February 1, 2016

February 2nd, 2016

Nothing happened today. But January’s finished with – that’s enough good news for one day!

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 9bp, FixedResets up 41bp and DeemedRetractibles off 16bp. The Performance Highlights table is published (I’ve run out of things to say over the past year!). Volume was extremely low.

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

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

Here’s TRP:

impVol_TRP_160201
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.06 to be $0.87 rich, while TRP.PR.C, resetting 2021-1-30 at +154, is $0.80 cheap at its bid price of 11.15.

impVol_MFC_160201
Click for Big

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 17.79 to be 1.01 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 17.80 to be 1.18 cheap.

impVol_BAM_160201
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.56 to be $1.76 cheap. BAM.PF.F, resetting at +286bp on 2019-9-30 is bid at 19.09 and appears to be $0.87 rich.

impVol_FTS_160201
Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 18.26, looks $0.36 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 15.75 and is $0.68 cheap.

pairs_FR_160201
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.24%, with one outlier below -2.00%. There are two junk outliers above 0.00%.

pairs_FF_160201
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 5.30 % 6.43 % 18,358 16.16 1 -0.0781 % 1,473.5
FixedFloater 7.54 % 6.59 % 27,452 15.71 1 0.0794 % 2,636.9
Floater 4.65 % 4.77 % 70,336 15.89 4 -0.1229 % 1,647.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.1252 % 2,700.6
SplitShare 4.89 % 6.38 % 80,844 2.71 6 0.1252 % 3,160.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1252 % 2,465.7
Perpetual-Premium 5.87 % 5.87 % 81,661 14.00 6 0.0334 % 2,514.1
Perpetual-Discount 5.79 % 5.85 % 100,080 14.09 33 0.0877 % 2,488.2
FixedReset 5.49 % 4.93 % 233,222 14.35 83 0.4073 % 1,849.1
Deemed-Retractible 5.26 % 5.61 % 132,652 5.23 34 -0.1624 % 2,566.9
FloatingReset 3.12 % 4.69 % 57,344 5.57 15 -1.1631 % 1,992.6
Performance Highlights
Issue Index Change Notes
HSE.PR.A FixedReset -2.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 8.70
Evaluated at bid price : 8.70
Bid-YTW : 7.04 %
GWO.PR.O FloatingReset -2.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.01
Bid-YTW : 12.22 %
BAM.PR.R FixedReset -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 13.56
Evaluated at bid price : 13.56
Bid-YTW : 5.65 %
FTS.PR.I FloatingReset -1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 10.49
Evaluated at bid price : 10.49
Bid-YTW : 4.59 %
TD.PF.E FixedReset -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 19.39
Evaluated at bid price : 19.39
Bid-YTW : 4.65 %
FTS.PR.G FixedReset -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 15.75
Evaluated at bid price : 15.75
Bid-YTW : 4.79 %
TRP.PR.D FixedReset -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 16.30
Evaluated at bid price : 16.30
Bid-YTW : 4.99 %
TRP.PR.E FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 17.06
Evaluated at bid price : 17.06
Bid-YTW : 4.84 %
BAM.PF.E FixedReset -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 17.46
Evaluated at bid price : 17.46
Bid-YTW : 5.08 %
SLF.PR.E Deemed-Retractible -1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.60
Bid-YTW : 7.30 %
TRP.PR.F FloatingReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 11.57
Evaluated at bid price : 11.57
Bid-YTW : 5.18 %
HSE.PR.E FixedReset -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 15.12
Evaluated at bid price : 15.12
Bid-YTW : 7.26 %
BAM.PF.D Perpetual-Discount -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 19.53
Evaluated at bid price : 19.53
Bid-YTW : 6.36 %
SLF.PR.C Deemed-Retractible -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.58
Bid-YTW : 7.26 %
CIU.PR.C FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 10.68
Evaluated at bid price : 10.68
Bid-YTW : 4.93 %
MFC.PR.I FixedReset 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.45
Bid-YTW : 7.98 %
MFC.PR.M FixedReset 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.00
Bid-YTW : 8.00 %
BMO.PR.M FixedReset 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.77
Bid-YTW : 3.69 %
BNS.PR.Q FixedReset 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 3.93 %
MFC.PR.K FixedReset 1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.54
Bid-YTW : 8.86 %
BMO.PR.Z Perpetual-Discount 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 22.64
Evaluated at bid price : 23.00
Bid-YTW : 5.43 %
FTS.PR.M FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 18.26
Evaluated at bid price : 18.26
Bid-YTW : 4.68 %
BNS.PR.R FixedReset 1.48 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.95
Bid-YTW : 4.04 %
SLF.PR.I FixedReset 1.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.26
Bid-YTW : 8.61 %
BAM.PF.F FixedReset 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 19.09
Evaluated at bid price : 19.09
Bid-YTW : 4.95 %
RY.PR.K FloatingReset 1.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 4.82 %
BNS.PR.B FloatingReset 1.65 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.51
Bid-YTW : 4.79 %
TRP.PR.H FloatingReset 1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 9.20
Evaluated at bid price : 9.20
Bid-YTW : 4.75 %
BNS.PR.A FloatingReset 1.84 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.75
Bid-YTW : 4.13 %
IFC.PR.C FixedReset 1.84 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.60
Bid-YTW : 9.03 %
RY.PR.I FixedReset 1.91 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 3.81 %
GWO.PR.N FixedReset 1.91 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.25
Bid-YTW : 11.37 %
MFC.PR.L FixedReset 2.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.95
Bid-YTW : 8.64 %
IFC.PR.A FixedReset 2.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.51
Bid-YTW : 10.21 %
BIP.PR.B FixedReset 2.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 22.57
Evaluated at bid price : 23.55
Bid-YTW : 5.89 %
IAG.PR.A Deemed-Retractible 2.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.90
Bid-YTW : 7.21 %
BNS.PR.P FixedReset 2.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 3.62 %
FTS.PR.H FixedReset 2.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 13.20
Evaluated at bid price : 13.20
Bid-YTW : 4.26 %
PWF.PR.S Perpetual-Discount 2.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.76 %
MFC.PR.J FixedReset 3.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.80
Bid-YTW : 8.19 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.B FixedReset 118,733 Nesbitt crossed blocks of 40,000 and 70,000, both at 17.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 17.38
Evaluated at bid price : 17.38
Bid-YTW : 4.50 %
NA.PR.X FixedReset 98,953 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 23.13
Evaluated at bid price : 24.96
Bid-YTW : 5.55 %
RY.PR.Q FixedReset 65,296 RBC crossed 25,000 at 25.75.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 23.34
Evaluated at bid price : 25.66
Bid-YTW : 5.10 %
BNS.PR.E FixedReset 48,206 RBC crossed 25,000 at 25.70. Desjardins crossed 10,000 at 25.72.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 5.07 %
BMO.PR.W FixedReset 37,655 Scotia crossed 25,300 at 16.86.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 16.91
Evaluated at bid price : 16.91
Bid-YTW : 4.56 %
BMO.PR.T FixedReset 30,823 Desjardins crossed 20,000 at 17.16.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 4.56 %
There were 11 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.O FloatingReset Quote: 11.01 – 12.50
Spot Rate : 1.4900
Average : 1.1889

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.01
Bid-YTW : 12.22 %

RY.PR.K FloatingReset Quote: 21.75 – 22.58
Spot Rate : 0.8300
Average : 0.5717

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 4.82 %

GWO.PR.N FixedReset Quote: 12.25 – 12.90
Spot Rate : 0.6500
Average : 0.4547

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.25
Bid-YTW : 11.37 %

TD.PF.E FixedReset Quote: 19.39 – 19.99
Spot Rate : 0.6000
Average : 0.4256

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 19.39
Evaluated at bid price : 19.39
Bid-YTW : 4.65 %

FTS.PR.K FixedReset Quote: 16.15 – 16.59
Spot Rate : 0.4400
Average : 0.2784

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 16.15
Evaluated at bid price : 16.15
Bid-YTW : 4.64 %

MFC.PR.J FixedReset Quote: 17.80 – 18.31
Spot Rate : 0.5100
Average : 0.3650

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.80
Bid-YTW : 8.19 %

PWF.PR.Q Listed: No Trading, Wide Spread

February 2nd, 2016

PWF.PR.Q is a FloatingReset, Bills+160bp, resulting from the 20% conversion from PWF.PR.P, which has reset at 2.306%. 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 no shares today and closed at 11.25-17.50 (!), 50×50.

