November 8, 2013

There was a good US jobs number:

The addition of 204,000 workers followed a revised 163,000 gain in September that was larger than initially estimated, Labor Department figures showed today in Washington. The median forecast of 91 economists surveyed by Bloomberg called for an increase of 120,000. The jobless rate rose to 7.3 percent from an almost five-year low.

This didn’t help the Treasury and gold markets much:

Treasuries sank the most since July and gold slid as a bigger-than-forecast increase in American payrolls fueled speculation the Federal Reserve may trim stimulus earlier than expected. The dollar strengthened against all 16 major peers while U.S. stocks advanced.

The yield on 10-year Treasuries jumped 14 basis points to 2.74 percent at 12:58 p.m. in New York and climbed as much as 16 basis points. Gold futures dropped 1.8 percent to $1,285.00 an ounce. The Standard & Poor’s 500 Index (SPX) rebounded 0.9 percent after tumbling 1.3 percent yesterday. French bonds fell after S&P downgraded the country’s debt. The dollar climbed 0.4 percent against the euro. AT&T Inc. and BNP Paribas SA led 21 billion euros ($28 billion) of bond sales in Europe this week, the busiest in two months.

That’s right, S&P downgraded France:

  • We believe the French government’s reforms to taxation, as well as to product, services, and labor markets, will not substantially raise France’s medium-term growth prospects, and that ongoing high unemployment is weakening support for further significant fiscal and structural policy measures.
  • Furthermore, we believe lower economic growth is constraining the government’s ability to consolidate public finances.
  • We are therefore lowering our long-term foreign and local currency sovereign credit ratings on France to ‘AA’.
  • The outlook is stable, reflecting our view that the probability that we will raise or lower the rating on France over the next two years is less than one-in-three.

Angst is rising over the Fed exit from QE:

The Fed’s financial-crisis actions — from acquiring debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc. to three rounds of quantitative easing — have led so far to the record payments. Now, the prospect of a stronger economy and rising interest rates means the value of the Fed’s bond holdings will fall at the same time its funding costs climb because the central bank pays interest on the excess reserves it holds for banks.

This could cause operating losses and invite increased scrutiny from lawmakers already critical of the central bank’s policies.

That’s a risk central bankers are grappling with as they consider when to slow the $85 billion monthly pace of their government and mortgage-backed securities purchases. Federal Reserve Bank of New York President William C. Dudley said in a speech last month that the central bank’s balance-sheet expansion does “create some budget risk” that threatens the institution’s independence.

I know a number of Asset Managers read this blog. How would you guys like a quarter like these guys?

Pacific Investment Management Co., the world’s largest fixed-income manager, had $39 billion in net redemptions during the third quarter as investors fled bonds in anticipation of rising interest rates.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 51bp, FixedResets up 22bp and DeemedRetractibles gaining 2bp. As might be expected, the Performance Highlights table is fairly lengthy, with the down side dominated by Perpetual Discounts and winners by FixedResets. Volume was very high.

