July 28, 2016

July 28th, 2016
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.5715 % 1,693.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5715 % 3,094.4
Floater 4.85 % 4.54 % 87,855 16.18 4 0.5715 % 1,783.3
OpRet 4.83 % -2.31 % 44,331 0.09 1 0.0394 % 2,854.9
SplitShare 5.12 % 5.56 % 100,707 4.55 5 -0.0322 % 3,365.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0322 % 2,625.9
Perpetual-Premium 5.45 % -3.86 % 81,191 0.09 12 0.5544 % 2,701.9
Perpetual-Discount 5.17 % 5.11 % 104,583 14.80 26 0.4468 % 2,869.2
FixedReset 4.98 % 4.28 % 147,833 7.11 88 0.0875 % 2,040.9
Deemed-Retractible 4.98 % 4.88 % 118,698 0.42 33 0.4089 % 2,791.3
FloatingReset 2.94 % 4.49 % 31,224 5.14 11 0.6993 % 2,153.3
Performance Highlights
Issue Index Change Notes
TRP.PR.C FixedReset -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 12.70
Evaluated at bid price : 12.70
Bid-YTW : 4.37 %
TRP.PR.B FixedReset -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 12.11
Evaluated at bid price : 12.11
Bid-YTW : 4.12 %
SLF.PR.G FixedReset -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.24
Bid-YTW : 9.81 %
NA.PR.Q FixedReset -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 4.04 %
GWO.PR.H Deemed-Retractible 1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 5.44 %
GWO.PR.I Deemed-Retractible 1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.13
Bid-YTW : 5.70 %
PWF.PR.K Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 23.71
Evaluated at bid price : 23.98
Bid-YTW : 5.17 %
GWO.PR.S Deemed-Retractible 1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : 4.90 %
BMO.PR.R FloatingReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.15
Bid-YTW : 4.43 %
TRP.PR.G FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 19.92
Evaluated at bid price : 19.92
Bid-YTW : 4.66 %
IFC.PR.A FixedReset 1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.39
Bid-YTW : 9.60 %
BAM.PR.B Floater 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 10.51
Evaluated at bid price : 10.51
Bid-YTW : 4.54 %
MFC.PR.F FixedReset 1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.50
Bid-YTW : 9.51 %
TD.PR.Z FloatingReset 1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 4.38 %
TD.PR.T FloatingReset 1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.24
Bid-YTW : 4.30 %
PWF.PR.P FixedReset 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 13.55
Evaluated at bid price : 13.55
Bid-YTW : 4.19 %
BAM.PR.S FloatingReset 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 4.89 %
PWF.PR.T FixedReset 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 20.49
Evaluated at bid price : 20.49
Bid-YTW : 3.88 %
SLF.PR.J FloatingReset 1.61 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.60
Bid-YTW : 11.13 %
POW.PR.G Perpetual-Premium 1.69 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-04-15
Maturity Price : 26.00
Evaluated at bid price : 26.52
Bid-YTW : 2.80 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.R FixedReset 75,245 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.74
Bid-YTW : 3.91 %
TD.PF.D FixedReset 67,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 20.56
Evaluated at bid price : 20.56
Bid-YTW : 4.24 %
BMO.PR.Q FixedReset 46,900 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.69
Bid-YTW : 6.49 %
BIP.PR.A FixedReset 39,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 19.58
Evaluated at bid price : 19.58
Bid-YTW : 5.53 %
RY.PR.M FixedReset 25,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 4.15 %
SLF.PR.J FloatingReset 24,070 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.60
Bid-YTW : 11.13 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
POW.PR.G Perpetual-Premium Quote: 26.52 – 26.99
Spot Rate : 0.4700
Average : 0.3058

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-04-15
Maturity Price : 26.00
Evaluated at bid price : 26.52
Bid-YTW : 2.80 %

BAM.PR.S FloatingReset Quote: 14.50 – 15.10
Spot Rate : 0.6000
Average : 0.4897

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 4.89 %

IAG.PR.A Deemed-Retractible Quote: 23.07 – 23.29
Spot Rate : 0.2200
Average : 0.1434

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.07
Bid-YTW : 5.85 %

TRP.PR.C FixedReset Quote: 12.70 – 13.06
Spot Rate : 0.3600
Average : 0.2878

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-28
Maturity Price : 12.70
Evaluated at bid price : 12.70
Bid-YTW : 4.37 %

NA.PR.Q FixedReset Quote: 24.01 – 24.25
Spot Rate : 0.2400
Average : 0.1691

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 4.04 %

HSB.PR.D Deemed-Retractible Quote: 25.00 – 25.17
Spot Rate : 0.1700
Average : 0.1106

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 5.11 %

FTS.PR.E To Be Redeemed

July 28th, 2016

Fortis Inc. has announced:

Fortis will redeem all of the issued and outstanding First Preference Shares, Series “E” of the Corporation in accordance with their terms on or about 1 September 2016. The redemption price will be $25.3063 in cash for each share, being equal to $25.00 plus $0.3063, representing the amount of the accrued and unpaid dividends per share for the period from and including 1 June 2016 to but not including 1 September 2016. A notice of redemption providing additional details will be mailed to the registered holders of First Preference Shares, Series E on or about 29 July 2016.

FTS.PR.E commenced trading on 2004-7-16 as a 4.9% 12-year Operating Retractible. It is currently redeemable at par and becomes retractible for common shares September 1, 2016 – but that option has now been superseded by the redemption. FTS.PR.E has been tracked by HIMIPref™ since issued and is currently the sole member of the Operating Retractible subindex.

DBRS Maintains Negative Trend on Bank Debt; Preferreds Stable

July 28th, 2016

DBRS has announced that it:

has today maintained the Negative trend on the senior and subordinated debt ratings of the Royal Bank of Canada, The Toronto-Dominion Bank, the Bank of Nova Scotia, the Bank of Montreal, the Canadian Imperial Bank of Commerce, the National Bank of Canada and their subsidiaries. Additionally, the Negative trend has been maintained on related short-term ratings that might be affected by a long-term rating change under DBRS methodologies. The ratings were previously revised to Negative from Stable on May 20, 2015, to reflect the declining likelihood of systemic support. For details on the rating actions on specific banks, please see their separate press releases.

The maintenance of the Negative trend reflects DBRS’s view that ongoing changes in Canadian legislation and regulation still indicate that the potential for timely systemic support for these six banks that DBRS considers systemically important institutions is declining, leading to a likely change in DBRS’s support assessment to SA3 from SA2 for these banks. Currently, the six banks’ final ratings benefit from an uplift of one notch above their intrinsic assessments because of the SA2 support assessment.

