June 20, 2018

June 20th, 2018

Trade politics are complicating projections of Canadian interest rates:

The gap between September 2018 and December 2018 bankers’ acceptance futures narrowed to 14.5 basis points Tuesday amid record two-day volumes in the spread. Market participants are now pricing in just 41 basis points of additional policy tightening by year-end, down from more than 60 basis points as recently as last month. The Canadian dollar has declined in tandem, sliding 2.6 per cent against the greenback since the start of June.

Expectations for future BOC rate hikes are waning as the outlook for North American Free Trade Agreement negotiations grows increasingly fraught.

The odds of a rate increase at the BOC’s July 11 meeting have dwindled to about 67 percent, according to overnight index swap pricing, from roughly 80 percent in the aftermath of the bank’s May 30 meeting.

The Canadian dollar has tumbled more than 5 per cent versus the greenback in 2018, making the loonie the second-worst performing Group-of-10 currency in the span.

PerpetualDiscounts now yield 5.55%, equivalent to 7.22% interest at the standard equivalency factor of 1.3x. Long corporates now yield a little over 3.80%, so the pre-tax interest-equivalent spread is now about 340bp, a significant widening from the 330bp reported June 13.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.0413 % 3,027.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0413 % 5,554.7
Floater 3.32 % 3.51 % 71,365 18.50 4 0.0413 % 3,201.2
OpRet 0.00 % 0.00 % 0 0.00 0 0.2235 % 3,173.6
SplitShare 4.63 % 4.63 % 74,319 4.98 5 0.2235 % 3,790.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2235 % 2,957.1
Perpetual-Premium 5.62 % -5.09 % 57,914 0.08 9 0.0174 % 2,879.9
Perpetual-Discount 5.38 % 5.55 % 63,357 14.50 26 -0.0016 % 2,963.6
FixedReset 4.31 % 4.63 % 154,998 5.65 106 0.1092 % 2,541.2
Deemed-Retractible 5.18 % 5.80 % 68,377 5.55 27 0.2156 % 2,949.3
FloatingReset 3.05 % 3.71 % 33,930 3.44 9 0.2850 % 2,800.2
Performance Highlights
Issue Index Change Notes
BAM.PR.X FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-20
Maturity Price : 18.31
Evaluated at bid price : 18.31
Bid-YTW : 4.95 %
BAM.PF.B FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-20
Maturity Price : 22.89
Evaluated at bid price : 23.52
Bid-YTW : 4.94 %
TD.PF.D FixedReset 1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.63
Bid-YTW : 4.61 %
SLF.PR.J FloatingReset 2.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.69
Bid-YTW : 6.63 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.B Deemed-Retractible 162,100 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.71
Bid-YTW : 7.23 %
BIP.PR.D FixedReset 74,400 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.99 %
TD.PF.I FixedReset 69,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.16
Bid-YTW : 4.52 %
NA.PR.G FixedReset 63,645 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-20
Maturity Price : 23.15
Evaluated at bid price : 25.03
Bid-YTW : 4.78 %
MFC.PR.O FixedReset 53,400 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.26
Bid-YTW : 3.84 %
IFC.PR.G FixedReset 30,925 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.82
Bid-YTW : 5.06 %
There were 7 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IFC.PR.E Deemed-Retractible Quote: 24.20 – 24.50
Spot Rate : 0.3000
Average : 0.1965

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 5.80 %

PWF.PR.A Floater Quote: 21.25 – 21.63
Spot Rate : 0.3800
Average : 0.3069

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-20
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 2.86 %

IAG.PR.G FixedReset Quote: 23.51 – 23.85
Spot Rate : 0.3400
Average : 0.2678

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.51
Bid-YTW : 5.29 %

BMO.PR.Q FixedReset Quote: 22.71 – 22.90
Spot Rate : 0.1900
Average : 0.1183

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.71
Bid-YTW : 4.83 %

TD.PF.F Perpetual-Discount Quote: 24.73 – 24.96
Spot Rate : 0.2300
Average : 0.1593

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-20
Maturity Price : 24.30
Evaluated at bid price : 24.73
Bid-YTW : 5.00 %

POW.PR.D Perpetual-Discount Quote: 23.15 – 23.35
Spot Rate : 0.2000
Average : 0.1306

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-20
Maturity Price : 22.88
Evaluated at bid price : 23.15
Bid-YTW : 5.49 %

