Archive for December, 2011

CM.PR.I to be Redeemed

Tuesday, December 20th, 2011

Canadian Imperial Bank of Commerce has announced:

its intention to redeem all of its issued and outstanding Non-cumulative Class A Preferred Shares Series 31 for cash. The redemptions will occur on January 31, 2012. The redemption price is $26.00 per Series 31 share.

The $0.293750 per share quarterly dividend declared on November 30, 2011 will be the final dividend on the Series 31 shares and will be paid on January 27, 2012 to shareholders of record on December 28, 2011, as previously announced.

Holders of the Series 31 shares should contact the financial institution, broker or other intermediary through which they hold the shares to confirm how they will receive their redemption proceeds.

December 19, 2011

Monday, December 19th, 2011

The Bank of England has released the 11Q4 Quarterly Bulletin with articles:

  • Markets and operations
  • Understanding recent developments in UK external trade
  • The financial position of British households: evidence from the 2011 NMG Consulting survey
  • Going public: UK companies’ use of capital markets
  • Trading models and liquidity provision in OTC derivatives markets
  • Summaries of recent Bank of England working papers
    • Systemic capital requirements
    • Estimating the impact of the volatility of shocks: a structural VAR approach
    • How do individual UK consumer prices behave?
    • An efficient minimum distance estimator for DSGE models
    • Time-varying volatility, precautionary saving and monetary policy

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts losing 15bp, FixedResets down 8bp and DeemedRetractibles gaining 10bp. Volatility was good. Volume was on the high side of 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 -0.0633 % 2,003.7
FixedFloater 4.94 % 4.69 % 36,584 16.97 1 -0.3107 % 3,122.6
Floater 3.32 % 3.68 % 68,856 18.13 3 -0.0633 % 2,163.4
OpRet 4.94 % 1.41 % 60,406 1.40 6 -0.4435 % 2,471.5
SplitShare 5.51 % 2.95 % 68,256 0.97 4 0.0104 % 2,537.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.4435 % 2,259.9
Perpetual-Premium 5.49 % 3.11 % 88,274 0.84 18 -0.0551 % 2,171.3
Perpetual-Discount 5.23 % 5.19 % 106,435 15.07 12 -0.1479 % 2,318.2
FixedReset 5.11 % 3.02 % 217,704 2.54 64 -0.0794 % 2,337.6
Deemed-Retractible 5.04 % 4.04 % 191,158 3.09 46 0.0968 % 2,227.8
Performance Highlights
Issue Index Change Notes
BAM.PR.X FixedReset -1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-19
Maturity Price : 22.90
Evaluated at bid price : 24.36
Bid-YTW : 3.39 %
PWF.PR.A Floater -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-19
Maturity Price : 19.03
Evaluated at bid price : 19.03
Bid-YTW : 2.78 %
FTS.PR.H FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-19
Maturity Price : 23.48
Evaluated at bid price : 25.50
Bid-YTW : 2.67 %
TCA.PR.X Perpetual-Premium -1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.30
Bid-YTW : 3.42 %
GWO.PR.N FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.00
Bid-YTW : 3.95 %
SLF.PR.B Deemed-Retractible 1.67 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.93
Bid-YTW : 6.49 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.G FixedReset 91,945 Recent underwriters’ clearance.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.70
Bid-YTW : 4.96 %
ENB.PR.D FixedReset 77,934 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-19
Maturity Price : 23.16
Evaluated at bid price : 25.18
Bid-YTW : 3.54 %
MFC.PR.D FixedReset 57,707 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 4.07 %
BMO.PR.L Deemed-Retractible 41,400 RBC crossed 21,100 at 27.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-25
Maturity Price : 26.00
Evaluated at bid price : 27.10
Bid-YTW : 2.81 %
MFC.PR.A OpRet 41,186 RBC bought 30,000 from Scotia at 25.00.
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 4.18 %
CM.PR.E Perpetual-Premium 37,608 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : 5.27 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CIU.PR.B FixedReset Quote: 27.26 – 27.80
Spot Rate : 0.5400
Average : 0.3414

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.26
Bid-YTW : 3.02 %

TCA.PR.X Perpetual-Premium Quote: 52.30 – 52.85
Spot Rate : 0.5500
Average : 0.3876

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.30
Bid-YTW : 3.42 %

ENB.PR.B FixedReset Quote: 25.61 – 25.90
Spot Rate : 0.2900
Average : 0.1777

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-19
Maturity Price : 23.32
Evaluated at bid price : 25.61
Bid-YTW : 3.50 %

PWF.PR.A Floater Quote: 19.03 – 19.50
Spot Rate : 0.4700
Average : 0.3802

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-19
Maturity Price : 19.03
Evaluated at bid price : 19.03
Bid-YTW : 2.78 %

RY.PR.X FixedReset Quote: 27.20 – 27.43
Spot Rate : 0.2300
Average : 0.1414

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 27.20
Bid-YTW : 3.01 %

RY.PR.H Deemed-Retractible Quote: 26.70 – 27.23
Spot Rate : 0.5300
Average : 0.4432

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.70
Bid-YTW : 3.76 %

UK to Force Split of Banks: Vanilla and Freestyle

Sunday, December 18th, 2011

Jennifer Ryan of Bloomberg reports that U.K.: Banks to Split Consumer, Investment Arms:

The U.K. will force banks to separate their investment and consumer businesses as part of its acceptance of the findings of the John Vickers-led Independent Commission on Banking, business secretary Vince Cable said.

“Tomorrow, the government is going to launch this initiative on the banks, accepting in full the Vickers commission,” he told BBC television today. “We’re going to proceed with the separation of the banks, the casinos and the business lending parts of the banks.”

Former Bank of England Chief Economist Vickers recommended in a Sept. 12 report that banks build fire breaks between their consumer and investment banks and boost the amount of loss- absorbing equity and debt they hold to between 17 percent and 20 percent. Since 2007, the government has had to spend, pledge and loan 850 billion pounds ($1.3 trillion) to rescue British banksChancellor of the Exchequer George Osborne will say in Parliament tomorrow that the government will enact the reforms stemming from the report and the Treasury will publish its response. The changes are to be implemented by 2019.

The units inside the fire breaks will include all checking accounts, mortgages, credit cards and lending to small- and medium-sized companies, the report said in September. As much as a third of U.K. bank assets, or about 2.3 trillion pounds, will be included, the document said. Trading and investment banking activities will be excluded from the ring-fence. Standard & Poor’s said Sept. 14 the elements of a bank outside the ring fence face a credit-ratings cut as they won’t be able to count on government support.