The legislation enacting the bank recapitalization, or bail-in, regime is moving forward, but DBRS does not yet have sufficient clarity on the details of the implementation to remove the benefit of systemic support from the affected ratings. Most recently, the Budget Implementation Act (Bill C-15) passed on June 8, 2016, included proposed amendments to existing legislation to enable the appropriate statutory powers for the bail-in regime. According to the Department of Finance Canada, the proposed amendments include permitting the Office of the Superintendent of Financial Institutions to designate the domestic systemically important banks (D-SIBs) to which the bail-in regime would apply, providing new powers for the Canada Deposit Insurance Corporation (CDIC) to carry out a bail-in by converting the eligible debt of a D-SIB that was determined to be non-viable into common shares, enabling CDIC to resolve a failed bank by taking temporary control of a non-viable bank to carry out a bail-in conversion, updating the process for investors to seek redress and revising the amount of minimum regulatory capital and debt subject to the new bail-in conversion power for D-SIBs (Department of Finance Canada, Bill C-15 – Budget Implementation Act 2016, No. 1 – Part 4: Various Measures, http://www.fin.gc.ca/pub/C15/04-eng.asp (May 10, 2016)). This will require amendments to be made to the Bank Act, the CDIC Act, the Financial Administration Act, the Payment Clearing and Settlement Act and the Winding-up and Restructuring Act.

This was reiterated in statements for each of the Big Six Banks … with some commentary regarding the highly topical housing costs issue:

BNS:

DBRS remains concerned over the significant appreciation seen in housing prices, particularly in the greater Vancouver and Toronto areas. Nonetheless, Scotiabank’s Canadian residential mortgage portfolio appears conservatively underwritten or is insured. Indeed, the Bank purchased bulk insurance on an additional portion of this portfolio during Q2 2016. Following this additional purchase, 62% of Scotiabank’s Canadian residential mortgage portfolio is now insured, while the loan-to-value of the uninsured portion is very conservative at 51%. Alberta, the province most exposed to the energy sector, represents 16% of the total residential mortgage portfolio and is primarily insured.

RY:

DBRS remains concerned about the significant appreciation seen in housing prices, particularly in the greater Vancouver and Toronto areas. Nonetheless, RBC’s Canadian residential mortgage portfolio appears conservatively underwritten or is insured. Indeed, 46% of RBC’s Canadian residential mortgage portfolio is now insured, while the loan-to-value ratio of the uninsured portion is conservative at 56%. Alberta, the most exposed province to the energy sector, represents 16% of the total residential mortgage portfolio and is primarily insured.

CM:

The Bank’s overall asset quality remains strong with impaired loans and provisions remaining at very low levels. CIBC’s overall credit quality benefits from the performance of its large and low-risk residential mortgage portfolio, which is 61% insured. However, DBRS remains concerned about the significant appreciation in housing prices, particularly in and around Toronto and Vancouver. Meanwhile, CIBC’s outstanding loan balances to the troubled resource sector are very manageable, with oil and gas comprising approximately 2% of loans and mining comprising less than 1%.

BMO:

DBRS remains concerned over the significant appreciation seen in housing prices, particularly in and around Vancouver and Toronto. Nonetheless, BMO’s residential mortgage portfolio appears conservatively underwritten or is insured. Specifically, 59% of BMO’s Canadian residential mortgage portfolio is insured, while the loan-to-value of the uninsured portion is a very conservative 57%. Meanwhile, loss rates for the past four quarters have been less than one basis point. Alberta, the province most exposed to the energy sector, represents 16% of the total residential mortgage portfolio and is primarily insured. The resource sector also remains challenged, but overall exposures to oil & gas and mining total less than 3% of the total loan portfolio.

NA:

National’s currently strong earnings power benefits from a very good revenue mix, modestly improving expense levels and generally low credit costs. However, National reported two issues in 2016 that have negatively affected earnings, including the $164 million pre-tax write-down of its investment in Maple Financial Group (MFG) and a $250 million pre-tax sectoral provision related to its oil & gas portfolio. Please see the DBRS commentaries on these two events dated May 5, 2016, and February 8, 2016, for more information.

TD:

TD’s risk profile remains strong, as evidenced by its still quite favourable credit quality indicators, though DBRS views current levels as likely unsustainable, given how low they are compared with historical norms. Similar to peers, the Bank’s oil & gas portfolio was pressured in recent periods but remains highly manageable, representing less than 1% of total loans. Moreover, DBRS anticipates seeing some signs of deterioration in other parts of the loan portfolio in the near to intermediate term, given the above-average debt levels of Canadian consumers, rapidly rising housing prices and expected credit quality trend reversion. Importantly, DBRS remains comforted by TD’s track record and disciplined approach to risk management.

July 27, 2016

July 27th, 2016

Japan is considering issuing 50-year bonds:

Japan’s finance ministry is considering issuing 50-year bonds but says it will first concentrate on deepening and broadening the nascent market for existing 30-year bonds, according to a senior ministry official.

Chikahisa Sumi, director of the market division at the Ministry of Finance, told the Financial Times that the MoF might issue a 50-year bond. His department is in charge of Japan’s large debt issuance.

The UK and France have issued 50-year bonds this year, becoming the first European governments to do so for many years. Super-long bonds are viewed as a useful instrument in ageing societies where they can help pension funds match liabilities and assets over a longer period.

Such desperate measures are necessary if they wish to have any bonds at all with positive yields!

Japanese government bond prices rose to lifetime highs on Wednesday [July 6] as negative yields spread to 20-year bonds, with the Brexit vote exacerbating a flight-to-safety bid that has crunched incomes of banks, pension funds and other Japanese investors.

The 20-year yield fell to as low as minus 0.005 percent , having declined more than 0.9 percentage point since the Bank of Japan made a historic shift to negative rates in late January, in addition to its massive bond buying programme.

With 40-year government bonds, the longest tenure on offer, also yielding just above zero percent, Japan is in line to becoming the only country after Switzerland to have all government bonds yield at negative levels.

On Tuesday [July 5], the 50-year Swiss government bond yield fell below zero percent.

The big news of the day was the July FOMC release:

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook have diminished. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

Bloomberg comments:

All but two of 94 analysts surveyed by Bloomberg News expected the Fed to leave interest rates unchanged at the meeting. Federal funds futures ahead of Wednesday’s statement suggested that traders see close to a 50-50 chance of a rate hike at or before the FOMC’s final meeting this year, in December.

