Archive for November, 2015

November 19, 2015

Friday, November 20th, 2015

Today’s post is dedicated to the snivelling cowards who don’t want to take in Syrian refugees because ISIS might get mad at us. Wear one of these on your lapel on future Remembrance Days instead of a poppy:

A_single_white_feather_closeup
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Today’s sick joke has to do with money laundering – Assiduous Readers will recall that here in North America we are spending untold billions of dollars on a regulatory regime that causes massive inconvenience to honest citizens and has, so far, caught the notorious master-criminals Hastert and Switzer, last discussed in detail on October 19. So how does ISIS make its money and move it around? They’ve got a lot of oil and wheat money:

These airstrikes were launched not because U.S. officials were prescient. They came after the Obama administration found and quietly fixed a colossal miscalculation. U.S. intelligence had grossly overestimated the damage they’d inflicted during airstrikes on the militants’ oil production apparatus last year, while underestimating Islamic State’s oil revenue by $400 million. According to U.S. Department of the Treasury officials and data they released in the wake of the Paris mayhem, the terrorist group is actually taking in $500 million from oil a year. What’s more, just a few hours before the first Islamic State suicide bomber blew himself up outside the Stade de France on Nov. 13, U.S. Army Colonel Steve Warren conceded at a press briefing that some American airstrikes disrupted IS oil operations for no more than a day or two.

Arguably the least appreciated resource for Islamic State is its fertile farms. Before even starting the engine of a single tractor, the group is believed to have grabbed as much as $200 million in wheat from Iraqi silos alone. Beyond harvested grains, the acreage now controlled by militants across the Tigris and Euphrates river valleys has historically produced half of Syria’s annual wheat crop, about one-third of Iraq’s, and almost 40 percent of Iraqi barley, according to UN agricultural officials and a Syrian economist. Its fields could yield $200 million per year if those crops are sold, even at the cut rates paid on black markets. And how do you conduct airstrikes on farm fields?

But here’s the best part: when ISIS conquers territory in Iraq, the Iraqi government continues to pay the civil service in the area:

ISIS uses adjacent areas not only to access foreign funds, but also to cull money from Iraqi government officials still working in its territory. For example, Baghdad may be paying up to $130 million every month to government workers in Mosul alone.

The city’s formal banking system was shut down after ISIS took over, so “department emissaries are sent into Iraqi or Kurdish territory [to] collect salary money.” When these officials return to disburse the funds, ISIS naturally takes a cut off the top — according to the FATF report, the group “could potentially profit hundreds of millions of USD annually from taxing these salary payments.”

The goal here should be strict regulation and transparency, not eliminating all money flows into these border areas.

The latter is neither realistic nor advisable, as a collapsed economy would only worsen the humanitarian crisis and hurt innocent civilians who are effectively ISIS hostages trying to survive one day at a time.

But without greater oversight and control over the flow of funds to areas in the Islamic State’s “near abroad,” the group will continue using backdoors to fund its brutality and terrorism in Syria, Iraq, and elsewhere.

So let’s not hear any more crap about how our Canadian banking regulations are an important element in the fight against terrorism. It’s a joke.

Oh, and while we’re on the topic of Canadian financial regulation, let’s see what Christine Duhaime has to say:

Two weeks from now, I appear before the United Nations law and policy group to discuss the regulation of bitcoin, the blockchain and digital finance, which are at the cutting edge of financial technology.

It’s appropriate that they asked a Canadian lawyer to speak, because we know about balanced financial regulation – 18 months ago, Canada moved to overregulate fintech with the world’s first law governing digital currencies, enacted amid concerns about terrorist financing.

Overnight, we drove away hundreds of millions of investment dollars in fintech from Canada, money that went to Britain instead.

Assiduous Reader JP sends me another interesting link today, bringing the score for the month to date to: JP 2 Youse Other Bums 0. This one is an essay on the corporate savings glut by Martin Wolf of the Financial Times:

In the six largest high-income economies – the US, Japan, Germany, France, the UK and Italy – corporations accounted for between half and just over two-thirds of gross investment in 2013 (the lowest share being in Italy, the highest in Japan).

Because corporations are responsible for such a large share of investment, they are also, in aggregate, the largest users of available savings, but their own retained earnings are also a huge source of savings.

If the corporate sector runs a structural surplus of savings over investment, other sectors must run offsetting structural deficits. If the government is to be in financial balance, either households or foreigners must run these deficits.

In the euro zone, this logic has led to huge current account surpluses (a financial deficit for foreigners). For the UK and US, it is likely to mean renewed household deficits – a destabilising possibility.

Why is corporate investment structurally weak? The ageing of societies is one reason: by slowing potential growth, it lowers the level of investment needed.

Globalisation is another: it motivates relocation of investment from the high-income countries. Another reason is technological innovation. Much investment today is in IT, whose price is collapsing: constant nominal investment finances rising real investment. Again, much innovation seems to reduce the need for capital: consider the substitution of warehouses for retail stores. Another explanation could be that management is not rewarded for investing.

Together, all this might explain why, to take the US example, the ratio of corporate investment to profits has declined substantially since 2000.

Moreover, if the corporate sector is unable to invest even its own savings, savings in the rest of the economy are bound to have a low marginal value. In such a world, both ultra-low real interest rates and high equity prices are not at all surprising. They are to be expected. So stop complaining.

The Bank of Canada has released the Bank of Canada Review, Autumn 2015, with articles:

  • Is Slower Growth the New Normal in Advanced Economies?
  • A Survey of Consumer Expectations for Canada
  • Measuring Durable Goods and Housing Prices in the CPI: An Empirical Assessment
  • The Effect of Regulatory Changes on Monetary Policy Implementation Frameworks
  • Recent Enhancements to the Management of Canada’s Foreign Exchange Reserves

In the article A Survey of Consumer Expectations for Canada, the following table appears:

inflationExpectations
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There have been two new developments in the fascinating Sprott Silver battle. First, the fund is proposing to become an ETF:

The Board of Trustees of Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (C$) (TSX:SBT.U) (US$) announced today that SBT has entered into a letter of intent with Purpose Investments Inc. (“Purpose”) regarding the proposed conversion of SBT into an exchange-traded silver bullion fund (“ETF”). The proposed conversion will involve certain amendments to SBT’s Declaration of Trust that will be subject to approval by SBT unitholders at a special unitholders’ meeting expected to be held by the end of January 2016. The proposal is also subject to the execution of definitive agreements, receipt of regulatory approvals and other customary conditions for transactions of this nature. Full details regarding the proposed conversion and its anticipated benefits will be outlined in a management information circular which will be mailed to unitholders in advance of the proposed special meeting.

Purpose is an independent, employee-owned Canadian investment management company established in January 2013 by Som Seif, founder and former CEO of Claymore Investments, a leading Canadian ETF provider, which was purchased by BlackRock, Inc. in 2012. Purpose, which has current assets under management of over $1.4 billion across 17 funds, is one of Canada’s most experienced ETF managers and has significant experience in managing bullion funds. Purpose and Silver Administrators Limited, SBT’s current administrator, will jointly administer SBT following approval of the conversion by SBT unitholders.

Second, the OSC has ordered enhanced disclosure from Sprott:

Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (C$) (TSX:SBT.U) (US$) announced today that the Ontario Securities Commission (“OSC”) has issued an order requiring Sprott Asset Management Silver Bid LP and certain of its affiliates (collectively, “Sprott”) to issue a notice of change that provides enhanced disclosure to Unitholders regarding the amendments Sprott unilaterally made to the voting powers of attorney solicited by Sprott in connection with its unsolicited offer (the “Sprott Offer”) to acquire all of the units of SBT. The OSC also prohibited Sprott from exercising rights purportedly attaching to the voting powers of attorney before the expiry of 15 days after the notice of change is issued.

The November 4, 2015 Notice of Variation of the Sprott Offer unilaterally amended the intended use of the voting powers of attorney granted by those Unitholders who had tendered to the Sprott Offer. Sprott now intends to use the powers of attorney to replace the independent trustees of SBT, and to elect Sprott insiders as trustees, if more than 50.1% of the outstanding units of SBT are tendered to the Sprott Offer. These powers of attorney were originally intended to be used to replace the trustees if 66 2/3% of the units were tendered to the Sprott Offer to facilitate completion of the Sprott Offer. SBT applied to the OSC for an order, which among other things, would prevent Sprott from using the powers of attorney in this manner, in part because of the lack of proper disclosure about the change of intent. So long as the unsolicited Sprott Offer remains outstanding, Unitholders who have tendered their units will have conveyed their voting rights to Sprott and have forfeited their ability to consider the alternative transaction described below.

The OSC order has been published on the OSC site.

Capital Power is attempting to clean up its structure at the expense of bondholders:

Capital Power Corporation (“Capital Power”) (TSX: CPX) and Capital Power L.P. (“CPLP”) announced today that CPLP has called a meeting of the holders (“CPLP Noteholders”) of issued and outstanding 4.85% Medium Term Notes due February 21, 2019 (“Series 3”) and 5.276% Medium Term Notes due November 16, 2020 (“Series 1”) (collectively, the “CPLP Notes”) of CPLP. The principal amounts outstanding are $250 million for Series 3 and $300 million for Series 1.

The record date for determining CPLP Noteholders entitled to vote at the meeting is November 18, 2015 with the meeting to be held in Toronto on December 17, 2015 at the time set out in the Notice of Meeting. An information circular (“Circular) and related proxy materials will be mailed to CPLP Noteholders and also are available on SEDAR at www.sedar.com.

The meeting has been called to consider passing an extraordinary resolution to authorize CPLP to enter into a supplemental indenture amending the terms of the trust indenture dated April 14, 2010. In accordance with the steps described in the Circular, all issued and outstanding CPLP Notes would be exchanged for an equal principal amount of newly issued medium term notes of Capital Power having financial and other terms that are the same as those attached to the CPLP Notes and benefiting from a guarantee to be provided by CPLP (“Note Exchange Transaction”).

The Note Exchange Transaction and additional steps to reorganize CPLP’s capital structure are being undertaken to simplify the organizational structure and reduce reporting obligations. The cessation of CPLP as a reporting issuer and transition of long-term credit ratings to only Capital Power will result in efficiencies for CPLP while providing noteholders with better liquidity over time and structural enhancement. The timing of the Note Exchange Transaction follows the exchange of all remaining Exchangeable Common Limited Partnership Units of CPLP for shares of Capital Power by EPCOR Power Development Corporation on April 2, 2015.

RBC Capital Markets is the Solicitation Agent for the Note Exchange Transaction and Kingsdale Shareholder Services has been retained to act as Information Agent.

The Information Circular is not yet available, so I’m not sure how much is being paid to brokers for favourable votes from their clients. I have not seen any indication, so far, regarding the effect on the credit ratings of this structural subordination:

The Company’s power generation operations and assets are owned by Capital Power L.P. (CPLP), a subsidiary of the Company. As at December 31, 2014, the Company held 21.750 million general partnership units and 62.112 million common limited partnership units of CPLP which represented approximately 82% of CPLP’s total partnership units. EPCOR (in this MD&A, EPCOR refers to EPCOR Utilities Inc. collectively with its subsidiaries) held 18.841 million exchangeable common limited partnership units of CPLP which represented approximately 18% of CPLP. CPLP’s exchangeable common limited partnership units are exchangeable for common shares of Capital Power Corporation on a one-for-one basis.

