Archive for July, 2012

July 31, 2012

Tuesday, July 31st, 2012

Pragma Trading provides an interesting perspective on high frequency trading:

Market making is an important function in the smooth operation of markets. In theory, there should be a natural equilibrium: market makers will compete only to the point that they can no longer profit by quoting more aggressively. This means they will trade at times or prices that directional traders will not, narrowing spreads and improving market quality.

However, the existence of ultra-long queues suggests that this equilibrium is out of whack. Market makers compete en masse where there is already deep liquidity and no opportunity for price improvement because of the tick size. From a market structure perspective, the concern is that there is no practical way to opt out of interacting with these superfluous market makers, and because of the take fees charged by exchanges, directional traders are effectively forced to subsidize HFTs even though there are other directional traders they could interact with directly. This effect is most pronounced where the spread size is very large despite fundamental liquidity, i.e. for low-priced, high-volume stocks. As demonstrated by the preponderance of ultra-long queues in lower-priced stocks and the total absence of ultra-long queues in stocks priced below $1, it appears that the penny tick size and the liquidity rebates paid by exchanges in the maker/taker model effectively subsidize HFTs in a way that is essential to much of their profitability, and are the root causes of this market distortion.

Bloomberg’s Matthew Philips did some more digging:

The question is whether the benefits speed traders bring to the market outweigh these added costs and trade-offs. Even if slightly longer wait times are costing long-term investors billions a year, having a more liquid market with tighter spreads has saved them that much, if not more, says Rick Cooper, a professor of finance at the Illinois Institute of Technology’s Stuart School of Business. Cooper used to work for long-term investors, building early algorithms and quant models for State Street Global Advisors. He doubts they want to go back to the old days where they were beholden to a small, clubby group of broker dealers serving as market makers. “Back in the day, when demand spiked, they would widen out the spread on you,” says Cooper. “It used to take us days to execute some of our big trades so we wouldn’t move the price.”

These days, any time a market-maker tries to widen out the spread, an electronic market maker usually jumps in and tightens it up again.

There’s some colour on the Facebook fiasco:

UBS’s admission that it lost nearly $356-million on the botched Facebook IPO puts pressure on Nasdaq OMX Group Inc. and raises questions about how quickly the exchange can put this problem behind it.

UBS handles most of the order flow from Charles Schwab Corp., one of the biggest U.S. brokerages, with about $1.8-trillion in client assets. It also takes orders from other retail brokerages, including TD Ameritrade and Fidelity.

But that alone may not account for the massive loss. UBS also said that, as a result of “multiple operational failures by NASDAQ, UBS’s pre-market orders were not confirmed for several hours” rather than in the usual milliseconds. That triggered its internal systems to re-enter orders multiple times, it said.

When the confirmations finally came through, UBS and other market makers were left owning large amounts of unwanted Facebook stock, which led to losses as the stock plunged.

“As a result of system protocols that we had designed to ensure our clients’ orders were filled consistent with regulatory guidelines and our own standards, orders were entered multiple times before the necessary confirmations from Nasdaq were received and our systems were able to process them,” UBS said. “Nasdaq ultimately filled all of these orders, exposing UBS to far more shares than our clients had ordered.”

No failsafes on the order-reentry algorithms, eh? Well, it’s nice that they saved a few thousand on programming.

