August 19, 2013

There are worries about more unintended consequences of tighter regulation:

Regulations aimed at reducing the risk of another financial crisis are starting to upend a key part of the bond market that expedites trading in everything from Treasuries to junk bonds.

The U.S. repurchase, or repo, market where banks and investors borrow and lend Treasuries and other fixed-income securities shrunk to $4.6 trillion daily outstanding last month, down 35 percent from a peak of $7.02 trillion in the first quarter of 2008, based on Federal Reserve data compiled from its 21 primary dealers.

From fewer repos to lower inventories of bonds, financial institutions are responding to more stringent capital standards imposed by regulators around the world. Already, the group of dealers and investors that advise the U.S. Treasury say that they see declines in liquidity in times of market stress, including wider gaps between bid and offer prices and the speed of completing trades. The potential consequences are higher borrowing costs for governments, companies and consumers.

Even though Fed data show primary dealers trade almost $600 billion of Treasuries each day on average, making the market the deepest, most liquid in the world, prices suggest constraints on bank balance sheets are having an impact on trading.

The difference between the prices at which dealers buy and sell Treasury futures contracts is about 2/32, or 63 cents per $1,000 face amount, or double what it was in the five years before the bankruptcy of Lehman Brothers, according to data compiled by Bloomberg.

The difference in yields between the newest Treasuries auctioned by the government and older bonds show investors are increasingly concerned about getting stuck with less liquid bonds, forgoing some yield in the process.

In Europe, heightened regulations are also affecting the ability of financial institutions to facilitate bond trades. The region’s biggest banks must cut 661 billion euros ($883 billion) of assets and generate 47 billion euros of capital to comply with new regulatory capital requirements, according to an analysis by Royal Bank of Scotland Group Plc.

“Before the crisis, we were able to execute clips of 20 million euros worth of corporate or covered bonds in just one or two minutes,” Stefan Kreuzkamp, the co-head of fixed income for Europe at Frankfurt-based Deutsche Asset & Wealth Management said in an Aug. 15 telephone interview. “These days, it could take a couple of hours,” said Kreuzkamp, whose firm has about 1 trillion euros in assets.

At the same time, 11 European Union states have agreed to a financial transaction tax, known as the FTT, that the European Commission estimates may raise as much as 35 billion euros a year. Stock and bond trades would be taxed at a rate of 0.1 percent and derivatives at 0.01 percent. The levy on bond transactions would include overnight transactions.

If the FTT is imposed in the current form, it will end the repo market in Europe, said Richard Comotto, a senior visiting fellow at the University of Reading’s International Capital Market Association Center in southern England who has published reports on the implications of new bank regulations. The ICMA estimates that to cover the tax, a repo market maker would have to charge a spread on an overnight repurchase agreement of 72.05 percentage points.

“While a lot of regulation is worthwhile and long overdue, it is coming too far and too much in a short space of time,” Comotto said in an interview. “Most of them are not well thought out.”

Amen to that, Mr. Comotto. Amen to that.