Nonetheless, anybody who votes in favour of this arrangement without a sweetener is a fool. The position in the capital structure is worth … something and should not be given up without getting … something.

Big 8 Split Inc., proud issuer of BIG.PR.D (not tracked by HIMIPref™) was confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the rating of Class D Preferred Shares, Series 1 (the Preferred Shares) issued by Big 8 Split Inc. (the Company) at Pfd-2 (low).

Dividends received from the Portfolio are used to pay fixed cumulative quarterly distributions to holders of the Preferred Shares, yielding 4.50% per annum on the initial issue price of $10.00. The Capital Shares are expected to receive all excess dividend income after the Preferred Share distributions and other Company expenses have been paid. Based on the current dividend yield on the Portfolio, the Preferred Share dividend coverage ratio is approximately 1.5 times, and as such there is no grind on the portfolio.

Downside protection available to the Preferred Shares consists of the net asset value of the Capital Shares. As of November 11, 2015, the downside protection was approximately 55.6%.

5Banc Split Inc., proud issuer of FBS.PR.C (tracked by HIMIPref™ but relegated to the Scraps index on volume concerns) has been confirmed at Pfd-2 by DBRS:

DBRS Limited (DBRS) has today confirmed the rating of Class C Preferred Shares, Series 1 (the Preferred Shares) issued by 5Banc Split Inc. (the Company) at Pfd-2.

Dividends received from the Portfolio are used to pay a quarterly fixed, cumulative, preferential distribution of $0.11875 per Preferred Share to yield 4.75% per annum. As of November 11, 2015, the downside protection was approximately 69%. Based on the dividend yields on the underlying Portfolio holdings as of November 11, 2015, the Preferred Share dividend coverage ratio is approximately 2.5 times.

Brookfield Renewable announced the exercise of the underwriters’ option for their new issue. I have updated the PrefBlog announcement post.

While today’s market swoon was nowhere near as dramatic as yesterday‘s, there was the same pattern of an exaggerated decline at the close, as the TXPL index moved from 708.63 at 3:56pm to 707.16 at the close:

TXPL_151119
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It was a mixed but poor day for the Canadian preferred share market, with PerpetualDiscounts off 19bp, FixedResets down 46bp and DeemedRetractibles gaining 2bp. The Performance Highlights table is ridiculously long. Volume was very high.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_151119
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.00 to be $0.82 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.59 cheap at its bid price of 13.25.

impVol_MFC_151119
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Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 21.20 to be 0.54 rich, while MFC.PR.K resetting at +222bp on 2018-9-19, is bid at 19.78 to be 0.49 cheap.

impVol_BAM_151119
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.79 to be $1.21 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 21.50 and appears to be $0.73 rich.

impVol_FTS_151119
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FTS.PR.K, with a spread of +205bp, and bid at 19.62, looks $0.85 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 14.03 and is $0.96 cheap.

pairs_FR_151119
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.42%, with one outlier above 0.00%. There is one junk outlier above 0.00% and one below -2.00%.

pairs_FF_151119
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Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 4.26 % 5.12 % 33,606 17.68 1 -1.8405 % 1,819.2
FixedFloater 6.13 % 5.37 % 26,572 17.06 1 0.0000 % 3,184.1
Floater 4.24 % 4.32 % 74,656 16.71 3 -5.2990 % 1,861.8
OpRet 4.86 % 3.66 % 33,587 0.77 1 0.1988 % 2,738.6
SplitShare 4.76 % 5.71 % 138,644 2.91 5 0.1975 % 3,215.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1975 % 2,509.2
Perpetual-Premium 5.80 % -0.83 % 89,865 0.08 6 -0.5710 % 2,505.7
Perpetual-Discount 5.53 % 5.61 % 86,880 14.46 33 -0.1895 % 2,592.1
FixedReset 4.87 % 4.64 % 222,470 15.43 76 -0.4579 % 2,102.5
Deemed-Retractible 5.15 % 5.25 % 115,642 5.39 33 0.0153 % 2,583.9
FloatingReset 2.57 % 3.76 % 59,939 5.77 10 0.1169 % 2,198.2
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater -6.77 % Exaggerated, but not completely wrong, as the issue traded 13,174 shares in a range of 11.03-99 before closing at 11.02-65, 4×1. The low of 11.03 was achieved by a single trade of 300 shares; 100 traded at 11.11; 200 at 11.25 and all the rest were above 11.30, with a VWAP of 11.60. So I’m guessing that the market maker got scared at around 3:30pm and took the rest of the day off. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 11.02
Evaluated at bid price : 11.02
Bid-YTW : 4.34 %
BAM.PR.K Floater -5.31 % This is much the same story as with BAM.PR.B, above, but this time there’s more excuse – there was a burst of small sells, possibly algorithmic, from National Bank that took the market down from 11.50 at 3:19 to 10.90 at 3:32. The issue traded 21,358 shares in a range of 10.90-85 before closing at 11.05-57, 1×1. The VWAP was 11.57. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 11.05
Evaluated at bid price : 11.05
Bid-YTW : 4.32 %
BAM.PR.C Floater -3.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 11.35
Evaluated at bid price : 11.35
Bid-YTW : 4.21 %
TRP.PR.C FixedReset -2.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 13.25
Evaluated at bid price : 13.25
Bid-YTW : 4.72 %
VNR.PR.A FixedReset -2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 20.53
Evaluated at bid price : 20.53
Bid-YTW : 4.70 %
SLF.PR.H FixedReset -2.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.51
Bid-YTW : 7.20 %
IFC.PR.A FixedReset -2.45 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.12
Bid-YTW : 8.20 %
PWF.PR.T FixedReset -2.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.41
Evaluated at bid price : 21.75
Bid-YTW : 3.97 %
BAM.PF.B FixedReset -2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.62
Evaluated at bid price : 19.62
Bid-YTW : 4.78 %
SLF.PR.J FloatingReset -2.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.67
Bid-YTW : 9.31 %
BAM.PR.E Ratchet -1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 25.00
Evaluated at bid price : 16.00
Bid-YTW : 5.12 %
TD.PF.E FixedReset -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.98
Evaluated at bid price : 22.51
Bid-YTW : 4.20 %
CM.PR.P FixedReset -1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.16
Evaluated at bid price : 19.16
Bid-YTW : 4.36 %
BAM.PR.T FixedReset -1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 17.86
Evaluated at bid price : 17.86
Bid-YTW : 4.78 %
BAM.PF.A FixedReset -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 4.81 %
TD.PF.B FixedReset -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.57
Evaluated at bid price : 19.57
Bid-YTW : 4.28 %
RY.PR.J FixedReset -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.47
Evaluated at bid price : 21.75
Bid-YTW : 4.21 %
CU.PR.C FixedReset -1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 4.29 %
FTS.PR.H FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 14.03
Evaluated at bid price : 14.03
Bid-YTW : 4.32 %
BAM.PF.C Perpetual-Discount -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.87 %
TD.PF.A FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.62
Evaluated at bid price : 19.62
Bid-YTW : 4.27 %
MFC.PR.I FixedReset -1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.23
Bid-YTW : 5.03 %
BAM.PF.D Perpetual-Discount -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.26
Evaluated at bid price : 21.26
Bid-YTW : 5.86 %
HSE.PR.A FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 14.25
Evaluated at bid price : 14.25
Bid-YTW : 4.86 %
RY.PR.H FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 4.27 %
PWF.PR.R Perpetual-Discount -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 24.10
Evaluated at bid price : 24.60
Bid-YTW : 5.62 %
BMO.PR.M FixedReset -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 3.61 %
CM.PR.Q FixedReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.86
Evaluated at bid price : 22.30
Bid-YTW : 4.15 %
RY.PR.M FixedReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.34
Evaluated at bid price : 21.34
Bid-YTW : 4.20 %
CU.PR.D Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 22.14
Evaluated at bid price : 22.45
Bid-YTW : 5.46 %
GWO.PR.N FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.85
Bid-YTW : 9.87 %
W.PR.J Perpetual-Discount 1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 24.08
Evaluated at bid price : 24.34
Bid-YTW : 5.82 %
TRP.PR.F FloatingReset 4.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 15.11
Evaluated at bid price : 15.11
Bid-YTW : 3.89 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.S FixedReset 214,079 Desjardins crossed 78,900 at 19.82. RBC crossed 112,000 at 19.79.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.68
Evaluated at bid price : 19.68
Bid-YTW : 4.45 %
TD.PF.B FixedReset 164,220 Scotia crossed blocks of 50,000 and 35,000, both at 19.70. RBC crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.57
Evaluated at bid price : 19.57
Bid-YTW : 4.28 %
NA.PR.W FixedReset 125,945 RBC crossed 112,000 at 19.59.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.33
Evaluated at bid price : 19.33
Bid-YTW : 4.35 %
RY.PR.H FixedReset 119,197 Scotia crossed two blocks of 50,000 each, both at 19.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 4.27 %
BNS.PR.Z FixedReset 87,857 Desjardins crossed 64,400 at 20.65.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.56
Bid-YTW : 5.90 %
BMO.PR.T FixedReset 81,650 Scotia crossed 25,000 at 19.55. RBC crossed 29,600 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 4.26 %
There were 59 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.B Floater Quote: 11.02 – 11.65
Spot Rate : 0.6300
Average : 0.4234

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 11.02
Evaluated at bid price : 11.02
Bid-YTW : 4.34 %

BAM.PF.C Perpetual-Discount Quote: 21.00 – 21.55
Spot Rate : 0.5500
Average : 0.3491

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.87 %

BAM.PR.K Floater Quote: 11.05 – 11.57
Spot Rate : 0.5200
Average : 0.3392

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 11.05
Evaluated at bid price : 11.05
Bid-YTW : 4.32 %

TD.PF.E FixedReset Quote: 22.51 – 22.99
Spot Rate : 0.4800
Average : 0.3272

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.98
Evaluated at bid price : 22.51
Bid-YTW : 4.20 %

PWF.PR.R Perpetual-Discount Quote: 24.60 – 24.98
Spot Rate : 0.3800
Average : 0.2403

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 24.10
Evaluated at bid price : 24.60
Bid-YTW : 5.62 %

PWF.PR.T FixedReset Quote: 21.75 – 22.33
Spot Rate : 0.5800
Average : 0.4407

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-19
Maturity Price : 21.41
Evaluated at bid price : 21.75
Bid-YTW : 3.97 %

FTN.PR.A To Get Bigger

Friday, November 20th, 2015

Quadravest has announced:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus in each of the provinces of Canada with respect to an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets, Scotia Capital Inc., and will also include BMO Capital Markets, GMP Securities L.P., Canaccord Genuity Corp., Dundee Securities, Raymond James, Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

The Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% and the Class A Shares will be offered at a price of $9.90 per Class A Share to yield 15.24%. The closing price on the TSX of each of the Preferred Shares and the Class A Shares on November 18, 2015 was $10.07 and $10.38, respectively.

Since inception of the Company, the aggregate dividends paid on the Preferred Shares have been $6.28 per share and the aggregate dividends paid on the Class A Shares have been $14.12 per share, for a combined total of $20.40. All distributions to date have been made in tax advantage eligible Canadian dividends or capital gains dividends. The net proceeds of the offering will be used by the Company to invest in an actively managed, high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal National Bank of Canada Bank of America Corp.
The Bank of Nova Scotia Manulife Financial Corporation Citigroup Inc.
Canadian Imperial Bank of Commerce Sun Life Financial Services of Canada Inc. Goldman Sachs Group Inc.
Royal Bank of Canada Great-West Lifeco Inc. JP Morgan Chase & Co.
The Toronto-Dominion Bank CI Financial Corp. Wells Fargo & Co.

