September 26, 2016

September 26th, 2016

Mark Gilbert of Bloomberg writes about his experience playing a game published by the Fed:

The San Francisco branch of the Federal Reserve has a game on its website that lets you play at being Chair of the Federal Reserve. After tinkering with it, I’ve come to some conclusions: Modeling the economy is a mug’s game, short-term interest rates are a poor tool for steering the economy, and I should never be given the job of running a central bank.

The website sets out the objectives:

Your job is to set monetary policy to achieve full employment and low price inflation. Your term will last four years (16 quarters). Keep unemployment close to its natural rate of 5 percent. Keep inflation near the Fed’s 2 percent inflation target. Pay attention to the headlines for information about the economy.

Here’s how I did:

ChairtheFedGame_160926
Click for Big
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 -0.1783 % 1,695.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1783 % 3,098.0
Floater 4.88 % 4.62 % 87,257 16.20 4 -0.1783 % 1,785.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,880.8
SplitShare 5.05 % 4.67 % 80,091 2.16 5 0.0000 % 3,440.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,684.3
Perpetual-Premium 5.50 % 4.65 % 62,963 1.95 12 0.0098 % 2,686.7
Perpetual-Discount 5.13 % 5.13 % 87,257 15.00 26 0.0934 % 2,908.9
FixedReset 4.98 % 4.27 % 148,525 6.98 92 0.1106 % 2,045.3
Deemed-Retractible 5.02 % 4.77 % 112,122 1.21 32 0.0789 % 2,799.3
FloatingReset 2.86 % 4.47 % 32,969 4.97 12 -0.1054 % 2,191.3
Performance Highlights
Issue Index Change Notes
TRP.PR.G FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 20.26
Evaluated at bid price : 20.26
Bid-YTW : 4.48 %
BAM.PR.T FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 15.38
Evaluated at bid price : 15.38
Bid-YTW : 4.81 %
TRP.PR.C FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 13.38
Evaluated at bid price : 13.38
Bid-YTW : 4.08 %
NA.PR.Q FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.22 %
BMO.PR.Q FixedReset 1.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.15
Bid-YTW : 6.16 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.H FixedReset 233,115 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 4.47 %
MFC.PR.G FixedReset 65,768 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.76
Bid-YTW : 6.87 %
CM.PR.Q FixedReset 43,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 20.02
Evaluated at bid price : 20.02
Bid-YTW : 4.27 %
TRP.PR.E FixedReset 40,516 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 18.73
Evaluated at bid price : 18.73
Bid-YTW : 4.27 %
TRP.PR.J FixedReset 37,100 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.59
Bid-YTW : 4.11 %
BNS.PR.O Deemed-Retractible 36,560 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-26
Maturity Price : 25.25
Evaluated at bid price : 25.61
Bid-YTW : -1.26 %
There were 29 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IFC.PR.A FixedReset Quote: 15.34 – 15.63
Spot Rate : 0.2900
Average : 0.1960

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.34
Bid-YTW : 9.55 %

RY.PR.M FixedReset Quote: 20.00 – 20.26
Spot Rate : 0.2600
Average : 0.1800

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.15 %

HSE.PR.A FixedReset Quote: 11.88 – 12.14
Spot Rate : 0.2600
Average : 0.1946

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 11.88
Evaluated at bid price : 11.88
Bid-YTW : 4.94 %

POW.PR.G Perpetual-Premium Quote: 25.64 – 25.84
Spot Rate : 0.2000
Average : 0.1348

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 4.93 %

VNR.PR.A FixedReset Quote: 18.36 – 18.70
Spot Rate : 0.3400
Average : 0.2801

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 18.36
Evaluated at bid price : 18.36
Bid-YTW : 4.79 %

