on August 15, 2015. There are currently 6,000,000 Series A Shares outstanding.

Subject to certain conditions set out in the prospectus supplement of the Company dated, May 26, 2010, to the short form base shelf prospectus, dated May 19, 2010 (collectively, the “Prospectus”) relating to the issuance of the Series A Shares, the holders of the Series A Shares have the right, at their option, to convert all or any of their Series A Shares, on a one-for-one basis, into Cumulative Floating Rate First Preferred Shares, Series B of the Company (the “Series B Shares”) on August 15, 2015 (the “Conversion Date”).

On such date, holders who do not exercise their right to convert their Series A Shares into Series B Shares will continue to hold their Series A Shares.

The foregoing conversion right is subject to the following:

1. if the Company determines that there would be less than 1,000,000 Series B Shares outstanding on the Conversion Date, then holders of Series A Shares will not be entitled to convert their shares into Series B Shares, and

2. alternatively, if the Company determines that there would remain outstanding less than 1,000,000 Series A Shares on the Conversion Date, then all remaining Series A Shares will automatically be converted into Series B Shares on a one-for-one basis on the Conversion Date.

In either case, Emera will give written notice to that effect to holders of Series A Shares no later than August 10, 2015.

The dividend rate applicable for the Series A Shares for the five-year period commencing on August 15, 2015 and ending on (and inclusive of) August 14, 2020, and the dividend rate applicable to the Series B Shares for the 3-month period commencing on August 15, 2015 and ending on (and inclusive of) November 14, 2015, will be determined on July 16, 2015 and notice of such dividend rates shall be provided to the holders of the Series A Shares on that day.

Beneficial owners of Series A Shares who wish to exercise their conversion right, should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from July 16, 2015 until 5:00 p.m. (EDT) on July 31, 2015.

Inquiries should be directed to Emera Investor Services, at 1-800-358-1995 or 902-428-6060, or by email to investors@emera.com.

EMA.PR.A is a FixedReset, 4.40%+184, announced 2010-5-25, which commenced trading 2010-6-2. If we assume that the July 3 GOC-5 yield of 0.80% remains the level at the time of reset, then the issue will reset at 2.64%, a 40% decline from the initial rate.

So, we shall learn the new rate on July 16, and can elect conversion until July 31 (or a day or two earlier when providing instructions via an intermediary). I’ll keep you posted!

July 2, 2015

July 3rd, 2015

Jobs, jobs, jobs!

The U.S. labor market took one step forward and one back in June as job creation advanced while wages stagnated and the size of the labor force receded.

The addition of 223,000 jobs followed a 254,000 increase in the prior month that was less than previously estimated, a Labor Department report showed Thursday in Washington. The jobless rate fell to a seven-year low of 5.3 percent as people left the workforce.

Earnings at private employers held at $24.95 an hour in June on average and rose 2 percent over the past 12 months, matching the mean since the current expansion began six years ago. Wages had increased 2.3 percent in the year ended in May.

Stocks fell as investors waited for Greece’s weekend referendum on austerity measures. The Standard & Poor’s 500 Index declined 0.2 percent to 2,072.51 at 12:27 p.m. in New York. The weak wage reading lifted Treasuries, dropping the yield on the benchmark 10-year note to 2.37 percent from 2.42 percent late on Wednesday.

Naturally, this juxtaposition of higher employment with disappointing wages has increased speculation regarding what the Fed thinks:

By one measure, the U.S. labor market has already met the Federal Reserve’s expectations for 2015: The jobless rate fell to 5.3 percent in June, matching the policy makers’ projection for the end of the year, a Labor Department report Thursday showed.

The Federal Open Market Committee said in June that unemployment would ease to 5.2 to 5.3 percent in 2015, elevated just slightly from their expectation of a 5-to-5.2 percent longer-run natural rate (the joblessness that exists because of factors like labor market churn rather than due to cyclical weakness in the economy). The fact that the labor market has reached the committee’s 2015 estimate already — and has done so without spurring stronger wage gains — may prompt officials to lower both the 2015 and the long-run estimate at their September meeting.

SEC Commissioner Daniel M. Gallagher is not happy with the proposed Compensation Clawback Listing Standards:

Over the past four years, I have made it obvious to most that I am no fan of the Dodd-Frank Act, and certainly not the Act’s executive compensation rulemaking mandates. As I have noted many times in the past, there are real opportunity costs to this agency when our resources are devoted to these politically-motivated mandates.[1] Staff hours spent on clawbacks, pay-for-performance, pay ratio, and hedging rules — not to mention other nonsensical Dodd-Frank mandates like conflict minerals and extractive resources —is time not being spent on meaningful, important projects like the disclosure review project.[2] We desperately need to revamp our disclosure rules to cut through the clutter and ensure that we are only requiring disclosure of information that is important to a reasonable investor’s voting or investment decision. And there are other projects in need of CorpFin’s attention — most notably the much-needed revamp of our shareholder proposal rule. But instead of addressing these actually important issues, for years priority has been placed on plowing through Dodd-Frank’s many intrusions into state corporate governance rules.

The third devil is that the scope of the required compensation to be clawed back includes compensation based on financial reporting metrics as well as compensation based on share price metrics like Total Shareholder Return, or TSR. Calculating the appropriate amount of clawback for TSR-based compensation is much more difficult than calculating a clawback for a financial reporting measure, requiring an analysis such as an event study to determine what the share price would have been but for the misstatement at the time the compensation was earned. These analyses require substantial use of assumptions and judgment, often producing a range of numbers, rather than a firm number. The release candidly admits this difficulty, and proposes simply that issuers “be permitted to use reasonable estimates.”[20] This is cold comfort for the post-facto second-guessing that is likely to occur.[21] And yet, excluding TSR-based metrics from the scope of the rule would not have been the right approach either, as it would have shifted compensation packages towards these pay metrics, further entrenching the short-termism that is abetted by the Commission’s executive compensation rules.[22] I don’t know what the right answer is here, but I do know that today’s proposal isn’t it.

I had to laugh at a trend in the advising industry highlighted by Kenmar Associates in their (subscription-based) newsletter “INVESTOR PROTECTION IN CANADA- Q2 2015″:

Are you being “Reverse Churned? We are seeing a large number of accounts being converted to fee-based effectively turning commissions into fees. This may not be in your Best interests. “Reverse churning,” a claim alleging that a dealer representative has failed in his/her duties to act fairly, honestly and good faith to a client by moving an under-traded account from a commission to a fee-based compensation structure solely for the purpose of generating revenue from that account or by failing to make trades in an account that would have otherwise been made had the account been commission, instead of fee-based could be taking place. The historic effect of the prevalence of churning claims, and the attendant increase in the necessity of documenting client approval of such transactions, as well as CRM2 reporting has been the creation of an incentive for brokers to move their clients to fee-based accounts. In other words, because commission-based accounts require more action to document and justify commissions/ paid, there is an incentive for brokers to move their clients to accounts which require less day-to-day oversight. This incentive also exists with respect to accounts in which there is relatively little trading say as in, RRIF’s. IIROC rules require that a dealer representative (aka “advisor”) have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer based on information obtained through reasonable diligence of the member or associated person to ascertain the customer’s investment profile. Is the rule being enforced? Don’t count on it. We recommend asking your advisor some probing questions if you have been converted.

I’m not sure that the choice of fee model counts as a “recommended transaction or investment strategy”, but I suppose that will be the subject of some complaints of some sort over the next little while. Many clients will, of course, be outraged that they are being charged $2,000 by an advisor who only executed two trades in a year; that will be a big issue should a fiduciary requirement eventually be imposed.

Sweden is going negative:

Sweden’s central bank lowered its main interest rate deeper into negative levels and expanded its bond purchases to the end of the year as the turmoil in Greece raises the specter of further krona gains.

The repo rate was cut to minus 0.35 percent from minus 0.25 percent, the Stockholm-based bank said in a statement. A reduction was predicted by 4 of 18 analysts in a Bloomberg survey, with remainder forecasting no change. The bank expanded its bond purchasing program by 45 billion kronor ($5.3 billion) to the end of year, adding to the 80 billion kronor to 90 billion kronor already announced.

The bank kept its repo rate unchanged in April after two cuts earlier in the year. Policy makers then added 40 billion kronor to 50 billion kronor to its bond buying from an initial 40 billion kronor announced since February.

The moves earlier this year had limited success in keeping the krona from strengthening against the euro, as the ECB’s own bond purchases and the turmoil in Greece weigh on the common currency. Before today, the krona was up more than 2 percent against the euro this year.

Here’s one reason why the US is pushing for free trade in dairy:

There’s so much milk flowing out of U.S. cows these days that some is ending up in dirt pits because dairies can’t find buyers.

Domestic output is set to be the highest ever for a fifth straight year. Farmers are still making money as prices tumble because of cheaper and more abundant feed for their herds. Supplies of raw milk are topping capacity at processing plants in parts of the U.S. and compounding a global surplus even with demand improving.

Global dairy prices have dropped 39 percent from an all-time high in February 2014 and are the lowest in five years, United Nations data show. In Chicago, benchmark Class III milk futures, used in cheese making, are down 36 percent to $16.23 per 100 pounds from a record $25.30 in September. Prices may fall to $14.41 by the end of the year before recovering in 2016, said Tom Bailey, a New York-based analyst at Rabobank International.

At the same time, the dollar’s rally against most of the world’s currencies helped to spur a 10 percent drop in U.S. milk exports in the first four months of 2015, while imports rose 12 percent, compounding the domestic surplus, government data show.

