October 30, 2014

October 30th, 2014

This sounds like a good programme:

Unemployed (USURTOT) and pregnant with her second child in late 2013, Shantel Burris knew she needed to make a change. In a year, the 24-year-old went from jobless benefits to earning double the New York minimum wage.

Her first step was getting a high school diploma, and a chat with a counselor sparked a “nonstop” process of preparation centered on 11 weeks of free job training and a battery of mock interviews at Career Network: Healthcare. The New York initiative trained and matched her with a position in August at Montefiore Medical Center, where she prepares patient meal trays for $16.08 an hour.

Programs like Career Network seek to alleviate a shortage of workers in jobs that require less than a bachelor’s degree though more than a high school diploma. For the 146.2 million Americans who are 18 and older without an associate’s or higher degree, such opportunities offer a pathway to higher pay and job stability that would be difficult to find on their own.

Success hinges on identifying openings at local employers and equipping a spectrum of Americans — from the jobless to the underemployed — with needed skills. Such programs might also help hiring catch up with job vacancies, which are near a record high.

The need for a demand-driven approach became apparent when JPMorgan Chase & Co., as part of its philanthropic efforts, explored ways to reduce the so-called skills gap. The New York-based company in December announced New Skills at Work, a five-year $250 million global project to tailor training to available jobs.

JPMorgan will examine labor demand in nine U.S. metro areas, identifying fast-growing industries with middle-skill openings and better pay. The data and funding will be shared with community organizations serving youth and long-term unemployed.

I think someone at CDHowe reads PrefBlog:

Canada’s central bank should start publishing minutes of interest-rate meetings including any dissenting views, to meet the standards of counterparts in the U.S. and U.K., a research group said.

Such a move would improve the Ottawa-based Bank of Canada’s transparency and improve public understanding of the process used to determine interest rates, the Toronto-based C.D. Howe Institute said in a report due to be published today.

The central bank has resisted disclosing minutes, saying the rate-setting panel works by consensus and the distilled views of policy makers are represented in the statements that accompany the eight-yearly rate decisions.

“Withholding dissenting opinions has the potential to limit public understanding of important monetary policy questions,” Pierre Siklos, an economics professor at Wilfrid Laurier University in Waterloo, Ontario, said in a summary of the report, co-authored with Matthias Neuenkirch at the University of Trier in Germany.

I said the same thing on October 10, 2014 and December 10, 2013 … and probably earlier, since I’ve thought this forever, but I won’t bother looking up more dates.

Ben Steverman of Bloomberg points out that that even US banks are still in the pre-PC mainframe era:

Behind every check written, card swiped and paycheck delivered is an antiquated payment system that isn’t real time. About $80 trillion a year flows by fits and starts through a Rube Goldberg-like set of interlocking payment networks. The most prominent is the Automated Clearing House, or ACH, now celebrating its 40th birthday. These networks carry funds electronically, yes. But they often only sync up with banks once a day. In other words, if you miss today’s only flight off Kiribati, then you have to wait for tomorrow’s.

It can take a customer of a U.S. bank more than three days to transfer funds to another U.S. bank. Banks haven’t seen an advantage in speeding that up, even though the lag is painful for businesses and families. Purchases don’t always clear before a store owner has to pony up for more inventory. Families get hit with overdraft fees when checks really are in the mail.

What the U.S. needs, the Federal Reserve said last month, is an entirely “new infrastructure” to keep banks connected day, night and through the weekend. Then last week, the Clearing House, a group owned by the largest banks, said it would build a real-time payment network. It didn’t specify a time frame or release cost estimates. It did say your bank would credit your account immediately and settle up with the payer’s bank later. The Fed estimates businesses could save $10 to $40 billion with a more efficient network.

Banks have been procrastinating on an upgrade. They worry changing over 1970s-era networks will be a big hassle. A 24/7 system will need to sync with bank’s old batch systems, which are designed to need maintenance on Sundays. And, if popular enough, real-time payments could threaten banks’ annual collection of $30 billion in overdraft fees and more than $12 billion in card fees.

That’s NUTHIN’! For a bachelor’s degree in Banking Contempt, transfer money across the Canada-US border. For a master’s, transfer it abroad. And for a Ph.D., see what happens when one of the clerks along the way makes a trivial data-input error. That’s happened to me … the money just disappears for a few days. Completely. They can’t even guess what happened.

IIROC – a regulatory organization notable for funnelling slush-funds to well-connected, friendly enterprises – has stepped up its interference in the bond market:

The Investment Industry Regulatory Organization of Canada said Thursday that it will change the reporting system for debt securities dealers. They will soon be required to report every trade on a daily basis, rather than weekly.

The new rules officially come into effect in two phases starting in November 2015, and they are meant to tighten up the current market trade reporting system (MTRS), which is based on weekly statistics that IIROC has said are not dependable enough, since methodologies differ among the firms.

Under the current reporting system, dealers issue a weekly aggregate transaction report to the Bank of Canada through MTRS. In the new system, called MTRS 2.0, IIROC dealer members will swiftly report to IIROC all of their over the counter debt security transactions, as well as those of their affiliates that are government securities distributors (GSDs). IIROC will then share the data with the Bank of Canada.

Enbridge was confirmed at Pfd-2(low) by DBRS:

DBRS has confirmed the Issuer Rating of Enbridge Inc. (ENB or the Company) at A (low) and ratings on ENB’s Medium-Term Notes & Unsecured Debentures, Commercial Paper and Cumulative Redeemable Preferred Shares ratings at A (low), R-1 (low) and Pfd-2 (low), respectively, all with Stable trends. The ratings reflect (1) a relatively strong business risk profile, (2) pressure on ENB’s near-to-medium-term credit metrics and (3) results under the ten-year Competitive Tolling Settlement (CTS), effective July 1, 2011.

(2) DBRS expects ENB’s credit metrics, on fully consolidated and modified consolidated bases, to be pressured during the early years of its planned $37 billion capex program (excluding Sponsored Investments) from 2014 to 2018, due to a significant debt financing component related to large free cash flow deficits. DBRS expects improvement in the later years (as the longer-dated projects come onstream and begin to generate cash flow).

Enbridge has a lot of issues outstanding – roughly 10% of the universe. ENB.PF.A, ENB.PF.C, ENB.PF.E, ENB.PF.G, ENB.PR.A, ENB.PR.B, ENB.PR.D, ENB.PR.F, ENB.PR.H, ENB.PR.J, ENB.PR.N, ENB.PR.P, ENB.PR.T and ENB.PR.Y.

