Archive for January, 2018

January 31, 2018

Wednesday, January 31st, 2018

PerpetualDiscounts now yield 5.27%, equivalent to 6.85% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.85%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 300bp, a slight (and perhaps spurious) widening from the 295bp reported January 31.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 1.4970 % 2,900.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.4970 % 5,322.0
Floater 3.43 % 3.60 % 48,538 18.27 4 1.4970 % 3,067.1
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0389 % 3,148.4
SplitShare 4.66 % 4.36 % 68,022 4.14 5 -0.0389 % 3,759.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0389 % 2,933.6
Perpetual-Premium 5.36 % -1.97 % 65,098 0.09 18 0.0573 % 2,871.4
Perpetual-Discount 5.28 % 5.27 % 70,590 15.03 16 0.0561 % 3,010.8
FixedReset 4.20 % 4.47 % 151,082 3.82 101 0.0674 % 2,542.5
Deemed-Retractible 5.06 % 5.44 % 84,097 5.80 28 -0.0798 % 2,955.9
FloatingReset 3.03 % 2.91 % 41,188 3.76 10 0.1339 % 2,778.5
Performance Highlights
Issue Index Change Notes
MFC.PR.F FixedReset -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.97
Bid-YTW : 7.35 %
BIP.PR.E FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 23.10
Evaluated at bid price : 24.86
Bid-YTW : 5.02 %
BAM.PR.T FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 21.54
Evaluated at bid price : 21.82
Bid-YTW : 4.82 %
GWO.PR.N FixedReset 1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.90
Bid-YTW : 6.59 %
PWF.PR.A Floater 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 19.87
Evaluated at bid price : 19.87
Bid-YTW : 3.03 %
BAM.PF.E FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 23.21
Evaluated at bid price : 24.18
Bid-YTW : 4.75 %
BAM.PR.R FixedReset 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 4.90 %
POW.PR.D Perpetual-Discount 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 23.86
Evaluated at bid price : 24.11
Bid-YTW : 5.22 %
BAM.PR.C Floater 1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 16.86
Evaluated at bid price : 16.86
Bid-YTW : 3.61 %
BAM.PR.K Floater 2.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 16.89
Evaluated at bid price : 16.89
Bid-YTW : 3.60 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.P FixedReset 251,984 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 3.35 %
CM.PR.S FixedReset 192,908 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 23.12
Evaluated at bid price : 24.87
Bid-YTW : 4.47 %
NA.PR.E FixedReset 168,525 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 23.07
Evaluated at bid price : 24.80
Bid-YTW : 4.60 %
BNS.PR.Q FixedReset 104,200 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.98
Bid-YTW : 3.81 %
TD.PF.I FixedReset 79,735 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.41
Bid-YTW : 4.14 %
BMO.PR.B FixedReset 77,722 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.17
Bid-YTW : 3.54 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
EIT.PR.A SplitShare Quote: 25.60 – 26.55
Spot Rate : 0.9500
Average : 0.5855

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 4.49 %

PWF.PR.R Perpetual-Premium Quote: 25.60 – 25.99
Spot Rate : 0.3900
Average : 0.2528

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-04-30
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : 4.82 %

CCS.PR.C Deemed-Retractible Quote: 23.80 – 24.50
Spot Rate : 0.7000
Average : 0.5814

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.80
Bid-YTW : 5.96 %

MFC.PR.F FixedReset Quote: 18.97 – 19.37
Spot Rate : 0.4000
Average : 0.2918

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.97
Bid-YTW : 7.35 %

RY.PR.L FixedReset Quote: 25.20 – 25.49
Spot Rate : 0.2900
Average : 0.1849

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : 3.25 %

PWF.PR.F Perpetual-Discount Quote: 24.51 – 24.79
Spot Rate : 0.2800
Average : 0.1790

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 24.22
Evaluated at bid price : 24.51
Bid-YTW : 5.38 %

AX.PR.I Settles Firm on Decent Volume

Wednesday, January 31st, 2018

Artis Real Estate Investment Trust has announced:

that it closed its previously announced public offering, through a syndicate of underwriters led by TD Securities Inc., RBC Capital Markets and Scotiabank (collectively the “Underwriters”), on a bought deal basis, of 5,000,000 cumulative minimum rate reset preferred trust units, Series I (“Series I Units”) at a price of $25.00 per Series I Unit for gross proceeds of $125,000,000 (the “Financing”).

DBRS Limited has assigned a rating of Pfd-3 (low) to the Series I Units.

Artis intends to use the net proceeds from the Financing to redeem its existing U.S. dollar denominated cumulative redeemable preferred trust units, Series C and for general trust purposes.