The Company’s investment objectives are:
Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends currently in the amount of 5.25% annually, to be set by the Board of Directors annually subject to a minimum of 5.25% until 2020; and
ii. on or about the termination date, currently December 1, 2020 (subject to further 5 year extensions thereafter), to pay the holders of the Preferred Shares $10.00 per Preferred Share.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends in an amount to be determined by the Board of the Directors; and
ii. to permit holders to participate in all growth in the net asset value of the Company above $10 per Unit, by paying holders on or about the termination date of December 1, 2020 (subject to further 5 year extensions thereafter) such amounts as remain in the Company after paying $10 per Preferred Share.

The sales period of this overnight offering will end at 9:00 a.m. EST on November 20, 2015.

The Net Asset Value Per Unit on November 18 is $17.05 and the new units are being offered at 19.90. Geez, the SplitShare business is nice when it works!

The last time FTN.PR.A got bigger was December 1, 2014, and there are currently slightly over 16.5-million units outstanding. Daily volume is better than most operating issues:

FTNPRA_151119_vol_spot
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FTNPRA_151119_vol_avg
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Update, 2015-11-20 : A very successful offering!

Financial 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight marketing of up to 3,335,474 Preferred Shares and up to 2,502,700 Class A Shares of the Company. Total proceeds of the offering are expected to be approximately $58.1 million.

Update, 2015-12-4: It closed:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight offering of 3,335,474 Preferred Shares and 2,502,700 Class A Shares of the Company. Total proceeds of the offering were $58.1 million, bringing the Company’s net assets to approximately $334.7 million. The shares will trade on the Toronto Stock Exchange under the existing symbols of FTN.PR.A (Preferred Shares) and FTN (Class A shares).

November 18, 2015

Thursday, November 19th, 2015

Assiduous Reader JP, who sends me more interesting links than all the rest of youse other bums combined, brings to my attention a popular press story on corporate bond liquidity:

Add one more name to the chorus of doom. Earlier this week, Andrew Tyrie, the Conservative MP and chairman of the Treasury Select Committee, wrote to Mark Carney, the Governor of the Bank of England, to express his concern about bond market liquidity – or, more precisely, the lack thereof.

In May, Nouriel Roubini, the US economist made famous for predicting the US housing problems that led to the financial crisis, wrote about “the liquidity timebomb”.

In June, Stephen Schwarzman, the chief executive of private equity firm Blackstone, penned a comment piece for The Wall Street Journal on bond market liquidity entitled: “How the next financial crisis will happen”.

Why has what sounds like a pretty niche subject got so many knickers in such a twist?

Regardless, there’s little appetite among regulators to row back on capital rules. So liquidity may need to come from somewhere else. One theory is that fund managers should try to trade directly with each other (although the fate of Bondcube, an online marketplace which tried to facilitate such transactions but went bust in July after only three months because investors couldn’t agree on prices without the involvement of a broker, doesn’t bode well).

Or perhaps the amount of liquidity available before the crisis was the aberration and we now need to reset our expectations. Should, for example, investors be allowed to withdraw money, at a moment’s notice, from funds that invest in rarely-traded securities?

Regulators have made a trade-off. Banks have been made less risky. But, as Bill Gross, the famous bond investor, said earlier this year, that risk hasn’t been eliminated – it’s just moved elsewhere in the system.

Nouriel Roubini’s piece makes the point:

As a result, when surprises occur – for example, the Fed signals an earlier-than-expected exit from zero interest rates, oil prices spike, or eurozone growth starts to pick up – the re-rating of stocks and especially bonds can be abrupt and dramatic: everyone caught in the same crowded trades needs to get out fast. Herding in the opposite direction occurs, but, because many investments are in illiquid funds and the traditional market makers who smoothed volatility are nowhere to be found, the sellers are forced into fire sales.

This combination of macro liquidity and market illiquidity is a time bomb. So far, it has led only to volatile flash crashes and sudden changes in bond yields and stock prices. But, over time, the longer central banks create liquidity to suppress short-run volatility, the more they will feed price bubbles in equity, bond, and other asset markets. As more investors pile into overvalued, increasingly illiquid assets – such as bonds – the risk of a long-term crash increases.

This is the paradoxical result of the policy response to the financial crisis. Macro liquidity is feeding booms and bubbles; but market illiquidity will eventually trigger a bust and collapse.

Blackrock’s report is titled US EQUITY MARKET STRUCTURE: LESSONS FROM AUGUST 24:

Contributors to disruptions on the morning of August 24:

3.Excessive use of market and stop-loss orders that seek “liquidity at any price” inflamed the situation.
  • When markets are volatile, liquidity can come at a cost.
  • Market and stop-loss orders that demand “liquidity at any price” added to selling pressure and proved especially risky on the morning of August 24.


Recommendations for enhancing US equity market resiliency:

7.Educate investors on how to navigate the modern US equity market. Customer-facing broker-dealers should consider whether there is more to do to raise investor awareness regarding usage of market and stop-loss orders in volatile periods, especially at the open or close.

Orders that seek liquidity at any price may expose investors to prices which reflect the cost of liquidity at a given point in time as opposed to the underlying fundamental value of a security. Taken together, we believe that it is important that investors are educated about how to navigate today’s complex equity market and volatility. In particular, investors should have an understanding of the implications and potential risks associated with the use of “liquidity at any price” order types, such as market and stop-loss orders. We are supportive of ongoing cost/benefit analyses to determine whether certain constraints on market and stop-loss orders would be appropriate. Further discussion is needed to determine whether other protections should be implemented; for example, additional disclosure to customers regarding the potential risks associated with the use of market and stop-loss orders. Customer-facing broker-dealers are best positioned to consider ongoing investor education efforts.

Blackrock’s emphasis on investor education is very sweet and leaves me wondering how much of this was written to curry favour with the regulators. Retail, taken as a whole, is stupid and enjoys being stupid. There are about a bazillion pages on the Web touting stop-loss orders as the sure-fire way to get free money, such as Stops – Minimizing Losses And Protecting Gains:

Next time someone tells you their stock portfolio is up by 50%, congratulate them, then ask “What have you done to protect your profit?”

If they look at you with a puzzled expression on their face, then you know their 50% paper gain could easily be lost within a matter of days or weeks. If they tell you they have an exit strategy with Stop Losses in place to protect a large percentage of their gain, then you know they are probably prepared.

Investor education, hah! I’ve got news for Blackrock: you can lead a horse to water, but you can’t make it drink.

On another note, the NYSE is banning stop-loss orders:

Stop orders — or instructions to immediately trade once a stock hits a certain price, even if the price is far worse than the one on the order — will no longer be available starting on Feb. 26, NYSE said this week.

Brokerage firms can still program their systems to carry out orders that achieve the same results as a stop order for their clients, by entering a market order on the client’s behalf after a stock price reaches a specified threshold.

Nonetheless, Cunningham said, the exchange wants “to raise the profile of the risks associated with this order type.”

One possibility for mitigating the volatility due to stop-loss orders is to make them transparent: the Exchanges could make public a list of trigger prices and stop volume throughout the trading day. This would, I think, lead to market players putting in limit bids somewhere below each stop-trigger in hopes of getting a lucky fill. Currently, the TSX (for example) does not provide pre-trade transparency on stop orders:

No pre-trade transparency of: i) orders entered in the MOC facility; ii) “On-Stop Book” orders, until the limit price of the order is triggered, at which point they become part of the “Regular Book”; and iii) dark orders are fully hidden until execution.

On the other hand, it would probably also lead to a thinning of the market immediately above the major trigger points, so maybe that’s not such a great idea. Another possibility is a new order type that would interact only with stop-loss orders; that is to say, instead of stop-loss orders turning into limit or market orders, they would retain their stop-identity for the purpose of interacting with this new, bottom-feeder, order type.

And on the other other hand, who cares? Players using stop-losses aren’t trading on fundamentals, so screw ’em! Vapourizing the investments of non-fundamental investors is a Public Good so let’s just do it, ride out the volatility and move on.

But perhaps the most effective argument against eliminating stop-loss as an order type is practical: the fact is that in the first place, such orders will simply move to the brokers’ books and in the second place will be available to anybody via a simple algorithm. The latter point means that you must accept that certain simple order types will suddenly be restricted to big players, which won’t be very popular with self-proclaimed Investor Activists or with regulators who stop and think about what it is they’re doing … well, OK, with self-proclaimed Investor Activists, anyway.

Veresen Inc., proud issuer of VSN.PR.A, was confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Notes rating of Veresen Inc. (Veresen or the Company) at BBB as well as its Preferred Shares rating at Pfd-3. The trend on the ratings is Stable. Veresen’s ratings are supported by firm take-or-pay and fee-based cash flows from a diversified portfolio of energy infrastructure assets; however, some of the Company’s midstream gas gathering and processing operations are exposed to volume and commodity price risks.

The Company’s non-consolidated financial profile remains reasonable for its current rating category. On a non-consolidated basis, the Company’s credit metrics improved in 2015 as debt relating to the Ruby acquisition in 2014 was fully repaid in 2015 with non-consolidated debt-to-capital at 24.1% and cash flow to debt at 32.5% as of Q3 2015. DBRS expects the Company to remain prudent in its future financing strategy to maintain its non-consolidated leverage at or near the 30.0% level.

The market made a funny noise this afternoon:

splat
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No, I mean really, look at the TXPL chart:

TXPL_151118
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So sure, it wasn’t a great day from the beginning, with the TXPL index down about half a point by about 11am and drifting slowly lower thereafter. Then the fun started at about 2:45pm, with the index losing an additional 14bp by 3:25pm, losing another 14bp by 3:39pm, and then just getting crushed, losing another 50bp by the close (to an index level of 710.46), for a total of 154bp on the day. Looks like we’re back to all that fun we had in September and early October, with motivated sellers waiting until late in the trading day to dump their holdings.

I’m not sure how that works. It seems to me that if I had a big sell order to execute, come hell or high water, I would try to take the market down earlier in the day, in order to attract some buyers at the lower prices. It seems to me that one possible – and I do mean possible, don’t anybody assume that this is what is actually happening – mechanism for this is that Joe Trader gets an order to sell 50,000 shares throughout the day, slaps it into a cautious, liquid-equity style algorithm and then finds out at 3pm that he’s only got fills on 5,000 and has to get cracking. I don’t like speculating about such micro-mechanisms, but … it just seems so wasteful to take the market down 50bp in the last five minutes-odd of the day, when relatively few participants will have a chance to react.

It was a rotten day for the Canadian preferred share market, with PerpetualDiscounts off 13bp, FixedResets losing 93bp and DeemedRetractibles down 36bp. The Performance Highlights table is suitably long, with a heavy load of TRP issues among the worst losers. Volume was extremely high.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_151118
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.06 to be $0.79 rich, while TRP.PR.G, resetting 2020-11-30 at +154, is $0.36 cheap at its bid price of 20.80.

impVol_MFC_151118
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Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 21.13 to be 0.48 rich, while MFC.PR.K resetting at +222bp on 2018-9-19, is bid at 19.76 to be 0.52 cheap.

impVol_BAM_151118
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.79 to be $1.33 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 21.70 and appears to be $0.83 rich.

impVol_FTS_151118
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FTS.PR.K, with a spread of +205bp, and bid at 19.55, looks $0.78 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 14.20 and is $0.82 cheap.

pairs_FR_151118
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.50%, with no outliers. There are two junk outliers above 0.00% and one below -2.00%.

pairs_FF_151118A
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The BCE.PR.R / BCE.PF.Q pair is no longer being plotted as BCE.PF.Q will not be created, as pointed out by Assiduous Reader Peculiar_Investor.