It was a mildly positive day for the Canadian preferred share market, with PerpetualDiscounts, FixedResets and DeemedRetractibles all gaining 3bp. Volatility was average. Volume was very low.

The TMXMoney screen for BAM.PR.E is worth a picture:

BAMPRE_141030
Click for Big
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 3.33 % 3.33 % 18,207 18.96 1 7.0919 % 2,512.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4131 % 3,972.5
Floater 3.00 % 3.11 % 62,797 19.44 4 -0.4131 % 2,667.4
OpRet 4.02 % -2.41 % 104,285 0.08 1 0.1571 % 2,748.7
SplitShare 4.27 % 3.61 % 72,619 3.79 5 0.0802 % 3,169.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1571 % 2,513.4
Perpetual-Premium 5.46 % -4.00 % 70,552 0.08 18 0.0698 % 2,468.1
Perpetual-Discount 5.25 % 5.09 % 102,249 15.22 18 0.0330 % 2,625.7
FixedReset 4.20 % 3.64 % 171,691 8.58 75 0.0324 % 2,570.5
Deemed-Retractible 5.00 % 2.00 % 98,728 0.17 42 0.0325 % 2,579.6
FloatingReset 2.55 % 0.72 % 69,573 0.16 6 0.1761 % 2,550.1
Performance Highlights
Issue Index Change Notes
PWF.PR.A Floater -2.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 2.75 %
FTS.PR.G FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 23.16
Evaluated at bid price : 24.70
Bid-YTW : 3.65 %
BAM.PR.T FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 23.44
Evaluated at bid price : 24.86
Bid-YTW : 3.85 %
MFC.PR.F FixedReset 1.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.70
Bid-YTW : 4.32 %
BAM.PR.E Ratchet 7.09 % There were two trades today, at 23.47 and 23.48, which must have overloaded the computers and taxed the expertise of market-maker, because (as shown by the screenshot above) TMXMoney is reporting the CDN Consolidated Quote as no-bid, no-offer, even though they also show a TSX quote of 22.50-49. We are left to conclude that the Toronto Exchange is no longer included in the Canadian consolidation.

Anyway, this market move report isn’t real, it’s just a reversal of yesterday’s nonsense.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 22.35
Evaluated at bid price : 22.50
Bid-YTW : 3.33 %

Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.A FixedReset 208,235 The first Exchange Date is 2014-12-31 and the dividend will (barring ridiculously low-probability events) fall substantially (HIMIPref™ incorporates the current estimate in the calculated yield).

Desjardins crossed 200,000 at 21.73.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 21.42
Evaluated at bid price : 21.71
Bid-YTW : 3.96 %

NA.PR.W FixedReset 171,770 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 23.15
Evaluated at bid price : 25.01
Bid-YTW : 3.67 %
BMO.PR.S FixedReset 131,674 Nesbitt crossed 50,000 at 25.52. Scotia crossed blocks of 25,000 and 49,200, both at 25.52.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 3.49 %
BMO.PR.K Deemed-Retractible 103,062 Scotia crossed two blocks of 25,000 each and one of 49,200, all at 25.78.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-25
Maturity Price : 25.50
Evaluated at bid price : 25.77
Bid-YTW : -4.08 %
FTS.PR.H FixedReset 102,650 Nesbitt crossed 100,000 at 20.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 20.21
Evaluated at bid price : 20.21
Bid-YTW : 3.74 %
PWF.PR.E Perpetual-Premium 81,145 Desjardins bought blocks of 39,600 and 39,500 from anonymous, both at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-29
Maturity Price : 25.00
Evaluated at bid price : 25.34
Bid-YTW : -10.84 %
There were 16 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
RY.PR.I FixedReset Quote: 25.45 – 25.78
Spot Rate : 0.3300
Average : 0.2048

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 3.03 %

ENB.PR.F FixedReset Quote: 24.62 – 24.89
Spot Rate : 0.2700
Average : 0.1725

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 23.16
Evaluated at bid price : 24.62
Bid-YTW : 4.02 %

BNS.PR.Q FixedReset Quote: 25.36 – 25.64
Spot Rate : 0.2800
Average : 0.1950

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : 3.22 %

TD.PR.T FloatingReset Quote: 25.40 – 25.69
Spot Rate : 0.2900
Average : 0.2076

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 1.84 %

ENB.PR.B FixedReset Quote: 24.62 – 24.84
Spot Rate : 0.2200
Average : 0.1438

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-30
Maturity Price : 23.31
Evaluated at bid price : 24.62
Bid-YTW : 3.93 %

W.PR.H Perpetual-Premium Quote: 25.06 – 25.50
Spot Rate : 0.4400
Average : 0.3639

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-29
Maturity Price : 25.00
Evaluated at bid price : 25.06
Bid-YTW : 5.37 %

October 29, 2014

October 29th, 2014

The FOMC is feeling a little more cheerful:

Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace. Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing.

Although inflation in the near term will likely be held down by lower energy prices and other factors, the Committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year.

The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation.

Voting against the action was Narayana Kocherlakota, who believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level.

As the Fed is a competently run central bank, one of the many statistics it publishes is the Ten-Year Breakeven Inflation Rate:

10YrBEIR_141029
Click for Big

After a brief wail, equities decided it wasn’t really news:

U.S. stocks pared declines, Treasuries retreated and the dollar rallied after the Federal Reserve confirmed it will end its asset-purchase program amid signs of a strengthening economy.

The Standard & Poor’s 500 Index (SPX) slid 0.1 percent at 4 p.m. in New York. The index fell as much as 0.8 percent after the Fed’s policy statement before trimming the slide. The 10-year Treasury note yield rose three basis points to 2.32 percent. The Bloomberg Dollar Spot Index jumped 0.6 percent, erasing earlier losses. Gold prices headed for the biggest drop in three weeks.

Moody’s downgraded Talisman to Baa3:

The Baa3 senior unsecured rating reflects Talisman’s sizable reserves, production and valuable other assets, tempered by the execution risks of an ongoing major shift in strategy and capital spending and dividends that outstrip internal cash flow generation. While production has declined due largely to asset sales, we expect modest production growth in 2015 from existing assets given the use of development capital in Southeast Asia, the Eagle Ford and Columbia. However, we expect an overall decline in reserves and production, cash flow, debt and negative free cash flow over the next 12 to 18 months as asset sales take place. When the strategic re-positioning is complete, we believe that Talisman will be positioned as a Baa3-rated company, with internally generated cash flow that can largely fund its negative free cash flow in the North Sea and an asset base that can provide growth opportunities and improvements in Talisman’s very high finding and development costs and very weak leveraged full-cycle ratio.