Vital statistics are:

PWF.PR.Q FloatingReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 11.25
Evaluated at bid price : 11.25
Bid-YTW : 4.58 %

TRP.PR.I Listed: No Trading, Wide Spread

February 2nd, 2016

TransCanada Corporation has announced:

that 1,285,739 of its 14,000,000 fixed rate Cumulative Redeemable First Preferred Shares, Series 5 (Series 5 Shares) were tendered for conversion today, on a one-for-one basis, into floating rate Cumulative Redeemable First Preferred Shares, Series 6 (Series 6 Shares). As a result of the conversion, TransCanada has 12,714,261 Series 5 Shares and 1,285,739 Series 6 Shares issued and outstanding. The Series 5 Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbol TRP.PR.C. The Series 6 Shares will begin trading on the TSX today under the symbol TRP.PR.I.

The Series 5 Shares will continue to pay on a quarterly basis, for the five-year period beginning on January 30, 2016, as and when declared by the Board of Directors of TransCanada, a fixed dividend at an annualized rate of 2.263 per cent.

The Series 6 Shares will pay a floating rate quarterly dividend for the five-year period beginning on February 1, 2016, as and when declared by the Board of Directors of TransCanada. The dividend rate for the Series 6 Shares for the first quarterly floating rate period commencing February 1, 2016 to, but excluding April 30, 2016, is 2.037 per cent and will be reset every quarter.

For more information on the terms of, and risks associated with an investment in, the Series 5 Shares and the Series 6 Shares, please see the Corporation’s prospectus supplement dated June 17, 2010 which can be found under the Corporation’s profile on SEDAR at www.sedar.com.

TRP.PR.I is a FloatingReset, Bills+154bp, resulting from the 9% conversion from TRP.PR.C, which has reset at 2.263%. 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 no shares today and closed at 9.00-17.50 (!), 5×50.

Vital statistics are:

TRP.PR.I FloatingReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-01
Maturity Price : 9.00
Evaluated at bid price : 9.00
Bid-YTW : 5.57 %

Implied Volatility of Straight Perpetuals

January 30th, 2016

While revising and expanding my essay regarding Implied Volatility for FixedResets I realized that it would be useful to refer to my prior effort regarding Implied Volatility for Straight Perpetuals, which was published in the January, 2010, edition of PrefLetter.

So, the essay Implied Volatility in Perpetual Preferreds (with its addendum, Portfolio Management Implications of Implied Volatility in Perpetual Preferreds) is now publicly available.

January 29, 2016

January 30th, 2016

Today’s big news was the Bank of Japan moving the deposit rate to negative:

Bank of Japan Governor Haruhiko Kuroda is matching European Central Bank President Mario Draghi in pursuing negative interest rates, and even pulling ahead when it comes to driving longer-term bond yields lower.

The yen plunged more than 1 percent against the euro after Kuroda unexpectedly cut the rate on excess reserves held by financial institutions at the BOJ to minus 0.1 percent. Two-year Japanese government bond yields sank to minus 0.085 percent, closing the gap on German negative yields, while 10-year JGB yields of 0.09 percent are lower than similar-dated bunds. Kuroda said the central bank will cut the rate further if needed and that he expects to drive yields lower across the bond curve.

Kuroda said Friday that negative rates don’t replace quantitative easing, they simply add to the BOJ’s options. The central bank pushed back its time frame for reaching stable 2 percent inflation to around the six months starting in April 2017, the third postponement in less than a year. The bank now sees inflation rising 0.8 percent in the 12 months starting this April, down from a previous forecast of 1.4 percent.

European and Japanese policy makers have faced extra pressure to boost stimulus after the yen and euro outperformed major peers for most of this month amid demand for havens as tumbling crude oil prices and concerns China’s economy is slowing spurred a more than $6 trillion rout in global stock markets.

This had an immediate effect on US equities:

U.S. stocks joined an advance in global equities, while bonds rallied as the Bank of Japan’s unexpected monetary stimulus boosted confidence that central banks remain vigilant of slowing economic growth. The yen tumbled, while oil gained.

The Standard & Poor’s 500 Index extended gains throughout the day to post the biggest advance since Sept. 8, while the Dow Jones Industrial Average rose almost 400 points as Microsoft Corp. rallied on earnings. Yields on 10-year Treasury notes retreated, while Japanese yields fell to records after the BOJ adopted a negative interest rate. The yen weakened versus the U.S. dollar by the most in more than a year. Oil climbed for a fourth day.

… and further doubt was cast on the prospects for Fed hikes:

In the bond market’s view, the chance of a Federal Reserve interest-rate increase this year is practically a toss-up after the Bank of Japan’s surprise policy move.

Yields on sovereign debt fell worldwide after BOJ Governor Haruhiko Kuroda introduced negative interest rates for some bank reserves to support the world’s third-biggest economy. Derivatives traders see less than a 60 percent shot that the Fed will raise its benchmark even once this year, let alone the four quarter-point increases that policy makers projected in December.

The move from Japan is another sign of slowing global economic growth, which triggered volatility across global markets to start the year. The European Central Bank has also signaled it may add stimulus. The divergence between U.S. monetary policy and the stances in Japan and the euro region risk strengthening the greenback by driving global investors to higher-yielding American assets. That could further damp inflation in the U.S., which hasn’t reached the Fed’s 2 percent target since 2012.

FedHikeOdds
Click for Big

And the rise in oil helped out Canada’s market as well:

Canadian stocks climbed a fourth day, trimming a monthly drop that sent shares into a bear market earlier this year, as crude prices rose and data showed the resource-rich nation’s economy expanded for the first time in three months.

The Standard & Poor’s/TSX Composite Index rose 1.8 percent to 12,822.13 at 4 p.m. in Toronto. The index has rallied 8.3 percent since hitting a 2 1/2-year low on Jan. 20. While the benchmark equity gauge posted its first negative January since 2010, the late rally among energy producers has boosted the S&P/TSX’s performance to the best among developed markets this year.

Which is a good thing, because real estate is the only Canadian bright spot:

Softness in the economy has been concentrated in goods-producing sectors, which shrunk by 2.6 percent year-to-date through November. Given the carnage in commodities, the slump in construction tied to non-residential investment and mining and oil and gas extraction comes as no surprise.

Meanwhile, the services sector continues to chug along with real output up 1 percent. This suggests that the commodity collapse has yet to infect the broader economy. The bad news? The majority of that growth–53 percent–can be attributed to a single sub-sector, and one that many economists fear was cyclically overextended even before this stretch of out-performance.

realEstateGrowthProportion
Click for Big

I seem to remember a similar figure being cited for the proportion of US growth attributable to housing in the 2000-2007 period, but can’t find a citation.

But we’ll close for today with a lecture on history modification:

Oxford University’s Oriel College has decided not to tear down its statue of the British colonialist Cecil Rhodes, because of the “overwhelming message” it received that the statue should stay. The true motive appears to have been money.

The college reportedly cut short its promised six-month “listening exercise,” after it became clear that even to continue a debate on the subject could cost as much as £100 million in donations from alumni. That would catch the attention of any educational institution.

Chris Patten, the last British governor of Hong Kong and the University’s Chancellor, had it right when he said earlier this month that students were free to speak out against whatever they wish — Rhodes, racism or the British Empire — but not to erase history. If that’s what they need, “they should think about being educated elsewhere”:

We have to listen to those who presume that they can re-write history within the confines of their own notion of what is politically, culturally and morally correct. We do have to listen, yes – but speaking for myself, I believe it would be intellectually pusillanimous to listen for too long without saying what we think, reaffirming the values that are at the heart of Karl Popper’s ‘Open Society’ and the generosity of spirit that animated the life of Nelson Mandela. One thing we should never tolerate is intolerance. We do not want to turn our university into a drab, bland, suburb of the soul where the diet is intellectual porridge.

It was a superb day for the Canadian preferred share market, with PerpetualDiscounts winning 108bp, FixedResets up 99bp and DeemedRetractibles gaining 75bp. The lengthy Performance Highlights table shows two HSE issues at the top – even as HSE was put on Trend-Negative by DBRS. Volume was average.

But however pleasant the day might have been, it’s a big relief to have finished the month! The TXPR Total Return index is down about 10.40% on the month while TXPL is down about 14.73%. This is stunning. As discussed on January 15, the worst month recorded by the BMO-CM “50″ since 1993 was November, 2008, at -10.7%, while October, 2008, will probably slip to third place with a mere 8.2% loss. It’s incredible.

