Category: Market Action

The major strength of capitalism is that people will make and sell what other people want. The major weakness of capitalism is that sometimes the appeal is not in the actual product. The random nature of mutual fund fees is basically a truism:

It seems reasonable to believe that investors would be willing to pay more if they received a higher rate of return. However, expense ratios and turnover are negatively correlated with return (Carhart, 1997; Dellva & Olson, 1998; O’Neal, 2004). Funds with low expense ratios outperform those with high expense ratios (Haslem, Baker, & Smith, 2008). Similarly, lower performing fund have higher fees, and high-quality funds do not charge comparatively higher fees (Gil-Bazo & Ruiz-Verdu, 2008). In general, mutual funds underperform by about the amount of fees and expenses (Carhart, 1997; Fama & French, 2008).
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Mutual funds on average underperform benchmarks by approximately the amount of fees and expenses (Fama and French, 2008). As a result of lower expenses, broad index funds tend to outperform actively managed funds with equivalent risk (Malkiel, 2003). Therefore, the best way for most investors to improve performance is to have a broad index fund with minimal costs (Malkiel, 2003).

Do consumers tend to follow this advice? Mahoney (2004) finds that mutual funds with low fees tend to be larger than funds with high fees, suggesting that many investors follow the wisdom of minimizing expenses. However, such investments in a broad market index fund do not necessarily coincide with low costs. For example, S&P 500 index funds are designed to follow the index and should be relatively similar. As a result, investors should seek the lowest costs for such funds. Surprisingly, returns vary by 2% per year, and expense ratios range from 6 bps to 135 bps per year (Elton, Gruber, & Busse, 2004). Even though less expensive alternatives exist, S&P fund investors also buy funds with loads and funds that spend more on marketing (Elton et al., 2004).

As noted above there is great emphasis on marketing:

Once invested in a high expense fund, investors may be less willing to search for lower cost alternatives. With thousands of mutual funds offered by hundreds of fund families, sorting through the choices is daunting. Sirri and Tufano (1998) contend that when search costs are high, individual investors turn to rating services and periodicals for advice. They document that fund flows relate directly to the size of the fund complex and level of media attention received by the fund. Since most mutual fund advertising focuses on past performance rather than cost, funds that spend disproportionately on marketing and distribution will tend to attract the less knowledgeable investors that rely on these publications.

This marketing-that-misses-the-point has spread to universities:

Harvard University said applications for this fall’s freshman class jumped 9 percent, to a record 37,305, after the school heightened recruiting on social media and publicized a $150 million gift mostly for financial aid.

Harvard joins six of eight Ivy League schools announcing more hopefuls this year, suggesting their admit rates may decline when decisions are announced next month. Columbia, Princeton, Brown and the University of Pennsylvania also reported records.

Colleges say they are increasing marketing efforts to reach top students, especially those from underrepresented groups. Some high school advisers wonder whether the institutions are trying to buff up their images of selectivity.

This has not gone unnoticed:

Colleges also boost applications by deluging students with brochures and book-length “viewbooks” featuring attractive students and famous alumni. Further tactics have included waiving application fees, making essays optional, and counting incomplete entries in application statistics. Colleges track down kids after buying names of students after they take SAT or ACT college entrance exams. Taking the bait isn’t cheap: Colleges typically charge from $50 to $75 to apply.

A survey last year of 1,500 university deans and high school counselors by the National Association for College Admission Counseling reported concern about a shift toward a “sales culture in college admission.” Non-emergency deadline extensions are the latest example, according to David Hawkins, the trade group’s executive director for policy.

Bloomberg’s got its own marketing to do … the phrase “sales culture” appears in the press release announcing the availability of survey report but not in the report itself.

But the report gets close enough:

College admission has become big business over the last decade. At some schools, vice presidents of enrollment oversee multi-million dollar admission budgets and hire high-priced marketing consultants to improve brand recognition and manage search campaigns. Our national conferences resemble trade shows, with massive vendor halls and corporate sponsors. Institutional pressures have increased in this competitive and public admission environment, leading to a shift in how admission offices operate. Institutional interest in selectivity and rankings can influence decisions on recruitment and review strategies.

This has bothered me for quite some time, and has come to a head with a report on Colby College:

Maine’s Colby College, founded in 1813, doubled its debt load last month by borrowing about $101 million for athletics, performing arts and other upgrades on its campus in Waterville. The plans reflect the ambitions of David Greene, the school’s president since last year, who’s seeking to boost applications and improve its standing in national rankings.
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“There is a tremendous risk taking on debt to build facilities that don’t serve the educational goals and are just to attract a particular type of student,” said David Bergeron, a vice president in Washington at Center for American Progress, a nonprofit that promotes access to higher education. “The bigger concern is that all of these efforts just lead to greater expense.”

This is craziness and just adds to the problem of student loan debt, which is beginning to have a significant economic effect as discussed on December 10, 2014. But it’s a crazy world.

The US Treasury is extending term:

As the insatiable demand for Treasuries pushes down yields, the U.S. has locked in low-cost financing for years to come by issuing more long-term debt. The average maturity of Treasuries is now poised to reach an all-time high this year.

The shift is saving money for American taxpayers — but it’s also made Treasuries more perilous for bond investors as the strength of the U.S. economy bolsters the Federal Reserve’s case for raising interest rates. Holders stand to lose about $570 billion if yields rise by a percentage point, data compiled by Bloomberg show. In 2009, it was $170 billion.
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The 30-year bond, the longest maturity security issued by the Treasury, returned 29 percent, double that for U.S. equities. The rally accelerated in 2015, pushing down yields to a record-low 2.22 percent on Jan. 30.

A year ago, yields were closer to 4 percent.
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Treasuries due three years or less make up 48 percent of the market for U.S. debt, versus 58 percent six years ago.

The share of bills, due in one year or less, is approaching the least since the 1950s.

That’s given the U.S. more time to repay its obligations. The average maturity has reached 68.7 months, or two months short of its high in 2001. With the U.S. budget deficit falling to a six-year low, the government is in better shape to finance its record debt burden when interest rates do rise.

The U.S. pays less in interest now than it did in 2008, even after the amount of U.S. debt outstanding more than doubled to $12.5 trillion.

There has been some echo of this in Canada:

In the 2012–13 Debt Management Strategy, the Government announced a temporary increase in 10-year bond issuance through an additional 10-year bond auction in the first quarter of 2012–13 and the discontinuation of regular bond buyback operations on a cash basis for the 10-year sector.

In September 2012, the Minister of Finance announced that a further $10 billion of issuance would be temporarily reallocated into 10- and 30-year nominal bonds (split 75/25 per cent) over a two-year period. Details were provided in a market notice accompanying the Quarterly Bond Schedule for the third quarter.[1]

These adjustments are advantageous and prudent because they contribute to a reduction in refinancing risk at a low cost, consistent with the key objectives of the Government’s medium-term debt strategy.

.. and in 2013-14:

In 2013–14, there was a further transition towards a more even distribution of market debt by remaining term to maturity to help reduce exposure to debt rollover risk. As projected in the Debt Management Strategy for 2013–14, the stock of treasury bills declined mainly as a result of about $42 billion of mortgage-backed securities purchased under the IMPP maturing in the latter half of 2013–14. The increase in the stock of bonds with remaining terms to maturity of 10 years or more reflects the temporary increase in longer-term issuance first announced in Budget 2012 and confirmed again in Budget 2013 (see Chart 2).

How the mighty have fallen! Sprott is accentuating its survivor bias:

Sprott Inc. has abruptly shuttered one of its hedge funds after it was hammered by the Swiss National Bank’s shocking mid-January decision to drop its currency peg to the euro.

The Sprott Absolute Return Income Fund, launched in Aug. 31, 2010, had $21-million in assets under management and a stated investment objective to “maximize absolute total returns on investments with low volatility” primarily by investing in fixed income securities, currencies and derivatives. It had just enjoyed a solid 2014, generating an 11.6-per-cent return – well in excess of the main hedge fund indexes – when disaster struck on Jan. 15.
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Its managers had staked 10 per cent of the fund’s assets selling a Euro-Swiss franc put, an option that would generate value for the fund as long as the Swiss central bank held to the currency peg.
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Sprott closed out the position at a huge loss: by the end of January, the fund’s assets under management had fallen by 17.8 per cent over the month, almost entirely due to the euro-Swiss franc put bet gone bad. By contrast, the index which tracks similar hedge funds, the HFRX Absolute Return Index, posted a 0.6 per cent gain.

Another media favourite is beating his breast and flaunting crocodile tears:

Famed investor Jeremy Grantham is still kicking himself for missing out on one of the more lucrative trading opportunities in recent years – buying put options on oil in 2014.

The sharp decline in crude prices was both inevitable and predictable, because global demand was not growing fast enough to absorb the increased supply coming from U.S. frackers, Mr. Grantham writes in his latest quarterly letter to institutional clients
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He exclaims: “How on Earth did I miss this!” Psychologists might label this a classic case of hindsight bias – the tendency to regard market-shifting developments as entirely predictable.

If you can’t actually foresee anything, the next best thing is to tell your clients that to a person of your calibre it should have been obvious. But I’ve had a look at Grantham’s firm’s performance – well, he’s better than the average stockbroker, anyway. No more than that.

Longevity risk is getting more important all the time:

AT&T Inc. last month absorbed a $7.9 billion non-cash charge from rising pension costs, including retirees’ longer lifespans. At Northrop Grumman Corp., updated mortality estimates boosted its pension obligations by $1.8 billion to $30.5 billion, while shareholders in International Business Machines Corp. saw their equity shrink by around $6 billion after the company recalculated its pension bill, in part because of the mortality changes.
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In September, Motorola Solutions Inc. cut its pension obligations by $4.2 billion by transferring responsibility for 30,000 retirees to Prudential Financial Inc. and offering others lump sum payments. Now, if Motorola retirees live longer, Prudential will be on the hook, not their former employer.

Dozens of additional deals are likely this year. In a MetLife Inc. survey of 228 pension plans, 29 percent said they are considering similar transactions over the next two years.

Demand for such pension risk transfer deals eventually will eclipse the insurance industry’s capacity and provide an opening for investment banks to sell securities known as “death derivatives,” some experts say.
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The trigger for corporate pension plans to update their lifespan assumptions was the October release of new mortality tables from the Society of Actuaries in Schaumburg, Illinois. Starting in 2009, society researchers pored over private pension plan data on 220,000 deaths and 10.5 million life-years, said Dale Hall, the society’s managing director for research.

The new estimates, the first update since 2000, were designed to provide more realistic guidance for plan sponsors who have generally done a poor job of keeping pace with the steady improvement in life expectancy in recent decades.

A 65-year-old male now can expect to live 21.6 additional years, two years longer than in the old tables.

Publication of the new tables — a standard reference for plan sponsors — began having a financial impact in fourth-quarter earnings statements.

That’s a double whammy for some:

U.S. public pensions reported median returns of 6.8 percent last year, the sixth year in a row of gains after the financial crisis, according to Wilshire Associates.

The gains, though, are less than the annual investment returns of 7.5 percent to 8 percent that many state and local governments count on to pay benefits for teachers, police and other employees. In the 10 years through Dec. 31, public pensions had a median return of 6.6 percent.
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Assets of the 100 largest U.S. public pension funds rose to $3.31 trillion in the third quarter of 2014 from $3.06 trillion in the same period of 2013, according to the U.S. Census Bureau. The average funding of state and local pensions has deteriorated even though investment returns have improved, partly because of inadequate contributions by governments, according to a report last year from Moody’s Investors Service on the 25 largest public plans. Unfunded liabilities tripled to almost $2 trillion from 2004 through 2013.

Nationwide, state and local pensions had a median allocation of 45.4 percent in U.S. stocks and 13 percent in foreign stocks, according to Wilshire’s Trust Universe Comparison Service.

Greece is planning to borrow now, default later:

Greece will seek about 10 billion euros ($11.3 billion) in short-term financing as it tries to stave off a funding crunch while buying time to push its creditors to ease austerity demands.

Greece’s Finance Minister Yanis Varoufakis will present a proposal at a Wednesday meeting of euro area finance ministers in Brussels that will ask for an 8 billion-euro increase in the stock of Treasury Bills the country is allowed, said a government official who asked not to be named as the negotiations are confidential. It will also seek the disbursement of 1.9 billion euros of profits that euro area central banks made on their Greek bonds holdings.
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Investors are less enthusiastic. Greek government bonds fell for a fourth day on Feb. 9, with yields on three-year notes jumping 308 basis points to 21.08 percent, while bank stocks fell 12.2 percent in the Athens Stock Exchange.

And here’s some more proof that millennials are useless:

Note that the figures represent the percentage of respondents who have personally observed this behaviour, not the percentage of parents who indulge. Respondents were 725 employers who responded to the Michigan State University’s 2006-2007 recruiting survey.

It was another good day for the Canadian preferred share market, with PerpetualDiscounts gaining 3bp, FixedResets winning 22bp and DeemedRetractibles up 10bp. The Performance Highlights table is lengthy again, dominated by winning FixedResets. Volume was low.

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

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

Here’s TRP:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.33 to be $0.85 rich, while TRP.PR.A, resetting 2019-12-31 at +192, is bid at a very suspicious 19.00 (with an enormous spread) to be $1.23 cheap.

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.J, resetting at +281 on 2018-3-19, bid at 25.45 to be $0.27 rich, while MFC.PR.K, resetting at +222 on 2018-9-19, is bid at 23.62 to be $0.50 cheap.

Here’s another good fit to reasonable numbers (it’s the scale that makes it look so awful!). I hope this market doesn’t start making sense, or I’ll be out of work!

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.68 to be $0.45 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.34 and appears to be $0.68 rich.

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 17.00, looks $0.86 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 23.63, and is $0.96 rich.

All the break-even rates are scattered around zero – which is at least somewhat more reasonable than being negative!

