Category: Market Action

Here’s bit of an update on the persecution of Navinder Singh Sarao:

Sarao’s lawyer, James Lewis, disclosed the existence of a worldwide freezing order on his client’s assets that precludes him from raising the 5 million-pound ($7.6 million) bail.

Sarao has been “languishing on remand unable to meet” the bail conditions, and it’s “impossible to supply the security,” because of the freezing order, Lewis said. He also unsuccessfully applied to have a blanket ban on Internet use amended to only restrict him from trading, arguing a complete prohibition was “manifestly disproportionate.”

Sarao has been in custody since April 21, when he was arrested at the house he shares with his parents near Heathrow airport. He is being held at Wandsworth prison in London while fighting extradition to the U.S.

Roscoe rejected a request to release Sarao solely on a 50,000 pound-security put up by his parents, saying the bail amount had to satisfy her that he isn’t a flight risk.

Yep, that’s the way to do it! Set bail to a ludicrously high amount, then freeze the guy’s assets so he can’t possibly put up the money! As noted on May 1, the most recent penalty for spoofing was a sixty day trading suspension. But Sarao’s offence was blatant? Yeah, right, that’s why it took five years to find it, and why it got no mention whatsoever in the SEC report.

Selective enforcement is an affront to justice, and the anti-spoofing laws are ridiculous and unenforceable in the first place.

Fitch Ratings thinks the Canadian economy is vulnerable to condos:

There are more than 80,000 condo units under construction across Ontario, most of them in the Greater Toronto Area. That’s 50 per cent higher than just four years ago, although the number of new housing starts has fallen from its peak in 2012, Fitch said. In the face of so much supply, condo prices have remained flat across the province.

Therein lies the problem, according to Fitch.

“As a large number of units come on line, prices may soften, which could reverberate throughout the Canadian economy,” Fitch director Stefan Hilts wrote. “Lower prices would reduce the incentives to build further units, which could hit employment in the construction sector that has been buoyed by continuing price growth. This in turn could lead to more significant downside exposure.”

Yellen is trying to talk down the market (without saying “irrational exuberance”):

Federal Reserve Chair Janet Yellen, surveying the financial landscape for signs of bubbles after more than six years of near-zero rates, warned that both stocks and bonds are richly valued.

“I would highlight that equity-market valuations at this point generally are quite high,” Yellen said in Washington on Wednesday in response to a question at a forum on finance. “Now, they’re not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low, but there are potential dangers there.”

Yellen said bond yields “could see a sharp jump” when the Fed raises its benchmark interest rate. Most Fed officials predict that will happen this year for the first time since 2006.

She highlighted the term premium:

“Long-term interest rates are at very low levels, and that would appear to embody low term premiums, which can move, and can move very rapidly,” Yellen said after a speech in Washington. “We need to be attentive, and are to the possibility that when the Fed decides it’s time to begin raising rates, these term premiums could move up, and we could see a sharp jump in long-term rates.”

And the “global bond rout” has spread to Japan:

Japan’s government bonds joined a worldwide rout in sovereign debt as investors in Tokyo returned from a three-day national holiday.
…
The yield on the 10-year bond jumped seven basis points to 0.43 percent as of 8:52 a.m. in Tokyo from May 1, according to Japan Bond Trading Co., the nation’s largest inter-dealer debt broker. The price of the 0.4 percent debt due March 2025 fell 0.665 yen to 99.716. A basis point is 0.01 percentage point.

Meanwhile in the real economy (remember that?) productivity is falling:

Productivity over the past six months fell by the most in more than two decades, leading to increases in U.S. labor costs that threaten corporate profits.

The measure of employee output per hour decreased at a 1.9 percent annualized rate after a revised 2.1 percent drop in the prior three months, a Labor Department report showed Wednesday in Washington. The decline on average over the past two quarters was the biggest since the first six months of 1993. Expenses per worker increased more than projected at the start of the year.

A lack of business investment in new technology may mean productivity will continue to languish and limit the economic expansion’s potential. Rising labor costs without offsetting increases in efficiency would also hurt business earnings, and in turn restrain the hiring that would propel consumer spending.

But it’s an ill wind that doesn’t blow the banks any good:

The chart watchers in the stock market would like to draw your attention to notable recent moves by some large U.S. banks. JPMorgan Chase & Co.’s shares, for example, on Monday reached the highest level in 15 years. Goldman Sachs Group Inc. touched the highest price since 2008 last month and the SPDR S&P Bank ETF reached a 13-month high this week.

One obvious reason for the recent strength is a strong earnings season. The 24 companies in the KBW Bank Index posted profit growth of 8.8 percent and beat analysts’ estimates by almost 10 percent. Another reason, however, is a bit more slippery: the recent spike higher in interest rates on longer-term Treasuries. The subsequent steepening of the yield curve, it stands to reason, should be good for banks because they borrow at short-term rates and lend at long-term rates.

The sell-side old boys’ club in the States has approved an increase in tick size for smaller company shares, as a way of chipping away against hedge-fund friendly maker-taker fees:

The U.S. Securities and Exchange Commission approved a two-year program designed to test ways to boost investors’ interest in smaller stocks.

The trading experiment, championed by small-business advocates and opposed by big investors such as Fidelity Investments and D.E. Shaw & Co., will widen the minimum price at which stocks for small companies are quoted on exchanges, the SEC said Wednesday in a statement. The program would reward brokers for making markets in less-liquid stocks by widening the amount they earn when buying and selling shares.

Exchanges must start the pilot program by May 6, 2016, the SEC said. It will apply to shares of 1,400 companies with market values under $3 billion and average daily trading volume of less than 1 million shares, the SEC said.
…
Asset managers such as Fidelity opposed the program because they’re concerned it will raise transaction costs and probably won’t foster more initial public offerings.

Naturally, it did not occur to anybody at the SEC or the Dodd-Frank crowd in congress to do something about the ridiculous cost of going public and being a public company.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 22bp, FixedResets off 14bp and DeemedRetractibles gaining 4bp. The Performance Highlights table is dominated by losing FixedResets. Volume was average.

PerpetualDiscounts now yield 5.02%, equivalent to 6.53% 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 not now about 250bp, a very sharp narrowing from the 295bp reported April 22.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.19 to be $1.17 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.91 cheap at its bid price of 25.01.

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 23.33 to be $0.30 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.35 to be $0.55 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 20.18 to be $0.53 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.72 and appears to be $0.50 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.60, looks $0.83 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.90 and is $0.41 rich.

Investment-grade pairs now predict an average over the next five years of about 0.30%, but TRP.PR.A / TRP.PR.F is an outlier at -0.73% and BNS.PR.Y / BNS.PR.D is at +0.96%. On the junk side, the DC.PR.B / DC.PR.D pair is at -0.78% while FFH.PR.C / FFH.PR.D is at +1.22%.

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	0.5320 %	2,338.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.5320 %	4,088.2
Floater	3.11 %	3.19 %	53,826	19.23	4	0.5320 %	2,485.7
OpRet	4.42 %	-1.10 %	36,036	0.15	2	0.0000 %	2,767.0
SplitShare	4.56 %	4.70 %	64,901	3.36	3	-0.1729 %	3,230.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,530.1
Perpetual-Premium	5.45 %	1.07 %	68,493	0.08	18	0.0153 %	2,521.6
Perpetual-Discount	5.04 %	5.02 %	122,804	15.44	15	0.2231 %	2,788.3
FixedReset	4.42 %	3.92 %	279,074	16.11	86	-0.1417 %	2,398.5
Deemed-Retractible	4.92 %	3.08 %	114,001	0.55	36	0.0443 %	2,651.1
FloatingReset	2.61 %	2.99 %	66,459	6.20	7	0.0611 %	2,322.9

Performance Highlights
Issue	Index	Change	Notes
CIU.PR.C	FixedReset	-6.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 15.90 Evaluated at bid price : 15.90 Bid-YTW : 3.94 %
SLF.PR.G	FixedReset	-1.93 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.80 Bid-YTW : 6.61 %
BAM.PF.E	FixedReset	-1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.12 Evaluated at bid price : 22.72 Bid-YTW : 4.21 %
TD.PF.B	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.77 Evaluated at bid price : 23.86 Bid-YTW : 3.54 %
MFC.PR.L	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.01 Bid-YTW : 4.65 %
IFC.PR.A	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.25 Bid-YTW : 5.90 %
TD.PF.C	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.71 Evaluated at bid price : 23.81 Bid-YTW : 3.53 %
TRP.PR.C	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 17.12 Evaluated at bid price : 17.12 Bid-YTW : 3.92 %
BAM.PF.A	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.88 Evaluated at bid price : 23.92 Bid-YTW : 4.23 %
VNR.PR.A	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 23.07 Evaluated at bid price : 24.00 Bid-YTW : 4.08 %
HSE.PR.E	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.62 Bid-YTW : 4.11 %
FTS.PR.J	Perpetual-Discount	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 24.08 Evaluated at bid price : 24.50 Bid-YTW : 4.91 %
BAM.PR.K	Floater	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.24 %
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 : 19.00 Bid-YTW : 6.10 %
ENB.PR.B	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 19.56 Evaluated at bid price : 19.56 Bid-YTW : 4.60 %
ENB.PF.G	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 21.92 Evaluated at bid price : 22.44 Bid-YTW : 4.42 %
CU.PR.E	Perpetual-Discount	1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 24.31 Evaluated at bid price : 24.77 Bid-YTW : 4.93 %
SLF.PR.H	FixedReset	1.81 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.71 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.Z	FixedReset	86,137	RBC crossed 69,000 at 24.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.93 Evaluated at bid price : 24.18 Bid-YTW : 3.45 %
TD.PF.C	FixedReset	81,580	RBC sold 15,700 to TD at 23.82, then crossed 44,200 at 23.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.71 Evaluated at bid price : 23.81 Bid-YTW : 3.53 %
RY.PR.J	FixedReset	77,339	RBC crossed 46,000 at 24.89. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 23.11 Evaluated at bid price : 24.86 Bid-YTW : 3.66 %
NA.PR.S	FixedReset	55,180	RBC crossed 43,100 at 24.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 23.10 Evaluated at bid price : 24.60 Bid-YTW : 3.55 %
CM.PR.Q	FixedReset	46,600	RBC crossed 42,500 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 23.10 Evaluated at bid price : 24.86 Bid-YTW : 3.74 %
GWO.PR.R	Deemed-Retractible	43,388	Scotia bought 10,000 from National at 24.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.93 Bid-YTW : 4.92 %
There were 30 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CIU.PR.C	FixedReset	Quote: 15.90 – 17.49 Spot Rate : 1.5900 Average : 1.2387 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 15.90 Evaluated at bid price : 15.90 Bid-YTW : 3.94 %
BNS.PR.Y	FixedReset	Quote: 22.69 – 23.25 Spot Rate : 0.5600 Average : 0.3622 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.69 Bid-YTW : 3.44 %
BAM.PF.E	FixedReset	Quote: 22.72 – 23.20 Spot Rate : 0.4800 Average : 0.3082 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.12 Evaluated at bid price : 22.72 Bid-YTW : 4.21 %
TD.PF.B	FixedReset	Quote: 23.86 – 24.25 Spot Rate : 0.3900 Average : 0.2414 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 22.77 Evaluated at bid price : 23.86 Bid-YTW : 3.54 %
BAM.PF.F	FixedReset	Quote: 24.51 – 24.85 Spot Rate : 0.3400 Average : 0.2019 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-06 Maturity Price : 23.03 Evaluated at bid price : 24.51 Bid-YTW : 4.09 %
MFC.PR.N	FixedReset	Quote: 23.45 – 23.75 Spot Rate : 0.3000 Average : 0.1993 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.45 Bid-YTW : 4.48 %

After years of pretending that their resource-funded low taxes meant that they were some kind of conservatives, Albertans have finally admitted they’re actually a pack of socialists:

Albertans have chosen a new political path with the stunning election of a majority New Democratic government, ending a Progressive Conservative dynasty in power for more than four decades.

The NDP, leading in the polls for much of the campaign, becomes only the third party to govern the province since 1935. Heading a new government, Leader Rachel Notley will now have a mandate to take the province in a new direction but will also inherit tough economic challenges.

Solidarity, comrades!

Australia cut policy rates and market rates rose:

Australia cut interest rates to a fresh record low and said there are signs of improving household spending, sending the currency and bond yields higher as markets bet policy makers won’t ease further.

The central bank lowered the key rate to 2 percent from 2.25 percent Tuesday, as predicted by traders and economists. Governor Glenn Stevens said in an accompanying statement “the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand.”

While weaker business investment and subdued spending by the government is weighing on the economy, encouraging the RBA to cut, there are signs that low borrowing costs are starting to spur stronger demand from households. Stevens cited a better jobs market and gave no indication the central bank was considering a further easing.

But bonds fell everywhere:

Treasuries fell with European bonds as oil’s rally above $60 a barrel added to signs of incipient inflation, while concern rose that Greece won’t be able to resolve its debt crisis. U.S. stocks tumbled the most in more than a month amid a retreat in global equities.

Yields on 10-year Treasury notes rose four basis points to 2.19 percent by 5 p.m. in New York, extending an eight-week high as U.S. crude jumped 2.5 percent to $60.40 a barrel. German bonds resumed losses, while Spanish debt tumbled with Greek stocks. The Standard & Poor’s 500 Index lost 1.2 percent, the steepest drop since March 25. European equities slid to the lowest level since March 10. Copper entered a bull market.

The exodus from sovereign-debt markets is accelerating as investors question the sustainability of rallies that pushed yields to record lows. Data Tuesday showed U.S. services growth accelerated more than forecast last month as the Federal Reserve considers raising interest rates. Crude traded in New York topped $60 for the first time this year on speculation the biggest supply glut in 85 years will ease.
…
Ten-year Treasury yields have increased 28 basis points, or 0.28 percentage point, since April 24 and earlier on Tuesday touched the highest level since March 6. German 10-year yields rose six basis points to 0.52 percent, for a seventh straight gain to the highest level since January. Spain’s 10-year rate jumped the most since June 2013.

There are rumblings of an increase in inflation targets:

A quarter of a century since New Zealand opened the era of inflation targeting, policy makers from the U.S., euro area, U.K. and Japan are all undershooting their consumer-price goals. Of the Group of Seven, only Canada is currently meeting its mandate.

