November PrefLetter Released!

November 14th, 2011

The November, 2011, 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 November edition contains two appendices: the first continues the discussion of Yield that commenced in the July issue and the second provides an update on the status of YLO Preferreds.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the November, 2011, issue, while the “Next Edition” will be the December, 2011, issue, scheduled to be prepared as of the close December 9 and eMailed to subscribers prior to market-opening on December 12.

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!

November PrefLetter Now in Preparation!

November 11th, 2011

The markets have closed and the November 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 November edition will contain two appendices: one will continue the discussion of Yield commenced in the July, 2011, issue and the other will briefly review YLO in light of their recent quarterly report.

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 October 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 November issue.

November 11, 2011

November 11th, 2011

Money funds are drawing back from Europe:

The biggest U.S. prime money-market funds cut their investments in Deutsche Bank AG (DBK) by $8.1 billion in October, the largest drop among 35 of the largest banks in Europe, the U.S., Japan and Canada, Bloomberg analysis shows.

The amount of Deutsche Bank short-term obligations held by the eight biggest U.S. funds eligible to purchase corporate debt, which included offerings from Fidelity Investments, JPMorgan Chase & Co. (JPM) and BlackRock Inc. (BLK), declined by 56 percent to $6.3 billion from Sept. 30 to Oct. 31, according to monthly portfolio updates compiled by Bloomberg and published in today’s Bloomberg Risk newsletter.

Deutsche Bank Chief Financial Officer Stefan Krause said that money funds aren’t a major source of funding on an Oct. 25 earnings call. Krause estimated that the funds provided 3 percent of the bank’s total funding.

Germany’s largest bank said it increased its discretionary unsecured wholesale funding to 135 billion euros from 113 billion euros between the end of June and the end of September, according to a presentation given by Krause at the time.

TMX DataLinx continues to have problems, so today’s report is again based on Yahoo!

It was a fine day for the Canadian preferred share market, with PerpetualDiscounts up 18bp, FixedResets gaining 13bp and DeemedRetractibles winning 20bp. Volatility was muted. Volume was light, although some nice blocks got crossed, particularly by Desjardins.

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 -0.2583 % 2,116.7
FixedFloater 4.80 % 4.50 % 26,267 17.29 1 0.4566 % 3,211.9
Floater 3.40 % 3.43 % 68,928 18.66 2 -0.2583 % 2,285.4
OpRet 4.96 % 3.19 % 54,366 1.51 7 -0.0879 % 2,477.0
SplitShare 5.76 % 6.56 % 59,076 5.13 3 0.0841 % 2,511.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0879 % 2,265.0
Perpetual-Premium 5.58 % 2.53 % 102,751 0.16 13 -0.0930 % 2,154.5
Perpetual-Discount 5.31 % 5.31 % 109,077 14.79 17 0.1792 % 2,294.9
FixedReset 5.10 % 2.88 % 214,432 2.51 63 0.1334 % 2,348.0
Deemed-Retractible 5.03 % 4.37 % 202,776 3.89 46 0.2048 % 2,220.8
Performance Highlights
Issue Index Change Notes
TCA.PR.X Perpetual-Premium -1.46 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.00
Bid-YTW : 3.54 %
BAM.PR.M Perpetual-Discount 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-11
Maturity Price : 23.02
Evaluated at bid price : 23.46
Bid-YTW : 5.11 %
IAG.PR.A Deemed-Retractible 2.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.04
Bid-YTW : 5.73 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.E Perpetual-Discount 757,100 Block city! All crosses were at 25.00. Desjardins crossed seven blocks:
  • two of 100,000 each
  • 50,000
  • 15,000
  • two of 10,000 each
  • 200,000

Nesbitt crossed 50,000 and TD crossed 86,000.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-11
Maturity Price : 24.72
Evaluated at bid price : 25.03
Bid-YTW : 5.63 %

SLF.PR.I FixedReset 162,992 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 4.35 %
TD.PR.R Deemed-Retractible 152,600 Scotia crossed blocks of 50,000 and 75,000, both at 26.70. TD crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-30
Maturity Price : 26.00
Evaluated at bid price : 26.76
Bid-YTW : 3.44 %
BNS.PR.X FixedReset 138,700 Nesbitt crossed blocks of 85,000 and 50,000, both at 27.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 27.30
Bid-YTW : 2.45 %
TD.PR.E FixedReset 91,785 RBC crossed blocks of 49,900 and 10,200, both at 27.30; Scotia crossed 23,900 at the same price.YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.31
Bid-YTW : 2.45 %
CM.PR.L FixedReset 89,500 Nesbitt crossed blocks of 23,300 and 47,400, both at 27.59.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.51
Bid-YTW : 2.38 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.F Deemed-Retractible Quote: 26.00 – 26.90
Spot Rate : 0.9000
Average : 0.5408

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 5.51 %

POW.PR.D Perpetual-Discount Quote: 24.26 – 24.70
Spot Rate : 0.4400
Average : 0.3182

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-11
Maturity Price : 23.82
Evaluated at bid price : 24.26
Bid-YTW : 5.18 %

IAG.PR.C FixedReset Quote: 26.50 – 26.94
Spot Rate : 0.4400
Average : 0.3301

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 3.63 %

HSE.PR.A FixedReset Quote: 25.75 – 26.20
Spot Rate : 0.4500
Average : 0.3421

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-11
Maturity Price : 23.44
Evaluated at bid price : 25.75
Bid-YTW : 3.15 %

TCA.PR.X Perpetual-Premium Quote: 52.00 – 52.48
Spot Rate : 0.4800
Average : 0.3755

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.00
Bid-YTW : 3.54 %

IAG.PR.A Deemed-Retractible Quote: 23.04 – 23.39
Spot Rate : 0.3500
Average : 0.2504

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.04
Bid-YTW : 5.73 %

November 10, 2011

November 11th, 2011

Whoopsy! S&P jumped the gun on France:

Standard & Poor’s roiled global equity, bond, currency and commodity markets when it sent and then corrected an erroneous message to subscribers suggesting France’s top credit rating had been downgraded.

