March 26, 2015

March 26th, 2015

GMP Capital Inc., proud issuer of GMP.PR.B, was confirmed at Pfd-3(low) [Trend Negative] by DBRS:

DBRS Limited (DBRS) has today confirmed the Pfd-3 (low) rating on the Cumulative Preferred Shares of GMP Capital Inc. (GMP or the Company). The trend remains Negative. The rating reflects the strength of the Company’s business franchise as a provider of investment banking and capital markets products and services to its targeted market of mid-sized, primarily Canadian, companies. However, DBRS remains very cautious about the continuing adverse market environment. While GMP’s results in the early part of 2014 demonstrated the Company’s ability to weather weak market conditions, the continuation of the Negative trend reflects the challenges posed by the dramatic decline in oil and gas prices as indicated by GMP’s losses in Q4 2014. To the extent that GMP can adjust to this changed environment, the trend could return to Stable, but sustained weakness in results that indicated a significant deterioration in GMP’s franchise strength or earnings power would likely increase the negative pressure on the rating.

Canaccord Genuity Group Inc., proud issuer of CF.PR.A and CF.PR.C, was confirmed at Pfd-3(low) by DBRS:

DBRS Limited (DBRS) has today confirmed its rating of the Cumulative Preferred Shares of Canaccord Genuity Group Inc. (Canaccord Genuity or the Company) at Pfd-3 (low) with a Stable trend. The Company has successfully integrated recent acquisitions, improved geographic diversity, enhanced its wealth management business segment and demonstrated resilience through the extended weak market environment. Nevertheless, the Company continues to face significant challenges.

Weakness in the energy sector, which has had an impact on many of Canaccord Genuity’s traditional Capital Markets clients, resulted in a loss in the last quarter of 2014 that also reflected impairment of goodwill/intangibles. As a result, the Company implemented expense control initiatives and other actions. The Company announced a planned 4% reduction in its overall workforce, primarily affecting the U.K./Europe and U.S. operations. In addition, there were a number of changes to the executive structure, including the appointment of a CEO for the combined North American capital markets and changes to the investment banking executive team.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 8bp, FixedResets off 10bp and DeemedRetractibles up 15bp. The Performance Highlights table is dominated by losing FixedResets, with a notable presence of Enbridge issues. Volume was above average.

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

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

Here’s TRP:

impVol_TRP_150326
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.83 to be $1.40 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.27 cheap at its bid price of 24.91.

impVol_MFC_150326
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Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.15 to be $0.49 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.47 to be $0.72 cheap.

impVol_BAM_150326
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The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.21 to be $0.64 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.25 and appears to be $0.83 rich.

impVol_FTS_150326
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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.31, looks $1.62 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.71 and is $1.13 rich.

pairs_FR_150326
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Investment-grade pairs predict an average over the next five years of about 0.10% – except for one outlier, TRP.PR.A / TRP.PR.F, which has a break-even of -0.24%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -2.31%.

pairs_FF_150326
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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 0.3014 % 2,361.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3014 % 4,128.9
Floater 3.21 % 3.21 % 65,192 19.21 3 0.3014 % 2,510.4
OpRet 4.07 % 1.51 % 109,900 0.23 1 -0.2378 % 2,762.6
SplitShare 4.37 % 4.32 % 34,163 3.47 4 -0.2695 % 3,206.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2378 % 2,526.1
Perpetual-Premium 5.30 % 1.67 % 56,991 0.08 25 -0.0031 % 2,523.4
Perpetual-Discount 4.97 % 4.99 % 160,970 15.23 9 0.0792 % 2,816.7
FixedReset 4.39 % 3.38 % 245,903 16.77 85 -0.1031 % 2,428.5
Deemed-Retractible 4.90 % -1.18 % 111,362 0.14 37 0.1547 % 2,661.2
FloatingReset 2.42 % 2.76 % 80,504 6.31 8 0.4479 % 2,351.5
Performance Highlights
Issue Index Change Notes
ENB.PR.Y FixedReset -1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 19.87
Evaluated at bid price : 19.87
Bid-YTW : 4.20 %
PWF.PR.P FixedReset -1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 3.25 %
ENB.PR.P FixedReset -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 4.22 %
ENB.PR.N FixedReset -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 4.27 %
MFC.PR.J FixedReset -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 3.51 %
BAM.PF.G FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 23.17
Evaluated at bid price : 25.07
Bid-YTW : 3.66 %
BAM.PR.T FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 21.33
Evaluated at bid price : 21.63
Bid-YTW : 3.65 %
TRP.PR.F FloatingReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 19.26
Evaluated at bid price : 19.26
Bid-YTW : 3.11 %
MFC.PR.M FixedReset 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.96
Bid-YTW : 3.54 %
GWO.PR.H Deemed-Retractible 1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : -5.74 %
MFC.PR.C Deemed-Retractible 1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.21
Bid-YTW : 4.95 %
CIU.PR.C FixedReset 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 3.12 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.E FixedReset 230,005 Scotia crossed blocks of 25,000 shares, 50,000 and 25,000, all at 24.90. RBC crossed blocks of 50,000 and 25,000 at the same price. Desjardins crossed blocks of 35,000 and 15,000 at the same price again.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 23.13
Evaluated at bid price : 24.83
Bid-YTW : 3.26 %
ENB.PR.B FixedReset 147,515 RBC crossed 125,000 at 19.28.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 4.21 %
SLF.PR.H FixedReset 104,013 Nesbitt crossed 101,400 at 22.58.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.58
Bid-YTW : 4.27 %
TD.PF.D FixedReset 72,900 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 23.14
Evaluated at bid price : 25.01
Bid-YTW : 3.41 %
FTS.PR.M FixedReset 58,569 Desjardins crossed 20,300 at 25.09. RBC crossed 15,900 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 23.23
Evaluated at bid price : 25.15
Bid-YTW : 3.25 %
CM.PR.Q FixedReset 49,450 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 23.09
Evaluated at bid price : 24.85
Bid-YTW : 3.44 %
There were 37 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CIU.PR.C FixedReset Quote: 17.50 – 18.39
Spot Rate : 0.8900
Average : 0.5730

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 3.12 %

CGI.PR.D SplitShare Quote: 25.35 – 25.96
Spot Rate : 0.6100
Average : 0.4652

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2023-06-14
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 3.58 %

PWF.PR.P FixedReset Quote: 18.75 – 19.12
Spot Rate : 0.3700
Average : 0.2650

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 3.25 %

ENB.PR.N FixedReset Quote: 20.65 – 21.00
Spot Rate : 0.3500
Average : 0.2467

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 4.27 %

ENB.PF.A FixedReset Quote: 21.46 – 21.78
Spot Rate : 0.3200
Average : 0.2205

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 21.46
Evaluated at bid price : 21.46
Bid-YTW : 4.26 %

CU.PR.C FixedReset Quote: 24.30 – 24.59
Spot Rate : 0.2900
Average : 0.2088

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-26
Maturity Price : 23.26
Evaluated at bid price : 24.30
Bid-YTW : 3.24 %

Yield Calculator for Resets: New and Improved!

March 26th, 2015

Assiduous Reader KB writes in and says:

I often have occasion to use your modified for resets spreadsheet on your site (ytc_resets).

I always have to remember to only use 25 years when I want a “Limit Maturity” of 30 years.

Anyway, it bothered me enough times that I modified it. I also added a couple fields for entering reset spread and GoC 5 year rate instead of having to modify the dividend formula each time.

Might be useful in place of the one you initially modified, or not. You can check it out, modify it, or throw it out. (it’s Excel 2007)

I’ve checked it out and everything is in order; so I have appropriated this development and it is now available for download.

Note that the new version is a .xlsx file and there may still be a few doddering old fogeys out there who haven’t upgraded since the last geological era, so the Old .xls version is still available.

There’s a detailed numerical example for the use of this calculator in the post What is the Yield of HSE.PR.A?. This explanation is based on the old version, but if you can’t figure out the layout difference then you don’t deserve to use nice things anyway.

March 25, 2015

March 26th, 2015

Big Pharma is watching you!

As Novartis AG’s chief executive, [Joe] Jimenez is barreling down untested paths at the frontier of biology and digital technology to prepare for a future in which the use of smartphones and other digital devices to monitor health will be the key to getting paid.

Projects and products include pills and inhalers with sensors that tell on patients who miss a dose; clinical tests that rely on Microsoft’s Kinect, the motion-sensing technology used with Xboxes, to measure walking speed and balance in people with multiple sclerosis; and Google contact lenses that focus automatically and can deduce diabetics’ blood-sugar levels from their tears — a gamble that Jimenez says could transform eyesight.

