April 18, 2012

April 18th, 2012

Chapter 4 of the IMF Global Financial Stability Report is a fascinating review of longevity risk:

Private pension providers and governments are particularly exposed to longevity risk and this risk is greatly increased in the current low-interest-rate environment. In line with other estimates in the literature, the analysis in this chapter finds that the liabilities of U.S. pension plans would rise by 9 percent for a three-year increase in longevity. Governments may be even more exposed: many not only sponsor defined benefit pension plans for their employees, but maintain extensive old-age social security systems covering most of the population. In addition, the government is likely liable for the “tail” of longevity risk: in the case of a longevity shock affecting the entire population, the private sector would likely be overwhelmed by the financial consequences. In that case, the losses are likely to be assumed by the government in some way, including through pension fund guarantee schemes that take on the pension liabilities of failing institutions and social security schemes that aim to prevent old age poverty.

However, the section that attracted press attention was Chapter 2: Sovereigns, Banks, and Emerging Ma rkets: Detailed Analysis and Policies:

Looking ahead, many European banks have announced medium-term business plans with reductions in assets amounting to about $2.0 trillion in total.

The variations in the scale of bank deleveraging across scenarios are mainly driven by differences in the extent of cyclical pressures. Under the complete policies scenario – where cyclical pressures ease – assets are cut back by $2.2 trillion, mostly reflecting banks’ own business plans. By contrast, in the weak policies scenario – where cyclical pressures are stronger – banks reduce assets by $3.8 trillion (Figure 2.27). As cyclical pressures intensify, the impact on EU credit rises disproportionately. This is because with stronger cyclical headwinds, more banks need to work their way further down the deleveraging pecking order when reducing their balance sheets, and so EU and domestic credit is curtailed more.

It was an unexciting day for the Canadian preferred share market, with PerpetualPremiums off 1bp, FixedResets flat and DeemedRetractibles down 5bp. A bright spot was the floating rate sector, which again scored a lock-out on the positive side of the Performance Highlights table. Volume was slightly below average.

PerpetualDiscounts now yield 5.18%, equivalent to 6.73% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.5% so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 225bp, a marked widening from the 215bp reported April 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 0.7709 % 2,397.0
FixedFloater 4.34 % 3.69 % 34,128 17.97 1 2.3364 % 3,634.2
Floater 3.01 % 3.03 % 45,539 19.67 3 0.7709 % 2,588.1
OpRet 4.75 % 2.84 % 44,202 1.16 5 -0.0306 % 2,510.6
SplitShare 5.26 % -1.05 % 86,555 0.66 4 0.1688 % 2,689.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0306 % 2,295.7
Perpetual-Premium 5.47 % 1.29 % 83,702 0.12 23 -0.0093 % 2,222.6
Perpetual-Discount 5.17 % 5.18 % 137,253 15.14 10 -0.0496 % 2,413.2
FixedReset 5.01 % 3.00 % 188,869 2.18 67 0.0011 % 2,399.1
Deemed-Retractible 4.96 % 3.85 % 203,839 1.98 46 -0.0547 % 2,309.9
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-18
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 3.00 %
BAM.PR.G FixedFloater 2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-18
Maturity Price : 22.58
Evaluated at bid price : 21.90
Bid-YTW : 3.69 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.E Deemed-Retractible 202,825 Nesbitt crossed blocks of 100,000 and 99,700, both at 23.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.12
Bid-YTW : 5.57 %
CM.PR.J Deemed-Retractible 121,222 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-30
Maturity Price : 25.75
Evaluated at bid price : 25.98
Bid-YTW : 3.35 %
PWF.PR.F Perpetual-Premium 100,981 Nesbitt crossed 100,000 at 25.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-18
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : -2.67 %
TRP.PR.A FixedReset 95,852 Nesbitt crossed 90,000 at 26.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.07 %
GWO.PR.P Deemed-Retractible 93,325 Nesbitt crossed 60,000 at 25.95; RBC crossed 30,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.91
Bid-YTW : 5.07 %
PWF.PR.E Perpetual-Premium 80,000 Nesbitt crossed 80,000 at 25.45.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 3.46 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.A Deemed-Retractible Quote: 23.76 – 24.20
Spot Rate : 0.4400
Average : 0.3392

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.76
Bid-YTW : 5.31 %

BAM.PR.X FixedReset Quote: 25.10 – 25.40
Spot Rate : 0.3000
Average : 0.2096

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-18
Maturity Price : 23.18
Evaluated at bid price : 25.10
Bid-YTW : 3.48 %

CIU.PR.A Perpetual-Discount Quote: 24.55 – 24.83
Spot Rate : 0.2800
Average : 0.1944

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-18
Maturity Price : 24.25
Evaluated at bid price : 24.55
Bid-YTW : 4.73 %

PWF.PR.M FixedReset Quote: 26.27 – 26.55
Spot Rate : 0.2800
Average : 0.1956

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.27
Bid-YTW : 2.96 %

RY.PR.E Deemed-Retractible Quote: 25.61 – 25.77
Spot Rate : 0.1600
Average : 0.0979

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.61
Bid-YTW : 4.02 %

BNS.PR.O Deemed-Retractible Quote: 26.85 – 27.00
Spot Rate : 0.1500
Average : 0.1024

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-26
Maturity Price : 26.00
Evaluated at bid price : 26.85
Bid-YTW : 1.99 %

April 17, 2012

April 17th, 2012

The Bank of Canada sounded a warning note:

The Bank projects that the economy will grow by 2.4 per cent in both 2012 and 2013 before moderating to 2.2 per cent in 2014. The degree of economic slack has been somewhat smaller than the Bank had anticipated in January, and the economy is now expected to return to full capacity in the first half of 2013.