This is echoed by the Guardian and the BBC, but journalists rarely do anything more than copy each other’s press releases anyway, so whether one can use the word “confirmed” is a matter of luck.

If it’s true – and if the attempt is successfull – I’m very pleased. As I said on March 24, 2008:

As I have stated so many times that Assiduous Readers are fed up to the back teeth with the incessant drone – we want a shadow banking system! We want to ensure that there are layers of regulation, with the banks at the inner core and a shock-absorber comprised of brokerages that will serve as a buffer between this core and a wild-and-wooly investment market. This will, from time to time, require (or, at least, encourage) the Fed to step in and take action, but the alternative is worse.

The Independent Commission on Banking has a refreshingly focussed website. In his opening remarks, Sir John Vickers made the points:

Structural separation would bring three main benefits:
  • it would help insulate vital UK retail banking services from global financial shocks, which is of particular importance given the way that major UK banks combine retail banking with global wholesale/investment banking;
  • it would make it easier and less costly to sort out banks – whether retail or investment banks – that still got into trouble despite greater loss-absorbing capacity. This is all part of getting taxpayers off the hook for the banks; and
  • it would be good for competitiveness because UK retail banking can be made safer while international standards apply to the global wholesale and investment banking activities of UK banks.

The separation is intended to take place as follows:

We are recommending a strong ring-fence – otherwise there would be little point in having one – but also a flexible one. This in essence is how it would work.

  • Only ring-fenced banks would supply the core domestic retail banking services of taking deposits from ordinary individuals and SMEs and providing them with overdrafts.
  • Ring-fenced banks could not undertake trading or markets business, or do derivatives (other than hedging retail risks) or supply services to overseas (in the sense of non-European) customers, or services (other than payments services) resulting in exposures to financial companies.
  • Other activities – such as lending to large domestic non-financial companies – would be allowed either side of the fence.

    The aggregate balance sheet of UK banks exceeds £6 trillion – more than four times annual UK output. On the basis above, between a sixth and a third of the balance sheet would be inside the fence.

  • The degree of capital required for core banks will be awesome:

    The other element of reform for financial stability concerns the ability of banks, especially those of systemic importance, to bear losses. On this our main recommendations are:
    • that large ring-fenced banks should have equity capital of at least 10% of risk-weighted assets and corresponding limits on overall leverage;
    • that the retail and other activities of large banks should have primary loss-absorbing capacity – equity plus long-term unsecured debt (‘bail-in bonds’) that readily bears loss at the point of failure – of 17%-20% of risk-weighted assets.
    • Remaining unsecured debt should also bear loss on failure if necessary; and depositor preference, so that insured deposits rank above all other unsecured debt.

    The complete Final Report: Recommendations weighs in at a whopping 363 pages. I am quite disappointed at the discussion of “bail-in” debt:

    First, the authorities should have a ‘primary bail-in power’ to impose losses in resolution on a set of pre-determined liabilities that are the most readily lossabsorbing. This should include the ability to be able to write down liabilities to recapitalise a bank (or part thereof) in resolution.46 As described in Paragraph 4.63, the class of (non-capital) liabilities that bears loss most readily is long-term unsecured debt. The Commission’s view is therefore that all unsecured debt with a term of at least 12 months at the time of issue – ‘bail-in bonds’47 – should be subject to the primary bail-in power.

    Second, the authorities should have a ‘secondary bail-in power’ that would allow them to impose losses on all unsecured51 liabilities beyond primary loss-absorbing capacity (again, including the ability to write down liabilities to re-capitalise a bank) in resolution, if such loss-absorbing capacity does not prove sufficient.

    As I have said so many times, I strongly dislike giving “the authorities” so much discretionary power. But at least it means that bank regulators will be treated to many excellent meals when the next crisis rears its head!

    SEC Inching towards Money Market Fund Reform

    Sunday, December 18th, 2011

    SEC Chairman Mary L. Schapiro used her Remarks at SIFMA’s 2011 Annual Meeting to discuss Money Market Fund reform, a topic which I consider very important for financial stability.

    Ms. Schapiro said:

    While the SEC’s new money market fund reforms were a critical first step, and many voices have said “you’ve done enough,” I believe additional steps should be taken to address the structural features that make money market funds vulnerable to runs.

    As was stated in the FSOC Annual Report issued in July, the SEC – working with FSOC – is evaluating options to address the structural vulnerabilities posed by money market funds. We are focused in particular on a capital buffer option to serve as a cushion for money market funds in times of emergency and floating NAVs, which would eliminate the expectation of stability that accompanies the $1.00 stable NAV. Both of these reform options would ensure that investors who use money market funds realize the costs that might be imposed during rare market events.

    The current focus on these two reform options is the result of a long and careful review conducted jointly with fellow financial regulators. In October 2010, the President’s Working Group released a Report on Money Market Funds.

    The President’s Working Group report is titled Money Market Fund Reform Options and on its release:

    The PWG now requests that the Financial Stability Oversight Council (FSOC), established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, consider the options discussed in this report and pursue appropriate next steps. To assist the FSOC in any analysis, the Securities and Exchange Commission, as the regulator of money market funds, will solicit public comments, including the production of empirical data and other information in support of such comments. A notice and request for comment will be published in the near future.

    The 2011 Annual Report of the FSOC has been discussed on PrefBlog. Anyway, back to Schapiro:

    While floating NAVs would reinforce what money market funds are – an investment – and what they are not – a guaranteed product – this option poses challenges for policymakers, particularly in fostering an orderly transition from stable NAVs to floating NAVs.

    Another option, a capital buffer for money market funds, also holds promise. And much of the SEC staff’s energy, working jointly with staff from other FSOC member agencies, is focused on developing a meaningful capital buffer reform proposal. In addition, a capital buffer potentially could be combined with redemption restrictions in order to address incentives to run that may not be curtailed by a capital buffer alone.

    I don’t remember seeing redemption restrictions being proposed before. Good old regulators! When in doubt, impose rationing, that’s the motto!

    An express and transparent capital buffer would make explicit what for many, but not all, money market funds is implicit today: namely that there is a source of capital available to the fund in times of emergency. Today that source of capital comes from discretionary sponsor support. If a money market fund held a troubled security, for example, the fund’s sponsor – or the sponsor’s well-capitalized parent – might buy the security out of the fund’s portfolio.