The bear market has been no barrier to more supply. At Mitch Breunig’s farm in Sauk City, Wisconsin, he’s still profitable even as the value of his milk fell 26 percent. Costs have dropped for things like fuel, and wet spring weather left an abundant alfalfa harvest, providing higher-quality hay for his 420 cows to eat. The animals are producing 3 percent more milk than last year.

Nice to see a tiny hint of rationality in Canadian securities regulation:

In Canada’s balkanized financial markets enforcement regime, when one provincial watchdog bans or suspends a fraudster or someone else who has violated securities rules, the others usually need to hold their own “rubber stamp” hearings to make the order apply in other provinces.

But the Alberta Securities Commission announced Thursday that as of July 1, most orders and settlement agreements made by other securities commissions across Canada will “automatically take effect” in Alberta, without any hearing or any notice to the person or company affected. Decisions made by regulators outside Canada, such as the U.S. Securities Exchange Commission, will not be automatically reciprocated, but could still be rubber-stamped and enforced by the ASC as they are now.

The changes comes after a rare and unusual decision last year, in which an ASC panel initially chose not to endorse an Ontario Securities Commission settlement with Bruce Moore, a former investment banker who agreed he had improperly traded shares through offshore accounts using confidential information he gleaned from his work at Canadian Imperial Bank of Commerce. The OSC had imposed a 15-year ban on working as a registrant in the securities industry and a 10-year ban on trading shares of public companies.

The ASC panel said it denied the request to enforce the bans in Alberta, because it had not received enough information from ASC staff – not even a copy of the original OSC decision in the case. However, the ASC later reciprocated the order, presumably after commissioners were provided with enough background.

Come on, guys. We know that provincial securities regulation is just a cash grab. You don’t need to make such a pretense of independence as all that.

It’s nice to see more Chinese money recycled into the global economy:

The trend has already hit Sydney, Vancouver and the U.S. Now it’s happening in Japan: busloads of real estate buyers from China coming in, buying up homes and pushing prices higher.

Realty agencies in Beijing are organizing twice-monthly tours to Tokyo and Osaka, where 40 Chinese at a time come for three-day property-shopping trips, seeking safe places to invest their cash abroad. They’re being prompted by the yen’s decline to 22-year lows and excitement over the 2020 Tokyo Olympics driving up prices, as they did in Beijing in 2008. Property tours will soon start from Shanghai too.

Partly as a result of nascent Chinese buying, Tokyo apartment prices have reached the highest levels since the early 1990s, up 11 percent over two years, according to the Real Estate Economic Institute Co.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 31bp, FixedResets off 4bp and DeemedRetractibles gaining 2bp. The Performance Highlights table is its usual lengthy self. Volume was exceedingly very awfully extremely low; I suppose today’s juxtaposition between a Canadian closing and an American one persuaded many fine representatives of the highest paid profession on earth to stay home.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150702
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 20.11 to be $0.74 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.53 cheap at its bid price of 16.21.

impVol_MFC_150702
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 24.83 to be $0.588 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 22.80 to be $0.41 cheap.

impVol_BAM_150702
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.39 to be $0.75 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.75 and appears to be $0.48 rich.

impVol_FTS_150702
Click for Big

FTS.PR.G, with a spread of +213bp, and bid at 21.38, looks $0.31 cheap and resets 2018-9-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.28 and is $0.12 rich.

pairs_FR_150702
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.37%, including the outlier TRP.PR.A / TRP.PR.F at -0.21. On the junk side there are three outliers: FFH.PR.E / FFH.PR.F at -0.79%; BRF.PR.A / BRF.PR.B at -0.43%; and DC.PR.B / DC.PR.D at -0.18%.

pairs_FF_150702
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 -0.1382 % 2,244.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1382 % 3,925.0
Floater 3.45 % 3.48 % 60,124 18.61 3 -0.1382 % 2,386.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0134 % 2,774.4
SplitShare 4.59 % 4.82 % 67,992 3.24 3 -0.0134 % 3,251.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0134 % 2,536.9
Perpetual-Premium 5.47 % 2.65 % 66,837 0.16 13 0.1089 % 2,515.7
Perpetual-Discount 5.35 % 5.30 % 97,153 14.94 21 0.3126 % 2,673.5
FixedReset 4.51 % 3.75 % 224,674 16.16 88 -0.0397 % 2,328.2
Deemed-Retractible 5.01 % 4.81 % 109,386 3.17 34 0.0239 % 2,620.7
FloatingReset 2.92 % 3.26 % 56,296 6.00 10 -0.2482 % 2,323.4
Performance Highlights
Issue Index Change Notes
SLF.PR.J FloatingReset -3.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.00
Bid-YTW : 7.70 %
SLF.PR.H FixedReset -2.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.50
Bid-YTW : 5.68 %
TRP.PR.E FixedReset -1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 21.84
Evaluated at bid price : 22.25
Bid-YTW : 3.87 %
TD.PF.A FixedReset -1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 22.07
Evaluated at bid price : 22.60
Bid-YTW : 3.67 %
IFC.PR.C FixedReset -1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 4.84 %
NA.PR.M Deemed-Retractible -1.32 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-05-15
Maturity Price : 25.25
Evaluated at bid price : 25.51
Bid-YTW : 5.64 %
NA.PR.S FixedReset -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 22.85
Evaluated at bid price : 23.95
Bid-YTW : 3.57 %
PWF.PR.R Perpetual-Premium -1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-04-30
Maturity Price : 25.25
Evaluated at bid price : 25.76
Bid-YTW : 5.22 %
NA.PR.Q FixedReset -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 3.60 %
HSE.PR.C FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 22.47
Evaluated at bid price : 23.30
Bid-YTW : 4.42 %
NA.PR.W FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 22.00
Evaluated at bid price : 22.51
Bid-YTW : 3.70 %
BAM.PF.G FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 22.54
Evaluated at bid price : 23.50
Bid-YTW : 4.14 %
HSE.PR.A FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 16.17
Evaluated at bid price : 16.17
Bid-YTW : 4.23 %
BAM.PF.C Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 21.26
Evaluated at bid price : 21.26
Bid-YTW : 5.75 %
IFC.PR.A FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.50
Bid-YTW : 6.26 %
ENB.PR.N FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 4.84 %
FTS.PR.J Perpetual-Discount 1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 23.19
Evaluated at bid price : 23.55
Bid-YTW : 5.08 %
GWO.PR.N FixedReset 1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.11
Bid-YTW : 6.89 %
HSE.PR.E FixedReset 1.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 23.00
Evaluated at bid price : 24.50
Bid-YTW : 4.51 %
ELF.PR.G Perpetual-Discount 2.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 22.08
Evaluated at bid price : 22.36
Bid-YTW : 5.31 %
IAG.PR.A Deemed-Retractible 3.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.00
Bid-YTW : 5.73 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.M Deemed-Retractible 130,160 TD crossed 123,300 at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-08-26
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : 0.30 %
BMO.PR.Q FixedReset 64,379 Nesbitt crossed 52,200 at 23.40.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 3.49 %
FTS.PR.H FixedReset 33,605 Desjardins crossed 30,500 at 16.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 16.90
Evaluated at bid price : 16.90
Bid-YTW : 3.57 %
ENB.PF.E FixedReset 24,190 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 4.74 %
TRP.PR.B FixedReset 20,908 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 14.68
Evaluated at bid price : 14.68
Bid-YTW : 3.73 %
ENB.PF.C FixedReset 16,543 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 20.08
Evaluated at bid price : 20.08
Bid-YTW : 4.74 %
There were 9 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
SLF.PR.H FixedReset Quote: 20.50 – 21.23
Spot Rate : 0.7300
Average : 0.4779

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.50
Bid-YTW : 5.68 %

PVS.PR.C SplitShare Quote: 24.92 – 25.50
Spot Rate : 0.5800
Average : 0.3662

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 5.16 %

MFC.PR.L FixedReset Quote: 22.31 – 23.02
Spot Rate : 0.7100
Average : 0.5012

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.31
Bid-YTW : 4.90 %

PWF.PR.R Perpetual-Premium Quote: 25.76 – 26.25
Spot Rate : 0.4900
Average : 0.3256

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-04-30
Maturity Price : 25.25
Evaluated at bid price : 25.76
Bid-YTW : 5.22 %

PWF.PR.S Perpetual-Discount Quote: 24.02 – 24.50
Spot Rate : 0.4800
Average : 0.3185

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 23.64
Evaluated at bid price : 24.02
Bid-YTW : 5.06 %

TRP.PR.E FixedReset Quote: 22.25 – 22.74
Spot Rate : 0.4900
Average : 0.3432

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-07-02
Maturity Price : 21.84
Evaluated at bid price : 22.25
Bid-YTW : 3.87 %

June 30, 2015

July 1st, 2015

The Canadian economic news is not encouraging:

Statistics Canada reported Tuesday that real gross domestic product (i.e. adjusted for inflation) shrank by 0.1 per cent in April from March. The economy was hit hard by a 3.4-per-cent drop in oil and gas extraction, as the Alberta oil sands, battered in recent months by sharply lower oil prices, was hit by maintenance shutdowns and other production delays. Manufacturing, retail sales and construction also took a step backward in the month.

The April decline was something of a shock to economists and market watchers, who had anticipated a turnaround from March’s 0.2-per-cent decline, and from a dismal first-quarter in which the economy contracted at an annualized rate of 0.6 per cent – its weakest quarter since the Great Recession. The oil price shock, harsh weather and U.S. port strikes weighed down activity in the quarter, but those factors appeared to have eased with the arrival of spring.

