HIMI Moves!

February 7th, 2016

The Toronto real-estate market is getting too much for me!

My new address is:

268 Poplar Plains Road #801
Toronto, Ontario
M4V 2P2

All other contact information remains the same:
jiHymas@himivest.com
416 604 4204

MAPF Portfolio Composition: January, 2016

February 7th, 2016

Turnover fell in January to about negligible levels.

There is extreme segmentation in the marketplace, with OSFI’s NVCC rule changes in February 2011 having had the effect of splitting the formerly relatively homogeneous Straight Perpetual class of preferreds into three parts:

  • Unaffected Straight Perpetuals
  • DeemedRetractibles explicitly subject to the rules (banks)
  • DeemedRetractibles considered by me, but not (yet!) by the market, to be likely to be explicitly subject to the rules in the future (insurers and insurance holding companies)

This segmentation, and the extreme valuation differences between the segments, has cut down markedly on the opportunities for trading.

To make this more clear, it used to be that there were 70-odd Straight Perpetuals and I was more or less indifferent as to which ones I owned (subject, of course, to issuer concentration concerns and other risk management factors). Thus, if any one of these 70 were to go down in price by – say – $0.25, I would quite often have something in inventory that I’d be willing to swap for it. The segmentation means that I am no longer indifferent; in addition to checking the valuation of a potential buy to other Straights, I also have to check its peer group. This cuts down on the potential for trading.

And, of course, the same segmentation has the same effect on trading opportunities between FixedReset issues.

There is no real hope that this situation will be corrected in the near-term. OSFI has indicated that the long-promised “Draft Definition of Capital” for insurers will not be issued “for public consultation in late 2012 or early 2013″, as they fear that it might encourage speculation in the marketplace. It is not clear why OSFI is so afraid of informed speculation, since the constant speculation in the marketplace is currently less informed than it would be with a little bit of regulatory clarity. While the framework has been updated, the modifications focus on the amount of capital required, not the required characteristics of that capital.

As a result of this delay, I have extended the Deemed Maturity date for insurers and insurance holding companies by three years (to 2025-1-31), in the expectation that when OSFI finally does provide clarity, they will allow the same degree of lead-in time for these companies as they did for banks. This had a major effect on the durations of preferred shares subject to the change but, fortunately, not much on their calculated yields as most of these issues were either trading near par when the change was made or were trading at sufficient premium that a par call was expected on economic grounds. However, with the declines in the market over the past nine months, the expected capital gain on redemption of the insurance-issued DeemedRetractibles has become an important component of the calculated yield.

Due to the footdragging by OSFI, I will be extending the DeemedMaturity date for insurance issues by another two years in the near future.

Sectoral distribution of the MAPF portfolio on January 29 was as follows:

MAPF Sectoral Analysis 2016-1-29
HIMI Indices Sector Weighting YTW ModDur
Ratchet 0% N/A N/A
FixFloat 0% N/A N/A
Floater 0% N/A N/A
OpRet 0% N/A N/A
SplitShare 1.5% (+0.1) 7.05% 5.28
Interest Rearing 0% N/A N/A
PerpetualPremium 0% N/A N/A
PerpetualDiscount 15.0% (+1.6) 5.96% 13.92
Fixed-Reset 53.9% (-2.5) 9.24% 9.56
Deemed-Retractible 6.4% (+0.8) 7.10% 7.10
FloatingReset 12.1% (+0.1) 8.69% 11.08
Scraps (Various) 10.8% (-0.2) 7.91% 13.92
Cash +0.3% (0) 0.00% 0.00
Total 100% 8.34% 10.40
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from December month-end. Cash is included in totals with duration and yield both equal to zero.
DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 (banks) or 2025-1-3 (insurers and insurance holding companies), in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind this analysis. (all recent editions have a short summary of the argument included in the “DeemedRetractible” section)

Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue.

Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 0.71% and a constant 3-Month Bill rate of 0.45%

The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.

Credit distribution is:

MAPF Credit Analysis 2016-01-29
DBRS Rating Weighting
Pfd-1 0 (0)
Pfd-1(low) 0 (0)
Pfd-2(high) 32.4 30.6% (+1.6)
Pfd-2 36.2% (-1.4)
Pfd-2(low) 20.3% (-0.3)
Pfd-3(high) 5.4% (-0.1)
Pfd-3 3.1% (-0.1)
Pfd-3(low) 1.7% (-0.1)
Pfd-4(high) 0% (0)
Pfd-4 0%
Pfd-4(low) 0% (0)
Pfd-5(high) 0% (0)
Pfd-5 0.5% (+0.1)
Cash +0.3% (0)
Totals will not add precisely due to rounding. Bracketted figures represent change from November month-end.
The fund holds a position in AZP.PR.C, which is rated P-5 by S&P and is unrated by DBRS
A position held in NPI.PR.C is not rated by DBRS, but has been included as “Pfd-3(high)” in the above table on the basis of its S&P rating of P-3(high).
A position held in INE.PR.A is not rated by DBRS, but has been included as “Pfd-3” in the above table on the basis of its S&P rating of P-3.

Liquidity Distribution is:

MAPF Liquidity Analysis 2016-01-29
Average Daily Trading Weighting
<$50,000 1.3% (-8.8)
$50,000 – $100,000 26.8% (+22.8)
$100,000 – $200,000 32.4% (-11.0)
$200,000 – $300,000 29.1% (+2.1)
>$300,000 10.1% (-5.1)
Cash +0.3% (0)
Totals will not add precisely due to rounding. Bracketted figures represent change from December month-end.

MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. The fund may be purchased either directly from Hymas Investment Management or through a brokerage account at Odlum Brown Limited. A “unit trust” is like a regular mutual fund, but is sold by offering memorandum rather than prospectus. This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission). Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.

A similar portfolio composition analysis has been performed on the Claymore Preferred Share ETF (symbol CPD) (and other funds) as of August 31, 2012, and published in the October (mainly methodology), November (most funds), and December (ZPR) 2012, PrefLetter. While direct comparisons are difficult due to the introduction of the DeemedRetractible class of preferred share (see above) it is fair to say:

  • MAPF credit quality is better
  • MAPF liquidity is a bit lower
  • MAPF Yield is higher
  • Weightings
    • MAPF is less exposed to Straight Perpetuals (including DeemedRetractibles)
    • MAPF is less exposed to Operating Retractibles
    • MAPF is more exposed to SplitShares
    • MAPF is less exposed to FixFloat / Floater / Ratchet
    • MAPF is overweighted in FixedResets

February 5, 2016

February 6th, 2016

Jobs, jobs, … well, a few jobs, anyway:

Job growth settled into a more sustainable pace in January and the unemployment rate dropped to an almost eight-year low of 4.9 percent, signs of a resilient labor market that’s causing wage growth to stir.

The 151,000 advance in payrolls, while less than forecast, largely reflected payback for a seasonal hiring pickup in the final two months of 2015, Labor Department figures showed Friday. The jobless rate fell to the lowest level since February 2008. Hourly earnings rose more than estimated after climbing in the year to December by the most since July 2009.

Friday’s data showed a much-awaited pickup in wage growth is starting to manifest itself. Average hourly earnings rose 0.5 percent from a month earlier to $25.39. The year-over-year increase of 2.5 percent followed a 2.7 percent jump in the 12 months ended in December, which was the biggest advance since mid-2009.

All in all, the report was somewhat hawkish for the Fed:

Most obviously, the jobless rate dropped in January to 4.9 percent, matching the Fed’s median forecast for the long-run sustainable level of unemployment — or “full employment” — and continuing the most impressive trend in U.S. economic data.

USUnemployment
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Perhaps even more encouraging was the move in the labor force participation rate. The share of the working-age population that was either employed or looking for a job ticked up to 62.7 percent in January from 62.6 percent the month before. From a year earlier, some 1.31 million people have entered the labor force.

USParticipationRate
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Average hourly earnings rose by a more-than-expected 2.5 percent in January from the year before. Wages for the year through December were revised upward to 2.7 percent, the highest level since July 2009.

USWageGrowth
Click for Big

Meanwhile, back in the frozen North:

Over all, Canada shed 5,700 jobs in January, pushing the jobless rate up by 0.1 percentage point and missing analyst expectations as energy-related declines offset a spurt in public sector employment.

Ontario was the only province to see job expansion, with 20,000 new positions created last month, according to Statscan. Most of the increases were in trade, education, and accommodation and food services.

But we can hope for higher unemployment amongst stock brokers!

Banks are watching wealthy clients flirt with robo-advisers, and that’s one reason the lenders are racing to release their own versions of the automated investing technology this year, according to a consultant.

Millennials and small investors aren’t the only ones using robo-advisers, a group that includes pioneers Wealthfront Inc. and Betterment LLC and services provided by mutual-fund giants, said Kendra Thompson, an Accenture Plc managing director. At Charles Schwab Corp., about 15 percent of those in automated portfolios have at least $1 million at the company.