Equities have no direction this month:

Stringing together gains in the American stock market has become next to impossible.

Knocked down 1.5 percent Wednesday, the Standard & Poor’s 500 Index has now gone 26 days without posting gains in back-to-back sessions, the longest stretch since 1994, data compiled by Bloomberg show. Losses in biotechnology and chip companies dragged U.S. stocks to a third day of declines, interrupting another run at a record for the Nasdaq Composite Index as investors sold the year’s best-performing equities.

The Fed is concerned about the mechanics of a rate hike:

In the past, the Fed increased the cost of overnight bank borrowing by raising the funds rate. The trillions of dollars in excess reserves that exist, compared with a few billion at the start of 2007, have obviated the need for banks to borrow daily and forced U.S. monetary authorities to come up with ways to influence market rates directly.

It has been evident since 2008, when the Fed gained the ability to pay interest on excess reserves, that the new rate wasn’t anchoring borrowing costs as envisioned. Government-sponsored agencies including regional Federal Home Loan Banks, primary providers of cash in the overnight market, aren’t able to receive such interest, which has enabled the funds rate to drift below IOER [Interest On Excess Reserves], now at 0.25 percent.

To make matters worse, widespread negative yields abroad, and heightened regulation on banks and money funds, have sapped the supply of safe short-term assets and buoyed demand. That further casts doubt on whether a tightening of policy will be smooth.

Strategists have expressed concern that, when the Fed starts to tighten policy by raising IOER, other market rates may not follow, leaving monetary conditions too accommodative. While banks receiving interest on surplus reserves have dimmed their desire to dump excess cash into the money markets, the funds rate has still consistently traded below the IOER. The reverse repo program thus far has helped provide a floor for the funds rate.

Problems with the Effective Fed Funds rate became apparent during the Credit Crunch, as discussed at Effective Fed Funds Rate Continues to Confuse, Effective Fed Funds Rate: A Technical Explanation? and Effective Fed Funds and Interest on Excess Reserves.

There will be a secondary offering of Capital Power common:

Capital Power Corporation (TSX: CPX) (“Capital Power”) and EPCOR Utilities Inc. (“EPCOR”) announced today that Capital Power and EPCOR have entered into an agreement with a syndicate of underwriters, co-led by CIBC and TD Securities Inc., as bookrunners, for a secondary offering by EPCOR Power Development Corporation (“EPDC”), a subsidiary of EPCOR, on a bought deal basis, of 9,000,000 common shares of Capital Power at an offering price of $23.85 per common share. Capital Power will not receive any of the proceeds ($215 million, before giving effect to the over-allotment option) from the sale of common shares by EPDC.

The underwriters have also been granted an option to purchase up to an additional 450,000 common shares at the issue price to cover over-allotments, if any. If exercised, EPDC will receive additional gross proceeds of approximately $10.7 million. The over-allotment option is exercisable, in whole or in part, by the underwriters at any time up to 30 days after the closing of the offering. Capital Power will not receive any proceeds from the exercise of the over-allotment option.

Capital Power doesn’t appear to be hard up for cash. They’ve suspended their DRIP:

Effective for the expected June 30, 2015 dividend, Capital Power will be suspending its Dividend Reinvestment Plan (DRIP) for its common shares until further notice. Shareholders participating in the DRIP will begin receiving cash dividends on the expected July 31, 2015 payment date. If the Company elects to reinstate the DRIP in the future, shareholders that were enrolled in the DRIP at suspension and remained enrolled at reinstatement, will automatically resume participation in the DRIP.

Capital Power is the proud issuer of CPX.PR.A, CPX.PR.C and CPX.PR.E, all FixedResets.

Loblaw Companies Limited, proud issuer of L.PR.A, was confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating, Medium-Term Notes rating and Debentures rating of Loblaw Companies Limited (Loblaw or the Company) at BBB, its Cumulative Redeemable Second Preferred Shares, Series A rating at Pfd-3 and its Short-Term Issuer Rating at R-2 (middle), all with Stable trends. DBRS also confirmed the Senior Unsecured Debt rating of Shoppers Drug Mart Corporation (Shoppers) at BBB with a Stable trend, based on guarantee by Loblaw. The confirmation primarily reflects Loblaw’s continued deleveraging efforts, which should result in credit metrics considered acceptable for the current rating by the end of 2015, as well as, its solid operating performance in 2014.

DBRS expects that Loblaw’s financial leverage should continue to decline as the Company uses free cash flow to repay debt pursuant to its deleveraging plan following the acquisition of Shoppers. Cash flow from operations should track operating income over the medium term, while capital expenditures (capex) should remain in the current $1.2 billion to $1.4 billion per year with a shifting focus toward retail investments. The cash outlay related to dividends is expected to remain above the $400 million level. DBRS, therefore, continues to believe that Loblaw will generate free cash flow in the $700 million per year range. Loblaw is expected to use free cash flow in the near term primarily for debt repayment. DBRS forecasts that lease-adjusted debt-to-EBITDAR attributable to the retail operations should return below 3.50 times (x) by the end of 2015, a level considered acceptable for the current rating. Over the longer term, DBRS expects that Loblaw will begin using free cash flow to complete share repurchases. Should operating performance remain solid and credit metrics improve further toward the Company’s stated target (i.e., lease-adjusted debt-to-EBITDAR of 3.25x) as a result of growing operating income and/or continuing debt repayment, a positive rating action would likely result.

George Weston Limited, proud issuer of WN.PR.A, WN.PR.C, WN.PR.D and WN.PR.E (all Straight Perpetuals) was confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Medium-Term Notes and Debentures rating of George Weston Limited (Weston or the Company) at BBB, its Short-Term Issuer Rating at R-2 (high) and its Preferred Shares rating at Pfd-3, all with Stable trends. The confirmations reflect the confirmation of the ratings of Loblaw Companies Limited (Loblaw; see separate press release) as well as Weston’s stable balance-sheet debt levels despite pressure on the Weston Foods bakery business from higher commodity costs.

Weston’s financial profile is expected to remain relatively stable going forward based on the Company’s ownership in Loblaw, its cash-on-hand, and its stable balance-sheet debt levels. Weston announced a strategic plan in 2015, which includes expansionary capex of approximately $300 million in 2015 and approximately $170 million in 2016 to increase capacity (including two new facilities in the United States) and innovation in key growth areas. As a result of the increase in capex, Weston Foods is expected to incur a free cash flow deficit through the end of 2016. DBRS believes the Company will use a portion of its cash-on-hand to fund such investments, while maintaining at least $1 billion of cash-on-hand and short-term investments through the end of Loblaw’s deleveraging plans expected to be completed at the end of 2015. Over the longer-term DBRS expects the Company will continue to use cash-on-hand and free cash-flow generated to invest in growth (organic and/or acquisitions) and/or to increase returns to shareholders. Weston’s ownership interest in Loblaw could return above the 50% level in the medium term as Loblaw is expected to use free cash flow to complete share repurchases once it completes its deleveraging plan. DBRS notes that a positive rating action at Loblaw would not necessarily result in a corresponding rating action at Weston.

It was a modestly negative day for the Canadian preferred share market, with PerpetualDiscounts down 7bp, FixedResets losing 14bp and DeemedRetractibles off 4bp. The Performance Highlights table is notable for a large contingent of Enbridge FixedReset losers. Volume was high.

PerpetualDiscounts now yield 4.99%, equivalent to 6.49% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.6% so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 290bp, a widening from the 280bp reported March 18.