KER-RUNCH! The Canadian preferred share market got pasted today, with PerpetualDiscounts losing 130bp, FixedResets off 73bp and DeemedRetractibles down 97bp. There doesn’t seem to be much point looking for a pattern in the enormous Performance Highlights table, although it is interesting that FixedResets are prominent among the big losers. 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 -0.3896 % 2,620.2
FixedFloater 4.26 % 3.56 % 32,031 18.23 1 2.4368 % 3,894.4
Floater 2.57 % 2.92 % 72,272 19.88 5 -0.3896 % 2,829.1
OpRet 4.68 % 4.38 % 73,022 2.81 3 -0.0650 % 2,595.3
SplitShare 4.77 % 4.40 % 55,914 4.11 6 -1.4278 % 2,905.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0650 % 2,373.1
Perpetual-Premium 5.81 % 5.87 % 96,244 14.07 12 -0.5994 % 2,230.3
Perpetual-Discount 5.79 % 5.92 % 152,582 13.99 25 -1.2984 % 2,230.3
FixedReset 5.09 % 4.12 % 240,673 4.18 84 -0.7278 % 2,403.0
Deemed-Retractible 5.31 % 5.43 % 200,777 6.94 43 -0.9680 % 2,278.4
Performance Highlights
Issue Index Change Notes
BNA.PR.E SplitShare -8.02 % It’s not clear whether the “last” bid of 23.16 was effective at the close, but either way this isn’t a ‘real’ loss. The issue traded 6,598 shares in a range of 24.99-18, so the 23.16 bid I paid for is just more bullshit from the bullshit artists of Bullshitville.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 23.16
Bid-YTW : 7.17 %
SLF.PR.G FixedReset -5.03 % Real! The “last” bid of 21.51 is significantly above the low for the day of 21.32 and there were a fair number of trades scattered around the 21.50 mark.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.51
Bid-YTW : 5.30 %
FTS.PR.H FixedReset -4.67 % Real again! There were a couple of trades below the quoted bid and plenty within spitting distance of it.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.39 %
BNS.PR.Y FixedReset -4.09 % Real.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.49
Bid-YTW : 4.67 %
MFC.PR.F FixedReset -3.48 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.20
Bid-YTW : 4.89 %
ENB.PR.H FixedReset -3.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.69
Evaluated at bid price : 22.08
Bid-YTW : 4.60 %
BAM.PF.B FixedReset -3.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.84
Evaluated at bid price : 22.32
Bid-YTW : 5.06 %
CIU.PR.C FixedReset -3.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.61
Evaluated at bid price : 22.03
Bid-YTW : 3.84 %
PWF.PR.K Perpetual-Discount -2.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.37
Evaluated at bid price : 21.37
Bid-YTW : 5.85 %
PWF.PR.S Perpetual-Discount -2.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.46
Evaluated at bid price : 21.46
Bid-YTW : 5.65 %
POW.PR.G Perpetual-Premium -2.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 23.49
Evaluated at bid price : 23.84
Bid-YTW : 5.94 %
PWF.PR.L Perpetual-Discount -2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.55
Evaluated at bid price : 21.55
Bid-YTW : 5.98 %
GWO.PR.L Deemed-Retractible -2.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 6.11 %
GWO.PR.I Deemed-Retractible -2.52 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.47
Bid-YTW : 6.94 %
ENB.PR.N FixedReset -2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.33
Evaluated at bid price : 23.12
Bid-YTW : 4.78 %
BNS.PR.K Deemed-Retractible -2.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.46 %
SLF.PR.B Deemed-Retractible -2.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.11
Bid-YTW : 6.91 %
ELF.PR.G Perpetual-Discount -2.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 20.30
Evaluated at bid price : 20.30
Bid-YTW : 5.93 %
POW.PR.D Perpetual-Discount -2.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.63
Evaluated at bid price : 21.63
Bid-YTW : 5.86 %
ENB.PR.D FixedReset -2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.01
Evaluated at bid price : 22.51
Bid-YTW : 4.72 %
GWO.PR.H Deemed-Retractible -2.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.97
Bid-YTW : 7.05 %
PWF.PR.F Perpetual-Discount -2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.05
Evaluated at bid price : 22.34
Bid-YTW : 5.92 %
BAM.PR.T FixedReset -2.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.77
Evaluated at bid price : 23.74
Bid-YTW : 4.56 %
ENB.PR.F FixedReset -2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.23
Evaluated at bid price : 22.90
Bid-YTW : 4.74 %
RY.PR.C Deemed-Retractible -2.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 5.52 %
GWO.PR.R Deemed-Retractible -2.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.08
Bid-YTW : 6.37 %
GWO.PR.Q Deemed-Retractible -2.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.13
Bid-YTW : 6.20 %
FTS.PR.K FixedReset -1.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.86
Evaluated at bid price : 24.26
Bid-YTW : 4.06 %
ENB.PR.P FixedReset -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.17
Evaluated at bid price : 22.85
Bid-YTW : 4.72 %
POW.PR.B Perpetual-Discount -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.60
Evaluated at bid price : 22.85
Bid-YTW : 5.92 %
