Archive for July, 2018

July 19, 2018

Thursday, July 19th, 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 0.5236 % 3,118.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5236 % 5,722.1
Floater 3.46 % 3.66 % 65,875 18.17 4 0.5236 % 3,297.7
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2448 % 3,193.4
SplitShare 4.60 % 4.49 % 57,658 4.91 5 -0.2448 % 3,813.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2448 % 2,975.5
Perpetual-Premium 5.63 % -13.78 % 61,947 0.09 9 0.0350 % 2,907.3
Perpetual-Discount 5.38 % 5.50 % 55,939 14.65 26 -0.0049 % 2,984.1
FixedReset 4.30 % 4.58 % 128,667 4.45 106 0.0279 % 2,560.4
Deemed-Retractible 5.13 % 5.87 % 67,046 5.47 27 -0.0529 % 2,975.9
FloatingReset 3.29 % 3.82 % 34,513 3.36 9 -0.0099 % 2,831.6
Performance Highlights
Issue Index Change Notes
IAG.PR.I FixedReset -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 4.91 %
SLF.PR.I FixedReset 1.20 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 4.52 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.T FloatingReset 239,000 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-08-30
Maturity Price : 25.00
Evaluated at bid price : 24.97
Bid-YTW : 1.05 %
GWO.PR.S Deemed-Retractible 177,200 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 5.71 %
BMO.PR.R FloatingReset 143,000 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : -4.29 %
TRP.PR.E FixedReset 104,084 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-19
Maturity Price : 21.89
Evaluated at bid price : 22.43
Bid-YTW : 4.88 %
PWF.PR.G Perpetual-Premium 85,400 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-08-18
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : -17.39 %
CM.PR.R FixedReset 60,639 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 4.28 %
There were 12 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.I FixedReset Quote: 24.95 – 25.32
Spot Rate : 0.3700
Average : 0.2369

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 4.91 %

MFC.PR.J FixedReset Quote: 25.05 – 25.29
Spot Rate : 0.2400
Average : 0.1463

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2023-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 4.70 %

TRP.PR.E FixedReset Quote: 22.43 – 22.69
Spot Rate : 0.2600
Average : 0.1699

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-19
Maturity Price : 21.89
Evaluated at bid price : 22.43
Bid-YTW : 4.88 %

TD.PF.G FixedReset Quote: 26.27 – 26.48
Spot Rate : 0.2100
Average : 0.1347

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.27
Bid-YTW : 3.51 %

TRP.PR.A FixedReset Quote: 20.23 – 20.72
Spot Rate : 0.4900
Average : 0.4317

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-19
Maturity Price : 20.23
Evaluated at bid price : 20.23
Bid-YTW : 4.87 %

BAM.PR.X FixedReset Quote: 18.56 – 18.78
Spot Rate : 0.2200
Average : 0.1645

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-19
Maturity Price : 18.56
Evaluated at bid price : 18.56
Bid-YTW : 4.90 %

July 18, 2018

Wednesday, July 18th, 2018

PerpetualDiscounts now yield 5.51%, equivalent to 7.16% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.82%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 335bp, a significant widening from the 325bp reported July 11.

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 -1.2202 % 3,102.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.2202 % 5,692.3
Floater 3.48 % 3.69 % 68,463 18.11 4 -1.2202 % 3,280.5
OpRet 0.00 % 0.00 % 0 0.00 0 0.0079 % 3,201.2
SplitShare 4.59 % 4.55 % 58,582 4.91 5 0.0079 % 3,822.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0079 % 2,982.8
Perpetual-Premium 5.64 % -13.95 % 61,600 0.09 9 0.0087 % 2,906.3
Perpetual-Discount 5.38 % 5.51 % 56,848 14.66 26 -0.0886 % 2,984.2
FixedReset 4.30 % 4.60 % 129,253 4.27 106 0.0601 % 2,559.7
Deemed-Retractible 5.13 % 5.87 % 64,734 5.47 27 -0.1817 % 2,977.5
FloatingReset 3.29 % 3.87 % 33,868 3.37 9 -0.2122 % 2,831.9
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 3.69 %
BAM.PR.K Floater -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 3.69 %
BAM.PR.C Floater -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 17.68
Evaluated at bid price : 17.68
Bid-YTW : 3.69 %
PWF.PR.Q FloatingReset -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 21.34
Evaluated at bid price : 21.65
Bid-YTW : 3.50 %
SLF.PR.E Deemed-Retractible -1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.74
Bid-YTW : 7.11 %
SLF.PR.B Deemed-Retractible -1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.75
Bid-YTW : 6.60 %
MFC.PR.B Deemed-Retractible -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.01
Bid-YTW : 7.08 %
HSE.PR.G FixedReset 4.38 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 4.64 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.F FloatingReset 277,700 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.80
Bid-YTW : 4.26 %
TRP.PR.E FixedReset 201,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 22.01
Evaluated at bid price : 22.63
Bid-YTW : 4.83 %
PWF.PR.I Perpetual-Premium 120,401 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-08-17
Maturity Price : 25.00
Evaluated at bid price : 25.58
Bid-YTW : -23.09 %
PWF.PR.L Perpetual-Discount 112,433 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 22.86
Evaluated at bid price : 23.13
Bid-YTW : 5.52 %
PWF.PR.T FixedReset 100,436 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 23.47
Evaluated at bid price : 24.20
Bid-YTW : 4.53 %
POW.PR.G Perpetual-Premium 99,739 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : 5.33 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CM.PR.R FixedReset Quote: 25.04 – 25.38
Spot Rate : 0.3400
Average : 0.2006

