September 10, 2012

There are rising expectations for low rates forever:

Just six months ago, money market traders expected the Federal Reserve to raise interest rates by the end of 2013. Now, they see borrowing costs staying at record lows for about three more years as the economic outlook worsens.

Bond market measures from overnight index swaps, which indicate no increase in the federal funds rate until mid-2015, to a 62 percent decline in a measure of volatility in government bonds signal that rates will stay near zero for longer. The gap between two- and five-year Treasury yields, which decreases when traders expect benchmark rates to remain subdued, is more than 50 percent narrower than its average since 2008.

It was an off day for the Canadian preferred share market, with PerpetualPremiums and FixedResets down 7bp, while DeemedRetractibles lost 9bp. Volatiltiy was average, all on the downside. Volume continued at holiday levels.

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 0.6532 % 2,420.4
FixedFloater 4.52 % 3.88 % 35,161 17.52 1 -1.8692 % 3,519.1
Floater 3.01 % 3.06 % 52,909 19.51 3 0.6532 % 2,613.4
OpRet 4.65 % 3.20 % 59,626 0.78 4 -0.5531 % 2,539.1
SplitShare 5.47 % 4.89 % 74,124 4.61 3 -0.0665 % 2,802.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.5531 % 2,321.8
Perpetual-Premium 5.29 % 3.79 % 90,607 1.05 28 -0.0694 % 2,278.9
Perpetual-Discount 4.93 % 4.99 % 98,633 15.40 3 -0.0830 % 2,535.6
FixedReset 4.99 % 3.09 % 165,280 4.08 70 -0.0730 % 2,421.3
Deemed-Retractible 4.95 % 3.64 % 122,853 1.95 46 -0.0909 % 2,366.1
Performance Highlights
Issue Index Change Notes
FTS.PR.E OpRet -2.16 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.26
Bid-YTW : 2.19 %
BAM.PR.G FixedFloater -1.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-10
Maturity Price : 21.75
Evaluated at bid price : 21.00
Bid-YTW : 3.88 %
HSB.PR.D Deemed-Retractible -1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.70
Bid-YTW : 4.33 %
TRP.PR.A FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-10
Maturity Price : 23.69
Evaluated at bid price : 25.52
Bid-YTW : 3.22 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.B Deemed-Retractible 277,305 Nesbitt crossed blocks of 227,300 (nice ticket!) and 47,900, both at 24.40.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.39
Bid-YTW : 5.13 %
CIU.PR.B FixedReset 113,500 National crossed blocks of 82,000 and 26,700.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.00
Bid-YTW : 2.08 %
PWF.PR.M FixedReset 62,000 TD crossed 62,000 at 26.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.39 %
MFC.PR.B Deemed-Retractible 52,706 Nesbitt crossed 47,900 at 23.86.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.78
Bid-YTW : 5.33 %
MFC.PR.G FixedReset 42,829 RBC sold 13,200 to Nesbitt at 25.70, then crossed 15,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-12-19
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 3.68 %
MFC.PR.H FixedReset 37,900 RBC crossed 20,000 at 25.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 3.82 %
There were 16 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.M Perpetual-Discount Quote: 24.15 – 24.50
Spot Rate : 0.3500
Average : 0.2175

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-10
Maturity Price : 23.87
Evaluated at bid price : 24.15
Bid-YTW : 4.99 %

HSB.PR.D Deemed-Retractible Quote: 25.70 – 26.11
Spot Rate : 0.4100
Average : 0.2800

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.70
Bid-YTW : 4.33 %

IAG.PR.F Deemed-Retractible Quote: 26.07 – 26.49
Spot Rate : 0.4200
Average : 0.2910

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.07
Bid-YTW : 5.31 %

FTS.PR.E OpRet Quote: 26.26 – 26.59
Spot Rate : 0.3300
Average : 0.2108

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.26
Bid-YTW : 2.19 %

PWF.PR.M FixedReset Quote: 26.05 – 26.40
Spot Rate : 0.3500
Average : 0.2503

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.39 %

IAG.PR.C FixedReset Quote: 25.86 – 26.23
Spot Rate : 0.3700
Average : 0.2893

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.86
Bid-YTW : 3.25 %

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