BAM.PF.A FixedReset -1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.79
Evaluated at bid price : 24.04
Bid-YTW : 4.96 %
ENB.PR.T FixedReset -1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.13
Evaluated at bid price : 22.81
Bid-YTW : 4.72 %
PWF.PR.E Perpetual-Discount -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 23.14
Evaluated at bid price : 23.40
Bid-YTW : 5.93 %
POW.PR.C Perpetual-Premium -1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 24.25
Evaluated at bid price : 24.54
Bid-YTW : 5.98 %
CU.PR.D Perpetual-Discount -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.24
Evaluated at bid price : 21.52
Bid-YTW : 5.70 %
MFC.PR.C Deemed-Retractible -1.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.34
Bid-YTW : 6.87 %
ENB.PR.B FixedReset -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.45
Evaluated at bid price : 23.15
Bid-YTW : 4.62 %
FTS.PR.F Perpetual-Discount -1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.32
Evaluated at bid price : 21.32
Bid-YTW : 5.77 %
RY.PR.A Deemed-Retractible -1.48 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.35
Bid-YTW : 5.46 %
SLF.PR.A Deemed-Retractible -1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.38
Bid-YTW : 6.70 %
BNS.PR.Z FixedReset -1.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.87
Bid-YTW : 4.72 %
ENB.PR.Y FixedReset -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.94
Evaluated at bid price : 22.50
Bid-YTW : 4.70 %
CM.PR.E Perpetual-Premium -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 24.05
Evaluated at bid price : 24.30
Bid-YTW : 5.81 %
FTS.PR.G FixedReset -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.23
Evaluated at bid price : 22.92
Bid-YTW : 4.45 %
BAM.PR.M Perpetual-Discount -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 19.65
Evaluated at bid price : 19.65
Bid-YTW : 6.15 %
SLF.PR.D Deemed-Retractible -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.40
Bid-YTW : 6.92 %
BMO.PR.J Deemed-Retractible -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 4.98 %
CU.PR.F Perpetual-Discount -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 5.67 %
NA.PR.L Deemed-Retractible -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.45
Bid-YTW : 5.21 %
SLF.PR.H FixedReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 4.52 %
W.PR.H Perpetual-Discount -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.64
Evaluated at bid price : 22.89
Bid-YTW : 6.08 %
SLF.PR.C Deemed-Retractible -1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.43
Bid-YTW : 6.90 %
MFC.PR.B Deemed-Retractible -1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.60
Bid-YTW : 6.89 %
CU.PR.E Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.27
Evaluated at bid price : 21.55
Bid-YTW : 5.69 %
TRP.PR.C FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.63
Evaluated at bid price : 22.05
Bid-YTW : 4.12 %
POW.PR.A Perpetual-Discount -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 23.60
Evaluated at bid price : 23.87
Bid-YTW : 5.93 %
BMO.PR.K Deemed-Retractible -1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 5.39 %
BMO.PR.M FixedReset -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.07
Bid-YTW : 4.19 %
GWO.PR.F Deemed-Retractible -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 6.11 %
TD.PR.O Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.17
Bid-YTW : 5.41 %
PWF.PR.M FixedReset -1.06 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.45 %
BAM.PR.B Floater -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 18.11
Evaluated at bid price : 18.11
Bid-YTW : 2.92 %
BMO.PR.Q FixedReset -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.05 %
RY.PR.D Deemed-Retractible -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.47
Bid-YTW : 5.43 %
SLF.PR.E Deemed-Retractible -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.56
Bid-YTW : 6.88 %
MFC.PR.G FixedReset 1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-12-19
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : 3.97 %
BAM.PR.G FixedFloater 2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 22.63
Evaluated at bid price : 22.28
Bid-YTW : 3.56 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.M Deemed-Retractible 75,550 RBC crossed three blocks, 10,000 shares, 20,000 and 39,900, all at 25.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.49
Bid-YTW : 5.60 %
GWO.PR.H Deemed-Retractible 56,869 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.97
Bid-YTW : 7.05 %
MFC.PR.H FixedReset 53,721 Scotia crossed 22,000 at 25.30; Nesbitt crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.14 %
MFC.PR.K FixedReset 52,800 Scotia crossed 48,000 at 23.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 4.62 %
PWF.PR.S Perpetual-Discount 45,463 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.46
Evaluated at bid price : 21.46
Bid-YTW : 5.65 %
CM.PR.L FixedReset 45,451 RBC crossed 40,000 at 25.63.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.61
Bid-YTW : 3.43 %
There were 66 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BNA.PR.E SplitShare Quote: 23.16 – 25.00
Spot Rate : 1.8400
Average : 0.9948