The Canadian dollar slumped about four-tenths of a penny against its U.S. counterpart on the news, to about 80.5 cents (U.S.).

Meanwhile, the US is going all-out to increase productivity:

Retailers and manufacturers blasted President Barack Obama’s plan to make more Americans eligible for overtime pay, saying the move would stunt workers’ careers and cost companies billions.

The National Retail Federation says Obama’s proposed rule change to greatly increase how many salaried employees can claim overtime would force companies to use more part-time and entry-level workers. Businesses also may offer fewer promotions and convert salaried employees to hourly to avoid raising their pay, the NRF said.

Obama’s plan would make workers who earn a salary of as much as $970 a week, or about $50,000 a year, eligible to claim overtime under the Fair Labor Standards Act. The current threshold is $455 a week, or about $24,000 a year, which is below the poverty line for a family of four. This change would benefit 4.68 million people, the White House said Tuesday on its website.

An analysis by the Economic Policy Institute showed large increases in the percentage of workers that would be eligible for overtime if the threshold were raised to a level similar to Obama’s proposal. Among retail supervisors, about 56 percent would be covered, up from 8 percent. The group calculated comparable jumps for restaurant managers, insurance clerks and customer-service representatives.

This is another step in the process of improving North American productivity, in conjunction with minimum wage changes. A few businesses will, no doubt, go under. Good. If your business operating model can be summed up as ‘Sweat Your Labour’, then the faster you go bankrupt the better it will be for those of us who prefer a more skilful approach.

Speaking of productivity I was thrilled to learn of a bricklaying robot:

As robots get smarter, cheaper and more versatile, they’re taking on a growing number of challenges – and bricklaying can now be added to the list. Engineers in Perth, Australia, have created a fully working house-building machine that can create the brick framework of a property in just two days, working about 20 times faster than a human bricklayer.

Named Hadrian (after Hadrian’s Wall in the UK), the robot has a top laying speed of 1,000 bricks per hour, which works out as the equivalent of about 150 homes a year. Of course there’s no need for the machine to sleep, eat or take tea breaks either, giving it another advantage over manual laborers.

At the heart of Hadrian is a 28 m (92 ft) articulated telescopic boom. Though mounted on an excavator in the photo below, the finished version will sit on a truck, allowing it easier movement from place to place. The robot brick-layer uses information fed from a 3D CAD representation of the home for brick placement, with mortar or adhesive delivered under pressure to the head of the boom.

Impressive! And according to the company video, it builds proper double-brick houses instead of this frame crap we adore in Canada. It’s too bad the engineering for this initiative was done in Australia, but not in Canada … but I suppose in Canada we’re plenty productive enough already, eh?

And Jody Shenn of Bloomberg made an excellent point at the end of her story about lending to shadow-banks:

U.S. banks’ loans to nondepository financial companies, or shadow banks, have jumped more than 230 percent over the past three years, according to the semiannual risk perspective report released by the Office of the Comptroller of the Currency on Tuesday. They were the fifth-largest category of commercial-loan holdings at banks at the end of last year, up from the 11th spot at the end of 2011.

It’s not just banks that are offering nonbanks a helping hand.

Another report released Tuesday, from the overseer of Fannie Mae and Freddie Mac, shows that those companies may also be playing a role, as they increase the fees they charge lenders to guarantee mortgages.

Over the past two years, the mortgage giants have been charging small lenders less (on a risk-adjusted basis) to guarantee loans than they charge large ones, in a switch from the past, according to the report. And many of those small lenders are nonbanks.

In other words, if you push risk down in one place, it can pop up in another place that may not be so far removed from the first.

I thought that was an interesting nugget regarding the elimination of incentives for volume. It’s true!

December 2012
FHFA directs Enterprises to implement an additional 10 basis point average increase, raise 30-year fees by more than 15-year fees to better align returns across both products, and make changes intended to increase fees by more for larger lenders in order to remove fee concessions for volume of deliveries.

I can’t seem to find anything regarding the rationale for this peculiar action.

The Canadian preferred share market ended a horrible month on a positive note, with PerpetualDiscounts winning 22bp, FixedResets gaining 11bp and DeemedRetractibles up 18bp. The Performance Highlights table is its usual lengthy self. Volume was low.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150630
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 20.02 to be $0.58 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.48 cheap at its bid price of 16.35.

impVol_MFC_150630
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule). The lowest spread issue, MFC.PR.F, is again noticeably off the line defined by the higher-spread issues.

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 24.61 to be $0.44 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 22.60 to be $0.53 cheap.

impVol_BAM_150630
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.37 to be $0.79 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 23.75 and appears to be $0.69 rich.

impVol_FTS_150630
Click for Big

FTS.PR.G, with a spread of +213bp, and bid at 21.25, looks $0.34 cheap and resets 2018-9-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.34 and is $0.29 rich.

That’s the first time since I started publishing these charts regularly that FTS.PR.H has not been the cheapest issue; it is therefore interesting to see just how good Implied Volatility Theory has been as a predictor of returns since January 23, a date for which the Fortis issues were examined in detail in the post Effect of Varying GOC-5 Rate On Implied Volatility Rich/Cheap Analysis.

FTS FixedResets: Characteristics
Ticker Current
Dividend
Issue
Reset
Spread
Next
Exchange
Date
FTS.PR.G 0.9708 +213 2018-9-1
FTS.PR.H 1.0625 +145 2015-6-1
FTS.PR.K 1.00 +205 2019-3-1
FTS.PR.M 1.025 +248 2019-12-1
FTS.PR.H has since reset at 2.50%


FTS FixedResets:
Comparison of 2015-1-23 and 2015-6-30
Actual Prices
Ticker Bid Price
2015-1-23
Rich / (Cheap)
2015-1-23
Bid Price
2015-6-30
Rich / (Cheap)
2015-6-30
Total Return
2015-1-23
to
2015-6-30
FTS.PR.G 24.70 0.13 21.25 (0.34) -12.26%
FTS.PR.H 18.28 (0.88) 16.80 (0.01) -5.12%
FTS.PR.K 25.15 1.12 21.34 0.29 -12.99%
FTS.PR.M 25.58 (0.70) 23.70 0.04 -5.71%

FTS FixedResets:
Comparison of 2015-1-23 and 2015-6-30
Fair Value Prices
Ticker Fair Value
2015-1-23
Fair Value
2015-6-30
"Fair" Return
2015-1-23
to
2015-6-30
FTS.PR.G 24.57 21.59 -10.22%
FTS.PR.H 19.16 16.81 -9.42%
FTS.PR.K 24.03 21.05 -10.46%
FTS.PR.M 26.28 23.66 -8.10%
Total return calculated with reinvestment of dividends on the ex-date at actual prices, not "fair" prices

Well … I’d say Implied Volatility worked pretty well!

pairs_FR_150630
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.36%, including the outlier TRP.PR.A / TRP.PR.F at -0.09 and the new SLF.PR.G / SLF.PR.J pair at +1.08%. On the junk side there are three outliers: FFH.PR.E / FFH.PR.F at -0.64%; BRF.PR.A / BRF.PR.B at -0.88%; and DC.PR.B / DC.PR.D at -0.24%.

