September 4, 2015

September 5th, 2015

The Boston Fed published a paper by Eva Liebmann and Joe Peek titled Global Standards for Liquidity Regulation:

Liquidity risk has received increased attention recently, especially in light of the 2007 – 2009 financial crisis, when banks’ extensive reliance on short-term funding, maturity mismatches between assets and liabilities, and insufficient liquidity buffers made them quite susceptible to liquidity risk. To mitigate such risk, the Basel Committee on Banking Supervision (BCBS) introduced an improved global capital framework and new global liquidity standards for banks in December 2010 in the form of the new Basel Accord (Basel III). This brief offers insights from the crisis experience, identifies the problems that the new liquidity regulation aims to address, and summarizes underlying differences between the United States and Europe that may affect the ability to design and implement consistent global standards.

Regrettably, there is only a brief nod to the role of the central banks:

In addition, the U.S. Federal Reserve (like some other central banks) replaced funding normally provided in these money markets by using a mix of traditional and less traditional policy tools, including emergency liquidity facilities. Carlson et al. (2015) argue in this context that liquidity regulations combined with other regulatory tools are important complements to the LOLR tool and are particularly valuable in mitigating moral hazard. While the existence of the LOLR is important during a systemic shock such as the 2007–2009 financial crisis, it is as important to have in place at individual financial institutions liquidity buffers that can be run down in response to an idiosyncratic shock.

The referenced “Carlson et al.” paper is by Mark Carlson, Burcu Duygan-Bump, and William Nelson, titled Why Do We Need Both Liquidity Regulations and a Lender of Last Resort? A Perspective from Federal Reserve Lending during the 2007–09 U.S. Financial Crisis:

During the 2007–09 financial crisis, there were severe reductions in the liquidity of financial markets, runs on the shadow banking system, and destabilizing defaults and near-defaults of major financial institutions. In response, the Federal Reserve, in its role as lender of last resort (LOLR), injected extraordinary amounts of liquidity. In the aftermath, lawmakers and regulators have taken steps to reduce the likelihood that such lending would be required in the future, including the introduction of liquidity regulations. These changes were motivated in part by the argument that central bank lending entails extremely high costs and should be made unnecessary by liquidity regulations. By contrast, some have argued that the loss of liquidity was the result of market failures, and that central banks can solve such failures by lending, making liquidity regulations unnecessary. In this paper, we argue that LOLR lending and liquidity regulations are complementary tools. Liquidity shortfalls can arise for two very different reasons: First, sound institutions can face runs or a deterioration in the liquidity of markets they depend on for funding. Second, solvency concerns can cause creditors to pull away from troubled institutions. Using examples from the recent crisis, we argue that central bank lending is the best response in the former situation, while orderly resolution (by the institution as it gets through the problem on its own or via a controlled failure) is the best response in the second situation. We also contend that liquidity regulations are a necessary tool in both situations: They help ensure that the authorities will have time to assess the nature of the shortfall and arrange the appropriate response, and they provide an incentive for banks to internalize the externalities associated with any liquidity risks.

These authors acknowledge the politicized nature of the regulatory change:

The scale of Federal Reserve intervention in financial markets during the crisis generated considerable controversy, and U.S. lawmakers and regulators subsequently took various steps to reduce the chances of a future financial crisis and to reduce the likelihood that lending by the Federal Reserve would be required in the future even if there were a financial crisis. For example, as part of the Basel III liquidity and capital rules, liquidity regulations were implemented that require banks to maintain more liquid balance sheets. Additionally, to prevent Federal Reserve loans from being used to support failing institutions, the authority of the Federal Reserve to provide emergency liquidity to individual nonbank institutions was eliminated.

Part of the motivation for these regulatory and legal changes was the view that central bank lending was itself a bad thing—that the loans were bailouts of financial institutions that protected them from the consequences of their risky behavior. Within the economic literature, moral hazard is seen as the principle cost associated with central bank lending as it encourages institutions to take on more risk than they would otherwise.3 Some have also criticized this lending on the grounds that it pushed central bank policy into fiscal policy and threatened the independence of the Federal Reserve.4 These concerns have led to proposals by some to eliminate even the remaining emergency authority of the Federal Reserve to lend in “unusual and exigent circumstances.”5

The view that LOLR loans are “bailouts of financial institutions” is indeed common: it is held, for example, by Canadian Centre for Policy Alternatives senior economist David Macdonald:

“At some point during the crisis, three of Canada’s banks — CIBC, BMO, and Scotiabank — were completely under water, with government support exceeding the market value of the company,” Macdonald said.

“Without government supports to fall back on, Canadian banks would have been in serious trouble.”

One of the most well-known ways in which policymakers helped the banks during the crisis is through a $69-billion CMHC program whereby the housing agency took mortgages off the balance sheets of big Canadian banks. In contrast with other support facilities, all of the funds granted by the CMHC were through selling assets (in this case mortgages) to the housing agency. They were not funds that had to be paid back.

“The federal government claims it was offering the banks ‘liquidity support,’ but it looks an awful lot like a bailout to me,” says Macdonald.

“It would have been cheaper to buy every single share in these companies,” Macdonald said.

However, neither I nor any thinking person should be swayed by the screaming of slogan chanters with insufficient economic expertise to differentiate between insolvency and illiquidity. The fact that the Fed paper takes such pig-ignorant ravings into account for public policy purposes detracts from the credibility of the paper.

Getting back to the Fed paper, Assiduous Readers will recall that I subscribe to the classical view:

The literature on the LOLR similarly provides a long range of these alternative views, which are well summarized in Freixas et al. (1999) and Bordo (1990). The classical position, often attributed to Bagehot (1873) and Thornton (1802), is that the LOLR should provide funding freely to illiquid but solvent institutions against high-quality collateral and at a penalty rate to allay a panic. However, the literature is full of papers pointing to the difficulties of distinguishing between liquidity and solvency problems, especially during a crisis, as well as the potential problems with how to define and impose a penalty rate (see, for instance, Goodhart, 1999).

These issues lead, on the one extreme, to the view that the Federal Reserve should only provide liquidity to the market as a whole via open market operations, but not to individual banks, since liquidity would then be allocated to individual, creditworthy banks via the interbank market (see Goodfriend and King, 1988; Bordo, 1990; and Schwartz, 1992 and 1995). On the other extreme is the view that the LOLR will have to assist illiquid and insolvent institutions at times, and that lending should not be at a penalty rate because the elevated rate could worsen the problems of a bank receiving support (see Goodhart, 1985 and 1987; Goodhart and Schoenmaker, 1995). The literature also has a long discussion of the moral hazard consequences as a cost that offsets the benefit of central bank lending as noted in Freixas et al. (1999), though there is also a range of perspectives that point out that the collapse of liquidity is a market failure and the central bank provision of liquidity is a public good. For instance, Holmstrom and Tirole (1998) note that public insurance against aggregate risks should allow firms to undertake more profitable activities with higher social return. Others note that there is no moral hazard as long as central banks provide the liquidity against properly priced collateral (for example, Buiter, 2007) or that moral hazard can be managed by various policies, such as constructive ambiguity (for example, Freixas, 1999) and regulations (for example, Cao and Illing, 2011).

Our paper’s main contribution to the literature is to reconcile these different perspectives by thinking of central bank lending as encompassing two very different types of liquidity demands and using that as a guide to think about the right mix of LOLR and regulatory tools. Moreover, our discussion on the Federal Reserve’s experience during the crisis also illustrates some of the key real-time issues faced by a LOLR that arise during a crisis and the associated limitations of a
LOLR as a policy tool.

I’ll keep reading and keep thinking … but currently I lean towards the view that the liquidity regulations largely exist as a politicized response to criticism from the ignorant and those who cynically manipulate the ignorant to serve their other political interests.

So I’ll take solace in the growing recognition that circuit-breakers do not work as intended. Sadly, the response to ‘rules not working’ appears to be ‘more rules’:

When stocks were halted on Aug. 24, the result caused mayhem for many large ETFs because they became unmoored from their underlying share prices. The result was exaggerated swings in ETF prices, in excess of 40 per cent in some cases.

This week, securities officials said they were considering changes to the measures meant to control extreme volatility. “Everything is on the table,” said Steve Crutchfield, head of exchange-traded products at the New York Stock Exchange. In Canada, the Investment Industry Regulatory Organization of Canada recently produced new guidance on stock price thresholds to reduce unexplained volatility. The new guidance is designed to prevent orders from being executed at prices more than 10 per cent different from market prices on ETFs and actively traded stocks.

Meanwhile, the US jobs number was entertainingly ambiguous:

Data today showed U.S. employers added 173,000 workers in August and the jobless rate dropped to 5.1 percent. The gain in payrolls, while less than forecast, followed advances in July and June that were stronger than previously reported. The unemployment rate is the lowest since April 2008. Average hourly earnings climbed more than forecast and workers put in a longer workweek, the report also showed.

The jobs report is the last major data point before the Fed meets later this month on Sept. 16-17 to discuss the timing of its first increase in interest rates in nearly a decade. Investors raised bets on a September liftoff to 30 percent from 26 percent before the jobs data, while that’s still less than the 48 percent odds predicted before China devalued the yuan on Aug. 11.

Fed Bank of Richmond President Jeffrey Lacker said the central bank should end the era of record-low interest rates, now that the impacts from winter weather and energy prices have passed. He said labor-market slack has been reduced to pre-recession levels, and shorter-term inflation measures are tracking the U.S. central bank’s 2 percent target.

“It’s time to align our monetary policy with the significant progress we have made,” Lacker said in the text of a speech in Richmond.

The Canadian number was considered encouraging by some:

For months now, Mr. Poloz has been anxiously waiting for lower interest rates, the cheaper dollar and a resurgent U.S. economy to take the sting out of the oil-price collapse.

Mr. Poloz finally got a hint of that in the July trade numbers. Canadian merchandise exports grew 2.3 per cent, paced by double-digit gains in autos and aircraft. That helped shrink the trade deficit to its lowest level since last November.

And on Friday there was more evidence that Canada’s slump was fleeting, and distinctly unrecession-like. The economy generated another 12,000 jobs in August, proving the country’s labour market remains surprisingly resilient. The gains were paced by new full-time and government jobs.