June 19, 2018

June 19th, 2018
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.1923 % 3,025.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1923 % 5,552.4
Floater 3.32 % 3.53 % 71,685 18.47 4 -0.1923 % 3,199.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.0399 % 3,166.6
SplitShare 4.64 % 4.80 % 76,775 4.99 5 0.0399 % 3,781.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0399 % 2,950.5
Perpetual-Premium 5.62 % -5.27 % 58,447 0.08 9 0.0523 % 2,879.4
Perpetual-Discount 5.38 % 5.55 % 63,816 14.50 26 0.1726 % 2,963.7
FixedReset 4.32 % 4.66 % 160,192 5.69 106 -0.1931 % 2,538.4
Deemed-Retractible 5.19 % 5.80 % 70,757 5.55 27 -0.0330 % 2,943.0
FloatingReset 3.06 % 3.72 % 35,328 3.44 9 -0.2344 % 2,792.3
Performance Highlights
Issue Index Change Notes
SLF.PR.J FloatingReset -2.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.30
Bid-YTW : 6.97 %
TRP.PR.B FixedReset -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 16.85
Evaluated at bid price : 16.85
Bid-YTW : 4.78 %
BAM.PR.R FixedReset -1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 20.30
Evaluated at bid price : 20.30
Bid-YTW : 5.11 %
HSE.PR.A FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 17.17
Evaluated at bid price : 17.17
Bid-YTW : 5.20 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.E FixedReset 102,130 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 22.72
Evaluated at bid price : 23.86
Bid-YTW : 4.84 %
BNS.PR.E FixedReset 64,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.46
Bid-YTW : 3.64 %
MFC.PR.N FixedReset 63,067 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.25
Bid-YTW : 5.51 %
NA.PR.W FixedReset 54,452 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 22.83
Evaluated at bid price : 23.22
Bid-YTW : 4.63 %
MFC.PR.Q FixedReset 53,975 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.52
Bid-YTW : 5.05 %
BMO.PR.S FixedReset 53,552 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 22.89
Evaluated at bid price : 23.46
Bid-YTW : 4.67 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
SLF.PR.J FloatingReset Quote: 19.30 – 19.72
Spot Rate : 0.4200
Average : 0.2595

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.30
Bid-YTW : 6.97 %

BAM.PF.A FixedReset Quote: 24.60 – 24.87
Spot Rate : 0.2700
Average : 0.1722

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 23.74
Evaluated at bid price : 24.60
Bid-YTW : 5.01 %

EMA.PR.H FixedReset Quote: 25.15 – 25.40
Spot Rate : 0.2500
Average : 0.1585

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 23.20
Evaluated at bid price : 25.15
Bid-YTW : 4.80 %

HSE.PR.G FixedReset Quote: 24.80 – 25.10
Spot Rate : 0.3000
Average : 0.2099

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-06-30
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 4.98 %

CM.PR.S FixedReset Quote: 23.95 – 24.19
Spot Rate : 0.2400
Average : 0.1613

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 22.78
Evaluated at bid price : 23.95
Bid-YTW : 4.70 %

PWF.PR.F Perpetual-Discount Quote: 23.90 – 24.18
Spot Rate : 0.2800
Average : 0.2020

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-19
Maturity Price : 23.63
Evaluated at bid price : 23.90
Bid-YTW : 5.57 %

CPX.PR.E : No Conversion to FloatingReset

June 19th, 2018

Capital Power Corporation has announced (on June 18):

that after having taken into account all Election Notices following the June 15, 2018 conversion deadline, in respect of the Cumulative Rate Reset Preference Shares, Series 5 (Series 5 Shares) tendered for conversion into Cumulative Floating Rate Preference Shares, Series 6 (Series 6 Shares), the holders of Series 5 Shares were not entitled to convert their shares. There were approximately 236,824 Series 5 Shares tendered for conversion, which was less than the required one million shares required for conversion into Series 6 Shares.

There are eight million Series 5 Shares listed on the Toronto Stock Exchange (TSX) under the symbol CPX.PR.E. Effective June 30, 2018, the Annual Fixed Dividend Rate for the next five-year period has been reset to 5.23800%.

For more information on the terms of, and risks associated with an investment in the Series 5 Shares, please see Capital Power’s prospectus supplement dated March 7, 2013 which is available on sedar.com or on Capital Power’s website at capitalpower.com.

It will be recalled that CPX.PR.E will reset to 5.238% effective 2018-6-30 and will hence be referred to as a FixedReset, 5.238%+315.

CPX.PR.E is a FixedReset, 5.238%+315, that commenced trading 2013-3-14 at 4.50% after being announced 2013-3-5. It is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

It will be further recalled that I recommended against conversion.

LBS.PR.A To Get Bigger

June 19th, 2018

Brompton Group has announced:

Life & Banc Split Corp. (TSX:LBS) (TSX:LBS.PR.A) (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Wednesday, June 20, 2018. The offering is expected to close on or about July 4, 2018 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $9.80 per Class A Share for a distribution rate of 12.2% on the issue price, and the Preferred Shares will be offered at a price of $10.00 per Preferred Share for a yield to maturity of 4.9%.(1) The closing price on the TSX for each of the Class A and Preferred Shares on June 18, 2018 was $9.99 and $10.18, respectively. The Class A and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (calculated as at June 18, 2018), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The Company invests in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks and the four major publicly traded Canadian life insurance companies:

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

The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per Class A Share and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.11875 per Preferred Share, and to return the original issue price plus accrued dividends (if any) to holders of Preferred Shares on November 29, 2018.

On September 25, 2017 the Company’s board of directors approved an extension of the maturity date of the Class A and Preferred Shares of the Company for an additional term to October 30, 2023. The Preferred Share dividend rate for the extended term will be announced at least 60 days prior to the original November 29, 2018 maturity date. The new dividend rate will be determined based on market yields for Preferred Shares with similar terms.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial and Scotiabank.

LBS.PR.A also had a treasury offering last September.

LBS / LBS.PR.A had an NAVPU of 19.15 on June 14, so the offering price of 19.80 per Whole Unit is a premium of 3.9% – certainly not as big as we’ve ever seen, but any kind of premium at all for a mutual fund is good business!