The Canadian preferred share market closed the month on a happy note, with PerpetualPremiums up 3bp, FixedResets gaining 4bp and DeemedRetractibles winning 7bp. Volatility was muted. Volume was low.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.0201 % 2,295.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0201 % 3,433.4
Floater 3.17 % 3.20 % 68,807 19.23 3 0.0201 % 2,478.2
OpRet 4.76 % 2.39 % 35,313 0.89 5 0.1074 % 2,534.9
SplitShare 5.48 % 4.90 % 66,028 4.66 3 -0.0133 % 2,762.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1074 % 2,318.0
Perpetual-Premium 5.32 % 0.17 % 102,065 0.46 27 0.0303 % 2,268.6
Perpetual-Discount 4.96 % 4.96 % 40,040 15.27 6 0.2188 % 2,508.6
FixedReset 4.99 % 3.04 % 183,329 3.96 71 0.0445 % 2,423.3
Deemed-Retractible 4.96 % 3.48 % 146,360 1.21 46 0.0657 % 2,349.4
Performance Highlights
Issue Index Change Notes
IAG.PR.F Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.22
Bid-YTW : 5.34 %
MFC.PR.F FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 3.98 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.A FixedReset 125,743 Scotia crossed blocks of 21,600 shares, 30,000 and 40,000, all at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 3.22 %
BMO.PR.M FixedReset 107,715 Desjardins crossed 100,000 at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.52
Bid-YTW : 2.71 %
CM.PR.L FixedReset 89,050 Scotia crossed blocks of 30,000 shares, 28,000 and 25,000, all at 26.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 2.52 %
BNS.PR.J Deemed-Retractible 52,575 National crossed 50,000 at 25.92.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-29
Maturity Price : 25.00
Evaluated at bid price : 25.92
Bid-YTW : 2.24 %
SLF.PR.C Deemed-Retractible 50,503 National crossed 46,100 at 22.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 5.75 %
MFC.PR.I FixedReset 39,442 RBC crossed 12,000 at 25.05.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 4.37 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.E Deemed-Retractible Quote: 26.30 – 26.89
Spot Rate : 0.5900
Average : 0.3522

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.30
Bid-YTW : 5.40 %

HSE.PR.A FixedReset Quote: 25.83 – 26.29
Spot Rate : 0.4600
Average : 0.3051

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-31
Maturity Price : 23.54
Evaluated at bid price : 25.83
Bid-YTW : 3.04 %

HSB.PR.C Deemed-Retractible Quote: 25.53 – 25.87
Spot Rate : 0.3400
Average : 0.2296

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.53
Bid-YTW : 4.21 %

IAG.PR.F Deemed-Retractible Quote: 26.22 – 26.65
Spot Rate : 0.4300
Average : 0.3482

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.22
Bid-YTW : 5.34 %

BAM.PR.C Floater Quote: 16.40 – 16.84
Spot Rate : 0.4400
Average : 0.3615

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-31
Maturity Price : 16.40
Evaluated at bid price : 16.40
Bid-YTW : 3.22 %

NA.PR.L Deemed-Retractible Quote: 25.56 – 25.77
Spot Rate : 0.2100
Average : 0.1409

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-30
Maturity Price : 25.50
Evaluated at bid price : 25.56
Bid-YTW : -0.49 %

LSC.PR.C Redeemed on Schedule

Tuesday, July 31st, 2012

Scotia Managed Companies has announced:

The Board of Directors of Lifeco Split Corporation Inc. (“Lifeco”) has announced today that the redemption prices for all outstanding Capital Shares and Preferred Shares to be paid on July 31, 2012 are as follows:
Redemption Price per Preferred Share: $36.84
Redemption Price per Capital Share: $4.4466

Holders of 27,010 Capital Shares requested delivery of and will receive their pro rata share of portfolio shares in payment for their Capital Shares.

Capital Shares and Preferred Shares of Lifeco are listed for trading on The Toronto Stock Exchange under the symbols LSC and LSC.PR.C respectively. The Capital Shares and Preferred Shares will be de-listed from The Toronto Stock Exchange as at the close of trading on July 31, 2012.

The maturity was previously discussed on PrefBlog. LSC.PR.C was not tracked by HIMIPref™.