    Clearly such activity saved investors from losses and was in their interests. But it also had the perverse effect of lulling investors into the belief that losses were extremely remote, if not somehow impossible, due to sponsor support.

    A dedicated capital buffer, or similar structure, could provide that type of cushion. It could mitigate the incentive for investors to run since there would be dedicated resources to address any losses in the fund

    In assessing potential capital buffer structures, we are examining the pros and cons of various sources of the capital. The capital in a money market fund could come from (1) the fund’s sponsor, (2) the fund’s shareholders, or (3) the market, through the issuance of debt or a subordinated equity class. In addition, we are closely examining the appropriate size of any capital buffer. A challenge is how to establish a capital buffer that offers meaningful protection against unexpected events, without over-protecting and unnecessarily interfering with the prudent and efficient portfolio management of the fund.

    Capital buffers have achieved a good level of academic support, as reported on PrefBlog in the post Squam Lake Group on Money Market Fund Regulation.

    In a speech picked by Reuters, the new Republican SEC commissioner Daniel Gallagher made a speech on the topic titled SEC Reform After Dodd-Frank and the Financial Crisis:

    To put a finer point on it, in light of the extensive disclosures regarding the possibility of loss, money market funds should not be treated by investors or by regulators as providing the surety of federally insured demand deposits.

    So what is prompting this urgency to reform money market funds? What are the particular risks that money market funds, as currently constituted, pose to investors and to the capital markets? What problem are we solving here?

    Well, as the events following the Lehman bankruptcy and Primary Reserve’s breaking of the buck showed, investors are treating money market funds as being perfectly safe – disclosures nonwithstanding. And problem is the effect on financial stability of the breathtaking run on money market funds that followed.

    Like it or not, US MMFs have a huge systemic importance, as pointed out in an opinion piece by two partners at Dechert LLP (a law firm) titled How the Dodd-Frank Act Should Affect Mutual Funds, Including Money Market Funds:

    Money market funds are an intermediary of short-term credit to the economy. They hold over 40 percent of outstanding commercial paper and approximately 65 percent of short-term municipal debt. Money market funds also manage a substantial portion of U.S. business short-term assets (24 percent as of 2006). As of December 29, 2010, money market funds had approximately $2.8 trillion of assets, or approximately 25 percent of all U.S. fund assets. Of the $2.8 trillion in money market funds, more than $1.8 trillion was invested in institutional money market funds.

    I don’t think that there can be any doubt regarding the role played by MMFs in financial stability. But back to Gallagher:

    I’ll admit that I just posed a bit of a trick question. We cannot know what risks money market funds pose unless – and this brings me to my second point – we have a clearer understanding of the effects of the Commission’s 2010 money market reforms. For some reason, much of the discussion surrounding the current need for money market reform sweeps aside the fact that the Commission has already responded to the 2008 crisis by making significant changes to Rule 2a-7. Notably, those amendments only became effective in May 2010.

    The Rule 2a-7 amendments do not address the problem. Oh, they require a bit more liquidity, and they require a bit more box-ticking on credit quality – but the problem is, what if a money market fund holds a security that goes bust? There is no amount of box-ticking, no amount of analysis, that is going to eliminate that possibility.

    First, I am hesitant about any form of so-called “capital” requirement, whether it takes the form of a “buffer” or of an actual capital requirement similar to those imposed on banks. Although I am not opposed to a bank-like capital requirement in principle, it is my understanding that the level of capital that would be required to legitimately backstop the funds would effectively end the industry.

    His claim regarding his understanding is not footnoted, which is a shame.

    However, if having sufficient capital would end the industry, then is the industry worth having? MMFs exist mainly for the purpose of doing an end-run around the banks – providing essentially the same services without having to submit to all the capital rules. In that sense, imposing a capital buffer rule that ends the industry can be seen more as a closing of a loophole than anything else.

    In a very big sense, a bank with a large MMF operation can be viewed as simply having an unrecognized off-balance sheet obligation – something we’re trying to get away from!

    I will note, however, that at least one industry participant has suggested the possibility of a stand-alone redemption fee. Although the details of the imposition of such a fee would need to be carefully considered, this suggestion avoids my worries about capital requirements. This minimal approach does not set up false expectations of capital protection, externalizes the costs of redemptions, and could be part of an orderly process to wind down funds when necessary. And, a meaningful redemption fee may cause a healthy process of self-selection among investors that could cull out those more likely to “run” in a time of stress. But despite my initial positive reaction to the notion of a redemption fee standing alone, grafting the fee onto a capital buffer regime will not assuage my concerns with such a capital requirement. Indeed, a combined approach retains all the problems of any capital solution, unless something significant is done to manage investor expectations regarding the level of protection provided.

    His mention of a possible redemption fee has been left unfootnoted, but may be related to the paper by the Dechert partners referenced above:

    The alternative suggested here is that, during a period of illiquidity, as declared by a money market fund’s board (or, alternatively, the SEC or another designated federal regulator), a money market fund may impose a redemption fee on a large share redemption approximately equal to the cost imposed by the redeeming shareholder and other redeeming shareholders on the money market fund’s remaining shareholders. For example, if redemptions in cash are expected to impact the market value of the fund’s remaining portfolio securities by an estimated dollar value or percentage, then the redeeming shareholders would be entitled to receive their principal value (i.e., the $1.00 NAV) minus the market impact that the redemptions have on the fund. Thus, during a period of declared illiquidity, a shareholder who insists upon making a large redemption of its shares would receive less than the full amount of its shares’ NAV. As soon as the declaration is withdrawn at the end of the period of illiquidity, money market funds would no longer be permitted to impose a redemption fee on redeeming shareholders and, once again, share transactions would occur at the $1.00 NAV.

    I can’t say I’m very impressed with the redemption fee argument. Most importantly, it implies breaking the buck in all but name – there’s no insurance aspect to it, as there is with a capital buffer, or guarantees from a credible counterparty.

    Update, 2011-12-23: Bloomberg’s editors suggest:

    To add another level of security, regulators should consider one other change the industry has proposed: Allow funds to quickly close the door on redemptions when management deems it necessary. Hedge funds routinely used this lifesaver during the financial crisis. Few failed as a result. We would prefer that, instead of the industry deciding whether to shut the gate, which could leave millions of small investors in a cash crunch, the SEC make that decision in consultation with the Fed and the Treasury.