The benchmark Stoxx Europe 600 Index extended its decline to 1.5 percent to 234.11 and French 10-year bond yields surged as much as 28 basis points to 3.48 percent, the highest level since July. The euro pared gains and U.S. equities briefly dropped after the mistaken announcement. Commodities erased gains before resuming increases after S&P affirmed France’s AAA rating in a later statement.

S&P’s erroneous message was put out at 3:57 p.m. Paris time. The company sent a release at 5:40 p.m. Paris time saying the message was incorrect and affirming France’s rating.

Meanwhile Cameron appears to favour monetization of European debt:

U.K. Prime Minister David Cameron suggested that the European Central Bank should use its resources to underpin the euro-area bailout fund and give it enough capacity to rescue the region’s larger economies.

“If the leaders of the euro zone want to save their currency then they, together with institutions of the euro zone, must act now,” Cameron said in a speech in London today. “The longer the delay, the greater the danger.”

Cameron said yesterday Italy’s position is close to being unsustainable, given the rise in bond yields.

“If you don’t have credibility about your plans to deal with your debts and deal with your deficits, whether you like the markets or not, they won’t lend you any money,” Cameron told lawmakers. “That’s what we are seeing in countries like Greece and now tragically in Italy, where the price of borrowing money is getting to a totally unsustainable level.”

Greece finally got a new Prime Minister:

Lucas Papademos, named today to be interim prime minister of Greece, steered the country into the euro region as central bank governor more than a decade ago. Now the former European Central Bank vice president will have to secure the country’s euro membership for a second time.

Papademos, who has never held elected office, helped foster economic growth rates that surpassed Germany’s and France’s in his eight years at Greece’s central bank before moving to the ECB in 2002. Most recently a visiting professor at Harvard University in Cambridge, Massachusetts, and an adviser to departing Prime Minister George Papandreou, Papademos takes over a country weeks from being unable to meet its debt obligations.

The OSC has provided a report on Dialogue 2011, referred to as “an important forum to consult with our stakeholders”, held on November 1.

The Toronto Stock Exchange’s DataLinx service is having problems again, so this report has been prepared using prices from Yahoo!

It was an uneventful day in the Canadian preferred share market, with PerpetualDiscounts up 2bp, FixedResets gaining 5bp and DeemedRetractibles down 5bp. Volatility was good. Volume was 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 -0.2576 % 2,122.1
FixedFloater 4.82 % 4.53 % 26,163 17.26 1 0.1524 % 3,197.3
Floater 3.39 % 3.41 % 159,606 18.70 2 -0.2576 % 2,291.4
OpRet 4.96 % 0.94 % 54,498 1.51 7 -0.1646 % 2,479.2
SplitShare 5.77 % 6.60 % 59,674 5.13 3 0.2953 % 2,509.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1646 % 2,267.0
Perpetual-Premium 5.57 % 2.73 % 103,756 0.15 13 0.0251 % 2,156.5
Perpetual-Discount 5.32 % 5.21 % 108,941 14.73 17 0.0218 % 2,290.8
FixedReset 5.11 % 2.96 % 211,446 2.51 63 0.0542 % 2,344.9
Deemed-Retractible 5.04 % 4.36 % 205,970 3.46 46 -0.0497 % 2,216.2
Performance Highlights
Issue Index Change Notes
MFC.PR.E FixedReset -1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-19
Maturity Price : 25.00
Evaluated at bid price : 25.96
Bid-YTW : 4.49 %
MFC.PR.C Deemed-Retractible -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 6.67 %
GWO.PR.G Deemed-Retractible -1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 5.54 %
BNS.PR.L Deemed-Retractible -1.21 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-04-28
Maturity Price : 25.25
Evaluated at bid price : 25.39
Bid-YTW : 4.34 %
MFC.PR.B Deemed-Retractible -1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.07
Bid-YTW : 6.35 %
CM.PR.P Deemed-Retractible 1.01 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-10-29
Maturity Price : 25.00
Evaluated at bid price : 25.88
Bid-YTW : 1.97 %
BAM.PR.N Perpetual-Discount 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-10
Maturity Price : 22.98
Evaluated at bid price : 23.41
Bid-YTW : 5.12 %
GWO.PR.N FixedReset 1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.90
Bid-YTW : 3.22 %
HSB.PR.C Deemed-Retractible 1.99 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-30
Maturity Price : 25.25
Evaluated at bid price : 25.65
Bid-YTW : 4.43 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.I FixedReset 398,680 New issue settled today.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 4.41 %
CM.PR.E Perpetual-Discount 160,844 Nesbitt crossed 100,000 at 25.00; Scotia crossed 25,000 at 24.99.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-10
Maturity Price : 24.69
Evaluated at bid price : 24.99
Bid-YTW : 5.64 %
CM.PR.D Perpetual-Premium 109,636 Scotia crossed blocks of 25,000 and 19,000, both at 25.32. RBC crossed 49,900 at 25.33.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.33
Bid-YTW : 3.21 %
BNS.PR.Z FixedReset 73,802 Recent secondary offering.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 3.18 %
TD.PR.K FixedReset 59,039 Scotia crossed blocks of 30,00 and 26,500, both at 27.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.44
Bid-YTW : 2.60 %
TD.PR.E FixedReset 54,828 RBC crossed blocks of 24,900 and 25,000, both at 27.30.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.30
Bid-YTW : 2.46 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.M Perpetual-Discount Quote: 23.02 – 23.45
Spot Rate : 0.4300
Average : 0.3218