Update, 2018-6-20 They raised just over $50-million:

Life & Banc Split Corp. (the “Company”) is pleased to announce a successful overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively). Gross proceeds of the offering are expected to be approximately $50.1 million. The offering is expected to close on or about July 4, 2018 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (the “TSX”). The Company has granted the Agents (as defined below) an over-allotment option, exercisable for 30 days following the closing date of the offering, to purchase up to an additional 15% of the number of Class A Shares and Preferred Shares issued at the closing of the offering.

June 18, 2018

June 18th, 2018
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.2341 % 3,031.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.2341 % 5,563.1
Floater 3.32 % 3.51 % 68,957 18.50 4 0.2341 % 3,206.0
OpRet 0.00 % 0.00 % 0 0.00 0 0.1039 % 3,165.3
SplitShare 4.64 % 4.81 % 74,453 4.99 5 0.1039 % 3,780.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1039 % 2,949.3
Perpetual-Premium 5.62 % -6.83 % 59,091 0.08 9 0.0218 % 2,877.9
Perpetual-Discount 5.39 % 5.54 % 64,236 14.52 26 0.0181 % 2,958.6
FixedReset 4.31 % 4.62 % 162,255 5.66 106 0.0799 % 2,543.3
Deemed-Retractible 5.19 % 5.78 % 70,382 5.55 27 0.0063 % 2,944.0
FloatingReset 3.05 % 3.70 % 34,580 3.44 9 0.0949 % 2,798.8
Performance Highlights
Issue Index Change Notes
IFC.PR.F Deemed-Retractible -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.52
Bid-YTW : 5.66 %
TD.PF.F Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 24.39
Evaluated at bid price : 24.85
Bid-YTW : 4.98 %
IFC.PR.A FixedReset 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.75
Bid-YTW : 7.60 %
TRP.PR.B FixedReset 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 4.71 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.S FixedReset 75,071 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 22.89
Evaluated at bid price : 23.46
Bid-YTW : 4.67 %
NA.PR.G FixedReset 62,209 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 23.13
Evaluated at bid price : 24.98
Bid-YTW : 4.79 %
IFC.PR.G FixedReset 28,500 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 5.07 %
EMA.PR.H FixedReset 23,560 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 23.19
Evaluated at bid price : 25.11
Bid-YTW : 4.81 %
BMO.PR.W FixedReset 22,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 22.59
Evaluated at bid price : 23.01
Bid-YTW : 4.63 %
TRP.PR.B FixedReset 15,408 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 4.71 %
There were 5 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CU.PR.I FixedReset Quote: 25.90 – 26.20
Spot Rate : 0.3000
Average : 0.2041

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 3.07 %

TRP.PR.G FixedReset Quote: 23.92 – 24.24
Spot Rate : 0.3200
Average : 0.2302

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 23.02
Evaluated at bid price : 23.92
Bid-YTW : 5.06 %

BAM.PR.B Floater Quote: 17.09 – 17.42
Spot Rate : 0.3300
Average : 0.2440

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 17.09
Evaluated at bid price : 17.09
Bid-YTW : 3.53 %

BAM.PR.C Floater Quote: 17.13 – 17.39
Spot Rate : 0.2600
Average : 0.1795

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 17.13
Evaluated at bid price : 17.13
Bid-YTW : 3.52 %

RY.PR.O Perpetual-Discount Quote: 24.56 – 24.85
Spot Rate : 0.2900
Average : 0.2109

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-18
Maturity Price : 24.13
Evaluated at bid price : 24.56
Bid-YTW : 5.01 %

MFC.PR.G FixedReset Quote: 24.04 – 24.38
Spot Rate : 0.3400
Average : 0.2614

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.04
Bid-YTW : 5.09 %

A Primer on the Canadian Bankers’ Acceptance Market

June 18th, 2018

The Bank of Canada has released a staff discussion paper by Kaetlynd McRae and Danny Auger titled A Primer on the Canadian Bankers’ Acceptance Market:

This paper discusses how the bankers’ acceptance (BA) market in Canada is organized and its essential link to the Canadian Dollar Offered Rate (CDOR). Globally, BAs are a niche product used only in a limited number of jurisdictions. In Canada, BAs provide a key source of funding for small and medium-sized corporate borrowers that may not otherwise have direct access to the primary funding market because of their size and credit ratings. More recently, BAs have also become an increasingly important funding source for large corporate borrowers because of credit-rating downgrades in certain sectors and industry consolidation. With the market’s continued growth, BAs account for the greatest portion of money market instruments issued by non-government entities and are the second-largest money market instrument overall in Canada, averaging just over 25 per cent of the total domestic money market in 2017. For the investment community in Canada, BAs provide a source of short-term income and liquidity because of their relatively attractive yield, liquidity and credit ratings.

The BA market is intrinsically linked to CDOR, which was originally developed to establish a daily benchmark reference rate for BA borrowings. This rate is quite nuanced compared with rates in other jurisdictions in that it is not directly a bank borrowing rate. Instead, it is a committed lending rate at which banks are contractually willing to lend cash to corporate borrowers with existing BA facilities. CDOR is also used as the main interest rate benchmark for calculating the floating-rate component of both over-the-counter and exchange-traded Canadian-dollar derivative products. Another use of CDOR is to determine interest payments on floating-rate notes.

I admit to being a little disappointed that my concerns regarding the precise credit quality of BAs were not addressed in the paper. I would also have liked to see a discussion regarding the application of covered bond legislation to BAs.

