Category: Market Action

Market Action

April 28, 2015

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:

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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%.

Click for Big

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 %

Market Action

April 27,2015

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.

Here’s TRP:

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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 %

Market Action

April 24, 2015

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.

Click For Big

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.

Here’s TRP:

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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 %

Market Action

April 23, 2015

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:

Click for Big

Click for Big

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:

Click for Big

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.

Here’s TRP:

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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.

Click for Big

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%.

Click for Big

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 %

Market Action

April 22, 2015

There are a few new tidbits of information coming out about the arrest of Navinder Singh Sarao, but nothing worth a complete post. I have updated the posts Scapegoat for Flash Crash Isolated! and Flash Crash: Incompetence, Position Limits, Retail. Seems to me to be a case of stupid people attempting to enforce stupid rules in a stupid manner and ending up with a severe case of stupid. So, yeah, the obvious solution is to toss some petty little clown in jail for thirty years or so. That’s justice.

FRBNY President William Dudley gave a speech Monday titled The U.S. Monetary Policy Outlook and its Global Implications which Bloomberg sumamarizes as ‘inflation will pick up due to oil, rent, jobs and expectations’. I was more interested in his endorsement of mission-creep, which I complained about yesterday:

A second area in which we can and must collectively do better is safeguarding global financial stability. Simply put, we failed to act both early enough and decisively enough to stem the credit excesses that spawned the financial crisis and the Great Recession. While the U.S. was not alone in this shortcoming, given our position in the global financial system we especially should have done a better job. We’ve taken important steps through new legislative mandates and a broader effort to rethink our regulatory and supervisory framework. In particular, systemically important banking organizations must now hold higher amounts of capital and liquidity that are better aligned with their risk profiles and the official sector is making progress in ensuring no financial firm will be too-big-to-fail.

Although this remains very much a work in progress, these efforts should help us to avoid repeating the mistakes of the recent past, and enable us to be more proactive in mitigating potential future vulnerabilities. Of course, we at the Fed are not alone here. Since the recent financial crisis, central banks worldwide have been engaged in a broad rethinking of how to better fulfill their mandates.

So it looks like all the central bankers of the world are going to have to go to stockbroker school: ‘Yes, it looks at first glance as if I’ve made some pretty horrible recommendations that have lost you a lot of money. But if you hadn’t done this and then that had happened, it would have been worse!’ Isn’t risk wonderful? There’s always a worse-case scenario you can point at.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 8bp, FixedResets gaining 6bp and DeemedRetractibles off 18bp. The Performance Highlights table continues to show extreme volatility. Volume was high.

PerpetualDiscounts now yield 5.11%, equivalent to 6.64% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.7%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 295bp,, a slight (and perhaps spurious) uptick from the 290bp reported April 8.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 22.26 to be $0.41 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.39 cheap at its bid price of 14.42.

Click for Big

Most expensive is MFC.PR.I, resetting at +286 on 2017-9-19, bid at 25.06 to be $0.46 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.36 to be $0.69 cheap.

Click for Big

This fit is actually quite good.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.15 to be $0.50 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 23.50 and appears to be $0.59 rich.

Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 15.73, looks $0.80 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.01 and is $0.32 rich.

Click for Big

Investment-grade pairs now predict an average over the next five years of about 0.30%. The DC.PR.B / DC.PR.D pair has reversed yesterday‘s nonsense and has returned to its customary outlier status, with a breakeven rate of -1.41%.

Click for Big

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	-0.7088 %	2,181.0
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.7088 %	3,813.4
Floater	3.33 %	3.51 %	56,651	18.50	4	-0.7088 %	2,318.5
OpRet	4.43 %	-2.18 %	39,675	0.11	2	-0.0197 %	2,762.6
SplitShare	4.56 %	4.52 %	64,456	3.40	3	0.0533 %	3,231.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0197 %	2,526.1
Perpetual-Premium	5.33 %	1.42 %	66,751	0.09	25	-0.0079 %	2,516.1
Perpetual-Discount	5.11 %	5.11 %	144,618	15.05	9	0.0801 %	2,794.0
FixedReset	4.62 %	3.95 %	282,657	16.14	85	0.0568 %	2,312.6
Deemed-Retractible	4.92 %	3.52 %	109,690	0.83	36	-0.1800 %	2,647.0
FloatingReset	2.58 %	2.94 %	74,026	6.23	8	0.0053 %	2,346.1

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.Z	FixedReset	-1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 22.66 Evaluated at bid price : 23.31 Bid-YTW : 4.24 %
IFC.PR.A	FixedReset	-1.58 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.35 Bid-YTW : 6.28 %
GWO.PR.N	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.10 Bid-YTW : 6.79 %
BAM.PR.C	Floater	-1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 14.10 Evaluated at bid price : 14.10 Bid-YTW : 3.56 %
BAM.PR.K	Floater	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 14.01 Evaluated at bid price : 14.01 Bid-YTW : 3.58 %
FTS.PR.J	Perpetual-Premium	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 23.80 Evaluated at bid price : 24.20 Bid-YTW : 4.96 %
BAM.PR.B	Floater	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 14.30 Evaluated at bid price : 14.30 Bid-YTW : 3.51 %
CM.PR.O	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 22.59 Evaluated at bid price : 23.50 Bid-YTW : 3.49 %
PWF.PR.T	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 23.00 Evaluated at bid price : 24.27 Bid-YTW : 3.44 %
ENB.PR.Y	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.60 %
ENB.PR.H	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 17.44 Evaluated at bid price : 17.44 Bid-YTW : 4.62 %
BAM.PF.F	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 22.48 Evaluated at bid price : 23.30 Bid-YTW : 4.17 %
SLF.PR.G	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.50 Bid-YTW : 7.24 %
RY.PR.H	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 22.79 Evaluated at bid price : 23.93 Bid-YTW : 3.34 %
ENB.PF.G	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 4.67 %
CU.PR.G	Perpetual-Discount	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 23.16 Evaluated at bid price : 23.49 Bid-YTW : 4.84 %
BAM.PR.X	FixedReset	1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 4.35 %
BAM.PF.E	FixedReset	2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 21.46 Evaluated at bid price : 21.75 Bid-YTW : 4.23 %
TRP.PR.B	FixedReset	2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 14.42 Evaluated at bid price : 14.42 Bid-YTW : 3.76 %
MFC.PR.M	FixedReset	2.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 4.67 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.A	FloatingReset	376,415	RBC crossed 372,100 at 24.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 3.12 %
TRP.PR.B	FixedReset	218,749	TD crossed blocks of 100,000 and 111,400, both at 14.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 14.42 Evaluated at bid price : 14.42 Bid-YTW : 3.76 %
TRP.PR.F	FloatingReset	129,100	Scotia crossed blocks of 70,000 and 46,600, both at 18.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 3.54 %
FTS.PR.H	FixedReset	90,100	TD sold 17,400 to RBC at 15.70, then crossed 41,300 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 15.73 Evaluated at bid price : 15.73 Bid-YTW : 3.74 %
BAM.PR.T	FixedReset	87,416	RBC crossed 77,800 at 19.58. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 4.27 %
ENB.PR.B	FixedReset	67,812	RBC crossed 50,000 at 18.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 4.69 %
There were 47 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNS.PR.C	FloatingReset	Quote: 24.10 – 24.71 Spot Rate : 0.6100 Average : 0.4216 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 3.08 %
IAG.PR.A	Deemed-Retractible	Quote: 24.15 – 24.53 Spot Rate : 0.3800 Average : 0.2697 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.15 Bid-YTW : 5.11 %
PWF.PR.H	Perpetual-Premium	Quote: 25.35 – 25.60 Spot Rate : 0.2500 Average : 0.1496 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-22 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -12.32 %
TRP.PR.F	FloatingReset	Quote: 18.00 – 18.43 Spot Rate : 0.4300 Average : 0.3321 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 3.54 %
GWO.PR.N	FixedReset	Quote: 17.10 – 17.49 Spot Rate : 0.3900 Average : 0.2971 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.10 Bid-YTW : 6.79 %
CU.PR.G	Perpetual-Discount	Quote: 23.49 – 23.80 Spot Rate : 0.3100 Average : 0.2177 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-22 Maturity Price : 23.16 Evaluated at bid price : 23.49 Bid-YTW : 4.84 %

Market Action

April 21, 2015

It is becoming increasingly fashionable to ascribe another mandate to central bankers:

“Society has given our central bankers worldwide the responsibility for macro-prudential risk, all the risk in the system, not just the risk in the banking system,” Fink said at the Credit Suisse Global Megatrends conference. “I don’t think there is enough talk about what are the costs of the low rate environment to the other components of our global society — pension funds, retirees, savers, and insurance companies.”

[Axa SA’s Henri] De Castries in 2013 called central bank policies a form of “financial repression” that forced savers to rescue the banking system.