July 30, 2012

Monday, July 30th, 2012

It was a good day for the Canadian preferred share market, with PerpetualPremiums winning 12bp, FixedResets up 3bp and DeemedRetractibles gaining 2bp. Volatility was average. Volume was very low.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,294.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0000 % 3,432.7
Floater 3.17 % 3.19 % 68,842 19.24 3 0.0000 % 2,477.7
OpRet 4.77 % 2.82 % 35,904 0.89 5 0.1460 % 2,532.2
SplitShare 5.48 % 4.90 % 65,743 4.66 3 -0.0932 % 2,762.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1460 % 2,315.5
Perpetual-Premium 5.32 % 0.77 % 99,418 0.46 27 0.1206 % 2,267.9
Perpetual-Discount 4.97 % 4.96 % 40,036 15.20 6 -0.2455 % 2,503.1
FixedReset 4.99 % 3.03 % 181,728 4.01 71 0.0294 % 2,422.2
Deemed-Retractible 4.96 % 3.53 % 144,836 1.81 46 0.0199 % 2,347.9
Performance Highlights
Issue Index Change Notes
BAM.PR.N Perpetual-Discount -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-30
Maturity Price : 23.72
Evaluated at bid price : 24.00
Bid-YTW : 4.99 %
TRP.PR.C FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-30
Maturity Price : 23.44
Evaluated at bid price : 25.40
Bid-YTW : 2.90 %
IAG.PR.E Deemed-Retractible -1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.24
Bid-YTW : 5.21 %
PWF.PR.E Perpetual-Premium 1.27 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 1.09 %
Volume Highlights
Issue Index Shares
Traded
Notes
IAG.PR.G FixedReset 70,900 RBC crossed 25,000 at 25.55; Desjardins crossed 28,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 4.02 %
RY.PR.F Deemed-Retractible 47,873 TD crossed 40,000 at 25.78.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 3.53 %
BNS.PR.K Deemed-Retractible 39,505 TD crossed 29,000 at 25.52.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-28
Maturity Price : 25.25
Evaluated at bid price : 25.52
Bid-YTW : 3.32 %
SLF.PR.I FixedReset 26,770 RBC crossed 25,000 at 25.68.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.57
Bid-YTW : 3.79 %
HSB.PR.C Deemed-Retractible 25,633 TD crossed 25,000 at 25.62.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 4.16 %
ENB.PR.N FixedReset 24,770 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-30
Maturity Price : 23.15
Evaluated at bid price : 25.16
Bid-YTW : 3.84 %
There were 15 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.C Floater Quote: 16.40 – 16.85
Spot Rate : 0.4500
Average : 0.2753

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-30
Maturity Price : 16.40
Evaluated at bid price : 16.40
Bid-YTW : 3.22 %

BAM.PR.N Perpetual-Discount Quote: 24.00 – 24.32
Spot Rate : 0.3200
Average : 0.2004

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-30
Maturity Price : 23.72
Evaluated at bid price : 24.00
Bid-YTW : 4.99 %

ELF.PR.G Perpetual-Discount Quote: 23.15 – 23.47
Spot Rate : 0.3200
Average : 0.2132

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-30
Maturity Price : 22.72
Evaluated at bid price : 23.15
Bid-YTW : 5.15 %

PWF.PR.M FixedReset Quote: 26.09 – 26.38
Spot Rate : 0.2900
Average : 0.2069

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.09
Bid-YTW : 3.01 %

POW.PR.D Perpetual-Premium Quote: 25.14 – 25.45
Spot Rate : 0.3100
Average : 0.2306

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.14
Bid-YTW : 4.86 %

TD.PR.O Deemed-Retractible Quote: 25.99 – 26.24
Spot Rate : 0.2500
Average : 0.1777

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-29
Maturity Price : 25.75
Evaluated at bid price : 25.99
Bid-YTW : -6.64 %

Marginal Tax Rates: Alberta 2012

Sunday, July 29th, 2012

E&Y have analyzed Alberta tax rates as of 2012-1-15 and we may draw some conclusions from these data:

Investors Taxable Income Marginal Rate on Interest Marginal Rate on Dividends Equivalency Factor
Widows & Orphans $30,000 25.00% 0.00% 1.33
Professionals $75,000 32.00% 9.63% 1.33
Plutocrats $150,000 39.00% 19.29% 1.32

Equivalency factors for Professionals and Plutocrats have declined marginally since my 2011 post on this topic.

Two nuances should be noted. Firstly, E&Y appears to have put a floor of 0.00% on the published marginal tax rate for dividends; in fact, the tax on dividends can be negative if the taxpayer has other income available to soak up the excess dividend tax credit. This will increase the equivalency factor for “Widows & Orphans”.

Secondly, if the taxpayer is subject to OAS clawback, the equivalency factor will decline by about 0.1. It should be noted that this figure is an extremely rough estimate and is based solely on the direct income tax effect – there may be other net-income-tested benefits to the taxpayer, such as drug plans, which will exacerbate the decline.