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_160129
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.30 to be $1.07 rich, while TRP.PR.C, resetting 2021-1-30 at +154, is $0.88 cheap at its bid price of 11.15.

impVol_MFC_160129
Click for Big

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 17.65 to be 1.04 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 17.89 to be 0.92 cheap.

impVol_BAM_160129
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.84 to be $1.50 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 17.70 and appears to be $1.07 rich.

impVol_FTS_160129
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 16.29, looks $0.32 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.00 and is $0.37 cheap.

pairs_FR_160129
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.04%, with one outlier below -2.00% and one above 0.00%. There are two junk outliers above 0.00%.

pairs_FF_160129
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 5.29 % 6.43 % 19,060 16.17 1 0.0782 % 1,474.7
FixedFloater 7.55 % 6.59 % 27,928 15.71 1 1.5323 % 2,634.8
Floater 4.65 % 4.77 % 71,286 15.90 4 0.0984 % 1,649.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.4614 % 2,697.2
SplitShare 4.90 % 6.71 % 81,879 2.72 6 0.4614 % 3,156.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.4614 % 2,462.7
Perpetual-Premium 5.87 % 5.85 % 84,063 13.94 6 0.7474 % 2,513.2
Perpetual-Discount 5.80 % 5.86 % 101,817 14.09 33 1.0802 % 2,486.0
FixedReset 5.61 % 4.96 % 236,096 14.62 83 0.9863 % 1,841.6
Deemed-Retractible 5.25 % 5.68 % 133,217 6.96 34 0.7483 % 2,571.1
FloatingReset 2.98 % 4.61 % 57,808 5.57 13 -0.0089 % 2,016.1
Performance Highlights
Issue Index Change Notes
IAG.PR.G FixedReset -2.95 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.75
Bid-YTW : 7.67 %
RY.PR.K FloatingReset -1.97 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.40
Bid-YTW : 5.12 %
PWF.PR.S Perpetual-Discount -1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 20.44
Evaluated at bid price : 20.44
Bid-YTW : 5.91 %
GWO.PR.N FixedReset 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.02
Bid-YTW : 11.63 %
GWO.PR.I Deemed-Retractible 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.92
Bid-YTW : 7.07 %
RY.PR.P Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 23.99
Evaluated at bid price : 24.35
Bid-YTW : 5.38 %
BAM.PR.M Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 19.25
Evaluated at bid price : 19.25
Bid-YTW : 6.25 %
BMO.PR.Z Perpetual-Discount 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.39
Evaluated at bid price : 22.70
Bid-YTW : 5.50 %
ELF.PR.F Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.01
Evaluated at bid price : 22.25
Bid-YTW : 6.00 %
GWO.PR.P Deemed-Retractible 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.89
Bid-YTW : 6.15 %
BMO.PR.T FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 4.58 %
GWO.PR.G Deemed-Retractible 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.08
Bid-YTW : 6.44 %
BNS.PR.M Deemed-Retractible 1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.32
Bid-YTW : 5.05 %
TRP.PR.F FloatingReset 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 11.71
Evaluated at bid price : 11.71
Bid-YTW : 5.13 %
BAM.PF.D Perpetual-Discount 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 19.75
Evaluated at bid price : 19.75
Bid-YTW : 6.29 %
PWF.PR.K Perpetual-Discount 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 21.38
Evaluated at bid price : 21.38
Bid-YTW : 5.83 %
MFC.PR.B Deemed-Retractible 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.27
Bid-YTW : 7.03 %
RY.PR.N Perpetual-Discount 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.12
Evaluated at bid price : 22.46
Bid-YTW : 5.45 %
TD.PR.S FixedReset 1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 3.60 %
NA.PR.Q FixedReset 1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.16
Bid-YTW : 4.76 %
MFC.PR.G FixedReset 1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.89
Bid-YTW : 8.37 %
CU.PR.E Perpetual-Discount 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 21.32
Evaluated at bid price : 21.32
Bid-YTW : 5.85 %
CM.PR.O FixedReset 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 4.58 %
BAM.PR.Z FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 5.26 %
TD.PF.F Perpetual-Discount 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.16
Evaluated at bid price : 22.51
Bid-YTW : 5.46 %
PVS.PR.B SplitShare 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 23.83
Bid-YTW : 6.39 %
POW.PR.G Perpetual-Discount 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 23.71
Evaluated at bid price : 24.16
Bid-YTW : 5.83 %
CU.PR.D Perpetual-Discount 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 21.27
Evaluated at bid price : 21.27
Bid-YTW : 5.87 %
RY.PR.A Deemed-Retractible 1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 5.13 %
RY.PR.O Perpetual-Discount 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.08
Evaluated at bid price : 22.40
Bid-YTW : 5.46 %
RY.PR.G Deemed-Retractible 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.17
Bid-YTW : 5.12 %
TRP.PR.A FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 4.86 %
IFC.PR.A FixedReset 1.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.21
Bid-YTW : 10.53 %
GWO.PR.H Deemed-Retractible 1.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.89
Bid-YTW : 6.82 %
BAM.PR.G FixedFloater 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 25.00
Evaluated at bid price : 12.59
Bid-YTW : 6.59 %
ELF.PR.H Perpetual-Discount 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.65
Evaluated at bid price : 23.00
Bid-YTW : 6.02 %
CU.PR.C FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 4.67 %
MFC.PR.H FixedReset 1.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.54
Bid-YTW : 7.43 %
TRP.PR.G FixedReset 1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 5.09 %
CIU.PR.C FixedReset 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 10.57
Evaluated at bid price : 10.57
Bid-YTW : 5.05 %
POW.PR.B Perpetual-Discount 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.69
Evaluated at bid price : 22.98
Bid-YTW : 5.86 %
RY.PR.W Perpetual-Discount 1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.66
Evaluated at bid price : 22.90
Bid-YTW : 5.35 %
BAM.PR.X FixedReset 1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 12.53
Evaluated at bid price : 12.53
Bid-YTW : 5.41 %
CU.PR.F Perpetual-Discount 1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 5.79 %
POW.PR.A Perpetual-Discount 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 23.83
Evaluated at bid price : 24.08
Bid-YTW : 5.86 %
FTS.PR.F Perpetual-Discount 2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 21.69
Evaluated at bid price : 21.94
Bid-YTW : 5.67 %
TD.PR.Y FixedReset 2.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.83
Bid-YTW : 3.84 %
CU.PR.G Perpetual-Discount 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 5.85 %
MFC.PR.I FixedReset 2.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.25
Bid-YTW : 8.15 %
BAM.PR.R FixedReset 2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 13.84
Evaluated at bid price : 13.84
Bid-YTW : 5.58 %
RY.PR.M FixedReset 2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 18.42
Evaluated at bid price : 18.42
Bid-YTW : 4.62 %
MFC.PR.N FixedReset 2.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.65
Bid-YTW : 8.21 %
PWF.PR.H Perpetual-Premium 2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 24.29
Evaluated at bid price : 24.60
Bid-YTW : 5.87 %
BIP.PR.B FixedReset 2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 22.31
Evaluated at bid price : 23.05
Bid-YTW : 6.03 %
FTS.PR.K FixedReset 2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 16.29
Evaluated at bid price : 16.29
Bid-YTW : 4.64 %
HSE.PR.G FixedReset 2.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 15.40
Evaluated at bid price : 15.40
Bid-YTW : 7.15 %
HSE.PR.C FixedReset 2.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 14.10
Evaluated at bid price : 14.10
Bid-YTW : 7.23 %
BNS.PR.L Deemed-Retractible 2.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 5.15 %
MFC.PR.F FixedReset 2.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.05
Bid-YTW : 11.79 %
MFC.PR.M FixedReset 2.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.80
Bid-YTW : 8.17 %
FTS.PR.H FixedReset 2.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 12.85
Evaluated at bid price : 12.85
Bid-YTW : 4.42 %
FTS.PR.J Perpetual-Discount 2.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 5.70 %
BIP.PR.A FixedReset 2.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 17.81
Evaluated at bid price : 17.81
Bid-YTW : 6.16 %
CCS.PR.C Deemed-Retractible 3.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.71
Bid-YTW : 7.11 %
FTS.PR.G FixedReset 3.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 4.76 %
FTS.PR.M FixedReset 3.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 4.78 %
FTS.PR.I FloatingReset 3.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 10.70
Evaluated at bid price : 10.70
Bid-YTW : 4.52 %
PWF.PR.P FixedReset 3.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 12.00
Evaluated at bid price : 12.00
Bid-YTW : 4.86 %
TRP.PR.B FixedReset 3.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 10.35
Evaluated at bid price : 10.35
Bid-YTW : 4.96 %
SLF.PR.H FixedReset 3.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.60
Bid-YTW : 10.22 %
PWF.PR.T FixedReset 4.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 3.82 %
HSE.PR.A FixedReset 4.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 8.90
Evaluated at bid price : 8.90
Bid-YTW : 6.96 %
HSE.PR.E FixedReset 5.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 15.30
Evaluated at bid price : 15.30
Bid-YTW : 7.20 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.G FixedReset 177,471 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 : 5.05 %
NA.PR.X FixedReset 103,750 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 23.12
Evaluated at bid price : 24.94
Bid-YTW : 5.57 %
RY.PR.M FixedReset 56,839 TD crossed 40,600 at 18.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 18.42
Evaluated at bid price : 18.42
Bid-YTW : 4.62 %
MFC.PR.G FixedReset 51,500 Scotia crossed 40,000 at 17.66.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.89
Bid-YTW : 8.37 %
RY.PR.Q FixedReset 50,272 Desjardins crossed 15,000 at 25.65.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 23.33
Evaluated at bid price : 25.61
Bid-YTW : 5.14 %
SLF.PR.H FixedReset 46,100 Scotia crossed 40,000 at 14.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.60
Bid-YTW : 10.22 %
There were 31 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BMO.PR.R FloatingReset Quote: 21.79 – 22.50
Spot Rate : 0.7100
Average : 0.5274