June 15, 2018

June 15th, 2018

The New York Fed has released a paper by Andreas Fuster and James Vickery titled Regulation and Risk Shuffling in Bank Securities Portfolios:

Bank capital requirements are based on a mix of market values and book values. We investigate the effects of a policy change that ties regulatory capital to the market value of the “available-for-sale” investment securities portfolio for some banking organizations. Our analysis is based on security-level data on individual bank portfolios matched to bond characteristics. We find little clear evidence that banks respond by reducing the riskiness of their securities portfolios, although there is some evidence of a greater use of derivatives to hedge securities exposures. Instead, banks respond by reclassifying securities to mitigate the effects of the policy change. This shift is most pronounced for securities with high levels of interest rate risk.

Quantitatively more importantly, we nd evidence that treated banks respond by actively reshuing their portfolios, and in particular classifying risky securities as \held to maturity” (HTM) rather than available for sale (AFS). The use of detailed security-level data allow us to control in a precise way for security characteristics – most finely by including both BHC fixed effects and a vector of CUSIP-by-calendar quarter fixed effects in our specifications. This is an important feature of our analysis, since it allows us to isolate the effects of the accounting classification decision for a given security from changes in the composition in investment securities portfolios which was occurring during this period. In these specifications, our preferred point estimates suggest that a security is 20 percentage points more likely to be classified as HTM rather than AFS if owned by a BHC subject to the AOCI rule (measured on a fully phased-in basis), or 38 percentage points measured on a weighted basis. For both agency MBS and Treasury securities, we find that these effects are concentrated among bonds with higher duration.

It’s a common fallacy – you will often find people arguing vociferously that a five year GIC is less risky than a five year bond because the reported price doesn’t change and the holder doesn’t intend to sell it anyway. Crazy.

In another paper released today, Richard Crump, Domenico Giannone, and Sean Hundtofte claim that volatility has meaning in a paper titled Changing Risk-Return Profiles:

We show that realized volatility, especially the realized volatility of financial sector stock returns, has strong predictive content for the future distribution of market returns. This is a robust feature of the last century of U.S. data and, most importantly, can be exploited in real time. Current realized volatility has the most information content on the uncertainty of future returns, whereas it has only limited content about the location of the future return distribution. When volatility is low, the predicted distribution of returns is less dispersed and probabilistic forecasts are sharper. Given this finding on the importance of financial sector volatility not just to financial equity return uncertainty but to the broader market, we test for changes in the realized volatility of banks over a $50 billion threshold associated with more stringent Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) requirements. We find that the equity volatility of these large banks is differentially lower by 9 percentage points after Dodd-Frank compared to pre-crisis levels, controlling for changes over the same period for all banks and all large firms.

Our paper is most closely related to Cenesizoglu and Timmermann (2008) who study whether economic and financial variables can help improve prediction of the quantiles of the return distribution. Cenesizoglu and Timmermann (2008) also find evidence of predictive power especially in the upper tail of the return distribution. Our paper is also related to Massacci (2015) who evaluates the accuracy of density forecasts but restricts the economic and financial variables to predict the location of the distribution only. Durham and Geweke (2014) predict higher-frequency, daily returns allowing for realized intraday volatility and option-implied volatility but restrict these variables to predict the scale of the distribution only.

Our paper is also related to those papers that investigate interactions between financial crises (high periods of market volatility) and equity returns. For example, Baron and Xiong (2017) ex-amine changes in skew of bank equity returns in response to changes in economic leverage (bank credit/GDP). Moreira and Muir (2017) look at the returns of a market portfolio managed by lagged volatility, finding investors are not compensated for risk in periods of lagged high volatility. Similarly, when we examine the distribution of aggregate returns conditional on realized volatility we find no predictability in the average return, but do find predictability in the risk to holding the
market portfolio (either in terms of variance at short horizon, or skew at longer horizons), indicating a breakdown in a risk-return tradeoff. Adrian et al. (2017b) document a strongly nonlinear dependence of stock and bond returns on past equity market volatility as measured by the VIX with expected stock returns increasing for stocks when volatility increases from moderate to high levels.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.1650 % 3,024.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1650 % 5,550.1
Floater 3.33 % 3.52 % 69,860 18.49 4 -0.1650 % 3,198.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1038 % 3,162.0
SplitShare 4.65 % 4.81 % 77,123 5.00 5 -0.1038 % 3,776.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1038 % 2,946.3
Perpetual-Premium 5.62 % -7.38 % 58,754 0.08 9 0.0131 % 2,877.2
Perpetual-Discount 5.39 % 5.54 % 64,902 14.52 26 0.1779 % 2,958.0
FixedReset 4.31 % 4.71 % 166,698 5.66 106 -0.1117 % 2,541.3
Deemed-Retractible 5.19 % 5.78 % 70,434 5.56 27 0.0535 % 2,943.8
FloatingReset 3.13 % 3.83 % 35,795 3.45 9 -0.0449 % 2,796.2
Performance Highlights
Issue Index Change Notes
BAM.PR.X FixedReset -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 18.36
Evaluated at bid price : 18.36
Bid-YTW : 5.02 %
BAM.PF.B FixedReset -1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 22.80
Evaluated at bid price : 23.42
Bid-YTW : 5.04 %
IFC.PR.A FixedReset -1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.55
Bid-YTW : 7.79 %
PWF.PR.T FixedReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 23.59
Evaluated at bid price : 24.26
Bid-YTW : 4.65 %
Volume Highlights
Issue Index Shares
Traded
Notes
EMA.PR.H FixedReset 97,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 23.19
Evaluated at bid price : 25.11
Bid-YTW : 4.80 %
NA.PR.G FixedReset 65,575 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 23.13
Evaluated at bid price : 24.97
Bid-YTW : 4.85 %
TD.PF.I FixedReset 55,300 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : 4.46 %
NA.PR.C FixedReset 41,570 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 24.98
Bid-YTW : 4.59 %
BMO.PR.W FixedReset 31,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 22.60
Evaluated at bid price : 23.02
Bid-YTW : 4.70 %
RY.PR.Z FixedReset 30,177 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 22.93
Evaluated at bid price : 23.50
Bid-YTW : 4.62 %
There were 18 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.G FixedReset Quote: 24.05 – 24.57
Spot Rate : 0.5200
Average : 0.3215