Rather than lowering their sights to make things easier, the misses are fanning calls for targets to be increased from the 2 percent most aim for to perhaps as high as 4 percent.

While a similar idea was pitched five years ago by International Monetary Fund economists led by Olivier Blanchard, and endorsed by Nobel laureate Paul Krugman, this time around it may be the central-banking community itself proposing a rethink.

Former Federal Reserve Chair Ben S. Bernanke last month suggested he would be open to an increase in the U.S. Federal Reserve’s 2 percent goal, saying there is nothing “magical” about that number.

Fed Bank of Boston President Eric Rosengren said the same month it could be the case “inflation targets have been set too low.” His colleague from San Francisco, John Williams, told the New York Times that if the future is one of weaker growth because of demographics and productivity then it’s worth asking “is the 2 percent inflation goal sufficiently high in that kind of world?”

But if they can’t hit 2 percent, why lift the targets?

Doing so may ignite current inflation expectations, lowering so-called real interest rates and giving economic growth an extra spur, according to Jeremy Lawson, chief economist at Standard Life Investments Ltd.

And today’s drone news is about privacy:

Conflict is on the rise. A New Jersey man last year shot down a drone flying over his neighborhood. Last June, a woman in Connecticut was arrested after she was accused of assaulting a young man flying a helicopter drone over a public beach.

In the past two years, at least seven states have outlawed the use of drones to violate privacy, according to the National Conference of State Legislatures. California is considering a bill that would expand trespassing laws to include piloting a drone within 350 feet above private property without permission.
…
States already protect citizens against Peeping Toms regardless of the technology involved, said Brendan Schulman, an attorney who specializes in drones at Kramer Levin Naftalis and Frankel in New York.

“Many of these state law proposals are an overreaction, because existing state privacy laws already cover the types of misconduct that people are most concerned about,” he said. “It shouldn’t matter if you use a tripod or a zoom lens or a hidden camera placed in a tree. If you’re invading someone’s privacy, it’s the misconduct that should be illegal, and not the technology.”

PrefBlog’s “Things That Make You Go ‘Hmmm'” department presents, for your delectation and amusement, charts of the TXPL FixedReset index and of ZPR, the ETF based on that index, for today:

So it looks like there was mild weakness in TXPL commencing at about 1pm, which had no effect on ZPR until about 3pm, when ZPR started collapsing, which in turn led to a rapid collapse just before the bell in TXPL. ZPR had volume for the day of 895,012 which, by standards of the past month, is above average but not spectacular. Total returns for the day for the two measures were roughly equal. It would be most interesting to learn just what is going on; if the liquidity pundits are correct – and I think they are – we may see more of this type of loose-linkage-fast-collapse behaviour in the future, should a general rise in bond yields become disorderly.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 29bp, FixedResets down 47bp and DeemedRetractibles gaining 6bp. ENB FixedResets dominate the bad part of the Performance Highlights table. 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 24.20 to be $1.15 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.91 cheap at its bid price of 25.01.

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 23.30 to be $0.51 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.34 to be $0.58 cheap.

The cheapest issue relative to its peers is BAM.PF.R, resetting at +230bp on 2016-6-30, bid at 20.05 to be $0.71 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.12 and appears to be $0.82 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.60, looks $0.78 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.02 and is $0.52 rich.

Investment-grade pairs now predict an average over the next five years of about 0.30%, but TRP.PR.A / TRP.PR.F is an outlier at -0.69%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -0.78%, but has now managed to edge its way into the graph area while the new data point for BRF.PR.A / BRF.PR.B is at -1.22% and BRF.PR.B lost its virginity with a whopping 600 shares traded.

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	1.2035 %	2,325.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.2035 %	4,066.6
Floater	3.12 %	3.21 %	53,444	19.19	4	1.2035 %	2,472.5
OpRet	4.42 %	-1.08 %	36,619	0.16	2	-0.0196 %	2,767.0
SplitShare	4.56 %	4.77 %	67,067	3.36	3	0.4006 %	3,235.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0196 %	2,530.1
Perpetual-Premium	5.45 %	1.35 %	68,942	0.08	18	-0.0523 %	2,521.2
Perpetual-Discount	5.05 %	5.00 %	115,691	15.45	15	-0.2869 %	2,782.1
FixedReset	4.42 %	3.90 %	272,866	16.19	86	-0.4716 %	2,401.9
Deemed-Retractible	4.92 %	3.19 %	112,578	0.30	36	0.0565 %	2,649.9
FloatingReset	2.61 %	2.99 %	68,831	6.20	7	0.0367 %	2,321.5

Performance Highlights
Issue	Index	Change	Notes
ENB.PR.B	FixedReset	-4.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 4.67 %
BAM.PR.T	FixedReset	-2.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 20.39 Evaluated at bid price : 20.39 Bid-YTW : 4.34 %
FTS.PR.J	Perpetual-Discount	-2.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.83 Evaluated at bid price : 24.24 Bid-YTW : 4.96 %
BAM.PR.X	FixedReset	-2.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 18.03 Evaluated at bid price : 18.03 Bid-YTW : 4.31 %
ENB.PR.F	FixedReset	-2.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.61 %
ENB.PR.D	FixedReset	-2.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 19.92 Evaluated at bid price : 19.92 Bid-YTW : 4.51 %
ENB.PF.G	FixedReset	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 21.70 Evaluated at bid price : 22.11 Bid-YTW : 4.50 %
BAM.PR.R	FixedReset	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 4.41 %
IFC.PR.C	FixedReset	-1.78 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.21 Bid-YTW : 4.28 %
ENB.PR.J	FixedReset	-1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 21.55 Evaluated at bid price : 21.81 Bid-YTW : 4.41 %
ENB.PF.E	FixedReset	-1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 21.63 Evaluated at bid price : 21.99 Bid-YTW : 4.50 %
ENB.PF.C	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 21.60 Evaluated at bid price : 21.93 Bid-YTW : 4.49 %
ENB.PR.T	FixedReset	-1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 20.43 Evaluated at bid price : 20.43 Bid-YTW : 4.57 %
BNS.PR.Y	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.82 Bid-YTW : 3.35 %
NA.PR.S	FixedReset	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.07 Evaluated at bid price : 24.52 Bid-YTW : 3.57 %
ENB.PR.N	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 21.15 Evaluated at bid price : 21.15 Bid-YTW : 4.55 %
ENB.PR.Y	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 19.83 Evaluated at bid price : 19.83 Bid-YTW : 4.60 %
TRP.PR.D	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 22.64 Evaluated at bid price : 23.54 Bid-YTW : 3.74 %
ENB.PR.P	FixedReset	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 20.66 Evaluated at bid price : 20.66 Bid-YTW : 4.51 %
CU.PR.E	Perpetual-Discount	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.98 Evaluated at bid price : 24.40 Bid-YTW : 5.00 %
MFC.PR.F	FixedReset	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.75 Bid-YTW : 6.26 %
BAM.PR.K	Floater	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 15.30 Evaluated at bid price : 15.30 Bid-YTW : 3.28 %
CIU.PR.C	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.68 %
BAM.PR.C	Floater	1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 15.39 Evaluated at bid price : 15.39 Bid-YTW : 3.26 %
HSE.PR.A	FixedReset	2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 17.17 Evaluated at bid price : 17.17 Bid-YTW : 4.24 %
BAM.PR.B	Floater	2.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 15.65 Evaluated at bid price : 15.65 Bid-YTW : 3.21 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.C	FixedReset	63,365	TD bought 10,000 from RBC at 24.09, then crossed 20,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 22.82 Evaluated at bid price : 24.07 Bid-YTW : 3.48 %
ENB.PR.D	FixedReset	63,180	TD crossed 40,000 at 20.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 19.92 Evaluated at bid price : 19.92 Bid-YTW : 4.51 %
TRP.PR.G	FixedReset	50,330	RBC crossed 17,500 at 25.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.13 Evaluated at bid price : 25.01 Bid-YTW : 3.90 %
RY.PR.H	FixedReset	47,655	TD crossed 25,000 at 24.22. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 22.89 Evaluated at bid price : 24.15 Bid-YTW : 3.48 %
CM.PR.Q	FixedReset	46,260	Scotia crossed 40,000 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.02 Evaluated at bid price : 24.65 Bid-YTW : 3.78 %
PWF.PR.P	FixedReset	45,955	Scotia bought 21,300 from RBC at 18.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 3.70 %
There were 41 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ENB.PR.B	FixedReset	Quote: 19.28 – 19.93 Spot Rate : 0.6500 Average : 0.3703 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 4.67 %
FTS.PR.J	Perpetual-Discount	Quote: 24.24 – 24.90 Spot Rate : 0.6600 Average : 0.4218 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.83 Evaluated at bid price : 24.24 Bid-YTW : 4.96 %
BMO.PR.T	FixedReset	Quote: 24.05 – 24.60 Spot Rate : 0.5500 Average : 0.3169 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 22.85 Evaluated at bid price : 24.05 Bid-YTW : 3.48 %
NA.PR.S	FixedReset	Quote: 24.52 – 25.00 Spot Rate : 0.4800 Average : 0.2874 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.07 Evaluated at bid price : 24.52 Bid-YTW : 3.57 %
IFC.PR.C	FixedReset	Quote: 24.21 – 24.69 Spot Rate : 0.4800 Average : 0.3131 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.21 Bid-YTW : 4.28 %
CU.PR.E	Perpetual-Discount	Quote: 24.40 – 24.89 Spot Rate : 0.4900 Average : 0.3266 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-05 Maturity Price : 23.98 Evaluated at bid price : 24.40 Bid-YTW : 5.00 %

Canadian banks do not own hedge funds, so the TMX announced reductions in maker-taker fees:

TMX Group Ltd., the owner of the Toronto Stock Exchange and other Canadian markets, said Monday that it will cut rebates it pays traders who provide liquidity by an average of 31 percent and trading fees by 26 percent on average.

The rebate-and-fee system — called maker-taker and also deployed by American exchanges — is blamed by critics for skewing incentives for brokers and encouraging needless trading meant to simply collect the rebates. While the New York Stock Exchange’s owner last year talked about changing the system in the U.S., TMX’s statement Monday included concrete plans that are poised to be implemented.

“The maker-taker model has been controversial for a long time,” Kevan Cowan, president of TSX Markets and group head of equities, said in a phone interview from Toronto. “It’s closely linked to issues around electronic trading. We felt, based on primarily customer feedback but also what’s going on in the regulatory and competitive landscape, that now was a good time for us to take a leadership position.”

It will be noted that the banks clear-cut the competitive landscape by buying the Toronto Exchange. This move was permitted by the regulators on the grounds that the banks would pay the regulators extra money.

Treasuries took another hit today:

The 30-year bond yield rose five basis points, or 0.05 percentage point, to 2.88 percent at 5 p.m. New York time. The price of the 2.5 percent security maturing in February 2045 fell 30/32, or $9.38 per $1,000 face amount, to 92 1/2, according to Bloomberg Bond Trader prices. The yield reached the highest level since Dec. 24.

Benchmark 10-year yields rose 21 basis points last week, nearly matching the 22 basis point move in German bunds of comparable maturity, the most since January 2013.
…
The gap between yields on Treasuries maturing in five- and 30-years, known as the yield curve, widened to 1.37 percentage points, the most since December.

The 5-30 spread is – or at least should be! – important for FixedReset pricing. Steepening should(!) imply poor performance by FixedResets.

I found this piece on youthful environment interesting:

Male children who are raised in below-median income families in Baltimore earn 1.4 percent less in adult family income for each year that they’re exposed to the neighborhood. That means a man who spent his entire childhood — 20 years — in Baltimore would earn about 28 percent less relative to the national average as an adult.

That gives Baltimore the worst ranking among the 100 largest counties in the U.S. While a penalty exists for girls, too, it’s less substantial, amounting to 0.3 percent in lost earnings per childhood year.

There are pockets across the U.S. “which seem to produce especially poor outcomes for boys,” Harvard economists Raj Chetty and Nathaniel Hendren wrote in a new study. “Areas with high degrees of segregation and sprawl generate particularly negative outcomes for boys relative to girls.”

The abstract of the paper, The Impacts of Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects and County-Level Estimates, by Raj Chetty and Nathaniel Hendren, reads:

We characterize the effects of neighborhoods on children’s earnings and other outcomes in adulthood by studying more than five million families who move across counties in the U.S. Our analysis consists of two parts. In the first part, we present quasi-experimental evidence that neighborhoods affect intergenerational mobility through childhood exposure effects. In particular, the outcomes of children whose families move to a better neighborhood – as measured by the outcomes of children already living there – improve linearly in proportion to the time they spend growing up in that area. We distinguish the causal effects of neighborhoods from confounding factors by comparing the outcomes of siblings within families, studying moves triggered by displacement shocks, and exploiting sharp variation in predicted place effects across birth cohorts, genders, and quantiles. We also document analogous childhood exposure effects for college attendance, teenage birth rates, and marriage rates. In the second part of the paper, we identify the causal effect of growing up in every county in the U.S. by estimating a fixed effects model identified from families who move across counties with children of different ages. We use these estimates to decompose observed intergenerational mobility into a causal and sorting component in each county. For children growing up in families at the 25th percentile of the income distribution, each year of childhood exposure to a one standard deviation (SD) better county increases income in adulthood by 0.5%. Hence, growing up in a one SD better county from birth increases a child’s income by approximately 10%. Low-income children are most likely to succeed in counties that have less concentrated poverty, less income inequality, better schools, a larger share of two-parent families, and lower crime rates. Boys’ outcomes vary more across areas than girls, and boys have especially poor outcomes in highly-segregated areas. In urban areas, better areas have higher house prices, but our analysis uncovers significant variation in neighborhood quality even conditional on prices.

Fortis still hasn’t announced a reset rate for FTS.PR.H yet, despite the fact that it must have been calculated:

“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.
…
“Subsequent Fixed Rate Period” means, for the initial Subsequent Fixed Rate Period, the period commencing on June 1, 2015 to, but excluding, June 1, 2020 and, for each succeeding Subsequent Fixed Rate Period, the period commencing on the first day of June immediately following the end of the immediately preceding Subsequent Fixed Rate Period to, but excluding, June 1 in the fifth year thereafter.
…
The Annual Fixed Dividend Rate applicable to a Subsequent Fixed Rate Period will be determined by the Corporation on the Fixed Rate Calculation Date. Such determination will, in the absence of manifest error, be final and binding upon the Corporation and upon all holders of the Series H First Preference Shares. The Corporation will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series H First Preference Shares.

