Category: Market Action

So what’s the worst kind of person to have at the top of an important government agency? A micro-manager who is unfamiliar with the substance of the work:

Expectations were high for [Mary Jo] White, who came to the [Chair of the SEC] job with a reputation as a tough prosecutor. As U.S. Attorney for the Southern District of New York, she took on terrorists and mobsters. Later she became a highly sought-after defense attorney, representing banks and other defendants in government probes. In announcing her nomination in January 2013, President Obama warned the financial industry: “You don’t want to mess with Mary Jo.”

That reputation has been dented at the SEC. The pace of rulemaking has been so slow that some staff have labeled White’s office the cheese cellar: It’s where policy goes to age. The nickname has stuck as proposals and reports have piled up in her office, waiting for her careful, often line-by-line consideration. White’s circumspection has slowed the progress of high-profile rules governing executive pay, broker obligations, and swaps, the financial products that helped fuel the financial crisis.

White had never held a position for which she had to develop complex financial policy. That lack of experience, plus difficulty in developing a consensus on nettlesome issues, has contributed to the agency’s troubles, say critics inside and outside the agency. “You take a commission that faces the most challenging regulatory agenda since its creation and you appoint a nonpolicy person as chair,” says Barbara Roper, director of investor protection for the Consumer Federation of America. The SEC under White “has been as unproductive as I thought it would be.”

My favourite journalist, Matt Levine, takes a good look at the touted FX so-called rigging settlement:

Then there are three bullet points describing other naughtiness that does not rise to the level of antitrust conspiracy. Those bullet points begin:

“We added markup to price quotes using hand signals and/or other internal arrangements or communications.”

“We have, without informing clients, worked limit orders at levels (i.e., prices) better than the limit order price so that we would earn a spread or markup in connection with our execution of such orders.”

“We made decisions not to fill clients’ limit orders at all, or to fill them only in part, in order to profit from a spread or markup in connection with our execution of such orders.”

You might read these sentences as admissions of guilt, or disclosures of crimes, or even apologies. In context — in the context of a disclosure notice sent to clients as part of the bank’s probation for a felony conviction, one paragraph after the apology for the massive antitrust conspiracy — that’s kind of what they look like. And in the banks’ plea agreements, the practices described in those bullet points are listed as “other relevant conduct” for the criminal conspiracy. So I read the bullet points as confessions yesterday, and was puzzled because, while they seem like sharp practices, they don’t quite seem like crimes.

But those bullet points are actually introduced by the phrase, “The Firm has engaged in other practices on occasion, including:.” These are not crimes, just “practices.” And the disclosure notice just describes them. It stops after the bullet points. It never says “and those practices were wrong.” Or “and we’re sorry we did those things.” Or even: “and we’ll stop doing them.”

Because they won’t! Here’s another letter that JPMorgan is sending to its clients along with the disclosure notice.2 This one is not a condition of its probation. Here’s how it starts:

The purpose of this letter is to clarify the nature of the trading relationship between you and the Corporate & Investment Bank at JPMorgan Chase & Co. and its affiliates (together, “JPMorgan” or the “Firm”) and to disclose relevant practices of JPMorgan when acting as a dealer, on a principal basis, in the wholesale spot foreign exchange (“FX”) markets. We want to ensure that there are no ambiguities or misunderstandings regarding those practices.

So: That does not sound like an apology. That sounds downright feisty. The disclosure notice, which JPMorgan has to send, starts with an apology and then goes on to list some things that JPMorgan did in the past. The client letter, which JPMorgan wants to send, starts with a defiant “no ambiguities or misunderstandings” and then goes on to list some things that JPMorgan will keep doing in the future.

So guess what? JPMorgan acts a principal on FX transactions, to the bewildered astonishment of pseudo-portfolio managers and ignorant regulatory lawyers. And they intend to continue acting as principal! How about that, eh? And their job as principal is to make money for their firm, not yours! Isn’t that astonishing? Golly, it sure is different from kindergarten, where teacher told us to work together.

Levine adds a good point, which has me weeping that it is considered necessary to emphasize:

Of course salespeople and traders talk to each other! The salesperson’s job is to help the trader understand how to price a trade for a particular client. If the salesperson thinks it’s in the bank’s interest to add a markup — that is, if the salesperson thinks that the client is not particularly price-sensitive and will not trade away if the price is too high — then the salesperson’s job is to inform the trader.

The regulatory weenies get a much more sympathetic hearing in another article:

The manipulation didn’t stop at putting in low fixes, the traders quoted by the FCA also were attempting to trigger client stops for their own ends.

In the example the FCA gives, a client had placed to stop loss order to buy GBP77 million at the rate of 95 against another currency. The Barclays trader attempts to get the currency to trade at 97 so he could sell the full GBP77 million to the client at 96.5. Barclays would profit from this stop loss order if the average rate they bought GBP in the market was lower than this stop stop loss order.

Good for the Barclays guys! As principals, they had absolutely zero duty to their counterparty, who was a complete moron for placing a stop order in the first place. Let’s just hope that the twerp who placed that order has gone bankrupt and is now spending his days naked and hungry in a London alleyway.

It may be that the US 10-Year Break Even Inflation Rate has found a new level:

Demand at Thursday’s $13 billion auction of U.S. Treasury Inflation-Protected Securities, or TIPS, declined from the previous sale in March. The offering attracted the lowest demand since September 2014, when oil prices were collapsing, bringing down a key measure of bond-market inflation forecasts along with them.

“We’re just simply not too wrought up about inflation expectations at the moment,” said Jim Vogel, interest-rate strategist with FTN Financial in Memphis, Tennessee.

The U.S. 10-year break-even rate, a gauge of the inflation outlook derived from the yield difference between Treasuries and index-linked securities, was at 1.87 percentage points, up from a low this year of 1.53 percent on Jan. 13. That made TIPS less attractive on Thursday.

The CPPIB has reported annual returns to March 31, 2015:

CPPIB measures its performance against a market-based benchmark, the Reference Portfolio, representing a passive portfolio of public market investments that can reasonably be expected to generate the long-term returns needed to help sustain the CPP at the current contribution rate.

In fiscal 2015, the CPP Fund’s gross return of 18.7% outperformed the Reference Portfolio delivering $3.6 billion in gross dollar value-added (DVA) above the Reference Portfolio’s return, after external management fees and transaction costs. Net of all CPPIB costs, the investment portfolio exceeded the benchmark’s return by 1.3%, producing $2.8 billion in net DVA.

“Dollar value-added is an important measure as it shows the difference between active investments made relative to their benchmarks in dollar terms. We will maintain a greater focus on total Fund – absolute as well as relative – returns, by continuing to develop and apply our capabilities more widely to portfolio management,” said Mr. Wiseman. “Our attention to both measures helps maximize returns, CPPIB’s objective, in the best interests of current and future beneficiaries, since the source of pension benefits is the total Fund. To reduce volatility, DVA is particularly valuable when it is generated as loss reduction in negative market conditions. Both total returns and DVA can vary widely from year-to-year depending on market conditions. Accordingly, both measures must be looked at over longer periods of at least one market cycle, such as five years or more.”

Given our long-term view and risk-return accountability framework, we track cumulative value-added returns since the April 1, 2006, inception of the Reference Portfolio. Cumulative value-added over the past nine years totals $5.8 billion, after all costs.

They also talked a lot about nominal and real returns, which I think is a mistake – they’re just setting themselves up for criticism in a bad year. I confess I am a little troubled by the asset mix:

18.7% private equity! That’s a lot! And I continue to be convinced that at some point we’re going to see a big wave of scandals resulting from too many people playing too many games for too long with private equity valuations…

And it’s about time for me to complain again about pricing trends in education:

The college building boom is coming to New York City’s elite private schools.

With interest rates poised to rise, the Ivy League stepping stones are selling tax-exempt debt at the fastest pace in over a decade to keep their edge. Riverdale Country School in the Bronx, Saint Ann’s School in Brooklyn and La Scuola d’Italia Guglielmo Marconi near Central Park plan to sell almost $150 million of bonds to pay for projects, including a new six-lane pool and musical ensemble rooms.

The borrowing reflects the competitive pressure to replace decades-old buildings and dangle the latest amenities to draw the children of New York’s wealthiest. Tuition runs as high as $45,600 a year, in a city where half the households earn less than $52,000.
…
To lure students, U.S. universities have borrowed more than $250 billion in the municipal market over the past decade for labs, dormitories and gyms with features like rock-climbing walls. For public colleges, it’s a way to attract higher-paying out-of-state students. For private ones, to best the competition.

The approach has caught on in New York, where some 234,000 pupils, almost one-fifth of the total, attend private schools.
…
The New York schools are borrowing through Build NYC Resource Corp., a city agency that allows non-profits to raise money in the municipal-bond market. The schools repay investors, who are willing to accept lower interest rates because the income isn’t taxed. Build NYC receives fees for arranging the sales. It isn’t on the hook if they default.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 22bp, FixedResets off 16bp and DeemedRetractibles gaining 4bp. Enbridge FixedResets dominated the “return challenged” section of the Performance Highlights table. 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 23.90 to be $0.84 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.66 cheap at its bid price of 24.98.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.55 to be $0.62 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.10 to be $0.61 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.76 to be $0.61 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 25.00 and appears to be $0.55 rich.

FTS.PR.H, with a spread of +145bp, and bid at 15.92, looks $1.14 cheap and resets 2015-6-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 24.80 and is $0.63 rich.

Investment-grade pairs predict an average over the next five-odd years of about 0.30%, including the TRP.PR.A / TRP.PR.F at -0.45%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.24%, while DC.PR.B / DC.PR.D has leapt upwards to +1.26%. It’s a far cry from, for instance, March 30 when the latter pair had a break-even rate of -2.87% … since then, the price spread has narrowed from $4.00 to $0.28, while the total returns are -11.68% and +3.81%, respectively.

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	-1.3675 %	2,283.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.3675 %	3,992.8
Floater	3.18 %	3.35 %	54,243	18.84	4	-1.3675 %	2,427.6
OpRet	4.45 %	-7.20 %	32,945	0.11	2	-0.2172 %	2,776.9
SplitShare	4.60 %	4.70 %	61,797	3.36	3	0.2019 %	3,241.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.2172 %	2,539.2
Perpetual-Premium	5.47 %	2.93 %	63,815	0.08	18	0.0022 %	2,516.9
Perpetual-Discount	5.06 %	5.07 %	118,712	15.35	15	0.2184 %	2,782.0
FixedReset	4.41 %	3.80 %	271,530	16.08	86	-0.1570 %	2,413.8
Deemed-Retractible	4.93 %	3.52 %	109,143	0.83	35	0.0355 %	2,636.3
FloatingReset	2.57 %	2.92 %	58,733	6.16	7	-0.0304 %	2,333.3

