October 6, 2011

More worries!

Canadian pension funds saw their funding problems grow dramatically in the third quarter as bond yields tumbled while stock markets went into decline.

Pension consulting firm Mercer said its pension health index slipped to 60 per cent funding at the end of September from 71 per cent at the end of June and 75 per cent at the end of March. The index measures the change in funded status of a typical pension plan with average asset allocations.

[Mercer’s pension guy] Mr. [Scott] Clausen said the decrease in bond yields contributed to about 8 percentage points of the drop in the pension health index in the third quarter, while declining investment returns accounted for the other 3 percentage point decline.

There’s a big round of quantitative easing in the UK:

Bank of England Governor Mervyn King has lost faith in European governments’ ability to resolve the region’s debt crisis.

The central bank yesterday announced its biggest stimulus since the depths of the recession, citing “vulnerabilities” related to the euro-area turmoil. King said the move, the first loosening of U.K. monetary policy since 2009, was a response to what may be the worst financial crisis ever.

King’s refusal to wait for European governments signals determination to shield the U.K. from a crisis that threatens to tip Britain’s biggest trading partner into recession. It also shows concern that failure to protect bank funding markets risks recreating conditions that led to the collapse of Lehman Brothers Holdings Inc. three years ago.

The U.K. central bank, which left its benchmark interest rate at a record-low 0.5 percent, raised the ceiling for so- called quantitative easing to 275 billion pounds ($421 billion) from 200 billion pounds. That’s the biggest expansion since the first round of stimulus in March 2009. Only 11 of 32 economists in a Bloomberg News survey predicted the increase.

DBRS confirmed BBD at Pfd-4.

S&P changed the outlook on TD from positive to stable:

  • We are revising the outlook on Toronto-Dominion Bank (TD Bank) to stable
    from positive based on our expectations that a weak Canadian economic recovery will provide more challenging operating conditions than had previously been expected.
  • TD Bank continues to experience consistent and strong core operating performance from domestic operations with a growing contribution from its U.S. retail bank.
  • We are affirming our ‘AA-/A-1+’ counterparty credit ratings on TD Bank
    and related entities.

S&P changed the outlook on RY from positive to stable:

  • We are revising the outlook on Royal Bank of Canada to stable from
    positive for a potential upgrade based on our expectations that a weaker Canadian economic recovery will provide more challenging operating conditions than had previously been expected.
  • We are affirming our ‘AA-/A-1+’ counterparty credit ratings on RBC and related entities.
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 1.3107 % 1,959.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.3107 % 2,947.4
Floater 3.67 % 3.66 % 159,540 18.18 2 1.3107 % 2,116.0
OpRet 4.89 % 4.22 % 60,421 1.58 8 -0.1944 % 2,431.1
SplitShare 5.48 % 1.34 % 54,036 0.39 4 -0.2683 % 2,447.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1944 % 2,223.0
Perpetual-Premium 5.72 % 4.53 % 109,795 1.04 13 0.2400 % 2,114.2
Perpetual-Discount 5.44 % 5.53 % 109,329 14.64 17 0.1299 % 2,217.5
FixedReset 5.18 % 3.34 % 211,229 2.69 61 0.1223 % 2,312.7
Deemed-Retractible 5.13 % 4.64 % 226,477 7.73 46 0.2166 % 2,172.7
Performance Highlights
Issue Index Change Notes
BAM.PR.P FixedReset -1.48 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-30
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 4.76 %
BAM.PR.J OpRet -1.41 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.88 %
SLF.PR.F FixedReset -1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 4.66 %
TRP.PR.C FixedReset -1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 23.24
Evaluated at bid price : 25.07
Bid-YTW : 3.02 %
RY.PR.A Deemed-Retractible 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 4.49 %
IAG.PR.C FixedReset 1.03 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 3.55 %
BAM.PR.N Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.63 %
SLF.PR.C Deemed-Retractible 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.32
Bid-YTW : 7.09 %
TCA.PR.Y Perpetual-Premium 1.10 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 51.66
Bid-YTW : 3.99 %
SLF.PR.E Deemed-Retractible 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.45
Bid-YTW : 7.06 %
SLF.PR.D Deemed-Retractible 1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.30
Bid-YTW : 7.10 %
RY.PR.H Deemed-Retractible 1.32 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.88
Bid-YTW : 3.69 %
MFC.PR.E FixedReset 1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.66
Bid-YTW : 4.64 %
HSE.PR.A FixedReset 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 23.37
Evaluated at bid price : 25.52
Bid-YTW : 3.15 %
BAM.PR.R FixedReset 2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 23.45
Evaluated at bid price : 25.90
Bid-YTW : 3.76 %
FTS.PR.F Perpetual-Discount 2.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 24.70
Evaluated at bid price : 24.99
Bid-YTW : 4.94 %
BAM.PR.B Floater 2.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 3.66 %
HSB.PR.E FixedReset 2.71 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.91
Bid-YTW : 3.71 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.M FixedReset 88,812 Nesbitt sold 15,000 to TD at 25.90, then crossed 40,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.83
Bid-YTW : 3.09 %
CM.PR.L FixedReset 70,802 RBC crossed 49,000 at 27.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.96
Bid-YTW : 3.14 %
MFC.PR.A OpRet 65,945 RBC crossed two blocks of 25,000 each, both at 24.95.
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 4.22 %
TRP.PR.C FixedReset 65,102 TD crossed 35,000 at 25.30; RBC crossed 14,600 at 25.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 23.24
Evaluated at bid price : 25.07
Bid-YTW : 3.02 %
SLF.PR.D Deemed-Retractible 56,312 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.30
Bid-YTW : 7.10 %
MFC.PR.E FixedReset 38,472 RBC crossed 25,000 at 25.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.66
Bid-YTW : 4.64 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.N Perpetual-Discount Quote: 21.25 – 22.38
Spot Rate : 1.1300
Average : 0.7040

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.63 %

BAM.PR.J OpRet Quote: 25.78 – 26.90
Spot Rate : 1.1200
Average : 0.8849

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.88 %

NA.PR.N FixedReset Quote: 25.64 – 26.32
Spot Rate : 0.6800
Average : 0.4669

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 3.44 %

BNA.PR.D SplitShare Quote: 26.35 – 26.86
Spot Rate : 0.5100
Average : 0.3165

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-11-05
Maturity Price : 26.00
Evaluated at bid price : 26.35
Bid-YTW : -2.63 %

IAG.PR.F Deemed-Retractible Quote: 25.71 – 26.24
Spot Rate : 0.5300
Average : 0.3454

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.71
Bid-YTW : 5.59 %

PWF.PR.G Perpetual-Premium Quote: 24.65 – 25.14
Spot Rate : 0.4900
Average : 0.3153

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-10-06
Maturity Price : 24.34
Evaluated at bid price : 24.65
Bid-YTW : 5.98 %

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