I assume this figure will be released tomorrow morning:

Fortis Inc. (“Fortis” or the “Corporation”) (TSX:FTS) will release its first quarter 2015 results on Tuesday, May 5, 2015. A teleconference and webcast will be held the same day at 10:00 a.m. (Eastern). Barry Perry, President and Chief Executive Officer, Fortis, and Karl Smith, Executive Vice President, Chief Financial Officer, Fortis, will discuss the Corporation’s first quarter 2015 results.

Analysts, members of the media and other interested parties in North America are invited to participate by calling 1.877.223.4471. International participants may participate by calling 647.788.4922. Please dial in 10 minutes prior to the start of the call. No pass code is required.

It was a positive day for the Canadian preferred share market, with PerpetualDiscounts up 17bp, FixedResets winning 17bp and DeemedRetractibles gaining 1bp. The Performance Highlights table calmed down a bit, but is still dominated by winning FixedResets. 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 24.32 to be $1.21 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.96 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.L, resetting at +216 on 2019-6-19, bid at 23.31 to be $0.40 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.48 to be $0.50 cheap.

The cheapest issue relative to its peers is BAM.PF.R, resetting at +230bp on 2016-6-30, bid at 20.43 to be $0.60 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.16 and appears to be $0.61 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.75, looks $0.65 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.03 and is $0.52 rich.

Investment-grade pairs now predict an average over the next five years of about 0.25%, but TRP.PR.A / TRP.PR.F is an outlier at -0.62%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.39%, while the new data point for BRF.PR.A / BRF.PR.B is at -1.22% … but there has still been no trading yet for BRF.PR.B.

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	0.0792 %	2,298.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0792 %	4,018.3
Floater	3.16 %	3.28 %	53,773	19.02	4	0.0792 %	2,443.1
OpRet	4.42 %	-1.06 %	38,133	0.16	2	0.0786 %	2,767.5
SplitShare	4.57 %	4.90 %	68,087	3.37	3	-0.0134 %	3,222.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0786 %	2,530.6
Perpetual-Premium	5.45 %	0.70 %	68,360	0.08	18	0.0959 %	2,522.5
Perpetual-Discount	5.02 %	4.98 %	114,596	15.44	15	0.1499 %	2,790.1
FixedReset	4.40 %	3.86 %	273,131	16.35	86	0.1686 %	2,413.2
Deemed-Retractible	4.93 %	2.98 %	113,370	0.30	36	0.0111 %	2,648.4
FloatingReset	2.61 %	2.99 %	69,505	6.20	7	0.0184 %	2,320.7

Performance Highlights
Issue	Index	Change	Notes
IFC.PR.A	FixedReset	-1.52 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.68 Bid-YTW : 5.63 %
MFC.PR.M	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.65 Bid-YTW : 4.45 %
BAM.PR.X	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 18.52 Evaluated at bid price : 18.52 Bid-YTW : 4.19 %
FTS.PR.H	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 3.84 %
PWF.PR.P	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.69 %
MFC.PR.K	FixedReset	1.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.44 Bid-YTW : 4.36 %
GWO.PR.N	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.36 Bid-YTW : 6.19 %
ENB.PR.F	FixedReset	1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 20.69 Evaluated at bid price : 20.69 Bid-YTW : 4.49 %
PWF.PR.A	Floater	2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 2.83 %
SLF.PR.G	FixedReset	2.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.20 Bid-YTW : 6.33 %
CIU.PR.C	FixedReset	3.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.76 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.E	FixedReset	52,830	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.69 %
GWO.PR.R	Deemed-Retractible	37,100	TD crossed 30,000 at 25.03. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.88 %
SLF.PR.H	FixedReset	36,246	RBC crossed 30,000 at 22.07. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 4.84 %
CM.PR.Q	FixedReset	31,504	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 23.08 Evaluated at bid price : 24.82 Bid-YTW : 3.75 %
TD.PF.B	FixedReset	30,413	TD crossed 25,000 at 24.28. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 22.95 Evaluated at bid price : 24.28 Bid-YTW : 3.46 %
TRP.PR.G	FixedReset	29,900	RBC crossed 17,500 at 25.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.76 %
There were 26 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
VNR.PR.A	FixedReset	Quote: 24.13 – 24.83 Spot Rate : 0.7000 Average : 0.4552 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 23.13 Evaluated at bid price : 24.13 Bid-YTW : 4.05 %
IFC.PR.A	FixedReset	Quote: 20.68 – 21.26 Spot Rate : 0.5800 Average : 0.4049 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.68 Bid-YTW : 5.63 %
RY.PR.H	FixedReset	Quote: 24.08 – 24.45 Spot Rate : 0.3700 Average : 0.2201 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 22.86 Evaluated at bid price : 24.08 Bid-YTW : 3.49 %
BAM.PR.Z	FixedReset	Quote: 24.41 – 24.84 Spot Rate : 0.4300 Average : 0.3154 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 23.21 Evaluated at bid price : 24.41 Bid-YTW : 4.21 %
SLF.PR.G	FixedReset	Quote: 18.20 – 18.50 Spot Rate : 0.3000 Average : 0.1925 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.20 Bid-YTW : 6.33 %
PWF.PR.T	FixedReset	Quote: 24.86 – 25.25 Spot Rate : 0.3900 Average : 0.2836 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 23.23 Evaluated at bid price : 24.86 Bid-YTW : 3.50 %

The CME’s Department of Selective Enforcement has decided to make a sudden fuss about spoofing and two guys have been scapegoated:

CME Group Inc. said it suspended two traders for placing manipulative trades similar to the ones that catapulted Navinder Singh Sarao into headlines around the world last week.

Heet Khara and Nasim Salim engaged in a practice called “layering,” in which orders are placed with no intention of following through on them, according to CME, the owner of the futures exchange where the two gold and silver traders did business. Khara and Salim are barred from trading on CME markets for 60 days.

However, the trivial nature of the transgression is illustrated by the fact that they only face a 60 day trading ban. Have a nice holiday guys … unless, of course, you hire somebody else to push the buttons with the assistance of your advice. The ZeroHedge blog considers the affair to be scapegoating and window-dressing with a hint of racism.

Anti-Spoofing regulations are unenforceable and spoofing does no direct harm to the interests of fundamental traders (indirect harm, through a thinning of the markets, is possible but I have not seen evidence of this). Anti-spoofing regulations should be repealed; I suspect that consequent private sector development of counter-spoofing tactics will be far more effective than any amount of regulation could ever possibly be.

Holy smokaramaville, but it’s been a week and half for the fixed income markets! Bloomberg notes that it’s been the worst week in almost two months (put that way, it sounds pretty routine, doesn’t it?):

The worst week for U.S. 10-year notes in almost two months got even bleaker as a rout in European bonds continued to diminish investor appetite for relatively higher U.S. yields. The notes also extended an April decline after a report showed U.S. consumer confidence rose last month.
…
Treasury 10-year yields rose eight basis points, or 0.08 percentage point, to 2.11 percent as of 5 p.m. New York time. It touched 2.12 percent, the highest since March 13, based on Bloomberg Bond Trader data. The benchmark 2 percent note due in February 2025 fell 23/32, or $7.19 per $1,000 face amount, to 99.
…
Ten-year yields climbed 20 basis points this week, the most since the week ending March 6, and are up from 1.92 percent at the start of April.

U.S. debt extended losses after the University of Michigan said Friday that its final consumer-confidence index for April increased to 95.9 from 93 in March. The median projection in a Bloomberg survey of economists was for 96.

That followed a series of weak first-quarter economic readings that the Fed this week blamed on “transitory” factors including brutal winter weather in much of the U.S. Fed Chair Janet Yellen and her colleagues reiterated in a statement on April 29 after a two-day meeting that they believe growth will pick up to a “moderate pace”.
…
Euro-area debt started selling off early in the week and reached a peak on April 29, when 55 billion euros ($62 billion) was wiped off the value of the region’s government bonds on the day.

The extra yield that investors get for holding Treasury 10-year notes instead of similar-maturity German bunds narrowed to 167 basis points on Thursday, the least on a closing basis since April 3.

… and the chart:

This is despite the moderating influence of hedge fund activity:

They don’t think it will last.

Hedge-fund managers and other large speculators who saw the start or this week’s bond rout nevertheless moved in the opposite direction, trimming bearish bets on 10-year notes to the lowest level in 10 weeks.

Net shorts on the securities totaled 98,565 contracts as of April 28, down from 153,366 the week before, according to Commodity Futures Trading Commission data.

It would be most interesting to learn whether hedge-fund activity is generally counterflow. I suspect it is, given that reversion is what quants do best, but I am not aware of any research on this.

And all this affected Canada. According to the BoC, five-year Canadas were trading at 0.71% last Friday, and according to Perimeter they ended this week at 1.04%. That’s a hell of a move for a five year sovereign – although not quite so fast as the descent in January when the overnight rate got cut.

What’s driving it, I think, is that as discussed yesterday, the previously announced European deflation has been cancelled. So markets which were expecting low rates forever are now expecting high rates forever … and this has certainly had an effect in the preferred share market, as previous panic over continued reductions in FixedReset dividends on reset have, at the very least, been moderated.

But we’ll see what next week brings. The market does what it wants to do when it wants to do it. For what it’s worth, I believe that the current situation of 5-year governments trading below inflation to be unsustainable, a very useful word for financial analysis since it doesn’t mean anything. I will opine that I believe the paradox will be resolved by an increase in sovereign yields (rather than a decline in inflation), but I would not dream of predicting just exactly when this might occur.

Still, the violent change in sentiment made it a wild month for FixedResets!

Look at all the fun you had in April and it didn’t cost you anything!

It was an unevenly strong day for the Canadian preferred share market, with PerpetualDiscounts up 30bp, FixedResets winning 64bp and DeemedRetractibles gaining 3bp. The Performance Highlights table is, as one might expect, dominated by winning FixedResets. 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 24.15 to be $1.11 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.88 cheap at its bid price of 25.05.

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 23.30 to be $0.40 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.41 to be $0.53 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.45 to be $0.61 cheap. BAM.PR.X, resetting at +180bp 2017-6-30 is bid at 18.75 and appears to be $0.82 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.57, looks $0.82 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.22 and is $0.64 rich.

Investment-grade pairs now predict an average over the next five years of about 0.25%, but TRP.PR.A / TRP.PR.F is an outlier at -0.33%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.27%. The new data point for BRF.PR.A / BRF.PR.B cannot be considered reliable.

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	0.9600 %	2,296.3
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.9600 %	4,015.1
Floater	3.16 %	3.25 %	54,172	19.09	4	0.9600 %	2,441.2
OpRet	4.42 %	-4.62 %	37,871	0.09	2	-0.0197 %	2,765.3
SplitShare	4.57 %	4.76 %	68,324	3.37	3	-0.2663 %	3,223.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0197 %	2,528.6
Perpetual-Premium	5.45 %	-0.79 %	68,911	0.08	18	0.0676 %	2,520.1
Perpetual-Discount	5.03 %	4.99 %	115,903	15.41	15	0.3046 %	2,785.9
FixedReset	4.40 %	3.73 %	276,479	16.74	86	0.6384 %	2,409.2
Deemed-Retractible	4.93 %	2.99 %	112,826	0.24	36	0.0343 %	2,648.1
FloatingReset	2.59 %	2.96 %	71,981	6.21	7	-0.1222 %	2,320.2

Performance Highlights
Issue	Index	Change	Notes
BAM.PF.B	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 22.00 Evaluated at bid price : 22.45 Bid-YTW : 4.07 %
FTS.PR.K	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 21.85 Evaluated at bid price : 22.22 Bid-YTW : 3.54 %
ENB.PR.Y	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.14 Evaluated at bid price : 20.14 Bid-YTW : 4.32 %
RY.PR.L	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 3.19 %
TRP.PR.D	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 22.74 Evaluated at bid price : 23.75 Bid-YTW : 3.51 %
ENB.PF.A	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 21.75 Evaluated at bid price : 22.14 Bid-YTW : 4.27 %
MFC.PR.J	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 3.97 %
NA.PR.W	FixedReset	1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 22.83 Evaluated at bid price : 24.10 Bid-YTW : 3.33 %
MFC.PR.N	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.70 Bid-YTW : 4.24 %
IAG.PR.G	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 3.82 %
BAM.PR.B	Floater	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 15.44 Evaluated at bid price : 15.44 Bid-YTW : 3.25 %
BNS.PR.R	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.47 Bid-YTW : 3.04 %
ENB.PF.G	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 22.02 Evaluated at bid price : 22.60 Bid-YTW : 4.22 %
PWF.PR.P	FixedReset	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 3.47 %
BNS.PR.Z	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 3.55 %
TD.PF.C	FixedReset	1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 22.82 Evaluated at bid price : 24.06 Bid-YTW : 3.31 %
FTS.PR.F	Perpetual-Discount	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 24.57 Evaluated at bid price : 24.80 Bid-YTW : 5.01 %
ENB.PR.N	FixedReset	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 21.45 Evaluated at bid price : 21.45 Bid-YTW : 4.28 %
BAM.PR.K	Floater	1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 15.16 Evaluated at bid price : 15.16 Bid-YTW : 3.31 %
ENB.PR.H	FixedReset	1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 4.30 %
BAM.PR.X	FixedReset	1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.89 %
BAM.PF.E	FixedReset	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 22.35 Evaluated at bid price : 23.13 Bid-YTW : 3.94 %
BAM.PR.R	FixedReset	1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 4.06 %
MFC.PR.M	FixedReset	2.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.15 %
BAM.PR.T	FixedReset	2.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 4.03 %
ENB.PR.D	FixedReset	2.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 4.20 %
CIU.PR.C	FixedReset	2.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 16.43 Evaluated at bid price : 16.43 Bid-YTW : 3.59 %
HSE.PR.A	FixedReset	2.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 4.05 %
MFC.PR.L	FixedReset	3.56 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 4.37 %
ENB.PR.B	FixedReset	3.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.22 %
SLF.PR.G	FixedReset	3.98 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.75 Bid-YTW : 6.39 %