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.04
Bid-YTW : 4.34 %

HSE.PR.A FixedReset Quote: 17.65 – 18.05
Spot Rate : 0.4000
Average : 0.2996

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 17.65
Evaluated at bid price : 17.65
Bid-YTW : 5.08 %

TRP.PR.H FloatingReset Quote: 17.20 – 17.55
Spot Rate : 0.3500
Average : 0.2596

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 4.01 %

PWF.PR.A Floater Quote: 21.48 – 21.91
Spot Rate : 0.4300
Average : 0.3432

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 21.48
Evaluated at bid price : 21.48
Bid-YTW : 3.04 %

TRP.PR.G FixedReset Quote: 24.24 – 24.54
Spot Rate : 0.3000
Average : 0.2205

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 23.19
Evaluated at bid price : 24.24
Bid-YTW : 5.00 %

CU.PR.C FixedReset Quote: 22.80 – 23.15
Spot Rate : 0.3500
Average : 0.2711

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-18
Maturity Price : 22.23
Evaluated at bid price : 22.80
Bid-YTW : 4.66 %

July 17, 2018

Tuesday, July 17th, 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 -0.8677 % 3,140.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.8677 % 5,762.6
Floater 3.44 % 3.63 % 69,230 18.24 4 -0.8677 % 3,321.0
OpRet 0.00 % 0.00 % 0 0.00 0 0.0711 % 3,200.9
SplitShare 4.59 % 4.53 % 60,688 4.91 5 0.0711 % 3,822.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0711 % 2,982.5
Perpetual-Premium 5.64 % -15.45 % 60,633 0.09 9 -0.0480 % 2,906.1
Perpetual-Discount 5.37 % 5.49 % 53,852 14.69 26 -0.0836 % 2,986.9
FixedReset 4.30 % 4.60 % 130,877 5.57 106 -0.1231 % 2,558.1
Deemed-Retractible 5.12 % 5.88 % 65,660 5.47 27 0.0466 % 2,982.9
FloatingReset 3.29 % 3.77 % 31,356 3.37 9 -0.1577 % 2,837.9
Performance Highlights
Issue Index Change Notes
HSE.PR.G FixedReset -4.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 23.67
Evaluated at bid price : 24.00
Bid-YTW : 5.73 %
PWF.PR.A Floater -2.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 21.28
Evaluated at bid price : 21.55
Bid-YTW : 3.00 %
HSE.PR.A FixedReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 17.69
Evaluated at bid price : 17.69
Bid-YTW : 5.07 %
TRP.PR.K FixedReset -1.09 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.38
Bid-YTW : 4.67 %
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 : 19.12
Bid-YTW : 7.52 %
BAM.PR.X FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 18.62
Evaluated at bid price : 18.62
Bid-YTW : 4.89 %
Volume Highlights
Issue Index Shares
Traded
Notes
PWF.PR.I Perpetual-Premium 106,316 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-08-16
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : -24.10 %
PWF.PR.K Perpetual-Discount 102,782 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 22.17
Evaluated at bid price : 22.45
Bid-YTW : 5.52 %
BMO.PR.C FixedReset 68,433 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.29
Bid-YTW : 4.37 %
TRP.PR.F FloatingReset 62,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 4.11 %
TRP.PR.E FixedReset 46,070 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 22.01
Evaluated at bid price : 22.63
Bid-YTW : 4.83 %
IFC.PR.G FixedReset 35,924 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 5.03 %
There were 12 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSE.PR.G FixedReset Quote: 24.00 – 25.25
Spot Rate : 1.2500
Average : 0.6780