AX.PR.I is a FixedReset, 6.00%+393M600, ROC issue announced 2018-01-22. It will be tracked by HIMIPref™ but will be relegated to the Scraps subindex on the basis of its Pfd-3(low) rating from DBRS.

The issue traded 419,647 shares today in a range of 24.90-99 before closing at 24.95-97. Vital statistics are:

AX.PR.I FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-31
Maturity Price : 23.13
Evaluated at bid price : 24.95
Bid-YTW : 5.98 %

Investors should note that according to the prospectus (see SEDAR and search for Artis Real Estate Investment Trust Jan 24 2018 15:21:01 ET Prospectus (non pricing) supplement – English PDF 606 K; I am not permitted to link to this public document on its public website directly, because the Canadian Securities Administrators don’t want you to bother your pretty little heads with things like “prospectuses” and the like. Just do what the nice man at the bank tells you is best. If he wasn’t wise and benevolent, he wouldn’t be working for a bank, would he now?) [emphasis added]:

The holders of Series I Units will have the right, at their option, to reclassify their Series I Units as Preferred Units, Series J (“Series J Units”) of Artis, subject to certain conditions, on April 30, 2023 and on April 30 every five years thereafter.

The CRA (as hereinafter defined) has expressed the preliminary view that the reclassification of the Series I Units and Series J Units would likely result in a taxable disposition at that time.

The tax consequences of reclassification are not necessarily a good or bad thing, although note that the fact that such reclassification is an option suggests the issue will be trading below par. It will depend on your Adjusted Cost Base and personal tax circumstances.

Thanks again to Assiduous Reader JB who originally brought this issue to my attention.

The new issue looks quite expensive to me, according to Implied Volatility Analysis:

impvol_ax_180131
Click for Big

This perceived richness has a different source than the other issues discussed here recently, such as the BEP.PR.M issue, the CM.PR.S issue and the NA.PR.E, since the calculated level of Implied Volatility, 9%, is actually quite reasonable.

In this case, the richness is due to the extraordinarily high value that retail – fighting the last war, as always – has placed on the minimum reset guarantee. If, like me, you consider the guarantee to have little or no value, you will expect the new issue to be trading near the price of AX.PR.A, which has an Issue Reset Spread of 406bp (and a current coupon of 5.662%). However, this issue closed today at 23.50 bid, indicating that retail considers the minimum rate guarantee to be worth somewhere around $1.50. Wow! That’s many multiples of the value of the call option in this analysis!

TRI.PR.B on Credit Watch – Negative by S&P

Wednesday, January 31st, 2018

Standard & Poor’s has announced:

  • •Toronto-based Thomson Reuters announced that it has signed a binding agreement to sell a 55% majority stake in its Financial & Risk (F&R) business, which accounts for more than half of its consolidated revenue and EBITDA, to Blackstone Group for about $17 billion.
  • •The company will use most of the net proceeds to fund stock repurchases totaling $9 billion to $11 billion and repay $3 billion in debt.
  • •We are placing our ratings on Thomson Reuters, including the ‘BBB+’ corporate credit rating, on CreditWatch negative.
  • •The CreditWatch placement reflects the possible loss of the diversification benefits we believe support Thomson Reuters’ creditworthiness and the ‘BBB+’ rating. At this stage, it isn’t clear whether the debt repayment and the more focused, smaller and stable remaining business will fully offset the sale.


We aim to resolve the negative CreditWatch placement within 90 days after we review the transaction and speak with Thomson Reuters’ management. We will reassess our rating and our view on Thomson Reuters’ business strategy, operating costs, and financial position and policy. We will also examine whether the benefits of a smaller, and more stable and focused company will offset the loss of the diversification benefits we previously considered supportive of Thomson Reuters’ creditworthiness.

If we believe the sale does not have a material impact on our view of the business risk and expect its pro forma adjusted leverage will remain comfortably below 3x over the next two to three years, we would likely affirm the ratings. Alternatively, if our analysis indicates a deterioration in the company’s creditworthiness or if we expect it will sustain leverage above 3x, we could lower the rating by up to two notches.

S&P currently rates the preferreds at P-2(low), in contrast with the recently confirmed DBRS rating of Pfd-3(high) assigned via downgrade in 2013.