The stable outlook reflects our expectation that Talisman will complete its restructuring and have size, leverage and return metrics supportive of a Baa3 rating. The rating could be downgraded if capital productivity fails to improve with a leveraged full cycle ratio of at least 1.0x or if retained cash flow to debt appears likely to decline below 30%. The rating could also be downgraded if the proceeds of asset sales are used for shareholder returns and not debt reduction.

A rating upgrade is unlikely in the near term, but possible if Talisman displays a clear focus on core assets that have a positive organic growth profile that can be developed at reasonable costs leading to sustainable sequential growth in production and reserves, and sustainable improvements in both the leveraged full-cycle ratio (above 1.5x) and RCF to debt (above 40%).

Talisman is the proud issuer of TLM.PR.A, which was downgraded to P-3 by S&P earlier this month, and downgraded to Pfd-3 by DBRS in September.

The Canadian preferred share market skyrocketted today, with PerpetualDiscounts winning 45bp, FixedResets up 32bp and DeemedRetractibles gaining 22bp. Volatility was high, with BAM issues prominent in the hightlights. Volume was average, but there were quite a few six-figure volumes; on the other hand, most of those high volumes were due to RBC performing matched pairs of crosses … which may be real, or may indicate that they were mostly ‘internal crosses’ (where the same manager manages both accounts and he’s just rebalancing).

PerpetualDiscounts now yield 5.09%, equivalent to 6.62% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.2%, so the pre-tax interest-equivalent spread is no about 240bp, a significant narrowing from the 270bp reported October 15.

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 3.57 % 3.93 % 18,511 18.74 1 -8.3804 % 2,345.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1848 % 3,989.0
Floater 2.99 % 3.11 % 63,575 19.43 4 -0.1848 % 2,678.5
OpRet 4.03 % -0.65 % 104,857 0.08 1 0.0393 % 2,744.3
SplitShare 4.27 % 3.87 % 69,465 3.79 5 0.2767 % 3,167.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0393 % 2,509.4
Perpetual-Premium 5.47 % -1.27 % 70,599 0.09 18 0.1311 % 2,466.4
Perpetual-Discount 5.26 % 5.09 % 100,719 15.20 18 0.4480 % 2,624.8
FixedReset 4.19 % 3.64 % 171,804 8.49 75 0.3186 % 2,569.6
Deemed-Retractible 5.00 % 2.73 % 101,295 0.32 42 0.2171 % 2,578.8
FloatingReset 2.55 % 1.85 % 70,363 3.58 6 -0.0261 % 2,545.6
Performance Highlights
Issue Index Change Notes
BAM.PR.E Ratchet -8.38 % Not real, since volume on the TSE was a big fat zero. I don’t know whether this Toronto Stock Exchange screw-up is due to horrible market-making or their practice of not selling closing quotes.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 3.93 %
BAM.PF.E FixedReset 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 23.22
Evaluated at bid price : 25.25
Bid-YTW : 4.00 %
BAM.PF.A FixedReset 1.18 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.77
Bid-YTW : 3.77 %
BAM.PF.C Perpetual-Discount 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.55
Evaluated at bid price : 21.85
Bid-YTW : 5.60 %
BAM.PR.M Perpetual-Discount 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.57
Evaluated at bid price : 21.57
Bid-YTW : 5.57 %
MFC.PR.B Deemed-Retractible 1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.31
Bid-YTW : 5.62 %
FTS.PR.G FixedReset 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 23.27
Evaluated at bid price : 25.00
Bid-YTW : 3.59 %
BAM.PF.D Perpetual-Discount 1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.72
Evaluated at bid price : 22.00
Bid-YTW : 5.62 %
BAM.PR.N Perpetual-Discount 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.63
Evaluated at bid price : 21.63
Bid-YTW : 5.56 %
BAM.PR.X FixedReset 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.50
Evaluated at bid price : 21.87
Bid-YTW : 3.97 %
MFC.PR.C Deemed-Retractible 1.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.77
Bid-YTW : 5.76 %
BAM.PR.R FixedReset 1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 23.93
Evaluated at bid price : 25.75
Bid-YTW : 3.71 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.F FixedReset 200,005 Nesbitt crossed 20,000 at 24.83. TD crossed two blocks of 20,000 each, both at the same price. RBC crossed four blocks: 50,000 shares, 25,000 shares, 10,000 and 19,900, all at the same price again.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 23.24
Evaluated at bid price : 24.83
Bid-YTW : 3.97 %
TRP.PR.C FixedReset 152,779 RBC crossed two blocks of 75,000 each, both at 21.43.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.39
Evaluated at bid price : 21.39
Bid-YTW : 3.65 %
HSE.PR.A FixedReset 143,273 RBC crossed two blocks of 67,500 each, both at 22.53.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 22.22
Evaluated at bid price : 22.60
Bid-YTW : 3.67 %
GWO.PR.N FixedReset 133,831 RBC crossed two blocks of 65,000 each, both at 21.82.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 4.57 %
PWF.PR.P FixedReset 111,635 RBC crossed two blocks of 52,900 each, both at 22.23.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.81
Evaluated at bid price : 22.30
Bid-YTW : 3.52 %
NA.PR.W FixedReset 110,358 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 23.14
Evaluated at bid price : 25.00
Bid-YTW : 3.67 %
TRP.PR.A FixedReset 108,823 RBC crossed two blocks of 42,000 each, both at 21.72.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 21.44
Evaluated at bid price : 21.74
Bid-YTW : 3.96 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.E Ratchet Quote: 21.01 – 23.55
Spot Rate : 2.5400
Average : 1.5147

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 3.93 %

W.PR.H Perpetual-Premium Quote: 25.05 – 25.50
Spot Rate : 0.4500
Average : 0.2804

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 24.83
Evaluated at bid price : 25.05
Bid-YTW : 5.53 %

MFC.PR.A OpRet Quote: 25.46 – 25.81
Spot Rate : 0.3500
Average : 0.2062

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-28
Maturity Price : 25.25
Evaluated at bid price : 25.46
Bid-YTW : -0.65 %

BAM.PR.T FixedReset Quote: 24.60 – 24.91
Spot Rate : 0.3100
Average : 0.2079

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-29
Maturity Price : 23.34
Evaluated at bid price : 24.60
Bid-YTW : 3.90 %

MFC.PR.F FixedReset Quote: 22.33 – 22.75
Spot Rate : 0.4200
Average : 0.3180

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.33
Bid-YTW : 4.51 %

TD.PR.P Deemed-Retractible Quote: 25.84 – 26.11
Spot Rate : 0.2700
Average : 0.1819

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-01
Maturity Price : 25.50
Evaluated at bid price : 25.84
Bid-YTW : -9.60 %

October 28, 2014

October 28th, 2014

Nothing happened today.