Marginal Tax Rates: BC 2012

Sunday, July 29th, 2012

E&Y have analyzed British Columbia tax rates as of 2012-1-15 and we may draw some conclusions from these data:

Investors Taxable Income Marginal Rate on Interest Marginal Rate on Dividends Equivalency Factor
Widows & Orphans $30,000 23.26% 0.00% 1.30
Professionals $75,000 32.50% 10.32% 1.33
Plutocrats $150,000 43.70% 25.78% 1.32

Equivalency factors have increased for Widows & Orphans and declined for Professionals and Plutocrats since my 2011 post on this topic.

Two nuances should be noted. Firstly, E&Y appears to have put a floor of 0.00% on the published marginal tax rate for dividends; in fact, the tax on dividends can be negative if the taxpayer has other income available to soak up the excess dividend tax credit. This will increase the equivalency factor for “Widows & Orphans”.

Secondly, if the taxpayer is subject to OAS clawback, the equivalency factor will decline by about 0.1. It should be noted that this figure is an extremely rough estimate and is based solely on the direct income tax effect – there may be other net-income-tested benefits to the taxpayer, such as drug plans, which will exacerbate the decline.

Marginal Tax Rates: Ontario 2012

Sunday, July 29th, 2012

E&Y have analyzed Ontario tax rates as of 2012-1-15 and we may draw some conclusions from these data:

Investors Taxable Income Marginal Rate on Interest Marginal Rate on Dividends Equivalency Factor
Widows & Orphans $30,000 20.05% 0.00% 1.25
Professionals $75,000 32.98% 14.19% 1.28
Plutocrats $150,000 46.41% 29.54% 1.31

The equivalency factor for plutocrats declined slightly since my 2011 post on this topic

Two nuances should be noted. Firstly, E&Y appears to have put a floor of 0.00% on the published marginal tax rate for dividends; in fact, the tax on dividends can be negative if the taxpayer has other income available to soak up the excess dividend tax credit. This will increase the equivalency factor for “Widows & Orphans”.

Secondly, if the taxpayer is subject to OAS clawback, the equivalency factor will decline by about 0.1. It should be noted that this figure is an extremely rough estimate and is based solely on the direct income tax effect – there may be other net-income-tested benefits to the taxpayer, such as drug plans, which will exacerbate the decline.

July 27, 2012

Friday, July 27th, 2012

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums off 2bp, FixedResets up 11bp and DeemedRetractibles gaining 8bp. Volatility was minor. Volume was extremely low.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.6484 % 2,294.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.6484 % 3,432.7
Floater 3.17 % 3.20 % 68,877 19.22 3 0.6484 % 2,477.7
OpRet 4.77 % 2.79 % 37,336 0.90 5 -0.0768 % 2,528.5
SplitShare 5.47 % 4.90 % 66,362 4.67 3 0.0799 % 2,765.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0768 % 2,312.1
Perpetual-Premium 5.33 % 1.17 % 100,505 0.47 27 -0.0231 % 2,265.2
Perpetual-Discount 4.96 % 4.92 % 104,875 15.56 6 0.0614 % 2,509.3
FixedReset 4.99 % 2.97 % 183,799 4.38 71 0.1064 % 2,421.5
Deemed-Retractible 4.96 % 3.45 % 139,766 1.53 46 0.0759 % 2,347.4
Performance Highlights
Issue Index Change Notes
CIU.PR.B FixedReset 1.08 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.19
Bid-YTW : 2.42 %
BAM.PR.B Floater 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-27
Maturity Price : 16.72
Evaluated at bid price : 16.72
Bid-YTW : 3.16 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.N FixedReset 346,498 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-27
Maturity Price : 23.15
Evaluated at bid price : 25.15
Bid-YTW : 3.69 %
BMO.PR.M FixedReset 73,021 Desjardins crossed 60,000 at 25.83.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.91
Bid-YTW : 2.39 %
PWF.PR.R Perpetual-Premium 53,341 Nesbitt crossed 49,700 at 26.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 4.68 %
ENB.PR.F FixedReset 48,137 TD crossed 30,000 at 25.60.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-27
Maturity Price : 23.24
Evaluated at bid price : 25.41
Bid-YTW : 3.55 %
PWF.PR.P FixedReset 34,818 TD crossed 30,000 at 25.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-27
Maturity Price : 23.50
Evaluated at bid price : 25.62
Bid-YTW : 2.73 %
BNS.PR.Q FixedReset 31,576 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.44
Bid-YTW : 2.91 %
There were 12 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BNS.PR.N Deemed-Retractible Quote: 26.35 – 26.88
Spot Rate : 0.5300
Average : 0.3346