TRI.PR.B is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

January 30, 2018

Tuesday, January 30th, 2018
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -1.1385 % 2,857.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.1385 % 5,243.5
Floater 3.48 % 3.62 % 46,941 18.24 4 -1.1385 % 3,021.8
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0311 % 3,149.7
SplitShare 4.66 % 4.25 % 68,580 4.14 5 -0.0311 % 3,761.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0311 % 2,934.8
Perpetual-Premium 5.36 % -3.10 % 65,906 0.09 18 0.0743 % 2,869.7
Perpetual-Discount 5.28 % 5.29 % 69,033 14.97 16 0.0134 % 3,009.1
FixedReset 4.20 % 4.45 % 151,744 3.81 101 -0.0941 % 2,540.8
Deemed-Retractible 5.05 % 5.44 % 83,604 5.81 28 -0.0679 % 2,958.3
FloatingReset 3.03 % 2.88 % 41,026 0.97 10 -0.0519 % 2,774.8
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -2.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 16.42
Evaluated at bid price : 16.42
Bid-YTW : 3.71 %
POW.PR.D Perpetual-Discount -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 23.49
Evaluated at bid price : 23.76
Bid-YTW : 5.29 %
BAM.PR.R FixedReset -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 20.95
Evaluated at bid price : 20.95
Bid-YTW : 4.97 %
BAM.PR.C Floater -1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 16.60
Evaluated at bid price : 16.60
Bid-YTW : 3.67 %
CCS.PR.C Deemed-Retractible -1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.87
Bid-YTW : 5.91 %
MFC.PR.C Deemed-Retractible -1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.95
Bid-YTW : 6.86 %
BAM.PR.T FixedReset -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 21.30
Evaluated at bid price : 21.59
Bid-YTW : 4.87 %
BAM.PF.E FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 23.05
Evaluated at bid price : 23.87
Bid-YTW : 4.82 %
TRP.PR.J FixedReset -1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.42
Bid-YTW : 3.98 %
TRP.PR.B FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 4.74 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.Q FixedReset 201,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-10-25
Maturity Price : 25.00
Evaluated at bid price : 24.98
Bid-YTW : 3.80 %
IFC.PR.E Deemed-Retractible 188,000 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.76
Bid-YTW : 5.48 %
MFC.PR.R FixedReset 163,100 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 3.81 %
CM.PR.S FixedReset 136,756 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 23.12
Evaluated at bid price : 24.88
Bid-YTW : 4.47 %
RY.PR.Q FixedReset 133,000 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 26.52
Bid-YTW : 3.45 %
CM.PR.O FixedReset 111,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 23.59
Evaluated at bid price : 24.00
Bid-YTW : 4.53 %
TD.PF.D FixedReset 104,751 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 4.13 %
BNS.PR.E FixedReset 103,589 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.61
Bid-YTW : 3.42 %
There were 20 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
POW.PR.D Perpetual-Discount Quote: 23.76 – 24.38
Spot Rate : 0.6200
Average : 0.3688

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 23.49
Evaluated at bid price : 23.76
Bid-YTW : 5.29 %

CCS.PR.C Deemed-Retractible Quote: 23.87 – 24.53
Spot Rate : 0.6600
Average : 0.4514

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.87
Bid-YTW : 5.91 %

BAM.PR.K Floater Quote: 16.42 – 16.90
Spot Rate : 0.4800
Average : 0.3062

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 16.42
Evaluated at bid price : 16.42
Bid-YTW : 3.71 %

HSE.PR.G FixedReset Quote: 25.17 – 25.68
Spot Rate : 0.5100
Average : 0.3444

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.17
Bid-YTW : 4.49 %

BAM.PR.R FixedReset Quote: 20.95 – 21.41
Spot Rate : 0.4600
Average : 0.2987

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 20.95
Evaluated at bid price : 20.95
Bid-YTW : 4.97 %

BAM.PF.E FixedReset Quote: 23.87 – 24.33
Spot Rate : 0.4600
Average : 0.3026

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-30
Maturity Price : 23.05
Evaluated at bid price : 23.87
Bid-YTW : 4.82 %

January 29, 2018

Monday, January 29th, 2018

Tim Shufelt of the Globe penned a great piece on the stability risks posed by ETFs that included some great quotes from “Mark Kamstra, a professor of finance at York University’s Schulich School of Business, who specializes in the study of financial bubbles.”:

Mass redemptions from active funds could quickly reverse, however, if stock pickers start to reliably beat the market. “People chase returns, so if they see active investors doing great, they’ll plow back into them,” Mr. Kamstra said. Which is why it’s odd to hear active managers complain about ETFs skewing valuations, he said. If that’s actually happening, who better than a skilled stock picker to take advantage of those mispricings. “If I were an active investor, I’d be loving that stuff. It makes for opportunities,” Mr. Kamstra said.

Yep. CPD and ZPR are my best friends. However, I was disappointed that the problem of differential liquidity was not discussed in the article – I quoted the following on August 22, 2014:

The WSJ points out:
While it’s important to look at how ETF shares are trading, the fund’s underlying holdings are really the heart of the liquidity issue, experts say.