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 23.67
Evaluated at bid price : 24.00
Bid-YTW : 5.73 %

TRP.PR.K FixedReset Quote: 25.38 – 25.77
Spot Rate : 0.3900
Average : 0.2398

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.38
Bid-YTW : 4.67 %

PWF.PR.A Floater Quote: 21.55 – 21.91
Spot Rate : 0.3600
Average : 0.2480

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 21.28
Evaluated at bid price : 21.55
Bid-YTW : 3.00 %

TRP.PR.J FixedReset Quote: 26.21 – 26.49
Spot Rate : 0.2800
Average : 0.1700

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 3.99 %

TRP.PR.C FixedReset Quote: 17.68 – 18.00
Spot Rate : 0.3200
Average : 0.2200

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 17.68
Evaluated at bid price : 17.68
Bid-YTW : 4.84 %

CU.PR.C FixedReset Quote: 22.88 – 23.15
Spot Rate : 0.2700
Average : 0.1846

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-17
Maturity Price : 22.28
Evaluated at bid price : 22.88
Bid-YTW : 4.64 %

EMA.PR.C To Reset At 4.721%

Tuesday, July 17th, 2018

Emera Incorporated has announced:

the applicable dividend rates for its Cumulative Rate Reset First Preferred Shares, Series C (the “Series C Shares”) and Cumulative Floating Rate First Preferred Shares, Series D (the “Series D Shares”), in each case, payable if, as and when declared by the Board of Directors of the Company:
• 4.721% per annum on the Series C Shares ($0.29506 per Series C Share per quarter), being equal to the sum of the Government of Canada bond yield as at July 16, 2018, plus 2.65%, payable quarterly on the 15th of February, May, August and November of each year during the five-year period commencing on August 15, 2018 and ending on (and inclusive of) August 14, 2023; and
• 4.1140% on the Series D Shares of the Company (the “Series D Shares”) for the three-month period commencing on August 15, 2018 and ending on (and inclusive of) November 14, 2018 ($0.25924 per Series D Share for the quarter), being equal to the sum of the three-month Government of Canada treasury bill yield rate as at July 16, 2018, plus 2.65% (calculated on the basis of the actual number of days elapsed during the quarter divided by 365), payable on the 15th of November 2018. The quarterly floating dividend rate will be reset every quarter.

Holders of the Series C Shares have the right, at their option, to convert all or any of their Series C Shares, on a one-for-one basis, into Series D Shares on August 15, 2018 (the “Conversion Date”). On such date, holders who do not exercise their right to convert their Series C Shares into Series D Shares will continue to hold their Series C Shares. The foregoing conversion right is subject to the following:
• if the Company determines that there would be less than 1,000,000 Series D Shares outstanding on the Conversion Date, then holders of Series C Shares will not be entitled to convert their shares into Series D Shares, and
• alternatively, if the Company determines that there would remain outstanding less than 1,000,000 Series C Shares on the Conversion Date, then all remaining Series C Shares will automatically be converted into Series D Shares on a one-for-one basis on the Conversion Date.

Beneficial owners of Series C Shares who wish to exercise their conversion right should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from July 16, 2018 until 5:00 p.m. (EDT) on July 31, 2018.

EMA.PR.C is a FixedReset, 4.10%+265, that commenced trading 2012-6-7 after being announced 2012-5-29. The extension was announced 2018-07-06. DBRS discontinued coverage of Emera in June, 2016. The preferreds are rated P-2(low) by S&P. It is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

Note that the July 31 notification deadline is that of the company; brokers will normally set their internal deadlines a day or two in advance of this date – so check, well in advance! If you miss the brokers’ deadline, but still have time to make the company deadline, brokers will usually attempt the conversion on a ‘best efforts’ basis, provided you grovel in a sufficiently entertaining fashion.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., EMA.PR.C and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_fr_180716
Click for Big

The market appears to be relatively uninterested in floating rate product; the implied rates until the next interconversion are approximately equal to the current 3-month bill rate and the averages for investment-grade and junk issues reflect this, at +1.49% and +1.21%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the EMA.PR.C FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for EMA.PR.C) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 2.00% 1.50% 1.00%
EMA.PR.C 23.60 265bp 23.53 23.02 22.51

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to be cheap and trading below the price of their FixedReset counterparts. Therefore, it seems likely that I will recommend that holders of EMA.PR.C continue to hold the issue and not to convert, but I will wait until it’s closer to the July 31 notification deadline before making a final pronouncement. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

July 16, 2018

Monday, July 16th, 2018

There was a good article in the New York Times regarding lagging paycheques in the US:

Yet many are far from making up all the lost ground. Hourly earnings have moved forward at a crawl, with higher prices giving workers less buying power than they had last summer. Last-minute scheduling, no-poaching and noncompete clauses, and the use of independent contractors are popular tactics that put workers at a disadvantage. Threats to move operations overseas, where labor is cheaper, continue to loom.

