The revolving door revolved again:
The former chief of staff to federal finance minister Jim Flaherty has left Ottawa to take on a new role at the Bank of Nova Scotia.
Kevin McCarthy will become a director in Scotiabank’s Canadian banking unit starting in November.
It always pays to remind the political hacks of what you can do for them – you never know when you’re going to have to kowtow. Three cheers for the Crony Capitalist Snivel Servants’ Superannuation Scheme!
Who wants to buy some bonds?
Verizon Communications Inc. (VZ) is poised to pay investors a premium on an unprecedented $49 billion of bonds, a cost Apple Inc. (AAPL) escaped during its then-record $17 billion offering four months ago.
The telephone company may sell $11 billion of 10-year bonds today at a yield that’s 225 basis points more than Treasuries, according to a person with knowledge of the issue. The yield is 47 basis points more than investors demand to own bonds with similar maturities and BBB ratings, according to data compiled by Bloomberg.
…
Along with $4 billion of floating-rate debt due in 2016 and 2018, Verizon also plans to sell $4.25 billion of three-year, fixed-rate notes that may yield 165 basis points more than Treasuries; $4.75 billion of five-year debt with a spread of 190 basis points; $4 billion of seven-year securities that pay 215; $6 billion of 20-year bonds yielding 250 more than benchmarks; and a $15 billion, 30-year portion with a spread of 265, the person said.
DBRS considers that the GMP – Richardson – Macquarie dance has no effects on the creditworthiness of GMP.PR.B:
Richardson-GMP, which is roughly one third owned by GMP, announced last night an agreement to purchase MPW for $132 million. Richardson-GMP will be issuing $60 million of preferred shares, half of which will be purchased by GMP, and $30 million of common shares of which GMP will purchase roughly $10 million. GMP will use existing cash resources to fund its net $40 million incremental investment in Richardson-GMP.
While Richardson-GMP has not been contributing much to GMP’s bottom line, it has been modestly profitable recently. With MPW adding nearly $13 billion in assets under administration to Richardson-GMP’s existing $15 billion, the incremental scale will improve Richardson-GMP’s profitability. DBRS views the private wealth business as a diversifying influence in GMP’s profitability profile, but this acquisition does not overcome the fundamental capital market weakness challenges which are the primary reason for the existing Negative trend.
IGM, proud issuer of IGM.PR.B, was confirmed at Pfd-2(high) by DBRS:
With the help of its unique exclusive consultant network, IG has returned to positive net sales during the first half of 2013, after experiencing net redemptions of $149 million during the same period in 2012. The IG distribution model – which relies on close communication between consultants and customers – yields a lower redemption rate (9.8% twelve-month trailing redemption rate on long-term mutual funds at June 30, 2013) than that of the industry (16.5% industry average, provided by IGM).
By contrast, the Mackenzie business model, which caters to third-party distribution, is more vulnerable to underlying fund performance and investor sentiment, which is reflected in the higher redemption rate of 16.2% for the twelve months trailing Q2 2013. Overall assets under management (AUM) is up, helped by favourable equity market performance and modest net sales so far in 2013. When investor sentiment towards equities stabilizes, Mackenzie funds should fare well versus its peers.
…
In addition to strong profitability, the Company’s credit rating also benefits from strong cash flows (which easily cover the upfront distribution costs of mutual fund sales), strong liquidity and a conservative financial profile. Debt plus preferred shares-to-EBITDA was 1.1 times (x) in 2012 and for H1 2013, which is conservative. The Company’s ratio of debt plus preferred shares-to-total capitalization remains appropriate for the rating, at just over 25%, down noticeably from 2010.
The Canadian preferred share market came back a little today, with PerpetualDiscounts winning 23bp, FixedResets gaining 5bp and DeemedRetractibles up 12bp. Volatility continues to be high, with another lengthy Performance Highlights table heavily skewed towards winners, with BAM PerpetualDiscount issues prominent. Volume was slightly above average.
PerpetualDiscounts now yield 5.78%, equivalent to 7.51% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 5.0%, so the pre-tax interest-equivalent spread (in this context, the Seniority Spread) is now about 250bp, a sharp decline from the 270bp reported September 4, as PerpetualDiscounts are, overall, unchanged while long corporates got thumped for 20bp.