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-10
Maturity Price : 22.64
Evaluated at bid price : 23.02
Bid-YTW : 5.21 %

BAM.PR.G FixedFloater Quote: 19.71 – 19.99
Spot Rate : 0.2800
Average : 0.1992

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-10
Maturity Price : 25.00
Evaluated at bid price : 19.71
Bid-YTW : 4.53 %

RY.PR.F Deemed-Retractible Quote: 25.11 – 25.50
Spot Rate : 0.3900
Average : 0.3119

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 4.32 %

HSE.PR.A FixedReset Quote: 25.75 – 26.05
Spot Rate : 0.3000
Average : 0.2238

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-10
Maturity Price : 23.44
Evaluated at bid price : 25.75
Bid-YTW : 3.14 %

CM.PR.M FixedReset Quote: 27.36 – 27.82
Spot Rate : 0.4600
Average : 0.3845

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.36
Bid-YTW : 2.96 %

GWO.PR.I Deemed-Retractible Quote: 22.56 – 22.87
Spot Rate : 0.3100
Average : 0.2536

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.56
Bid-YTW : 5.88 %

SLF.PR.I Closes at Discount on Moderate Volume

November 11th, 2011

Sun Life Financial has announced:

the successful completion of a Canadian public offering of $300 million of Class A Non-Cumulative Rate Reset Preferred Shares Series 12R (the “Series 12R Shares”) at a price of $25.00 per share and yielding 4.25 per cent annually. The offering, initially for $250 million of Series 12R Shares, was increased to $300 million following exercise by the underwriting syndicate, co-led by Scotia Capital Inc., CIBC and TD Securities Inc., of an option to purchase an additional $50 million of Series 12R Shares.

The Series 12R Shares were issued under a prospectus supplement dated November 3, 2011, which was issued pursuant to a short form base shelf prospectus dated April 12, 2011. Copies of those documents are available on the SEDAR website for Sun Life Financial Inc. at www.sedar.com. The Series 12R Shares are listed on the Toronto Stock Exchange under the ticker symbol SLF.PR.I.

SLF.PR.I is a FixedReset, 4.25%+273, announced November 3.

The issue traded 398,680 shares today in a range of 24.60-90 before closing at 24.55-60, 10×4. The issue will be tracked by HIMIPref™ and has been assigned to the FixedReset index. In accordance with my views on DeemedRetractibles, a hardMaturity entry has been added to the call schedule, on the assumption that regulatory changes applied to banks with respect to Tier 1 Capital will be extended to apply to insurers and insurance holding companies.

Vital statistics are:

SLF.PR.I FixedReset YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 4.41 %

Are Preferred Shares A Good Buy?

November 11th, 2011

David Aston was kind enough to quote me in his Moneysense piece Are preferred shares a good buy?:

Third, before taxes, the yields on preferred shares tend to be pretty similar to those of long-term bonds for the same company, says preferred shares expert James Hymas, president of Hymas Investment Management in Toronto. Even though they’re not as reliable as the company’s bonds, they give you about the same before-tax yield. So if you’re investing inside a TFSA or RRSP where taxes don’t matter, go with the bonds.

Fourth—and this is their key advantage—the dividends on Canadian preferred shares get the same highly advantageous tax treatment as dividends on Canadian common shares. So they generally beat bonds hands-down when held in non-registered accounts, where taxes matter. In fact, as a rule of thumb, a bond has to generate about 1.3 times the before-tax yield in order to end up with the same after-tax income compared to a preferred share, says Hymas.

[This post was written 2012-2-6, but backdated to the Moneysense publication date, 2011-11-25)

RON.PR.A: DBRS Downgrades to Pfd-3(low)

November 11th, 2011

DBRS has announced that it:

has today downgraded the long-term rating of RONA inc. (Rona or the Company) to BBB (low) from BBB, maintaining the Negative trend. At the same time, DBRS has downgraded the Company’s Preferred Shares rating to Pfd-3 (low) from Pfd-3, also with a Negative trend.

On May 11, 2011, DBRS changed the trends on Rona’s ratings to Negative from Stable.

Subsequent to that statement, Rona released its Q2 2011 results, which delivered same-store sales growth of -9.6%, overall revenue decline of -2.4% and EBITDA of $90 million (versus $133 million year-over-year) as the Company continued to engage in heavy promotional activity to spur growth. Yesterday, Rona released its Q3 2011 results, which delivered same-store sales growth of -5.1%. Overall revenue increased by 2.1% (due to the inclusion of acquisitions and new store openings), resulting in EBITDA of $105.4 million, an increase of 1.7% year-over-year. As such, combined with a moderate increase in debt from the previous year, lease-adjusted debt-to-EBITDAR for the last twelve months ended Q3 2011 increased to 3.1x.