pairs_FF_150630
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 2.3327 % 2,247.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 2.3327 % 3,930.4
Floater 3.45 % 3.47 % 60,674 18.57 3 2.3327 % 2,389.7
OpRet 4.79 % -4.82 % 22,401 0.08 1 0.0392 % 2,774.8
SplitShare 4.59 % 4.80 % 68,624 3.25 3 0.2281 % 3,251.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0392 % 2,537.3
Perpetual-Premium 5.50 % 5.10 % 64,414 4.21 19 -0.0668 % 2,512.9
Perpetual-Discount 5.28 % 5.20 % 118,505 15.07 15 0.2233 % 2,665.2
FixedReset 4.51 % 3.77 % 228,423 16.34 88 0.1074 % 2,329.1
Deemed-Retractible 5.01 % 4.69 % 110,914 0.64 34 0.1759 % 2,620.1
FloatingReset 2.96 % 3.23 % 41,834 6.01 11 -0.1035 % 2,329.2
Performance Highlights
Issue Index Change Notes
FTS.PR.I FloatingReset -3.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 3.71 %
TRP.PR.A FixedReset -2.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 20.02
Evaluated at bid price : 20.02
Bid-YTW : 3.68 %
GWO.PR.N FixedReset -1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.85
Bid-YTW : 7.08 %
ENB.PR.J FixedReset -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 19.54
Evaluated at bid price : 19.54
Bid-YTW : 4.74 %
BAM.PF.E FixedReset -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 21.75
Evaluated at bid price : 22.15
Bid-YTW : 4.17 %
MFC.PR.L FixedReset -1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 4.94 %
TRP.PR.G FixedReset -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 23.11
Evaluated at bid price : 24.91
Bid-YTW : 3.77 %
PWF.PR.P FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 3.65 %
FTS.PR.G FixedReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 3.77 %
ENB.PF.A FixedReset 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 4.71 %
MFC.PR.C Deemed-Retractible 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 5.93 %
ENB.PR.T FixedReset 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.83 %
BAM.PR.N Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 20.77
Evaluated at bid price : 20.77
Bid-YTW : 5.76 %
ENB.PR.D FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 4.84 %
ELF.PR.F Perpetual-Premium 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 24.23
Evaluated at bid price : 24.53
Bid-YTW : 5.40 %
VNR.PR.A FixedReset 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 23.09
Evaluated at bid price : 24.00
Bid-YTW : 3.96 %
BMO.PR.T FixedReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.18
Evaluated at bid price : 22.75
Bid-YTW : 3.62 %
BAM.PR.M Perpetual-Discount 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 20.90
Evaluated at bid price : 20.90
Bid-YTW : 5.72 %
BAM.PR.C Floater 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 3.47 %
BAM.PF.B FixedReset 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 4.30 %
TRP.PR.C FixedReset 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 16.35
Evaluated at bid price : 16.35
Bid-YTW : 3.80 %
BAM.PR.T FixedReset 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 20.57
Evaluated at bid price : 20.57
Bid-YTW : 4.09 %
TD.PF.C FixedReset 1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.09
Evaluated at bid price : 22.65
Bid-YTW : 3.64 %
RY.PR.Z FixedReset 2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.44
Evaluated at bid price : 23.15
Bid-YTW : 3.53 %
BAM.PR.B Floater 2.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 14.79
Evaluated at bid price : 14.79
Bid-YTW : 3.37 %
BAM.PR.K Floater 3.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 14.29
Evaluated at bid price : 14.29
Bid-YTW : 3.49 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.K FloatingReset 59,000 Nesbitt crossed 25,000 at 24.41.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.40
Bid-YTW : 3.23 %
ENB.PR.F FixedReset 56,853 Scotia crossed blocks of 35,000 and 12,000, both at 18.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 4.87 %
TD.PF.C FixedReset 45,300 Scotia crossed 25,000 at 22.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.09
Evaluated at bid price : 22.65
Bid-YTW : 3.64 %
TRP.PR.A FixedReset 39,530 TD crossed 37,000 at 20.55.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 20.02
Evaluated at bid price : 20.02
Bid-YTW : 3.68 %
RY.PR.L FixedReset 37,200 TD crossed blocks of 10,000 and 15,200, both at 25.92.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.89
Bid-YTW : 3.36 %
BMO.PR.T FixedReset 28,106 Desjardins crossed 18,300 at 22.85.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.18
Evaluated at bid price : 22.75
Bid-YTW : 3.62 %
There were 22 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.I FloatingReset Quote: 16.00 – 16.98
Spot Rate : 0.9800
Average : 0.6831

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 3.71 %

HSE.PR.E FixedReset Quote: 24.05 – 24.80
Spot Rate : 0.7500
Average : 0.5393

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.82
Evaluated at bid price : 24.05
Bid-YTW : 4.61 %

CM.PR.O FixedReset Quote: 22.95 – 23.45
Spot Rate : 0.5000
Average : 0.3706

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.31
Evaluated at bid price : 22.95
Bid-YTW : 3.62 %

MFC.PR.M FixedReset Quote: 22.60 – 23.15
Spot Rate : 0.5500
Average : 0.4271

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.60
Bid-YTW : 4.89 %

TRP.PR.A FixedReset Quote: 20.02 – 20.49
Spot Rate : 0.4700
Average : 0.3500

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 20.02
Evaluated at bid price : 20.02
Bid-YTW : 3.68 %

FTS.PR.J Perpetual-Discount Quote: 23.20 – 23.75
Spot Rate : 0.5500
Average : 0.4327

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 22.88
Evaluated at bid price : 23.20
Bid-YTW : 5.16 %

SLF.PR.J Listed; One Hundred Shares Trade

June 30th, 2015

As earlier reported on PrefBlog, there was a 50% conversion from the FixedReset, SLF.PR.G, to the FloatingReset SLF.PR.J

SLF.PR.G will pay 2.275% (on its par value of $25), or $0.142188 per share per quarter, until its next exchange date of 2020-6-30. SLF.PR.J will pay the three month Canada treasury bill rate, plus 141bp, reset quarterly, throughout its existence.

As both of these issues are issued by an insurance holding company and neither has an NVCC clause, I have added a DeemedMaturity entry to the call schedule; I am therefore assuming that these will be called at par on or before 2025-6-30. See the heading “DeemedRetractibles” on the Format of PrefLetter page for more information. Please note carefully that this is the result of my analysis and is neither a binding commitment of the issuer nor guaranteed in any way.

Vital statistics are:

SLF.PR.G FixedReset YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.27
Bid-YTW : 7.48 %
SLF.PR.J FloatingReset YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.50
Bid-YTW : 7.31 %

At the indicated bid prices, the break-even three-month bill rate (the average bill rate at which the total return of the two elements of the Strong Pair will be equal until the next Exchange Date) is 1.08%, so far above the average for all investment grade FixedReset / FloatingReset Strong Pairs (irrespective of Exchange Date) of 0.36% that this pair constitutes an outlier. If the average rate exceeds 1.08% then SLF.PR.J will outperform SLF.PR.G over the period (measured from today’s bid prices).

pairs_FR_150630
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TRP.PR.H Listed; 39% Conversion

June 30th, 2015

TransCanada Corporation has announced:

that 5,466,595 of its 14,000,000 fixed rate Cumulative Redeemable First Preferred Shares, Series 3 (Series 3 Shares) were tendered for conversion into floating-rate Cumulative Redeemable First Preferred Shares, Series 4 (Series 4 Shares). As a result of the conversion TransCanada has 8,533,405 Series 3 Shares and 5,466,595 Series 4 Shares issued and outstanding. The Series 3 Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbol TRP.PR.B. The Series 4 Shares will begin trading on the TSX today under the symbol TRP.PR.H.

The Series 3 Shares will continue to pay on a quarterly basis, for the five-year period beginning on June 30, 2015, as and when declared by the Board of Directors of TransCanada, a fixed dividend based on an annual fixed dividend rate of 2.152 per cent.

The Series 4 Shares will pay a floating quarterly dividend for the five-year period beginning on June 30, 2015, as and when declared by the Board of Directors of TransCanada. The floating quarterly dividend rate for the Series 4 Shares for the first quarterly floating rate period (being the period from June 30, 2015 to but excluding September 30, 2015) is 1.945 per cent and will be reset every quarter.

For more information on the terms of, and risks associated with an investment in, the Series 3 Shares and the Series 4 Shares, please see the Corporation’s prospectus supplement dated March 4, 2010 which can be found under the Corporation’s profile on SEDAR at www.sedar.com or on the Corporation’s website.

No shares traded today and the closing quote, as reported by the Toronto Stock Exchange, was 14.35-25.00.

Vital statistics are:

TRP.PR.B FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 3.74 %
TRP.PR.H FloatingReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-30
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 3.81 %

At the indicated bid prices, the break-even three-month bill rate (the average bill rate at which the total return of the two elements of the Strong Pair will be equal until the next Exchange Date) is 0.26%, slightly below the average for all investment grade FixedReset / FloatingReset Strong Pairs (irrespective of Exchange Date) of 0.36%. Thus, if the average rate exceeds 0.26% then TRP.PR.H will outperform TRP.PR.B over the period (measured from today’s bid prices), which seems like a pretty good bet.

pairs_FR_150630
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BSC.PR.B Proposes Term Extension For Capital Units; Preferreds To Be Redeemed On Schedule

June 30th, 2015

The Bank of Nova Scotia has announced:

BNS Split Corp. II (the “Company”) announced today that its Board of Directors has approved a proposal to reorganize the Company. The reorganization will permit holders of Capital Shares to extend their investment in the Company beyond the scheduled redemption date of September 22, 2015 for an additional five years. The Preferred Shares will be redeemed on the same terms originally contemplated in their share provisions. Holders of Capital Shares who do not wish to extend their investment and all holders of Preferred Shares will have their shares redeemed on September 22, 2015.

The reorganization will involve (i) the extension of the originally scheduled redemption date, (ii) a special retraction right to enable holders of Capital Shares to retract their shares as originally contemplated should they not wish to extend their investment and (iii) the issuance of a new class of preferred shares in order to provide continuing leverage for the Capital Shares. The Company may also offer additional Capital Shares at the time of the preferred share offering.

A special meeting of holders of the Capital Shares will be held on August 7, 2015 to consider and vote upon the proposed reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Capital Shares of record on July 9, 2015 in connection with the special meeting and will be available on www.sedar.com. Implementation of the proposed reorganization will also be subject to applicable regulatory approval including the Toronto Stock Exchange.

BNS Split Corp. II is a mutual fund corporation created to hold a portfolio of common shares of The Bank of Nova Scotia. Capital Shares and Preferred Shares of BNS Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols BSC and BSC.PR.B respectively.

BSC.PR.B was last mentioned on PrefBlog when there was a partial call for redemption last September. BSC.PR.B is tracked by HIMIPref™ but is relegated to the Scraps index on volume concerns.

June 29, 2015

June 30th, 2015

Greece finally shut down its banking system:

Greece moved to avert the collapse of its financial system, shutting lenders and imposing capital controls as of Monday, a measure that will deepen the recession and risk driving the nation toward an exit from the euro.

The move to husband resources followed the breakdown of aid talks with the international creditors late Friday and the European Central Bank decision to freeze its lifeline to Greek banks. On the streets, lines at ATMs and gas stations signified how daily life was about to be disrupted.

With cash flooding out at a record pace and its financial backstop gone, Greece would become the second euro-area country, after Cyprus in 2013, to declare a bank holiday and impose capital controls. European officials, meantime, discussed quarantining Greece from the rest of the currency bloc, while keeping it from spinning out of the euro’s orbit.