| 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 | -0.0755 % | 2,584.7 |
| FixedFloater | 4.28 % | 3.59 % | 32,925 | 18.14 | 1 | 0.6346 % | 3,880.4 |
| Floater | 2.61 % | 2.87 % | 67,765 | 20.07 | 5 | -0.0755 % | 2,790.8 |
| OpRet | 4.65 % | 2.98 % | 67,273 | 0.54 | 3 | 0.1383 % | 2,627.6 |
| SplitShare | 4.76 % | 4.79 % | 52,829 | 4.09 | 6 | 0.0092 % | 2,945.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1383 % | 2,402.7 |
| Perpetual-Premium | 5.94 % | 6.06 % | 116,508 | 13.75 | 2 | 0.0000 % | 2,232.5 |
| Perpetual-Discount | 5.67 % | 5.78 % | 129,740 | 14.16 | 36 | 0.2303 % | 2,295.0 |
| FixedReset | 4.95 % | 3.90 % | 242,985 | 3.89 | 85 | 0.0475 % | 2,446.6 |
| Deemed-Retractible | 5.20 % | 4.92 % | 190,210 | 6.93 | 43 | 0.1248 % | 2,343.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PF.B | FixedReset | -2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 22.41 Evaluated at bid price : 23.30 Bid-YTW : 4.86 % |
| MFC.PR.K | FixedReset | -1.32 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.93 Bid-YTW : 4.57 % |
| TRI.PR.B | Floater | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 22.50 Evaluated at bid price : 22.76 Bid-YTW : 2.30 % |
| TRP.PR.D | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 23.00 Evaluated at bid price : 24.65 Bid-YTW : 4.35 % |
| BAM.PR.Z | FixedReset | 1.06 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.48 Bid-YTW : 4.27 % |
| HSB.PR.C | Deemed-Retractible | 1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.82 % |
| MFC.PR.F | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.61 Bid-YTW : 4.33 % |
| PWF.PR.P | FixedReset | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 23.03 Evaluated at bid price : 23.90 Bid-YTW : 3.94 % |
| BAM.PR.N | Perpetual-Discount | 1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 5.95 % |
| CIU.PR.A | Perpetual-Discount | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 5.69 % |
| BAM.PF.C | Perpetual-Discount | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 20.29 Evaluated at bid price : 20.29 Bid-YTW : 6.00 % |
| GWO.PR.N | FixedReset | 1.62 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.91 Bid-YTW : 4.89 % |
| HSB.PR.D | Deemed-Retractible | 1.72 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.66 Bid-YTW : 5.20 % |
| BAM.PF.D | Perpetual-Discount | 1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 5.84 % |
| TRP.PR.C | FixedReset | 2.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 22.56 Evaluated at bid price : 23.06 Bid-YTW : 4.06 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.T | FixedReset | 138,030 | RBC bought 57,800 from Scotia at 25.65, crossed 30,000 at 25.69, sold 10,000 to Nesbitt at 25.69, then crossed blocks of 10,000 and 19,000 at 25.69. Busy day! YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 2.79 % |
| TD.PR.T | FixedReset | 97,200 | Desjardins crossed 20,000 at 25.09; RBC crossed blocks of 50,000 and 20,700 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.03 Bid-YTW : 2.52 % |
| RY.PR.P | FixedReset | 65,250 | RBC bought 13,200 from CIBC at 13,200; Desjardins crossed 40,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.44 Bid-YTW : 3.01 % |
| ENB.PR.Y | FixedReset | 59,544 | RBC crossed 43,000 at 23.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 22.53 Evaluated at bid price : 23.57 Bid-YTW : 4.56 % |
| CU.PR.G | Perpetual-Discount | 38,452 | RBC crossed 30,000 at 20.44. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-09-11 Maturity Price : 20.46 Evaluated at bid price : 20.46 Bid-YTW : 5.55 % |
| BMO.PR.R | FixedReset | 31,150 | TD crossed 20,000 at 25.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 2.54 % |
| There were 37 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: 23.93 – 24.50 Spot Rate : 0.5700 Average : 0.3967 YTW SCENARIO |
| BAM.PR.G | FixedFloater | Quote: 22.20 – 22.92 Spot Rate : 0.7200 Average : 0.5572 YTW SCENARIO |
| CIU.PR.B | FixedReset | Quote: 25.57 – 25.94 Spot Rate : 0.3700 Average : 0.2405 YTW SCENARIO |
| CU.PR.G | Perpetual-Discount | Quote: 20.46 – 20.79 Spot Rate : 0.3300 Average : 0.2278 YTW SCENARIO |
| IAG.PR.A | Deemed-Retractible | Quote: 21.51 – 21.88 Spot Rate : 0.3700 Average : 0.2717 YTW SCENARIO |
| VNR.PR.A | FixedReset | Quote: 25.25 – 25.54 Spot Rate : 0.2900 Average : 0.1950 YTW SCENARIO |
Hi all,
Gold is down $40/oz today, and this has dragged down pretty much all markets, and all market categories, including the long bond and many pref issues.
Want to know what prompted the gold sell-off today? One of James’ favourite things! Dumbass, sloppy, inaccurate statistical reporting. Here’s the “official” explanation:
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“Gold prices hit their daily low shortly after weekly U.S. jobless claims was released, showing a surprising 31,000 decline in the latest reporting week. That was the lowest number since 2006. However, a Labor Department official shortly thereafter said that number is flawed due to state reporting errors—two states did not report their claims and they were not included in the overall report. Nonetheless, the selling pressure in gold and silver did increase following the weekly jobless numbers.”
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Welcome to the sophistication of investing in the modern era! (and guess what? . . . this is just a teenie, tiny buying opportunity for gold today, because guess what happens tomorrow when this little reporting error hits the “street” . . . now you’re getting it)
[…] PerpetualDiscounts now yield 5.65%, equivalent to 7.34% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 5.0%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 235bp, a sharp decline from the 250bp reported September 11. […]