HSE.PR.C FixedReset Quote: 19.15 – 19.42
Spot Rate : 0.2700
Average : 0.2122

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 5.07 %

September 23, 2016

September 24th, 2016
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.4968 % 1,698.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4968 % 3,103.5
Floater 4.87 % 4.60 % 90,578 16.24 4 -0.4968 % 1,788.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0159 % 2,880.8
SplitShare 5.05 % 4.73 % 81,363 2.17 5 -0.0159 % 3,440.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0159 % 2,684.3
Perpetual-Premium 5.50 % 4.61 % 66,703 1.96 12 0.0098 % 2,686.5
Perpetual-Discount 5.13 % 5.14 % 87,017 15.01 26 0.0127 % 2,906.2
FixedReset 4.98 % 4.46 % 149,265 6.94 92 0.0150 % 2,043.1
Deemed-Retractible 5.03 % 4.91 % 112,929 4.66 32 -0.0038 % 2,797.1
FloatingReset 2.85 % 4.47 % 33,004 4.98 12 -0.4024 % 2,193.6
Performance Highlights
Issue Index Change Notes
TRP.PR.F FloatingReset -2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 13.71
Evaluated at bid price : 13.71
Bid-YTW : 4.47 %
TRP.PR.H FloatingReset -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 10.47
Evaluated at bid price : 10.47
Bid-YTW : 4.32 %
PWF.PR.T FixedReset -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 19.61
Evaluated at bid price : 19.61
Bid-YTW : 4.19 %
BMO.PR.A FloatingReset -1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 4.89 %
BAM.PR.B Floater -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 10.37
Evaluated at bid price : 10.37
Bid-YTW : 4.56 %
BIP.PR.B FixedReset 1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.59
Bid-YTW : 4.89 %
VNR.PR.A FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.94 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.H FixedReset 214,830 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 4.49 %
TD.PF.H FixedReset 213,511 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 4.55 %
NA.PR.W FixedReset 126,350 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 4.37 %
RY.PR.Z FixedReset 55,250 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.90
Evaluated at bid price : 18.90
Bid-YTW : 4.12 %
PWF.PR.T FixedReset 51,950 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 19.61
Evaluated at bid price : 19.61
Bid-YTW : 4.19 %
BAM.PF.D Perpetual-Discount 43,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 23.01
Evaluated at bid price : 23.36
Bid-YTW : 5.25 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
NA.PR.W FixedReset Quote: 18.20 – 18.48
Spot Rate : 0.2800
Average : 0.1765

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 4.37 %

BMO.PR.A FloatingReset Quote: 21.25 – 21.90
Spot Rate : 0.6500
Average : 0.5564

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 4.89 %

GWO.PR.M Deemed-Retractible Quote: 25.92 – 26.25
Spot Rate : 0.3300
Average : 0.2479

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-23
Maturity Price : 25.75
Evaluated at bid price : 25.92
Bid-YTW : -3.67 %

BAM.PF.H FixedReset Quote: 26.74 – 26.99
Spot Rate : 0.2500
Average : 0.1734

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.74
Bid-YTW : 3.24 %

W.PR.K FixedReset Quote: 25.69 – 26.07
Spot Rate : 0.3800
Average : 0.3048

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.69
Bid-YTW : 4.82 %

HSE.PR.G FixedReset Quote: 21.05 – 21.33
Spot Rate : 0.2800
Average : 0.2125

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 5.16 %

BBD Downgraded to P-5(low) by S&P

September 24th, 2016

S&P Global Ratings has announced:

  • •Bombardier Inc. has cut its 2016 delivery forecast for the C-Series due to jet engine delivery delays by Pratt & Whitney.
  • •In addition, the business and commercial jet portfolios continue to be pressured due to softer end markets, leading us to revise the business risk profile to weak from fair.
  • •As a result, we are lowering our long-term corporate credit and issue ratings on Bombardier to ‘B-’ from ‘B’.
  • •We are lowering our global scale and Canada scale ratings on the company’s preferred stock to ‘CCC-’ and ‘P-5(Low)’
  • •The stable outlook reflects our view that the company’s liquidity provides significant financial flexibility to cover cash flow deficits and any unexpected underperformance through 2017.


“The downgrade primarily reflects our view of the company’s increased sensitivity to protracted weakness in its end markets and future delays to its C-Series program,” said S&P Global Ratings credit analyst Aniki Saha-Yannopoulos.

The ratings on Bombardier reflect what we view as the company’s weak business risk profile and highly leveraged financial risk profile. Our ratings take into consideration the company’s competitive market position in the transportation and business aircraft segments, as well as Bombardier’s product diversity. These positives are offset, in part we believe, by the continued risk associated with Bombardier’s production ramp-up of the C-Series jet, high leverage, weakness in the business jet space, and declining cash flow from both the aerospace and transportation divisions.