The deteriorating operating performance and weakened credit metrics result in a credit risk profile that is no longer consistent with a BBB rating. In terms of outlook, DBRS has maintained the Negative trend on the ratings as we believe meaningful recovery will remain challenging, since Rona is expected to continue facing intense competition in a highly promotional-based, consumer-challenged environment. The Company expects to generate some cost savings, which may help offset investment in pricing. Nevertheless, DBRS expects that any significant improvement in performance will be difficult to realize without same-store sales and margin stabilization over the near term.

If the Company’s plans and performance lead to signs of stabilization in same-store sales, operating income and key credit metrics (lease-adjusted debt-to-EBITDAR of approximately 3.0x) over the next year, the ratings outlook could stabilize. However, a continued and meaningful decline in same-store sales, operating income and key credit metrics over the course of 2012 could result in a downgrade to BB (high).

RON.PR.A was last discussed on PrefBlog in the post RON.PR.A: Ripe for Credit Downgrade?. RON.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

November 9, 2011

November 10th, 2011

Oh, those wacky Europeans and their Risk-Weighted Assets!

Banks in Europe are undercutting regulators’ demands that they boost capital by declaring assets they hold less risky today than they were yesterday.

Banco Santander SA (SAN), Spain’s largest lender, and Banco Bilbao Vizcaya Argentaria SA (BBVA), the second-biggest, say they can go halfway to adding 13.6 billion euros ($18.8 billion) of capital by changing how they calculate risk-weightings, the probability of default lenders assign to loans, mortgages and derivatives. The practice, known as “risk-weighted asset optimization,” allows banks to boost capital ratios without cutting lending, selling assets or tapping shareholders.

Spanish banks aren’t alone in using the practice. Unione di Banche Italiane SCPA (UBI), Italy’s fourth-biggest bank, said it will change its risk-weighting model instead of turning to investors for the 1.5 billion euros regulators say it needs. Commerzbank AG (CBK), Germany’s second-biggest lender, said it will do the same. Lloyds Banking Group Plc (LLOY), Britain’s biggest mortgage lender, and HSBC Holdings Plc (HSBA), Europe’s largest bank, both said they cut risk-weighted assets by changing the model.

The proportion of risk-weighted assets to total assets at European banks is half that of American banks, according to an April 6 Barclays Capital report written by analysts Simon Samuels and Mike Harrison.

Sheila Bair, who stepped down as chairman of the Federal Deposit Insurance Corp. in June, has called Europe’s adoption of risk-weighting “naive.”

Some regulators, including Bair, have pushed for a leverage ratio that would require lenders to hold a fixed amount of capital against total assets.

Banco Santander, based in Madrid, and BBVA in Bilbao said they’re justified in adjusting risk-weightings because Spanish regulators have held them to higher standards than elsewhere.

Spanish banks have an average ratio of risk-weighted assets to total assets of 52 percent compared with 32 percent for U.K. banks, 31 percent for French and Benelux banks and 35 percent for German banks, analysts at Keefe, Bruyette & Woods Inc., wrote in an Oct. 26 report.

DARPA’s looking for hackers:

At the conference, officials of the Defense Advanced Research Projects Agency pleaded with hackers to help them out and said that the agency plans to boost spending as it battles unnamed adversaries in cyberspace.

Regina Dugan, DARPA director, addressed an audience that comprised what the agency called “visionary hackers,” academics and others, according to a Reuters story.

Ms. Dugan contended that the military needs “more and better options” to meet cyber threats to a growing range of industrial and other systems controlled by computers vulnerable to penetration, including cars with advanced computer diagnostic boards. Of concern are brakes, accelerators, steering and other modern car systems that “we need to worry about” because they could be remotely hacked via such diagnostic controls, said another DARPA program manager.

DARPA officials said the country is at risk particularly since the playing field is far from level. Layered security defenses have grown increasingly bloated, according to a recent in-house analysis, while attackers operate with lean, mean malware.

The agency’s analysis reports that some security packages are weighing in at an eye-popping 10 million lines of code, while malicious software on average runs on a whip-thin 125 lines.

To combat such threats, DARPA officials called for both an increase in the development of cyber defensive technologies and of offensive weapon systems.

There’ll be some good money for talented kids in that pot! I presume that Canadian federal government programmers need not apply:

The applications that are not “kicked out” of Service Canada’s automated system at the start cannot be fixed on the computer until a 28-day period has passed, even if the errors are reported to agents in the Service Canada processing office.

These applications then need to be processed manually by agents. The agents have an additional 21 days to do the recalculations, but, because their workforce is shrinking, the time frame is often not met and much longer delays of weeks or months are becoming commonplace.

What’s happening in Greece???

Greece’s critical power-sharing talks have hit a significant hurdle, with political leaders leaving a top-level meeting that had been expected to conclude three days of negotiations without naming a new prime minister to take over from George Papandreou.

The president’s office said Wednesday the meeting would reconvene on Thursday morning. It gave no reason. Earlier, Giorgos Karatzaferis, the head of a small right-wing party, had stormed out of the meeting, accusing the heads of the two main parties of using “trickery” but not giving any details.

I’ve already expressed doubts as to whether the population will permit the “paying back” part of the bail-out plan – but will the politicians even get as far as the “taking the money” part? Bloomberg reports:

Negotiations on a government between Papandreou and Samaras dragged on for a third day today as the two sides disagreed on a prime minister and the opposition balked at European Union demands for written commitments to secure a bailout package.

The new government must implement budget measures and decisions related to an Oct. 26 European bailout package that’s worth 130 billion euros ($177 billion), including a debt swap, before holding elections.

