Category: Market Action

Jobs, jobs, jobs!

Employers added 215,000 jobs in July and the unemployment rate held at a seven-year low of 5.3 percent, a Labor Department report showed Friday in Washington. The gain in payrolls last month followed a 231,000 advance in June that was bigger than previously estimated.
…
While the data also showed a pickup in hours worked, average hourly earnings climbed a less-than-forecast 2.1 percent from a year earlier, indicating little momentum in wage growth.

Retail and professional business services led the industries adding to headcounts in July, followed by health care and leisure and hospitality. Manufacturing payrolls rose by the most in six months on gains among non-durable goods producers. More jobs were also added in construction.

The report also showed a jump in full-time employment, while the number of part-time workers declined.
…
The average work week for all employees increased 6 minutes to 34.6 hours. A longer workweek often amounts to greater take-home pay for many employees.

The labor force participation rate, which indicates the share of working-age people who are employed or looking for work, held at 62.6 percent.

Factories boosted payrolls by 15,000, the most since January. The gains were led by more hiring in the non-durables industries, including food, plastics and paper.

Retailers added almost 36,000 workers and employment in the health care and leisure industries each climbed by about 30,000 in July.

We have another hilarious example of the law of unintended consequences:

London’s swankiest neighborhoods of Knightsbridge and Belgravia are becoming no-go areas for even the wealthiest property investors.

They are being driven out by higher sales taxes introduced by Chancellor of the Exchequer George Osborne in December, which rise to as much as 12 percent of the cost of the most expensive homes.

Buying agent Camilla Dell says that her clients are spending an average of 2 million pounds ($3.1 million) less on each transaction this year and they’re more interested in cheaper areas such as Hackney and Shoreditch. That’s because an investor buying a 5 million-pound home pays almost 364,000 pounds more in tax than if they spent the same amount of money on 10 apartments costing 500,000 pounds each.
…
With investors now buying more homes in less expensive districts, prices below Osborne’s threshold are climbing and owner-occupiers, who should have benefited from his tax cuts, are being penalized, Dell said. The tax increases kick in at 937,000 pounds.

“The very buyers Osborne was setting out to help, he’s put at a disadvantage,” she said. “At the same time, sales at the higher end have frozen. It was a very, very bad move.”
…
Investors who buy multiple apartments for about 500,000 pounds in London typically receive a rental yield of 4 percent to 5 percent, compared with about 2 percent for a luxury home in London’s best districts, Morris said.

And, interestingly with respect to Supply Management and the TPP, there is a global oversupply of milk:

Just months after the European Union lifted caps on milk production, there’s too much of it and some farmers are going broke. EU prices have tumbled to a five-year low, compounded by a global surplus and shrinking demand that’s disrupted exports. China is cutting back purchases and Russia, once the largest buyer of EU butter and cheese, halted imports last year in retaliation for sanctions over its conflict with Ukraine.
…
An EU gauge tracking consumer prices for milk, cheese and eggs has dropped 2.1 percent from last year. Retail prices for whole milk in France fell 5.6 percent since last year, according to the latest government data from June.

With prices so low, there’s little incentive for European producers to increase supply, even after EU regulators in April ended a system that had capped production for 30 years. This year, the EU expects output to rise 1 percent to 161.4 million tons.

The removal of quotas marked a change to an open-market system. Before the limits, government purchases of surpluses were intended to aid farmers but instead led to overproduction.
…
The plunge in dairy costs helped push down a gauge of global food prices in July to the lowest since September 2009, the United Nations’ Food & Agriculture Organization said Thursday.

It’s nice to see Rob Ford fairly treated:

DBRS notes that the City’s operating fiscal discipline has improved notably in recent years, with nearly $1.0 billion in ongoing operational savings or efficiencies achieved from 2011 to 2014 through a comprehensive service review process and through negotiated provisions in collective agreements.

There’s more fuss at the SEC about the Pay-Ratio Disclosure Rule discussed August 5, with Piwowar adding to his remarks:

The pay ratio disclosure rulemaking has flaws throughout. I further enumerate a number of those defects below.

I. The Proposing Release did not provide sufficient notice under the Administrative Procedure Act.[2]
…
II. Once the Commission decided what objectives Section 953(b) was intended to accomplish, it failed to publicly disclose such understanding prior to adoption.
…
III. The Commission failed to consider what the quantitative effects of providing flexibility would be on the accuracy of the pay ratio. By not evaluating such quantitative effects, the Commission acted in an arbitrary and capricious manner when it limited the de minimis exclusion of non-U.S. employees to 5%.
…
IV. The Commission acted arbitrarily and capriciously when it defined “employee” to include contract workers only if they are employed by an unaffiliated third party.
…
V. The Commission’s economic analysis failed to consider academic studies as to whether the pay ratio might create pressure to increase CEO compensation.
…
VI. Use of the pay ratio for comparative purposes among companies may violate an investment adviser’s fiduciary duty under the Investment Advisers Act of 1940.[69]
…
VII. Conclusion

I have many objections to the pay ratio disclosure, as set forth in my remarks at the Commission’s open meeting and my comments above. Should the final rule become effective, I have one request for companies. Please keep track of your compliance costs and consider voluntarily disclosing that information alongside your pay ratio. The Commission and others should have an understanding of your actual compliance costs, and voluntary disclosures would make the likely incredibly high costs evident. But even then, be careful; such information must be “clearly identified, not misleading, and not presented with greater prominence than the required ratio.”[76]

It was a positive day for the Canadian preferred share market, with PerpetualDiscounts winning 32bp, FixedResets up 5bp and DeemedRetractibles gaining 2bp. PerpetualDiscounts were notable on the good side of the Performance Highlights table. 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:

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 13.90 to be $0.44 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.84 cheap at its bid price of 14.50.

Another good fit today!

Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.58 to be 0.46 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.09 to be $0.49 cheap.

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 18.05 to be $1.16 cheap. BAM.PR.X, resetting at +180bp on 2017-6-30 is bid at 17.30 and appears to be $1.30 rich.

FTS.PR.K, with a spread of +205bp, and bid at 20.46, looks $0.54 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 19.98 and is $0.84 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.08%, with one outlier above 1.00%. There is one junk outlier below -1.00%.

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	-0.5846 %	2,024.3
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.5846 %	3,539.4
Floater	3.62 %	3.66 %	55,008	18.12	3	-0.5846 %	2,152.0
OpRet	0.00 %	0.00 %	0	0.00	0	0.2819 %	2,774.8
SplitShare	4.59 %	4.80 %	57,506	3.14	3	0.2819 %	3,251.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2819 %	2,537.3
Perpetual-Premium	5.72 %	5.33 %	65,963	2.08	9	0.0000 %	2,484.9
Perpetual-Discount	5.40 %	5.41 %	81,815	14.82	29	0.3250 %	2,610.5
FixedReset	4.71 %	3.80 %	207,666	16.08	87	0.0480 %	2,232.4
Deemed-Retractible	5.12 %	5.17 %	104,809	5.46	34	0.0195 %	2,579.6
FloatingReset	2.33 %	3.27 %	45,369	6.02	9	-0.2134 %	2,252.0

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.F	FloatingReset	-2.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 3.53 %
TRP.PR.A	FixedReset	-1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 18.22 Evaluated at bid price : 18.22 Bid-YTW : 3.70 %
ENB.PR.J	FixedReset	-1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 5.00 %
MFC.PR.N	FixedReset	-1.65 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.52 Bid-YTW : 5.34 %
ENB.PR.Y	FixedReset	-1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 16.78 Evaluated at bid price : 16.78 Bid-YTW : 4.84 %
HSE.PR.A	FixedReset	-1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 14.81 Evaluated at bid price : 14.81 Bid-YTW : 4.09 %
MFC.PR.G	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 4.04 %
SLF.PR.G	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.46 Bid-YTW : 7.25 %
ENB.PR.T	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 4.99 %
ELF.PR.H	Perpetual-Discount	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 24.31 Evaluated at bid price : 24.80 Bid-YTW : 5.58 %
BAM.PF.F	FixedReset	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 22.58 Evaluated at bid price : 23.45 Bid-YTW : 3.87 %
CU.PR.E	Perpetual-Discount	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 22.24 Evaluated at bid price : 22.61 Bid-YTW : 5.41 %
FTS.PR.G	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 19.98 Evaluated at bid price : 19.98 Bid-YTW : 3.67 %
FTS.PR.F	Perpetual-Discount	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 23.02 Evaluated at bid price : 23.30 Bid-YTW : 5.34 %
RY.PR.J	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 22.72 Evaluated at bid price : 23.85 Bid-YTW : 3.45 %
BMO.PR.W	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 21.63 Evaluated at bid price : 21.95 Bid-YTW : 3.39 %
FTS.PR.H	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 16.46 Evaluated at bid price : 16.46 Bid-YTW : 3.28 %
CU.PR.G	Perpetual-Discount	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.24 %
TRP.PR.D	FixedReset	1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 3.78 %
CU.PR.F	Perpetual-Discount	2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 5.28 %
ENB.PR.F	FixedReset	2.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 16.71 Evaluated at bid price : 16.71 Bid-YTW : 4.92 %
TRP.PR.C	FixedReset	2.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 14.45 Evaluated at bid price : 14.45 Bid-YTW : 3.73 %
POW.PR.B	Perpetual-Discount	6.95 %	Rebounding most of the way from yesterday‘s nonsense. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 23.71 Evaluated at bid price : 24.02 Bid-YTW : 5.61 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.M	Deemed-Retractible	132,649	TD crossed blocks of 50,000 and 75,200, both at 25.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-27 Maturity Price : 25.00 Evaluated at bid price : 25.19 Bid-YTW : 3.79 %
BNS.PR.Z	FixedReset	105,620	Nesbitt crossed 22,900 at 22.60; TD crossed 74,100 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.64 Bid-YTW : 3.80 %
HSB.PR.C	Deemed-Retractible	100,500	Scotia crossed 100,000 at 25.20. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 5.15 %
FTS.PR.H	FixedReset	65,560	RBC crossed 49,400 at 16.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 16.46 Evaluated at bid price : 16.46 Bid-YTW : 3.28 %
BNS.PR.B	FloatingReset	51,650	TD crossed 50,000 at 23.18. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.18 Bid-YTW : 3.27 %
CU.PR.G	Perpetual-Discount	50,541	RBC bought 25,000 from anonymous at 21.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.24 %
There were 18 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.N	FixedReset	Quote: 16.12 – 17.00 Spot Rate : 0.8800 Average : 0.5782 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.12 Bid-YTW : 7.31 %
MFC.PR.L	FixedReset	Quote: 21.21 – 22.00 Spot Rate : 0.7900 Average : 0.5006 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.21 Bid-YTW : 5.41 %
BAM.PR.N	Perpetual-Discount	Quote: 21.23 – 21.67 Spot Rate : 0.4400 Average : 0.2691 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 21.23 Evaluated at bid price : 21.23 Bid-YTW : 5.67 %
MFC.PR.M	FixedReset	Quote: 21.87 – 22.25 Spot Rate : 0.3800 Average : 0.2400 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.87 Bid-YTW : 5.20 %
BAM.PR.M	Perpetual-Discount	Quote: 21.21 – 21.60 Spot Rate : 0.3900 Average : 0.2737 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-07 Maturity Price : 21.21 Evaluated at bid price : 21.21 Bid-YTW : 5.68 %
MFC.PR.C	Deemed-Retractible	Quote: 21.41 – 21.96 Spot Rate : 0.5500 Average : 0.4481 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.41 Bid-YTW : 6.69 %

Walmart’s run into a little labour trouble after raising their in-house minimum wage because the tier above wants to keep their increment:

When Wal-Mart Stores Inc. chief Doug McMillon announced plans to boost store workers’ minimum wage earlier this year, he said the move was intended to improve morale and retain employees.

Yet for some of the hundreds of thousands of workers getting no raise, the policy is having the opposite effect.

In interviews and in hundreds of comments on Facebook, Wal-Mart employees are calling the move unfair to senior workers who got no increase and now make the same or close to what newer, less experienced colleagues earn. New workers started making a minimum of $9 an hour in April and will get at least $10 an hour in February.

“It is pitting people against each other,” said Charmaine Givens-Thomas, a 10-year veteran who makes $12 an hour at a store near Chicago and belongs to OUR Walmart, a union-backed group that has lobbied for better working conditions. “It hurts morale when people feel like they aren’t being appreciated. I hear people every day talking about looking for other jobs and wanting to remove themselves from Wal-Mart and a job that will make them feel like that.”

And, perhaps not very coincidentally, there are murmurings of disquiet about a US national $15 minimum wage:

As the proposed federal minimum wage goes up and up, economists support it less and less. In January 2014, seven Nobel laureates and eight ex-presidents of the American Economic Association signed a letter backing a federal minimum wage of $10.10 an hour by 2016, up from $7.25. They said it would “provide a much-needed boost” to low-income workers while causing “little or no” job loss. Fifteen dollars an hour is another story. None of those luminaries signed the letter in July that endorsed a Senate bill introduced by presidential candidate Bernie Sanders (D-Vt.) to raise the federal minimum to $15 an hour by 2020.

Regional economic differences are one reason a lot of economists are nervous about jumping to $15: A wage floor that’s right for New York or San Francisco could be too high for Brownsville, Texas; Gadsden, Ala.; or Ponce, Puerto Rico. In such places, $15 an hour “may have large negative employment effects,” Ronald Ehrenberg, a Cornell University labor economist, wrote in an e-mail. He was one of about 600 economists who signed the $10.10 letter last year. He says he wasn’t approached to sign the $15 letter but would have said no if asked.
…
A $15 minimum is just 67 percent of the median wage in high-cost Alaska, so it would have a modest effect if implemented today, lifting pay of people at the bottom but not affecting the middle rungs of the income ladder. In Puerto Rico, though, $15 is 155 percent of the median wage. If the federal minimum were raised to $15 today (rather than in 2020, as Sanders proposes), it would be 55 percent higher than the midpoint of what all Puerto Ricans earn. That would cause severe stress in a financially struggling territory already squeezed by the $7.25 minimum. Even within a single state, it’s hard to come up with a minimum that works everywhere. In California, the median wage varies from more than $28 an hour in Silicon Valley (technically San Benito and Santa Clara counties) to less than $14 in Visalia-Porterville, a farm town 190 miles away by car.

A portion of the justification cited in the Bernie Saunders endorsement letter is the 50-year trend in productivity:

The real, inflation-adjusted, value of the federal minimum wage has fallen dramatically over time. The real value of the federal minimum wage peaked in 1968 at 10.85 an hour, 50 percent above the current level. Moreover, since 1968, average U.S. labor productivity has risen by roughly 140 percent. This means that, if the federal minimum wage had risen in step with both inflation and average labor productivity since 1968, the federal minimum wage today would be $26.00 an hour. (References for all data cited in this petition can be found here: LINK)

So we can take a look at the link and see how their productivity increase was derived:

Labor productivity over time is measured by the BLS Labor Productivity and Costs program (LPC). The specific index used here is for the Business Sector. The index value (base year=2009) in 1968 is 43.503 and 105.998 for 2014, indicating a 143 percent increase in productivity (105.998 /43.503).