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 -0.2058 % 2,513.0
FixedFloater 4.17 % 3.45 % 28,102 18.47 1 1.1540 % 4,026.7
Floater 2.95 % 2.98 % 62,050 19.75 3 -0.2058 % 2,713.4
OpRet 4.62 % 2.92 % 68,834 0.38 3 0.1800 % 2,642.2
SplitShare 4.74 % 5.10 % 69,402 3.93 6 0.0474 % 2,960.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1800 % 2,416.0
Perpetual-Premium 5.57 % 2.42 % 125,907 0.09 11 0.0809 % 2,309.0
Perpetual-Discount 5.55 % 5.53 % 177,655 14.57 27 -0.5123 % 2,371.1
FixedReset 4.98 % 3.50 % 231,640 3.32 82 0.2179 % 2,472.6
Deemed-Retractible 5.07 % 3.92 % 197,178 1.64 42 0.0242 % 2,414.3
FloatingReset 2.61 % 2.41 % 284,464 4.51 5 0.0000 % 2,456.6
Performance Highlights
Issue Index Change Notes
BAM.PF.C Perpetual-Discount -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 19.81
Evaluated at bid price : 19.81
Bid-YTW : 6.22 %
ELF.PR.H Perpetual-Discount -1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 23.73
Evaluated at bid price : 24.10
Bid-YTW : 5.75 %
BAM.PF.D Perpetual-Discount -1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 19.87
Evaluated at bid price : 19.87
Bid-YTW : 6.26 %
FTS.PR.J Perpetual-Discount -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 22.58
Evaluated at bid price : 22.95
Bid-YTW : 5.25 %
BAM.PR.M Perpetual-Discount -1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 20.09
Evaluated at bid price : 20.09
Bid-YTW : 6.00 %
CU.PR.E Perpetual-Discount -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 23.23
Evaluated at bid price : 23.55
Bid-YTW : 5.20 %
ELF.PR.F Perpetual-Discount -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 23.09
Evaluated at bid price : 23.35
Bid-YTW : 5.72 %
BAM.PR.R FixedReset -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 23.47
Evaluated at bid price : 25.07
Bid-YTW : 4.25 %
BAM.PR.N Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.03 %
TRP.PR.A FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 23.95
Evaluated at bid price : 24.40
Bid-YTW : 3.92 %
BAM.PR.G FixedFloater 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 22.97
Evaluated at bid price : 22.79
Bid-YTW : 3.45 %
SLF.PR.G FixedReset 1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 3.93 %
ENB.PR.N FixedReset 1.47 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-01
Maturity Price : 25.00
Evaluated at bid price : 24.90
Bid-YTW : 4.28 %
IFC.PR.A FixedReset 1.93 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.76
Bid-YTW : 4.48 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.W Perpetual-Premium 113,050 RBC crossed 100,000 at 25.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.19 %
RY.PR.R FixedReset 110,268 Nesbitt bought blocks of 13,700 shares, 15,000 and 20,000 from RBC all at 25.30; then bought another 11,700 from TD at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.22
Bid-YTW : 2.33 %
TD.PR.O Deemed-Retractible 100,818 TD crossed 99,900 at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-08
Maturity Price : 25.25
Evaluated at bid price : 25.43
Bid-YTW : -2.57 %
BNS.PR.Z FixedReset 76,515 RBC bought 61,500 from Dundee at 61,500.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 4.08 %
BMO.PR.J Deemed-Retractible 74,986 TD crossed 70,000 at 25.64.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-25
Maturity Price : 25.50
Evaluated at bid price : 25.64
Bid-YTW : 1.88 %
TD.PR.Y FixedReset 58,970 TD crossed 50,000 at 24.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.94
Bid-YTW : 3.60 %
There were 61 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.D FixedReset Quote: 24.48 – 24.98
Spot Rate : 0.5000
Average : 0.3428

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 22.95
Evaluated at bid price : 24.48
Bid-YTW : 4.17 %

FTS.PR.J Perpetual-Discount Quote: 22.95 – 23.39
Spot Rate : 0.4400
Average : 0.2871

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 22.58
Evaluated at bid price : 22.95
Bid-YTW : 5.25 %

MFC.PR.F FixedReset Quote: 23.05 – 23.39
Spot Rate : 0.3400
Average : 0.2161

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.05
Bid-YTW : 4.48 %

IFC.PR.A FixedReset Quote: 23.76 – 24.12
Spot Rate : 0.3600
Average : 0.2377

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.76
Bid-YTW : 4.48 %

GWO.PR.N FixedReset Quote: 21.83 – 22.18
Spot Rate : 0.3500
Average : 0.2433

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.83
Bid-YTW : 4.80 %

BAM.PF.C Perpetual-Discount Quote: 19.81 – 20.05
Spot Rate : 0.2400
Average : 0.1427

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-11-08
Maturity Price : 19.81
Evaluated at bid price : 19.81
Bid-YTW : 6.22 %

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