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 4.19 % 5.02 % 33,409 17.81 1 0.8040 % 1,853.3
FixedFloater 6.13 % 5.37 % 27,664 17.07 1 0.9115 % 3,184.1
Floater 4.02 % 4.05 % 71,275 17.28 3 -2.0267 % 1,965.9
OpRet 4.87 % 3.91 % 33,654 0.77 1 0.0000 % 2,733.2
SplitShare 4.77 % 5.79 % 139,572 2.92 5 0.1554 % 3,209.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1554 % 2,504.2
Perpetual-Premium 5.77 % -3.17 % 74,058 0.08 6 -0.0983 % 2,520.1
Perpetual-Discount 5.51 % 5.56 % 85,985 14.52 33 -0.1288 % 2,597.0
FixedReset 4.84 % 4.57 % 223,125 15.43 76 -0.9315 % 2,112.2
Deemed-Retractible 5.15 % 5.15 % 114,601 5.40 33 -0.3563 % 2,583.5
FloatingReset 2.57 % 3.73 % 55,485 5.77 10 -0.1826 % 2,195.6
Performance Highlights
Issue Index Change Notes
TRP.PR.B FixedReset -5.98 % Only marginally real, since the issue traded 7,602 shares today in a range of 12.56-34, with a VWAP of 12.90. Every single one of the last 25 sales came out of Scotia, mostly in lots of 100 shares, taking the price down from 12.73 at 3:33 to 12.56 at 3:59 … but only the last four of these, totalling 900 shares, were at prices below 12.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 12.43
Evaluated at bid price : 12.43
Bid-YTW : 4.49 %
PWF.PR.P FixedReset -4.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 14.54
Evaluated at bid price : 14.54
Bid-YTW : 4.41 %
TRP.PR.C FixedReset -3.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 13.63
Evaluated at bid price : 13.63
Bid-YTW : 4.59 %
IAG.PR.G FixedReset -3.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.83
Bid-YTW : 5.19 %
TRP.PR.A FixedReset -3.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 15.83
Evaluated at bid price : 15.83
Bid-YTW : 4.74 %
GWO.PR.N FixedReset -3.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.65
Bid-YTW : 10.07 %
HSE.PR.E FixedReset -2.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.84
Evaluated at bid price : 22.25
Bid-YTW : 5.11 %
TRP.PR.E FixedReset -2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.06
Evaluated at bid price : 19.06
Bid-YTW : 4.62 %
VNR.PR.A FixedReset -2.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 4.57 %
TRP.PR.F FloatingReset -2.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 14.44
Evaluated at bid price : 14.44
Bid-YTW : 4.08 %
MFC.PR.J FixedReset -2.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.05
Bid-YTW : 5.44 %
TRP.PR.D FixedReset -2.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 4.73 %
BAM.PR.K Floater -2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 11.67
Evaluated at bid price : 11.67
Bid-YTW : 4.09 %
BMO.PR.T FixedReset -2.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.48
Evaluated at bid price : 19.48
Bid-YTW : 4.28 %
HSE.PR.A FixedReset -2.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 14.41
Evaluated at bid price : 14.41
Bid-YTW : 4.80 %
HSE.PR.C FixedReset -2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 20.76
Evaluated at bid price : 20.76
Bid-YTW : 5.11 %
BAM.PR.B Floater -1.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 11.82
Evaluated at bid price : 11.82
Bid-YTW : 4.04 %
NA.PR.W FixedReset -1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.31
Evaluated at bid price : 19.31
Bid-YTW : 4.36 %
BMO.PR.Y FixedReset -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.93
Evaluated at bid price : 22.41
Bid-YTW : 4.09 %
BAM.PR.C Floater -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 11.80
Evaluated at bid price : 11.80
Bid-YTW : 4.05 %
FTS.PR.G FixedReset -1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 4.26 %
PWF.PR.T FixedReset -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.93
Evaluated at bid price : 22.26
Bid-YTW : 3.88 %
BAM.PF.F FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 4.66 %
MFC.PR.H FixedReset -1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.82
Bid-YTW : 4.92 %
TRP.PR.H FloatingReset -1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 11.44
Evaluated at bid price : 11.44
Bid-YTW : 3.73 %
BMO.PR.W FixedReset -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.39
Evaluated at bid price : 19.39
Bid-YTW : 4.26 %
SLF.PR.H FixedReset -1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.99
Bid-YTW : 6.85 %
W.PR.H Perpetual-Discount -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 23.57
Evaluated at bid price : 23.84
Bid-YTW : 5.83 %
W.PR.J Perpetual-Discount -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 23.71
Evaluated at bid price : 23.98
Bid-YTW : 5.91 %
GWO.PR.Q Deemed-Retractible -1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.37
Bid-YTW : 6.23 %
MFC.PR.G FixedReset -1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.95
Bid-YTW : 5.16 %
BMO.PR.S FixedReset -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 20.09
Evaluated at bid price : 20.09
Bid-YTW : 4.25 %
BMO.PR.M FixedReset -1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 3.43 %
MFC.PR.N FixedReset -1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.13
Bid-YTW : 5.84 %
TD.PF.E FixedReset -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 22.23
Evaluated at bid price : 22.91
Bid-YTW : 4.11 %
MFC.PR.K FixedReset -1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.76
Bid-YTW : 6.58 %
CM.PR.O FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.85
Evaluated at bid price : 19.85
Bid-YTW : 4.31 %
PWF.PR.K Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 22.09
Evaluated at bid price : 22.37
Bid-YTW : 5.57 %
BAM.PR.Z FixedReset -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 20.85
Evaluated at bid price : 20.85
Bid-YTW : 4.89 %
FTS.PR.K FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 4.05 %
TD.PF.C FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 4.27 %
MFC.PR.B Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.57
Bid-YTW : 6.84 %
NA.PR.S FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.79
Evaluated at bid price : 19.79
Bid-YTW : 4.42 %
BAM.PR.M Perpetual-Discount -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 5.80 %
BNS.PR.A FloatingReset 1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.67
Bid-YTW : 3.36 %
IFC.PR.A FixedReset 1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.55
Bid-YTW : 7.85 %
FTS.PR.J Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.63
Evaluated at bid price : 21.92
Bid-YTW : 5.42 %
FTS.PR.F Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 22.33
Evaluated at bid price : 22.60
Bid-YTW : 5.43 %
BNS.PR.Y FixedReset 1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.65
Bid-YTW : 5.20 %
BIP.PR.A FixedReset 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 5.35 %
SLF.PR.G FixedReset 1.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.25
Bid-YTW : 8.60 %
MFC.PR.F FixedReset 2.87 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.43
Bid-YTW : 8.74 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.A FixedReset 109,290 Nesbitt crossed 100,000 at 16.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 15.83
Evaluated at bid price : 15.83
Bid-YTW : 4.74 %
TRP.PR.C FixedReset 93,645 Nesbitt crossed blocks of 18,800 and 59,900, both at 14.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 13.63
Evaluated at bid price : 13.63
Bid-YTW : 4.59 %
SLF.PR.I FixedReset 86,530 TD crossed 18,500 at 22.39 and another 18,500 at 22.40, followed by two blocks of 18,600 each, both at 22.40.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 5.34 %
TRP.PR.F FloatingReset 75,000 RBC crossed 68,000 at 15.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 14.44
Evaluated at bid price : 14.44
Bid-YTW : 4.08 %
RY.PR.H FixedReset 57,874 Scotia crossed 40,000 at 19.87.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 19.81
Evaluated at bid price : 19.81
Bid-YTW : 4.23 %
BNS.PR.M Deemed-Retractible 57,160 TD crossed 50,000 at 25.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-07-27
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 4.25 %
There were 56 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.F FloatingReset Quote: 14.44 – 15.30
Spot Rate : 0.8600
Average : 0.5393

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 14.44
Evaluated at bid price : 14.44
Bid-YTW : 4.08 %

IAG.PR.G FixedReset Quote: 22.83 – 23.50
Spot Rate : 0.6700
Average : 0.4298

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.83
Bid-YTW : 5.19 %

PWF.PR.P FixedReset Quote: 14.54 – 15.18
Spot Rate : 0.6400
Average : 0.4217

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 14.54
Evaluated at bid price : 14.54
Bid-YTW : 4.41 %

MFC.PR.J FixedReset Quote: 22.05 – 22.65
Spot Rate : 0.6000
Average : 0.3945

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.05
Bid-YTW : 5.44 %

CU.PR.D Perpetual-Discount Quote: 22.22 – 22.73
Spot Rate : 0.5100
Average : 0.3289

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-18
Maturity Price : 21.86
Evaluated at bid price : 22.22
Bid-YTW : 5.52 %

GWO.PR.N FixedReset Quote: 13.65 – 14.23
Spot Rate : 0.5800
Average : 0.4034

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.65
Bid-YTW : 10.07 %

November 17, 2015

Wednesday, November 18th, 2015

Just the bare bones again today, I’m afraid!