It was a modestly good day for the Canadian preferred share market, with PerpetualDiscounts and DeemedRetractibles both up 5bp and FixedResets winning 9bp. Volatility was modest. Volume was very low.

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 3.26 % 3.27 % 19,340 19.07 1 -2.1277 % 2,560.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3424 % 3,996.4
Floater 2.99 % 3.11 % 64,412 19.45 4 0.3424 % 2,683.5
OpRet 4.03 % -0.30 % 105,534 0.08 1 0.0000 % 2,743.3
SplitShare 4.29 % 3.92 % 72,329 3.80 5 0.1829 % 3,158.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,508.4
Perpetual-Premium 5.47 % -1.10 % 69,035 0.09 18 0.0765 % 2,463.2
Perpetual-Discount 5.28 % 5.12 % 98,182 15.17 18 0.0545 % 2,613.1
FixedReset 4.21 % 3.66 % 171,752 8.61 75 0.0949 % 2,561.5
Deemed-Retractible 5.01 % 2.52 % 100,125 0.32 42 0.0514 % 2,573.2
FloatingReset 2.55 % 1.86 % 72,944 3.59 6 -0.0261 % 2,546.3
Performance Highlights
Issue Index Change Notes
BAM.PR.E Ratchet -2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 22.85
Evaluated at bid price : 23.00
Bid-YTW : 3.27 %
CIU.PR.C FixedReset -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 20.46
Evaluated at bid price : 20.46
Bid-YTW : 3.62 %
MFC.PR.C Deemed-Retractible -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.35
Bid-YTW : 5.99 %
BAM.PF.E FixedReset 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 23.14
Evaluated at bid price : 25.00
Bid-YTW : 4.05 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.W FixedReset 607,573 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 23.13
Evaluated at bid price : 24.96
Bid-YTW : 3.68 %
CM.PR.E Perpetual-Premium 408,545 Desjardins crossed 398,200 at 25.12. Nice ticket!
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-27
Maturity Price : 25.00
Evaluated at bid price : 25.13
Bid-YTW : -1.10 %
BAM.PF.G FixedReset 101,540 Scotia crossed 30,000 at 25.25; RBC crossed 14,200 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 23.20
Evaluated at bid price : 25.25
Bid-YTW : 4.24 %
CM.PR.G Perpetual-Premium 101,355 Desjardins crossed 95,500 at 25.12.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-27
Maturity Price : 25.00
Evaluated at bid price : 25.17
Bid-YTW : -3.20 %
MFC.PR.M FixedReset 78,180 Desjardins crossed 54,500 at 25.28.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-12-19
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 3.83 %
CM.PR.O FixedReset 74,446 Nesbitt crossed 30,000 at 25.25; RBC crossed 30,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 23.26
Evaluated at bid price : 25.25
Bid-YTW : 3.66 %
There were 15 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.E Ratchet Quote: 23.00 – 23.55
Spot Rate : 0.5500
Average : 0.3905

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 22.85
Evaluated at bid price : 23.00
Bid-YTW : 3.27 %

CIU.PR.C FixedReset Quote: 20.46 – 20.89
Spot Rate : 0.4300
Average : 0.2960

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 20.46
Evaluated at bid price : 20.46
Bid-YTW : 3.62 %

MFC.PR.C Deemed-Retractible Quote: 22.35 – 22.75
Spot Rate : 0.4000
Average : 0.2681

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.35
Bid-YTW : 5.99 %

CGI.PR.D SplitShare Quote: 25.28 – 25.95
Spot Rate : 0.6700
Average : 0.5678

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2023-06-14
Maturity Price : 25.00
Evaluated at bid price : 25.28
Bid-YTW : 3.68 %

FTS.PR.M FixedReset Quote: 25.34 – 25.59
Spot Rate : 0.2500
Average : 0.1642

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 23.26
Evaluated at bid price : 25.34
Bid-YTW : 3.84 %

BAM.PR.N Perpetual-Discount Quote: 21.28 – 21.55
Spot Rate : 0.2700
Average : 0.1999

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-28
Maturity Price : 21.28
Evaluated at bid price : 21.28
Bid-YTW : 5.65 %

FTS Outlook Revised By S&P From Negative To Stable

October 28th, 2014

Following the conversion of convertible debentures Standard & Poor’s has announced:

  • •On Oct. 28, 2014, Fortis Inc. announced the receipt of the final installment, C$1.2 billion, of the C$1.8 billion convertible debentures that it used to finance the UNS Energy Corp. transaction.
  • •In addition, holders of more than 99% of C$1.79 billion in principal of the convertible debentures have elected to convert the debt into Fortis common shares.
  • •The conversion will reduce the company’s debt load and lifts the adjusted funds from operations-to-debt metric above the downgrade threshold.
  • •As a result, we are revising our outlook on Fortis and its Canadian and Caribbean subsidiaries to stable from negative.
  • •We are also affirming our ratings on the companies, including our ‘A-’ long-term corporate credit rating on Fortis.


The stable outlook reflects Standard & Poor’s assessment of the underlying operational and financial stability of Fortis’ operating companies. We expect these operating companies to continue generating stable and predictable cash flow, a key credit strength, which mitigates the relatively weak financial measures for the ratings.

We could lower the ratings on Fortis if the company’s AFFO-to-debt were to fall and stay below 9%. This could happen if Fortis were to employ more leverage or if its larger subsidiaries encountered major financial or operational difficulties or adverse regulatory decisions. Alternatively, investment in assets with materially higher business risks and cash flow variability could also lead to a downgrade.

A positive outlook or upgrade during our two-year forecast horizon would require Fortis to improve its credit metrics on a sustained basis, specifically AFFO-to-debt above 14%. However, we believe this is unlikely given the company’s expansion program.

The previous assessment of a negative outlook was previously reported on PrefBlog.

Fortis Inc. has several preferred issues trading on the Toronto Exchange: FTS.PR.E (OperatingRetractible); FTS.PR.F and FTS.PR.J (PerpetualDiscount); and FTS.PR.G, FTS.PR.H, FTS.PR.K and FTS.PR.M (FixedReset).

October 27, 2014

October 27th, 2014

There is muttering that increased regulation has not only deliquified the corporate market but that the Treasury market is also suffering:

It was still early in the New York trading day on Oct. 15 and investors were already pouring into U.S. government bonds as global financial markets from Asia to Europe buckled. Because yields were falling so fast, Comiskey, the head Treasury dealer at Bank of Nova Scotia, realized that he ran the risk of being stuck with losses or unwanted inventory if his computers automatically generated quotes to buy and sell with customers.