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_150325
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.80 to be $1.29 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.32 cheap at its bid price of 24.95.

impVol_MFC_150325
Click for Big

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.15 to be $0.52 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.47 to be $0.67 cheap.

impVol_BAM_150325
Click for Big

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.21 to be $0.67 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.14 and appears to be $0.64 rich.

impVol_FTS_150325
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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.33, looks $1.49 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.71 and is $1.10 rich.

pairs_FR_150325
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Investment-grade pairs predict an average over the next five years of a little under 0.10% – except for one outlier, TRP.PR.A / TRP.PR.F, which has a break-even of -0.51%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -2.09%.

pairs_FF_150325
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 1.8864 % 2,354.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.8864 % 4,116.5
Floater 3.22 % 3.22 % 61,060 19.18 3 1.8864 % 2,502.8
OpRet 4.06 % 0.48 % 101,768 0.24 1 0.1190 % 2,769.1
SplitShare 4.35 % 4.26 % 34,254 3.48 4 0.1700 % 3,215.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1190 % 2,532.1
Perpetual-Premium 5.30 % 1.77 % 57,064 0.08 25 0.0027 % 2,523.5
Perpetual-Discount 4.97 % 4.99 % 163,378 15.20 9 -0.0651 % 2,814.5
FixedReset 4.38 % 3.37 % 239,358 16.78 85 -0.1429 % 2,431.0
Deemed-Retractible 4.91 % -0.20 % 112,356 0.17 37 -0.0427 % 2,657.1
FloatingReset 2.43 % 2.82 % 80,805 6.31 8 -0.1118 % 2,341.0
Performance Highlights
Issue Index Change Notes
ENB.PF.A FixedReset -1.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 21.32
Evaluated at bid price : 21.60
Bid-YTW : 4.21 %
ENB.PF.C FixedReset -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 21.51
Evaluated at bid price : 21.51
Bid-YTW : 4.25 %
MFC.PR.C Deemed-Retractible -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.87
Bid-YTW : 5.13 %
ENB.PF.G FixedReset -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 21.41
Evaluated at bid price : 21.71
Bid-YTW : 4.25 %
ENB.PR.J FixedReset -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 21.48
Evaluated at bid price : 21.48
Bid-YTW : 4.13 %
ENB.PR.F FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 19.86
Evaluated at bid price : 19.86
Bid-YTW : 4.27 %
IFC.PR.A FixedReset -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.20
Bid-YTW : 4.96 %
HSE.PR.A FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 17.13
Evaluated at bid price : 17.13
Bid-YTW : 3.72 %
GWO.PR.I Deemed-Retractible -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 4.99 %
MFC.PR.L FixedReset -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 3.79 %
BAM.PR.K Floater 4.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 15.43
Evaluated at bid price : 15.43
Bid-YTW : 3.23 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.M FixedReset 208,600 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 23.00
Evaluated at bid price : 24.65
Bid-YTW : 3.35 %
RY.PR.J FixedReset 154,275 Scotia crossed 122,000 at 25.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 23.18
Evaluated at bid price : 25.10
Bid-YTW : 3.37 %
ENB.PR.T FixedReset 147,624 RBC crossed 140,000 at 20.47.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 20.31
Evaluated at bid price : 20.31
Bid-YTW : 4.21 %
GWO.PR.M Deemed-Retractible 79,595 Scotia crossed 70,000 at 26.22.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-04-30
Maturity Price : 26.00
Evaluated at bid price : 26.20
Bid-YTW : -3.27 %
TD.PF.D FixedReset 76,980 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 23.15
Evaluated at bid price : 25.02
Bid-YTW : 3.41 %
CM.PR.Q FixedReset 74,225 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 23.10
Evaluated at bid price : 24.88
Bid-YTW : 3.44 %
There were 47 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.G FixedReset Quote: 23.51 – 23.91
Spot Rate : 0.4000
Average : 0.2391

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 22.68
Evaluated at bid price : 23.51
Bid-YTW : 3.16 %

BNS.PR.M Deemed-Retractible Quote: 25.67 – 25.98
Spot Rate : 0.3100
Average : 0.1915

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-07-27
Maturity Price : 25.25
Evaluated at bid price : 25.67
Bid-YTW : 1.50 %

TRP.PR.D FixedReset Quote: 24.01 – 24.44
Spot Rate : 0.4300
Average : 0.3202

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 22.85
Evaluated at bid price : 24.01
Bid-YTW : 3.36 %

MFC.PR.C Deemed-Retractible Quote: 23.87 – 24.24
Spot Rate : 0.3700
Average : 0.2688

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.87
Bid-YTW : 5.13 %

ENB.PR.F FixedReset Quote: 19.86 – 20.14
Spot Rate : 0.2800
Average : 0.1934

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-25
Maturity Price : 19.86
Evaluated at bid price : 19.86
Bid-YTW : 4.27 %

MFC.PR.M FixedReset Quote: 24.67 – 24.89
Spot Rate : 0.2200
Average : 0.1371

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.67
Bid-YTW : 3.68 %

LBS.PR.A To Get Bigger

March 25th, 2015

Brompton Group has announced:

Life & Banc Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus with respect to a treasury offering of class A shares and preferred shares. The class A and preferred share offering prices will be set at levels that ensure that existing unitholders are not diluted.

Life & Banc Split Corp. invests in a portfolio of common shares of the six largest Canadian banks (“Banks”) and the four major publicly traded Canadian life insurance companies (“Lifecos”). Currently, the portfolio consists of common shares of the following Banks and Lifecos:

The Bank of Nova Scotia Royal Bank of Canada
National Bank of Canada Industrial Alliance Insurance and Financial Services Inc.
The Toronto-Dominion Bank Great-West Lifeco Inc.
Canadian Imperial Bank of Commerce Manulife Financial Corporation
Bank of Montreal Sun Life Financial Inc.

The investment objectives for the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per class A share and to provide the opportunity for growth in net asset value per class A share.
The investment objectives for the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.11875 per preferred share ($0.475 per annum), representing a yield on the original issue price of 4.75% per annum, and to return the original issue price to holders of preferred shares on the maturity date of the Company, November 29, 2018.

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

LBS.PR.A last got bigger in November 2013. LBS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

March 24, 2015

March 24th, 2015

It’s nice to see my number one market worry get some play in the press:

1. Fund managers decide how much their assets are worth

Legalese: “Asset valuations will be determined by managers. The fund does not intend to commission periodic appraisals of the investments and will not be obligated to provide fair market value estimates.”

What that means: Private equity managers often have large holdings in illiquid assets such as troubled companies and real estate, which are, in fact, difficult to value. That said, it’s in the managers’ best interests to assign generous values because the managers typically get to keep 20 percent of profits and rely on historical returns to pitch new funds to investors.

Fed watching has become more intensive:

The euro made its third attempt this month to climb and stay above $1.10 as Federal Reserve Vice Chairman Stanley Fischer added to speculation U.S. interest rates will increase at a limited pace as stimulus expands in Europe.

The single currency extended its biggest weekly gain in three years on Monday after Fischer said there won’t be a “smooth upward path” for interest rates even as the first increase may be warranted before the end of 2015.

San Francisco Fed President John Williams, who votes on central bank policy this year, said in remarks prepared for delivery in Sydney Tuesday that a discussion should happen mid-year about tightening policy. He also said that he sees a stronger dollar pushing down growth.

“Williams gave dollar a bit of a lift because he didn’t rule out a tightening in June,” said Yuji Saito, director of foreign exchange at Credit Agricole SA in Tokyo. “Markets remain mixed over the outlook of the Fed tightening with Fischer’s comments blending with that of Williams’.”

Fischer said Monday in New York that “a smooth path upward in the federal funds rate will almost certainly not be realized” as the economy will encounter headwinds such as the surprise plunge in oil prices. He said while forward guidance on rates remains important, its role may diminish.

Traders predict 56 basis points of increases to the federal funds target rate over the next 12 months, down from 62 on March 6, according to a Credit Suisse Group AG swaps index.

Stanford’s just hired a new honcho for their $21-billion endowment fund. I know nothing more about the guy than what’s in the Bloomberg notice – but what I do know, I like!

Wallace graduated from Yale in New Haven, Connecticut, in 2002 and went to work for the university’s renowned investment arm, which is run by David Swensen, according to the office. In 2005, he joined Alta Advisers, an investment company serving the family of Swedish industrialist Hans Rausing.

Before his career in investment management, Wallace danced professionally for 16 years with the American Ballet Theater, the Boston Ballet and the Washington Ballet, according to a profile. He has also served on an investment committee for Cambridge University and as a governor of the Royal Ballet School in London.

See – he’s buy-side! Always has been buy-side! Uncontaminated by any sell-side idiocy and – presumably! – with a good record of buy-side performance. And the fact that he had an actual career before going into the biz is also a plus – it increases the chance that he’s not a dork, although you never can be sure …

Did you load up on debt in the past couple of years? You’re in good company:

Vancouver, B.C. – TELUS announced today it is offering $1.75 billion of senior unsecured notes in three series, the first with a 3-year maturity, the second with a 7-year maturity and the third with a long 30-year maturity. The notes are offered through a syndicate of agents led by CIBC World Markets, Scotia Capital, and TD Securities. Closing of the offering is expected to occur on or about March 27, 2015.