A spokesman for Canada’s Ministry of Finance recently endorsed the idea:

Specifically, we use more and better data to assist our financial system monitoring, backed by deeper conversations and models where appropriate, to make more informed judgments about financial stability risks. We’ve added other potential sources of vulnerability, such as the balance sheets of households, companies and banks, to our macroeconomic models.

We’re also making progress toward a better understanding of how monetary policy actions influence risk taking. For example, when a central bank cuts interest rates to cushion the economy from a shock, the hope is that people will borrow more at that lower interest rate and spend more money. What this means is that financial imbalances are a necessary by-product of monetary policy action, especially if the action is prolonged, so these additional adjustment dynamics must be fully taken into account when conducting policy.

Clearly, though, incorporating financial stability into our monetary policy framework remains a work in progress. As a practitioner, it still feels to me like we are adding various rooms onto a house we love, rather than creating a new, elegant and coherent structure. We need to make sure there’s enough flexibility and clarity about the role of financial stability in our monetary policy framework. We need to better understand how macroprudential policies – such as mortgage insurance rules – that are aimed at promoting financial stability interact with monetary policy.
…
The Bank has been setting policy with a view to balancing the risks facing both the outlook for returning inflation sustainably to its target, and the risks to financial stability such as those posed by the indebtedness of Canadian households. The sudden drop in global oil prices has increased both risks. The oil-price shock is an important setback in our progress toward full capacity, full employment and stable inflation because it is a net negative for economic growth. And because lower oil prices mean lower Canadian income, the shock will worsen the debt-to-income ratio of Canadian households, thereby increasing financial stability risks.

This is absurd mission-creep, which will lead to yet another layer of unaccountable bureaucrats stifling innovation and competition while bloating the financial system and collecting large pay-cheques.

For example, the reincarnation of King Canute rules in Denmark, holding back the tides of speculators responding to economic reality:

Denmark halted government bond auctions on Jan. 30 as part of a series of steps designed to deter investors from pouring into AAA-rated krone assets. Speculation the central bank may need to abandon its currency peg soared after Switzerland dropped its euro cap on Jan. 15. The International Monetary Fund has since declared Denmark triumphant in its battle against speculators, and said the central bank’s handling of the matter added to its credibility.

The central bank’s acknowledgment that Denmark’s bond market may need some liquidity support follows criticism from some of the country’s biggest institutional investors. PFA A/S, Denmark’s largest commercial pension fund, has said the suspension of bond sales is killing liquidity and creating an “unsustainable situation.”

Meanwhile, the Canadian government cemented the structural deficit:

Canada cut its projected surpluses by C$18 billion ($14.7 billion) over the next five years as the federal government copes with the impact of lower oil prices and seeks to finance new tax cuts ahead of an October election.

Canada’s federal government will post a surplus of C$1.4 billion for the fiscal year that began April 1, ending a seven-year run of deficits, aided by the sale of shares in General Motors Co. and by reducing its buffer for emergencies. Surpluses will grow to as high as C$4.8 billion by 2019 as government income recovers.
…
Harper’s almost decade-long, three-term record of wholesale tax cuts has been marred by the run-up of debt totaling almost C$150 billion since the 2008-2009 recession.

Wow, $4.8-billion! I guess the take-away is that we only expect a recession every thirty years or so. Good times!

It was a moderately good day for the Canadian preferred share market, with PerpetualDiscounts winning 31bp, FixedResets gaining 3bp and DeemedRetractibles up 5bp. Volatility continued to be high, as reported on the Performance Highlights table, with FixedResets making up large complements of both winners and losers. Volume was very high, with TRP issues prominent.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 22.30 to be $0.48 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.59 cheap at its bid price of 14.11.

Click for Big

Most expensive is MFC.PR.I, resetting at +286 on 2017-9-19, bid at 25.05 to be $0.43 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.55 to be $0.48 cheap.

Click for Big

This fit is actually quite good.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.13 to be $0.42 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 23.40 and appears to be $0.54 rich.

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 15.65, 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 21.01 and is $0.32 rich.

Click for Big

Investment-grade pairs now predict an average over the next five years of about 0.30%. The DC.PR.B / DC.PR.D pair is just a dumb number, since the Toronto Stock Exchange reports a bid of 15.00 for the latter issue, despite the fact that there were no trades today and the close Monday was 20.14. It is not clear whether the idiotic quote is due to the TSX’s peculiar reporting practices or their inadequate supervision of market makers.

Click for Big

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	0.6154 %	2,196.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.6154 %	3,840.6
Floater	3.30 %	3.47 %	57,249	18.61	4	0.6154 %	2,335.1
OpRet	4.43 %	-2.13 %	41,319	0.11	2	0.0394 %	2,763.2
SplitShare	4.56 %	4.58 %	63,978	3.40	3	0.1334 %	3,230.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0394 %	2,526.6
Perpetual-Premium	5.33 %	1.73 %	65,918	0.09	25	0.0263 %	2,516.3
Perpetual-Discount	5.11 %	5.10 %	145,822	15.10	9	0.3119 %	2,791.8
FixedReset	4.63 %	3.95 %	278,838	16.13	85	0.0290 %	2,311.3
Deemed-Retractible	4.91 %	3.48 %	108,589	0.68	36	0.0453 %	2,651.8
FloatingReset	2.58 %	2.94 %	74,599	6.23	8	-0.0287 %	2,346.0

Performance Highlights
Issue	Index	Change	Notes
ENB.PF.G	FixedReset	-2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 20.34 Evaluated at bid price : 20.34 Bid-YTW : 4.73 %
BAM.PF.B	FixedReset	-1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 21.16 Evaluated at bid price : 21.16 Bid-YTW : 4.34 %
TRP.PR.F	FloatingReset	-1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 3.54 %
NA.PR.W	FixedReset	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 22.58 Evaluated at bid price : 23.56 Bid-YTW : 3.42 %
BAM.PR.R	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 19.13 Evaluated at bid price : 19.13 Bid-YTW : 4.35 %
ENB.PR.P	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 4.51 %
FTS.PR.G	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 3.78 %
BAM.PF.F	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 22.33 Evaluated at bid price : 23.04 Bid-YTW : 4.22 %
BAM.PR.X	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 16.43 Evaluated at bid price : 16.43 Bid-YTW : 4.44 %
CM.PR.P	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 22.56 Evaluated at bid price : 23.51 Bid-YTW : 3.40 %
FTS.PR.M	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 22.80 Evaluated at bid price : 24.00 Bid-YTW : 3.62 %
ENB.PR.H	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 4.67 %
FTS.PR.H	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 15.65 Evaluated at bid price : 15.65 Bid-YTW : 3.76 %
MFC.PR.B	Deemed-Retractible	1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 4.99 %
PWF.PR.P	FixedReset	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 3.64 %
PWF.PR.A	Floater	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 17.52 Evaluated at bid price : 17.52 Bid-YTW : 2.87 %
PWF.PR.T	FixedReset	1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 23.10 Evaluated at bid price : 24.52 Bid-YTW : 3.39 %
TRP.PR.C	FixedReset	1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 3.81 %
MFC.PR.F	FixedReset	2.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.35 Bid-YTW : 6.98 %
TRP.PR.B	FixedReset	2.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 14.11 Evaluated at bid price : 14.11 Bid-YTW : 3.84 %
MFC.PR.N	FixedReset	2.94 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.75 Bid-YTW : 4.74 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.M	Deemed-Retractible	150,834	Scotia sold 15,500 to Canaccord at 25.27, then three blocks of 10,000 each to RBC, all at 25.25. RBC crossed 50,000 at 25.28; TD crossed 40,000 at 25.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-27 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : 3.51 %
PWF.PR.R	Perpetual-Premium	65,660	Nesbitt crossed 35,000 at 26.33. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.27 Bid-YTW : 4.53 %
TRP.PR.B	FixedReset	61,297	TD crossed 45,000 at 14.16. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 14.11 Evaluated at bid price : 14.11 Bid-YTW : 3.84 %
TRP.PR.C	FixedReset	54,177	RBC crossed 38,000 at 16.21. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 3.81 %
TRP.PR.E	FixedReset	45,003	Scotia crossed 40,000 at 22.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 21.87 Evaluated at bid price : 22.30 Bid-YTW : 3.85 %
CM.PR.Q	FixedReset	38,798	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 23.05 Evaluated at bid price : 24.72 Bid-YTW : 3.60 %
There were 54 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNS.PR.Y	FixedReset	Quote: 21.80 – 22.53 Spot Rate : 0.7300 Average : 0.4284 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.80 Bid-YTW : 4.05 %
PWF.PR.S	Perpetual-Premium	Quote: 24.34 – 24.69 Spot Rate : 0.3500 Average : 0.2240 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 23.94 Evaluated at bid price : 24.34 Bid-YTW : 4.93 %
RY.PR.H	FixedReset	Quote: 23.63 – 24.03 Spot Rate : 0.4000 Average : 0.3048 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 22.65 Evaluated at bid price : 23.63 Bid-YTW : 3.39 %
CIU.PR.C	FixedReset	Quote: 15.71 – 16.29 Spot Rate : 0.5800 Average : 0.4952 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-21 Maturity Price : 15.71 Evaluated at bid price : 15.71 Bid-YTW : 3.74 %
PVS.PR.C	SplitShare	Quote: 25.33 – 25.58 Spot Rate : 0.2500 Average : 0.1883 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.33 Bid-YTW : 4.58 %
ENB.PR.A	Perpetual-Premium	Quote: 25.37 – 25.75 Spot Rate : 0.3800 Average : 0.3200 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-21 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : -3.10 %

Market Action

April 20, 2015

There are signs of a recovery in US inflation:

The cost of living excluding food and fuel rose 0.2 percent in March for a third month, reflecting broad-based gains in rents, medical care, clothing and used vehicles, a Labor Department report showed Friday in Washington. The University of Michigan said its preliminary consumer sentiment index for April climbed to the second-highest level in more than eight years.
…
On a year-over-year basis, consumer prices excluding food and fuel climbed 1.8 percent in March, the biggest 12-month advance since October. Over the past three months, so-called core costs were up at a 2.3 percent annualized rate, the most since June, compared with a 1.6 percent increase in February.