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.C	Floater	-1.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 14.90 Evaluated at bid price : 14.90 Bid-YTW : 3.38 %
BAM.PR.B	Floater	-1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 15.04 Evaluated at bid price : 15.04 Bid-YTW : 3.35 %
RY.PR.M	FixedReset	-1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 22.85 Evaluated at bid price : 24.25 Bid-YTW : 3.74 %
BAM.PR.K	Floater	-1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 14.80 Evaluated at bid price : 14.80 Bid-YTW : 3.40 %
ENB.PR.B	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 4.67 %
ENB.PF.C	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 21.31 Evaluated at bid price : 21.31 Bid-YTW : 4.59 %
ENB.PF.E	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 21.32 Evaluated at bid price : 21.32 Bid-YTW : 4.62 %
ENB.PF.A	FixedReset	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 21.37 Evaluated at bid price : 21.37 Bid-YTW : 4.59 %
GWO.PR.N	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.03 Bid-YTW : 6.52 %
ENB.PR.D	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 19.09 Evaluated at bid price : 19.09 Bid-YTW : 4.65 %
TRP.PR.B	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 15.70 Evaluated at bid price : 15.70 Bid-YTW : 3.83 %
ENB.PR.H	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 18.34 Evaluated at bid price : 18.34 Bid-YTW : 4.58 %
ENB.PR.J	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 21.12 Evaluated at bid price : 21.12 Bid-YTW : 4.52 %
ENB.PR.Y	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 4.63 %
ENB.PF.G	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 21.45 Evaluated at bid price : 21.75 Bid-YTW : 4.53 %
PWF.PR.S	Perpetual-Discount	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 24.38 Evaluated at bid price : 24.80 Bid-YTW : 4.86 %
BMO.PR.T	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 23.10 Evaluated at bid price : 24.65 Bid-YTW : 3.38 %
FTS.PR.K	FixedReset	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 21.32 Evaluated at bid price : 21.61 Bid-YTW : 3.80 %
CIU.PR.C	FixedReset	1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 3.77 %
TRP.PR.C	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 3.79 %
TRP.PR.D	FixedReset	1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 22.57 Evaluated at bid price : 23.41 Bid-YTW : 3.78 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.Y	FixedReset	103,869	TD crossed blocks of 49,200 and 49,900, both at 23.43. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 3.00 %
HSE.PR.A	FixedReset	75,913	RBC crossed 71,700 at 17.28. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 17.21 Evaluated at bid price : 17.21 Bid-YTW : 4.26 %
FTS.PR.M	FixedReset	70,980	RBC crossed 55,000 at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 23.13 Evaluated at bid price : 24.80 Bid-YTW : 3.60 %
RY.PR.K	FloatingReset	59,900	TD crossed 50,000 at 24.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.32 Bid-YTW : 2.94 %
TRP.PR.A	FixedReset	53,133	Scotia crossed blocks of 18,000 and 20,000, both at 21.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 20.92 Evaluated at bid price : 20.92 Bid-YTW : 3.72 %
IFC.PR.C	FixedReset	48,858	Nesbitt crossed 40,000 at 24.80. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 4.00 %
There were 24 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
RY.PR.M	FixedReset	Quote: 24.25 – 24.82 Spot Rate : 0.5700 Average : 0.3455 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 22.85 Evaluated at bid price : 24.25 Bid-YTW : 3.74 %
RY.PR.K	FloatingReset	Quote: 24.32 – 24.98 Spot Rate : 0.6600 Average : 0.4455 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.32 Bid-YTW : 2.94 %
FTS.PR.H	FixedReset	Quote: 15.92 – 16.49 Spot Rate : 0.5700 Average : 0.4132 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 15.92 Evaluated at bid price : 15.92 Bid-YTW : 4.01 %
HSE.PR.E	FixedReset	Quote: 25.47 – 25.79 Spot Rate : 0.3200 Average : 0.2137 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.47 Bid-YTW : 4.29 %
ELF.PR.H	Perpetual-Premium	Quote: 25.22 – 25.54 Spot Rate : 0.3200 Average : 0.2245 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 24.74 Evaluated at bid price : 25.22 Bid-YTW : 5.50 %
HSE.PR.A	FixedReset	Quote: 17.21 – 17.51 Spot Rate : 0.3000 Average : 0.2112 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-21 Maturity Price : 17.21 Evaluated at bid price : 17.21 Bid-YTW : 4.26 %

Six banks have agreed to pay extra taxes as a regulatory extortion payment:

Six of the world’s biggest banks will pay $5.8 billion and five of them agreed to plead guilty to charges tied to a currency-rigging probe as they seek to wind down almost half a decade of enforcement actions.

Citicorp, JPMorgan Chase & Co., Barclays Plc and Royal Bank of Scotland Plc agreed to plead guilty to conspiring to manipulate the price of U.S. dollars and euros in settlements with the Justice Department announced in Washington Wednesday. The main banking unit of UBS Group AG agreed to plead guilty to charges related to interest-rate manipulation. The Swiss bank, the first to cooperate with antitrust investigators, was granted immunity in the currency probe.

The four banks that agreed to plead guilty to currency charges are among the world’s biggest foreign-exchange traders. They were accused of colluding to influence benchmark rates by aligning positions and pushing transactions through at the same time. Traders who described themselves as members of “The Cartel” used online chat rooms to discuss their positions in the minutes before the rates were set, the Justice Department said.

As discussed on June 12, 2013, I don’t understand the fuss about this. The dealers were simply positioning themselves to meet the forward obligations they had incurred in writing the clients a very short-term forward contract. Big deal. The only people who could possibly be hurt by any amount of manipulation of the fix are moronic portfolio managers who seek to “avoid risk” by entering a Market-On-Close order and the idiots who hire them. No sympathy here!

Cloud computing is getting some serious attention:

It sounds like the mother of all spreadsheets: 1 million rows, 1 million columns — 1 trillion entries in all.

Fortunately, Braxton McKee isn’t using Excel. Instead, he’s tapping into the cloud to crunch all that market data on the cheap with software he built that learns as it goes.

The cost of that cosmic power: $10.
…
Five years ago, the sort of programming involved in McKee’s 1-trillion-point dense matrix would have taken months of coding and $1 million-plus of hardware. Now McKee simply logs onto Amazon Web Services to name his price for computing capacity and sets his code loose. Out of a loft in the Flatiron District in Manhattan, he works on what he calls “coffee time.” His goal is to make every model — no matter how much data are involved – – compute in the time it takes him to putter to his office kitchen, brew a Nespresso Caramelito, and walk back to his desk.

There’s a slim chance that the banks’ hegemony on Canadian finance will be eroded:

Earlier in May, reports came out that stock-market operator Chi-X Global Holdings, which operates a trading venue in Canada, is exploring a sale. At the time, numerous prospective bidders were mentioned, so it’s hard to tell who would eventually win any auction, but the mere mention of Nasdaq as a potential suitor is catching Canadians’ attention.

To be clear, Nasdaq would acquire Chi-X globally, so this wouldn’t be a Canada-only deal. But the acquisition would have particularly serious implications here. Chi-X’s Canadian trading platforms have roughly a 17-per-cent market share – the official figure pegs that share closer to 20 per cent, but this volume is arguably inflated – and its venues are widely viewed as being competitive with the much bigger TMX.

What Chi-X lacks, though, is a listing business. That’s something TMX still has a near monopoly on, although Aequitas is trying to erode it. Not only does Aequitas offer a trading platform, it also features a new listing option for Canadian companies. Still, pretty much everyone agrees that building this business will take time.

It would be nice to see a big global outfit come in to undo some of the damage done by the unholy Canadian regulatory alliance, as discussed on July 4, 2012.

It would be very cool to have my 4am pizza delivered by quadropter. It would be even cooler, not to mention faster, to have it delivered by a ten engine tiltrotor:

Imagine a battery-powered plane that has 10 engines and can take off like a helicopter and fly efficiently like an aircraft. That is a concept being developed by NASA researchers called Greased Lightning or GL-10.

The team, at NASA’s Langley Research Center in Hampton, Virginia, is looking at the idea initially as a potential unmanned aerial vehicle (UAV). “We have a couple of options that this concept could be good for,” said Bill Fredericks, aerospace engineer. “It could be used for small package delivery or vertical take off and landing, long endurance surveillance for agriculture, mapping and other applications. A scaled up version — much larger than what we are testing now — would make also a great one to four person size personal air vehicle.””
…
During a recent spring day the engineers took the GL-10 to test its wings at a military base about two hours away from NASA Langley. The remotely piloted plane has a 10-foot wingspan (3.05 meters), eight electric motors on the wings, two electric motors on the tail and weighs a maximum of 62 pounds (28.1 kilograms) at take off.

It had already passed hover tests — flying like a helicopter — with flying colors. But now was the big hurdle — the transition from vertical to forward “wing-borne” flight. As engineers who have designed full-scale vertical take off and landing tiltrotors such as the V-22 Osprey will tell you — that is no easy task because of the challenging flight aerodynamics.

“During the flight tests we successfully transitioned from hover to wing-borne flight like a conventional airplane then back to hover again. So far we have done this on five flights,” said Fredericks. “We were ecstatic. Now we’re working on our second goal — to demonstrate that this concept is four times more aerodynamically efficient in cruise than a helicopter.”

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 10bp, FixedResets down 16bp and DeemedRetractibles gaining 6bp. The performance highlights table is long compared to the overall move, with ENB FixedResets prominent on the bad side. Volume was below average.

PerpetualDiscounts now yield 5.07%, equivalent to 6.59% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.95%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 265bp, a widening from the 255bp reported May 14.

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 24.00 to be $0.98 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.72 cheap at its bid price of 24.97.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.55 to be $0.59 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.10 to be $0.63 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.77 to be $0.56 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.95 and appears to be $0.54 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.05, looks $0.96 cheap and resets 2015-6-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 24.75 and is $0.77 rich.

Investment-grade pairs predict an average over the next five-odd years of about 0.30%, including the TRP.PR.A / TRP.PR.F at -0.50% and the BNS.PR.Y / BNS.PR.D pair at +0.63%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.21%, while BRF.PR.A / BRF.PR.B is at -1.17%.

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	0.0472 %	2,315.3
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0472 %	4,048.2
Floater	3.14 %	3.28 %	54,296	19.00	4	0.0472 %	2,461.3
OpRet	4.44 %	-10.60 %	34,303	0.12	2	0.3170 %	2,782.9
SplitShare	4.61 %	4.72 %	61,950	3.36	3	-0.7746 %	3,234.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.3170 %	2,544.7
Perpetual-Premium	5.47 %	2.17 %	65,273	0.08	18	0.0131 %	2,516.8
Perpetual-Discount	5.07 %	5.07 %	119,643	15.35	15	-0.0951 %	2,776.0
FixedReset	4.40 %	3.82 %	263,785	16.16	86	-0.1628 %	2,417.6
Deemed-Retractible	4.94 %	3.51 %	112,721	0.92	35	0.0562 %	2,635.4
FloatingReset	2.56 %	2.92 %	61,156	6.17	7	0.0974 %	2,334.0

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.D	FixedReset	-2.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 22.36 Evaluated at bid price : 23.03 Bid-YTW : 3.86 %
SLF.PR.G	FixedReset	-2.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.63 Bid-YTW : 6.78 %
BAM.PR.X	FixedReset	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 18.44 Evaluated at bid price : 18.44 Bid-YTW : 4.24 %
ENB.PF.C	FixedReset	-1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 21.33 Evaluated at bid price : 21.62 Bid-YTW : 4.50 %
FTS.PR.K	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 3.89 %
ENB.PF.A	FixedReset	-1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 21.35 Evaluated at bid price : 21.65 Bid-YTW : 4.50 %
FTS.PR.G	FixedReset	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 21.36 Evaluated at bid price : 21.36 Bid-YTW : 3.91 %
ENB.PF.E	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 21.35 Evaluated at bid price : 21.63 Bid-YTW : 4.53 %
ENB.PR.N	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 20.34 Evaluated at bid price : 20.34 Bid-YTW : 4.67 %
ENB.PR.T	FixedReset	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 19.73 Evaluated at bid price : 19.73 Bid-YTW : 4.68 %
ENB.PR.D	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 19.32 Evaluated at bid price : 19.32 Bid-YTW : 4.60 %
TRP.PR.A	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 20.96 Evaluated at bid price : 20.96 Bid-YTW : 3.71 %
MFC.PR.L	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.36 Bid-YTW : 4.36 %
PWF.PR.P	FixedReset	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 19.02 Evaluated at bid price : 19.02 Bid-YTW : 3.66 %
PWF.PR.A	Floater	1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 2.78 %
MFC.PR.M	FixedReset	2.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 3.88 %
TD.PF.B	FixedReset	2.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 22.99 Evaluated at bid price : 24.37 Bid-YTW : 3.46 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.Q	FixedReset	222,139	Desjardins crossed 15,100 at 25.00; RBC crossed blocks of 50,000 shares, 49,700 and 49,400 at the same price. Raymond James bought 13,200 from TD at 25.08. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 23.15 Evaluated at bid price : 25.01 Bid-YTW : 3.73 %
ENB.PR.D	FixedReset	79,741	Nesbitt crossed 70,000 at 19.35. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 19.32 Evaluated at bid price : 19.32 Bid-YTW : 4.60 %
BNS.PR.Y	FixedReset	56,300	TD crossed 50,000 at 23.28. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 3.07 %
RY.PR.H	FixedReset	53,150	RBC crossed 50,000 at 24.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 22.99 Evaluated at bid price : 24.38 Bid-YTW : 3.45 %
HSE.PR.A	FixedReset	50,090	TD crossed 25,000 at 17.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 17.17 Evaluated at bid price : 17.17 Bid-YTW : 4.27 %
BNS.PR.N	Deemed-Retractible	42,363	TD crossed 39,600 at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-19 Maturity Price : 25.50 Evaluated at bid price : 25.65 Bid-YTW : 1.41 %
There were 24 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.D	FixedReset	Quote: 23.03 – 23.49 Spot Rate : 0.4600 Average : 0.2916 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-20 Maturity Price : 22.36 Evaluated at bid price : 23.03 Bid-YTW : 3.86 %
MFC.PR.F	FixedReset	Quote: 18.92 – 19.35 Spot Rate : 0.4300 Average : 0.3048 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.92 Bid-YTW : 6.02 %
MFC.PR.K	FixedReset	Quote: 23.50 – 23.81 Spot Rate : 0.3100 Average : 0.1953 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 4.23 %
SLF.PR.B	Deemed-Retractible	Quote: 24.39 – 24.70 Spot Rate : 0.3100 Average : 0.2052 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.39 Bid-YTW : 5.24 %
POW.PR.G	Perpetual-Premium	Quote: 26.07 – 26.38 Spot Rate : 0.3100 Average : 0.2103 YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 26.07 Bid-YTW : 4.89 %
PWF.PR.R	Perpetual-Premium	Quote: 25.99 – 26.35 Spot Rate : 0.3600 Average : 0.2668 YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.99 Bid-YTW : 4.81 %

Nothing happened today.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 11bp, FixedResets gaining 6bp and DeemedRetractibles down 35bp. The Performance Highlights table is lengthy relative to the overall move. Volume was well 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 24.13 to be $1.03 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.89 cheap at its bid price of 24.95.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.35 to be $0.71 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.06 to be $0.60 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.66 to be $0.74 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 25.00 and appears to be $0.54 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.05, looks $1.16 cheap and resets 2015-6-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 24.88 and is $0.69 rich.