The 1.50 per cent 3-year Notes, Series CS, were priced at $99.962 per $100 principal amount for an effective yield of 1.513 per cent per annum and will mature on March 27, 2018. The 2.35 per cent 7-year Notes, Series CT, were priced at $99.731 per $100 principal amount for an effective yield of 2.392 per cent per annum and will mature on March 28, 2022. The 4.40 per cent long 30-year Notes, Series CU, were priced at $99.972 per $100 principal amount for an effective yield of 4.402 per cent per annum and will mature on January 29, 2046.

The net proceeds will be used to fund all or a portion of the remaining $1.2 billion required to acquire the AWS-3 spectrum licences and repay short term indebtedness, with any remaining balance used for general corporate purposes.

Of course, all that debt comes with a price:

DBRS Limited (DBRS) has today placed the Issuer Rating, Notes rating and Commercial Paper rating of TELUS Corporation (TELUS or the Company; rated A (low), A (low) and R-1 (low), respectively) and the Senior Debentures rating of TELUS Communications Inc. (rated A (low)) Under Review with Negative Implications. The rating action follows the Company’s announcement that it has secured 15 megahertz (MHz) of AWS-3 (advanced wireless services) spectrum for $1.5 billion. While DBRS recognizes the importance of investing sufficiently in spectrum over the long term, the Negative Implications of the review status reflect DBRS’s concern that this particularly large spectrum purchase will likely be financed with debt and weaken the financial risk profile of TELUS well beyond its previously stated policy range (net debt-to-EBITDA of 1.5 times (x) to 2.0x) and levels appropriate for the current rating categories. Operationally and financially, DBRS expects TELUS will continue to perform well and deliver mid-single digit growth in EBITDA to approximately $4.4 billion in 2015, based on the Company’s growing subscriber bases across both wireless and wireline, increasing revenues per user and ongoing network expansion.

Notwithstanding the Company’s prospects for growth in earnings over the near to medium term, DBRS questions TELUS’ willingness and ability to deleverage toward its previously stated leverage target within a reasonable time frame (i.e., two years), given its capital investment plan and anticipated returns to shareholders. In its ongoing review with management, DBRS will focus on an update of the Company’s business strategy going forward (including capital investment and spectrum purchases) and its financial management intentions (including dividend distributions, share repurchases and financing sources) in order to determine whether a downgrade is warranted. DBRS aims to receive clarity from TELUS management on the aforementioned issues in the coming weeks in order to resolve the Under Review status of the ratings.

But don’t worry! All that debt will be inflated away:

Data today showed the cost of living in the U.S. excluding food and fuel rose more than forecast in February, reflecting broad-based gains that helped keep a floor under inflation.

The so-called core consumer-price index climbed 0.2 percent for a second month, a Labor Department report showed Tuesday in Washington. A broader measure of prices overall also climbed 0.2 percent, the first advance in four months, as fuel costs stabilized.

Purchases of new homes in the U.S. unexpectedly rose in February to a seven-year high as stronger job gains helped bolster industry activity amid severe weather. Sales climbed 7.8 percent to a 539,000 annualized pace, the most since February 2008.

But the US has a problem: too many jobs:

Now, Goldman Sachs Group Inc. is weighing in. Job growth will have to slow going forward to catch down to the rest of the data, according to David Mericle, a Goldman Sachs economist, who says the pace of employment gains has “been running ‘too hot’ recently” relative to overall economic growth.

“Our model suggests that the recent 275-300k rate of monthly payroll gains is likely to be as good as it gets,” Mericle wrote in a note to clients. “Under our baseline forecast for 3% real GDP growth this year and next, we expect a gradual deceleration to a roughly 200k rate. The risks to both the GDP and employment numbers in 2016 are a bit to the downside.”

Outsize payroll growth in recent months has helped generate a swift decline in the unemployment rate. In February, it was 5.5 percent, down from 6.7 percent a year earlier.

The speed of the drop has taken Federal Reserve policy makers by surprise, and it prompted them to lower their year-end forecasts for the unemployment rate at the Federal Open Market Committee’s March meeting. The central tendency of those projections, which excludes the top and bottom three of the 17 committee members’ forecasts, fell to 5 percent to 5.2 percent from 5.2-5.3 percent in December, when the previous set of projections were published.

That 5-5.2 percent range matches the central tendency of what Fed officials deem to be “full employment.” Fed officials would say lower rates of unemployment would start to spur an acceleration in consumer price increases

It isn’t just Big Data that’s watching you … it’s your colleagues!

Stroz Friedberg, a New York-based consulting firm that specializes in digital forensics, is rolling out software called Scout, which evaluates users through the content of their e-mails and other communications using linguistic and behavioral analysis techniques developed by the FBI. The software establishes a base line and then scans for variations that may signal that an employee presents a growing risk to the company. Red flags could include a spike in references to financial stresses such as “late rent” and “medical bills.”

Edward Stroz, the firm’s founder and a former FBI agent, says that while companies may have found this idea too intrusive in the past, he’s seen a change in perception in the past year. He’s still careful when discussing the software, describing it as a way to help employers build a “caring workplace.”

Some of the methods at companies that hire Securonix make even Baikalov wonder how much is too much. He cites the practice of matching information on user behavior online with feeds from video cameras and other systems that monitor physical locations. Some companies, he says, have created ticket systems so employees can report suspicious behavior by colleagues. “Is it too much, or is it actually the right amount of diligence?” he says. “I’m really curious how much we will get out of it. It’s really the extreme in kind of Orwell-like monitoring.”

And it’s been too long since my last rant on university tuition:

Some top-ranked business schools are raising tuition by between 2 percent and 10 percent this fall, bumping up the cost of classes for the 2015-16 academic year to nearly $66,000 at the high end. Throw in room and board, fees, and textbooks, and it will cost as much as $99,000 to attend B-school next year, according to data compiled by Bloomberg Business.

Half of the MBA programs ranked in Bloomberg Businessweek’s top 20 have announced updated tuition numbers so far this year. Of that group, the University of Maryland’s Smith School of Business has biggest tuition hike, with tuition up by 9.9 percent next year for out-of-state residents, bringing the cost of classes to $52,380 from $47,655.

It’s ridiculous. How can a university education possibly cost that much? How can it possibly be worth that much?

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts and FixedResets both gaining 13bp, while DeemedRetractibles were off 8bp. The Performance Highlights table is back to it’s usual (for the past four months) length. Volume was on the high side of average.

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

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

Here’s TRP:

impVol_TRP_150324
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.75 to be $1.23 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.24 cheap at its bid price of 24.95.

impVol_MFC_150324
Click for Big

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.41 to be $0.74 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.54 to be $0.64 cheap.

impVol_BAM_150324
Click for Big

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.36 to be $0.61 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.30 and appears to be $0.70 rich.

impVol_FTS_150324
Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.32, looks $1.47 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.71 and is $1.06 rich.

pairs_FR_150324
Click for Big

Investment-grade pairs predict an average over the next five years of about 0.10% – except for one outlier, TRP.PR.A / TRP.PR.F, which has a break-even of -0.48%. The DC.PR.B / DC.PR.D pair has gone completely insane and now predicts an average bill rate over the next 4 3/4 years of -5.15% … but the indicated bid of 19.08 on DC.PR.D is just a little bit more Toronto Stock Exchange idiocy, since the low for the day was 21.65 on frenetic volume of 1,500 shares.