    I don’t buy it. As soon as one MMF locks its doors, there will be a run on all the others. Additionally, there will be very grave effects on holders who need the money and to whom $0.98 now is worth a lot more than (maybe) $1.00 in two weeks.

    PrefInfo.com Updated!

    Saturday, December 17th, 2011

    PrefInfo has been updated to 2011-12-17.

    As always, finding an error will win you a PrefLetter … just let me know about it and if I agree it’s an error, you’ll get a free copy!

    December 16, 2011

    Friday, December 16th, 2011

    BMO will be exiting the annuity business:

    Ottawa is wading into a high-stakes battle between banks and life insurers, ordering the banks to stop selling products that resemble annuities.

    The decision is a win for the country’s life insurers and a blow to Bank of Montreal … which kicked off this battle in January when it began selling a product called BMO Lifetime Cash Flow, which provided buyers 55 and older with guaranteed payments for life.

    Finance Minister Jim Flaherty said Friday that the Conservative government will introduce legislation to prevent banks from offering financial products that function like life annuities.

    Some of the best investment advice I’ve ever recieved was given to me before I was ten years old. My Dad always said: When the little guys get in …:

    Royal Canadian Mint’s retail gold fund is an unheralded success.

    Since the books opened three weeks ago, the initial public offering has raised $600-million. That technically makes it the largest IPO of the year.

    it’s time to get out:

    While bullion’s slide of as much as 9 percent this week took its drop from the record $1,923.70 an ounce reached in September to almost 20 percent, the common definition of a bear market, investors are still holding the most metal ever in exchange-traded products, a wager now valued at $119.2 billion.

    We’re starting to get a little clarity on the MF Global situation. It seems that after six weeks of very costly forensic analysis, the CME looked at its notes from an October 31 meeting:

    CME Group detailed its dealings with MF Global in documents released yesterday by the oversight panel of the House Financial Services Committee. Christine Serwinski, chief financial officer for North America at MF Global, and Edith O’Brien, a treasurer, told Mike Procajlo, an exchange auditor, at around 1 a.m. on Oct. 31 in Serwinski’s Chicago office that the customer money was transferred on Oct. 27 and Oct. 28 and possibly Oct. 26, according to a CME Group timeline.

    MF Global had its credit rating cut to junk on Oct. 27 by Moody’s Investors Service and Fitch Ratings as its shares plunged and bonds began trading at distressed levels amid a crisis of investor confidence over the Europe trades.

    The downgrades “sparked an increase in margin calls” that were “threatening overall liquidity,” Bradley Abelow, MF Global’s president and chief operating officer, said in the company’s bankruptcy filing.

    Customer funds were also used to make a $175 million loan to MF Global’s U.K. subsidiary, Duffy said yesterday.

    A revised MF Global customer segregation report was sent to CME Group on Oct. 31 that showed $891.5 million in missing customer money as of Oct. 28, the CME Group chronology shows.

    This has not been previously disclosed because muttering darkly about “missing” funds is a better regulatory career move. Assiduous Readers will doubtless remember that on November 2 I wrote:

    Experience suggests to me that the actual players know very well what the answer to the segregated account mystery is, but are posturing for political purposes.

    Fitch is gloomy on Europe:

    The euro declined against the dollar after Fitch Ratings said it may downgrade Belgium, Spain, Slovenia, Italy, Ireland and Cyprus, adding to concern the region’s debt crisis hasn’t been contained.

    The euro fell 0.1 percent to $1.3004 per euro at 12:53 p.m. in New York. It dropped 0.2 percent to 101.17 yen.

    Fitch said a “comprehensive solution” to the euro-zone crisis is “technically and politically beyond reach.”

    After years of government waffling, the Belgians have been cut:

    Belgium’s credit rating was cut two levels to Aa3 by Moody’s Investors Service, which said rising borrowing costs, slowing growth and liabilities arising from Dexia SA’s breakup threaten to inflate the euro area’s fifth- highest debt load.

    Moody’s lowered Belgium’s debt rating to the fourth-highest investment grade, from Aa1, with a negative outlook, the ratings company said today in a statement. The action follows Standard & Poor’s one-step downgrade of Belgium to AA on Nov. 25. Fitch Ratings put Belgium’s AA+ on review for a downgrade today.

    Belgian borrowing costs touched the highest level in 11 years in November, with the yield on the benchmark 10-year bond closing at 5.86 percent before S&P’s downgrade on Nov. 25. They started surging almost two months earlier as the caretaker government bought Dexia SA (DEXB)’s Belgian banking unit for 4 billion euros ($5.2 billion) and agreed to guarantee as much as 54.5 billion euros of the crisis-hit lender’s liabilities for as long as 10 years.

    The yield on the 4.25 percent securities due September 2021 was little changed today at 4.26 percent. That’s 240 basis points, or 2.4 percentage points, more than German Bunds of similar maturity.

    And Dealbreaker has a very interesting piece on the difficulties of making money on a bet against Greece: It’s Not So Easy To Get Away From This Voluntary Greek Bond Swap. Which will be fine for the politicians – the last thing they want is honest price discovery!

    Rob Carrick has a good piece in the Globe: Bond ETFs confuse you? Here’s a simple guide. [Update: Assidiuous Reader prefhound points out in the comments that the article does not mention the horrific effects of taxation on returns when bond ETFs are held in taxable accounts]

    But there was some good news today:

    The 100-watt incandescent light bulb has been spared from a U.S. phaseout in a spending deal reached by Republican and Democratic leaders in Congress.

    Legislation debated today will prohibit the Energy Department from enforcing elimination of the traditional, pear- shaped bulb. Tea Party activists and their Republican allies campaigned against the energy efficiency requirement as an example of government overreach.

    The federal standards limited the “freedom of average Americans” to buy whatever type of bulb they wanted, Representative Michael Burgess, a Texas Republican, said today in an interview. The House passed the bill today 296-121.

    Never mind petty details like the mercury in fluorescent bulbs … if you want people to use less electricity, just raise the price. What’s so hard about that?