On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:

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	0.5962 %	2,195.0
FixedFloater	4.33 %	3.50 %	21,095	18.42	1	1.6698 %	4,078.2
Floater	3.28 %	3.46 %	59,380	18.59	4	0.5962 %	2,333.4
OpRet	4.04 %	1.95 %	100,068	0.35	1	0.0395 %	2,753.1
SplitShare	4.28 %	4.05 %	32,867	3.56	5	0.0203 %	3,195.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,517.4
Perpetual-Premium	5.33 %	-5.46 %	60,894	0.08	24	-0.0424 %	2,514.4
Perpetual-Discount	4.95 %	4.81 %	127,430	15.26	10	0.0292 %	2,789.3
FixedReset	4.37 %	3.38 %	218,977	17.00	79	0.2233 %	2,444.4
Deemed-Retractible	4.91 %	0.89 %	108,317	0.12	39	0.0969 %	2,647.5
FloatingReset	2.48 %	2.91 %	84,742	6.42	7	0.1611 %	2,312.7

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.A	FixedReset	-5.00 %	Not entirely real, but indicative of a bad day nonetheless. There was a sale of 2,200 shares at 3:59pm that took out the bids; executions of this order (possibly more than just one, but the seller [anonymous] and timestamp are the same) started at 19.73 and continued until 100 were executed at 19.43. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 3.73 %
TRP.PR.F	FloatingReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 17.91 Evaluated at bid price : 17.91 Bid-YTW : 3.43 %
BAM.PF.B	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 22.91 Evaluated at bid price : 24.16 Bid-YTW : 3.60 %
IFC.PR.C	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.63 Bid-YTW : 3.79 %
BAM.PR.C	Floater	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 14.45 Evaluated at bid price : 14.45 Bid-YTW : 3.48 %
ENB.PF.G	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 22.63 Evaluated at bid price : 23.74 Bid-YTW : 3.87 %
TRP.PR.D	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 22.92 Evaluated at bid price : 24.20 Bid-YTW : 3.32 %
BMO.PR.Q	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.16 Bid-YTW : 3.53 %
NA.PR.W	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 23.11 Evaluated at bid price : 24.84 Bid-YTW : 3.09 %
HSE.PR.A	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 17.96 Evaluated at bid price : 17.96 Bid-YTW : 3.63 %
PWF.PR.T	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 23.35 Evaluated at bid price : 25.30 Bid-YTW : 3.13 %
ENB.PR.F	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 21.47 Evaluated at bid price : 21.47 Bid-YTW : 4.00 %
MFC.PR.F	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 4.83 %
ENB.PR.Y	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 4.01 %
BAM.PR.G	FixedFloater	1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 21.99 Evaluated at bid price : 21.92 Bid-YTW : 3.50 %
IFC.PR.A	FixedReset	1.97 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.19 Bid-YTW : 5.66 %
TRP.PR.C	FixedReset	2.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 3.45 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	119,507	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 23.21 Evaluated at bid price : 25.21 Bid-YTW : 3.34 %
NA.PR.W	FixedReset	89,388	TD crossed blocks of 60,000 and 25,000 at 24.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 23.11 Evaluated at bid price : 24.84 Bid-YTW : 3.09 %
GWO.PR.N	FixedReset	59,248	Desjardins sold 41,200 to anonymous at 19.75. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.50 Bid-YTW : 5.08 %
MFC.PR.M	FixedReset	53,993	Scotia crossed 40,000 at 24.65. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.74 Bid-YTW : 3.72 %
FTS.PR.M	FixedReset	47,700	RBC crossed 10,000 at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 23.22 Evaluated at bid price : 25.15 Bid-YTW : 3.30 %
CM.PR.O	FixedReset	36,230	TD crossed 27,000 at 24.88. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 23.15 Evaluated at bid price : 24.85 Bid-YTW : 3.14 %
There were 23 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.A	FixedReset	Quote: 19.00 – 20.45 Spot Rate : 1.4500 Average : 0.9583 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 3.73 %
PWF.PR.P	FixedReset	Quote: 19.01 – 19.52 Spot Rate : 0.5100 Average : 0.3088 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 3.20 %
TRP.PR.F	FloatingReset	Quote: 17.91 – 18.49 Spot Rate : 0.5800 Average : 0.4194 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 17.91 Evaluated at bid price : 17.91 Bid-YTW : 3.43 %
CU.PR.F	Perpetual-Discount	Quote: 23.59 – 24.00 Spot Rate : 0.4100 Average : 0.3053 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 23.25 Evaluated at bid price : 23.59 Bid-YTW : 4.76 %
CU.PR.E	Perpetual-Premium	Quote: 25.01 – 25.50 Spot Rate : 0.4900 Average : 0.3892 YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 4.87 %
FTS.PR.J	Perpetual-Discount	Quote: 25.00 – 25.40 Spot Rate : 0.4000 Average : 0.3022 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-09 Maturity Price : 24.57 Evaluated at bid price : 25.00 Bid-YTW : 4.81 %

Jobs, jobs, jobs!

The U.S. labor market leaped forward in January, capping the greatest three-month jobs gain in 17 years and delivering the biggest wage increase since 2008.

Payrolls advanced by 257,000 last month following increases in December and November that were even bigger than previously reported, figures from the Labor Department showed Friday in Washington. The unemployment rate rose to 5.7 percent from 5.6 percent as more than a million Americans streamed into the labor force seeking work.
…
Average hourly earnings jumped 0.5 percent, the most since November 2008, from the prior month. They were up 2.2 percent over the past year, the biggest advance since August.
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A striking aspect of the report was a revision that added 147,000 jobs to the payroll tally for the previous two months, which also incorporated adjustments back to 2010.

Employment in November was revised up to a 423,000 gain, the most since May 2010. Private payrolls, which exclude government agencies, soared 414,000 that month, the biggest advance since September 1997.

Job gains in January were led by retailers, construction firms and health-care companies.

So, previously scheduled deflation has been cancelled:

After the jobs report, traders pulled forward their expectations for when the Fed will raise borrowing costs from near zero, where they’ve been since 2008. Futures contracts show a 27 percent chance of a June rate increase, up from 18 percent on Thursday.

It’s not just the labor market that’s giving ammunition to to the view that higher rates are coming. Oil is also headed for its biggest two-week rally since March 1998, alleviating concerns that the commodities drop will ruin the U.S. outlook.

The bond market is now pricing in annual inflation of 1.49 percent for the next five years, up from 1.07 percent just a month ago, according to break-even rates on Treasury Inflation Protected Securities. That’s a lot closer to the Fed’s 2 percent target.

At the same time, derivatives traders still don’t see the economy strengthening enough to compel the Fed to raise its benchmark rate above 2 percent by the end of 2018. The Fed’s longer-run forecast for rates is about 4 percent.

Canada was not left out – McJobs, McJobs, McJobs!

The Canadian economy created a greater-than-expected 35,400 jobs last month, fuelled by growth in part-time positions, the self employed and Alberta’s non-energy sector.

The country’s unemployment rate fell to 6.6 per cent in January from 6.7 per cent a month earlier, Statistics Canada said Friday.

The gains topped forecasts and show some resilience in the face of lower oil prices and weakening business investment. But some of the details were weaker, showing part-time work and self employment led last month’s gains while the country’s participation rate remains at its lowest level since 2000.
…
In the last year, full-time employment has risen 0.8 per cent and part-time climbed 0.6 per cent. The total number of hours worked is slightly higher, up 0.3 per cent.

The numbers come after Statscan recently revised its estimates for job growth in 2014. Employment gains were the slowest since 2009 last year, at 121,000, a third lower than the originally estimated increase of 186,000.

Canada’s participation rate was unchanged at 65.7 per cent last month.

So, given that future Canadian jobs will depend on demand for domestic staff in the States, the dollar fell:

The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, declined 0.8 percent to C$1.2529 per U.S. dollar at 2:52 p.m. in Toronto. One loonie buys 79.82 U.S. cents.
…
Canada’s currency depreciated 1.8 percent on Jan. 21 after the central bank trimmed its main rate to 0.75 percent from 1 percent. On Jan. 30 it touched C$1.2799 per U.S. dollar, the lowest level in nearly six years, part of the currency’s worst monthly start to a year in Bloomberg records going back to 1971.

Bank of Canada policy makers next meet March 4, with swaps traders seeing 60 percent chance they will cut the rate to 0.5 percent, according to Bloomberg calculations based on trading in overnight index swaps. Yesterday, the odds were 64 percent.

But we’re doing better than Greece!

Standard & Poor’s cut Greece’s long-term sovereign credit rating to B– from B on Friday, warning that liquidity restraints on Greek banks would limit the time the new government has to clinch a deal with its creditors.
…
“Liquidity constraints have narrowed the time frame during which Greece’s new government can reach an agreement with its official creditors.”

The rating agency said both Greece’s long and short-term ratings remained on creditwatch negative, meaning they could be lowered again, and warned that drawn out talks could produce a worsening economic situation in the country.

“A prolongation of talks with official creditors could also lead to … deposit withdrawals and, in a worst-case scenario, the imposition of capital controls and a loss of access to lender-of-last-resort financing, potentially resulting in Greece’s exclusion from the Economic and Monetary Union.”

I couldn’t find a news story on it – stories on Canada bonds are rare – but yields popped today CBID:

2 Year 0.49%
5 Year 0.78%
10 Year 1.45%
30 Year 2.03%

Which can be compared to the BoC’s numbers as of yesterday:

2 Year . 0.43%
5 Year 0.68%
10 Year 1.35%
30 Year 1.94%-ish

The Canadian preferred share market did very well again today, with PerpetualDiscounts and DeemedRetractibles both gaining 4bp and FixedResets up 65bp. The Performance Highlights table is suitably lengthy, suitably dominated by winning FixedResets. Volume was slightly below average.

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

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

Here’s TRP:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.32 to be $0.75 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is bid at 16.90 to be $0.57 cheap.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.20 to be $0.41 rich, while MFC.PR.H, resetting at +313 on 2017-3-19, is bid at 25.80 to be $0.49 cheap.

Here’s another good fit to reasonable numbers (it’s the scale that makes it look so awful!). I hope this market doesn’t start making sense, or I’ll be out of work!

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.63 to be $0.45 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.25 and appears to be $0.57 rich.

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 17.00, looks $0.87 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 23.73 after poor performance on the day, and is $1.11 rich.

All the break-even rates are scattered around zero – which is at least somewhat more reasonable than being negative!

On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:

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	-0.5927 %	2,181.9
FixedFloater	4.41 %	3.57 %	21,300	18.30	1	0.2325 %	4,011.2
Floater	3.30 %	3.47 %	59,355	18.56	4	-0.5927 %	2,319.6
OpRet	4.05 %	2.02 %	97,968	0.36	1	-0.0789 %	2,752.0
SplitShare	4.28 %	4.06 %	34,232	3.57	5	0.0424 %	3,194.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0789 %	2,516.4
Perpetual-Premium	5.32 %	-3.22 %	59,216	0.08	24	0.0131 %	2,515.5
Perpetual-Discount	4.95 %	4.81 %	128,875	15.28	10	0.0376 %	2,788.5
FixedReset	4.38 %	3.35 %	217,895	17.26	79	0.6487 %	2,438.9
Deemed-Retractible	4.92 %	1.37 %	109,984	0.15	39	0.0404 %	2,645.0
FloatingReset	2.52 %	2.98 %	87,785	6.42	7	0.2984 %	2,308.9

Performance Highlights
Issue	Index	Change	Notes
FTS.PR.G	FixedReset	-2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.39 Evaluated at bid price : 23.02 Bid-YTW : 3.16 %
FTS.PR.K	FixedReset	-1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.72 Evaluated at bid price : 23.73 Bid-YTW : 3.01 %
PWF.PR.A	Floater	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 17.35 Evaluated at bid price : 17.35 Bid-YTW : 2.87 %
BMO.PR.S	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 23.20 Evaluated at bid price : 24.94 Bid-YTW : 3.00 %
TRP.PR.D	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.80 Evaluated at bid price : 23.93 Bid-YTW : 3.23 %
TRP.PR.C	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 3.30 %
MFC.PR.F	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.25 Bid-YTW : 4.83 %
BAM.PF.B	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 23.02 Evaluated at bid price : 24.41 Bid-YTW : 3.42 %
POW.PR.G	Perpetual-Premium	1.31 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 27.04 Bid-YTW : 3.64 %
BMO.PR.Q	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.90 Bid-YTW : 3.58 %
ENB.PR.T	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 21.28 Evaluated at bid price : 21.28 Bid-YTW : 3.93 %
BNS.PR.Y	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 3.39 %
GWO.PR.N	FixedReset	1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.32 Bid-YTW : 5.03 %
ENB.PR.J	FixedReset	1.74 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.24 Evaluated at bid price : 22.84 Bid-YTW : 3.75 %
BNS.PR.Z	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.15 Bid-YTW : 3.41 %
ENB.PF.E	FixedReset	1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.53 Evaluated at bid price : 23.50 Bid-YTW : 3.76 %
ENB.PR.N	FixedReset	1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.03 Evaluated at bid price : 22.48 Bid-YTW : 3.79 %
PWF.PR.P	FixedReset	1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 19.09 Evaluated at bid price : 19.09 Bid-YTW : 2.99 %
TRP.PR.B	FixedReset	2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 3.19 %
ENB.PF.A	FixedReset	2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.55 Evaluated at bid price : 23.50 Bid-YTW : 3.74 %
ENB.PR.D	FixedReset	2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 3.85 %
ENB.PR.B	FixedReset	2.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 3.85 %
ENB.PF.G	FixedReset	2.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.51 Evaluated at bid price : 23.49 Bid-YTW : 3.80 %
SLF.PR.G	FixedReset	2.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.01 Bid-YTW : 5.24 %
HSE.PR.A	FixedReset	2.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 3.46 %
SLF.PR.H	FixedReset	2.84 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 3.01 %
MFC.PR.L	FixedReset	2.98 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.75 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	304,493	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 23.16 Evaluated at bid price : 25.06 Bid-YTW : 3.25 %
RY.PR.Z	FixedReset	80,920	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 23.23 Evaluated at bid price : 25.03 Bid-YTW : 2.88 %
BMO.PR.R	FloatingReset	61,610	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.66 Bid-YTW : 2.98 %
ENB.PF.C	FixedReset	58,250	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.44 Evaluated at bid price : 23.31 Bid-YTW : 3.77 %
TD.PR.T	FloatingReset	43,700	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 2.85 %
BMO.PR.T	FixedReset	39,475	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 23.13 Evaluated at bid price : 24.82 Bid-YTW : 2.93 %
There were 28 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.G	FixedReset	Quote: 23.02 – 23.81 Spot Rate : 0.7900 Average : 0.5416 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 22.39 Evaluated at bid price : 23.02 Bid-YTW : 3.16 %
ENB.PR.T	FixedReset	Quote: 21.28 – 21.89 Spot Rate : 0.6100 Average : 0.3815 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 21.28 Evaluated at bid price : 21.28 Bid-YTW : 3.93 %
PWF.PR.T	FixedReset	Quote: 25.00 – 25.59 Spot Rate : 0.5900 Average : 0.4119 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 23.25 Evaluated at bid price : 25.00 Bid-YTW : 3.05 %
CGI.PR.D	SplitShare	Quote: 25.30 – 25.80 Spot Rate : 0.5000 Average : 0.3421 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.68 %
PWF.PR.A	Floater	Quote: 17.35 – 17.90 Spot Rate : 0.5500 Average : 0.4052 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 17.35 Evaluated at bid price : 17.35 Bid-YTW : 2.87 %
BMO.PR.W	FixedReset	Quote: 24.60 – 24.95 Spot Rate : 0.3500 Average : 0.2252 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-06 Maturity Price : 23.03 Evaluated at bid price : 24.60 Bid-YTW : 2.94 %

Despite the best efforts of the Europeans to prohibit criticism, DBRS placed Greece on Review-Negative:

DBRS, Inc. has today placed the Hellenic Republic’s long-term foreign and local currency issuer ratings of B and short-term foreign and local currency issuer ratings of R-4 Under Review with Negative Implications.

