In reaction to the trashing of five-hundred years of bankruptcy law as irrelevant, DBRS is proposing yet another tier of bank obligation for analytical purposes:
DBRS Ratings Limited (DBRS) is proposing to introduce a Preferred Obligations Rating (POR), initially in jurisdictions where legislation is in place or is expected to be introduced under the European Bank Recovery and Resolution Directive (BRRD). This rating would address the risk of default of particular obligations/exposures at certain banks that have a higher probability of remaining in a continuing bank in the event of the resolution of a troubled bank. Even though these preferred obligations may not be explicitly excluded from being bailed-in under the BRRD, DBRS expects them to receive preferential treatment relative to other senior obligations.
…
A preferred obligations rating would likely encompass, but not be limited to, the following obligations:– Derivatives and collateralized exposures
– Payment and collection services
– Obligations of a bank as issuer of covered bonds, referred to as the covered bond attachment point in DBRS’s covered bond methodology
– Certain liquidity lines/ contingent liabilitiesSome of these preferred obligations may be part of structured finance transactions and therefore have implications for DBRS’s structured finance ratings. DBRS notes as well that Article 79 of the BRRD protects, in all but extreme circumstances, structured finance arrangements from being broken up or amended.
Covered bonds are explicitly excluded from bail-in, and Article 79 of the BRRD applies to covered bonds as well as structured finance arrangements. In addition, DBRS expects the likelihood that the covered bond programme remains part of a continuing bank in resolution to be high if the covered bond programme is considered part of the bank’s critical functions. Hence, the attachment point for a covered bond is expected to be higher than the rating of senior bonds.
Geez, I wish they’d stayed away from the word “preferred”!
Here’s the latest in 3-D printing news:
Britain’s navy could be using a fleet of unmanned surface and underwater vessels and small 3D-printed ships within 15 years, according to a report from the former government defense-research laboratory, Qinetiq Group Plc.
Three-dimensional printing of craft up to 15-meters (50 feet) long and formed from layers of metal and plastic powder would permit cheaper and quicker production, according to the Global Marine Technology Trends 2030 report, published Monday. Navies could also use the process to print mission-critical equipment at sea, allowing them to spend less time in dock.
And, since talk about 3-D printing immediately brings drones to mind, here’s a good Thanksgiving project for all you home handy-men out there: The Swarm Manned Aerial Vehicle Multirotor Super Drone Flying:
The Swarm man carrying multi-rotor airborne flight testing montage. 54 counter-rotation propellers, six grouped control channels with KK2.15 stabilization. Take off weight 148kg, max lift, approx. 164kg. Endurance10 minutes. Power approx. 22KW.
Just a bit of fun for my self, never intended for making a significant journey or flying much above head height. Approx cost £6000.
It was good day for the Canadian preferred share market, with PerpetualDiscounts up 21bp, FixedResets winning 27bp and DeemedRetractibles gaining 2bp. The Performance Highlights table is notable for its contingent of TRP winners, which have been hit relatively hard through the last month of the downturn. Volume was very low.
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
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.86 to be $0.67 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.02 cheap at its bid price of 13.45.
Click for Big
Another good fit today for MFC, with Implied Volatility rising a bit today.
Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.14 to be 0.52 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 19.73 to be 0.42 cheap.
Click for Big
The fit on the BAM issues continues to be horrible.
The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.29 to be $1.06 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.50 and appears to be $0.92 rich.
Click for Big
FTS.PR.K, with a spread of +205bp, and bid at 19.25, looks $0.52 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.57 and is $0.62 cheap.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.11%, with no outliers; not only that, but all data points are negative! Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -1.32% and the unregulated issues averaging -0.81%. There are two junk outliers below -2.00%.
Click for Big
Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?