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.79
Bid-YTW : 4.50 %

SLF.PR.H FixedReset Quote: 14.60 – 15.10
Spot Rate : 0.5000
Average : 0.3290

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.60
Bid-YTW : 10.22 %

BMO.PR.S FixedReset Quote: 17.40 – 17.87
Spot Rate : 0.4700
Average : 0.3032

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 4.61 %

BNS.PR.P FixedReset Quote: 23.58 – 24.29
Spot Rate : 0.7100
Average : 0.5701

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.58
Bid-YTW : 4.08 %

BAM.PF.F FixedReset Quote: 18.80 – 19.60
Spot Rate : 0.8000
Average : 0.6625

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-29
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 5.06 %

BNS.PR.B FloatingReset Quote: 21.16 – 21.80
Spot Rate : 0.6400
Average : 0.5269

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.16
Bid-YTW : 5.09 %

HSE: Trend Negative, says DBRS

January 30th, 2016

DBRS has announced that it:

has today taken rating actions on 11 issuers following a full review of the oil and gas portfolio. This review covered 19 issuers and was undertaken in light of the recent price crude oil price declines and the outlook for a continued weak pricing environment. The rating actions are highlighted in the table below. As a result of the announced actions today, all issuers within DBRS’s oil and gas portfolio (with the exception of Suncor Energy Inc., rated A (low), and Canadian Oil Sands Limited (COS), rated BBB (low), which are both Under Review with Developing Implications) now have a Negative trend.

The weak pricing environment has created material, near-term financial challenges for oil and gas issuers that has been reflected today by DBRS’s rating and trend changes. Companies have responded to the lower pricing environment by cutting capital expenditure (capex) programs, undertaking asset sales and implementing cost-saving measures. However the sharp contraction in cash flows from oil- and gas-producing activities has been far greater, resulting in cash flow deficits, a drain on liquidity and escalating debt/cash flow ratios. The integrated oil companies and multinational oil companies rated by DBRS (which have downstream exposure) have weathered the pricing storm better but have also experienced weakening financial risk profiles. With expectations for continued weak pricing, the key credit metrics of issuers will remain under pressure. DBRS anticipates companies will announce additional significant capex cuts, cost-saving measures and possible dividend cuts to preserve liquidity and balance sheet strength. As such, DBRS will monitor each issuer closely as more information becomes available. A lack of concrete action by issuers to respond to a period of lower pricing and/or prevent their financial profiles from eroding further could lead to further negative rating actions by DBRS.

With the weak pricing outlook for both oil and natural gas, DBRS-rated oil and gas companies were all stress tested under various crude oil and natural gas pricing scenarios over a two-year forecast period. As a base case scenario DBRS used a forecast in line with the forward oil and gas price curves. The base case price forecast incorporated a West Texas Intermediate (WTI) oil price of USD 32 per barrel (bbl) in 2016 and USD 37/bbl in 2017. The natural gas price base case incorporated a forecast of USD 2.25 and CDN 2.25 per thousand cubic feet for NYMEX and AECO natural gas, respectively, in 2016. For 2017 the forecast was USD 2.75 and CDN 2.75 for NYMEX and AECO natural gas, respectively. A CDN/USD $0.70 exchange rate was assumed in the base case. DBRS also considered stressed pricing scenarios as low as USD 25/bbl for WTI in 2016, USD 30/bbl in 2017 and a CDN/USD exchange rate of $0.68. The stress tests focused on the effect that oil and gas prices would have on: (1) internally generated cash flow, (2) discretionary versus committed capex, (3) dividend flexibility, (4) planned asset dispositions, (5) covenant tests, (6) available liquidity, (7) key credit metrics and (8) a recovery rate analysis for high yield credits. Moreover, for non-investment-grade issuers borrowing bases were stress tested, at reductions of 20%, 25%, and 30% of current levels given the uncertainty with the upcoming borrowing base reviews.

Affected issues are HSE.PR.A, HSE.PR.C, HSE.PR.E and HSE.PR.G.

Implied Volatility analysis shows a high level of Implied Volatility (implying a certain amount of directionality in expected pricing is contradicting an assumption of the Black-Scholes analysis) and a very high spread.

impVol_HSE_160129
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According to this analysis, HSE.PR.E, resetting at +357bp on 2020-3-31, is $0.17 cheap, while HSE.PR.C, resetting at +313 on 2019-12-31 is $0.11 rich.

January 28, 2016

January 29th, 2016

The regulatory push to move trading jobs offshore is showing signs of success:

The $13.2 trillion Treasuries market is getting pushed around more by global developments, the [JPMorgan] analysts wrote in a note titled “24 hour party people redux: Global liquidity in U.S. Treasury futures.”

Sleep-deprived Wall Street traders aren’t the only ones who should care. It underscores the changing structure of a market where plenty of strange distortions are happening, the analysts said.

Bond dealers’ trading books are smaller than before the financial crisis, and new regulations are making it more expensive to facilitate trades and provide some types of overnight financing. On top of that, reserve managers at global central banks sold more U.S. debt to raise cash last year, which put more pressure on the balance sheets of the dealers handling that business, the analysts said.

As a result, more trading is happening in futures relative to cash Treasuries, according to the note, since futures transactions don’t require banks to use their balance sheets. For one 10-year Treasury futures contract, about 5 percent of its volume comes around the open of trading in Tokyo and more than 25 percent is traded around the open in London, the analysts said.

To my dismay, the NYT has endorsed a Tobin Tax:

A well-designed financial transaction tax — one that applies a tiny tax rate to an array of transactions and is split between buyers and sellers — would be a progressive way to raise substantial revenue without damaging the markets. A new study by researchers at the nonpartisan Tax Policy Center has found that a 0.1 percent tax rate could bring in $66 billion a year, with 40 percent coming from the top 1 percent of income earners and 75 percent from the top 20 percent. As the rate rises, however, traders would most likely curtail their activity. The tax could bring in $76 billion a year if it was set at 0.3 percent, but above that rate, trading would probably decrease and the total revenue raised would start to fall.

The burden of this tax would be concentrated at the top, because that’s where the ownership of financial assets is concentrated.

Critics also contend that a financial transaction tax would have damaging effects on trade volume, volatility and the ability of markets to determine asset prices. That is debatable, and setting the tax rate low at first, and raising it gradually, would help avoid potential damage. But the possibility of unintended consequences is not the real obstacle to a broad and prudent financial transaction tax. It is that a majority of lawmakers are not willing to challenge Wall Street’s power. Imposing the tax will take leadership from the next president.

My opposition to a Tobin tax was last discussed on December 29, 2015.

A link in Ken Kivenko’s Fund Observer led me to an exhortation from the Consumers Council of Canada, which led me to an OSC-commissioned report titled Current Practices for Risk Profiling in Canada And Review of Global Best Practices, which led me to a Morningstar paper titled Variable Risk Preference Bias:

The average monthly risk aversion scores from our dataset are shown in Figure 1 along with the S&P 500 Index to illustrate the relation between stock returns and risk aversion over time.

riskAversionAndIndexLevel
Click for Big

The OSC report claims that:

Guillemette and Finke (2014) find that the correlation between a popular risk tolerance assessment score and the S&P 500 was 0.90 (or nearly perfect) during the January 2007 through March 2009 bear market, but then only 0.01 between the remainder of 2009 and April 2012. A review of scores from a 3-question risk tolerance instrument given to employees participating in Morningstar’s Managed Account program shows a similar correlation between S&P values and measured risk tolerance.