Volume Highlights
Issue	Index	Shares Traded	Notes
SLF.PR.G	FixedReset	94,480	RBC bought two blocks from Nesbitt: 16,700 at 17.00 and 22,600 at 17.20. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.75 Bid-YTW : 6.39 %
ENB.PR.B	FixedReset	80,049	RBC crossed 19,300 at 19.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.22 %
BMO.PR.J	Deemed-Retractible	78,100	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-31 Maturity Price : 25.25 Evaluated at bid price : 25.22 Bid-YTW : 2.35 %
TD.PF.C	FixedReset	59,208	Desjardins crossed 38,200 at 24.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 22.82 Evaluated at bid price : 24.06 Bid-YTW : 3.31 %
RY.PR.C	Deemed-Retractible	41,600	Nesbitt bought four blocks of 10,000 each from anonymous, all at 25.16. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-24 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.22 %
CM.PR.Q	FixedReset	31,700	Nesbitt crossed 25,000 at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 23.09 Evaluated at bid price : 24.85 Bid-YTW : 3.59 %
There were 23 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CIU.PR.C	FixedReset	Quote: 16.43 – 17.25 Spot Rate : 0.8200 Average : 0.6700 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 16.43 Evaluated at bid price : 16.43 Bid-YTW : 3.59 %
CU.PR.D	Perpetual-Discount	Quote: 24.86 – 25.25 Spot Rate : 0.3900 Average : 0.2449 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 24.40 Evaluated at bid price : 24.86 Bid-YTW : 4.98 %
ENB.PR.P	FixedReset	Quote: 20.73 – 21.09 Spot Rate : 0.3600 Average : 0.2225 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.73 Evaluated at bid price : 20.73 Bid-YTW : 4.29 %
ENB.PR.T	FixedReset	Quote: 20.61 – 20.94 Spot Rate : 0.3300 Average : 0.2032 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 20.61 Evaluated at bid price : 20.61 Bid-YTW : 4.33 %
ENB.PF.E	FixedReset	Quote: 22.15 – 22.43 Spot Rate : 0.2800 Average : 0.1814 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-01 Maturity Price : 21.74 Evaluated at bid price : 22.15 Bid-YTW : 4.29 %
GWO.PR.H	Deemed-Retractible	Quote: 24.63 – 24.90 Spot Rate : 0.2700 Average : 0.1749 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.63 Bid-YTW : 5.13 %

More news about the generational wealth transfer of ludicrous university tuition:

Surging student-loan debt represents a key risk to the economy’s expansion because wage gains are failing to keep up, according to Beth Ann Bovino, U.S. chief economist at Standard & Poor’s.

As the attached chart illustrates, the dollar amount of borrowing has increased in each quarter since 2003, when data compiled by the Federal Reserve Bank of New York begins. The chart also displays student loans as a percentage of consumer debt, which has consistently risen since 2007’s third quarter.

Education-related loans amounted to $1.16 trillion at the end of last year, a 71 percent increase from the second quarter of 2009, when the latest recession ended. The growth contrasted with declines in mortgages, home-equity loans, credit cards and other forms of consumer borrowing.

To brighten everybody’s day, here’s another drone story:

Industrial deforestation is responsible for the destruction of forests worldwide and results in disruptive effects on their ecosystems, including reduced biodiversity, increased soil erosion and the release of greenhouse gas emissions, to name a few.

Planting a tree takes a lot longer than cutting one down, and it’s a relatively slow and expensive process. Fortunately, a solution may be on the horizon.

BioCarbon Engineering, the brainchild of former NASA engineer Lauren Fletcher, has proposed a solution: Industrial reforestation with robot drones. Could reforestation get any more awesome?

The drones would plant an estimated 1 billion trees a year, saving people from having to do it by hand. This would make reforestation quicker and cheaper. However, Fletcher doesn’t say that this new method of reforestation is necessarily better than planting trees by hand, just cheaper. If put into full effect, the drone method of planting trees could cut the price of traditional practices down to 15% of the original cost.

Much to the amusement of Bloomberg, Ben Bernanke took some shots at the Wall Street Journal:

The editorialists point out that the Federal Open Market Committee’s projections of economic growth have been too high since the financial crisis, which is true. Therefore (the WSJ concludes), monetary policy is not working and efforts to use it to support the recovery should be discontinued.

It’s generous of the WSJ writers to note, as they do, that “economic forecasting isn’t easy.” They should know, since the Journal has been forecasting a breakout in inflation and a collapse in the dollar at least since 2006, when the FOMC decided not to raise the federal funds rate above 5-1/4 percent.
…
The WSJ also argues that, because monetary policy has not been a panacea for our economic troubles, we should stop using it. I agree that monetary policy is no panacea, and as Fed chairman I frequently said so. With short-term interest rates pinned near zero, monetary policy is not as powerful or as predictable as at other times. But the right inference is not that we should stop using monetary policy, but rather that we should bring to bear other policy tools as well. I am waiting for the WSJ to argue for a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive.

It must be nice to have retired from public life and be able to shoot back a little!

the previously scheduled deflation has been cancelled:

Euro-area consumer prices ended a four-month streak of declines after the European Central Bank started pumping billions of euros into the bloc’s economy through its quantitative-easing program.

Prices stagnated in April from a year earlier after falling 0.1 percent in March, the European Union’s statistics office in Luxembourg said Thursday. The inflation reading was in line with the median estimate in a Bloomberg survey. Unemployment held at 11.3 percent in March.

The improvement helps ECB President Mario Draghi’s case that large-scale asset purchases have already shown success in averting deflation in the 19-nation economy. Bank lending increased in March for the first time since 2012 and encouraging data from Germany to Spain point to a strengthening recovery even as the Greek crisis undermines confidence.

“The big bad deflationary spiral lasted all of four months,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. “We expect headline inflation to accelerate to above 1 percent by year end as the depressing impact of energy prices fades,” while “core inflation will start to pick up as the effects of the past depreciation of the euro and the recovery of the economy feed through.”

Prices excluding vulnerable items such as energy, food and tobacco rose 0.6 percent from April last year, according to Eurostat. A slump in energy prices eased.

Nova Scotia Power is the proud issuer of NSI.PR.D, an operating retractible with a 5.9% coupon that will become redeemable at
$25.00 on October 15 of this year. Today, the company issued 30 year notes at 3.612%. Any bets on redemption?

Brookfield Asset Management Inc., proud issuer of more series of shares, directly and indirectly, than you can shake a stick at, has been confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the ratings and Stable trend of Brookfield Asset Management Inc. (BAM or the Company) as indicated in the table below. The confirmation reflects the increasing contribution of predictable fee-based revenue to the Company following its corporate reorganization and that BAM’s core business segments have performed in line with expectation. Performance in 2014 was supported by (1) average hydrology on an enlarged capacity in the renewable energy segment, (2) improving in-place rents and occupancy rates in office properties and strong retail properties demand in the United States and (3) increased contribution from assets recently commissioned or acquired in the infrastructure segment. With its reorganization completed, DBRS expects such fees (a large proportion of which are fixed or based on sizes of fee-bearing assets) to be predictable and to increasingly contribute to company-level cash flows.

With only a moderate increase in company-level borrowings, BAM’s financial metrics remain consistent with levels DBRS expects for its ratings. Despite issuances of debt and preferred shares in 2014, company-level debt increased only modestly by about $100 million, thanks largely to the favourable exchange rate effect of a weakened Canadian dollar against the U.S. dollar, the Company’s reporting currency.

BAM defines “Funds From Operations” (FFO) as “net income prior to fair value changes, depreciation and amortization, and deferred income taxes, and BAM’s proportionate share of FFO in its equity accounted investments”. DBRS understands that cash flow distributed to BAM in fees, dividends and divestment proceeds has amounted to approximately 70% to 80% of FFO (as adjusted by DBRS to exclude non-recurring items and disposition gains) in recent years. Company-level FFO-to-debt improved modestly to 39% in 2014 from 38% in 2013, while FFO interest coverage recorded a larger improvement to 7.9 times (x) from 6.0x, as BAM refinanced maturing debt with lower-cost debt issues. On an adjusted basis, FFO-to-debt in 2014 was 33% and FFO interest coverage was 7.0x. The adjustments are in accordance with DBRS’s Preferred Share and Hybrid Criteria for Corporate Issuers, published on January 21, 2015. DBRS assesses that company-level liquidity remains strong, supported by ample cash and credit availability, a demonstrated ability to access capital markets and an ability to monetize its listed assets (with total market capitalization providing 5.5x coverage of company-level debt).

To maintain the ratings, DBRS expects BAM to maintain its company-level FFO-to-debt to at least 35% (30% on an adjusted basis) and FFO interest coverage in excess of 5.5x (5.0x on adjusted basis). In addition, DBRS expects that the Company’s business risk profiles would not materially deteriorate because of significant investments in higher-risk businesses, that cash distribution to BAM will remain at similar proportion to its annual FFO and that company-level liquidity will remain strong.

It was yet another violently mixed day for the Canadian preferred share market, with PerpetualDiscounts down 9bp, FixedResets gaining 43bp and DeemedRetractibles off 4bp. As one might expect, there is a lengthy Performance Highlights table dominated by winning FixedResets. Volume was above average.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.05 to be $1.04 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.83 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 23.40 to be $0.22 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.39 to be $0.32 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 20.17 to be $0.63 cheap. BAM.PR.X, resetting at +180bp 2017-6-30 is bid at 18.42 and appears to be $0.80 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.65, looks $0.64 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 $0.43 rich – reclaiming the title of ‘Most Expensive FTS FixedReset’ it briefly ceded to FTS.PR.M.

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 -0.34%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.41%.

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	2.0075 %	2,274.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	2.0075 %	3,976.9
Floater	3.19 %	3.29 %	54,839	18.99	4	2.0075 %	2,418.0
OpRet	4.42 %	-4.47 %	38,022	0.09	2	-0.1178 %	2,765.9
SplitShare	4.56 %	4.64 %	68,811	3.38	3	0.1200 %	3,231.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1178 %	2,529.1
Perpetual-Premium	5.33 %	4.27 %	69,300	0.66	25	-0.0744 %	2,518.4
Perpetual-Discount	5.14 %	5.29 %	138,935	14.94	9	-0.0852 %	2,777.5
FixedReset	4.43 %	3.74 %	285,615	16.62	86	0.4265 %	2,393.9
Deemed-Retractible	4.93 %	3.19 %	112,170	0.24	36	-0.0443 %	2,647.2
FloatingReset	2.51 %	3.04 %	71,296	6.22	9	0.1573 %	2,323.1

Performance Highlights
Issue	Index	Change	Notes
BAM.PF.E	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.12 Evaluated at bid price : 22.72 Bid-YTW : 4.03 %
BAM.PF.A	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.96 Evaluated at bid price : 24.10 Bid-YTW : 4.01 %
SLF.PR.G	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.07 Bid-YTW : 6.86 %
BNS.PR.R	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.14 Bid-YTW : 3.26 %
FTS.PR.F	Perpetual-Premium	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 24.15 Evaluated at bid price : 24.43 Bid-YTW : 5.08 %
TRP.PR.E	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.83 Evaluated at bid price : 24.05 Bid-YTW : 3.51 %
GWO.PR.N	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.19 Bid-YTW : 6.07 %
BAM.PR.R	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 20.17 Evaluated at bid price : 20.17 Bid-YTW : 4.14 %
TRP.PR.B	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 15.34 Evaluated at bid price : 15.34 Bid-YTW : 3.56 %
ENB.PR.N	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 4.35 %
ENB.PR.P	FixedReset	1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 20.86 Evaluated at bid price : 20.86 Bid-YTW : 4.27 %
ENB.PR.Y	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 19.94 Evaluated at bid price : 19.94 Bid-YTW : 4.37 %
CU.PR.F	Perpetual-Discount	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 23.21 Evaluated at bid price : 23.55 Bid-YTW : 4.83 %
ENB.PR.J	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 21.77 Evaluated at bid price : 22.10 Bid-YTW : 4.16 %
SLF.PR.H	FixedReset	1.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.05 Bid-YTW : 4.76 %
RY.PR.H	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.89 Evaluated at bid price : 24.14 Bid-YTW : 3.31 %
ENB.PF.G	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 21.83 Evaluated at bid price : 22.30 Bid-YTW : 4.28 %
TRP.PR.D	FixedReset	1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.62 Evaluated at bid price : 23.50 Bid-YTW : 3.57 %
CM.PR.O	FixedReset	1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.96 Evaluated at bid price : 24.30 Bid-YTW : 3.35 %
FTS.PR.K	FixedReset	1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 21.69 Evaluated at bid price : 22.00 Bid-YTW : 3.59 %
RY.PR.Z	FixedReset	1.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.97 Evaluated at bid price : 24.29 Bid-YTW : 3.25 %
BNS.PR.Y	FixedReset	2.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.85 Bid-YTW : 3.27 %
FTS.PR.G	FixedReset	2.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 21.87 Evaluated at bid price : 22.20 Bid-YTW : 3.58 %
MFC.PR.L	FixedReset	2.27 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.81 %
BAM.PR.K	Floater	2.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 14.91 Evaluated at bid price : 14.91 Bid-YTW : 3.37 %
BAM.PF.B	FixedReset	2.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 22.20 Evaluated at bid price : 22.75 Bid-YTW : 4.00 %
ENB.PR.T	FixedReset	2.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 20.74 Evaluated at bid price : 20.74 Bid-YTW : 4.30 %
FTS.PR.H	FixedReset	2.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 16.65 Evaluated at bid price : 16.65 Bid-YTW : 3.55 %
MFC.PR.F	FixedReset	3.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.85 Bid-YTW : 5.98 %
BAM.PR.C	Floater	3.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 15.10 Evaluated at bid price : 15.10 Bid-YTW : 3.33 %
BAM.PR.B	Floater	3.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 15.24 Evaluated at bid price : 15.24 Bid-YTW : 3.29 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.Y	FixedReset	118,368	Desjardins crossed blocks of 77,000 and 21,900, both at 19.89. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 19.94 Evaluated at bid price : 19.94 Bid-YTW : 4.37 %
FTS.PR.J	Perpetual-Premium	67,826	Desjardins crossed 50,000 at 24.72. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 24.29 Evaluated at bid price : 24.72 Bid-YTW : 4.86 %
ENB.PR.T	FixedReset	61,411	Desjardins crossed 10,000 at 20.30; RBC crossed 16,900 at 20.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 20.74 Evaluated at bid price : 20.74 Bid-YTW : 4.30 %
BMO.PR.J	Deemed-Retractible	57,134	Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-30 Maturity Price : 25.25 Evaluated at bid price : 25.22 Bid-YTW : 2.20 %
RY.PR.J	FixedReset	45,145	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 23.12 Evaluated at bid price : 24.90 Bid-YTW : 3.50 %
SLF.PR.G	FixedReset	43,285	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.07 Bid-YTW : 6.86 %
There were 43 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
RY.PR.K	FloatingReset	Quote: 24.15 – 24.75 Spot Rate : 0.6000 Average : 0.3497 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.15 Bid-YTW : 3.04 %
GWO.PR.F	Deemed-Retractible	Quote: 25.55 – 26.21 Spot Rate : 0.6600 Average : 0.4547 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-30 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : -14.40 %
RY.PR.L	FixedReset	Quote: 25.64 – 26.19 Spot Rate : 0.5500 Average : 0.3528 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.64 Bid-YTW : 3.47 %
TRP.PR.F	FloatingReset	Quote: 18.76 – 19.25 Spot Rate : 0.4900 Average : 0.3178 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 3.42 %
FTS.PR.F	Perpetual-Premium	Quote: 24.43 – 25.00 Spot Rate : 0.5700 Average : 0.4004 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-30 Maturity Price : 24.15 Evaluated at bid price : 24.43 Bid-YTW : 5.08 %
MFC.PR.L	FixedReset	Quote: 22.50 – 23.05 Spot Rate : 0.5500 Average : 0.3828 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.81 %

The big news of the day was the FOMC press release:

Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that underutilization of labor resources was little changed. Growth in household spending declined; households’ real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high. Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

The word “transitory” was bad for bonds:

U.S. government debt declined a third day as a rout in European bonds made U.S. securities less attractive. Yields briefly dropped after the Fed said a first-quarter economic slowdown was transitory, with the selloff recommencing as traders looked in vain for some direction in the central bank’s policy statement.