One reason: Big investors known as “authorized participants” can swap a basket of the fund’s underlying holdings for ETF shares—or vice versa. This process helps arbitrage away significant gaps between the ETF’s share price and its NAV, the value of its underlying holdings. But when the underlying holdings are costly to trade and tough to obtain, authorized participants are less willing to round up that basket of securities. That means big gaps can develop between an ETF’s share price and its NAV.

One place to watch out for these premiums and discounts is in bond ETFs, especially those focused on areas like corporate investment-grade and high-yield, or “junk,” bonds. The iShares iBoxx $ High Yield Corporate Bond Fund closed within 0.5% of NAV on only four days in the fourth quarter, iShares says, and traded at a premium as large as 2.1% in that period.

When underlying holdings are traded less frequently, or not at all, an ETF’s returns also may diverge from the benchmark it is designed to track. That became an issue for some bond ETFs recently as the Federal Reserve bought up large quantities of agency bonds and mortgage-backed securities, essentially removing them from the market. Vanguard Group recently changed some of its bond index funds and ETFs to benchmarks that exclude these securities purchased by the Fed.

The biggest test of bond-ETF liquidity may be yet to come. So far investors have poured money into these products, and many bond ETFs are trading at significant premiums to NAV. But if investors reverse course and stampede out, the trading could get ugly, experts say. Given the relative illiquidity of many of the underlying bonds, the ETFs could start trading at significant discounts to NAV.

“When everybody tries to get out, it’s going to be a debacle,” says Scott Freeze, president of Street One Financial.

Don’t get me wrong – I think ETFs serve a great purpose and particularly recommend them for retail bond investors. But when you have a liquidity inversion – the ETF being more liquid than all (or even just some) of the underlying assets put together – you face huge problems in that ETF cash flows can overwhelm the cash market, which will lead to galloping, self-reinforcing price trends.

Does anybody remember the financial crisis? A big part of the problem was the AAA tranches of sub-prime-mortgage-backed securities. There wasn’t really anything much wrong with the AAA tranches – the junk and mezzanine debt got whacked, but the all that happened to (most!) AAA tranches was a downgrade or two (which is why the politicians like to talk about downgrades when criticizing the banks, not actual defaults). But the downgrades caused selling pressure … and nobody wanted to buy … and the world fell apart. And the same think can happen again if you have billion-dollar cash-flows in a million-dollar market.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.2139 % 2,890.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.2139 % 5,303.8
Floater 3.44 % 3.59 % 46,384 18.31 4 0.2139 % 3,056.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2716 % 3,150.7
SplitShare 4.66 % 4.28 % 69,104 4.15 5 -0.2716 % 3,762.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2716 % 2,935.7
Perpetual-Premium 5.37 % -0.89 % 66,851 0.09 18 -0.0044 % 2,867.6
Perpetual-Discount 5.28 % 5.30 % 69,503 14.97 16 0.1417 % 3,008.7
FixedReset 4.19 % 4.47 % 151,033 3.80 101 0.1689 % 2,543.2
Deemed-Retractible 5.05 % 5.44 % 83,810 5.81 28 0.0546 % 2,960.3
FloatingReset 3.03 % 2.72 % 42,566 0.97 10 0.2951 % 2,776.3
Performance Highlights
Issue Index Change Notes
PVS.PR.E SplitShare -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 4.63 %
TRP.PR.G FixedReset -1.17 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-11-30
Maturity Price : 25.00
Evaluated at bid price : 24.45
Bid-YTW : 4.89 %
CU.PR.G Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 21.51
Evaluated at bid price : 21.80
Bid-YTW : 5.23 %
TRP.PR.D FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 23.37
Evaluated at bid price : 23.85
Bid-YTW : 4.64 %
BAM.PR.M Perpetual-Discount 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 21.85
Evaluated at bid price : 22.09
Bid-YTW : 5.43 %
GWO.PR.N FixedReset 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.72
Bid-YTW : 6.73 %
BAM.PR.T FixedReset 1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 21.57
Evaluated at bid price : 21.86
Bid-YTW : 4.81 %
BNS.PR.C FloatingReset 1.55 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-01-26
Maturity Price : 25.00
Evaluated at bid price : 24.91
Bid-YTW : 2.70 %
TRP.PR.C FixedReset 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 18.35
Evaluated at bid price : 18.35
Bid-YTW : 4.66 %
BAM.PR.R FixedReset 1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 21.34
Evaluated at bid price : 21.34
Bid-YTW : 4.88 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.T FixedReset 171,765 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 23.60
Evaluated at bid price : 24.00
Bid-YTW : 4.51 %
NA.PR.E FixedReset 146,694 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 23.07
Evaluated at bid price : 24.78
Bid-YTW : 4.61 %
CM.PR.S FixedReset 101,311 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 23.12
Evaluated at bid price : 24.89
Bid-YTW : 4.46 %
RY.PR.E Deemed-Retractible 96,450 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-02-28
Maturity Price : 25.00
Evaluated at bid price : 25.24
Bid-YTW : -10.73 %
MFC.PR.R FixedReset 82,850 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 26.08
Bid-YTW : 3.88 %
BMO.PR.M FixedReset 61,120 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.08
Bid-YTW : 3.78 %
There were 29 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
POW.PR.G Perpetual-Premium Quote: 25.65 – 26.25
Spot Rate : 0.6000
Average : 0.3633