“It’s real money moving,” Thompson said in an interview. “You’re seeing experimentation from people with much larger portfolios, where they’re taking a portion of their money and putting them in these offerings to try them out.”

despite the best efforts of their future colleagues:

OSC Notice 33-745 also provided some commentary on what would be expected of a registered advising representative (AR) in the context of an online advisory business:

“The online advice model that we have considered acceptable involves an interactive website used to collect KYC information, which will be reviewed by a registered AR. The AR will communicate with the client by telephone, video link, email or internet chats. The AR must ensure that sufficient KYC information has been gathered to support the PM firm’s obligation to make suitability determinations for the client.

Each of the firms that we have registered to provide online advice operates on a discretionary managed account basis, using portfolios of unleveraged exchange traded funds (ETFs) or low cost mutual funds. In most cases, these are model portfolios which are selected for a client based on a profile generated by the KYC collection process. An AR will review and approve the suitability of the portfolio for the client. The client’s account is periodically rebalanced to the parameters set for their portfolio.

This is not the so-called “robo-advice” model seen in the United States, where online advice has seen rapid growth in the last few years. The online advisers operating in Ontario are offering hybrid services that utilize an online platform for the efficiencies it offers, while ARs remain actively involved in decision making.”

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 62bp, FixedResets up 54bp and DeemedRetractibles gaining 8bp. The Performance Highlights table is lengthy. Volume was well 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_160205
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.43 to be $1.04 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.76 cheap at its bid price of 18.30.

impVol_MFC_160205
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Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 18.30 to be 1.21 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 18.20 to be 1.23 cheap.

impVol_BAM_160205
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.30 to be $1.65 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 17.30 and appears to be $1.05 rich.

impVol_FTS_160205
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 16.15, looks $0.22 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.10 and is $0.24 cheap.

pairs_FR_160205
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.92%, with two outliers above 0.00%. There are four junk outliers above 0.00%.

pairs_FF_160205
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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 5.29 % 6.43 % 17,535 16.15 1 0.0000 % 1,474.7
FixedFloater 7.54 % 6.59 % 26,260 15.69 1 0.0000 % 2,636.9
Floater 4.57 % 4.73 % 76,154 15.97 4 0.5841 % 1,676.7
OpRet 0.00 % 0.00 % 0 0.00 0 0.1458 % 2,707.8
SplitShare 4.88 % 6.35 % 81,687 2.70 6 0.1458 % 3,168.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1458 % 2,472.3
Perpetual-Premium 5.83 % 5.52 % 82,594 2.51 6 0.1461 % 2,533.9
Perpetual-Discount 5.74 % 5.77 % 98,625 14.25 33 0.2292 % 2,517.0
FixedReset 5.46 % 4.80 % 221,263 14.54 83 0.0119 % 1,856.9
Deemed-Retractible 5.24 % 5.56 % 130,758 5.22 34 0.0540 % 2,577.8
FloatingReset 3.04 % 4.65 % 50,430 5.56 16 0.1946 % 2,022.2
Performance Highlights
Issue Index Change Notes
TRP.PR.I FloatingReset -3.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 11.17
Evaluated at bid price : 11.17
Bid-YTW : 4.48 %
BAM.PF.G FixedReset -2.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 18.10
Evaluated at bid price : 18.10
Bid-YTW : 5.27 %
BAM.PF.F FixedReset -2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 5.15 %
HSE.PR.A FixedReset -2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 8.61
Evaluated at bid price : 8.61
Bid-YTW : 7.12 %
BAM.PF.E FixedReset -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 5.13 %
BAM.PF.B FixedReset -2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 5.16 %
TRP.PR.H FloatingReset -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 9.17
Evaluated at bid price : 9.17
Bid-YTW : 4.77 %
BAM.PF.A FixedReset -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 5.19 %
BMO.PR.Z Perpetual-Discount -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 22.41
Evaluated at bid price : 22.73
Bid-YTW : 5.50 %
VNR.PR.A FixedReset -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 16.77
Evaluated at bid price : 16.77
Bid-YTW : 5.38 %
BAM.PR.Z FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 5.34 %
SLF.PR.G FixedReset -1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.87
Bid-YTW : 10.85 %
BAM.PR.B Floater 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 10.10
Evaluated at bid price : 10.10
Bid-YTW : 4.73 %
MFC.PR.L FixedReset 1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.09
Bid-YTW : 8.54 %
W.PR.H Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 22.70
Evaluated at bid price : 22.99
Bid-YTW : 6.04 %
ELF.PR.F Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 22.10
Evaluated at bid price : 22.32
Bid-YTW : 5.99 %
TD.PF.E FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 19.77
Evaluated at bid price : 19.77
Bid-YTW : 4.57 %
HSE.PR.C FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 15.07
Evaluated at bid price : 15.07
Bid-YTW : 6.72 %
MFC.PR.H FixedReset 1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.05
Bid-YTW : 7.05 %
PWF.PR.K Perpetual-Discount 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 21.37
Evaluated at bid price : 21.64
Bid-YTW : 5.75 %
RY.PR.J FixedReset 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 4.53 %
MFC.PR.F FixedReset 1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.18
Bid-YTW : 11.63 %
CCS.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 : 22.35
Bid-YTW : 6.70 %
W.PR.J Perpetual-Discount 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 22.93
Evaluated at bid price : 23.20
Bid-YTW : 6.09 %
HSE.PR.E FixedReset 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 6.86 %
CIU.PR.C FixedReset 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 10.45
Evaluated at bid price : 10.45
Bid-YTW : 4.90 %
PWF.PR.T FixedReset 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 21.13
Evaluated at bid price : 21.13
Bid-YTW : 3.83 %
HSE.PR.G FixedReset 1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 6.76 %
W.PR.K FixedReset 1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 22.89
Evaluated at bid price : 24.25
Bid-YTW : 5.42 %
GWO.PR.O FloatingReset 1.99 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.25
Bid-YTW : 11.94 %
FTS.PR.I FloatingReset 2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 10.25
Evaluated at bid price : 10.25
Bid-YTW : 4.70 %
BNS.PR.F FloatingReset 2.76 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.26
Bid-YTW : 7.48 %
TRP.PR.C FixedReset 3.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 11.76
Evaluated at bid price : 11.76
Bid-YTW : 4.78 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PR.T FixedReset 83,306 TD crossed 80,000 at 14.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 14.25
Evaluated at bid price : 14.25
Bid-YTW : 5.50 %
NA.PR.X FixedReset 66,528 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 23.14
Evaluated at bid price : 24.98
Bid-YTW : 5.55 %
RY.PR.H FixedReset 65,145 Desjardins crossed 50,000 at 17.58.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 4.47 %
TD.PF.G FixedReset 54,500 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 5.18 %
MFC.PR.J FixedReset 52,368 Desjardins crossed 50,000 at 18.15.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.20
Bid-YTW : 7.88 %
TRP.PR.G FixedReset 45,354 Desjardins bought 20,700 from National at 18.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 18.30
Evaluated at bid price : 18.30
Bid-YTW : 5.13 %
There were 22 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSE.PR.C FixedReset Quote: 15.07 – 18.50
Spot Rate : 3.4300
Average : 1.8786

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 15.07
Evaluated at bid price : 15.07
Bid-YTW : 6.72 %

GWO.PR.O FloatingReset Quote: 11.25 – 13.50
Spot Rate : 2.2500
Average : 1.5421

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.25
Bid-YTW : 11.94 %

SLF.PR.J FloatingReset Quote: 11.74 – 12.55
Spot Rate : 0.8100
Average : 0.5388

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.74
Bid-YTW : 11.55 %

CU.PR.C FixedReset Quote: 17.00 – 17.50
Spot Rate : 0.5000
Average : 0.3251

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 4.62 %

RY.PR.M FixedReset Quote: 18.80 – 19.39
Spot Rate : 0.5900
Average : 0.4292

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-05
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 4.50 %

TD.PR.Z FloatingReset Quote: 21.85 – 22.45
Spot Rate : 0.6000
Average : 0.4393

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.85
Bid-YTW : 4.49 %

February 4, 2016

February 5th, 2016

There are mutterings about increasing foreign holdings of Canada bonds:

The Canadian fixed-income market is exposed to foreign investors like never before, said Warren Lovely, head of public-sector research at National Bank. And with Canada’s once-superior economic stature having slouched under the weight of the commodity shock, the appeal of Canadian bonds to global investors could fade, he said.

“If not a full-blown systemic risk, Canada’s leverage to foreign portfolio investors is a notable vulnerability for the country’s capital markets and debt issuers,” he said.

GOCForeignHeld
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Morgan Stanley has prepared some interesting charts on global monetary policy:

The Bank of England voted unanimously not to raise interest rates Thursday, as the sole dissenter on the Monetary Policy Committee abandoned his recent calls to tighten policy. The European Commission also slashed its inflation forecasts, all but guaranteeing more quantitative easing when the European Central Bank next meets in March. Now, given the world’s deteriorating economic backdrop, that December rate increase from the Federal Reserve looks increasingly anachronistic.

monthsToUKHike
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chanceOfUKCut
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chanceOfFedHikeMarch
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S&P published a review article titled Negative Interest Rates: Why Central Banks Can Defy “Time Preference”. It’s mainly about the BoJ move to negative policy rates, but concluded:

Since the Global Financial Crisis erupted in 2008 and triggered the Great Recession and ushered in a period of secular macro deleveraging, the major central banks of the world have progressively implemented all manner of “unconventional” monetary policy measures. There are now five major central banks implementing some form of negative interest rate policy. Two of those central banks are also implementing full-fledged QE. The Federal Reserve has made one interest rate hike, but it continues to have a balance sheet with a stock of QE on it to the tune of more than $3 trillion. Similarly the Bank of England, while not having raised interest rates yet, maintains a much enlarged balance sheet, thanks to its earlier five rounds of QE. Several major central banks have experimented with various forms of forward guidance too.