So that was kind of interesting. But what made me laugh was the paragraph in the Morningstar report that read:

Differences in the method of compensation provided through share class structure may influence whether the advisor gains from de-biasing a client who is tempted to shift his or her portfolio to safety during an equity market decline. Class A shares compensate the advisor through the payment of an upfront load. Advisors may have an incentive to encourage a client to buy a safer fund (and pay a front-end load) when they feel more risk averse and then sell them another risky fund when their risk aversion declines after prices rise. This provides a disincentive to de-bias a client. Advisors who receive compensation through higher trail commissions (C shares) have no incentive to encourage a client to shift out of risky funds during a temporary increase in risk aversion. Higher trail compensation may provide a valuable de-biasing incentive since the advisor does not need to sell a new fund to receive compensation. We hypothesize that lower 12b-1 fees lead to an incentive for advisors not to de-bias clients since their compensation is increased by catering to investor variable risk preferences by selling them new funds. For example, if the stock market falls and the client becomes more risk averse, an advisor compensated through front-end commissions has a greater incentive to move that client into bonds than an advisor who receives more commissions on a trail basis.

Granted, this is in the context of a comparison between transaction-based and asset-based fees, but it still made me laugh. I don’t think that part will be cited in an OSC report any time soon! However, the Morningstar paper also led me to a paper published by the Chicago Fed titled From the Horse’s Mouth: How do Investor Expectations of Risk and Return Vary with Economic Conditions?:

Data obtained from monthly Gallup/UBS surveys from 1998-2007 and from a special supplement to the Michigan Surveys of Consumer Attitudes, run in 22 monthly surveys between 2000-2005, are used to analyze stock market beliefs and portfolio choices of household investors. We show that the key variables found to be positive predictors of actual stock returns in the asset-pricing literature are also highly correlated with investor’s reported expected returns, but with the opposite sign. Moreover, analysis of the micro data indicates that expectations of both risk and returns on stocks are strongly influenced by perceptions of economic conditions. In particular, when investors believe macroeconomic conditions are more expansionary, they tend to expect both higher returns and lower volatility. This is difficult to reconcile with the canonical view that expected returns on stocks rise during recessions to compensate household investors for increased exposure or sensitivity to macroeconomic risks. Finally, the relevance of these investors’ reported expectations is supported by the finding of a significant link between their expectations and portfolio choices. In particular, we show that portfolio equity positions tend to be higher for those respondents that anticipate higher expected returns or lower uncertainty.

So it’s all interesting and goes a long way towards providing comfort that the ‘people are selling because the market is down’ hypothesis has at least some basis in fact.

Here’s a good illustration about how empty-headed regulatory do-goodism can reduce civil liberties while inflating university costs:

The online admissions application for Auburn University appears simple, until you get to this question on Page 7:

“Have you ever been charged with or convicted of or pled guilty or nolo contendere to a crime other than a minor traffic offense, or are there any criminal charges now pending against you?”

Those who check “yes,” even though they have never been convicted of any crime, face extra scrutiny — a follow-up call from the admissions office asking for additional information, the university says.

“Lots of colleges and universities don’t like the fact that they feel like they have to ask these questions,” said Michael Reilly, the executive director of the American Association of Collegiate Registrars and Admissions Officers. “But they feel like they do, just because of how prominent some of these cases are of things like sexual assault on college campuses. And they feel like they need to do what they can to screen students.”

It was a very good day for the Canadian preferred share market, with PerpetualDiscounts winning 80bp, FixedResets up 64bp and DeemedRetractibles gaining 36bp. There are lots of winners in the Performance Highlights table! 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_160128
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.25 to be $1.20 rich, while TRP.PR.C, resetting 2021-1-30 at +154, is $0.73 cheap at its bid price of 11.17.

impVol_MFC_160128
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Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 17.25 to be 0.89 rich, while MFC.PR.F, resetting at +141bp on 2016-6-19, is bid at 11.74 to be 0.88 cheap.

impVol_BAM_160128
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.55 to be $1.69 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 17.61 and appears to be $1.10 rich.

impVol_FTS_160128
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FTS.PR.K, with a spread of +205bp, and bid at 15.90, looks $0.38 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 $0.41 cheap.

pairs_FR_160128A
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.81%, with two outliers below -1.50%. There are no junk outliers.

pairs_FF_160128
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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 5.30 % 6.43 % 19,181 16.17 1 -1.6154 % 1,473.5
FixedFloater 7.66 % 6.69 % 28,181 15.59 1 0.6494 % 2,595.0
Floater 4.65 % 4.79 % 72,305 15.86 4 2.5492 % 1,648.3
OpRet 0.00 % 0.00 % 0 0.00 0 -0.3275 % 2,684.9
SplitShare 4.92 % 6.90 % 81,025 2.71 6 -0.3275 % 3,141.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3275 % 2,451.4
Perpetual-Premium 5.92 % 5.89 % 84,349 13.87 6 0.1146 % 2,494.6
Perpetual-Discount 5.86 % 5.91 % 101,914 14.00 33 0.7968 % 2,459.4
FixedReset 5.66 % 5.05 % 237,273 14.62 83 0.6386 % 1,823.6
Deemed-Retractible 5.29 % 5.78 % 134,694 6.95 34 0.3613 % 2,552.0
FloatingReset 2.98 % 4.67 % 58,561 5.57 13 0.1107 % 2,016.2
Performance Highlights
Issue Index Change Notes
TRP.PR.H FloatingReset -2.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 9.13
Evaluated at bid price : 9.13
Bid-YTW : 4.81 %
PWF.PR.A Floater -2.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 10.90
Evaluated at bid price : 10.90
Bid-YTW : 4.33 %
CCS.PR.C Deemed-Retractible -2.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.07
Bid-YTW : 7.54 %
GWO.PR.N FixedReset -2.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.90
Bid-YTW : 11.77 %
CIU.PR.C FixedReset -1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 10.39
Evaluated at bid price : 10.39
Bid-YTW : 5.14 %
BNS.PR.L Deemed-Retractible -1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.61
Bid-YTW : 5.63 %
BAM.PR.E Ratchet -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 25.00
Evaluated at bid price : 12.79
Bid-YTW : 6.43 %
FTS.PR.M FixedReset -1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 17.44
Evaluated at bid price : 17.44
Bid-YTW : 4.94 %
PWF.PR.H Perpetual-Premium -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 23.71
Evaluated at bid price : 24.02
Bid-YTW : 6.01 %
MFC.PR.H FixedReset -1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.22
Bid-YTW : 7.66 %
PVS.PR.C SplitShare -1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 6.89 %
CM.PR.Q FixedReset -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 4.70 %
TD.PR.T FloatingReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.82
Bid-YTW : 4.43 %
BNS.PR.B FloatingReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 5.22 %
BNS.PR.D FloatingReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.42
Bid-YTW : 6.83 %
SLF.PR.H FixedReset 1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.10
Bid-YTW : 10.72 %
RY.PR.E Deemed-Retractible 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.25 %
GWO.PR.I Deemed-Retractible 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.71
Bid-YTW : 7.21 %
MFC.PR.F FixedReset 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.74
Bid-YTW : 12.15 %
RY.PR.I FixedReset 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.41
Bid-YTW : 4.29 %
PWF.PR.E Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 23.09
Evaluated at bid price : 23.35
Bid-YTW : 5.91 %
NA.PR.W FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 16.51
Evaluated at bid price : 16.51
Bid-YTW : 4.81 %
RY.PR.N Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 21.84
Evaluated at bid price : 22.18
Bid-YTW : 5.51 %
BAM.PF.H FixedReset 1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.84 %
SLF.PR.C Deemed-Retractible 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.74
Bid-YTW : 7.14 %
GWO.PR.G Deemed-Retractible 1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.82
Bid-YTW : 6.60 %
TRP.PR.E FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 4.82 %
TRP.PR.F FloatingReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 11.57
Evaluated at bid price : 11.57
Bid-YTW : 5.20 %
BMO.PR.M FixedReset 1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.48
Bid-YTW : 3.93 %
TRP.PR.B FixedReset 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 10.00
Evaluated at bid price : 10.00
Bid-YTW : 5.13 %
TRP.PR.A FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 14.19
Evaluated at bid price : 14.19
Bid-YTW : 4.93 %
CU.PR.G Perpetual-Discount 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 5.97 %
HSE.PR.E FixedReset 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 14.52
Evaluated at bid price : 14.52
Bid-YTW : 7.60 %
BIP.PR.A FixedReset 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 6.35 %
MFC.PR.N FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.25
Bid-YTW : 8.54 %
NA.PR.S FixedReset 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 17.06
Evaluated at bid price : 17.06
Bid-YTW : 4.83 %
HSE.PR.C FixedReset 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 13.76
Evaluated at bid price : 13.76
Bid-YTW : 7.41 %
MFC.PR.C Deemed-Retractible 1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.78
Bid-YTW : 7.19 %
CU.PR.F Perpetual-Discount 1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 5.89 %
RY.PR.F Deemed-Retractible 1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.97
Bid-YTW : 5.22 %
CU.PR.H Perpetual-Discount 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 22.26
Evaluated at bid price : 22.55
Bid-YTW : 5.91 %
BMO.PR.Q FixedReset 1.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.56
Bid-YTW : 7.39 %
CU.PR.E Perpetual-Discount 1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 21.03
Evaluated at bid price : 21.03
Bid-YTW : 5.93 %
BAM.PR.N Perpetual-Discount 1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 19.03
Evaluated at bid price : 19.03
Bid-YTW : 6.32 %
BNS.PR.C FloatingReset 1.61 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.07
Bid-YTW : 4.51 %
FTS.PR.H FixedReset 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 12.50
Evaluated at bid price : 12.50
Bid-YTW : 4.55 %
GWO.PR.Q Deemed-Retractible 1.68 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.98
Bid-YTW : 6.44 %
TD.PF.C FixedReset 1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 17.35
Evaluated at bid price : 17.35
Bid-YTW : 4.53 %
ELF.PR.G Perpetual-Discount 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 5.89 %
IFC.PR.C FixedReset 1.82 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.19
Bid-YTW : 9.41 %
BAM.PF.D Perpetual-Discount 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 19.51
Evaluated at bid price : 19.51
Bid-YTW : 6.36 %
MFC.PR.K FixedReset 1.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.25
Bid-YTW : 9.13 %
RY.PR.K FloatingReset 2.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.83
Bid-YTW : 4.76 %
CU.PR.D Perpetual-Discount 2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 20.97
Evaluated at bid price : 20.97
Bid-YTW : 5.95 %
MFC.PR.L FixedReset 2.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.55
Bid-YTW : 8.99 %
BAM.PR.M Perpetual-Discount 2.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 6.32 %
BAM.PF.F FixedReset 2.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 5.09 %
MFC.PR.J FixedReset 2.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.19
Bid-YTW : 8.70 %
BNS.PR.Q FixedReset 2.76 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.44
Bid-YTW : 4.19 %
NA.PR.Q FixedReset 2.93 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.85
Bid-YTW : 5.01 %
HSE.PR.A FixedReset 3.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 8.50
Evaluated at bid price : 8.50
Bid-YTW : 7.29 %
CIU.PR.A Perpetual-Discount 3.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 5.94 %
IFC.PR.A FixedReset 3.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.00
Bid-YTW : 10.74 %
BAM.PR.B Floater 4.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 9.93
Evaluated at bid price : 9.93
Bid-YTW : 4.80 %
BAM.PR.C Floater 4.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 9.85
Evaluated at bid price : 9.85
Bid-YTW : 4.84 %
BNS.PR.R FixedReset 4.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.51
Bid-YTW : 4.40 %
BAM.PR.K Floater 4.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 9.95
Evaluated at bid price : 9.95
Bid-YTW : 4.79 %
PWF.PR.P FixedReset 6.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 11.60
Evaluated at bid price : 11.60
Bid-YTW : 5.02 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.E FixedReset 112,233 Nesbitt crossed 75,000 at 25.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 23.28
Evaluated at bid price : 25.43
Bid-YTW : 5.16 %
TD.PF.G FixedReset 86,650 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 5.18 %
NA.PR.X FixedReset 81,645 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 23.09
Evaluated at bid price : 24.86
Bid-YTW : 5.59 %
RY.PR.M FixedReset 78,680 Nesbitt crossed 74,500 at 18.27.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 18.03
Evaluated at bid price : 18.03
Bid-YTW : 4.72 %
BAM.PF.C Perpetual-Discount 73,400 Scotia crossed 70,000 at 19.32.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 19.32
Evaluated at bid price : 19.32
Bid-YTW : 6.36 %
BMO.PR.S FixedReset 69,756 Nesbitt crossed 56,700 at 17.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 17.23
Evaluated at bid price : 17.23
Bid-YTW : 4.66 %
There were 30 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.E FixedReset Quote: 17.61 – 18.75
Spot Rate : 1.1400
Average : 0.7170