Immediately at stake is the fate of an 8 billion-euro loan installment under an earlier aid package, a 110 billion-euro EU- led bailout agreed in May 2010. The tranche must be paid before the middle of December to prevent a collapse of the country’s financial system.

Italy’s not having much fun either:

The euro-region’s defenses are being breached.

Investors today propelled Italy’s 10-year bond yield to close at a euro-era high of 7.25 percent after the promised exit of Prime Minister Silvio Berlusconi failed to convince them that his country can slash Europe’s second-largest debt burden.

This sounds like dealers are setting up for a lousy auction:

Italy may struggle to sell 5 billion euros ($6.8 billion) of Treasury bills tomorrow, after bond yields surged to euro-era records on Prime Minister Silvio Berlusconi’s resignation offer and LCH Clearnet SA demanded more collateral on the country’s bonds.

Italy auctions one-year bills tomorrow at 11:00 a.m. in Rome, followed by a sale of five-year bonds on Nov. 14. The auction comes after the country’s 10-year bond yield jumped 57 basis points to 7.33 percent, crossing the 7 percent threshold that led Greece, Portugal and Ireland to seek bailouts. Italy paid 3.57 percent the last time it sold one-year bills on Oct. 11. Similar maturity debt currently yields about 8.41 percent.

DBRS downgraded Italy a notch:

DBRS Ratings Limited (DBRS) has today downgraded the ratings on the Republic of Italy’s long-term foreign and local currency debt to A (high) from AA (low). The trend on both ratings remains Negative. The downgrade reflects: (1) persistent stress in market funding conditions; (2) fiscal consolidation implementation risks due to economic and political uncertainties; and, (3) structural economic growth challenges.

European difficulties are having effects in the Antipodes:

New Zealand’s central bank deferred plans to tighten bank lending rules as global turmoil increases the risks for the nation’s economy and financial system.

The Reserve Bank will delay an increase in the core funding ratio to 75 percent from 70 percent by about six months to Jan. 1, 2013, according to its Financial Stability Report released in Wellington today. The ratio sets the minimum share of bank loans that must be funded from local deposits or wholesale borrowings of one year or longer.

“Conditions in global funding markets have deteriorated,” the central bank said in the report. “It would have been very difficult to place new longer-term unsecured debt issues over the past three months as the sovereign debt crisis played out.”

The central bank introduced the ratio in July to reduce local banks’ reliance on short-term debt raised overseas, intending to counter the impact of that funding getting frozen.

Jefferson County’s gone bust:

Jefferson County, Alabama, commissioners voted 4-1 to file the largest U.S. municipal bankruptcy after reaching an impasse over concessions with holders of $3.14 billion of bonds.

JPMorgan Chase & Co. (JPM), which arranged most of the debt to fund a sewer renovation, will likely take the biggest loss.

A provisional agreement with creditors that commissioners approved in September included $1.1 billion in concessions and called for sewer-rate increases of as much as 8.2 percent for the first three years. The county was unable to get signed commitments from creditors, Commission PresidentDavid Carrington said today

The vote by officials in Alabama’s most populous county occurred about a month after Pennsylvania’s capital of Harrisburg sought court protection citing millions in overdue bond payments tied to a trash-to-energy incinerator. A Jefferson filing would eclipse that of California’s Orange County in 1994.

The crisis in Alabama arose when investors dumped Jefferson county’s bonds as the subprime mortgage-market meltdown sent ripples through Wall Street. Jefferson’s floating-rate securities were coupled with interest-rate swaps, a money-saving strategy pitched by banks that backfired. As credit markets convulsed in 2008, the county’s interest costs soared. When banks demanded early payoffs of the bonds, the county defaulted.

The debt deals also were rife with political corruption, leading the cost of the sewer project to soar as it was built during the 1990s. Former commission president and Birmingham Mayor Larry Langford, a Democrat, was convicted of accepting bribes in connection with the financing.

Two former JPMorgan bankers are fighting Securities and Exchange Commission charges that they made $8 million in undisclosed payments to friends of commissioners to secure the bank’s role in the deals. In 2009, JPMorgan agreed to a $722 million settlement with the SEC.

Be careful doing business in Ontario! Don’t sell securities that go down; only sell securities that go up, OK? Companies are now required to report on changes in the analytical methodology of third parties, and to guess how liquid the market for their securities is going to be.

There is renewed speculation that the TMX / Maple deal will close:

TMX, owner of the Toronto Stock Exchange, rose to C$44.70 this month, shrinking the gap to Maple Group Acquisition Corp.’s C$50-a-share offer to the narrowest since it became the sole bidder in June, according to data compiled by Bloomberg.

“The deal will get done and the regulators will probably do a little tinkering around the edges,” Thomas Caldwell, Toronto-based chief executive officer of Caldwell Securities Ltd., which oversees about $1 billion including TMX shares, said in a telephone interview. “At the end of the day, Maple Group’s offering C$50 a share. Price is going to decide this.”

The Competition Bureau is reviewing the C$3.73 billion ($3.64 billion) TMX transaction. Quebec’s Autorite des Marches Financiers scheduled hearings on Nov. 24 and Nov. 25 and the Ontario Securities Commission has hearings Dec. 1 and Dec. 2.

“Regulatory approval is more likely with the board and management supporting the transaction,” Edward Ditmire, an analyst at Macquarie in New York, said in a telephone interview. He says there’s a better than 50 percent chance the deal closes.