They didn’t go into any more detail than that, so we’ll ask FRED and see what the inflation-adjusted minimum wage looks like:

So the real minimum wage in the States is currently at its 1950 value and has been for the last twenty-five years. There was a significant peak in 1968, as the endorsement letter writers state; I assume this is because all the kids were hippies then (LAZY, SMELLY hippies) or were in Vietnam. But I will leave that to historians and content myself with pointing out that the selection of a starting point for their claim is not representative of long-term conditions.

It’s much the same in Ontario Livio Di Matteo on the Worthwhile Canadian Initiative blog:

But the other thing they’re doing is sticking productivity into the mix as well. Now, according to the Pew Research Center:

According to the Bureau of Labor Statistics, last year 1.532 million hourly workers earned the federal minimum of $7.25 an hour; nearly 1.8 million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.3 million hourly workers at or below the federal minimum.

That group represents 4.3% of the nation’s 75.9 million hourly-paid workers and 2.6% of all wage and salary workers. In 1979, when the BLS began regularly studying minimum-wage workers, they represented 13.4% of hourly workers and 7.9% of all wage and salary workers. (Bear in mind that the 3.3 million figure doesn’t include salaried workers, although BLS says relatively few salaried workers are paid at what would translate into below-minimum hourly rates. Also, 23 states, as well as the District of Columbia, have higher minimum wages than the federal standard; people who earned the state minimum wage in those jurisdictions aren’t included in the 3.3 million total.)

… and …

So – freely interpreting here – minimum wage earners are potato peelers, pizza makers, waitresses, store cashiers, manicurists, office cleaners and gardeners.

And my point is: how has the productivity of employees in these occupations increased over the last fifty years? There may have been some marginal improvement – gardeners can now use leaf-blowers and make far louder noises than they used to – but I’ll suggest that, by and large, the productivity in these occupations has not moved much and certainly has not increased by the 143% figure used to derive the justification for the $26.00 figure given in the Sanders endorsement letter.

In fact, I’ll go further and suggest that the uneven distribution of productivity gains over the past fifty years is what is causing income inequality in the first place. Or at least a chunk of it, the chunk that you see when you work at McDonalds and the guy across the street is a systems administrator for a medium sized company.

Now don’t get me wrong! I support an increased minimum wage and I would even like it to be indexed not to inflation, but to inflation +50bp (say), so that we can increase the incentive to modernize all these marginal jobs. If we want to redistribute the fruits of productivity gains – and I will not dismiss the idea outright – that is something we should be doing through the tax system, in what is usually referred to as a guaranteed annual income:

According to several Queen’s University professors, the cost of replacing social assistance (which includes welfare and disability support) and Old Age Security (which includes a top-up for low-income seniors), plus providing every adult with an annual income of $20,000 and children with an income guarantee of $6,000, would be $40-billion. The Fraser Institute calculates the total cost of Canada’s current income support system (payout plus administrative costs) at $185-billion in 2013.

Our own estimates, which build on existing social programs, range from a gross annual cost of $17-billion for a program that (in today’s dollars) is slightly more generous than was offered in Dauphin, to a “Cadillac” version costing $58-billion that would guarantee everyone a minimum income equal to the low-income cutoff and pay at least some benefits to people earning well above the low-income cutoff.

The cost of a GAI depends on how generous it is, how quickly benefits are phased out with additional income and how existing social programs are affected.

Sadly, however, the political trend is in the other direction – with some idiots touting narrowly targeted tax credits in order to create jobs for tax lawyers and CRA auditors, while other idiots tout means-tested benefits in order to impose ludicrous effective marginal tax rates on recipients to ensure they remain dependent and don’t get uppity. I’m sure I’ve discussed means-testing of benefits and marginal tax rates on PrefBlog, and referred to a Congressional Budget Office study on the matter, but can’t find the reference! [Update: try Illustrative Examples of Effective Marginal Tax Rates Faced by Married and Single Taxpayers: Supplemental Material for Effective Marginal Tax Rates for Low- and Moderate-Income Workers, which isn’t exactly the one I remember, but it’s close!]

Meanwhile, cord-cutters are cutting prices:

Cord-cutting millennials who shun cable TV have long plagued the entertainment industry. Now they’re wreaking havoc on Wall Street.

Media companies led by Walt Disney Co. lost more than $60 billion in market capitalization in two days on mounting evidence of shrinking demand for cable TV and networks like ESPN that make money from ads. So-called cord cutters, who quit paying for pay-TV packages of hundreds of channels and favor online streaming services like Netflix Inc., are undermining a business model that has sustained the TV industry for decades.

It took Disney, a company with a stellar record of sales and profit, to deliver the wake-up call and end Wall Street’s 6 1/2 year love affair with traditional media. Disney’s disappointing results Tuesday night led to what long-time cable analyst Craig Moffett called swift and unprecedented carnage. The S&P 500 Media Index has since dropped 11 percent — on pace to be the worst two-day slump since 2008.

… and Treasuries are jumpy:

For the past six years, a Federal Reserve rate interest-rate hike wasn’t on anyone’s radar screen. Now, even minor data points are provoking outsized reactions given a real possibility the central bank may raise rates next month for the first time in almost a decade.

The weak employment cost index report on July 31 sent Treasury 10-year yields tumbling four basis points in five minutes, more than six times the average move after the past year’s reports. On Wednesday, yields slid three basis points in 10 minutes on disappointing data on private-sector job creation, reversed course, then continued to climb after a strong reading on service-sector growth.

There was an interesting piece in the Globe regarding the potential for corporate ownership of law firms:

Australia’s Slater & Gordon Ltd. became the first law firm in the world to be listed on a stock exchange in 2007. And despite its critics, it has since been busy growing revenue at a rapid clip, gobbling up rivals at home and in Britain. It now has its eyes on Canada.
…
The concept was an issue in Law Society of Upper Canada elections earlier this year. The Ontario Trial Lawyers Association (OTLA), which represents personal injury lawyers likely to face competitive pressure if Slater & Gordon enters Canada, endorsed a list of candidates opposed to the idea. Twenty-seven of the 40 lawyers who won what are known as “bencher” seats on the law society’s governing body were OTLA-approved. A follow-up report on the idea is expected to come before the law society this fall.

Proponents say allowing law firms to attract capital from non-lawyers means they can use it to expand and provide innovative new legal services, such as those offered in kiosks in department stores or via the Web. They say these new services will help deal with the “access to justice” problem, which sees many Canadians unable to afford a lawyer.

But naysayers warn the reforms would force lawyers to answer to bottom-line-focused shareholders, instead of just to their clients and the greater good. They say this would create new ethical and conflict-of-interest land mines, if the interests of a law firm’s owners and its clients clash. Critics also charge that there is no evidence these new structures help those who cannot afford a lawyer to hire one.

Of the naysayer’s points, only the second, regarding ethics and conflict-of-interest, carries much weight with me. To suggest that practitioner-owned firms think only of their clients and the greater good is to put these firms on rather a higher pedestal than I think is warranted; the third point is irrelevant because the onus is on the regulators to prove that harm is likely, rather than on innovators to prove that improvement is likely.

The Law Society of Upper Canada has published Alternative Business Structures and the Legal Profession in Ontario: A Discussion Paper in which is stated:

Legal service regulation ensures that clients have competent, independent legal representation provided with candour and confidentiality. It also protects society by ensuring that legal services are provided with fidelity to the cause of justice, the rule of law and the administration of justice. These professional values would have to be safeguarded in any move to liberalize ownership or structure including ABS.

Many of those who are sceptical of ABS express particular concern about protection of these professional values.[22] On the other hand, ABS proponents do not dismiss the importance of these professional values, but rather believe that these values can be properly protected in an ABS model.[23]

Footnote 22 refers to a paper by Nick Robinson of Harvard Law School titled When Lawyers Don’t Get All the Profits: Non-Lawyer Ownership of Legal Services, Access, and Professionalism:

With multiple countries now allowing for non-lawyer ownership of legal services, and other jurisdictions considering a similar shift, the legal profession is in the midst of a global regulatory moment. Where non-lawyer ownership has been allowed, personal injury firms have listed on stock exchanges, major insurance companies have bought law firms, and brands best known for their grocery stores have started offering legal services. Proponents argue that these developments will spur investment and innovation, promoting access to justice by making legal services more affordable and reliable. However, there has been little empirical research to test this proposition.

This article draws on case studies and quantitative data from the United Kingdom and Australia, where non-lawyer ownership has been allowed, as well as the United States – where parallels to such ownership have emerged in online and administrative law legal services. Based on this evidence, it argues that the benefits of non-lawyer ownership have been oversold with respect to access to civil legal services for poor and moderate-income populations and it identifies serious new professionalism challenges such ownership can create. While some form of non-lawyer ownership is likely to continue to spread, these conclusions cast doubt on the ability of non-lawyer ownership to substantially improve access to legal services, suggesting that alternative access strategies should be prioritized. They also point towards the need to carefully regulate non-lawyer ownership in some contexts.

Traditionally, academics have been wary that lawyers will capture the regulation of legal services, but non-lawyer ownership, which allows for others to profit from legal services as well, raises the likelihood that new actors may also capture the profession’s regulation. Given this environment, the article recommends that going forward a diverse set of stakeholders, drawing on as much empirical data as possible, develop a tailored approach to the regulation of non-lawyer ownership.

It’s an interesting debate and not much different, as far as I can tell, from the question of whether corporations should be allowed to own Portfolio Management companies. I think the disputing lawyers would be well advised to look at some of the bank-owned asset managers as a case study; I suspect that corporate ownership of law firms will lead to:

• increased access to
• plain vanilla, cookie-cutter legal advice

It was another poor day for the Canadian preferred share market, with PerpetualDiscounts down 38bp, FixedResets losing 46bp and DeemedRetractibles off 2bp. Enbridge issues were particularly notable on the unfortunate side of the lengthy Performance Highlights table. Volume was 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:

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 18.55 to be $0.71 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $1.17 cheap at its bid price of 14.10.

Another good fit today!

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 17.13 to be 0.44 rich, while MFC.PR.M, resetting at +236bp on 2019-122-19, is bid at 21.85 to be $0.46 cheap.

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 18.00 to be $1.22 cheap. BAM.PF.X, resetting at +180bp on 2017-6-30 is bid at 17.25 and appears to be $1.19 rich.

FTS.PR.K, with a spread of +205bp, and bid at 20.63, looks $0.42 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 19.75 and is $0.99 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.04%, with one outlier above 1.00%. There is one junk outlier above +1.00%.

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	1.9964 %	2,036.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.9964 %	3,560.3
Floater	3.60 %	3.63 %	55,481	18.20	3	1.9964 %	2,164.7
OpRet	0.00 %	0.00 %	0	0.00	0	0.4585 %	2,767.0
SplitShare	4.60 %	4.80 %	59,880	3.15	3	0.4585 %	3,242.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.4585 %	2,530.1
Perpetual-Premium	5.72 %	5.38 %	65,117	2.09	9	-0.1762 %	2,484.9
Perpetual-Discount	5.42 %	5.41 %	81,761	14.70	28	-0.3768 %	2,602.0
FixedReset	4.71 %	3.83 %	209,406	16.00	87	-0.4633 %	2,231.3
Deemed-Retractible	5.12 %	5.15 %	106,205	5.47	34	-0.0207 %	2,579.1
FloatingReset	2.32 %	3.29 %	45,782	6.02	9	-0.0099 %	2,256.8

Performance Highlights
Issue	Index	Change	Notes
POW.PR.B	Perpetual-Discount	-7.95 %	Looks like completely inadequate market-making on this issue, since the incredible volume of 6,480 shares appears to have overwhelmed the market making arrangements at the Exchange. The VWAP was 24.24; at 3:51pm there was a trade of 400 shares at 24.25; at 3:57, 100 shares at 23.88; at 3:59, 100 shares at 22.84; and again at 3:59, 200 shares at 22.83. So, while I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers, I’ll bet a nickel the market-maker is just plain lazy, with a stupid supervisor. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 22.18 Evaluated at bid price : 22.46 Bid-YTW : 6.01 %
TRP.PR.C	FixedReset	-3.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 14.06 Evaluated at bid price : 14.06 Bid-YTW : 3.83 %
ENB.PR.D	FixedReset	-3.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 15.63 Evaluated at bid price : 15.63 Bid-YTW : 5.05 %
ENB.PR.F	FixedReset	-2.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 5.06 %
ENB.PR.P	FixedReset	-2.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 4.95 %
FTS.PR.K	FixedReset	-2.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 20.63 Evaluated at bid price : 20.63 Bid-YTW : 3.53 %
ENB.PF.C	FixedReset	-2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 17.86 Evaluated at bid price : 17.86 Bid-YTW : 5.01 %
HSE.PR.C	FixedReset	-2.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 21.81 Evaluated at bid price : 22.20 Bid-YTW : 4.41 %
ENB.PF.E	FixedReset	-2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 17.91 Evaluated at bid price : 17.91 Bid-YTW : 5.04 %
TRP.PR.E	FixedReset	-1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 3.88 %
ENB.PF.A	FixedReset	-1.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 17.74 Evaluated at bid price : 17.74 Bid-YTW : 5.05 %
ENB.PR.T	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 16.88 Evaluated at bid price : 16.88 Bid-YTW : 4.93 %
BMO.PR.W	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 21.37 Evaluated at bid price : 21.67 Bid-YTW : 3.43 %
HSE.PR.A	FixedReset	-1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 15.02 Evaluated at bid price : 15.02 Bid-YTW : 4.03 %
BAM.PF.A	FixedReset	-1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 21.29 Evaluated at bid price : 21.58 Bid-YTW : 4.24 %
BAM.PR.T	FixedReset	-1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 4.24 %
ENB.PR.Y	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 4.76 %
FTS.PR.H	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 16.25 Evaluated at bid price : 16.25 Bid-YTW : 3.32 %
BAM.PR.R	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 4.19 %
CU.PR.C	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 23.13 Evaluated at bid price : 23.50 Bid-YTW : 3.27 %
TRP.PR.B	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 13.90 Evaluated at bid price : 13.90 Bid-YTW : 3.49 %
BMO.PR.T	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 22.03 Evaluated at bid price : 22.50 Bid-YTW : 3.31 %
PWF.PR.R	Perpetual-Premium	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 24.41 Evaluated at bid price : 24.90 Bid-YTW : 5.54 %
FTS.PR.G	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 3.71 %
ENB.PR.N	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 16.97 Evaluated at bid price : 16.97 Bid-YTW : 5.06 %
BAM.PF.D	Perpetual-Discount	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.78 %
PVS.PR.D	SplitShare	1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.24 Bid-YTW : 5.25 %
SLF.PR.H	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.60 Bid-YTW : 5.98 %
BAM.PR.B	Floater	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 13.25 Evaluated at bid price : 13.25 Bid-YTW : 3.59 %
RY.PR.K	FloatingReset	1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 3.26 %
CU.PR.G	Perpetual-Discount	1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.33 %
BAM.PF.B	FixedReset	1.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 4.09 %
BAM.PR.C	Floater	2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 12.97 Evaluated at bid price : 12.97 Bid-YTW : 3.67 %
BAM.PR.K	Floater	2.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 13.12 Evaluated at bid price : 13.12 Bid-YTW : 3.63 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.K	Deemed-Retractible	140,630	Nesbitt crossed 40,000 at 25.40; TD crossed 100,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-25 Maturity Price : 25.25 Evaluated at bid price : 25.37 Bid-YTW : 2.74 %
MFC.PR.J	FixedReset	117,700	RBC crossed blocks of 40,000 and 65,000, both at 23.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.48 Bid-YTW : 4.30 %
BNS.PR.O	Deemed-Retractible	100,600	Scotia crossed 100,000 at 25.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-04-27 Maturity Price : 25.25 Evaluated at bid price : 25.52 Bid-YTW : 4.14 %
BNS.PR.B	FloatingReset	78,897	TD crossed 77,200 at 23.20. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.15 Bid-YTW : 3.29 %
MFC.PR.G	FixedReset	55,425	RBC crossed 21,900 at 24.65. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.87 %
SLF.PR.H	FixedReset	53,339	RBC crossed 40,000 at 19.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.60 Bid-YTW : 5.98 %
There were 33 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
POW.PR.B	Perpetual-Discount	Quote: 22.46 – 24.25 Spot Rate : 1.7900 Average : 1.0132 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 22.18 Evaluated at bid price : 22.46 Bid-YTW : 6.01 %
BAM.PR.B	Floater	Quote: 13.25 – 14.25 Spot Rate : 1.0000 Average : 0.5912 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 13.25 Evaluated at bid price : 13.25 Bid-YTW : 3.59 %
BMO.PR.W	FixedReset	Quote: 21.67 – 22.26 Spot Rate : 0.5900 Average : 0.3650 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 21.37 Evaluated at bid price : 21.67 Bid-YTW : 3.43 %
TRP.PR.C	FixedReset	Quote: 14.06 – 14.69 Spot Rate : 0.6300 Average : 0.4129 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 14.06 Evaluated at bid price : 14.06 Bid-YTW : 3.83 %
MFC.PR.N	FixedReset	Quote: 21.88 – 23.00 Spot Rate : 1.1200 Average : 0.9053 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.88 Bid-YTW : 5.13 %
TRP.PR.F	FloatingReset	Quote: 16.85 – 17.50 Spot Rate : 0.6500 Average : 0.4432 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-06 Maturity Price : 16.85 Evaluated at bid price : 16.85 Bid-YTW : 3.42 %