When future historians look back on this period, they will likely describe a world in which the major central banks all experimented with new forms of monetary policy easing and learned from one another in the process, as one central bank after another pioneered new policy innovations and others adopted and adapted them, some rapidly, others with long lags. Disentangling cause and effect in the process of cross-fertilization and adaptation will be no simple feat.

There is nothing new in this of course: The 20 years or so preceding the financial crisis were ones in which similar cross-fertilization of ideas and practice occurred, as what become known as “flexible inflation targeting” became the orthodoxy of central banking, before it was confronted by the ghost of Hyman Minsky (14).

It is my compelling sense that this process of cross-pollination of policy learning and institutional evolution is far from over. The journey into uncharted monetary waters continues.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 62bp, FixedResets up 54bp and DeemedRetractibles gaining 8bp. The Performance Highlights table is lengthy. Volume was 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_160204
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.46 to be $1.14 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.86 cheap at its bid price of 18.21.

impVol_MFC_160204
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Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 18.35 to be 1.36 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 18.15 to be 1.20 cheap.

impVol_BAM_160204
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.30 to be $1.88 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 17.66 and appears to be $1.17 rich.

impVol_FTS_160204
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FTS.PR.K, with a spread of +205bp, and bid at 16.24, looks $0.23 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.15 and is $0.27 cheap.

pairs_FR_160204
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.98%, with two outliers above 0.00%. There are two junk outliers above 0.00%.

pairs_FF_160204
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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 5.29 % 6.43 % 17,743 16.16 1 0.0000 % 1,474.7
FixedFloater 7.54 % 6.59 % 27,398 15.69 1 0.8000 % 2,636.9
Floater 4.60 % 4.74 % 73,652 15.95 4 1.0079 % 1,667.0
OpRet 0.00 % 0.00 % 0 0.00 0 0.1181 % 2,703.8
SplitShare 4.88 % 6.33 % 80,663 2.70 6 0.1181 % 3,164.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1181 % 2,468.7
Perpetual-Premium 5.83 % 5.83 % 81,018 13.99 6 0.3798 % 2,530.2
Perpetual-Discount 5.76 % 5.80 % 99,183 14.18 33 0.6211 % 2,511.3
FixedReset 5.46 % 4.86 % 225,799 14.39 83 0.5445 % 1,856.7
Deemed-Retractible 5.24 % 5.75 % 131,429 6.94 34 0.0779 % 2,576.4
FloatingReset 3.04 % 4.54 % 52,268 5.56 16 0.3644 % 2,018.3
Performance Highlights
Issue Index Change Notes
FTS.PR.I FloatingReset -2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 10.04
Evaluated at bid price : 10.04
Bid-YTW : 4.80 %
CIU.PR.C FixedReset -1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 10.29
Evaluated at bid price : 10.29
Bid-YTW : 4.97 %
TD.PF.E FixedReset -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.56
Evaluated at bid price : 19.56
Bid-YTW : 4.61 %
HSE.PR.C FixedReset -1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 14.90
Evaluated at bid price : 14.90
Bid-YTW : 6.80 %
BNS.PR.D FloatingReset -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.01
Bid-YTW : 7.25 %
HSE.PR.G FixedReset -1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 15.90
Evaluated at bid price : 15.90
Bid-YTW : 6.89 %
BNS.PR.F FloatingReset -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.77
Bid-YTW : 7.98 %
MFC.PR.F FixedReset -1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.02
Bid-YTW : 11.81 %
PWF.PR.T FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 20.78
Evaluated at bid price : 20.78
Bid-YTW : 3.89 %
W.PR.K FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.69
Evaluated at bid price : 23.80
Bid-YTW : 5.54 %
BAM.PF.C Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 6.24 %
RY.PR.N Perpetual-Discount 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.35
Evaluated at bid price : 22.65
Bid-YTW : 5.41 %
BNS.PR.P FixedReset 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.26
Bid-YTW : 3.55 %
FTS.PR.M FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 18.10
Evaluated at bid price : 18.10
Bid-YTW : 4.72 %
CIU.PR.A Perpetual-Discount 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.71
Evaluated at bid price : 19.71
Bid-YTW : 5.85 %
BMO.PR.Z Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.73
Evaluated at bid price : 23.10
Bid-YTW : 5.41 %
BMO.PR.W FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 17.22
Evaluated at bid price : 17.22
Bid-YTW : 4.48 %
CU.PR.F Perpetual-Discount 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.68
Evaluated at bid price : 19.68
Bid-YTW : 5.73 %
CM.PR.O FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 17.80
Evaluated at bid price : 17.80
Bid-YTW : 4.49 %
BAM.PF.A FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 18.46
Evaluated at bid price : 18.46
Bid-YTW : 5.10 %
TRP.PR.B FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 10.52
Evaluated at bid price : 10.52
Bid-YTW : 4.83 %
BAM.PR.C Floater 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 9.96
Evaluated at bid price : 9.96
Bid-YTW : 4.79 %
BNS.PR.A FloatingReset 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 4.10 %
BIP.PR.B FixedReset 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.70
Evaluated at bid price : 23.81
Bid-YTW : 5.82 %
RY.PR.M FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 4.52 %
VNR.PR.A FixedReset 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.31 %
CM.PR.Q FixedReset 1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.03
Evaluated at bid price : 19.03
Bid-YTW : 4.63 %
BAM.PF.D Perpetual-Discount 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.99
Evaluated at bid price : 19.99
Bid-YTW : 6.22 %
BAM.PR.M Perpetual-Discount 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.52
Evaluated at bid price : 19.52
Bid-YTW : 6.17 %
MFC.PR.H FixedReset 1.80 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.81
Bid-YTW : 7.22 %
BAM.PR.K Floater 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 10.08
Evaluated at bid price : 10.08
Bid-YTW : 4.74 %
TRP.PR.A FixedReset 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 14.55
Evaluated at bid price : 14.55
Bid-YTW : 4.77 %
BAM.PR.N Perpetual-Discount 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.58
Evaluated at bid price : 19.58
Bid-YTW : 6.15 %
MFC.PR.J FixedReset 1.84 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.22
Bid-YTW : 7.87 %
IAG.PR.G FixedReset 1.93 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.51
Bid-YTW : 7.84 %
NA.PR.W FixedReset 1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 4.76 %
HSE.PR.A FixedReset 1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 8.79
Evaluated at bid price : 8.79
Bid-YTW : 6.97 %
W.PR.J Perpetual-Discount 2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.62
Evaluated at bid price : 22.87
Bid-YTW : 6.18 %
MFC.PR.I FixedReset 2.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.90
Bid-YTW : 7.64 %
MFC.PR.G FixedReset 2.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.15
Bid-YTW : 8.15 %
GWO.PR.N FixedReset 2.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.50
Bid-YTW : 11.10 %
W.PR.H Perpetual-Discount 2.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.50
Evaluated at bid price : 22.76
Bid-YTW : 6.10 %
BAM.PF.E FixedReset 3.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 5.02 %
BAM.PF.G FixedReset 3.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 18.65
Evaluated at bid price : 18.65
Bid-YTW : 5.11 %
FTS.PR.G FixedReset 4.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 16.15
Evaluated at bid price : 16.15
Bid-YTW : 4.67 %
BAM.PF.B FixedReset 5.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 5.05 %
TRP.PR.I FloatingReset 9.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 11.52
Evaluated at bid price : 11.52
Bid-YTW : 4.35 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.X FixedReset 372,600 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 23.14
Evaluated at bid price : 24.98
Bid-YTW : 5.54 %
TD.PF.G FixedReset 127,910 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.52
Bid-YTW : 5.14 %
BNS.PR.Z FixedReset 127,490 Desjardins crossed blocks of 40,000 and 29,100, both at 18.82. TD crossed 50,000 at 18.85.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.94
Bid-YTW : 7.12 %
RY.PR.Q FixedReset 117,729 RBC crossed two blocks of 25,000 each and one of 30,000, all at 25.63.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 23.32
Evaluated at bid price : 25.56
Bid-YTW : 5.13 %
HSB.PR.D Deemed-Retractible 101,940 Nesbitt crossed 99,700 at 24.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 5.24 %
NA.PR.W FixedReset 85,609 Scotia crossed blocks of 32,200 and 40,000, both at 16.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 4.76 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.F FixedReset Quote: 18.80 – 20.00
Spot Rate : 1.2000
Average : 0.9477

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 5.03 %

W.PR.K FixedReset Quote: 23.80 – 24.49
Spot Rate : 0.6900
Average : 0.4580

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.69
Evaluated at bid price : 23.80
Bid-YTW : 5.54 %