Economists have offered various explanations for why workers are not doing better: the steady weakening of labor unions, the ability of American companies to find cheaper labor abroad or automate further, piddling productivity growth and the rise of superstar companies that are extremely efficient with a relatively small labor force.

gdpshares
Click for Big

It’s difficult to look through this list of trend-drivers and find a suitable place for the imposition of public policy constraints – most potential measure will do more harm than good, to everybody.

However, I will suggest that it is appropriate for labour legislation to make ‘last minute scheduling’ less attractive – it’s an extremely exploitive management strategy that needs to be reined in. For instance, my contact in the nursing business works as ‘permanent casual’ (I think that’s the label!) with a major hospital complex. She has no set hours; every week she has to tell them her availability and they call her when they need her … and by ‘call’, I mean at 5am to start a 7am shift.

She has to give them so many potential shifts every week, including some on weekends, some graveyard shifts and some afternoons. If they call her for an ‘available’ shift and she turns it down, that’s a black mark. Three black marks in a year and she’s fired.

The problem with this – besides illustrating the complete mismanagement of the Ontario health care system – is that she gets nothing for making herself available other than the chance she might get called. It’s ridiculous. She could make herself available for 168 hours a week, not get a single call and they wouldn’t have to pay her a dime. That’s what I call exploitive. And, mind you, she works for a hospital – a civil servant in all but name. One would think that employment standards there would be pretty good.

If the ‘last-minute scheduling’ system is to be allowed to endure – and there are good reasons why it should be around to some degree – then workers should be either guaranteed that some proportion (two thirds?) of their availability will be taken up, or paid some hourly rate ($5/hour minimum) for availability that isn’t taken up.

Scheduling has attracted some notice from the Ontario Ministry of Labour and revised legislation is scheduled to come into force:

On-call pay — Three-hour minimum pay: Employees who are “on-call” and not called into work, or who are called into work but work less than three hours, must be paid three hours pay. Only one three-hour minimum applies to all on-call scenarios which may occur during a 24-hour period. On-call pay is not required if the on-call is for purposes of ensuring the continued delivery of essential public services and the employee was not required to work.

I think that addresses my concern – at least partially – but notice that ‘essential public services’, such as nursing in hospitals, has been specifically exempted! We will have to see whether the legislation survives the new Ontario Mindless Kneejerk Party government, and just how everything works out in practice.

Another possibility to be explored is a Guaranteed Annual Income. There was a long opinion piece in the weekend Globe about the idea, but the experiment that’s currently running is very poorly conceived:

In its new pilot, Ontario is providing single recipients up to $16,989 a year and families up to $24,027, minus 50 percent for any earnings

Fifty percent. And then there’s traditional taxes on top of that. So what’s the effective marginal tax rate on that? Maybe sixty, seventy percent for a low income earner? Boy, that leaves a lot of incentive to pick up an extra shift and go for that minor promotion, doesn’t it?

No, the way to implement a Guaranteed Annual Income is to make it universal and include it in taxable income. We don’t need to implement the whole thing all at once. Start off with a $1,000 refundable tax credit, included in income, and increase it whenever possible. Bear in mind that effective marginal tax rates are important … especially the particularly moronic ones, with a sharp cut-off of benefits.