There is more muttering about a September Fed hike:

Traders have never been more convinced of a September rate hike by the Federal Reserve.

The chances of an interest-rate increase next month reached 52 percent Wednesday, up from just 38 percent just two days earlier. What’s fueled the change of heart? Hawkish comments from Fed Bank of Atlanta President Dennis Lockhart on Tuesday, and a surprisingly strong report on U.S. service-sector growth Wednesday morning.
…
Yields on Treasury one-month bills rose Wednesday to the highest since November, while those on two-year notes touched the highest since 2011. Longer maturities slumped as well. Benchmark 10-year yields added five basis points to 2.27 percent.

But historical rules may not apply in this peculiar world:

Treasury two-year yields of just 0.73 percent are low historically, yet they’re looking better and better compared with the alternatives.

The U.S. yield is almost 1 percentage point more than its German counterpart, which is negative 0.25 percent. The premium reached the most this week since 2007. Against Canada, the spread was as much as 33 basis points on Aug. 4, also the most in eight years.
…
While the Fed is getting ready to raise rates, the European Central Bank is buying government bonds to support the economy by putting downward pressure on borrowing costs. The Bank of Canada cut interest rates twice this year.

Yesterday I reported on SEC Commissioner Daniel M. Gallagher’s harsh words reporting Dodd-Frank. Today there’s some more Dodd-Frank idiocy:

The Securities and Exchange Commission today adopted a final rule that requires a public company to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees. The new rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, provides companies with flexibility in calculating this pay ratio, and helps inform shareholders when voting on “say on pay.”

This social engineering was endorsed by Commissioner Kara M. Stein, Commissioner Luis A. Aguilar and Chair Mary Jo White, who noted:

To say that the views on the pay ratio disclosure requirement are divided is an obvious understatement. Since it was mandated by Congress, the pay ratio rule has been controversial, spurring a contentious and, at times, heated dialogue. The Commission has received more than 287,400 comment letters, including over 1,500 unique letters, with some asserting the importance of the rule to shareholders as they consider the issue of appropriate CEO compensation and investment decisions, and others asserting that the rule has no benefits and will needlessly cause issuers to incur significant costs.

These differences in views were evident at the time the Commission voted to propose the pay ratio rule. That the Commission was even considering the rule proposal was, for example, criticized as contrary to our mission. We may hear similar thoughts today.

So the three Democrats supported the measure, but the two Republicans opposed it; our friend Commissioner Daniel M. Gallagher stated:

The release does an impressive job of creating out of whole cloth a rationale for this rule: that it could help inform investors in their oversight of executive compensation, including say-on-pay votes.[1] But, to steal a line from Justice Scalia, this is pure applesauce.[2] The purpose of this rule is not to inform a reasonable investor’s voting or investment decision.[3] The AFL-CIO, which lobbied for the rule’s inclusion in Dodd-Frank, has explained for us its true purpose: “Disclosing this pay ratio will shame companies into lowering C.E.O. pay.”[4] And, “They will be embarrassed, and that’s the whole point.”[5] But addressing perceived income inequality is not the province of the securities laws or the Commission. And yet here we are, on the cusp of adopting a nakedly political rule that hijacks the SEC’s disclosure regime to once again effect social change desired by ideologues and special interest groups.

* * *

As an initial matter, we did not have to take up this rule today. Section 953(b) of Dodd-Frank does not have a statutory deadline. There are other, more pressing matters for the Commission, including policymaking with respect to matters actually involving the SEC’s core mission. On the occasion of Dodd-Frank’s fifth anniversary, many have spoken about the law as a fait accompli. But that is far from the truth at the SEC.[6] For example, we have not completed our implementation of Title VII,[7] and we are way past the statutory deadline for adopting mandated rules on stock lending transparency. This rulemaking may well be the most useless of all our Dodd-Frank mandates — that really says something — and it warranted the “caboose” treatment.

and Commissioner Michael S. Piwowar said:

Today’s rulemaking implements a provision of the highly partisan Dodd-Frank Act[2] that pandered to politically-connected special interest groups and, independent of the Act, could not stand on its own merits.[3] I am incredibly disappointed the Commission is stepping into that fray.

Section 953(b) of Dodd-Frank simply has nothing to do with protecting investors, ensuring fair, orderly, and efficient markets, or facilitating capital formation. The proposing release is candid about the fact that “neither the statute nor the related legislative history directly states the objectives or intended benefits of the provision or of a specific market failure, if any, that is intended to be remedied.”[4]
…
The timing of this vote is quite peculiar given the recent moves by Congress to repeal the pay-ratio provision. Last week, six more co-sponsors signed on to a bill introduced in the House by Representative Bill Huizenga of Michigan to repeal Section 953(b), bringing the total number of co-sponsors to 23 members.[32] Less than a month ago, Senator Mike Rounds of South Dakota introduced a pay-ratio repeal bill in the Senate, which added a co-sponsor two days ago.[33] It does not seem coincidental that our open meeting was scheduled for the week after the House of Representatives adjourned for August recess and one day before the Senate is expected to do the same.[34]

But it ain’t over ’til it’s over … and that might be a while:

Even so, Republicans and business groups still oppose the requirement and said the SEC ignored some of their recommendations to improve it. Groups such as the U.S. Chamber of Commerce or the Business Roundtable are expected to sue the agency over the rule.

“We will continue to review the rule and explore our options for how best to clean up the mess it has created,” the chamber’s David Hirschmann said in a statement Wednesday.

The whole thing is as crazy as it would be to get the securities regulators to encourage greater representation by women on boards and in positions of senior management … oh, wait … we’ve done that … it was a request of the Ontario government. Well, at least it reassures us that everything is perfect in InvestmentLand!

Wonder of wonders, it was a good day for the Canadian preferred share market, something I haven’t had much opportunity to say in he past three months! PerpetualDiscounts gained 29bp, FixedResets won 62bp and DeemedRetractibles were up 32bp. The Performance Highlights table is lengthy and very heavily tilted towards winners. Volume was below average.

PerpetualDiscounts now yield 5.43%, equivalent to 7.06% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.0%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 305bp, a significant increase from the 295bp reported July 29.

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:

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 14.06 to be $0.46 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.81 cheap at its bid price of 14.36.

Another good fit today!

Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.85 to be 0.59 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.20 to be $0.42 cheap.

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 21.83 to be $1.04 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 23.40 and appears to be $1.17 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.18, looks $0.70 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 19.96 and is $1.03 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.03%, with one outlier above 1.00%. There is one junk outlier above +1.00%.

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	0.4166 %	1,996.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.4166 %	3,490.6
Floater	3.68 %	3.73 %	55,743	17.97	3	0.4166 %	2,122.3
OpRet	0.00 %	0.00 %	0	0.00	0	-0.7363 %	2,754.4
SplitShare	4.62 %	4.98 %	60,650	3.15	3	-0.7363 %	3,228.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.7363 %	2,518.6
Perpetual-Premium	5.71 %	5.37 %	66,049	2.09	9	0.1765 %	2,489.3
Perpetual-Discount	5.40 %	5.43 %	83,874	14.66	28	0.2884 %	2,611.8
FixedReset	4.69 %	3.80 %	210,220	15.97	87	0.6218 %	2,241.7
Deemed-Retractible	5.12 %	5.17 %	104,287	5.48	34	0.3192 %	2,579.6
FloatingReset	2.32 %	3.29 %	46,800	6.02	9	0.1789 %	2,257.0

Performance Highlights
Issue	Index	Change	Notes
PVS.PR.D	SplitShare	-2.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.44 %
BAM.PF.B	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 4.18 %
FTS.PR.K	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 21.18 Evaluated at bid price : 21.18 Bid-YTW : 3.43 %
HSE.PR.G	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.01 Evaluated at bid price : 22.55 Bid-YTW : 4.71 %
GWO.PR.S	Deemed-Retractible	1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 5.33 %
ELF.PR.H	Perpetual-Discount	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 24.13 Evaluated at bid price : 24.61 Bid-YTW : 5.62 %
CU.PR.D	Perpetual-Discount	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.72 Evaluated at bid price : 23.04 Bid-YTW : 5.40 %
ENB.PR.H	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 15.62 Evaluated at bid price : 15.62 Bid-YTW : 4.75 %
HSE.PR.C	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.16 Evaluated at bid price : 22.75 Bid-YTW : 4.28 %
CU.PR.C	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 23.42 Evaluated at bid price : 23.78 Bid-YTW : 3.23 %
GWO.PR.G	Deemed-Retractible	1.15 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 5.49 %
BAM.PR.T	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 18.41 Evaluated at bid price : 18.41 Bid-YTW : 4.18 %
BAM.PF.D	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 21.39 Evaluated at bid price : 21.72 Bid-YTW : 5.70 %
MFC.PR.I	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 3.82 %
BAM.PR.R	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 18.22 Evaluated at bid price : 18.22 Bid-YTW : 4.14 %
TD.PR.Z	FloatingReset	1.27 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.11 Bid-YTW : 3.29 %
BMO.PR.T	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.19 Evaluated at bid price : 22.75 Bid-YTW : 3.27 %
MFC.PR.F	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.03 Bid-YTW : 6.93 %
ENB.PR.B	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 15.64 Evaluated at bid price : 15.64 Bid-YTW : 5.01 %
RY.PR.Z	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.05 Evaluated at bid price : 22.50 Bid-YTW : 3.29 %
GWO.PR.P	Deemed-Retractible	1.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.51 %
NA.PR.W	FixedReset	1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 21.57 Evaluated at bid price : 21.88 Bid-YTW : 3.47 %
BMO.PR.S	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.29 Evaluated at bid price : 22.88 Bid-YTW : 3.34 %
TRP.PR.A	FixedReset	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 3.66 %
FTS.PR.H	FixedReset	1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 3.28 %
TD.PF.B	FixedReset	1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.03 Evaluated at bid price : 22.50 Bid-YTW : 3.33 %
ENB.PR.T	FixedReset	1.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 17.21 Evaluated at bid price : 17.21 Bid-YTW : 4.84 %
TD.PF.C	FixedReset	1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 21.66 Evaluated at bid price : 22.00 Bid-YTW : 3.41 %
SLF.PR.G	FixedReset	1.88 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.77 Bid-YTW : 7.01 %
IFC.PR.C	FixedReset	2.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.30 Bid-YTW : 4.86 %
BMO.PR.W	FixedReset	2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 21.73 Evaluated at bid price : 22.09 Bid-YTW : 3.36 %
TRP.PR.C	FixedReset	2.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 14.62 Evaluated at bid price : 14.62 Bid-YTW : 3.68 %
CU.PR.F	Perpetual-Discount	2.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 5.38 %
HSE.PR.E	FixedReset	2.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.39 Evaluated at bid price : 23.16 Bid-YTW : 4.57 %
PWF.PR.T	FixedReset	2.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 23.04 Evaluated at bid price : 24.30 Bid-YTW : 3.14 %
ENB.PR.P	FixedReset	2.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 4.80 %
TRP.PR.E	FixedReset	2.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 3.80 %
BAM.PR.X	FixedReset	3.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 17.15 Evaluated at bid price : 17.15 Bid-YTW : 3.80 %
TRP.PR.D	FixedReset	3.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 20.77 Evaluated at bid price : 20.77 Bid-YTW : 3.80 %

Volume Highlights
Issue	Index	Shares Traded	Notes
SLF.PR.G	FixedReset	164,280	TD crossed 160,000 at 16.70. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.77 Bid-YTW : 7.01 %
RY.PR.J	FixedReset	121,200	Desjardins crossed 113,100 at 23.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.56 Evaluated at bid price : 23.51 Bid-YTW : 3.52 %
PWF.PR.T	FixedReset	103,109	RBC crossd 100,000 at 24.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 23.04 Evaluated at bid price : 24.30 Bid-YTW : 3.14 %
BMO.PR.Y	FixedReset	78,718	Desjardins crossed 74,300 at 24.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.77 Evaluated at bid price : 24.00 Bid-YTW : 3.50 %
HSB.PR.D	Deemed-Retractible	67,500	RBC crossed 49,800 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.93 Bid-YTW : 5.17 %
TD.PR.Y	FixedReset	51,933	RBC crossed 50,000 at 25.07. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 2.88 %
There were 25 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.F	Perpetual-Discount	Quote: 22.93 – 23.90 Spot Rate : 0.9700 Average : 0.6488 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.68 Evaluated at bid price : 22.93 Bid-YTW : 5.43 %
ENB.PR.J	FixedReset	Quote: 17.58 – 18.28 Spot Rate : 0.7000 Average : 0.4452 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 17.58 Evaluated at bid price : 17.58 Bid-YTW : 4.92 %
MFC.PR.N	FixedReset	Quote: 21.88 – 22.80 Spot Rate : 0.9200 Average : 0.6700 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.88 Bid-YTW : 5.13 %
HSE.PR.G	FixedReset	Quote: 22.55 – 23.25 Spot Rate : 0.7000 Average : 0.4504 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 22.01 Evaluated at bid price : 22.55 Bid-YTW : 4.71 %
TRP.PR.B	FixedReset	Quote: 14.06 – 14.75 Spot Rate : 0.6900 Average : 0.4812 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-05 Maturity Price : 14.06 Evaluated at bid price : 14.06 Bid-YTW : 3.45 %
PVS.PR.D	SplitShare	Quote: 24.00 – 24.50 Spot Rate : 0.5000 Average : 0.3164 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.44 %

There are new indications of a September Fed hike:

Traders are seeing virtually even odds on a September interest-rate increase in the U.S., pushing a gauge of the dollar to a four-month high.