VNR.PR.A FixedReset Quote: 17.00 – 17.64
Spot Rate : 0.6400
Average : 0.4179

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.31 %

W.PR.J Perpetual-Discount Quote: 22.87 – 23.40
Spot Rate : 0.5300
Average : 0.3652

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 22.62
Evaluated at bid price : 22.87
Bid-YTW : 6.18 %

FTS.PR.I FloatingReset Quote: 10.04 – 10.57
Spot Rate : 0.5300
Average : 0.3980

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 10.04
Evaluated at bid price : 10.04
Bid-YTW : 4.80 %

BAM.PR.N Perpetual-Discount Quote: 19.58 – 19.98
Spot Rate : 0.4000
Average : 0.2794

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-04
Maturity Price : 19.58
Evaluated at bid price : 19.58
Bid-YTW : 6.15 %

BPO: S&P Upgrades to P-3(high)

February 5th, 2016

Standard & Poor’s has announced:

  • •Brookfield Office Properties Inc. (BPO) and Brookfield Canada Office Properties (BPOC) are 100% and 83% owned subsidiaries of Brookfield Property Partners (BPY) respectively.
  • •On Feb. 3, 2015, Standard & Poor’s assigned its ‘BBB’ corporate credit rating to Brookfield Property Partners.
  • •We are raising our corporate credit ratings on BPO and BPOC to ‘BBB’ from ‘BBB-’ based on our assessment of its “core” status within BPY.
  • •The stable outlook reflects our expectation that BPO and BPOC will remain core subsidiaries within BPY’s sizeable office portfolio.


We could lower the ratings if we lowered the ratings on BPY or if the status within the group changed.

Similarly, in the event of an upgrade of BPY, we would raise the ratings on these core subsidiaries.

Affected issues are BPO.PR.A, BPO.PR.H, BPO.PR.J, BPO.PR.K, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T, BPO.PR.W, BPO.PR.X and BPO.PR.Y.

February 3, 2016

February 4th, 2016

I mentioned yesterday the thesis that depressed markets are due to SWFs cashing out (although whenever I read that acronym, my first thought is “Single White Female”. Blush, blush.) Charles Stein of Bloomberg adds a bit more colour to that idea:

Money managers are having trouble hanging on to money.

Franklin Resources Inc. said Wednesday that investors withdrew $20.6 billion in the fourth quarter, the latest asset manager to highlight the issue of redemptions. Affiliated Mangers Group Inc. said on Tuesday that it had outflows of $6.8 billion, while Waddell & Reed saw $5 billion in withdrawals, contributing to the biggest drop in its stock since the financial crisis of 2008.

Money managers are hurt by slumping stock markets worldwide, which have prompted investors to dump anything perceived as risky. The firms are getting squeezed by sovereign wealth funds in need of cash after oil prices plunged, and the shift by investors from active funds to cheaper ones that track indexes. The preference for passive products and exchange-traded funds has created winners, including Vanguard Group Inc. and BlackRock Inc.

Aberdeen Asset Managment Plc last month cited the cash needs of sovereign wealth funds as one of the reasons the firm experienced 9.1 billion pounds ($13.2 billion) of withdrawals in the fourth quarter. The wealth funds from oil-producing nations, which boosted their investments when energy prices were high, are taking money back to fill the budget shortfalls created by cheap oil.

“Sovereign wealth funds were set up for a rainy day and that rainy day has arrived,” Aberdeen CEO Martin Gilbert said on a conference call in January. Gilbert in November said that 2016 would be a tough one for the asset management business if oil remained at $45 to $50 a barrel. It sells today for about $30.

Phillips of Casey Quirk estimated that about 70 percent of net global flows in 2015 went into passive products, a business dominated by a small number of players. Vanguard, known for its low-cost index funds and exchange-traded funds, collected a record $236 billion in deposits last year, including more than $58 billion in the fourth quarter.

cashFlows
Click for Big

But what the hell. Every day there’s an announcement of astonishing technological progress:

Scientists at the Max Planck Institute in Germany have successfully conducted a revolutionary nuclear fusion experiment. Using their experimental reactor, the Wendelstein 7-X (W7X) stellarator, they have managed to sustain a hydrogen plasma – a key step on the path to creating workable nuclear fusion. The German chancellor Angela Merkel, who herself has a doctorate in physics, switched on the device at 2:35 p.m. GMT (9:35 a.m. EST).

As a clean, near-limitless source of energy, it’s no understatement to say that controlled nuclear fusion (replicating the process that powers the Sun) would change the world, and several nations are striving to make breakthroughs in this field. Germany is undoubtedly the frontrunner in one respect: This is the second time that it’s successfully fired up its experimental fusion reactor.

So this is just one element in the thesis that technological progress has become so swift that disruptions in the market have become so frequent and fundamental that low growth – at least in the developed world – is virtually inevitable. Disruption is good in the long run, but bad in the short run … it took a long time for stenographers to re-train as administrative assistants, and a long time for companies to realize they needed them! It would be ideal if disruptions were maintained at a constant low level to allow for adjustment without broader-based recessions … but those darned engineers and scientists refuse to cooperate!

It was a good day for the Canadian preferred share market, with PerpetualDiscounts gaining 35bp, FixedResets winning 55bp and DeemedRetractibles up 40bp. The Performance Highlights table is lengthy. Volume was a little below average.

PerpetualDiscounts now yield 5.82%, equivalent to 7.57% interest at the standard equivalency factor of 1.3x. Long corporates continue to yield 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 335bp, a significant decline from the 350bp reported January 27.

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_160203
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.35 to be $1.15 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.82 cheap at its bid price of 18.10.

impVol_MFC_160203
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Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 18.20 to be 1.39 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 17.75 to be 1.31 cheap.

impVol_BAM_160203
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.35 to be $1.59 cheap. BAM.PF.F, resetting at +286bp on 2019-9-30 is bid at 18.80 and appears to be $0.99 rich.

impVol_FTS_160203
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 16.23, looks $0.49 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 15.50 and is $0.65 cheap.

pairs_FR_160203
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.98%, with one outlier above 0.00%. There are three junk outliers above 0.00%.

