October 3, 2012

These are great times for American mortgage borrowers, as long as they have jobs and aren’t underwater:

Mortgage prepayment rates have soared to the highest in seven years as homeowners take advantage of the lowest borrowing costs on record to refinance.

Home loans were repaid in August at a pace that would erase 25 percent of the debt in a year, according to Lender Processing Services Inc. (LPS), a Jacksonville, Florida-based data provider that tracks 40 million mortgages.

The cost of 30-year loans dropped to 3.4 percent last week, helping push refinancing applications to a three-year high, after the Federal Reserve said it will buy $40 billion of mortgage securities per month to stimulate the economy. That followed government efforts to increase refinancing with new rules designed to expand eligibility and reduce costs.

If the feds insist on coddling an expensive flag-carrier, Canadians know what to do:

The Conference Board of Canada report says about five million Canadians now cross the U.S. border by land every year to fly out of American airports.

It says higher airfares and fees and taxes in Canada, as well as differences in wages, aircraft prices and industry productivity makes it 30 per cent cheaper to fly out of the U.S.

We want unilateral open-skies, now!

It was a dull day for the Canadian preferred share market, with PerpetualPremiums up 2bp, FixedResets gaining 1bp and DeemedRetractibles down 4bp. Volatility was average. Volume was average.

PerpetualDiscounts (all four of them! from both issuers!) now yield 4.87%, equivalent to 6.33% interest at the standard conversion factor of 1.3x. Long Corporates now yield 4.2% (!) so the pre-tax interest equivalent spread is now about 215bp, unchanged from the September 26 report.

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 0.0948 % 2,457.0
FixedFloater 4.31 % 3.69 % 35,838 17.86 1 0.0454 % 3,690.1
Floater 2.98 % 3.01 % 55,160 19.74 3 0.0948 % 2,652.9
OpRet 4.62 % 0.16 % 60,159 0.65 4 0.4399 % 2,572.7
SplitShare 5.44 % 5.00 % 73,465 4.54 3 0.1589 % 2,822.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.4399 % 2,352.5
Perpetual-Premium 5.28 % 2.20 % 94,872 0.39 27 0.0194 % 2,299.9
Perpetual-Discount 5.00 % 4.87 % 103,831 15.72 4 0.0409 % 2,588.2
FixedReset 4.97 % 2.97 % 183,535 4.24 73 0.0064 % 2,435.4
Deemed-Retractible 4.94 % 3.42 % 121,611 1.20 46 -0.0390 % 2,377.9
Performance Highlights
Issue Index Change Notes
SLF.PR.H FixedReset -1.45 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.44
Bid-YTW : 3.96 %
GWO.PR.I Deemed-Retractible -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 5.07 %
PWF.PR.K Perpetual-Premium -1.06 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.91 %
IGM.PR.B Perpetual-Premium 1.75 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 26.00
Evaluated at bid price : 26.76
Bid-YTW : 4.12 %
Volume Highlights
Issue Index Shares
Traded
Notes
IFC.PR.A FixedReset 334,187 RBC crossed 50,000 at 25.45. National crossed five blocks: 49,400 shares, 50,000 shares, 25,000 and two of 75,000 each, all at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 3.54 %
CU.PR.C FixedReset 176,213 Nesbitt crossed two blocks of 50,000 each at 26.10. National crossed 50,000 and TD crossed 16,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.12 %
ENB.PR.P FixedReset 110,960 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-10-03
Maturity Price : 23.14
Evaluated at bid price : 25.14
Bid-YTW : 3.69 %
BMO.PR.N FixedReset 78,131 Scotia crossed blocks of 25,000 and 50,000, both at 26.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 1.91 %
TD.PR.E FixedReset 73,979 TD crossed 50,000 at 26.95; Desjardins crossed 10,000 at 26.97.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.97
Bid-YTW : 1.84 %
TD.PR.A FixedReset 61,703 Nesbitt crossed 50,000 at 25.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.98
Bid-YTW : 2.65 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IGM.PR.B Perpetual-Premium Quote: 26.76 – 28.70
Spot Rate : 1.9400
Average : 1.2662

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 26.00
Evaluated at bid price : 26.76
Bid-YTW : 4.12 %

PWF.PR.K Perpetual-Premium Quote: 25.25 – 25.56
Spot Rate : 0.3100
Average : 0.1993

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.91 %

PWF.PR.P FixedReset Quote: 25.18 – 25.34
Spot Rate : 0.1600
Average : 0.0986

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-10-03
Maturity Price : 23.39
Evaluated at bid price : 25.18
Bid-YTW : 2.97 %

RY.PR.A Deemed-Retractible Quote: 25.77 – 25.95
Spot Rate : 0.1800
Average : 0.1210

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-24
Maturity Price : 25.25
Evaluated at bid price : 25.77
Bid-YTW : 3.42 %

W.PR.H Perpetual-Premium Quote: 25.75 – 25.97
Spot Rate : 0.2200
Average : 0.1646

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : -5.47 %

RY.PR.T FixedReset Quote: 26.99 – 27.20
Spot Rate : 0.2100
Average : 0.1582

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.99
Bid-YTW : 2.32 %

One Response to “October 3, 2012”

  1. […] PerpetualDiscounts now yield 5.01%, equivalent to 6.51% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.25%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 225bp, widening from the 215bp reported October 3. […]

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