As a result of this reduced slack and higher gasoline prices, the profile for inflation is expected to be somewhat firmer than anticipated in January. After moderating this quarter, total CPI inflation is expected, along with core inflation, to be around 2 per cent over the balance of the projection horizon as the economy reaches its production potential, the growth of labour compensation remains moderate, and inflation expectations stay well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.

Is this a first? If not globally, then for a super-major bank? Citibank had a negative say-on-pay vote:

Citigroup Inc. (C) shareholders rejected the bank’s executive compensation plan in an advisory vote amid criticism it would let Chief Executive Officer Vikram Pandit collect rewards too easily.

About 45 percent of the votes were in favor of the plan, which Citigroup had argued would help attract and retain top talent, according to a preliminary tally at the New York-based firm’s annual meeting in Dallas today.

“That’s a serious matter,” Chairman Richard Parsons said in response to the outcome. “The board of directors takes this matter seriously” and will seek a more quantitative, formula- based method for setting top executives’ pay, he said.

Comrade Peace-Prize is demonizing speculation:

President Barack Obama urged Congress to bolster federal supervision of oil markets, including bigger penalties for market manipulation and greater power for regulators to increase the amount of money that traders must put up to back their energy bets.

Obama asked Congress to fund a six-fold increase for surveillance and enforcement staff at the Commodity Futures Trading Commission to put “more cops on the beat” overseeing oil markets.

He is seeking to empower the CFTC to raise margin requirements for traders’ oil positions and also asked lawmakers to raise civil and criminal penalties for businesses that are guilty of market manipulation to $10 million from $1 million. The plan would cost $52 million.

“Rising gas prices means a rough ride for a lot of families” Obama said in remarks in the White House Rose Garden today. “When gas prices go up it’s like an additional tax that comes right out of your pocket.”

The European market is a shell game:

Spanish, Italian and Portuguese banks are loading up on bonds issued by their own governments, a move that shifts more of the risk of sovereign default to European taxpayers from private creditors.

Holdings of Spanish government debt by lenders based in the country jumped 26 percent in two months, to 220 billion euros ($289 billion) at the end of January, data from Spain’s treasury show. Italian banks increased ownership of their nation’s sovereign bonds by 31 percent to 267 billion euros in the three months ended in February, according to Bank of Italy data.

German and French banks, meanwhile, have cut holdings of those countries’ bonds, as well as Irish and Greek debt, by as much as 50 percent since 2010 in some cases. That leaves domestic firms on the hook for a restructuring such as Greece’s last month and their main financier, the European Central Bank, facing losses. Like Greece, governments would have to rescue their lenders with funds borrowed from the European Union.

“The more banks stop cross-border lending, the more the ECB steps in to do the financing,” said Guntram Wolff, deputy director of Bruegel, a Brussels-based research institute. “So the exposure of the core countries to the periphery is shifting from the private to the public sector.”

This is very much to the politicians’ advantage. Should there be another default, one in which the ECB loses money, they will be able to point at banks and evil bonus-seeking traders as the cause of the losses, rather than the sovereign default.

How does one get ahead in life? Bootlicking is a perennial favourite:

The Bank of England has its eye on Canada’s central bank chief, the Financial Times reports today.

The newspaper said that a member of the Bank of England’s court, the group that oversees the central bank but does not set policy, recently approached Mr. Carney about the idea of replacing Mervyn King in June, 2013.

The Bank of Canada told The Globe and Mail that the newspaper report indicating Mr. Carney had been approached as a potential candidate was not accurate. Mr. Carney, who is respected around the world, and most recently was also tapped to head the global Financial Stability Board, would not comment to the newspaper.

It’s rocket science! It’s an entirely unheard of approach to investing! Imagine, a pension plan sitting down to determine what they want to accomplish before investing!

Healthcare of Ontario Pension Plan’s big bet on bonds paid off in 2011, as the plan ended the year up 12.2 per cent on its investments and more than fully funded.

What happens, however, when rates rise and that bond bet turns around? Not what you might think, according to HOOPP. Yes, the bonds may decline in value, but that shouldn’t leave the plan with a funding gap.

HOOPP, which runs about $40-billion, is a booster of an approach to pension management known as liability driven investment (LDI). For adherents of LDI, beating market benchmarks is considered largely irrelevant and the goal is simply to remain in a fully funded state with enough assets to cover projected liabilities.

Geez, I don’t know about my Assiduous Readers, but I think these guys should all get Nobel Prizes. Two each! Taking account of client objectives prior to formulating an investment strategy is revolutionary!

There was a good upward move in the Canadian preferred share market today, with PerpetualPremiums gaining 3bp, FixedResets up 9bp and DeemedRetractibles winning 14bp. The Performance Highlights table is comprised entirely of winning Floaters, presumably driven up by thoughts of imminent BoC rate hikes. Volume was well below average.