Yellen will speak at the Kansas City Fed’s Jackson Hole, Wyoming, symposium on Aug. 26. That will provide her with an opportunity to discuss the committee’s sense of the economy’s progress.

“The market is going to pay a lot of attention to that speech,” [partner at Cornerstone Macro LLC Roberto] Perli said.

The bond market seems to have read it as dovish:

Treasuries rose, the dollar fell versus the euro and U.S. stocks ended mixed as the Federal Reserve reiterated its intention to tighten gradually even as the economy shows signs of improvement. Gold rallied.

The yield on 30-year Treasury notes fell six basis points, while two-year yields slipped three basis points. The greenback erased gains against a basket of 10 of its major peers after officials repeated that “economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate.” The S&P 500 Index slipped as crude’s plunge weighed on energy producers. Apple Inc.’s best rally since April 2014 led the Nasdaq 100 Index higher. Gold futures jumped.

I’m certainly not going to attempt to estimate the timing for a vigorous series of Fed moves – or even whether the next hike will be the first of a long series or just a one-off – but I will bet a nickel that when the Fed does start hiking in earnest, it’s going to make the first half of 1994 look like a hiccup.

Is past performance an indicator of future performance for those who take risky bets? Today we learned of one guy who couldn’t resist trying to snowball his windfall:

In 2015, [Ronnie] Music [Jr.] won $3,000,000 in a Georgia scratch-off lottery game. As part of the case, investigating agents seized over $1 million worth of methamphetamine, a large cache of firearms, thousands of rounds of ammunition, multiple vehicles, and over $600,000 in cash.

United States Attorney Ed Tarver stated, “Defendant Music decided to test his luck by sinking millions of dollars of lottery winnings into the purchase and sale of crystal meth. As a result of his unsound investment strategy, Music now faces decades in a federal prison.”

PerpetualDiscounts now yield 5.12%, equivalent to 6.66% at the standard equivalency factor of 1.3x. Long corporates now yield about 3.75%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 290bp, a significant narrowing from the 305bp reported July 13.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.5748 % 1,684.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5748 % 3,076.8
Floater 4.88 % 4.59 % 86,991 16.13 4 0.5748 % 1,773.2
OpRet 4.83 % -1.84 % 46,052 0.10 1 -0.0788 % 2,853.8
SplitShare 5.11 % 5.43 % 101,291 4.56 5 0.0241 % 3,366.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0241 % 2,626.8
Perpetual-Premium 5.48 % -15.21 % 79,914 0.09 12 0.0591 % 2,687.0
Perpetual-Discount 5.19 % 5.12 % 104,665 14.79 26 0.2617 % 2,856.4
FixedReset 4.99 % 4.27 % 148,899 7.12 88 0.1629 % 2,039.2
Deemed-Retractible 5.00 % 4.48 % 121,696 0.42 33 0.0604 % 2,779.9
FloatingReset 2.96 % 4.62 % 31,668 5.14 11 0.0046 % 2,138.3
Performance Highlights
Issue Index Change Notes
VNR.PR.A FixedReset -3.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 17.62
Evaluated at bid price : 17.62
Bid-YTW : 5.03 %
MFC.PR.F FixedReset -1.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.32
Bid-YTW : 9.68 %
BAM.PR.S FloatingReset -1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 14.30
Evaluated at bid price : 14.30
Bid-YTW : 4.96 %
CM.PR.Q FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 20.58
Evaluated at bid price : 20.58
Bid-YTW : 4.24 %
NA.PR.W FixedReset 1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 18.09
Evaluated at bid price : 18.09
Bid-YTW : 4.27 %
BNS.PR.D FloatingReset 1.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.92
Bid-YTW : 6.83 %
NA.PR.S FixedReset 1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 18.78
Evaluated at bid price : 18.78
Bid-YTW : 4.27 %
TRP.PR.B FixedReset 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 12.25
Evaluated at bid price : 12.25
Bid-YTW : 4.07 %
TRP.PR.H FloatingReset 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 10.45
Evaluated at bid price : 10.45
Bid-YTW : 4.32 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.D FixedReset 100,105 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 18.05
Evaluated at bid price : 18.05
Bid-YTW : 4.41 %
TD.PF.G FixedReset 52,125 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 3.84 %
TD.PF.D FixedReset 51,375 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 4.24 %
TRP.PR.G FixedReset 46,325 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 19.69
Evaluated at bid price : 19.69
Bid-YTW : 4.71 %
BAM.PF.D Perpetual-Discount 42,530 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 22.52
Evaluated at bid price : 22.81
Bid-YTW : 5.42 %
RY.PR.W Perpetual-Discount 35,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-26
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 0.33 %
There were 30 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.M Deemed-Retractible Quote: 26.21 – 27.00
Spot Rate : 0.7900
Average : 0.5466

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-26
Maturity Price : 25.75
Evaluated at bid price : 26.21
Bid-YTW : -10.61 %

W.PR.K FixedReset Quote: 25.82 – 26.32
Spot Rate : 0.5000
Average : 0.3557

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.82
Bid-YTW : 4.50 %

CU.PR.I FixedReset Quote: 26.36 – 26.67
Spot Rate : 0.3100
Average : 0.1946

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 26.36
Bid-YTW : 3.33 %

BMO.PR.R FloatingReset Quote: 21.90 – 22.25
Spot Rate : 0.3500
Average : 0.2554

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.90
Bid-YTW : 4.65 %

GWO.PR.F Deemed-Retractible Quote: 25.76 – 26.10
Spot Rate : 0.3400
Average : 0.2501

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-26
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : -23.77 %

VNR.PR.A FixedReset Quote: 17.62 – 18.07
Spot Rate : 0.4500
Average : 0.3650

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-27
Maturity Price : 17.62
Evaluated at bid price : 17.62
Bid-YTW : 5.03 %

BMO.PR.Q To Reset At 1.805%

July 26th, 2016

Bank of Montreal has announced (although not yet on their website):

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 25 (the “Preferred Shares Series 25″) and Non-Cumulative Floating Rate Class B Preferred Shares, Series 26 (the “Preferred Shares Series 26″).

With respect to any Preferred Shares Series 25 that remain outstanding after August 25, 2016, commencing as of such date, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on August 25, 2016, and ending on August 24, 2021, will be 1.805 per cent, being equal to the sum of the five-year Government of Canada bond yield as at July 26, 2016, plus 1.15 per cent, as determined in accordance with the terms of the Preferred Shares Series 25.