As defined in EU Regulation 462/2009, amending Regulation 1060/2009 on credit rating agencies, DBRS’s ratings on Greece are subject to certain publication restrictions, as set out in Article 8a of the Regulation, including publication in accordance with a pre-established calendar (see “2015 Planned Publication Calendar for EU Sovereign Rating Reports,” published 19 December 2014). Under Article 8a, deviation of the publication of sovereign ratings from the calendar must be accompanied by a detailed explanation of the reasons for the deviation. While the next scheduled publication date for our ratings on Greece is 12 June 2015, the deviation has been caused by DBRS’s elevated concern over the potential for a deterioration in Greece’s creditworthiness as a result of actions of the new Greek government following the general elections on 25 January 2015, and subsequent developments. Reviews are typically concluded within three months.

With respect to Greece:

If a bridging program can be agreed to at the Eurogroup meeting, there will then be some months of difficult negotiation ahead for Greece and its lenders. With Varoufakis today saying that he did not even reach an agreement to disagree with Schäuble, all parties still have a long way to go to reach the necessary common ground for a sustainable agreement.

Absent that agreement, Greek banks can continue to rely on ELA funding for the moment. (See an explainer here for how ELA works)

If there is a complete breakdown in negotiations, however, it is likely that the ECB will then take the view that the Greek banks will have become insolvent at that point, due to their holdings of Greek debt.

It was another positive day for the Canadian preferred share market, with PerpetualDiscounts gaining 11bp, FixedResets winning 22bp and DeemedRetractibles up 13bp. Despite the relatively calm index numbers, the Performance Highlights table is quite lengthy, dominated by winning FixedResets. Volume was below average.

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

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

Here’s TRP:

The respite from bad behaviour for the TRP FixedResets is over; TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.30 to be $0.85 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is bid at 16.70 to be $0.48 cheap.

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

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.50 to be $0.44 rich, while MFC.PR.H, resetting at +313 on 2017-3-19, is bid at 25.71 to be $0.45 cheap.

Here’s another good fit to reasonable numbers. I hope this market doesn’t start making sense, or I’ll be out of work!

The cheapest issue relative to its peers is now BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.49 to be $0.47 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.20 and appears to be $0.66 rich.

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 16.90, looks $1.03 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 24.20, and is $1.22 rich.

All the break-even rates are scattered around zero – which is at least somewhat more reasonable than being negative!

On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:

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	0.0329 %	2,195.0
FixedFloater	4.42 %	3.59 %	21,041	18.28	1	-0.1393 %	4,001.9
Floater	3.28 %	3.47 %	59,076	18.56	4	0.0329 %	2,333.4
OpRet	4.04 %	1.78 %	98,608	0.36	1	0.0790 %	2,754.2
SplitShare	4.28 %	4.19 %	34,579	3.97	5	-0.2126 %	3,193.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0790 %	2,518.4
Perpetual-Premium	5.32 %	-6.19 %	58,891	0.08	24	0.1176 %	2,515.1
Perpetual-Discount	4.95 %	4.94 %	143,141	15.52	10	0.1087 %	2,787.5
FixedReset	4.41 %	3.40 %	221,784	17.13	79	0.2203 %	2,423.2
Deemed-Retractible	4.92 %	1.49 %	111,046	0.22	39	0.1284 %	2,643.9
FloatingReset	2.53 %	3.03 %	81,400	6.42	7	0.6444 %	2,302.1

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.L	FixedReset	-3.45 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 4.11 %
BAM.PR.R	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 21.49 Evaluated at bid price : 21.49 Bid-YTW : 3.60 %
SLF.PR.H	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 3.34 %
BAM.PF.B	FixedReset	-1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.89 Evaluated at bid price : 24.12 Bid-YTW : 3.48 %
CGI.PR.D	SplitShare	-1.37 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 3.73 %
MFC.PR.K	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.44 Bid-YTW : 4.04 %
TRP.PR.B	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 3.25 %
CU.PR.F	Perpetual-Discount	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 23.49 Evaluated at bid price : 23.85 Bid-YTW : 4.70 %
MFC.PR.F	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.01 Bid-YTW : 4.97 %
ENB.PR.A	Perpetual-Premium	1.07 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-07 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : -6.32 %
ENB.PF.A	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.30 Evaluated at bid price : 23.02 Bid-YTW : 3.84 %
BMO.PR.L	Deemed-Retractible	1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-07 Maturity Price : 25.75 Evaluated at bid price : 26.26 Bid-YTW : -20.84 %
TRP.PR.F	FloatingReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 3.40 %
PWF.PR.P	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.05 %
ENB.PR.P	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 21.19 Evaluated at bid price : 21.19 Bid-YTW : 3.93 %
TD.PR.T	FloatingReset	1.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.71 Bid-YTW : 2.90 %
ENB.PF.C	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.33 Evaluated at bid price : 23.10 Bid-YTW : 3.82 %
TRP.PR.E	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.92 Evaluated at bid price : 24.30 Bid-YTW : 3.22 %
FTS.PR.K	FixedReset	1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.90 Evaluated at bid price : 24.12 Bid-YTW : 2.94 %
BMO.PR.Q	FixedReset	2.26 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 3.79 %
HSE.PR.A	FixedReset	2.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 3.55 %
GWO.PR.N	FixedReset	3.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.01 Bid-YTW : 5.21 %
BAM.PF.E	FixedReset	3.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.85 Evaluated at bid price : 24.20 Bid-YTW : 3.49 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	301,478	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 23.16 Evaluated at bid price : 25.05 Bid-YTW : 3.26 %
BNS.PR.A	FloatingReset	89,998	Desjardins crossed 74,800 at 24.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.03 %
BNS.PR.R	FixedReset	80,670	Nesbitt crossed 75,000 at 25.63. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 2.91 %
MFC.PR.M	FixedReset	77,315	Scotia crossed 51,200 at 24.35. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 3.79 %
GWO.PR.S	Deemed-Retractible	35,143	Scotia crossed 25,000 at 26.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.30 Bid-YTW : 4.69 %
GWO.PR.Q	Deemed-Retractible	26,273	Scotia crossed 23,300 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-09-30 Maturity Price : 25.25 Evaluated at bid price : 25.90 Bid-YTW : 4.71 %
There were 25 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.B	FixedReset	Quote: 14.75 – 15.60 Spot Rate : 0.8500 Average : 0.4853 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 3.25 %
MFC.PR.L	FixedReset	Quote: 23.50 – 24.45 Spot Rate : 0.9500 Average : 0.6244 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 4.11 %
BMO.PR.S	FixedReset	Quote: 24.66 – 25.10 Spot Rate : 0.4400 Average : 0.2833 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 23.10 Evaluated at bid price : 24.66 Bid-YTW : 3.05 %
SLF.PR.A	Deemed-Retractible	Quote: 24.92 – 25.39 Spot Rate : 0.4700 Average : 0.3275 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 4.88 %
IFC.PR.A	FixedReset	Quote: 19.65 – 20.16 Spot Rate : 0.5100 Average : 0.3833 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.65 Bid-YTW : 5.87 %
ENB.PR.D	FixedReset	Quote: 20.15 – 20.56 Spot Rate : 0.4100 Average : 0.2834 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 20.15 Evaluated at bid price : 20.15 Bid-YTW : 3.94 %

The EU is tightening the screws on Greece:

The European Central Bank heaped pressure on Greece’s new government by restricting access to its direct liquidity lines, citing concerns about the country’s commitment to existing bailout pledges.

The decision marks an escalating standoff between Greek politicians and other officials in the euro area. It came hours after new Greek Finance Minister Yanis Varoufakis met ECB President Mario Draghi to garner support for his government’s plans to tear up its 240 billion-euro ($272 billion) rescue package and renegotiate the nation’s debt.

“The ECB today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic,” the Frankfurt-based central bank said in an e-mailed statement on Wednesday. “The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the program review and is in line with existing Eurosystem rules.”

Greek lenders, who since 2010 had been able to access funds from the ECB against junk-rated collateral, must now apply for funding from their national central bank at higher rates. While a similar shut-off occurred briefly in 2012, the government and its creditors are this time at odds on how to proceed and the current move risks precipitating a Greek exit from the euro.

It was a rip-roaring day for the Canadian preferred share market, with PerpetualDiscounts winning 62bp, FixedResets up 57bp and DeemedRetractibles gaining 13bp. The Performance Highlights table is, well, about what you’d expect, heavily dominated by winning FixedResets. Volume was very high.

[Added 2015-2-5]: PerpetualDiscounts now yield 4.94%, equivalent to 6.42% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.6% (!) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 280bp, a significant widening from the 260bp reported January 28.

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:

Still a very good fit for the TRP FixedResets; the maximum error is for TRP.PR.E, which resets 2019-10-30 at +235, bid at 23.92 to be $0.43 rich.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.34 to be $0.66 rich, while MFC.PR.H, resetting at +313 on 2017-3-19, is bid at 25.66 to be $0.61 cheap.

Here’s another good fit to reasonable numbers. I hope this market doesn’t start making sense, or I’ll be out of work!

The cheapest issue relative to its peers is now BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.87 to be $0.36 cheap. BAM.PF.B, resetting at +263bp 2019-3-31 is bid at 24.46 and appears to be $0.55 rich.

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 17.00, looks $0.73 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 23.70, and is $0.92 rich.

Three Investment Grade FixedReset/FloatingReset pair are now showing positive break-even average three month bill rates until interconversion!

On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:

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	1.6234 %	2,194.2
FixedFloater	4.41 %	3.58 %	21,918	18.29	1	-0.6458 %	4,007.5
Floater	3.29 %	3.47 %	57,950	18.58	4	1.6234 %	2,332.6
OpRet	4.05 %	1.99 %	98,225	0.37	1	0.0395 %	2,752.0
SplitShare	4.27 %	4.21 %	32,030	3.97	5	0.1391 %	3,200.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,516.4
Perpetual-Premium	5.33 %	-3.18 %	60,740	0.08	24	-0.1403 %	2,512.2
Perpetual-Discount	4.96 %	4.94 %	134,407	15.50	10	0.6183 %	2,784.4
FixedReset	4.42 %	3.39 %	219,719	17.08	79	0.5747 %	2,417.9
Deemed-Retractible	4.92 %	1.74 %	108,145	0.23	39	0.1337 %	2,640.5
FloatingReset	2.54 %	3.12 %	81,490	6.42	7	0.3390 %	2,287.3

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.F	FloatingReset	-2.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 18.02 Evaluated at bid price : 18.02 Bid-YTW : 3.45 %
PWF.PR.P	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 3.09 %
ENB.PR.A	Perpetual-Premium	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 25.03 Evaluated at bid price : 25.23 Bid-YTW : 5.54 %
BMO.PR.S	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.18 Evaluated at bid price : 24.90 Bid-YTW : 3.00 %
GWO.PR.N	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.45 Bid-YTW : 5.56 %
CM.PR.O	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.16 Evaluated at bid price : 24.87 Bid-YTW : 3.01 %
PWF.PR.T	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.30 Evaluated at bid price : 25.15 Bid-YTW : 3.03 %
CM.PR.P	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.02 Evaluated at bid price : 24.60 Bid-YTW : 3.00 %
BAM.PR.C	Floater	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 14.42 Evaluated at bid price : 14.42 Bid-YTW : 3.49 %
BMO.PR.W	FixedReset	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.01 Evaluated at bid price : 24.55 Bid-YTW : 2.95 %
IAG.PR.G	FixedReset	1.38 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 3.34 %
HSE.PR.A	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 16.83 Evaluated at bid price : 16.83 Bid-YTW : 3.66 %
MFC.PR.M	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.41 Bid-YTW : 3.81 %
BAM.PR.K	Floater	1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 14.30 Evaluated at bid price : 14.30 Bid-YTW : 3.52 %
SLF.PR.H	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.17 %
PWF.PR.A	Floater	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 2.84 %
BMO.PR.T	FixedReset	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.08 Evaluated at bid price : 24.67 Bid-YTW : 2.96 %
FTS.PR.G	FixedReset	1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 22.67 Evaluated at bid price : 23.53 Bid-YTW : 3.07 %
ENB.PF.C	FixedReset	1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 22.13 Evaluated at bid price : 22.75 Bid-YTW : 3.89 %
FTS.PR.H	FixedReset	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.09 %
BNS.PR.A	FloatingReset	1.84 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 2.95 %
MFC.PR.L	FixedReset	2.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.34 Bid-YTW : 3.68 %
MFC.PR.N	FixedReset	2.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.72 %
FTS.PR.K	FixedReset	2.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 22.71 Evaluated at bid price : 23.70 Bid-YTW : 3.01 %
BAM.PR.B	Floater	2.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 3.47 %
CU.PR.G	Perpetual-Discount	3.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.50 Evaluated at bid price : 23.85 Bid-YTW : 4.70 %
SLF.PR.G	FixedReset	3.65 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.46 Bid-YTW : 5.58 %
MFC.PR.F	FixedReset	3.94 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.80 Bid-YTW : 5.09 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	271,103	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.15 Evaluated at bid price : 25.01 Bid-YTW : 3.26 %
BMO.PR.P	FixedReset	102,200	TD sold 10,000 to Nesbitt at 24.98, then crossed 90,000 at 24.99. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 3.05 %
TD.PR.Q	Deemed-Retractible	55,840	Called for redemption March 2. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-06 Maturity Price : 25.50 Evaluated at bid price : 25.59 Bid-YTW : 1.74 %
SLF.PR.I	FixedReset	51,775	Desjardins crossed 27,100 at 25.74. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.18 %
FTS.PR.J	Perpetual-Discount	43,250	RBC crossed 40,000 at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 24.69 Evaluated at bid price : 25.12 Bid-YTW : 4.78 %
PWF.PR.S	Perpetual-Discount	36,225	RBC bought 10,000 from TD at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 24.54 Evaluated at bid price : 24.96 Bid-YTW : 4.81 %
There were 53 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: 23.59 – 24.85 Spot Rate : 1.2600 Average : 0.7059 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.59 Bid-YTW : 3.27 %
BAM.PF.E	FixedReset	Quote: 23.40 – 24.20 Spot Rate : 0.8000 Average : 0.5222 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 22.48 Evaluated at bid price : 23.40 Bid-YTW : 3.66 %
ELF.PR.H	Perpetual-Premium	Quote: 25.60 – 26.31 Spot Rate : 0.7100 Average : 0.4924 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-04-17 Maturity Price : 25.25 Evaluated at bid price : 25.60 Bid-YTW : 5.23 %
PWF.PR.L	Perpetual-Premium	Quote: 25.45 – 25.90 Spot Rate : 0.4500 Average : 0.2955 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-06 Maturity Price : 25.25 Evaluated at bid price : 25.45 Bid-YTW : -4.02 %
ENB.PR.A	Perpetual-Premium	Quote: 25.23 – 25.58 Spot Rate : 0.3500 Average : 0.2076 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 25.03 Evaluated at bid price : 25.23 Bid-YTW : 5.54 %
SLF.PR.H	FixedReset	Quote: 24.65 – 25.30 Spot Rate : 0.6500 Average : 0.5135 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.17 %

Stop me if you’ve heard this one before:

Denmark’s central bank sold a record amount of kroner last month to weaken the currency and preserve its peg to the euro as speculators test policy makers’ resolve.