… and less encouraging by others:

The Canadian dollar closed at 75.39 cents (U.S.) on Friday, down 0.40 cents from Thursday.

The loonie was under pressure after a lacklustre Labour Force Survey was released from Statistics Canada. The jobs report shows employment in Canada was little changed in August. Last month, Canada added a mere 12,000 jobs or an increase of 0.1 per cent to the labour force. Despite the increase, national unemployment ticked up 0.2 percentage points to 7.0 per cent, as more people in Canada searched for a job.

The loonie was also dragged by lower oil prices. West Texas Intermediate (WTI) crude closed down 70 cents (U.S.) at $46.05 (U.S.).

Markets on both sides of the border will be closed on Monday to mark Labour Day. An announcement from the Bank of Canada on interest rates and a release Wednesday, from Statistics Canada, of key housing starts and building permits data for July could affect the Canadian dollar next week.

R Split III Corp, proud issuer of RBS.PR.B, was confirmed at Pfd-2 by DBRS:

The main form of credit enhancement available to the Preferred Shares is a buffer of downside protection. Downside protection corresponds to the percentage decline in the market value of the Portfolio that must be experienced before the Preferred Shares would be in a loss position. The amount of downside protection available to the Preferred Shares as of August 27, 2015, is 72.3%.

The dividend coverage ratio is approximately 3.1 times. Other key rating factors include the downside protection stability in recent months, the credit quality and concentration of the Portfolio in one asset and the approaching maturity date of the Preferred Shares. Based on these considerations and aforementioned performance metrics, DBRS has confirmed the Pfd-2 rating of the Preferred Shares.

Dividend 15 Split Corp., proud issuer of DFN.PR.A, was confirmed at Pfd-3 by DBRS:

The payment of the Class A Share distributions results in an average annual grind on the Portfolio NAV of approximately 6.2% over the next four years. No monthly distributions to the Class A Shares will be made if the dividends of the Preferred Shares are in arrears or if the NAV of the Company falls below 1.5 times the principal amount of the outstanding Preferred Shares. Furthermore, no special distributions will be made if the NAV of the Company is below $25.

The amount of downside protection available to the Preferred Shares as of August 28, 2015, is 52.1%. The Preferred Share dividend coverage ratio is approximately 1.1 times.

One particular strength of the Portfolio is the consistency of dividend distributions of the underlying companies to date. Some potential areas of concern include the Portfolio concentration in the financial services and insurance industry. In addition, volatility of prices and possible future changes in the dividend policies of the underlying companies in the Portfolio may result in reductions in downside protection and dividend coverage.

Based on these considerations and the aforementioned performance metrics, DBRS confirms the Pfd-3 rating of the Dividend 15 Split Corp. Preferred Shares.

It was another good day for the Canadian preferred share market, with PerpetualDiscounts up 24bp, FixedResets winning 52bp and DeemedRetractibles gaining 4bp. The Performance Highlights table is suitably long. Volume was infinitesimal, as practitioners of the highest paid profession on earth took the day off enjoy the sunshine and complain about the poor service at patio bars.

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_150904
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.70 to be $0.86 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.97 cheap at its bid price of 13.13.

impVol_MFC_150904
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.18 to be 0.44 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 22.75 to be 0.27 cheap.

impVol_BAM_150904
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.40 to be $0.93 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 20.80 and appears to be $0.97 rich.

impVol_FTS_150904
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FTS.PR.K, with a spread of +205bp, and bid at 18.85, looks $0.35 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.45 and is $0.49 cheap.

pairs_FR_150904
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.01%, with no outliers; not only that, but all data points are negative! Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -1.28% and the unregulated issues averaging -0.64%. There are two junk outliers below -1.80% and one above +0.20%.

pairs_FF_150904
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 -1.6225 % 1,632.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.6225 % 2,853.5
Floater 4.50 % 4.56 % 58,007 16.22 3 -1.6225 % 1,734.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0948 % 2,771.5
SplitShare 4.64 % 5.05 % 65,008 3.10 3 -0.0948 % 3,248.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0948 % 2,534.3
Perpetual-Premium 5.73 % 2.71 % 58,767 0.08 8 -0.0445 % 2,489.0
Perpetual-Discount 5.45 % 5.50 % 74,244 14.61 30 0.2441 % 2,595.3
FixedReset 4.70 % 4.14 % 181,049 16.09 74 0.5248 % 2,161.4
Deemed-Retractible 5.15 % 5.22 % 101,067 5.52 33 0.0379 % 2,577.5
FloatingReset 2.43 % 3.80 % 52,532 5.95 9 0.0487 % 2,174.8
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -2.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 10.36
Evaluated at bid price : 10.36
Bid-YTW : 4.62 %
MFC.PR.F FixedReset -1.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.75
Bid-YTW : 7.99 %
CU.PR.F Perpetual-Discount -1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 5.47 %
BAM.PR.B Floater -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 10.66
Evaluated at bid price : 10.66
Bid-YTW : 4.49 %
IFC.PR.A FixedReset -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.65
Bid-YTW : 8.37 %
HSE.PR.C FixedReset -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 20.90
Evaluated at bid price : 20.90
Bid-YTW : 4.81 %
CU.PR.G Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 20.86
Evaluated at bid price : 20.86
Bid-YTW : 5.43 %
BAM.PF.C Perpetual-Discount 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.43
Evaluated at bid price : 21.43
Bid-YTW : 5.77 %
RY.PR.M FixedReset 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 22.25
Evaluated at bid price : 22.97
Bid-YTW : 3.68 %
RY.PR.Z FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.46
Evaluated at bid price : 21.81
Bid-YTW : 3.58 %
TD.PF.B FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.42
Evaluated at bid price : 21.75
Bid-YTW : 3.63 %
TD.PF.C FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.35
Evaluated at bid price : 21.65
Bid-YTW : 3.64 %
BMO.PR.W FixedReset 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 3.68 %
RY.PR.H FixedReset 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.54
Evaluated at bid price : 21.81
Bid-YTW : 3.63 %
VNR.PR.A FixedReset 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 20.04
Evaluated at bid price : 20.04
Bid-YTW : 4.60 %
NA.PR.W FixedReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.06
Evaluated at bid price : 21.06
Bid-YTW : 3.81 %
RY.PR.J FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 22.51
Evaluated at bid price : 23.40
Bid-YTW : 3.69 %
BAM.PR.N Perpetual-Discount 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.68 %
BMO.PR.T FixedReset 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.54
Evaluated at bid price : 21.80
Bid-YTW : 3.61 %
CU.PR.C FixedReset 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.40
Evaluated at bid price : 21.40
Bid-YTW : 3.76 %
TRP.PR.B FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 12.38
Evaluated at bid price : 12.38
Bid-YTW : 4.13 %
HSE.PR.E FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 22.00
Evaluated at bid price : 22.50
Bid-YTW : 4.81 %
NA.PR.S FixedReset 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.45
Evaluated at bid price : 21.80
Bid-YTW : 3.79 %
MFC.PR.N FixedReset 1.67 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.65
Bid-YTW : 5.88 %
BMO.PR.S FixedReset 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.98
Evaluated at bid price : 22.39
Bid-YTW : 3.59 %
MFC.PR.M FixedReset 1.74 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.06
Bid-YTW : 5.69 %
FTS.PR.F Perpetual-Discount 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 22.43
Evaluated at bid price : 22.69
Bid-YTW : 5.42 %
BAM.PR.R FixedReset 1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 4.59 %
FTS.PR.H FixedReset 2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 3.78 %
TRP.PR.F FloatingReset 2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 14.45
Evaluated at bid price : 14.45
Bid-YTW : 3.90 %
CM.PR.P FixedReset 2.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.40
Evaluated at bid price : 21.40
Bid-YTW : 3.72 %
TRP.PR.A FixedReset 2.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 16.86
Evaluated at bid price : 16.86
Bid-YTW : 4.14 %
HSE.PR.A FixedReset 2.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 14.25
Evaluated at bid price : 14.25
Bid-YTW : 4.44 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.B Deemed-Retractible 55,869 RBC crossed blocks of 25,000 and 24,800, both at 25.04.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-10-04
Maturity Price : 25.00
Evaluated at bid price : 25.06
Bid-YTW : 3.52 %
PWF.PR.P FixedReset 55,398 RBC crossed blocks of 32,500 and 13,000, both at 16.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 3.73 %
BAM.PR.R FixedReset 41,849 RBC bought 16,800 from Scotia at 16.93.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 4.59 %
IAG.PR.G FixedReset 31,657 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.89
Bid-YTW : 4.28 %
MFC.PR.F FixedReset 30,165 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.75
Bid-YTW : 7.99 %
HSE.PR.A FixedReset 15,329 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 14.25
Evaluated at bid price : 14.25
Bid-YTW : 4.44 %
There were 7 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IFC.PR.A FixedReset Quote: 16.65 – 17.80
Spot Rate : 1.1500
Average : 0.6845

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.65
Bid-YTW : 8.37 %

NA.PR.W FixedReset Quote: 21.06 – 21.84
Spot Rate : 0.7800
Average : 0.5364

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.06
Evaluated at bid price : 21.06
Bid-YTW : 3.81 %

RY.PR.J FixedReset Quote: 23.40 – 24.00
Spot Rate : 0.6000
Average : 0.3739

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 22.51
Evaluated at bid price : 23.40
Bid-YTW : 3.69 %

HSE.PR.E FixedReset Quote: 22.50 – 23.20
Spot Rate : 0.7000
Average : 0.4961

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 22.00
Evaluated at bid price : 22.50
Bid-YTW : 4.81 %

CU.PR.F Perpetual-Discount Quote: 20.71 – 21.20
Spot Rate : 0.4900
Average : 0.3122

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 5.47 %

ELF.PR.G Perpetual-Discount Quote: 21.40 – 21.93
Spot Rate : 0.5300
Average : 0.3574

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-04
Maturity Price : 21.40
Evaluated at bid price : 21.40
Bid-YTW : 5.64 %

Why you can’t trust the yields on preferred ETFs

September 4th, 2015

John Heinzl was kind enough to quote me in Why you can’t trust the yields on preferred ETFs:

Both CPD and ZPR have also cut their distributions recently. ZPR trimmed its distribution by about 6 per cent in July, and CPD reduced its monthly payout by about 10 per cent in August. That may be just a taste of what’s to come.