“They’re like everyone else, looking at the data and saying ‘we think it’s transitory,’” said New York-based Jack Flaherty, who manages the $17 billion GAM Unconstrained Bond Strategy. “But their crystal ball is no better than anyone else’s.”

The yield on the 10-year note rose four basis points, or 0.04 percentage point, to 2.04 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader data. The price of the benchmark 2 percent security due in February 2025 fell 10/32, or $3.13 per $1,000 face value, to 99 21/32.

Yields touched 2.08 percent, the highest since March 16, still below the 2014 close of 2.17 percent.

Rout in European bonds? That sounds interesting:

German 10-year bond yields rose 12 basis points, or 0.12 percentage point, to a seven-week high of 0.29 percent as of the London close. That’s the biggest jump since January 2013. The 0.5 percent bund due in February 2025 fell 1.195, or 11.95 euros per 1,000-euro face amount, to 102.075.

The volume of bund futures contracts traded climbed to 1,099,253, the most since March 5.

Germany got bids of 3.649 billion euros at its notes auction, short of the 4 billion-euro sales goal. It’s the first time an auction of five-year debt missed the target since Jan. 21 and the third bond sale that was technically uncovered this year, according to data compiled by Bloomberg. The nation sold the securities due in 2020 at an average yield of minus 0.07 percent.

Adding to the supply pressure, Italy auctioned 8.25 billion euros of debt on Wednesday, while Portugal sold 2.5 billion euros of 10- and 30-year bonds via banks.

Bonds extended losses across Europe amid signs inflation is reviving in the region, reducing the value of fixed payments on bonds.

So at least Bernanke will have interesting things to discuss:

Pimco has hired former Federal Reserve chairman Ben Bernanke as a senior adviser, the bond fund manager said Wednesday.

It’s the latest private venture for Bernanke, who since his departure from the nation’s central bank last year has been on the speaking circuit and was recently hired by a major hedge fund as an adviser as well.

Bernanke will provide economic advice to Pimco’s fund managers and will occasionally interact with the firm’s clients, the Newport Beach, Calif.-based company said.

In response to higher bond yields and particularly higher anticipated GOC-5 rates, the Canadian preferred share market roared ahead today, albeit rather unevenly, with PerpetualDiscounts up 9bp, FixedResets winning 91bp and DeemedRetractibles gaining 7bp. The Performance Highlights table is, um, about what you would expect, with no losers. Volume was above average, with more than usual inter-dealer block trades.

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 23.81 to be $0.95 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.71 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 23.40 to be $0.31 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.35 to be $0.52 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.95 to be $0.76 cheap. BAM.PR.X, resetting at +180bp 2017-6-30 is bid at 18.55 and appears to be $1.00 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.20, looks $0.91 cheap and resets 2015-6-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 24.95 and is $0.58 rich.

Investment-grade pairs now predict an average over the next five years of about 0.25%, but TRP.PR.A / TRP.PR.F is an outlier at -0.54% and the new BNS.PR.Y / BNS.PR.D pair is at +0.95%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.52%.

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	2.3897 %	2,229.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	2.3897 %	3,898.6
Floater	3.26 %	3.42 %	55,665	18.71	4	2.3897 %	2,370.4
OpRet	4.42 %	-6.02 %	39,596	0.09	2	0.1376 %	2,769.1
SplitShare	4.57 %	4.55 %	68,452	3.38	3	0.0934 %	3,228.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1376 %	2,532.1
Perpetual-Premium	5.32 %	3.53 %	70,686	0.09	25	0.0206 %	2,520.3
Perpetual-Discount	5.13 %	5.29 %	137,780	14.96	9	0.0852 %	2,779.8
FixedReset	4.45 %	3.74 %	285,909	16.52	86	0.9057 %	2,383.7
Deemed-Retractible	4.93 %	2.91 %	112,075	0.32	36	0.0688 %	2,648.4
FloatingReset	2.51 %	3.07 %	72,413	6.22	9	0.4494 %	2,319.4

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.D	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 22.42 Evaluated at bid price : 23.13 Bid-YTW : 3.64 %
IAG.PR.G	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.92 %
BNS.PR.D	FloatingReset	1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.51 Bid-YTW : 3.23 %
BAM.PR.R	FixedReset	1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 4.19 %
ENB.PR.Y	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 19.69 Evaluated at bid price : 19.69 Bid-YTW : 4.43 %
BAM.PR.T	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.15 %
FTS.PR.M	FixedReset	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 23.18 Evaluated at bid price : 24.95 Bid-YTW : 3.44 %
BAM.PF.B	FixedReset	1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.84 Evaluated at bid price : 22.21 Bid-YTW : 4.12 %
BMO.PR.T	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 22.76 Evaluated at bid price : 23.85 Bid-YTW : 3.35 %
BAM.PF.E	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 22.31 Evaluated at bid price : 23.05 Bid-YTW : 3.96 %
MFC.PR.M	FixedReset	1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.64 Bid-YTW : 4.34 %
BNS.PR.Z	FixedReset	1.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.84 Bid-YTW : 3.88 %
FTS.PR.G	FixedReset	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.39 Evaluated at bid price : 21.72 Bid-YTW : 3.66 %
MFC.PR.L	FixedReset	1.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 5.10 %
ENB.PF.A	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.43 Evaluated at bid price : 21.69 Bid-YTW : 4.37 %
MFC.PR.N	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.40 Bid-YTW : 4.40 %
TRP.PR.E	FixedReset	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 22.73 Evaluated at bid price : 23.81 Bid-YTW : 3.55 %
TD.PF.A	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 22.92 Evaluated at bid price : 24.25 Bid-YTW : 3.30 %
ENB.PR.D	FixedReset	1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 4.30 %
ENB.PR.P	FixedReset	1.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 4.32 %
IFC.PR.C	FixedReset	1.86 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.84 %
SLF.PR.H	FixedReset	2.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 4.93 %
ENB.PF.C	FixedReset	2.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.47 Evaluated at bid price : 21.76 Bid-YTW : 4.35 %
ENB.PR.F	FixedReset	2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 20.14 Evaluated at bid price : 20.14 Bid-YTW : 4.40 %
BMO.PR.Q	FixedReset	2.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.14 Bid-YTW : 3.62 %
ENB.PF.G	FixedReset	2.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.59 Evaluated at bid price : 21.95 Bid-YTW : 4.36 %
ENB.PR.B	FixedReset	2.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.35 %
MFC.PR.K	FixedReset	2.45 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 4.46 %
TRP.PR.F	FloatingReset	2.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 3.43 %
ENB.PR.H	FixedReset	2.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 4.37 %
ENB.PF.E	FixedReset	2.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.53 Evaluated at bid price : 21.86 Bid-YTW : 4.35 %
ENB.PR.J	FixedReset	2.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.55 Evaluated at bid price : 21.81 Bid-YTW : 4.22 %
PWF.PR.P	FixedReset	2.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 3.53 %
IFC.PR.A	FixedReset	2.87 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.78 Bid-YTW : 5.40 %
BAM.PR.B	Floater	3.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 14.70 Evaluated at bid price : 14.70 Bid-YTW : 3.42 %
CIU.PR.C	FixedReset	3.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 3.69 %
BAM.PR.K	Floater	3.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 14.57 Evaluated at bid price : 14.57 Bid-YTW : 3.45 %
BAM.PR.C	Floater	3.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 14.60 Evaluated at bid price : 14.60 Bid-YTW : 3.44 %
SLF.PR.G	FixedReset	4.55 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.25 Bid-YTW : 6.73 %
GWO.PR.N	FixedReset	4.77 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.00 Bid-YTW : 6.19 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.E	FixedReset	309,500	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 23.16 Evaluated at bid price : 25.08 Bid-YTW : 3.60 %
TRP.PR.G	FixedReset	133,186	Nesbitt sold 12,900 to RBC at 25.00, crossed 40,000 at 25.00, then crossed another 40,000 at 25.01. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 23.13 Evaluated at bid price : 25.00 Bid-YTW : 3.74 %
ENB.PR.D	FixedReset	94,550	RBC sold 17,700 to anonymous at 19.70, crossed 25,000 at 19.85, and crossed 10,000 at 19.76. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 4.30 %
CM.PR.Q	FixedReset	92,970	Scotia bought blocks of 19,000 and 10,000 from CIBC at 25.00, and bought 20,000 from RBC at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 23.08 Evaluated at bid price : 24.80 Bid-YTW : 3.60 %
CM.PR.P	FixedReset	80,600	RBC crossed 50,000 at 24.00; TD crossed 12,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 22.79 Evaluated at bid price : 24.00 Bid-YTW : 3.32 %
ENB.PR.B	FixedReset	74,764	RBC bought 34,600 from Desjardins at 19.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.35 %
There were 41 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: 21.60 – 21.99 Spot Rate : 0.3900 Average : 0.2868 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 21.31 Evaluated at bid price : 21.60 Bid-YTW : 3.65 %
ENB.PR.B	FixedReset	Quote: 19.60 – 19.84 Spot Rate : 0.2400 Average : 0.1496 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.35 %
BAM.PR.K	Floater	Quote: 14.57 – 14.88 Spot Rate : 0.3100 Average : 0.2279 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-29 Maturity Price : 14.57 Evaluated at bid price : 14.57 Bid-YTW : 3.45 %
GWO.PR.Q	Deemed-Retractible	Quote: 25.50 – 25.75 Spot Rate : 0.2500 Average : 0.1706 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 4.97 %
IAG.PR.G	FixedReset	Quote: 25.00 – 25.35 Spot Rate : 0.3500 Average : 0.2722 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.92 %
RY.PR.I	FixedReset	Quote: 25.29 – 25.50 Spot Rate : 0.2100 Average : 0.1334 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.29 Bid-YTW : 3.00 %

A spokesman for the Ministry of Finance has declared there is no housing bubble:

“We don’t believe we’re in a bubble,” Bank of Canada Governor Stephen Poloz said in testimony Tuesday to the House of Commons Standing Committee on Finance. He said Canada’s long-running boom in the housing market hasn’t been underpinned by the kind of rampant speculative buying that is the hallmark of an asset bubble.

“Our housing construction has stayed very much in line with our estimates of demographic demand,” he said. “There’s no excess.”

This despite the central bank’s own estimate, published last December in its Financial System Review, that Canada’s housing market is overpriced by between 10 and 30 per cent.

Mr. Poloz indicated that he believes the overvaluation is not a symptom of runaway prices and widespread investor speculation, but rather of ongoing strength in consumer demand spurred by historically low interest rates – rates that were cut by the central bank in order to keep consumer demand buoyant to support Canada’s economy during the Great Recession.

A few months ago I received an eMail from a Concerned Investor:

This is not likely to happen but if the BOC 5 year rate fell to minus 2% or lower and some of these insanely priced resets at less than 200 basis points aren’t called ( and by the way probably never will) would the buyer be obliged to pay the issuer the difference ?

… and I answered with a reference to a PrefBlog comment that addressed a question regarding a negative GOC-5 yield.

We are now seeing some real life examples in European markets:

Negative interest rates are an odd fish in the world of finance given that they basically wreak havoc on a central tenet of investing; that investors will be compensated in some way for, you know, investing in things.

Bloomberg’s Alastair Marsh reports today on POPYM 2007-2 A3G, a 2007 securitization deal that bundled together loans made to small businesses in Spain. Trustees for the bonds appear to be halting coupon payments to the debt’s investors after a benchmark interest rate to which the deal is tied turned negative in recent days.
…
While this particular Spanish securitization, put together by Banco Popular, does have a legal clause that stops coupons from turning negative, it’s highly unlikely that all banks which created such bond deals would have anticipated an era of negative rates. In other words, it’s not entirely clear how such securitized debt will react to a sub-zero world.

For what it’s worth, Danish mortgage lender Nykredit said last month that it would fix coupon rates on its own floating-rate bonds to zero if benchmark interest rates turn negative.

Negative yields! On a protracted basis! Ha-ha! That’s as ridiculous an idea as thinking there could ever be a significant decline in US national real-estate prices!

I noted a broadly based retail trend towards low-cost funds and ETFs on April 24. One impediment to such a trend in Canada has just been addressed:

Exchange-traded funds will now be more readily available to investors as an industry solution announced Tuesday will provide mutual fund advisers direction on how to sell ETFs.

Unlike mutual funds, ETFs are sold on an exchange. Currently, mutual fund licensed representatives can trade in exchange-traded funds that meet the definition of a mutual fund under securities legislation. This includes the majority of ETFs in the marketplace.