With respect to any Preferred Shares Series 26 that may be issued on August 25, 2016, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of the actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on August 25, 2016, and ending on November 24, 2016, will be 1.622 per cent, being equal to the sum of the three-month Government of Canada Treasury bill yield as at July 26, 2016, plus 1.15 per cent, as determined in accordance with the terms of the Preferred Shares Series 26.

Beneficial owners of Preferred Shares Series 25 who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to ensure that they meet the deadline to exercise such right, which is 5:00 p.m. (EDT) on August 10, 2016.

Conversion enquiries should be directed to BMO’s Registrar and Transfer Agent, Computershare Trust Company of Canada, at 1-800-340-5021.

I previously reported that this issue will be extended.

BMO.PR.Q is a FixedReset, 3.90%+115, that commenced trading 2011-3-11 after being announced 2011-3-2.

The new rate therefore represents a 54% cut in dividends. Ouch!

This issue has been tracked by HIMIPref™ and is a member of the FixedResets index. A hardMaturity at par dated 2022-1-31 has been added to the call schedule indicated by the prospectus to reflect an anticipated call due to the issues lack of a NVCC clause and OSFI’s refusal to grandfather such issues – but note that this Deemed Maturity is a matter of analysis, not a formal commitment of the issuer!

As noted, the deadline to notify the company regarding conversion is 5:00 p.m. (EDT) on August 10, 2016; brokers will have internal deadlines a day or two in advance.

I will post a recommendation regarding whether or not to convert closer to the deadline.

July 26, 2016

July 26th, 2016

Low returns are finally catching up to American pension plans:

Twenty-year annualized returns for public pensions in the U.S. are poised to decline to 7.47% once fiscal 2016 results are released in coming weeks, according to an estimate from Wilshire Trust Universe Comparison Service, which tracks pension investment returns.

That would be the lowest-ever annual mark recorded by Wilshire, which began tracking the statistic 16 years ago. In 2001, near the height of the dot-com boom, pensions’ 20-year median return was 12.3%, according to Wilshire.

Weak annual gains for the California Public Employees’ Retirement System and California State Teachers’ Retirement System dropped their 20-year returns below 7.5% investment targets, to 7.03% and 7.1%, respectively. The two funds, known as Calpers and Calstrs, are the largest public pensions in the U.S. by assets and oversee a combined $484 billion for 2.6 million public workers and retirees.

Ms. Frost’s comments came days before Calpers said that its fiscal 2016 return was 0.6%, the slimmest gain since the 2008-2009 crisis. Calpers has a funding gap of roughly $112 billion, according to the most recent available data. As recently as last year, Calpers Chief Investment Officer Ted Eliopoulos said in an annual letter that the plan was “reassured by our 20-year investment return of 7.76%,” which exceeded the internal target of 7.5%.

Now, “it is a struggle to have a positive return,” Mr. Eliopoulos said in a media call last week.

Good old CalPERS, always good for a laugh.

Meanwhile, a vitriolic attack on Trump by Mary Anastasia O’Grady titled Wharton Grad Trump Fails Economics has some useful information and links:

In the Foreign Affairs magazine essay recently titled “The Truth About Trade,” economist at Dartmouth Douglas Irwin observed that while the technology has “enabled wide productivity and efficiency improvements,” has “also make a lot of blue-collar jobs obsolete. “Mr. Irwin cites a study by the Center for Business and Economic Research at Ball State University, which “found that productivity growth accounted for more than 85 percent of the jobs lost in manufacturing between 2000 and 2010, a period when employment in the sector fell by 5.6 million. “this 85% compares, according to the study, with 13% of job loss associated with trading during the same period. In other words, to bring most jobs back, Mr. Trump should prohibit mechanization. Would Mr. Pence broke the news to farmers Indiana?

In a paper published last summer in the Journal of Economic Perspectives, an economist at MIT David Autor unload automation reason has hit the middle class hard. He observed that to write code for a task, the programmer should be able to “say explicitly ‘rule’ or procedures” required to do so. But the task is understood by man “secretly” is not easy to automate. Mr. Autor call these obstacles “Polanyi Paradox” after the Hungarian-born chemist and economist who observed that “we know more than we know.”

This is the “higher education” and “low-education” work that requires “interpersonal interaction, flexibility, adaptability and problem-solving” -the most difficult to automate records Mr. Autor. Traditional job-secondary education has become the easiest to replace with technology.

The Polanyi Paradox, by the way, was formulated by Michael Polanyi, who was the father of UofT’s John Polanyi. After a lengthy internet search (I hope you’re grateful!), I have found the CBER Ball State study, by Michael J. Hicks and Srikant Devaraj, titled The Myth and the Reality of Manufacturing in America:

Manufacturing has continued to grow, and the sector itself remains a large, important, and growing sector of the U.S. economy. Employment in manufacturing has stagnated for some time, primarily due to growth in productivity of manufacturing production processes.

Three factors have contributed to changes in manufacturing employment in recent years: Productivity, trade, and domestic demand. Overwhelmingly, the largest impact is productivity. Almost 88 percent of job losses in manufacturing in recent years can be attributable to productivity growth, and the long-term changes to manufacturing employment are mostly linked to the productivity of American factories. Growing demand for manufacturing goods in the U.S. has offset some of those job losses, but the effect is modest, accounting for a 1.2 percent increase in jobs beyond what we would expect if consumer demand for domestically manufactured goods was flat.

Exports lead to higher levels of domestic production and employment, while imports reduce domestic production and employment. The difference between these, or net exports, has been negative since 1980, and has contributed to roughly 13.4 percent of job losses in the U.S. in the last decade. Our estimate is almost exactly that reported by the more respected research centers in the nation.

Manufacturing production remains robust. Productivity growth is the largest contributor to job displacement over the past several decades. This leads to a domestic policy consideration.

The paper by David Autor is titled Why Are There Still So Many Jobs? The History and Future of Workplace Automation:

Major newspaper stories offer fresh examples daily of technologies that substitute for human labor in an expanding—although still circumscribed—set of tasks. The offsetting effects of complementarities and rising demand in other areas are, however, far harder to identify as they occur. My own prediction is that employment polarization will not continue indefinitely (as argued in Autor 2013). While some of the tasks in many current middle-skill jobs are susceptible to automation, many middle-skill jobs will continue to demand a mixture of tasks from across the skill spectrum. For example, medical support occupations—radiology technicians, phlebotomists, nurse technicians, and others—are a significant and rapidly growing category of relatively well-remunerated, middle-skill employment. Most of these occupations require mastery of “middle-skill” mathematics, life sciences, and analytical reasoning. They typically require at least two years of postsecondary vocational training, and in some cases a four-year college degree or more. This broad description also fits numerous skilled trade and repair occupations, including plumbers, builders, electricians, heating/ventilating/air-conditioning installers, and automotive technicians. It also fits a number of modern clerical occupations that provide coordination and decision-making functions, rather than simply typing and filing, like a number of jobs in marketing. There are also cases where technology is enabling workers with less esoteric technical mastery to perform additional tasks: for example, the nurse practitioner occupation that increasingly performs diagnosing and prescribing tasks in lieu of physicians.