I certainly hope that the costly mission-creep at US universities becomes a political issue:

Most Americans believe people who want to go to college can get in somewhere—they just don’t think they’d be able to afford it, according to a new Gallup-Lumina Foundation poll.

While 61 percent of adults believe education beyond high school is available to anyone who needs it, only 21 percent agree that it’s affordable, according to the poll results, released on Thursday. Some racial groups were much more optimistic than others. Fifty-one percent of Hispanic adults said higher education is still affordable, Gallup found. Just 19 percent of black adults and 17 percent of white adults agreed.
…
Tuition at public colleges has risen more than 250 percent over the last 30 years, the two organizations noted. At the same time, financial aid hasn’t kept up. Students have been leaving school with record amounts of debt: In a separate study, Gallup and Purdue University found more than a third of students who graduated college from 2000 to 2014 were saddled with more than $25,000 in loans. Even if Americans believe anyone, in theory, could find their way to a college classroom, they’re not optimistic anyone could pay to stay there.

Assiduous Readers with good memories will remember that S&P warned about financial repression, as discussed on August 31, 2012; that the banks had to jump through hoops to help clients meet the rules, as discussed on September 11, 2012; and that there have been rumblings about a similar effect in Canada, as discussed on October 15, 2013. Now the problem of financial repression is receiving broader attention:

Moreover, Gluskin Sheff + Associates chief economist David Rosenberg pointed out in a note to clients that 80 per cent of the new Treasuries supply over the past year have been bought by foreign central banks, pension funds, insurers, banks, and insurance companies.

These entities, in Mr. Rosenberg’s words, are ones “that need Treasuries, not want them.”

No less an authority than Ben Bernanke, Fed chairman-turned-blogger-turned-hedge fund adviser, concurred that price-insensitive buyers are playing a large role in the market.

“New regulations require banks to hold ample liquidity and securities dealers to post more collateral in derivatives transactions,” he wrote in a recent blog post. “Insurance companies and pension funds also face rules that effectively require them to hold significant amounts of safe, longer-term bonds. This mandated demand seems likely to put downward pressure on longer-term yields for the foreseeable future.”

Bernanke’s blog post is titled Why are interest rates so low, part 4: Term premiums .

What’s a Grecian Urn? Doesn’t matter, it will all be confiscated anyway:

Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras ordered local governments to move their funds to the central bank.

With negotiations over bailout aid deadlocked, Tsipras needs the cash for salaries, pensions and a repayment to the International Monetary Fund. Greek bonds fell after the move, pushing three-year yields to the highest since the nation’s debt restructuring in 2012. The order was questioned by local officials and slammed by the leading opposition party.

The decree to confiscate reserves now held in commercial banks and transfer them to the central bank could raise about 2 billion euros ($2.15 billion), according to two people familiar with the decision. It shows how time is running out for Tsipras, a point made by European officials who addressed the matter at IMF meetings in Washington in recent days.

Geez, if I was Greek, everything I owned would be kept in a safe deposit box out of the country.

DBRS takes the view that Hydro One bonds are as good as they always were:

DBRS Limited (DBRS) today notes that the government of the Province of Ontario (the Province, rated AA (low) with a Stable Trend by DBRS) has announced its intention to broaden the ownership of Hydro One Inc. (Hydro One or the Company, rated A (high) with a Stable Trend, wholly-owned by the Province) through an initial public offering (IPO) that could see the Province gradually reduce its ownership in the Company to 40% over the next four to five years. DBRS has reviewed the details of the Province’s announcement together with the final recommendation of the Premier’s Advisory Council on Government Assets (the Council) released on April 16, 2015, and has concluded that the proposal as it currently stands has no material impact on Hydro One’s credit profile.

DBRS rates Hydro One on a stand-alone basis, independent of its ownership structure; however, the ratings are constrained by the rating of the Province, which acts as a ceiling. The Province provides indirect support to Hydro One with a flexible dividend policy which, given the Company’s heavy capital expenditure (capex) program, allows Hydro One to maintain its leverage below the 60% set by the Ontario Energy Board. At the same time, Hydro One’s current ownership structure limits its ability to access the equity markets directly and the Company’s additional funding needs are financed largely through a combination of operating cash flow and debt. Significant external funding is required to finance the Company’s capex program (nearly $5 billion over the next three years) to replace Hydro One’s aging electricity infrastructure. Maintaining adequate access to the public debt markets is therefore critical for the Company. DBRS notes that the proposed partial divestiture of ownership by the Province could provide the Company wider access to capital through the equity markets.

S&P begs to differ:

•We are downgrading our long-term corporate credit rating on Hydro One Inc. to ‘A’ from ‘A+’. We are also revising our view on the likelihood of extraordinary government support from the Province of Ontario to “moderately high” from “high.”
•In addition, we are affirming our ‘A-1’ short-term corporate credit and ‘A-1 (mid)’ commercial paper ratings on Hydro One.
•The stable outlook reflects our view of the relatively stable regulatory regime that we believe contributes to predictable cash flows.

Standard & Poor’s Ratings Services today said it lowered its long-term corporate credit rating on Hydro One Inc. to ‘A’ from ‘A+’. The outlook is stable.

Standard & Poor’s also revised its view of the likelihood of extraordinary support to “moderately high” from “high.”

“These rating actions and revisions are in response to the Government of Ontario’s announcement that it has a clear intention to immediately conduct an initial public offering of 15% of Hydro One and ultimately to sell up to 60%,” said Standard & Poor’s credit analyst Stephen Goltz.
…
We believe that the strength and durability of the link between the government and the company have weakened with the government’s announcement of its intention to privatize the majority of Hydro One. Accordingly, based on our criteria, we have revised our assessment of the link between the government and the company to “strong” from “very strong” (see “Rating Government-Related Entities: Methodology And Assumptions,” published March 25, 2015, on RatingsDirect). We continue to assess the role of the company to the government as “important.”

In addition, we have not changed our assessment of the ‘a’ SACP on the company. The sale of Hydro One Brampton Inc. is not material to this assessment.

Regulators will be thrilled to learn that the war on banks is having an effect:

HSBC Holdings Plc will consider whether to move its headquarters from London once the regulatory environment becomes clearer, Chairman Douglas Flint said.

“We are beginning to see the final shape of regulation, the final shape of structural reform and as soon as that mist lifts sufficiently, we will once again start to look at where the best place for HSBC is,” Flint, 59, told a shareholder meeting in Hong Kong on Monday after one investor urged him to quit London.

HSBC, Europe’s largest bank, has faced calls to move its domicile away from the British capital after the government increased the levy on bank’s balance sheets for an eighth time this year. HSBC is hit the hardest by the tax and paid 750 million pounds ($1.1 billion) last year. Both the Labour and Conservative parties have pledged a more onerous tax regime for banks in their manifestos for the May 7 U.K. election.
…
Standard Chartered Plc, another British bank that like HSBC makes most of its profit in Asia, is also being urged by Aberdeen Asset Management Plc, its second-largest shareholder, to relocate to Asia because of the cost of being in London.

And now for something completely different:

Signs that prices are starting to firm prompted investors to pile into the iShares TIPS ETF, which is comprised of Treasury Inflation-Protected Securities. Shares of the fund looked like a better bet last week, after the Labor Department reported that March consumer prices excluding food and energy rose by more than expected from last year, and oil prices held above $50 a barrel for 10 days straight.
…
The fund attracted $634 million last week, its biggest weekly inflow since it was created in late 2003.
…
A market gauge known as the break-even rate, used as a proxy for inflation expectations over the life of five-year TIPS, last week touched the highest level October. The difference between yield on the security and fixed-rate Treasuries of similar maturity reach 1.7266 percent on April 17.