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 0.5154 % 3,167.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5154 % 5,813.0
Floater 3.41 % 3.62 % 70,015 18.27 4 0.5154 % 3,350.1
OpRet 0.00 % 0.00 % 0 0.00 0 0.3807 % 3,198.7
SplitShare 4.59 % 4.50 % 60,800 4.92 5 0.3807 % 3,819.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3807 % 2,980.4
Perpetual-Premium 5.63 % -14.47 % 60,725 0.09 9 0.0481 % 2,907.5
Perpetual-Discount 5.37 % 5.48 % 53,187 14.70 26 0.1198 % 2,989.4
FixedReset 4.29 % 4.58 % 131,403 4.18 106 0.0326 % 2,561.3
Deemed-Retractible 5.12 % 5.87 % 64,769 5.47 27 0.3665 % 2,981.5
FloatingReset 3.28 % 3.78 % 32,647 3.37 9 0.0740 % 2,842.4
Performance Highlights
Issue Index Change Notes
IFC.PR.F Deemed-Retractible -1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.65
Bid-YTW : 5.64 %
SLF.PR.C Deemed-Retractible 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.63
Bid-YTW : 7.14 %
TRP.PR.E FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-16
Maturity Price : 21.99
Evaluated at bid price : 22.59
Bid-YTW : 4.83 %
SLF.PR.B Deemed-Retractible 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.85
Bid-YTW : 6.51 %
SLF.PR.A Deemed-Retractible 1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.71
Bid-YTW : 6.57 %
IFC.PR.C FixedReset 1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.20
Bid-YTW : 5.38 %
MFC.PR.B Deemed-Retractible 1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 6.87 %
MFC.PR.C Deemed-Retractible 1.75 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.55
Bid-YTW : 7.29 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.W Perpetual-Discount 204,575 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-16
Maturity Price : 24.55
Evaluated at bid price : 24.80
Bid-YTW : 5.00 %
TRP.PR.F FloatingReset 147,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-16
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 4.10 %
BMO.PR.C FixedReset 56,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.27
Bid-YTW : 4.39 %
RY.PR.J FixedReset 54,821 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-16
Maturity Price : 23.45
Evaluated at bid price : 24.57
Bid-YTW : 4.75 %
TRP.PR.J FixedReset 51,153 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.25
Bid-YTW : 3.92 %
TRP.PR.D FixedReset 50,960 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-16
Maturity Price : 22.19
Evaluated at bid price : 22.90
Bid-YTW : 4.79 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.N FixedReset Quote: 23.72 – 23.96
Spot Rate : 0.2400
Average : 0.1628

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.72
Bid-YTW : 5.22 %

HSE.PR.A FixedReset Quote: 17.91 – 18.22
Spot Rate : 0.3100
Average : 0.2329

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-16
Maturity Price : 17.91
Evaluated at bid price : 17.91
Bid-YTW : 5.00 %

PWF.PR.R Perpetual-Discount Quote: 24.96 – 25.20
Spot Rate : 0.2400
Average : 0.1665

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 24.96
Bid-YTW : 5.50 %

IAG.PR.I FixedReset Quote: 25.10 – 25.30
Spot Rate : 0.2000
Average : 0.1290

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2023-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 4.78 %

MFC.PR.L FixedReset Quote: 22.67 – 22.89
Spot Rate : 0.2200
Average : 0.1503

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.67
Bid-YTW : 5.99 %

PWF.PR.P FixedReset Quote: 19.66 – 19.93
Spot Rate : 0.2700
Average : 0.2024

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-16
Maturity Price : 19.66
Evaluated at bid price : 19.66
Bid-YTW : 4.43 %

July PrefLetter Released!

Sunday, July 15th, 2018

The July, 2018, 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.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the June, 2018, issue, while the “Next Edition” will be the August, 2018, issue, scheduled to be prepared as of the close August 10 and eMailed to subscribers prior to market-opening on August 13.

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.

But Adrian2 now advises:

Well, as of now, FileApp is free (again?).

July 13, 2018

Friday, July 13th, 2018

… and now it’s time for PrefLetter!

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 0.8530 % 3,151.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.8530 % 5,783.2
Floater 3.42 % 3.64 % 68,786 18.23 4 0.8530 % 3,332.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2768 % 3,186.5
SplitShare 4.61 % 4.54 % 61,528 4.92 5 -0.2768 % 3,805.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2768 % 2,969.1
Perpetual-Premium 5.64 % -15.44 % 60,963 0.09 9 -0.0044 % 2,906.1
Perpetual-Discount 5.38 % 5.48 % 54,569 14.69 26 0.1035 % 2,985.8
FixedReset 4.30 % 4.58 % 132,763 4.17 106 0.0813 % 2,560.5
Deemed-Retractible 5.14 % 5.93 % 64,706 5.48 27 0.1828 % 2,970.6
FloatingReset 3.28 % 3.73 % 32,884 3.38 9 0.0691 % 2,840.3
Performance Highlights
Issue Index Change Notes
MFC.PR.M FixedReset -1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 5.47 %
BAM.PF.E FixedReset 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 23.30
Evaluated at bid price : 23.68
Bid-YTW : 4.85 %
BAM.PR.B Floater 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 17.89
Evaluated at bid price : 17.89
Bid-YTW : 3.64 %
BAM.PR.C Floater 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 3.64 %
IFC.PR.A FixedReset 1.79 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.85
Bid-YTW : 7.60 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.W Perpetual-Discount 222,825 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 24.49
Evaluated at bid price : 24.72
Bid-YTW : 5.02 %
BMO.PR.W FixedReset 50,591 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 22.68
Evaluated at bid price : 23.12
Bid-YTW : 4.61 %
BAM.PF.F FixedReset 28,494 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 24.54
Evaluated at bid price : 24.86
Bid-YTW : 4.93 %
RY.PR.H FixedReset 27,568 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 23.23
Evaluated at bid price : 23.75
Bid-YTW : 4.54 %
NA.PR.G FixedReset 21,207 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 23.21
Evaluated at bid price : 25.20
Bid-YTW : 4.75 %
EMA.PR.H FixedReset 19,036 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2023-08-15
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 4.48 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.I FixedReset Quote: 26.00 – 27.00
Spot Rate : 1.0000
Average : 0.5836