“We’ll be seeing more cuts, almost certainly,” preferred share specialist James Hymas, president of Hymas Investment Management, said in an interview. “Any mutual fund with a significant position in fixed resets will be cutting its dividend. You can take that as near a certainty as you ever get in this business.”

If the trailing yields of preferred share ETFs are misleading, what sort of future yields can investors realistically expect? Assuming the five-year Canada bond yield stays well under 1 per cent, Mr. Hymas estimates that CPD’s projected yield is 4.2 per cent. It could be higher or lower than that, depending on what happens to bond yields.

If there’s a silver lining, it’s this: Rate-reset preferreds have been beaten up so badly that they could produce some handsome returns if bond yields start heading back up, Mr. Hymas said. And he believes they will – eventually – given that the five-year yield is now below the inflation rate, meaning that government bond investors are losing money on a real basis.

“It is simply not sustainable for a five-year Canada to trade below inflation forever,” he said. “That simply cannot go on.”

Plenty of bruised preferred share investors are hoping he’s right.

September 3, 2015

September 4th, 2015

So, are the oil sands now a white elephant?

The last place oil producers want to be when prices plummet to profit-demolishing lows is midstream on a billion-dollar project in one of the costliest parts of the planet to extract crude.

Yet that’s exactly where half a dozen oil sands operators from Suncor Energy Inc. to Brion Energy Corp. find themselves with prices for Canadian oil now hovering around $30 a barrel. While all around them projects have been postponed or canceled, their investments were judged too far along when the oil game suddenly moved from offense to defense.

These projects will add at least another 500,000 barrels a day — roughly a 25 percent increase from Alberta — to an oversupplied North American market by 2017.

A general rule of thumb says new plants require a West Texas Intermediate price of $80 a barrel to break even. Western Canada Select, a blend of heavy Alberta crude, is currently selling at a discount of about $14 a barrel to the WTI benchmark, which closed at $46.75 Thursday in New York.

Returns on capital invested by Canada’s largest oil-sands producers reached 20 percent at some points over the past five years, according to data compiled by Bloomberg. That figure is now closer to zero or negative for companies such as Athabasca Oil Co. and Cenovus.

There are two things you can sell in this world: entertainment and things. Don’t sell things:

In most AT&T, Sprint, or T-Mobile stores, it takes a while to find the ZTE phones, buried in the back, past the latest from Apple and Samsung. But they’re there. In AT&T stores it’s the ZTE Maven, which has a screen, speakers, and a processor with capabilities somewhere between the iPhone 5 and 6. As Tony Greco, ZTE’s head of U.S. retail marketing, puts it, “These were state-of-the-art features two years ago.” The Maven’s draw, really, is price. Without any subsidies from a wireless carrier, the phone costs just $60. And it’s not even one of the company’s cheaper models.

ZTE is quietly becoming a force in the U.S. by selling good enough phones at low prices—smaller prepaid smartphones for $30, basic phones with QWERTY keyboards for about the same, and so on. The Chinese company’s products are among the cheap phones of choice at three of the big four U.S. carriers. (Verizon doesn’t carry them.) ZTE claimed about 8 percent of America’s smartphone market in the second quarter of this year, says researcher IDC, up from 4.2 percent in the first quarter of 2014. That ranks the company fourth among smartphone makers overall, behind Apple, Samsung, and LG. “We came from nowhere, and now we are a solid force,” says Lixin Cheng, head of ZTE’s U.S. operations.

So the question of the day is: if you pay quintuple price, can you really say you’ve bought a “smart” ‘phone?

Thanks to a new thesaurus, I now have many more words to describe the preferred share market:

Let’s let Rajna Gibson Brandon and Christopher Hemmens from the University of Geneva and the University of St. Gallen’s Mathieu Trepanier explain:

“We find that market irrationality has a signicantly negative effect on subsequent stock market returns — proxied by the S&P 500 and the Dow Jones Industrial Average — and exacerbates stock market volatility,” they write in a new research paper. “The full impact takes time to manifest with small downturns at first culminating in a significant negative impact after three days followed by a weak reversal almost a week later.”

By “market irrationality” they are referring specifically to the types of words appearing in the financial press that, to use some fancy words, may prove to be parlous augers for stock prices. They list 141 words, but some of the favorites around here are “bonkers,” “barbarous,” “berserk,” “daft,” “perverse” and “psycho.” (Yes, a lot of words beginning with “b,” the Greek equivalent of which is “beta.”)

Brompton Split Banc Corp., proud issuer of SBC.PR.A was confirmed at Pfd-3(high) by DBRS:

The main form of credit enhancement available to the Preferred Shares is a buffer of downside protection. Downside protection corresponds to the percentage decline in market value of the Portfolio that must be experienced before the Preferred Shares would be in a loss position. The amount of downside protection available to the Preferred Shares as of August 6, 2015, is 55.8%.

In the past year, the performance of the Company has been stable. Current dividend coverage is 1.65 times. Quarterly Preferred Share and monthly Capital Share distributions have remained unchanged since 2013. Other key rating considerations include the credit quality, volatility and diversification of the Portfolio as well as changes in the dividend policies of the underlying companies in the Portfolio.

Based on the aforementioned considerations and performance metrics, DBRS confirms the Pfd-3 (high) rating of the Preferred Shares issued by Brompton Split Banc Corp.

Canadian Banc Corp., proud issuer of BK.PR.A, was confirmed at Pfd-3(high) by DBRS:

The main form of credit enhancement available to the Preferred Shares is a buffer of downside protection. The amount of downside protection available to the Preferred Shares as of August 26, 2015, is 53.4%. The Preferred Share dividend coverage ratio is approximately 1.18 times.

Although the credit quality of the underlying assets of the Portfolio is strong, the Portfolio is concentrated in the financial services industry. As a result, its value has recently seen a slight deterioration due to the weak performance of common shares of the six Canadian Banks since the beginning of 2015. The floating nature of dividend distributions to Preferred Shares and Class A Shares, although mitigated by predetermined ranges of dividend yields, may potentially increase the volatility of the protection available to holders of the Preferred Shares in a high interest rate environment.

Based on these considerations and aforementioned performance metrics, DBRS confirms the Pfd-3 (high) rating of the Canadian Banc Corp. Preferred Shares.

It was another fine day for the Canadian preferred share market, with PerpetualDiscounts gaining 12bp, FixedResets winning 45bp and DeemedRetractibles up 16bp. The Performance Highlights table is notable for having very few losers today. Volume was very 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_150903
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.67 to be $0.93 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.83 cheap at its bid price of 13.10.

impVol_MFC_150903
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Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.00 to be 0.30 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 19.77 to be 0.31 cheap.

impVol_BAM_150903
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.07 to be $1.26 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 20..85 and appears to be $1.02 rich.

impVol_FTS_150903
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 18.80, looks $0.46 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.30 and is $0.50 cheap.

pairs_FR_150903
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.94%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -1.25% and the unregulated issues averaging -0.51%. There is one junk outlier below -1.80% and one above +0.20%.

pairs_FF_150903
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 -0.2490 % 1,658.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.2490 % 2,900.5
Floater 4.42 % 4.50 % 56,166 16.34 3 -0.2490 % 1,763.5
OpRet 0.00 % 0.00 % 0 0.00 0 0.1221 % 2,774.2
SplitShare 4.64 % 4.87 % 66,031 3.10 3 0.1221 % 3,251.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1221 % 2,536.7
Perpetual-Premium 5.72 % 5.42 % 59,641 2.01 8 0.0594 % 2,490.1
Perpetual-Discount 5.46 % 5.52 % 75,759 14.63 30 0.1244 % 2,589.0
FixedReset 4.73 % 4.20 % 178,014 16.09 74 0.4543 % 2,150.1
Deemed-Retractible 5.15 % 5.08 % 102,708 5.52 33 0.1619 % 2,576.5
FloatingReset 2.43 % 3.80 % 49,700 5.95 9 -0.0216 % 2,173.7
Performance Highlights
Issue Index Change Notes
TRP.PR.F FloatingReset -2.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 14.16
Evaluated at bid price : 14.16
Bid-YTW : 3.98 %
SLF.PR.H FixedReset -1.82 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.85
Bid-YTW : 6.55 %
FTS.PR.F Perpetual-Discount -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 22.07
Evaluated at bid price : 22.30
Bid-YTW : 5.52 %
SLF.PR.C Deemed-Retractible 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.06
Bid-YTW : 6.73 %
TD.PF.E FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 22.95
Evaluated at bid price : 24.45
Bid-YTW : 3.63 %
BAM.PR.R FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 17.07
Evaluated at bid price : 17.07
Bid-YTW : 4.68 %
CM.PR.Q FixedReset 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 22.45
Evaluated at bid price : 23.30
Bid-YTW : 3.77 %
BAM.PF.C Perpetual-Discount 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 5.83 %
BMO.PR.Y FixedReset 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 22.62
Evaluated at bid price : 23.65
Bid-YTW : 3.72 %
SLF.PR.D Deemed-Retractible 1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.90
Bid-YTW : 6.83 %
TRP.PR.B FixedReset 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 12.21
Evaluated at bid price : 12.21
Bid-YTW : 4.19 %
BAM.PR.M Perpetual-Discount 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.77 %
NA.PR.S FixedReset 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 3.89 %
TRP.PR.G FixedReset 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 4.35 %
MFC.PR.M FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.70
Bid-YTW : 5.91 %
BAM.PR.T FixedReset 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 17.68
Evaluated at bid price : 17.68
Bid-YTW : 4.59 %
HSE.PR.C FixedReset 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.15
Evaluated at bid price : 21.15
Bid-YTW : 4.75 %
MFC.PR.H FixedReset 1.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 4.51 %
TD.PR.T FloatingReset 1.79 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.70
Bid-YTW : 3.53 %
TRP.PR.C FixedReset 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 13.10
Evaluated at bid price : 13.10
Bid-YTW : 4.45 %
BAM.PF.D Perpetual-Discount 2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.31
Evaluated at bid price : 21.60
Bid-YTW : 5.76 %
HSE.PR.E FixedReset 2.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.76
Evaluated at bid price : 22.15
Bid-YTW : 4.89 %
NA.PR.W FixedReset 2.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 3.85 %
BMO.PR.W FixedReset 2.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 3.72 %
PWF.PR.P FixedReset 3.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 3.73 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.K FixedReset 99,506 RBC crossed blocks of 47,200 and 30,000, both at 19.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.77
Bid-YTW : 6.24 %
RY.PR.Z FixedReset 72,000 RBC crossed 50,000 at 21.60.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.28
Evaluated at bid price : 21.56
Bid-YTW : 3.63 %
BNS.PR.O Deemed-Retractible 69,410 RBC sold 12,200 to anonymous at 25.62; 10,000 to TD at 25.62, and another 20,000 to TD at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-04-27
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : 4.14 %
IAG.PR.G FixedReset 55,881 RBC crossed 50,000 at 23.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.78
Bid-YTW : 4.34 %
BAM.PF.B FixedReset 42,250 Desjardins crossed 36,800 at 20.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 20.24
Evaluated at bid price : 20.24
Bid-YTW : 4.44 %
MFC.PR.G FixedReset 34,467 RBC crossed 30,000 at 22.70.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.53
Bid-YTW : 5.07 %
There were 18 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
RY.PR.M FixedReset Quote: 22.72 – 24.00
Spot Rate : 1.2800
Average : 1.0892