It was a fine day for the Canadian preferred share market, with PerpetualDiscounts winning 48bp, FixedResets up 44bp and DeemedRetractibles gaining 42bp. The Performance Highlights table is dominated by winners, topped by low-spread insurance issues. Volume was slightly above 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 4.22 % 5.06 % 33,535 17.75 1 1.0625 % 1,838.5
FixedFloater 6.18 % 5.43 % 28,737 17.00 1 -0.6468 % 3,155.3
Floater 3.94 % 3.97 % 69,577 17.43 3 -1.3151 % 2,006.6
OpRet 4.87 % 3.89 % 33,956 0.77 1 0.0000 % 2,733.2
SplitShare 4.74 % 5.85 % 138,843 4.36 5 0.1988 % 3,204.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1988 % 2,500.3
Perpetual-Premium 5.76 % -5.56 % 73,938 0.08 6 0.5538 % 2,522.6
Perpetual-Discount 5.51 % 5.55 % 87,389 14.53 33 0.4781 % 2,600.3
FixedReset 4.80 % 4.41 % 222,953 15.54 76 0.4364 % 2,132.0
Deemed-Retractible 5.13 % 4.75 % 115,536 5.40 33 0.4163 % 2,592.7
FloatingReset 2.57 % 3.67 % 54,986 5.77 10 0.4687 % 2,199.6
Performance Highlights
Issue Index Change Notes
CU.PR.C FixedReset -2.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 20.12
Evaluated at bid price : 20.12
Bid-YTW : 4.22 %
VNR.PR.A FixedReset -2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 21.36
Evaluated at bid price : 21.67
Bid-YTW : 4.42 %
BAM.PR.K Floater -1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 11.95
Evaluated at bid price : 11.95
Bid-YTW : 3.99 %
BAM.PR.B Floater -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 12.06
Evaluated at bid price : 12.06
Bid-YTW : 3.96 %
BAM.PF.G FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 21.45
Evaluated at bid price : 21.72
Bid-YTW : 4.60 %
BIP.PR.A FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 5.43 %
NA.PR.S FixedReset -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.37 %
NA.PR.W FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 19.70
Evaluated at bid price : 19.70
Bid-YTW : 4.27 %
BAM.PR.N Perpetual-Discount 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 21.12
Evaluated at bid price : 21.12
Bid-YTW : 5.71 %
GWO.PR.I Deemed-Retractible 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.64
Bid-YTW : 6.59 %
BAM.PR.E Ratchet 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 25.00
Evaluated at bid price : 16.17
Bid-YTW : 5.06 %
GWO.PR.Q Deemed-Retractible 1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.69
Bid-YTW : 6.04 %
BAM.PR.X FixedReset 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 15.63
Evaluated at bid price : 15.63
Bid-YTW : 4.72 %
BNS.PR.B FloatingReset 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.78
Bid-YTW : 3.67 %
FTS.PR.J Perpetual-Discount 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 21.36
Evaluated at bid price : 21.65
Bid-YTW : 5.49 %
FTS.PR.K FixedReset 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 19.78
Evaluated at bid price : 19.78
Bid-YTW : 4.00 %
POW.PR.B Perpetual-Discount 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 23.61
Evaluated at bid price : 23.88
Bid-YTW : 5.66 %
GWO.PR.P Deemed-Retractible 1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 5.79 %
BAM.PR.Z FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 4.83 %
BAM.PR.R FixedReset 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 16.72
Evaluated at bid price : 16.72
Bid-YTW : 5.03 %
BMO.PR.R FloatingReset 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 3.52 %
PVS.PR.B SplitShare 1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 5.59 %
GWO.PR.G Deemed-Retractible 1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.85
Bid-YTW : 5.99 %
POW.PR.G Perpetual-Discount 1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 24.48
Evaluated at bid price : 24.94
Bid-YTW : 5.66 %
TRP.PR.F FloatingReset 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 14.81
Evaluated at bid price : 14.81
Bid-YTW : 3.97 %
GWO.PR.M Deemed-Retractible 1.38 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 5.05 %
FTS.PR.F Perpetual-Discount 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 22.10
Evaluated at bid price : 22.32
Bid-YTW : 5.50 %
POW.PR.D Perpetual-Discount 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 22.61
Evaluated at bid price : 22.86
Bid-YTW : 5.52 %
TRP.PR.E FixedReset 1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 4.49 %
FTS.PR.G FixedReset 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 19.08
Evaluated at bid price : 19.08
Bid-YTW : 4.19 %
MFC.PR.J FixedReset 1.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.60
Bid-YTW : 5.11 %
HSE.PR.A FixedReset 1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 14.72
Evaluated at bid price : 14.72
Bid-YTW : 4.70 %
TRP.PR.C FixedReset 1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 14.15
Evaluated at bid price : 14.15
Bid-YTW : 4.42 %
IAG.PR.G FixedReset 1.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.63
Bid-YTW : 4.72 %
SLF.PR.G FixedReset 1.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.03
Bid-YTW : 8.79 %
FTS.PR.H FixedReset 1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 14.23
Evaluated at bid price : 14.23
Bid-YTW : 4.26 %
TRP.PR.G FixedReset 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 20.87
Evaluated at bid price : 20.87
Bid-YTW : 4.66 %
HSE.PR.E FixedReset 2.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 22.26
Evaluated at bid price : 22.90
Bid-YTW : 4.95 %
MFC.PR.G FixedReset 2.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.26
Bid-YTW : 4.98 %
IFC.PR.C FixedReset 2.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.48
Bid-YTW : 6.39 %
SLF.PR.J FloatingReset 2.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.90
Bid-YTW : 9.09 %
BAM.PR.T FixedReset 2.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 18.29
Evaluated at bid price : 18.29
Bid-YTW : 4.66 %
IFC.PR.A FixedReset 3.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.35
Bid-YTW : 8.01 %
GWO.PR.N FixedReset 3.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.10
Bid-YTW : 9.63 %
MFC.PR.F FixedReset 3.45 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.00
Bid-YTW : 9.11 %
PWF.PR.P FixedReset 3.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 15.16
Evaluated at bid price : 15.16
Bid-YTW : 4.22 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PR.R FixedReset 199,850 Scotia crossed blocks of 155,000 and 22,400, both at 16.55.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 16.72
Evaluated at bid price : 16.72
Bid-YTW : 5.03 %
RY.PR.I FixedReset 79,701 RBC crossed blocks of 45,500 and 25,000, both at 24.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.40
Bid-YTW : 3.66 %
BMO.PR.T FixedReset 76,306 Nesbitt crossed 15,000 at 20.06 and 50,000 at 19.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 19.93
Evaluated at bid price : 19.93
Bid-YTW : 4.18 %
IFC.PR.A FixedReset 70,380 Desjardins crossed 60,000 at 17.00.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.35
Bid-YTW : 8.01 %
CM.PR.O FixedReset 60,325 RBC crossed 50,000 at 20.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 20.09
Evaluated at bid price : 20.09
Bid-YTW : 4.25 %
PWF.PR.P FixedReset 37,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 15.16
Evaluated at bid price : 15.16
Bid-YTW : 4.22 %
There were 37 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSE.PR.A FixedReset Quote: 14.72 – 15.29
Spot Rate : 0.5700
Average : 0.3310

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 14.72
Evaluated at bid price : 14.72
Bid-YTW : 4.70 %

TRP.PR.B FixedReset Quote: 13.22 – 13.69
Spot Rate : 0.4700
Average : 0.3168

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 13.22
Evaluated at bid price : 13.22
Bid-YTW : 4.22 %

BNS.PR.A FloatingReset Quote: 23.42 – 23.85
Spot Rate : 0.4300
Average : 0.2911

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.42
Bid-YTW : 3.54 %

VNR.PR.A FixedReset Quote: 21.67 – 22.30
Spot Rate : 0.6300
Average : 0.4994

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 21.36
Evaluated at bid price : 21.67
Bid-YTW : 4.42 %

BAM.PR.G FixedFloater Quote: 15.36 – 15.85
Spot Rate : 0.4900
Average : 0.3722

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-17
Maturity Price : 25.00
Evaluated at bid price : 15.36
Bid-YTW : 5.43 %

SLF.PR.H FixedReset Quote: 19.26 – 19.56
Spot Rate : 0.3000
Average : 0.1896

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.26
Bid-YTW : 6.66 %

New Issue: BEP Preferred Units FixedReset 5.50%+447M550

Wednesday, November 18th, 2015

Brookfield Renewable Energy Partners L.P. has announced:

that it has agreed to issue 5,000,000 Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 7 (the “Series 7 Preferred Units”) on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotiabank for distribution to the public. The Series 7 Preferred Units will be issued at a price of $25.00 per unit, for gross proceeds of $125,000,000.

Holders of the Series 7 Preferred Units will be entitled to receive a cumulative quarterly fixed distribution yielding 5.50% annually for the initial period ending January 31, 2021. Thereafter, the distribution rate will be reset every five years at a rate equal to the greater of (i) the 5-year Government of Canada bond yield plus 4.47%, and (ii) 5.50%. The Series 7 Preferred Units are redeemable on or after January 31, 2021.

Holders of the Series 7 Preferred Units will have the right, at their option, to reclassify their Series 7 Preferred Units into Cumulative Floating Rate Reset Class A Preferred Limited Partnership Units, Series 8 (“Series 8 Preferred Units”), subject to certain conditions, on January 31, 2021 and on January 31 every 5 years thereafter. Holders of Series 8 Preferred Units will be entitled to receive a cumulative quarterly floating distribution at a rate equal to the 90-day Canadian Treasury Bill yield plus 4.47%.

Brookfield Renewable has granted the underwriters an option, exercisable until 48 hours prior to closing, to purchase up to an additional 2,000,000 Series 7 Preferred Units which, if exercised, would increase the gross offering size to $175,000,000.

The Series 7 Preferred Units will be offered in all provinces and territories of Canada by way of a supplement to Brookfield Renewable’s existing Canadian short form base shelf prospectus. The Series 7 Preferred Units may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

Brookfield Renewable intends to use the net proceeds of the issue of Series 7 Preferred Units to repay indebtedness and for general corporate purposes. The offering of Series 7 Preferred Units is expected to close on or about November 25, 2015.

I am assuming that since these are referred to as “Preferred Units” that the distributions will be characterized as a mixture of dividends, ordinary income and return of capital, but I have not yet been able to confirm this; but this would be consistent with the new security they are offering in exchange for BRF.PR.E.

Update, 2015-11-19: The company announced on November 18:

that as a result of strong investor demand for its previously announced offering, the underwriters have exercised their option to increase the size of the offering to 7,000,000 Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 7 (the “Series 7 Preferred Units”). The Series 7 Preferred Units will be issued at a price of C$25.00 per share, for gross proceeds of C$175,000,000 pursuant to a prospectus supplement filed today. The Series 7 Preferred Units are being offered on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., CIBC, RBC Capital Markets and Scotiabank for distribution to the public.

November 16, 2015

Monday, November 16th, 2015

There’s are some interesting ventures assigning credit scores to marginal borrowers:

They have no bank account, no credit score, no financial identity. So a quarter of humanity hasn’t been able to borrow money. Until now.

Several dozen startups say they have developed ways to bring those 2 billion people into the international financial system, monitoring cell phone use and other personal habits to predict creditworthiness. For example, people who don’t let their phone batteries run low tend to do the same for their debt balance. Borrowers who get more calls than they make are better risks, and applicants who state their loan purpose in a few words are better borrowers than those who end up writing an essay.

A key to creditworthiness is personal daily routine. People who charge the same amount of airtime on the same day every week are better credit risks than those who purchase a large amount, then let their accounts sit empty, according to Van Der Tuin of First Access. When phones stay in the same place every day, that is often a sign that the owner is at work.

Moreover, in emerging market countries mobile phones are increasingly serving as ledgers of money movement. So monitoring phone records becomes a simple substitute for examining a bank account. At the same time, traditional credit risk assessments, according to the startups, have ignored the added importance of social capital. Beyond serving as de facto bank statements, mobile and online footprints indicate how well borrowers are treated by their community.

It was a positive day for the Canadian preferred share market, with PerpetualDiscounts up 8bp, FixedResets winning 36bp and DeemedRetractibles gaining 4bp. The Performance Highlights table, while still much longer than was the norm a year ago, is unusually short when judged by 2015 standards. Volume was below average.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_151116
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.31 to be $0.87 rich, while TRP.PR.G, resetting 2020-11-30 at +154, is $0.53 cheap at its bid price of 20.47.

impVol_MFC_151116
Click for Big

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 21.20 to be 0.64 rich, while MFC.PR.F resetting at +141bp on 2016-6-19, is bid at 14.50 to be 0.68 cheap.

impVol_BAM_151116
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.52 to be $1.59 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.00 and appears to be $1.01 rich.

impVol_FTS_151116
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 19.55, looks $0.82 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 13.96 and is $1.01 cheap.

pairs_FR_151116
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.61%, with no outliers. There are three junk outliers above 0.00% and one below -2.00%.

pairs_FF_151116
Click for Big

The light blue point is an estimate for the potential BCE.PR.R / BCE.PF.Q pair, the latter of which is not trading. Its price has been set to the average defined by the other BCE Ratchet Rate preferreds.