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 3.71 %

MFC.PR.F FixedReset Quote: 19.30 – 19.97
Spot Rate : 0.6700
Average : 0.4196

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.30
Bid-YTW : 7.34 %

RY.PR.N Perpetual-Discount Quote: 24.99 – 25.52
Spot Rate : 0.5300
Average : 0.3249

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 24.52
Evaluated at bid price : 24.99
Bid-YTW : 4.95 %

BAM.PF.H FixedReset Quote: 25.89 – 26.33
Spot Rate : 0.4400
Average : 0.2641

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.89
Bid-YTW : 3.57 %

TRP.PR.F FloatingReset Quote: 20.65 – 21.00
Spot Rate : 0.3500
Average : 0.2178

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-13
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 4.12 %

PVS.PR.F SplitShare Quote: 25.50 – 26.00
Spot Rate : 0.5000
Average : 0.4037

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 4.54 %

July 12, 2018

Thursday, July 12th, 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 0.5899 % 3,125.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5899 % 5,734.3
Floater 3.22 % 3.43 % 69,721 18.71 4 0.5899 % 3,304.7
OpRet 0.00 % 0.00 % 0 0.00 0 0.3492 % 3,195.4
SplitShare 4.60 % 4.48 % 62,123 4.93 5 0.3492 % 3,816.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3492 % 2,977.4
Perpetual-Premium 5.64 % -14.13 % 61,412 0.09 9 0.0000 % 2,906.2
Perpetual-Discount 5.38 % 5.48 % 53,917 14.70 26 -0.1115 % 2,982.7
FixedReset 4.30 % 4.63 % 136,522 4.19 106 0.0118 % 2,558.4
Deemed-Retractible 5.15 % 5.97 % 65,697 5.48 27 -0.1014 % 2,965.2
FloatingReset 3.24 % 3.72 % 34,234 3.39 9 0.2077 % 2,838.3
Performance Highlights
Issue Index Change Notes
TRP.PR.E FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 21.81
Evaluated at bid price : 22.30
Bid-YTW : 4.92 %
BAM.PR.K Floater 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 17.72
Evaluated at bid price : 17.72
Bid-YTW : 3.43 %
PWF.PR.Q FloatingReset 2.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 21.56
Evaluated at bid price : 21.96
Bid-YTW : 3.39 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.G FixedReset 1,036,959 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-07-25
Maturity Price : 25.00
Evaluated at bid price : 26.25
Bid-YTW : 3.69 %
NA.PR.G FixedReset 132,207 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 23.21
Evaluated at bid price : 25.21
Bid-YTW : 4.76 %
RY.PR.W Perpetual-Discount 81,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 24.47
Evaluated at bid price : 24.71
Bid-YTW : 5.02 %
IFC.PR.G FixedReset 73,756 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 5.09 %
BMO.PR.W FixedReset 58,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 22.67
Evaluated at bid price : 23.11
Bid-YTW : 4.63 %
SLF.PR.G FixedReset 56,587 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.10
Bid-YTW : 6.90 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PF.D FixedReset Quote: 24.40 – 24.95
Spot Rate : 0.5500
Average : 0.3605

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.40
Bid-YTW : 4.76 %

HSE.PR.A FixedReset Quote: 17.87 – 18.22
Spot Rate : 0.3500
Average : 0.2235

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 5.03 %

TRP.PR.H FloatingReset Quote: 17.20 – 17.50
Spot Rate : 0.3000
Average : 0.1899

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 3.95 %

TRP.PR.A FixedReset Quote: 20.53 – 21.47
Spot Rate : 0.9400
Average : 0.8363

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-12
Maturity Price : 20.53
Evaluated at bid price : 20.53
Bid-YTW : 4.82 %

MFC.PR.J FixedReset Quote: 25.00 – 25.30
Spot Rate : 0.3000
Average : 0.2003

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2023-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.74 %

MFC.PR.B Deemed-Retractible Quote: 21.92 – 22.30
Spot Rate : 0.3800
Average : 0.2809

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.92
Bid-YTW : 7.13 %

BoC Raises Policy Rate 25bp; Prime Follows

Wednesday, July 11th, 2018

The Bank of Canada has announced:

The Bank of Canada today increased its target for the overnight rate to 1 ½ per cent. The Bank Rate is correspondingly 1 ¾ per cent and the deposit rate is 1 ¼ per cent.