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.35
Bid-YTW : 2.26 %

PWF.PR.E Perpetual-Premium Quote: 25.23 – 25.75
Spot Rate : 0.5200
Average : 0.3528

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.23
Bid-YTW : 3.57 %

FTS.PR.H FixedReset Quote: 25.41 – 25.80
Spot Rate : 0.3900
Average : 0.2278

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-27
Maturity Price : 23.54
Evaluated at bid price : 25.41
Bid-YTW : 2.60 %

GWO.PR.N FixedReset Quote: 24.46 – 24.75
Spot Rate : 0.2900
Average : 0.1856

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.46
Bid-YTW : 3.22 %

CM.PR.K FixedReset Quote: 26.30 – 26.65
Spot Rate : 0.3500
Average : 0.2501

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.30
Bid-YTW : 2.67 %

SLF.PR.F FixedReset Quote: 26.45 – 26.70
Spot Rate : 0.2500
Average : 0.1709

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 3.14 %

S&P: Outlook Negative on BNS, LB, NA, RY & TD

Friday, July 27th, 2012

Standard & Poor’s has announced:

it has revised its outlooks on seven Canadian financial institution ratings to negative from stable. The financial institutions are:
  • The Bank of Nova Scotia
  • Central 1 Credit Union
  • Home Capital Group Inc.
  • Laurentian Bank of Canada
  • National Bank of Canada
  • Royal Bank of Canada
  • Toronto-Dominion Bank

At the same time, Standard & Poor’s affirmed its ratings on all seven banks.

The outlook revisions are linked to our evolving views of economic risk and industry risk for banks operating in Canada. A prolonged run-up in housing prices and consumer indebtedness in Canada is in our view contributing to growing imbalances and Canada’s vulnerability to the generally weak global economy, applying negative pressure on economic risk for banks. Growing pressure on banks’ risk appetites and profitability arising from competition for loan and deposit market share could also lead to a deterioration in our view of industry risk.

The negative outlook recognizes the potential for deterioration of Canadian banks’ financial performance and capitalization generally, associated with consumer debt burdens proving excessive in an unfavorable economic scenario, or due to competitive pressures amplified by the shift to a consumer deleveraging phase.

Over the past decade, Canadian consumer credit market debt (including residential mortgage loans and consumer credit) has risen to more than 150% from 110% of disposable income, and relative to GDP, consumer debt has increased to more than 90% from about 70%. Over the same period, Canadian house prices have approximately doubled, with compounded real growth in housing prices estimated to be about 5% per year.

Bank risk profiles have benefited from Canadian banks’ underwriting practices, stable performance metrics for banks’ credit portfolios, and the sharing of mortgage risk between the banks, the borrowers (extensively based on full recourse to the consumer), and the providers of mortgage insurance, notably the Canada Mortgage and Housing Corporation (AAA/Stable/A-1+). In our view, Canadian banks’ risk tolerances and risk management capabilities are generally strong and attuned to risks inherent in the Canadian consumer and housing sectors. Even so, we believe there is currently growing potential for deterioration of Canadian bank credit profiles associated with scenarios incorporating consumer sector stress.

Systemic factors are incorporated in Standard & Poor’s rating methodology primarily through its Banking Industry Country Risk Assessment, or BICRA. The BICRA framework takes into account economic and institutional risk factors present in the environment in which banks operate. Canada’s BICRA is currently set at ‘1’ (lowest risk) on a 1 to 10 scale. The BICRA component of the analysis is intended to highlight emergent systemic risks that may not be fully apparent when viewing the sector at the level of individual banks.