    It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 9bp, FixedResets gaining 6bp and DeemedRetractibles winning 13bp. There was continued good volatility skewed to the downside, with the SLF FixedResets being prominent on the loser list. 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 -0.5245 % 2,004.9
    FixedFloater 4.92 % 4.67 % 36,443 17.01 1 -0.4126 % 3,132.4
    Floater 3.32 % 3.70 % 69,817 18.09 3 -0.5245 % 2,164.8
    OpRet 4.92 % 1.37 % 61,301 1.41 6 0.1094 % 2,482.5
    SplitShare 5.51 % 3.13 % 63,248 0.97 4 0.1250 % 2,537.1
    Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1094 % 2,270.0
    Perpetual-Premium 5.49 % 2.06 % 88,335 0.09 18 0.1516 % 2,172.5
    Perpetual-Discount 5.22 % 5.18 % 107,769 15.09 12 -0.0928 % 2,321.6
    FixedReset 5.11 % 3.02 % 215,365 2.48 64 0.0620 % 2,339.5
    Deemed-Retractible 5.04 % 3.97 % 186,746 3.10 46 0.1318 % 2,225.7
    Performance Highlights
    Issue Index Change Notes
    BAM.PR.K Floater -2.31 % YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-16
    Maturity Price : 13.97
    Evaluated at bid price : 13.97
    Bid-YTW : 3.75 %
    SLF.PR.G FixedReset -2.22 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 22.00
    Bid-YTW : 4.85 %
    SLF.PR.H FixedReset -1.38 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 22.15
    Bid-YTW : 5.15 %
    IAG.PR.F Deemed-Retractible -1.32 % YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2019-03-31
    Maturity Price : 25.00
    Evaluated at bid price : 25.36
    Bid-YTW : 5.65 %
    BAM.PR.B Floater -1.25 % YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-16
    Maturity Price : 14.18
    Evaluated at bid price : 14.18
    Bid-YTW : 3.70 %
    SLF.PR.I FixedReset -1.20 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-12-31
    Maturity Price : 25.00
    Evaluated at bid price : 23.07
    Bid-YTW : 5.14 %
    NA.PR.O FixedReset 1.08 % YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2014-02-15
    Maturity Price : 25.00
    Evaluated at bid price : 27.21
    Bid-YTW : 2.66 %
    PWF.PR.O Perpetual-Premium 1.11 % YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2018-10-31
    Maturity Price : 25.00
    Evaluated at bid price : 26.30
    Bid-YTW : 5.06 %
    PWF.PR.A Floater 1.37 % YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-16
    Maturity Price : 19.26
    Evaluated at bid price : 19.26
    Bid-YTW : 2.74 %
    Volume Highlights
    Issue Index Shares
    Traded
    Notes
    IFC.PR.A FixedReset 108,384 TD crossed 99,800 at 24.85.
    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 24.86
    Bid-YTW : 3.82 %
    RY.PR.Y FixedReset 69,859 Scotia crossed blocks of 50,000 and 18,000, both at 27.40.
    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2014-11-24
    Maturity Price : 25.00
    Evaluated at bid price : 27.33
    Bid-YTW : 2.92 %
    MFC.PR.G FixedReset 49,925 Recent underwriters’ clearance.
    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 23.74
    Bid-YTW : 4.98 %
    BAM.PR.N Perpetual-Discount 33,459 RBC crossed 30,000 at 23.44.
    YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-16
    Maturity Price : 22.91
    Evaluated at bid price : 23.34
    Bid-YTW : 5.08 %
    TD.PR.G FixedReset 32,695 TD crossed 25,000 at 27.10.
    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2014-04-30
    Maturity Price : 25.00
    Evaluated at bid price : 27.15
    Bid-YTW : 2.83 %
    SLF.PR.I FixedReset 31,550 YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-12-31
    Maturity Price : 25.00
    Evaluated at bid price : 23.07
    Bid-YTW : 5.14 %
    There were 31 other index-included issues trading in excess of 10,000 shares.
    Wide Spread Highlights
    Issue Index Quote Data and Yield Notes
    SLF.PR.I FixedReset Quote: 23.07 – 23.60
    Spot Rate : 0.5300
    Average : 0.3150

    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-12-31
    Maturity Price : 25.00
    Evaluated at bid price : 23.07
    Bid-YTW : 5.14 %

    IAG.PR.F Deemed-Retractible Quote: 25.36 – 25.83
    Spot Rate : 0.4700
    Average : 0.3349

    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2019-03-31
    Maturity Price : 25.00
    Evaluated at bid price : 25.36
    Bid-YTW : 5.65 %

    BNA.PR.E SplitShare Quote: 22.77 – 23.73
    Spot Rate : 0.9600
    Average : 0.8385

    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2017-12-10
    Maturity Price : 25.00
    Evaluated at bid price : 22.77
    Bid-YTW : 6.75 %

    HSB.PR.D Deemed-Retractible Quote: 25.26 – 25.61
    Spot Rate : 0.3500
    Average : 0.2382

    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2013-12-31
    Maturity Price : 25.25
    Evaluated at bid price : 25.26
    Bid-YTW : 4.85 %

    NA.PR.P FixedReset Quote: 27.05 – 27.45
    Spot Rate : 0.4000
    Average : 0.2930

    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2014-02-15
    Maturity Price : 25.00
    Evaluated at bid price : 27.05
    Bid-YTW : 2.96 %

    BAM.PR.K Floater Quote: 13.97 – 14.33
    Spot Rate : 0.3600
    Average : 0.2531

    YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-16
    Maturity Price : 13.97
    Evaluated at bid price : 13.97
    Bid-YTW : 3.75 %

    YLO.PR.A and YLO

    Friday, December 16th, 2011

    I confessed puzzlement yesterday about the price of YLO.PR.A … trading with an implied common conversion price of about $0.10, about half the current price of YLO. Assiduous Reader prefhound stepped up with two reasons:

    • ex-dividend: as he says, the price drop on the 12/12 ex-date was extreme – the bid went from 2.30 to 1.80 after a dividend of $0.26563, a Drop Off Rate of 188% … but not so severe as September’s DOR of 670%!
    • tax-loss selling: this is entirely reasonable when we look at YLO.PR.A in isolation, or even if we look at the whole YLO complex; but I feel the ratios should be better preserved

    For more on the Dividend Drop Off Rate (in general, academic terms) see the May, 2011, edition of PrefLetter.