The greenback rallied versus most major peers Tuesday as Federal Reserve Bank of Atlanta President Dennis Lockhart said in an interview with the Wall Street Journal that the central bank is close to raising rates next month for the first time since 2006. A report Friday is forecast to show U.S. employers added more than 200,000 jobs again in July.
…
Traders are pricing in a 48 percent probability that the Fed will raise borrowing costs in September, based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.

So I don’t know how this fits in:

Investor demand for longer-maturity Treasuries means they’re willing to accept a smaller yield premium to get the securities. Fidelity Investments says the trend has further to go.

The extra yield on 10-year notes over two-year securities shrank to 147 basis points Tuesday, the narrowest spread in three months. Traders in the world’s biggest bond market call this a flattening of the yield curve. The figure is less than the average of almost 2 percentage points for the past five years.
…
The difference between one-year U.S. yields and those for similar-maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was negative 0.67 percent. It has been below zero for two weeks.

SEC Commissioner Daniel M. Gallagher gave an entertaining speech on Dodd-Frank:

Last month marked the fifth anniversary of the Dodd-Frank Act,[1] meaning that my entire tenure as a Commissioner has occurred in the midst of the first Five-Year Plan for our national economy. And, as is always the case with grandiose central plans, Dodd-Frank has backfired, strangling our economy, increasing the fragility of the financial system, and politicizing our independent financial regulators.
…
Prudential regulation is an important tool for bank regulators to use in supervising banks’ risk-taking activities, so as to ensure that risks are limited to an acceptable level and avoid posing an undue strain on the government insurance backstop — despite the moral hazard and expectations of “no losses” that the insurance itself creates. But in practice, “prudential” regulation can and has evolved into an opaque regulatory system in which the government’s invisible hand replaces the market’s, transcending rule enforcement and becoming the decision maker for ostensibly private enterprises.

The attempts by our prudential regulators and their international counterparts to de-risk the U.S. capital markets and make them look like the banking markets are not just philosophically wrong — they are an attack on U.S. competitiveness. As I have stated before, piling more regulatory burdens on our capital markets will only cause more activity to move overseas, where up-and-coming jurisdictions in Asia and elsewhere would be more than happy to gain market share.[7] And it will stifle domestic economic activity, as companies will be forced to line up for bank loans made scarce by new bank regulations rather than pursuing capital formation opportunities in the market.

It was another rotten day for the Canadian preferred share market, with PerpetualDiscounts and FixedResets both down 27bp and DeemedRetractibles losing 39bp. TRP, ENB and SLF issues are notable on the bad side of the Performance Highlights table. Volume was 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:

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 14.15 to be $0.84 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.85 cheap at its bid price of 14.30.

Another good fit today!

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 16.78 to be 0.36 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.12 to be $0.44 cheap.

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 21.78 to be $1.21 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 23.25 and appears to be $0.95 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.40, looks $0.91 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.14 and is $0.88 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of +0.03%, with one outlier above 1.00% and one below -1.00%. There is one junk outlier above +1.00%.

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	-0.8774 %	1,988.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.8774 %	3,476.1
Floater	3.69 %	3.73 %	56,089	17.98	3	-0.8774 %	2,113.5
OpRet	0.00 %	0.00 %	0	0.00	0	-0.0669 %	2,774.8
SplitShare	4.59 %	4.95 %	60,699	3.15	3	-0.0669 %	3,251.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0669 %	2,537.3
Perpetual-Premium	5.72 %	4.49 %	68,288	0.08	9	-0.2817 %	2,484.9
Perpetual-Discount	5.41 %	5.46 %	84,389	14.62	28	-0.2738 %	2,604.3
FixedReset	4.72 %	3.87 %	211,653	15.77	87	-0.2673 %	2,227.9
Deemed-Retractible	5.13 %	5.19 %	105,051	5.47	34	-0.3934 %	2,571.4
FloatingReset	2.33 %	3.38 %	47,702	6.02	9	-0.5781 %	2,253.0

Performance Highlights
Issue	Index	Change	Notes
ENB.PR.B	FixedReset	-3.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 15.41 Evaluated at bid price : 15.41 Bid-YTW : 5.09 %
TRP.PR.C	FixedReset	-3.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 14.30 Evaluated at bid price : 14.30 Bid-YTW : 3.76 %
TRP.PR.B	FixedReset	-2.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 14.15 Evaluated at bid price : 14.15 Bid-YTW : 3.43 %
TRP.PR.A	FixedReset	-2.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 18.09 Evaluated at bid price : 18.09 Bid-YTW : 3.72 %
ENB.PR.H	FixedReset	-2.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 15.45 Evaluated at bid price : 15.45 Bid-YTW : 4.81 %
TRP.PR.E	FixedReset	-2.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 3.92 %
CU.PR.F	Perpetual-Discount	-2.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 5.51 %
GWO.PR.P	Deemed-Retractible	-2.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.62 Bid-YTW : 5.72 %
TD.PR.Z	FloatingReset	-2.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.82 Bid-YTW : 3.50 %
ENB.PF.G	FixedReset	-2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 4.99 %
FTS.PR.F	Perpetual-Discount	-2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.65 Evaluated at bid price : 22.91 Bid-YTW : 5.43 %
PWF.PR.L	Perpetual-Discount	-2.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 23.56 Evaluated at bid price : 23.81 Bid-YTW : 5.38 %
ELF.PR.H	Perpetual-Discount	-2.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 23.88 Evaluated at bid price : 24.35 Bid-YTW : 5.68 %
SLF.PR.D	Deemed-Retractible	-2.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.07 Bid-YTW : 6.82 %
ENB.PF.C	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 18.16 Evaluated at bid price : 18.16 Bid-YTW : 4.93 %
FTS.PR.H	FixedReset	-1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 16.17 Evaluated at bid price : 16.17 Bid-YTW : 3.29 %
PWF.PR.O	Perpetual-Premium	-1.51 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-31 Maturity Price : 25.25 Evaluated at bid price : 25.51 Bid-YTW : 5.31 %
HSE.PR.E	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.06 Evaluated at bid price : 22.60 Bid-YTW : 4.70 %
MFC.PR.I	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 3.98 %
SLF.PR.B	Deemed-Retractible	-1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.48 Bid-YTW : 6.33 %
SLF.PR.C	Deemed-Retractible	-1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.10 Bid-YTW : 6.80 %
MFC.PR.N	FixedReset	-1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.95 Bid-YTW : 5.08 %
SLF.PR.E	Deemed-Retractible	-1.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.36 Bid-YTW : 6.69 %
CU.PR.G	Perpetual-Discount	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 5.44 %
BIP.PR.A	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.53 Evaluated at bid price : 21.85 Bid-YTW : 4.88 %
CU.PR.C	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 23.14 Evaluated at bid price : 23.51 Bid-YTW : 3.27 %
POW.PR.G	Perpetual-Premium	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 24.49 Evaluated at bid price : 24.98 Bid-YTW : 5.64 %
BAM.PR.C	Floater	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 12.60 Evaluated at bid price : 12.60 Bid-YTW : 3.78 %
ENB.PR.F	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 16.80 Evaluated at bid price : 16.80 Bid-YTW : 4.89 %
ENB.PR.P	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 16.80 Evaluated at bid price : 16.80 Bid-YTW : 4.94 %
BAM.PR.K	Floater	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 12.76 Evaluated at bid price : 12.76 Bid-YTW : 3.73 %
BNS.PR.Q	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.67 Bid-YTW : 3.21 %
GWO.PR.S	Deemed-Retractible	-1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 5.46 %
ENB.PR.N	FixedReset	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 4.98 %
ENB.PF.A	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 18.14 Evaluated at bid price : 18.14 Bid-YTW : 4.93 %
GWO.PR.Q	Deemed-Retractible	-1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.64 %
BAM.PR.R	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 4.19 %
BNS.PR.A	FloatingReset	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.85 Bid-YTW : 3.14 %
ELF.PR.F	Perpetual-Discount	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 23.91 Evaluated at bid price : 24.15 Bid-YTW : 5.53 %
PWF.PR.K	Perpetual-Discount	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.86 Evaluated at bid price : 23.13 Bid-YTW : 5.37 %
MFC.PR.F	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.78 Bid-YTW : 7.11 %
CU.PR.E	Perpetual-Discount	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.48 Evaluated at bid price : 22.77 Bid-YTW : 5.46 %
MFC.PR.L	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.92 Bid-YTW : 5.59 %
BAM.PF.B	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 4.09 %
MFC.PR.K	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.12 Bid-YTW : 5.35 %
BAM.PF.E	FixedReset	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.65 Evaluated at bid price : 22.00 Bid-YTW : 3.91 %
TD.PF.F	Perpetual-Discount	1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 23.81 Evaluated at bid price : 24.15 Bid-YTW : 5.10 %
ENB.PR.Y	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 17.32 Evaluated at bid price : 17.32 Bid-YTW : 4.68 %
BAM.PR.Z	FixedReset	1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.44 Evaluated at bid price : 21.78 Bid-YTW : 4.28 %
HSE.PR.C	FixedReset	2.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.01 Evaluated at bid price : 22.50 Bid-YTW : 4.34 %
BAM.PR.N	Perpetual-Discount	2.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 5.62 %
BAM.PR.X	FixedReset	2.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 16.61 Evaluated at bid price : 16.61 Bid-YTW : 3.93 %
FTS.PR.J	Perpetual-Discount	3.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.35 Evaluated at bid price : 22.75 Bid-YTW : 5.29 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.P	FixedReset	144,674	Desjardins crossed 130,900 at 21.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.52 Evaluated at bid price : 21.81 Bid-YTW : 3.45 %
BMO.PR.T	FixedReset	79,500	Scotia crossed 74,000 at 22.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.98 Evaluated at bid price : 22.43 Bid-YTW : 3.33 %
BMO.PR.Y	FixedReset	78,561	Desjardins crossed 75,000 at 24.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.76 Evaluated at bid price : 23.96 Bid-YTW : 3.51 %
HSE.PR.G	FixedReset	71,650	Haywood (who?) crossed 70,000 at 22.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.15 Evaluated at bid price : 22.78 Bid-YTW : 4.66 %
CM.PR.O	FixedReset	69,403	Scotia crossed 56,000 at 22.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 22.12 Evaluated at bid price : 22.63 Bid-YTW : 3.39 %
BAM.PR.Z	FixedReset	66,075	Scotia crossed 56,000 at 21.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 21.44 Evaluated at bid price : 21.78 Bid-YTW : 4.28 %
There were 32 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.E	FixedReset	Quote: 20.50 – 21.27 Spot Rate : 0.7700 Average : 0.4808 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 3.92 %
ELF.PR.H	Perpetual-Discount	Quote: 24.35 – 24.90 Spot Rate : 0.5500 Average : 0.3375 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 23.88 Evaluated at bid price : 24.35 Bid-YTW : 5.68 %
MFC.PR.L	FixedReset	Quote: 20.92 – 21.50 Spot Rate : 0.5800 Average : 0.3781 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.92 Bid-YTW : 5.59 %
GWO.PR.P	Deemed-Retractible	Quote: 24.62 – 25.12 Spot Rate : 0.5000 Average : 0.3204 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.62 Bid-YTW : 5.72 %
MFC.PR.N	FixedReset	Quote: 21.95 – 22.50 Spot Rate : 0.5500 Average : 0.3959 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.95 Bid-YTW : 5.08 %
PWF.PR.L	Perpetual-Discount	Quote: 23.81 – 24.24 Spot Rate : 0.4300 Average : 0.2860 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-04 Maturity Price : 23.56 Evaluated at bid price : 23.81 Bid-YTW : 5.38 %

Nothing happened today.

The Canadian preferred share market took another whacking to close the month, with PerpetualDiscounts losing 58bp, FixedResets down 56bp and DeemedRetractibles off 23bp. The Performance Highlights table is suitably horrible. 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:

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 24.56 to be $0.76 rich, while TRP.PR.D, resetting 2019-4-30 at +238, is $0.84 cheap at its bid price of 20.00.

Another good fit today!

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 16.95 to be 0.62 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 20.80 to be $0.79 cheap.

The fit on the BAM issues was particularly horrible today.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 21.37 to be $1.49 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 23.45 and appears to be $1.30 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.40, looks $0.81 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.25 and is $0.84 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of +0.02%, with one outlier above 1.00%. There are no junk outliers.