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 23.74
Evaluated at bid price : 24.05
Bid-YTW : 5.12 %

BAM.PF.E FixedReset Quote: 23.25 – 23.68
Spot Rate : 0.4300
Average : 0.3025

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 22.88
Evaluated at bid price : 23.25
Bid-YTW : 5.00 %

GWO.PR.Q Deemed-Retractible Quote: 23.60 – 23.97
Spot Rate : 0.3700
Average : 0.2459

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 6.19 %

IFC.PR.A FixedReset Quote: 19.55 – 19.85
Spot Rate : 0.3000
Average : 0.1978

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.55
Bid-YTW : 7.79 %

IFC.PR.F Deemed-Retractible Quote: 24.80 – 25.22
Spot Rate : 0.4200
Average : 0.3247

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 5.44 %

BAM.PF.F FixedReset Quote: 24.41 – 24.80
Spot Rate : 0.3900
Average : 0.2950

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-15
Maturity Price : 24.00
Evaluated at bid price : 24.41
Bid-YTW : 5.08 %

GDV.PR.A Steady on Good Volume

June 15th, 2018

Brompton Group has announced (on June 7):

Global Dividend Growth Split Corp. (the “Company”) has determined the exchange ratios for the exchange option (the “Exchange Option”) with respect to its initial public offering. Under the Exchange Option, prospective purchasers could purchase Class A shares or Units (consisting of one Class A and one Preferred share) of the Company by an exchange of freely tradable equity securities (“Exchange Securities”) of the issuers listed below (the “Exchange Eligible Issuers”). The Exchange Option deadline was 5:00 p.m. on May 24, 2018.

The following table indicates the adjusted volume weighted average trading price (“Adjusted VWAP”) and exchange ratio for the Exchange Securities of each Exchange Eligible Issuer as calculated in the manner described in the Company’s prospectus dated May 23, 2018. The adjusted volume weighted average trading price and exchange ratios are rounded to four decimal places. Fractional Class A shares/Units will not be issued.