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-04-15
Maturity Price : 25.25
Evaluated at bid price : 25.65
Bid-YTW : 4.92 %

RY.PR.M FixedReset Quote: 24.52 – 25.00
Spot Rate : 0.4800
Average : 0.2899

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-11-24
Maturity Price : 25.00
Evaluated at bid price : 24.52
Bid-YTW : 4.26 %

GWO.PR.N FixedReset Quote: 19.72 – 20.20
Spot Rate : 0.4800
Average : 0.3043

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.72
Bid-YTW : 6.73 %

CU.PR.G Perpetual-Discount Quote: 21.80 – 22.30
Spot Rate : 0.5000
Average : 0.3255

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-29
Maturity Price : 21.51
Evaluated at bid price : 21.80
Bid-YTW : 5.23 %

GWO.PR.S Deemed-Retractible Quote: 25.30 – 25.68
Spot Rate : 0.3800
Average : 0.2127

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 5.15 %

PWF.PR.E Perpetual-Premium Quote: 25.12 – 25.45
Spot Rate : 0.3300
Average : 0.2025

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-02-28
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : -0.89 %

January 26, 2018

Friday, January 26th, 2018
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.2560 % 2,884.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.2560 % 5,292.5
Floater 3.44 % 3.59 % 44,325 18.32 4 -0.2560 % 3,050.1
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2014 % 3,159.2
SplitShare 4.65 % 4.12 % 66,489 3.37 5 -0.2014 % 3,772.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2014 % 2,943.7
Perpetual-Premium 5.37 % -0.95 % 66,793 0.09 18 0.0656 % 2,867.7
Perpetual-Discount 5.29 % 5.31 % 69,621 14.96 16 0.0964 % 3,004.5
FixedReset 4.20 % 4.45 % 152,687 3.82 101 0.0629 % 2,538.9
Deemed-Retractible 5.05 % 5.42 % 82,919 5.82 28 0.0798 % 2,958.7
FloatingReset 3.05 % 2.93 % 44,212 3.76 10 -0.1127 % 2,768.1
Performance Highlights
Issue Index Change Notes
BNS.PR.C FloatingReset -1.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.53
Bid-YTW : 3.40 %
BMO.PR.Y FixedReset 1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-08-25
Maturity Price : 25.00
Evaluated at bid price : 24.72
Bid-YTW : 4.56 %
MFC.PR.F FixedReset 1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.15
Bid-YTW : 7.15 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.D FixedReset 106,727 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 23.12
Evaluated at bid price : 23.61
Bid-YTW : 4.63 %
TD.PR.T FloatingReset 104,900 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 2.49 %
BAM.PR.K Floater 102,412 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 16.96
Evaluated at bid price : 16.96
Bid-YTW : 3.59 %
BMO.PR.T FixedReset 83,819 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 23.45
Evaluated at bid price : 23.85
Bid-YTW : 4.48 %
CM.PR.S FixedReset 69,965 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 23.14
Evaluated at bid price : 24.94
Bid-YTW : 4.41 %
NA.PR.E FixedReset 65,220 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 23.07
Evaluated at bid price : 24.79
Bid-YTW : 4.57 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BNS.PR.C FloatingReset Quote: 24.53 – 24.95
Spot Rate : 0.4200
Average : 0.2409

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.53
Bid-YTW : 3.40 %

TRP.PR.C FixedReset Quote: 18.07 – 18.34
Spot Rate : 0.2700
Average : 0.1803

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 18.07
Evaluated at bid price : 18.07
Bid-YTW : 4.67 %

BIP.PR.E FixedReset Quote: 24.72 – 24.95
Spot Rate : 0.2300
Average : 0.1517

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 23.05
Evaluated at bid price : 24.72
Bid-YTW : 5.01 %