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 17.61
Evaluated at bid price : 17.61
Bid-YTW : 5.06 %

MFC.PR.M FixedReset Quote: 17.32 – 18.37
Spot Rate : 1.0500
Average : 0.6620

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.32
Bid-YTW : 8.55 %

TRP.PR.C FixedReset Quote: 11.17 – 12.10
Spot Rate : 0.9300
Average : 0.5588

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 11.17
Evaluated at bid price : 11.17
Bid-YTW : 5.08 %

TRP.PR.B FixedReset Quote: 10.00 – 10.70
Spot Rate : 0.7000
Average : 0.4075

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 10.00
Evaluated at bid price : 10.00
Bid-YTW : 5.13 %

TRP.PR.A FixedReset Quote: 14.19 – 14.90
Spot Rate : 0.7100
Average : 0.4527

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-28
Maturity Price : 14.19
Evaluated at bid price : 14.19
Bid-YTW : 4.93 %

MFC.PR.N FixedReset Quote: 17.25 – 17.96
Spot Rate : 0.7100
Average : 0.4724

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.25
Bid-YTW : 8.54 %

DC.PR.C Will Be Extended

January 29th, 2016

Dundee Corporation has announced:

that holders of First Preference Shares, Series 4 (the “Series 4 Preferred Shares”) earlier today approved the previously announced plan of arrangement (the “Arrangement”) of the Company pursuant to which each Series 4 Preferred Share will be exchanged for: (i) 0.7136 of a First Preference Share, Series 5 of the Company; and (i) 0.25 of a Class A subordinate voting share purchase warrant.

The Arrangement was approved at the special meeting, with 3,056,887 Series 4 Preferred Shares, representing 93.22% of the total votes cast at the meeting, voting in favour of the Arrangement and 222,393 Series 4 Preferred Shares, representing 6.78% of the total votes cast at the meeting, voting against it.

The Company intends to apply for the final order of the Ontario Superior Court of Justice (Commercial List) to approve the Arrangement on February 10, 2016. Assuming that court approval is obtained, the Arrangement is expected to be completed on or about February 12, 2016.

Dundee made an initial proposal in November that attracted some press coverage and an exhortation to consider exercising dissent rights. This led to reconsideration by Dundee despite a rather peculiar endorsement from a proxy advisor and led to a sweeter offer that attracted further commentary.

I would dearly love to know how much of a role the exorbitant proxy solicitation fees played. How many votes were actually cast by informed shareholders, vs. how many by mis-informed or under-informed holders pressured by their fee-hungry advisors … and how many were cast simply by the advisors themselves?

Anyway, I have set up a new security for this issue on HIMIPref™, which reflects the new dividend rate and new call schedule, but the old par value – since the issue will trade based on $17.84 par until the change is approved by the court and the new Series 5 shares start trading on the Exchange.

Vital statistics are:

DC.PR.C Operating Retractible YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2019-06-30
Maturity Price : 17.84
Evaluated at bid price : 15.95
Bid-YTW : 11.66 %

I had previously estimated that a coupon of 13% would be required in order for the issue to trade at around par, which was later revised to 11%-12%. So far it looks like I was about right.

January 27, 2016

January 28th, 2016

Today’s big news was the 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 continue to strengthen. Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.

Given the economic outlook, 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.

The important part was the emphasis on global conditions:

The FOMC said Wednesday it is “closely monitoring global economic and financial developments” while “assessing their implications for the labor market and inflation, and for the balance of risks to the outlook” in their statement after a two-day meeting in Washington.

That was a soft back-pedal from December when they said risks were “balanced,” and some economists said it makes an interest-rate hike at the next FOMC meeting in March less likely, while not precluding it. The FOMC left the target for their benchmark rate unchanged at 0.25 percent to 0.5 percent.

fedMarchOdds
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… and the markets were volatile:

U.S. stocks retreated as the Federal Reserve signaled that financial-market turmoil may pose risks to its outlook for the U.S. economy, while largely maintaining its policy stance. The dollar extended losses versus the euro, while two-year Treasuries rose.

The Standard & Poor’s 500 Index sank as the Fed said it is “closely monitoring” developments from China to Europe as well as oil for any adverse impact on the U.S. economy. Apple Inc. and Boeing Co. plunged on disappointing results as the two accounted for more than half of the Dow Jones Industrial Average’s 223-point slide. Yields on two-year Treasury notes fell a third day, as the Fed kept benchmark rates unchanged and said any future hikes would be gradual. Oil rose past $32 a barrel, and gold gained.