Company Name (Exchange Ticker Symbol) CUSIP ISIN Adjusted VWAP
(C$ Equiv.)
Exchange
Ratio Per Class A Share
Exchange Ratio Per Unit
Global Equities
APPLE INCORPORATED (AAPL) 37833100 US0378331005 $249.4883 20.7734 11.3404
BCE (BCE) 05534B760 CA05534B7604 $54.4520 4.5339 2.4751
CARNIVAL CORPORATION (CCL) 143658300 PA1436583006 $79.9122 6.6538 3.6324
CISCO SYSTEMS INCORPORATED (CSCO) 17275R102 US17275R1023 $56.6722 4.7188 2.5760
ENBRIDGE (ENB) 29250N105 CA29250N1050 $40.3859 3.3627 1.8357
HSBC HOLDINGS (HSBC) 404280406 US4042804066 $63.6714 5.3015 2.8942
IBM CORPORATION (IBM) 459200101 US4592001014 $186.5488 15.5328 8.4795
INTEL CORPORATION (INTC) 458140100 US4581401001 $73.4187 6.1131 3.3372
JOHNSON & JOHNSON (JNJ) 478160104 US4781601046 $158.4643 13.1944 7.2029
JP MORGAN CHASE & CO. (JPM) 46625H100 US46625H1005 $141.7487 11.8026 6.4431
MANULIFE FINANCIAL (MFC) 56501R106 CA56501R1064 $24.6940 2.0561 1.1225
NOVARTIS AG (NVS) 66987V109 US66987V1098 $97.7830 8.1418 4.4447
PFIZER INCORPORATED (PFE) 717081103 US7170811035 $47.2153 3.9313 2.1462
PROCTER & GAMBLE CO. (PG) 742718109 US7427181091 $96.5067 8.0355 4.3867
SANOFI SA (SNY) 80105N105 US80105N1054 $50.0553 4.1678 2.2752
SUN LIFE FINANCIAL INCORPORATED (SLF) 866796105 CA8667961053 $54.4145 4.5308 2.4734
TELUS CORPORATION (T) 87971M103 CA87971M1032 $45.4713 3.7861 2.0669
TEXAS INSTRUMENTS INCORPORATED (TXN) 882508104 US8825081040 $151.1907 12.5887 6.8723
TORONTO-DOMINION BANK (TD) 891160509 CA8911605092 $75.2690 6.2672 3.4213
Other
ALIMENTATION COUCHE-TARD INCORPORATED (ATD) 01626P403 CA01626P4033 $55.1488 4.5919 2.5068
ARC RESOURCES LIMITED (ARX) 00208D408 CA00208D4084 $13.0453 1.0862 0.5930
BARRICK GOLD CORPORATION (ABX) 67901108 CA0679011084 $16.8209 1.4006 0.7646
BLACKBERRY LIMITED (BB) 09228F103 CA09228F1036 $15.6563 1.3036 0.7117
CRESCENT POINT ENERGY CORPORATION (CPG) 22576C101 CA22576C1014 $10.0508 0.8369 0.4569
EMERA INCORPORATED (EMA) 290876101 CA2908761018 $40.1965 3.3469 1.8271
ENCANA CORPORATION (ECA) 292505104 CA2925051047 $15.9743 1.3301 0.7261
FIRST QUANTUM MINERALS LIMITED (FM) 335934105 CA3359341052 $21.5054 1.7906 0.9775
FRANCO-NEVADA CORPORATION (FNV) 351858105 CA3518581051 $91.7520 7.6396 4.1705
INTER PIPELINE FUND (IPL) 45833V109 CA45833V1094 $24.4985 2.0398 1.1136
KINROSS GOLD CORPORATION (K) 496902404 CA4969024047 $4.6261 0.3852 0.2103
PEMBINA PIPELINE CORPORATION (PPL) 706327103 CA7063271034 $44.7449 3.7256 2.0339
SHAW COMMUNICATIONS INCORPORATED (SJR.B) 82028K200 CA82028K2002 $26.5114 2.2074 1.2051
TRANSCANADA CORPORATION (TRP) 89353D107 CA89353D1078 $53.9139 4.4891 2.4506
VALEANT PHARMACEUTICALS INTERNATIONAL INCORPORATED (VRX) 91911K102 CA91911K1021 $30.8004 2.5646 1.4000
Exchange-Traded Funds
ISHARES CORE S&P 500 INDEX ETF (XUS) 46434R109 CA46434R1091 $44.7166 3.7233 2.0326
ISHARES CORE S&P/TSX CAPPED COMPOSITE INDEX ETF (XIC) 46430J101 CA46430J1012 $25.7062 2.1404 1.1685
ISHARES MSCI EAFE INDEX ETF (XIN) 46428L100 CA46428L1004 $26.7373 2.2263 1.2153
ISHARES MSCI EUROPE IMI INDEX ETF (XEU) 46434W108 CA46434W1086 $24.9395 2.0766 1.1336
ISHARES MSCI WORLD INDEX ETF (XWD) 46430Y108 CA46430Y1088 $50.5080 4.2055 2.2958
ISHARES S&P/TSX 60 INDEX ETF (XIU) 46428D108 CA46428D1087 $23.9088 1.9907 1.0868
VANGUARD S&P 500 INDEX ETF (VFV) 92205Y105 CA92205Y1051 $63.4257 5.2811 2.8830

The Toronto Stock Exchange has conditionally approved the listing of the Class A and Preferred shares, subject to the Company fulfilling all customary requirements. Trading under the symbols GDV and GDV.PR.A is expected to commence on the closing date, June 15, 2018.

The Company will invest in a diversified portfolio (the “Portfolio”) of equity securities of large capitalization global dividend growth companies selected by the Manager. In order to qualify for inclusion in the Portfolio, at the time of investment and at the time of each periodic reconstitution and/or rebalancing of the Portfolio, each global dividend growth company included in the Portfolio must (i) have a market capitalization of at least US$10 billion; and (ii) have a history of dividend growth or, in the Manager’s view, have high potential for future dividend growth.

The Manager expects that at least 20 global dividend growth companies will comprise the Portfolio. The indicative portfolio includes: Airbus SE, Apple Inc., AstraZeneca plc, BCE Inc., Carnival Corporation, Cisco Systems Inc., Deutsche Post AG, Enbridge Inc., HSBC Holdings plc, Intel Corporation, IBM Corporation, Johnson & Johnson, JP Morgan Chase & Co., Manulife Financial Corporation, Novartis AG, Pfizer Inc., Proctor & Gamble Co., Sanofi SA, Siemens AG, Sun Life Financial Inc., TELUS Corporation, Texas Instruments Inc., Toronto-Dominion Bank, UBS Group AG, and Vinci SA.

The investment objectives for the Class A shares are to provide their holders with regular monthly non-cumulative cash distributions and the opportunity for capital appreciation through exposure to the Portfolio. The monthly cash distribution is targeted to be $0.10 per Class A share representing a yield on the issue price of the Class A shares of 10.0% per annum.

The investment objectives for the Preferred shares are to provide their holders with fixed cumulative preferential quarterly cash distributions and to return the original issue price of $10.00 to holders on June 30, 2021, subject to extension for successive terms of up to five years as determined by the board of directors of the Company. The quarterly cash distribution will be $0.1250 per Preferred share ($0.50 per annum, or 5.0% per annum on the issue price of $10.00 per preferred share), until June 30, 2021. The Preferred shares have been provisionally rated Pfd-3 (high) by DBRS Limited.