Investment-grade pairs predict an average over the next five-odd years of about 0.30%, including the TRP.PR.A / TRP.PR.F at -0.29% and the BNS.PR.Y / BNS.PR.D pair at +0.62%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.03%, while BRF.PR.A / BRF.PR.B is at -0.82%.

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	-0.6717 %	2,314.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.6717 %	4,046.3
Floater	3.14 %	3.25 %	53,291	19.07	4	-0.6717 %	2,460.1
OpRet	4.46 %	-5.25 %	35,607	0.12	2	0.0000 %	2,774.2
SplitShare	4.57 %	4.32 %	60,943	3.36	3	0.0668 %	3,259.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,536.7
Perpetual-Premium	5.47 %	2.98 %	63,967	0.08	18	-0.1614 %	2,516.5
Perpetual-Discount	5.07 %	5.08 %	120,725	15.34	15	-0.1118 %	2,778.6
FixedReset	4.40 %	3.80 %	267,619	16.27	86	0.0584 %	2,421.6
Deemed-Retractible	4.94 %	3.50 %	111,884	0.84	35	-0.3529 %	2,633.9
FloatingReset	2.57 %	2.96 %	62,001	6.17	7	-0.0608 %	2,331.7

Performance Highlights
Issue	Index	Change	Notes
TD.PF.B	FixedReset	-3.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 22.70 Evaluated at bid price : 23.70 Bid-YTW : 3.59 %
MFC.PR.B	Deemed-Retractible	-3.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.27 Bid-YTW : 5.56 %
SLF.PR.B	Deemed-Retractible	-1.81 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.38 Bid-YTW : 5.25 %
PWF.PR.S	Perpetual-Discount	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 23.96 Evaluated at bid price : 24.36 Bid-YTW : 4.95 %
MFC.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 : 23.17 Bid-YTW : 5.46 %
BAM.PR.K	Floater	-1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 15.14 Evaluated at bid price : 15.14 Bid-YTW : 3.32 %
TRP.PR.C	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 17.38 Evaluated at bid price : 17.38 Bid-YTW : 3.89 %
BAM.PR.R	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 4.23 %
SLF.PR.A	Deemed-Retractible	-1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.14 Bid-YTW : 5.32 %
FTS.PR.K	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 21.33 Evaluated at bid price : 21.63 Bid-YTW : 3.80 %
HSE.PR.A	FixedReset	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 17.14 Evaluated at bid price : 17.14 Bid-YTW : 4.28 %
PWF.PR.A	Floater	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 2.83 %
ENB.PR.B	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 19.42 Evaluated at bid price : 19.42 Bid-YTW : 4.58 %
PWF.PR.T	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 23.41 Evaluated at bid price : 25.40 Bid-YTW : 3.42 %
BAM.PR.X	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 18.79 Evaluated at bid price : 18.79 Bid-YTW : 4.16 %
MFC.PR.F	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.05 Bid-YTW : 5.93 %
MFC.PR.N	FixedReset	1.80 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.35 Bid-YTW : 3.91 %
SLF.PR.G	FixedReset	2.74 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.01 Bid-YTW : 6.51 %

Volume Highlights
Issue	Index	Shares Traded	Notes
FTS.PR.M	FixedReset	148,540	Desjardins crossed blocks of 75,000 and 42,200, both at 25.07. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 23.16 Evaluated at bid price : 24.88 Bid-YTW : 3.58 %
PWF.PR.P	FixedReset	77,150	Scotia crossed blocks of 40,000 and 33,000, both at 19.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 18.73 Evaluated at bid price : 18.73 Bid-YTW : 3.71 %
TRP.PR.B	FixedReset	58,923	RBC crossed 36,200 at 16.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 15.77 Evaluated at bid price : 15.77 Bid-YTW : 3.81 %
TD.PF.D	FixedReset	57,079	RBC crossed 48,800 at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 23.09 Evaluated at bid price : 24.84 Bid-YTW : 3.76 %
TD.PR.Y	FixedReset	56,600	TD crossed 39,900 at 25.35 and 16,000 at 25.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.27 Bid-YTW : 3.06 %
CU.PR.C	FixedReset	56,122	RBC crossed 50,000 at 24.68. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 23.40 Evaluated at bid price : 24.55 Bid-YTW : 3.52 %
There were 42 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PF.B	FixedReset	Quote: 23.70 – 24.75 Spot Rate : 1.0500 Average : 0.6051 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 22.70 Evaluated at bid price : 23.70 Bid-YTW : 3.59 %
PWF.PR.S	Perpetual-Discount	Quote: 24.36 – 24.90 Spot Rate : 0.5400 Average : 0.3425 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 23.96 Evaluated at bid price : 24.36 Bid-YTW : 4.95 %
CIU.PR.C	FixedReset	Quote: 16.47 – 17.20 Spot Rate : 0.7300 Average : 0.5332 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-19 Maturity Price : 16.47 Evaluated at bid price : 16.47 Bid-YTW : 3.82 %
MFC.PR.L	FixedReset	Quote: 23.10 – 23.85 Spot Rate : 0.7500 Average : 0.5550 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.10 Bid-YTW : 4.50 %
MFC.PR.B	Deemed-Retractible	Quote: 23.27 – 23.68 Spot Rate : 0.4100 Average : 0.2435 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.27 Bid-YTW : 5.56 %
GWO.PR.I	Deemed-Retractible	Quote: 23.72 – 24.15 Spot Rate : 0.4300 Average : 0.3077 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.72 Bid-YTW : 5.29 %

FFN.PR.A was confirmed at Pfd-4(high) by DBRS:

DBRS Limited (DBRS) has today confirmed the rating of the Preferred Shares issued by North American Financial 15 Split Corp. (the Company) at Pfd-4 (high).

In October 2004, the Company issued 6.4 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). Although these shares were offered separately, together they form a Unit. The redemption date was originally December 1, 2014, but shareholders have approved an extension of the redemption date for both classes of shares to December 1, 2019.
…
Since the last rating confirmation in May 2014, the NAV of the Company has been generally stable, with downside protection fluctuating from 37% to 41% over the past year. The Preferred Share dividend coverage ratio is below 1.0 times and the monthly Class A Share distribution is expected to result in an average grind on the portfolio of 5.3% annually for the remaining term until maturity. As a result, the rating of the Preferred Shares has been confirmed at Pfd-4 (high).

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts down 19bp, FixedResets losing 20bp and DeemedRetractibles off 3bp. The Performance Highlights table is of more-or-less average length, dominated by FixedReset losers. Volume was 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.E, which resets 2019-10-30 at +235, is bid at 24.05 to be $0.91 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.80 cheap at its bid price of 25.00.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 23.92 to be $0.38 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.00 to be $0.55 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.61 to be $0.81 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.87 and appears to be $0.48 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.10, looks $1.01 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.91 and is $0.61 rich.

Investment-grade pairs predict an average over the next five-odd years of about 0.30%, including the TRP.PR.A / TRP.PR.F at -0.29% and the BNS.PR.Y / BNS.PR.D pair at +0.71. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -0.99%, while BRF.PR.A / BRF.PR.B is at -0.81%.

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	1.0576 %	2,329.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.0576 %	4,073.6
Floater	3.12 %	3.25 %	53,558	19.07	4	1.0576 %	2,476.8
OpRet	4.46 %	-4.81 %	37,076	0.13	2	-0.0271 %	2,774.2
SplitShare	4.58 %	4.31 %	60,926	3.38	3	1.0633 %	3,257.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0271 %	2,536.7
Perpetual-Premium	5.46 %	1.34 %	62,909	0.08	18	-0.0022 %	2,520.6
Perpetual-Discount	5.06 %	5.05 %	121,054	15.35	15	-0.1896 %	2,781.7
FixedReset	4.40 %	3.71 %	269,085	16.38	86	-0.2027 %	2,420.2
Deemed-Retractible	4.92 %	3.39 %	111,416	0.77	35	-0.0272 %	2,643.2
FloatingReset	2.59 %	2.92 %	61,930	6.18	7	-0.0243 %	2,333.2

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.G	FixedReset	-3.15 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.53 Bid-YTW : 6.73 %
TRP.PR.C	FixedReset	-2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 17.62 Evaluated at bid price : 17.62 Bid-YTW : 3.72 %
ENB.PR.J	FixedReset	-2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 4.40 %
MFC.PR.M	FixedReset	-2.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.11 %
MFC.PR.K	FixedReset	-2.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.37 Bid-YTW : 4.24 %
FTS.PR.J	Perpetual-Discount	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 23.61 Evaluated at bid price : 24.00 Bid-YTW : 4.94 %
FTS.PR.H	FixedReset	-1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 16.10 Evaluated at bid price : 16.10 Bid-YTW : 3.84 %
ENB.PF.G	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 21.66 Evaluated at bid price : 22.05 Bid-YTW : 4.38 %
RY.PR.Z	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 23.10 Evaluated at bid price : 24.59 Bid-YTW : 3.31 %
PVS.PR.D	SplitShare	1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 4.83 %
PVS.PR.C	SplitShare	1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 4.31 %
BAM.PR.K	Floater	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 15.35 Evaluated at bid price : 15.35 Bid-YTW : 3.28 %
BAM.PR.B	Floater	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 15.46 Evaluated at bid price : 15.46 Bid-YTW : 3.25 %
BAM.PR.C	Floater	1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 15.30 Evaluated at bid price : 15.30 Bid-YTW : 3.29 %
CIU.PR.C	FixedReset	1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 3.69 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.A	OpRet	421,300	Called for redemption 2015-6-19. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-19 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 1.26 %
CM.PR.Q	FixedReset	135,310	RBC sold 35,000 to anonymous at 25.00. Desjardins crossed 60,900 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 23.11 Evaluated at bid price : 24.89 Bid-YTW : 3.69 %
TD.PF.D	FixedReset	119,839	TD crossed 100,000 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 23.09 Evaluated at bid price : 24.84 Bid-YTW : 3.70 %
RY.PR.K	FloatingReset	46,000	Nesbitt crossed 45,000 at 24.21. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 3.00 %
PWF.PR.T	FixedReset	40,100	TD crossed 39,500 at 25.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 23.32 Evaluated at bid price : 25.11 Bid-YTW : 3.40 %
TRP.PR.B	FixedReset	36,853	TD crossed 25,000 at 15.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 15.77 Evaluated at bid price : 15.77 Bid-YTW : 3.68 %
There were 22 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.M	FixedReset	Quote: 24.00 – 24.60 Spot Rate : 0.6000 Average : 0.4240 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.11 %
ENB.PF.G	FixedReset	Quote: 22.05 – 22.39 Spot Rate : 0.3400 Average : 0.2162 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 21.66 Evaluated at bid price : 22.05 Bid-YTW : 4.38 %
FTS.PR.J	Perpetual-Discount	Quote: 24.00 – 24.42 Spot Rate : 0.4200 Average : 0.3188 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 23.61 Evaluated at bid price : 24.00 Bid-YTW : 4.94 %
HSE.PR.A	FixedReset	Quote: 17.36 – 17.65 Spot Rate : 0.2900 Average : 0.1957 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 17.36 Evaluated at bid price : 17.36 Bid-YTW : 4.10 %
FTS.PR.F	Perpetual-Discount	Quote: 24.25 – 24.55 Spot Rate : 0.3000 Average : 0.2166 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-15 Maturity Price : 23.99 Evaluated at bid price : 24.25 Bid-YTW : 5.05 %
GWO.PR.R	Deemed-Retractible	Quote: 24.95 – 25.20 Spot Rate : 0.2500 Average : 0.1785 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.93 %

The Bank of Canada published the Bank of Canada Review – Spring 2015, which is a bust as far as capital markets articles are concerned. Articles are:

• Inflation Dynamics in the Post-Crisis Period
• The Slowdown in Global Trade
• Improving the Foundation of Canada’s Payments System
• The “Bank” at the Bank of Canada
• The Use of Cash in Canada

Some investors thought they heard opportunity knock today … but only the ding-dongs:

Fooling investors is surprisingly easy. You can even do it on the government’s official site for company filings.