The optimism vanished after midnight on Friday when Tsipras shocked his counterparts across the region with his call for a July 5 referendum on the austerity demanded by creditors, just days before the June 30 expiry of the current bailout and a $1.7 billion payment due to the IMF.

In the aftermath, Greeks lined up this weekend to get access to as much of their money as they could. Two senior Greek bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning. Skai television reported as much as 1 billion euros ($1.1 billion) was withdrawn.

Greek bank deposits shrank by 30 billion euros between January and May this year to 129.9 billion euros, according to data released by Bank of Greece on its website on Thursday.

On Sunday night, long queues formed at numerous gas stations in Athens, reflecting doubts over the country’s ability to keep importing fuel. Lines at ATMs receded, as machines emptied.

That means that a Fairfax bet has gone bad:

Investors led by Canada’s Fairfax, which previously made successful bets on Bank of Ireland during the financial crisis, in April last year bought about 1.3 billion shares in Eurobank, according to the firm’s 2014 letter to shareholders. The stake amounts to about 9 percent of the share capital today and is valued at about 191 million euros. The shares are now worth less than half the 31 cents that investors in the share sale paid.

And there are various apocalyptic scenarios being touted:

It has the potential to prompt a Greek withdrawal from NATO, increase the influx of refugees into Europe and threaten Greek support for international sanctions against Russia over Ukraine.

“Greece spiraling into chaos would be a significant strategic disruption for Europe and therefore for the U.S.,” retired U.S. Admiral James Stavridis, a former NATO supreme allied commander, said in an interview. “There’s more to this crisis than money and the financial markets.”

If Greece ultimately is pushed off the euro currency for defaulting on its debt, it could seek revenge by pulling out of the North Atlantic Treaty Organization, blocking European Union sanctions on Russia or forcing the U.S. from its naval base in Crete, said Stavridis, a Greek-American who is dean of the Fletcher School of Law and Diplomacy at Tufts University in Massachusetts.

“A Greece that feels unloved and pushed out is less likely to be helpful” to the U.S. and Europe, he said.

But it’s an ill wind that blows nobody any good:

What is a crisis in Greece is an opportunity for Seamus Fahy 1,700 miles away in Dublin.

Fahy is offering a 15 percent discount for Greeks who want to store cash and valuables at Merrion Vaults, where 3,000 deposit boxes are protected underground in Dublin’s city center. He says he’s had about 20 Greek customers in recent months as concern mounted about how long the nation could stay in the euro region.

“If you lived in Athens, and had 200,000 euros, wouldn’t you try to get it out?” asks Fahy, a diamond dealer who opened the vaults in 2013, just off one of the city’s main Georgian-era squares, close to the Irish prime minister’s complex in Dublin.

But it’s no fun being Greek:

Uncertain what might happen next, with banks and financial markets closed, across Athens people wasted little time Monday, rushing to the nearest A.T.M. to withdraw their new daily maximum of 60 euros, determined to raise every last cent while they could.

Anecdotally, how people said they would vote in the referendum had little to do with those considerations, but broke down largely along lines of age and class. Older and more affluent Greeks leaned toward voting yes and younger and poorer Greeks leaned toward no, essentially as a protest of what they viewed as foreign oppression.

Whatever the outcome, Athenians were busy adapting to the new reality on Monday, focusing more on getting through the week than worrying too far into the future. People were emptying supermarket shelves, filling up containers at gas stations and lining up at automated teller machines, hoping that the supply of hard cash would not run out before it was their turn.

Meanwhile Element Financial, proud issuer of EFN.PR.A, EFN.PR.C, EFN.PR.E and EFN.PR.G, has bought another automobile fleet operation:

Canada’s Element Financial Corp said it will buy General Electric Co’s fleet management operations in the United States, Mexico, Australia and New Zealand for $8.6-billion ($6.98-billion (U.S.) in cash.

GE also signed a memorandum of understanding to sell its European fleet businesses to Arval, a fully-owned subsidiary of BNP Paribas.

Reuters reported on Friday that Element was close to buying a large chunk of GE’s vehicle fleet management business.

GE has said the business includes $9-billion in assets. The sale would be part of a plan it unveiled in April to divest about $200 billion in GE Capital assets as it moves away from finance and focuses on manufacturing industrial equipment.

… and that’s just a start:

Element Financial Corp.’s $8.6-billion acquisition of part of General Electric Co.’s fleet management business is not the end of the company’s growth plans, according to chief executive Steve Hudson, who went so far as to name his next acquisition targets.

“This message of growth at Element is: It’s not over, it’s not over, it’s not over,” said Mr. Hudson, on a conference call with analysts Monday. “They say you have to say something three times,” he added.

None of the EFN issues are tracked by HIMIPref™ because they don’t have a credit rating. With any luck that will change in the future as they visit the capital markets more often. A credit rating is important because the threat of a highly visible public spanking serves to concentrate the minds of management and the board.

I am pleased to see that the US is slowly grinding towards T+2 settlement:

Recently, an industry-led committee of members across the securities industry issued a white paper outlining the timeline and actions required to move from a three-day (T+3) trade settlement cycle to a two-day (T+2) trade settlement cycle for securities transactions in the United States by the third quarter 2017.[1] We applaud industry’s leadership in seeking changes to mitigate risks and improve capital efficiency.

Earlier this year, the Commission’s Investor Advisory Committee encouraged the Commission and market participants to move forward on reducing the settlement cycle, which would improve investor protections and reduce systemic risks.[2]

We look forward to working with our fellow Commissioners and the staff, as well as partnering with market participants to shorten the settlement cycle as soon as possible.

Footnotes:
[1] See “Shortening the Settlement Cycle: The Move to T+2” available at LINK. Currently, the Commission’s rules require settlement of trades in equities, corporate and municipal bonds, and unit investment trusts (UIT) three business days after a trade is executed, which is commonly referred to as T+3. Trade settlement is the date upon which security ownership transfers.

[2] See “Recommendation of the Investor Advisory Committee: Shortening the Trade Settlement Cycle in U.S. Financial Markets (February 12, 2015)” available at LINK.

I’ve been advocating for T+1 for over twenty years now. I mean, just what exactly is the problem? Everything’s electronic, it’s not like we have to send guys rooting through the vaults for street name certificates any more. Shorter settlement will decrease exposure to counterparty bankruptcy.

The next obvious step is allowing all investment managers to instruct custodians electronically. A username + password is no easier to forge than a signature and all but a very small part of the volume can be subjected to a sanity check.

Alberta is increasing its minimum wage:

Alberta, one of the lowest payers of minimum wage in Canada, is becoming one of the highest.

Jobs Minister Lori Sigurdson announced Monday that the $10.20 per hour minimum wage will rise by $1 to $11.20 an hour on Oct. 1.

Sigurdson said the decision was as much about social policy as economics.

“We believe minimum wage should at least allow people to meet their basic needs,” Sigurdson told reporters.

“Paying people a decent minimum wage will translate into a better life for low-income workers and, as a result, a better life for their families and for all Albertans.”

She also said the NDP government remains on track to hike the rate to $15 an hour by 2018, in keeping with its campaign promise in the May 5 election.

Super, although the rationale is nonsensical. Alberta’s productivity growth is a disgrace:

Labour productivity growth in Ontario’s business sector in the 2000-2012 period, at 0.5 per cent per year, was the second lowest among the provinces, higher only than Alberta’s annual growth rate of 0.4 per cent (Chart II).

It is well known that Canada’s labour productivity gap with the United States has widened significantly (Baldwin and Gu, 2009). This is also true for Ontario. In real terms, labour productivity in Ontario’s business sector declined relative to the United States from 88.3 per cent in 1987 to 71.6 per cent in 2012.

Labour productivity growth in Ontario’s business sector was only one-third of the U.S. average over the 2000-2012 period (0.5 per cent versus 1.6 per cent). All eight Great Lake states (Illinois, Indiana, Michigan, New York, Ohio, Minnesota, Pennsylvania, and Wisconsin) had considerably stronger labour productivity growth than Ontario.

A higher minimum wage will force increased automation on marginal companies, or they’ll go bankrupt and good riddance. A reliance on cheap labour and favourable exchange rates is no way for Canadians to get rich.

Brookfield Renewable Energy Partners L.P., proud (indirect) issuer of BRF.PR.A, BRF.PR.B, BRF.PR.C, BRF.PR.E and BRF.PR.F, has followed up its June 23 announcement of a Normal Course Issuer Bid by announcing:

that, in connection with Brookfield Renewable Power Preferred Equity Inc.’s (“BRP Equity”) previously announced normal course issuer bid program, BRP Equity has entered into an automatic purchase plan with its designated broker to allow for purchases of its Series 1 Class A Preference Shares, Series 2 Class A Preference Shares and Series 3 Class A Preference Shares. The plan will commence on July 1, 2015 and terminate on August 6, 2015.

From time to time, when BRP Equity does not possess material non-public information about itself or its securities, it may enter into automatic purchase plans with its broker to allow for the purchase of preferred shares at times when BRP Equity ordinarily would not be active in the market due to its own internal trading blackout periods and insider trading rules. Any such plans entered into with BRP Equity’s broker will be adopted in accordance with the requirements of applicable Canadian securities laws. The series of preferred shares subject to an automatic purchase plan may vary. Outside of these periods, preferred shares will be repurchased in accordance with management’s discretion, subject to applicable law.