On another note, there is perennial weeping about affordable housing in the big cities, with “affordable” being a euphemism for “subsidized slum”. Bloomberg’s Patrick Clark has written a piece titled Why It’s So Hard to Build Affordable Housing: It’s Not Affordable:

“If we want to prioritize closing the gap for low-income households, we’re going to need more funding from public subsidy,” said Erika Poethig, director of urban policy initiatives at the Urban Institute, which published an online simulator Tuesday for the purpose of illustrating the challenges to building new affordable housing. Our Denver developer above is fictional, but he’s an illustration of what that simulator churns out: No matter how you slice it, creating the affordable housing needed today probably requires government help.

Playing with the simulator, you quickly learn that there are only a few levers that truly affect a developer’s ability to finance a project. Taking a smaller fee or negotiating a more favorable loan can help at the margins; so can making the project so appealing to residents that no one ever moves out. To really reduce costs or raise revenue, though, there are just these options: Spend less on land, materials, and labor, or bring in more money by raising rents or finding new public financing. But land, materials, and labor can only be cut so much (construction costs are effectively fixed by labor and commodities markets), and raising rents removes the “affordable” from affordable housing.

That leaves subsidies, the biggest of which is the low-income housing tax credit, which Congress funded to the tune of $7 billion last year. Even so, that program is more useful to developers building for higher wage-earners, said Linda McMahon, chief executive of The Real Estate Council, a trade group for Dallas-area real estate companies. “Below 50 percent of area median income, you’re talking about people who can only afford $500 or so in rent, and you really need another layer of subsidy to pay your [commercial] mortgage,” she said.

DBRS has announced publication of a paper titled DBRS: Basel Capital Requirements – What’s Changing?:

The Basel Committee on Banking Supervision (BCBS) has been active in recent months, finalising the minimum capital requirements for market risk (published in January 2016), while also publishing proposed revisions to the standardised approach (December 2015) and the internal model approach for credit (March 2016) and the standardised approach for operational risk (March 2016). These actions are part of the Committee’s efforts to reform global regulatory standards, and reduce the variability of risk-weighted assets (RWAs) across banks and jurisdictions. While DBRS expects that these efforts will improve comparability across the global banking peer group, further transparency would also be valuable in better understanding the risk profile of banks. In particular, DBRS would view positively the standardized disclosure of RWA calculations and components. DBRS also notes that the full implementation of these new requirements is likely to result in a significant amount of operational work for banks, and is expected to lead to a sizeable increase in RWAs.

With full implementation expected to be required from 2019 (the market risk requirements are to be fully implemented from January 2019 and DBRS expects the time period for implementation to be similar for both credit and operational risk requirements once finalised) this will likely add to the already heavy expense burden associated with regulatory compliance, and result in further pressure for those banks that are currently challenged by limited internal capital generation.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.5055 % 1,674.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5055 % 3,059.2
Floater 4.90 % 4.69 % 88,107 16.05 4 0.5055 % 1,763.1
OpRet 4.83 % -2.58 % 46,681 0.10 1 0.1975 % 2,856.0
SplitShare 5.12 % 5.31 % 99,842 2.30 5 -0.0482 % 3,365.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0482 % 2,626.1
Perpetual-Premium 5.48 % 0.81 % 81,619 0.27 12 0.0746 % 2,685.4
Perpetual-Discount 5.20 % 5.18 % 101,603 15.07 26 0.4483 % 2,848.9
FixedReset 4.99 % 4.34 % 150,392 7.12 88 0.0893 % 2,035.8
Deemed-Retractible 5.00 % 4.17 % 123,530 0.09 33 0.2234 % 2,778.3
FloatingReset 2.96 % 4.53 % 32,176 5.13 11 -0.3188 % 2,138.2
Performance Highlights
Issue Index Change Notes
BNS.PR.D FloatingReset -3.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.60
Bid-YTW : 7.16 %
TRP.PR.H FloatingReset -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 10.25
Evaluated at bid price : 10.25
Bid-YTW : 4.40 %
IFC.PR.C FixedReset -1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.86
Bid-YTW : 8.09 %
BMO.PR.Q FixedReset -1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.00
Bid-YTW : 6.29 %
BMO.PR.Y FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 20.52
Evaluated at bid price : 20.52
Bid-YTW : 4.28 %
PWF.PR.I Perpetual-Premium -1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : -30.73 %
GWO.PR.N FixedReset -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.40
Bid-YTW : 9.52 %
POW.PR.G Perpetual-Premium 1.08 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-04-15
Maturity Price : 25.25
Evaluated at bid price : 26.17
Bid-YTW : 4.55 %
MFC.PR.I FixedReset 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.65
Bid-YTW : 6.42 %
SLF.PR.J FloatingReset 1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.50
Bid-YTW : 11.23 %
MFC.PR.L FixedReset 1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.53
Bid-YTW : 7.49 %
MFC.PR.K FixedReset 1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.08
Bid-YTW : 7.73 %
BAM.PR.S FloatingReset 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 4.89 %
TRP.PR.F FloatingReset 2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 13.71
Evaluated at bid price : 13.71
Bid-YTW : 4.47 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.J FixedReset 277,914 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 4.34 %
TRP.PR.D FixedReset 144,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 17.99
Evaluated at bid price : 17.99
Bid-YTW : 4.43 %
RY.PR.Q FixedReset 113,497 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 3.86 %
TRP.PR.B FixedReset 101,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 12.02
Evaluated at bid price : 12.02
Bid-YTW : 4.15 %
TRP.PR.A FixedReset 100,885 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 4.56 %
MFC.PR.O FixedReset 84,230 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 4.39 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.I Perpetual-Premium Quote: 25.80 – 26.15
Spot Rate : 0.3500
Average : 0.2213