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 1.7451 % 2,378.7
FixedFloater 4.44 % 3.79 % 34,472 17.79 1 0.0000 % 3,551.2
Floater 3.04 % 3.05 % 45,224 19.61 3 1.7451 % 2,568.3
OpRet 4.75 % 2.84 % 45,969 1.17 5 0.1608 % 2,511.3
SplitShare 5.26 % 2.43 % 82,011 0.66 4 0.0199 % 2,685.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1608 % 2,296.4
Perpetual-Premium 5.47 % 1.10 % 83,412 0.12 23 0.0263 % 2,222.8
Perpetual-Discount 5.17 % 5.16 % 130,251 15.18 10 -0.0041 % 2,414.3
FixedReset 5.01 % 2.97 % 187,266 2.18 67 0.0938 % 2,399.1
Deemed-Retractible 4.96 % 3.82 % 193,293 2.83 46 0.1403 % 2,311.2
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 3.05 %
BAM.PR.C Floater 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 3.06 %
BAM.PR.K Floater 2.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 17.34
Evaluated at bid price : 17.34
Bid-YTW : 3.04 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.O FixedReset 128,821 Desjardins crossed 120,000 at 27.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 27.16
Bid-YTW : 2.72 %
BAM.PF.A FixedReset 92,470 Nesbitt crossed blocks of 40,000 and 20,000, both at 25.35; Scotia sold 18,400 to anonymous at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 23.22
Evaluated at bid price : 25.40
Bid-YTW : 4.26 %
ENB.PR.H FixedReset 67,097 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 23.21
Evaluated at bid price : 25.35
Bid-YTW : 3.54 %
PWF.PR.K Perpetual-Discount 54,944 Nesbitt crossed 50,000 at 24.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 24.07
Evaluated at bid price : 24.40
Bid-YTW : 5.07 %
GWO.PR.P Deemed-Retractible 52,800 RBC crossed 40,000 at 25.96.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.86
Bid-YTW : 5.09 %
BNS.PR.Y FixedReset 43,322 Nesbitt crossed 40,000 at 25.40.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.31
Bid-YTW : 2.77 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.A Deemed-Retractible Quote: 23.90 – 24.20
Spot Rate : 0.3000
Average : 0.2286

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 5.24 %

BNA.PR.D SplitShare Quote: 26.30 – 26.57
Spot Rate : 0.2700
Average : 0.2069

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-17
Maturity Price : 26.00
Evaluated at bid price : 26.30
Bid-YTW : 2.43 %

BAM.PR.G FixedFloater Quote: 21.40 – 22.00
Spot Rate : 0.6000
Average : 0.5396

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 22.25
Evaluated at bid price : 21.40
Bid-YTW : 3.79 %

CM.PR.P Deemed-Retractible Quote: 25.36 – 25.57
Spot Rate : 0.2100
Average : 0.1507

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-10-29
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : 2.42 %

CM.PR.D Perpetual-Premium Quote: 25.87 – 26.09
Spot Rate : 0.2200
Average : 0.1618

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-17
Maturity Price : 25.25
Evaluated at bid price : 25.87
Bid-YTW : -24.66 %

BAM.PR.C Floater Quote: 17.25 – 17.66
Spot Rate : 0.4100
Average : 0.3584

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-17
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 3.06 %

April 16, 2012

April 16th, 2012

Spain looks as if it’s sliding down the greasy path:

A Spanish minister called on the European Central Bank to do more to stem the sovereign debt crisis as the cost of insuring the country’s bonds against default surged to a record.

“They should step up purchases of bonds,” Jaime Garcia- Legaz, a deputy minister in Luis de Guindos’s Economy Ministry, said yesterday in an interview.

His comments came as ECB officials split over the steps to tame the crisis amid growing expectations that Spain will be the next euro member to seek a European bailout. Spanish banks’ borrowings from the ECB surged almost 50 percent in March, data showed yesterday, as they took almost a third of the longer-term lending offered to euro-region institutions.

But China is inching towards convertibility:

China’s decision to widen the yuan’s trading band against the dollar for the first time since 2007 signals a drive toward a convertible currency that also saw overseas investors get bigger investment quotas this month.

The increase to 1 percent from 0.5 percent takes effect tomorrow, the People’s Bank of China said on its website yesterday. This month, regulators raised quotas for foreigners buying onshore stocks and bonds to $80 billion from $30 billion and increased the amount of yuan held offshore that can be invested locally.

Spanish troubles have led the Europeans to admit that the Euro is only a reserve currency in good times – in bad times, not so much:

European officials travel to Washington this week seeking a larger global war chest to combat the two-year debt crisis as the Spanish government battles to quell renewed market turmoil over its finances.

Three weeks after European leaders unveiled emergency euro- area funding exceeding the symbolic $1 trillion mark, concerns about Spain’s position have ratcheted the nation’s borrowing costs to the highest levels this year. Crisis-fighting resources will dominate talks at the International Monetary Fund’s spring meeting in Washington from April 20-22.

Sarkozy wants the ECB to inflate Europe out of its difficulties, although he’s very careful to cast this in a more politically correct manner:

French President Nicolas Sarkozy, speaking to the biggest rally of his re-election bid, said the European Central Bank should do more to promote economic growth, reviving an issue he raised in his 2007 campaign.

“On the question of the ECB’s role in boosting growth, we French are going to open the debate,” Sarkozy told a crowd today in central Paris that his aides estimated at more than 100,000. “If Europe is not going to sink in the international economy, it must renew with growth.”

“Europe must cut its debts, it has no choice,” Sarkozy said. “But between deflation and growth, it has no choice either. If it chooses deflation, it will disappear.”

Krugman is on board with the idea:

The way economist Paul Krugman sees it, Europe has two options.

It can continue with its current path, imposing austerity on governments in an attempt to rein in ever-worsening fiscal situations. Or, it can opt for the reverse, wherein the European Central Bank and eurozone leaders move to implement expansionary monetary and fiscal policies to spur growth.

Right now Europe has chosen austerity and according to Mr. Krugman, that choice is clearly showing that Europe is carrying out economic suicide.

“Europe has had several years of experience with harsh austerity programs, and the results are exactly what students of history told you would happen: such programs push depressed economies even deeper into depression,” he said in a column in the New York Times.