The latest reminder unspooled within a few minutes Thursday when a notice came out that a purported private-equity firm made a bid to buy Avon Products Inc. In a market where computers scrape filings and trade automatically on news headlines, the stock shot up 20 percent before the company said it was a hoax.

The notice, submitted by a firm registered at an empty office, was filed on the Securities and Exchange Commission’s Edgar system, which houses more than 20 million company filings for investors to peruse. Already more than 4,700 filings have been submitted today.

The SEC doesn’t verify whether entities using its filing systems “are real or have money,” said James Maloney, a former SEC official now at law firm Gibson Dunn & Crutcher. Getting access to Edgar “is no more complicated than signing up for an e-mail account,” he said.
…
Should the SEC vet Edgar filings before they go out? Maloney says no.

“It would be the equivalent of saying don’t let anyone have e-mail or Twitter because they might use it for bad purposes,” he said.

Live by the sword, die by the sword. Good riddance.

Still, it was a pretty good day, all in:

The Standard & Poor’s 500 Index closed at an all-time high, halting a three-session slide, as Microsoft Corp. and Apple Inc. led a rally in technology shares and the weaker dollar spurred gains in multi-national companies.

It looks like infrastructure investors have another target:

Greece will continue with efforts to privatize the country’s largest port and regional airports as it seeks ways to attract investment for other state assets, Economy Minister George Stathakis said, in a government concession in talks with its creditors.

The privatization process that is already underway for the Piraeus Port Authority SA, operator of Greece’s largest harbor, and for 14 regional airports will continue, Stathakis said today in an interview in Tbilisi, Georgia. “We’re trying to revise some elements of these privatizations in order to improve them and I think we’ll get a sensible agreement for both.”

A sale of the Piraeus Port would be a reversal on the part of Greece’s Syriza party-led government, which had earlier pledged to block such moves. As part of ongoing negotiations to unlock aid to Europe’s most-indebted nation, Greek’s European creditors have asked for more specific policy proposals in areas including labor market deregulation, a pension-system overhaul, sales tax reform and privatization of state-held assets. Still, Stathakis said the government doesn’t plan to sell other assets at the moment.

Fed hikes? What Fed hikes?

The longer U.S. central bankers wait to initiate their tightening cycle, the more traders push back their expectations for when borrowing costs will start rising. On Thursday, futures contracts were implying that traders saw the fed funds rate at about 0.3 percent rate by December. That’s the lowest estimate of the year, and about half the forecast for the overnight lending benchmark that the Fed gave in March.

The market is essentially calling the Fed’s bluff. Traders are betting that policy makers won’t be able to raise rates this year without disrupting stocks and bonds, something that they’d really rather not do. So either U.S. policy makers will have to risk another market-wide tantrum, or they’ll give in to traders who embrace the idea of these historically low borrowing costs sticking around for longer.

I’m not going to try and guess whether hikes will come this year, next year, or not until after my retirement. But my fears of a disorderly return to normal are growing.

It was a mixed day for the Canadian preferred share market today, with PerpetualDiscounts off 7bp, FixedResets up 4bp and DeemedRetractibles gaining 1bp. The Performance Highlights table is shorter than it has been of late, but still much longer than the 2014 average. Volume was very low.

PerpetualDiscounts now yield 5.06%, equivalent to 6.58% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.05%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 255bp, a slight (and perhaps spurious) widening from the 250bp reported May 6.

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 24.15 to be $0.94 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.79 cheap at its bid price of 24.92.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.75 to be $0.51 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.35 to be $0.65 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.54 to be $0.86 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.93 and appears to be $0.52 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.33, looks $0.98 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.00 and is $0.57 rich.

Investment-grade pairs predict an average over the next five-odd years of about 0.30%, including the TRP.PR.A / TRP.PR.F at -0.36% and the BNS.PR.Y / BNS.PR.D pair at +0.78. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -0.85%, while BRF.PR.A / BRF.PR.B is at -1.05%.

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	0.3167 %	2,305.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.3167 %	4,031.0
Floater	3.15 %	3.30 %	53,697	18.96	4	0.3167 %	2,450.8
OpRet	4.43 %	-4.72 %	38,605	0.13	2	0.0123 %	2,774.9
SplitShare	4.57 %	4.80 %	60,523	3.34	3	-0.0267 %	3,223.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0123 %	2,537.4
Perpetual-Premium	5.46 %	2.09 %	63,637	0.08	18	-0.0283 %	2,520.6
Perpetual-Discount	5.05 %	5.06 %	120,016	15.38	15	-0.0687 %	2,787.0
FixedReset	4.39 %	3.73 %	271,447	16.57	86	0.0412 %	2,425.1
Deemed-Retractible	4.92 %	3.35 %	111,028	0.62	35	0.0137 %	2,644.0
FloatingReset	2.59 %	2.89 %	61,323	6.18	7	-0.1154 %	2,333.7

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.C	FixedReset	-3.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 3.63 %
RY.PR.Z	FixedReset	-1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 23.00 Evaluated at bid price : 24.34 Bid-YTW : 3.36 %
CU.PR.E	Perpetual-Discount	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 24.30 Evaluated at bid price : 24.76 Bid-YTW : 4.93 %
CU.PR.D	Perpetual-Discount	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 24.73 Evaluated at bid price : 25.20 Bid-YTW : 4.85 %
GWO.PR.N	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.15 Bid-YTW : 6.27 %
ENB.PR.T	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 4.55 %
PWF.PR.A	Floater	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 2.78 %
MFC.PR.K	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 3.98 %
BAM.PR.R	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 21.27 Evaluated at bid price : 21.27 Bid-YTW : 4.08 %
IFC.PR.A	FixedReset	1.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.05 Bid-YTW : 5.37 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.T	FixedReset	159,112	RBC crossed 108,600 at 25.29. TD bought blocks of 10,000 and 30,000 from Scotia, both at 25.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 23.35 Evaluated at bid price : 25.20 Bid-YTW : 3.38 %
PWF.PR.P	FixedReset	130,633	Nesbitt sold 23,800 to RBC at 18.65 and another 16,200 to TD at 18.60, then crossed 90,000 at 18.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 18.57 Evaluated at bid price : 18.57 Bid-YTW : 3.64 %
BMO.PR.T	FixedReset	53,326	RBC crossed 50,000 at 24.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 23.00 Evaluated at bid price : 24.40 Bid-YTW : 3.36 %
BAM.PR.Z	FixedReset	52,397	Nesbitt crossed 44,700 at 24.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 23.28 Evaluated at bid price : 24.56 Bid-YTW : 4.12 %
ENB.PR.T	FixedReset	45,126	RBC crossed 34,200 at 20.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 4.55 %
BMO.PR.L	Deemed-Retractible	38,400	RBC crossed two blocks of 19,100 each, both at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-24 Maturity Price : 25.50 Evaluated at bid price : 25.71 Bid-YTW : -3.13 %
There were 18 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PR.T	FloatingReset	Quote: 24.10 – 24.54 Spot Rate : 0.4400 Average : 0.2733 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 2.85 %
HSE.PR.C	FixedReset	Quote: 25.00 – 25.40 Spot Rate : 0.4000 Average : 0.2404 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 23.19 Evaluated at bid price : 25.00 Bid-YTW : 4.15 %
PWF.PR.P	FixedReset	Quote: 18.57 – 19.06 Spot Rate : 0.4900 Average : 0.3676 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 18.57 Evaluated at bid price : 18.57 Bid-YTW : 3.64 %
RY.PR.Z	FixedReset	Quote: 24.34 – 24.78 Spot Rate : 0.4400 Average : 0.3358 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 23.00 Evaluated at bid price : 24.34 Bid-YTW : 3.36 %
PWF.PR.A	Floater	Quote: 17.90 – 18.35 Spot Rate : 0.4500 Average : 0.3746 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-14 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 2.78 %
GWO.PR.N	FixedReset	Quote: 18.15 – 18.40 Spot Rate : 0.2500 Average : 0.1807 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.15 Bid-YTW : 6.27 %

On April 30, S&P published its 2014 Annual Global Corporate Default Study And Rating Transitions:

In a year marked by considerable geopolitical turmoil, the ending of the Federal Reserve’s monthly asset purchases, and the steep decline in the price of oil, corporate borrowers fared very well by historical standards. In the full year, 60 global corporate issuers defaulted, considerably lower than the 81 last year and the lowest total since 2011 (see table 1). These 60 defaulted issuers accounted for a total of $91.6 billion in debt, down from $97.3 billion in 2013.

Overall, credit quality and rating stability remained high in 2014 (see table 6). The ratio of downgrades to upgrades increased marginally relative to 2013, but the rate of upgrades still outpaced that of downgrades. Overall, the percentage of rating actions decreased, and the magnitude of individual rating changes remained muted. This pushed the average number of notches recorded among downgrades to 1.36 from 1.38 in 2013. Meanwhile, the average number of notches for upgrades remained nearly unchanged, at 1.16 versus 1.15 in 2013 (see chart 13). (Watch the related CreditMatters TV segment titled, “Standard & Poor’s Global Corporate Default And Rating Transitions Study,” dated April 30, 2015.)

Overview

• •The number of global defaults in 2014 declined to 60 from 81 in 2013. This helped push the global speculative-grade default rate down to 1.42% from 2.28% at the end of 2013. Similar to 2013, this decline is a result of both a smaller number of defaults and an increase in the number of speculative-grade issuers in 2014–up to 3,163 from 2,804 a year earlier.
• •The one-year global Gini ratio rose to 93 in 2014, which is the second highest in 34 years. This is largely attributable to the roughly 91% of the rated defaulters in 2014 beginning the year with ratings of ‘B-‘ or lower.
• •The overall rate of rating actions decreased in 2014. The downgrade rate decreased to 8.4% from 9.4% in 2013, while the upgrade rate declined to 9.3% from 11.4%. Ratings stability increased, with the rate of unchanged ratings hitting a 10-year high of 74.5%.
• •Consistent with past years, the U.S. continues to account for the majority of defaults globally in 2014, at 55%. However, this is the lowest percentage in the past 34 years. Following the U.S., emerging markets accounted for just over 25% of the remaining defaulters.

They have also published a bit more commentary:

U.S. corporate credit performed exceptionally well in 2014 as the number of rated companies defaulting declined to its lowest number since 2007. While the Federal Reserve completed its round of tapering, winding down its monthly large-scale asset purchases, interest rates for highly rated credits fell from already low levels. Corporate bond issuance surpassed $1 trillion for a third consecutive year, and investment-grade and Treasury bond yields fell. As the speculative-grade market faced rising volatility during the year brought about by falling oil prices and rising geopolitical strains, the speculative-grade default rate fell to below 2%, less than one half of its long-term average. Slow but steady economic growth continued to support business conditions, and the upgrade to downgrade ratio improved as more U.S. companies were upgraded than downgraded in 2014. The number of U.S. corporate defaulters fell to 33 from 45 in 2013. The defaulting companies were either unrated or were rated ‘B-‘ and lower as of the beginning of 2014, consistent with our findings that Standard & Poor’s Ratings Services’ U.S. corporate credit ratings continue to serve as effective indicators of relative credit risk. (Watch the related CreditMatters TV segment titled, “Standard & Poor’s U.S. Corporate Default And Rating Transitions Study,” dated May 11, 2015.)