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 4.27 % 5.12 % 33,004 17.68 1 0.0000 % 1,819.2
FixedFloater 6.14 % 5.39 % 28,258 17.05 1 2.0462 % 3,175.8
Floater 3.88 % 3.92 % 69,743 17.55 3 -0.3549 % 2,033.4
OpRet 4.87 % 3.88 % 35,356 0.77 1 0.5383 % 2,733.2
SplitShare 4.75 % 5.85 % 140,232 4.36 5 -0.2533 % 3,198.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2533 % 2,495.4
Perpetual-Premium 5.79 % 0.76 % 72,285 0.08 6 0.4304 % 2,508.7
Perpetual-Discount 5.53 % 5.60 % 84,242 14.45 33 0.0783 % 2,588.0
FixedReset 4.82 % 4.32 % 221,875 15.44 76 0.3610 % 2,122.8
Deemed-Retractible 5.15 % 5.15 % 112,263 5.40 33 0.0395 % 2,582.0
FloatingReset 2.58 % 3.79 % 54,565 5.77 10 0.3836 % 2,189.4
Performance Highlights
Issue Index Change Notes
FTS.PR.J Perpetual-Discount -1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 21.40
Evaluated at bid price : 21.40
Bid-YTW : 5.57 %
FTS.PR.F Perpetual-Discount -1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 21.75
Evaluated at bid price : 22.00
Bid-YTW : 5.58 %
CU.PR.C FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 20.62
Evaluated at bid price : 20.62
Bid-YTW : 4.12 %
CM.PR.Q FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 22.00
Evaluated at bid price : 22.51
Bid-YTW : 4.10 %
PVS.PR.D SplitShare -1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 23.55
Bid-YTW : 5.89 %
BAM.PF.E FixedReset -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 20.22
Evaluated at bid price : 20.22
Bid-YTW : 4.66 %
BAM.PR.M Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 20.84
Evaluated at bid price : 20.84
Bid-YTW : 5.79 %
HSE.PR.C FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 5.00 %
GWO.PR.N FixedReset -1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.65
Bid-YTW : 10.06 %
ELF.PR.H Perpetual-Discount 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 24.02
Evaluated at bid price : 24.52
Bid-YTW : 5.65 %
MFC.PR.N FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.20
Bid-YTW : 5.79 %
MFC.PR.H FixedReset 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 4.73 %
VNR.PR.A FixedReset 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 21.68
Evaluated at bid price : 22.12
Bid-YTW : 4.32 %
SLF.PR.J FloatingReset 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.60
Bid-YTW : 9.37 %
PWF.PR.R Perpetual-Discount 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 24.19
Evaluated at bid price : 24.69
Bid-YTW : 5.60 %
MFC.PR.K FixedReset 1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.87
Bid-YTW : 6.50 %
SLF.PR.H FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.27
Bid-YTW : 6.65 %
IAG.PR.G FixedReset 1.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.19
Bid-YTW : 4.97 %
RY.PR.J FixedReset 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 21.93
Evaluated at bid price : 22.39
Bid-YTW : 4.07 %
TRP.PR.E FixedReset 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 19.31
Evaluated at bid price : 19.31
Bid-YTW : 4.56 %
BAM.PR.G FixedFloater 2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 25.00
Evaluated at bid price : 15.46
Bid-YTW : 5.39 %
TRP.PR.D FixedReset 2.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 18.73
Evaluated at bid price : 18.73
Bid-YTW : 4.64 %
NA.PR.W FixedReset 2.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 19.92
Evaluated at bid price : 19.92
Bid-YTW : 4.22 %
TRP.PR.B FixedReset 2.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 13.10
Evaluated at bid price : 13.10
Bid-YTW : 4.26 %
HSE.PR.A FixedReset 2.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 14.46
Evaluated at bid price : 14.46
Bid-YTW : 4.78 %
ELF.PR.G Perpetual-Discount 3.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 21.33
Evaluated at bid price : 21.33
Bid-YTW : 5.64 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.J FloatingReset 107,990 Nesbitt crossed 95,000 at 13.60.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.60
Bid-YTW : 9.37 %
RY.PR.P Perpetual-Discount 86,500 Haywood bought 65,000 from RBC at 24.75.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 24.34
Evaluated at bid price : 24.72
Bid-YTW : 5.37 %
BNS.PR.P FixedReset 50,500 RBC crossed 49,200 at 24.45.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.57
Bid-YTW : 3.49 %
TRP.PR.D FixedReset 30,394 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 18.73
Evaluated at bid price : 18.73
Bid-YTW : 4.64 %
TD.PF.F Perpetual-Discount 29,600 RBC crossed 25,000 at 23.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 23.36
Evaluated at bid price : 23.67
Bid-YTW : 5.20 %
BNS.PR.Z FixedReset 25,045 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.54
Bid-YTW : 5.90 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.E FixedReset Quote: 20.22 – 21.00
Spot Rate : 0.7800
Average : 0.4902

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 20.22
Evaluated at bid price : 20.22
Bid-YTW : 4.66 %

BAM.PR.Z FixedReset Quote: 20.85 – 21.58
Spot Rate : 0.7300
Average : 0.5360

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 20.85
Evaluated at bid price : 20.85
Bid-YTW : 4.89 %

HSE.PR.E FixedReset Quote: 22.45 – 22.80
Spot Rate : 0.3500
Average : 0.2401

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 21.98
Evaluated at bid price : 22.45
Bid-YTW : 5.06 %

FTS.PR.H FixedReset Quote: 13.96 – 14.50
Spot Rate : 0.5400
Average : 0.4328

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 13.96
Evaluated at bid price : 13.96
Bid-YTW : 4.34 %

TD.PF.E FixedReset Quote: 23.20 – 23.60
Spot Rate : 0.4000
Average : 0.2976

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 22.39
Evaluated at bid price : 23.20
Bid-YTW : 4.05 %

BAM.PR.E Ratchet Quote: 16.00 – 16.50
Spot Rate : 0.5000
Average : 0.4044

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-16
Maturity Price : 25.00
Evaluated at bid price : 16.00
Bid-YTW : 5.12 %

November PrefLetter Released!

Monday, November 16th, 2015

The November, 2015, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

The regular appendices reporting on DeemedRetractibles and FixedResets are included.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the November, 2015, issue, while the “Next Edition” will be the December, 2015, issue, scheduled to be prepared as of the close December 11 and eMailed to subscribers prior to market-opening on December 14.

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

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

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

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

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

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

Note: Assiduous Reader DG informs me:

In case you have any other Apple users: you need to install a free App from the apple store called “FileApp”. It comes with it’s own tutorial and allows you to download and save a PDF file.

However, Assiduous Reader Adrian informs me in the comments to the January 2015 release:

Some nitpicking for DG:
FileApp costs $1.19 in the Apple Store.

November 13, 2015

Friday, November 13th, 2015

Assiduous Reader IR brought to my attention recently a fascinating article titled Six Strange Things That Have Been Happening in Financial Markets:

Interesting things have certainly been happening in the underpinnings of global markets—things that either run counter to long-standing financial logic, or represent an unusual dislocation in the “normal” state of market affairs, or were once rare occurrences but have been happening with increasing frequency.

1. Negative swap spreads

2. Fractured repo rates

3. Corporate bond inventories below zero
corporateBondInventory
Click for Big

Analysts at Goldman Sachs made waves this week when they highlighted the fact that inventories of some corporate bonds held by big dealer-banks had gone negative for the first time since the Federal Reserve began collecting such data. That means big banks are now net short corporate bonds with a maturity greater than 12 months equivalent to $1.4 billion, bucking the longer-term trend of net positive positions.

The record-breaking event revived a flurry of concerns about so-called liquidity, or ease of trading, in the $8.1 trillion corporate bond market. Similar to the repo market, a confluence of new rules is said to have made it more difficult for banks to hold corporate bonds on their balance sheets. At the same time, years of low interest rates have encouraged investors to herd into corporate bonds and hold onto them tightly.

Synthetic credit is trading tighter than cash credit

CDSBasis
Click for Big


Above is the so-called basis between the CDX IG, an index that includes CDS tied to U.S. investment-grade companies, and the underlying cash bonds. The basis has been persistently wide and negative in recent years, as spreads on the CDX index trade at tighter levels than cash.

“In exchange for the substantial liquidity of derivative indices, investors are often giving up spread right now, as most indices trade at a negative basis versus the comparable cash market,” Barclays’ Bradley Rogoff wrote in research published today. “The negative basis right now is near the largest we have witnessed at a time when there was not a funding crisis.”

Investors may be ogling such synthetic tools not just because of their purported liquidity benefits but also because of funding benefits, a similar dynamic to the one currently pushing swap spreads into negative territory.

Market moves that aren’t supposed to happen keep happening

The number of assets registering large moves—four or more standard deviations away from their normal trading range—has been increasing. Such moves would normally be expected to happen once every 62 years.

While Martin blamed much of the confusion on unexpected decisions by central banks—such as the Swiss National Bank’s surprise decision to scrap its long-standing currency cap—there have been sharp market moves with seemingly little reasons behind them. Perhaps the best-known example is Oct. 15, 2014, when the yield on the 10-year U.S. Treasury briefly plunged 33 basis points—a seven standard-deviation move that should happen once every 1.6 billion years, based on a normal distribution of probabilities.

Volatility is itself more volatile

Negative swap spreads were discussed on November 5.

The CDS Basis was discussed in the post BIS Releases March 2009 Quarterly Review, where the wide spread was considered to suggest “that arbitrage activities that would usually tend to compress the price differential continued to be constrained by elevated capital and financing costs for leveraged investors.” I consider this to have the potential for severely adverse effects on the economy due to “debt decoupling”, discussed in the post Credit Default Swaps: Links to Primers, notably a paper by Hu and Black titled Debt, Equity, and Hybrid Decoupling: Governance and Systemic Risk Implications:

There are also several sources of qualitative evidence. One is the recent tendency for credit default swap contracts to require the protection buyer, if it is also a creditor, to act in the interests of other creditors. This suggests concern that the protection buyer might not otherwise do so. How this obligation can be enforced, however, without disclosure of either votes or hedges, is anyone’s guess. We have also heard from bankruptcy judges that they sometimes see odd behavior in their courtrooms, which empty crediting might explain. For example, one judge described a case in which a junior creditor complained that the firm’s value was too high, even though a lower value would hurt the class of debt the creditor ostensibly held.

Also hinted at yesterday was the latest twist in the Silver Bullion Trust / Sprott battle:

Sprott has amended the Offer by attempting to unilaterally expand the scope of the powers of attorney granted to it by those Unitholders that tender to the Offer. The amendments purport to give Sprott the authority to replace the independent Trustees of SBT, insert their own conflicted Trustees and force completion of their inadequate Offer, despite their continued failure to attract sufficient Unitholder support for doing so by legitimate means.

SBT believes that Sprott’s attempt to unilaterally amend the powers of attorney is invalid and that any actions that Sprott would purport to take pursuant to them would be invalid. SBT also believes that Sprott’s actions are contrary to the take-over bid and proxy solicitation rules and the public interest. SBT has commenced an application before the Ontario Securities Commission to contest the amendments and other aspects of the Offer and has sought an order from the Ontario Securities Commission cease trading the Offer.