The stable outlook reflects our view that even though the company faces multiple risks, it has ample liquidity resources to manage its operations.

The most recent news regarding Bombardier’s core competency is:

Canadian government officials should “make up their minds” on a financial aid request by struggling aircraft maker Bombardier Inc., Quebec Finance Minister Carlos Leitao says.

Quebec announced an aid package for the C Series program late last year, which helped stabilize the Montreal-based company and allowed it to secure sales for the jet, Mr. Leitao said at the Bloomberg Canadian Fixed Income Conference in New York. Quebec finalized the deal in June.

Bombardier also sought federal help late last year, though Prime Minister Justin Trudeau’s government has since sought corporate-governance concessions in exchange for any aid package. Bombardier and the federal government remain locked in a standoff over the matter. Mr. Leitao says federal funding would allow the company to start developing new products.

Philip Proulx, a spokesman for federal Innovation Minister Navdeep Bains, who is leading talks with Bombardier on behalf of Mr. Trudeau’s government, declined to comment directly on whether a decision on the aid request is imminent.

“We want to be part of the solution to help set the company up for long term success,” Mr. Proulx said by e-mail. “That is why we continue to be engaged with the company. For us, the priority is to ensure good quality jobs, R&D investments and head office remains in Canada.”

Affected issues are BBD.PR.B, BBD.PR.C and BBD.PR.D.

September 22, 2016

September 23rd, 2016
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.5351 % 1,707.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5351 % 3,119.0
Floater 4.84 % 4.56 % 91,709 16.32 4 0.5351 % 1,797.5
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0238 % 2,881.3
SplitShare 5.05 % 4.69 % 81,472 2.17 5 -0.0238 % 3,440.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0238 % 2,684.7
Perpetual-Premium 5.50 % 4.59 % 63,232 1.06 12 0.0553 % 2,686.2
Perpetual-Discount 5.13 % 5.15 % 89,860 14.99 26 0.0285 % 2,905.9
FixedReset 4.98 % 4.43 % 146,346 6.94 92 -0.0723 % 2,042.8
Deemed-Retractible 5.03 % 4.50 % 111,455 3.20 32 0.0318 % 2,797.2
FloatingReset 2.84 % 4.37 % 33,451 4.99 12 -0.0481 % 2,202.4
Performance Highlights
Issue Index Change Notes
PWF.PR.T FixedReset -1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.12 %
PWF.PR.P FixedReset -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 13.15
Evaluated at bid price : 13.15
Bid-YTW : 4.48 %
BAM.PR.T FixedReset -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 15.47
Evaluated at bid price : 15.47
Bid-YTW : 5.02 %
VNR.PR.A FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 5.03 %
CM.PR.Q FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 20.08
Evaluated at bid price : 20.08
Bid-YTW : 4.47 %
BAM.PR.R FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 15.61
Evaluated at bid price : 15.61
Bid-YTW : 4.87 %
TRP.PR.F FloatingReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 14.02
Evaluated at bid price : 14.02
Bid-YTW : 4.37 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.H FixedReset 1,021,288 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 4.52 %
BNS.PR.H FixedReset 137,935 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.47
Bid-YTW : 4.50 %
RY.PR.Z FixedReset 130,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.86
Evaluated at bid price : 18.86
Bid-YTW : 4.13 %
FTS.PR.J Perpetual-Discount 103,295 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 23.43
Evaluated at bid price : 23.90
Bid-YTW : 4.99 %
CM.PR.P FixedReset 84,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.42
Evaluated at bid price : 18.42
Bid-YTW : 4.30 %
SLF.PR.A Deemed-Retractible 54,213 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.97
Bid-YTW : 5.39 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
VNR.PR.A FixedReset Quote: 18.20 – 18.63
Spot Rate : 0.4300
Average : 0.3181