pairs_FF_160203
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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 5.29 % 6.43 % 18,511 16.16 1 0.0000 % 1,474.7
FixedFloater 7.60 % 6.64 % 28,586 15.63 1 0.8065 % 2,615.9
Floater 4.65 % 4.82 % 74,649 15.80 4 0.9179 % 1,650.3
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0069 % 2,700.6
SplitShare 4.89 % 6.26 % 80,714 2.71 6 -0.0069 % 3,160.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0069 % 2,465.7
Perpetual-Premium 5.86 % 5.83 % 81,596 14.00 6 0.1201 % 2,520.6
Perpetual-Discount 5.79 % 5.82 % 98,399 14.14 33 0.3534 % 2,495.8
FixedReset 5.49 % 4.89 % 226,762 14.48 83 0.5471 % 1,846.6
Deemed-Retractible 5.25 % 5.69 % 131,408 6.94 34 0.4027 % 2,574.4
FloatingReset 3.05 % 4.68 % 52,853 5.56 16 1.0284 % 2,011.0
Performance Highlights
Issue Index Change Notes
BAM.PF.B FixedReset -5.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 16.46
Evaluated at bid price : 16.46
Bid-YTW : 5.35 %
BAM.PF.G FixedReset -2.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.98
Evaluated at bid price : 17.98
Bid-YTW : 5.31 %
PWF.PR.T FixedReset -2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 21.01
Evaluated at bid price : 21.01
Bid-YTW : 3.85 %
BAM.PR.T FixedReset -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 5.44 %
BAM.PF.E FixedReset -1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.13
Evaluated at bid price : 17.13
Bid-YTW : 5.18 %
FTS.PR.G FixedReset -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 4.88 %
BNS.PR.N Deemed-Retractible -1.10 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-01-27
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 4.68 %
BMO.PR.W FixedReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.03
Evaluated at bid price : 17.03
Bid-YTW : 4.53 %
CIU.PR.C FixedReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 10.47
Evaluated at bid price : 10.47
Bid-YTW : 4.89 %
RY.PR.F Deemed-Retractible 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 4.94 %
BMO.PR.Y FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 19.35
Evaluated at bid price : 19.35
Bid-YTW : 4.52 %
RY.PR.P Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 23.72
Evaluated at bid price : 24.06
Bid-YTW : 5.45 %
CM.PR.O FixedReset 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 4.54 %
RY.PR.I FixedReset 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 3.90 %
TD.PF.B FixedReset 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.39
Evaluated at bid price : 17.39
Bid-YTW : 4.49 %
SLF.PR.I FixedReset 1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.45
Bid-YTW : 8.46 %
CU.PR.C FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 4.56 %
CU.PR.H Perpetual-Discount 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 22.35
Evaluated at bid price : 22.66
Bid-YTW : 5.79 %
TRP.PR.F FloatingReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 11.79
Evaluated at bid price : 11.79
Bid-YTW : 5.08 %
VNR.PR.A FixedReset 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 5.39 %
TRP.PR.A FixedReset 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 14.29
Evaluated at bid price : 14.29
Bid-YTW : 4.86 %
MFC.PR.I FixedReset 1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.50
Bid-YTW : 7.94 %
NA.PR.S FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.56
Evaluated at bid price : 17.56
Bid-YTW : 4.66 %
RY.PR.L FixedReset 1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 3.91 %
SLF.PR.J FloatingReset 1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.66
Bid-YTW : 11.63 %
BIP.PR.A FixedReset 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 6.07 %
HSE.PR.A FixedReset 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 8.62
Evaluated at bid price : 8.62
Bid-YTW : 7.11 %
MFC.PR.M FixedReset 1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.26
Bid-YTW : 7.80 %
BAM.PR.K Floater 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 9.90
Evaluated at bid price : 9.90
Bid-YTW : 4.82 %
CCS.PR.C Deemed-Retractible 1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.05
Bid-YTW : 6.89 %
BNS.PR.F FloatingReset 1.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.00
Bid-YTW : 7.74 %
RY.PR.K FloatingReset 1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.82
Bid-YTW : 4.77 %
TD.PF.C FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 4.48 %
PWF.PR.S Perpetual-Discount 1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 5.74 %
BNS.PR.Z FixedReset 1.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.90
Bid-YTW : 7.16 %
TRP.PR.E FixedReset 1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.35
Evaluated at bid price : 17.35
Bid-YTW : 4.75 %
BNS.PR.L Deemed-Retractible 1.79 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.48
Bid-YTW : 4.94 %
BAM.PR.B Floater 1.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 9.91
Evaluated at bid price : 9.91
Bid-YTW : 4.82 %
RY.PR.M FixedReset 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 18.45
Evaluated at bid price : 18.45
Bid-YTW : 4.58 %
MFC.PR.J FixedReset 1.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.89
Bid-YTW : 8.12 %
BNS.PR.C FloatingReset 2.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.16
Bid-YTW : 4.44 %
MFC.PR.N FixedReset 2.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.20
Bid-YTW : 7.78 %
FTS.PR.F Perpetual-Discount 2.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 21.95
Evaluated at bid price : 22.19
Bid-YTW : 5.61 %
TRP.PR.C FixedReset 2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 11.40
Evaluated at bid price : 11.40
Bid-YTW : 4.93 %
SLF.PR.G FixedReset 2.75 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.10
Bid-YTW : 10.60 %
HSE.PR.E FixedReset 2.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 15.85
Evaluated at bid price : 15.85
Bid-YTW : 6.92 %
BNS.PR.B FloatingReset 2.95 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.65
Bid-YTW : 4.68 %
CM.PR.P FixedReset 3.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.21
Evaluated at bid price : 17.21
Bid-YTW : 4.54 %
FTS.PR.J Perpetual-Discount 3.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 21.55
Evaluated at bid price : 21.55
Bid-YTW : 5.62 %
HSE.PR.G FixedReset 3.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 16.11
Evaluated at bid price : 16.11
Bid-YTW : 6.80 %
SLF.PR.H FixedReset 4.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.68
Bid-YTW : 10.13 %
HSE.PR.C FixedReset 4.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 6.68 %
TRP.PR.I FloatingReset 5.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 10.50
Evaluated at bid price : 10.50
Bid-YTW : 4.77 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.X FixedReset 144,750 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 23.13
Evaluated at bid price : 24.97
Bid-YTW : 5.55 %
RY.PR.Q FixedReset 144,512 Nesbitt crossed blocks of 50,000 and 59,000, both at 25.62.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 23.32
Evaluated at bid price : 25.59
Bid-YTW : 5.12 %
BNS.PR.E FixedReset 111,649 RBC crossed 25,000 at 25.63. Scotia crossed blocks of 40,000 and 20,000, both at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 23.33
Evaluated at bid price : 25.58
Bid-YTW : 5.11 %
BMO.PR.W FixedReset 59,769 Nesbitt crossed 25,100 at 17.00. Desjardins crossed 16,500 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.03
Evaluated at bid price : 17.03
Bid-YTW : 4.53 %
TD.PF.G FixedReset 47,207 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 5.07 %
BMO.PR.T FixedReset 37,422 Scotia crossed 25,000 at 17.22.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 17.22
Evaluated at bid price : 17.22
Bid-YTW : 4.51 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.B FixedReset Quote: 16.46 – 17.43
Spot Rate : 0.9700
Average : 0.6121

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 16.46
Evaluated at bid price : 16.46
Bid-YTW : 5.35 %

NA.PR.W FixedReset Quote: 16.24 – 17.01
Spot Rate : 0.7700
Average : 0.4632

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 16.24
Evaluated at bid price : 16.24
Bid-YTW : 4.86 %

RY.PR.K FloatingReset Quote: 21.82 – 22.83
Spot Rate : 1.0100
Average : 0.7406

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.82
Bid-YTW : 4.77 %

FTS.PR.G FixedReset Quote: 15.50 – 16.11
Spot Rate : 0.6100
Average : 0.3914

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 4.88 %

PWF.PR.T FixedReset Quote: 21.01 – 21.70
Spot Rate : 0.6900
Average : 0.4862

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 21.01
Evaluated at bid price : 21.01
Bid-YTW : 3.85 %

CIU.PR.A Perpetual-Discount Quote: 19.50 – 20.18
Spot Rate : 0.6800
Average : 0.4980

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-03
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 5.91 %

RON.PR.A: Lowe’s Offers $20 As Part Of Takeover

February 4th, 2016

Lowe’s Companies, Inc. and RONA Inc. have announced:

that they have entered into a definitive agreement under which Lowe’s is expected to acquire all of the issued and outstanding common shares of RONA for C$24 per share in cash, and all of the issued and outstanding preferred shares of RONA for C$20 per share in cash. The total transaction value is C$3.2 billion (US$2.3 billion) (the “Transaction”). The offer represents a premium of 104 percent to RONA’s closing common share price on February 2, 2016 and a 38 percent premium to RONA’s 52-week high of C$17.36. Together, Lowe’s Canada and RONA stores will create Canada’s leading home improvement retailer with 2015 pro forma revenues from Canadian operations of approximately C$5.6 billion. Excluding transaction and integration costs, we anticipate the Transaction will be accretive to Lowe’s earnings in the first year following the close of the acquisition.

The Transaction has been unanimously approved by the Boards of Directors of Lowe’s and RONA and is supported by the management teams of both companies. The Transaction is expected to proceed by way of a plan of arrangement by which Lowe’s would acquire all of the outstanding shares of RONA, subject to RONA common shareholder approval and satisfaction of customary conditions, including the receipt of all necessary regulatory approvals. The RONA Board has received an opinion from Scotia Capital Inc. that the consideration to be received by RONA’s common and preferred shareholders pursuant to the Transaction is fair, from a financial point of view.

The RONA Board will recommend that RONA shareholders vote in favor of the plan of arrangement at a special meeting of shareholders expected to be held before the end of the first quarter of 2016. Further information regarding the Transaction will be included in RONA’s information circular to be mailed to RONA shareholders in advance of the special meeting. The arrangement agreement provides that RONA is subject to customary non-solicitation provisions.

$20 is quite the premium over yesterday’s closing quote of 12.41-05!

The consensus is that the deal will succeed – f’rinstance, Frederic Tomesco of Bloomberg:

The fact both boards agreed to the C$3.2 billion ($2.3 billion) offer, along with Lowe’s commitment to preserve head-office jobs and maintain supply agreements, will likely seal the deal. Political conditions in Canada’s second-most populous province also favor the acquisition after helping to scupper a hostile offer in 2012.

Rona’s biggest shareholder, the provincial pension fund manager Caisse de Dépôt et Placement du Québec, said Wednesday it would tender its shares to the offer. Quebec’s new economy minister indicated the government probably wouldn’t stand in the way of a deal.

“If three of the groups that were against Lowe’s last time — the board, the government and the Caisse — are saying it’s a good idea, it would be hard to see it not get the green light,” Karl Moore, a management professor at McGill University’s Desautels Faculty of Management in Montreal, said in a telephone interview. “There’ll be some squawking for sure, but that’s predictable. The opposition has to be against this deal in principle.”

Matthew Townsend and Scott Deveau of Bloomberg point out that the plunging loonie helped a lot:

The Canadian dollar’s loss is Lowe’s gain.

After being rebuffed in its attempt to buy Quebec-based retailer Rona Inc. in 2012, Lowe’s Cos. reached agreement on Wednesday to buy it for C$3.2 billion ($2.3 billion). Two big changes in the past four years made the transaction possible: The Parti Quebecois, which opposed the original deal, is out of power, and the loonie fell to its lowest level against the dollar in more than a decade.

Lowe’s withdrew the $1.8 billion unsolicited bid for Rona in 2012 after the board and some Quebec politicians opposed the offer, concerned about a loss of jobs and local control in the French-speaking province. The withdrawal came just 12 days after the separatist Parti Quebecois won elections.

Since then, the Liberals have taken power in Quebec, and the loonie has dropped to 72 cents versus the U.S. dollar, compared with parity when Lowe’s pulled its bid, making it cheaper for Lowe’s to offer a richer premium. So while the C$24 a share bid in Canadian dollar terms is about 65 percent higher than the C$14.50 a share bid that was rejected, in U.S. dollar terms the offer is just 16 percent higher.