    It’s the ratios that get me … say you’re an investor wanting to take a flutter on YLO. You can buy the common at $0.20 – and lots of people are; as many, in fact, as are selling at $0.20 – or you can buy YLO.PR.A as a common substitute at $0.10 / share. So why choose the former? The downside of the choice will only show up if the common goes above $2.00 before the end of March (assuming early conversion) or the end of 2012 (assuming late conversion) … if the buyers really do have conviction that this will happen, then why isn’t this showing up in the price?

    And one thing that bothers me about the tax-loss selling idea is that it works a whole lot better in reverse. Say you own YLO common. You’ve taken a beating, but you want to maintain exposure. So, sell your damn YLO already and buy YLO.PR.A! Then you get your tax loss AND you maintain exposure AND you get the common cheaper. What’s not to like? The only thing I can think of that’s not to like (other than the potential for the common going above $2) is that this means you have to think about it, something I suspect many YLO holders are trying to avoid.

    Assiduous Reader MC pointed out via eMail:

    • Hard to borrow YLO, therefore hard to arbitrage the spread with a short YLO / long YLO.PR.A strategy
    • Liquidity discount on the YLO.PR.A
    • Fear of (forced?) selling of YLO common on conversion

    With respect to the first point … that makes sense. Assiduous Reader SF tells me that his brokerage is issuing buy-in notices like crazy. This could also be a factor if we turn the question upside down: maybe it’s not YLO.PR.A that’s cheap, maybe it’s YLO that’s expensive, due to all the buy-ins.

    We can all remember (or claim that we vaguely remember, anyway) the relatively recent example of Air Canada (?) common shortly before its reorganization. Remember? The company kept emphasizing that common shareholders would be wiped out, and the thing kept trading at around $1 anyway, due to buy-ins and people gambling that the buy-in pressure woud increase.

    The third rationale doesn’t appeal to me much, since that should apply equally to both instruments; but it has occured to me that you can make an argument in favour of this mechanism based on differential awareness of the exchange … at this point, I presume that virtually all participants in the market for YLO.PR.A are aware of the potential for conversion, but I’m not sure how many of the common stock guys are. The Efficient Market Hypothesis, of course, says they all are, but maybe, just maybe, this is just one more hole to poke in the poor old thing.

    So, in my continuing series of Worthwhile MBA Theses I suggest that some eager student look at as many similar situations as possible and see if the convertING instrument is always (mostly? statistically significantly?) undervalued relative to the convertED instrument. It’s certainly possible!

    MC’s other two reasons sound good to me … but I’m still bothered by size of the deviation from fair value. You want to tell me these mean a discount of 10%, I’ll say fine. You say 20%, I’ll swallow hard and say OK. But 50%? Really?

    December 15, 2011

    Thursday, December 15th, 2011

    Ontario is on Outlook-Negative by Moody’s:

    Ontario’s rating outlook was cut to negative from stable by Moody’s Investors Service on concern Canada’s most populous province faces a higher risk in meeting fiscal targets given a recent slowdown in economic growth.

    The province in November revised its forecasts down for provincial growth in 2011 and 2012 to 1.8 percent and 1.8 percent, from 2.4 percent and 2.7 percent, Moody’s said. The provincial economy is affected by the moderation in U.S. growth, given its higher export share relative to other Canadian provinces and the estimated 80 percent of international exports destined for the nation’s largest trading partner.

    “The negative outlook on the province reflects the softening economic outlook, Ontario’s growing debt burden, and the extended timeframe to achieving a balanced budget,” Moody’s Assistant Vice President Jennifer Wong, lead analyst for the Province of Ontario, said in the statement.

    Thank you, Premier Dad! Thank you, green energy lobbyists!

    Fitch downgraded GS and BAC among others:

    The downgrades “reflected challenges faced by the sector as a whole,” Fitch said. “These challenges result from both economic developments as well as a myriad of regulatory changes.”

    Credit ratings of the world’s biggest lenders have come under pressure amid weak economic growth and doubts about whether European regulators have done enough to end the continent’s debt crisis. Lenders in the European Union must raise about $149 billion in fresh capital to help address the sovereign-debt turmoil, the European Banking Authority said on Dec. 9.

    Long-term issuer default ratings for Bank of America, Citigroup and Goldman Sachs were cut to A from A+, according to the statement. Barclays and Credit Suisse were downgraded to A from AA-, while BNP Paribas (BNP) and Deutsche Bank fell to A+ from AA-. Morgan Stanley’s long-term issuer default rating was affirmed at A.

    First Asset has decided there aren’t enough index providers:

    Toronto-based First Asset Investment Management Inc. has licensed seven Morningstar indexes to serve as benchmarks for exchange-traded funds that it expects to launch early in the new year on the Toronto Stock Exchange.

    … the Morningstar Canada Momentum Index, Morningstar Canada Dividend Income Index, Morningstar Canada Value Index and Morningstar U.S. Dividend Target 50 Index. … Morningstar Canada Liquid Bond Index and the Morningstar Emerging Market Composite Bond Index … the Morningstar Diversified Futures Index

    First Asset Investment Management, a subsidiary of First Asset Capital Corp., entered the ETF business in June and currently manages six ETFs with combined assets of $50 million.

    There is well-founded speculation on European bank runs:

    Kyle Bass, the Dallas-based hedge fund manager who said in 2009 that governments would default within three years, said Greek, Portuguese and Spanish depositors will withdraw money from banks in the coming months.

    In Greece, business and household bank deposits have slumped 26 percent in the past two years to 176 billion euros ($229 billion), and fell in October by the most since the nation joined the euro, according to the Bank of Greece. There were 2.24 trillion euros of overnight deposits with euro-region financial institutions at the end of September, down from 2.26 trillion in July, according to data compiled by Bloomberg.

    Latvians pulled about $54 million from local Swedbank AB automatic teller machines on Dec. 11 and 12 on speculation customers wouldn’t be able to access their funds. “The rumors were knowingly distributed with the goal of destabilizing the situation in Latvia,” Prime Minister Valdis Dombrovskis said, according to the Leta newswire. Clients withdrew about 1.5 percent of total deposits on Dec. 12, the Swedish bank said in an e-mailed statement.

    The IMF managing director says the Europeans have to call in the IMF:

    The European debt crisis is growing to the point that it won’t be solved by one group of countries, Christine Lagarde, the managing director of the International Monetary Fund said today.

    Lagarde said that if countries don’t work together, the world will face a situation similar to the 1930s, before the world slid into World War II.

    Lagarde said international support would probably be channeled through the IMF for “organizing a collective financial responsibility, a fiscal solidarity and that element of risk-sharing that is expected, pretty much, around the globe.”