The bank, which cut rates three times in January to fight back capital flows, has delivered an unprecedented package of measures to defend its currency regime. It sold 106.3 billion kroner ($16.3 billion) last month, bringing foreign reserves to a record 564.1 billion kroner. Its benchmark deposit rate is now minus 0.5 percent.
…
The krone amount sold by the central bank in January was almost three times the previous record of 38.5 billion kroner, set in May 2010. Denmark’s foreign currency reserves now equal about 29 percent of the country’s gross domestic product, Nykredit Markets said in a note. Switzerland’s foreign reserves were 80 percent of GDP before the country dropped its cap Jan. 15, according to Nykredit.
…
Record-low rates have already pushed a number of mortgage banks to say they’re looking into issuing 30-year fixed-rated loans at 1.5 percent, the lowest ever for that maturity.

Yields on Danish government bonds all traded at record lows this week. Danske Bank estimates the yield on the 10-year benchmark bond may even drop below zero. It traded at about 0.2 percent today. Danish five-year yields have been negative for much of this year while two-year yields dropped below zero in December.

Short the Euro to buy oil?

Oil prices rose on Tuesday, headed for the biggest four-day advance since January 2009 as a tumbling dollar sent commodities rallying.

Despite signs that U.S. crude supplies had registered another heavy build last week, investors were growing more confident that oil prices have hit a bottom after a seven-month rout. Traders said oil bulls were encouraged by BP’s plan to cut capital expenditure by 13 per cent to $20-billion (U.S.) in 2015, which came after reductions announced by other major energy companies.
…
On Tuesday, the dollar dropped more than 1 per cent against a basket of currencies, heading for its biggest daily drop since July 2013 and boosting the value of commodities priced in the currency.

But cutting rates is becoming alarmingly popular:

As central banks outside of the United States race to the bottom on interest rates, the flight to the U.S. dollar on the promise of rising rates by the Federal Reserve is creating a new risk: That the healthy American economy could catch cold from the global rate-cutting frenzy.

Australia added to the fast-growing list of countries easing their monetary policy, cutting its key rate to 2.25 per cent from 2.5 per cent Tuesday.
…
As the rate-cutting snowballed in recent weeks, market watchers say “competitive devaluation” is playing a growing role. Countries appear to be lowering rates at least in part to discourage investors from buying their currency, as they jockey for position with trading partners doing the same.

Rob Carrick of the Globe writes a piece titled Value the dividend in your beaten down preferred shares:

One of the more shocking investing stories of this year has to be the carnage in the preferred share market.

Some preferreds were hammered during that brief hiccup in the summer of 2013 when interest rates appeared to be set for a sustained rise, and others have been brutal in early 2015, as interest rates slide. Investors who own preferred shares have to be reeling at this point. Will these popular bond alternatives ever find favour again?
…
Rate reset preferreds are designed to protect investors against rising interest rates; in a falling rate environment, they’re dead weight in the eyes of some investors.

In fact, it’s rate resets that are producing particularly bad results for investors right now. The S&P/TSX preferred share index was down 4.9 per cent for the year through Feb. 3, while the BMO S&P/TSX Laddered Preferred Share Index ETF (ZPR-T), an ETF that holds rate reset preferreds, fell 7.6 per cent.
…
It’s worth noting that ZPR’s yield has reached 4.7 per cent. In a non-registered account, that yield looks even better on an after-tax basis thanks to the dividend tax credit.

I am appalled at that last paragraph. The CURRENT YIELD on ZPR may well be 4.7%, but since when is Current Yield worth any consideration at all? Particulary in an article that emphasizes the influence of a “falling rate environment”?

It was another mixed day for the Canadian preferred share market, with PerpetualDiscounts down 10bp, FixedResets up 35bp and DeemedRetractibles gaining 4bp. The Performance Highlights table is its usual incredible length, and still with a high proportion of FixedResets on the bad side … but at least this time there is a large contingent of FixedReset winners! Volume was very high.

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

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

Here’s TRP:

Still a very good fit for the TRP FixedResets; the maximum error is for TRP.PR.B, which resets 2015-6-30 at +128, bid at 14.71 to be $0.27 cheap.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.85 to be $0.57 rich, while MFC.PR.F, resetting at +141 on 2016-6-19, and MFC.PR.H, resetting at +313 on 2017-3-19, are bid at 19.05 and 25.86 respectively to be $0.28 cheap.

Here’s another good fit to reasonable numbers. I hope this market doesn’t start making sense, or I’ll be out of work!

The cheapest issue relative to its peers is now BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.96 to be $0.32 cheap. BAM.PF.B, resetting at +263bp 2019-3-31 is bid at 24.30 and appears to be $0.43 rich.

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 16.70, looks $0.80 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 23.15, and i $0.74 rich.

What can I say? Every single Investment Grade FixedReset/FloatingReset pair is now showing a negative break-even average three month bill rate until interconversion.

On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:

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	-1.2723 %	2,159.2
FixedFloater	4.38 %	3.55 %	21,014	18.33	1	-0.0922 %	4,033.5
Floater	3.34 %	3.53 %	58,485	18.44	4	-1.2723 %	2,295.4
OpRet	4.05 %	2.08 %	97,195	0.37	1	0.0000 %	2,750.9
SplitShare	4.28 %	4.18 %	33,351	3.98	5	0.0626 %	3,195.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,515.4
Perpetual-Premium	5.32 %	-2.45 %	57,741	0.08	24	0.2177 %	2,515.7
Perpetual-Discount	4.99 %	4.97 %	124,365	15.46	10	-0.0954 %	2,767.3
FixedReset	4.44 %	3.42 %	217,824	17.09	79	0.3459 %	2,404.1
Deemed-Retractible	4.93 %	1.56 %	105,917	0.23	39	0.0446 %	2,637.0
FloatingReset	2.55 %	3.24 %	78,385	6.42	7	-0.0815 %	2,279.6

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.G	FixedReset	-2.94 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.81 Bid-YTW : 6.00 %
TRP.PR.C	FixedReset	-2.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 16.74 Evaluated at bid price : 16.74 Bid-YTW : 3.33 %
HSE.PR.A	FixedReset	-2.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 3.71 %
BAM.PR.B	Floater	-2.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 14.15 Evaluated at bid price : 14.15 Bid-YTW : 3.55 %
TRP.PR.B	FixedReset	-2.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 14.71 Evaluated at bid price : 14.71 Bid-YTW : 3.26 %
FTS.PR.H	FixedReset	-2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 3.15 %
TRP.PR.F	FloatingReset	-2.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 3.36 %
BAM.PR.C	Floater	-1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 14.25 Evaluated at bid price : 14.25 Bid-YTW : 3.53 %
BNS.PR.P	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 2.94 %
BAM.PR.K	Floater	-1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 14.10 Evaluated at bid price : 14.10 Bid-YTW : 3.56 %
FTS.PR.K	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 22.42 Evaluated at bid price : 23.15 Bid-YTW : 3.11 %
FTS.PR.G	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 22.47 Evaluated at bid price : 23.15 Bid-YTW : 3.14 %
IFC.PR.A	FixedReset	-1.52 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.50 Bid-YTW : 5.96 %
NA.PR.M	Deemed-Retractible	-1.08 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-15 Maturity Price : 25.50 Evaluated at bid price : 25.67 Bid-YTW : 2.76 %
MFC.PR.F	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.05 Bid-YTW : 5.55 %
FTS.PR.M	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 23.17 Evaluated at bid price : 25.00 Bid-YTW : 3.20 %
ENB.PF.E	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 22.10 Evaluated at bid price : 22.73 Bid-YTW : 3.93 %
ENB.PR.P	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 20.71 Evaluated at bid price : 20.71 Bid-YTW : 4.03 %
BAM.PF.G	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 23.12 Evaluated at bid price : 24.95 Bid-YTW : 3.62 %
ENB.PF.A	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 22.02 Evaluated at bid price : 22.56 Bid-YTW : 3.93 %
MFC.PR.M	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.07 Bid-YTW : 3.98 %
BNS.PR.B	FloatingReset	1.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 3.14 %
MFC.PR.K	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 3.96 %
ENB.PR.F	FixedReset	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 3.94 %
TD.PF.B	FixedReset	1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 23.05 Evaluated at bid price : 24.58 Bid-YTW : 2.98 %
BAM.PF.E	FixedReset	1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 22.41 Evaluated at bid price : 23.25 Bid-YTW : 3.69 %
CU.PR.E	Perpetual-Premium	2.22 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 4.61 %
SLF.PR.H	FixedReset	2.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 3.34 %
TRP.PR.E	FixedReset	2.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 22.79 Evaluated at bid price : 24.00 Bid-YTW : 3.28 %
MFC.PR.L	FixedReset	2.98 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.85 Bid-YTW : 3.93 %
BNS.PR.Y	FixedReset	3.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.82 Bid-YTW : 3.76 %
TD.PF.C	FixedReset	4.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 22.98 Evaluated at bid price : 24.50 Bid-YTW : 3.02 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	464,210	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 23.14 Evaluated at bid price : 24.99 Bid-YTW : 3.27 %
TD.PF.B	FixedReset	70,917	RBC crossed 48,500 at 24.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 23.05 Evaluated at bid price : 24.58 Bid-YTW : 2.98 %
MFC.PR.N	FixedReset	61,250	Scotia crossed 36,600 at 23.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 3.97 %
SLF.PR.G	FixedReset	60,505	RBC crossed 51,000 at 18.66. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.81 Bid-YTW : 6.00 %
CU.PR.F	Perpetual-Discount	58,055	Nesbitt crossed blocks of 25,700 and 30,900, both at 23.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 23.17 Evaluated at bid price : 23.50 Bid-YTW : 4.77 %
BNS.PR.A	FloatingReset	56,093	Scotia crossed 42,500 at 23.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.89 Bid-YTW : 3.24 %
There were 54 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.J	FixedReset	Quote: 25.00 – 25.44 Spot Rate : 0.4400 Average : 0.2692 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.54 %
PWF.PR.T	FixedReset	Quote: 24.87 – 25.45 Spot Rate : 0.5800 Average : 0.4312 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 23.20 Evaluated at bid price : 24.87 Bid-YTW : 3.08 %
SLF.PR.G	FixedReset	Quote: 17.81 – 18.50 Spot Rate : 0.6900 Average : 0.5486 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.81 Bid-YTW : 6.00 %
BNS.PR.Q	FixedReset	Quote: 25.31 – 25.68 Spot Rate : 0.3700 Average : 0.2606 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 2.84 %
MFC.PR.B	Deemed-Retractible	Quote: 24.29 – 24.70 Spot Rate : 0.4100 Average : 0.3007 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.29 Bid-YTW : 5.12 %
BAM.PR.X	FixedReset	Quote: 17.96 – 18.35 Spot Rate : 0.3900 Average : 0.2832 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-03 Maturity Price : 17.96 Evaluated at bid price : 17.96 Bid-YTW : 3.73 %

The prospects for global deflation are attracting a lot of ink:

European and Chinese factories slashed prices in January as production flat-lined, heightening global deflation risks that point to another wave of central bank stimulus in the coming year.

While the pulse of activity was livelier in other parts of Asia – Japan, India and South Korea – they too shared a common condition of slowing inflation.
…
Markit’s final PMI reading for the euro zone, published on Monday, was 51.0, in line with the flash estimate. Although at a six-month high, it was only just above the 50 mark that separates growth from contraction. In December the index came in at 50.6.

Worryingly for policymakers, firms cut prices in January at the steepest rate since mid-2013. Data on Friday showed annual inflation was a record-equalling low of –0.6 per cent in January across the 19 nations using the euro.

In Britain, manufacturing grew slightly faster but factories cut prices at the fastest pace since 2009.

There’s a new estimate for Treasury liquidity:

For decades, the $12.5 trillion market for U.S. government debt was renowned for its “depth,” Wall Street’s way of talking about a market’s ability to handle large trades without big moves in prices. But lately, that resiliency has practically vanished — and that’s a big worry.

Less depth has meant greater volatility. So Treasuries — the world’s haven asset during turmoil — may be prone to more disruptions, particularly as the Federal Reserve prepares to raise interest rates. And if investors begin to doubt whether they’ll still be able to buy and sell on a moment’s notice, that has the potential to elevate the U.S.’s cost to borrow.

How much depth has the market lost? A year ago, you could trade about $280 million of Treasuries without causing prices to move, according to JPMorgan Chase & Co. Now, it’s $80 million.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 54bp, FixedResets gaining 9bp and DeemedRetractibles off 6bp. The relatively mild index numbers masked a lot of individual changes, as the Performance Highlights table is its usual lengthy self. Volume was below average.