The problem for the majority of mutual fund advisers is that they do not have access to an exchange in order to settle the trade.

The Canadian ETF Association (CEFTA), along with the Federation of Mutual Fund Dealers (FMFD), announced mutual fund dealers would soon be able to provide advisers access to an exchange through a partnership with custody and trade execution provider National Bank Correspondent Network (NBCN). The solution was announced at the FMFD conference earlier Tuesday.

Of course, there’s a very good chance that the fees on fee-based accounts will (i) exceed the savings generated by the migration and/or (ii) dissuade unsophisticated investors from the notion, but we’ll just have to see how everything shakes out.

Treasury yields rose significantly today:

Treasury 10-year yields reached 2 percent for the first time in a month as the Federal Reserve began a two-day policy meeting and investors were lured away by higher-yielding corporate debt.

U.S. government debt dropped for a second day as Fed policy makers gathered in Washington to debate whether growth is strong enough to raise borrowing costs for the first time since 2006, with economists forecasting a September move. Oracle Corp. and Amgen Inc. are raising money in the bond market, weighing down Treasuries as underwriters hedged bets on interest rates.
…
Yields on 10-year note yields rose eight basis points, or 0.08 percentage point, to 2 percent as of 5 p.m. New York time, according to Bloomberg Bond Trader data. The price of the benchmark 2 percent security due in February 2025 fell 23/32, or $7.19 per $1,000 face value, to 99 31/32.

It’s the first time yields have touched 2 percent since March 26, along with the highest close since March 17 and biggest increase since March 6. Yields are still down from the 2014 close of 2.17 percent.

Treasury five-year note yields added six basis points to 1.40 percent.

In a very encouraging sign, we see an investment firm hiring traders:

Canyon Partners co-Chief Executive Officer Josh Friedman says his credit investment firm has added traders from Wall Street as banks exit market making.

“Wall Street has lots of traders who are available because they’re not allowed to take positions,” Friedman said in a Bloomberg Television interview with Stephanie Ruhle Monday at the Milken Institute Global Conference in Beverly Hills, California. “If we’re interested in buying a security, we want to make sure we have very high talent level on the trading desk to be able to go out and source those securities at cheap prices.”
…
“It’s hard to move large blocks of debt and we’ll find that the people who actually buy it are not intermediaries, but they’ll be end consumers who are not leveraged,” he said. “It means there will be other types of opportunities to make money.”

A “handful or maybe two handfuls” of other credit firms are taking similar action, said Friedman.

And finally, here’s an alternative investment I could wrap myself around:

A U.K. brewer is offering investors an alternative to record-low interest rates at home and negative bond yields in the euro area: bottles of its own craft beer.

Innis & Gunn Brewing Co. Ltd., which is based in Edinburgh, is offering beer coupons in place of interest payments on a 3 million-pound ($4.6 million) notes issue. It’s just the latest small company to embrace crowdfunding to raise cash.

The brewer will use the proceeds of the four-year sale to fund the construction of a new site. The notes offer gross annual interest of 7.25 percent for investments starting at 500 pounds. Investors opting to be paid in beer will receive the equivalent of 9 percent interest a year, the company said.

It was a violently mixed day for the Canadian preferred share market, with PerpetualDiscounts off 20bp, FixedResets up 36bp and DeemedRetractibles gaining 2bp. The Performance Highlights table is lengthy, with ENB, TRP and BAM issues again prominent. Volume was on the high 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 23.41 to be $0.71 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.59 cheap at its bid price of 15.05.

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.I, resetting at +286 on 2017-9-19, bid at 25.28 to be $0.34 rich, while MFC.PR.L, resetting at +216bp on 2019-6-19, is bid at 21.66 to be $0.64 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.72 to be $0.81 cheap. BAM.PR.X, resetting at +180bp 2017-6-30 is bid at 28.46 and appears to be $1.08 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.15, looks $0.77 cheap and resets 2015-6-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 24.61 and is $0.45 rich.

It’s nice to see FTS.PR.M replace FTS.PR.K as most expensive of the series. I think this is the first change in either extremity for as long as I’ve been producing these daily Implied Volatility reports.

Investment-grade pairs now predict an average over the next five years of about 0.25%, but TRP.PR.A / TRP.PR.F is an outlier at -0.84% and the new BNS.PR.Y / BNS.PR.D pair is at +0.83%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.58%.

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	0.5883 %	2,177.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.5883 %	3,807.6
Floater	3.33 %	3.52 %	55,671	18.46	4	0.5883 %	2,315.1
OpRet	4.42 %	-4.21 %	40,163	0.09	2	0.0197 %	2,765.3
SplitShare	4.57 %	4.58 %	69,159	3.38	3	0.1069 %	3,225.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0197 %	2,528.6
Perpetual-Premium	5.32 %	4.23 %	70,073	0.50	25	0.1538 %	2,519.8
Perpetual-Discount	5.14 %	5.29 %	139,041	14.96	9	-0.2032 %	2,777.5
FixedReset	4.49 %	3.81 %	288,512	16.36	86	0.3569 %	2,362.3
Deemed-Retractible	4.92 %	2.63 %	112,597	0.32	36	0.0199 %	2,646.6
FloatingReset	2.52 %	3.11 %	73,163	6.22	9	0.2398 %	2,309.1

Performance Highlights
Issue	Index	Change	Notes
BAM.PF.B	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 21.62 Evaluated at bid price : 21.90 Bid-YTW : 4.18 %
ENB.PR.H	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 18.05 Evaluated at bid price : 18.05 Bid-YTW : 4.48 %
TRP.PR.C	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 3.61 %
FTS.PR.H	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 16.15 Evaluated at bid price : 16.15 Bid-YTW : 3.66 %
BAM.PR.T	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 19.93 Evaluated at bid price : 19.93 Bid-YTW : 4.21 %
BAM.PR.K	Floater	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 14.04 Evaluated at bid price : 14.04 Bid-YTW : 3.58 %
MFC.PR.F	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.20 Bid-YTW : 6.41 %
ENB.PF.A	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 4.46 %
BAM.PF.F	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.01 Evaluated at bid price : 24.45 Bid-YTW : 3.93 %
PWF.PR.T	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.26 Evaluated at bid price : 24.95 Bid-YTW : 3.32 %
ENB.PR.Y	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 4.48 %
BAM.PF.A	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.03 Evaluated at bid price : 24.25 Bid-YTW : 3.97 %
ELF.PR.H	Perpetual-Premium	1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-17 Maturity Price : 25.00 Evaluated at bid price : 25.82 Bid-YTW : 4.92 %
VNR.PR.A	FixedReset	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.16 Evaluated at bid price : 24.21 Bid-YTW : 3.84 %
TRP.PR.A	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 3.59 %
BNS.PR.Z	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.51 Bid-YTW : 4.12 %
BAM.PF.G	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 22.99 Evaluated at bid price : 24.55 Bid-YTW : 3.92 %
BNS.PR.D	FloatingReset	1.64 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.26 Bid-YTW : 3.40 %
HSE.PR.C	FixedReset	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.00 Evaluated at bid price : 24.50 Bid-YTW : 4.15 %
ENB.PR.B	FixedReset	1.70 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 19.15 Evaluated at bid price : 19.15 Bid-YTW : 4.46 %
IFC.PR.A	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.20 Bid-YTW : 5.76 %
MFC.PR.K	FixedReset	2.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.45 Bid-YTW : 4.76 %
TRP.PR.B	FixedReset	2.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 3.62 %
ENB.PR.J	FixedReset	2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 21.26 Evaluated at bid price : 21.26 Bid-YTW : 4.35 %
BAM.PR.X	FixedReset	2.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 3.95 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.D	FixedReset	470,488	TD crossed two blocks of 230,000 each, both at 19.56. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.38 %
HSE.PR.A	FixedReset	85,051	RBC crossed 25,000 at 16.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 16.05 Evaluated at bid price : 16.05 Bid-YTW : 4.23 %
ENB.PR.F	FixedReset	83,952	TD crossed 25,000 at 19.80, then another 25,000 at 19.77. Desjardns crossed 20,000 at 19.64. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 4.50 %
TD.PF.E	FixedReset	82,980	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.12 Evaluated at bid price : 24.97 Bid-YTW : 3.62 %
TRP.PR.B	FixedReset	73,846	TD crossed 61,100 at 14.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 3.62 %
PWF.PR.P	FixedReset	62,000	Scotia crossed blocks of 13,900 and 15,000, both at 17.68. TD crossed 14,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 3.63 %
There were 38 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PF.A	FixedReset	Quote: 24.25 – 25.00 Spot Rate : 0.7500 Average : 0.4540 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.03 Evaluated at bid price : 24.25 Bid-YTW : 3.97 %
SLF.PR.H	FixedReset	Quote: 21.30 – 21.80 Spot Rate : 0.5000 Average : 0.3446 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.30 Bid-YTW : 5.19 %
GWO.PR.F	Deemed-Retractible	Quote: 25.55 – 25.95 Spot Rate : 0.4000 Average : 0.2732 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-28 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : -14.76 %
CU.PR.G	Perpetual-Discount	Quote: 23.16 – 23.52 Spot Rate : 0.3600 Average : 0.2409 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 22.86 Evaluated at bid price : 23.16 Bid-YTW : 4.92 %
BAM.PF.E	FixedReset	Quote: 22.72 – 23.35 Spot Rate : 0.6300 Average : 0.5364 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 22.12 Evaluated at bid price : 22.72 Bid-YTW : 4.03 %
FTS.PR.M	FixedReset	Quote: 24.61 – 24.98 Spot Rate : 0.3700 Average : 0.2840 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-28 Maturity Price : 23.05 Evaluated at bid price : 24.61 Bid-YTW : 3.51 %

I talked about my fascination with the Amazon drone proposal on April 13 and it turns out that one Assiduous Reader is involved with the project up to his neck! Now some more details have been released:

In its most detailed public disclosure about a proposed service called Prime Air, Amazon is arguing that cargo drones should be allowed to take flight if the online retailer can show they’re not going to collide with planes or crash to the ground.

The drones, still in development, would mostly fly at least 200 feet off the ground, relying on sensors and computers to select a route to customers’ doors and avoid hazards, Amazon said in a request Friday to the Federal Aviation Administration seeking leniency on pending drone regulations. One Amazon employee would operate many drones simultaneously, according to the request letter.
…
The FAA’s proposed rules would block Amazon’s plans. The agency proposal wouldn’t allow drones to carry commercial cargo and would require they only be flown within sight of an operator, prohibiting flights of 10 miles (16 kilometers), or longer, envisioned by Amazon.

Instead of flatly prohibiting such flights, the FAA needs to set up criteria to allow them if Amazon or other companies can demonstrate they’re safe and reliable, Misener said.
…
The Small UAV Coalition, a trade group representing companies including Amazon and Google Inc., and the Association for Unmanned Vehicle Systems International, another trade group for the drone industry, filed similar comments as Amazon.

AUVSI said the FAA should drop its proposed ban of night drone flights if a user could demonstrate they were as safe as daytime operations.
…
It also highlights the cutting-edge robotics and computer technology underpinning what Amazon wants to do. If a drone loses radio contact with its operator, it must be capable of safely returning to base or landing without harming people or property, for example.

Amazon envisions using automated sensors to “sense-and-avoid” other drones and obstructions, according to its letter. Except for takeoff and landing, drones would stay in a zone of 200 feet to 500 feet from the ground. Most traditional planes and helicopters fly above 500 feet.

I confess to some surprise that the major courier companies are not members of the Small UAV Coalition, but while there are reports that they’re interested in drones, they’re more interested in big ones. Small ones are deprecated; but the Big FedEx Guy sounds a lot like the guys who thought the worldwide market for computers was maybe six units:

Speaking exclusively to IBTimes UK, David Binks, the President of EMEA at FedEx Express, confirmed that the company has “had some conversations” with drone manufacturers – as it does with other technological companies, such as the manufacturers of driverless cars – but that he can only envisage a time when the robots will take a “niche” place in the delivery sector.

“That’s a topic that comes up frequently. I think drones are an interesting tech in terms of what learning we can get out of them and what they facilitate in terms of future technology. We keep an eye on that, we work with the organisations who are developing those types of technology as we do with the automotive industry, who are working on driverless vehicles,” he added.

“I can see a time when perhaps they have a niche use. I don’t know whether that would become a widespread parcel delivery network. We’d have an awful lot of drones in the sky.

“It might be for a very specific delivery opportunity in a remote area where it’s very difficult to get to. I think that type of use might be interesting in the future.”

It will be fascinating to learn how all this shakes out over the next few years; I look forward to the day when I can order beer and pizza at 4am and pick it up from the helipad on the front porch!

Assiduous Reader JP sends me yet another great link (well done, JP!) from the Economist titled Frozen: Regulators have made banking safer. But has that made markets riskier?:

TO ENSURE that it meets the 750 new rules on capital imposed in the aftermath of the financial crisis, JPMorgan Chase employs over 950 people. A further 400 or so try to follow around 500 regulations on the liquidity of its assets, designed to stop the bank toppling over if markets seize up. A team of 300 is needed to monitor compliance with the Volcker rule, which in almost 1,000 pages restricts banks from trading on their own account.

The intention of all these rules is to prevent a repeat of the bankruptcies and bail-outs of 2008. But some observers, including JPMorgan’s boss, Jamie Dimon, and Larry Summers, a former Treasury secretary, argue that in their rush to make banks safer, regulators may have created a riskier financial system. By throttling the bits of banks that “make markets” in bonds, shares, currencies and commodities, the theory goes, watchdogs have made such assets less liquid. Investors may not be able to buy and sell them quickly, cheaply and without moving the price. The consequences in a downturn, when markets are less liquid anyway, could be severe.

The problem is the elimination of the ‘three pillars’ of the financial system: banks, insurers and securities dealers. First the banks were allowed to swallow up the securities sector (or, as in the case of Goldman Sachs, securities dealers were converted willy-nilly into banks). Then banks were no longer permitted to act as securities dealers. And all this has been done without anybody, even once, thinking about what they were doing.

I have no problem with forcing the banks out of the securities business; in fact, I support the idea. But really, something should be in place beforehand, don’t you think? We need to nurture the next generation of securities dealers – I suggest that hedge funds should be, generally speaking, happy to set up trading operations … but you can bet that should they start attempting to do this, they will be vilified by regulators and self-proclaimed “investor advocates” … particularly the ones who like to parade their ignorance by demanding that bonds be exchange traded.