I haven’t seen one of these before and must confess I don’t know exactly how they work. But it would seem to indicate that the company is more serious about its NCIB than issuers usually are.

It was a violently mixed day for the Canadian preferred share market, with PerpetualDiscounts down 38bp, FixedResets off 28bp and DeemedRetractibles gaining 34bp. FixedResets dominated a very lengthy Performance Highlights table (on the bad side), joined by a healthy dollop of PerpetualDiscounts; SLF DeemedRetractibles were a feature of the good part of the table, although I can’t think why. Volume was very high.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150629
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 20.49 to be $0.97 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.80 cheap at its bid price of 16.10.

impVol_MFC_150629
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule). The lowest spread issue, MFC.PR.F, is again noticeably off the line defined by the higher-spread issues.

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 24.71 to be $0.51 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 22.65 to be $0.53 cheap.

impVol_BAM_150629
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.20 to be $0.74 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.44 and appears to be $0.98 rich.

impVol_FTS_150629
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.70, looks $0.18 cheap and resets 2020-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.42 and is $0.35 rich.

pairs_FR_150629
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.25%, including the outlier TRP.PR.A / TRP.PR.F at -0.67%. On the junk side there are three outliers: FFH.PR.E / FFH.PR.F at -0.70%; BRF.PR.A / BRF.PR.B at -0.62%; and DC.PR.B / DC.PR.D at -0.24%.

pairs_FF_150629
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 1.6770 % 2,196.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.6770 % 3,840.8
Floater 3.53 % 3.52 % 61,538 18.46 3 1.6770 % 2,335.2
OpRet 4.80 % -4.51 % 22,663 0.08 1 -0.2733 % 2,773.7
SplitShare 4.60 % 4.87 % 71,459 3.25 3 -0.2943 % 3,244.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2733 % 2,536.3
Perpetual-Premium 5.49 % 4.79 % 64,971 2.33 19 -0.0781 % 2,514.6
Perpetual-Discount 5.30 % 5.21 % 119,414 15.05 15 -0.3811 % 2,659.2
FixedReset 4.56 % 3.74 % 233,855 16.02 88 -0.2822 % 2,326.6
Deemed-Retractible 5.02 % 4.38 % 112,282 0.88 34 0.3374 % 2,615.5
FloatingReset 2.85 % 3.28 % 58,478 6.01 9 -0.1329 % 2,331.6
Performance Highlights
Issue Index Change Notes
FTS.PR.M FixedReset -2.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.58
Evaluated at bid price : 23.50
Bid-YTW : 3.73 %
MFC.PR.M FixedReset -2.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 4.86 %
PWF.PR.P FixedReset -1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 3.61 %
HSE.PR.E FixedReset -1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.80
Evaluated at bid price : 24.01
Bid-YTW : 4.62 %
BAM.PR.T FixedReset -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 4.17 %
BAM.PF.B FixedReset -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 4.36 %
RY.PR.Z FixedReset -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.14
Evaluated at bid price : 22.66
Bid-YTW : 3.62 %
HSE.PR.A FixedReset -1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 4.28 %
BAM.PR.R FixedReset -1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 4.34 %
ELF.PR.G Perpetual-Discount -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 21.54
Evaluated at bid price : 21.80
Bid-YTW : 5.45 %
CU.PR.D Perpetual-Discount -1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 23.23
Evaluated at bid price : 23.60
Bid-YTW : 5.23 %
FTS.PR.F Perpetual-Discount -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.96
Evaluated at bid price : 23.20
Bid-YTW : 5.33 %
CU.PR.E Perpetual-Discount -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 23.32
Evaluated at bid price : 23.70
Bid-YTW : 5.21 %
ELF.PR.F Perpetual-Premium -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 24.00
Evaluated at bid price : 24.25
Bid-YTW : 5.47 %
VNR.PR.A FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.94
Evaluated at bid price : 23.70
Bid-YTW : 4.02 %
ENB.PR.D FixedReset -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 4.89 %
MFC.PR.N FixedReset -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.58
Bid-YTW : 4.83 %
ENB.PF.A FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.76 %
MFC.PR.K FixedReset -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.41
Bid-YTW : 4.77 %
MFC.PR.L FixedReset -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.51
Bid-YTW : 4.79 %
TD.PF.C FixedReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 21.80
Evaluated at bid price : 22.21
Bid-YTW : 3.74 %
PWF.PR.T FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 23.25
Evaluated at bid price : 24.88
Bid-YTW : 3.39 %
GWO.PR.H Deemed-Retractible 1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.45
Bid-YTW : 5.73 %
MFC.PR.B Deemed-Retractible 1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.53
Bid-YTW : 6.08 %
IAG.PR.G FixedReset 1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 3.89 %
TRP.PR.G FixedReset 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 23.20
Evaluated at bid price : 25.20
Bid-YTW : 3.71 %
SLF.PR.E Deemed-Retractible 1.52 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.71
Bid-YTW : 5.79 %
BAM.PF.E FixedReset 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 21.95
Evaluated at bid price : 22.44
Bid-YTW : 4.10 %
SLF.PR.A Deemed-Retractible 1.65 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.46
Bid-YTW : 5.62 %
SLF.PR.C Deemed-Retractible 1.95 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.43
Bid-YTW : 5.90 %
SLF.PR.B Deemed-Retractible 1.98 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.67
Bid-YTW : 5.55 %
BAM.PR.C Floater 4.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 14.15
Evaluated at bid price : 14.15
Bid-YTW : 3.52 %
Volume Highlights
Issue Index Shares
Traded
Notes
HSE.PR.G FixedReset 141,625 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.90
Evaluated at bid price : 24.30
Bid-YTW : 4.55 %
TD.PF.B FixedReset 76,228 TD crossed 70,000 at 22.82.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.26
Evaluated at bid price : 22.87
Bid-YTW : 3.62 %
ENB.PR.Y FixedReset 59,313 TD crossed 45,000 at 18.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 4.88 %
SLF.PR.A Deemed-Retractible 57,158 Desjardins crossed 50,000 at 23.35.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.46
Bid-YTW : 5.62 %
PWF.PR.L Perpetual-Premium 51,000 Scotia crossed 50,000 at 25.04.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 24.67
Evaluated at bid price : 24.95
Bid-YTW : 5.18 %
RY.PR.N Perpetual-Discount 46,750 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-11-24
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.84 %
There were 55 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.F Perpetual-Premium Quote: 24.25 – 24.96
Spot Rate : 0.7100
Average : 0.4669

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 24.00
Evaluated at bid price : 24.25
Bid-YTW : 5.47 %

TD.PF.C FixedReset Quote: 22.21 – 22.75
Spot Rate : 0.5400
Average : 0.3679

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 21.80
Evaluated at bid price : 22.21
Bid-YTW : 3.74 %

FTS.PR.M FixedReset Quote: 23.50 – 24.08
Spot Rate : 0.5800
Average : 0.4321

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.58
Evaluated at bid price : 23.50
Bid-YTW : 3.73 %

FTS.PR.I FloatingReset Quote: 16.50 – 17.00
Spot Rate : 0.5000
Average : 0.3577

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 3.60 %

RY.PR.Z FixedReset Quote: 22.66 – 23.23
Spot Rate : 0.5700
Average : 0.4300

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.14
Evaluated at bid price : 22.66
Bid-YTW : 3.62 %

RY.PR.H FixedReset Quote: 22.60 – 23.02
Spot Rate : 0.4200
Average : 0.2919

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-29
Maturity Price : 22.09
Evaluated at bid price : 22.60
Bid-YTW : 3.67 %

June 26, 2015

June 26th, 2015

I forgot to mention this earlier: Tiff Macklem has gone through the revolving door:

Bank of Nova Scotia appointed Tiff Macklem, a former Bank of Canada senior deputy governor, to its board of directors.

Macklem stepped down from the Ottawa-based central bank in May 2013 and has been serving as dean of the University of Toronto’s Rotman School of Management since July of that year.

“Tiff’s professional experience and understanding of the financial-services industry makes him a strong addition,” Thomas O’Neill, chairman of the board of directors at Canada’s third-largest bank by assets, said in a statement Monday.

The Russell indices were rebalanced today:

The Russell indexes are about to go through their annual rebalancing, leading to what Convergex, the global brokerage firm that’s based in New York, says will “almost certainly be the busiest trading day of the year.”

What’s more, as much as half of today’s trading volume may come in the last five minutes of the session.

Russell’s large-cap index includes 1,000 corporate names while the small-cap index has 2,000. Together they cover more than 90 percent of “reasonably investable” U.S. stocks, according to Convergex.

It will be interesting to learn whether there is any weeping from the regulators regarding institutional desk ‘trading against their clients’ by accumulating positions in advance. Why not? That’s the sort of idiotic wail we’ve heard about FX fixing.

As it happens, Convergex’ prediction didn’t come true:

About 8.9 billion shares changed hands in the U.S. today, the third-busiest session of the year. Russell’s U.S. stock indexes, including the Russell 1000 Index and the Russell 2000, are used as benchmarks for $5.2 trillion in assets, according to the company’s website.

Bloomberg published a nice chart illustrating Greek bank deposits:

GreekDeposits_150626
Click for Big

My old buddy Doug Grieve, who was on the preferred share institutional desk at Nesbitt for a long, long time, has recently become the Portfolio Manager for Lysander-Slater Preferred Share Dividend Fund.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 10bp, FixedResets gaining 30bp and DeemedRetractibles down 13bp. The Performance Highlights table is dominated by winning FixedResets – we haven’t seen that for a while! Volume was below average.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150626
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 20.42 to be $0.84 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.82 cheap at its bid price of 16.25.

impVol_MFC_150626
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule). The lowest spread issue, MFC.PR.F, is again noticeably off the line defined by the higher-spread issues.