The S&P 500 fell 1.1 percent to 1,882.95 as of 4 p.m. in New York, and is headed for a January loss of 7.9 percent, the most since May 2010, with anxiety over global growth wiping as much as $2.4 trillion from the value of U.S. equities this year.

In Canada, Bombardier Inc.’s shares fell below C$1, the latest blow for the iconic Canadian manufacturer as it buckles under $9 billion in debt. The nation’s equity benchmark advanced 0.3 percent as energy producers and banks climbed.

Treasuries recovered from their weakest levels of the day. Led by shorter maturities, yields retreated from their Wednesday highs as stocks fell following the Fed’s decision to keep its target range at 0.25 percent to 0.5 percent, as predicted by Wall Street analysts.

The Fed also emphasized that its policy on inflation is symmetrical:

As part of its annual organizational meeting actions, the Federal Open Market Committee reaffirmed its “Statement on Longer-Run Goals and Monetary Policy Strategy,” with a revision to clarify that it views its inflation objective as symmetric, and with an updated reference to participants’ estimates of the longer-run normal unemployment rate in the most recent Summary of Economic Projections (December 2015).

Voting against was James Bullard, who agreed the Committee’s inflation goal is symmetric, but believed the amended language is not sufficiently focused on expected future deviations of inflation from the goal.

Meanwhile, there’s a move afoot to increase the paperwork inherent in giving advice:

Canada’s mutual fund regulator is looking into whether fees charged by fund companies – such as management fees – should be included in regulatory changes that will provide investors with greater transparency concerning the cost of financial advice and of their investments.

The changes, known as the second phase of the client relationship model (CRM2), are slated for July 16, 2016, and currently do not include the costs imposed by mutual fund managers.

The focus of CRM2 is to provide disclosure of the cost of advice rather than the overall cost of an investment product. Currently – under CRM2 rules – the Mutual Fund Dealers Association will require wealth management companies to provide each investor with an annual summary of charges paid by the investor and compensation received by the firm.

Although the changes have yet to come into effect, the MFDA received feedback from financial advisers, investment dealers, fund companies and investor advocates asking to consider expanding the reporting rules to require disclosure of the other costs of owning investment funds that are not paid to the investment firm – or the financial adviser – such as management fees, fund operating costs, redemption fees and short-term trading fees.

This will help build on the biggest regulatory success story in Canadian history:

In 2000, banks controlled 23 per cent of all Canadian long-term mutual fund assets, with independents controlling 64 per cent. By the end of 2015, the banks had more than doubled their market share to nearly 50 per cent.

The banks have an enormous advantage: distribution through their branch networks. They have also been building – and buying – fund manufacturing businesses. In many cases, they now control which funds are created and where they are sold.

So buy GICs, people! They’re FREE!

Meanwhile, bond investors aren’t getting away with much:

While not as pronounced as the rout in global equity markets, losses are beginning to pile up in the bond market too. The average spread over benchmark government yields for highly rated debt has widened to 1.83 percentage points, the most in three years, from 1.18 percentage points in March, according to Bank of America Merrill Lynch indexes. Investors lost 0.2 percent on global corporate bonds in 2015, snapping a string of annual gains that averaged 7.9 percent over the previous six years, the data show.

Debt at global companies rated by Standard & Poor’s reached three times earnings before interest, tax, depreciation and amortization in 2015, the highest in data going back to 2003 and up from 2.8 times last year, according to the ratings company. Total debt at listed companies in China, the world’s second-largest economy, has climbed to the highest level in three years, according to data compiled by Bloomberg.

corporateDebtToEarnings
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Best of all, there are high hopes that soon all those pesky non-banks will be gone:

Bombardier class B shares sank below $1 in Toronto trading Wednesday, less than half the price of its $2.21-a-share equity offering a year ago. The drop raises the possibility the company will be ejected from Canada’s main S&P/TSX stock index. To be eligible for inclusion in the index, which is reviewed quarterly, a security has to have a minimum volume-weighted average price of $1 over the past three months and must represent a minimum weight of 0.05 per cent of the index.

Tomorrow is the long awaited vote on the murky DC.PR.C Exchange Offer. One must carefully guard against human propensity to form patterns from unconnected events … but Dundee just raised a bunch of cash:

Euro Pacific Canada (“Euro Pacific”) and Dundee Securities Ltd., have entered into a definitive agreement, in which Euro Pacific will acquire Dundee Goodman Private Wealth (“DGPW”), a division of Dundee Securities Ltd. Upon completion of this transaction 78 investment advisors and related support teams will move from DGPW to Euro Pacific. Approximately $3.5 billion of investible client assets will also be transferred to Euro Pacific. Euro Pacific will also acquire Dundee Securities’ separately managed account program as well as employees related to its fixed income, foreign exchange and insurance businesses. DGPW and Euro Pacific are both members of the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Canadian Investor Protection Fund (“CIPF”).

Transaction Highlights:

•Increases Euro Pacific Assets Under Management and Administration to approximately $4.2 billion;
•Euro Pacific triples in size to 100 investment advisors along with related support staff and adds offices in Toronto, Montreal, Ottawa, Calgary, Vancouver and Victoria;
•Advances Dundee’s focus of growing its alternative asset management and private investment counsel business lines;
•Dundee and Euro Pacific will enter into a distribution agreement for future differentiated products; and
•The transaction is expected to result in approximately $40 million of additional liquidity and ongoing cost savings to Dundee, which will support strategic priorities.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 27bp, FixedResets up 14bp and DeemedRetractibles gaining 12bp. The Performance Highlights table is its usual jolly self. Volume was above average.

PerpetualDiscounts now yield 5.96%, equivalent to 7.75% at the standard equivalency factor of 1.3x. Long corporates now yield about 4.25% (maybe a little more) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 350bp, a slight (and perhaps spurious) decline from the 355bp reported January 13. Incredibly elevated!

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_160127
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.05 to be $1.12 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.70 cheap at its bid price of 18.05.

impVol_MFC_160127
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Most expensive is MFC.PR.M, resetting at +236bp on 2019-12-19, bid at 17.33 to be 0.89 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 17.55 to be 0.90 cheap.

impVol_BAM_160127
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.45 to be $1.72 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 17.69 and appears to be $1.24 rich.

impVol_FTS_160127
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FTS.PR.K, with a spread of +205bp, and bid at 15.84, 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 15.40 and is $0.50 cheap.

pairs_FR_160127A
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.52%, with one outlier below -1.50% and one above +0.50%. There is one junk outlier below -1.50% and two above +0.50%.