It will be a black day for Canada if the banks succeed in cementing a bit more of the Old-boy Club hegemony in the financial landscape. A foreign buyer for the TMX is greatly desirable.

Just in time for the Christmas shopping season comes this insurance news:

Should you be burdened with a particular fear of the supernatural, then you are well looked after when it comes to unusual insurance policies. Ghost, werewolf and vampire insurance can also be procured very easily, with each policy redeemable in the event of an attack by these creatures of the night.

Bell Aliant, proud guarantor of BAF.PR.A, was confirmed by DBRS:

DBRS has today confirmed the short- and long-term ratings of Bell Aliant Regional Communications, Limited Partnership (Bell Aliant or the Company) at R-1 (low) and BBB (high), respectively, along with the preferred share rating at Pfd-3 (high). The trends are Stable. The confirmation reflects a business risk profile that, while undergoing a transition from legacy voice services to focusing on growth areas such as data and video, has to-date been manageable. The ratings also incorporate Bell Aliant’s relatively stable financial risk profile, which remains slightly higher than its Canadian peers but within an acceptable range. DBRS believes that for Bell Aliant, the successful transition to providing new services – both in terms of investment and execution – remains more acute than for other telcos that typically have wireless services throughout their territory to provide growth while this fixed-line transition occurs.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts winning 11bp, FixedResets down 3bp and DeemedRetractibles gaining 6bp. Volatility was average. 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 0.0967 % 2,127.6
FixedFloater 4.83 % 4.53 % 26,123 17.25 1 -0.1015 % 3,192.4
Floater 3.38 % 3.40 % 161,266 18.72 2 0.0967 % 2,297.3
OpRet 4.95 % 0.96 % 55,181 1.51 7 0.1845 % 2,483.3
SplitShare 5.78 % 6.77 % 60,433 5.12 3 -0.2525 % 2,501.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1845 % 2,270.7
Perpetual-Premium 5.57 % 2.54 % 106,033 0.15 13 0.1653 % 2,156.0
Perpetual-Discount 5.32 % 5.43 % 108,968 14.74 17 0.1115 % 2,290.3
FixedReset 5.13 % 3.07 % 208,077 2.52 62 -0.0299 % 2,343.6
Deemed-Retractible 5.04 % 4.33 % 207,277 3.46 46 0.0575 % 2,217.3
Performance Highlights
Issue Index Change Notes
SLF.PR.H FixedReset -2.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.40 %
ELF.PR.F Perpetual-Discount -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-09
Maturity Price : 22.17
Evaluated at bid price : 22.45
Bid-YTW : 5.96 %
CM.PR.P Deemed-Retractible -1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-10-29
Maturity Price : 25.00
Evaluated at bid price : 25.62
Bid-YTW : 3.04 %
POW.PR.D Perpetual-Discount 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-09
Maturity Price : 24.25
Evaluated at bid price : 24.55
Bid-YTW : 5.13 %
BNS.PR.L Deemed-Retractible 1.18 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-04-28
Maturity Price : 25.25
Evaluated at bid price : 25.70
Bid-YTW : 3.95 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.B FixedReset 69,654 TD crossed 15,000 at 25.60; RBC crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-09
Maturity Price : 23.27
Evaluated at bid price : 25.45
Bid-YTW : 3.64 %
CM.PR.G Perpetual-Discount 59,975 Scotia crossed blocks of 10,000 and 25,000, both at 24.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-09
Maturity Price : 24.59
Evaluated at bid price : 24.91
Bid-YTW : 5.45 %
GWO.PR.I Deemed-Retractible 59,574 RBC crossed 49,900 at 22.64.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.56
Bid-YTW : 5.88 %
MFC.PR.C Deemed-Retractible 43,693 rBC crossed 28,600 at 21.60.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.52
Bid-YTW : 6.51 %
BAM.PR.Z FixedReset 34,065 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-09
Maturity Price : 23.11
Evaluated at bid price : 25.02
Bid-YTW : 4.38 %
CM.PR.E Perpetual-Discount 32,383 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-09
Maturity Price : 24.68
Evaluated at bid price : 24.98
Bid-YTW : 5.64 %
There were 21 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.H OpRet Quote: 25.36 – 26.83
Spot Rate : 1.4700
Average : 0.9090

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-12-09
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : -4.02 %

W.PR.H Perpetual-Discount Quote: 25.08 – 25.47
Spot Rate : 0.3900
Average : 0.2390

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-09
Maturity Price : 23.88
Evaluated at bid price : 25.08
Bid-YTW : 5.48 %

RY.PR.F Deemed-Retractible Quote: 25.15 – 25.50
Spot Rate : 0.3500
Average : 0.2263

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 4.28 %

CU.PR.B Perpetual-Premium Quote: 25.55 – 25.90
Spot Rate : 0.3500
Average : 0.2323

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-12-09
Maturity Price : 25.25
Evaluated at bid price : 25.55
Bid-YTW : -12.40 %

CM.PR.M FixedReset Quote: 27.32 – 27.73
Spot Rate : 0.4100
Average : 0.3018

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.32
Bid-YTW : 3.01 %

TD.PR.G FixedReset Quote: 27.15 – 27.34
Spot Rate : 0.1900
Average : 0.1125

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.15
Bid-YTW : 2.70 %

TCA Issues Long Paper at 4.587%

November 9th, 2011

DBRS reports that they have:

today assigned a rating of “A” with a Stable trend to the following TransCanada PipeLines Limited (TCPL) new debt issuance:

(1) Proposed $500 million 3.65% unsecured medium-term notes maturing on November 15, 2021.