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 5.03 %

BMO.PR.R FloatingReset Quote: 22.50 – 22.79
Spot Rate : 0.2900
Average : 0.1890

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 4.27 %

SLF.PR.G FixedReset Quote: 14.10 – 14.36
Spot Rate : 0.2600
Average : 0.1711

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.10
Bid-YTW : 10.07 %

MFC.PR.G FixedReset Quote: 19.65 – 19.91
Spot Rate : 0.2600
Average : 0.1838

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.65
Bid-YTW : 7.12 %

TRP.PR.D FixedReset Quote: 17.90 – 18.17
Spot Rate : 0.2700
Average : 0.1943

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 4.59 %

PWF.PR.T FixedReset Quote: 19.90 – 20.23
Spot Rate : 0.3300
Average : 0.2603

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.12 %

New Issue: CPX FixedReset 6.00%+526M600

September 22nd, 2016

Capital Power Corporation has announced:

that it will issue 6,000,000 Cumulative Minimum Rate Reset Preference Shares, Series 7 (the “Series 7 Shares”) at a price of $25.00 per Series 7 Share (the “Offering”) for aggregate gross proceeds of $150 million on a bought deal basis with a syndicate of underwriters, co-led by TD Securities Inc. and CIBC Capital Markets. In addition, Capital Power has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase up to an additional 2,000,000 Series 7 Shares on the same terms, for additional gross proceeds of up to $50 million.

The Series 7 Shares will pay fixed cumulative dividends of $1.50 per share per annum, yielding 6.00% per annum, payable on the last business day of March, June, September and December of each year, as and when declared by the board of directors of Capital Power, for the initial period ending December 31, 2021. Based on an October 4, 2016 closing, the first quarterly dividend of $0.3616 per share is expected to be paid on December 30, 2016. The dividend rate will be reset on December 31, 2021 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 5.26%, provided that, in any event, such rate shall not be less than 6.00%. The Series 7 Shares are redeemable by Capital Power, at its option, on December 31, 2021 and every five years thereafter.

Holders of Series 7 Shares will have the right to convert all or any part of their shares into Cumulative Floating Rate Preference Shares, Series 8 (the “Series 8 Shares”), subject to certain conditions, on December 31, 2021 and every five years thereafter. Holders of Series 8 Shares will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 5.26%, as and when declared by the board of directors of Capital Power.

Net proceeds of the offering will be used to reduce indebtedness under Capital Power’s credit facilities.

Standard & Poor’s, a division of the McGraw Hill Companies, Inc. has assigned a provisional rating of P-3 for the Series 7 Shares and DBRS Limited has assigned a preliminary rating of Pfd-3 (low) for the Series 7 Shares.

The Series 7 Shares will be issued pursuant to a prospectus supplement to Capital Power’s short form base shelf prospectus dated May 3, 2016. This prospectus supplement will be filed with securities regulatory authorities in Canada. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

I don’t get it, frankly. This issue looks horrifically expensive. Look at the Implied Volatility analysis, for instance:

impVol_CPX_160922
Click for Big

So look, there’s the new issue, way over on the right hand side with an Expected Future Current Yield of 6.00% – that’s the lowest of all the CPX outstanding FixedResets: CPX.PR.A, 6.18%; CPX.PR.C, 6.59%; CPX.PR.E, 6.57%.

So look, you can pick up over half a point in yield AND have lower call risk AND have increased leverage with respect to future increases in GOC-5 by buying CPX.PR.C or CPX.PR.E. These issues are even relatively liquid – relative to other junk issues – trading about $100,000-worth every day. Why wouldn’t you just buy on the secondary market?

All I can think of is:

  • Liquidity: You can put a million dollars to work with one ‘phone call. Doing this on the secondary market would require you to do some work, like a peon.
  • The Minimum Reset: I don’t understand how it could possibly be so valuable, but it takes two to make a market!

September 21, 2016

September 21st, 2016

Today’s big news is the FOMC policy rate decision:

The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a 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 objectives of maximum employment and 2 percent inflation.

Voting against the action were: Esther L. George, Loretta J. Mester, and Eric Rosengren, each of whom preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

Projections for the future course of rates eased slightly but remained skewed upwards:

The central bank’s so-called “dot plot”, which it uses to signal its outlook for the path of interest rates, showed that officials expected one quarter-point rate increase this year. Three policy makers projected that keeping rates unchanged this year would be most appropriate. Officials scaled back expectations for hikes in 2017 and over the longer run.

Policy makers see two rate hikes next year, down from their June median projection of three.