pairs_FF_150324
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 -1.2562 % 2,310.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.2562 % 4,040.3
Floater 3.28 % 3.24 % 61,794 19.12 3 -1.2562 % 2,456.5
OpRet 4.07 % 0.97 % 102,798 0.24 1 0.0000 % 2,765.8
SplitShare 4.36 % 4.42 % 32,890 3.48 4 0.2807 % 3,209.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,529.1
Perpetual-Premium 5.30 % 1.00 % 58,783 0.09 25 -0.0658 % 2,523.4
Perpetual-Discount 4.97 % 5.00 % 168,673 15.26 9 0.1305 % 2,816.3
FixedReset 4.38 % 3.38 % 231,905 16.83 85 0.1295 % 2,434.5
Deemed-Retractible 4.90 % 0.53 % 112,569 0.17 37 -0.0842 % 2,658.2
FloatingReset 2.43 % 2.82 % 82,031 6.31 8 0.1173 % 2,343.6
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -2.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 14.78
Evaluated at bid price : 14.78
Bid-YTW : 3.37 %
CU.PR.D Perpetual-Premium -1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 24.59
Evaluated at bid price : 25.03
Bid-YTW : 4.92 %
GWO.PR.H Deemed-Retractible -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.78
Bid-YTW : 4.98 %
MFC.PR.K FixedReset -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.16
Bid-YTW : 3.70 %
FTS.PR.H FixedReset -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 16.32
Evaluated at bid price : 16.32
Bid-YTW : 3.35 %
SLF.PR.G FixedReset -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.65
Bid-YTW : 6.18 %
IFC.PR.A FixedReset 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.45
Bid-YTW : 4.81 %
BNS.PR.Z FixedReset 1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.59
Bid-YTW : 3.29 %
MFC.PR.C Deemed-Retractible 1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 4.95 %
ENB.PR.F FixedReset 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 4.21 %
CIU.PR.C FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 3.19 %
PWF.PR.P FixedReset 1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 3.20 %
HSE.PR.A FixedReset 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 17.32
Evaluated at bid price : 17.32
Bid-YTW : 3.68 %
ENB.PR.J FixedReset 1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 21.43
Evaluated at bid price : 21.76
Bid-YTW : 4.04 %
Volume Highlights
Issue Index Shares
Traded
Notes
FTS.PR.G FixedReset 155,021 Nesbitt crossed 148,900 at 23.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 22.78
Evaluated at bid price : 23.71
Bid-YTW : 3.12 %
TD.PF.A FixedReset 153,647 RBC crossed 42,800 at 24.96. TD crossed two blocks of 50,000 each at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 23.16
Evaluated at bid price : 24.92
Bid-YTW : 3.06 %
TRP.PR.C FixedReset 143,666 Nesbitt crossed 131,300 at 17.21.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 17.28
Evaluated at bid price : 17.28
Bid-YTW : 3.44 %
TD.PF.C FixedReset 126,115 TD crossed two blocks of 50,000 each, both at 24.71.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 23.06
Evaluated at bid price : 24.69
Bid-YTW : 3.12 %
RY.PR.M FixedReset 115,625 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 23.00
Evaluated at bid price : 24.65
Bid-YTW : 3.35 %
CM.PR.P FixedReset 110,344 Desjardins crossed 100,000 at 24.65.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 23.12
Evaluated at bid price : 24.85
Bid-YTW : 3.01 %
There were 36 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.H Deemed-Retractible Quote: 24.78 – 25.18
Spot Rate : 0.4000
Average : 0.2519

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.78
Bid-YTW : 4.98 %

CU.PR.D Perpetual-Premium Quote: 25.03 – 25.45
Spot Rate : 0.4200
Average : 0.3114

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-24
Maturity Price : 24.59
Evaluated at bid price : 25.03
Bid-YTW : 4.92 %

MFC.PR.K FixedReset Quote: 24.16 – 24.60
Spot Rate : 0.4400
Average : 0.3451

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.16
Bid-YTW : 3.70 %

MFC.PR.I FixedReset Quote: 25.80 – 26.08
Spot Rate : 0.2800
Average : 0.1894

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-09-19
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 3.09 %

GWO.PR.I Deemed-Retractible Quote: 24.35 – 24.57
Spot Rate : 0.2200
Average : 0.1562

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 4.85 %

SLF.PR.E Deemed-Retractible Quote: 23.76 – 24.08
Spot Rate : 0.3200
Average : 0.2603

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.76
Bid-YTW : 5.16 %

March 23, 2015

March 23rd, 2015

Negative yields bring reaching for yield:

Norway’s $870 billion sovereign wealth fund said this month that it added Nigeria and lifted its share of lower-rated company debt to the highest since at least 2006. Allianz SE, Europe’s biggest insurer, is shifting from German bunds to bulk up on mortgages. JPMorgan Asset Management is buying speculative-grade corporate debt to boost returns.

Norges Bank Investment Management, the world’s largest sovereign wealth fund, increased corporate bonds rated BBB or lower to 8.3 percent of its debt assets at the end of last year from 7.5 percent in the prior quarter, the fund said March 13.

Among those assets are about $200 million of bonds issued by Petroleo Brasiliero SA. Brazil’s state-controlled oil company, the biggest corporate debt issuer in emerging markets, has seen its benchmark 2024 bonds tumble almost 10 percent since allegations of kickbacks and bribes emerged in November.

The fund also added developing countries such as Ghana and Mauritius and invested in Nigeria’s currency for the first time. It has just 0.1 percent in top-rated corporate bonds.

Scotia has announced a sub-debt offering with a coupon of 2.58% to its pretend-maturity of 2022-3-30:

The Bank of Nova Scotia (“Scotiabank”) (TSX: BNS) (NYSE: BNS) today announced an inaugural Basel III-compliant offering of $1.25 billion of 2.58% Subordinated Debentures due 2027 (the “Debentures”) pursuant to its June 27, 2014 base shelf prospectus.

The Debentures, to be sold through an agency syndicate led by Scotiabank Global Banking & Markets, are expected to be issued on March 30, 2015. Interest will be payable semi-annually from the date of issue until March 30, 2022 at a rate of 2.58% per annum. From March 30, 2022 to maturity on March 30, 2027, the Debentures will pay a quarterly coupon at a rate equal to the 90 day bankers’ acceptance plus 1.19%, beginning June 30, 2022.

On or after March 30, 2022, Scotiabank may, at its option, with the prior approval of the Superintendent of Financial Institutions (Canada), in whole at any time or in part from time to time at a redemption price which is equal to par, plus accrued and unpaid interest, redeem the Debentures, on not less than 30 nor more than 60 days’ notice to registered holders.

Net proceeds from this transaction will be used for general banking purposes.

Scotiabank intends to file, in Canada, a pricing supplement to its June 27, 2014 base shelf prospectus. A copy of this document as well as the base shelf prospectus can be obtained at www.sedar.com.

This issue is rated A(low) by DBRS (emphasis added):

DBRS assigned the NVCC Sub Debt a rating equal to the Bank’s intrinsic assessment of AA (low) less three rating notches because the NVCC Sub Debt has the Office of the Superintendent of Financial Institutions (OSFI)-required non-viability contingent capital (NVCC) triggers and no additional triggers. Furthermore, DBRS has assumed that Scotiabank will follow the market precedent if issuing NVCC preferred shares in the future. Under this assumption, in the event of a conversion to common shares, the NVCC Sub Debt would have a potential for recovery that is sufficiently better than the NVCC Preferred Shares to allow for a differentiation in the NVCC Sub Debt rating relative to the NVCC Preferred Shares rating. Please see the DBRS press release entitled “DBRS Provides Guidance on Canadian Bank Non-Viability Contingent Capital Ratings” dated January 10, 2014, for more details.

I was hoping to learn today about the extent of the exercise of the hypothetical Unit Special Retraction Right of BSD / BSD.PR.A (discussed in the post BSD.PR.A Hypothetical Preferred Special Retraction Right: 44% Tender) but sadly there is nothing as yet.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 36bp, FixedResets off 4bp and DeemedRetractibles gaining 4bp. Volatility was much lower than what has become normal over the last four months. Volume was below average.

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

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

Here’s TRP:

impVol_TRP_150323
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.72 to be $1.25 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.21 cheap at its bid price of 24.95.

impVol_MFC_150323
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Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.30 to be $0.62 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.57 to be $0.61 cheap.

impVol_BAM_150323
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The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.50 to be $0.54 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.52 and appears to be $0.92 rich.

impVol_FTS_150323
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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.51, looks $1.31 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.70 and is $0.99 rich.

pairs_FR_150323
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Investment-grade pairs predict an average over the next five years of a little under 0.10% – except for one outlier, TRP.PR.A / TRP.PR.F, which has a break-even of -0.47%. The DC.PR.B / DC.PR.D pair has gone from the extreme to the ludicrous and now predicts an average bill rate over the next 4 3/4 years of -2.30%.