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	-0.7937 %	2,005.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.7937 %	3,506.9
Floater	3.66 %	3.69 %	56,377	18.08	3	-0.7937 %	2,132.2
OpRet	0.00 %	0.00 %	0	0.00	0	-0.1603 %	2,776.6
SplitShare	4.58 %	4.95 %	62,897	3.16	3	-0.1603 %	3,254.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1603 %	2,539.0
Perpetual-Premium	5.57 %	5.17 %	71,550	14.44	13	0.5753 %	2,491.9
Perpetual-Discount	5.43 %	5.46 %	84,676	14.71	24	-0.5762 %	2,611.5
FixedReset	4.72 %	3.83 %	207,733	16.03	88	-0.5645 %	2,233.8
Deemed-Retractible	5.11 %	5.12 %	105,251	5.48	34	-0.2309 %	2,581.5
FloatingReset	2.40 %	3.23 %	46,521	6.05	10	-0.1139 %	2,266.1

Performance Highlights
Issue	Index	Change	Notes
FTS.PR.J	Perpetual-Discount	-7.29 %	Not even close to having any resemblance to reality. Perhaps the market maker was overwhelmed by the enormous volume of 1,450 shares, which traded in a range of 23.60-66. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.60 Evaluated at bid price : 21.88 Bid-YTW : 5.51 %
TRP.PR.D	FixedReset	-4.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.01 %
MFC.PR.L	FixedReset	-3.95 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.65 Bid-YTW : 5.78 %
BAM.PR.Z	FixedReset	-3.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.37 Evaluated at bid price : 21.37 Bid-YTW : 4.44 %
MFC.PR.K	FixedReset	-3.75 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.80 Bid-YTW : 5.58 %
PWF.PR.T	FixedReset	-3.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 22.79 Evaluated at bid price : 23.75 Bid-YTW : 3.29 %
IAG.PR.A	Deemed-Retractible	-3.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.72 Bid-YTW : 6.57 %
TRP.PR.E	FixedReset	-2.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.03 Evaluated at bid price : 21.03 Bid-YTW : 3.87 %
ENB.PR.D	FixedReset	-2.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 16.15 Evaluated at bid price : 16.15 Bid-YTW : 4.95 %
TRP.PR.F	FloatingReset	-2.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 17.08 Evaluated at bid price : 17.08 Bid-YTW : 3.42 %
IFC.PR.C	FixedReset	-1.96 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 5.07 %
BAM.PR.C	Floater	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 12.75 Evaluated at bid price : 12.75 Bid-YTW : 3.73 %
ENB.PR.T	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 4.95 %
BAM.PR.B	Floater	-1.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 13.09 Evaluated at bid price : 13.09 Bid-YTW : 3.64 %
ENB.PR.B	FixedReset	-1.84 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 4.97 %
ELF.PR.G	Perpetual-Discount	-1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.60 Evaluated at bid price : 21.85 Bid-YTW : 5.47 %
SLF.PR.I	FixedReset	-1.79 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.03 Bid-YTW : 4.62 %
BAM.PR.T	FixedReset	-1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 18.17 Evaluated at bid price : 18.17 Bid-YTW : 4.29 %
POW.PR.D	Perpetual-Discount	-1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 22.33 Evaluated at bid price : 22.60 Bid-YTW : 5.57 %
ENB.PR.N	FixedReset	-1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 17.40 Evaluated at bid price : 17.40 Bid-YTW : 4.98 %
ENB.PR.Y	FixedReset	-1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 4.82 %
CU.PR.C	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 23.44 Evaluated at bid price : 23.80 Bid-YTW : 3.28 %
MFC.PR.M	FixedReset	-1.52 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 5.13 %
GWO.PR.L	Deemed-Retractible	-1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.77 %
BMO.PR.Y	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 22.82 Evaluated at bid price : 24.10 Bid-YTW : 3.52 %
SLF.PR.C	Deemed-Retractible	-1.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.40 Bid-YTW : 6.60 %
GWO.PR.H	Deemed-Retractible	-1.33 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.01 Bid-YTW : 6.06 %
PWF.PR.S	Perpetual-Discount	-1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 22.20 Evaluated at bid price : 22.55 Bid-YTW : 5.33 %
SLF.PR.G	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.49 Bid-YTW : 7.23 %
FTS.PR.F	Perpetual-Discount	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 23.12 Evaluated at bid price : 23.40 Bid-YTW : 5.31 %
ENB.PR.P	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 4.94 %
BAM.PF.A	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.70 Evaluated at bid price : 21.95 Bid-YTW : 4.22 %
ENB.PF.E	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 18.29 Evaluated at bid price : 18.29 Bid-YTW : 4.98 %
ENB.PF.A	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 4.92 %
RY.PR.H	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.77 Evaluated at bid price : 22.12 Bid-YTW : 3.45 %
ENB.PR.J	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 17.61 Evaluated at bid price : 17.61 Bid-YTW : 4.96 %
NA.PR.S	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 22.15 Evaluated at bid price : 22.66 Bid-YTW : 3.51 %
SLF.PR.H	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.25 Bid-YTW : 6.25 %
BAM.PF.E	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.34 Evaluated at bid price : 21.63 Bid-YTW : 4.03 %
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 : 21.65 Bid-YTW : 6.50 %
MFC.PR.G	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.51 Bid-YTW : 3.98 %
TD.PR.S	FixedReset	1.26 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.93 Bid-YTW : 2.83 %
CIU.PR.C	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 16.34 Evaluated at bid price : 16.34 Bid-YTW : 3.18 %
HSE.PR.G	FixedReset	1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 22.10 Evaluated at bid price : 22.70 Bid-YTW : 4.72 %
BAM.PR.K	Floater	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 12.91 Evaluated at bid price : 12.91 Bid-YTW : 3.69 %
BAM.PR.X	FixedReset	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 16.19 Evaluated at bid price : 16.19 Bid-YTW : 4.11 %
PWF.PR.O	Perpetual-Premium	7.38 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-10-31 Maturity Price : 25.75 Evaluated at bid price : 25.90 Bid-YTW : 3.31 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.Z	Perpetual-Discount	62,792	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 23.53 Evaluated at bid price : 23.85 Bid-YTW : 5.26 %
RY.PR.O	Perpetual-Discount	34,405	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 23.36 Evaluated at bid price : 23.66 Bid-YTW : 5.20 %
ENB.PR.B	FixedReset	33,687	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 4.97 %
CU.PR.C	FixedReset	30,775	RBC crossed 24,800 at 24.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 23.44 Evaluated at bid price : 23.80 Bid-YTW : 3.28 %
SLF.PR.H	FixedReset	27,240	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.25 Bid-YTW : 6.25 %
HSB.PR.D	Deemed-Retractible	26,865	RBC bought 18,800 from anonymous at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.12 %
There were 18 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.J	Perpetual-Discount	Quote: 21.88 – 23.42 Spot Rate : 1.5400 Average : 0.9873 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.60 Evaluated at bid price : 21.88 Bid-YTW : 5.51 %
IAG.PR.A	Deemed-Retractible	Quote: 21.72 – 22.70 Spot Rate : 0.9800 Average : 0.7410 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.72 Bid-YTW : 6.57 %
TRP.PR.D	FixedReset	Quote: 20.00 – 20.64 Spot Rate : 0.6400 Average : 0.4307 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.01 %
BAM.PF.E	FixedReset	Quote: 21.63 – 22.20 Spot Rate : 0.5700 Average : 0.3903 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 21.34 Evaluated at bid price : 21.63 Bid-YTW : 4.03 %
RY.PR.J	FixedReset	Quote: 23.70 – 24.15 Spot Rate : 0.4500 Average : 0.2830 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 22.65 Evaluated at bid price : 23.70 Bid-YTW : 3.52 %
TRP.PR.F	FloatingReset	Quote: 17.08 – 17.70 Spot Rate : 0.6200 Average : 0.4645 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-31 Maturity Price : 17.08 Evaluated at bid price : 17.08 Bid-YTW : 3.42 %

Too bad none of this activity is taking place in Canada. We spend our billions on pipelines to ship the raw material out of the country.:

While the collapse in oil and gas prices since the middle of last year caused energy companies to slash investment in oil wells, Thursday’s report on second-quarter GDP showed an interesting dynamic taking shape — investment in factories has been running full bore.

It may be surprising on the surface, given that manufacturing has simmered down this year on the heels of a weaker global economy, but spending on all types of production facilities increased at a 65 percent annualized pace in the second quarter. That was almost enough to offset a 68 percent plunge in investment in wells and mines that marked the biggest drop in 29 years.

Outlays for factory-related structures jumped even more from January through March — surging at a 95 percent pace. Over the last four quarters, investment in plants increased an average 64 percent, the strongest since records began in 1958.
…
Spending on chemical plant construction in the private sector stood at a seasonally adjusted annual rate of $48.4 billion in May, up almost 10 percent from a month earlier, according to the latest data from the Census Bureau. During the first five months of this year, an unadjusted $15.9 billion was spent on chemical plants, more than double the $7 billion for the same period in 2014.

In another bit of sensible news that is, obviously, not from Canada, electric car owners are being paid for flex-time:

One hundred owners of BMW AG’s i3 hatchback receive $1,000 upfront to participate in Pacific Gas & Electric Co.’s 18-month trial, which starts this week and is confined to the San Francisco Bay Area. Peter Berman, a 70-year-old, semi-retired Los Altos psychologist, was selected from about 400 applicants.

“My understanding is that we’ll get a text message that says ‘Hey, you’re charging your car right now, can you back off for an hour?’” said Berman, who began leasing his $40,000-plus i3 in October. “This is the wave of the future. We can’t continue to be dependent on gas and oil and coal for our energy use. I’m really curious as to how this is all going to unfold.”

The PG&E-BMW pilot is one of myriad experiments under way worldwide as utilities try to anticipate what will happen if (or when) millions of electric vehicles pour onto city streets and highways. Power companies see both challenge and promise. Yes, electric cars could put more pressure on the grid if everyone plugs them in at the same time. But utilities could also tap batteries for backup power when the grid is under strain or temporarily knocked out in an emergency, paying drivers for the electricity harvested from their parked cars.

But how about the Pan-Am Games, huh? Weren’t they something? The memories will distract us from obsessing over the fact that even the Brits are moving ahead of us in ejector bed technology.

I haven’t passed on any drone news in almost a week now, so here’s some more on air traffic control:

The Google concept, called Project Wing, would enable people to get products delivered “in short order,” even in the most populated areas, Dave Vos, the project’s leader, said here today (July 29) at a NASA-sponsored conference on drones. Project Wing was first described publicly in August 2014, when test flights of early prototypes were conducted in Australia, The Atlantic reported.

In order to take to the skies, drones need to not only communicate with people on the ground, but also with other high-fliers that are delivering small packages, taking aerial surveys or doing other work, Vos said.

Key to this vision of a drone-filled future is the use of existing cellular phone infrastructure.

“We don’t need to develop new protocols,” Vos said at the conference.

In his vision, drones would be outfitted with an automatic dependent surveillance-broadcast (ADS-B) receiver that would enable the unmanned fliers to communicate with each other, as well as with ground-based systems. Existing ADS-B systems in aircraft allow them to locate their position using satellites, and then rebroadcast that location to a ground-based station. This type of multi-way communication could enable the drones to avoid obstacles in midflight and fly safely to their destination, Vos said.

A drone equivalent of air traffic control systems will also be needed, Vos said. Google envisions cellular carriers and other private companies collaborating with the Federal Aviation Administration (FAA) to craft a drone air traffic safety system.

Nowadays, of course, there are only two things worth reading: technology news and um, something else, probably. So here’s an insurance industry projection:

A black Volkswagen Golf rolls along at 12 mph on an empty road in the heart of Virginia’s horse country. Suddenly the dashboard lights up, and there’s a warning sound. The driver ignores it. A moment later, the VW brakes hard—all on its own—and comes to a stop a foot in front of an inflated box painted to look like the rear end of a car. The Insurance Institute for Highway Safety (IIHS) has been running tests like this a few times a month at its research center in Ruckersville, Va. The objective is to vet automakers’ latest crash avoidance technologies, like the one in the Golf, to identify the most effective ones.

The auto insurance industry is having its Napster moment. Like record companies at the dawn of online music file sharing, Allstate, Geico, State Farm, and others are grappling with innovations that could put a huge dent in their revenue. As carmakers automate more aspects of driving, accidents will likely plunge and car owners will need less coverage. Premiums consumers pay could drop as much as 60 percent in 15 years as self-driving cars hit the roads, says Donald Light, head of the North America property and casualty practice for Celent, a research firm. His message for insurers: “You have to be prepared to see that part of your business shrink, probably considerably.”
…
For example, a system introduced on the 2013 Honda Accord beeps when cars get too close to traffic ahead or leave their lane without signaling. It has had a measurable effect on the frequency of some types of claims: Bodily injury liability losses dropped 40 percent and medical payments decreased 27 percent, according to a 2014 study of insurance claims data by the Highway Loss Data Institute, IIHS’s sister organization.
…
The bottom line: Insurers collected $195 billion in auto premiums from U.S. drivers last year. By 2030, consumers could pay 60 percent less.

It was a grim day for the Canadian preferred share market, with PerpetualDiscounts losing 82bp, FixedResets down 42bp and DeemedRetractibles off 36bp. Floaters were taken outside and shot. The Performance Highlights table is lengthy. Volume was above 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:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 21.60 to be $0.58 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $1.04 cheap at its bid price of 14.90.

Another good fit today!

Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.90 to be 0.48 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 24.21 to be $0.39 cheap.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 22.22 to be $0.89 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.85 and appears to be $1.27 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.41, looks $0.84 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.24 and is $0.84 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of +0.03%, with one outlier above 1.00%. There is one junk outlier, also above +1.00%.

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	-5.0559 %	2,021.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-5.0559 %	3,534.9
Floater	3.63 %	3.66 %	56,735	18.14	3	-5.0559 %	2,149.2
OpRet	0.00 %	0.00 %	0	0.00	0	-0.1467 %	2,781.1
SplitShare	4.57 %	4.76 %	61,537	3.17	3	-0.1467 %	3,259.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1467 %	2,543.0
Perpetual-Premium	5.60 %	5.48 %	71,512	14.11	13	-0.8312 %	2,477.7
Perpetual-Discount	5.40 %	5.40 %	85,216	14.76	24	-0.8233 %	2,626.6
FixedReset	4.69 %	3.82 %	210,382	16.04	88	-0.4211 %	2,246.5
Deemed-Retractible	5.10 %	5.17 %	105,394	5.48	34	-0.3644 %	2,587.5
FloatingReset	2.40 %	3.18 %	46,922	6.05	10	-0.3687 %	2,268.7