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

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

Here’s TRP:

The TRP FixedResets are very well behaved, with an excellent fit to reasonable numbers!

Another excellent fit, but this time the numbers are more 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).

Here’s another good fit to reasonable numbers. I hope this market doesn’t start making sense, or I’ll be out of work!

The cheapest issue relative to its peers is now BAM.PF.E, resetting at +255bp on 2020-3-31 (more than five years hence!), bid at 22.82 to be $0.59 cheap. BAM.PF.B, resetting at +263bp 2019-3-31 is bid at 24.25 and appears to be $0.43 rich.

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 17.07, looks $0.64 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 23.51, and is still $0.82.

What can I say? Every Investment Grade FixedReset/FloatingReset pair but one (TRP.PR.A / TRP.PR.F) is now showing a negative break-even average three month bill rate until interconversion.

On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:

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	-0.4114 %	2,187.0
FixedFloater	4.38 %	3.55 %	20,957	18.33	1	1.0713 %	4,037.2
Floater	3.30 %	3.47 %	57,370	18.58	4	-0.4114 %	2,324.9
OpRet	4.05 %	2.06 %	98,674	0.37	1	0.0000 %	2,750.9
SplitShare	4.28 %	4.25 %	30,885	3.98	5	0.3133 %	3,193.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,515.4
Perpetual-Premium	5.33 %	0.19 %	57,305	0.08	24	-0.0212 %	2,510.3
Perpetual-Discount	4.97 %	4.97 %	115,073	15.46	10	0.5379 %	2,770.0
FixedReset	4.46 %	3.46 %	214,817	17.05	79	0.0939 %	2,395.8
Deemed-Retractible	4.93 %	0.96 %	101,421	0.23	39	-0.0648 %	2,635.8
FloatingReset	2.55 %	3.25 %	78,190	6.42	7	0.0314 %	2,281.5

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.X	FixedReset	-3.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 18.03 Evaluated at bid price : 18.03 Bid-YTW : 3.72 %
TD.PF.C	FixedReset	-3.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 22.54 Evaluated at bid price : 23.50 Bid-YTW : 3.21 %
IFC.PR.A	FixedReset	-3.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.80 Bid-YTW : 5.77 %
PWF.PR.A	Floater	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 2.89 %
ENB.PR.D	FixedReset	-1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 3.97 %
TRP.PR.E	FixedReset	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 22.51 Evaluated at bid price : 23.40 Bid-YTW : 3.39 %
CU.PR.C	FixedReset	-1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.21 Evaluated at bid price : 24.26 Bid-YTW : 3.15 %
IFC.PR.C	FixedReset	-1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 3.94 %
HSE.PR.A	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 3.61 %
TD.PF.B	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 22.88 Evaluated at bid price : 24.15 Bid-YTW : 3.06 %
BAM.PR.B	Floater	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 3.47 %
GWO.PR.P	Deemed-Retractible	-1.13 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.30 Bid-YTW : 4.57 %
TRP.PR.D	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 22.59 Evaluated at bid price : 23.50 Bid-YTW : 3.31 %
CM.PR.P	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 22.88 Evaluated at bid price : 24.25 Bid-YTW : 3.06 %
GWO.PR.Q	Deemed-Retractible	-1.00 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-09-30 Maturity Price : 25.25 Evaluated at bid price : 25.64 Bid-YTW : 4.91 %
ENB.PR.B	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 3.99 %
BAM.PR.G	FixedFloater	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 21.89 Evaluated at bid price : 21.70 Bid-YTW : 3.55 %
RY.PR.I	FixedReset	1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.09 Bid-YTW : 3.04 %
BNS.PR.P	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 2.68 %
TD.PF.A	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.15 Evaluated at bid price : 24.90 Bid-YTW : 2.93 %
MFC.PR.H	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 3.61 %
BAM.PF.F	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.12 Evaluated at bid price : 24.80 Bid-YTW : 3.63 %
VNR.PR.A	FixedReset	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.43 Evaluated at bid price : 25.00 Bid-YTW : 3.43 %
ENB.PF.C	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 21.97 Evaluated at bid price : 22.50 Bid-YTW : 3.94 %
ENB.PR.N	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 21.31 Evaluated at bid price : 21.60 Bid-YTW : 3.96 %
MFC.PR.N	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.83 Bid-YTW : 3.92 %
BAM.PR.R	FixedReset	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 21.60 Evaluated at bid price : 22.00 Bid-YTW : 3.47 %
BNS.PR.Z	FixedReset	1.80 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 3.79 %
CGI.PR.D	SplitShare	2.16 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.54 Bid-YTW : 3.54 %
BAM.PR.K	Floater	2.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 14.32 Evaluated at bid price : 14.32 Bid-YTW : 3.51 %
BAM.PF.G	FixedReset	2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.03 Evaluated at bid price : 24.69 Bid-YTW : 3.67 %
ENB.PR.Y	FixedReset	2.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 3.93 %
PWF.PR.T	FixedReset	2.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.14 Evaluated at bid price : 24.70 Bid-YTW : 3.11 %
MFC.PR.M	FixedReset	3.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 4.14 %
FTS.PR.J	Perpetual-Discount	3.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 24.77 Evaluated at bid price : 25.20 Bid-YTW : 4.77 %
SLF.PR.G	FixedReset	3.97 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.35 Bid-YTW : 5.65 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	101,699	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.12 Evaluated at bid price : 24.94 Bid-YTW : 3.28 %
PWF.PR.P	FixedReset	56,983	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.04 %
BAM.PF.G	FixedReset	53,520	Scotia sold two blocks of 10,000 each to TD and crossed another 11,400, all at 24.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 23.03 Evaluated at bid price : 24.69 Bid-YTW : 3.67 %
GWO.PR.N	FixedReset	41,875	Desjardins sold blocks of 24,400 and 12,000 to anonymous at 18.28. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.15 Bid-YTW : 5.75 %
SLF.PR.D	Deemed-Retractible	32,928	RBC crossed 25,000 at 23.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.61 Bid-YTW : 5.25 %
ENB.PR.B	FixedReset	27,548	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 3.99 %
There were 25 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ENB.PR.J	FixedReset	Quote: 22.25 – 23.47 Spot Rate : 1.2200 Average : 0.7071 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 21.86 Evaluated at bid price : 22.25 Bid-YTW : 3.87 %
TD.PF.C	FixedReset	Quote: 23.50 – 24.50 Spot Rate : 1.0000 Average : 0.5620 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 22.54 Evaluated at bid price : 23.50 Bid-YTW : 3.21 %
MFC.PR.I	FixedReset	Quote: 25.26 – 26.05 Spot Rate : 0.7900 Average : 0.4792 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 3.67 %
PVS.PR.C	SplitShare	Quote: 25.66 – 26.50 Spot Rate : 0.8400 Average : 0.5576 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 4.17 %
ENB.PR.T	FixedReset	Quote: 20.70 – 21.24 Spot Rate : 0.5400 Average : 0.3378 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.04 %
TRP.PR.E	FixedReset	Quote: 23.40 – 24.00 Spot Rate : 0.6000 Average : 0.3981 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-02 Maturity Price : 22.51 Evaluated at bid price : 23.40 Bid-YTW : 3.39 %

You know what Russia needs? Russia needs another James Coyne, that’s what Russia needs:

The message some Russia watchers are getting from Friday’s surprise interest-rate cut is this: Start listening more to what President Vladimir Putin’s aides say about monetary policy and less to central bankers.

Here’s the key evidence. In comments made just nine days ago, the country’s central bank chief indicated she saw no chance of a rate cut any time soon after inflation soared to a five-year high. A week earlier, though, one of Putin’s most vocal economic aides urged the exact opposite, saying a reduction was needed to bolster the ailing economy.

So when the Bank of Russia shocked traders and analysts alike by announcing it was lowering the benchmark rate from an 11-year high, the words spoken by that aide, Andrey Belousov, left many to speculate that the Kremlin is exerting more pressure on central bank policy makers. The rate cut — to 15 percent from 17 percent — triggered a wave of ruble selling that drove the currency down as much as 4 percent, adding to a year-long selloff that’s left it down 50 percent percent [sic] against the dollar.

How ’bout that loonie performance, eh?

Canada’s dollar fell for a 10th week, the longest losing streak since 2000, after a report showing the economy unexpectedly shrank bolstered speculation the central bank will cut interest rates again.

The currency reached the weakest level in almost six years as data showed gross domestic product contracted 0.2 percent in November. Government bonds climbed, pushing yields to record lows. The Bank of Canada reduced borrowing costs last week for the first time since 2009, saying the surprise move was meant to provide insurance as the slump in crude oil, the nation’s biggest export, weighed on the economy.
…
The loonie, as Canada’s dollar is known for the image of the aquatic bird on the C$1 coin, depreciated 0.9 percent to C$1.2732 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.2799, the weakest since March 2009, and sank 2.5 percent on the week. One loonie buys 78.54 U.S. cents.

The Canadian currency dropped 8.7 percent since Dec. 31, the fifth consecutive monthly loss and the biggest since October 2008.
…
The yield on Canada’s benchmark 10-year bond sank to as low as 1.246 percent, while two-year yields touched 0.391 percent and 30-year yields reached 1.830 percent, all records.

The nation’s largest trade partner expanded less than forecast in the fourth quarter. U.S. GDP grew at an annualized 2.6 percent, the Commerce Department in Washington reported, fanning concern the global slowdown is becoming a drag on the world’s biggest economy. Economists surveyed by Bloomberg had forecast a 3 percent advance after a 5 percent gain from July through September.

The median forecast in a Bloomberg survey for Canada’s monthly GDP was for little change after 0.3 percent growth in October. Instead, it shrank the most in 11 months. The economy grew 1.9 percent in November from a year earlier, versus a forecast of 2.1 percent and an advance of 2.3 percent in October.

Long Canadas at 1.83%. If I had a fifteen year old hat, I’d have to eat it. But honestly, who owns Canadas any more? That’s, like, so 20th century:

With years of income and investing ahead, the Canada Pension Plan Investment Board can afford to own more risky assets such as real estate and stocks, according to Chief Executive Officer Mark Wiseman. Pension contributions will continue to grow through 2022, allowing the fund to reduce its 28 percent holdings in fixed income, he said.

“We’re an 18-year-old investor,” Wiseman, who’s 44, said during an interview Tuesday at Bloomberg’s Toronto office. “The portfolio can afford to have less bonds than it has today.”
…
The 28 percent allocation to bonds and money market securities the CPPIB lists on its website as of March of last year is already below the 29 percent average for private pension plans in Canada, according to data from Towers Watson. In 2000, the Canada Pension Plan was 95 percent invested in fixed income, according to its latest annual report.

Caisse CEO Michael Sabia, who oversees the management of pensions in Quebec, said in November that it’s looking to cut its bond holdings to 30 percent from 35 percent. Ontario Teachers’ Pension Plan, the country’s third biggest pension plan, has a 41 percent allocation to fixed income.

Quick! Enact some more regulations to force the banks to buy more! Not that there’s any shortage of buyers now, but there will be, once the tide turns. I’m just waiting for the first big wave of private equity / infrastructure valuation scandals, which I see as being inevitable. Figures can lie and liars can figure. Deal with it.

The politicians will be telling us that economic decline is all oil’s fault, but what are the numbers?

Canada’s economy shrank in November on manufacturing and oil production, pushing the dollar to the weakest in almost six years on speculation the central bank will make another rate cut following last week’s surprise move.

Gross domestic product shrank by 0.2 percent, the most in 11 months, to an annualized C$1.65 trillion ($1.30 trillion), Statistics Canada said Friday in Ottawa. The median forecast in a Bloomberg economist survey was for output to be little changed. Manufacturing declined by 1.9 percent, the most since January 2009, mining and quarrying fell by 2.5 percent, and oil and gas extraction by 0.7 percent.

The IMF recommendations won’t be popular in the halls of power:

Canada’s policy makers should maintain accommodative measures to ensure the economy isn’t sidetracked by the oil shock, the IMF said today in a report.

The Bank of Canada’s decision this month to counter falling oil prices with a rate cut was appropriate, while the federal should consider putting future fiscal tightening on pause once it balances its budget this year to promote growth, the International Monetary Fund said.

Trouble is, the pseudo-conservatives first goosed the economy when it didn’t need it, eliminating the $10-billion surplus. Then there was nothing in reserve when a recession hit. Holy smokes! A recession! Who would have thought they were still possible? And now politics will lead to a tightening – or at least, non-relaxation – in fiscal policy.

I used to be a Conservative. But then my party was taken over by ultra-partisan apparatchiks and sloganeering charlatans.

All over Canada, preferred share investors are telling their buddies about their investments!

About the best thing one can say about the Canadian preferred share market today is that it wasn’t as bad as yesterday! PerpetualDiscounts were off 2bp, FixedResets were down 149bp (bringing their two day loss to a staggering 3.23%) and DeemedRetractibles gained 4bp. ENB and BAM FixedResets are prominent at the extreme bad end of the very length Performance Highlights table – but not much escaped! Volume was high.

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

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

Here’s TRP:

It’s surpising to see that after such a wild day, there is such an excellent fit to theory for the TRP FixedResets!

MFC.PR.F is now back on the line defined by its peers; additionally, as a result of today’s big moves in BAM FixedReset prices, Implied Volatility has markedely increased from 20% yesterday.

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).

A very strange distinction from the MFC series, because the Implied Volatility for the BAM FixedResets has declined markedly, from 19% yesterday. I would like to think that this means the BAM Implied Volatility will permanently settle to single digits – where I think it should be for true perpetual FixedResets – while MFC Implied Volatility will permanently increase to 40%, where I think it should be for issues with a DeemedRetraction … but I’ll see if this lasts before I start thinking that!

The cheapest issue relative to its peers is now BAM.PF.G, resetting at +284bp on 2020-6-30 (more than five years hence!), bid at 24.10 to be $0.57 cheap. BAM.PF.B, resetting at +263bp 2019-3-31 is bid at 24.30 and appears to be $0.58 rich. With all the fuss over Issue Reset Spreads, it is interesting to see that the relationship between bid and spread is inverted for these two issues.

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 17.05, looks $0.66 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.50, is still $0.80 expensive after losing $1.71 on the day!

What can I say? Every Investment Grade FixedReset/FloatingReset pair but one (RY.PR.I / RY.PR.K) is now showing a negative break-even average three month bill rate until interconversion … and the exception is showing only a 0.02% breakeven average rate! Meanwhile, the DC.PR.B / DC.PR.D pair (not shown) clocks in at -1.22%, while the other two junk pairs are strongly positive. You guys interpret this, it’s beyond me; but it does show, overall, the market’s extreme distaste for Floating Rate product.