It was a modest day for the Canadian preferred share market, with PerpetualPremiums up 1bp, FixedResets gaining 4bp and DeemedRetractibles winning 5bp. Volatility was muted. Volume was below average, despite a fair amount of good-sized blocks.

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 1.2106 % 2,337.9
FixedFloater 4.44 % 3.79 % 34,550 17.79 1 0.6585 % 3,551.2
Floater 3.09 % 3.10 % 43,814 19.48 3 1.2106 % 2,524.3
OpRet 4.76 % 2.97 % 45,992 1.17 5 -0.0077 % 2,507.3
SplitShare 5.26 % -1.04 % 81,851 0.67 4 -0.2576 % 2,684.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0077 % 2,292.7
Perpetual-Premium 5.47 % -3.01 % 83,825 0.12 23 0.0136 % 2,222.2
Perpetual-Discount 5.17 % 5.09 % 130,960 15.19 10 -0.0949 % 2,414.4
FixedReset 5.01 % 2.99 % 186,841 2.18 67 0.0429 % 2,396.8
Deemed-Retractible 4.96 % 3.89 % 199,883 2.87 46 0.0531 % 2,307.9
Performance Highlights
Issue Index Change Notes
BAM.PR.N Perpetual-Discount -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-16
Maturity Price : 22.59
Evaluated at bid price : 22.96
Bid-YTW : 5.20 %
BMO.PR.P FixedReset -1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.66
Bid-YTW : 3.25 %
BAM.PR.C Floater 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-16
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 3.10 %
BAM.PR.B Floater 1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-16
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 3.10 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.B FixedReset 168,970 Nesbitt bought 10,000 from anonymous at 25.69 and 49,900 from RBC at 25.65. Nesbitt crossed two blocks of 50,000 each, both at 25.65.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-16
Maturity Price : 23.51
Evaluated at bid price : 25.50
Bid-YTW : 2.73 %
RY.PR.X FixedReset 164,386 TD crossed blocks of 99,700 shares, 20,000 and 30,000, all at 27.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 27.18
Bid-YTW : 2.82 %
ENB.PR.H FixedReset 163,805 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-16
Maturity Price : 23.19
Evaluated at bid price : 25.30
Bid-YTW : 3.55 %
BAM.PR.T FixedReset 160,896 Scotia crossed 25,000 at 25.25. RBC crossed blocks of 99,800 and 18,000, both at 25.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-16
Maturity Price : 23.25
Evaluated at bid price : 25.25
Bid-YTW : 3.81 %
BMO.PR.O FixedReset 122,580 Desjardins crossed 121,400 at 27.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 27.17
Bid-YTW : 2.70 %
TD.PR.O Deemed-Retractible 108,604 Nesbitt crossed blocks of 50,000 and 40,000, both at 26.10.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-16
Maturity Price : 25.75
Evaluated at bid price : 25.87
Bid-YTW : -3.13 %
CM.PR.E Perpetual-Premium 101,711 Nesbitt crossed two blocks of 50,000 each, both at 25.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-16
Maturity Price : 25.25
Evaluated at bid price : 25.85
Bid-YTW : -24.07 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
POW.PR.G Perpetual-Premium Quote: 25.78 – 26.49
Spot Rate : 0.7100
Average : 0.4115

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 5.20 %

BAM.PR.K Floater Quote: 16.95 – 17.43
Spot Rate : 0.4800
Average : 0.3475

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-16
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 3.11 %

IGM.PR.B Perpetual-Premium Quote: 26.40 – 26.85
Spot Rate : 0.4500
Average : 0.3218

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : 4.90 %

BMO.PR.P FixedReset Quote: 26.66 – 26.96
Spot Rate : 0.3000
Average : 0.1802

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.66
Bid-YTW : 3.25 %

PWF.PR.F Perpetual-Premium Quote: 25.12 – 25.49
Spot Rate : 0.3700
Average : 0.2695

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-16
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : -3.01 %

GWO.PR.M Deemed-Retractible Quote: 26.17 – 26.47
Spot Rate : 0.3000
Average : 0.2038

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.17
Bid-YTW : 5.25 %

LFE.PR.A Reorg Proposal Approved

April 16th, 2012

Canadian Life Companies Split Corp. has announced:

A special meeting of the shareholders of Canadian Life Companies Split Corp. (the “Company”) was held earlier today.

The primary purpose of the meeting was to consider and, if thought advisable, to approve a special resolution to reorganize the Company, including a capital reorganization of the Preferred Shares of the Company and an extension of the termination date of the Company, as described in the Management Information Circular dated March 14, 2012 and the March 21, 2012 press release. Class A Shareholders voted 95.0% in favour of the resolution and Preferred Shareholders voted 82.6% in favour of the resolution, and therefore the resolution was approved.

The Company will issue shortly a further press release including all key dates related to the capital reorganization and special retraction.

The proposal was unveiled in late March.

More to follow …

April PrefLetter Released!

April 16th, 2012

The April, 2012, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

The April edition contains an appendix discussing retirement withdrawals, long-term equity returns and mean reversion..

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the April, 2012, issue, while the “Next Edition” will be the May, 2012, issue, scheduled to be prepared as of the close May 11 and eMailed to subscribers prior to market-opening on May 14.

PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.

Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.

Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!

Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.

Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!

April PrefLetter Now in Preparation!

April 13th, 2012

The markets have closed and the April edition of PrefLetter is now being prepared.

PrefLetter is the monthly newsletter recommending individual issues of preferred shares to subscribers. There is at least one recommendation from every major type of preferred share with investment-grade constituents. The recommendations are taylored for “buy-and-hold” investors.

The April edition will contain an appendix dealing with retirement withdrawals, with particular emphasis on the question of mean reversion of long-term equity returns. The annuity data I have been updating every April will also be updated.