pairs_FF_150323
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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 2.5089 % 2,340.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 2.5089 % 4,091.7
Floater 3.24 % 3.24 % 62,102 19.15 3 2.5089 % 2,487.7
OpRet 4.07 % 0.96 % 103,794 0.24 1 0.0000 % 2,765.8
SplitShare 4.37 % 4.42 % 32,120 3.48 4 -0.4988 % 3,200.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,529.1
Perpetual-Premium 5.30 % 0.81 % 58,024 0.09 25 0.1094 % 2,525.1
Perpetual-Discount 4.97 % 5.02 % 170,899 15.21 9 -0.3621 % 2,812.7
FixedReset 4.38 % 3.44 % 237,616 16.82 85 -0.0421 % 2,431.4
Deemed-Retractible 4.90 % -1.46 % 109,935 0.15 37 0.0352 % 2,660.4
FloatingReset 2.43 % 2.89 % 83,375 6.31 8 0.3048 % 2,340.9
Performance Highlights
Issue Index Change Notes
TRP.PR.D FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 22.85
Evaluated at bid price : 24.00
Bid-YTW : 3.36 %
ENB.PR.J FixedReset -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 4.15 %
PVS.PR.C SplitShare -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 25.13
Bid-YTW : 4.75 %
BNS.PR.Z FixedReset -1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.31
Bid-YTW : 3.49 %
PWF.PR.T FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 23.41
Evaluated at bid price : 25.45
Bid-YTW : 3.11 %
TRP.PR.F FloatingReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 3.15 %
HSE.PR.A FixedReset 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 3.75 %
TRP.PR.C FixedReset 2.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 17.16
Evaluated at bid price : 17.16
Bid-YTW : 3.47 %
BAM.PR.K Floater 8.48 % Not significant – just a reversal of Friday‘s nonsense. Thank you, Toronto Stock Exchange!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 15.22
Evaluated at bid price : 15.22
Bid-YTW : 3.27 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.M FixedReset 300,440 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 22.98
Evaluated at bid price : 24.60
Bid-YTW : 3.35 %
RY.PR.Z FixedReset 202,531 Nesbitt crossed blocks of 111,000 and 75,000, both at 25.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 23.23
Evaluated at bid price : 25.01
Bid-YTW : 3.01 %
RY.PR.J FixedReset 155,144 Scotia crossed 150,000 at 25.10.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 23.15
Evaluated at bid price : 25.00
Bid-YTW : 3.39 %
TD.PF.D FixedReset 96,490 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 23.14
Evaluated at bid price : 24.99
Bid-YTW : 3.41 %
MFC.PR.L FixedReset 87,807 Nesbitt crossed 84,000 at 24.43.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 3.71 %
BMO.PR.S FixedReset 77,489 RBC crossed 75,000 at 25.12.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 23.23
Evaluated at bid price : 25.01
Bid-YTW : 3.11 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PR.T FloatingReset Quote: 24.03 – 24.70
Spot Rate : 0.6700
Average : 0.3918

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.03
Bid-YTW : 2.69 %

GWO.PR.N FixedReset Quote: 18.37 – 18.87
Spot Rate : 0.5000
Average : 0.2989

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.37
Bid-YTW : 5.70 %

ENB.PR.J FixedReset Quote: 21.35 – 21.80
Spot Rate : 0.4500
Average : 0.2841

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 4.15 %

PWF.PR.P FixedReset Quote: 18.72 – 19.14
Spot Rate : 0.4200
Average : 0.2841

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 18.72
Evaluated at bid price : 18.72
Bid-YTW : 3.25 %

BNS.PR.Z FixedReset Quote: 23.31 – 23.65
Spot Rate : 0.3400
Average : 0.2117

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.31
Bid-YTW : 3.49 %

TRP.PR.D FixedReset Quote: 24.00 – 24.30
Spot Rate : 0.3000
Average : 0.1997

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-23
Maturity Price : 22.85
Evaluated at bid price : 24.00
Bid-YTW : 3.36 %

DBRS Cautious on TA Australia Deal

March 23rd, 2015

TransAlta Corporation has announced:

entered into an investment agreement with TransAlta Renewables Inc. (“TransAlta Renewables”) (TSX: RNW) pursuant to which TransAlta Renewables has agreed to invest in TransAlta’s Australian power generation and gas pipeline portfolio (the “Portfolio”) and fund the remaining project costs for the South Hedland gas-fired project for a combined value of approximately $1.78 billion (the “Transaction”). The Portfolio consists of 575 MW of power generation from six operating assets and the South Hedland project currently under construction, as well as the recently commissioned 270 km gas pipeline. TransAlta Renewables’ investment will consist of the acquisition of securities which track the cash flows of the Portfolio.

“TransAlta created TransAlta Renewables in 2013 to unlock the underlying value in our contracted assets and to fund our growth” said Dawn Farrell, President and CEO. “This transaction highlights the value of our Australian investment strategy, finances the South Hedland plant, generates cash to strengthen our balance sheet and provides greater financial flexibility. The transaction significantly benefits both companies as TransAlta remains the majority shareholder and sponsor of TransAlta Renewables.”

DBRS comments:

Initially, the Transaction is expected to have a minimal impact on the credit quality of TAC as the Transaction is to be funded with all equity at OpCo. In the medium term, the ratings of TAC will likely be influenced by OpCo’s funding strategy related to the South Hedland gas-fired project under construction which requires a substantial investment of approximately $570 million (approximately $70 million spent in 2014). OpCo is contemplating funding alternatives associated with the South Hedland project. In the interim, the intercompany credit facility increase from TAC gives OpCo time to assess alternatives. DBRS will treat the funding alternative review as an event and assess OpCo’s actions and the resulting impact on TAC’s ratings when the funding plan is finalized.

DBRS acknowledges that the new OpCo structure creates another source of equity and could serve as a lower cost of capital for future growth opportunities; however, as TAC’s ownership in OpCo decreases and OpCo’s asset portfolio grows, the integration between TAC and OpCo could weaken. In this case, DBRS will increasingly weigh in on deconsolidated analysis for both TAC and CHD, which could ultimately result in a rating differential between TAC and CHD. TAC’s rating could be pressured if it significantly increases its exposure to construction and development risk as well as merchant risk of greenfield projects, and funds new projects with debt. This may not have a material impact on CHD if OpCo continues to fully hedge power production through PPAs with investment-grade counterparties and maintains reasonable financial metrics. Construction cost overrun risk associated with the South Hedland project is manageable given that the majority of the budgeted investment is either under fixed- price engineering, procurement and construction contracts or fixed fee to the off-taker, Horizon Power, a state government-owned corporation for existing assets.

Finally, since the lower-risk assets of TAC have been transferred to OpCo and this trend is expected to continue, holders of TAC’s direct external debt are facing structural subordination risk should OpCo raise a material amount of third-party debt in the future. OpCo has not raised any new external recourse debt since its inception in 2013 as TAC has provided virtually all necessary funding requirements to date. As such, TAC’s rating has not taken meaningful structural subordination effects into account, except outstanding debt related to CHD (which was grandfathered to OpCo at its inception in 2013). TAC’s ratings will likely be affected negatively should OpCo issue a material amount of third-party debt in the future as this will create structural subordination challenges for TAC’s bondholders.

TransAlta has four series of preferreds outstanding, all FixedResets: TA.PR.D, TA.PR.F, TA.PR.H and TA.PR.J.

Implied Volatility gives a murky picture. The Implied Volatility (which is of the Market Reset Spread, remember) is extremely low, but it could be simply that the highest spread issue, TA.PR.J, resetting at +380bp on 2019-9-30, is simply ridiculously expensive and is throwing everything off.

impVol_TA_150323
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New Issue: VSN FixedReset, 5.00%+427

March 23rd, 2015

Veresen Inc. has announced:

it has agreed to issue 8,000,000 Cumulative Redeemable Preferred Shares, Series E (“Series E Preferred Shares”) at a price of $25.00 per share for total gross proceeds of $200 million on a bought deal basis. The Series E Preferred Shares will be offered to the public through a syndicate of underwriters co-led by Scotiabank, TD Securities Inc. and RBC Capital Markets.

The holders of Series E Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of 5.00%, representing $1.25 per share, payable quarterly for an initial period up to but excluding June 30, 2020, as and when declared by the Board of Directors of Veresen. The first quarterly dividend payment date is scheduled for June 30, 2015. The dividend rate will reset on June 30, 2020 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 4.27%.

Subject to regulatory approval, the Series E Preferred Shares are redeemable by Veresen, in whole or in part, on June 30, 2020 and on June 30 of every fifth year thereafter at a price of $25.00 per share plus accrued and unpaid dividends.

The holders of Series E Preferred Shares will have the right to convert all or any part of their shares into Cumulative Redeemable Preferred Shares, Series F (“Series F Preferred Shares”), subject to certain conditions, on June 30, 2020, and on June 30 of every fifth year thereafter. The holders of Series F Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the Board of Directors of Veresen, at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 4.27%.

The offering is expected to close on or about April 1, 2015, subject to customary closing conditions. Net proceeds from the offering will be used to repay amounts outstanding under the credit facility that Veresen entered into for purposes of financing its acquisition of a 50% convertible preferred interest in Ruby Pipeline Holding Company, L.L.C., the entity which indirectly owns the Ruby pipeline system.