So for about half an hour, as yields on 10-year Treasuries tumbled below 2 percent in the biggest plummet in five years, he executed client orders individually over the phone.

Bank of Nova Scotia was hardly alone in taking steps to protect itself in one of the most volatile trading days since the collapse of Lehman Brothers Holdings Inc. in 2008, showing how regulators’ efforts to rein in risk-taking among the world’s biggest banks is causing disruptions in what is supposed to be the deepest, most liquid market in the world — that of U.S. Treasury securities. Because dealers have cut back so much in recent years, concern is deepening that parts of the market have become less efficient in times of turmoil.

JPMorgan & Chase Co., a primary dealer, estimates the amount of U.S. debt available to trade at one time without moving prices has plunged 48 percent to $150 million since April. The measure is based on the average size of the best three bids and offers that go through the New York-based bank’s trading desks on a weekly basis.

An unprecedented $946 billion of U.S. government debt changed hands through London-based ICAP Plc on Oct. 15, which suggests that concerns over liquidity may be overblown and were due more to the fact buyers couldn’t get the prices they wanted when everyone else wanted to buy at the same time.

Richard Prager, the head of trading and liquidity strategies at BlackRock Inc., the world’s largest asset manager, says regulations are one of the reasons why bond dealers have less incentive to facilitate trades for clients.

To comply with higher capital requirements from the Basel Committee on Banking Supervision, firms with bond trading desks have responded by reducing inventories. Primary dealers have slashed their U.S. debt holdings 56 percent to $64 billion from a record high in October 2013, data compiled by Bloomberg show.

But dealer holdings of junk have fallen off a cliff:

Wall Street’s biggest debt dealers have been dumping speculative-grade securities at the fastest pace on record ahead of annual stress tests by the Fed. They reduced their holdings by 68 percent in the week ended Oct. 15 as the market posted losses of 1.5 percent that week alone, according to data released by the Fed last week.

The Fed is homing in on speculative-grade corporate debt in particular because such bonds and loans tend to suffer disproportionately in times of stress.

Under a worst-case scenario being simulated in the latest round of Fed stress tests, “U.S. corporate credit quality deteriorates sharply,” according to an Oct. 23 Fed report. Relative yields on high-yield bonds and loans would “widen to levels the same as the peaks reached in the 2007–2009 recession.”

At 4.38 percentage points, the extra yield investors currently demand to own junk bonds instead of government debt is just a fifth the 21.8-percentage-point spread reached in December 2008, according to Bank of America Merrill Lynch index data.

The ECB is getting serious about deflation:

The European Central Bank said it settled 1.704 billion euros ($2.2 billion) of covered-bond purchases last week as it started its latest effort to revive the euro-area economy.

The Frankfurt-based institution began purchases on Oct. 20, returning to the market for a third time in six years as part of a renewed attempt to stave off deflation and pump life into a moribund recovery.

Investors have been closely watching the ECB’s first week of asset buying to gauge how quickly President Mario Draghi plans to fulfill his pledge of expanding the institution’s balance sheet by as much as 1 trillion euros. Even though the ECB will add asset-backed securities to the purchase plan this year, stimulus may not be enough to revive the region’s economy.

German opposition to sovereign-bond purchases means officials have chosen covered bonds and ABS as the latest tools to help expand the balance sheet. While policy makers say their plans will spark new issuance, economists at firms including Morgan Stanley and Commerzbank AG say the central bank will probably need to buy other assets to reach the target.

Of the region’s 2.6 trillion-euro covered-bond market, the ECB will only buy assets acceptable under its collateral framework for refinancing loans. Purchases will be announced weekly, starting today, and the pool of bonds eligible is about 600 billion euros, ECB Vice President Vitor Constancio said this month.

ABS buying is scheduled to begin later this quarter and there are about 400 billion euros of such assets eligible to buy, according to Constancio.

Who remembers Osborne Computer Corporation? Not Ford!:

The problem with high-tech hardware, whether it’s a smartphone or a pickup truck, is that everyone wants the newest thing. When Apple (AAPL) has a new iPhone in the works, would-be buyers delay their purchases until the next iteration hits the market. Turns out, that tricky timing dynamic happens with cars, too.

Ford Motor (F), in particular, is facing a bad bit of product whiplash at the moment. It has 16 vehicle launches next year, ranging from facelifts to entirely new models, in the most aggressive schedule to date of what car folks call “product cadence.”

The so-called “product launch effects” drove Ford’s auto-related sales down 3 percent in the recent quarter. Profit plummeted 34 percent, in part because Ford idled factories to retool assembly lines for making its new vehicles. Sales of the Ford Edge slid 18 percent in North America as buyers awaited an all-new version expected to hit dealers in the spring. And some 11 percent fewer Ford Fiestas zipped off lots, a vehicle that hasn’t been changed drastically since 2008.

Nowhere is the product path more fraught than for the F-150 pickup, the long-time best-selling vehicle in North America and Ford’s big metal enchilada. Not only is Ford making a new F-150; it’s making a drastically new one. Huge plates of steel will be replaced with lighter aluminum in a bid for fuel efficiency. It’s a massive overhaul, and truck buyers definitely took notice.

So, Toronto civic election results are beginning to trickle in and it appears heavy turnout is favouring Tory. So every Councillor elected tonight will stay up late to put together a grab-bag list of little projects that will just cost pennies per taxpayer each, and they’ll all get approved. Inclusiveness, you know. An end to divisiveness.

It was a strong day for the Canadian preferred share market, with PerpetualDiscounts winning 24bp, FixedResets up 14bp and DeemedRetractibles gaining 9bp. Volatility was average. Volume was low.