(2) Proposed $250 million 4.55% unsecured medium-term notes maturing on November 15, 2041.

The issues are expected to settle on November 15, 2011.

The new debt will rank equally, except as to sinking funds, with all of TCPL’s existing and future senior unsecured debt. Net proceeds from the offering will be used to repay indebtedness and for general corporate purposes.

It’s odd that DBRS considers these to be “proposed” issues: the WSJ says it’s not only been done, but that the offering raised $250-million more than the minimum amount targetted and notes:

It also raised C$250 million from an offering of long bonds maturing November 2041. The issue was priced at 184 basis points over the Government of Canada 2041 benchmark to yield 4.587%. The bonds carry a coupon of 4.55%

TCA has two issues of preferred shares outstanding, TCA.PR.X and TCA.PR.Y, both PerpetualPremiums, both with a par value of $50, and both with annual dividends of $2.80, or 5.6%. Sadly, both are trading at levels of about $53, making the YTW scenario a call in the near term, so a comparison to long bonds is of dubious value.

By way of contrast, non-preferred-share-issuing Encana issued in USD at 5.15%:

DBRS has today assigned a rating of A (low) with a Negative trend to the following Encana Corporation (Encana) new debt issuance:

(1) Proposed $600 million 3.9% senior unsecured notes maturing November 15, 2021.

(2) Proposed $400 million 5.15% senior unsecured notes maturing November 15, 2041.

The issues are expected to settle on November 14, 2011.

The new debt will rank equally with all of Encana’s existing and future senior unsecured debt. Net proceeds from the offering will be used to pay down commercial paper indebtedness and for general corporate purposes.

Notes:
All figures in U.S. dollars unless otherwise noted

November 8, 2011

November 8th, 2011

Rumours are floating about specific bank capital surcharges:

Citigroup Inc. (C), JPMorgan Chase & Co., BNP Paribas SA, Royal Bank of Scotland Group Plc, and HSBC Holdings Plc (HSBA) may face top capital surcharges of 2.5 percentage points, according to a provisional list prepared by global regulators and obtained by Bloomberg News.

The list was drawn up as part of plans by the Group of 20 nations to force banks whose failure could damage the global economy to boost their reserves by 1 to 2.5 percentage points above minimum levels agreed on by international regulators. Bank of America Corp. (BAC), Barclays Plc (BARC) and Germany’s biggest bank Deutsche Bank AG (DBK) may face surcharges of 2 percentage points, according to the list.

At least one ECB council member is objecting to the piggy-bank paradigm:

European Central Bank council member Jens Weidmann said the ECB cannot bail out governments by printing money.

“One of the severest forms of monetary policy being roped in for fiscal purposes is monetary financing, in colloquial terms also known as the financing of public debt via the money printing press,” Weidmann, who heads Germany’s Bundesbank, said in a speech in Berlin today. The prohibition of monetary financing in the euro area “is one of the most important achievements in central banking” and “specifically for Germany, it is also a key lesson from the experience of hyperinflation after World War I,” he said.

The ECB is under pressure to ramp up its bond purchases to cap soaring yields in Italy as governments fail to contain the two-year-old sovereign debt crisis. Weidmann also rejected proposals to use Bundesbank currency and gold reserves to help finance purchases by a special fund, saying this is another form of monetary financing.

Pierre Trudeau was a visionary! First in Greece, now in Italy, the slogan is “Elect me and I’ll quit!

Prime Minister Silvio Berlusconi offered to resign as soon as Parliament approves austerity measures in a vote next week, after defections from his ruling party left him without a majority.

“Once that task has been achieved, the prime minister will tender his resignation to the President,” who will then begin consultations with all political parties, President Giorgio Napolitano said tonight in an e-mailed statement after meeting Berlusconi in Rome.

The resignation offer came after Berlusconi failed to muster an absolute majority on a routine parliamentary ballot, obtaining only 308 votes in the 630-seat Chamber of Deputies today.

The yield on Italy’s benchmark 10-year bond jumped 11 basis points today to 6.77 percent, the most since the euro’s introduction in 1999 and near the 7 percent level that drove Greece, Ireland and Portugal to seek international bailouts. The extra premium investors demand to hold the debt instead of German bunds widened to a record 497 basis points.

The desperation of European politicians is leading them down some awfully stupid and dangerous pathways:

Bank regulators may get more powers to enforce a European Union plan to recapitalize lenders, including the ability to ban weaker banks from paying bonuses, under a proposal from the European Commission.

The commission, the EU’s executive arm, will propose the law “in the coming days,” Michel Barnier, the EU’s financial services chief said today.

Europe’s banks will need to raise 106 billion euros ($146 billion) in fresh capital under tougher rules being introduced in response to the euro area’s sovereign-debt crisis, the European Banking Authority said last month.

Policy makers want banks to use funds from withholding bonuses and dividends to reach the capital target, rather than reducing the size of their balance sheets.

The EBA will “ensure that there isn’t deleveraging, and in particular also that there isn’t deleveraging in host countries in which trans-national groups operate as a result of the need to achieve certain capital levels,” Polish Finance Minister Jacek Rostowski said in a speech in Brussels.

Well, if they’re trying to increase capital flight, that’s a really good way to do it! It’s getting to the point where I’m not sure I understand why anybody would entrust any money at all to European bank – whether as equity or insured deposit.