It was a mixed but strong day for the Canadian preferred share market with PerpetualDiscounts gaining 3bp, FixedResets up 48bp and DeemedRetractibles off 1bp. ENB and TRP FixedResets were prominent on the winning side of a lengthy Performance Highlights table. Volume was on the high 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 23.30 to be $0.75 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.75 cheap at its bid price of 14.71.

Another excellent fit (despite a sharp increase in Implied Volatility today), but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. 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 23.50 to be $0.53 rich, while MFC.PR.L, resetting at +216bp on 2019-6-19, is bid at 21.44 to be $0.69 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.91 to be $0.59 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.70 and appears to be $0.63 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.35, looks $0.51 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.58 and is $0.40 rich.

Investment-grade pairs now predict an average over the next five years of about 0.20%, but TRP.PR.A / TRP.PR.F is an outlier at -0.77% and the new BNS.PR.Y / BNS.PR.D pair is at +0.63%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.69%0.

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	0.3204 %	2,165.0
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.3204 %	3,785.4
Floater	3.35 %	3.54 %	56,374	18.42	4	0.3204 %	2,301.5
OpRet	4.42 %	-3.69 %	41,508	0.10	2	0.0984 %	2,764.8
SplitShare	4.58 %	4.57 %	68,024	3.38	3	-0.0934 %	3,221.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0984 %	2,528.1
Perpetual-Premium	5.33 %	4.33 %	65,449	0.09	25	0.0920 %	2,515.9
Perpetual-Discount	5.13 %	5.26 %	140,526	15.01	9	0.0331 %	2,783.1
FixedReset	4.50 %	3.80 %	288,203	16.49	86	0.4823 %	2,353.9
Deemed-Retractible	4.92 %	2.95 %	112,950	0.32	36	-0.0111 %	2,646.0
FloatingReset	2.53 %	3.07 %	73,437	6.22	9	-1.8712 %	2,303.5

Performance Highlights
Issue	Index	Change	Notes
CIU.PR.C	FixedReset	-1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 15.63 Evaluated at bid price : 15.63 Bid-YTW : 3.77 %
MFC.PR.F	FixedReset	-1.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.00 Bid-YTW : 6.54 %
PWF.PR.P	FixedReset	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 17.66 Evaluated at bid price : 17.66 Bid-YTW : 3.65 %
TD.PR.T	FloatingReset	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 3.02 %
SLF.PR.E	Deemed-Retractible	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 5.51 %
BAM.PR.Z	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 22.95 Evaluated at bid price : 23.85 Bid-YTW : 4.14 %
ENB.PR.F	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.53 %
BMO.PR.Q	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.70 Bid-YTW : 4.10 %
HSE.PR.A	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 16.07 Evaluated at bid price : 16.07 Bid-YTW : 4.23 %
ENB.PR.D	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 4.40 %
ENB.PR.P	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.14 Evaluated at bid price : 20.14 Bid-YTW : 4.42 %
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 : 21.19 Bid-YTW : 5.25 %
MFC.PR.K	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 5.01 %
BAM.PR.K	Floater	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 13.90 Evaluated at bid price : 13.90 Bid-YTW : 3.61 %
MFC.PR.J	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.23 %
ENB.PR.T	FixedReset	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.46 %
ENB.PR.B	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.83 Evaluated at bid price : 18.83 Bid-YTW : 4.54 %
ENB.PF.G	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.27 Evaluated at bid price : 21.27 Bid-YTW : 4.53 %
BNS.PR.R	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 2.92 %
TRP.PR.C	FixedReset	1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 3.56 %
IAG.PR.G	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.71 Bid-YTW : 4.07 %
ENB.PR.J	FixedReset	1.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 4.46 %
BAM.PR.X	FixedReset	1.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 4.06 %
ENB.PR.N	FixedReset	1.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 4.47 %
ENB.PF.E	FixedReset	2.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.15 Evaluated at bid price : 21.15 Bid-YTW : 4.53 %
TRP.PR.E	FixedReset	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 22.47 Evaluated at bid price : 23.30 Bid-YTW : 3.65 %
FTS.PR.H	FixedReset	2.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 3.62 %
ENB.PF.A	FixedReset	2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 4.51 %
ENB.PR.H	FixedReset	2.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.33 Evaluated at bid price : 18.33 Bid-YTW : 4.41 %
ENB.PF.C	FixedReset	2.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 21.14 Evaluated at bid price : 21.14 Bid-YTW : 4.50 %
TRP.PR.A	FixedReset	3.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 20.11 Evaluated at bid price : 20.11 Bid-YTW : 3.64 %

Volume Highlights
Issue	Index	Shares Traded	Notes
HSE.PR.A	FixedReset	262,493	RBC crossed 174,500 at 16.05, 32,000 at 16.09 and bought 10,200 from CIBC at 16.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 16.07 Evaluated at bid price : 16.07 Bid-YTW : 4.23 %
TD.PF.E	FixedReset	134,940	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 23.11 Evaluated at bid price : 24.93 Bid-YTW : 3.63 %
GWO.PR.M	Deemed-Retractible	75,400	Nesbitt crossed 75,000 at 26.22. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-27 Maturity Price : 26.00 Evaluated at bid price : 26.22 Bid-YTW : 0.11 %
BMO.PR.M	FixedReset	58,235	RBC crossed blocks of 28,900 and 20,000, both at 25.22. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.22 Bid-YTW : 2.92 %
ENB.PR.B	FixedReset	50,540	Scotia crossed 10,000 at 18.72; RBC crossed 22,600 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 18.83 Evaluated at bid price : 18.83 Bid-YTW : 4.54 %
RY.PR.D	Deemed-Retractible	50,030	Scotia crossed 40,000 at 25.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-27 Maturity Price : 25.25 Evaluated at bid price : 25.23 Bid-YTW : 1.42 %
There were 37 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ELF.PR.H	Perpetual-Premium	Quote: 25.50 – 26.00 Spot Rate : 0.5000 Average : 0.3155 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-04-17 Maturity Price : 25.25 Evaluated at bid price : 25.50 Bid-YTW : 5.28 %
CIU.PR.C	FixedReset	Quote: 15.63 – 16.60 Spot Rate : 0.9700 Average : 0.7925 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 15.63 Evaluated at bid price : 15.63 Bid-YTW : 3.77 %
BAM.PF.E	FixedReset	Quote: 22.70 – 23.26 Spot Rate : 0.5600 Average : 0.4338 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 22.10 Evaluated at bid price : 22.70 Bid-YTW : 4.03 %
BAM.PR.N	Perpetual-Discount	Quote: 22.60 – 22.95 Spot Rate : 0.3500 Average : 0.2357 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-27 Maturity Price : 22.15 Evaluated at bid price : 22.60 Bid-YTW : 5.29 %
SLF.PR.E	Deemed-Retractible	Quote: 23.25 – 23.56 Spot Rate : 0.3100 Average : 0.1994 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 5.51 %
TD.PR.T	FloatingReset	Quote: 23.80 – 24.08 Spot Rate : 0.2800 Average : 0.1743 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 3.02 %

A story on Bloomberg brought to my attention a Morningstar study titled 2015 Fee Study: Investors Are Driving Expense Ratios Down:

• Investors are paying less for fund management, largely as a matter of choice.
• The asset-weighted expense ratio across all funds was 0.64% in 2014, down from 0.65% in 2013
  and 0.76% five years ago.

• Investors are choosing low-cost funds. Over the past decade, 95% of all flows have gone into funds in the lowest-cost quintile. Passive funds have benefited disproportionately.
• Investors continue to move away from load-based share classes while typically lower-cost share classes, such as Institutional shares, have gained favor.
• Firms sponsoring lineups with lower asset-weighted expense ratios—most notably Vanguard—have gained market share during the past five years.
• Over the past five years, 63% of the fund share classes and exchange-traded products in our universe reduced their expense ratio, but only about 24% of them saw their fee fall by more than 10%.
• Meanwhile, 21% of the share classes we examined ratcheted up their takes.
• Estimated industry fee revenue is at an all-time high, reaching $88 billion in 2014, up from $50 billion 10 years ago.
• During that 10-year period, industry assets under management increased 143% while the asset weighted expense ratio declined 27% and industry fee revenue grew by approximately 78%.
• Thus, the industry—rather than fund shareholders—has benefitted most from the increase in asset under management.

…
During the past decade, low-cost funds have been attracting far more inflows than their more expensive peers. This has helped to reduce the industry’s average asset-weighted expense ratio over time. Mutual funds and ETPs with expense ratios ranking in the least-expensive quintile of all funds attracted an aggregate $3.03 trillion of estimated net inflows during the past 10 years, compared with just $160 billion for funds in the remaining four quintiles. That is to say that 95% of all flows have gone into funds in the lowest-cost quintile. Passive funds (mutual funds and ETPs) have been prominent recipients of the capital flowing into low-cost funds. Compared with funds falling in cost quintiles 2 through 5, funds in the lowest-cost quintile are more likely to be index funds.

Note that in the US trailers are referred to as 12b-1 fees. The SEC is attemting to ensure that the paperwork associated with such fees is maximized.

Investor Advocates – generally more accurately referred to as “Increased Employment Of Regulators Advocates”, or “Paid Stalking Horses For Regulators” or simply as “Blowhards Without Brains, Knowledge Or Mandate” – will be horrified at the notion that investors are migrating to lower-cost funds without the benefit of increased regulation.

BNS Split Corp. II, proud issuer of BSC.PR.B, has been confirmed at Pfd-2 by DBRS:

The dividends received from the Portfolio are used to pay a fixed cumulative quarterly distribution of $0.2003 per share to holders of the Class B Preferred Shares, yielding approximately 4.25% annually on the initial issue price of $18.85. The current yield on the Portfolio shares fully covers the Class B Preferred Share dividends, providing dividend coverage (net of expenses) of approximately 2.5 times. The Class A Capital Shares receive all excess dividend income after the Class B Preferred Share distributions and other expenses of the Company have been paid.

The performance of the Company has been somewhat volatile since the last rating action. However, downside protection did increase to 68.2% on April 16, 2015, compared with 67.5% on April 10, 2014. A recent increase in dividend distributions from the Bank of Nova Scotia helped boost the dividend coverage ratio. As a result, the rating of the Class B Preferred Shares has been confirmed at Pfd-2.

It was a violently mixed day for the Canadian preferred share market, with PerpetualDiscounts down 33bp, FixedResets gaining 81bp and DeemedRetractibles off 4bp. The Performance Highlights table is, predictably, stuffed full of winning FixedResets, with ENB, BAM and TRP issues well represented. 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 22.81 to be $0.51 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.49 cheap at its bid price of 14.69.

Another excellent fit (despite a sharp increase in Implied Volatility today), but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. 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 23.40 to be $0.45 rich, while MFC.PR.L, resetting at +216bp on 2019-6-19, is bid at 21.44 to be $0.70 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.76 to be $0.61 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.68 and appears to be $0.71 rich.

FTS.PR.H, with a spread of +145bp, and bid at 16.00, looks $0.67 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.40 and is $0.42 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 -0.09% The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.41%0.

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	-0.6534 %	2,158.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.6534 %	3,773.3
Floater	3.36 %	3.57 %	56,571	18.37	4	-0.6534 %	2,294.2
OpRet	4.43 %	-1.55 %	40,480	0.10	2	-0.0197 %	2,762.1
SplitShare	4.57 %	4.61 %	66,590	3.39	3	0.0267 %	3,224.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0197 %	2,525.6
Perpetual-Premium	5.34 %	3.25 %	65,701	0.09	25	-0.0539 %	2,513.6
Perpetual-Discount	5.13 %	5.10 %	139,637	15.00	9	-0.3251 %	2,782.2
FixedReset	4.55 %	3.89 %	299,839	16.48	86	0.8061 %	2,342.6
Deemed-Retractible	4.92 %	3.46 %	111,549	0.82	36	-0.0365 %	2,646.3
FloatingReset	2.58 %	2.94 %	72,209	6.22	8	-0.1121 %	2,347.5