The Bank expects the global economy to grow by about 3 ¾ per cent in 2018 and 3 ½ per cent in 2019, in line with the April Monetary Policy Report (MPR). The US economy is proving stronger than expected, reinforcing market expectations of higher policy rates and pushing up the US dollar. This is contributing to financial stresses in some emerging market economies. Meanwhile, oil prices have risen. Yet, the Canadian dollar is lower, reflecting broad-based US dollar strength and concerns about trade actions. The possibility of more trade protectionism is the most important threat to global prospects.

Canada’s economy continues to operate close to its capacity and the composition of growth is shifting. Temporary factors are causing volatility in quarterly growth rates: the Bank projects a pick-up to 2.8 per cent in the second quarter and a moderation to 1.5 per cent in the third. Household spending is being dampened by higher interest rates and tighter mortgage lending guidelines. Recent data suggest housing markets are beginning to stabilize following a weak start to 2018. Meanwhile, exports are being buoyed by strong global demand and higher commodity prices. Business investment is growing in response to solid demand growth and capacity pressures, although trade tensions are weighing on investment in some sectors. Overall, the Bank still expects average growth of close to 2 per cent over 2018-2020.

CPI and the Bank’s core measures of inflation remain near 2 per cent, consistent with an economy operating close to capacity. CPI inflation is expected to edge up further to about 2.5 per cent before settling back to 2 per cent by the second half of 2019. The Bank estimates that underlying wage growth is running at about 2.3 per cent, slower than would be expected in a labour market with no slack.

As in April, the projection incorporates an estimate of the impact of trade uncertainty on Canadian investment and exports. This effect is now judged to be larger, given mounting trade tensions.

The July projection also incorporates the estimated impact of tariffs on steel and aluminum recently imposed by the United States, as well as the countermeasures enacted by Canada. Although there will be difficult adjustments for some industries and their workers, the effect of these measures on Canadian growth and inflation is expected to be modest.

Governing Council expects that higher interest rates will be warranted to keep inflation near target and will continue to take a gradual approach, guided by incoming data. In particular, the Bank is monitoring the economy’s adjustment to higher interest rates and the evolution of capacity and wage pressures, as well as the response of companies and consumers to trade actions.

As usual there are no details of how the voting went or any capsule description of the rationale for such dissent, as is routinely provided by professionally managed central banks such as the US Federal Reserve. It’s a pity that members of the grandiosely named Governing Council are so insecure!

Market reaction was muted:

The Canadian dollar weakened to a more than one-week low against its U.S. counterpart on Wednesday as broad-based gains for the greenback offset an interest rate hike and the prospect of further tightening by the Bank of Canada.

The U.S. dollar rose as the market put aside trade tension fears and focused on an expectation-beating inflation report, which increased prospects that the Federal Reserve will raise interest rates two more times this year.

“This U.S. dollar move offsets and even more so the somewhat hawkish BoC hike,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

The Bank of Canada raised its benchmark interest rate by 25 basis points to 1.50 per cent, the fourth hike since last summer.

Money markets see a nearly 70 per cent chance of further tightening by December.

The Big Banks hiked prime. Sadly, we do not know what has been done with the banks’ top secret internal primes or the spreads to Prime that the average customer might see on his renewal notice.

Details are:

July 11, 2018

Wednesday, July 11th, 2018

A good day for FixedResets, presumably due to the Bank of Canada policy hike and anticipation of increasing five-year Canada yields.

PerpetualDiscounts now yield 5.47%, equivalent to 7.11% 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 325bp, unchanged from July 4