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

Today, Brompton announced:

Brompton Funds Limited (the “Manager”) is pleased to announce that Global Dividend Growth Split Corp. (the “Company”) has completed its initial public offering of 3,550,000 Class A shares and 3,550,000 Preferred shares for total gross proceeds of $78.1 million. The Class A and Preferred shares will commence trading today on the Toronto Stock Exchange under the symbols GDV and GDV.PR.A, respectively.

The Company will invest in a diversified portfolio (the “Portfolio”) of equity securities of large capitalization global dividend growth companies selected by the Manager. In order to qualify for inclusion in the Portfolio, at the time of investment and at the time of each periodic reconstitution and/or rebalancing of the Portfolio, each global dividend growth company included in the Portfolio must (i) have a market capitalization of at least US$10 billion; and (ii) have a history of dividend growth or, in the Manager’s view, have high potential for future dividend growth.
The investment objectives for the Class A shares are to provide their holders with regular monthly non-cumulative cash distributions and the opportunity for capital appreciation through exposure to the Portfolio. The monthly cash distribution is targeted to be $0.10 per Class A share representing a yield on the issue price of the Class A shares of 10.0% per annum.

The investment objectives for the Preferred shares are to provide their holders with fixed cumulative preferential quarterly cash distributions and to return the original issue price of $10.00 to holders on June 30, 2021, subject to extension for successive terms of up to five years as determined by the board of directors of the Company. The quarterly cash distribution will be $0.1250 per Preferred share ($0.50 per annum, or 5.0% per annum) on the issue price of $10.00 per Preferred share, until June 30, 2021. The Preferred shares have been provisionally rated Pfd-3 (high) by DBRS Limited.

Brompton Funds Limited acts as the manager and portfolio manager of the Company. The Manager currently manages five split share corporations with combined assets of over $1.3 billion.

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

DBRS has finalized the Pfd-3(high) rating:

DBRS Limited (DBRS) finalized the provisional rating of Pfd-3 (high) assigned to the Preferred Shares issued by Global Dividend Growth Split Corp. (the Company). The Company issued an equal number (3,550,000) of the Preferred Shares and the Class A Shares at an issue price of $10.00 per Preferred Share and $12.00 per Class A Share. From to time or during the events of issuance and redemption, the number of the Class A Shares outstanding may exceed the number of the Preferred Shares outstanding. It is expected that such excess will not be more than 10% and the excess of over 10% should not be outstanding for more than 15 days. Both classes of shares are scheduled to mature on June 30, 2021. The term of the Company may be extended beyond the maturity date for additional terms of five years each as determined by the Company’s board of directors.

Based on the initial asset coverage of 2.1x, the net asset value of the Company would have to fall by approximately 53% for the holders of the Preferred Shares to be in a loss position. The initial dividend coverage ratio is 0.6x.

GDV.PR.A commenced marketing in late April and issued a final prospectus on May 24. It is a 5% three-year SplitShare and will be tracked by HIMIPref™ but has been relegated to the Scraps subindex on credit concerns.

The issue traded 154,447 shares today in a range of 9.90-00 before closing at 10.00-01. Vital statistics are:

GDV.PR.A SplitShare YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-06-30
Maturity Price : 10.00
Evaluated at bid price : 10.00
Bid-YTW : 4.98 %

June 14, 2018

June 14th, 2018
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.9577 % 3,029.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.9577 % 5,559.3
Floater 3.32 % 3.53 % 68,077 18.47 4 0.9577 % 3,203.8
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2549 % 3,165.3
SplitShare 4.64 % 4.79 % 79,798 5.00 5 -0.2549 % 3,780.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2549 % 2,949.3
Perpetual-Premium 5.62 % -7.11 % 59,278 0.08 9 0.0872 % 2,876.9
Perpetual-Discount 5.40 % 5.56 % 64,535 14.49 26 0.2477 % 2,952.8
FixedReset 4.31 % 4.69 % 166,346 4.27 106 0.1525 % 2,544.2
Deemed-Retractible 5.19 % 5.80 % 71,312 5.56 27 0.0954 % 2,942.2
FloatingReset 3.13 % 3.83 % 34,073 3.45 9 0.0649 % 2,797.4
Performance Highlights
Issue Index Change Notes
TRP.PR.B FixedReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-14
Maturity Price : 16.84
Evaluated at bid price : 16.84
Bid-YTW : 4.89 %
PVS.PR.F SplitShare -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.04
Bid-YTW : 4.81 %
GWO.PR.N FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.26
Bid-YTW : 7.31 %
IFC.PR.A FixedReset 1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.80
Bid-YTW : 7.56 %
BAM.PR.K Floater 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-14
Maturity Price : 17.08
Evaluated at bid price : 17.08
Bid-YTW : 3.53 %
Volume Highlights
Issue Index Shares
Traded
Notes
PWF.PR.R Perpetual-Discount 145,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-14
Maturity Price : 24.55
Evaluated at bid price : 24.85
Bid-YTW : 5.60 %
MFC.PR.M FixedReset 58,000 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.39
Bid-YTW : 5.55 %
TD.PF.I FixedReset 52,410 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : 4.46 %
TRP.PR.K FixedReset 44,059 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.53
Bid-YTW : 4.39 %
TD.PR.Y FixedReset 43,220 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 3.91 %
NA.PR.G FixedReset 41,050 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-14
Maturity Price : 23.13
Evaluated at bid price : 24.97
Bid-YTW : 4.85 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.T FixedReset Quote: 20.70 – 21.10
Spot Rate : 0.4000
Average : 0.2578