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 22.10
Evaluated at bid price : 22.72
Bid-YTW : 3.73 %

RY.PR.H FixedReset Quote: 21.55 – 22.25
Spot Rate : 0.7000
Average : 0.5119

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.27
Evaluated at bid price : 21.55
Bid-YTW : 3.67 %

TRP.PR.F FloatingReset Quote: 14.16 – 15.14
Spot Rate : 0.9800
Average : 0.8062

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 14.16
Evaluated at bid price : 14.16
Bid-YTW : 3.98 %

FTS.PR.F Perpetual-Discount Quote: 22.30 – 22.85
Spot Rate : 0.5500
Average : 0.3983

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 22.07
Evaluated at bid price : 22.30
Bid-YTW : 5.52 %

HSE.PR.G FixedReset Quote: 22.31 – 22.90
Spot Rate : 0.5900
Average : 0.4392

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 21.86
Evaluated at bid price : 22.31
Bid-YTW : 4.84 %

VNR.PR.A FixedReset Quote: 19.80 – 20.37
Spot Rate : 0.5700
Average : 0.4658

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-03
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 4.66 %

ALA.PR.A To Reset At 3.38%

September 3rd, 2015

I have learned that ALA.PR.A will reset at 3.38%.

ALA.PR.A is a FixedReset with a spread of 266bp over five-year Canadas, which commenced trading August 19, 2010 after being announced August 10, 2010. The original coupon was 5.00%, so the reset rate of 3.38% represents a decline of 32%. Hey, by recent 40%+ standards, that looks good!

Holders have the option to convert into a FloatingReset, and this option must be exercised prior to 5pm, September 15 before vanishing until the next reset date in 2020. Recent market conditions have been highly unfavourable for FloatingResets and it is likely that I will recommend against conversion. However, conditions can change dramatically and rapidly and I will wait until September 10 to make a more formal recommendation.

Note that the September 15 notification date is for notification of the company, and brokers will generally have an internal deadline a day or two prior to this … so if you’re planning to wait until the last minute, contact your broker and find out precisely when the last minute will be!

I complained yesterday about the lack of information made available by the company and sent them an eMail. AltaGas’ Investor Relations department refused to answer my question directly and instead gave me contact information for a third party not employed by AltaGas, expressing the pious hope that he “may be able to assist.”

AltaGas’ Investor Relations department must be the most totally useless public company department on earth.

September 2, 2015

September 2nd, 2015

Here’s a sign of the times from Pengrowth:

Pengrowth’s (TSX:PGF)(NYSE:PGH) Board of Directors has approved a change to the Company’s dividend policy, moving to a quarterly payment at a rate of $0.01 per share per quarter ($0.04 per share annually), as a result of the continued weakness in commodity prices. With the macro environment continuing to deteriorate and given the outlook for a prolonged weakness in commodity prices, the Company believes that it is prudent to preserve capital and accelerate its efforts to reduce overall indebtedness.

The new dividend policy will take effect following the payment of the $0.02 per share dividend payable on September 15, 2015 with the first quarterly payment expected to be paid on December 15, 2015.

Pengrowth remains committed to taking actions to ensure the Company lives within its cash flow and looking at all options to reduce its overall indebtedness. Today’s dividend reduction is consistent with all of the measures the Company has taken in 2015 to counter the impact of falling prices and preserve its financial liquidity.

These measures include:

  • •A 78 percent reduction in anticipated 2015 capital spending compared to 2014.
  • •Targeted non-core asset sales of $600 million in 2015.
  • •Continued focus on capital cost reductions, resulting in a 20 to 25 percent reduction for most types of services.
  • •Ongoing staffing re-alignments with a seven percent reduction in head office full-time staff in the last nine months.
  • •Commitment to ongoing hedging efforts to protect future cash flows and capital programs.

In the absence of stronger commodity prices, Pengrowth would expect 2016 capital spending to be under $100 million.

And here’s another sign of the times from Rob Carrick:

If you think the stock market has been nasty lately, you should check out what preferred shares have gone through.

It’s a slaughter, really. These supposedly low-risk widow-and-orphan stocks are in a bear market that looks much worse than what the broader market has been through. The S&P/TSX composite index was down 11.3 per cent for the 12 months to Aug. 31, while the S&P/TSX preferred share index was down 19.5 per cent. The composite has made 15.5 per cent in total for the five years to Aug. 31, while the pref share index is down about 21 per cent.

Regrettably, the piece states:

What will bring the pref market back this time? Possibly the 5.5 per cent yield now being generated by the preferred share index. At a time when five-year Government of Canada bonds yield 0.75 per cent, that’s quite the value proposition.

The 5.5% yield must be Current Yield; while I consider the conclusion reasonable enough, the use of inapplicable data to support it detracts from the article. It should also be noted that Mr. Carrick’s quoted returns are based on price indices, rather than total return, which makes a bit of a difference! The following table by no means changes the conclusion, but is a bit more precise:

Comparison of ^SPTSX and ^TXPR
Index 1-Year 5-Year
Cumulative
Price Indices
^SPTSX -11.31% +16.33%
^TXPR -19.50% -20.71
Total Return Indices
^SPTSX -8.28 +34.4%
^TXPR -15.44% +1.88%

The IMF brings happy news and analysis:

Global growth in the first half of 2015 was lower than in the second half of 2014, reflecting a further slowdown in emerging economies and a weaker recovery in advanced economies … Financial conditions for emerging economies have tightened … Risks are tilted to the downside, and a simultaneous realization of some of these risks would imply a much weaker outlook.

So what should we do?

Advanced economies should maintain supportive policies. In most advanced economies substantial output gaps and below-target inflation suggest that the monetary stance must stay accommodative. Fiscal policy should remain growth friendly and be anchored in credible medium-term plans. Managing high public debt in a low-growth and low-inflation environment remains a key challenge.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 47bp, FixedResets up 33bp and DeemedRetractibles gaining 7bp. Floaters did really well! The Performance Highlights table is its usual extremely lengthy self. Volume was on the low side of average.

PerpetualDiscounts now yield 5.49%, equivalent to 7.14% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.15%, so the pre-tax interest-equivalent spread is now about 300bp, a sharp narrowing from the 325bp reported August 26.

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_150902
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.75 to be $1.12 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.02 cheap at its bid price of 12.85.

impVol_MFC_150902
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 16.00 to be 0.30 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 19.61 to be 0.37 cheap.

impVol_BAM_150902
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The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.89 to be $1.42 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.60 and appears to be $1.03 rich.

impVol_FTS_150902
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Implied Volatility eased a little today, but there are perils in relying too heavily on a four-point curve.

FTS.PR.K, with a spread of +205bp, and bid at 18.91, looks $0.46 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.39 and is $0.52 cheap.

pairs_FR_150902
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.91%, with no outliers although I had to change the scale of the graph. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -1.30% and the unregulated issues averaging -0.37%. There are two junk outliers below -1.80% and one above +0.20%.