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-7.69 %	Exaggerated, since the range for the day was 13.24-76, with a VWAP of 13.62 on volume of 3,681. It looks like a trade of 300 shares late in the day overwhelmed the market’s capacity to absorb selling pressure. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 12.72 Evaluated at bid price : 12.72 Bid-YTW : 3.74 %
PWF.PR.O	Perpetual-Premium	-7.34 %	Ridiculous, since the range for the day was 26.03-12 (VWAP 26.04) on volume of 3,300 shares. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 23.83 Evaluated at bid price : 24.12 Bid-YTW : 6.04 %
BAM.PR.B	Floater	-4.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 13.34 Evaluated at bid price : 13.34 Bid-YTW : 3.57 %
HSE.PR.E	FixedReset	-3.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.18 Evaluated at bid price : 22.80 Bid-YTW : 4.69 %
CU.PR.G	Perpetual-Discount	-3.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.32 Evaluated at bid price : 21.32 Bid-YTW : 5.37 %
BAM.PR.C	Floater	-3.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 13.00 Evaluated at bid price : 13.00 Bid-YTW : 3.66 %
ENB.PR.J	FixedReset	-2.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 4.91 %
CU.PR.F	Perpetual-Discount	-2.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.39 %
BAM.PR.Z	FixedReset	-2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.97 Evaluated at bid price : 22.22 Bid-YTW : 4.24 %
MFC.PR.L	FixedReset	-2.36 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 5.25 %
MFC.PR.C	Deemed-Retractible	-2.36 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.52 Bid-YTW : 6.60 %
MFC.PR.B	Deemed-Retractible	-2.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 6.46 %
TD.PF.F	Perpetual-Discount	-2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 23.35 Evaluated at bid price : 23.65 Bid-YTW : 5.20 %
ENB.PF.C	FixedReset	-1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 18.44 Evaluated at bid price : 18.44 Bid-YTW : 4.90 %
ENB.PR.B	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 4.87 %
TRP.PR.B	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 14.65 Evaluated at bid price : 14.65 Bid-YTW : 3.37 %
TRP.PR.C	FixedReset	-1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 14.90 Evaluated at bid price : 14.90 Bid-YTW : 3.71 %
ENB.PR.F	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 16.92 Evaluated at bid price : 16.92 Bid-YTW : 4.92 %
HSE.PR.G	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.90 Evaluated at bid price : 22.37 Bid-YTW : 4.80 %
MFC.PR.G	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.21 Bid-YTW : 4.14 %
RY.PR.J	FixedReset	-1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.69 Evaluated at bid price : 23.78 Bid-YTW : 3.50 %
POW.PR.B	Perpetual-Discount	-1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 23.95 Evaluated at bid price : 24.20 Bid-YTW : 5.57 %
ENB.PF.G	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 18.79 Evaluated at bid price : 18.79 Bid-YTW : 4.88 %
ENB.PF.E	FixedReset	-1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 18.49 Evaluated at bid price : 18.49 Bid-YTW : 4.92 %
GWO.PR.N	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.00 Bid-YTW : 7.45 %
FTS.PR.F	Perpetual-Discount	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 23.41 Evaluated at bid price : 23.68 Bid-YTW : 5.25 %
GWO.PR.R	Deemed-Retractible	-1.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 5.98 %
TRP.PR.A	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 3.64 %
BAM.PR.X	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 15.95 Evaluated at bid price : 15.95 Bid-YTW : 4.17 %
RY.PR.N	Perpetual-Premium	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 23.67 Evaluated at bid price : 24.00 Bid-YTW : 5.17 %
TRP.PR.D	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 20.91 Evaluated at bid price : 20.91 Bid-YTW : 3.83 %
GWO.PR.I	Deemed-Retractible	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 6.28 %
RY.PR.Z	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.80 Evaluated at bid price : 22.15 Bid-YTW : 3.40 %
ENB.PR.D	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 4.84 %
SLF.PR.J	FloatingReset	-1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.06 Bid-YTW : 7.08 %
TD.PR.S	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.62 Bid-YTW : 3.04 %
POW.PR.D	Perpetual-Discount	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.69 Evaluated at bid price : 22.98 Bid-YTW : 5.47 %
RY.PR.M	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.58 Evaluated at bid price : 23.62 Bid-YTW : 3.44 %
CM.PR.O	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.19 Evaluated at bid price : 22.75 Bid-YTW : 3.41 %
PWF.PR.S	Perpetual-Discount	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.45 Evaluated at bid price : 22.85 Bid-YTW : 5.26 %
BMO.PR.Q	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.56 Bid-YTW : 3.79 %
TD.PF.E	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.97 Evaluated at bid price : 24.51 Bid-YTW : 3.51 %
ENB.PR.T	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 17.33 Evaluated at bid price : 17.33 Bid-YTW : 4.85 %
HSE.PR.C	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.66 Evaluated at bid price : 22.00 Bid-YTW : 4.49 %
NA.PR.S	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.30 Evaluated at bid price : 22.90 Bid-YTW : 3.47 %
BIP.PR.A	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.64 Evaluated at bid price : 22.00 Bid-YTW : 4.88 %
NA.PR.W	FixedReset	1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.32 Evaluated at bid price : 21.60 Bid-YTW : 3.56 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.Z	Perpetual-Discount	282,348	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 23.49 Evaluated at bid price : 23.81 Bid-YTW : 5.27 %
BMO.PR.R	FloatingReset	107,377	Anonymous crossed 100,400 at 23.15. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 3.18 %
TRP.PR.B	FixedReset	86,020	Scotia crossed 80,000 at 14.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 14.65 Evaluated at bid price : 14.65 Bid-YTW : 3.37 %
ENB.PR.Y	FixedReset	65,913	RBC crossed 50,000 at 17.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 17.29 Evaluated at bid price : 17.29 Bid-YTW : 4.74 %
ENB.PR.F	FixedReset	60,058	RBC crossed 47,700 at 17.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 16.92 Evaluated at bid price : 16.92 Bid-YTW : 4.92 %
ENB.PR.H	FixedReset	47,166	TD crossed 22,500 at 15.87. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 15.85 Evaluated at bid price : 15.85 Bid-YTW : 4.75 %
There were 37 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.O	Perpetual-Premium	Quote: 24.12 – 26.13 Spot Rate : 2.0100 Average : 1.1237 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 23.83 Evaluated at bid price : 24.12 Bid-YTW : 6.04 %
BAM.PR.Z	FixedReset	Quote: 22.22 – 23.05 Spot Rate : 0.8300 Average : 0.6048 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 21.97 Evaluated at bid price : 22.22 Bid-YTW : 4.24 %
BAM.PR.K	Floater	Quote: 12.72 – 13.24 Spot Rate : 0.5200 Average : 0.3686 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 12.72 Evaluated at bid price : 12.72 Bid-YTW : 3.74 %
CM.PR.O	FixedReset	Quote: 22.75 – 23.13 Spot Rate : 0.3800 Average : 0.2441 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-30 Maturity Price : 22.19 Evaluated at bid price : 22.75 Bid-YTW : 3.41 %
TD.PR.S	FixedReset	Quote: 24.62 – 25.00 Spot Rate : 0.3800 Average : 0.2442 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.62 Bid-YTW : 3.04 %
SLF.PR.H	FixedReset	Quote: 19.45 – 20.00 Spot Rate : 0.5500 Average : 0.4171 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.45 Bid-YTW : 6.11 %

The FOMC release was equivocal:

Growth in household spending has been moderate and the housing sector has shown additional improvement; however, business fixed investment and net exports stayed soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey‑based measures of longer-term inflation expectations have remained stable.
…
The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate.
…
The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

There was no dissent.

Treasuries eased slightly on the news, but nothing special:

The 10-year note yield rose three basis points, or 0.03 percentage point, to 2.28 percent at 3:04 p.m. in New York, according to Bloomberg Bond Trader data. The benchmark 2.125 percent security due in May 2025 fell 7/32, or $2.19 per $1,000 face amount, to 98 21/32. The yield climbed three basis points on Tuesday.
…
Traders are pricing in a 39 percent probability that the Fed raises rates at or before the September meeting, based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff. That compared with a 40 percent probability before the Fed announcement.

The likelihood of a December rate increase was 71 percent, compared with 70 percent.

Meanwhile, Joe Oliver showed who’s boss at the Bank of Canada:

Last week, while addressing questions about Canada’s fragile economy, federal Finance Minister Joe Oliver was asked whether the Bank of Canada should consider using “quantitative easing” to stimulate Canada’s economy. He responded immediately, saying it’s “not on the table.” But whatever the case for the use of this approach to monetary policy, Mr. Oliver should know better than to speak about something clearly outside his purview.
…
Mr. Oliver can play his best role in this complex debate by staying out of it altogether.

The federal government is the sole shareholder of the Bank of Canada, whose governor is accountable to the finance minister and, through him or her, to Parliament.

But the Bank of Canada is also “operationally independent” from the federal government, and this independence is crucial to the bank’s long-term success in maintaining low and stable inflation.

Over many years and across many countries, evidence clearly shows that when elected governments get too involved in the operational details of monetary policy, inflation rises and becomes more volatile.

Mr. Oliver should be talking a lot about the current weakness of the Canadian economy, and also about what he is prepared to do – with fiscal policy – to make the situation better for Canadians. But when he faces questions about monetary policy, he should defer to the bank’s governor. To do anything else is to undermine the bank’s ability to make monetary policy in the best interests of the country.

Trouble is, the BoC is no longer “operationally independent”. That went out the window with Dodge, Chretien and Turner.

There’s some interesting discussion of bond liquidity today … fund managers are holding cash, which is market timing:

Western Asset Management Co., which oversees about $455 billion, has developed a system of ranking securities based on their perceived liquidity to make sure they’ve got plenty of easy-to-sell assets in a pinch. Loomis Sayles & Co. is “comfortable holding higher-than-average reserves, such as cash and high-quality developed market sovereign debt,” according to a report this month.

For funds that are loaded up with hard-to-trade bonds, “it could be a challenge under difficult market conditions to meet very large redemptions” without suffering huge losses, according to Michael Buchanan, Western Asset’s deputy chief investment officer, in a July 20 paper. “Overall the trend is that liquidity will continue to decline.”
…
The silver lining is that these measures taken by investors may end up reducing the risk of a market seizure, both because banks are safer and investors are more prepared. Both Western Asset and Loomis Sayles are planning for a dislocation in which they can be on the other side of the trade, buying bonds in the case of a forced sale.

In the July 20th interview – not a paper, as far as I can tell – Mr. Buchanan says:

Proprietary trading and hedge funds were active participants in the trading of fixed-income markets. By closing these lines of business, the regulation reduced the number of players bidding and offering securities on a daily basis, making periods of heightened volatility more violent from a mark-to-market perspective. Market regulatory modifications include a proposal by the European Commission to implement a tax of 1–10 basis points (bps) on transactions in all classes of fixed-income instruments. If finalized as proposed, it would clearly act as yet another disincentive for market-makers to commit capital to the investment community, further reducing liquidity in the market.
…
Maintaining portfolio liquidity for mutual funds is of significant importance, and as such, we have been increasing the use of instruments such as cash, T-Bills, ETFs and derivatives to provide additional liquidity. Across all vehicles, we are utilizing the primary market more frequently as new issues price, more often than not, at large concessions to secondary issues, and the new issues actively trade with minimal bid/offer spreads. We are also employing derivatives via indices/tranches that provide a liquidity enhancement while maintaining exposure to the given asset class. In those cases when we consider an issue for investment, we often value the on-the-run investment opportunity more than an off-the-run opportunity on a relative value basis.
…
The biggest reduction in liquidity has been experienced by off-the-run issues in the credit market and non-current coupon bonds in the MBS market. For example, an off-the-run issue on a 10-year bond for an investment-grade issuer trades at a 10–20 bps discount to that issuer’s on-the-run issue, versus a 5–10 bps discount that was available pre-crisis.

And Matt Levine contributes some information in his usual entertaining style:

One potential solution for that problem is to have investors just trade bonds with each other, cutting out the banks as middlemen. But it turns out that doesn’t work very well, in part because investors don’t know how much bonds are supposed to cost, and need banks to tell them:

Many bonds don’t trade for weeks or months, leaving gaps in pricing that historically were filled by banks that had more market information at their command than their customers.

On Bondcube, which announced its closure on July 22, investors who found each other on the company’s system often couldn’t agree on a price, according to a person familiar with the matter, who asked not to be identified because the information isn’t public. So bids and offers were too far apart.

Oops.
…
Bondcube is also a nice little lens through which to look at the felony fraud charges against the mortgage traders — Jesse Litvak, Matthew Katke and potentially others — accused of lying about this sort of price information. I find these cases very confusing, because these guys didn’t lie about any fundamental facts of the bonds they were selling. They never fudged cash-flow statements or bribed home appraisers or anything like that. Instead they (allegedly) just told customers that they’d paid 58 cents on the dollar for a bond, when really they’d paid 57, and pocketed the difference. That seems clearly irrelevant to a sophisticated investor’s view of value, and so arguably not material: If the investor thought the bond was worth 59, and paid 58.25 for it, then why does it matter that the dealer bought it for 57 instead of 58?
…
Of course you could still make a go of it. That’s sort of the point of Ken Griffin’s op-ed from the other day, arguing that “recent reforms and regulatory pressures have dramatically increased the number of participants who can make prices and provide liquidity across many fixed-income markets.” The bio on that piece says that “Mr. Griffin is the founder and CEO of Citadel LLC, a hedge-fund manager and securities dealer,” and I suspect there was a time when it would have left off the “securities dealer” part. But Citadel realized that when banks won’t make markets, somebody has to, and it might as well be Citadel.

Tragically, Mr. Levine let a shibboleth go by unchallenged:

But one of the most popular solutions for bond-market illiquidity, urged by BlackRock and others, is more electronic trading of bonds. At best, electronic venues would aggregate price and order information in a way that increases price discovery and liquidity. Or they might just lead to a bunch of investors twiddling their thumbs and wishing there were some dealers to make markets.

Sadly, electronic trading of bonds (of anything, in fact) harms liquidity. It’s been proven over and over again.

It was another poor day for the Canadian preferred shares market, with PerpetualDiscounts losing 25bp, FixedResets off 6bp and DeemedRetractibles down 10bp. The Performance Highlights table is lengthy but balanced. Volume was average.

PerpetualDiscounts now yield 5.34%, equivalent to 6.94% at the standard equivalency factor of 1.3x. Long corporates now yield about 4.0%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 295bp, somewhat wider than the 285bp reported July 22.

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:

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 14.90 to be $0.62 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.99 cheap at its bid price of 15.20.

Another good fit today!

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.02 to be 0.30 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.75 to be $0.28 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 18.11 to be $0.94 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.83 and appears to be $1.18 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.48, looks $0.90 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.23 and is $0.86 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of +0.08%, with one outlier above 1.00%. There are no junk outliers.

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	0.3904 %	2,129.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.3904 %	3,723.2
Floater	3.45 %	3.45 %	57,595	18.62	3	0.3904 %	2,263.7
OpRet	0.00 %	0.00 %	0	0.00	0	0.1469 %	2,785.2
SplitShare	4.57 %	4.75 %	62,512	3.17	3	0.1469 %	3,264.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1469 %	2,546.8
Perpetual-Premium	5.55 %	4.96 %	72,456	2.25	13	-0.0950 %	2,498.4
Perpetual-Discount	5.35 %	5.34 %	85,958	14.82	24	-0.2536 %	2,648.4
FixedReset	4.67 %	3.76 %	212,944	16.12	88	-0.0562 %	2,256.0
Deemed-Retractible	5.08 %	5.18 %	104,905	5.49	34	-0.1014 %	2,597.0
FloatingReset	2.39 %	3.14 %	43,477	6.06	10	0.2127 %	2,277.1