What a difference a day makes! It was a fine day for the Canadian preferred share market, with PerpetualDiscounts gaining 9bp, FixedResets winning 40bp and DeemedRetractibles up 13bp. The Performance Highlights table is suitably lengthy, with a good crop of losers to remind us that volatility remains at extreme levels. Volume was average.

Here’s TRP:

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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 22.35 to be $0.60 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.82 cheap at its bid price of 13.79.

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Most expensive is MFC.PR.I, resetting at +286 on 2017-9-19, bid at 25.04 to be $0.48 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.55 to be $0.29 cheap.

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This fit is actually quite good.

The cheapest issue relative to its peers is BAM.PF.A, resetting at +290bp on 2016-9-30, bid at 22.95 to be $0.41 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 23.45 and appears to be $0.45 rich.

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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 15.47, looks $0.91 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 20.98 and is $0.36 rich.

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Investment-grade pairs now predict an average over the next five years of about 0.30%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -1.57%.

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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	0.5688 %	2,183.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.5688 %	3,817.1
Floater	3.32 %	3.50 %	57,801	18.54	4	0.5688 %	2,320.8
OpRet	4.43 %	-1.74 %	41,098	0.12	2	-0.0393 %	2,762.1
SplitShare	4.57 %	4.59 %	64,364	3.41	3	0.0267 %	3,225.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0393 %	2,525.6
Perpetual-Premium	5.33 %	1.06 %	65,072	0.09	25	0.0920 %	2,515.7
Perpetual-Discount	5.13 %	5.10 %	139,016	15.04	9	0.4033 %	2,783.1
FixedReset	4.62 %	3.95 %	276,510	16.21	85	0.1282 %	2,310.6
Deemed-Retractible	4.91 %	3.42 %	108,908	0.68	36	0.1336 %	2,650.6
FloatingReset	2.58 %	2.93 %	76,743	6.23	8	0.1981 %	2,346.6

Performance Highlights
Issue	Index	Change	Notes
TD.PF.A	FixedReset	-2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.40 Evaluated at bid price : 23.17 Bid-YTW : 3.50 %
BMO.PR.W	FixedReset	-1.84 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.57 Evaluated at bid price : 23.51 Bid-YTW : 3.42 %
TRP.PR.E	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 21.90 Evaluated at bid price : 22.35 Bid-YTW : 3.84 %
IAG.PR.G	FixedReset	-1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 4.47 %
TRP.PR.D	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 21.69 Evaluated at bid price : 22.01 Bid-YTW : 3.85 %
BMO.PR.T	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.85 Evaluated at bid price : 24.05 Bid-YTW : 3.35 %
MFC.PR.K	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.55 Bid-YTW : 5.25 %
TD.PF.C	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.31 Evaluated at bid price : 23.03 Bid-YTW : 3.50 %
BNS.PR.Y	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 4.08 %
BAM.PF.E	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 4.33 %
SLF.PR.B	Deemed-Retractible	1.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 4.91 %
SLF.PR.I	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 4.10 %
ENB.PR.P	FixedReset	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 19.91 Evaluated at bid price : 19.91 Bid-YTW : 4.46 %
BAM.PR.M	Perpetual-Discount	1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.46 Evaluated at bid price : 22.75 Bid-YTW : 5.25 %
PWF.PR.P	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 17.39 Evaluated at bid price : 17.39 Bid-YTW : 3.69 %
TD.PF.B	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.42 Evaluated at bid price : 23.18 Bid-YTW : 3.49 %
BNS.PR.Z	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.86 Bid-YTW : 4.57 %
TRP.PR.C	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 3.88 %
BMO.PR.Q	FixedReset	1.60 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 4.42 %
ENB.PR.D	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 18.66 Evaluated at bid price : 18.66 Bid-YTW : 4.57 %
TRP.PR.A	FixedReset	1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 19.42 Evaluated at bid price : 19.42 Bid-YTW : 3.76 %
HSE.PR.C	FixedReset	1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.75 Evaluated at bid price : 23.90 Bid-YTW : 4.27 %
MFC.PR.F	FixedReset	2.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.01 Bid-YTW : 7.22 %
IFC.PR.A	FixedReset	2.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.57 Bid-YTW : 6.13 %
GWO.PR.N	FixedReset	2.72 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.35 Bid-YTW : 6.61 %
ENB.PR.F	FixedReset	3.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 19.48 Evaluated at bid price : 19.48 Bid-YTW : 4.54 %
SLF.PR.H	FixedReset	4.87 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.45 Bid-YTW : 5.68 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.R	Deemed-Retractible	116,550	Nesbitt bought 39,800 from TD at 25.49 and crossed 75,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-04-30 Maturity Price : 25.25 Evaluated at bid price : 25.49 Bid-YTW : 4.45 %
NA.PR.W	FixedReset	82,750	Nesbitt crossed 15,000 at 23.90 and bought blocks of 15,000 shares, 15,000 and 10,000 from anonymous at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.73 Evaluated at bid price : 23.88 Bid-YTW : 3.36 %
CM.PR.Q	FixedReset	79,409	RBC crossed 40,000 at 24.88. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 23.05 Evaluated at bid price : 24.72 Bid-YTW : 3.60 %
RY.PR.M	FixedReset	61,537	RBC crossed 20,000 at 24.62. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.91 Evaluated at bid price : 24.41 Bid-YTW : 3.52 %
PWF.PR.T	FixedReset	54,500	TD crossed 48,600 at 24.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.94 Evaluated at bid price : 24.14 Bid-YTW : 3.46 %
CM.PR.P	FixedReset	41,380	RBC crossed 10,000 at 23.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.68 Evaluated at bid price : 23.75 Bid-YTW : 3.35 %
There were 35 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.F	FixedReset	Quote: 17.01 – 18.59 Spot Rate : 1.5800 Average : 0.9112 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.01 Bid-YTW : 7.22 %
MFC.PR.L	FixedReset	Quote: 21.30 – 22.99 Spot Rate : 1.6900 Average : 1.2771 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.30 Bid-YTW : 5.48 %
PWF.PR.T	FixedReset	Quote: 24.14 – 25.13 Spot Rate : 0.9900 Average : 0.6956 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 22.94 Evaluated at bid price : 24.14 Bid-YTW : 3.46 %
PWF.PR.A	Floater	Quote: 17.26 – 17.97 Spot Rate : 0.7100 Average : 0.5235 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-20 Maturity Price : 17.26 Evaluated at bid price : 17.26 Bid-YTW : 2.92 %
BNS.PR.C	FloatingReset	Quote: 24.06 – 24.50 Spot Rate : 0.4400 Average : 0.2972 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 3.11 %
RY.PR.L	FixedReset	Quote: 26.05 – 26.43 Spot Rate : 0.3800 Average : 0.2412 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 3.29 %

Market Action

April 17, 2015

Has deflation been cancelled?

Core consumer prices rose 2.4 percent in March from a year earlier, the most since December 2008, and February retail sales climbed 1.7 percent, Statistics Canada said Friday from Ottawa. Price gains showed up in everything from text messages to fresh meat to cars.

Consumer spending fueled by low interest rates has been among the biggest sources of growth since a recession that started at the end of 2008, with manufacturing and business investment curtailed by weak global demand. Today’s retail figures showed gains in every major category, from a 5.6 percent increase at general merchandise stores to 0.9 percent at automobile dealers.
…
Canada’s currency climbed as much as 0.8 percent to C$1.2088 per U.S. dollar, the strongest since Jan. 21. It was down 0.4 percent at 1:36 p.m. in Toronto. Yields on benchmark government two-year bonds rose 5 basis points to 0.63 percent, the third straight increase.

We are told that it is it is hard to find a virtuous woman? for her price is far above rubies [sic]. Sadly, we are never given the salacious details of Ruby’s pricing, but modern market science allows us to infer that a little bit of liquidity, if you know what I mean, helps a lot:

For colored stones, prices often increase with supply as jewelers acquire enough stock to justify marketing the gems to customers. Take regular emeralds: their value has appreciated 1,000 percent in five years as Harebottle’s Gemfields Plc and peers expanded mines, while marketing campaigns fronted by Hollywood star Mila Kunis gave demand a boost.

Now Harebottle wants to bring the same game to rubies. Gemfields’ Montepuez in Mozambique, estimated to contain as much as 40 percent of the world’s known supply of the deep-red stones, could triple output from the 8 million carats targeted for this year, according to the executive.

The potential rewards are compelling. At its first Singapore auction last December, Gemfields sold high-quality rubies for an average $689 a carat, dwarfing the $66 a carat for comparable emeralds. Production growth is underpinned by rising demand in China, where the color red symbolizes prosperity, health and wealth, making rubies an auspicious investment.