pairs_FF_150902
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 2.7502 % 1,663.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 2.7502 % 2,907.8
Floater 4.41 % 4.49 % 56,917 16.36 3 2.7502 % 1,767.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.2311 % 2,770.8
SplitShare 4.64 % 4.95 % 65,834 3.10 3 0.2311 % 3,247.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2311 % 2,533.6
Perpetual-Premium 5.73 % 3.09 % 58,849 0.08 8 0.1240 % 2,488.7
Perpetual-Discount 5.47 % 5.49 % 76,420 14.65 30 0.4722 % 2,585.8
FixedReset 4.75 % 4.21 % 178,396 16.07 74 0.3278 % 2,140.4
Deemed-Retractible 5.16 % 5.08 % 100,744 5.54 33 0.0658 % 2,572.4
FloatingReset 2.43 % 3.83 % 46,075 5.95 9 -0.3451 % 2,174.2
Performance Highlights
Issue Index Change Notes
MFC.PR.M FixedReset -2.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.40
Bid-YTW : 6.10 %
GWO.PR.I Deemed-Retractible -1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.43
Bid-YTW : 6.54 %
HSE.PR.G FixedReset -1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 21.85
Evaluated at bid price : 22.30
Bid-YTW : 4.84 %
TD.PR.T FloatingReset -1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 3.83 %
MFC.PR.G FixedReset -1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.31
Bid-YTW : 5.20 %
SLF.PR.I FixedReset -1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.35
Bid-YTW : 5.60 %
BMO.PR.W FixedReset -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 3.84 %
FTS.PR.H FixedReset -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 14.74
Evaluated at bid price : 14.74
Bid-YTW : 3.84 %
BNS.PR.C FloatingReset -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.61
Bid-YTW : 3.89 %
NA.PR.W FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 3.96 %
RY.PR.H FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 21.36
Evaluated at bid price : 21.36
Bid-YTW : 3.73 %
BNS.PR.B FloatingReset -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.56
Bid-YTW : 3.73 %
IAG.PR.G FixedReset 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.84
Bid-YTW : 4.31 %
SLF.PR.H FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.20
Bid-YTW : 6.31 %
BAM.PF.C Perpetual-Discount 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 20.95
Evaluated at bid price : 20.95
Bid-YTW : 5.90 %
TD.PF.D FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 22.57
Evaluated at bid price : 23.54
Bid-YTW : 3.72 %
CU.PR.E Perpetual-Discount 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 22.07
Evaluated at bid price : 22.38
Bid-YTW : 5.49 %
CU.PR.D Perpetual-Discount 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 22.07
Evaluated at bid price : 22.38
Bid-YTW : 5.49 %
FTS.PR.J Perpetual-Discount 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 21.78
Evaluated at bid price : 22.12
Bid-YTW : 5.38 %
ENB.PR.A Perpetual-Discount 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 24.16
Evaluated at bid price : 24.41
Bid-YTW : 5.66 %
FTS.PR.G FixedReset 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 18.39
Evaluated at bid price : 18.39
Bid-YTW : 4.12 %
BAM.PR.C Floater 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 10.57
Evaluated at bid price : 10.57
Bid-YTW : 4.53 %
TRP.PR.D FixedReset 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 18.97
Evaluated at bid price : 18.97
Bid-YTW : 4.37 %
MFC.PR.I FixedReset 1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.72
Bid-YTW : 5.01 %
HSE.PR.C FixedReset 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 4.83 %
BMO.PR.Q FixedReset 1.71 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.37
Bid-YTW : 4.88 %
TRP.PR.E FixedReset 1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 19.75
Evaluated at bid price : 19.75
Bid-YTW : 4.27 %
BAM.PF.D Perpetual-Discount 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 21.17
Evaluated at bid price : 21.17
Bid-YTW : 5.90 %
MFC.PR.H FixedReset 2.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 4.73 %
RY.PR.M FixedReset 2.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 22.18
Evaluated at bid price : 22.85
Bid-YTW : 3.70 %
BAM.PR.R FixedReset 2.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 16.89
Evaluated at bid price : 16.89
Bid-YTW : 4.73 %
FTS.PR.K FixedReset 2.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 18.91
Evaluated at bid price : 18.91
Bid-YTW : 3.98 %
CU.PR.F Perpetual-Discount 2.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.39 %
BAM.PR.K Floater 2.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 10.67
Evaluated at bid price : 10.67
Bid-YTW : 4.49 %
MFC.PR.J FixedReset 3.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.70
Bid-YTW : 5.34 %
BAM.PR.B Floater 3.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 10.89
Evaluated at bid price : 10.89
Bid-YTW : 4.40 %
TRP.PR.F FloatingReset 4.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 14.57
Evaluated at bid price : 14.57
Bid-YTW : 3.87 %
GWO.PR.N FixedReset 4.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.45
Bid-YTW : 7.93 %
BIP.PR.A FixedReset 5.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 22.08
Evaluated at bid price : 22.65
Bid-YTW : 4.76 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.S FixedReset 85,388 Desjardins crossed 80,000 at 22.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 21.63
Evaluated at bid price : 21.90
Bid-YTW : 3.68 %
MFC.PR.L FixedReset 75,700 Nesbitt crossed 75,000 at 19.85.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.47
Bid-YTW : 6.54 %
MFC.PR.M FixedReset 66,200 Nesbitt crossed 60,000 at 20.85.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.40
Bid-YTW : 6.10 %
RY.PR.L FixedReset 61,200 Desjardins crossed 60,000 at 25.65.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.59
Bid-YTW : 3.50 %
BNS.PR.R FixedReset 58,200 TD crossed 45,400 at 25.05.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.03
Bid-YTW : 3.34 %
NA.PR.M Deemed-Retractible 57,404 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-10-02
Maturity Price : 25.50
Evaluated at bid price : 25.79
Bid-YTW : -4.34 %
There were 29 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.L FixedReset Quote: 19.47 – 21.30
Spot Rate : 1.8300
Average : 1.1618

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.47
Bid-YTW : 6.54 %

MFC.PR.J FixedReset Quote: 21.70 – 22.67
Spot Rate : 0.9700
Average : 0.5706

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.70
Bid-YTW : 5.34 %

RY.PR.M FixedReset Quote: 22.85 – 24.00
Spot Rate : 1.1500
Average : 0.8801

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 22.18
Evaluated at bid price : 22.85
Bid-YTW : 3.70 %

BMO.PR.W FixedReset Quote: 20.50 – 21.04
Spot Rate : 0.5400
Average : 0.3800

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-02
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 3.84 %

GWO.PR.I Deemed-Retractible Quote: 21.43 – 21.89
Spot Rate : 0.4600
Average : 0.3156

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.43
Bid-YTW : 6.54 %

PWF.PR.O Perpetual-Premium Quote: 25.43 – 25.84
Spot Rate : 0.4100
Average : 0.2765

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.43
Bid-YTW : 5.67 %

What Is The Reset Rate On ALA.PR.A?

September 2nd, 2015

To my surprise and irritation, the reset rate on ALA.PR.A has not yet been announced.

The company’s preferred share page has a link to the Prospectus Supplement for the issue, but this link takes one to SEDAR, so I can’t provide a direct link to the document myself. The regulators are doing a fine job of making access to public documents inconvenient to the investor-scum elements of the public!

However, the relevant parts of the Supplement are:

“Initial Fixed Rate Period” means the period from and including the date of issue of the Series A Shares to, but excluding, September 30, 2015.

“Subsequent Fixed Rate Period” means, for the initial Subsequent Fixed Rate Period, the period from and including September 30, 2015 to, but excluding, September 30, 2020, and for each succeeding Subsequent Fixed Rate Period means the period from and including the day immediately following the last day of the immediately preceding Subsequent Fixed Rate Period to, but excluding, September 30 in the fifth year thereafter.

“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.

On each Fixed Rate Calculation Date, AltaGas shall determine the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period. Each such determination shall, in the absence of manifest error, be final and binding upon AltaGas and upon all holders of Series A Shares. AltaGas shall, on each Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series A Shares.

The Series A Shares and Series B Shares will be issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (“CDS Participant”). AltaGas will cause a global certificate or certificates representing any newly issued Series A Shares or Series B Shares to be delivered to, and registered in the name of, CDS or its nominee.

So Altagas has fulfilled the letter of their obligation by sending a billet-doux to CDS, which is:

a wholly owned subsidiary of TMX Group Limited
(TMX Group)

which in turn is substantially owned by:

Each of CIBC World Markets Inc., National Bank Financial & Co. Inc., Scotia Capital Inc., and TD Securities Inc., either directly or through an affiliate, has agreed to maintain a specified minimum ownership interest in TMX Group for a period of five years from September 14, 2012. For the year ended September 14, 2013, each of these investors were required to own at least 6.25%, and for each of the four following years, each of these investors must own at least 5.625%, of our common shares outstanding as
at September 14, 2012″

Assiduous Readers will remember the July 4, 2012 report that the regulators had agreed to permit an extension of the banking oligopoly’s hegemony over the Canadian financial system in return for something the regulators consider very important: extra payments to the regulators.

So what it all boils down to is: investors are scum. If you want to know what the reset rate on ALA.PR.A is, your best bet is to ‘phone your friendly (and probably bank-owned) broker and, after listening to a pitch for GICs while you’re on hold for half an hour, ask your friendly Customer Service Rep if they wouldn’t mind telling you the reset rate on this issue, provided it doesn’t interfere with lunch or anything.

However, hope springs eternal and I have sent the following missive to AltaGas Investor Relations:

Sirs,

It is my understanding from the prospectus supplement that the dividend rate for ALA.PR.A for the period September 30, 2015, to September 29, 2020, has been determined.

What is the new dividend rate?

Will there be any kind of announcement or notification on your website?

Sincerely,

September 1, 2015

September 2nd, 2015

It was kind of an interesting day, with US equities getting smacked:

U.S. stocks joined a worldwide selloff, after equities’ worst month in more than three years, amid continuing concerns that China’s slowdown will weigh on the global economy.

The Standard & Poor’s 500 Index slid 3 percent to 1,913.85 at 4 p.m. in New York, the third-worst drop this year. … The Dow Jones Industrial Average sank 469.68 points, or 2.8 percent, to 16,058.35. The Nasdaq Composite Index lost 2.9 percent.

Equities dropped in Asia, with the Shanghai Composite Index slumping as much as 4.8 percent, after manufacturing reports pointed to a deepening Chinese economic slowdown.

International Monetary Fund Managing Director Christine Lagarde said Tuesday the global expansion outlook is worse than the lender anticipated less than two months ago. “This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America,” Lagarde said in a speech in Jakarta.

A report today showed U.S. factories expanded in August at the slowest pace since May 2013 as anemic demand from emerging markets such as China translated into leaner factory order books. A measure of exports matched the weakest reading since April 2009. The weak manufacturing data surface ahead of the Federal Reserve’s September policy meeting in which they will debate whether the economy is strong enough to withstand an increase in interest rates in the face of fragile overseas economies.

In somewhat related news, it looks like the deal with Iran will survive not just US Congress, but a very noticeable surge in sponsored content for pro-Israeli groups in my Facebook feed:

President Barack Obama all but wrapped up enough U.S. Senate votes to protect the Iran nuclear deal in Congress as two more Democratic senators said Tuesday they will support the agreement.

The backing from Senators Chris Coons of Delaware and Bob Casey of Pennsylvania brings the president within one vote of the 34 he needs. Eleven Democrats haven’t declared a position, including West Virginia’s Joe Manchin, who said in July he was leaning toward supporting the agreement. An aide has said Manchin remains undecided.

Which is somewhat related because of the effects on the oil market:

The Americas will take the brunt of any cuts in oil production as Iran increases output once international sanctions are lifted, according to a report by A.T. Kearney Inc.’s oil and gas consulting practice in Dubai.

North, South and Central American oil production could fall 1.1 million barrels a day by 2020 because of higher costs as Iran’s output climbs, starting with an increase of 800,000 barrels a day next year, Chicago-based A.T. Kearney said in a report to be issued this week. Brent crude prices are seen trading at $45 to $65 a barrel next year, according to the report. The international benchmark was about $47 a barrel on Tuesday.