FedDotPlot_160921
Click for Big

It’s interesting to see more argument that technology, not globalization, is the bug-bear of the middle class:

In the realm of international trade, it is a truism seemingly as consistent as gravity: Jobs and investment flow from north to south, while manufactured goods travel the other way around. Factories in the United States and Canada shutter as work shifts to Mexico and Central America, where human hands do it more cheaply.

So the established order of trade was by all appearances turned upside down on Tuesday, as General Motors agreed to cease manufacturing an automobile engine at a factory in Mexico while moving jobs to a plant in Canada.

In an era of increasingly sophisticated manufacturing that relies more on computers and robotics than low-wage hands, centers of innovation like Canada and the United States will exert a greater pull than before.

Given that state-of-the-art products fetch a higher price, it is presumably worth paying a premium to the limited numbers of humans involved in their creation — and especially since this buys proximity to the minds that dream up lucrative new visions. The Canadian plant getting the jobs sits near Waterloo, the birthplace of the BlackBerry, which is something like Canada’s Silicon Valley.

Above all, the deal underscores the potency of markets in shaping what happens in commercial life, a force far more powerful than demagogues making dubious promises about tearing up trade deals.

CalPERS, the giant pension fund that doesn’t do credit analysis, is the subject of some sharp commentary by Megan McArdle:

For example, Calpers, which uses a 7.5 percent discount rate, has a funding level of about 75 percent. It is currently contemplating lowering that discount rate all the way to 6.5 percent, but only over two decades.

It’s hard to believe that 20 years was chosen for mathematical reasons. After all, the wave of boomer retirements, which will be the greatest stressor our national retirement systems have ever seen, should be well over by 2035. Rather, one suspects it was chosen because Calpers doesn’t dare change it faster. Changing it faster would mean big increases in current contributions.

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 0.8273 % 1,698.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.8273 % 3,102.4
Floater 4.87 % 4.59 % 93,930 16.27 4 0.8273 % 1,787.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.0953 % 2,882.0
SplitShare 5.05 % 4.80 % 76,122 2.17 5 0.0953 % 3,441.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0953 % 2,685.3
Perpetual-Premium 5.50 % 4.59 % 64,217 1.96 12 0.2545 % 2,684.7
Perpetual-Discount 5.14 % 5.15 % 89,206 15.00 26 0.1231 % 2,905.0
FixedReset 4.98 % 4.44 % 147,743 6.95 92 0.2045 % 2,044.3
Deemed-Retractible 5.03 % 4.49 % 112,649 3.20 32 0.1480 % 2,796.4
FloatingReset 2.84 % 4.41 % 32,056 4.99 12 0.1840 % 2,203.5
Performance Highlights
Issue Index Change Notes
MFC.PR.H FixedReset 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.35
Bid-YTW : 6.19 %
VNR.PR.A FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 4.97 %
TRP.PR.H FloatingReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 10.67
Evaluated at bid price : 10.67
Bid-YTW : 4.24 %
BMO.PR.A FloatingReset 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 4.65 %
TRP.PR.F FloatingReset 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 13.88
Evaluated at bid price : 13.88
Bid-YTW : 4.41 %
BAM.PR.S FloatingReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 14.95
Evaluated at bid price : 14.95
Bid-YTW : 4.74 %
BAM.PR.B Floater 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 10.38
Evaluated at bid price : 10.38
Bid-YTW : 4.55 %
SLF.PR.H FixedReset 1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.30
Bid-YTW : 8.92 %
BAM.PR.C Floater 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 10.31
Evaluated at bid price : 10.31
Bid-YTW : 4.59 %
BAM.PF.G FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 4.64 %
BAM.PR.K Floater 2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 10.40
Evaluated at bid price : 10.40
Bid-YTW : 4.55 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.H FixedReset 986,699 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 4.52 %
BNS.PR.H FixedReset 907,815 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 4.48 %
NA.PR.A FixedReset 236,165 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-15
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 4.44 %
TD.PF.A FixedReset 221,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 4.21 %
RY.PR.H FixedReset 136,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 18.83
Evaluated at bid price : 18.83
Bid-YTW : 4.19 %
BAM.PR.K Floater 80,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 10.40
Evaluated at bid price : 10.40
Bid-YTW : 4.55 %
There were 21 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.O FixedReset Quote: 26.62 – 26.98
Spot Rate : 0.3600
Average : 0.2211