Those taking an annual subscription to PrefLetter receive a discount on viewing of my seminars.

PrefLetter is now available to all residents of Canada.

The April issue will be eMailed to clients and available for single-issue purchase with immediate delivery prior to the opening bell on Monday. I will write another post when the new issue has been uploaded to the server … so watch this space carefully if you intend to order “Next Issue” or “Previous Issue”! Until then, the “Next Issue” is the April issue.

April 13, 2012

April 13th, 2012

Spanish CDSs hit a new high:

The cost of insuring against a Spanish default jumped to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout.

Credit-default swaps on Spain rose 17 basis points to 498 as of 4 p.m. in London, surpassing the previous all-time high closing price of 493, according to CMA. The contracts are up from 431 at the start of the month and 380 at the end of 2011, signalling a deterioration in investor perceptions of credit quality.

The rate on Spain’s 10-year note rose 17 basis points today to 5.99 percent, 21 basis points up from a week ago.

Given the fun ‘n’ games with Greek CDSs, I think that if I were buying European sovereign CDSs, I would want the trigger to be something other than formal default – maybe have something triggered by subordination to other instruments, or IMF loans.

A lot of Europeans are voting with their feet … or ATM card, anyway:

This analysis suggests that capital flight is happening on a scale unprecedented in the euro era — mainly from Spain and Italy to Germany, the Netherlands and Luxembourg (see chart). In March alone, about 65 billion euros left Spain for other euro- zone countries. In the seven months through February, the relevant debts of the central banks of Spain and Italy increased by 155 billion euros and 180 billion euros, respectively. Over the same period, the central banks of Germany, the Netherlands and Luxembourg saw their corresponding credits to other euro- area central banks grow by about 360 billion euros.


Click for Big

There’s more trouble at Air Canada:

Air Canada … is warning travellers of flight disruptions, saying some pilots are staging an illegal walkout.

There were cancellations of roughly 30 departures and 30 arrivals on Friday morning at Toronto’s Pearson International Airport, mostly affecting Air Canada, said airport spokesman Scott Armstrong.

This is easy to fix, fortunately. If Air Canada is so important that the Feds have to take away the right to strike, then the longer-term solution is to make Air Canada less important. Give the Emirates rights to the Toronto-Dubai route! Allow cabotage! Let anybody fly between any two points, as long as they meet safety standards and have bought the landing rights in a competitive auction!

BPO Properties, proud issuer of BPO.PR.F, BPO.PR.H, BPO.PR.J, BPO.PR.K, BPO.PR.K, BPO.PR.L, BPO.PR.N, BPO.PR.P and BPO.PR.R, was confirmed at Pfd-3 by DBRS:

DBRS has today confirmed the Issuer Rating of BPO Properties Ltd. (BPO or the Company) at BBB and its Cumulative Redeemable Preferred Shares rating at Pfd-3, with trends at Stable. The BBB rating incorporates the following credit strengths: (1) BPO has strong ownership and an experienced management team; (2) BPO has a premier Class-A to AAA office portfolio, located in the downtown markets in three of Canada’s largest office markets, namely Toronto, Calgary and Vancouver, featuring a number of flagship office properties, such as First Canadian Place, Bay Adelaide Centre West Tower, Bay Wellington Tower, Exchange Tower and Bankers Hall; (3) the portfolio has strong occupancy levels, which are above market comparables in each of its markets, with exception to Toronto; and (4) BPO’s reasonable credit metrics and certain debt restrictions.

Conversely, the rating incorporates the following associated risks: (1) BPO’s portfolio’s heavy concentration in the downtown markets of Toronto and Calgary; (2) significant property concentration with the Company’s top five properties, accounting for approximately 54.8% of the Company’s total leasable area in the portfolio; (3) above-average tenant concentration (however, this concern is somewhat mitigated by the high creditworthiness of the Company’s top 15 tenants).

The stable outlook takes into consideration DBRS’s expectation for reasonable growth in operating cash flow in 2012, mainly due to the continued lease-up of Bay Adelaide Centre West Tower. In addition, minimal lease maturities in 2012 should continue to contribute stable cash flow and limit the Company’s exposure to market conditions and re-tenanting costs. DBRS expects BPO to maintain a good liquidity position and positive free cash flow position. The Company has no active commercial development projects and has manageable near-term capital commitments. Overall, DBRS expects BPO’s financial profile to remain stable in 2012, with support from higher cash flow levels and reasonable financial flexibility to fund manageable capital commitments (mainly maturing mortgages).

New rules for dark orders on Canadian exchanges will go into effect in in October:

The new framework involves several elements. Among them:
  • Visible orders will have execution priority over dark orders on the same marketplace at the same price.
  • In order to trade with a dark order, smaller orders must receive a minimum level of price improvement, which is defined as one trading increment or half a trading increment for securities with a bid-ask spread of one trading increment.
  • The IIROC has the ability to designate a minimum size for dark orders, although it isn’t doing so at this time.

I confess that I have not yet looked at the details.

The CME had an incident today illustrative of the frictions between visible and dark trading:

Local traders in the CME Group Inc. (CME)’s Eurodollar options pit walked off the job today to protest a block trade yesterday.

“These guys that stand in there all day and make prices would have loved to participate in that particular price, but they weren’t able to,” Rocco Chierici, a broker at R.J. O’Brien & Associates on the floor of the Chicago Mercantile Exchange, said in a telephone interview.

Prices for the block trades of options on Eurodollar futures were higher than offers in the pit, which wouldn’t be allowed in open-outcry trading, Chierici said.