So slow economic growth and subdued pricing for oil add up to one thing:

Treasury market analysts are scaling back their forecasts for a selloff as yields show traders expect almost no inflation for the next two years.

Benchmark 10-year yields will hold below 3 percent through September 2016, based on Bloomberg surveys of economists, with the most recent forecasts given the heaviest weightings. In June, the projection was for 3.15 percent.

A bond-market gauge called the break-even rate shows traders expect the average annual rate of inflation to be 0.3 percent over the coming 24 months. The figure has tumbled from more than 1 percent as recently as July. Federal Reserve Bank of Boston President Eric Rosengren said uncertainty over inflation and global growth justifies a modest pace of interest-rate increases, regardless of when the central bank begins.

‘What’s in it for me’, you ask? How about more vacations in Canada?

Canada’s economy shrank again in the second quarter as plunging oil prices triggered a drop in investment, with fresh debate about a recession dealing a blow to Prime Minister Stephen Harper’s bid for re-election.

Gross domestic product declined at a 0.5 percent annualized pace from April to June, Statistics Canada said Tuesday in Ottawa. The agency revised the first-quarter contraction to 0.8 percent from 0.6 percent.

The Group of Seven’s biggest crude oil exporter is struggling as a global commodity slump guts business spending.

Canada’s dollar depreciated 0.3 percent to C$1.3173 per U.S. dollar at 11:55 a.m. Toronto time. The currency is down about 12 percent this year. Swaps trading showed the odds of a rate cut next week fell to about 21 percent after Tuesday’s report, down from 24 percent Monday and 36 percent a week ago.

The consecutive GDP declines are milder than any back-to-back contractions since at least 1981, including the last recession in 2009 which saw drops of 3.6 percent and 8.7 percent. The job market also suggests there’s no broad-based slump in the world’s 11th largest economy. The jobless rate of 6.8 percent for July is down from 7 percent a year ago. August labor data is due Sept. 4.

Fortunately, all this gloom is alleviated by more news from the highly entertaining battle between Sprott and the bullion trusts. Sprott recently announced:

the filing of notices of change (the “Notices of Change”) in connection with the offers (together, the “Sprott offers”) by Sprott Asset Management Gold Bid LP and Sprott Asset Management Silver Bid LP to acquire all of the outstanding units of Central GoldTrust (“GTU”) and Silver Bullion Trust (“SBT”), respectively, for units of Sprott Physical Gold Trust and units of Sprott Physical Silver Trust, in each case on a Net Asset Value (“NAV”) to NAV exchange basis.

We can find, after a bit of difficulty, the document on SEDAR, filed under “Silver Bullion Trust Aug 28 2015 17:49:05 ET Notice of change or variation – English PDF 73 K”, a public document that the regulators consider so critical to the efficient and fair functioning of the public markets that they prohibit investor scum and other interested parties from linking to it directly. After accepting the regulators’ terms of use and offering a little prayer of thanksgiving for our transparent capital markets, we find:

The Offeror has (subject to the next two sentences) agreed to pay to each Soliciting Dealer a fee of U.S.$0.0448 for each SBT Unit deposited through such Soliciting Dealer and either: (i) taken-up and paid for by the Offeror under the Offer; or (ii) provided the Merger Transaction is completed, deemed to be withdrawn from the Offer under the Merger Election, based on, among other things, the claims submitted, CDS and DTC participant deposits and the CDS and DTC participant list as at the Expiry Time. The aggregate amount payable with respect to any single beneficial holder of SBT Units will not be less than U.S.$50.00 and not be more than U.S.$1,500.00, provided that no fee will be payable in respect of deposits of less than 1,000 SBT Units per beneficial holder. When SBT Units deposited are beneficially owned by more than one person, only one minimum and maximum amount will be applied. The Offeror may require the Soliciting Dealers to furnish evidence of beneficial ownership satisfactory to the Offeror before payment of such solicitation fees.

Silver Bullion Trust has a NAVPU of USD 8.38 as of September 1, so this payment comes to a little over 50bp on unit value, which is nice work if you can get it. The target has this to say:

The Trustees note the recent announcement by Sprott that they intend to pay financial advisors and brokers to secure tenders to their Offer, a clear indication that the Sprott Offer has thus far been unable to attract sufficient Unitholder support. The Trustees caution Unitholders regarding any advice or recommendations they may receive from their financial advisors or brokers, which may be biased and based on their desire to collect solicitation fees from Sprott. Sprott is paying your broker to convince you to tender. Don’t be talked into tendering!

I continue to scan the news for mention of solicitation fees and new issue commissions being discussed in connection with potential bans on mutual fund trailer commissions, but there’s nothing. The regulators are too busy coming up with new ways to restrict public access to public documents, while self-proclaimed investor advocates concentrate on trying to get their heads out of their asses.

You know what’s good about the internet? This is what’s good about the internet:


Click for Big

In other other news (about chess), Lev Aronian won the 2015 Sinquefield Cup (a ridiculously strong tournament), but the highlights reel has to include So – Nakamura in round 6 and Nakamura – Grischuk in round 9. Fighting chess! Those with a taste for it may wish to watch the Thoresen Chess Engine Competition Season 8, which brings the world’s strongest chess programmes together on some rather high-end hardware.

The Canadian preferred share market commenced the new month on a mixed note, with PerpetualDiscounts gaining 12bp, FixedResets down 6bp and DeemedRetractibles off 2bp. Reported yields for the FixedReset subindex dropped significantly from yesterday due to the mass migration of ENB issues from FixedResets into Scraps due to credit concerns. The Performance Highlights table continues to show a lot of churn amongst the FixedResets. Volume was extremely 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_150901
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.40 to be $0.88 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.00 cheap at its bid price of 12.75.

impVol_MFC_150901
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.M, resetting at +236bp on 2019-12-19, bid at 20.85 to be 0.39 rich, while MFC.PR.J, resetting at +261bp on 2018-3-19, is bid at 21.00 to be 0.44 cheap.

impVol_BAM_150901
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.51 to be $1.68 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.60 and appears to be $1.15 rich.

impVol_FTS_150901
Click for Big

Implied Volatility reversed yesterday’s precipitous decline, illustrating the perils of relying too heavily on a four-point curve.

FTS.PR.M, with a spread of +248bp, and bid at 20.65, looks $0.26 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.12 and is $0.60 cheap.

pairs_FR_150901
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.94%, with no outliers. Note that the distribution is bimodal (although less than recently), with NVCC non-compliant bank issues averaging -1.05% and the unregulated issues averaging -0.78%. There are four junk outliers below -1.60% and two above +0.40%.

pairs_FF_150901
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 -1.6976 % 1,618.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.6976 % 2,829.9
Floater 4.53 % 4.60 % 57,627 16.15 3 -1.6976 % 1,720.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.3791 % 2,764.4
SplitShare 4.66 % 5.11 % 60,978 3.11 3 -0.3791 % 3,239.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3791 % 2,527.8
Perpetual-Premium 5.73 % 5.53 % 61,765 0.08 8 -0.0397 % 2,485.6
Perpetual-Discount 5.49 % 5.55 % 76,999 14.56 30 0.1164 % 2,573.6
FixedReset 4.76 % 4.21 % 180,656 16.09 74 -0.0607 % 2,133.4
Deemed-Retractible 5.17 % 5.29 % 98,575 5.52 33 -0.0152 % 2,570.7
FloatingReset 2.42 % 3.58 % 44,365 5.96 9 -0.4563 % 2,181.7
Performance Highlights
Issue Index Change Notes
HSE.PR.E FixedReset -3.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.55
Evaluated at bid price : 21.55
Bid-YTW : 5.06 %
FTS.PR.M FixedReset -2.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 4.14 %
BAM.PR.B Floater -2.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 10.50
Evaluated at bid price : 10.50
Bid-YTW : 4.56 %
HSE.PR.C FixedReset -2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 4.92 %
TRP.PR.F FloatingReset -2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 13.98
Evaluated at bid price : 13.98
Bid-YTW : 4.03 %
BAM.PF.F FixedReset -2.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 22.10
Evaluated at bid price : 22.61
Bid-YTW : 4.21 %
PWF.PR.P FixedReset -1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 15.47
Evaluated at bid price : 15.47
Bid-YTW : 3.85 %
BMO.PR.Q FixedReset -1.82 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 5.18 %
BAM.PR.X FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 14.76
Evaluated at bid price : 14.76
Bid-YTW : 4.74 %
BAM.PF.A FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.27
Evaluated at bid price : 21.55
Bid-YTW : 4.43 %
BAM.PR.C Floater -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 10.41
Evaluated at bid price : 10.41
Bid-YTW : 4.60 %
TRP.PR.G FixedReset -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.31
Evaluated at bid price : 21.31
Bid-YTW : 4.39 %
ENB.PR.A Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 23.75
Evaluated at bid price : 24.06
Bid-YTW : 5.74 %
PVS.PR.D SplitShare -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 5.22 %
GWO.PR.G Deemed-Retractible -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 6.03 %
BMO.PR.R FloatingReset -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.71
Bid-YTW : 3.56 %
RY.PR.N Perpetual-Discount 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 24.27
Evaluated at bid price : 24.64
Bid-YTW : 5.06 %
MFC.PR.K FixedReset 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.58
Bid-YTW : 6.36 %
BAM.PR.R FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 16.51
Evaluated at bid price : 16.51
Bid-YTW : 4.84 %
MFC.PR.G FixedReset 1.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.63
Bid-YTW : 5.01 %
PWF.PR.S Perpetual-Discount 2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 22.25
Evaluated at bid price : 22.61
Bid-YTW : 5.35 %
IFC.PR.C FixedReset 2.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.62
Bid-YTW : 6.08 %
BAM.PF.E FixedReset 2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 4.37 %
MFC.PR.M FixedReset 2.96 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.85
Bid-YTW : 5.81 %
PWF.PR.L Perpetual-Discount 2.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 23.30
Evaluated at bid price : 23.56
Bid-YTW : 5.46 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.T FloatingReset 90,200 Nesbitt crossed 70,000 at 22.80.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.62
Bid-YTW : 3.58 %
PWF.PR.I Perpetual-Premium 30,100 TD crossed two blocks of 15,000 each, both at 25.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-10-01
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 0.22 %
BAM.PF.C Perpetual-Discount 21,299 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 5.97 %
PVS.PR.D SplitShare 18,810 Scotia crossed 10,000 at 24.33.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 5.22 %
TD.PF.A FixedReset 18,175 TD crossed 11,500 at 21.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.44
Evaluated at bid price : 21.44
Bid-YTW : 3.72 %
BMO.PR.T FixedReset 17,120 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 3.68 %
There were 11 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BIP.PR.A FixedReset Quote: 21.50 – 25.00
Spot Rate : 3.5000
Average : 1.8989