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.62
Bid-YTW : 4.12 %

BAM.PR.S FloatingReset Quote: 14.95 – 15.35
Spot Rate : 0.4000
Average : 0.2710

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 14.95
Evaluated at bid price : 14.95
Bid-YTW : 4.74 %

CU.PR.H Perpetual-Discount Quote: 25.09 – 25.50
Spot Rate : 0.4100
Average : 0.2869

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 24.68
Evaluated at bid price : 25.09
Bid-YTW : 5.26 %

BIP.PR.C FixedReset Quote: 25.30 – 25.53
Spot Rate : 0.2300
Average : 0.1411

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 5.08 %

TRP.PR.G FixedReset Quote: 20.32 – 20.60
Spot Rate : 0.2800
Average : 0.2027

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 20.32
Evaluated at bid price : 20.32
Bid-YTW : 4.61 %

CU.PR.G Perpetual-Discount Quote: 22.73 – 22.98
Spot Rate : 0.2500
Average : 0.1728

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-21
Maturity Price : 22.44
Evaluated at bid price : 22.73
Bid-YTW : 4.98 %

EFN To Partition: Credit Effects Unclear

September 20th, 2016

Element Financial Corporation has announced:

that the previously announced separation transaction (the “Separation Transaction”), to be implemented by way of plan of arrangement (the “Arrangement”) has received the requisite shareholder approval at Element’s special meeting of shareholders held on September 20, 2016 (the “Meeting”). As a result of the Separation Transaction, shareholders will hold one new common share of Element Fleet Management Corp. and one common share of ECN Capital Corp. (“ECN Capital”) for each common share of Element held. The results of the ballot were 313,993,690 common shares (99.52%) voted at the meeting in favour of the resolution.

According to the Management Information Circular:

On February 16, 2016, we announced that our Board of Directors unanimously approved in principle the reorganization of Element into two separate publicly-traded companies (the “Spin-Out Transaction”) that Element believes will be better able to pursue independent strategies and opportunities for growth and ultimately enhance long-term value for shareholders. If implemented, the reorganization would result in Element (which will be renamed “Element Fleet Management Corp.”) continuing as a fleet management company focused on generating revenue and earnings based on the continued service to Element’s existing fleet management business. The reorganization would also result in the creation of a new commercial finance company (to be named “ECN Capital Corp.”) with a broad origination platform in the commercial and vendor, rail and aircraft sectors, which will transition into an asset management business.

Each of Element’s outstanding series of preferred shares will remain outstanding obligations of Element Fleet following the Element Arrangement.

Element’s Debentures will also remain outstanding obligations of Element Fleet following the Element Arrangement, and the Board has determined to adjust the conversion prices of the Debentures after the Element Effective Date in a manner equitable in the circumstances so as to reflect the effect of the Element Arrangement. Such adjustment will be subject to the approval of the TSX.

While Element expects that the credit rating of Element Fleet following the Element Arrangement will improve in relation to Element’s current credit rating, there can be no assurance that its credit rating will improve or be maintained. In any case, the credit ratings assigned to Element are not a recommendation to buy, hold or sell securities of Element. A rating is not a comment on the market price of a security nor is it an assessment of ownership given various investment objectives. There can be no assurance that the credit ratings assigned to Element will remain in effect for any given period of time and ratings may be upgraded, downgraded, placed under review, confirmed and discontinued by an applicable credit ratings agency at any time. Real or anticipated changes in credit ratings may affect the ma rket value of securities of Element Fleet. In addition, real or anticipated changes in credit ratings may affect Element Fleet’s ability to obtain short -term and long-term financing and the cost at which Element Fleet can access the capital markets.

DBRS has had the company on Review-Positive since the announcement of intention in February, as previously reported. There has not yet been any announcement from the Credit Rating Agencies regarding changes in rating now that shareholder approval of the split has been obtained.