Overview

• •In 2014, 33 U.S. companies with $82 billion in outstanding debt defaulted; by comparison, 45 U.S. corporates defaulted with $64.9 billion of outstanding debt in 2013.
• •The U.S. speculative-grade (‘BB+’ and lower) corporate default rate fell to 1.59% as of year-end 2014 from 2.16% as of year-end 2013. Of the companies that defaulted in 2014, the highest rated was ‘B-‘.
• •Companies in the lowest rating categories had the highest default rates: 25% of the companies rated ‘CCC’/’C’ at the beginning of the year had defaulted by the end of the year.
• •The one-year Gini ratio for Standard & Poor’s 2014 ratings’ performance climbed to a new high of 96.1%. This is the highest one-year Gini recorded for U.S. corporates in our data going back to 1981.
• •Overall, ratings were more stable in 2014 than in 2013: Nearly 76% of ratings were unchanged in 2014, up from 72% the prior year.

SEC Chair Mary Jo White gave a speech lauding the opportunities that market complexity gives for regulatory employment, and the fine job the SEC is doing, titled Optimizing Our Equity Market Structure. These were Opening Remarks at the Inaugural Meeting of the Equity Market Structure Advisory Committee:

It is fitting that today we are starting our market structure discussion with an assessment of Rule 611 of Regulation NMS — the order protection rule. The selection of this rule for the inaugural meeting is reflective of how important it is to examine the fundamentals of our current market and regulatory structure, to explore their impact and assess their continued utility. This is not done just for an interesting discussion — although I am sure it will be that. Rather, we are about the serious business of optimizing the structure of our equity markets through a careful, data-driven assessment where no issue is off limits or any assumption unquestioned. And Rule 611 is most certainly a rule that features prominently in the discussion of market structure, with different views of its various impacts, including critiques that it has: (1) contributed to excessive fragmentation; (2) led to increased off-exchange trading; (3) harmed institutional investors; and (4) failed to achieve the objective of enhancing displayed liquidity. The Division of Trading and Markets has prepared and posted on our website a memorandum that is intended to help explore the extent to which these claims may or may not be accurate. Addressing Rule 611 will no doubt serve to highlight the other forces that have shaped our market structure, whether they be regulatory, competitive, or technological.

Rule 611 is part of Regulation NMS:

Regulation NMS includes new substantive rules that are designed to modernize and strengthen the regulatory structure of the U.S. equity markets. First, the “Order Protection Rule” requires trading centers to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the execution of trades at prices inferior to protected quotations displayed by other trading centers, subject to an applicable exception. To be protected, a quotation must be immediately and automatically accessible. Second, the “Access Rule” requires fair and non-discriminatory access to quotations, establishes a limit on access fees to harmonize the pricing of quotations across different trading centers, and requires each national securities exchange and national securities association to adopt, maintain, and enforce written rules that prohibit their members from engaging in a pattern or practice of displaying quotations that lock or cross automated quotations. Third, the “Sub-Penny Rule” prohibits market participants from accepting, ranking, or displaying orders, quotations, or indications of interest in a pricing increment smaller than a penny, except for orders, quotations, or indications of interest that are priced at less than $1.00 per share. Finally, the Commission is adopting amendments to the “Market Data Rules” that update the requirements for consolidating, distributing, and displaying market information, as well as amendments to the joint industry plans for disseminating market information that modify the formulas for allocating plan revenues (“Allocation Amendment”) and broaden participation in plan governance (“Governance Amendment”).

After all the garbage coming from the regulators, it’s nice to see that someone gets it:

An ex-Jefferies & Co. trader convicted last year of lying to buyers and sellers of mortgage-backed bonds may have done nothing worse in one judge’s view than what a homeowner does when selling a house.

There’s a “certain amount of license and puffery” that goes on in the bond market, especially with “big boys” “who are capable of very sophisticated analysis,” U.S. Circuit Judge Barrington D. Parker said Wednesday during the appeal of Jesse Litvak’s conviction. “This kind of thing goes on all the time.”

Litvak, 40, was found guilty by a federal jury in New Haven, Connecticut, in March 2014, becoming the first person convicted of fraud tied to the Troubled Asset Relief Program set up by the U.S. amid the 2008 financial crisis. On appeal, Litvak says the case would make crimes out of statements in everyday negotiations such as car sales and that his lies weren’t material to the bond transactions.

Parker, one of three judges hearing the case in the U.S. Court of Appeals in New York, may agree. He asked Assistant U.S. Attorney Jonathan Francis if a real estate broker would be making a material misrepresentation by falsely telling a home buyer that a seller wouldn’t accept a lower offer.

Francis said the rules are different in the securities industry and that a higher standard is needed to discourage deceit and ensure that markets are fair and that investors won’t be ripped off.

Mr. Francis’ position is, of course, bullshit. The reason there is more regulation in the securities industry than in real-estate is because there are more layers of middlemen in securities transactions and these middlemen are giant corporations who pay regulatory fees as a part of doing business and pass them on to clients without itemization. If clients knew how much regulation was costing them, directly and indirectly, there would be a lot less regulation.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 24bp, FixedResets off 3bp and DeemedRetractibles down 7bp. The performance highlights table shows volatility remains a big factor, with Enbridge issues prominent on the bad side. Volume was on the low side of 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 24.20 to be $0.99 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.79 cheap at its bid price of 15.78.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.75 to be $0.60 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.33 to be $0.61 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.52 to be $0.83 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.97 and appears to be $0.56 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.46, looks $1.01 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.08 and is $0.50 rich.

Investment-grade pairs predict an average over the next five-odd years of about 0.30%, including the TRP.PR.A / TRP.PR.F at -0.36%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.06%, while BRF.PR.A / BRF.PR.B is at -1.36%.

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	-0.4728 %	2,298.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4728 %	4,018.3
Floater	3.16 %	3.30 %	54,370	18.96	4	-0.4728 %	2,443.1
OpRet	4.41 %	-4.13 %	38,819	0.13	2	0.0980 %	2,774.6
SplitShare	4.57 %	4.81 %	59,198	3.34	3	0.0802 %	3,224.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0980 %	2,537.1
Perpetual-Premium	5.46 %	2.38 %	63,834	0.08	18	0.0052 %	2,521.3
Perpetual-Discount	5.04 %	5.04 %	121,767	15.29	15	0.2370 %	2,788.9
FixedReset	4.39 %	3.76 %	272,135	16.42	86	-0.0255 %	2,424.1
Deemed-Retractible	4.92 %	3.24 %	110,399	0.62	35	-0.0696 %	2,643.6
FloatingReset	2.58 %	2.92 %	61,974	6.18	7	-0.0729 %	2,336.4

Performance Highlights
Issue	Index	Change	Notes
ENB.PR.N	FixedReset	-2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 4.59 %
ENB.PR.Y	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 4.59 %
HSE.PR.A	FixedReset	-1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 17.48 Evaluated at bid price : 17.48 Bid-YTW : 4.07 %
ENB.PR.P	FixedReset	-1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 20.01 Evaluated at bid price : 20.01 Bid-YTW : 4.52 %
ENB.PR.F	FixedReset	-1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 4.61 %
TRP.PR.D	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 22.62 Evaluated at bid price : 23.51 Bid-YTW : 3.68 %
ENB.PR.D	FixedReset	-1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.46 %
ENB.PR.T	FixedReset	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 19.68 Evaluated at bid price : 19.68 Bid-YTW : 4.60 %
ENB.PR.B	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 4.47 %
ELF.PR.H	Perpetual-Premium	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 24.72 Evaluated at bid price : 25.20 Bid-YTW : 5.49 %
ELF.PR.G	Perpetual-Discount	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 23.11 Evaluated at bid price : 23.40 Bid-YTW : 5.11 %
ENB.PR.A	Perpetual-Premium	1.04 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-12 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -14.37 %
RY.PR.Z	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 23.15 Evaluated at bid price : 24.72 Bid-YTW : 3.29 %
SLF.PR.H	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.95 Bid-YTW : 4.96 %
CM.PR.P	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 23.00 Evaluated at bid price : 24.50 Bid-YTW : 3.34 %
CU.PR.D	Perpetual-Discount	1.23 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-09-01 Maturity Price : 25.25 Evaluated at bid price : 25.50 Bid-YTW : 4.61 %
CIU.PR.C	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 16.20 Evaluated at bid price : 16.20 Bid-YTW : 3.76 %
PWF.PR.S	Perpetual-Discount	1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 24.33 Evaluated at bid price : 24.75 Bid-YTW : 4.86 %
MFC.PR.M	FixedReset	2.74 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 3.85 %
MFC.PR.L	FixedReset	3.65 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.59 Bid-YTW : 4.31 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.H	FixedReset	121,407	Nesbitt crossed 100,000 at 18.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 18.37 Evaluated at bid price : 18.37 Bid-YTW : 4.47 %
MFC.PR.A	OpRet	89,420	Called for redemption June 19. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 0.32 %
BAM.PF.G	FixedReset	44,659	Desjardins crossed 40,000 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 23.14 Evaluated at bid price : 24.97 Bid-YTW : 3.94 %
SLF.PR.H	FixedReset	41,221	Nesbitt crossed 38,300 at 21.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.95 Bid-YTW : 4.96 %
ENB.PR.P	FixedReset	27,576	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 20.01 Evaluated at bid price : 20.01 Bid-YTW : 4.52 %
RY.PR.H	FixedReset	24,106	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 23.07 Evaluated at bid price : 24.59 Bid-YTW : 3.34 %
There were 29 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.K	FixedReset	Quote: 23.82 – 24.50 Spot Rate : 0.6800 Average : 0.4164 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.82 Bid-YTW : 4.12 %
ELF.PR.H	Perpetual-Premium	Quote: 25.20 – 25.65 Spot Rate : 0.4500 Average : 0.3273 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 24.72 Evaluated at bid price : 25.20 Bid-YTW : 5.49 %
ENB.PR.N	FixedReset	Quote: 20.35 – 20.73 Spot Rate : 0.3800 Average : 0.2644 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 4.59 %
ENB.PR.F	FixedReset	Quote: 19.55 – 19.87 Spot Rate : 0.3200 Average : 0.2273 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-13 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 4.61 %
MFC.PR.I	FixedReset	Quote: 25.48 – 25.73 Spot Rate : 0.2500 Average : 0.1654 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.48 Bid-YTW : 3.85 %
IFC.PR.A	FixedReset	Quote: 20.78 – 21.15 Spot Rate : 0.3700 Average : 0.2903 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.78 Bid-YTW : 5.53 %

For those who missed it, Bloomberg has an admirable piece on the some explanations of the global bond rout:

Between the ECB’s bond buying and the threat of deflation, yields across Europe started to go negative this year, meaning investors were essentially paying for the privilege to lend their money out. That created a spill over effect into bond markets in the rest of the world as investors went in search of a better deal, pulling yields down in those markets too. The average yield across all Germany’s debt went negative about three weeks ago. That seems to have been the straw that broke the camel’s back. Since then that average yield has climbed to the highest level this year. Yields on about $2 trillion of bonds across 12 countries still linger below zero.

The US Department of So-Called Justice has decided a little more regulatory extortion is never a bad thing:

The U.S. Justice Department is set to rip up its agreement not to prosecute UBS Group AG for rigging benchmark interest rates, according to a person familiar with the matter, taking a new step to hold banks accountable for repeat offenses.

The move by the U.S. would be a first for the industry, making good on a March threat by a senior Justice Department official to revoke such agreements and putting banks on notice that these accords can be unwound if misconduct continues.
…
UBS’s cooperation in the currency probe may help shield it from antitrust charges in that matter. However, the bank is still exposed to fraud charges in that case, and any admission of wrongdoing could also put it in violation of an earlier deal the Zurich-based bank struck with the Justice Department.

In a December 2012 non-prosecution agreement with the U.S. to resolve a worldwide investigation into the manipulation of the London interbank offered rate, or Libor, UBS promised not to commit crimes for two years.