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 5.06 %

TRP.PR.F FloatingReset Quote: 13.98 – 15.00
Spot Rate : 1.0200
Average : 0.7095

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 13.98
Evaluated at bid price : 13.98
Bid-YTW : 4.03 %

HSE.PR.E FixedReset Quote: 21.55 – 22.50
Spot Rate : 0.9500
Average : 0.6500

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.55
Evaluated at bid price : 21.55
Bid-YTW : 5.06 %

IFC.PR.A FixedReset Quote: 16.83 – 17.55
Spot Rate : 0.7200
Average : 0.4259

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.83
Bid-YTW : 8.22 %

PWF.PR.S Perpetual-Discount Quote: 22.61 – 23.48
Spot Rate : 0.8700
Average : 0.6252

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 22.25
Evaluated at bid price : 22.61
Bid-YTW : 5.35 %

FTS.PR.J Perpetual-Discount Quote: 21.82 – 22.90
Spot Rate : 1.0800
Average : 0.8775

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.48
Evaluated at bid price : 21.82
Bid-YTW : 5.46 %

NPI.PR.A To Reset At 3.51%

September 1st, 2015

Northland Power Inc. has announced:

that pursuant to the share terms in respect of the Cumulative Rate Reset Preferred Shares, Series 1 (“Series 1 Shares”), it has determined the fixed dividend rate for the five years commencing September 30, 2015 and ending September 29, 2020. The fixed quarterly dividends on the Series 1 Shares during that period will be paid at an annual rate of 3.51% (Cdn. $0.22 per share per quarter).

Holders of Series 1 Shares have the right, at their option, exercisable not later than 5:00 pm (Toronto time) on September 15, 2015, to convert all or part of their Series 1 Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series 2 (the “Series 2 Shares”), effective September 30, 2015. The quarterly floating rate dividends on the Series 2 Shares will be paid at an annual rate, calculated for each quarter, of 2.80% over the annual yield on 90-day Government of Canada treasury bills. The actual quarterly dividend rate in respect of the September 30, 2015 to December 30, 2015 dividend period for the Series 2 Shares will be 0.80% (3.18% on an annualized basis) and the dividend, if and when declared, for such dividend period will be Cdn. $0.20 per share, payable on December 31, 2015.

Holders of Series 1 Shares are not required to elect to convert all or any part of their Series 1 Shares into Series 2 Shares.

As provided in the share conditions of the Series 1 Shares, (i) if Northland determines that there would be fewer than 1,000,000 Series 1 Shares outstanding after September 30, 2015, all remaining Series 1 Shares will be automatically converted into Series 2 Shares on a one-for-one basis effective September 30, 2015; or (ii) if Northland determines that there would be fewer than 1,000,000 Series 2 Shares outstanding after September 30, 2015, no Series 1 Shares will be permitted to be converted into Series 2 Shares. There are currently 6,000,000 Series 1 Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 2 Shares effective upon conversion. Listing of the Series 2 Shares is subject to Northland fulfilling all the listing requirements of the TSX and, upon approval, the Series 2 Shares will be listed on the TSX under the trading symbol “NPI.PR.B”.

NPI.PR.A is a FixedReset with a spread of 280bp over five-year Canadas, which commenced trading July 28, 2015 under the ticker symbol NPP.PR.A after being announced July 6, 2010. The ticker was changed effective January 1, 2011 after conversion from an Income Trust. The original coupon was 5.25%, so the reset rate of 3.51% represents a decline of 33%. Hey, by recent 40%+ standards, that looks good!

As noted in the press release, holders have the option to convert into NPI.PR.B, a FloatingReset, and this option must be exercised prior to 5pm, September 15 before vanishing until the next reset date in 2020. Recent market conditions have been highly unfavourable for FloatingResets and it is likely that I will recommend against conversion. However, conditions can change dramatically and rapidly and I will wait until September 10 to make a more formal recommendation.

Note that the September 15 notification date is for notification of the company, and brokers will generally have an internal deadline a day or two prior to this … so if you’re planning to wait until the last minute, contact your broker and find out precisely when the last minute will be!

FFH.PR.G To Reset At 3.318%

September 1st, 2015

Fairfax Financial Holdings Limited has announced:

that it has determined the fixed dividend rate on its Cumulative 5-Year Rate Reset Preferred Shares, Series G (“Series G Shares”) (TSX:FFH.PR.G) for the five years commencing October 1, 2015 and ending September 30, 2020. The fixed quarterly dividends on the Series G Shares during that period will be paid at an annual rate of 3.318% (Cdn.$0.207375 per share per quarter).

Holders of Series G Shares have the right, at their option, exercisable not later than 5:00pm (Toronto time) on September 15, 2015, to convert all or part of their Series G Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series H (the “Series H Shares”), effective September 30, 2015. The quarterly floating rate dividends on the Series H Shares will be paid at an annual rate, calculated for each quarter, of 2.56% over the annual yield on three month Government of Canada treasury bills. The actual quarterly dividend rate in respect of the October 1, 2015 to December 30, 2015 dividend period for the Series H Shares will be 0.731987% (2.936% on an annualized basis) and the dividend for such dividend period, if and when declared, will be Cdn.$0.18300 per share, payable on December 30, 2015.

Holders of Series G Shares are not required to elect to convert all or any part of their Series G Shares into Series H Shares. A holder of Series G Shares who does not so elect will (subject to the next paragraph) retain their Series G Shares.

As provided in the share conditions of the Series G Shares, (i) if Fairfax determines that there would be fewer than 1,000,000 Series G Shares outstanding after September 30, 2015, all remaining Series G Shares will be automatically converted into Series H Shares on a one-for-one basis effective September 30, 2015; and (ii) if Fairfax determines that there would be fewer than 1,000,000 Series H Shares outstanding after September 30, 2015, no Series G Shares will be permitted to be converted into Series H Shares. There are currently 10,000,000 Series G Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series H Shares effective upon conversion. Listing of the Series H Shares is subject to Fairfax fulfilling all the listing requirements of the TSX and, upon approval, the Series H Shares will be listed on the TSX under the trading symbol “FFH.PR.H”.

Fairfax is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.

FFH.PR.G is a FixedReset with a spread of 256bp over five-year Canadas, which commenced trading July 28, 2010 after being announced July 20, 2010. The original coupon was 5.00%, so the reset rate of 3.318% represents a decline of 34%. Hey, by recent 40%+ standards, that looks good!

As noted in the press release, holders have the option to convert into FFH.PR.H, a FloatingReset, and this option must be exercised prior to 5pm, September 15 before vanishing until the next reset date in 2020. Recent market conditions have been highly unfavourable for FloatingResets and it is likely that I will recommend against conversion. However, conditions can change dramatically and rapidly and I will wait until September 10 to make a more formal recommendation.

Note that the September 15 notification date is for notification of the company, and brokers will generally have an internal deadline a day or two prior to this … so if you’re planning to wait until the last minute, contact your broker and find out precisely when the last minute will be!

August 31, 2015

August 31st, 2015

“It doesn’t matter whether a cat is white or black, as long as it throws financial guys in jail after a crash“:

China’s brokerages tumbled after Citic Securities Co. executives were detained and people familiar with the matter said the industry was told to contribute another 100 billion yuan ($15.7 billion) to a market rescue fund.

Four executives of Citic including managing directors Xu Gang and Liu Wei, admitted alleged insider trading, the state-run Xinhua News Agency said. The nation’s largest brokerage fell as much as 8.6 percent in Shanghai and slid to the lowest since May 2014 in Hong Kong. A Citic press officer declined to comment.

The China Securities Regulatory Commission ordered the rescue-fund contributions at a meeting with 50 brokerages on Saturday that was attended by CSRC Chairman Xiao Gang, said the people, who asked not to be identified because the meeting hasn’t been made public. The regulator encouraged listed brokerages to buy back shares worth as much as 10 percent of their total market value, the people said.

Central bankers are feeling some angst:

Mario Draghi may have skipped the Federal Reserve’s Jackson Hole symposium this year, but he can’t dodge its conclusion: central banks can’t steer inflation as well as they thought.

Less than six months into a stimulus program that the European Central Bank president promised would revive consumer-price growth, the euro area is facing renewed disinflationary pressure as China’s economy slows and commodity prices slump. Inflation failed to pick up this month, data showed on Monday, and Draghi may have to downgrade the institution’s forecasts on Thursday.

The newest risk to prices highlights how in the 19-nation currency bloc — as in the U.S., the U.K. and other industrialized nations — headline inflation is still far below target even as the economy recovers.

At Jackson Hole, academics effectively delivered a beating to central banks’ confidence in their ability to predict and manage their key variable, by pointing out wide gaps in knowledge about how inflation works.

Harvard University’s Gita Gopinath argued that the relationship between prices and exchange rates isn’t well understood. Boston University’s Simon Gilchrist said that strict inflation targeting can worsen economic outcomes.

Worse still, trying to influence inflation while not understanding it is a “recipe for disaster,” according to MIT Sloan School of Management professor Athanasios Orphanides, himself a former ECB Governing Council member.

I knew American universities were venal, but I didn’t know just how venal they could be:

Bank of America’s relationship with the university extends well beyond marketing at sports events. The bank has an $8.4 million, seven-year contract with Michigan State giving it access to students’ names and addresses and use of the university’s logo. The more students who take the banks’ credit cards, the more money the university gets. Under certain circumstances, Michigan State even stands to receive more money if students carry a balance on these cards.

The relationships are reminiscent of those uncovered two years ago between student loan companies and universities. In those, some lenders offered universities an incentive to steer potential borrowers their way.

In Friday’s post I mentioned some interesting things that are happening with barcodes and smartphones … these were interesting enough that I did some poking around.