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

IFC.PR.C / IFC.PR.D: 16% Conversion To FloatingReset

September 20th, 2016

Intact Financial Corporation has announced:

that 1,594,996 of its 10,000,000 Non-cumulative Rate Reset Class A Shares Series 3 (the “Series 3 Preferred Shares”) were tendered, for conversion on September 30, 2016, on a one-for-one basis, into Non-cumulative Floating Rate Class A Shares Series 4 of IFC (the “Series 4 Preferred Shares”) after having taken into account all elections received before the September 15, 2016, 5:00 p.m. (ET) conversion deadline. As a result of the conversion, on September 30, 2016, IFC will have 8,405,004 Series 3 Preferred Shares and 1,594,996 Series 4 Preferred Shares issued and outstanding. The Series 3 Preferred Shares will continue to be listed on the Toronto Stock Exchange (“TSX”) under the symbol IFC.PR.C. The Series 4 Preferred Shares will begin trading on the TSX on September 30, 2016 under the symbol IFC.PR.D, subject to IFC fulfilling all the listing requirements of the TSX.

Subject to certain conditions described in IFC’s prospectus supplement dated August 11, 2011, IFC may redeem the Series 3 Preferred Shares, in whole or in part, on September 30, 2021 and on September 30 every five years thereafter and may redeem the Series 4 Preferred Shares, in whole or in part, after September 30, 2016.

For more information on the terms of, and risks associated with an investment in, the Series 3 Preferred Shares and the Series 4 Preferred Shares, see IFC’s prospectus supplement dated August 11, 2011 which is available on www.sedar.com.

I previously reported that IFC.PR.C will reset at 3.332%, to be reset again in five years at GOC-5 + 266bp if not called. IFC.PR.D will pay 3-month bills +266bp, reset quarterly. There will be another conversion opportunity at the next Reset Date.

CF.PR.A: No Conversion To FloatingReset

September 20th, 2016

Canaccord Genuity Group Inc. has announced:

that after having taken into account all election notices received by the September 15, 2016 conversion deadline in respect of the Cumulative 5-Year Rate Reset First Preferred Shares, Series A (the “Series A Preferred Shares”) tendered for conversion into Cumulative Floating Rate First Preferred Shares, Series B (the “Series B Preferred Shares”), the holders of the Series A Preferred Shares are not entitled to convert their shares. There were 761,594 Series A Preferred Shares tendered for conversion, which is less than the 1,000,000 shares required for the ability to proceed with the conversion into Series B Preferred Shares, in accordance with the terms of the Series A Preferred Shares.

There are currently 4,540,000 Series A Preferred Shares listed on the Toronto Stock Exchange under the symbol CF.PR.A.

I previously reported that CF.PR.A will reset at 3.885% for the next five years before resetting again at GOC-5 + 321bp. The FloatingReset shares, which will not be issued at the present time, would have paid three-month bills +321bp, reset quarterly. The notice of extension was also reported.

SLF.PR.H / SLF.PR.K: 14% Conversion to FloatingReset

September 20th, 2016

Sun Life Financial Inc. has announced:

that 1,080,072 of its 8,000,000 Class A Non-Cumulative Rate Reset Preferred Shares Series 10R (the “Series 10R Shares”) have been elected for conversion on September 30, 2016, on a one-for-one basis, into Class A Non-Cumulative Floating Rate Preferred Shares Series 11QR (the “Series 11QR Shares”). Consequently, on September 30, 2016, Sun Life Financial will have 6,919,928 Series 10R Shares and 1,080,072 Series 11QR Shares issued and outstanding. The Series 10R Shares and Series 11QR Shares will be listed on the Toronto Stock Exchange under the symbols SLF.PR.H and SL.PR.K, respectively.

Subject to regulatory approval, Sun Life Financial: (i) may redeem the Series 10R Shares and the Series 11QR Shares in whole or in part on September 30, 2021 and on the 30th of September every five years thereafter by the payment of an amount for each share so redeemed of $25.00, together with all declared and unpaid dividends to the date fixed for such redemption, and (ii) may redeem the Series 11QR Shares in whole or in part on any other date after September 30, 2016 by the payment of an amount for each share so redeemed of $25.50, together with all declared and unpaid dividends to the date fixed for such redemption.

I previously reported that SLF.PR.H will reset at 2.842% for five years, while SLF.PR.K will pay 3-month bills + 217bp, reset quarterly; the notice of extension was also reported.