Assiduous Reader HS sends me a couple of links (which is more than most of you have ever done). The first is a mainstream report on ENB preferreds and their credit woes:

Over the past two years, Enbridge has come to the market on eight separate occasions with offerings of rate reset preferred shares. The offerings featured a variety of currencies (US$ or C$), coupons (4 per cent or 4.40 per cent) and spreads above five-year Canada bonds — the yield that serves as the base rate for the prefs. The last issue for $200 million was completed last September.
…
The Canadian restructuring was viewed as positive for Enbridge’s common shareholders – but not its debt holders. In other words, the drop down in assets wasn’t credit-friendly. Indeed, the pref share ratings are under review.

The restructuring at Enbridge occurred before the preferred share market was hit by the fallout from an unexpected 25 basis points cut in the bank rate made in January.

He also sends a link for a Schwab piece titled The Bond Investor’s Trilemma: Positioning for a Fed Rate Hike. I usually don’t pass brokerage analysis along – waste of time! – but brokerage work is useful for data and charts. In this case, there are three good charts:

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It is interesting that the market is so much more gloomy than the Fed.

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Schwab comments:

Market-based measures of inflation expectations have been edging lower lately, along with actual inflation readings.

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I’m almost getting tired of beating the drum on corporate bond liquidity … but one more time won’t hurt! Schwab comments:

One outgrowth of the financial crisis and its aftermath has been reduced liquidity in the bond market. Since the financial crisis, many banks have reduced their risk-taking and are not making markets in bonds or holding as many bonds as in the past. Consequently, there are fewer buyers and sellers in the market and if you want to sell a bond, you may have a difficult time finding a buyer at a reasonable price, especially during periods of market volatility.

Rob Carrick wrote a fairly lengthy piece in the Globe titled What investors should know about the recent plunge in preferred shares:

But rate resets have been trouble.

Investors clearly bought them with the expectation that the reset would help them tap into a higher yield down the line. Today, however, some of these shares are headed to a reset at a time when rates are at unexpectedly low levels. It all comes down to this: Five-year Canada bonds had a yield around 0.75 per cent at midweek, compared with about 3 per cent five years ago.

You can see the result of this rate decline in Fortis Inc.’s Series H five-year fixed rate reset shares (FTS.PR.H). They currently pay a dividend that yielded 4.25 per cent when issued at a value of $25 per share. The dividend on these shares will be reset on June 1 to produce a dividend yield of 1.45 percentage points above the five-year Canada bond yield. Based on recent bond yields, these shares would, after reset, have a yield of about 2.2 per cent based on the $25 issue price. In dollar terms, the dividend would fall to 55 cents from the current $1.06.

The shares traded this week in the $15.25 range, which meant their yield based on the current $1.06 dividend was 6.9 per cent. Mr. Nagel calculates their yield after the reset at about 3.6 per cent based on this week’s share price and a dividend of 55 cents. No matter how you look at it, investors are going to get less in dividends after the reset. Now, what should they do about it?
…
Mr. Nagel lays out the decision on whether to choose the floating rate option like this: Do you want a lower yield now in exchange for the opportunity for increases if interest rates rise over the next five years, or would you prefer to lock in 3.6 per cent? The floating rate option could end up being the most rewarding, he argues. If rates do go up in the five years to come, you’ll benefit in the near term rather than having to wait until the next reset date. With floating rate shares, adjustments are made every three months.

Another thought from Mr. Nagel is to sell all or part of your rate reset preferred shares and put the money into straight preferreds, which pay a fixed dividend. Straight preferreds have benefited a little bit from lower rates – Desjardins data show they were up 2.5 per cent as a group for the year to April 10, while the preferred share universe was down 8 per cent.

Still another possibility would be to switch from preferred shares to dividend-paying common shares. They’ve had a rough go lately as well, but that’s a matter for a future column.

It appears that Mr. Nagel’s thinking has evolved since his exhortations in January, 2010:

On the other hand, if the bond yield is low and it looks like the shares will be reset, the best bet — available in the vast majority of cases — is to convert to floating rate preferred shares, which are usually pegged to the Government of Canada three-month treasury bills plus the spread.

But now market timing and return chasing is the recommended strategy. Market timing achieves the main objective of the investment industry, which is the generation of excessive commissions.

Dividend Growth Split Corp., proud issuer of DGS.PR.A, has been confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed the Preferred Shares rating of Dividend Growth Split Corp. (the Company) at Pfd-3. In December 2007, the Company issued approximately 1.5 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). Subsequent to the initial public offering, the Company has completed six follow-on offerings. The total number of Preferred Shares and Class A Shares outstanding currently stands at approximately 18.7 million shares each. The scheduled redemption date for both classes of shares issued is November 28, 2019.
…
The net asset value (NAV) of the Company has been volatile since the last rating confirmation in April 2014. As of April 9, 2015, the downside protection available to the Preferred Shares is approximately 45.2%, down from 46.7% on April 3, 2014. The dividend coverage ratio is approximately 0.99 times. The Pfd-3 rating of the Preferred Shares is based primarily on the downside protection available and the additional protection provided by an asset coverage test, which does not permit any distributions to holders of the Class A Shares if the NAV of the Company falls below $15.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 4bp, FixedResets down 38bp and DeemedRetractibles off 26bp. The Performance Highlights table is predictably dominated by losing FixedResets, but the recent high level of volatility manifests itself in a large number of winners as well – notably a few Enbridge issues. Volume was super-duper very extremely high.

Here’s TRP:

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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 22.68 to be $1.85 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.88 cheap at its bid price of 13.68.

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Losses by the lower-spread issues have resulted in a sharp decrease in Implied Volatility, which was 17% yesterday and 19% on March 31.

Most expensive is MFC.PR.I, resetting at +286 on 2017-9-19, bid at 25.15 to be $0.47 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.15 to be $0.46 cheap.

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This fit is actually quite good.

The cheapest issue relative to its peers is BAM.PF.A, resetting at +290bp on 2016-9-30, bid at 23.13 to be $0.24 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 23.51 and appears to be $0.51 rich.

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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 15.40, looks $1.00 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.05 and is $0.35 rich.

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Investment-grade pairs (including TRP.PR.A / TRP.PR.F, which is no longer an outlier) now predict an average over the next five years of about 0.28%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -1.57%.

Click for Big

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	-1.8391 %	2,170.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.8391 %	3,795.5
Floater	3.34 %	3.53 %	58,020	18.48	4	-1.8391 %	2,307.7
OpRet	4.43 %	-2.25 %	39,277	0.12	2	0.0394 %	2,763.2
SplitShare	4.57 %	4.57 %	59,598	3.41	3	0.1604 %	3,225.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0394 %	2,526.6
Perpetual-Premium	5.34 %	1.29 %	65,141	0.08	25	-0.1062 %	2,513.4
Perpetual-Discount	5.15 %	5.10 %	144,513	14.97	9	0.0380 %	2,771.9
FixedReset	4.63 %	3.83 %	278,207	16.26	85	-0.3848 %	2,307.6
Deemed-Retractible	4.91 %	3.40 %	109,562	0.59	36	-0.2554 %	2,647.1
FloatingReset	2.54 %	2.98 %	77,994	6.25	8	-0.0856 %	2,342.0