The Global Food Safety Resource published an interesting article titled Food Regulatory Trends in 2015, which included the interesting note:

In December 2014, Guangdong province piloted an e-traceability system for baby formula. Consumers can use a mobile app and scan a barcode to get information about the product including it’s provenance. But it’s unique to Guangdong and doesn’t translate nationally.

The Grower, a specialty newsletter billing itself as ‘Canada’s Premier Horticultural Publication’, published an article titled How a celery swizzle stick meets its bar code in the field, which contains a bit of insight into Canada’s laws regarding food traceability and how this is implemented at the farm level.

GS1 Canada (the worldwide GS1 organization is mentioned in the Reuters article that got me interested) issued a statement titled Update On Loblaw And Wal-Mart GS1 DataBar™ Pilots (the GS1 Databar was used in one of the examples in the article) that stated:

In June 2006, Loblaw Companies Limited (Loblaw) and Wal-Mart Stores inc. (Wal-Mart) selected several suppliers to pilot the GS1 DataBar™ … on apples and bananas …

To date, Loblaw and Wal-Mart have attributed the following business benefits to their DataBar pilots:
•Decreased out-of-stocks
•Improved shrink control
•Enhanced product replenishment
•Increased customer satisfaction at self-checkouts

So on Saturday evening I visited my local Loblaws and looked at the apples and bananas and lo and behold! They all had GS1 Databars on them!

So it may be concluded that all the data is in place for consumer access to provenance information for apples and bananas at Loblaws. All that is needed is a smartphone App that will read and interpret the information and possibly access to Loblaw’s database – I’m not sure how much, if any, of the data is proprietary.

So you can bet that as soon as Loblaws thinks they can make a dollar out the proposition this traceability will be available – at least as far as Loblaw’s apples and bananas are concerned.

However, I’m not holding my breath waiting for the roll-out. As the comments to the Globe’s republished article so convincingly demonstrate, Canadians as a group are both mentally deficient and terrified of anything developed after 1973. But maybe there’s an App Developer out there who might like to steal a march on the big boys …

I was hoping for some definitive news today on the all-but-certain extensions of NPI.PR.A, FFH.PR.G and ALA.PR.A, which reset 2015-9-30, but there’s nothing.

The Canadian preferred share market closed the month with a good strong day, with PerpetualDiscounts gaining 13bp, FixedResets winning 56bp and DeemedRetractibles up 21bp. There is still a lot of churn in the market, as is demonstrated by yet another lengthy Performance Highlights table. Volume was extremely 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_150831
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.46 to be $0.82 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.00 cheap at its bid price of 12.85.

impVol_MFC_150831
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 20.55 to be 0.48 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 19.37 to be 0.42 cheap.

impVol_BAM_150831
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.27 to be $2.00 cheap. BAM.PF.F, resetting at +286bp on 2019-9-30 is bid at 23.15 and appears to be $1.54 rich.

impVol_FTS_150831
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Implied Volatility declined precipitously today, illustrating the perils of relying too heavily on a four-point curve.

FTS.PR.H, with a spread of +145bp, and bid at 14.95, looks $0.50 expensive and resets 2020-6-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.28 and is $0.60 cheap.

pairs_FR_150831
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.68%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -0.82% and the unregulated issues averaging -0.49%. There are two junk outliers below -1.60% and one two above +0.40%..

pairs_FF_150831
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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 0.9201 % 1,646.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.9201 % 2,878.8
Floater 4.46 % 4.53 % 58,030 16.29 3 0.9201 % 1,750.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.3260 % 2,774.9
SplitShare 4.64 % 5.01 % 58,636 3.11 3 0.3260 % 3,252.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3260 % 2,537.4
Perpetual-Premium 5.72 % 5.67 % 61,999 14.03 9 0.3319 % 2,486.6
Perpetual-Discount 5.50 % 5.57 % 77,670 14.54 29 0.1270 % 2,570.6
FixedReset 4.95 % 4.35 % 195,597 15.56 87 0.5555 % 2,134.7
Deemed-Retractible 5.17 % 5.26 % 97,775 5.54 34 0.2128 % 2,571.1
FloatingReset 2.36 % 3.51 % 45,996 5.95 9 0.2358 % 2,191.7
Performance Highlights
Issue Index Change Notes
PWF.PR.L Perpetual-Discount -2.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.63
Evaluated at bid price : 22.88
Bid-YTW : 5.63 %
SLF.PR.I FixedReset -2.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.72
Bid-YTW : 5.37 %
BMO.PR.Y FixedReset -2.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.39
Evaluated at bid price : 23.20
Bid-YTW : 3.81 %
MFC.PR.L FixedReset -1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.33
Bid-YTW : 6.63 %
IFC.PR.C FixedReset -1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.15
Bid-YTW : 6.39 %
PWF.PR.S Perpetual-Discount -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.88
Evaluated at bid price : 22.16
Bid-YTW : 5.47 %
FTS.PR.G FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 18.28
Evaluated at bid price : 18.28
Bid-YTW : 4.15 %
ELF.PR.H Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 23.57
Evaluated at bid price : 24.02
Bid-YTW : 5.79 %
BMO.PR.K Deemed-Retractible 1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-09-30
Maturity Price : 25.50
Evaluated at bid price : 25.85
Bid-YTW : -10.17 %
TRP.PR.F FloatingReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 3.93 %
BMO.PR.W FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 3.79 %
GWO.PR.L Deemed-Retractible 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 5.65 %
ENB.PF.C FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.65
Evaluated at bid price : 17.65
Bid-YTW : 5.17 %
ENB.PF.A FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 5.24 %
BAM.PR.N Perpetual-Discount 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 5.82 %
PWF.PR.T FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.72
Evaluated at bid price : 23.59
Bid-YTW : 3.44 %
ENB.PR.J FixedReset 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 5.11 %
TD.PF.A FixedReset 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 3.75 %
W.PR.H Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 24.05
Evaluated at bid price : 24.30
Bid-YTW : 5.74 %
HSE.PR.C FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.02
Evaluated at bid price : 21.02
Bid-YTW : 4.78 %
W.PR.J Perpetual-Discount 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 24.06
Evaluated at bid price : 24.32
Bid-YTW : 5.84 %
BAM.PR.B Floater 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 10.80
Evaluated at bid price : 10.80
Bid-YTW : 4.43 %
PVS.PR.D SplitShare 1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 5.01 %
TD.PF.B FixedReset 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 3.74 %
FTS.PR.F Perpetual-Discount 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.33
Evaluated at bid price : 22.60
Bid-YTW : 5.44 %
TRP.PR.C FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 12.85
Evaluated at bid price : 12.85
Bid-YTW : 4.53 %
NA.PR.S FixedReset 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 3.92 %
NA.PR.W FixedReset 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.53
Evaluated at bid price : 20.53
Bid-YTW : 3.90 %
BMO.PR.T FixedReset 1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 3.69 %
BAM.PF.B FixedReset 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 4.45 %
BAM.PR.X FixedReset 1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 4.66 %
RY.PR.K FloatingReset 2.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.33
Bid-YTW : 3.39 %
ENB.PR.P FixedReset 2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 5.26 %
HSE.PR.G FixedReset 2.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.14
Evaluated at bid price : 22.75
Bid-YTW : 4.73 %
FTS.PR.J Perpetual-Discount 2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.69
Evaluated at bid price : 22.00
Bid-YTW : 5.41 %
ENB.PR.H FixedReset 2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 14.85
Evaluated at bid price : 14.85
Bid-YTW : 5.16 %
MFC.PR.G FixedReset 2.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.29
Bid-YTW : 5.21 %
TRP.PR.G FixedReset 2.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.33
Evaluated at bid price : 21.60
Bid-YTW : 4.31 %
GWO.PR.S Deemed-Retractible 2.52 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 5.31 %
ENB.PR.Y FixedReset 2.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.91
Evaluated at bid price : 15.91
Bid-YTW : 5.24 %
FTS.PR.M FixedReset 2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 4.02 %
TRP.PR.A FixedReset 2.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 4.25 %
ENB.PR.F FixedReset 2.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.99
Evaluated at bid price : 15.99
Bid-YTW : 5.29 %
ENB.PR.B FixedReset 3.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.10
Evaluated at bid price : 15.10
Bid-YTW : 5.36 %
BAM.PF.F FixedReset 3.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.42
Evaluated at bid price : 23.15
Bid-YTW : 4.09 %
MFC.PR.N FixedReset 3.74 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.55
Bid-YTW : 5.93 %
Volume Highlights
Issue Index Shares
Traded
Notes
HSB.PR.D Deemed-Retractible 261,800 Scotia crossed blocks of 50,000 and 210,700, both at 24.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.90
Bid-YTW : 5.26 %
TRP.PR.D FixedReset 26,010 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 18.83
Evaluated at bid price : 18.83
Bid-YTW : 4.40 %
TD.PF.C FixedReset 23,150 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 3.73 %
ENB.PR.N FixedReset 19,420 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 5.31 %
ENB.PF.C FixedReset 19,180 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.65
Evaluated at bid price : 17.65
Bid-YTW : 5.17 %
ENB.PR.J FixedReset 18,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 5.11 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.M FixedReset Quote: 20.25 – 22.30
Spot Rate : 2.0500
Average : 1.2798

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 6.19 %

BAM.PF.G FixedReset Quote: 22.70 – 24.12
Spot Rate : 1.4200
Average : 0.8188

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.11
Evaluated at bid price : 22.70
Bid-YTW : 4.21 %

BAM.PF.E FixedReset Quote: 20.27 – 21.80
Spot Rate : 1.5300
Average : 1.0370

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 4.47 %

RY.PR.M FixedReset Quote: 22.40 – 23.85
Spot Rate : 1.4500
Average : 1.0600

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.90
Evaluated at bid price : 22.40
Bid-YTW : 3.79 %

TRP.PR.E FixedReset Quote: 19.46 – 20.25
Spot Rate : 0.7900
Average : 0.5126

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 19.46
Evaluated at bid price : 19.46
Bid-YTW : 4.33 %

PWF.PR.L Perpetual-Discount Quote: 22.88 – 23.65
Spot Rate : 0.7700
Average : 0.5216

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.63
Evaluated at bid price : 22.88
Bid-YTW : 5.63 %