On the other hand, this distaste does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:

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	-3.8601 %	2,196.0
FixedFloater	4.42 %	3.61 %	19,962	18.26	1	-2.4091 %	3,994.4
Floater	3.28 %	3.42 %	54,328	18.68	4	-3.8601 %	2,334.5
OpRet	4.05 %	2.02 %	98,459	0.38	1	-0.0395 %	2,750.9
SplitShare	4.29 %	4.12 %	32,080	3.59	5	0.0893 %	3,184.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0395 %	2,515.4
Perpetual-Premium	5.42 %	-7.76 %	56,337	0.08	19	0.1709 %	2,510.8
Perpetual-Discount	5.03 %	4.90 %	109,890	14.97	16	-0.0180 %	2,755.1
FixedReset	4.46 %	3.64 %	207,362	16.73	78	-1.4896 %	2,393.5
Deemed-Retractible	4.93 %	0.59 %	105,365	0.17	39	0.0365 %	2,637.5
FloatingReset	2.57 %	3.29 %	75,989	6.42	7	-2.2628 %	2,280.7

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.X	FixedReset	-6.38 %	Perfectly legitimate. Of the last 25 trades of the day (1:04pm and afterwards), twenty-four were board lots and all these board lots were executed below 19.00. VWAP on the day’s 11,960 shares was 19.08. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 18.77 Evaluated at bid price : 18.77 Bid-YTW : 3.80 %
BAM.PR.K	Floater	-6.10 %	Not entirely real. The low for the day was 14.59; a last bid there would have reduced the loss to 2%-odd, but that’s still bad enough! YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 14.00 Evaluated at bid price : 14.00 Bid-YTW : 3.59 %
ENB.PR.N	FixedReset	-4.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 4.23 %
ENB.PR.B	FixedReset	-4.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.17 %
ENB.PR.T	FixedReset	-4.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 4.25 %
PWF.PR.T	FixedReset	-4.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.85 Evaluated at bid price : 24.00 Bid-YTW : 3.41 %
BAM.PR.T	FixedReset	-4.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.10 Evaluated at bid price : 22.35 Bid-YTW : 3.64 %
ENB.PR.P	FixedReset	-4.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 20.65 Evaluated at bid price : 20.65 Bid-YTW : 4.22 %
FTS.PR.K	FixedReset	-4.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.61 Evaluated at bid price : 23.50 Bid-YTW : 3.22 %
MFC.PR.M	FixedReset	-4.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 4.60 %
PWF.PR.A	Floater	-4.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 2.84 %
ENB.PR.Y	FixedReset	-4.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.23 %
ENB.PR.H	FixedReset	-3.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.06 %
TD.PR.Z	FloatingReset	-3.71 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.09 Bid-YTW : 3.41 %
SLF.PR.H	FixedReset	-3.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 3.90 %
BAM.PR.R	FixedReset	-3.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.34 Evaluated at bid price : 21.64 Bid-YTW : 3.75 %
ENB.PR.F	FixedReset	-3.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.19 %
FTS.PR.G	FixedReset	-3.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.71 Evaluated at bid price : 23.61 Bid-YTW : 3.23 %
ENB.PF.C	FixedReset	-3.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.78 Evaluated at bid price : 22.21 Bid-YTW : 4.17 %
BAM.PF.E	FixedReset	-3.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.16 Evaluated at bid price : 22.81 Bid-YTW : 3.94 %
ENB.PR.D	FixedReset	-3.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 4.10 %
BAM.PF.G	FixedReset	-3.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.80 Evaluated at bid price : 24.10 Bid-YTW : 3.94 %
PWF.PR.P	FixedReset	-3.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 18.62 Evaluated at bid price : 18.62 Bid-YTW : 3.33 %
BNS.PR.C	FloatingReset	-2.72 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.58 Bid-YTW : 3.29 %
BAM.PR.C	Floater	-2.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 14.60 Evaluated at bid price : 14.60 Bid-YTW : 3.44 %
BNS.PR.B	FloatingReset	-2.55 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.29 Bid-YTW : 3.30 %
BAM.PR.B	Floater	-2.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 14.67 Evaluated at bid price : 14.67 Bid-YTW : 3.42 %
TD.PR.T	FloatingReset	-2.51 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 3.19 %
BMO.PR.R	FloatingReset	-2.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.31 Bid-YTW : 3.23 %
BAM.PR.G	FixedFloater	-2.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.78 Evaluated at bid price : 21.47 Bid-YTW : 3.61 %
ENB.PF.E	FixedReset	-2.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.93 Evaluated at bid price : 22.45 Bid-YTW : 4.15 %
ENB.PR.J	FixedReset	-2.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.99 Evaluated at bid price : 22.45 Bid-YTW : 4.00 %
HSE.PR.A	FixedReset	-2.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 17.24 Evaluated at bid price : 17.24 Bid-YTW : 3.83 %
ENB.PF.A	FixedReset	-2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.92 Evaluated at bid price : 22.40 Bid-YTW : 4.13 %
BAM.PF.F	FixedReset	-2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 23.01 Evaluated at bid price : 24.50 Bid-YTW : 3.85 %
ENB.PF.G	FixedReset	-2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 21.97 Evaluated at bid price : 22.52 Bid-YTW : 4.16 %
MFC.PR.L	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 4.34 %
MFC.PR.K	FixedReset	-1.85 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 4.23 %
BMO.PR.Q	FixedReset	-1.84 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.84 Bid-YTW : 4.49 %
MFC.PR.F	FixedReset	-1.73 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.75 Bid-YTW : 5.93 %
MFC.PR.G	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.09 Bid-YTW : 3.86 %
CU.PR.C	FixedReset	-1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 23.35 Evaluated at bid price : 24.60 Bid-YTW : 3.27 %
BMO.PR.S	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.98 Evaluated at bid price : 24.35 Bid-YTW : 3.26 %
TRP.PR.F	FloatingReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 3.33 %
TRP.PR.E	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.68 Evaluated at bid price : 23.75 Bid-YTW : 3.49 %
BMO.PR.W	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.83 Evaluated at bid price : 24.10 Bid-YTW : 3.19 %
CM.PR.O	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.98 Evaluated at bid price : 24.40 Bid-YTW : 3.26 %
FTS.PR.M	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 23.03 Evaluated at bid price : 24.61 Bid-YTW : 3.44 %
MFC.PR.H	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.34 Bid-YTW : 3.99 %
PWF.PR.R	Perpetual-Premium	1.14 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-30 Maturity Price : 26.00 Evaluated at bid price : 26.70 Bid-YTW : 4.03 %
SLF.PR.B	Deemed-Retractible	1.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.90 %
TRP.PR.C	FixedReset	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 17.38 Evaluated at bid price : 17.38 Bid-YTW : 3.48 %
GWO.PR.F	Deemed-Retractible	2.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : -20.72 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	1,134,296	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 23.12 Evaluated at bid price : 24.95 Bid-YTW : 3.42 %
BNS.PR.Y	FixedReset	66,503	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.20 Bid-YTW : 4.40 %
BMO.PR.Q	FixedReset	62,196	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.84 Bid-YTW : 4.49 %
TRP.PR.D	FixedReset	57,113	RBC bought 12,100 from National at 23.26. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.72 Evaluated at bid price : 23.75 Bid-YTW : 3.44 %
BMO.PR.P	FixedReset	43,724	Called for redemption February 25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 3.24 %
TD.PF.B	FixedReset	42,130	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 23.00 Evaluated at bid price : 24.45 Bid-YTW : 3.17 %
There were 48 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: 23.05 – 24.50 Spot Rate : 1.4500 Average : 0.8830 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 4.60 %
PWF.PR.A	Floater	Quote: 17.50 – 19.00 Spot Rate : 1.5000 Average : 1.1607 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 2.84 %
HSE.PR.A	FixedReset	Quote: 17.24 – 18.00 Spot Rate : 0.7600 Average : 0.4804 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 17.24 Evaluated at bid price : 17.24 Bid-YTW : 3.83 %
TD.PR.Z	FloatingReset	Quote: 23.09 – 23.71 Spot Rate : 0.6200 Average : 0.4027 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.09 Bid-YTW : 3.41 %
BNS.PR.Z	FixedReset	Quote: 22.20 – 22.78 Spot Rate : 0.5800 Average : 0.3802 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.20 Bid-YTW : 4.24 %
FTS.PR.J	Perpetual-Discount	Quote: 24.41 – 25.09 Spot Rate : 0.6800 Average : 0.4910 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 24.00 Evaluated at bid price : 24.41 Bid-YTW : 4.92 %

Craig Torres and Aki Ito provide some interesting charts illustrating the Fed’s insouciance regarding the prospects of oil-fuelled deflation:

There’s core inflation:

There’s consumer expectations of inflation:

… and there’s trimmed mean inflation:

Oil, Schmoil!

But hey, how ’bout that Canadian economy, eh?

Canadian payroll employment dropped in November by the most in almost five years, a government report showed Thursday, adding to concern the outlook for the nation’s labor market is dimming as oil prices tumble.

The number of non-farm payroll employees fell by 33,000, Statistics Canada said, the most since August 2009, just after the last recession. The Ottawa-based agency also published revised labor force data Wednesday that cut the total number of 2014 job gains by more than a third.

It’s not doing the loonie any good:

Weak oil prices and a surging U.S. currency made another dent in the value of the Canadian dollar Thursday, adding momentum to the loonie’s unprecedented downward spiral.

The dollar, which has fallen about 14 per cent in the past six months, closed at 79.30 cents (U.S.), down more than half a cent on the day.

Artis REIT, proud issuer of AX.PR.A, AX.PR.E and AX.PR.G, was confirmed at Pfd-3(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the ratings of Artis Real Estate Investment Trust’s (Artis or the Trust) Senior Unsecured Debentures at BBB (low) and Preferred Trust Units at Pfd-3 (low), all with Stable trends. The rating confirmation reflects the expected improvement in key financial metrics and growth in operating income driven mainly by significant property acquisitions over the last few years. The ratings continue to be supported by Artis’s mid-sized and diversified commercial real estate portfolio, diverse tenant base and conservative financial profile; however, they remain constrained by a concentration of properties in suburban office and smaller retail formats as well as the Trust’s exposure to small or secondary markets, limited scale within each asset type segment and high proportion of secured debt.
…
DBRS notes that the achievement of a positive rating action for Artis will be less dependent on improving coverage and leverage metrics and more reliant on increasing size and scale while improving overall asset quality. On the other hand, weaker-than-expected operating and earnings performance and/or higher financial leverage that leads to EBITDA interest coverage falling below 2.20 times on a sustained basis could result in a negative rating action.

Happy preferred share investors are so excited about this market they can hardly speak!:

This is not the worst day ever for FixedResets! There was November 25, 2008 (-3.38%), October 10, 2008 (-2.92%) [which ended so wildly that I had to issue an update to PrefLetter a week later, because the prices didn’t make any sense at all], November 19, 2008 (-2.67%), October 23, 2008 (-2.37%) and November 21, 2008 (-2.21%). So this is only the sixth worse day for FixedResets ever. Note that the quoted numbers are taken from the monthly revisions to the indices and therefore will not necessarily match the originally published figures.

Alert Assiduous Readers will have noticed, however, that all these chart-topping days were in October and November, 2008, when information regarding the impending collapse of the Canadian economy and zero-recovery bankruptcy of every Canadian bank was first leaked to the better-connected individuals in the market (these events were later cancelled), so these were all credit-based disasters. So we have the privilege of having witnessed the worst ever yield-based FixedReset day. And, of course, FixedResets are now a much larger part of the market than they were back in the old days.

It was (ahem) a poor day for the Canadian preferred share market, with PerpetualDiscounts and DeemedRetractibles both off 16bp and FixedResets down 174bp. The Performance Highlights table … well, yeah, the Performance Highlights table. Volume was high.

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

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

Here’s TRP:

So according to this, the cheapest issue is now TRP.PR.C, bid at 17.30; it is $0.57 cheap, and will reset 2016-1-30 at +154. TRP.PR.E, bid at 25.11 and resetting at +235bp on 2019-10-30 is $0.75 rich.

MFC.PR.F is now visibly above the line defined by its peers.

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).

Changes in the market level, which have had the visible effect of reducing Implied Volatility, have resulted in the cheapest issue relative to its peers being BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 23.01 to be $0.29 cheap. BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 23.85 and appears to be $0.55 rich.

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 17.30, looks $1.28 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.21, looks $1.31 expensive and resets 2019-3-1.

The point representing the DC.PR.B / DC.PR.D pair, interconvertible 2019-9-30, is not shown: it has an implied three-month bill yield of negative 1.16% – rather an extreme view for the market to take!

It is interesting to see that while the TRP.PR.A / TRP.PR.F pair is now showing a positive breakeven three-month bill yield over the next five years, the BNS.PR.P / BNS.PR.A pair, resetting 2018-4-26, is calculated at negative 0.19%. surprising to see this in an investment-grade pair, but when the market goes nuts, it doesn’t fool around!

Pairs equivalence is looking more rational, with the investment grade pairs (which are presumably more closely watched and easier to trade) do show a rising trend with increasing time to interconversion which, qualitatively speaking, is entirely reasonable, although the increase (over five years-odd) looks pretty substantial given the scale of the chart (two years-odd).