| 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 | -0.6026 % | 1,622.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.6026 % | 2,836.3 |
| Floater | 4.52 % | 4.60 % | 58,358 | 16.13 | 3 | -0.6026 % | 1,724.5 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0949 % | 2,768.9 |
| SplitShare | 4.65 % | 5.08 % | 65,694 | 3.09 | 3 | -0.0949 % | 3,245.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0949 % | 2,531.9 |
| Perpetual-Premium | 5.73 % | 3.48 % | 58,561 | 0.08 | 8 | -0.0099 % | 2,488.8 |
| Perpetual-Discount | 5.44 % | 5.51 % | 73,699 | 14.59 | 30 | 0.2147 % | 2,600.9 |
| FixedReset | 4.69 % | 4.14 % | 178,868 | 15.98 | 74 | 0.2662 % | 2,167.1 |
| Deemed-Retractible | 5.15 % | 5.26 % | 99,946 | 5.50 | 33 | 0.0202 % | 2,578.0 |
| FloatingReset | 2.44 % | 3.91 % | 54,279 | 5.93 | 9 | -0.1677 % | 2,171.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.S | Deemed-Retractible | -1.65 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 5.55 % |
| BMO.PR.Q | FixedReset | -1.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.35 Bid-YTW : 4.96 % |
| BAM.PR.C | Floater | -1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 10.36 Evaluated at bid price : 10.36 Bid-YTW : 4.63 % |
| TD.PR.Z | FloatingReset | -1.37 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.27 Bid-YTW : 3.95 % |
| BMO.PR.T | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.51 Evaluated at bid price : 21.51 Bid-YTW : 3.73 % |
| MFC.PR.K | FixedReset | -1.00 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.73 Bid-YTW : 6.31 % |
| HSE.PR.A | FixedReset | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 14.40 Evaluated at bid price : 14.40 Bid-YTW : 4.48 % |
| TRP.PR.G | FixedReset | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.53 Evaluated at bid price : 21.53 Bid-YTW : 4.39 % |
| GWO.PR.N | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.52 Bid-YTW : 7.96 % |
| BAM.PF.D | Perpetual-Discount | 1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.81 Evaluated at bid price : 22.09 Bid-YTW : 5.64 % |
| TRP.PR.F | FloatingReset | 1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 14.65 Evaluated at bid price : 14.65 Bid-YTW : 3.87 % |
| MFC.PR.C | Deemed-Retractible | 1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 6.53 % |
| BAM.PF.C | Perpetual-Discount | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.41 Evaluated at bid price : 21.74 Bid-YTW : 5.67 % |
| NA.PR.S | FixedReset | 1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.81 Evaluated at bid price : 22.15 Bid-YTW : 3.78 % |
| FTS.PR.M | FixedReset | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.04 Evaluated at bid price : 21.04 Bid-YTW : 4.11 % |
| MFC.PR.F | FixedReset | 1.65 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.01 Bid-YTW : 7.85 % |
| IFC.PR.A | FixedReset | 1.80 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.95 Bid-YTW : 8.18 % |
| BAM.PR.M | Perpetual-Discount | 1.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.42 Evaluated at bid price : 21.42 Bid-YTW : 5.66 % |
| NA.PR.W | FixedReset | 2.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 3.78 % |
| FTS.PR.K | FixedReset | 2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 3.96 % |
| HSE.PR.E | FixedReset | 2.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 22.30 Evaluated at bid price : 23.00 Bid-YTW : 4.73 % |
| TRP.PR.C | FixedReset | 2.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 13.45 Evaluated at bid price : 13.45 Bid-YTW : 4.43 % |
| TRP.PR.A | FixedReset | 2.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 17.28 Evaluated at bid price : 17.28 Bid-YTW : 4.10 % |
| BAM.PR.T | FixedReset | 2.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 18.03 Evaluated at bid price : 18.03 Bid-YTW : 4.57 % |
| TRP.PR.D | FixedReset | 3.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 4.26 % |
| TRP.PR.B | FixedReset | 3.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 12.77 Evaluated at bid price : 12.77 Bid-YTW : 4.08 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.D | FixedReset | 46,900 | RBC crossed 39,200 at 23.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 22.69 Evaluated at bid price : 23.80 Bid-YTW : 3.71 % |
| RY.PR.O | Perpetual-Discount | 16,400 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 23.99 Evaluated at bid price : 24.35 Bid-YTW : 5.08 % |
| BMO.PR.Z | Perpetual-Discount | 15,833 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 24.41 Evaluated at bid price : 24.80 Bid-YTW : 5.09 % |
| TD.PF.F | Perpetual-Discount | 15,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 23.99 Evaluated at bid price : 24.35 Bid-YTW : 5.09 % |
| TRP.PR.C | FixedReset | 15,131 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 13.45 Evaluated at bid price : 13.45 Bid-YTW : 4.43 % |
| TRP.PR.D | FixedReset | 14,265 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-08 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 4.26 % |
| There were 10 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRP.PR.G | FixedReset | Quote: 21.53 – 23.00 Spot Rate : 1.4700 Average : 0.9484 YTW SCENARIO |
| MFC.PR.F | FixedReset | Quote: 16.01 – 16.88 Spot Rate : 0.8700 Average : 0.6017 YTW SCENARIO |
| BMO.PR.Q | FixedReset | Quote: 21.35 – 22.08 Spot Rate : 0.7300 Average : 0.4733 YTW SCENARIO |
| FTS.PR.M | FixedReset | Quote: 21.04 – 21.69 Spot Rate : 0.6500 Average : 0.3999 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 25.41 – 25.99 Spot Rate : 0.5800 Average : 0.3619 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 17.28 – 18.00 Spot Rate : 0.7200 Average : 0.5049 YTW SCENARIO |