    Let us all give thanks that we will be saved by the heroic bureaucrats of the IMF!

    The SEC has released a statement whining that regulatory extortion is getting more difficult:

    Last month, a federal district court declined to approve a consent judgment because, in its view, the underlying allegations were ‘unsupported by any proven or acknowledged facts.’ As a result, the court rejected a $285 million settlement between the SEC and Citigroup that reasonably reflected the relief the SEC would likely have obtained if it prevailed at trial.

    We believe the court was incorrect in requiring an admission of facts — or a trial — as a condition of approving a proposed consent judgment, particularly where the agency provided the court with information laying out the reasoned basis for its conclusions.

    The court’s new standard is at odds with decades of court decisions that have upheld similar settlements by federal and state agencies across the country. In fact, courts have routinely approved settlements in which a defendant does not admit or even expressly denies liability, exactly because of the benefits that settlements provide.

    In cases such as this, a settlement puts money back in the pockets of harmed investors without years of courtroom delay and without the twin risks of losing at trial or winning but recovering less than the settlement amount – risks that always exist no matter how strong the evidence is in a particular case.

    What has happened to ethics? What has happened to respect for the rule of law? If the court system has become so grossly inefficient that trials take too long, then the solution is to reform the court system – not to tell the accused that since a trial would take too long, we’re going to string you up.

    Meanwhile, we may finally be getting some clarity on the MF Global fiasco:

    Corzine suggested Terrence Duffy, CME Group executive chairman, may have been referring to some funds transfers that occurred as MF Global was selling billions of dollars in securities. JPMorgan Chase & Co. (JPM), which was involved in the transactions, told MF Global the sale could not be completed until overdrafts in some accounts in London were corrected.

    “I contacted the firm’s back office in Chicago and asked them to resolve the issues, which I understood they did,” Corzine said. He didn’t say explicitly whether he was aware at the time that the loan may have included funds from customer accounts.

    “The back office in Chicago explicitly confirmed to me that the funds were appropriately transferred,” Corzine said.

    Texas Republican Randy Neugebauer, chairman of the oversight subcommittee, said he was uncomfortable with the amount of power Corzine held at MF Global before he stepped down.

    “What we saw was one person had an extreme amount of authority, Mr. Corzine, as the chair of the board and the CEO of the company,” Neugebauer said in his opening statement. “And, according to people we have interviewed, one of the principal traders of this company. There was no real barrier or firewall for protecting the investors of the company.”

    Three cheers for Randy Neugebauer, who appears to have a good head on his shoulders! All kinds of criminal instructions are issued with plausible denial by the big boss saying ‘Get it done’.

    Ed Clark wants his mummy to look after him:

    Ed Clark, the chief executive officer of Toronto-Dominion Bank (TD-T71.85-0.55-0.76%), said in an interview that he believes Ottawa could tighten the rules on housing loans more than it already has, without hurting the economy or putting the housing market at risk.

    The banks prefer that the government direct the industry on mortgage lending, concerned that if one lender were to stop offering 30-year mortgages, another would likely swoop in and try to steal that market share. Last December, Mr. Clark warned that if a bank tried to cut back on longer mortgages on its own, it would be “carved up” by its rivals.

    Well, we wouldn’t want to lose any of our likely-to-default customers, would we? Then we might be left only with good customers.

    As I have said so many times this year (*sigh*) I can’t figure out what’s going on with YLO. The common is trading at $0.20. YLO.PR.A can be converted by the company into 12.5 common shares at the end of March, after paying one more dividend of $0.26563, and it’s prudent to assume that this will happen. If the company doesn’t convert prior to December 2012, then holders will get $25, which will be highly inconvenient for the company, to say the least, so it will (almost) certainly happen next year, probably sooner rather than later (to avoid either paying a dividend or skipping it).

    So here’s my question: why is YLO.PR.A trading for $1.60? That’s an implied conversion price of about $0.10 for the common, half the market price.

    It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts winning 14bp, FixedResets up 1bp, and DeemedRetractibles losing 13bp. The Bozo Spread (Current Yield PerpetualDiscounts less Current Yield FixedResets) is now only 10bp! MFC issues got hammered again today, amid more than usual volatility skewed to the downside. 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 -1.4067 % 2,015.5
    FixedFloater 4.90 % 4.65 % 35,153 17.04 1 -0.3085 % 3,145.4
    Floater 3.30 % 3.65 % 68,859 18.20 3 -1.4067 % 2,176.2
    OpRet 4.92 % 1.42 % 60,986 1.41 6 -0.1157 % 2,479.8
    SplitShare 5.52 % 3.12 % 62,634 0.98 4 0.1693 % 2,533.9
    Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1157 % 2,267.5
    Perpetual-Premium 5.49 % 2.70 % 88,782 0.09 18 0.1431 % 2,169.2
    Perpetual-Discount 5.21 % 5.16 % 106,203 15.12 12 0.1376 % 2,323.8
    FixedReset 5.11 % 3.06 % 218,381 2.48 64 0.0054 % 2,338.0
    Deemed-Retractible 5.05 % 4.18 % 188,703 3.17 46 -0.1256 % 2,222.7
    Performance Highlights
    Issue Index Change Notes
    MFC.PR.C Deemed-Retractible -3.94 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 20.24
    Bid-YTW : 7.21 %
    MFC.PR.B Deemed-Retractible -3.15 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 20.62
    Bid-YTW : 7.14 %
    BNA.PR.E SplitShare -1.74 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2017-12-10
    Maturity Price : 25.00
    Evaluated at bid price : 22.65
    Bid-YTW : 6.85 %
    BAM.PR.K Floater -1.65 % YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-15
    Maturity Price : 14.30
    Evaluated at bid price : 14.30
    Bid-YTW : 3.67 %
    SLF.PR.H FixedReset -1.36 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 22.46
    Bid-YTW : 4.98 %
    BAM.PR.B Floater -1.31 % YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-15
    Maturity Price : 14.36
    Evaluated at bid price : 14.36
    Bid-YTW : 3.65 %
    PWF.PR.A Floater -1.30 % YTW SCENARIO
    Maturity Type : Limit Maturity
    Maturity Date : 2041-12-15
    Maturity Price : 19.00
    Evaluated at bid price : 19.00
    Bid-YTW : 2.78 %
    GWO.PR.N FixedReset -1.23 % YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 22.55
    Bid-YTW : 4.24 %
    IAG.PR.E Deemed-Retractible -1.01 % YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2017-12-31
    Maturity Price : 25.25
    Evaluated at bid price : 25.54
    Bid-YTW : 5.70 %
    BMO.PR.J Deemed-Retractible 1.14 % YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2015-02-25
    Maturity Price : 25.25
    Evaluated at bid price : 25.76
    Bid-YTW : 3.88 %
    RY.PR.G Deemed-Retractible 1.19 % YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2015-05-24
    Maturity Price : 25.25
    Evaluated at bid price : 25.55
    Bid-YTW : 4.18 %
    Volume Highlights
    Issue Index Shares
    Traded
    Notes
    FBS.PR.C SplitShare 200,185 New issue settled today.
    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2012-12-15
    Maturity Price : 10.00
    Evaluated at bid price : 10.16
    Bid-YTW : 3.12 %
    MFC.PR.G FixedReset 187,045 Recent blue light special.
    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 23.80
    Bid-YTW : 4.95 %
    CM.PR.E Perpetual-Premium 158,744 RBC crossed blocks of 49,900 shares, 49,800 and 44,000, all at 25.30.
    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2012-10-31
    Maturity Price : 25.00
    Evaluated at bid price : 25.30
    Bid-YTW : 5.01 %
    PWF.PR.M FixedReset 100,500 Nesbitt crossed blocks of 20,000 and 75,400, both at 26.70.
    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2014-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 26.66
    Bid-YTW : 3.13 %
    RY.PR.Y FixedReset 77,985 Scotia crossed 75,000 at 27.40.
    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2014-11-24
    Maturity Price : 25.00
    Evaluated at bid price : 27.25
    Bid-YTW : 3.03 %
    FTS.PR.C OpRet 59,459 TD bought 55,300 from CIBC at 25.65.
    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2012-01-14
    Maturity Price : 25.50
    Evaluated at bid price : 25.70
    Bid-YTW : -1.69 %
    There were 32 other index-included issues trading in excess of 10,000 shares.
    Wide Spread Highlights
    Issue Index Quote Data and Yield Notes
    W.PR.J Perpetual-Premium Quote: 25.55 – 26.44
    Spot Rate : 0.8900
    Average : 0.5238