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 23.16
Bid-YTW : 7.17 %

BAM.PF.B FixedReset Quote: 22.32 – 23.24
Spot Rate : 0.9200
Average : 0.5691

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.84
Evaluated at bid price : 22.32
Bid-YTW : 5.06 %

GWO.PR.L Deemed-Retractible Quote: 24.35 – 24.99
Spot Rate : 0.6400
Average : 0.4303

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 6.11 %

SLF.PR.G FixedReset Quote: 21.51 – 22.00
Spot Rate : 0.4900
Average : 0.3140

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.51
Bid-YTW : 5.30 %

CIU.PR.C FixedReset Quote: 22.03 – 22.79
Spot Rate : 0.7600
Average : 0.5910

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.61
Evaluated at bid price : 22.03
Bid-YTW : 3.84 %

FTS.PR.F Perpetual-Discount Quote: 21.32 – 21.76
Spot Rate : 0.4400
Average : 0.2777

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-08-19
Maturity Price : 21.32
Evaluated at bid price : 21.32
Bid-YTW : 5.77 %

4 Responses to “August 19, 2013”

  1. adrian2 says:

    SLF.PR.G FixedReset
    YTW SCENARIO
    Maturity Type : Hard Maturity
    Maturity Date : 2025-01-31
    Maturity Price : 25.00
    Evaluated at bid price : 21.51
    Bid-YTW : 5.30 %

    My very simplistic, back of the envelope calculation, assumes a good quality rate reset with a spread of less than 250 bps will be allowed to continue as a perpetual, 250…350 bps is a gray zone, over 350 bps will likely be redeemed. SLF.PR.G has a spread of 141 bps, while current GOC 5yr is just under 2%, so in 2015 Sunlife would be able to let it carry on at a yield of about 3.4%, assuming no change in 5 year rates.

    Can you explain in a few words why HIMIPref™ has the maturity scenario as Hard Maturity @ $25, while three years ago (just after issuance) it was limit maturity http://www.prefblog.com/?p=10968 ?

    Thanks,
    Adrian

  2. adrian2 says:

    Sorry, just realized it’s a rate reset deemed retractible…

  3. nervousone says:

    Hi adrian! . . . Good news! . . . a/o 3pm today, the long bond has gained back 5bps to sit @ 3.16%, down from yesterday’s close of 3.21% !!

    So let’s look at a few prefs –> MFC.PR.C down .24/sh to $20.40, PWF.PR.F down .50/sh to $22, SLF.PR.D down .10/sh to $20.39, WN.PR.E down .06/sh to $21.29.

    Oh, not so good after all . . . I guess you’ll be needing an address to mail that $100 cheque to pretty soon!

  4. adrian2 says:

    Well, nervousone, this just proves my point: it’s not a linear, one-to-one relationship between the long term yield and prefs yield.

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