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	-2.4838 %	2,284.2
FixedFloater	4.32 %	3.50 %	20,044	18.43	1	0.1821 %	4,093.0
Floater	3.16 %	3.34 %	54,162	18.89	4	-2.4838 %	2,428.3
OpRet	4.05 %	1.90 %	101,958	0.38	1	0.0395 %	2,752.0
SplitShare	4.30 %	4.12 %	31,975	3.59	5	-0.3032 %	3,181.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,516.4
Perpetual-Premium	5.43 %	-6.99 %	56,222	0.08	19	-0.0638 %	2,506.5
Perpetual-Discount	5.03 %	4.88 %	110,630	15.03	16	-0.1621 %	2,755.6
FixedReset	4.41 %	3.55 %	204,947	17.06	77	-1.7390 %	2,429.7
Deemed-Retractible	4.93 %	0.31 %	100,758	0.15	39	-0.1564 %	2,636.6
FloatingReset	2.51 %	2.85 %	74,515	6.44	7	-0.7000 %	2,333.5

Performance Highlights
Issue	Index	Change	Notes
HSE.PR.A	FixedReset	-7.11 %	Yep, this is real all right. Of the last twenty-five trades, twenty three were board lots and all but five of these were executed at or below the closing bid. So it’s real. Volume was 33,561, with a VWAP of 17.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 17.65 Evaluated at bid price : 17.65 Bid-YTW : 3.74 %
MFC.PR.N	FixedReset	-5.21 %	Sort of real! Three board lots traded just above the last bid, but most of the final twenty-five trades were fifty cents higher than this figure. Volume was 20,800, with a VWAP of 24.55. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.65 Bid-YTW : 4.23 %
TRP.PR.B	FixedReset	-5.06 %	Yes, sir, this is real all right! Of the last twenty five trades, all but one were at or below the last bid. Volume on the day was 57,112, with a VWAP of 15.21. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 3.51 %
BNS.PR.Y	FixedReset	-4.72 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.21 Bid-YTW : 4.39 %
PWF.PR.P	FixedReset	-4.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 3.22 %
TRP.PR.E	FixedReset	-4.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.82 Evaluated at bid price : 24.05 Bid-YTW : 3.43 %
TRP.PR.D	FixedReset	-4.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.66 Evaluated at bid price : 23.63 Bid-YTW : 3.46 %
MFC.PR.L	FixedReset	-3.85 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.70 Bid-YTW : 4.10 %
BAM.PR.B	Floater	-3.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 3.34 %
TRP.PR.A	FixedReset	-3.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 3.57 %
ENB.PF.G	FixedReset	-3.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.26 Evaluated at bid price : 23.02 Bid-YTW : 4.05 %
BAM.PR.K	Floater	-3.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 14.91 Evaluated at bid price : 14.91 Bid-YTW : 3.37 %
BNS.PR.Z	FixedReset	-3.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 4.20 %
PWF.PR.T	FixedReset	-3.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.30 Evaluated at bid price : 25.15 Bid-YTW : 3.19 %
BMO.PR.Q	FixedReset	-3.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 4.19 %
ENB.PF.A	FixedReset	-3.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.23 Evaluated at bid price : 22.91 Bid-YTW : 4.02 %
MFC.PR.K	FixedReset	-3.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.74 Bid-YTW : 4.00 %
BAM.PR.C	Floater	-3.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 3.35 %
GWO.PR.N	FixedReset	-2.96 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.05 Bid-YTW : 6.02 %
GWO.PR.F	Deemed-Retractible	-2.90 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-28 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 4.31 %
MFC.PR.M	FixedReset	-2.71 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 4.08 %
ENB.PR.F	FixedReset	-2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 21.47 Evaluated at bid price : 21.47 Bid-YTW : 4.03 %
ENB.PF.C	FixedReset	-2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.27 Evaluated at bid price : 23.00 Bid-YTW : 4.00 %
IAG.PR.A	Deemed-Retractible	-2.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 4.98 %
MFC.PR.F	FixedReset	-2.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.08 Bid-YTW : 5.72 %
BAM.PR.R	FixedReset	-2.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 21.90 Evaluated at bid price : 22.45 Bid-YTW : 3.59 %
ENB.PR.J	FixedReset	-2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.33 Evaluated at bid price : 23.00 Bid-YTW : 3.88 %
ENB.PF.E	FixedReset	-2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.26 Evaluated at bid price : 23.00 Bid-YTW : 4.03 %
ENB.PR.Y	FixedReset	-2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 4.05 %
BAM.PR.T	FixedReset	-2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.09 Evaluated at bid price : 23.40 Bid-YTW : 3.46 %
SLF.PR.H	FixedReset	-2.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 3.45 %
CM.PR.P	FixedReset	-2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.97 Evaluated at bid price : 24.46 Bid-YTW : 3.18 %
FTS.PR.K	FixedReset	-2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.07 Evaluated at bid price : 24.54 Bid-YTW : 3.03 %
MFC.PR.J	FixedReset	-2.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 3.67 %
BMO.PR.T	FixedReset	-1.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.02 Evaluated at bid price : 24.51 Bid-YTW : 3.14 %
BAM.PR.X	FixedReset	-1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 3.54 %
ENB.PR.D	FixedReset	-1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 21.07 Evaluated at bid price : 21.07 Bid-YTW : 3.96 %
BNS.PR.B	FloatingReset	-1.89 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 2.89 %
BNS.PR.C	FloatingReset	-1.70 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.24 Bid-YTW : 2.85 %
CM.PR.O	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.09 Evaluated at bid price : 24.70 Bid-YTW : 3.20 %
NA.PR.S	FixedReset	-1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.15 Evaluated at bid price : 24.80 Bid-YTW : 3.26 %
FTS.PR.M	FixedReset	-1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.14 Evaluated at bid price : 24.91 Bid-YTW : 3.38 %
BMO.PR.W	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 22.96 Evaluated at bid price : 24.40 Bid-YTW : 3.13 %
BAM.PF.G	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.11 Evaluated at bid price : 24.92 Bid-YTW : 3.77 %
SLF.PR.B	Deemed-Retractible	-1.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.63 Bid-YTW : 5.07 %
MFC.PR.I	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : 3.78 %
FTS.PR.H	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 3.36 %
SLF.PR.G	FixedReset	-1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.80 Bid-YTW : 6.23 %
BMO.PR.R	FloatingReset	-1.36 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 2.84 %
CGI.PR.D	SplitShare	-1.34 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.83 %
TD.PF.A	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.07 Evaluated at bid price : 24.70 Bid-YTW : 3.13 %
MFC.PR.G	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.52 Bid-YTW : 3.54 %
TRP.PR.C	FixedReset	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 3.55 %
TD.PF.C	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.02 Evaluated at bid price : 24.60 Bid-YTW : 3.16 %
TD.PF.B	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.06 Evaluated at bid price : 24.61 Bid-YTW : 3.14 %
ENB.PR.H	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 3.90 %
FTS.PR.J	Perpetual-Discount	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 24.18 Evaluated at bid price : 24.60 Bid-YTW : 4.88 %
IFC.PR.A	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 5.48 %
TD.PR.Z	FloatingReset	-1.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.98 Bid-YTW : 2.82 %
RY.PR.Z	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.22 Evaluated at bid price : 25.00 Bid-YTW : 3.04 %
BAM.PF.F	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.20 Evaluated at bid price : 25.05 Bid-YTW : 3.73 %
NA.PR.Q	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 3.22 %
TRP.PR.F	FloatingReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 3.29 %
BMO.PR.S	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.11 Evaluated at bid price : 24.70 Bid-YTW : 3.20 %
NA.PR.W	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.05 Evaluated at bid price : 24.70 Bid-YTW : 3.14 %
SLF.PR.A	Deemed-Retractible	-1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 4.95 %
BMO.PR.J	Deemed-Retractible	1.02 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-28 Maturity Price : 25.50 Evaluated at bid price : 25.70 Bid-YTW : -8.87 %
MFC.PR.B	Deemed-Retractible	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 5.03 %
GWO.PR.P	Deemed-Retractible	1.72 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 4.35 %
GWO.PR.I	Deemed-Retractible	1.82 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 5.04 %
BNS.PR.A	FloatingReset	2.94 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.15 Bid-YTW : 3.08 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.Q	Deemed-Retractible	136,060	Called for redemption March 2. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-02 Maturity Price : 25.50 Evaluated at bid price : 25.58 Bid-YTW : 1.39 %
ENB.PR.H	FixedReset	103,708	Nesbitt crossed 72,000 at 20.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 3.90 %
MFC.PR.M	FixedReset	56,850	Nesbitt crossed 40,000 at 24.34. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 4.08 %
CU.PR.G	Perpetual-Discount	46,428	National bought 25,000 from RBC at 23.71. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 23.27 Evaluated at bid price : 23.60 Bid-YTW : 4.82 %
TRP.PR.B	FixedReset	38,012	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 3.51 %
TRP.PR.C	FixedReset	34,936	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 3.55 %
There were 48 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.F	Deemed-Retractible	Quote: 25.15 – 26.04 Spot Rate : 0.8900 Average : 0.5147 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-28 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 4.31 %
MFC.PR.N	FixedReset	Quote: 23.65 – 24.20 Spot Rate : 0.5500 Average : 0.3349 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.65 Bid-YTW : 4.23 %
MFC.PR.H	FixedReset	Quote: 25.63 – 26.13 Spot Rate : 0.5000 Average : 0.3028 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.63 Bid-YTW : 3.63 %
TRP.PR.F	FloatingReset	Quote: 19.00 – 19.95 Spot Rate : 0.9500 Average : 0.7742 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 3.29 %
SLF.PR.I	FixedReset	Quote: 25.53 – 25.99 Spot Rate : 0.4600 Average : 0.3048 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.53 Bid-YTW : 3.30 %
TRP.PR.A	FixedReset	Quote: 20.00 – 20.49 Spot Rate : 0.4900 Average : 0.3410 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-29 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 3.57 %

The FOMC release was ‘steady as she goes’:

Information received since the Federal Open Market Committee met in December suggests that economic activity has been expanding at a solid pace. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; recent declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.
…
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

… but markets were hoping for more gloom (which makes sense, right? Ummmm….):

U.S. stocks fell, sending the Dow Jones Industrial Average to its biggest two-day loss in a year, as energy shares plunged and concern grew about international risks to the American economy and weakness in multinational earnings.

Energy companies slumped 3.9 percent as a group after oil retreated. Apple Inc. climbed 5.7 percent after reporting a record $18 billion in quarterly profit, one of the biggest in corporate history. Boeing Co. advanced 5.4 percent as it posted a quarterly profit that beat analysts’ estimates.

The Standard & Poor’s 500 Index fell 1.4 percent to 2,002.16 at 4 p.m. in New York. The Dow Jones Industrial Average lost 195.84 points, or 1.1 percent, to 17,191.37. The gauge fell 2.8 percent over two days, the most since February 2014. The Nasdaq 100 Index dropped 0.6 percent, erasing an earlier rally of 1.7 percent. The Chicago Board Options Exchange Volatility Index, known as the VIX, added 19 percent to 20.44, its biggest jump of the year.
…
U.S. stocks turned lower after the Fed boosted its assessment of the economy and downplayed low inflation readings while repeating a pledge to remain “patient” on raising interest rates. Losses accelerated in the final hour, pushing declines in the Dow and S&P 500 beyond 1 percent and wiping out gains in the Nasdaq.

Karl Marx’ ghost is chuckling quietly about the inherent contradictions of capitalism:

This year, at least a dozen elite colleges, including Chicago, Duke, Dartmouth, and Columbia, have offered extensions of once-sacrosanct January admissions deadlines. The University of Pennsylvania, Vanderbilt, and Bates are among schools whose admissions deans said they were doing so for the first time, aside from individual hardship cases or such emergencies as storms and major website failures.
…
These universities are hardly hurting for customers. More than 30,000 hopefuls are applying to Chicago this year. In the last go-round, the school rejected 92 percent—the most ever—making it one of the most selective schools in the U.S. Advisers and high school seniors say they suspect schools are just burnishing reputations for selectivity. More applications mean more rejections, which heightens a college’s prestige in the world of higher education.

… while I cannot help but wonder what Gloria Steinem would think of keeping women in the seraglio (for their own safety, of course):

Sorority women at the University of Virginia were ordered to stay home on the biggest party night of the year to protect their “safety and well-being” — and they are furious about it.

Members of the National Panhellenic Conference told 16 UVA sorority chapters last week not to participate in Boys’ Bid Night fraternity parties on Saturday. The revelry has led to allegations of sexual assault and excessive drinking in the past. Women who break the prohibition may face sanctions.

“They are treating us like children and punishing us for being women,” said Whitney Rosser, a senior from Lynchburg, Virginia, and a member of Alpha Phi. “We’re angry because we are being told we are not allowed to go out instead of addressing the deeper issue of why sexual assault happens.”

Meanwhile…:

It was another explosively mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 3bp, FixedResets down 83bp (!) and DeemedRetractibles off 7bp. The Performance Highlights table is suitably enormous. Volume was slightly below average.

PerpetualDiscounts now yield 4.84%, equivalent to 6.29% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.71% so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 260bp, a slight (and perhaps spurious) narrowing from the 260bp reported January 21

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:

So according to this, the cheapest issue is now TRP.PR.C, bid at 17.27 following its appalling recent performance; it is $0.63 cheap, and will reset 2016-1-30 at +154. TRP.PR.E, bid at 25.11 and resetting at +235bp on 2019-10-30 is $0.67 rich.

MFC.PR.F is now visibly above the line defined by its peers.

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).

Changes in the market level, which have had the visible effect of reducing Implied Volatility, have resulted in the cheapest issue relative to its peers being BAM.PF.E, resetting at +255bp on 2020-3-31, bid at 23.80 to be $0.40 cheap. BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 23.90 and appears to be $0.72 rich.

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 17.30, looks $1.32 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.05, looks $1.38 expensive and resets 2019-3-1.

The point representing the DC.PR.B / DC.PR.D pair, interconvertible 2019-9-30, is not shown: it has an implied three-month bill yield of negative 1.27% – rather an extreme view for the market to take!

It is interesting to see that the TRP.PR.A / TRP.PR.F pair is now showing a breakeven three-month bill yield over the next five years of negative 0.16% … surprising to see this in an investment-grade pair, but when the market goes nuts, it doesn’t fool around!