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : -30.73 %

BNS.PR.A FloatingReset Quote: 23.01 – 23.45
Spot Rate : 0.4400
Average : 0.3340

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.01
Bid-YTW : 4.09 %

BNS.PR.D FloatingReset Quote: 18.60 – 18.96
Spot Rate : 0.3600
Average : 0.2554

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.60
Bid-YTW : 7.16 %

W.PR.K FixedReset Quote: 25.70 – 26.00
Spot Rate : 0.3000
Average : 0.1976

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 4.62 %

IFC.PR.C FixedReset Quote: 17.86 – 18.17
Spot Rate : 0.3100
Average : 0.2141

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.86
Bid-YTW : 8.09 %

CM.PR.Q FixedReset Quote: 20.35 – 20.74
Spot Rate : 0.3900
Average : 0.2985

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-26
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 4.29 %

July 25, 2016

July 25th, 2016
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.3624 % 1,666.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3624 % 3,043.9
Floater 4.93 % 4.72 % 88,989 16.01 4 0.3624 % 1,754.2
OpRet 4.84 % -0.58 % 43,220 0.10 1 0.0395 % 2,850.4
SplitShare 5.11 % 5.42 % 100,253 4.57 5 -0.0161 % 3,367.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0161 % 2,627.4
Perpetual-Premium 5.48 % -12.44 % 80,448 0.09 12 -0.1231 % 2,683.4
Perpetual-Discount 5.23 % 5.21 % 100,913 15.12 26 -0.0693 % 2,836.2
FixedReset 5.00 % 4.32 % 149,948 7.13 88 -0.0164 % 2,034.0
Deemed-Retractible 5.01 % 3.96 % 124,370 0.09 33 -0.1774 % 2,772.1
FloatingReset 2.95 % 4.47 % 32,391 5.13 11 -0.0147 % 2,145.1
Performance Highlights
Issue Index Change Notes
HSE.PR.A FixedReset -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 11.79
Evaluated at bid price : 11.79
Bid-YTW : 5.11 %
GWO.PR.M Deemed-Retractible -1.48 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-24
Maturity Price : 25.75
Evaluated at bid price : 26.01
Bid-YTW : -1.94 %
TRP.PR.G FixedReset -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 19.65
Evaluated at bid price : 19.65
Bid-YTW : 4.72 %
BAM.PF.H FixedReset -1.14 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 4.02 %
HSE.PR.E FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 19.63
Evaluated at bid price : 19.63
Bid-YTW : 5.52 %
MFC.PR.M FixedReset -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.88
Bid-YTW : 7.44 %
BNS.PR.E FixedReset -1.08 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 4.10 %
BIP.PR.B FixedReset -1.07 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.77 %
MFC.PR.L FixedReset -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.27
Bid-YTW : 7.70 %
MFC.PR.F FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.41
Bid-YTW : 9.59 %
BNS.PR.D FloatingReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.20
Bid-YTW : 6.53 %
VNR.PR.A FixedReset 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 4.85 %
CCS.PR.C Deemed-Retractible 1.34 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.12
Bid-YTW : 5.61 %
BMO.PR.Q FixedReset 1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 6.04 %
FTS.PR.H FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 14.15
Evaluated at bid price : 14.15
Bid-YTW : 3.90 %
BAM.PR.K Floater 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 10.25
Evaluated at bid price : 10.25
Bid-YTW : 4.65 %
TRP.PR.C FixedReset 1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 12.86
Evaluated at bid price : 12.86
Bid-YTW : 4.31 %
CU.PR.C FixedReset 2.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 17.76
Evaluated at bid price : 17.76
Bid-YTW : 4.42 %
GWO.PR.N FixedReset 2.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.55
Bid-YTW : 9.37 %
FTS.PR.G FixedReset 2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 4.09 %
TRP.PR.H FloatingReset 2.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 10.39
Evaluated at bid price : 10.39
Bid-YTW : 4.34 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.A FixedReset 94,134 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-15
Maturity Price : 25.00
Evaluated at bid price : 26.19
Bid-YTW : 4.51 %
TRP.PR.D FixedReset 59,673 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 4.42 %
HSB.PR.C Deemed-Retractible 50,800 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-24
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 2.04 %
BIP.PR.A FixedReset 43,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 19.65
Evaluated at bid price : 19.65
Bid-YTW : 5.50 %
MFC.PR.J FixedReset 38,250 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.44
Bid-YTW : 7.03 %
HSE.PR.G FixedReset 27,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 5.42 %
There were 13 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BNS.PR.E FixedReset Quote: 26.51 – 26.98
Spot Rate : 0.4700
Average : 0.2930

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 4.10 %

GWO.PR.M Deemed-Retractible Quote: 26.01 – 26.44
Spot Rate : 0.4300
Average : 0.2685

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-24
Maturity Price : 25.75
Evaluated at bid price : 26.01
Bid-YTW : -1.94 %

TRP.PR.J FixedReset Quote: 26.35 – 26.72
Spot Rate : 0.3700
Average : 0.2670

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.35
Bid-YTW : 4.47 %

IAG.PR.G FixedReset Quote: 19.35 – 19.65
Spot Rate : 0.3000
Average : 0.2150

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.35
Bid-YTW : 7.27 %

MFC.PR.F FixedReset Quote: 14.41 – 14.64
Spot Rate : 0.2300
Average : 0.1479

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.41
Bid-YTW : 9.59 %

POW.PR.D Perpetual-Discount Quote: 24.10 – 24.34
Spot Rate : 0.2400
Average : 0.1599

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-25
Maturity Price : 23.85
Evaluated at bid price : 24.10
Bid-YTW : 5.21 %

New Issue: BIP FixedReset 5.35%+464M535

July 25th, 2016

Brookfield Infrastructure has announced:

that it has agreed to issue 8,000,000 Cumulative Class A Preferred Limited Partnership Units, Series 5 (“Series 5 Preferred Units”) on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., CIBC Capital Markets, RBC Capital Markets, and Scotiabank. The Series 5 Preferred Units will be issued at a price of $25.00 per unit, for gross proceeds of $200,000,000. Holders of the Series 5 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution at a rate of 5.35% annually for the initial period ending September 30, 2021. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 4.64%, and (ii) 5.35%. The Series 5 Preferred Units are redeemable on or after September 30, 2021.

Holders of the Series 5 Preferred Units will have the right, at their option, to reclassify their Series 5 Preferred Units into Cumulative Class A Preferred Limited Partnership Units, Series 6 (“Series 6 Preferred Units”), subject to certain conditions, on September 30, 2021 and on September 30 every five years thereafter. Holders of Series 6 Preferred Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the 90-day Canadian Treasury Bill yield plus 4.64%.

Brookfield Infrastructure has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Series 5 Preferred Units which, if exercised, would increase the gross offering size to $250,000,000.