SBT is of the view that the use of the powers of attorney by Sprott to replace its independent Trustees when the conditions to the Offer have not been met is not a purpose for which the powers of attorney were solicited, and a clear violation of law. Sprott’s plan to change the terms of the powers of attorney granted by certain SBT Unitholders – without consulting Unitholders or complying with securities laws – is nothing more than an illegitimate tactic to ignore the will of Unitholders and replace SBT’s independent Trustees with insiders of Sprott, all of whom are clearly and obviously conflicted. Further, Sprott had previously represented to Unitholders and the Ontario Superior Court of Justice that it would use the powers of attorney granted in connection with the Offer for the purpose of carrying out the mechanics required to complete the Offer, only if they achieved the minimum acceptance of 66⅔% of SBT Units.

This is great entertainment – but I’m glad I’m not the one paying the lawyers!

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts off 2bp, FixedResets losing 56bp and DeemedRetractibles down 5bp. BAM issues were notable in the bad part of the Performance Highlights table. Volume was average. What a week it has been – but at least we’re not alone.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_151113
Click for Big

There is a major increase in implied volatility today. It’s almost as if the issues with the lowest spreads have a ‘floor price’ – which is not to say that they don’t go down, but they seem to outperform on lousy days.

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 18.94 to be $0.68 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.24 cheap at its bid price of 13.90.

impVol_MFC_151113
Click for Big

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 20.98 to be 0.55 rich, while MFC.PR.F resetting at +141bp on 2016-6-19, is bid at 14.45 to be 0.69 cheap.

impVol_BAM_151113
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.41 to be $1.70 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.11 and appears to be $1.12 rich.

impVol_FTS_151113
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 19.70, looks $0.78 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 14.20 and is $0.93 cheap.

pairs_FR_151113
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.57%, with one outlier above 0.00%. There are two junk outliers above 0.00% and one below -2.00%.

pairs_FF_151113
Click for Big

The light blue point is an estimate for the potential BCE.PR.R / BCE.PF.Q pair, the latter of which is not trading. Its price has been set to the average defined by the other BCE Ratchet Rate preferreds.

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

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 4.27 % 5.12 % 31,167 17.69 1 0.0000 % 1,819.2
FixedFloater 6.27 % 5.51 % 28,644 16.91 1 -3.5646 % 3,112.2
Floater 3.87 % 3.89 % 69,597 17.62 3 0.1915 % 2,040.6
OpRet 4.84 % 4.54 % 33,557 0.77 1 0.0000 % 2,718.6
SplitShare 4.74 % 5.71 % 140,624 4.37 5 -0.2039 % 3,206.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2039 % 2,501.7
Perpetual-Premium 5.82 % 4.37 % 72,269 0.08 6 -0.0199 % 2,497.9
Perpetual-Discount 5.53 % 5.61 % 84,446 14.46 33 -0.0158 % 2,585.9
FixedReset 4.83 % 4.40 % 223,365 15.46 76 -0.5566 % 2,115.1
Deemed-Retractible 5.18 % 5.19 % 110,584 5.41 34 -0.0530 % 2,581.0
FloatingReset 2.59 % 3.86 % 53,963 5.78 10 -0.3009 % 2,181.0
Performance Highlights
Issue Index Change Notes
BAM.PR.T FixedReset -4.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 17.74
Evaluated at bid price : 17.74
Bid-YTW : 4.81 %
BAM.PR.X FixedReset -3.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 15.54
Evaluated at bid price : 15.54
Bid-YTW : 4.75 %
BAM.PR.G FixedFloater -3.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 25.00
Evaluated at bid price : 15.15
Bid-YTW : 5.51 %
ELF.PR.G Perpetual-Discount -3.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 20.57
Evaluated at bid price : 20.57
Bid-YTW : 5.84 %
BAM.PR.Z FixedReset -2.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 20.76
Evaluated at bid price : 20.76
Bid-YTW : 4.91 %
BIP.PR.A FixedReset -2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 5.31 %
TRP.PR.E FixedReset -2.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 18.94
Evaluated at bid price : 18.94
Bid-YTW : 4.65 %
MFC.PR.K FixedReset -2.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.59
Bid-YTW : 6.68 %
TRP.PR.D FixedReset -2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 18.30
Evaluated at bid price : 18.30
Bid-YTW : 4.75 %
SLF.PR.J FloatingReset -2.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.45
Bid-YTW : 9.50 %
HSE.PR.E FixedReset -2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 21.97
Evaluated at bid price : 22.45
Bid-YTW : 5.06 %
RY.PR.Z FixedReset -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 19.85
Evaluated at bid price : 19.85
Bid-YTW : 4.17 %
FTS.PR.K FixedReset -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 19.70
Evaluated at bid price : 19.70
Bid-YTW : 4.09 %
MFC.PR.F FixedReset -1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.45
Bid-YTW : 9.60 %
CU.PR.C FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 20.91
Evaluated at bid price : 20.91
Bid-YTW : 4.06 %
RY.PR.H FixedReset -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 19.87
Evaluated at bid price : 19.87
Bid-YTW : 4.21 %
MFC.PR.H FixedReset -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.89
Bid-YTW : 4.87 %
BNS.PR.D FloatingReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.50
Bid-YTW : 5.62 %
MFC.PR.I FixedReset -1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.12
Bid-YTW : 5.08 %
CM.PR.Q FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 22.18
Evaluated at bid price : 22.80
Bid-YTW : 4.04 %
MFC.PR.G FixedReset -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.82
Bid-YTW : 5.23 %
BAM.PF.B FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 20.32
Evaluated at bid price : 20.32
Bid-YTW : 4.61 %
NA.PR.W FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 4.32 %
FTS.PR.H FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 14.20
Evaluated at bid price : 14.20
Bid-YTW : 4.33 %
BAM.PF.F FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 21.32
Evaluated at bid price : 21.61
Bid-YTW : 4.61 %
RY.PR.M FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 21.52
Evaluated at bid price : 21.52
Bid-YTW : 4.16 %
TD.PF.C FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 19.65
Evaluated at bid price : 19.65
Bid-YTW : 4.24 %
RY.PR.N Perpetual-Discount -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 23.00
Evaluated at bid price : 23.40
Bid-YTW : 5.23 %
TD.PF.A FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 19.87
Evaluated at bid price : 19.87
Bid-YTW : 4.22 %
SLF.PR.H FixedReset 1.82 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.99
Bid-YTW : 6.84 %
FTS.PR.J Perpetual-Discount 4.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 21.75
Evaluated at bid price : 22.08
Bid-YTW : 5.47 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.B Deemed-Retractible 127,633 Nesbitt crossed 64,800 at 24.95. Desjardins crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 4.76 %
MFC.PR.I FixedReset 104,994 Desjardins crossed blocks of 43,300 and 25,000, both at 23.47.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.12
Bid-YTW : 5.08 %
NA.PR.S FixedReset 55,987 TD crossed 25,000 at 20.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 20.05
Evaluated at bid price : 20.05
Bid-YTW : 4.36 %
BMO.PR.S FixedReset 48,972 Scotia crossed 30,000 at 20.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 20.05
Evaluated at bid price : 20.05
Bid-YTW : 4.26 %
RY.PR.Z FixedReset 47,041 Scotia crossed 28,600 at 20.23.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 19.85
Evaluated at bid price : 19.85
Bid-YTW : 4.17 %
BAM.PF.H FixedReset 30,706 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.40 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.G Perpetual-Discount Quote: 20.57 – 21.47
Spot Rate : 0.9000
Average : 0.5444

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 20.57
Evaluated at bid price : 20.57
Bid-YTW : 5.84 %

MFC.PR.K FixedReset Quote: 19.59 – 20.13
Spot Rate : 0.5400
Average : 0.3679

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.59
Bid-YTW : 6.68 %

BAM.PR.T FixedReset Quote: 17.74 – 18.30
Spot Rate : 0.5600
Average : 0.3910

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 17.74
Evaluated at bid price : 17.74
Bid-YTW : 4.81 %

GWO.PR.S Deemed-Retractible Quote: 24.21 – 24.75
Spot Rate : 0.5400
Average : 0.3960

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.21
Bid-YTW : 5.83 %

TRP.PR.F FloatingReset Quote: 14.52 – 15.00
Spot Rate : 0.4800
Average : 0.3492

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 14.52
Evaluated at bid price : 14.52
Bid-YTW : 4.05 %

RY.PR.M FixedReset Quote: 21.52 – 21.90
Spot Rate : 0.3800
Average : 0.2650

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-13
Maturity Price : 21.52
Evaluated at bid price : 21.52
Bid-YTW : 4.16 %

November 12, 2015

Friday, November 13th, 2015

There were a few things I wanted to discuss in today’s post, notably Six Strange Things That Have Been Happening in Financial Markets and a new twist in the Sprott Silver Battle, but frankly – it’s late and I’m tired. So today, folks, all you’re getting is the barest of bare bones.