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.X	FixedReset	-3.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 16.15 Evaluated at bid price : 16.15 Bid-YTW : 4.12 %
IAG.PR.A	Deemed-Retractible	-2.77 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.46 Bid-YTW : 6.11 %
TRP.PR.C	FixedReset	-2.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 15.15 Evaluated at bid price : 15.15 Bid-YTW : 3.65 %
BIP.PR.A	FixedReset	-2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 21.46 Evaluated at bid price : 21.75 Bid-YTW : 4.94 %
NA.PR.W	FixedReset	-2.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.65 %
HSE.PR.G	FixedReset	-1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 22.13 Evaluated at bid price : 22.74 Bid-YTW : 4.71 %
BAM.PR.R	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 18.11 Evaluated at bid price : 18.11 Bid-YTW : 4.22 %
HSE.PR.C	FixedReset	-1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 21.49 Evaluated at bid price : 21.77 Bid-YTW : 4.55 %
BAM.PR.B	Floater	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 13.95 Evaluated at bid price : 13.95 Bid-YTW : 3.41 %
BAM.PF.E	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 21.53 Evaluated at bid price : 21.83 Bid-YTW : 3.99 %
SLF.PR.J	FloatingReset	-1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.25 Bid-YTW : 6.93 %
BAM.PF.A	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 21.92 Evaluated at bid price : 22.25 Bid-YTW : 4.15 %
FTS.PR.J	Perpetual-Discount	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 23.37 Evaluated at bid price : 23.75 Bid-YTW : 5.06 %
IFC.PR.A	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.30 Bid-YTW : 6.91 %
ENB.PF.C	FixedReset	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 4.80 %
ENB.PR.J	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 18.30 Evaluated at bid price : 18.30 Bid-YTW : 4.77 %
TD.PF.B	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 21.83 Evaluated at bid price : 22.20 Bid-YTW : 3.43 %
BMO.PR.S	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 22.08 Evaluated at bid price : 22.55 Bid-YTW : 3.44 %
ENB.PR.D	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 4.78 %
ENB.PR.N	FixedReset	1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 4.89 %
ENB.PF.G	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 19.09 Evaluated at bid price : 19.09 Bid-YTW : 4.80 %
MFC.PR.F	FixedReset	1.96 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.14 Bid-YTW : 6.89 %
TRP.PR.F	FloatingReset	2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 17.40 Evaluated at bid price : 17.40 Bid-YTW : 3.36 %
IFC.PR.C	FixedReset	2.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.30 Bid-YTW : 4.89 %
BAM.PR.C	Floater	2.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 13.41 Evaluated at bid price : 13.41 Bid-YTW : 3.55 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.Y	FixedReset	261,061	TD traded two blocks of 123,000 shares each, both at 17.32. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 17.45 Evaluated at bid price : 17.45 Bid-YTW : 4.70 %
BMO.PR.Z	Perpetual-Discount	96,035	New issue settled today YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 23.67 Evaluated at bid price : 24.00 Bid-YTW : 5.22 %
RY.PR.F	Deemed-Retractible	92,085	RBC crossed blocks of 43,100 and 40,700, both at 24.96. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.06 %
ENB.PF.C	FixedReset	71,415	RBC crossed 60,000 at 18.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 4.80 %
TRP.PR.C	FixedReset	63,670	Desjardins crossed 49,800 at 15.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 15.15 Evaluated at bid price : 15.15 Bid-YTW : 3.65 %
FTS.PR.H	FixedReset	51,700	TD crossed 50,000 at 16.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 16.43 Evaluated at bid price : 16.43 Bid-YTW : 3.34 %
There were 30 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.N	FixedReset	Quote: 16.24 – 16.81 Spot Rate : 0.5700 Average : 0.3261 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.24 Bid-YTW : 7.26 %
POW.PR.G	Perpetual-Premium	Quote: 25.17 – 25.59 Spot Rate : 0.4200 Average : 0.2699 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 24.68 Evaluated at bid price : 25.17 Bid-YTW : 5.59 %
RY.PR.I	FixedReset	Quote: 24.68 – 25.10 Spot Rate : 0.4200 Average : 0.2766 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.68 Bid-YTW : 3.28 %
GWO.PR.L	Deemed-Retractible	Quote: 25.31 – 25.79 Spot Rate : 0.4800 Average : 0.3390 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 5.43 %
BIP.PR.A	FixedReset	Quote: 21.75 – 22.25 Spot Rate : 0.5000 Average : 0.3622 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 21.46 Evaluated at bid price : 21.75 Bid-YTW : 4.94 %
CU.PR.E	Perpetual-Discount	Quote: 23.23 – 23.59 Spot Rate : 0.3600 Average : 0.2266 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-29 Maturity Price : 22.89 Evaluated at bid price : 23.23 Bid-YTW : 5.34 %

Nothing happened today, either. BORING!

It was another rotten day for the Canadian preferred share market, with PerpetualDiscounts losing 28bp, FixedResets off 4bp and DeemedRetractibles down 19bp. The Performance Highlights table is predictably lengthy. 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:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 21.67 to be $0.56 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.83 cheap at its bid price of 15.50.

Another good fit today!

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.01 to be $0.37 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 22.32 to be $0.35 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 18.41 to be $0.85 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 22.10 and appears to be $1.26 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.55, looks $0.90 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.36 and is $0.79 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.01%, with one outlier above 1.00%. There are no junk outliers.

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	0.2446 %	2,121.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.2446 %	3,708.7
Floater	3.46 %	3.47 %	57,220	18.59	3	0.2446 %	2,254.9
OpRet	0.00 %	0.00 %	0	0.00	0	0.1070 %	2,781.1
SplitShare	4.57 %	4.91 %	62,461	3.17	3	0.1070 %	3,259.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1070 %	2,543.0
Perpetual-Premium	5.55 %	5.09 %	70,069	2.25	13	-0.1530 %	2,500.8
Perpetual-Discount	5.35 %	5.38 %	85,562	14.82	23	-0.2808 %	2,655.2
FixedReset	4.66 %	3.78 %	213,402	16.20	88	-0.0368 %	2,257.3
Deemed-Retractible	5.07 %	5.22 %	105,889	5.48	34	-0.1870 %	2,599.6
FloatingReset	2.39 %	3.17 %	43,706	6.04	10	0.4564 %	2,272.2

Performance Highlights
Issue	Index	Change	Notes
HSE.PR.C	FixedReset	-2.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 21.73 Evaluated at bid price : 22.10 Bid-YTW : 4.47 %
BAM.PR.Z	FixedReset	-2.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.22 Evaluated at bid price : 22.57 Bid-YTW : 4.17 %
ENB.PR.P	FixedReset	-1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 4.90 %
NA.PR.W	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 21.44 Evaluated at bid price : 21.70 Bid-YTW : 3.55 %
PWF.PR.K	Perpetual-Discount	-1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 23.19 Evaluated at bid price : 23.49 Bid-YTW : 5.28 %
NA.PR.S	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.16 Evaluated at bid price : 22.67 Bid-YTW : 3.51 %
ENB.PR.N	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 17.40 Evaluated at bid price : 17.40 Bid-YTW : 4.98 %
IGM.PR.B	Perpetual-Premium	-1.41 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.26 Bid-YTW : 5.83 %
ENB.PR.Y	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 17.36 Evaluated at bid price : 17.36 Bid-YTW : 4.72 %
BAM.PR.M	Perpetual-Discount	-1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 21.02 Evaluated at bid price : 21.02 Bid-YTW : 5.72 %
MFC.PR.C	Deemed-Retractible	-1.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.02 Bid-YTW : 6.28 %
SLF.PR.H	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.26 Bid-YTW : 6.24 %
ENB.PR.T	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 4.86 %
SLF.PR.B	Deemed-Retractible	-1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.14 Bid-YTW : 5.92 %
BMO.PR.S	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.05 Evaluated at bid price : 22.51 Bid-YTW : 3.51 %
HSB.PR.C	Deemed-Retractible	-1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 5.38 %
SLF.PR.A	Deemed-Retractible	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 5.95 %
BMO.PR.M	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.16 %
CU.PR.G	Perpetual-Discount	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 21.83 Evaluated at bid price : 22.11 Bid-YTW : 5.15 %
BAM.PR.X	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 16.72 Evaluated at bid price : 16.72 Bid-YTW : 3.97 %
HSE.PR.E	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.75 Evaluated at bid price : 23.90 Bid-YTW : 4.43 %
TRP.PR.G	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.50 Evaluated at bid price : 23.45 Bid-YTW : 3.86 %
BAM.PR.B	Floater	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 14.13 Evaluated at bid price : 14.13 Bid-YTW : 3.37 %
BAM.PF.F	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.47 Evaluated at bid price : 23.26 Bid-YTW : 3.95 %
ELF.PR.F	Perpetual-Discount	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 24.22 Evaluated at bid price : 24.51 Bid-YTW : 5.44 %
SLF.PR.I	FixedReset	1.83 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.43 Bid-YTW : 4.39 %
TRP.PR.H	FloatingReset	2.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 15.25 Evaluated at bid price : 15.25 Bid-YTW : 2.77 %
IFC.PR.C	FixedReset	2.78 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.85 Bid-YTW : 5.15 %
IAG.PR.A	Deemed-Retractible	3.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.10 Bid-YTW : 5.73 %
TRP.PR.F	FloatingReset	5.83 %	Reverses yesterday‘s nonsense. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 3.42 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.C	FixedReset	253,521	TD crossed blocks of 150,000 shares, 40,000 and 52,200, all at 15.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.56 %
TD.PF.E	FixedReset	77,136	RBC crossed 75,000 at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 23.04 Evaluated at bid price : 24.70 Bid-YTW : 3.47 %
TRP.PR.H	FloatingReset	67,350	National bought 11,200 shares from anonymous at 15.50, then two blocks of 10,000 each and one of 25,700 from TD, all at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 15.25 Evaluated at bid price : 15.25 Bid-YTW : 2.77 %
HSE.PR.A	FixedReset	33,237	Desjardins crossed 27,100 at 15.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 15.51 Evaluated at bid price : 15.51 Bid-YTW : 3.97 %
HSE.PR.G	FixedReset	31,537	RBC bought 12,100 from TD at 23.21. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.39 Evaluated at bid price : 23.19 Bid-YTW : 4.60 %
RY.PR.Z	FixedReset	20,156	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 21.91 Evaluated at bid price : 22.30 Bid-YTW : 3.37 %
There were 23 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PF.A	FixedReset	Quote: 22.05 – 22.78 Spot Rate : 0.7300 Average : 0.4805 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 21.71 Evaluated at bid price : 22.05 Bid-YTW : 3.47 %
CU.PR.D	Perpetual-Discount	Quote: 23.09 – 23.69 Spot Rate : 0.6000 Average : 0.3736 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.76 Evaluated at bid price : 23.09 Bid-YTW : 5.38 %
TD.PF.B	FixedReset	Quote: 21.95 – 22.45 Spot Rate : 0.5000 Average : 0.2987 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 21.65 Evaluated at bid price : 21.95 Bid-YTW : 3.48 %
BAM.PR.C	Floater	Quote: 13.12 – 13.92 Spot Rate : 0.8000 Average : 0.6261 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 13.12 Evaluated at bid price : 13.12 Bid-YTW : 3.63 %
RY.PR.M	FixedReset	Quote: 23.80 – 24.40 Spot Rate : 0.6000 Average : 0.4319 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-28 Maturity Price : 22.67 Evaluated at bid price : 23.80 Bid-YTW : 3.41 %
MFC.PR.K	FixedReset	Quote: 21.75 – 22.29 Spot Rate : 0.5400 Average : 0.4054 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 5.00 %

Nothing happened today.

It was a horrid day for the Canadian preferred share market, with PerpetualDiscounts down 56bp, FixedResets losing 71bp and DeemedRetractibles off 27bp. A very lengthy Performance Highlights table is dominated by losers. Volume was 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:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 21.70 to be $0.67 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.93 cheap at its bid price of 15.40.

Another good fit today!

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.06 to be $0.40 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 22.12 to be $0.60 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 18.30 to be $0.86 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 22.20 and appears to be $1.42 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.37, looks $0.76 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.44 and is $0.68 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.11%, with one outlier below -1.00% (and even then, only with the help of a dummy bid!). There are no junk outliers.

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	0.0979 %	2,115.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0979 %	3,699.6
Floater	3.47 %	3.47 %	59,232	18.59	3	0.0979 %	2,249.4
OpRet	0.00 %	0.00 %	0	0.00	0	0.0669 %	2,778.1
SplitShare	4.58 %	4.87 %	62,717	3.17	3	0.0669 %	3,255.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0669 %	2,540.3
Perpetual-Premium	5.54 %	5.04 %	70,203	4.13	13	-0.0917 %	2,504.7
Perpetual-Discount	5.34 %	5.33 %	89,167	14.84	23	-0.5602 %	2,662.6
FixedReset	4.66 %	3.72 %	216,014	16.27	88	-0.7114 %	2,258.1
Deemed-Retractible	5.06 %	4.98 %	106,723	5.50	34	-0.2719 %	2,604.5
FloatingReset	2.40 %	3.09 %	43,352	6.05	10	-0.8626 %	2,261.9

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.F	FloatingReset	-5.29 %	Not real; the issue traded 10,456 shares today in a range of 16.98-10 and the Toronto Stock Exchange reports “No Bid” on their closing quotations (so I have input a dummy bid $1.00 below the ask). I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 16.11 Evaluated at bid price : 16.11 Bid-YTW : 3.63 %
IFC.PR.C	FixedReset	-4.15 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.26 Bid-YTW : 5.50 %
BAM.PR.X	FixedReset	-3.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 16.55 Evaluated at bid price : 16.55 Bid-YTW : 4.01 %
MFC.PR.M	FixedReset	-3.62 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.12 Bid-YTW : 5.06 %
TRP.PR.G	FixedReset	-3.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.36 Evaluated at bid price : 23.18 Bid-YTW : 3.92 %
IAG.PR.A	Deemed-Retractible	-2.61 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.41 Bid-YTW : 6.13 %
ENB.PF.A	FixedReset	-2.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 4.86 %
IFC.PR.A	FixedReset	-2.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.02 Bid-YTW : 7.11 %
BAM.PR.C	Floater	-2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 13.21 Evaluated at bid price : 13.21 Bid-YTW : 3.60 %
NA.PR.S	FixedReset	-2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.36 Evaluated at bid price : 23.00 Bid-YTW : 3.44 %
ENB.PF.E	FixedReset	-1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 18.61 Evaluated at bid price : 18.61 Bid-YTW : 4.89 %
ENB.PR.J	FixedReset	-1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 18.19 Evaluated at bid price : 18.19 Bid-YTW : 4.80 %
CU.PR.G	Perpetual-Discount	-1.84 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.59 Evaluated at bid price : 21.89 Bid-YTW : 5.20 %
BIP.PR.A	FixedReset	-1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.75 Evaluated at bid price : 22.15 Bid-YTW : 4.84 %
RY.PR.H	FixedReset	-1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.79 Evaluated at bid price : 22.15 Bid-YTW : 3.44 %
TD.PF.E	FixedReset	-1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.97 Evaluated at bid price : 24.51 Bid-YTW : 3.51 %
CU.PR.F	Perpetual-Discount	-1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.55 Evaluated at bid price : 21.83 Bid-YTW : 5.22 %
ENB.PR.N	FixedReset	-1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 17.65 Evaluated at bid price : 17.65 Bid-YTW : 4.91 %
MFC.PR.F	FixedReset	-1.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.80 Bid-YTW : 7.14 %
TD.PF.C	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.45 Evaluated at bid price : 21.72 Bid-YTW : 3.51 %
BNS.PR.D	FloatingReset	-1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.30 Bid-YTW : 3.95 %
BAM.PF.C	Perpetual-Discount	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.31 Evaluated at bid price : 21.31 Bid-YTW : 5.76 %
ENB.PF.G	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 4.89 %
BMO.PR.W	FixedReset	-1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.55 Evaluated at bid price : 21.84 Bid-YTW : 3.51 %
BAM.PR.T	FixedReset	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 18.65 Evaluated at bid price : 18.65 Bid-YTW : 4.18 %
POW.PR.D	Perpetual-Discount	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 23.09 Evaluated at bid price : 23.35 Bid-YTW : 5.39 %
ENB.PR.P	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 17.44 Evaluated at bid price : 17.44 Bid-YTW : 4.80 %
SLF.PR.I	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.01 Bid-YTW : 4.62 %
RY.PR.Z	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.87 Evaluated at bid price : 22.25 Bid-YTW : 3.38 %
ENB.PR.T	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 4.80 %
BAM.PF.A	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.04 Evaluated at bid price : 22.42 Bid-YTW : 4.11 %
TD.PF.A	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.73 Evaluated at bid price : 22.08 Bid-YTW : 3.46 %
SLF.PR.E	Deemed-Retractible	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.18 Bid-YTW : 6.16 %
PWF.PR.S	Perpetual-Discount	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.75 Evaluated at bid price : 23.05 Bid-YTW : 5.22 %
RY.PR.O	Perpetual-Discount	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 23.86 Evaluated at bid price : 24.20 Bid-YTW : 5.08 %
BAM.PR.R	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 18.30 Evaluated at bid price : 18.30 Bid-YTW : 4.18 %
SLF.PR.C	Deemed-Retractible	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 6.21 %
BMO.PR.Q	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.02 Bid-YTW : 3.62 %
BMO.PR.M	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 2.99 %
TRP.PR.C	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 15.35 Evaluated at bid price : 15.35 Bid-YTW : 3.60 %
HSE.PR.G	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.42 Evaluated at bid price : 23.26 Bid-YTW : 4.58 %
SLF.PR.H	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.50 Bid-YTW : 6.07 %
FTS.PR.K	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.37 Evaluated at bid price : 21.37 Bid-YTW : 3.44 %
BAM.PR.K	Floater	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 13.71 Evaluated at bid price : 13.71 Bid-YTW : 3.47 %