The Series 5 Preferred Units will be offered in all provinces and territories of Canada by way of a supplement to Brookfield Infrastructure’s existing short form base shelf prospectus.

Brookfield Infrastructure intends to use the net proceeds of the issue of the Series 5 Preferred Units for investment opportunities, working capital and other general corporate purposes. The offering of Series 5 Preferred Units is expected to close on or about August 2, 2016.

Note that this issue has an unusual tax status on its distributions: like BIP.PR.A and BIP.PR.B, the distributions will be comprised of a mixture of ordinary income and return of capital, in what are expected to be approximately equal proportions, but with no guarantees on just what the proportions will be, either for any particular year or in total!

It will be interesting to see how this issue trades relative to BIP.PR.B, which is a FixedReset, 5.50%+453M550 (Interest + ROC). Readers will note that BIP.PR.B has a lower Issue Reset Spread (453bp vs 464bp) than the new issue, but a higher Minimum Reset Rate (5.50% vs. 5.35%). BIP.PR.B closed today at 25.85-96, 2×5.

July 22, 2016

July 22nd, 2016

Jason Zweig of the Wall Street Journal has some good advice for fixed income investors in a piece titled Investors: Do the Hard Thing, Don’t Do the Easy Thing:

The reach for yield is becoming a reckless lunge.

While high-quality bonds still have their place, too many investors are buying high-risk bonds instead.

Since June 30, according to TrimTabs Investment Research, a firm in Sausalito, Calif., that tracks how money moves in and out of the financial markets, investors have poured $1.2 billion into exchange-traded funds specializing in bonds from emerging-market countries. So far in July, investors have pumped another $2.8 billion into high-yield ETFs holding so-called junk bonds issued by below-investment-grade companies.

Put simply, one out of every 14 dollars invested in those two fund categories arrived in the past three weeks.

The easy thing is to submit to your worst instincts and reach for riskier investments that pay higher income — for now.

What is hard is to be patient and ornery. As bonds yield less, save more. Remember that you can get higher yield only by buying longer-term or lower-quality bonds — which will also raise your risk. With interest payments so low, long-term bonds are particularly vulnerable to an unexpected rise in rates.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.3251 % 1,660.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.3251 % 3,032.9
Floater 4.95 % 4.72 % 89,848 16.01 4 -0.3251 % 1,747.9
OpRet 4.84 % -0.17 % 45,000 0.11 1 0.6362 % 2,849.3
SplitShare 5.11 % 5.41 % 98,639 2.31 5 0.1448 % 3,368.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1448 % 2,627.8
Perpetual-Premium 5.47 % 1.62 % 83,037 0.28 12 0.1614 % 2,686.7
Perpetual-Discount 5.22 % 5.14 % 101,921 15.07 26 0.1658 % 2,838.2
FixedReset 5.00 % 4.34 % 151,499 7.14 88 0.6438 % 2,034.4
Deemed-Retractible 5.00 % 3.17 % 125,421 0.09 33 0.1454 % 2,777.0
FloatingReset 2.90 % 4.40 % 31,964 5.15 11 0.4780 % 2,145.4
Performance Highlights
Issue Index Change Notes
SLF.PR.J FloatingReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.26
Bid-YTW : 11.42 %
BAM.PR.R FixedReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 4.67 %
CM.PR.P FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.72
Evaluated at bid price : 18.72
Bid-YTW : 4.10 %
RY.PR.M FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.97
Evaluated at bid price : 19.97
Bid-YTW : 4.18 %
TD.PF.D FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.39
Evaluated at bid price : 20.39
Bid-YTW : 4.27 %
RY.PR.Z FixedReset 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 3.96 %
BNS.PR.E FixedReset 1.09 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 3.83 %
RY.PR.H FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.84
Evaluated at bid price : 18.84
Bid-YTW : 4.06 %
SLF.PR.I FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.71
Bid-YTW : 7.58 %
RY.PR.R FixedReset 1.14 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.78
Bid-YTW : 3.87 %
BNS.PR.B FloatingReset 1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.18
Bid-YTW : 4.40 %
BAM.PF.A FixedReset 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.59
Evaluated at bid price : 19.59
Bid-YTW : 4.72 %
BAM.PF.F FixedReset 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.64 %
TRP.PR.C FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 12.67
Evaluated at bid price : 12.67
Bid-YTW : 4.37 %
BAM.PF.B FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.19
Evaluated at bid price : 18.19
Bid-YTW : 4.76 %
HSE.PR.A FixedReset 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 11.97
Evaluated at bid price : 11.97
Bid-YTW : 5.03 %
RY.PR.J FixedReset 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.37
Evaluated at bid price : 20.37
Bid-YTW : 4.21 %
BAM.PF.E FixedReset 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 4.54 %
BNS.PR.R FixedReset 1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.39
Bid-YTW : 3.63 %
MFC.PR.N FixedReset 1.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.96
Bid-YTW : 7.30 %
PWF.PR.T FixedReset 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 3.94 %
CU.PR.C FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 4.51 %
FTS.PR.H FixedReset 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 13.96
Evaluated at bid price : 13.96
Bid-YTW : 3.95 %
TRP.PR.A FixedReset 1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 15.05
Evaluated at bid price : 15.05
Bid-YTW : 4.54 %
BAM.PF.G FixedReset 1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.49
Evaluated at bid price : 20.49
Bid-YTW : 4.56 %
MFC.PR.M FixedReset 1.87 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.09
Bid-YTW : 7.27 %
TRP.PR.G FixedReset 2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.66 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.J FixedReset 199,600 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.56
Bid-YTW : 6.93 %
FTS.PR.K FixedReset 79,825 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.11
Evaluated at bid price : 18.11
Bid-YTW : 4.03 %
MFC.PR.F FixedReset 68,001 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.26
Bid-YTW : 9.72 %
NA.PR.A FixedReset 65,811 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-15
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 4.48 %
RY.PR.E Deemed-Retractible 44,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-21
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : -3.82 %
BNS.PR.Q FixedReset 40,065 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.93
Bid-YTW : 3.75 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.E FixedReset Quote: 18.50 – 18.92
Spot Rate : 0.4200
Average : 0.2868

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.36 %

TRP.PR.D FixedReset Quote: 17.93 – 18.24
Spot Rate : 0.3100
Average : 0.2080

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 17.93
Evaluated at bid price : 17.93
Bid-YTW : 4.44 %

RY.PR.W Perpetual-Discount Quote: 24.80 – 25.06
Spot Rate : 0.2600
Average : 0.1647