Performance Highlights
Issue	Index	Change	Notes
TD.PF.B	FixedReset	-4.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.21 Evaluated at bid price : 22.82 Bid-YTW : 3.48 %
SLF.PR.H	FixedReset	-4.36 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.50 Bid-YTW : 6.18 %
TD.PF.C	FixedReset	-3.84 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.17 Evaluated at bid price : 22.80 Bid-YTW : 3.47 %
MFC.PR.F	FixedReset	-3.70 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.66 Bid-YTW : 7.37 %
SLF.PR.I	FixedReset	-3.49 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.03 Bid-YTW : 4.17 %
BAM.PR.B	Floater	-3.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 14.23 Evaluated at bid price : 14.23 Bid-YTW : 3.53 %
IAG.PR.G	FixedReset	-3.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 4.21 %
BAM.PR.C	Floater	-3.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 14.19 Evaluated at bid price : 14.19 Bid-YTW : 3.54 %
CIU.PR.C	FixedReset	-3.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 15.80 Evaluated at bid price : 15.80 Bid-YTW : 3.57 %
MFC.PR.N	FixedReset	-2.59 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.20 Bid-YTW : 4.99 %
MFC.PR.J	FixedReset	-2.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.77 Bid-YTW : 4.27 %
BAM.PF.E	FixedReset	-2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 21.12 Evaluated at bid price : 21.12 Bid-YTW : 4.30 %
IFC.PR.A	FixedReset	-1.79 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.16 Bid-YTW : 6.32 %
TD.PF.A	FixedReset	-1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.65 Evaluated at bid price : 23.65 Bid-YTW : 3.32 %
NA.PR.W	FixedReset	-1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.74 Evaluated at bid price : 23.90 Bid-YTW : 3.28 %
NA.PR.S	FixedReset	-1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 23.02 Evaluated at bid price : 24.40 Bid-YTW : 3.32 %
MFC.PR.M	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 4.84 %
BMO.PR.S	FixedReset	-1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.91 Evaluated at bid price : 24.15 Bid-YTW : 3.34 %
PWF.PR.P	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 17.12 Evaluated at bid price : 17.12 Bid-YTW : 3.61 %
CM.PR.P	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.72 Evaluated at bid price : 23.85 Bid-YTW : 3.26 %
SLF.PR.D	Deemed-Retractible	-1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.24 Bid-YTW : 5.44 %
SLF.PR.C	Deemed-Retractible	-1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 5.44 %
SLF.PR.E	Deemed-Retractible	-1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.40 Bid-YTW : 5.41 %
BAM.PR.K	Floater	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 14.11 Evaluated at bid price : 14.11 Bid-YTW : 3.56 %
HSE.PR.C	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.56 Evaluated at bid price : 23.49 Bid-YTW : 4.28 %
FTS.PR.F	Perpetual-Premium	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 24.18 Evaluated at bid price : 24.46 Bid-YTW : 5.06 %
RY.PR.H	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.87 Evaluated at bid price : 24.10 Bid-YTW : 3.28 %
TRP.PR.E	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.11 Evaluated at bid price : 22.68 Bid-YTW : 3.69 %
SLF.PR.B	Deemed-Retractible	-1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.61 Bid-YTW : 5.06 %
RY.PR.Z	FixedReset	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.92 Evaluated at bid price : 24.16 Bid-YTW : 3.24 %
CM.PR.O	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.78 Evaluated at bid price : 23.90 Bid-YTW : 3.34 %
ENB.PR.F	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 18.86 Evaluated at bid price : 18.86 Bid-YTW : 4.58 %
MFC.PR.I	FixedReset	1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.83 %
ENB.PF.G	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 4.53 %
ENB.PF.C	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 20.37 Evaluated at bid price : 20.37 Bid-YTW : 4.57 %
TRP.PR.B	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 13.68 Evaluated at bid price : 13.68 Bid-YTW : 3.79 %
MFC.PR.K	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.77 Bid-YTW : 5.06 %
TRP.PR.C	FixedReset	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 15.75 Evaluated at bid price : 15.75 Bid-YTW : 3.80 %
BAM.PR.R	FixedReset	1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 19.39 Evaluated at bid price : 19.39 Bid-YTW : 4.18 %
ENB.PR.T	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 19.62 Evaluated at bid price : 19.62 Bid-YTW : 4.44 %
ENB.PR.N	FixedReset	1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 4.51 %
ENB.PR.Y	FixedReset	2.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 18.92 Evaluated at bid price : 18.92 Bid-YTW : 4.50 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.L	Perpetual-Premium	257,257	Scotia crossed 125,000 at 24.94. Nesbitt crossed 125,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 24.66 Evaluated at bid price : 24.90 Bid-YTW : 5.13 %
MFC.PR.G	FixedReset	251,476	TD crossed four blocks: 10,000 shares, 40,000 shares, 139,700 and 50,000, all at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 3.91 %
RY.PR.J	FixedReset	231,776	RBC crossed three blocks of 40,000 each, all at 24.95, and bought 13,500 from TD at the same price. Scotia crossed 50,000 at the same price again. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 23.13 Evaluated at bid price : 24.94 Bid-YTW : 3.46 %
POW.PR.A	Perpetual-Premium	184,100	Scotia crossed 59,300 at 25.35; Nesbitt crossed 60,000 at the same price; TD crossed 60,400 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-17 Maturity Price : 25.00 Evaluated at bid price : 25.33 Bid-YTW : -9.76 %
TD.PF.D	FixedReset	136,215	RBC bought 15,000 from TD at 24.70, then crossed 78,600 at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 23.09 Evaluated at bid price : 24.85 Bid-YTW : 3.50 %
CM.PR.Q	FixedReset	100,045	Scotia crossed blocks of 40,000 and 45,900, both at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 23.06 Evaluated at bid price : 24.75 Bid-YTW : 3.52 %
There were 71 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
SLF.PR.I	FixedReset	Quote: 24.03 – 25.00 Spot Rate : 0.9700 Average : 0.5592 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.03 Bid-YTW : 4.17 %
MFC.PR.M	FixedReset	Quote: 22.60 – 24.00 Spot Rate : 1.4000 Average : 1.0401 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 4.84 %
TRP.PR.E	FixedReset	Quote: 22.68 – 23.64 Spot Rate : 0.9600 Average : 0.6056 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.11 Evaluated at bid price : 22.68 Bid-YTW : 3.69 %
SLF.PR.H	FixedReset	Quote: 19.50 – 20.50 Spot Rate : 1.0000 Average : 0.6795 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.50 Bid-YTW : 6.18 %
TD.PF.B	FixedReset	Quote: 22.82 – 23.55 Spot Rate : 0.7300 Average : 0.4616 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-17 Maturity Price : 22.21 Evaluated at bid price : 22.82 Bid-YTW : 3.48 %
IAG.PR.G	FixedReset	Quote: 24.25 – 24.97 Spot Rate : 0.7200 Average : 0.4870 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 4.21 %

Market Action

April 16, 2015

Aston Hill is looking for a buyer:

Executives at Aston Hill Financial Inc. have been shopping their firm to other asset managers, hoping to find a buyer.

Over the past two months, senior employees at Aston Hill have reached out to several Canadian firms and expressed interest in selling their company, according to multiple people familiar with the discussions.

The overtures have been made at a volatile time for the company, which recently lost a high profile mandate to manage $2.2-billion ‎worth of funds for IA Clarington Investments Inc. which prompted Aston Hill to slash its dividend.

In January 2011, Aston Hill renamed its subsidiary, Catapult Financial Management Inc. to Aston Hill Investments Inc.

Catapult was mentioned on PrefBlog in February 2009 as offering a closed-end actively managed preferred share fund, Preferred Share Investment Trust. This fund now has $68.1-million under management and is still managed by Aston Hill Investments Inc. Performance has been disappointing.

It was another poor day for the Canadian preferred share market, with PerpetualDiscounts off 13bp, FixedResets losing 27bp and DeemedRetractibles down 15bp. The lengthy Performance Highlights table is dominated by losing FixedResets. Volume was extremely high.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 22.96 to be $1.11 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.98 cheap at its bid price of 13.50.

Click for Big

Most expensive is MFC.PR.J, resetting at +261 on 2018-3-19, bid at 24.30 to be $0.49 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 25.12 to be $0.70 cheap.

Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.06 to be $0.56 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 23.61 and appears to be $0.57 rich.

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 15.25, looks $1.01 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.05 and is $0.46 rich.

Click for Big

Investment-grade pairs other than TRP.PR.A / TRP.PR.F now predict an average over the next five years of about 0.30%, up marginally on the day. TRP.PR.A / TRP.PR.F remains an outlier, predicting 0.70%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -1.29%.

Click for Big

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	1.2637 %	2,211.4
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.2637 %	3,866.6
Floater	3.28 %	3.41 %	58,156	18.74	4	1.2637 %	2,350.9
OpRet	4.43 %	-1.59 %	38,516	0.13	2	0.0000 %	2,762.1
SplitShare	4.58 %	4.57 %	62,057	3.42	3	-0.0668 %	3,219.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,525.6
Perpetual-Premium	5.33 %	-0.12 %	64,639	0.08	25	-0.1598 %	2,516.0
Perpetual-Discount	5.15 %	5.08 %	145,758	14.91	9	-0.1327 %	2,770.9
FixedReset	4.61 %	3.80 %	263,395	16.35	85	-0.2724 %	2,316.5
Deemed-Retractible	4.90 %	2.38 %	106,875	0.16	36	-0.1484 %	2,653.8
FloatingReset	2.54 %	2.99 %	77,851	6.25	8	-0.0535 %	2,344.0