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 3.19 % 3.20 % 19,388 19.24 1 -0.4237 % 2,615.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.2145 % 3,982.8
Floater 3.00 % 3.12 % 65,301 19.42 4 0.2145 % 2,674.3
OpRet 4.03 % -0.44 % 97,718 0.08 1 0.0000 % 2,743.3
SplitShare 4.29 % 3.92 % 75,303 3.79 5 0.1035 % 3,152.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,508.4
Perpetual-Premium 5.48 % -0.31 % 69,715 0.08 18 -0.0153 % 2,461.3
Perpetual-Discount 5.28 % 5.13 % 98,102 15.17 18 0.2377 % 2,611.7
FixedReset 4.21 % 3.68 % 171,651 8.61 75 0.1369 % 2,559.0
Deemed-Retractible 5.01 % 2.77 % 102,438 0.25 42 0.0925 % 2,571.8
FloatingReset 2.55 % 1.44 % 75,943 0.16 6 0.0000 % 2,547.0
Performance Highlights
Issue Index Change Notes
HSB.PR.D Deemed-Retractible -1.18 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 4.64 %
GWO.PR.H Deemed-Retractible 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.97
Bid-YTW : 5.46 %
FTS.PR.F Perpetual-Discount 1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 24.07
Evaluated at bid price : 24.55
Bid-YTW : 5.04 %
Volume Highlights
Issue Index Shares
Traded
Notes
CU.PR.C FixedReset 53,654 Nesbitt crossed 49,000 at 25.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 2.90 %
NA.PR.W FixedReset 47,650 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 23.13
Evaluated at bid price : 24.95
Bid-YTW : 3.68 %
BAM.PF.E FixedReset 42,350 RBC crossed 40,000 at 24.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 23.05
Evaluated at bid price : 24.74
Bid-YTW : 4.11 %
CM.PR.O FixedReset 37,944 Desjardins crossed 25,000 at 25.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 23.26
Evaluated at bid price : 25.24
Bid-YTW : 3.67 %
ENB.PR.F FixedReset 24,352 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 23.20
Evaluated at bid price : 24.73
Bid-YTW : 3.99 %
TD.PR.Q Deemed-Retractible 23,876 RBC crossed 20,000 at 26.14.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-26
Maturity Price : 25.75
Evaluated at bid price : 26.10
Bid-YTW : -11.40 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.L Perpetual-Premium Quote: 24.86 – 25.22
Spot Rate : 0.3600
Average : 0.2230

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 24.57
Evaluated at bid price : 24.86
Bid-YTW : 5.14 %

TRP.PR.D FixedReset Quote: 24.91 – 25.20
Spot Rate : 0.2900
Average : 0.1697

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 23.17
Evaluated at bid price : 24.91
Bid-YTW : 3.80 %

FTS.PR.K FixedReset Quote: 24.62 – 24.95
Spot Rate : 0.3300
Average : 0.2219

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-27
Maturity Price : 23.08
Evaluated at bid price : 24.62
Bid-YTW : 3.63 %

IFC.PR.A FixedReset Quote: 23.60 – 23.97
Spot Rate : 0.3700
Average : 0.2632

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 4.31 %

MFC.PR.K FixedReset Quote: 25.00 – 25.29
Spot Rate : 0.2900
Average : 0.1944

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 3.81 %

GWO.PR.S Deemed-Retractible Quote: 25.57 – 25.80
Spot Rate : 0.2300
Average : 0.1350

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.57
Bid-YTW : 5.04 %

PrefInfo.com Running Again

October 26th, 2014

I mentioned earlier that there were problems with PrefInfo.com … for some reason my server refuses to run PHP for the site, although the PHP code runs on all the other sites (including this one!).

I haven’t been able to figure out the problem, but I’ve re-written the code for index page to be HTML, rather than PHP. There has been some loss of functionality – the last ten headlines from this blog are no longer displayed. But all the information is there, same as ever, and that’s the vital part.

I continue to try to understand what my server has against PHP, but my main hope right now is my Help Wanted ad, which you can see (for now!) in the right-hand navigation panel, right underneath “Publisher”.

October 24, 2014

October 25th, 2014

Amidst all the problems facing the world today, it’s very nice to see that the US National Institute of Health is funding some vital research:

Training minority scientists, improving mentoring, and adjusting university enrollment processes are among the newly funded efforts to increase the diversity of the biomedical workforce. Armed with $31 million from the National Institutes of Health (NIH) Common Fund, a dozen university teams will lead the way in encouraging young students of all racial and ethnic backgrounds to enter a career in scientific research, the agency announced this week (October 22).

On a brighter note, the ECB is getting at least a little more serious about stress tests:

Twenty-five lenders in the European Central Bank’s euro-area bank health check are poised to fail the regulator’s Comprehensive Assessment, according to a draft communique of the final results seen by Bloomberg News.

One-hundred-and-five banks are shown passing the review, according to the draft statement. Of the lenders that failed, about 10 will still face capital shortfalls they need to plug, according to a person with knowledge of the matter, who asked not to be identified because they weren’t authorized to speak publicly. That figure is likely to change as talks continue before the final results are published Oct. 26, said the person.

The two-part review forms one pillar of the ECB’s effort to rekindle confidence in the euro zone after half a decade of financial turmoil. ECB President Mario Draghi has said banks need to fail to prove the losses of the past have been dealt with. After two previous European stress tests didn’t reveal problems at lenders that later failed, the ECB has staked its reputation on getting this exercise right.

“The numbers are consistent with our expectations,” said Alberto Gallo, head of European macro-credit research at Royal Bank of Scotland Group Plc in London. “It’s too early to say the exercise is credible. The key will be to see how much stress the strong banks will take, and how many of them will pass by a narrow margin.” He expects 11 banks will need to plug capital gaps after measures already taken this year.

An interesting sign of the times … Quadravest has published an extra evaluation of LFE.PR.B:

*Oct 17th NAV is being provided to investors in addition to the Oct 15th NAV, due to recent volatility in financial markets.

A pity they didn’t do this during the depths of the Credit Crunch – it would have been helpful.

And, as a parting note, PrefBlog endorses Doug Ford for Mayor of Toronto. He’s the only one who can credibly claim to be concerned about costs; Chow will spend because she has a vision, Tory will spend because it’s so much more inclusive than saying no. As a bonus, it will be great fun to go downtown after Ford is declared winner to watch all they geysers of latte erupt from people’s noses.

It was a positive day for the Canadian preferred share market, with PerpetualDiscounts gaining 3bp, FixedResets up 4bp and DeemedRetractibles winning 13bp. Volatility was minimal. Volume was pathetically, awfully, ridiculously, terribly low.