pairs_FF_160127
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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 5.21 % 6.33 % 20,027 16.30 1 1.6537 % 1,497.7
FixedFloater 7.71 % 6.73 % 28,687 15.54 1 -1.0442 % 2,578.3
Floater 4.77 % 5.01 % 73,237 15.47 4 1.5897 % 1,607.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.3917 % 2,693.7
SplitShare 4.90 % 6.74 % 77,690 2.72 6 0.3917 % 3,152.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3917 % 2,459.4
Perpetual-Premium 5.92 % 5.92 % 87,378 13.96 6 0.4741 % 2,491.7
Perpetual-Discount 5.91 % 5.96 % 102,059 13.97 33 -0.2657 % 2,440.0
FixedReset 5.69 % 5.10 % 235,170 14.64 83 0.1390 % 1,812.0
Deemed-Retractible 5.31 % 5.86 % 130,509 6.95 34 0.1222 % 2,542.8
FloatingReset 2.98 % 4.80 % 59,349 5.57 13 0.1601 % 2,014.0
Performance Highlights
Issue Index Change Notes
BAM.PF.F FixedReset -4.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 5.22 %
MFC.PR.J FixedReset -3.85 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.75
Bid-YTW : 9.06 %
BIP.PR.B FixedReset -3.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 21.85
Evaluated at bid price : 22.30
Bid-YTW : 6.25 %
BAM.PR.R FixedReset -2.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 13.45
Evaluated at bid price : 13.45
Bid-YTW : 5.74 %
CIU.PR.A Perpetual-Discount -2.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.14 %
BNS.PR.B FloatingReset -1.98 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 5.01 %
ELF.PR.G Perpetual-Discount -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 5.99 %
BAM.PF.G FixedReset -1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 18.41
Evaluated at bid price : 18.41
Bid-YTW : 5.20 %
BAM.PR.M Perpetual-Discount -1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 18.61
Evaluated at bid price : 18.61
Bid-YTW : 6.47 %
MFC.PR.I FixedReset -1.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.84
Bid-YTW : 8.47 %
PWF.PR.P FixedReset -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 10.93
Evaluated at bid price : 10.93
Bid-YTW : 5.33 %
FTS.PR.I FloatingReset -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 10.34
Evaluated at bid price : 10.34
Bid-YTW : 4.68 %
TD.PF.C FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 17.06
Evaluated at bid price : 17.06
Bid-YTW : 4.61 %
BNS.PR.R FixedReset -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.51
Bid-YTW : 5.21 %
PWF.PR.E Perpetual-Discount -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 22.83
Evaluated at bid price : 23.11
Bid-YTW : 5.97 %
BAM.PR.N Perpetual-Discount -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 18.73
Evaluated at bid price : 18.73
Bid-YTW : 6.43 %
BAM.PF.D Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 19.16
Evaluated at bid price : 19.16
Bid-YTW : 6.48 %
GWO.PR.P Deemed-Retractible -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 6.39 %
RY.PR.M FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 18.05
Evaluated at bid price : 18.05
Bid-YTW : 4.71 %
RY.PR.F Deemed-Retractible -1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 5.52 %
RY.PR.I FixedReset -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.17
Bid-YTW : 4.48 %
BAM.PR.G FixedFloater -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 25.00
Evaluated at bid price : 12.32
Bid-YTW : 6.73 %
MFC.PR.H FixedReset -1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.50
Bid-YTW : 7.45 %
BAM.PF.A FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 18.56
Evaluated at bid price : 18.56
Bid-YTW : 5.10 %
BAM.PF.B FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 5.00 %
TD.PR.Y FixedReset 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.30
Bid-YTW : 4.26 %
POW.PR.D Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 21.17
Evaluated at bid price : 21.17
Bid-YTW : 5.96 %
BNS.PR.Q FixedReset 1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 4.69 %
FTS.PR.H FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 12.30
Evaluated at bid price : 12.30
Bid-YTW : 4.63 %
PWF.PR.I Perpetual-Premium 1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-26
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : -13.83 %
RY.PR.P Perpetual-Discount 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 23.55
Evaluated at bid price : 23.87
Bid-YTW : 5.49 %
BMO.PR.Q FixedReset 1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.51
Bid-YTW : 7.68 %
BAM.PR.K Floater 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 9.51
Evaluated at bid price : 9.51
Bid-YTW : 5.02 %
TD.PR.T FloatingReset 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.09
Bid-YTW : 4.20 %
BNS.PR.D FloatingReset 1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.63
Bid-YTW : 6.62 %
FTS.PR.M FixedReset 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 17.72
Evaluated at bid price : 17.72
Bid-YTW : 4.86 %
SLF.PR.D Deemed-Retractible 1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.43
Bid-YTW : 7.35 %
SLF.PR.B Deemed-Retractible 1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.85
Bid-YTW : 6.78 %
RY.PR.L FixedReset 1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.60
Bid-YTW : 4.11 %
IAG.PR.G FixedReset 1.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.20
Bid-YTW : 7.34 %
IFC.PR.C FixedReset 1.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.90
Bid-YTW : 9.67 %
BNS.PR.Z FixedReset 1.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.60
Bid-YTW : 7.48 %
BAM.PR.E Ratchet 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 25.00
Evaluated at bid price : 13.00
Bid-YTW : 6.33 %
IGM.PR.B Perpetual-Premium 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 23.98
Evaluated at bid price : 24.44
Bid-YTW : 6.05 %
SLF.PR.I FixedReset 1.74 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.95
Bid-YTW : 8.89 %
SLF.PR.E Deemed-Retractible 1.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.66
Bid-YTW : 7.25 %
PWF.PR.A Floater 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 11.15
Evaluated at bid price : 11.15
Bid-YTW : 4.23 %
SLF.PR.A Deemed-Retractible 1.96 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.87
Bid-YTW : 6.71 %
NA.PR.W FixedReset 2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 16.34
Evaluated at bid price : 16.34
Bid-YTW : 4.86 %
PVS.PR.B SplitShare 2.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 6.74 %
TRP.PR.B FixedReset 2.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 9.87
Evaluated at bid price : 9.87
Bid-YTW : 5.20 %
BAM.PR.C Floater 2.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 9.44
Evaluated at bid price : 9.44
Bid-YTW : 5.06 %
CU.PR.C FixedReset 2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 4.73 %
BMO.PR.M FixedReset 2.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.40
Bid-YTW : 4.16 %
VNR.PR.A FixedReset 2.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 5.52 %
TD.PR.S FixedReset 3.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 3.91 %
TRP.PR.H FloatingReset 3.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 9.39
Evaluated at bid price : 9.39
Bid-YTW : 4.68 %
TRP.PR.C FixedReset 4.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 11.22
Evaluated at bid price : 11.22
Bid-YTW : 5.06 %
PWF.PR.T FixedReset 4.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 3.99 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.A Deemed-Retractible 98,602 RBC bought 26,100 from Desjardins at 21.71 and another 10,000 from TD at 22.00.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.87
Bid-YTW : 6.71 %
NA.PR.X FixedReset 96,928 >Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 23.10
Evaluated at bid price : 24.87
Bid-YTW : 5.59 %
RY.PR.O Perpetual-Discount 78,130 TD bought three blocks of 10,000 each from RBC, all at 21.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 21.58
Evaluated at bid price : 21.90
Bid-YTW : 5.58 %
BMO.PR.W FixedReset 57,258 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 16.89
Evaluated at bid price : 16.89
Bid-YTW : 4.69 %
CU.PR.C FixedReset 55,539 Scotia crossed blocks of 25,000 and 16,100, both at 16.73.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 4.73 %
TD.PF.G FixedReset 48,550 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 5.18 %
There were 40 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CIU.PR.A Perpetual-Discount Quote: 19.10 – 20.25
Spot Rate : 1.1500
Average : 0.7867

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.14 %

BNS.PR.R FixedReset Quote: 22.51 – 23.80
Spot Rate : 1.2900
Average : 1.0317

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.51
Bid-YTW : 5.21 %

RY.PR.F Deemed-Retractible Quote: 23.60 – 24.20
Spot Rate : 0.6000
Average : 0.3537

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 5.52 %

RY.PR.P Perpetual-Discount Quote: 23.87 – 24.65
Spot Rate : 0.7800
Average : 0.5734

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 23.55
Evaluated at bid price : 23.87
Bid-YTW : 5.49 %

BIP.PR.B FixedReset Quote: 22.30 – 22.87
Spot Rate : 0.5700
Average : 0.3806

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-27
Maturity Price : 21.85
Evaluated at bid price : 22.30
Bid-YTW : 6.25 %

SLF.PR.C Deemed-Retractible Quote: 20.51 – 21.10
Spot Rate : 0.5900
Average : 0.4012

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.51
Bid-YTW : 7.29 %

TXT.PR.A To Be Extended

January 27th, 2016

Strathbridge Asset Management has announced:

Top 10 Split Trust (the “Fund”) announced today that pursuant to the Fund’s trust agreement, the term of the Fund is being extended automatically for an additional five year period beyond the March 31, 2016 termination date to March 31, 2021. The automatic extension was approved by unitholders of the Fund at a meeting held on March 21, 2011. In connection with the automatic extension of the term, holders of Capital Units and Preferred Securities have a special retraction right (“Special Retraction Right”) to permit holders of such securities to retract such securities on March 31, 2016 on the terms on which such securities would have been redeemed or repaid had the term of the Fund not been extended.

Retraction payments for Capital Units and Preferred Securities tendered pursuant to the Special Retraction Right will be made no later than 10 business days following the retraction date of March 31, 2016, provided that such securities have been surrendered for retraction on or prior to 5:00 p.m. (Toronto time) on March 18, 2016. If more Capital Units than Preferred Securities are retracted under the Special Retraction Right, the Fund will redeem Preferred Securities on a pro rata basis to ensure an equal number of Capital Units and Preferred Securities remain outstanding. Conversely, if more Preferred Securities than Capital Units are retracted under the Special Retraction Right, the Fund will consolidate the Capital Units on a basis to ensure an equal number of Capital Units and Preferred Securities remain outstanding. Notice of such retraction or consolidation, as the case may be, will be made via press release on or before March 22, 2016.

The Fund is an investment trust designed to provide unitholders with exposure to the six largest Canadian banks and four largest Canadian life insurance companies. Preferred Security distributions of $0.78125 per security per annum are paid quarterly for a yield of 6.25% on the $12.50 issue price. Capital Unit distributions are calculated and paid each calendar quarter based on 7.5% per annum of the net asset value of the Capital Unit.

TXT.PR.A is not tracked by HIMIPref™ since it’s such a small issue – only 1,376,799 shares out according to the Exchange.