Don’t bet your bottom dollar on Chicago, Chicago:

Chicago had its credit rating cut to junk by Moody’s Investors Service after the Illinois Supreme Court’s rejection of a state pension-overhaul plan reduced the city’s options for fixing its own underfunded system.

The two-level downgrade to Ba1 affects $8.1 billion of general obligations, which were already the lowest-rated among the 90 biggest U.S. cities, excluding Detroit. The outlook is still negative. Moody’s has dropped the city seven levels since July 2013.
…
The deterioration in the credit standing of the third-most-populous U.S. city underscores how pension promises are squeezing the finances of states and localities nationwide. Moody’s downgrade compounds Chicago’s fiscal struggles: its counterparties can immediately demand as much as $2.2 billion in accelerated principal, accrued interest and termination fees, New York-based Moody’s said in the report.

There’s an interesting piece on Bloomberg about using technology to compete with cheap labour:

A few years ago, in an effort to diversify his company’s offerings, Pomini teamed up with Selvaggia Armani, an artist and designer. The two began working on a series of lamps designed by Armani and manufactured to order on Pomini’s 3D printers. The pieces—some of which include intricate meshwork or interlocking chains that would be difficult to produce using traditional methods—take shape slowly, each layer fused from powdered nylon by a high-power laser. The project was a surprising success: Pomini now works with more than a dozen designers; he introduced 3D­printed jewelry in 2012. “This is the beauty of this technology,” says Armani, 47. “You can build things that are impossible.”
…
Armani have helped turn northeastern Italy into an unlikely hothouse of innovation. Last year growth in the region was positive for the first time since 2007, at 0.5 percent. Exports rose by 3.5 percent in 2014 and are expected to keep climbing. In the province of Trento, for instance, the public and private sectors together invest some 2 percent of gross domestic product in research and development. At the Centro Moda Canossa—a trade school in Trento for children age 14 to 18 specializing in fashion design and tailoring—the faculty recently added a class in which students incorporate 3D printing, laser cutting, and microcontroller chips into their designs. “You can’t offer a job from the past. Nobody will come,” says Michele Bommassar, 36, the school’s vice director. “You have to offer the jobs of the future.”

Is anybody in Canada listening? No? OK, go back to sleep, then. You’ll want to be rested for the anti-globalization demo.

In other news, Hydro One, having achieved the pinnacle of operating efficiency, has decided to join the Junior Justice League:

A Hydro One employee will be fired following an incident on Sunday when a female television reporter was harassed by Toronto FC fans hurling obscenities while she was doing a live hit.

“Hydro One is taking steps to terminate the employee for violating our Code of Conduct,” Hydro One spokesman Daffyd Roderick said in a statement.

“Respect for all people is ingrained in the code and our values. We are committed to a work environment where discrimination or harassment of any type is met with zero tolerance.”

So now, not only will universities like Dalhousie be able to administer the extra-judicial flavour of the month (as discussed on January 6) but any two-bit corporation will be able to do the same. So we are beginning to see a reversion to the good old days, when your employer had the ability to regulate every aspect of your life … it will be interesting to learn when unions become popular again, which will happen as soon as enough people get fed up with the abuse and fearful of its consequences – especially when it results from an essentially random occurance of internet pile-on.

It was a negative day for the Canadian preferred share market, with PerpetualDiscounts losing 26bp, FixedResets off 4bp and DeemedRetractibles down 8bp. FixedResets dominated both ends of the Performance Highlights table. Volume was extremely high.

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 24.26 to be $0.49 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.21 cheap at its bid price of 25.00.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.04 to be $0.40 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.33 to be $0.35 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.65 to be $0.69 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.96 and appears to be $0.55 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.30, looks $1.08 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.00 and is $0.50 rich.

Investment-grade pairs predict an average over the next five-odd years of about 0.40%, but TRP.PR.A / TRP.PR.F remains an outlier at -0.39%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.12%.

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	0.1104 %	2,309.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.1104 %	4,037.3
Floater	3.14 %	3.27 %	54,838	19.02	4	0.1104 %	2,454.7
OpRet	4.41 %	-2.65 %	39,132	0.14	2	0.1178 %	2,771.8
SplitShare	4.58 %	4.80 %	59,082	3.34	3	-0.3594 %	3,221.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1178 %	2,534.6
Perpetual-Premium	5.45 %	2.18 %	66,363	0.08	18	0.0283 %	2,521.2
Perpetual-Discount	5.05 %	5.07 %	119,922	15.35	15	-0.2559 %	2,782.3
FixedReset	4.38 %	3.73 %	273,092	16.33	86	-0.0363 %	2,424.7
Deemed-Retractible	4.91 %	3.51 %	110,294	0.78	35	-0.0752 %	2,645.4
FloatingReset	2.58 %	2.91 %	62,405	6.19	7	-0.0243 %	2,338.1

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.L	FixedReset	-3.76 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.76 Bid-YTW : 4.76 %
SLF.PR.H	FixedReset	-3.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.70 Bid-YTW : 5.10 %
FTS.PR.H	FixedReset	-2.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 3.84 %
FTS.PR.K	FixedReset	-1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 21.70 Evaluated at bid price : 22.00 Bid-YTW : 3.72 %
ENB.PR.T	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.56 %
PWF.PR.P	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.60 %
IFC.PR.A	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.80 Bid-YTW : 5.51 %
PWF.PR.S	Perpetual-Discount	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.92 Evaluated at bid price : 24.32 Bid-YTW : 4.95 %
GWO.PR.I	Deemed-Retractible	-1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 5.26 %
MFC.PR.H	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 2.64 %
BMO.PR.T	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.06 Evaluated at bid price : 24.55 Bid-YTW : 3.33 %
BAM.PR.R	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 4.16 %
BAM.PR.X	FixedReset	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 18.65 Evaluated at bid price : 18.65 Bid-YTW : 4.08 %
GWO.PR.N	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.35 Bid-YTW : 6.13 %
NA.PR.W	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.00 Evaluated at bid price : 24.50 Bid-YTW : 3.37 %
TRP.PR.C	FixedReset	1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 3.52 %
BMO.PR.S	FixedReset	1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.22 Evaluated at bid price : 24.92 Bid-YTW : 3.35 %
BAM.PR.T	FixedReset	2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 21.27 Evaluated at bid price : 21.55 Bid-YTW : 4.01 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PF.F	FixedReset	127,583	Desjardins crossed 100,000 at 24.85; TD crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.16 Evaluated at bid price : 24.86 Bid-YTW : 3.96 %
CM.PR.Q	FixedReset	115,410	Nesbitt crossed 76,800 at 25.00; TD crossed 25,000 at 24.97. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.10 Evaluated at bid price : 24.85 Bid-YTW : 3.69 %
RY.PR.H	FixedReset	82,086	Desjardins crossed 20,000 at 24.62; RBC crossed 40,400 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.08 Evaluated at bid price : 24.61 Bid-YTW : 3.34 %
ENB.PR.H	FixedReset	63,230	RBC crossed blocks of 23,600 and 26,400, both at 18.86. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 4.46 %
RY.PR.C	Deemed-Retractible	59,095	Nesbitt crossed 50,000 at 25.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-24 Maturity Price : 25.00 Evaluated at bid price : 25.18 Bid-YTW : 2.95 %
ENB.PR.T	FixedReset	51,581	RBC crossed 40,000 at 20.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.56 %
There were 52 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.M	FixedReset	Quote: 24.09 – 24.97 Spot Rate : 0.8800 Average : 0.5983 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.09 Bid-YTW : 4.19 %
IAG.PR.G	FixedReset	Quote: 25.95 – 26.50 Spot Rate : 0.5500 Average : 0.4134 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 2.70 %
RY.PR.Z	FixedReset	Quote: 24.46 – 24.94 Spot Rate : 0.4800 Average : 0.3657 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 23.05 Evaluated at bid price : 24.46 Bid-YTW : 3.34 %
PWF.PR.F	Perpetual-Discount	Quote: 25.01 – 25.29 Spot Rate : 0.2800 Average : 0.1688 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 24.69 Evaluated at bid price : 25.01 Bid-YTW : 5.28 %
GWO.PR.F	Deemed-Retractible	Quote: 25.61 – 25.98 Spot Rate : 0.3700 Average : 0.2603 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-11 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : -14.88 %
BAM.PF.B	FixedReset	Quote: 22.65 – 22.99 Spot Rate : 0.3400 Average : 0.2306 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-12 Maturity Price : 22.14 Evaluated at bid price : 22.65 Bid-YTW : 4.15 %

Markets are forecasting no changes in the Canadian policy rate:

The bond market is starting to believe Bank of Canada Governor Stephen Poloz’s newfound optimism in the Canadian economy, resetting borrowing costs back to the day of his shock rate cut.

Traders have almost completely priced out another rate cut in banker’s acceptances contracts, a predictor of interest rates. Contracts due December, 2015, reached 1 per cent this month for the first time since Jan. 21, the day the Bank of Canada lowered its overnight rate to 0.75 per cent to contend with the collapse in the price of oil, the nation’s biggest export.

So-called Bax contracts have settled about 20 basis points above the central bank’s target rate on average since 1992, data compiled by Bloomberg show. The yield has averaged 0.91 per cent this year.

It was another violently mixed day for the Canadian preferred share market, with PerpetualDiscounts down 58bp, FixedResets gaining 18bp and DeemedRetractibles off 6bp. A lengthy Performance Highlights table is dominated by FixedResets, particularly on the good side. 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 24.24 to be $0.98 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.90 cheap at its bid price of 24.95.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.65 to be $0.49 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.16 to be $0.55 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.52 to be $0.62 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.98 and appears to be $0.58 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.68, looks $0.95 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.40 and is $0.64 rich.

Investment-grade pairs now predict an average over the next five years of about 0.40%, but TRP.PR.A / TRP.PR.F is an outlier at -0.51% and BNS.PR.Y / BNS.PR.D is at +0.78%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.03% while BRF.PR.A / BRF.PR.B is at +1.03%.

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	-0.9378 %	2,306.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.9378 %	4,032.9
Floater	3.15 %	3.26 %	55,736	19.05	4	-0.9378 %	2,452.0
OpRet	4.42 %	-2.04 %	38,273	0.14	2	-0.0785 %	2,768.6
SplitShare	4.56 %	4.66 %	59,622	3.35	3	0.1600 %	3,233.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0785 %	2,531.6
Perpetual-Premium	5.45 %	2.00 %	66,427	0.08	18	-0.0697 %	2,520.5
Perpetual-Discount	5.04 %	5.03 %	119,119	15.36	15	-0.5779 %	2,789.5
FixedReset	4.38 %	3.72 %	270,070	16.39	86	0.1805 %	2,425.6
Deemed-Retractible	4.91 %	3.22 %	110,721	0.53	35	-0.0569 %	2,647.4
FloatingReset	2.58 %	2.92 %	62,894	6.19	7	0.2251 %	2,338.7

