Europe is inching towards quantitative easing:
Mario Draghi dragged the European Central Bank toward more monetary stimulus with a pledge to assess the need early next year, disappointing some investors seeking faster action.
Even as he unveiled “substantially” lower forecasts for euro-area inflation and economic growth, the ECB president said officials will wait to evaluate whether they’re doing enough to revive the weakest consumer-price growth in five years. They are already intensifying preparations for further measures, including studying the merits of buying government debt.
If policy makers do see a need to combat a prolonged period of low inflation then “this would imply altering early next year the size, pace and composition of our measures,” Draghi told reporters in Frankfurt after his Governing Council met to set policy for the last time in 2014. “We don’t need unanimity” on the 24-member council to act, he said.
The ECB Governing Council expects to consider a proposal for a broad-based asset program including sovereign debt next month, according to two euro-area central-bank officials familiar with deliberations who asked not to be identified because the discussion is private. The package is envisaged to include various types of bonds, but no equities, and has yet to be designed, the people said.
Canadian equities got hammered:
Canadian stocks fell the most in more than a year as the nation’s biggest banks posted results that missed estimates and energy shares resumed a selloff with the price of crude.
Toronto-Dominion Bank (TD), the country’s largest lender by assets, tumbled the most in more than five years after posting fourth-quarter profit short of estimates. Energy stocks tumbled 2.1 percent as a group as oil fell. Canadian Oil Sands Ltd. (COS) sank 16 percent to a decade low after slashing its dividend. Enbridge Inc. jumped 10 percent to a record on plans to transfer C$17 billion ($14.9 billion) in assets to a fund.
The Standard & Poor’s/TSX Composite Index (SPTSX) slumped 284.11 points, or 1.9 percent, to 14,469.95 at 4 p.m. in Toronto, the biggest drop since June 2013. The equities benchmark pared its gain to 6.2 percent this year.
…
All of the 10 industries in the S&P/TSX dropped at least 0.6 percent on trading volume 45 percent higher than the 30-day average today. Global equities slumped after the European Central Bank said policy makers will reassess stimulus next quarter, damping hopes for additional bond purchases this year.
And whenever there’s a big market move there’s only one party at fault:
A nearly 1 per cent drop in the S&P/TSX composite index in the final hour of trading Thursday was due to a large order from Goldman Sachs to sell a basket of Canadian stocks, according to a note from the Bank of Montreal.
Canada’s main stock index recorded one of its biggest declines of the year on Thursday, as investors reacted to another push lower in the price of crude oil as well as a disappointing earnings report from Toronto-Dominion Bank.
According to BMO, the Goldman Sachs sell order was for approximately $600-million in a broad selection of Canadian stocks, but many were in the banking and energy sectors. The heaviest volumes sold by Goldman were shares in Royal Bank of Canada, TD Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Natural Resources, Enbridge and Suncor.
The TSX closed down 284.1 points, or 1.93 per cent, at 14,469.95, far outpacing the 0.12 per cent fall in the S&P 500. The Canadian index had been down nearly 1 per cent prior to 3 p.m. (ET), which is around when the Goldman order was believed to be transacted.
The feds are shilling for the Toronto Exchange:
The Canadian government has approved Burger King Worldwide Inc.’s purchase of Tim Hortons Inc. on condition it maintains employment levels and list the company in Toronto.
To win approval under the nation’s foreign takeover law, Burger King has agreed to “work with Tim Hortons (THI) franchisees” to maintain employment levels across Canada, and accelerate expansion of new restaurants outside Canada at a “significantly greater pace than currently planned,” Industry Minister James Moore said in a statement.
…
Burger King has also agreed to establish the new company’s headquarters in Oakville, Ontario and list on the Toronto Stock Exchange, according to the statement. Other commitments include managing Tim Hortons as a “distinct brand” that won’t be co-branded with Burger King and the maintenance of franchise rent and royalty structure at current levels for the next five years.
Yay! Micromanagement and central planning! Soon we’ll all be RICH!
Bond salesmen won’t be rich, though (emphasis added):
Four of Canada’s six biggest banks have posted quarterly declines in trading, dragged down by plunging bond markets in October and one-time changes to how lenders value uncollaterized derivatives.
Toronto-Dominion Bank’s trading revenue dropped 14 percent to C$296 million ($260 million) in the period ended Oct. 31 from a year earlier, led by declines in interest-rate and credit trading, the company said today. The lender recorded a C$65 million pretax charge in its wholesale bank tied to the valuation adjustment.
…
Bank of Montreal (BMO) trading revenue tumbled 21 percent to C$186 million as fixed-income trading plunged 79 percent from a year earlier, the bank said in a Dec. 2 statement. The valuation adjustment reduced revenue by C$39 million.
…
CIBC trading revenue fell 81 percent to C$27 million, with a C$98 million loss in interest-rates trading, the Toronto-based bank said today in a statement. The lender said it recorded an C$82 million after-tax charge tied to funding valuation adjustments.Trimming Capital
Royal Bank’s total trading revenue slid 43 percent to C$371 million, fueled by a 70 percent drop in trading of interest-rate and credit securities, the Toronto-based bank said yesterday. Royal Bank had a C$51 million after-tax charge tied to the adjustments.