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.75 to be $0.46 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.83 to be $0.31 cheap.

impVol_BAM_150626
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.50 to be $0.63 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.08 and appears to be $0.51 rich.

impVol_FTS_150626
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.80, looks $0.16 cheap and resets 2020-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.27 and is $0.18 rich.

pairs_FR_150626
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.30%, including the outlier TRP.PR.A / TRP.PR.F at -0.50%. On the junk side there are two outliers: FFH.PR.E / FFH.PR.F at -0.54%; and BRF.PR.A / BRF.PR.B at -0.25%.

pairs_FF_150626
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 0.3124 % 2,160.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3124 % 3,777.5
Floater 3.58 % 3.60 % 61,691 18.28 3 0.3124 % 2,296.7
OpRet 4.78 % -8.20 % 22,554 0.08 1 0.0000 % 2,781.3
SplitShare 4.58 % 4.81 % 73,896 3.26 3 0.1742 % 3,254.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,543.2
Perpetual-Premium 5.48 % 4.24 % 62,311 0.51 19 0.1339 % 2,516.6
Perpetual-Discount 5.27 % 5.20 % 116,415 15.07 15 -0.0993 % 2,669.4
FixedReset 4.55 % 3.80 % 235,375 16.09 88 0.2959 % 2,333.2
Deemed-Retractible 5.04 % 3.38 % 112,680 0.89 34 -0.1343 % 2,606.7
FloatingReset 2.49 % 2.92 % 56,168 6.09 9 0.0542 % 2,334.7
Performance Highlights
Issue Index Change Notes
BAM.PF.E FixedReset -2.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.70
Evaluated at bid price : 22.08
Bid-YTW : 4.24 %
BAM.PF.B FixedReset -1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.28
Evaluated at bid price : 21.56
Bid-YTW : 4.33 %
MFC.PR.B Deemed-Retractible -1.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.24
Bid-YTW : 6.24 %
FTS.PR.J Perpetual-Discount -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 23.07
Evaluated at bid price : 23.41
Bid-YTW : 5.11 %
FTS.PR.K FixedReset -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.27
Evaluated at bid price : 21.27
Bid-YTW : 3.80 %
BAM.PR.C Floater -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 13.51
Evaluated at bid price : 13.51
Bid-YTW : 3.69 %
MFC.PR.N FixedReset 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.83
Bid-YTW : 4.72 %
ENB.PR.D FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 4.92 %
MFC.PR.K FixedReset 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 4.68 %
NA.PR.S FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 23.00
Evaluated at bid price : 24.32
Bid-YTW : 3.55 %
FTS.PR.H FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.80
Evaluated at bid price : 16.80
Bid-YTW : 3.67 %
BMO.PR.T FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.03
Evaluated at bid price : 22.51
Bid-YTW : 3.73 %
TRP.PR.E FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.14
Evaluated at bid price : 22.70
Bid-YTW : 3.83 %
MFC.PR.M FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.12
Bid-YTW : 4.63 %
MFC.PR.F FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.25
Bid-YTW : 7.14 %
BMO.PR.W FixedReset 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.04
Evaluated at bid price : 22.55
Bid-YTW : 3.68 %
BAM.PR.T FixedReset 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 4.17 %
BAM.PR.B Floater 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 3.46 %
IAG.PR.G FixedReset 2.45 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.65
Bid-YTW : 4.13 %
TRP.PR.C FixedReset 3.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.25
Evaluated at bid price : 16.25
Bid-YTW : 3.92 %
TD.PF.A FixedReset 3.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.17
Evaluated at bid price : 22.75
Bid-YTW : 3.71 %
HSE.PR.A FixedReset 3.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.25
Evaluated at bid price : 16.25
Bid-YTW : 4.32 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.R FloatingReset 153,921 Desjardins bought blocks of 17,100 and 85,500 from RBC, both at 24.05. TD crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.02
Bid-YTW : 2.87 %
ENB.PR.N FixedReset 88,870 TD crossed 74,800 at 18.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 18.91
Evaluated at bid price : 18.91
Bid-YTW : 4.94 %
ENB.PR.F FixedReset 77,669 Scotia crossed 41,900 at 18.20; RBC bought 10,000 from Nesbitt at 18.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 18.28
Evaluated at bid price : 18.28
Bid-YTW : 4.94 %
BNS.PR.R FixedReset 71,895 Nesbitt crossed 35,000 at 25.51.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 3.18 %
CU.PR.F Perpetual-Discount 45,608 Scotia crossed 40,000 at 21.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.56
Evaluated at bid price : 21.85
Bid-YTW : 5.19 %
ENB.PR.T FixedReset 34,865 Scotia crossed 30,000 at 18.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 18.36
Evaluated at bid price : 18.36
Bid-YTW : 4.94 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.C Deemed-Retractible Quote: 22.13 – 22.99
Spot Rate : 0.8600
Average : 0.5876

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.13
Bid-YTW : 6.15 %

BAM.PF.B FixedReset Quote: 21.56 – 22.00
Spot Rate : 0.4400
Average : 0.2957

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.28
Evaluated at bid price : 21.56
Bid-YTW : 4.33 %

MFC.PR.B Deemed-Retractible Quote: 22.24 – 22.64
Spot Rate : 0.4000
Average : 0.2636

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.24
Bid-YTW : 6.24 %

MFC.PR.F FixedReset Quote: 17.25 – 17.84
Spot Rate : 0.5900
Average : 0.4554

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.25
Bid-YTW : 7.14 %

IFC.PR.A FixedReset Quote: 19.26 – 19.84
Spot Rate : 0.5800
Average : 0.4506

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.26
Bid-YTW : 6.46 %

CIU.PR.C FixedReset Quote: 16.56 – 17.23
Spot Rate : 0.6700
Average : 0.5541

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 3.65 %

June 25, 2015

June 25th, 2015

In order to address an alarming shortage of employment opportunities for bureaucrats, the OECD has inaugurated publication of the OECD Business and Finance Outlook. The full publication is here; it’s a long paean to the glories of state intervention.

I’ve seen a lot of whining in the press about the effect of Chinese buying on the price of Vancouver real-estate, but in Sydney, Australia, it’s a full-court press:

Since announcing a crackdown on unlawful home purchases in February, the government has forced only one foreigner to sell up. Chinese already buy almost a quarter of new homes in Sydney and their outlay will more than double to A$60 billion ($46 billion) in the six years to 2020, according to Credit Suisse Group AG.

“Forget the anti-corruption,” said Ray Chan, managing director of Sydney-based Henson Properties, which sells homes almost exclusively to Chinese. “A lot of money is coming through.”

Amid concern that offshore demand is pricing locals out of the market, Treasurer Joe Hockey plans bigger fines and jail time for those flouting restrictions. Yet more than six months after a parliamentary inquiry called for a national register of the citizenship of buyers, the database is still a work in progress — leaving officials with no firm grasp of the scale of overseas purchases.

We don’t really like competition, do we?

And Bloomberg introduces us to a real live compliance guy:

Several tax brackets down from [JPMorgan Chase CEO Jamie] Dimon, Justin “the Compliance Guru” Hall is betting that Dimon’s scourge will, by contrast, ensure his own upward mobility. Hall, 28, is a compliance officer at Charles Schwab Corp.’s retail bank. He and thousands of others like him, at every company in finance, are charged with keeping their revenue-obsessed colleagues on the right side of the rules. Compliance, not banking, has been the real growth business since 2008, when free-market liberties turned to liabilities and markets collapsed.

Hall, who uses the self-awarded “guru” designation on his Linked­In profile, couldn’t be happier with his choice of career. “There’s definitely no shortage of opportunity,” he says. “You’re usually involved with all the big dogs in the company. Your visibility is huge.”

Compliance types point to these big numbers [of post-crisis fines paid] as proof that hiring a few of their ilk really pays off. JPMorgan has hired 8,000 compliance and control people since the crisis. Employees completed 800,000 hours of compliance training in the bank’s mortgage business alone in 2014.

In another era, someone like Justin Hall might have gone into plastics, or semiconductors, to make his fortune. Growing up in Chandler, Arizona, Hall spent half his time living in a trailer park with one of his divorced parents. He sold phone books and magazines door-to-door, then switched to selling phone service for WorldCom, where his charm helped him pull down $98,000 the year he turned 17. “I have a knack for picking up people’s cues,” he says.

He got into financial services in 2005 at age 18, right out of high school, through a neighbor who worked at Bank of America and told him about a job there as a credit risk analyst. After a promotion, Hall ended up on a BofA team examining Countrywide Financial and its assets before the bank took a $2 billion stake in the troubled lender in 2007. That got him into compliance. He went to college, earning a bachelor’s degree in project management and finance from the University of Phoenix in 2012 and a master’s in management of information systems from Arizona State in 2014. He joined Schwab’s in-house bank, based in Phoenix, in October, working on an oversight program for ensuring that third-party vendors comply with banks’ risk regulations.