    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2012-01-14
    Maturity Price : 25.00
    Evaluated at bid price : 25.55
    Bid-YTW : -9.40 %

    POW.PR.A Perpetual-Premium Quote: 25.29 – 25.75
    Spot Rate : 0.4600
    Average : 0.2814

    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2012-01-14
    Maturity Price : 25.00
    Evaluated at bid price : 25.29
    Bid-YTW : 2.84 %

    BNA.PR.E SplitShare Quote: 22.65 – 23.50
    Spot Rate : 0.8500
    Average : 0.7053

    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2017-12-10
    Maturity Price : 25.00
    Evaluated at bid price : 22.65
    Bid-YTW : 6.85 %

    MFC.PR.F FixedReset Quote: 23.52 – 23.90
    Spot Rate : 0.3800
    Average : 0.2450

    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2022-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 23.52
    Bid-YTW : 4.16 %

    BMO.PR.K Deemed-Retractible Quote: 26.12 – 26.39
    Spot Rate : 0.2700
    Average : 0.1520

    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2014-11-25
    Maturity Price : 25.50
    Evaluated at bid price : 26.12
    Bid-YTW : 4.39 %

    PWF.PR.O Perpetual-Premium Quote: 26.01 – 26.41
    Spot Rate : 0.4000
    Average : 0.2982

    YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2018-10-31
    Maturity Price : 25.00
    Evaluated at bid price : 26.01
    Bid-YTW : 5.25 %

    EMP.PR.B Called for Redemption

    Thursday, December 15th, 2011

    Empire Company has announced:

    that it will redeem all of its Series 2 Preferred Shares on January 31, 2012 in accordance with their terms. Currently 164,900 Series 2 Preferred Shares are issued and outstanding. The Series 2 Preferred Shares will be redeemed at a price of $25 per share plus an amount equal to all dividends accrued and unpaid to January 31, 2012.

    This is a tiny little issue with only 164,900 shares outstanding – market capitalization is $4.1-million.

    EMP.PR.B was last mentioned on PrefBlog when it was downgraded to Pfd-4(high) by DBRS. DBRS discontinued the rating in February 2009.

    FBS.PR.B Redeemed; FBS.PR.C Issued

    Thursday, December 15th, 2011

    5Banc Split Inc, operated by TD Securities, has announced:

    that it has completed an offering of 2,580,135 Class C preferred shares, series 1 (the “Class C Preferred Shares”) at a price of $10.00 per Class C Preferred Share raising gross proceeds of approximate $25.8 million. The Class C Preferred Shares were offered on a best efforts basis by a syndicate of agents led by TD Securities Inc. which included Scotia Capital Inc., BMO Capital Markets and National Bank Financial Inc.

    The Company holds a portfolio of publicly listed common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and The Toronto-Dominion Bank in order to provide holders of the Class C Preferred Shares with fixed cumulative preferential dividends and to provide holders of its Class B capital shares (the “Capital Shares”) with a leveraged investment and excess dividends, if any, subject to the prior rights of holders of Class C Preferred Shares and after payment of the expenses of the Company and dividends payable on the Class C Preferred Shares.

    The Class C Preferred Shares and the Capital Shares are listed and posted for trading on the Toronto Stock Exchange under the symbols FBS.PR.C and FBS.B, respectively. The Class C Preferred Shares are rated Pfd-2 (low) by DBRS Limited. The Class B preferred shares of the Company have been redeemed today in accordance with their terms.

    The prospectus for FBS.PR.C is posted on the fund’s site.

    FBS.PR.B was last mentioned on PrefBlog when the refunding was announced.

    FBS.PR.C will be tracked by HIMIPref™ and will be eligible for the SplitShare index, but is expected to be relegated to the Scraps index on volume concerns.

    Update: DBRS rates FBS.PR.C at Pfd-2(low).

    Update: Vital statistics for FBS.PR.C are:

    FBS.PR.C SplitShare YTW SCENARIO
    Maturity Type : Call
    Maturity Date : 2012-12-15
    Maturity Price : 10.00
    Evaluated at bid price : 10.16
    Bid-YTW : 3.12 %