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.C	Floater	-1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 15.10 Evaluated at bid price : 15.10 Bid-YTW : 3.33 %
CU.PR.F	Perpetual-Discount	-1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 22.46 Evaluated at bid price : 22.85 Bid-YTW : 4.91 %
CIU.PR.C	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 16.02 Evaluated at bid price : 16.02 Bid-YTW : 3.80 %
RY.PR.Z	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 23.08 Evaluated at bid price : 24.54 Bid-YTW : 3.32 %
TRP.PR.D	FixedReset	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 22.71 Evaluated at bid price : 23.69 Bid-YTW : 3.65 %
PWF.PR.S	Perpetual-Discount	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 24.21 Evaluated at bid price : 24.62 Bid-YTW : 4.89 %
TRP.PR.A	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 3.64 %
CU.PR.G	Perpetual-Discount	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 22.55 Evaluated at bid price : 22.95 Bid-YTW : 4.89 %
BAM.PR.B	Floater	-1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 15.41 Evaluated at bid price : 15.41 Bid-YTW : 3.26 %
ENB.PR.F	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 20.23 Evaluated at bid price : 20.23 Bid-YTW : 4.53 %
FTS.PR.M	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 23.16 Evaluated at bid price : 24.89 Bid-YTW : 3.57 %
BMO.PR.T	FixedReset	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 22.96 Evaluated at bid price : 24.30 Bid-YTW : 3.38 %
MFC.PR.N	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.96 Bid-YTW : 4.18 %
FTS.PR.K	FixedReset	1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 21.98 Evaluated at bid price : 22.40 Bid-YTW : 3.64 %
MFC.PR.M	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 4.07 %
BNS.PR.Z	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 3.48 %
TRP.PR.C	FixedReset	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 18.30 Evaluated at bid price : 18.30 Bid-YTW : 3.57 %
GWO.PR.N	FixedReset	1.97 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.15 Bid-YTW : 6.27 %
SLF.PR.G	FixedReset	2.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.03 Bid-YTW : 6.38 %
FTS.PR.G	FixedReset	2.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 21.85 Evaluated at bid price : 22.16 Bid-YTW : 3.72 %
RY.PR.H	FixedReset	2.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 23.11 Evaluated at bid price : 24.70 Bid-YTW : 3.32 %
MFC.PR.L	FixedReset	2.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.65 Bid-YTW : 4.28 %
TD.PF.B	FixedReset	2.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 23.12 Evaluated at bid price : 24.69 Bid-YTW : 3.33 %
HSE.PR.A	FixedReset	2.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 17.92 Evaluated at bid price : 17.92 Bid-YTW : 3.97 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.B	FixedReset	122,714	TD crossed four blocks: 35,000 shares, 17,500 shares, 30,000 and 29,500, all at 15.91. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 15.80 Evaluated at bid price : 15.80 Bid-YTW : 3.67 %
RY.PR.I	FixedReset	85,880	Nesbitt crossed two blocks of 35,000 each and one of 15,000, all at 25.35. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 2.99 %
TRP.PR.G	FixedReset	68,982	TD crossed 20,000 at 25.07. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 23.11 Evaluated at bid price : 24.95 Bid-YTW : 3.81 %
BNS.PR.O	Deemed-Retractible	63,250	RBC crossed 61,100 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-10 Maturity Price : 25.50 Evaluated at bid price : 25.82 Bid-YTW : -7.56 %
TRP.PR.A	FixedReset	58,801	TD crossed 35,000 at 21.40 and 15,000 at 21.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 3.64 %
BMO.PR.M	FixedReset	45,800	RBC crossed 45,200 at 25.23. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 2.85 %
There were 31 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.K	FixedReset	Quote: 22.40 – 22.98 Spot Rate : 0.5800 Average : 0.3664 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 21.98 Evaluated at bid price : 22.40 Bid-YTW : 3.64 %
MFC.PR.H	FixedReset	Quote: 25.79 – 26.24 Spot Rate : 0.4500 Average : 0.2931 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.79 Bid-YTW : 3.21 %
RY.PR.Z	FixedReset	Quote: 24.54 – 24.88 Spot Rate : 0.3400 Average : 0.2403 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-11 Maturity Price : 23.08 Evaluated at bid price : 24.54 Bid-YTW : 3.32 %
MFC.PR.C	Deemed-Retractible	Quote: 23.78 – 24.05 Spot Rate : 0.2700 Average : 0.1733 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.78 Bid-YTW : 5.26 %
IAG.PR.A	Deemed-Retractible	Quote: 23.99 – 24.31 Spot Rate : 0.3200 Average : 0.2254 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.99 Bid-YTW : 5.23 %
BMO.PR.K	Deemed-Retractible	Quote: 25.60 – 25.84 Spot Rate : 0.2400 Average : 0.1504 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-10 Maturity Price : 25.50 Evaluated at bid price : 25.60 Bid-YTW : -2.01 %

Jobs, jobs, jobs!

April’s job-creation score was better, March was worse, and the U.S. jobless rate crept closer to the Federal Reserve’s moving target for full employment.

The 223,000 increase in payrolls last month followed a revised 85,000 gain in March that was the smallest since June 2012, figures from the Labor Department showed Friday in Washington. The jobless rate fell to 5.4 percent, the lowest since May 2008, from 5.5 percent.
…
Wage growth remained limited, with average hourly earnings rising 0.1 percent in April after a revised 0.2 percent March gain that was weaker than initially reported. The median forecast in a Bloomberg survey projected a 0.2 percent increase for last month.

Compared with a year earlier, hourly pay was up 2.2 percent last month, holding within the narrow range tracked over the past four years.
…
The report also included positive news on the size of the labor force. The participation rate, which indicates the share of working-age people who are employed or looking for work, increased to 62.8 percent from 62.7 percent in March, which matched the lowest since 1978. The gain was paced by 45-to-64 year-old Americans.
…
The Fed now defines full employment as between 5 percent and 5.2 percent, according to projections released after their March 17-18 meeting. The range was lowered from 5.2 percent to 5.5 percent after the jobless rate reached the top of the scale in February.

In Canada, not so much:

The Target effect is denting Canada’s jobs numbers.

Employers shed a total of 19,700 jobs last month, according to Statistics Canada, the most since August, as retailers eliminated thousands of sales, cashiers and clerks positions.

The numbers show the impact of a raft of store closings amid upheaval in the sector, including Target Canada, Best Buy, Mexx, Smart Set, Indigo Books and Sony. The sector may be in flux, but it remains the largest source of employment in the country.
…
The retail sector posted a loss of 20,500 workers, Statscan said Friday, leaving employment levels flat from a year earlier. Monthly jobs numbers can be volatile, but separate payrolls data show the retail sector has contracted for four months in a row.

In January, Target said it was pulling out of Canada, an abrupt move that spelled job losses for 17,600 of its workers over the ensuing months and put pressure on hundreds of firms that served the chain, forcing some of them to lay off staff, too.

Across Canada, the jobless rate stayed at 6.8 per cent as fewer people looked for work.

Monthly numbers can swing up and down, but smoothed-out averages show employment has grown by just 2,600 jobs on average per month in the past half-year. Year-over-year employment growth has been stuck below 1 per cent for the past 13 months.

Other sectors shed workers as well last month, in construction and information services. Natural resources were little changed in the month, but are down 6.6 per cent from a year earlier, reflecting the oil price slide.

On the other hand, it’s my understanding that in Toronto, house flippers have basically been priced out of the market by eager-to-buy veterans of too many bidding wars. In the States, not so much:

Real estate buyers seeking money to renovate and flip U.S. houses are getting help from some of the world’s biggest investment firms.

Colony Capital Inc., Blackstone Group LP and Cerberus Capital Management are among the companies that have started making bridge loans to investors who buy homes to sell them quickly for a profit. Borrowing costs — traditionally the highest in residential lending — are tumbling as the firms compete for customers.

The foray represents a deepening bet on the housing market by Wall Street-backed companies, many of which have built rental-home empires during the past three years and started specialty-lending businesses to finance smaller investors. Big firms with deep pockets and access to cheap capital may have an edge over local private lenders that have dominated flipper financing.
…
Home flippers are benefiting from rising prices, limited new construction and a shortage of inventory on the market. While quick resales have decreased from the start of the housing market’s rebound, when investors snapped up discounted distressed homes, profits are getting bigger.

The average gross profit for completed flips in the first quarter was $72,450, up from $61,684 a year earlier and the highest in records dating to 2011, according to a report Thursday from RealtyTrac, a real estate data firm. Markets with the highest average gross return on investment included Baltimore, central Florida and Detroit.

‘Who will watch the watchers?’ query the wise men in Congress. Watcher watchers!

Senate Banking Committee Chairman Richard Shelby is putting the finishing touches on a bill that could give Congress more power over the New York Fed and create a commission with authority to propose sweeping reforms of the entire Fed system.

Other senators want to curb the Fed’s ability to bail out banks during a financial meltdown and increase transparency of its regulation.

“Shelby wants to do something with the Fed,” said Ed Mills, a financial-policy analyst at FBR & Co. in Arlington, Virginia, and a former adviser to Democrats in the House and Senate. “It seems as if they’re going to have something in here that is additional oversight of the Fed or rebalancing some of the power internally at the Fed, whether staff resources or more transparency.”

There’s really only one structural problem with the Fed: it has responsibility for both bank supervision and monetary policy. While there are good arguments to be made in favour of combining the mandates, as has been discussed previously on PrefBlog (see, for example, September 10, 2008 and Willem Buiter’s Prescription), I continue to think that puts just too much power in the hands of one institution.

As far as ‘Fed bailouts of Wall Street Banks’ are concerned – well, for the most part that’s a canard. The explicit bail-outs were done by the Treasury with the authority of congress. The Fed simply lent to solvent banks against adequate collateral … which is what Central Banks are supposed to do during a liquidity crisis. They can, however, be criticized for not ensuring that these loans were not made at penalty rates:

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Brookfield Investments Corporation, proud issuer of BRN.PR.A (which is not tracked by HIMIPref™) has been confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the rating of Pfd-2 (low) with a Stable trend for the Senior Preferred Shares of Brookfield Investments Corporation (Brookfield Investments or the Company). The rating continues to be based on the strength of Brookfield Investments’ owner (Brookfield Asset Management Inc. or BAM; rated A (low), Stable trend by DBRS), as well as the Company’s relatively stable portfolio of real estate and asset management investments, with strong asset and dividend coverage. The rating remains limited by Brookfield Investments’ exposure to the volatility of overall capital markets, concentration of investments in the real estate sector, lack of investment restrictions and the relative illiquidity of unlisted investments.

It was another strong-mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 19bp, FixedResets up 33bp and DeemedRetractibles off 2bp. The strength in FixedResets came at the end of the day:

A Performance Highlights table of unsurprising size was unsurprisingly dominated by winning FixedResets, but there were a few losers in the mix. Volume was quite high.

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 24.48 to be $0.96 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.12 cheap at its bid price of 25.04.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.K, resetting at +222 on 2018-9-19, bid at 23.52 to be $0.28 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.61 to be $0.43 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 20.52 to be $0.60 cheap. BAM.PR.X, resetting at +180bp 2017-6-30 is bid at 18.51 and appears to be $0.57 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.63, looks $0.76 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.14 and is $0.52 rich.

Investment-grade pairs now predict an average over the next five years of about 0.35%, but TRP.PR.A / TRP.PR.F is an outlier at -0.78% and BNS.PR.Y / BNS.PR.D is at +0.84%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -0.68% while DC.PR.B / DC.PR.D is now at 0.95%.

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	-0.4202 %	2,328.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4202 %	4,071.1
Floater	3.12 %	3.22 %	55,010	19.15	4	-0.4202 %	2,475.2
OpRet	4.41 %	-1.93 %	38,432	0.15	2	-0.0196 %	2,770.8
SplitShare	4.57 %	4.78 %	61,960	3.36	3	0.0267 %	3,228.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0196 %	2,533.6
Perpetual-Premium	5.45 %	1.43 %	67,136	0.08	18	0.0763 %	2,522.3
Perpetual-Discount	5.01 %	5.00 %	120,224	15.42	15	0.1884 %	2,805.7
FixedReset	4.38 %	3.73 %	274,342	16.32	86	0.3291 %	2,421.2
Deemed-Retractible	4.92 %	3.04 %	110,198	0.22	36	-0.0243 %	2,648.9
FloatingReset	2.59 %	2.93 %	65,325	6.20	7	-0.1033 %	2,333.4