BAM.PR.T FixedReset Quote: 21.57 – 21.90
Spot Rate : 0.3300
Average : 0.2599

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 21.29
Evaluated at bid price : 21.57
Bid-YTW : 4.83 %

W.PR.M FixedReset Quote: 26.35 – 26.60
Spot Rate : 0.2500
Average : 0.1811

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 26.35
Bid-YTW : 3.71 %

BAM.PR.R FixedReset Quote: 20.93 – 21.10
Spot Rate : 0.1700
Average : 0.1129

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-26
Maturity Price : 20.93
Evaluated at bid price : 20.93
Bid-YTW : 4.92 %

January 25, 2018

Friday, January 26th, 2018

So, how about the industry reactions to the Pacific trade deal, eh?:

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which Trade Minister François-Philippe Champagne announced on Tuesday, will benefit Canada’s agricultural sector, chiefly beef and pork producers, which are being granted market access to the once-sheltered Japanese market – access that rivals in Australia already enjoy.

But Canada’s dairy farmers, the head of the country’s largest private-sector union and a major portion of the Canadian auto industry say the new deal makes major concessions to foreign competitors that will cost jobs in Canada without yielding sufficient reciprocal benefits.

Key sectors of the auto industry in Canada oppose the new agreement.

Auto-parts makers say the TPP would open them up to more intense competition from low-cost countries such as Vietnam and Malaysia. The Detroit Three auto makers say it will eliminate tariffs on Japan-made vehicles entering the Canadian market while not removing existing non-tariff barriers in Japan.

So confident exporters love it and coddled parasites hate it? I like this deal already!

Clare O’Hara of the Globe continues the whitewashing of the Canadian discount brokerages negligence:

Online discount brokerages at Canada’s Big Six banks are continuing to see a surge in trading volumes and new account openings amid the investor frenzy centred on cannabis and cryptocurrency-related stocks.

The increased activity has been testing the limits of what some of the brokerages can handle during peak periods in the North American trading day.

Royal Bank of Canada’s RBC Direct Investing experienced outages on Tuesday morning that blocked some investors from accessing their online trading accounts for approximately an hour.

Meanwhile, Toronto-Dominion Bank has had to postpone a new online system for opening accounts, forcing investors to visit branches in person and endure at least a one-week waiting period.

Officials for other online brokerages at Bank of Montreal, National Bank of Canada, Canadian Imperial Bank of Commerce and Bank of Nova Scotia have all confirmed they also have been seeing higher-than-normal trading volumes.

For some of them, account opening requests have been running more than three times the average rates of 2017.

Scotiabank confirmed it has seen an increase of account openings of more than three times the daily average of last year, as well as almost double the trading volume than expected for this month.

BMO InvestorLine has seen its traffic volume increase steadily each month since September; since November, it has a 26-per-cent increase in new accounts, according to the bank.

I don’t give a rat’s putootie about “double the trading volume expected for this month.” I have two questions instead: How was the expectation developed? And mainly, how does that expectation compare with what might be reasonably expected during an actual market break?

I also don’t give a rat’s putootie about account openings of “three times the average rates of 2017”. 2017 was a nothing year. Nothing significant happened. Who cares about 2017? What might the account opening rate be during an actual market break?

These clowns have had a mild stress test and failed miserably.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.3712 % 2,891.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3712 % 5,306.1
Floater 3.44 % 3.57 % 43,525 18.36 4 0.3712 % 3,057.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.1163 % 3,165.6
SplitShare 4.64 % 4.11 % 66,526 3.38 5 0.1163 % 3,780.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1163 % 2,949.6
Perpetual-Premium 5.37 % -1.13 % 67,476 0.09 18 0.0656 % 2,865.9
Perpetual-Discount 5.30 % 5.29 % 69,172 14.98 16 -0.0963 % 3,001.6
FixedReset 4.20 % 4.47 % 147,433 3.89 101 0.2177 % 2,537.3
Deemed-Retractible 5.06 % 5.48 % 83,606 5.82 28 0.0547 % 2,956.3
FloatingReset 3.04 % 2.96 % 40,932 3.78 10 0.0694 % 2,771.2
Performance Highlights
Issue Index Change Notes
PWF.PR.Z Perpetual-Discount -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 23.99
Evaluated at bid price : 24.36
Bid-YTW : 5.29 %
MFC.PR.M FixedReset 1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.24
Bid-YTW : 4.86 %
SLF.PR.H FixedReset 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.24
Bid-YTW : 5.43 %
BAM.PR.B Floater 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 17.03
Evaluated at bid price : 17.03
Bid-YTW : 3.57 %
MFC.PR.J FixedReset 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.79
Bid-YTW : 4.88 %
TRP.PR.H FloatingReset 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 3.61 %
IFC.PR.C FixedReset 1.91 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-30
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 4.66 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.A FixedReset 308,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 23.49
Evaluated at bid price : 23.86
Bid-YTW : 4.43 %
BNS.PR.G FixedReset 208,500 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-07-25
Maturity Price : 25.00
Evaluated at bid price : 26.72
Bid-YTW : 3.41 %
BAM.PR.Z FixedReset 132,393 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 23.11
Evaluated at bid price : 24.85
Bid-YTW : 4.89 %
RY.PR.Q FixedReset 107,957 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 26.56
Bid-YTW : 3.38 %
BNS.PR.Q FixedReset 102,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-10-25
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 3.68 %
BMO.PR.S FixedReset 102,635 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 24.00
Evaluated at bid price : 24.40
Bid-YTW : 4.48 %
There were 24 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.J FixedReset Quote: 25.50 – 26.39
Spot Rate : 0.8900
Average : 0.5165