Royal Bank has been trimming the capital devoted to bond trading as global regulations meant to prevent another credit crisis make it one of the lender’s most costly businesses, CFO Janice Fukakusa said.
So bond market liquidity just got a little worse. Just in time for the long-awaited crash due to policy rate changes!
I try to restrain myself from ranting on non-preferred share issues on this soap-box, but every now and then something irritates me enough that I think it would be a shame to deprive you of my views. Today’s rant is about a Bloomberg story titled Princeton Has a Shadow Fraternity System Nobody Controls. So in the first place, the headline is nonsense. The ‘shadow fraternity system’ certainly is under control by somebody, how could it be otherwise? The writer is merely upset that it’s not controlled by people of whom he approves.
When Princeton officials learned that a student had mass-emailed a photo of a woman performing oral sex at one of its 11 eating clubs (social clubs that resemble fraternities), it quietly began investigating the matter. Despite the fact that passing around a photo of a sex act without the consent of those pictured is a crime in New Jersey, the university did not inform local police. The school’s squeamish approach to the incident raises questions about how it can discipline its students — and abide by stricter government guidelines for handling sexual assault — when so much of social life at the institution lives outside the walls of campus.
…
“Our investigation began as soon as we received a report, just days after the alleged incident,” says Martin Mbugua, a University spokesman. The Princeton Police Department only found out about the email three weeks later, when an anonymous third party notified the police chief. Any misbehavior at the Tiger Inn, headquartered in a stately mansion on a street just off the main campus, technically falls under the jurisdiction of local police.In November, the Department of Education found that Princeton botched its response to reports of sexual assault and the University formally agreed to tighten its handling of alleged sexual crimes. New guidelines implemented by the government require schools to investigate sexual violence reports that occur outside of school grounds if the incident has “continuing effects on campus.”
So the university is on the defensive about not being an official informer, and are expected to be Junior Policemen with respect to sexual violence. Sorry, buddies: these are university students we are talking about here – young men and young women. If they want something to be a police matter, they should be expected to know how to contact the police themselves. Junior Police and a Junior Justice System with the power to expel students are not the answer to anything. But meanwhile, the politicians bleat that 20-year olds are old enough to die in Afghanistan, but not old enough to take responsibility for themselves, and drip crocodile tears over the rising cost of tuition due to administrative overload.
There was one cry on the lips of FixedReset investors today:
One thing I can’t help but highlighting, given the horrible (second-worst) performance of TRP.PR.C today, is the Implied Volatility analysis for the TRP FixedResets:
Click for Big
Assiduous Readers will recognize that the overall appearance of the graph has not changed from the chart published as of the close on December 2, but Alert Assiduous Readers will notice that the fit to theory is much better. On Tuesday I asserted that:
Prices for the TRP issues are very strange: consider that TRP.PR.A, bid at 21.15, is priced lower than TRP.PR.C, which is a FixedReset, 4.40%+154, resetting 2016-1-30, bid at 21.77. … TRP.PR.A is now $1.44 cheap while TRP.PR.C is $1.73 expensive
Well, that was then. Now I say that TRP.PR.A is bid at 21.39 and is $0.89 cheap, while TRP.PR.C is bid at 20.82 and is $1.06 expensive. So according to me, there’s more adjustment yet to come!
Despite that – and despite a reported 42bp decline in TXPR and a 79bp hit for TXPL – it was a mixed day for the Canadian preferred share market today, with PerpetualDiscounts off 6bp, FixedResets down 62bp and DeemedRetractibles gaining 4bp. There is a very lengthy list of performance highlights, just like the old days of 2008, dominated of course by FixedReset losers with a large contingent of Enbridge issues, spooked by the credit muttering. Volume was average.