CADUSD
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… and Bloomberg’s Brooke Sutherland suggests it’s all about footprint:

Focusing on Canada may be a distraction, but it’s a distraction that could pay off for Lowe’s. While the home-improvement company has benefited from a rebounding real estate market, the maturing U.S. retail landscape and the rise of online shopping puts a cap on the growth opportunities for big-box vendors. Many are shuttering stores, or at least slowing down expansion.

Lowe’s, for example, had 1,793 U.S. locations as of January 2015 — a gain of about 76 from a year earlier, much of which could be explained by the acquisition of Orchard Supply Hardware. The way to keep growing its store base is to make more acquisitions and push harder into adjacent markets such as Canada, where Home Depot currently has almost five times as many locations as Lowe’s. With Canada’s home improvement industry valued at C$45 billion, Lowe’s can’t really afford to sit on the sidelines.

feetPrints
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John Heinzl was kind enough to quote me when discussing the preferred share part of the deal:

Rona Inc.’s battered preferred-share investors may not be getting as fat a premium as common shareholders in the $3.2-billion takeover by Lowe’s Cos. Inc., but they should be thrilled with what they’re being offered, money managers say.

As part of the deal, the U.S. home-improvements chain is offering $20 for each Class A rate-reset preferred share of Quebec-based Rona. The offer, which is based on a fairness opinion from Scotia Capital, represents a 59-per-cent premium to the closing price of Rona’s preferred shares before the deal was announced.

Some Rona preferred shareholders said it’s possible Lowe’s might make a higher offer for the preferreds. “Perhaps they could be persuaded to offer more money. Perhaps. I’m not banking on it but not discounting it either,” said Benj Gallander, co-editor of Contra the Heard Investment Letter. “These are early days.”

Don’t hold your breath, said preferred-share fund manager James Hymas, president of Hymas Investment Management. Rona’s preferred shareholders don’t have the leverage to squeeze more money out of Lowe’s, he said.

“They can always try, but I don’t know how far they’ll get,” said Mr. Hymas, who does not own Rona’s preferred shares.

After all the suffering Rona’s preferred investors have endured, they should be happy that Lowe’s is willing to take them out at $20, Mr. Hymas said.

“You don’t want to kill the goose that lays the golden egg,” he said. “They’re not going to sweeten that deal. There is no reason to.”

I base this view on the fact that during the conference call the following statements were made:

what’s important to understand that a positive vote from the pref holders is not a condition precedent to the closing of the transaction.

If you don’t have a majority acceptance from the prefs, does RONA continue to report its financial results? … Yes. So the entity would need to continue to report as a public listed entity. Yes.

So a negative vote from RONA preferred shareholders will mean just that the shares will continue to be outstanding. Since RON.PR.A is a FixedReset, 5.25%+265, that commenced trading 2011-2-22 after being announced 2011-2-1, it has a relatively low reset. Absurdly low for junk, albeit more reasonable for investment grade. Investment-grade issues with comparable resets are:

  • MFC.PR.J, +261, bid at 17.89
  • RY.PR.M, +262, bid at 18.45
  • TD.PF.D, +279, bid at 19.00
  • SLF.PR.I, +273, bid at 17.45
  • BAM.PF.B, +263, bid at 16.46
  • BMO.PR.Y, +271, bid at 19.35

So it’s a decent premium over fair value even given an upgrade in credit quality. I’ll suggest that Lowe’s takes the view that they’re willing to give that premium to the preferred shareholders if they’re co-operative, or give it to the lawyers, bookkeepers, auditors and accountants if that’s what the preferred shareholders decide they want. Since the takeover deal is not conditional on preferred shareholder approval they’ve got no reason to pay an extortionate premium for the prefs.

And yes, the credit quality will almost certainly go up if the deal is approved. DBRS confirmed Lowe’s at A(low):

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Debt rating of Lowe’s Companies, Inc. (Lowe’s or the Company) at A (low) as well as its Short-Term Rating at R-1 (low), all with Stable trends. This action follows the Company’s announcement that it has entered into a definitive agreement under which Lowe’s is expected to acquire all issued and outstanding common shares of RONA inc. (RONA) for CAD 24 per share in cash and all issued and outstanding preferred shares of RONA for CAD 20 per share in cash. The total transaction value including the assumption of RONA’s debt is CAD 3.2 billion ($2.3 billion; the Transaction or Acquisition).

Despite the risks associated with the effective integration of RONA, DBRS believes that the relatively modest magnitude of the Transaction and the temporary increase in financial leverage keep Lowe’s credit risk profile in a range acceptable for the current rating category. Should Lowe’s be challenged to maintain credit metrics in a range acceptable for the current A (low) rating because of weaker-than-expected consolidated operating performance or more aggressive-than-expected financial management (i.e., slower deleveraging), the current ratings could be pressured.

…. while putting RONA on Review-Positive:

DBRS Limited (DBRS) has today placed the ratings of RONA inc. (RONA or the Company) Under Review with Positive Implications following the Company’s announcement that it has entered into a definitive agreement under which RONA will be acquired by Lowe’s Companies, Inc. (Lowe’s; please see separate DBRS press release) for a total transaction value of $3.2 billion (the Transaction). The total transaction value comprises Lowe’s offer to acquire RONA’s issued and outstanding common shares for $24 per share in cash as well as its issued and outstanding preferred shares for $20 per share, plus RONA’s outstanding debt.

Rona’s Under Review – Positive Implications status reflects Lowe’s current ratings (A (low) and R-1 (low) as rated by DBRS), the intention to purchase RONA’s outstanding preferred shares and the assumption of RONA’s outstanding senior unsecured debt. As of September 27, 2015, RONA had approximately $313 million of senior unsecured debt outstanding, consisting of $116 million of senior unsecured debentures and $197 million drawn on its revolving credit facility (maximum limit of $700 million). DBRS notes that the Company’s senior unsecured debentures will mature in October 2016.

S&P has also taken a positive view regarding RONA’s ratings:

  • •Home improvement retailers Lowe’s Cos. Inc. and RONA Inc. announced today that they have entered into a definitive agreement under which Lowe’s is expected to acquire RONA for about C$3.2 billion
  • •As a result, we are placing our ratings on RONA Inc., including our ‘BB+ long-term corporate credit rating on the company, on CreditWatch with positive implications.
  • •We intend to resolve the CreditWatch placement on the acquisition’s closing, which we expect by the third quarter of 2016. At that time, we would likely equalize our long-term corporate credit rating on RONA with that on Lowe’s.


The CreditWatch placement follows Lowe’s Cos. Inc.’s and RONA Inc.’s announcement that they have entered into a definitive agreement under which Lowe’s is expected to acquire RONA for about C$3.2 billion. As part of the transaction, we expect Lowe’s to purchase all of the issued and outstanding preferred shares of RONA for C$20 per share in cash and assume its C$116.6 million of unsecured notes that mature in 2016.

“The positive CreditWatch placement reflects our view of the potential uplift for RONA creditors from the possible acquisition of the company by the higher-rated Lowe’s,” said Standard & Poor’s credit analyst Alessio Di Francesco.

So, assuming the common shareholders vote in favour of the deal, holders of RON.PR.A will wind up in one of two positions:

  • Owning a perfectly normal investment-grade preferred share trading somewhere around $17-$19, or
  • Getting $20 cash.

I’d rather take the cash and deploy it into something else! However, a formal recommendation will have to await receipt of the management information circular.

At today’s closing bid of 19.95, RON.PR.A yields 4.22% to perpetuity.

REI.PR.A To Be Redeemed

February 3rd, 2016

RioCan Real Estate Investment Trust has announced:

that it will exercise its right to redeem all of its 5 million outstanding Cumulative Rate Reset Preferred Trust Units, Series A (the “Series A Units”) on March 31, 2016 at the cash redemption price of $25.00 per Series A Unit, for total redemption proceeds of $125 million.

The regular quarterly distribution will be paid in the usual manner on March 31, 2016 to unitholders of record on March 31, 2016.

From and after March 31, 2016, the Series A Units will cease to be entitled to distributions and the only remaining rights of holders of such units will be to receive payment of the cash redemption price.

Beneficial holders who are not directly the registered holder of Series A Units should contact the financial institution, broker or other intermediary through which they hold these units to confirm how they will receive their redemption proceeds. Instructions with respect to receipt of the redemption amount will be set out in the redemption notice to be mailed to the registered holder of the Series A Units shortly. Inquiries should be directed to our Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825 (or in Toronto 416-682-3860).

REI.PR.A is a FixedReset, 5.25%+262, which commenced trading 2011-1-26 after being announced 2011-1-17.

This redemption is really, really weird. A spread over Canadas of +262bp is not really considered all that much nowadays, not for a junk-rated company when investment-grade issuers are paying close to +500 for new money. I will also point out the following from their 15Q3 Report:

As at September 30, 2015, the weighted average contractual interest rate of RioCan’s debt portfolio is 3.87% (4.12% as at December 31, 2014), a decrease of 27 basis points from the weighted average contractual rate of 4.14% as at September 30, 2014.