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 3.18 % 3.18 % 19,257 19.28 1 -1.0067 % 2,627.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.7636 % 3,974.2
Floater 3.00 % 3.12 % 65,260 19.41 4 0.7636 % 2,668.6
OpRet 4.03 % -0.84 % 97,523 0.08 1 0.1969 % 2,743.3
SplitShare 4.30 % 3.91 % 78,398 3.80 5 -0.0875 % 3,149.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1969 % 2,508.4
Perpetual-Premium 5.48 % -1.80 % 70,733 0.08 18 0.1138 % 2,461.6
Perpetual-Discount 5.29 % 5.14 % 98,563 15.16 18 0.0262 % 2,605.5
FixedReset 4.22 % 3.60 % 164,952 16.72 75 0.0391 % 2,555.5
Deemed-Retractible 5.02 % 1.96 % 100,803 0.19 42 0.1298 % 2,569.5
FloatingReset 2.55 % -6.10 % 58,483 0.08 6 0.0261 % 2,547.0
Performance Highlights
Issue Index Change Notes
BAM.PF.E FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 23.04
Evaluated at bid price : 24.74
Bid-YTW : 4.04 %
BAM.PR.E Ratchet -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 23.36
Evaluated at bid price : 23.60
Bid-YTW : 3.18 %
PWF.PR.A Floater 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 2.68 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.O FixedReset 60,870 TD bought two blocks from CIBC – 10,000 at 25.16 and 20,700 at 25.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 23.24
Evaluated at bid price : 25.20
Bid-YTW : 3.60 %
ENB.PR.P FixedReset 53,327 Scotia crossed 40,000 at 24.14.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 22.88
Evaluated at bid price : 24.13
Bid-YTW : 4.03 %
BAM.PR.C Floater 42,905 Nesbitt crossed 40,000 at 16.72.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 16.74
Evaluated at bid price : 16.74
Bid-YTW : 3.16 %
NA.PR.W FixedReset 41,420 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 23.11
Evaluated at bid price : 24.91
Bid-YTW : 3.62 %
ENB.PR.J FixedReset 26,505 Scotia crossed 24,100 at 24.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 23.24
Evaluated at bid price : 25.08
Bid-YTW : 3.98 %
ENB.PF.G FixedReset 22,975 TD bought 10,000 from CIBC at 25.10.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 23.13
Evaluated at bid price : 25.06
Bid-YTW : 4.07 %
There were 8 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
NEW.PR.D SplitShare Quote: 32.65 – 33.65
Spot Rate : 1.0000
Average : 0.6960

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-06-26
Maturity Price : 32.07
Evaluated at bid price : 32.65
Bid-YTW : 1.94 %

TRP.PR.A FixedReset Quote: 21.52 – 21.80
Spot Rate : 0.2800
Average : 0.1712

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 21.52
Evaluated at bid price : 21.52
Bid-YTW : 3.91 %

ELF.PR.G Perpetual-Discount Quote: 21.88 – 22.16
Spot Rate : 0.2800
Average : 0.2018

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 21.57
Evaluated at bid price : 21.88
Bid-YTW : 5.45 %

HSE.PR.A FixedReset Quote: 22.40 – 22.70
Spot Rate : 0.3000
Average : 0.2228

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 21.87
Evaluated at bid price : 22.40
Bid-YTW : 3.60 %

PVS.PR.D SplitShare Quote: 24.30 – 24.60
Spot Rate : 0.3000
Average : 0.2284

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 5.11 %

CU.PR.F Perpetual-Discount Quote: 22.24 – 22.44
Spot Rate : 0.2000
Average : 0.1379

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-24
Maturity Price : 21.91
Evaluated at bid price : 22.24
Bid-YTW : 5.12 %

LCS.PR.A Added to HIMIPref™ Database

October 25th, 2014

As previously discussed, LCS.PR.A approved a term extension to April 29, 2019, last spring, together with a big fat dividend of 0.575 p.a., paid quarterly. At that time, Brompton also clearly signalled its intent to grow the fund by announcing a treasury offering.

On August 18, 2014, Brompton Funds announced:

it has filed a preliminary short form prospectus with respect to a treasury offering of class A shares and preferred shares.

The Company invests in a portfolio, on an approximately equal weight basis, of common shares of Canada’s four largest publicly-listed life insurance companies: Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.

The investment objectives of the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.075 per class A share and to provide the opportunity for growth in net asset value per class A share.

The investment objectives of the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.575 per annum and to return the original issue price ($10.00) to holders of preferred shares on the maturity date of the Company, April 29, 2019.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC, and Scotiabank, and includes BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Dundee Securities Ltd., Industrial Alliance Securities Inc., Mackie Research Capital Corporation, and Manulife Securities Incorporated.

On August 25, 2014, Brompton Funds announced:

that the Company’s treasury offering of class A and preferred shares has been priced at $7.55 per class A share and $10.05 per preferred share. The final class A share and preferred share offering prices were determined so as to be non-dilutive to the net asset value per unit of the Company on August 22, 2014, the most recently calculated net asset value, as adjusted for dividends and certain expenses accrued prior to or upon settlement of the offering.

The Company intends to file a final prospectus in each of the provinces and territories of Canada in connection with the offering. The offering is expected to close on or about September 3, 2014 and is subject to customary closing conditions including approvals of applicable securities regulatory authorities and the Toronto Stock Exchange.

On September 3, 2014, Bromption Funds announced:

that it has completed a treasury offering of 2,850,000 class A shares and 2,850,000 preferred shares for aggregate gross proceeds of approximately $50.2 million. The class A shares and preferred shares will continue to trade on the Toronto Stock Exchange under the existing symbols LCS and LCS.PR.A, respectively.

The Company’s treasury offering was priced at $7.55 per class A share and $10.05 per preferred share. The final class A share and preferred share offering prices were determined so as to be non-dilutive to the most recent calculated net asset value per unit of the Company on the date of pricing of the offering, August 22, 2014, as adjusted for dividends and certain expenses accrued prior to or upon settlement of the offering.

and finally, on September 16, 2014, Brompton Funds announced:

that it has completed the issuance of 84,000 class A shares and 84,000 preferred shares for gross proceeds of approximately $1.5 million. This issuance was pursuant to the exercise of the over-allotment option granted to the agents in connection with the Company’s recently completed treasury offering. Following the exercise of the over-allotment option, total gross proceeds raised pursuant to this offering are approximately $51.6 million.

So that was a very nice offering and brought the fund up to a total size of over $90-million, with over 5.6-million units outstanding; so the fund is now of sufficient size that adding it to the investable universe is not guaranteed to be a complete waste of time.

As previously discussed, DBRS upgraded the preferreds to Pfd-4(high) in December 2013, and this rating has just been confirmed, although the ‘Positive Trend’ has been dropped:

As part of the term extension, the fixed cumulative quarterly distributions to the Preferred Shares will be increased to $0.14375 per preferred share starting May 1, 2014, yielding 5.75% annually on their issue price of $10.00 per share (up from 5.25% previously). Holders of the Class A Shares are expected to continue receiving regular monthly targeted cash distributions of $0.075 per share, yielding 6% annually on their issue price of $15.00 per share. Class A Share distributions were suspended in March 2011 because the Company’s net asset value fell below $15.00 per unit (i.e., 33% downside protection), but were reinstated in July 2013. On April 21, 2014, DBRS placed the ratings of the Preferred Shares Under Review with Positive Implications. Since then, the performance of the Company has been volatile, with downside protection dropping to 34.8% as of October 17, 2014, from 37.2% as of April 10, 2014. Because of the volatility and recent negative trend, the rating of the Preferred Shares has been confirmed and removed from Under Review with Positive Implications.