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 24.55
Evaluated at bid price : 24.80
Bid-YTW : 4.93 %

PWF.PR.T FixedReset Quote: 20.16 – 20.54
Spot Rate : 0.3800
Average : 0.2936

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 3.94 %

FTS.PR.H FixedReset Quote: 13.96 – 14.34
Spot Rate : 0.3800
Average : 0.2977

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 13.96
Evaluated at bid price : 13.96
Bid-YTW : 3.95 %

NA.PR.X FixedReset Quote: 26.50 – 26.69
Spot Rate : 0.1900
Average : 0.1214

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-15
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 4.15 %

July 21, 2016

July 21st, 2016

So now it’s official: it’s not what you know, it’s who you know:

Among currently employed workers, those who found their job through a referral from their network had an average weekly salary of $772.20, or roughly $40,000 per year. Those who did not find their job via a referral had an average weekly salary of $725.84, or nearly $38,000 per year. On average, salaries were 6 percent higher if workers found their job through their networks.

Further, their earnings are even more positively skewed. One way to interpret this is that network searchers have more “upside” risk: They can potentially draw a variety of wages, but there are more very high potential outcomes through the network, To quantify this, Kelley’s statistic is 0.6 for network-finders and 0.44 for others, meaning that 80 percent rather than 74 percent of the dispersion between 90th and 10th percentile is accounted for by the top half (from 90th percentile to 50th).

The distribution of wage offers should typically be different from the distribution of wages among employed workers. Not all offers are accepted, and workers at lower wages tend to make more over time through selective job mobility and pay increases on the job. Still, even among the distribution of wage offers, we see a premium associated with those who found jobs through their network. Workers who were searching while unemployed received offers through their networks that averaged 62 percent more than those found through direct contact. Workers searching while employed received network offers that were 12 percent higher, on average.

This is based on a working paper by Marcelo Arbex, Dennis O’Dea, and David Wiczer titled Network Search: Climbing the Job Ladder Faster:

We introduce an irregular network structure into a model of frictional, on-the-job search in which workers find jobs through their network connections or directly from firms. We show that jobs found through network search have wages that stochastically dominate those found through direct contact. Because we consider irregular networks, heterogeneity in the worker’s position within the network leads to heterogeneity in wage and employment dynamics: better connected workers climb the job ladder faster and do not fall off it as far. These workers also pass along higher quality referrals, which benefits their connections. Despite this rich heterogeneity from the network structure, the mean-field approach allows the problem of our workers to be formulated tractably and recursively. We then calibrate and study the wage and employment dynamics coming from our job ladder with network heterogeneity. This quantitative version of our mechanism is consistent with several features of empirical studies on networks and labor markets: jobs found through networks have higher wages and last longer.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.0542 % 1,665.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.0542 % 3,042.8
Floater 4.93 % 4.70 % 90,430 16.04 4 -0.0542 % 1,753.6
OpRet 4.87 % 5.56 % 46,750 0.11 1 -0.7106 % 2,831.3
SplitShare 5.12 % 5.50 % 98,394 4.57 5 0.0966 % 3,363.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0966 % 2,624.0
Perpetual-Premium 5.48 % 1.61 % 82,677 0.28 12 0.0746 % 2,682.4
Perpetual-Discount 5.22 % 5.16 % 100,386 15.10 26 0.1420 % 2,833.5
FixedReset 5.02 % 4.34 % 152,073 7.15 88 -0.0562 % 2,021.3
Deemed-Retractible 5.00 % 3.50 % 124,546 0.34 33 0.3321 % 2,773.0
FloatingReset 2.91 % 4.55 % 31,749 5.15 11 0.2124 % 2,135.2
Performance Highlights
Issue Index Change Notes
FTS.PR.K FixedReset -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 18.03
Evaluated at bid price : 18.03
Bid-YTW : 4.04 %
FTS.PR.M FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 19.70
Evaluated at bid price : 19.70
Bid-YTW : 4.25 %
TRP.PR.C FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 12.50
Evaluated at bid price : 12.50
Bid-YTW : 4.43 %
MFC.PR.L FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.29
Bid-YTW : 7.67 %
BAM.PR.S FloatingReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 14.31
Evaluated at bid price : 14.31
Bid-YTW : 4.88 %
SLF.PR.C Deemed-Retractible 1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.55
Bid-YTW : 6.01 %
POW.PR.D Perpetual-Discount 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 23.91
Evaluated at bid price : 24.15
Bid-YTW : 5.20 %
TRP.PR.B FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 11.75
Evaluated at bid price : 11.75
Bid-YTW : 4.24 %
GWO.PR.I Deemed-Retractible 1.73 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.89
Bid-YTW : 5.84 %
CCS.PR.C Deemed-Retractible 2.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.68 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.J FixedReset 79,196 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.41
Bid-YTW : 4.40 %
FTS.PR.J Perpetual-Discount 43,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 23.22
Evaluated at bid price : 23.65
Bid-YTW : 5.07 %
TRP.PR.D FixedReset 41,631 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 4.45 %
POW.PR.A Perpetual-Premium 32,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-20
Maturity Price : 25.00
Evaluated at bid price : 25.49
Bid-YTW : -16.23 %
TD.PF.B FixedReset 28,925 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 18.62
Evaluated at bid price : 18.62
Bid-YTW : 4.12 %
CCS.PR.C Deemed-Retractible 24,850 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.68 %
There were 15 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
VNR.PR.A FixedReset Quote: 18.05 – 19.40
Spot Rate : 1.3500
Average : 0.9878

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 18.05
Evaluated at bid price : 18.05
Bid-YTW : 4.90 %

BIP.PR.B FixedReset Quote: 26.10 – 26.56
Spot Rate : 0.4600
Average : 0.3275

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 4.50 %

BNS.PR.E FixedReset Quote: 26.51 – 26.75
Spot Rate : 0.2400
Average : 0.1528

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 4.09 %

BAM.PF.G FixedReset Quote: 20.12 – 20.38
Spot Rate : 0.2600
Average : 0.1788

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 20.12
Evaluated at bid price : 20.12
Bid-YTW : 4.65 %

FTS.PR.M FixedReset Quote: 19.70 – 19.98
Spot Rate : 0.2800
Average : 0.2034

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-21
Maturity Price : 19.70
Evaluated at bid price : 19.70
Bid-YTW : 4.25 %

FTS.PR.E OpRet Quote: 25.15 – 25.39
Spot Rate : 0.2400
Average : 0.1684

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2016-08-31
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 5.56 %