Performance Highlights
Issue	Index	Change	Notes
BAM.PF.E	FixedReset	-4.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 21.56 Evaluated at bid price : 21.56 Bid-YTW : 4.21 %
MFC.PR.K	FixedReset	-2.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.46 Bid-YTW : 5.24 %
TRP.PR.E	FixedReset	-2.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 22.28 Evaluated at bid price : 22.96 Bid-YTW : 3.63 %
TRP.PR.D	FixedReset	-1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 21.98 Evaluated at bid price : 22.42 Bid-YTW : 3.68 %
CU.PR.C	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 23.27 Evaluated at bid price : 24.31 Bid-YTW : 3.31 %
BMO.PR.W	FixedReset	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 22.80 Evaluated at bid price : 24.00 Bid-YTW : 3.25 %
CU.PR.E	Perpetual-Premium	-1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 24.29 Evaluated at bid price : 24.72 Bid-YTW : 5.00 %
IFC.PR.C	FixedReset	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 3.94 %
FTS.PR.M	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 22.69 Evaluated at bid price : 23.75 Bid-YTW : 3.59 %
SLF.PR.H	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.39 Bid-YTW : 5.62 %
FTS.PR.G	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 3.64 %
CIU.PR.C	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 3.46 %
BAM.PR.B	Floater	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 14.70 Evaluated at bid price : 14.70 Bid-YTW : 3.41 %
BAM.PR.C	Floater	2.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 14.65 Evaluated at bid price : 14.65 Bid-YTW : 3.42 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	152,806	RBC crossed 90,000 at 25.02. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 23.12 Evaluated at bid price : 24.90 Bid-YTW : 3.47 %
TD.PF.C	FixedReset	131,600	TD crossed 120,000 at 24.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 22.66 Evaluated at bid price : 23.71 Bid-YTW : 3.29 %
BIP.PR.A	FixedReset	88,298	TD crossed two blocks of 40,000 each, both at 24.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 22.97 Evaluated at bid price : 24.50 Bid-YTW : 4.42 %
NA.PR.W	FixedReset	80,400	TD crossed 70,000 at 24.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 22.91 Evaluated at bid price : 24.30 Bid-YTW : 3.20 %
TD.PF.D	FixedReset	73,200	RBC crossed 25,000 at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 23.03 Evaluated at bid price : 24.67 Bid-YTW : 3.53 %
TRP.PR.G	FixedReset	70,700	Desjardins crossed 50,000 at 24.87. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 23.07 Evaluated at bid price : 24.85 Bid-YTW : 3.69 %
There were 69 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.K	FixedReset	Quote: 21.46 – 22.14 Spot Rate : 0.6800 Average : 0.4802 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.46 Bid-YTW : 5.24 %
CU.PR.D	Perpetual-Premium	Quote: 24.80 – 25.21 Spot Rate : 0.4100 Average : 0.2512 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 24.34 Evaluated at bid price : 24.80 Bid-YTW : 4.98 %
MFC.PR.N	FixedReset	Quote: 22.79 – 23.49 Spot Rate : 0.7000 Average : 0.5427 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.79 Bid-YTW : 4.66 %
TD.PF.C	FixedReset	Quote: 23.71 – 24.14 Spot Rate : 0.4300 Average : 0.2890 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 22.66 Evaluated at bid price : 23.71 Bid-YTW : 3.29 %
BAM.PR.X	FixedReset	Quote: 16.46 – 16.89 Spot Rate : 0.4300 Average : 0.2895 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-16 Maturity Price : 16.46 Evaluated at bid price : 16.46 Bid-YTW : 4.30 %
NA.PR.M	Deemed-Retractible	Quote: 25.61 – 25.94 Spot Rate : 0.3300 Average : 0.2081 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-14 Maturity Price : 25.50 Evaluated at bid price : 25.61 Bid-YTW : 0.32 %

Market Action

April 15, 2015

Today’s big news was the Bank of Canada rate decision:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

Total CPI inflation is at 1 per cent, reflecting the drop in consumer energy prices. Core inflation has remained close to 2 per cent in recent months, as the temporary effects of sector-specific factors and pass-through of the lower Canadian dollar have offset the disinflationary forces from slack in the economy.
…
The very weak first quarter has led to a widening of Canada’s output gap and additional downward pressure on projected inflation. However, the anticipated recovery in growth means that the output gap will be back in line with its previous trajectory later this year. Consequently, the effects on core inflation of the lower dollar and the output gap will continue to offset each other. As the economy reaches and remains at full capacity around the end of 2016, both total and core inflation are projected to be close to 2 per cent on a sustained basis.

Risks to the outlook for inflation are now roughly balanced and risks to financial stability appear to be evolving as expected. The Bank judges that the current degree of monetary policy stimulus remains appropriate and therefore is maintaining the target for the overnight rate at 3/4 per cent.

The loonie liked the news:

The Canadian dollar touched its highest level in two months after the central bank kept borrowing rates unchanged, pointing to signs damage from an oil-price shock may already be fading and manufacturing exports picking up.
…
In its monetary policy report, the Bank of Canada said the economy is responding to the stimulus it added to cushion Canada’s economy from the fall in oil, its largest export, and forecast faster growth later in the year.
…
The bank said in its quarterly MPR there were signs of improvement in the labor market and the non-energy exports it is counting on to drive economic expansion, with industries sensitive to a lower exchange rate, like aircraft and industrial machinery, expected to lead growth.

Parakeet Poluz had some good news for the electoral prospects of his masters:

Bank of Canada Governor Stephen Poloz is becoming Canada’s leading optimist projecting a faster return to target on inflation amid a generally improving economy.

Growth will quicken to a 2.8 percent annualized pace in the third quarter, the central bank said Wednesday, exceeding all forecasts in a Bloomberg survey. Poloz kept the benchmark interest rate at 0.75 percent and said the positive side of the story will dominate in the second half, lifting inflation back to the 2 percent target almost a year ahead of schedule.

It’s a stark change from January, when Poloz shocked markets by cutting rates by a quarter point, a move he called “insurance” against the economic damage wrought by collapsing oil prices. He also told the Financial Times last month Canada’s economy was atrocious in the first quarter. The statement released by the bank Wednesday signaled the worst of the oil-price shock may be over, with improvements ranging from early signs of labor-market strength to gains in the non-energy exporting sector.

My favourite SEC Commissioner, Daniel M. Gallagher, had some interesting things to say about supra-national regulatory bodies:

On its face, “regulatory harmonization” sounds like a noble goal: if jurisdictions could coalesce around a single set of high-quality standards, compliance burdens could be reduced with no real reduction of investor protections. Since the crisis, however, “regulatory harmonization” has taken on a new and worrisome meaning. Instead of facilitating cooperation among regulators from different jurisdictions, the concept of “regulatory harmonization” has morphed into a top-down, forcible imposition of one-size-fits-all regulatory standards on sovereign nations by opaque groups of global regulators. This “one world, one government” approach to regulation doesn’t allow itself to be bothered by musty old concepts like national sovereignty or consent of the governed.

In 2009, the G-20 directed the FSB to coordinate the work of national authorities and multinational standard-setting organizations in the development of effective financial services regulation, with an emphasis on promoting financial stability. However, in reality, the FSB has been doing far more than merely coordinate the efforts of national regulators.

Recently, as evidenced by a memorandum to FSB members from its chairman, Bank of England Governor Mark Carney, the FSB has removed all doubt of its real purpose: to direct national authorities to implement the FSB’s own policies.[3] Mr. Carney explained in his memo that the FSB’s decisions must receive “full, consistent and prompt implementation” in member nations, as this “is essential to maintaining an open and resilient financial system.”
…
Let me be clear: I am not calling for the disbanding of international financial regulatory organizations. Rather, we must return these entities to their original pre-financial crisis purposes of facilitating cooperation among regulators from different jurisdictions. The concepts that steered these efforts were regulatory equivalence and substituted compliance. The ultimate goal was for regulators in each jurisdiction to recognize that many of their foreign counterparts had regulatory goals similar to their own, and that their regulatory approaches were of a high quality despite their differences. Indeed, there is usually more than one way to achieve any given regulatory objective, and it’s not always clear which way is “best.”

Having acknowledged that there is more than one way to achieve the same goals, we as regulators could voluntarily choose to deem compliance with a high quality foreign regulatory regime to qualify as a substitute for compliance with our own domestic requirements. In doing so, we could avoid complicated cross-border regulatory disputes and lend greater certainty and predictability to cross-border transactions. By avoiding layered, duplicative, and sometimes incompatible regulations, we could facilitate smoother and more efficient interactions between our respective capital markets, and by allowing and even encouraging heterogeneity of regulation, we could foster robustness and innovation in our capital markets.

The current coercive approach to regulatory harmonization, on the other hand, is flawed as a matter of policy and will become increasingly impractical as the number of nations needing to be coerced grows. It is difficult enough to reach agreement on matters between the U.S. and Europe, despite their many similarities. Other markets, particularly in Asia, the Middle East, and other parts of the developing world, will undoubtedly — and in fact already have — considered going it alone. Others may not have been invited to the party in the first place, and so feel themselves under no obligation to play along.

In an effort to divine the future, Canadian preferred share investors turned to the tarot … two cards kept showing up:

Click for Big

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 14bp, FixedResets off 98bp and DeemedRetractibles gaining 2bp. MFC, FTS and BAM FixedResets were notably prominent on an extremely lengthy Performance Highlights table, while volatility itself was underscored by the fact that there was an observable crop of winners as well. Volume was extremely high.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.50 to be $1.45 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.96 cheap at its bid price of 15.45.

Click for Big

Most expensive is MFC.PR.J, resetting at +261 on 2018-3-19, bid at 24.35 to be $0.52 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.12 to be $0.41 cheap.