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.P	FixedReset	-1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 18.87 Evaluated at bid price : 18.87 Bid-YTW : 3.57 %
GWO.PR.N	FixedReset	-1.66 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.80 Bid-YTW : 6.50 %
FTS.PR.G	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 21.39 Evaluated at bid price : 21.71 Bid-YTW : 3.79 %
BAM.PR.K	Floater	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 15.30 Evaluated at bid price : 15.30 Bid-YTW : 3.28 %
MFC.PR.N	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.70 Bid-YTW : 4.32 %
BAM.PF.F	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.14 Evaluated at bid price : 24.80 Bid-YTW : 3.97 %
HSE.PR.A	FixedReset	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 17.45 Evaluated at bid price : 17.45 Bid-YTW : 4.08 %
NA.PR.S	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.29 Evaluated at bid price : 25.12 Bid-YTW : 3.39 %
MFC.PR.K	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.52 Bid-YTW : 4.28 %
CU.PR.D	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-09-01 Maturity Price : 25.25 Evaluated at bid price : 25.25 Bid-YTW : 4.81 %
MFC.PR.L	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.14 Bid-YTW : 4.55 %
BAM.PF.G	FixedReset	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.14 Evaluated at bid price : 24.96 Bid-YTW : 3.94 %
FTS.PR.M	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.24 Evaluated at bid price : 25.15 Bid-YTW : 3.51 %
TD.PF.C	FixedReset	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 22.89 Evaluated at bid price : 24.22 Bid-YTW : 3.39 %
BAM.PR.T	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 4.12 %
BAM.PR.X	FixedReset	1.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 18.51 Evaluated at bid price : 18.51 Bid-YTW : 4.11 %
BAM.PF.A	FixedReset	2.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.24 Evaluated at bid price : 24.76 Bid-YTW : 3.99 %
TRP.PR.C	FixedReset	2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 3.63 %
CIU.PR.C	FixedReset	2.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 3.74 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CU.PR.F	Perpetual-Discount	125,058	TD crossed 72,500 at 23.35; RBC crossed 52,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 22.94 Evaluated at bid price : 23.25 Bid-YTW : 4.83 %
RY.PR.M	FixedReset	102,306	RBC bought blocks of 10,000 and 20,000 from TD, both at 24.84, then crossed 24,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.05 Evaluated at bid price : 24.76 Bid-YTW : 3.57 %
BAM.PF.D	Perpetual-Discount	96,307	RBC crossed blocks of 25,000 and 60,600 at 23.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.15 Evaluated at bid price : 23.47 Bid-YTW : 5.27 %
FTS.PR.M	FixedReset	86,240	Desjardins crossed 75,000 at 25.09. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.24 Evaluated at bid price : 25.15 Bid-YTW : 3.51 %
TRP.PR.F	FloatingReset	55,200	RBC crossed 40,000 at 18.97. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 19.04 Evaluated at bid price : 19.04 Bid-YTW : 3.39 %
SLF.PR.A	Deemed-Retractible	54,594	Scotia crossed 40,000 at 24.75. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.71 Bid-YTW : 4.99 %
There were 48 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
RY.PR.H	FixedReset	Quote: 24.17 – 24.75 Spot Rate : 0.5800 Average : 0.3928 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 22.90 Evaluated at bid price : 24.17 Bid-YTW : 3.42 %
ENB.PR.D	FixedReset	Quote: 20.00 – 20.45 Spot Rate : 0.4500 Average : 0.2761 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.42 %
BMO.PR.T	FixedReset	Quote: 24.05 – 24.60 Spot Rate : 0.5500 Average : 0.3993 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 22.85 Evaluated at bid price : 24.05 Bid-YTW : 3.42 %
BMO.PR.W	FixedReset	Quote: 24.01 – 24.37 Spot Rate : 0.3600 Average : 0.2258 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 22.81 Evaluated at bid price : 24.01 Bid-YTW : 3.40 %
BMO.PR.S	FixedReset	Quote: 24.46 – 24.88 Spot Rate : 0.4200 Average : 0.3022 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 23.04 Evaluated at bid price : 24.46 Bid-YTW : 3.44 %
BAM.PR.K	Floater	Quote: 15.30 – 15.67 Spot Rate : 0.3700 Average : 0.2589 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-08 Maturity Price : 15.30 Evaluated at bid price : 15.30 Bid-YTW : 3.28 %

I hear there’s a bit of backlash against the lawyers, accountants and stockbrokers crossing the Alberta-Saskatchewan border in search of a better life:

The Swiss central bank accumulated a lot of foreign currency as it attempted to defend the indefensible CHF / EUR peg. Guess what they’ve done with all that cash!

The Swiss National Bank had a rough quarter in Q1 as the decision to abandon the increasingly unsustainable EURCHF floor (an event which marked an implicit admission that central banks are not all-powerful after all) blew a $32 billion hole in the central bank’s euro reserves. That, however, wasn’t the most remarkable takeaway from the SNB’s quarterly report.

More interesting than the massive loss was the line item in the SNB’s balance sheet which shows that 18% of the bank’s assets are held in foreign stocks.

By “blew a hole”, he must be referring to the P&L – the balance sheet bloated, of course.

Liquidity problems continue to attract attention:

As bonds tumbled across Europe, the bid-ask spread, a gauge of the market’s depth derived from the difference in prices or yields between buyers and sellers, widened. It reached 0.27 basis point for German 10-year bunds on Thursday, up from as low as 0.1 in March and an average of 0.2 this year, data compiled by Bloomberg show.

That means sellers may be getting squeezed by a shortage of buyers. Adding to the risk of holding bonds, implied option volatility on German 10-year bund futures contracts surged in the past week to the highest since August 2012.
…
Bonds have sold off in a global rout that wiped more than $430 billion from the market in the past week. A capitulation on long positions, or bets that prices will rise, was triggered by a shift in sentiment as improving economic data and rising oil prices prompted investors to revolt against record-low yields.

Yet the magnitude of the decline wasn’t justified by those economic numbers, none of which points to a big jump in inflation or interest rates, according to Rabobank’s McGuire.

The yield on Germany’s 10-year bund, the benchmark euro-zone security, has surged 43 basis points since the start of last week to a high for 2015. A basis point is 0.01 percentage point.

The jump suggests that increased regulation may be hampering dealers’ ability to make markets and that bond-purchase programs such as the European Central Bank’s quantitative-easing plan have cut the amount of securities in circulation.

The Canadian preferred share market was on fire today, albeit very unevenly. Can I call this “on mixed fire”? PerpetualDiscounts gained 43bp, FixedResets were up 62bp, while DeemedRetractibles were off 6bp. The volume highlights table is, predictably, both lengthy and dominated by FixedResets. Volume was very high.

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 24.24 to be $0.95 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.86 cheap at its bid price of 25.11.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 23.97 to be $0.51 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.52 to be $0.47 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 20.34 to be $0.56 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.16 and appears to be $0.72 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.70, looks $0.73 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.10 and is $0.50 rich.

Investment-grade pairs now predict an average over the next five years of about 0.40%, but TRP.PR.A / TRP.PR.F is an outlier at -0.77% and BNS.PR.Y / BNS.PR.D is at +0.70%. On the junk side, the BRF.PR.A / BRF.PR.B pair is at -0.72% while FFH.PR.C / FFH.PR.D is at +1.20%.

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 %	2,338.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0000 %	4,088.2
Floater	3.11 %	3.21 %	55,369	19.19	4	0.0000 %	2,485.7
OpRet	4.41 %	-2.41 %	38,332	0.15	2	0.1571 %	2,771.3
SplitShare	4.57 %	4.76 %	64,240	3.36	3	-0.0933 %	3,227.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1571 %	2,534.1
Perpetual-Premium	5.45 %	1.73 %	68,137	0.08	18	-0.0501 %	2,520.3
Perpetual-Discount	5.02 %	5.00 %	121,959	15.42	15	0.4341 %	2,800.4
FixedReset	4.40 %	3.81 %	277,275	16.21	86	0.6169 %	2,413.3
Deemed-Retractible	4.92 %	3.42 %	114,117	0.30	36	-0.0564 %	2,649.6
FloatingReset	2.59 %	2.96 %	64,301	6.20	7	0.5561 %	2,335.9

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.G	FixedReset	-1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.60 Bid-YTW : 6.75 %
NA.PR.S	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.19 Evaluated at bid price : 24.85 Bid-YTW : 3.50 %
ENB.PR.B	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 19.76 Evaluated at bid price : 19.76 Bid-YTW : 4.56 %
BAM.PR.T	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 4.27 %
CU.PR.G	Perpetual-Discount	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.04 Evaluated at bid price : 23.35 Bid-YTW : 4.81 %
ENB.PF.E	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 21.91 Evaluated at bid price : 22.40 Bid-YTW : 4.41 %
ENB.PF.C	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 21.82 Evaluated at bid price : 22.25 Bid-YTW : 4.42 %
TRP.PR.D	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.78 Evaluated at bid price : 23.83 Bid-YTW : 3.68 %
BAM.PF.G	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.01 Evaluated at bid price : 24.60 Bid-YTW : 4.07 %
BMO.PR.W	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.78 Evaluated at bid price : 23.94 Bid-YTW : 3.47 %
BAM.PR.X	FixedReset	1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 4.29 %
BAM.PF.D	Perpetual-Discount	1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.07 Evaluated at bid price : 23.39 Bid-YTW : 5.29 %
BAM.PF.A	FixedReset	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.03 Evaluated at bid price : 24.25 Bid-YTW : 4.16 %
TRP.PR.F	FloatingReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 19.02 Evaluated at bid price : 19.02 Bid-YTW : 3.40 %
ENB.PR.T	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 20.59 Evaluated at bid price : 20.59 Bid-YTW : 4.54 %
BAM.PF.C	Perpetual-Discount	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.76 Evaluated at bid price : 23.06 Bid-YTW : 5.31 %
NA.PR.W	FixedReset	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.94 Evaluated at bid price : 24.35 Bid-YTW : 3.45 %
ENB.PR.J	FixedReset	1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 21.65 Evaluated at bid price : 21.94 Bid-YTW : 4.39 %
TRP.PR.A	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 3.66 %
ENB.PR.F	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 4.56 %
IAG.PR.G	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 3.53 %
ENB.PR.Y	FixedReset	1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 20.03 Evaluated at bid price : 20.03 Bid-YTW : 4.55 %
BNS.PR.Y	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 3.19 %
ENB.PR.P	FixedReset	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 20.91 Evaluated at bid price : 20.91 Bid-YTW : 4.46 %
TD.PF.B	FixedReset	1.84 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.96 Evaluated at bid price : 24.30 Bid-YTW : 3.46 %
PWF.PR.P	FixedReset	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 19.21 Evaluated at bid price : 19.21 Bid-YTW : 3.60 %
BAM.PF.E	FixedReset	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.37 Evaluated at bid price : 23.16 Bid-YTW : 4.11 %
RY.PR.Z	FixedReset	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.14 Evaluated at bid price : 24.70 Bid-YTW : 3.35 %
MFC.PR.N	FixedReset	2.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.97 Bid-YTW : 4.21 %
MFC.PR.M	FixedReset	2.43 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.26 %
TRP.PR.B	FixedReset	2.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 15.68 Evaluated at bid price : 15.68 Bid-YTW : 3.81 %
TRP.PR.C	FixedReset	2.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 17.58 Evaluated at bid price : 17.58 Bid-YTW : 3.82 %
IFC.PR.A	FixedReset	3.70 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.00 Bid-YTW : 5.44 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.M	Deemed-Retractible	80,747	Scotia crossed 75,000 at 25.36. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-07-27 Maturity Price : 25.25 Evaluated at bid price : 25.33 Bid-YTW : 3.42 %
TRP.PR.E	FixedReset	43,201	Desjardins crossed 15,800 at 24.23. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.92 Evaluated at bid price : 24.24 Bid-YTW : 3.64 %
TD.PF.C	FixedReset	42,757	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.73 Evaluated at bid price : 23.85 Bid-YTW : 3.52 %
ENB.PR.B	FixedReset	37,690	Desjardins crossed 10,000 at 19.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 19.76 Evaluated at bid price : 19.76 Bid-YTW : 4.56 %
CM.PR.O	FixedReset	37,659	TD crossed 17,300 at 24.51. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.05 Evaluated at bid price : 24.51 Bid-YTW : 3.48 %
RY.PR.H	FixedReset	34,819	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.93 Evaluated at bid price : 24.23 Bid-YTW : 3.47 %
There were 53 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.L	FixedReset	Quote: 22.87 – 23.64 Spot Rate : 0.7700 Average : 0.5104 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.87 Bid-YTW : 4.73 %
TD.PF.B	FixedReset	Quote: 24.30 – 25.00 Spot Rate : 0.7000 Average : 0.4812 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 22.96 Evaluated at bid price : 24.30 Bid-YTW : 3.46 %
CIU.PR.C	FixedReset	Quote: 15.81 – 17.50 Spot Rate : 1.6900 Average : 1.4748 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 15.81 Evaluated at bid price : 15.81 Bid-YTW : 3.96 %
BNS.PR.Z	FixedReset	Quote: 23.25 – 23.73 Spot Rate : 0.4800 Average : 0.3096 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 3.79 %
BNS.PR.O	Deemed-Retractible	Quote: 25.68 – 26.08 Spot Rate : 0.4000 Average : 0.2443 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-06 Maturity Price : 25.50 Evaluated at bid price : 25.68 Bid-YTW : -1.80 %
FTS.PR.M	FixedReset	Quote: 24.77 – 25.25 Spot Rate : 0.4800 Average : 0.3304 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-07 Maturity Price : 23.11 Evaluated at bid price : 24.77 Bid-YTW : 3.65 %