“There are rules that prohibit that in the pit, but you can circumvent the pit” in a block trade, Chierici said. “I believe they wanted to make the point that the system is not fair.”

Six block trades totaling 215,200 options traded at 8:11 a.m. Chicago time yesterday, according to CME Group’s website. The trade was rolling positions from April contracts, which expired today, into June contracts.

“The block trade in question was managed by longstanding rules and processes of our exchanges,” Michael Shore, a CME Group spokesman, said in an e-mail. “It was a legitimate, well- managed trade, which was executed within one tick of the market and in one trade.”

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums up 12bp, while both FixedResets and DeemedRetractibles were off 1bp. The Performance Highlights table is comprised entirely of Floating Rate issues (the fact that they are all BAM issues is not indicative – BAM is the only issuer in these indices at this time). Volume was absurdly low.

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 -1.0214 % 2,309.9
FixedFloater 4.47 % 3.82 % 34,917 17.75 1 -2.7002 % 3,528.0
Floater 3.13 % 3.14 % 45,559 19.39 3 -1.0214 % 2,494.1
OpRet 4.76 % 3.06 % 45,056 1.15 5 -0.0459 % 2,507.5
SplitShare 5.25 % -4.99 % 81,065 0.67 4 0.0694 % 2,691.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0459 % 2,292.9
Perpetual-Premium 5.47 % -3.05 % 85,890 0.13 23 0.1191 % 2,221.9
Perpetual-Discount 5.16 % 5.10 % 131,810 15.28 10 -0.2511 % 2,416.7
FixedReset 5.02 % 3.00 % 182,519 2.19 67 -0.0063 % 2,395.8
Deemed-Retractible 4.97 % 3.82 % 202,830 2.88 46 -0.0128 % 2,306.7
Performance Highlights
Issue Index Change Notes
BAM.PR.G FixedFloater -2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-13
Maturity Price : 22.17
Evaluated at bid price : 21.26
Bid-YTW : 3.82 %
BAM.PR.B Floater -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-13
Maturity Price : 16.77
Evaluated at bid price : 16.77
Bid-YTW : 3.15 %
BAM.PR.K Floater -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-13
Maturity Price : 16.80
Evaluated at bid price : 16.80
Bid-YTW : 3.14 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.J Deemed-Retractible 102,400 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-30
Maturity Price : 25.75
Evaluated at bid price : 25.97
Bid-YTW : 3.34 %
BNS.PR.Z FixedReset 94,061 Desjardins crossed 49,600 at 25.13; TD crossed 30,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 3.14 %
BMO.PR.J Deemed-Retractible 59,059 TD crossed 50,000 at 25.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-25
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 3.90 %
ENB.PR.D FixedReset 57,075 Nesbitt crossed 40,000 at 25.56.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-01
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 3.69 %
RY.PR.A Deemed-Retractible 56,591 RBC crossed 50,000 at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-24
Maturity Price : 25.25
Evaluated at bid price : 25.56
Bid-YTW : 4.11 %
BMO.PR.K Deemed-Retractible 53,202 RBC crossed 50,000 at 26.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-11-25
Maturity Price : 26.00
Evaluated at bid price : 26.57
Bid-YTW : 2.57 %
There were 11 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.G FixedFloater Quote: 21.26 – 21.90
Spot Rate : 0.6400
Average : 0.4444

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-13
Maturity Price : 22.17
Evaluated at bid price : 21.26
Bid-YTW : 3.82 %

MFC.PR.G FixedReset Quote: 25.38 – 25.69
Spot Rate : 0.3100
Average : 0.1891

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-12-19
Maturity Price : 25.00
Evaluated at bid price : 25.38
Bid-YTW : 4.13 %

SLF.PR.G FixedReset Quote: 24.76 – 25.03
Spot Rate : 0.2700
Average : 0.1725

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.76
Bid-YTW : 3.55 %

CM.PR.K FixedReset Quote: 26.22 – 26.69
Spot Rate : 0.4700
Average : 0.3782

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.22
Bid-YTW : 3.05 %

BAM.PR.Z FixedReset Quote: 25.63 – 25.88
Spot Rate : 0.2500
Average : 0.1597

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-13
Maturity Price : 23.31
Evaluated at bid price : 25.63
Bid-YTW : 4.32 %

HSB.PR.C Deemed-Retractible Quote: 25.65 – 25.89
Spot Rate : 0.2400
Average : 0.1677

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-30
Maturity Price : 25.50
Evaluated at bid price : 25.65
Bid-YTW : 3.01 %

S&P Announces Quarterly TXPR Revision

April 13th, 2012

Standard & Poor’s Canadian Index Operations has announced:

the following index changes as a result of the quarterly S&P/TSX Preferred Share Index …. These changes will be effective at the open on Monday, April 23, 2012