Volume Highlights
Issue	Index	Shares Traded	Notes
FTS.PR.H	FixedReset	120,914	TD crossed 110,000 at 16.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 16.40 Evaluated at bid price : 16.40 Bid-YTW : 3.35 %
TRP.PR.B	FixedReset	100,361	TD crossed 92,400 at 15.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 14.91 Evaluated at bid price : 14.91 Bid-YTW : 3.31 %
PWF.PR.T	FixedReset	99,242	RBC crossed 70,000 at 24.65; TD crossed 24,400 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 23.18 Evaluated at bid price : 24.65 Bid-YTW : 3.12 %
TRP.PR.D	FixedReset	47,545	RBC crossed 25,000 at 21.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 3.79 %
BAM.PR.Z	FixedReset	36,803	TD crossed 25,000 at 23.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.54 Evaluated at bid price : 23.05 Bid-YTW : 4.06 %
TD.PF.E	FixedReset	34,679	RBC crossed 24,900 at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.97 Evaluated at bid price : 24.51 Bid-YTW : 3.51 %
There were 33 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IFC.PR.C	FixedReset	Quote: 21.26 – 22.39 Spot Rate : 1.1300 Average : 0.6807 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.26 Bid-YTW : 5.50 %
TRP.PR.F	FloatingReset	Quote: 16.11 – 17.11 Spot Rate : 1.0000 Average : 0.6391 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 16.11 Evaluated at bid price : 16.11 Bid-YTW : 3.63 %
MFC.PR.M	FixedReset	Quote: 22.12 – 22.88 Spot Rate : 0.7600 Average : 0.4740 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.12 Bid-YTW : 5.06 %
IAG.PR.A	Deemed-Retractible	Quote: 22.41 – 23.01 Spot Rate : 0.6000 Average : 0.4209 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.41 Bid-YTW : 6.13 %
BAM.PR.X	FixedReset	Quote: 16.55 – 17.00 Spot Rate : 0.4500 Average : 0.2913 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 16.55 Evaluated at bid price : 16.55 Bid-YTW : 4.01 %
BAM.PF.F	FixedReset	Quote: 22.94 – 23.49 Spot Rate : 0.5500 Average : 0.3915 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-27 Maturity Price : 22.29 Evaluated at bid price : 22.94 Bid-YTW : 4.02 %

Years of back-door largesse are having an effect on Chicago’s municipal pension plan:

A plan to ease Chicago’s $20 billion public-worker pension deficit is illegal, an Illinois judge ruled, leaving the city vulnerable to another credit downgrade.

Immediately after the ruling, Standard & Poor’s said it would probably lower the city’s rating again if a solution isn’t found. S&P already cut Chicago’s rating earlier this month to BBB+, or three levels above junk.

The Illinois Constitution bars the diminishing of public pensions, state court judge Rita Novak ruled Friday. The Illinois Supreme Court in May killed similar changes to the state’s pension funds.
…
The pension system in Chicago is $20 billion short and is only 36 percent funded, compared with 61 percent in 2005.

It’s not just equities that are getting nailed:

A plunge in commodities is pushing investors to the sidelines as they look to sell their most vulnerable holdings, while treading cautiously around new offerings. With oil prices slumping below $48, energy bonds have lost 5.3 percent this month, and debt linked to metals and mining companies have handed lenders declines of more than 8 percent.
…
Leveraged loans, which are repaid before junk bonds, haven’t been immune to the turmoil. Prices of the debt have fallen to 94.5 cents on the dollar, the lowest since December, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index.

This provides some company for the loonie:

Bank of Canada Governor Stephen Poloz has sparked a fire sale on the Canadian dollar.

The currency plunged as much as 0.5 percent to C$1.3103 against its U.S. counterpart, the lowest on an intraday basis since September 2004. It fell after a private gauge of Chinese manufacturing dropped to the lowest in 15 months, signaling decreased commodities demand.
…
The Canadian currency fell 0.2 percent to C$1.3066 versus the U.S. dollar as of 11:57 a.m. in Toronto. That’s weaker than C$1.29, the median year-end estimate of analysts and strategists surveyed by Bloomberg. The loonie is poised for a 4.6 percent decline this month.

Traders are still pricing in the chance of another interest-rate cut, though these expectations have moderated in the last week. Trading in overnight index swaps show an implied policy rate of 0.39 percent in six months, compared to the Bank of Canada’s current 0.5 percent, Bloomberg calculations show. Last week they were pricing a rate of 0.36 percent.

There will be a major new investment management firm in the States … led by Hillary Clinton! The firm’s gimmick will be an emphasis on long-term investment; I think the marketing slogan will be ‘Buy, Hold and Prosper’:

Hillary Clinton sharpened her criticism against what she sees as Wall Street excess by targeting investors who demand short-term corporate measures like share buybacks and dividends to pump up a company’s stock price.

“We need a new generation of committed, long-term investors to provide a counter-weight to the hit-and-run activists,” the Democratic presidential candidate said Friday in a speech at New York University’s Stern School of Business. She contrasted her favored approach with investors who agitate for immediate change “no matter how much it discourages and distracts management from pursuing strategies that would add the most long-term value.”
…
“Real value comes from long-term growth, not short-term profits,” said Clinton, 67. “It comes from building companies, not stripping them; from creating good jobs, not eliminating them; from seeing workers as assets to cultivate, not costs to be cut.”
…
Clinton is proposing that the top 43.4 percent tax rate on short-term capital gains be extended to apply to assets held for less than two years, compared with the current one-year threshold. Beyond that, she would implement a sliding scale of long-term capital gains rates, and taxpayers in the top bracket would have to keep holdings for at least six years to get today’s rate of 23.8 percent, which would remain the lowest available.

With a top investment manager like Clinton in charge, performance at this new firm is virtually certain to be better than that at all the firms run by dummies. Where do I send my money?

Geez, I haven’t mentioned drones since May 5; it’s a good thing there’s a Bloomberg piece on drone traffic control:

Google Inc., the company that brought order to the Internet, has set its sights on doing the same for the flocks of commercial drones expected to someday clog the skies.

The search-engine pioneer is joining some of the biggest companies in technology, communications and aviation — including Amazon.com Inc., Verizon Communications Inc. and Harris Corp. — in trying to create an air-traffic control system to prevent mid-air collisions.

But don’t expect a big federally operated network of control towers. The government hasn’t said who will run the system or how it will operate, and is asking for ideas.
…
At least 14 companies, including Google, Amazon, Verizon and Harris, have signed agreements with NASA to help devise the first air-traffic system to coordinate small, low-altitude drones, which the agency calls the Unmanned Aerial System Traffic Management. More than 100 other companies and universities have also expressed interest in the project, which will be needed before commercial drones can fly long distances to deliver goods, inspect power lines and survey crops.
…
PrecisionHawk, a Raleigh, North Carolina, drone company with about 100 employees, began developing its own drone traffic control system because the large agriculture and oil companies it flies for wanted something to keep tabs on unmanned flights. “Our clients need it,” Tyler Collins, the program’s director, said.

In a recent demonstration over a North Carolina cattle farm, Collins and his team intentionally steered a quad-copter drone toward an imagined crop duster at work on an adjacent farm, the kind of hazardous scenario PrecisionHawk employees have seen in the real world.

Within seconds an alert popped up on the operator’s smartwatch: “WARNING, nearing no-fly zone.” When the operator ignored the warning, an autopilot took over and flew the whirring machine back to safety.

PrecisionHawk’s system can automatically block its drones from flying into danger, such as around airports and other aircraft. And it makes a drone’s real-time flight track available so others can stay away.

CU Inc., proud issuer of CIU.PR.A and CIU.PR.C, has announced:

it will issue $400,000,000 of 3.964% Debentures maturing on July 27, 2045, at a price of $100.00 to yield 3.964%. This issue was sold by BMO Nesbitt Burns Inc., RBC Dominion Securities Inc., TD Securities Inc., Scotia Capital Inc. and CIBC World Markets Inc. Proceeds from the issue will be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.

CIU.PR.A is a PerpetualDiscount yielding 5.11% at today’s bid price of 22.77; the interest-equivalent is 6.64%, a spread of 268bp over these new long bonds.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts flat, FixedResets down 40bp and DeemedRetractibles off 11bp. The Performance Highlights table is its usual exaggerated length. 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:

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 14.98 to be $0.62 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.74 cheap at its bid price of 15.50.

Another good fit today!

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.05 to be $0.18 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 22.00 to be $0.19 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 18.50 to be $0.88 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 22.10 and appears to be $1.12 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.10, looks $0.51 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.45 and is $0.66 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of 0.07%, with no outliers. There are two junk outliers, one above +1.00% and one below -1.00%.

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	0.0000 %	2,113.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0000 %	3,696.0
Floater	3.47 %	3.52 %	60,052	18.47	3	0.0000 %	2,247.2
OpRet	0.00 %	0.00 %	0	0.00	0	0.0535 %	2,776.3
SplitShare	4.58 %	4.93 %	63,595	3.18	3	0.0535 %	3,253.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0535 %	2,538.6
Perpetual-Premium	5.53 %	4.94 %	70,321	2.27	13	-0.0336 %	2,506.9
Perpetual-Discount	5.31 %	5.31 %	92,888	14.90	23	-0.0037 %	2,677.6
FixedReset	4.63 %	3.79 %	213,536	16.11	88	-0.3952 %	2,274.3
Deemed-Retractible	5.05 %	4.92 %	106,941	3.30	34	-0.1106 %	2,611.6
FloatingReset	2.36 %	3.06 %	43,624	6.06	10	-0.1553 %	2,281.6

Performance Highlights
Issue	Index	Change	Notes
FTS.PR.G	FixedReset	-2.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.71 %
BAM.PR.Z	FixedReset	-2.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.53 Evaluated at bid price : 23.03 Bid-YTW : 4.14 %
ENB.PR.J	FixedReset	-2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 4.79 %
HSE.PR.A	FixedReset	-2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 15.81 Evaluated at bid price : 15.81 Bid-YTW : 4.02 %
BAM.PR.T	FixedReset	-2.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 18.89 Evaluated at bid price : 18.89 Bid-YTW : 4.22 %
FTS.PR.K	FixedReset	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 3.57 %
TRP.PR.F	FloatingReset	-1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 17.01 Evaluated at bid price : 17.01 Bid-YTW : 3.40 %
HSE.PR.E	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.64 Evaluated at bid price : 23.65 Bid-YTW : 4.55 %
HSE.PR.C	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 21.94 Evaluated at bid price : 22.40 Bid-YTW : 4.47 %
ENB.PF.G	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 4.90 %
MFC.PR.K	FixedReset	-1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 4.90 %
ELF.PR.G	Perpetual-Discount	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.07 Evaluated at bid price : 22.30 Bid-YTW : 5.35 %
SLF.PR.J	FloatingReset	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.42 Bid-YTW : 6.77 %
BMO.PR.S	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.33 Evaluated at bid price : 22.95 Bid-YTW : 3.50 %
CM.PR.Q	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.82 Evaluated at bid price : 24.11 Bid-YTW : 3.56 %
POW.PR.D	Perpetual-Discount	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 23.36 Evaluated at bid price : 23.65 Bid-YTW : 5.31 %
BAM.PR.M	Perpetual-Discount	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 21.18 Evaluated at bid price : 21.18 Bid-YTW : 5.67 %
BAM.PF.C	Perpetual-Discount	1.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 21.31 Evaluated at bid price : 21.60 Bid-YTW : 5.66 %
BAM.PR.N	Perpetual-Discount	2.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.59 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.B	FixedReset	110,982	TD crossed 99,200 at 14.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 14.98 Evaluated at bid price : 14.98 Bid-YTW : 3.40 %
TRP.PR.C	FixedReset	105,026	TD crossed 100,000 at 15.28. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 15.51 Evaluated at bid price : 15.51 Bid-YTW : 3.69 %
BAM.PF.F	FixedReset	94,553	Desjardins crossed 94,000 at 23.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.40 Evaluated at bid price : 23.12 Bid-YTW : 4.05 %
IFC.PR.A	FixedReset	77,200	Nesbitt crossed 67,500 at 18.65. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.44 Bid-YTW : 6.86 %
RY.PR.O	Perpetual-Discount	70,078	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 24.12 Evaluated at bid price : 24.48 Bid-YTW : 5.02 %
RY.PR.A	Deemed-Retractible	61,566	RBC crossed 50,000 at 24.97. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-23 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 3.79 %
There were 25 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.B	FixedReset	Quote: 14.98 – 15.74 Spot Rate : 0.7600 Average : 0.4321 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 14.98 Evaluated at bid price : 14.98 Bid-YTW : 3.40 %
MFC.PR.L	FixedReset	Quote: 22.05 – 22.99 Spot Rate : 0.9400 Average : 0.7237 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.05 Bid-YTW : 4.97 %
BAM.PR.N	Perpetual-Discount	Quote: 21.50 – 22.05 Spot Rate : 0.5500 Average : 0.3722 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.59 %
FTS.PR.G	FixedReset	Quote: 20.45 – 21.20 Spot Rate : 0.7500 Average : 0.5741 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.71 %
BAM.PR.Z	FixedReset	Quote: 23.03 – 23.59 Spot Rate : 0.5600 Average : 0.4147 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.53 Evaluated at bid price : 23.03 Bid-YTW : 4.14 %
CM.PR.Q	FixedReset	Quote: 24.11 – 24.75 Spot Rate : 0.6400 Average : 0.5014 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-24 Maturity Price : 22.82 Evaluated at bid price : 24.11 Bid-YTW : 3.56 %