The Series E Preferred Shares will be issued pursuant to a prospectus supplement that will be filed with the securities regulatory authority in each of the provinces of Canada under Veresen’s short form base shelf prospectus dated September 20, 2013. An application has been made to list the Series E Preferred Shares and the Series F Preferred Shares on the Toronto Stock Exchange.

This issue will join VSN.PR.A, a FixedReset 4.40%+292 that commenced trading 2012-2-14 and VSN.PR.E, a FixedReset 5.00%+301 that commenced trading 2013-10-21. One more and I can start calculating Implied Volatility!

Both extant issues were hit hard on the day: VSN.PR.A closed at 21.45-55, with the bid down 1.7% on the day, while VSN.PR.C closed at 24.00-12, with the bid down 3.7%.

March 20, 2015

March 20th, 2015

Greek bank depositors not only have to deal with the potential for bank failure should Greece exit the Euro, but I’m sure they’re also worried about a punitive tax on deposits in good banks. So they’ve found another option:

GreekCash
Click for Big

It nice to see a supervisor fired for poor supervision:

Citigroup Inc. fired a trader on Friday for allegedly mismarking an inflation-options book and dismissed his boss for lax oversight, according to a person familiar with the matter.

Carl Bonde lost his job in New York after the bank determined he’d inflated the value of his trading positions by less than $30 million, the person said. Keith Price, head of U.S. inflation trading, was dismissed for his failure to supervise Bonde, said the person, who asked not to be identified discussing a personnel matter.

How ’bout them equities, eh?

Global stocks powered to their best weekly rally in nearly two years, sending two of the biggest equity benchmarks to the brink of records, on speculation the U.S. Federal Reserve will leave interest rates at zero past mid-year while European policy makers press stimulus.

The MSCI All-Country World Index surged 3.2 percent for the five days, pushing the Nasdaq Composite Index to within 7 points of wiping out all its losses since the Internet bubble. The Stoxx Europe 600 Index soared 1.9 percent to close 0.4 percent from its March 2000 high.

Other benchmark indexes also gained during the week. The Standard & Poor’s 500 Index rose 2.7 percent to 2,108.10 in the five days, 0.4 percent away from a record. In London, the FTSE 100 Index hit a fresh record, climbing above 7,000 for the first time. The Russell 2000 Index gained 2.8 percent to an all-time high.

Capital Power Corporation, proud issuer of CPX.PR.A, CPX.PR.C and CPX.PR.E, has been confirmed at Pfd-3(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the rating of the Preferred Shares of Capital Power Corporation (CPC or the Company) at Pfd-3 (low) with a Stable trend. CPC’s Preferred Shares rating is based on the credit quality of its subsidiary, Capital Power L.P. (CPLP; rated BBB). Please see the CPLP rating report dated March 20, 2015, for more information on the credit quality of CPLP. The one-notch differential in the ratings of CPC and CPLP reflects the structural subordination at CPC.

CPC’s financial risk profile is based on its deconsolidated credit metrics. As CPC has no bonds/debentures issued at the parent level and is not expected to issue any debt in the foreseeable future, its adjusted leverage primarily consists of its preferred shares outstanding, which are treated as debt by DBRS. In the adjusted debt-to-capital calculation, the amount of preferred shares over the 20% preferred shares-to-equity threshold (defined as the percentage of preferred shares outstanding divided by total equity, excluding preferreds and minority interest) is treated as debt by DBRS. In 2014, CPC had $464 million of preferred shares outstanding, of which $67 million was treated as debt. As such, CPC’s unconsolidated debt-to-capital ratio was approximately 3% in 2014, which remains supportive of the current rating category. In addition, the unconsolidated fixed charge coverage ratio is expected to remain high at around five times.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 78bp, FixedResets up 10bp and DeemedRetractibles gaining 2bp. The Performance Highlights table has a good length, capped by winning PerpetualDiscounts. Volume was extremely high.

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

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

Here’s TRP:

impVol_TRP_150320
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.81 to be $1.31 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.37 cheap at its bid price of 24.92.

impVol_MFC_150320
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Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.48 to be $0.72 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 26.05 to be $0.63 cheap.

impVol_BAM_150320
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The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.53 to be $0.56 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.51 and appears to be $0.93 rich

impVol_FTS_150320
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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.60, looks $1.28 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.70 and is $0.92 rich.

pairs_FR_150320
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Investment-grade pairs predict an average over the next five years of about 0.00% – except for one outlier, TRP.PR.A / TRP.PR.F, which has a break-even of -0.63%. The DC.PR.B / DC.PR.D pair has gone from the extreme to the ludicrous and now predicts an average bill rate over the next 4 3/4 years of -2.36%

pairs_FF_150320
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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 -3.1190 % 2,282.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -3.1190 % 3,991.5
Floater 3.32 % 3.21 % 63,097 19.21 3 -3.1190 % 2,426.9
OpRet 4.07 % 0.93 % 105,377 0.25 1 -0.0397 % 2,765.8
SplitShare 4.46 % 4.31 % 57,630 4.43 5 -0.1429 % 3,216.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0397 % 2,529.1
Perpetual-Premium 5.29 % 1.26 % 57,461 0.09 25 0.0516 % 2,522.3
Perpetual-Discount 4.96 % 5.02 % 172,159 15.24 9 0.7483 % 2,822.9
FixedReset 4.38 % 3.42 % 241,019 16.83 85 0.0976 % 2,432.4
Deemed-Retractible 4.90 % -1.43 % 112,770 0.11 37 0.0171 % 2,659.5
FloatingReset 2.49 % 2.90 % 86,537 6.31 8 -0.0748 % 2,333.7
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -9.54 % A nonsensical closing bid, courtesy of those hard-working bank employees at the Toronto Stock Exchange. The issue traded 4,040 shares in a range of 15.41-72. As with the same issue on March 10, it is not clear whether this is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 14.03
Evaluated at bid price : 14.03
Bid-YTW : 3.55 %
ENB.PR.Y FixedReset -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 4.14 %
TRP.PR.F FloatingReset -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 3.25 %
SLF.PR.H FixedReset -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.36
Bid-YTW : 4.39 %
CGI.PR.D SplitShare -1.21 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2023-06-14
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 3.60 %
BNS.PR.Z FixedReset 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.55
Bid-YTW : 3.33 %
IAG.PR.G FixedReset 1.10 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.69
Bid-YTW : 2.99 %
BAM.PR.R FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 21.53
Evaluated at bid price : 21.53
Bid-YTW : 3.69 %
MFC.PR.L FixedReset 1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.48
Bid-YTW : 3.62 %
CIU.PR.C FixedReset 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 16.86
Evaluated at bid price : 16.86
Bid-YTW : 3.25 %
BAM.PR.N Perpetual-Discount 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 22.70
Evaluated at bid price : 23.04
Bid-YTW : 5.15 %
BAM.PF.C Perpetual-Discount 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 23.12
Evaluated at bid price : 23.45
Bid-YTW : 5.17 %
CU.PR.F Perpetual-Discount 1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 23.63
Evaluated at bid price : 24.00
Bid-YTW : 4.71 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.M FixedReset 276,913 Recent inventory blow-out.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 22.99
Evaluated at bid price : 24.61
Bid-YTW : 3.36 %
POW.PR.D Perpetual-Premium 230,738 Nesbitt crossed blocks of 50,000 shares, 110,600 and 60,000, all at 25.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-04-19
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 1.26 %
IAG.PR.G FixedReset 167,264 Nesbitt crossed 160,600 at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.69
Bid-YTW : 2.99 %
NA.PR.S FixedReset 162,676 TD crossed 125,000 at 25.40.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 23.34
Evaluated at bid price : 25.32
Bid-YTW : 3.15 %
RY.PR.J FixedReset 157,750 RBC crossed 69,800 at 24.99 and 16,000 at 25.00. RBC bought blocks of 17,700 and 19,900 from Nesbitt at 24.99.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 23.14
Evaluated at bid price : 24.97
Bid-YTW : 3.40 %
ENB.PR.N FixedReset 146,462 RBC crossed 139,000 at 21.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 4.20 %
BMO.PR.S FixedReset 142,232 Nesbitt crossed 48,300 at 25.06. RBC crossed 52,800 at 25.06 and 25,000 at 25.12.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 23.30
Evaluated at bid price : 25.20
Bid-YTW : 3.08 %
RY.PR.E Deemed-Retractible 137,605 Nesbitt crossed blocks of 65,100 and 70,000, both at 25.55.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-04-19
Maturity Price : 25.25
Evaluated at bid price : 25.57
Bid-YTW : -7.21 %
ENB.PR.D FixedReset 105,044 RBC crossed blocks of 35,000 and 51,400 at 19.54.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 19.40
Evaluated at bid price : 19.40
Bid-YTW : 4.21 %
CM.PR.Q FixedReset 102,874 RBC crossed 35,500 at 24.87.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 23.09
Evaluated at bid price : 24.86
Bid-YTW : 3.45 %
ENB.PR.F FixedReset 102,498 Nesbitt sold 18,500 to RBC at 20.00 and crossed 42,900 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 19.92
Evaluated at bid price : 19.92
Bid-YTW : 4.26 %
BMO.PR.T FixedReset 101,392 TD crossed 50,000 and 45,000 at 24.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 23.10
Evaluated at bid price : 24.71
Bid-YTW : 3.09 %
There were 49 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.K Floater Quote: 14.03 – 15.89
Spot Rate : 1.8600
Average : 1.1308