The following preferred shares of the affected banks are outstanding:

BNS.PR.J, BNS.PR.K, BNS.PR.L, BNS.PR.M, BNS.PR.N, BNS.PR.O, BNS.PR.P, BNS.PR.Q, BNS.PR.R, BNS.PT.T, BNS.PR.X, BNS.PR.Y, BNS.PR.Z.

LB.PR.D, LB.PR.E.

NA.PR.K, NA.PR.L, NA.PR.M, NA.PR.N, NA.PR.O, NA.PR.P.

RY.PR.A, RY.PR.B, RY.PR.C, RY.PR.D, RY.PR.E, RY.PR.F, RY.PR.G, RY.PR.H, RY.PR.I, RY.PR.L, RY.PR.N, RY.PR.P, RY.PR.R, RY.PR.T, RY.PR.W, RY.PR.X, RY.PR.Y.

TD.PR.A, TD.PR.C, TD.PR.E, TD.PR.G, TD.PR.I, TD.PR.K, TD.PR.O, TD.PR.P, TD.PR.Q, TD.PR.R, TD.PR.S, TD.PR.Y.

July 26, 2012

Friday, July 27th, 2012

It was a solidly positive day for the Canadian preferred share market, with PerpetualPremiums winning 12bp, FixedResets up 4bp and DeemedRetractibles gaining 8bp. Volatility was non-existent. 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 -0.1618 % 2,280.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1618 % 3,410.6
Floater 3.19 % 3.21 % 69,610 19.20 3 -0.1618 % 2,461.8
OpRet 4.77 % 2.78 % 38,422 0.90 5 0.1153 % 2,530.5
SplitShare 5.48 % 4.93 % 67,377 4.67 3 0.1601 % 2,763.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1153 % 2,313.9
Perpetual-Premium 5.33 % 1.08 % 98,503 0.47 27 0.1207 % 2,265.7
Perpetual-Discount 4.97 % 4.92 % 106,064 15.58 6 0.1983 % 2,507.7
FixedReset 4.99 % 3.04 % 189,163 4.15 71 0.0402 % 2,418.9
Deemed-Retractible 4.96 % 3.58 % 139,884 1.37 46 0.0819 % 2,345.7
Performance Highlights
Issue Index Change Notes
No individual gains or losses exceeding 1%!
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.B Deemed-Retractible 116,785 TD crossed 100,000 at 24.15.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.11
Bid-YTW : 5.36 %
MFC.PR.I FixedReset 114,443 National crossed 20,200 at 25.10; RBC crossed 35,000 at 25.00.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 4.28 %
BMO.PR.M FixedReset 87,679 Scotia crossed 55,000 at 25.78; National crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.84
Bid-YTW : 2.65 %
SLF.PR.A Deemed-Retractible 60,275 RBC crossed 37,100 at 23.80.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.81
Bid-YTW : 5.48 %
TD.PR.A FixedReset 54,800 TD crossed 35,000 at 25.72. Scotia crossed 13,400 at 25.68.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 3.06 %
BAM.PR.N Perpetual-Discount 41,416 RBC crossed 29,800 at 24.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-26
Maturity Price : 23.96
Evaluated at bid price : 24.25
Bid-YTW : 4.93 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
RY.PR.L FixedReset Quote: 25.97 – 26.35
Spot Rate : 0.3800
Average : 0.2474

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.97
Bid-YTW : 2.80 %

BNA.PR.C SplitShare Quote: 23.46 – 23.79
Spot Rate : 0.3300
Average : 0.2090

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 23.46
Bid-YTW : 5.64 %

CIU.PR.B FixedReset Quote: 26.90 – 27.27
Spot Rate : 0.3700
Average : 0.2516

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.90
Bid-YTW : 3.04 %

RY.PR.W Perpetual-Premium Quote: 25.58 – 25.89
Spot Rate : 0.3100
Average : 0.1986

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-25
Maturity Price : 25.50
Evaluated at bid price : 25.58
Bid-YTW : -3.62 %