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 1.3727 % 3,106.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.3727 % 5,700.7
Floater 3.24 % 3.44 % 70,208 18.68 4 1.3727 % 3,285.3
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0793 % 3,184.3
SplitShare 4.61 % 4.70 % 61,802 4.93 5 -0.0793 % 3,802.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0793 % 2,967.0
Perpetual-Premium 5.64 % -15.63 % 61,148 0.09 9 0.0306 % 2,906.2
Perpetual-Discount 5.38 % 5.47 % 56,026 14.70 26 -0.0279 % 2,986.0
FixedReset 4.30 % 4.60 % 134,249 4.29 106 0.4840 % 2,558.1
Deemed-Retractible 5.14 % 5.92 % 63,454 5.49 27 -0.0920 % 2,968.2
FloatingReset 3.25 % 3.72 % 34,409 3.39 9 0.2727 % 2,832.5
Performance Highlights
Issue Index Change Notes
MFC.PR.F FixedReset 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.09
Bid-YTW : 7.54 %
MFC.PR.J FixedReset 1.01 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2023-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.74 %
MFC.PR.L FixedReset 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.64
Bid-YTW : 6.02 %
BAM.PR.B Floater 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 17.63
Evaluated at bid price : 17.63
Bid-YTW : 3.44 %
IFC.PR.C FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.19
Bid-YTW : 5.39 %
GWO.PR.T Deemed-Retractible 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 5.92 %
SLF.PR.J FloatingReset 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.27
Bid-YTW : 6.42 %
MFC.PR.G FixedReset 1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-12-19
Maturity Price : 25.00
Evaluated at bid price : 24.53
Bid-YTW : 4.58 %
BAM.PR.K Floater 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 17.53
Evaluated at bid price : 17.53
Bid-YTW : 3.46 %
PWF.PR.P FixedReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 19.84
Evaluated at bid price : 19.84
Bid-YTW : 4.41 %
GWO.PR.N FixedReset 1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.98
Bid-YTW : 7.61 %
TRP.PR.A FixedReset 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 20.49
Evaluated at bid price : 20.49
Bid-YTW : 4.83 %
BAM.PF.G FixedReset 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 23.34
Evaluated at bid price : 24.37
Bid-YTW : 4.97 %
CU.PR.G Perpetual-Discount 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 21.44
Evaluated at bid price : 21.44
Bid-YTW : 5.32 %
CU.PR.C FixedReset 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 22.31
Evaluated at bid price : 22.94
Bid-YTW : 4.64 %
BAM.PR.R FixedReset 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 20.66
Evaluated at bid price : 20.66
Bid-YTW : 5.06 %
BAM.PF.F FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 24.37
Evaluated at bid price : 24.73
Bid-YTW : 4.97 %
TRP.PR.C FixedReset 1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 17.77
Evaluated at bid price : 17.77
Bid-YTW : 4.83 %
SLF.PR.H FixedReset 1.93 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.15
Bid-YTW : 5.67 %
MFC.PR.N FixedReset 2.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 5.20 %
BAM.PR.C Floater 2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 3.45 %
SLF.PR.G FixedReset 3.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.21
Bid-YTW : 6.81 %
MFC.PR.M FixedReset 3.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.71
Bid-YTW : 5.32 %
Volume Highlights
Issue Index Shares
Traded
Notes
POW.PR.G Perpetual-Premium 408,060 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 25.22
Bid-YTW : 5.26 %
TRP.PR.B FixedReset 150,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 4.76 %
PWF.PR.L Perpetual-Discount 104,234 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 22.86
Evaluated at bid price : 23.13
Bid-YTW : 5.51 %
PWF.PR.H Perpetual-Premium 94,500 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-08-10
Maturity Price : 25.00
Evaluated at bid price : 25.38
Bid-YTW : -15.79 %
IFC.PR.G FixedReset 75,456 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 5.02 %
PWF.PR.T FixedReset 75,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 23.60
Evaluated at bid price : 24.30
Bid-YTW : 4.53 %
There were 43 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: 25.11 – 26.11
Spot Rate : 1.0000
Average : 0.6790

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 4.81 %

TRP.PR.A FixedReset Quote: 20.49 – 21.40
Spot Rate : 0.9100
Average : 0.7225

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 20.49
Evaluated at bid price : 20.49
Bid-YTW : 4.83 %

TRP.PR.E FixedReset Quote: 22.61 – 22.98
Spot Rate : 0.3700
Average : 0.2307

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 22.00
Evaluated at bid price : 22.61
Bid-YTW : 4.85 %

PWF.PR.F Perpetual-Discount Quote: 23.79 – 24.17
Spot Rate : 0.3800
Average : 0.2696

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 23.52
Evaluated at bid price : 23.79
Bid-YTW : 5.52 %

W.PR.M FixedReset Quote: 25.60 – 25.85
Spot Rate : 0.2500
Average : 0.1671

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 4.41 %

TRP.PR.G FixedReset Quote: 24.21 – 24.55
Spot Rate : 0.3400
Average : 0.2600

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-07-11
Maturity Price : 23.17
Evaluated at bid price : 24.21
Bid-YTW : 5.02 %