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 4.39 %

BAM.PR.N Perpetual-Discount Quote: 21.84 – 22.23
Spot Rate : 0.3900
Average : 0.2462

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 21.58
Evaluated at bid price : 21.84
Bid-YTW : 5.48 %

BAM.PF.E FixedReset Quote: 24.10 – 24.45
Spot Rate : 0.3500
Average : 0.2277

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 23.17
Evaluated at bid price : 24.10
Bid-YTW : 4.72 %

PWF.PR.Z Perpetual-Discount Quote: 24.36 – 24.75
Spot Rate : 0.3900
Average : 0.2683

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-25
Maturity Price : 23.99
Evaluated at bid price : 24.36
Bid-YTW : 5.29 %

BMO.PR.Q FixedReset Quote: 22.81 – 23.07
Spot Rate : 0.2600
Average : 0.1664

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 4.46 %

BAM.PF.H FixedReset Quote: 26.24 – 26.50
Spot Rate : 0.2600
Average : 0.1813

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.24
Bid-YTW : 3.35 %

LCS.PR.A To Get Bigger

Friday, January 26th, 2018

Brompton Funds has announced:

Brompton Lifeco Split Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A and preferred shares.

The class A shares will be offered at a price of $7.65 for a distribution rate of 11.8% on the issue price, and the preferred shares will be offered at a price of $10.05 for a yield to maturity of 5.4%. The closing price on the Toronto Stock Exchange (“TSX”) for each of the class A and preferred shares on January 24, 2018 was $7.83 and $10.32, respectively. The class A and preferred share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company prior to pricing, as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The sales period of this overnight offering will end at 9:00 a.m. (ET) on January 26, 2018. The offering is expected to close on or about February 6, 2017 and is subject to certain closing conditions including approval by the TSX.
The Company invests in a portfolio of common shares of Canada’s four largest publicly-listed life insurance companies on an approximately equal weight basis: Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.

The investment objectives for the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.075 per class A share and to provide the opportunity for growth in the net asset value per class A share.

The investment objectives for the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.14375 per preferred share, and to return the original issue price plus accrued dividends (if any) to holders of preferred shares on April 29, 2019.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.

So the offering price for a Whole Unit is 17.70, against a NAVPU of 17.26 as of January 24. That’s a premium of 2.5% … not as much as we’ve seen on other recent deals, but still a pretty nice business!

Update, 2018-1-26: They raised $38.6-million. Not great, but not too shabby!

Brompton Lifeco Split Corp. (the “Company”) is pleased to announce a successful overnight treasury offering of class A and preferred shares. Gross proceeds of the offering are expected to be approximately $38.6 million. The offering is expected to close on or about February 6, 2018 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (the “TSX”).

January 24, 2018

Wednesday, January 24th, 2018

Well, here’s one way to compete in the financial industry:

When Edward Jones broker Paul Betenbaugh in California wanted to exact revenge on a rival, he went too far. He impersonated the competitor and posted ads on the Internet that solicited men for sexual encounters, according to a Tuesday order from the Financial Industry Regulatory Authority. The ads included the other broker’s business cell phone number, resulting in a number of unwanted calls and text messages, Finra said.

PerpetualDiscounts now yield 5.24%, equivalent to 6.81% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 385bp, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 295bp, a significant narrowing from the 305bp reported January 17.