A nice feature of the preferreds is that they have a decent monthly retraction feature, as explained in the prospectus:

Except as noted below, holders of Preferred Shares whose Preferred Shares are surrendered for retraction will be entitled to receive a retraction price per Preferred Share equal to 96% of the lesser of (i) the NAV per Unit determined as of such Retraction Date, less the cost to the Company of the purchase of a Class A Share for cancellation; and (ii) $10.00. For this purpose, the cost of the purchase of a Class A Share will include the purchase price of the Class A Share, and commission and such other costs, if any, related to the liquidation of any portion of the Portfolio to fund the purchase of the Class A Share. If the NAV per Unit is less than $10.00, plus any accrued and unpaid distributions on the Preferred Shares, the retraction price of a Class A Share will be nil. Any declared and unpaid distributions payable on or before a Retraction Date in respect of Preferred Shares tendered for retraction on such Retraction Date will also be paid on the Retraction Payment Date.

This feature was found to be supportive of market prices during the worst depths of the Credit Crunch.

The inclusion of this issue into the database has been backdated to May 1, 2014; this is the first date following the exercise of the Special Retraction Right offered to shareholders after the term extension. The issue with the prior terms has not been incorporated into the database since it was too small; but by adding as of May 1 I can get at least some relevant history.

New Issue: PWB FixedReset 7.00%+543

October 24th, 2014

Pacific & Western Bank of Canada has announced:

that it has filed and was receipted by the securities regulatory authorities in Ontario, Manitoba, Saskatchewan, Alberta and British Columbia for a preliminary short form prospectus for an offering of a minimum of $10,000,000 and a maximum of $25,000,000 of non-cumulative 5-year rate reset preferred shares, series 1 (the “Series 1 Preferred Shares”) in the capital of the Bank at a price of $25.00 per share (the “Offering”).

The syndicate of agents for this Offering is being led by Industrial Alliance Securities Inc. and includes Dundee Securities Ltd., Haywood Securities Inc., Mackie Research Capital Corporation, PI Financial Corp., Burgeonvest Bick Securities Limited, and Leede Financial Markets Inc. The Bank has granted the Agents an option, exercisable in whole or in part, to sell, as agents, such number of Series 1 Preferred Shares equal to 15% of the number of Series 1 Preferred Shares sold pursuant to the Offering on the same terms as set out above, to cover over-allotments, if any, and for market stabilization purposes, exercisable at any time within 30 days of closing.

The Series 1 Preferred Shares will yield 7.0% annually, payable quarterly, as and when declared by the Board of Directors of the Bank, for the initial period ending October 31, 2019, based on the stated issued price per share. Thereafter, the dividend rate will reset every five years at a level of 543 basis points over the then 5-year Government of Canada bond yield.

Subject to regulatory approval, the Bank has the right to redeem up to all of the then outstanding Series 1 Preferred Shares on October 31, 2019, and on October 31 every five years thereafter at a price of $25.00 per share.

Should the Bank choose not to exercise its right to redeem the Series 1 Preferred Shares, holders of these shares will have the right to convert their shares into an equal number of non-cumulative floating rate preferred shares, series 2 (the “Series 2 Preferred Shares”), subject to certain conditions, on October 31, 2019, and on October 31 every five years thereafter. Holders of the Series 2 Preferred Shares will be entitled to receive quarterly floating dividends, as and when declared by the Board of Directors of the Bank, equal to the 90-day Government of Canada Treasury Bill rate plus 543 basis points.

The net proceeds of the Offering are expected to qualify as Tier 1 capital of the Bank and will be used for general corporate purposes.

The Offering is scheduled to close on or about October 30, 2014 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange and other applicable securities regulatory authorities.

The Bank, a Canadian Schedule I chartered bank, raises deposits through various deposit brokers located across Canada and invests these deposits in loans, leases, commercial mortgages, residential development mortgages and debt of corporations.

The prospectus – available at SEDAR, I am not permitted to provide a direct link because the Alberta Securities Commission believes that investor scum should have to jump through hoops to get access to public documents – contains additional useful information:

The TSX has conditionally approved the listing of the Series 1 Preferred Shares under the symbol “PWB.PR.A” and the Common Shares into which such shares may be converted upon a Contingent Conversion, subject to the Bank fulfilling all of the requirements of TSX on or before December 29, 2014. The Common Shares of the Bank are listed and posted for trading on the TSX under the symbol “PWB”, and their closing price on October 21, 2014 was $5.73. The Series 2 Preferred Shares are not listed on the TSX and no application for listing of the Series 2 Preferred Shares has been made to the TSX.

As disclosed in the Annual Information Form, the only person or company that is, or has been within the immediate two preceding years, a promoter of the Bank or a subsidiary of the Bank under applicable securities laws is PWC Capital Inc. (formerly Pacific & Western Credit Corp.) (“PWC”). As of the date hereof, the number and percentage of each class of voting securities and equity securities of the Bank or any of its subsidiaries beneficially owned, or controlled or directed, directly or indirectly, by PWC are as follows:
Designation of Class Type of Ownership Number of Securities Percentage of Securities
Common Shares Of record and beneficial 17,210,839 88.5%

So the parent bank holding company is PWC, which has preferred shares trading under the symbol PWC.PR.B, which have been discussed on PrefBlog.

This new issue will not be tracked by HIMIPref™ since it does not have a credit rating. Public credit ratings can serve as a marvellous impulse to focus the minds of the directors and managers of the company during bad times and this is a very useful trait. An additional reason for not tracking it is the extremely small size of the issue – not known precisely at this point, but the maximum is $25-million.

Many thanks to Assiduous Reader prefQC for bringing this new issue to my attention.

Problems With PrefInfo.com

October 24th, 2014

My informational website PrefInfo.com is not currently working for some mysterious reason.

I have attempted to fix it in the past few days without success, but now that the weekend’s here I will be able to spend a bit more time determining what has gone wrong on my server.

If anybody can provide a little help and expertise about this, please call me or eMail. I am running the websites via Plesk under Windows.

I have been able to determine that the basic problem is that the server will no longer run PHP for PrefInfo.com, although it continues to run PHP for this site, for instance. It’s rather a shame about the PHP / PrefInfo problem, because the site is written in PHP.

I hope to have the problem resolved shortly.