ADDITIONS

Symbol

Issue Name
BAF.PR.C BELL ALIANT PREFERRED EQTY INC 5YR PR SER ‘C’
BAM.PF.A BROOKFIELD ASSET MANAGEMNT INC CL A PR SER 32
CM.PR.M CANADIAN IMPERIAL BANK SERIES ’37’ PR
ENB.PR.F ENBRIDGE INC. PR SER ‘F’
ENB.PR.H ENBRIDGE INC. PR SER ‘H’
FFH.PR.K FAIRFAX FINANCIAL HOLDINGS LTD 5YR SER ‘K’ PR
FTS.PR.F FORTIS INC. 1ST PR SERIES ‘F’
GWO.PR.P GREAT-WEST LIFECO INC. 5.40% 1ST PR SERIES P
GWO.PR.M GREAT-WEST LIFECO INC. 5.80% 1ST PR SERIES M
HSB.PR.C HSBC BANK CANADA CL 1 NON-CUMULATIVE SER C PR
HSB.PR.D HSBC BANK CANADA CL 1 NON-CUMULATIVE SER D PR
MFC.PR.H MANULIFE FINANCIAL CORP. CL 1 PR SER ‘7’
NXY.PR.A NEXEN INC. CL ‘A’ RESET SERIES 2 PR
POW.PR.G POWER CORPORATION OF CANADA 5.60% SER ‘G’ PR
PWF.PR.L POWER FINANCIAL CORP. 5.10% SERIES ‘L’ 1ST PR
PWF.PR.R POWER FINANCIAL CORP. 5.50% SERIES ‘R’ 1ST PR
REI.PR.C RIOCAN REAL ESTATE INVEST TR PR UNITS SER ‘C’
TLM.PR.A TALISMAN ENERGY INC. 1ST PR A SERIES 1
TCA.PR.X TRANSCANADA PIPELINES LIMITED 1ST PR ‘U’
TCA.PR.Y TRANSCANADA PIPELINES LIMITED 1ST PR ‘Y’
VSN.PR.A VERESEN INC. CUMULATIVE SERIES ‘A’ PR

DELETIONS

Symbol

Issue Name
DC.PR.A DUNDEE CORPORATION 5.00% SER ‘1’ PR
FTS.PR.C FORTIS INC. 1ST PR SERIES ‘C’
FTS.PR.E FORTIS INC. 1ST PR SERIES ‘E’

April 12, 2012

April 12th, 2012

Nothing happened today, although I was recently gratified to learn I’m not the only one in the world who is worried about central clearing houses:

IF THEY failed, there would be “mayhem”, says Paul Tucker of the Bank of England. Ben Bernanke, the chairman of the Federal Reserve, quotes a Mark Twain character, Pudd’nhead Wilson, to get the same point across: “If you put all your eggs in one basket, you better watch that basket.” Another regulator privately describes them as “too big to fail, on steroids”.

Central Clearing Houses are probably the single dumbest idea to come out of post-Credit Crunch reregulation. Who – other than a politician or a regulator – really thinks that a system susceptible to single-point failure is more stable than a network?

The Canadian preferred share market enjoyed a good uptick today, with PerpetualPremiums up 2bp, FixedResets gaining 14bp and DeemedRetractibles winning 21bp. Volatility was dominated by BAM, evenly split between winners and losers. Volume was light.

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 -0.8762 % 2,333.7
FixedFloater 4.35 % 3.70 % 36,324 17.97 1 1.1574 % 3,625.9
Floater 3.09 % 3.10 % 47,156 19.49 3 -0.8762 % 2,519.8
OpRet 4.75 % 3.05 % 46,618 1.15 5 0.0919 % 2,508.6
SplitShare 5.26 % -4.97 % 81,284 0.68 4 0.0993 % 2,689.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0919 % 2,293.9
Perpetual-Premium 5.48 % -2.35 % 87,239 0.13 23 0.0238 % 2,219.3
Perpetual-Discount 5.15 % 5.09 % 131,595 15.35 10 0.2848 % 2,422.8
FixedReset 5.01 % 2.97 % 182,716 2.19 67 0.1416 % 2,396.0
Deemed-Retractible 4.96 % 3.83 % 208,918 2.88 46 0.2101 % 2,307.0
Performance Highlights
Issue Index Change Notes
BAM.PR.C Floater -1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-12
Maturity Price : 16.91
Evaluated at bid price : 16.91
Bid-YTW : 3.12 %
BAM.PR.M Perpetual-Discount 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-12
Maturity Price : 23.24
Evaluated at bid price : 23.50
Bid-YTW : 5.08 %
BAM.PR.G FixedFloater 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-12
Maturity Price : 22.55
Evaluated at bid price : 21.85
Bid-YTW : 3.70 %
BAM.PR.N Perpetual-Discount 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-12
Maturity Price : 23.07
Evaluated at bid price : 23.51
Bid-YTW : 5.07 %
MFC.PR.C Deemed-Retractible 1.75 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.26
Bid-YTW : 5.50 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.A FixedReset 203,376 Nesbitt crossed 200,000 at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.03
Bid-YTW : 3.08 %
SLF.PR.F FixedReset 102,310 Nesbitt crossed 100,000 at 26.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.39
Bid-YTW : 3.48 %
GWO.PR.G Deemed-Retractible 76,373 RBC crossed blocks of 11,600 shares, 12,300 and 39,900, all at 25.00.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 5.25 %
BNS.PR.Z FixedReset 63,240 Desjardins crossed 46,000 at 25.13.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 3.19 %
ENB.PR.H FixedReset 62,670 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-12
Maturity Price : 23.16
Evaluated at bid price : 25.20
Bid-YTW : 3.64 %
NA.PR.K Deemed-Retractible 61,537 Desjardins crossed 50,000 at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-15
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : -15.21 %
There were 20 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.C Floater Quote: 16.91 – 17.57
Spot Rate : 0.6600
Average : 0.4498

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-12
Maturity Price : 16.91
Evaluated at bid price : 16.91
Bid-YTW : 3.12 %

ENB.PR.A Perpetual-Premium Quote: 25.91 – 26.24
Spot Rate : 0.3300
Average : 0.2124

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-12
Maturity Price : 25.00
Evaluated at bid price : 25.91
Bid-YTW : -28.20 %

CM.PR.K FixedReset Quote: 26.30 – 26.69
Spot Rate : 0.3900
Average : 0.2776

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.30
Bid-YTW : 2.90 %

FTS.PR.H FixedReset Quote: 25.40 – 25.88
Spot Rate : 0.4800
Average : 0.3705

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-12
Maturity Price : 23.49
Evaluated at bid price : 25.40
Bid-YTW : 3.04 %