So extending this issue would have continued to decrease their average funding cost and at the same time would be permanent capital. Against that, the estimated reset rate of 3.20% is probably a little more than they’re paying at the moment, there is – by definition – recourse to the company, and the rate will be reset in five years just like a regular mortgage. Referring to the 15Q3 Report again for the word “recourse”, we find:

As at September 30, 2015, the Trust’s mortgages payable and drawn lines of credit, was $4.7 billion ($4.6 billion as at December 31, 2014). The vast majority of the Trust’s Canadian mortgage indebtedness provides recourse to the assets of the Trust, as opposed to only having recourse to the specific property charged. RioCan follows this policy as it generally results in lower interest costs than would otherwise be obtained. In the United States, mortgage debt is generally non-recourse financing, with no U.S. secured debt having recourse to the assets of the Canadian operations of the Trust.

We also look back to their 11Q1 Report to see what they had to say about their issue of preferred units:

RioCan was the first Canadian real estate investment trust to issue preferred units, indicative of the Trust moving closer to its objective of becoming “best in class” from a capital markets perspective. The ability to issue preferred units allows RioCan greater flexibility in accessing capital markets and developing a desired capital structure.

RioCan is relatively unscathed by the Sears withdrawal:

Still, RioCan Real Estate Investment Trust, which was Target’s largest landlord, has so far been unscathed by Sears’s latest move to exit more stores. While Sears is leaving a home store in a RioCan-owned mall in British Columbia, the retailer has a deal to sublet the space to Leon’s Furniture Ltd., said Edward Sonshine, CEO of RioCan, which has five other Sears home stores and two of its full-line stores.

Even so, RioCan is already looking for an alternative tenant for one of its other Sears home stores because its lease expires in about a year and “we assume they won’t be renewing,” he said.

However, they recently sold their US portfolio:

RioCan Real Estate Investment Trust is ending its six-year foray into the U.S. with a deal to sell its 49 shopping centers in the country to Blackstone Group LP for $1.9 billion.

The sale to the Blackstone Real Estate Partners VIII fund will provide capital for RioCan’s recently announced acquisition of 23 properties from Kimco Realty Corp. and to cut debt, Canada’s largest retail landlord said in a statement Friday. The U.S. shopping centers are located in the Northeast and Texas.

RioCan entered the U.S. market following the financial crisis, purchasing grocery-anchored retail sites at a discount. In July, when the company announced its strategic review of the properties, Sonshine said a weakening Canadian dollar made it costly to expand in the U.S. and RioCan was looking to get more value from the assets.

The total price RioCan paid for the 49 retail sites was C$1.7 billion. The sale at C$2.7 billion, 59 percent more, will provide an internal rate of return of about 16 percent, according to the statement. The Canadian dollar has dropped about 25 percent in the past six years to about 71 cents per U.S. dollar, giving RioCan a sizable currency gain on its investment. The sale is expected to be completed on April 30.

So, I can’t really figure this one out. The best I can come up with is the idea that they don’t really see many new investment opportunities in Canada at the moment and assume that those that do come up can be financed with good old Canadian non-recourse, cut-rate mortgages.

But the price action on the day for the issue was pretty interesting:

REIPRA_160202
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You don’t see intra-day changes of 50%+ very often!

REI.PR.C was also up on the day, +12.8% to close at 21.15, presumably on speculation that the same thing will happen to it when its Exchange Date comes on 2017-6-30. It resets at +318, so it’s easy to follow the reasoning!

BNS.PR.F Listed: Minimal Trading

February 3rd, 2016

BNS.PR.F is a FloatingReset, Bills+134bp, resulting from the 32% conversion from BNS.PR.Z, which has reset at 2.063%. The issue will be tracked by HIMIPref™ and has been assigned to the FloatingReset subindex. The two issues constitute a Strong Pair.

The issue traded 200 shares today in a range of 18.20-51 and closed at 17.72-20, 1×1.

Vital statistics are:

BNS.PR.F FloatingReset YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.72
Bid-YTW : 8.03 %

February 2, 2016

February 3rd, 2016

There’s an interesting use of the psychology of dissent from Bridgewater hedge fund:

Along with modeling openness to criticism, [Bridgewater's founder Ray] Dalio has fought groupthink by refusing to make decisions based on hierarchy. Rather than conducting a vote where the majority rules, or deferring to people with the most seniority or status, he strives to create an idea meritocracy where all perspectives are heard and the best argument wins.

To do that, most leaders assign a devil’s advocate. The hope is to get someone to challenge the majority’s opinion. But according to [Berkeley psychologist Charlan] Nemeth’s research and Bridgewater’s example, we’re doing it wrong.

When people are designated to dissent, they’re just playing a role. This causes two problems: They don’t argue forcefully or consistently enough for the minority viewpoint, and group members are less likely to take them seriously.

“Dissenting for the sake of dissenting is not useful. It is also not useful if it is ‘pretend dissent’ — for example, if role-played,” Nemeth explains. “It is not useful if motivated by considerations other than searching for the truth or the best solutions. But when it is authentic, it stimulates thought; it clarifies and it emboldens.”

The secret to success is sincerity, the old saying goes: Once you can fake that, you’ve got it made. In fact, it’s not easy to fake sincerity. For devil’s advocates to be maximally effective, they need to really believe in the position they’re representing — and the group needs to believe that they believe it, too.

Bond yields plummeted today:

The U.S. 10-year note yield fell one basis point as of 10:54 a.m. in Tokyo, after tumbling 10 basis points Tuesday, according to Bloomberg Bond Trader data. The price of the 2.25 percent security due in November 2025 rose 1/8, or $1.25 per $1,000 face value, to 103 23/32. The last time the yield approached the record low was in January 2015 when it dropped to 1.64 percent.

Japan’s five-year yield declined to a record low of negative 0.12 percent.

Crude oil declined to a 12-year low in January, and the MSCI All Country World Index of shares has fallen more than 7 percent this year. The odds of the Fed following its December rate increase with another in 2016 are less than 50 percent, futures contracts indicate.

Gluskin Sheff + Associates Inc.’s chief economist David Rosenberg has an interesting take on depressed markets:

Those who claim that “break-even” price levels on Middle East oil production are in single digits are only looking at covering direct production costs and are ignoring the fiscal break-even levels. As per the International Monetary Fund, the fiscal break-even oil price for Saudi Arabia is nearly $96 a barrel (hence the government seeing a 20-per-cent deficit-to-GDP ratio); $68 a barrel for the United Arab Emirates (deficit of 4 per cent of GDP); and $58 a barrel for Qatar (budget gap of 1.5 per cent of GDP).

According to estimates I have seen, as of the end of 2015, 56 per cent of the assets that sovereign wealth funds had amassed came from the oil and gas related projects and up to 10 per cent of the total money invested was in global markets.

What has happened is that many governments, especially in the Gulf region (as well as Africa and Asia), have been compelled to draw down these reserves to cover their gaping fiscal deficits.

I am seeing figures that reveal that the Saudi Arabian Monetary Agency (the kingdom’s investment arm) has withdrawn something in the order of $70-billion from external managers in just the past six months to meet its social spending requirements.

The Fed’s new stress test will doubtless cause some excited comment:

In its annual stress test for 2016, the Fed said it will assess the resilience of big banks to a number of possible situations, including one where the rate on the three-month U.S. Treasury bill stays below zero for a prolonged period.

“The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities,” the central bank said in announcing the stress tests last week.

In that particular simulation, the unemployment rate doubles to 10 percent, the same level it reached in the aftermath of the last financial crisis.

Three-month bill rates have slipped slightly below zero several times in recent years, including in September after the Fed delayed rate liftoff amid global financial market turmoil, touching a low of minus 0.05 percent on Oct. 2.

But in the stress test, banks would have to handle three-month bill rates entering negative territory in the second quarter of 2016, and then falling to negative 0.5 percent and holding there through the first quarter of 2019.

And just so you don’t think I’ve forgotten about them, here’s some drone news:

Dutch police are working with a company called Guard From Above that claims to be “the first company in the world to use birds of prey to intercept hostile drones.”

COO and company co-founder Ben de Keijzer said that two of the most impressive characteristics of birds of prey are their speed and their power, both of which come in pretty handy when you’re knocking somebody’s Christmas toy – or a hostile attacker’s weapon – out the sky.

They are “the masters of the air,” he said, which would sound like marketing fluff speak if the video didn’t in fact show birds snapping up UAVs like so many plump chickens.

It’s an interesting idea – and the video embedded in the source is impressive – but surely it’s just a matter of time before an anti-drone drone is developed. I foresee the day when the Bad Guys send in fleets of bombers … the authorities deploy fleets of fighters to attack them … the Bad Guys deploy fighters to protect the bombers … it will be the Battle of Britain all over again!

And it was January all over again in the Canadian preferred share market, with PerpetualDiscounts off 5bp, FixedResets losing 67bp and DeemedRetractibles down 11bp. The Performance Highlights table shows a lot of churn. Volume was very low.

