June 7, 2012

Bernanke had some cheerful commentary:

Federal Reserve Chairman Ben S. Bernanke said the economy is at risk from Europe’s debt crisis and the prospect of fiscal tightening in the U.S., while refraining from discussing steps the central bank might take to protect the expansion.

Bernanke also warned lawmakers that “a severe tightening of fiscal policy at the beginning of next year that is built into current law — the so-called fiscal cliff — would, if allowed to occur, pose a significant threat to the recovery.”

Spain gets more interesting daily:

Spanish Prime Minister Mariano Rajoy said he’s talking to his European peers about how to shore up the country’s banks as Fitch Ratings cut Spain’s credit grade to within two steps of junk.

Rajoy spoke minutes before Fitch downgraded Spain by three levels to BBB, within two steps of non-investment grade. Fitch said the cost to the state of shoring up banks may amount to as much as 100 billion euros ($126 billion) in the worst case, compared with its previous estimate of 30 billion euros, as Spain will remain in recession next year.

Spain’s 10-year bond yield fell to 6.088 percent yesterday from 6.282 percent on June 6, retreating from the 7 percent threshold that triggered bailouts in Greece, Ireland and Portugal. The Treasury met its issuance goal at a bond auction, selling 2.07 billion euros of Spanish securities, surpassing the maximum target of 2 billion euros.

It was a day of solid recovery for the Canadian preferred share market, with PerpetualPremiums gaining 6bp, FixedResets up 10bp and DeemedRetractibles winning 23bp. Of great interest is the observation that the Bozo Spread (Current Yield PerpetualDiscounts less Current Yield FixedResets) has returned to negative territory. Volatility was minor.

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 -0.4347 % 2,309.9
FixedFloater 4.49 % 3.87 % 27,095 17.57 1 -0.8899 % 3,511.4
Floater 3.13 % 3.16 % 73,632 19.25 3 -0.4347 % 2,494.1
OpRet 4.81 % 2.61 % 36,708 1.03 5 0.0077 % 2,497.9
SplitShare 5.27 % -5.10 % 49,313 0.53 4 0.9686 % 2,717.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0077 % 2,284.1
Perpetual-Premium 5.45 % 3.18 % 78,887 0.63 26 0.0595 % 2,227.2
Perpetual-Discount 5.03 % 5.05 % 127,535 15.28 7 0.5221 % 2,447.5
FixedReset 5.05 % 3.14 % 194,111 7.83 71 0.0994 % 2,388.1
Deemed-Retractible 5.03 % 3.88 % 147,931 3.16 45 0.2376 % 2,296.6
Performance Highlights
Issue Index Change Notes
BAM.PR.C Floater -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-07
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 3.17 %
BAM.PR.N Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-07
Maturity Price : 23.72
Evaluated at bid price : 24.00
Bid-YTW : 5.02 %
SLF.PR.I FixedReset 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.27
Bid-YTW : 3.90 %
FBS.PR.C SplitShare 3.61 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-15
Maturity Price : 10.00
Evaluated at bid price : 10.63
Bid-YTW : -7.11 %
IAG.PR.A Deemed-Retractible 6.28 % Simply a recovery from the ridiculous behaviour yesterday, but not without odd goings-on today.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.86
Bid-YTW : 5.76 %
Volume Highlights
Issue Index Shares
Traded
Notes
HSE.PR.A FixedReset 156,601 Desjardins crossed 75,000 at 25.40; Nesbitt crossed 80,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-07
Maturity Price : 23.41
Evaluated at bid price : 25.44
Bid-YTW : 2.90 %
BNS.PR.Z FixedReset 88,099 GMP bought 25,900 from RBC at 25.00; TD crossed 39,800 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 3.01 %
BNS.PR.P FixedReset 78,134 TD crossed 75,000 at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 2.86 %
BNS.PR.Q FixedReset 52,716 RBC crossed 50,000 at 25.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.56
Bid-YTW : 2.90 %
VNR.PR.A FixedReset 52,607 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-07
Maturity Price : 23.19
Evaluated at bid price : 25.15
Bid-YTW : 3.88 %
SLF.PR.C Deemed-Retractible 33,751 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.63
Bid-YTW : 6.33 %
There were 21 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.H Perpetual-Premium Quote: 25.16 – 25.38
Spot Rate : 0.2200
Average : 0.1349

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-07
Maturity Price : 24.76
Evaluated at bid price : 25.16
Bid-YTW : 5.55 %

IGM.PR.B Perpetual-Premium Quote: 25.90 – 26.18
Spot Rate : 0.2800
Average : 0.2077

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 5.39 %

FTS.PR.F Perpetual-Premium Quote: 25.15 – 25.40
Spot Rate : 0.2500
Average : 0.1888

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-07
Maturity Price : 24.83
Evaluated at bid price : 25.15
Bid-YTW : 4.89 %

RY.PR.H Deemed-Retractible Quote: 26.62 – 26.85
Spot Rate : 0.2300
Average : 0.1739

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.62
Bid-YTW : 3.10 %

GWO.PR.P Deemed-Retractible Quote: 25.50 – 25.69
Spot Rate : 0.1900
Average : 0.1345

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 5.12 %

SLF.PR.H FixedReset Quote: 24.45 – 24.66
Spot Rate : 0.2100
Average : 0.1611

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.45
Bid-YTW : 3.83 %

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