ENB.PR.D FixedReset Quote: 25.36 – 25.69
Spot Rate : 0.3300
Average : 0.2208

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-26
Maturity Price : 23.24
Evaluated at bid price : 25.36
Bid-YTW : 3.45 %

NA.PR.L Deemed-Retractible Quote: 25.56 – 25.80
Spot Rate : 0.2400
Average : 0.1731

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-25
Maturity Price : 25.50
Evaluated at bid price : 25.56
Bid-YTW : -1.27 %

July 25, 2012

Wednesday, July 25th, 2012

It was a very uneventful day for the Canadian preferred share markets, with PerpetualPremiums gaining 1bp, FixedResets flat and DeemedRetractibles off 1bp. Volatility was almost non-existant. Volume was average.

PerpetualDiscounts now yield 4.93%, equivalent to 6.41% interest at the standard equivalency factor of 1.3x. Long corporates now yield 4.2% so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 220bp, continued very slow widening from the 215bp reported July 18.

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 -0.1414 % 2,283.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1414 % 3,416.2
Floater 3.19 % 3.21 % 70,554 19.20 3 -0.1414 % 2,465.8
OpRet 4.77 % 2.78 % 38,498 0.91 5 0.0461 % 2,527.6
SplitShare 5.49 % 4.91 % 67,576 4.68 3 0.0400 % 2,758.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0461 % 2,311.2
Perpetual-Premium 5.34 % 2.21 % 98,091 0.47 27 -0.0094 % 2,263.0
Perpetual-Discount 4.98 % 4.93 % 98,153 15.59 6 -0.1843 % 2,502.7
FixedReset 4.99 % 2.96 % 187,669 4.38 71 0.0043 % 2,417.9
Deemed-Retractible 4.97 % 3.60 % 140,747 1.37 46 0.0111 % 2,343.7
Performance Highlights
Issue Index Change Notes
IAG.PR.E Deemed-Retractible 1.30 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 26.00
Evaluated at bid price : 26.44
Bid-YTW : 5.23 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.N FixedReset 311,058 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-25
Maturity Price : 23.12
Evaluated at bid price : 25.08
Bid-YTW : 3.70 %
ENB.PR.F FixedReset 108,753 RBC crossed 57,000 at 25.72. TD crossed blocks of 20,000 and 15,000, both at 25.71.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-25
Maturity Price : 23.30
Evaluated at bid price : 25.60
Bid-YTW : 3.51 %
BNS.PR.N Deemed-Retractible 104,006 RBC crossed 103,900 at 26.30.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.33
Bid-YTW : 2.39 %
BNS.PR.M Deemed-Retractible 90,797 Nesbitt crossed 68,600 at 25.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-07-27
Maturity Price : 25.00
Evaluated at bid price : 25.77
Bid-YTW : 3.68 %
MFC.PR.H FixedReset 80,575 RBC crossed blocks of 54,800 and 20,000, both at 25.76.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.71
Bid-YTW : 4.05 %
NA.PR.L Deemed-Retractible 75,922 RBC crossed 73,000 at 25.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-24
Maturity Price : 25.50
Evaluated at bid price : 25.60
Bid-YTW : -3.31 %
There were 31 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
W.PR.H Perpetual-Premium Quote: 25.52 – 26.25
Spot Rate : 0.7300
Average : 0.5553

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.52
Bid-YTW : 1.41 %

IAG.PR.F Deemed-Retractible Quote: 26.20 – 26.60
Spot Rate : 0.4000
Average : 0.2710

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 5.34 %

GWO.PR.M Deemed-Retractible Quote: 26.69 – 26.98
Spot Rate : 0.2900
Average : 0.1831

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.69
Bid-YTW : 4.70 %

PWF.PR.O Perpetual-Premium Quote: 26.26 – 26.60
Spot Rate : 0.3400
Average : 0.2496

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.26
Bid-YTW : 4.88 %

ELF.PR.H Perpetual-Premium Quote: 25.65 – 25.88
Spot Rate : 0.2300
Average : 0.1453

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 5.18 %

NA.PR.P FixedReset Quote: 26.65 – 26.94
Spot Rate : 0.2900
Average : 0.2185

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.65
Bid-YTW : 2.05 %