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

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

Here’s TRP:

impVol_TRP_160202
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.05 to be $0.96 rich, while TRP.PR.C, resetting 2021-1-30 at +154, is $0.76 cheap at its bid price of 11.10.

impVol_MFC_160202
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Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 17.78 to be 1.13 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 17.75 to be 1.15 cheap.

impVol_BAM_160202
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.41 to be $1.75 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 17.46 and appears to be $0.99 rich.

impVol_FTS_160202
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FTS.PR.K, with a spread of +205bp, and bid at 16.16, looks $0.36 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 15.75 and is $0.45 cheap.

pairs_FR_160202
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.06%, with two outliers below -2.00% and one above 0.00%. There are three junk outliers above 0.00%.

pairs_FF_160202
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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 5.29 % 6.43 % 18,792 16.16 1 0.0782 % 1,474.7
FixedFloater 7.66 % 6.69 % 28,958 15.57 1 -1.5873 % 2,595.0
Floater 4.69 % 4.90 % 75,814 15.66 4 -0.7632 % 1,635.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.0069 % 2,700.8
SplitShare 4.89 % 6.30 % 81,252 2.71 6 0.0069 % 3,160.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0069 % 2,465.9
Perpetual-Premium 5.86 % 5.86 % 82,558 14.00 6 0.1403 % 2,517.6
Perpetual-Discount 5.80 % 5.84 % 99,234 14.11 33 -0.0487 % 2,487.0
FixedReset 5.49 % 4.97 % 224,497 14.50 84 -0.6746 % 1,836.6
Deemed-Retractible 5.27 % 5.67 % 130,702 6.95 34 -0.1110 % 2,564.1
FloatingReset 3.13 % 4.82 % 56,797 5.56 15 -0.1057 % 1,990.5
Performance Highlights
Issue Index Change Notes
FTS.PR.H FixedReset -4.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 12.60
Evaluated at bid price : 12.60
Bid-YTW : 4.47 %
SLF.PR.H FixedReset -3.62 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.10
Bid-YTW : 10.70 %
IAG.PR.G FixedReset -3.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.25
Bid-YTW : 8.04 %
MFC.PR.K FixedReset -3.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.03
Bid-YTW : 9.31 %
CM.PR.P FixedReset -2.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 16.70
Evaluated at bid price : 16.70
Bid-YTW : 4.68 %
FTS.PR.I FloatingReset -2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 10.20
Evaluated at bid price : 10.20
Bid-YTW : 4.72 %
IFC.PR.A FixedReset -2.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.14
Bid-YTW : 10.59 %
BAM.PR.K Floater -2.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 9.75
Evaluated at bid price : 9.75
Bid-YTW : 4.90 %
HSE.PR.A FixedReset -2.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 8.50
Evaluated at bid price : 8.50
Bid-YTW : 7.21 %
BNS.PR.B FloatingReset -2.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.03
Bid-YTW : 5.21 %
CM.PR.Q FixedReset -2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 18.60
Evaluated at bid price : 18.60
Bid-YTW : 4.74 %
FTS.PR.F Perpetual-Discount -2.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 21.37
Evaluated at bid price : 21.64
Bid-YTW : 5.75 %
SLF.PR.G FixedReset -2.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.75
Bid-YTW : 10.97 %
FTS.PR.M FixedReset -2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 4.78 %
PWF.PR.P FixedReset -2.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 12.00
Evaluated at bid price : 12.00
Bid-YTW : 4.80 %
TRP.PR.G FixedReset -2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 18.26
Evaluated at bid price : 18.26
Bid-YTW : 5.13 %
FTS.PR.J Perpetual-Discount -2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 20.89
Evaluated at bid price : 20.89
Bid-YTW : 5.79 %
RY.PR.P Perpetual-Discount -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 23.49
Evaluated at bid price : 23.81
Bid-YTW : 5.51 %
TRP.PR.A FixedReset -1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 14.10
Evaluated at bid price : 14.10
Bid-YTW : 4.93 %
BAM.PR.B Floater -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 9.73
Evaluated at bid price : 9.73
Bid-YTW : 4.91 %
BAM.PR.G FixedFloater -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 25.00
Evaluated at bid price : 12.40
Bid-YTW : 6.69 %
RY.PR.M FixedReset -1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 18.11
Evaluated at bid price : 18.11
Bid-YTW : 4.67 %
BAM.PF.F FixedReset -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 5.03 %
BAM.PF.A FixedReset -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 18.36
Evaluated at bid price : 18.36
Bid-YTW : 5.13 %
TD.PR.S FixedReset -1.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.62
Bid-YTW : 3.81 %
RY.PR.I FixedReset -1.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.64
Bid-YTW : 4.10 %
PWF.PR.S Perpetual-Discount -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 5.84 %
BAM.PR.Z FixedReset -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 5.30 %
BNS.PR.A FloatingReset -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.44
Bid-YTW : 4.38 %
MFC.PR.J FixedReset -1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.56
Bid-YTW : 8.38 %
RY.PR.K FloatingReset -1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.47
Bid-YTW : 5.06 %
W.PR.K FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 22.82
Evaluated at bid price : 24.10
Bid-YTW : 5.46 %
RY.PR.Z FixedReset -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 17.34
Evaluated at bid price : 17.34
Bid-YTW : 4.45 %
NA.PR.W FixedReset -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 16.30
Evaluated at bid price : 16.30
Bid-YTW : 4.84 %
IFC.PR.C FixedReset -1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.40
Bid-YTW : 9.21 %
RY.PR.H FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 17.32
Evaluated at bid price : 17.32
Bid-YTW : 4.51 %
IAG.PR.A Deemed-Retractible -1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.65
Bid-YTW : 7.39 %
MFC.PR.C Deemed-Retractible -1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.61
Bid-YTW : 7.32 %
CM.PR.O FixedReset -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 17.41
Evaluated at bid price : 17.41
Bid-YTW : 4.59 %
BAM.PR.R FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 13.41
Evaluated at bid price : 13.41
Bid-YTW : 5.71 %
MFC.PR.I FixedReset -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.25
Bid-YTW : 8.14 %
TD.PF.B FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 4.54 %
RY.PR.F Deemed-Retractible 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 5.13 %
TRP.PR.H FloatingReset 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 9.30
Evaluated at bid price : 9.30
Bid-YTW : 4.70 %
BMO.PR.M FixedReset 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 3.48 %
TRP.PR.D FixedReset 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 4.92 %
PWF.PR.L Perpetual-Discount 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 21.75
Evaluated at bid price : 22.00
Bid-YTW : 5.83 %
GWO.PR.P Deemed-Retractible 1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 6.03 %
PWF.PR.A Floater 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 11.08
Evaluated at bid price : 11.08
Bid-YTW : 4.26 %
TD.PF.E FixedReset 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 19.73
Evaluated at bid price : 19.73
Bid-YTW : 4.57 %
HSE.PR.G FixedReset 1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 15.60
Evaluated at bid price : 15.60
Bid-YTW : 7.03 %
HSE.PR.E FixedReset 1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 15.42
Evaluated at bid price : 15.42
Bid-YTW : 7.12 %
HSE.PR.C FixedReset 2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 6.99 %
PWF.PR.Q FloatingReset 4.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 11.75
Evaluated at bid price : 11.75
Bid-YTW : 4.39 %
TRP.PR.I FloatingReset 11.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 10.00
Evaluated at bid price : 10.00
Bid-YTW : 5.01 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.Q FixedReset 110,167 RBC crossed 50,000 at 25.60. Scotia crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 23.31
Evaluated at bid price : 25.55
Bid-YTW : 5.13 %
BAM.PR.C Floater 99,915 Scotia crossed 92,000 at 9.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 9.75
Evaluated at bid price : 9.75
Bid-YTW : 4.90 %
NA.PR.X FixedReset 70,505 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 23.13
Evaluated at bid price : 24.95
Bid-YTW : 5.55 %
BNS.PR.E FixedReset 68,429 RBC crossed 25,000 at 25.72. Desjardins crossed 18,500 at 25.59.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 23.34
Evaluated at bid price : 25.62
Bid-YTW : 5.10 %
SLF.PR.D Deemed-Retractible 43,666 Scotia crossed 40,000 at 20.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.35
Bid-YTW : 7.42 %
TD.PF.G FixedReset 38,311 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.61
Bid-YTW : 5.06 %
There were 15 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.K FixedReset Quote: 16.03 – 16.59
Spot Rate : 0.5600
Average : 0.3572

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.03
Bid-YTW : 9.31 %

BNS.PR.B FloatingReset Quote: 21.03 – 21.80
Spot Rate : 0.7700
Average : 0.5949

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.03
Bid-YTW : 5.21 %

BNS.PR.A FloatingReset Quote: 22.44 – 22.99
Spot Rate : 0.5500
Average : 0.3835

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.44
Bid-YTW : 4.38 %

RY.PR.P Perpetual-Discount Quote: 23.81 – 24.40
Spot Rate : 0.5900
Average : 0.4313

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-02
Maturity Price : 23.49
Evaluated at bid price : 23.81
Bid-YTW : 5.51 %

BMO.PR.R FloatingReset Quote: 21.75 – 22.50
Spot Rate : 0.7500
Average : 0.5946

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 4.53 %

SLF.PR.H FixedReset Quote: 14.10 – 14.75
Spot Rate : 0.6500
Average : 0.4946

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.10
Bid-YTW : 10.70 %