What-Debt? and Spend-Every-Penny (the guys who turned a structural surplus into a structural deficit) are now bringing us Europe: the sequel:

The Harper government will take longer to erase the deficit, won’t raise Employment Insurance premiums as high and will extend a temporary work-sharing program in response to a worsening Canadian economy.

Finance Minister Jim Flaherty released his fall economic update Tuesday, providing the first clear examples of the “flexibility” his government has promised in the face of slower-than-expected economic growth.

These assumptions for slower growth mean Ottawa is now projecting Canada will not produce a fiscal surplus until 2015-16 or 2016-17, depending on the success of a previously-announced plan to find $4-billion a year in spending cuts.

Prime Minister Stephen Harper had promised during the 2011 election campaign that Canada would be in surplus by 2014-15.

The size of the federal debt is now projected to rise from $550.3-billion in 2010-11 to $640.6-billion by 2015-16.

I have no problem with deficit spending, as long as it is accompanied by a plan showing how it will paid for through the cycle. Unfortunately, the Junior Republicans can’t be bothered to think so far ahead.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts gaining 17bp, FixedResets up 4bp and DeemedRetractibles winning 25bp. SLF issues were again notable on the downside of the Performance Highlights table. Volume was good.

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 0.0968 % 2,125.6
FixedFloater 4.82 % 4.53 % 25,353 17.26 1 1.2853 % 3,195.6
Floater 3.38 % 3.41 % 162,401 18.70 2 0.0968 % 2,295.1
OpRet 4.94 % 0.94 % 54,802 1.50 7 -0.1258 % 2,478.7
SplitShare 5.77 % 6.60 % 59,250 5.13 3 -0.2379 % 2,508.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1258 % 2,266.5
Perpetual-Premium 5.57 % 2.79 % 105,708 0.16 13 0.0516 % 2,152.4
Perpetual-Discount 5.33 % 5.31 % 109,499 14.74 17 0.1717 % 2,287.7
FixedReset 5.12 % 2.97 % 209,150 2.51 62 0.0390 % 2,344.3
Deemed-Retractible 5.04 % 4.39 % 208,499 3.82 46 0.2464 % 2,216.1
Performance Highlights
Issue Index Change Notes
GWO.PR.I Deemed-Retractible -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 5.91 %
FTS.PR.C OpRet -1.14 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-12-08
Maturity Price : 25.50
Evaluated at bid price : 26.10
Bid-YTW : -10.67 %
SLF.PR.A Deemed-Retractible -1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.12
Bid-YTW : 6.41 %
SLF.PR.B Deemed-Retractible -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.37
Bid-YTW : 6.32 %
BMO.PR.Q FixedReset -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.23
Bid-YTW : 3.09 %
FTS.PR.H FixedReset 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-08
Maturity Price : 23.53
Evaluated at bid price : 25.75
Bid-YTW : 2.82 %
BAM.PR.N Perpetual-Discount 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-08
Maturity Price : 22.62
Evaluated at bid price : 22.97
Bid-YTW : 5.22 %
BAM.PR.G FixedFloater 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-08
Maturity Price : 25.00
Evaluated at bid price : 19.70
Bid-YTW : 4.53 %
TD.PR.O Deemed-Retractible 1.38 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-10-31
Maturity Price : 25.50
Evaluated at bid price : 25.78
Bid-YTW : 3.72 %
IAG.PR.A Deemed-Retractible 1.71 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.66
Bid-YTW : 5.93 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.F FixedReset 292,424 RBC crossed blocks of 267,700 and 18,400, both at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.11
Bid-YTW : 4.50 %
CM.PR.E Perpetual-Discount 246,600 TD crossed blocks of 99,700 and 100,000, both at 25.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-08
Maturity Price : 24.69
Evaluated at bid price : 24.99
Bid-YTW : 5.63 %
SLF.PR.G FixedReset 110,370 RBC crossed blocks of 47,200 shares, 14,200 and 10,800, all at 24.50. Desjardins crossed 11,500 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.51
Bid-YTW : 3.68 %
CM.PR.G Perpetual-Discount 88,703 Scotia crossed 50,000 at 24.95. Desjardins crossed 12,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-08
Maturity Price : 24.60
Evaluated at bid price : 24.92
Bid-YTW : 5.44 %
RY.PR.R FixedReset 81,875 Scotia crossed blocks of 30,000 and 44,700, both at 26.93.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.90
Bid-YTW : 2.71 %
BAM.PR.O OpRet 50,900 TD crossed 50,000 at 25.80.
YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.58
Bid-YTW : 3.90 %
There were 38 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.J FixedReset Quote: 26.07 – 26.60
Spot Rate : 0.5300
Average : 0.3725

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.07
Bid-YTW : 4.24 %

GWO.PR.M Deemed-Retractible Quote: 25.95 – 26.49
Spot Rate : 0.5400
Average : 0.3975

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 5.43 %

BNA.PR.E SplitShare Quote: 23.09 – 23.75
Spot Rate : 0.6600
Average : 0.5198

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 23.09
Bid-YTW : 6.60 %

HSB.PR.C Deemed-Retractible Quote: 25.24 – 25.80
Spot Rate : 0.5600
Average : 0.4300

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.24
Bid-YTW : 5.08 %

HSB.PR.D Deemed-Retractible Quote: 25.30 – 25.70
Spot Rate : 0.4000
Average : 0.2910

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.95 %

IGM.PR.B Perpetual-Premium Quote: 26.20 – 26.50
Spot Rate : 0.3000
Average : 0.2062

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 5.15 %