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

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.0267 % 2,881.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.0267 % 5,286.5
Floater 3.45 % 3.60 % 40,187 18.30 4 -0.0267 % 3,046.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1471 % 3,161.9
SplitShare 4.64 % 4.11 % 66,550 3.38 5 -0.1471 % 3,776.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1471 % 2,946.2
Perpetual-Premium 5.37 % -2.28 % 68,527 0.09 18 -0.0072 % 2,864.0
Perpetual-Discount 5.29 % 5.24 % 70,346 15.01 16 0.1258 % 3,004.5
FixedReset 4.21 % 4.50 % 144,687 4.04 101 -0.0610 % 2,531.8
Deemed-Retractible 5.06 % 5.50 % 83,537 5.82 28 0.1414 % 2,954.7
FloatingReset 3.04 % 2.92 % 41,391 3.78 10 -0.0043 % 2,769.3
Performance Highlights
Issue Index Change Notes
MFC.PR.M FixedReset -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.03 %
MFC.PR.J FixedReset -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 5.08 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.I FixedReset 133,135 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 24.97
Bid-YTW : 3.38 %
BIP.PR.E FixedReset 129,274 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-24
Maturity Price : 23.12
Evaluated at bid price : 24.90
Bid-YTW : 4.97 %
NA.PR.E FixedReset 86,785 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-24
Maturity Price : 23.06
Evaluated at bid price : 24.75
Bid-YTW : 4.57 %
CM.PR.S FixedReset 53,519 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-24
Maturity Price : 23.13
Evaluated at bid price : 24.90
Bid-YTW : 4.42 %
TD.PF.C FixedReset 52,627 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-24
Maturity Price : 23.11
Evaluated at bid price : 23.45
Bid-YTW : 4.50 %
RY.PR.D Deemed-Retractible 33,695 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-02-23
Maturity Price : 25.00
Evaluated at bid price : 25.29
Bid-YTW : -13.70 %
There were 38 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.A Floater Quote: 19.45 – 20.00
Spot Rate : 0.5500
Average : 0.3724

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-24
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 3.10 %

MFC.PR.M FixedReset Quote: 24.00 – 24.48
Spot Rate : 0.4800
Average : 0.3077

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.03 %

MFC.PR.F FixedReset Quote: 18.95 – 19.47
Spot Rate : 0.5200
Average : 0.3792

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.95
Bid-YTW : 7.31 %

BAM.PF.D Perpetual-Discount Quote: 22.44 – 22.88
Spot Rate : 0.4400
Average : 0.3118

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-24
Maturity Price : 22.08
Evaluated at bid price : 22.44
Bid-YTW : 5.50 %

SLF.PR.H FixedReset Quote: 22.01 – 22.30
Spot Rate : 0.2900
Average : 0.1907

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.01
Bid-YTW : 5.60 %

POW.PR.D Perpetual-Discount Quote: 24.02 – 24.30
Spot Rate : 0.2800
Average : 0.1837

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-24
Maturity Price : 23.71
Evaluated at bid price : 24.02
Bid-YTW : 5.23 %

BIP.PR.E Settles Firm on Modest Volume

Tuesday, January 23rd, 2018

Brookfield Infrastructure hasn’t announced anything, but their new issue of BIP.PR.E settled today.

BIP.PR.E is a FixedReset, 5.00%+300M500, ROC, announced January 15. It will be tracked by HIMIPref™ and has been assigned to the FixedResets subindex on the basis of its P-2(low) rating from S&P (it is not rated by DBRS).

The issue traded 421,809 shares today in a range of 24.85-00 before closing at 24.93-95. Vital statistics are:

BIP.PR.E FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 23.13
Evaluated at bid price : 24.93
Bid-YTW : 4.96 %

This issue looks quite expensive to me, according to Implied Volatility Analysis:

impvol_bip_180123
Click for Big

We see in this chart many of the same features we saw when reviewing the recent new issues of NA.PR.E, BEP.PR.M and CM.PR.S:

  • The curve is very steep, with Implied Volatility equal to 40% (a ridiculously large figure), and
  • The prior issues are trading relatively near to, or well above par

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; the market seems to be taking the view that since things seem rosy now, they will always be rosy and everything will trade near par in the future.

I balk at ascribing a 100% probability to this outcome. There may still be a few old geezers amongst the Assiduous Readers of this blog who can still (faintly) remember the Great Bear Market of 2014-16, in which quite a few similar assumptions made earlier turned out to be slightly inaccurate.

For the long term, I suggest that any change in the slope of the curve will be a flattening, with a very high degree of confidence. This will imply that the higher-spread issues will outperform the lower-spread issues.

All told, though, I have no hesitation in slapping an ‘Expensive’ label on this issue – according to the Implied Volatility analysis shown above, the theoretical price of the new issue is 23.41, down from the announcement day estimate of 23.50 – and, remember, that is before making any adjustments for the ridiculously steep Implied Volatility calculation curve.