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 4.27 % 5.12 % 31,504 17.68 1 0.0000 % 1,819.2
FixedFloater 6.05 % 5.29 % 28,536 17.17 1 0.1913 % 3,227.2
Floater 3.88 % 3.92 % 68,686 17.55 3 2.1229 % 2,036.7
OpRet 4.84 % 4.52 % 32,765 0.78 1 0.0395 % 2,718.6
SplitShare 4.73 % 5.60 % 145,738 4.37 5 0.1121 % 3,212.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1121 % 2,506.8
Perpetual-Premium 5.82 % 3.40 % 88,415 0.08 6 -0.0728 % 2,498.4
Perpetual-Discount 5.53 % 5.64 % 83,047 14.45 33 -0.2943 % 2,586.3
FixedReset 4.81 % 4.51 % 225,507 15.51 76 -1.0322 % 2,127.0
Deemed-Retractible 5.18 % 5.20 % 108,826 5.41 34 -0.1084 % 2,582.3
FloatingReset 2.57 % 3.89 % 54,555 5.78 10 -0.1782 % 2,187.6
Performance Highlights
Issue Index Change Notes
TRP.PR.G FixedReset -5.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.41
Evaluated at bid price : 20.41
Bid-YTW : 4.85 %
FTS.PR.J Perpetual-Discount -4.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 21.03
Evaluated at bid price : 21.03
Bid-YTW : 5.77 %
HSE.PR.A FixedReset -3.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 14.15
Evaluated at bid price : 14.15
Bid-YTW : 5.06 %
TRP.PR.D FixedReset -3.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 18.69
Evaluated at bid price : 18.69
Bid-YTW : 4.76 %
TRP.PR.E FixedReset -3.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.38
Evaluated at bid price : 19.38
Bid-YTW : 4.64 %
NA.PR.S FixedReset -3.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.50 %
HSE.PR.C FixedReset -3.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 21.40
Evaluated at bid price : 21.40
Bid-YTW : 5.04 %
MFC.PR.F FixedReset -2.97 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.70
Bid-YTW : 9.50 %
TRP.PR.A FixedReset -2.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 16.01
Evaluated at bid price : 16.01
Bid-YTW : 4.80 %
MFC.PR.L FixedReset -2.81 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.07
Bid-YTW : 6.50 %
MFC.PR.K FixedReset -2.67 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.03
Bid-YTW : 6.45 %
IFC.PR.A FixedReset -2.65 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.55
Bid-YTW : 8.74 %
TRP.PR.H FloatingReset -2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 11.53
Evaluated at bid price : 11.53
Bid-YTW : 3.68 %
SLF.PR.H FixedReset -2.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.65
Bid-YTW : 7.19 %
FTS.PR.H FixedReset -2.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 14.36
Evaluated at bid price : 14.36
Bid-YTW : 4.41 %
NA.PR.W FixedReset -2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.67
Evaluated at bid price : 19.67
Bid-YTW : 4.38 %
TD.PF.D FixedReset -2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 22.00
Evaluated at bid price : 22.51
Bid-YTW : 4.18 %
BAM.PF.E FixedReset -2.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.56
Evaluated at bid price : 20.56
Bid-YTW : 4.67 %
MFC.PR.N FixedReset -1.87 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.95
Bid-YTW : 6.00 %
BAM.PR.Z FixedReset -1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 21.36
Evaluated at bid price : 21.36
Bid-YTW : 4.87 %
SLF.PR.G FixedReset -1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.00
Bid-YTW : 8.85 %
TRP.PR.F FloatingReset -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 4.00 %
CM.PR.P FixedReset -1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.59
Evaluated at bid price : 19.59
Bid-YTW : 4.36 %
BIP.PR.A FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 21.73
Evaluated at bid price : 22.11
Bid-YTW : 5.22 %
MFC.PR.J FixedReset -1.51 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.21
Bid-YTW : 5.41 %
BMO.PR.W FixedReset -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.64
Evaluated at bid price : 19.64
Bid-YTW : 4.31 %
MFC.PR.B Deemed-Retractible -1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.52
Bid-YTW : 6.85 %
MFC.PR.H FixedReset -1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 4.79 %
TD.PF.B FixedReset -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.07
Evaluated at bid price : 20.07
Bid-YTW : 4.27 %
TD.PR.Y FixedReset -1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.81
Bid-YTW : 4.05 %
TD.PR.Z FloatingReset -1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.45
Bid-YTW : 3.89 %
BMO.PR.T FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.84
Evaluated at bid price : 19.84
Bid-YTW : 4.30 %
TD.PF.C FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.86
Evaluated at bid price : 19.86
Bid-YTW : 4.30 %
MFC.PR.G FixedReset -1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.09
Bid-YTW : 5.16 %
PWF.PR.T FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 22.02
Evaluated at bid price : 22.39
Bid-YTW : 3.95 %
BAM.PF.H FixedReset -1.34 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.40 %
RY.PR.Z FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.24
Evaluated at bid price : 20.24
Bid-YTW : 4.20 %
TRP.PR.C FixedReset -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 13.85
Evaluated at bid price : 13.85
Bid-YTW : 4.69 %
IFC.PR.C FixedReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.12
Bid-YTW : 6.73 %
RY.PR.H FixedReset -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.13
Evaluated at bid price : 20.13
Bid-YTW : 4.26 %
BAM.PF.G FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 21.65
Evaluated at bid price : 22.00
Bid-YTW : 4.62 %
CU.PR.H Perpetual-Discount -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 23.48
Evaluated at bid price : 23.80
Bid-YTW : 5.52 %
BNS.PR.P FixedReset -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.27
Bid-YTW : 3.76 %
W.PR.J Perpetual-Discount -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 24.07
Evaluated at bid price : 24.33
Bid-YTW : 5.81 %
TD.PF.A FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.08
Evaluated at bid price : 20.08
Bid-YTW : 4.27 %
GWO.PR.R Deemed-Retractible -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.07
Bid-YTW : 6.64 %
RY.PR.J FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 21.76
Evaluated at bid price : 22.15
Bid-YTW : 4.20 %
BAM.PR.C Floater 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 12.05
Evaluated at bid price : 12.05
Bid-YTW : 3.96 %
BAM.PR.T FixedReset 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.73 %
TD.PR.T FloatingReset 1.78 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 3.46 %
BAM.PR.X FixedReset 2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 16.18
Evaluated at bid price : 16.18
Bid-YTW : 4.70 %
BAM.PR.K Floater 2.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 12.16
Evaluated at bid price : 12.16
Bid-YTW : 3.92 %
BAM.PR.B Floater 2.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 12.35
Evaluated at bid price : 12.35
Bid-YTW : 3.86 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PF.H FixedReset 82,443 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.40 %
CU.PR.I FixedReset 70,396 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 3.90 %
RY.PR.H FixedReset 65,246 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.13
Evaluated at bid price : 20.13
Bid-YTW : 4.26 %
TD.PF.B FixedReset 52,666 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 20.07
Evaluated at bid price : 20.07
Bid-YTW : 4.27 %
TD.PF.C FixedReset 33,606 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.86
Evaluated at bid price : 19.86
Bid-YTW : 4.30 %
BMO.PR.W FixedReset 33,404 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 19.64
Evaluated at bid price : 19.64
Bid-YTW : 4.31 %
There were 45 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.J Perpetual-Discount Quote: 21.03 – 22.23
Spot Rate : 1.2000
Average : 0.7292

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 21.03
Evaluated at bid price : 21.03
Bid-YTW : 5.77 %

ELF.PR.H Perpetual-Discount Quote: 24.25 – 25.00
Spot Rate : 0.7500
Average : 0.5031

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 23.77
Evaluated at bid price : 24.25
Bid-YTW : 5.71 %

TRP.PR.A FixedReset Quote: 16.01 – 16.70
Spot Rate : 0.6900
Average : 0.5199

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 16.01
Evaluated at bid price : 16.01
Bid-YTW : 4.80 %

MFC.PR.B Deemed-Retractible Quote: 21.52 – 21.99
Spot Rate : 0.4700
Average : 0.3328

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.52
Bid-YTW : 6.85 %

RY.PR.N Perpetual-Discount Quote: 23.65 – 24.00
Spot Rate : 0.3500
Average : 0.2182

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 23.35
Evaluated at bid price : 23.65
Bid-YTW : 5.18 %

BAM.PR.R FixedReset Quote: 16.44 – 16.92
Spot Rate : 0.4800
Average : 0.3534

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-11-12
Maturity Price : 16.44
Evaluated at bid price : 16.44
Bid-YTW : 5.26 %

BCE.PR.R To Reset To 4.13%: Convert to BCE.PF.Q or Hold?

Friday, November 13th, 2015

BCE Inc. has announced:

BCE Inc. will, on December 1, 2015, continue to have Cumulative Redeemable First Preferred Shares, Series R (“Series R Preferred Shares”) outstanding if, following the end of the conversion period on November 17, 2015, BCE Inc. determines that at least one million Series R Preferred Shares would remain outstanding. In such a case, as of December 1, 2015, the Series R Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on a fixed rate equal to the product of: (a) the average of the yields to maturity compounded semiannually, determined on November 10, 2015 by two investment dealers selected by BCE Inc., that would be carried by non-callable Government of Canada bonds with a 5-year maturity (the “Government of Canada Yield”), multiplied by (b) a percentage rate determined by BCE Inc. (the “Selected Percentage Rate”) for such period. The “Selected Percentage Rate” determined by BCE Inc. for such period is 390%. The “Government of Canada Yield” is 1.059%. Accordingly, the annual dividend rate applicable to the Series R Preferred Shares for the period of five years beginning on December 1, 2015 will be 4.130%.

Five years ago the rate was reset to 4.49% and there was no conversion into the RatchetRate.

According to the conversion notice issued by BCE (emphasis added):

This letter and the attached Notice of Conversion Privilege have been sent to the holders of BCE Inc. Cumulative Redeemable First Preferred Shares, Series R (the “Series R Preferred Shares”).

Beginning on October 16, 2015 and ending on November 17, 2015, holders of Series R Preferred Shares will have the right to choose one of the following options with regards to their shares:
1. To retain any or all of their Series R Preferred Shares and continue to receive a fixed quarterly dividend; or
2. To convert, on a one-for-one basis, any or all of their Series R Preferred Shares into BCE Inc. Cumulative Redeemable First Preferred Shares, Series Q (the “Series Q Preferred Shares”) and receive a floating monthly dividend.

Effective December 1, 2015, the fixed dividend rate for the Series R Preferred Shares will be set for a five-year period as explained in more detail in paragraph 5 of the attached Notice of Conversion Privilege. Should you wish to continue receiving a fixed quarterly dividend for the five-year period beginning December 1, 2015, you do not need to take any action with respect to this notice. However, should you wish to receive a floating monthly dividend, you must elect to convert your Series R Preferred Shares into Series Q Preferred Shares as explained in more detail in the attached Notice of Conversion Privilege.

In order to convert your shares, you must exercise your right of conversion during the conversion period, which runs from October 16, 2015 to November 17, 2015, inclusively. We would like to draw your attention to the fact that should Series Q Preferred Shares be issued following the conversion on December 1, 2015 of Series R Preferred Shares, the Series Q Preferred Shares so issued will begin trading under the symbol BCE.PF.Q. This is not to be confused with BCE Inc.’s Cumulative Redeemable First Preferred Shares, Series AQ which currently trade under the symbol BCE.PR.Q. Should any Series R Preferred Shares remain outstanding after December 1, 2015, they will continue to trade under the symbol BCE.PR.R.

Holders of both the Series R Preferred Shares and the Series Q Preferred Shares will have the opportunity to convert their shares again on December 1, 2020, and every five years thereafter as long as the shares remain outstanding.

Should you require advice as to whether to exercise your conversion privilege, please contact your investment advisor.

If you cannot locate your share certificate or have any questions about the steps to be followed, please contact CST Trust Company at 1-800-561-0934, the transfer agent and registrar for BCE Inc.’s preferred shares.

Please see the attached Notice of Conversion Privilege for further details.

So, there are two things to note very carefully: first, the deadline for notifying the company of an intent to convert is November 17, Tuesday, and not only that, but brokers will generally have earlier internal deadlines so you’ll have to act quickly if you want to convert! Second, the symbol will be BCE.PF.Q – rather confusing, really, but the company made a mistake when converting the BAF.PR.E issue into a BCE issue in September 2014 and it’s too late to fix it.

The conversion notice itself explains the mechanics of how RatchetRate preferreds work, but includes the following important point:

The Designated Percentage for the month of December 2015 will be 80% so that the annual floating dividend rate for the month of December 2015 will be equal to 80% of Prime.

All other RatchetRate preferreds are paying 100% of prime (since they’ve been priced so far below par for so long), and at the maximum rate of change (which is expected to be effective), it will be five months before the new issue’s dividend finally adjusts. This means that the price of 15.60, which is the logical expected trading price for the new issue, will probably not actually be attained until late Spring – until then, a price lower than 15.60 for the RatchetRate should be expected.

If we look at the implied break-even prime rates for the various FixedFloater / Ratchet strong pairs while assuming that the new RatchetRate will, if issued, eventually trade at 15.60 (the approximate level where other RatchetRates are trading), we can draw the following relationships:

pairs_FF_151112
Click for Big

Clearly, the implied rate of 2.99% for this pair is lower than the other pairs and is more likely to increase than decrease. It is unreasonable to assume that the price of the RatchetRate will change, because there are lots of these trading from the same issuer at about the level assigned, of 15.60. Therefore, it is more reasonable to assume a decrease in the price of BCE.PR.R, from its current bid of 16.70 to a target bid of 16.07, which will result in an implied break-even prime rate of 3.64%, which is the average of the other pairs. It will be noted, however, that this is still a higher bid than is expected for the Ratchet Rate! Therefore, I recommend retaining BCE.PR.R for those who insist on holding one element of the pair.

If you disagree with me and want to convert, remember you’ve got to act fast! The company deadline for receipt of notifications is November 17, and brokers’ internal deadlines will be earlier.