So the 800,000 hours of compliance training (at what? Maybe $50 per hour?) and 8,000 compliance and control people (at what? Maybe $75,000 each per year?) are only the tip of the iceberg. We’ve got guys like Justin Hall, obviously a real go-getter with a knack for sales, going into the ticky-box business because that’s where the action is. What a waste. What a completely useless drag on society. And, remember, pointing at those huge fine numbers to justify the expense assumes that (i) the fines would have been avoided with the big compliance push, and (ii) the fines represent an actual business cost, rather than a completely disproportionate (as discussed on June 10) element of the war on banks.

And there’s a report brewing that will probably serve to provide a fig-leaf for yet more regulation:

Regulators including the Fed and the Treasury Department are working on a report analyzing liquidity, including the events of Oct. 15, 2014, when yields on 10-year Treasuries plunged the most since 2009.

Speaking of liquidity…:

If rising interest rates prompt investors to flee debt markets, bank bonds could be the hardest hit among corporate securities, according to Bank of America Corp.

“We’re now moving into an environment of outflows, which means a lot of investors are going to have to sell bonds for an extended period of time,” Hans Mikkelsen, head of U.S. investment-grade credit strategy at Bank of America Merrill Lynch, said in a telephone interview.

Investors will have to ignore the fundamental fact that higher rates and a stronger economy are actually good for banks, he said, because they’ll just have to offload what they can.

Two factors make bank bonds an easy sell: they are widely owned and actively traded. A Bank of America survey of 94 credit investors last month showed a majority were overweight bank bonds. Trading in bank bonds made up more than 30 percent of the total volume of corporate debt traded in the past three months, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

That’s one reason bank bonds are attractive to investors. Banks including JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc. have sold $1.3 trillion of bonds since the financial crisis, according to data compiled by Bloomberg. That’s a fifth of the total $6.5 trillion investment-grade bonds issued in that period.

Six of America’s biggest banks — JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley, Citigroup and Wells Fargo & Co. — are among the top 11 most actively traded names in the corporate-bond market over the past three months, Trace data show.

I’m not sure I buy that. If there’s selling pressure on bank bonds, there will be pressure on everything else. After all, if we start with a ‘fair’ market and your bank bond then goes down $1 while the quote on your less-liquid industrial bond goes down $0.50, you’re going to try to sell the industrial bond. But you won’t be able to: as soon as you get on the ‘phone, the quote’s going to drop another buck as the traders adjust their pricing matrix. This warning implicitly assumes that in a tight liquidity environment, the liquidity (price) premium is going to change to a discount, and that’s a little hard to swallow.

It was another mixed day for the Canadian preferred share market, with PerpetualDiscounts down 26bp, FixedResets gaining 4bp and DeemedRetractibles off 4bp. Floaters got hammered. The Performance Highlights table reveals that beneath the very calm overall index result is a violent maelstrom of churning FixedResets. Volume was on the low side of average.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150625
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 20.50 to be $0.98 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.98 cheap at its bid price of 16.00.

impVol_MFC_150625
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule). The lowest spread issue, MFC.PR.F, is again noticeably off the line defined by the higher-spread issues.

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.70 to be $0.58 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 22.80 to be $0.38 cheap.

impVol_BAM_150625
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.35 to be $0.83 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.75 and appears to be $1.12 rich.

impVol_FTS_150625
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.61, looks $0.27 cheap and resets 2020-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.50 and is $0.46 rich.

pairs_FR_150625
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.35%, including the outlier TRP.PR.A / TRP.PR.F at -0.53%. On the junk side there are two outliers: FFH.PR.E / FFH.PR.F at -0.65%; and BRF.PR.A / BRF.PR.B at -0.39%.

pairs_FF_150625
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 -3.0070 % 2,153.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -3.0070 % 3,765.7
Floater 3.60 % 3.61 % 61,865 18.27 3 -3.0070 % 2,289.6
OpRet 4.78 % -8.35 % 22,912 0.08 1 -0.1559 % 2,781.3
SplitShare 4.59 % 4.80 % 74,849 3.26 3 -0.1873 % 3,248.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1559 % 2,543.2
Perpetual-Premium 5.48 % 4.80 % 62,992 4.22 19 0.0187 % 2,513.2
Perpetual-Discount 5.27 % 5.19 % 118,412 15.09 15 -0.2593 % 2,672.0
FixedReset 4.56 % 3.86 % 235,833 16.15 88 0.0402 % 2,326.3
Deemed-Retractible 5.03 % 3.20 % 111,993 0.65 34 -0.0360 % 2,610.2
FloatingReset 2.49 % 2.99 % 57,846 6.09 9 -0.0591 % 2,333.5
Performance Highlights
Issue Index Change Notes
IAG.PR.G FixedReset -3.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.06
Bid-YTW : 4.43 %
BAM.PR.K Floater -3.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 13.81
Evaluated at bid price : 13.81
Bid-YTW : 3.61 %
BAM.PR.C Floater -3.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 13.65
Evaluated at bid price : 13.65
Bid-YTW : 3.65 %
BAM.PR.B Floater -2.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 14.15
Evaluated at bid price : 14.15
Bid-YTW : 3.52 %
CU.PR.D Perpetual-Discount -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 23.42
Evaluated at bid price : 23.81
Bid-YTW : 5.18 %
HSE.PR.A FixedReset -2.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 15.66
Evaluated at bid price : 15.66
Bid-YTW : 4.48 %
MFC.PR.F FixedReset -1.73 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.00
Bid-YTW : 7.32 %
BAM.PF.A FixedReset -1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 22.29
Evaluated at bid price : 22.80
Bid-YTW : 4.35 %
IAG.PR.A Deemed-Retractible -1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.54
Bid-YTW : 5.99 %
MFC.PR.K FixedReset -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.40
Bid-YTW : 4.82 %
TRP.PR.C FixedReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 4.08 %
ENB.PR.H FixedReset -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 16.80
Evaluated at bid price : 16.80
Bid-YTW : 4.90 %
BMO.PR.T FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 21.85
Evaluated at bid price : 22.25
Bid-YTW : 3.78 %
TRP.PR.G FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 22.99
Evaluated at bid price : 24.60
Bid-YTW : 3.88 %
PWF.PR.S Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 23.39
Evaluated at bid price : 23.75
Bid-YTW : 5.11 %
TRP.PR.E FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 22.14
Evaluated at bid price : 22.70
Bid-YTW : 3.90 %
ENB.PF.A FixedReset 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 4.78 %
NA.PR.W FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 22.09
Evaluated at bid price : 22.66
Bid-YTW : 3.73 %
ENB.PF.E FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 20.24
Evaluated at bid price : 20.24
Bid-YTW : 4.79 %
FTS.PR.H FixedReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 16.61
Evaluated at bid price : 16.61
Bid-YTW : 3.71 %
SLF.PR.G FixedReset 1.48 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.51
Bid-YTW : 7.43 %
POW.PR.G Perpetual-Premium 1.57 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-04-15
Maturity Price : 25.25
Evaluated at bid price : 25.82
Bid-YTW : 4.97 %
BAM.PR.R FixedReset 1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 19.35
Evaluated at bid price : 19.35
Bid-YTW : 4.39 %
ENB.PF.G FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 4.76 %
ENB.PF.C FixedReset 1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 20.19
Evaluated at bid price : 20.19
Bid-YTW : 4.77 %
ENB.PR.J FixedReset 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 19.77
Evaluated at bid price : 19.77
Bid-YTW : 4.75 %
MFC.PR.N FixedReset 2.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.60
Bid-YTW : 4.85 %
MFC.PR.M FixedReset 2.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 4.81 %
PWF.PR.P FixedReset 2.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 3.64 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.T FloatingReset 139,638 TD crossed blocks of 88,400 and 50,000, both at 24.05.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.04
Bid-YTW : 2.88 %
BNS.PR.P FixedReset 95,800 TD crossed blocks of 45,000 and 50,000, both at 25.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.24
Bid-YTW : 3.10 %
TD.PR.Z FloatingReset 60,929 TD crossed 60,000 at 24.05.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 2.99 %
TD.PR.Y FixedReset 54,800 TD crossed 50,000 at 25.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.33
Bid-YTW : 3.02 %
HSE.PR.A FixedReset 50,290 Scotia crossed 40,000 at 16.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 15.66
Evaluated at bid price : 15.66
Bid-YTW : 4.48 %
BNS.PR.R FixedReset 42,860 Nesbitt crossed 35,000 at 25.53.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.52
Bid-YTW : 3.14 %
There were 29 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.K Floater Quote: 13.81 – 14.68
Spot Rate : 0.8700
Average : 0.6878

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 13.81
Evaluated at bid price : 13.81
Bid-YTW : 3.61 %

ENB.PF.G FixedReset Quote: 20.50 – 21.00
Spot Rate : 0.5000
Average : 0.3218

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 4.76 %

BAM.PR.C Floater Quote: 13.65 – 14.60
Spot Rate : 0.9500
Average : 0.7874

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 13.65
Evaluated at bid price : 13.65
Bid-YTW : 3.65 %

TRP.PR.E FixedReset Quote: 22.70 – 23.20
Spot Rate : 0.5000
Average : 0.3489

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 22.14
Evaluated at bid price : 22.70
Bid-YTW : 3.90 %

MFC.PR.K FixedReset Quote: 22.40 – 22.80
Spot Rate : 0.4000
Average : 0.2491

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.40
Bid-YTW : 4.82 %

TD.PF.A FixedReset Quote: 22.00 – 23.06
Spot Rate : 1.0600
Average : 0.9273

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-25
Maturity Price : 21.67
Evaluated at bid price : 22.00
Bid-YTW : 3.86 %