POW.PR.C Perpetual-Premium Quote: 25.32 – 25.57
Spot Rate : 0.2500
Average : 0.1749

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-12
Maturity Price : 25.00
Evaluated at bid price : 25.32
Bid-YTW : -10.02 %

TD.PR.R Deemed-Retractible Quote: 26.88 – 27.08
Spot Rate : 0.2000
Average : 0.1278

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-30
Maturity Price : 26.00
Evaluated at bid price : 26.88
Bid-YTW : 1.85 %

April 11, 2012

April 11th, 2012

Spain’s in trouble again:

European Central Bank Executive Board member Benoit Coeure triggered speculation that the bank will revive its bond-purchase program to lower Spain’s borrowing costs as the region’s debt crisis threatens to boil over again.

Spanish “market conditions are not justified,” Coeure, who heads the ECB’s market operations division, said at an event in Paris today. “Will the ECB intervene? We have an instrument, the securities markets program, which hasn’t been used recently but it still exists.”

The yield on Spanish 10-year bonds, which climbed to a four-month high of 5.99 percent this morning, slid to 5.82 percent after Coeure spoke. The euro gained more than a quarter of a cent to $1.3134 at 2 p.m. in Frankfurt and European stocks rose, with the Stoxx Europe 600 Index (SXXP) up 1 percent.

Spain’s 10-year borrowing costs have jumped more than 1 percentage point since March 2, when Prime Minister Mariano Rajoy said the country will miss a 2012 deficit goal approved by the European Union. The euro area’s fourth largest economy is in recession and unemployment is nearing 24 percent.

It will be interesting to see how this plays out. ECB intervention may lower the probability of default, but its super-senior creditor status (seen in the Greek default) will increase the severity of default.

The Canadian preferred share market drifted slightly upward today, with PerpetualPremiums winning 5bp, FixedResets gaining 2bp and DeemedRetractibles up 4bp. Volatility was good, with Floaters notable amongst the losers. Volume was a little below average.

PerpetualDiscounts now yield 5.07%, equivalent to 6.59% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.45%, so the pre-tax interest-equivalent spread (in this context, the Seniority Spread) is now about 215bp, unchanged from the report of April 4.

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 -1.8724 % 2,354.4
FixedFloater 4.40 % 3.75 % 37,502 17.88 1 1.6170 % 3,584.4
Floater 3.07 % 3.08 % 47,496 19.53 3 -1.8724 % 2,542.1
OpRet 4.76 % 3.05 % 48,536 1.18 5 -0.1224 % 2,506.3
SplitShare 5.26 % -2.18 % 81,747 0.68 4 -0.0298 % 2,686.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1224 % 2,291.8
Perpetual-Premium 5.48 % -1.48 % 84,797 0.14 23 0.0536 % 2,218.8
Perpetual-Discount 5.16 % 5.07 % 133,524 15.25 10 0.1488 % 2,415.9
FixedReset 5.02 % 3.07 % 184,280 2.18 67 0.0232 % 2,392.6
Deemed-Retractible 4.97 % 3.88 % 206,718 3.06 46 0.0397 % 2,302.2
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater -2.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 3.10 %
BAM.PR.C Floater -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 3.06 %
MFC.PR.C Deemed-Retractible -1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.86
Bid-YTW : 5.72 %
BAM.PR.K Floater -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 3.08 %
IAG.PR.A Deemed-Retractible 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 : 5.22 %
BAM.PR.G FixedFloater 1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 22.38
Evaluated at bid price : 21.60
Bid-YTW : 3.75 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.E Perpetual-Premium 80,265 Desjardins crossed 50,000 at 25.89; RBC crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-11
Maturity Price : 25.25
Evaluated at bid price : 25.85
Bid-YTW : -24.87 %
TD.PR.G FixedReset 79,020 TD crossed blocks of 40,000 and 25,000, both at 26.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 2.67 %
TRP.PR.B FixedReset 64,070 Desjardins crossed 60,000 at 25.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 23.50
Evaluated at bid price : 25.47
Bid-YTW : 2.82 %
BNS.PR.Z FixedReset 58,413 TD crossed 50,000 at 25.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 3.20 %
FTS.PR.E OpRet 54,750 TD crossed 49,600 at 26.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.25
Bid-YTW : 3.51 %
ENB.PR.H FixedReset 54,287 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 23.15
Evaluated at bid price : 25.18
Bid-YTW : 3.65 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.C Deemed-Retractible Quote: 22.86 – 23.18
Spot Rate : 0.3200
Average : 0.2257

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.86
Bid-YTW : 5.72 %

BNA.PR.D SplitShare Quote: 26.37 – 26.57
Spot Rate : 0.2000
Average : 0.1124

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-11
Maturity Price : 26.00
Evaluated at bid price : 26.37
Bid-YTW : -2.18 %

BAM.PR.B Floater Quote: 17.01 – 17.45
Spot Rate : 0.4400
Average : 0.3652

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 3.10 %

NA.PR.P FixedReset Quote: 26.77 – 27.00
Spot Rate : 0.2300
Average : 0.1591

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.77
Bid-YTW : 2.33 %

FTS.PR.H FixedReset Quote: 25.50 – 25.82
Spot Rate : 0.3200
Average : 0.2505

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-11
Maturity Price : 23.52
Evaluated at bid price : 25.50
Bid-YTW : 3.02 %

CM.PR.K FixedReset Quote: 26.45 – 26.67
Spot Rate : 0.2200
Average : 0.1543

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 2.64 %