| 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 | 0.0285 % | 2,518.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0285 % | 3,986.7 |
| Floater | 2.99 % | 3.10 % | 63,408 | 19.41 | 4 | 0.0285 % | 2,677.0 |
| OpRet | 4.39 % | -11.90 % | 27,137 | 0.08 | 2 | -0.0390 % | 2,759.6 |
| SplitShare | 4.27 % | 3.63 % | 41,879 | 3.75 | 5 | 0.0791 % | 3,198.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0390 % | 2,523.3 |
| Perpetual-Premium | 5.41 % | -2.69 % | 73,001 | 0.09 | 20 | 0.0605 % | 2,487.4 |
| Perpetual-Discount | 5.14 % | 5.03 % | 115,315 | 15.40 | 15 | -0.0652 % | 2,666.9 |
| FixedReset | 4.20 % | 3.58 % | 196,880 | 8.57 | 74 | -0.6162 % | 2,561.5 |
| Deemed-Retractible | 4.97 % | -0.69 % | 94,662 | 0.15 | 40 | 0.0446 % | 2,614.7 |
| FloatingReset | 2.54 % | 1.88 % | 60,146 | 3.48 | 5 | -0.1569 % | 2,544.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| HSE.PR.A | FixedReset | -4.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 19.61 Evaluated at bid price : 19.61 Bid-YTW : 4.06 % |
| TRP.PR.C | FixedReset | -3.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 20.82 Evaluated at bid price : 20.82 Bid-YTW : 3.63 % |
| PWF.PR.P | FixedReset | -3.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 3.58 % |
| GWO.PR.N | FixedReset | -3.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.30 Bid-YTW : 5.16 % |
| ENB.PR.Y | FixedReset | -2.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 22.14 Evaluated at bid price : 22.75 Bid-YTW : 4.17 % |
| ENB.PR.H | FixedReset | -2.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 21.63 Evaluated at bid price : 21.91 Bid-YTW : 4.09 % |
| FTS.PR.H | FixedReset | -1.87 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 19.97 Evaluated at bid price : 19.97 Bid-YTW : 3.57 % |
| SLF.PR.G | FixedReset | -1.70 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.20 Bid-YTW : 5.30 % |
| ENB.PR.B | FixedReset | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.10 Evaluated at bid price : 24.10 Bid-YTW : 3.89 % |
| ENB.PR.D | FixedReset | -1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 22.78 Evaluated at bid price : 23.66 Bid-YTW : 3.95 % |
| BAM.PR.X | FixedReset | -1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 21.45 Evaluated at bid price : 21.45 Bid-YTW : 3.98 % |
| ENB.PR.J | FixedReset | -1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.08 Evaluated at bid price : 24.60 Bid-YTW : 4.02 % |
| ENB.PF.E | FixedReset | -1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.07 Evaluated at bid price : 24.82 Bid-YTW : 4.06 % |
| ENB.PF.A | FixedReset | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.11 Evaluated at bid price : 24.86 Bid-YTW : 4.05 % |
| ENB.PR.N | FixedReset | -1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.03 Evaluated at bid price : 24.41 Bid-YTW : 4.04 % |
| ENB.PR.T | FixedReset | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 22.78 Evaluated at bid price : 23.92 Bid-YTW : 4.01 % |
| ENB.PR.P | FixedReset | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 22.80 Evaluated at bid price : 23.92 Bid-YTW : 4.01 % |
| BAM.PF.B | FixedReset | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.20 Evaluated at bid price : 24.96 Bid-YTW : 3.99 % |
| TRP.PR.B | FixedReset | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 3.77 % |
| BAM.PF.A | FixedReset | -1.16 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 4.13 % |
| ENB.PF.G | FixedReset | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.09 Evaluated at bid price : 24.92 Bid-YTW : 4.06 % |
| FTS.PR.J | Perpetual-Discount | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 24.04 Evaluated at bid price : 24.45 Bid-YTW : 4.86 % |
| IAG.PR.A | Deemed-Retractible | 1.24 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 5.23 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.P | FixedReset | 521,700 | Desjardins sold 18,500 to Scotia at 24.10, then blocks of 125,500 shares, 241,000 shares, 15,600 and 16,000 to anonymous, all at 24.00, and finally crossed 65,200 at 24.00. Nice tickets! YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 22.80 Evaluated at bid price : 23.92 Bid-YTW : 4.01 % |
| ENB.PF.C | FixedReset | 199,713 | Desjardins sold blocks of 111,200 and 55,200 to anonymous at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.13 Evaluated at bid price : 24.96 Bid-YTW : 4.01 % |
| TRP.PR.A | FixedReset | 157,332 | TD crossed 14,300 at 21.40 and 20,000 at 21.35. RBC crossed 37,300 at 21.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 21.39 Evaluated at bid price : 21.39 Bid-YTW : 3.85 % |
| MFC.PR.N | FixedReset | 120,750 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.06 Bid-YTW : 3.73 % |
| ENB.PF.E | FixedReset | 67,617 | National crossed 26,000 at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.07 Evaluated at bid price : 24.82 Bid-YTW : 4.06 % |
| ENB.PF.G | FixedReset | 37,700 | RBC bought 11,500 from anonymous at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-04 Maturity Price : 23.09 Evaluated at bid price : 24.92 Bid-YTW : 4.06 % |
| There were 29 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PVS.PR.C | SplitShare | Quote: 25.90 – 26.90 Spot Rate : 1.0000 Average : 0.5898 YTW SCENARIO |
| BAM.PF.E | FixedReset | Quote: 25.25 – 26.25 Spot Rate : 1.0000 Average : 0.5928 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 19.61 – 20.36 Spot Rate : 0.7500 Average : 0.4868 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 21.50 – 22.19 Spot Rate : 0.6900 Average : 0.4603 YTW SCENARIO |
| ENB.PR.Y | FixedReset | Quote: 22.75 – 23.10 Spot Rate : 0.3500 Average : 0.2344 YTW SCENARIO |
| BAM.PR.T | FixedReset | Quote: 25.02 – 25.49 Spot Rate : 0.4700 Average : 0.3566 YTW SCENARIO |