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-14
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 5.13 %

BAM.PF.E FixedReset Quote: 23.45 – 23.70
Spot Rate : 0.2500
Average : 0.1626

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-14
Maturity Price : 23.08
Evaluated at bid price : 23.45
Bid-YTW : 4.96 %

SLF.PR.H FixedReset Quote: 21.65 – 21.95
Spot Rate : 0.3000
Average : 0.2169

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.65
Bid-YTW : 6.03 %

MFC.PR.L FixedReset Quote: 22.76 – 22.99
Spot Rate : 0.2300
Average : 0.1499

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.76
Bid-YTW : 5.91 %

TRP.PR.K FixedReset Quote: 25.53 – 25.78
Spot Rate : 0.2500
Average : 0.1753

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.53
Bid-YTW : 4.39 %

BAM.PR.N Perpetual-Discount Quote: 20.94 – 21.24
Spot Rate : 0.3000
Average : 0.2345

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-14
Maturity Price : 20.94
Evaluated at bid price : 20.94
Bid-YTW : 5.69 %

June 13, 2018

June 13th, 2018

The FOMC hiked the US policy rate:

Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.

This had a minor effect on markets, unless it didn’t (there are always cross-currents!):

Benchmark 10-year U.S. Treasury notes last fell 9/32 in price to yield 2.9903 per cent, from 2.957 per cent late on Tuesday.

The 30-year bond last fell 11/32 in price to yield 3.1096 per cent, from 3.092 per cent Tuesday.

The dollar index, which measures the greenback against a basket of currencies, rose 0.09 per cent, with the euro up 0.06 per cent to $1.175.

The Dow Jones Industrial Average fell 117.74 points, or 0.46 per cent, to 25,202.99, the S&P 500 lost 11.19 points, or 0.40 per cent, to 2,775.66 and the Nasdaq Composite dropped 8.10 points, or 0.11 per cent, to 7,695.70

PerpetualDiscounts now yield 5.57%, equivalent to 7.24% interest at the standard conversion factor of 1.3x. Long corporates now yield about 3.95%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread” is now about 330bp, a slight (and perhaps spurious) widening from the 325bp reported June 6.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.0000 % 3,000.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0000 % 5,506.5
Floater 3.33 % 3.58 % 67,820 18.25 4 0.0000 % 3,173.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.0398 % 3,173.4
SplitShare 4.63 % 4.58 % 80,852 5.00 5 0.0398 % 3,789.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0398 % 2,956.9
Perpetual-Premium 5.63 % -6.37 % 61,726 0.09 9 0.1048 % 2,874.4
Perpetual-Discount 5.40 % 5.57 % 62,258 14.48 26 -0.1613 % 2,945.5
FixedReset 4.31 % 4.73 % 166,584 5.66 106 0.1686 % 2,540.3
Deemed-Retractible 5.19 % 5.80 % 70,760 5.55 27 -0.1650 % 2,939.4
FloatingReset 3.13 % 3.83 % 35,039 3.45 9 0.1801 % 2,795.6
Performance Highlights
Issue Index Change Notes
BAM.PF.E FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-13
Maturity Price : 23.28
Evaluated at bid price : 23.65
Bid-YTW : 4.99 %
TRP.PR.B FixedReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-13
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 4.83 %
RY.PR.M FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-13
Maturity Price : 23.16
Evaluated at bid price : 24.21
Bid-YTW : 4.73 %
MFC.PR.M FixedReset 1.34 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.40
Bid-YTW : 5.54 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.T FloatingReset 245,692 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.09
Bid-YTW : 2.76 %
TD.PF.B FixedReset 152,474 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-13
Maturity Price : 22.69
Evaluated at bid price : 23.19
Bid-YTW : 4.73 %
NA.PR.G FixedReset 125,850 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-13
Maturity Price : 23.13
Evaluated at bid price : 24.97
Bid-YTW : 4.85 %
NA.PR.C FixedReset 108,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.55 %
TRP.PR.J FixedReset 79,175 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.36 %
CM.PR.S FixedReset 73,015 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-13
Maturity Price : 22.81
Evaluated at bid price : 24.02
Bid-YTW : 4.74 %
There were 42 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.N FixedReset Quote: 19.06 – 19.45
Spot Rate : 0.3900
Average : 0.2628

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.06
Bid-YTW : 7.48 %

TD.PF.E FixedReset Quote: 24.51 – 24.85
Spot Rate : 0.3400
Average : 0.2191

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-10-31
Maturity Price : 25.00
Evaluated at bid price : 24.51
Bid-YTW : 4.80 %

HSE.PR.E FixedReset Quote: 24.86 – 25.30
Spot Rate : 0.4400
Average : 0.3205

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-03-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 4.73 %

TRP.PR.A FixedReset Quote: 20.15 – 20.49
Spot Rate : 0.3400
Average : 0.2363

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-06-13
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 4.96 %

MFC.PR.K FixedReset Quote: 22.50 – 22.87
Spot Rate : 0.3700
Average : 0.2731

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 6.23 %

IAG.PR.I FixedReset Quote: 25.00 – 25.32
Spot Rate : 0.3200
Average : 0.2236

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2023-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.78 %