The loonie got hammered today:
Canada’s dollar weakened to the lowest in more than five years on speculation the central bank may signal it’s more likely to lower interest rates than raise them when it releases a growth outlook tomorrow.
The currency sank as much as 1.5 percent, the most since Jan. 2, before the Bank of Canada updates quarterly inflation and growth projections to factor in the crude-oil slump.
…
The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 1.4 percent to C$1.2113 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.2115, the weakest level since April 2009.
…
One Canadian dollar purchases 82.71 U.S. cents.Yields on 30-year government bonds touched a record low of 2.04 percent, before trading at 2.05 percent.
Crude oil, Canada’s biggest export, traded below $50 a barrel in New York, from $107.73 in June. The central bank’s October forecast of growth of 2.4 percent this year was underpinned by an assumption U.S. benchmark crude would trade at an average of $85 a barrel.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 5bp, FixedResets off 4bp and DeemedRetractibles gaining 7bp … BORRRR-RING! However, the Performance Highlights table, while shorter than it has generally been for the past few weeks, still manages to produce an entertaining list with FixedResets highlighted for volatility. Volume was below average.
For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.
Remember that all rich /cheap assessments are:
- based on Implied Volatility Theory only
- are relative only to other FixedResets from the same issuer
- assume constant GOC-5 yield
- assume constant Implied Volatility
- assume constant spread
Here’s TRP:
Click for Big
So according to this, TRP.PR.A, bid at 20.46, is $1.30 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.51 and resetting at +154bp on 2016-1-30 is $1.54 rich.
Click for Big
MFC.PR.F continues to be near the line defined by its peers, although it drifted up today and is having an effect on the calculation. Implied Volatility continues to be a conundrum. It is far too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).
Click for Big
There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.50 and appears to be $0.90 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 25.69 and appears to be $1.24 rich.
It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.
Click for Big
This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.55, looks $1.03 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.35, looks $1.23 expensive and resets 2019-3-1
Click for Big
Pairs equivalence is all over the map, but the investment grade pairs (which are presumably more closely watched and easier to trade) do show a rising trend with increasing time to interconversio which, qualitatively speaking, is entirely reasonable.
| 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 | -0.5658 % | 2,535.6 |
| FixedFloater | 4.45 % | 3.63 % | 19,964 | 18.23 | 1 | -1.0648 % | 3,975.8 |
| Floater | 2.99 % | 3.11 % | 53,346 | 19.44 | 4 | -0.5658 % | 2,695.5 |
| OpRet | 4.04 % | 1.40 % | 91,943 | 0.41 | 1 | 0.0000 % | 2,756.4 |
| SplitShare | 4.27 % | 4.13 % | 32,033 | 3.61 | 5 | -0.2122 % | 3,201.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,520.4 |
| Perpetual-Premium | 5.43 % | -9.31 % | 56,485 | 0.09 | 19 | 0.0453 % | 2,504.7 |
| Perpetual-Discount | 5.11 % | 4.99 % | 105,766 | 15.41 | 16 | -0.0523 % | 2,713.0 |
| FixedReset | 4.22 % | 3.34 % | 201,755 | 16.86 | 77 | -0.0353 % | 2,535.6 |
| Deemed-Retractible | 4.92 % | 0.16 % | 97,222 | 0.19 | 39 | 0.0729 % | 2,632.0 |
| FloatingReset | 2.70 % | 2.38 % | 62,203 | 3.58 | 7 | -0.1744 % | 2,455.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.F | FixedReset | -1.87 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 4.56 % |
| BAM.PF.E | FixedReset | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.24 Evaluated at bid price : 25.28 Bid-YTW : 3.66 % |
| BAM.PF.B | FixedReset | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.34 Evaluated at bid price : 25.35 Bid-YTW : 3.64 % |
| GWO.PR.H | Deemed-Retractible | -1.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.43 Bid-YTW : 5.21 % |
| BAM.PR.G | FixedFloater | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 21.73 Evaluated at bid price : 21.37 Bid-YTW : 3.63 % |
| IAG.PR.A | Deemed-Retractible | 1.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.02 % |
| IFC.PR.A | FixedReset | 1.45 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.05 Bid-YTW : 5.37 % |
| BAM.PR.T | FixedReset | 1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.76 Evaluated at bid price : 25.69 Bid-YTW : 3.28 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BAM.PF.E | FixedReset | 170,820 | RBC crossed 166,000 at 25.73. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.24 Evaluated at bid price : 25.28 Bid-YTW : 3.66 % |
| TD.PF.C | FixedReset | 63,169 | RBC crossed 39,900 at 25.13. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.20 Evaluated at bid price : 25.13 Bid-YTW : 3.30 % |
| SLF.PR.I | FixedReset | 43,313 | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 2.04 % |
| ENB.PR.N | FixedReset | 34,390 | Scotia crossed 29,300 at 23.36. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 22.55 Evaluated at bid price : 23.36 Bid-YTW : 4.04 % |
| CU.PR.C | FixedReset | 33,434 | TD crossed 20,000 at 25.58. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 3.18 % |
| NA.PR.W | FixedReset | 25,245 | RBC crossed 20,000 at 25.24. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.22 Evaluated at bid price : 25.20 Bid-YTW : 3.28 % |
| There were 24 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: 22.38 – 22.82 Spot Rate : 0.4400 Average : 0.2732 YTW SCENARIO |
| GWO.PR.H | Deemed-Retractible | Quote: 24.43 – 24.94 Spot Rate : 0.5100 Average : 0.3490 YTW SCENARIO |
| TRP.PR.B | FixedReset | Quote: 16.65 – 17.15 Spot Rate : 0.5000 Average : 0.3547 YTW SCENARIO |
| MFC.PR.F | FixedReset | Quote: 21.50 – 21.92 Spot Rate : 0.4200 Average : 0.2760 YTW SCENARIO |
| CGI.PR.D | SplitShare | Quote: 25.75 – 26.20 Spot Rate : 0.4500 Average : 0.3098 YTW SCENARIO |
| PWF.PR.O | Perpetual-Premium | Quote: 26.16 – 26.78 Spot Rate : 0.6200 Average : 0.4831 YTW SCENARIO |