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 13.74 Evaluated at bid price : 13.74 Bid-YTW : 3.65 %
PWF.PR.T	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 23.23 Evaluated at bid price : 24.87 Bid-YTW : 3.32 %
IFC.PR.A	FixedReset	1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.71 Bid-YTW : 6.05 %
ENB.PR.Y	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 4.50 %
ENB.PR.P	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 19.92 Evaluated at bid price : 19.92 Bid-YTW : 4.46 %
FTS.PR.H	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 3.68 %
ENB.PF.A	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 20.65 Evaluated at bid price : 20.65 Bid-YTW : 4.60 %
ENB.PR.J	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 20.37 Evaluated at bid price : 20.37 Bid-YTW : 4.54 %
ENB.PF.C	FixedReset	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 20.65 Evaluated at bid price : 20.65 Bid-YTW : 4.60 %
TRP.PR.E	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.19 Evaluated at bid price : 22.81 Bid-YTW : 3.74 %
CIU.PR.C	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 15.93 Evaluated at bid price : 15.93 Bid-YTW : 3.68 %
TD.PF.A	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.73 Evaluated at bid price : 23.83 Bid-YTW : 3.37 %
BAM.PF.A	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.78 Evaluated at bid price : 23.72 Bid-YTW : 4.08 %
ENB.PR.F	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.56 %
PWF.PR.P	FixedReset	1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 3.58 %
FTS.PR.G	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 21.32 Evaluated at bid price : 21.32 Bid-YTW : 3.74 %
TD.PF.C	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.56 Evaluated at bid price : 23.50 Bid-YTW : 3.41 %
ENB.PR.D	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.44 %
MFC.PR.N	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.10 Bid-YTW : 4.55 %
BAM.PF.G	FixedReset	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.79 Evaluated at bid price : 24.05 Bid-YTW : 4.01 %
CM.PR.P	FixedReset	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.75 Evaluated at bid price : 23.90 Bid-YTW : 3.33 %
MFC.PR.K	FixedReset	1.64 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 5.14 %
TRP.PR.B	FixedReset	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 14.69 Evaluated at bid price : 14.69 Bid-YTW : 3.69 %
BAM.PF.E	FixedReset	1.70 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.09 Evaluated at bid price : 22.68 Bid-YTW : 4.03 %
FTS.PR.K	FixedReset	1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 3.70 %
BAM.PF.F	FixedReset	2.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.91 Evaluated at bid price : 24.21 Bid-YTW : 3.97 %
HSE.PR.A	FixedReset	2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 15.90 Evaluated at bid price : 15.90 Bid-YTW : 4.26 %
BAM.PR.R	FixedReset	2.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 19.76 Evaluated at bid price : 19.76 Bid-YTW : 4.21 %
ENB.PR.H	FixedReset	2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 17.92 Evaluated at bid price : 17.92 Bid-YTW : 4.50 %
BAM.PR.T	FixedReset	2.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 20.22 Evaluated at bid price : 20.22 Bid-YTW : 4.13 %
BAM.PR.Z	FixedReset	3.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 23.07 Evaluated at bid price : 24.10 Bid-YTW : 4.07 %
BAM.PF.B	FixedReset	3.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 21.80 Evaluated at bid price : 22.16 Bid-YTW : 4.12 %
TRP.PR.C	FixedReset	3.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 17.23 Evaluated at bid price : 17.23 Bid-YTW : 3.60 %
MFC.PR.F	FixedReset	4.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.25 Bid-YTW : 6.35 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.E	FixedReset	547,300	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 23.10 Evaluated at bid price : 24.91 Bid-YTW : 3.62 %
FTS.PR.H	FixedReset	498,240	RBC crossed blocks of 244,400 and 244,200, both at 15.96. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 3.68 %
TRP.PR.B	FixedReset	169,011	TD crossed two blocks of 80,000 each, both at 14.72. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 14.69 Evaluated at bid price : 14.69 Bid-YTW : 3.69 %
TRP.PR.C	FixedReset	127,500	TD crossed two blocks of 52,200 each, both at 16.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 17.23 Evaluated at bid price : 17.23 Bid-YTW : 3.60 %
SLF.PR.G	FixedReset	83,050	Desjardins crossed 48,100 at 16.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.50 Bid-YTW : 7.25 %
TRP.PR.D	FixedReset	74,275	Desjardins crossed 65,000 at 22.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.13 Evaluated at bid price : 22.65 Bid-YTW : 3.72 %
There were 36 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.A	Floater	Quote: 17.55 – 18.34 Spot Rate : 0.7900 Average : 0.6129 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 2.83 %
BAM.PF.E	FixedReset	Quote: 22.68 – 23.13 Spot Rate : 0.4500 Average : 0.2955 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 22.09 Evaluated at bid price : 22.68 Bid-YTW : 4.03 %
ENB.PR.F	FixedReset	Quote: 19.40 – 19.87 Spot Rate : 0.4700 Average : 0.3210 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.56 %
CU.PR.C	FixedReset	Quote: 24.50 – 24.93 Spot Rate : 0.4300 Average : 0.2812 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-24 Maturity Price : 23.36 Evaluated at bid price : 24.50 Bid-YTW : 3.36 %
IFC.PR.C	FixedReset	Quote: 24.10 – 24.47 Spot Rate : 0.3700 Average : 0.2304 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 4.13 %
MFC.PR.H	FixedReset	Quote: 25.34 – 25.78 Spot Rate : 0.4400 Average : 0.3065 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.34 Bid-YTW : 4.03 %

Assiduous Reader JP (who always sends me interesting links, unlike most of you) sent me a link a while ago about metals demand in China:

China’s steel and metals markets, a barometer of the world’s second-biggest economy, are “a lot worse than you think,” according to a Bloomberg Intelligence analyst who just completed a tour of the country.

What he saw: idle cranes, empty construction sites and half-finished, abandoned buildings in several cities. Conversations with executives reinforced the “gloomy” outlook.

“China’s metals demand is plummeting,” wrote Kenneth Hoffman, the metals analyst who spent a week traveling across the country, meeting with executives, traders, industry groups and analysts. “Demand is rapidly deteriorating as the government slows its infrastructure building and transforms into a consumer economy.”

This has been reflected in other statistics …:

A Chinese manufacturing gauge fell to a 12-month low in April, suggesting government efforts to cushion a slowdown are yet to revive the nation’s factories.

The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 49.2, missing the median estimate of 49.6 in a Bloomberg survey, which was also March’s final reading. Numbers below 50 indicate contraction.

The first reading of the economy’s health in April may deepen concern over a slowdown after first-quarter data showed the weakest economic expansion since 2009. Policy makers have stepped up efforts to halt the slide, cutting banks’ reserve requirements by 1 percentage point this week.

… and in default rates:

The true cost of the debt that China’s real estate developers peddled to eager international investors during a five-year property boom is now becoming clear.

Having found themselves shut out of local bond and loan markets seven years ago, a band of developers began looking elsewhere for funds. First an initial public offering, and then a dollar bond sale. It became a well-trodden path. By 2010, a core group of four — Kaisa Group Holdings Ltd., Fantasia Holdings Group Co., Renhe Commercial Holdings Co., Glorious Property Holdings Ltd. — raised a total of $5.6 billion. On Monday, Kaisa buckled under $10.5 billion of debt and defaulted.

China’s home builders became the single biggest source of dollar junk debt in Asia amid government measures to prevent a property bubble. Developers already funneled $78.8 billion from international equity and bond markets into an industry that’s grown to account for one third of the world’s second-biggest economy. Most of the first rush of dollar offerings, in 2010, falls due in the next two years.

In fact, manufacturing data globally is no great shakes:

Manufacturing Purchasing Managers Indexes disappointed everywhere today.

Japan, China, France, Germany and the U.S. all had PMI reports out today that missed expectations. Japan, China and France had readings below 50, signifying contraction.

It is a continuation of a 2015 downward trend for Japan and China, a continuation of sub-50 numbers for France and a reversal for Germany and the U.S., which had been producing some great numbers so far this year.

Deutsche Bank was subjected to yet another round of regulatory extortion:

Deutsche Bank AG was ordered to pay a record $2.5 billion fine and fire seven employees to settle U.S. and U.K. investigations into its role in rigging Libor.

Deutsche Bank must terminate six London employees and one in Frankfurt who engaged in wrongful conduct, according to New York’s Department of Financial Services, which was among the international regulators involved in the settlement announced Thursday. While the DFS didn’t identify them by name, one is a managing director, four are directors and two are vice presidents. A U.K. unit agreed to plead guilty to a wire-fraud charge as well.

“Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain,” DFS Superintendent Benjamin Lawsky said in a statement. “We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals.”

Geez, if I commit fraud, fraud so blatant that somebody thinks they can actually prove it in an actual court, I may well go to jail. Those guys are lucky they worked for a firm willing to help lower tax rates in their host countries.

But, in the end, who cares?

In a way it’s a shame that the Libor settlements are mostly about collecting and typesetting embarrassing instant messages. The interesting question in Libor manipulation is whether it caused a net harm: Did Bank X push Libor up while Bank Y pushed it down in ways that mostly reflected and equilibrated underlying interest-rate market dynamics? Or did the banks mostly work together in a way that systematically enriched them as a group at the expense of their clients as a group?

This seems like a very hard question, but also one that is of curiously little interest to the regulators. Among those regulators, the U.K. FCA has the most detailed mechanism for determining penalties; it is explicitly supposed to consider “the amount of benefit gained or loss avoided.” It completely shrugged off that determination for Deutsche Bank:

Deutsche Bank sought to manipulate LIBOR and EURIBOR submissions in order to improve the profitability of its trading positions. The Authority has not determined the amount of benefit gained.

Isn’t that question — for Deutsche Bank, and for the Libor-manipulating banks as a whole — the important one? Shouldn’t the Libor manipulating banks be assessed on the economic impact of their manipulation, and not just on who had the most bad quotes?

Eric Scott Hunsader of Nanex has released two charts showing Sarao’s (alleged, at this point) spoofing on Flash Crash Day:

He also states (in three separate tweets):

I now believe Nav Sarao may have been screen trading – though each click would result in placing/cancelling many orders
…
I don’t think Sarao used an automated trading system and could in fact have been trading as he claims (I was wrong yesterday)
…
Actually, I’m going with a hybrid – the spoofing algo was automated and running background, while Sarao click traded positions

Getting back to my main point in all this – that anti-spoofing rules are clearly unenforceable by regulatory measures and should be scrapped – we can allow ourselves to wonder just how fast the spoofing detection algorithm used to produce those two charts is; whether it could run in anything close to real time; and how many false-positives and false-negatives it might be expected to produce. If it could be done in real-time with reasonable accuracy, that would be a very good thing for HFT. Of course, there’s not much time:

Look at the time scale on the X-axis! The spoofs last less than a second.

From Alberta to Australia, politicians all look the same:

Even for a country with a history of commodity booms, this one was gargantuan.

Over the decade to 2013, Australia racked up $1 trillion in extra exports from the previous 10 years, thanks largely to China’s once-insatiable demand.

Despite the opportunity of funding infrastructure to meet the needs of millions of new citizens, the nation largely blew the extra cash on month-to-month spending. The added A$300 billion ($232 billion) in government revenue generated from the boom went to things like tax cuts and subsidies.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 10bp, FixedResets up 49bp and DeemedRetractibles gaining 1bp. ENB, BAM and TRP FixedResets are all prominent on the Performance Highlights table, which is comprised exclusively of winners. Volume was 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 22.51 to be $0.39 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.56 cheap at its bid price of 14.45.

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. 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 23.50 to be $0.77 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.40 to be $0.73 cheap.

This fit has deteriorated.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.30 to be $0.66 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.30 and appears to be $0.81 rich.

FTS.PR.H, with a spread of +145bp, and bid at 15.81, looks $0.69 cheap and resets 2015-6-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 24.22 and is $0.48 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 -0.27% The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.47%.

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	-0.4005 %	2,172.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4005 %	3,798.1
Floater	3.34 %	3.54 %	57,211	18.44	4	-0.4005 %	2,309.3
OpRet	4.43 %	-2.24 %	38,178	0.11	2	0.0000 %	2,762.6
SplitShare	4.57 %	4.54 %	65,865	3.39	3	-0.2530 %	3,223.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,526.1
Perpetual-Premium	5.33 %	2.22 %	66,168	0.09	25	-0.0476 %	2,514.9
Perpetual-Discount	5.11 %	5.11 %	140,004	15.05	9	-0.0989 %	2,791.3
FixedReset	4.60 %	3.93 %	296,315	16.31	85	0.4902 %	2,323.9
Deemed-Retractible	4.92 %	3.30 %	110,094	0.82	36	0.0100 %	2,647.3
FloatingReset	2.58 %	2.94 %	72,878	6.23	8	0.1712 %	2,350.1

Performance Highlights
Issue	Index	Change	Notes
ENB.PR.Y	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 19.09 Evaluated at bid price : 19.09 Bid-YTW : 4.55 %
TD.PF.C	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.37 Evaluated at bid price : 23.15 Bid-YTW : 3.48 %
TD.PF.A	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.57 Evaluated at bid price : 23.50 Bid-YTW : 3.43 %
TRP.PR.E	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.01 Evaluated at bid price : 22.51 Bid-YTW : 3.80 %
ENB.PF.E	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 20.52 Evaluated at bid price : 20.52 Bid-YTW : 4.66 %
ENB.PR.D	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 18.91 Evaluated at bid price : 18.91 Bid-YTW : 4.51 %
SLF.PR.I	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.67 Bid-YTW : 3.93 %
PWF.PR.T	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 23.13 Evaluated at bid price : 24.61 Bid-YTW : 3.37 %
TRP.PR.A	FixedReset	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 3.73 %
BAM.PF.A	FixedReset	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.61 Evaluated at bid price : 23.39 Bid-YTW : 4.15 %
BAM.PF.F	FixedReset	1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.67 Evaluated at bid price : 23.68 Bid-YTW : 4.08 %
ENB.PR.B	FixedReset	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 4.61 %
TRP.PR.D	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.03 Evaluated at bid price : 22.50 Bid-YTW : 3.75 %
TRP.PR.C	FixedReset	1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 3.74 %
ENB.PF.G	FixedReset	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 4.58 %
TD.PF.B	FixedReset	2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.59 Evaluated at bid price : 23.50 Bid-YTW : 3.43 %
MFC.PR.M	FixedReset	2.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 4.40 %
BAM.PF.E	FixedReset	2.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 21.85 Evaluated at bid price : 22.30 Bid-YTW : 4.11 %
BAM.PR.X	FixedReset	5.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 17.63 Evaluated at bid price : 17.63 Bid-YTW : 4.13 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.C	FixedReset	97,975	RBC crossed 55,600 at 16.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 3.74 %
BNS.PR.Z	FixedReset	68,230	Scotia crossed 60,800 at 22.10. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.17 Bid-YTW : 4.35 %
SLF.PR.G	FixedReset	63,805	Desjardins crossed 47,400 at 16.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.42 Bid-YTW : 7.30 %
HSE.PR.A	FixedReset	59,445	RBC crossed 49,700 at 15.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 4.35 %
RY.PR.J	FixedReset	58,826	RBC crossed 50,000 at 24.77. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 23.09 Evaluated at bid price : 24.81 Bid-YTW : 3.50 %
BNS.PR.L	Deemed-Retractible	55,756	RBC crossed 50,000 at 25.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-04-27 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 3.41 %
There were 50 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ENB.PF.G	FixedReset	Quote: 21.00 – 22.30 Spot Rate : 1.3000 Average : 0.7404 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 4.58 %
TRP.PR.E	FixedReset	Quote: 22.51 – 23.30 Spot Rate : 0.7900 Average : 0.5615 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.01 Evaluated at bid price : 22.51 Bid-YTW : 3.80 %
BAM.PF.G	FixedReset	Quote: 23.67 – 24.20 Spot Rate : 0.5300 Average : 0.3200 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.62 Evaluated at bid price : 23.67 Bid-YTW : 4.10 %
TD.PF.A	FixedReset	Quote: 23.50 – 23.98 Spot Rate : 0.4800 Average : 0.3210 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 22.57 Evaluated at bid price : 23.50 Bid-YTW : 3.43 %
BAM.PF.B	FixedReset	Quote: 21.41 – 21.78 Spot Rate : 0.3700 Average : 0.2463 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 21.41 Evaluated at bid price : 21.41 Bid-YTW : 4.29 %
PWF.PR.A	Floater	Quote: 17.55 – 18.09 Spot Rate : 0.5400 Average : 0.4188 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-23 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 2.83 %