Horrible performance by the MFC issues today resulted in a marked spread-widening; volatility was hardly affected. Yesterday’s figures were 223bp and 17%.

Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.07 to be $0.76 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.55 and appears to be $1.11 rich.

Again, horrible daily performance has manifested itself mainly in the spread. Yesterday’s figures were 303bp and 4%.

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 15.30, looks $0.88 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.01 and is $0.46 rich.

Click for Big

Investment-grade pairs other than TRP.PR.A / TRP.PR.F now predict an average over the next five years of just over 0.30%, up marginally on the day. TRP.PR.A / TRP.PR.F remains an outlier, predicting 0.89%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -1.11%.

Click for Big

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	2.0706 %	2,183.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	2.0706 %	3,818.4
Floater	3.32 %	3.48 %	58,896	18.59	4	2.0706 %	2,321.6
OpRet	4.43 %	-1.56 %	39,795	0.13	2	0.0000 %	2,762.1
SplitShare	4.58 %	4.56 %	62,990	3.42	3	-0.1201 %	3,222.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,525.6
Perpetual-Premium	5.32 %	0.92 %	64,904	0.08	25	-0.1784 %	2,520.1
Perpetual-Discount	5.14 %	5.11 %	145,629	14.92	9	0.1424 %	2,774.6
FixedReset	4.60 %	3.81 %	262,388	16.38	85	-0.9843 %	2,322.9
Deemed-Retractible	4.89 %	2.08 %	106,682	0.12	36	0.0165 %	2,657.8
FloatingReset	2.54 %	2.97 %	77,620	6.26	8	0.0321 %	2,345.3

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.K	FixedReset	-4.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 4.92 %
MFC.PR.N	FixedReset	-4.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.69 Bid-YTW : 4.71 %
MFC.PR.L	FixedReset	-3.78 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.65 Bid-YTW : 5.21 %
MFC.PR.M	FixedReset	-3.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.02 Bid-YTW : 4.60 %
FTS.PR.K	FixedReset	-3.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 3.68 %
FTS.PR.G	FixedReset	-3.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 21.12 Evaluated at bid price : 21.12 Bid-YTW : 3.68 %
BAM.PF.G	FixedReset	-2.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.56 Evaluated at bid price : 23.55 Bid-YTW : 4.04 %
BAM.PF.F	FixedReset	-2.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.53 Evaluated at bid price : 23.40 Bid-YTW : 4.06 %
BNS.PR.Z	FixedReset	-2.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 4.56 %
SLF.PR.G	FixedReset	-2.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.16 Bid-YTW : 7.36 %
TRP.PR.B	FixedReset	-2.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 13.61 Evaluated at bid price : 13.61 Bid-YTW : 3.81 %
TRP.PR.D	FixedReset	-2.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.22 Evaluated at bid price : 22.80 Bid-YTW : 3.60 %
BAM.PF.E	FixedReset	-2.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.01 Evaluated at bid price : 22.55 Bid-YTW : 3.97 %
ENB.PR.D	FixedReset	-2.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 18.02 Evaluated at bid price : 18.02 Bid-YTW : 4.62 %
ENB.PR.F	FixedReset	-2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 18.66 Evaluated at bid price : 18.66 Bid-YTW : 4.63 %
BMO.PR.Q	FixedReset	-2.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 4.52 %
BAM.PR.Z	FixedReset	-2.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.92 Evaluated at bid price : 23.80 Bid-YTW : 4.05 %
BAM.PF.A	FixedReset	-2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.64 Evaluated at bid price : 23.45 Bid-YTW : 4.05 %
MFC.PR.J	FixedReset	-1.97 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.35 Bid-YTW : 3.96 %
ENB.PR.Y	FixedReset	-1.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 18.43 Evaluated at bid price : 18.43 Bid-YTW : 4.62 %
SLF.PR.H	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.60 Bid-YTW : 5.49 %
RY.PR.H	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.95 Evaluated at bid price : 24.30 Bid-YTW : 3.24 %
BAM.PR.X	FixedReset	-1.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 16.59 Evaluated at bid price : 16.59 Bid-YTW : 4.26 %
TRP.PR.E	FixedReset	-1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.57 Evaluated at bid price : 23.50 Bid-YTW : 3.52 %
TD.PF.D	FixedReset	-1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 23.01 Evaluated at bid price : 24.62 Bid-YTW : 3.54 %
HSE.PR.C	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.75 Evaluated at bid price : 23.90 Bid-YTW : 4.19 %
FTS.PR.M	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.80 Evaluated at bid price : 24.00 Bid-YTW : 3.54 %
PWF.PR.T	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.99 Evaluated at bid price : 24.26 Bid-YTW : 3.36 %
BNS.PR.Y	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 4.16 %
ENB.PR.H	FixedReset	-1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 17.01 Evaluated at bid price : 17.01 Bid-YTW : 4.62 %
ENB.PR.B	FixedReset	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 17.67 Evaluated at bid price : 17.67 Bid-YTW : 4.70 %
FTS.PR.J	Perpetual-Premium	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 23.95 Evaluated at bid price : 24.36 Bid-YTW : 4.92 %
TD.PF.C	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.75 Evaluated at bid price : 23.90 Bid-YTW : 3.26 %
PWF.PR.S	Perpetual-Premium	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 24.22 Evaluated at bid price : 24.63 Bid-YTW : 4.86 %
BMO.PR.T	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.96 Evaluated at bid price : 24.31 Bid-YTW : 3.22 %
IFC.PR.A	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.52 Bid-YTW : 6.08 %
MFC.PR.G	FixedReset	-1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 3.99 %
CU.PR.D	Perpetual-Premium	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 24.55 Evaluated at bid price : 25.02 Bid-YTW : 4.94 %
TD.PF.A	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.85 Evaluated at bid price : 24.10 Bid-YTW : 3.24 %
TRP.PR.A	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 18.85 Evaluated at bid price : 18.85 Bid-YTW : 3.78 %
BAM.PR.C	Floater	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 14.32 Evaluated at bid price : 14.32 Bid-YTW : 3.50 %
IFC.PR.C	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.56 Bid-YTW : 3.81 %
ENB.PR.T	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 19.35 Evaluated at bid price : 19.35 Bid-YTW : 4.50 %
TD.PF.B	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.85 Evaluated at bid price : 24.05 Bid-YTW : 3.24 %
BAM.PF.D	Perpetual-Discount	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.84 Evaluated at bid price : 23.14 Bid-YTW : 5.32 %
BAM.PR.K	Floater	2.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 14.20 Evaluated at bid price : 14.20 Bid-YTW : 3.53 %
PWF.PR.A	Floater	3.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 2.92 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.Q	FixedReset	121,083	Scotia crossed 30,000 at 24.82. TD crossed 40,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 23.07 Evaluated at bid price : 24.80 Bid-YTW : 3.51 %
NA.PR.W	FixedReset	104,100	Nesbitt crossed 20,000 at 24.50. TD crossed 75,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.95 Evaluated at bid price : 24.38 Bid-YTW : 3.18 %
CM.PR.O	FixedReset	92,495	Nesbitt crossed 50,000 at 24.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.94 Evaluated at bid price : 24.25 Bid-YTW : 3.27 %
RY.PR.J	FixedReset	77,018	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 23.10 Evaluated at bid price : 24.85 Bid-YTW : 3.48 %
NA.PR.S	FixedReset	76,755	Nesbitt crossed 30,000 at 24.82; TD crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 23.17 Evaluated at bid price : 24.80 Bid-YTW : 3.25 %
TD.PF.D	FixedReset	73,580	RBC crossed 50,000 at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 23.01 Evaluated at bid price : 24.62 Bid-YTW : 3.54 %
There were 64 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.M	FixedReset	Quote: 23.02 – 24.45 Spot Rate : 1.4300 Average : 0.9255 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.02 Bid-YTW : 4.60 %
MFC.PR.L	FixedReset	Quote: 21.65 – 22.75 Spot Rate : 1.1000 Average : 0.7477 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.65 Bid-YTW : 5.21 %
BAM.PF.G	FixedReset	Quote: 23.55 – 24.25 Spot Rate : 0.7000 Average : 0.3867 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.56 Evaluated at bid price : 23.55 Bid-YTW : 4.04 %
BAM.PF.F	FixedReset	Quote: 23.40 – 23.80 Spot Rate : 0.4000 Average : 0.2412 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 22.53 Evaluated at bid price : 23.40 Bid-YTW : 4.06 %
MFC.PR.K	FixedReset	Quote: 22.01 – 22.42 Spot Rate : 0.4100 Average : 0.2612 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 4.92 %
ENB.PR.F	FixedReset	Quote: 18.66 – 19.19 Spot Rate : 0.5300 Average : 0.3880 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-04-15 Maturity Price : 18.66 Evaluated at bid price : 18.66 Bid-YTW : 4.63 %

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Category: Market Action

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