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 14.03
Evaluated at bid price : 14.03
Bid-YTW : 3.55 %

CGI.PR.D SplitShare Quote: 25.30 – 25.80
Spot Rate : 0.5000
Average : 0.3579

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2023-06-14
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 3.60 %

TD.PR.Z FloatingReset Quote: 23.85 – 24.26
Spot Rate : 0.4100
Average : 0.2781

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.85
Bid-YTW : 2.94 %

MFC.PR.K FixedReset Quote: 24.32 – 24.80
Spot Rate : 0.4800
Average : 0.3627

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.32
Bid-YTW : 3.62 %

BMO.PR.R FloatingReset Quote: 23.90 – 24.20
Spot Rate : 0.3000
Average : 0.2021

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 2.87 %

ENB.PR.T FixedReset Quote: 20.48 – 20.79
Spot Rate : 0.3100
Average : 0.2233

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-20
Maturity Price : 20.48
Evaluated at bid price : 20.48
Bid-YTW : 4.18 %

March 19, 2015

March 19th, 2015

TIPS are in high demand:

The U.S. Treasury Department can thank the Federal Reserve for the surge in demand at Thursday’s auction of inflation-protected bonds.

The $13 billion in 10-year Treasury Inflation-Protected Securities, or TIPS, were sold at a yield of 0.2 percent, the lowest at an auction of the debt since May 2013. The Fed indicated Wednesday it isn’t in a rush to raise interest rates, leaving the door open for economic growth to stoke inflation.

Ten-year break-evens, the difference between yields on 10-year Treasury inflation protected securities and nominal equivalents, show investors expect U.S. consumer prices to rise 1.79 percent a year for the coming decade, up from a 2015 low of 1.49 percent on Jan. 14.

The gauge rose as much as 0.09 percentage point Thursday as rising prices for TIPS pulled their yields down and further away from yields on benchmark 10-year notes.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 11bp, FixedResets gaining 10bp and DeemedRetractibles off 2bp. There was no real pattern in the Performance Highlights table, other than that it was dominated by winners; Floaters did well. Volume was well above average.

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

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

Here’s TRP:

impVol_TRP_150319
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.68 to be $1.23 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.40 cheap at its bid price of 24.85.

impVol_MFC_150319
Click for Big

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.20 to be $0.47 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.85 to be $0.82 cheap.

impVol_BAM_150319
Click for Big

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.29 to be $0.71 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.45 and appears to be $0.90 rich

impVol_FTS_150319
Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.70, looks $1.23 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.71 and is $0.91 rich.

pairs_FR_150319
Click for Big

Investment-grade pairs predict an average over the next five years of about 0.00% – except for one outlier, TRP.PR.A / TRP.PR.F, which has a break-even of -0.40%. The DC.PR.B / DC.PR.D pair has gone from the extreme to the ludicrous and now predicts an average bill rate over the next 4 3/4 years of -2.78%

pairs_FF_150319
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 1.8624 % 2,356.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.8624 % 4,120.0
Floater 3.22 % 3.21 % 63,980 19.22 3 1.8624 % 2,505.0
OpRet 4.07 % 0.76 % 106,654 0.25 1 0.1589 % 2,766.9
SplitShare 4.46 % 4.44 % 57,559 4.42 5 0.0159 % 3,221.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1589 % 2,530.1
Perpetual-Premium 5.29 % 0.08 % 56,492 0.09 25 0.1567 % 2,521.0
Perpetual-Discount 4.99 % 4.99 % 164,926 15.17 9 0.1124 % 2,801.9
FixedReset 4.38 % 3.52 % 241,768 16.69 85 0.1007 % 2,430.0
Deemed-Retractible 4.90 % -1.42 % 110,252 0.12 37 -0.0224 % 2,659.1
FloatingReset 2.49 % 2.93 % 87,529 6.31 8 0.2894 % 2,335.5
Performance Highlights
Issue Index Change Notes
HSE.PR.A FixedReset -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 16.78
Evaluated at bid price : 16.78
Bid-YTW : 3.97 %
TRP.PR.C FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 16.69
Evaluated at bid price : 16.69
Bid-YTW : 3.74 %
MFC.PR.C Deemed-Retractible 1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.04
Bid-YTW : 5.02 %
BAM.PR.B Floater 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 15.56
Evaluated at bid price : 15.56
Bid-YTW : 3.20 %
TRP.PR.D FixedReset 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 22.99
Evaluated at bid price : 24.34
Bid-YTW : 3.40 %
BAM.PR.C Floater 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 15.42
Evaluated at bid price : 15.42
Bid-YTW : 3.23 %
FTS.PR.H FixedReset 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 16.70
Evaluated at bid price : 16.70
Bid-YTW : 3.45 %
ENB.PR.Y FixedReset 1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 20.42
Evaluated at bid price : 20.42
Bid-YTW : 4.19 %
TRP.PR.F FloatingReset 1.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 3.21 %
BAM.PR.K Floater 2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 15.51
Evaluated at bid price : 15.51
Bid-YTW : 3.21 %
ELF.PR.H Perpetual-Premium 2.87 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 5.11 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.M FixedReset 483,371 Inventory blow-out sale.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 22.96
Evaluated at bid price : 24.53
Bid-YTW : 3.46 %
TD.PF.B FixedReset 222,494 TD crossed blocks of 50,000 shares, 49,700 and 100,000, all at 24.88.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 23.16
Evaluated at bid price : 24.86
Bid-YTW : 3.17 %
RY.PR.H FixedReset 184,144 RBC crossed 168,700 at 24.94
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 23.16
Evaluated at bid price : 24.86
Bid-YTW : 3.17 %
SLF.PR.I FixedReset 135,882 Nesbitt crossed 118,700 at 25.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.24
Bid-YTW : 3.58 %
BAM.PF.A FixedReset 73,320 Nesbitt crossed 64,600 at 25.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 23.37
Evaluated at bid price : 25.20
Bid-YTW : 3.72 %
GWO.PR.L Deemed-Retractible 71,300 Scotia crossed 20,000 at 26.18; Nesbitt crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-04-18
Maturity Price : 26.00
Evaluated at bid price : 26.18
Bid-YTW : -5.25 %
There were 43 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ENB.PF.E FixedReset Quote: 22.20 – 22.48
Spot Rate : 0.2800
Average : 0.1834

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 21.77
Evaluated at bid price : 22.20
Bid-YTW : 4.21 %

GWO.PR.P Deemed-Retractible Quote: 26.30 – 26.56
Spot Rate : 0.2600
Average : 0.1722

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-03-31
Maturity Price : 25.25
Evaluated at bid price : 26.30
Bid-YTW : 4.40 %

MFC.PR.H FixedReset Quote: 25.85 – 26.15
Spot Rate : 0.3000
Average : 0.2163

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 2.85 %

SLF.PR.I FixedReset Quote: 25.24 – 25.49
Spot Rate : 0.2500
Average : 0.1698

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.24
Bid-YTW : 3.58 %

PWF.PR.P FixedReset Quote: 18.60 – 18.93
Spot Rate : 0.3300
Average : 0.2503

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-03-19
Maturity Price : 18.60
Evaluated at bid price : 18.60
Bid-YTW : 3.43 %

PWF.PR.L Perpetual-Premium Quote: 25.35 – 25.65
Spot Rate : 0.3000
Average : 0.2225

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 3.91 %