Pairs equivalence is looking more rational, with the investment grade pairs (which are presumably more closely watched and easier to trade) do show a rising trend with increasing time to interconversion which, qualitatively speaking, is entirely reasonable, although the increase (over five years-odd) looks pretty substantial given the scale of the chart (two years-odd). The average break-even rate is way down from recent levels again today

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	-0.2155 %	2,342.4
FixedFloater	4.33 %	3.51 %	20,137	18.42	1	0.4575 %	4,085.6
Floater	3.08 %	3.21 %	54,521	19.20	4	-0.2155 %	2,490.1
OpRet	4.05 %	1.99 %	103,584	0.38	1	0.0791 %	2,750.9
SplitShare	4.28 %	4.12 %	29,842	3.59	5	0.0317 %	3,190.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0791 %	2,515.4
Perpetual-Premium	5.42 %	-7.15 %	56,355	0.08	19	0.0432 %	2,508.1
Perpetual-Discount	5.02 %	4.84 %	108,158	14.98	16	0.0283 %	2,760.1
FixedReset	4.33 %	3.42 %	204,899	17.23	77	-0.8338 %	2,472.7
Deemed-Retractible	4.92 %	0.30 %	101,576	0.17	39	-0.0666 %	2,640.7
FloatingReset	2.49 %	2.63 %	69,096	6.45	7	-1.2258 %	2,350.0

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.C	FixedReset	-6.90 %	Quite real enough, as all of the last twenty-five (small) trades of the day were executed at or below 17.50, with a low of 17.36. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 17.27 Evaluated at bid price : 17.27 Bid-YTW : 3.51 %
BNS.PR.A	FloatingReset	-5.21 %	Not real. One odd-lot traded at 23.84 to close the day, but the board-lot low on the day was 24.51. So this is just more of what us fiasco aficionados call a routine report from the Toronto Stock Exchange. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.46 Bid-YTW : 3.54 %
BAM.PF.E	FixedReset	-4.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 22.68 Evaluated at bid price : 23.80 Bid-YTW : 3.73 %
BAM.PR.R	FixedReset	-3.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 22.53 Evaluated at bid price : 22.95 Bid-YTW : 3.52 %
BAM.PR.X	FixedReset	-3.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.47 %
BAM.PR.K	Floater	-3.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 15.45 Evaluated at bid price : 15.45 Bid-YTW : 3.25 %
BAM.PR.T	FixedReset	-2.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 23.07 Evaluated at bid price : 23.90 Bid-YTW : 3.34 %
ENB.PR.P	FixedReset	-2.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 21.36 Evaluated at bid price : 21.66 Bid-YTW : 3.99 %
BAM.PR.C	Floater	-2.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 15.48 Evaluated at bid price : 15.48 Bid-YTW : 3.24 %
BAM.PR.B	Floater	-2.74 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 15.64 Evaluated at bid price : 15.64 Bid-YTW : 3.21 %
ENB.PR.D	FixedReset	-2.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 21.48 Evaluated at bid price : 21.48 Bid-YTW : 3.88 %
PWF.PR.P	FixedReset	-2.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 20.16 Evaluated at bid price : 20.16 Bid-YTW : 3.07 %
HSE.PR.A	FixedReset	-2.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 3.47 %
ENB.PR.N	FixedReset	-2.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 22.05 Evaluated at bid price : 22.51 Bid-YTW : 3.96 %
SLF.PR.G	FixedReset	-2.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.06 Bid-YTW : 6.05 %
ENB.PF.E	FixedReset	-2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 22.53 Evaluated at bid price : 23.50 Bid-YTW : 3.92 %
BAM.PF.B	FixedReset	-2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 23.03 Evaluated at bid price : 24.45 Bid-YTW : 3.57 %
GWO.PR.N	FixedReset	-2.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.60 Bid-YTW : 5.66 %
TRP.PR.D	FixedReset	-2.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 23.10 Evaluated at bid price : 24.65 Bid-YTW : 3.26 %
IFC.PR.C	FixedReset	-2.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.97 %
ENB.PR.F	FixedReset	-1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 21.76 Evaluated at bid price : 22.05 Bid-YTW : 3.90 %
ENB.PR.H	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.85 %
GWO.PR.P	Deemed-Retractible	-1.62 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.10 Bid-YTW : 4.73 %
ENB.PR.B	FixedReset	-1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 3.92 %
BMO.PR.Q	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 3.65 %
GWO.PR.I	Deemed-Retractible	-1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.67 Bid-YTW : 5.26 %
ENB.PR.T	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 21.39 Evaluated at bid price : 21.70 Bid-YTW : 4.00 %
TD.PR.T	FloatingReset	-1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.04 Bid-YTW : 2.70 %
TRP.PR.F	FloatingReset	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 3.26 %
BNS.PR.Z	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 3.64 %
BAM.PF.F	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 23.29 Evaluated at bid price : 25.33 Bid-YTW : 3.67 %
ENB.PF.G	FixedReset	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 22.68 Evaluated at bid price : 23.86 Bid-YTW : 3.87 %
MFC.PR.M	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.72 Bid-YTW : 3.74 %
MFC.PR.H	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 3.16 %
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 : 22.26 Bid-YTW : 3.64 %
BMO.PR.M	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 2.91 %
IAG.PR.A	Deemed-Retractible	1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.67 %
IFC.PR.A	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 5.33 %
MFC.PR.L	FixedReset	2.45 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.62 %
PWF.PR.A	Floater	7.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 2.72 %

Volume Highlights
Issue	Index	Shares Traded	Notes
HSB.PR.D	Deemed-Retractible	53,600	Desjardins crossed 48,800 at 25.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-27 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : -1.52 %
BMO.PR.R	FloatingReset	41,100	Desjardins crossed 40,000 at 24.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.39 Bid-YTW : 2.61 %
ENB.PF.E	FixedReset	34,400	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 22.53 Evaluated at bid price : 23.50 Bid-YTW : 3.92 %
TD.PF.B	FixedReset	34,071	RBC crossed 25,800 at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 23.17 Evaluated at bid price : 24.92 Bid-YTW : 3.08 %
SLF.PR.G	FixedReset	27,418	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.06 Bid-YTW : 6.05 %
ENB.PR.H	FixedReset	25,510	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.85 %
There were 28 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNS.PR.A	FloatingReset	Quote: 23.46 – 24.80 Spot Rate : 1.3400 Average : 0.7555 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.46 Bid-YTW : 3.54 %
BAM.PF.E	FixedReset	Quote: 23.80 – 24.80 Spot Rate : 1.0000 Average : 0.6821 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 22.68 Evaluated at bid price : 23.80 Bid-YTW : 3.73 %
BAM.PR.X	FixedReset	Quote: 20.45 – 21.11 Spot Rate : 0.6600 Average : 0.4161 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.47 %
IFC.PR.C	FixedReset	Quote: 24.31 – 24.85 Spot Rate : 0.5400 Average : 0.3497 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.97 %
GWO.PR.P	Deemed-Retractible	Quote: 26.10 – 26.68 Spot Rate : 0.5800 Average : 0.4214 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.10 Bid-YTW : 4.73 %
BAM.PF.B	FixedReset	Quote: 24.45 – 24.95 Spot Rate : 0.5000 Average : 0.3541 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-28 Maturity Price : 23.03 Evaluated at bid price : 24.45 Bid-YTW : 3.57 %

It was a poor day for US equities:

The Standard & Poor’s 500 Index lost 1.3 percent by 4 p.m. in New York, while the Dow Jones Industrial Average slid the most since Jan. 5. The Stoxx Europe 600 Index dropped 1 percent from a seven-year high as euro climbed 1.3 percent to $1.1378. Japan’s currency strengthened 0.5 percent helping send the Bloomberg Dollar Spot Index to its first retreat in eight days. Gold futures rose 1 percent as 10-year Treasury (USGG10YR) yields fell one basis point to 1.82 percent. U.S. natural gas advanced 3.5 percent as a snowstorm blanketed the country’s northeast.

Caterpillar (CAT), the world’s largest manufacturer of mining and construction equipment, reported profit that missed estimates, while Microsoft’s software-license sales to businesses trailed estimates. Orders for business equipment in the U.S. unexpectedly fell in December for a fourth month, signaling the global slowdown may be weighing on American companies. U.S. stock exchanges were operating normally amid travel bans imposed by the government because of the snowstorm.
…
Orders for U.S. durable goods — items meant to last at least three years — decreased 3.4 percent in December after falling 2.1 percent the prior month, Commerce Department data showed. Separate reports showed U.S. consumer confidence surged more than forecast, while purchases of new homes increased 11.6 percent in December.

… but Canada did all right:

Canadian stocks rose a fifth day, after erasing an earlier loss, as gold producers rallied to offset disappointing U.S. economic data and earnings. The U.S. is Canada’s largest trading partner.

Metro Inc. rallied to a record after announcing a three-for-one stock split and dividend increase. Torex Gold Resources Inc. and Detour Gold Corp. jumped at least 5.6 percent as gold snapped a two-day decline. Finning International Inc. (FTT), which sells Caterpillar Inc. equipment, lost 3.8 percent after the U.S.-based heavy equipment company forecast profit that missed estimates.

The Standard & Poor’s/TSX Composite Index (SPTSX) rose 36.05 points, or 0.2 percent, to 14,833.88 at 4 p.m. in Toronto, erasing an earlier loss of as much as 1 percent. The benchmark Canadian equity gauge has rallied 3.7 percent during its five-day streak, the longest since November. It is up 1.4 percent this year and trades at a two-month high.

Toronto is headed for another round of airport wars:

AGF Management Ltd. and billionaire investor Larry Tanenbaum are part of an investment group that agreed to buy Toronto Island’s Billy Bishop airport terminal from Porter Aviation Holdings Inc.

The terms of the deal weren’t disclosed, according to a statement today from the buyers, known as Nieuport Aviation Infrastructure Partners GP. People familiar with the matter said this month the sale of the terminal was expected to raise more than C$750 million ($605 million).

Robert Deluce, Porter’s chief executive officer, declined to comment on the price, saying the matter was confidential.
…
He said the airline remains focused on getting the go-ahead to expand the runway at Billy Bishop to accommodate the use of Bombardier Inc. (BBD/B) CSeries jets. He expects the matter will go before a vote at Toronto’s city council in the second half of 2015.

Deluce said he hoped the addition of a new terminal owner at the airport will bolster efforts to expand it.

The investment group included InstarAGF Asset Management Inc., a joint venture between AGF and Instar Group Inc. The group said it contributed C$105 million of capital to acquire the terminal.

AGF, based in Toronto, is a money manager with more than C$34 billion in assets under management. InstarAGF and Instar Group are run by Gregory Smith, a former executive at Brookfield Financial and Macquarie Capital Funds Canada Ltd. Tanenbaum is chairman of Kilmer Van Nostrand Co., a Toronto-based private equity firm, and is also chairman of Maple Leaf Sports & Entertainment Ltd., owner of the Toronto Maple Leafs and Toronto Raptors sports franchises.

The terminal will become the cornerstone asset in InstarAGF’s infrastructure fund established last year, in part to target infrastructure assets that are too small to get the attention of larger pension funds, Smith said in an interview.

The Globe has some interesting commentary on Canadian corporate issuance:

Canadian corporates have floated just $2.8-billion worth of fixed income securities in Canada this month, compared to $7.4-billion at the same time last year and $11-billion in the same periods in 2013 and 2012, Desjardins says. Meanwhile, there has been an almost 100 per cent jump year-over-year in fixed income issuance by Canadian corporates. So far, the tally is $19.5-billion beyond Canada’s borders – more than three-quarters of that from banks and other financial firms – compared to $10-billion by this point last year, according to Desjardins’ vice president and senior analyst, Jean-Francois Godin. “This is taking a lot of refinancing money out of the [domestic] market,” he said.

There are two reasons for this, according to senior figures in the Canadian bond world. The biggest factor is that Canadian banks have found a huge appetite for their debt internationally, particularly covered bonds, which are triple-A-rated fixed income instruments backed by mortgages. Central banks in Europe apparently can’t get enough of them, particularly as the European Central Bank cranks up its asset-buying machine to bolster the continent’s sluggish economies. In the last 20 days, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Commerce have issued €4.50-billion ($6.3-billion) in covered bonds to banks in Europe, which are drawn to the high ratings and ability to earn a slightly better return compared to European debt securities.

Happy preferred share investors held a meeting today:

It was carnage for the Canadian preferred share market today, with PerpetualDiscounts down 32bp, FixedResets losing 87bp and DeemedRetractibles off 7bp. A very lengthy Performance Highlights table is suitably dominated by losing FixedResets. Volume was high.

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

Remember that all rich /cheap assessments are:

• based on Implied Volatility Theory only
• are relative only to other FixedResets from the same issuer
• assume constant GOC-5 yield
• assume constant Implied Volatility
• assume constant spread

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.75, is $0.58 cheap, and will reset again 2019-12-31 at +192. TRP.PR.E, bid at 25.15 and resetting at +235bp on 2019-10-30 is $0.39 rich. In the interim, TRP.PR.E pays about $0.25 p.a. more than TRP.PR.A, which is not incorporated in the calculation of these numbers. Still, the yield to perpetuity (which does include the different dividends until reset) is 3.44% for TRP.PR.A and 3.22% for TRP.PR.E.

MFC.PR.F continues to be near the line defined by its peers, but underperformed today as Implied Volatility declined.

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).

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.25 and appears to be $0.38 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 24.63 and appears to be $0.80 rich.

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 17.28 after getting hammered today, looks $1.36 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.95, looks $1.39 expensive and resets 2019-3-1.

The point representing the DC.PR.B / DC.PR.D pair, interconvertible 2019-9-30, is not shown: it has an implied three-month bill yield of negative 1.56% – rather an extreme view for the market to take!

Pairs equivalence is looking more rational, with the investment grade pairs (which are presumably more closely watched and easier to trade) do show a rising trend with increasing time to interconversio which, qualitatively speaking, is entirely reasonable, although the increase (over five years-odd) looks pretty substantial given the scale of the chart (two years-odd). The average break-even rate is way down from recent levels again today

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	-3.6916 %	2,347.4
FixedFloater	4.35 %	3.53 %	19,899	18.39	1	2.1495 %	4,067.0
Floater	3.23 %	3.29 %	54,969	19.02	4	-3.6916 %	2,495.5
OpRet	4.05 %	2.18 %	107,126	0.39	1	0.1187 %	2,748.8
SplitShare	4.28 %	4.07 %	31,080	3.59	5	0.1510 %	3,189.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1187 %	2,513.5
Perpetual-Premium	5.43 %	-6.20 %	54,247	0.08	19	-0.1069 %	2,507.0
Perpetual-Discount	5.02 %	4.92 %	108,601	15.33	16	-0.3155 %	2,759.3
FixedReset	4.29 %	3.27 %	205,621	17.30	77	-0.8660 %	2,493.5
Deemed-Retractible	4.91 %	-0.04 %	102,742	0.16	39	-0.0676 %	2,642.4
FloatingReset	2.46 %	2.58 %	67,705	6.46	7	-0.8815 %	2,379.2

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.A	Floater	-10.37 %	Not real. Just another piece of Toronto Stock Exchange idiocy, although I’m not sure whether this one was inadequate market making or dumb reporting. The low for the day was $19.00, but I guess the huge volume of 4,001 shares, of which a whopping 1,283 were traded a mere five minutes prior to the close simply overwhelmed their systems. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 17.03 Evaluated at bid price : 17.03 Bid-YTW : 3.07 %
FTS.PR.H	FixedReset	-5.16 %	This one actually is real, since the last twenty-five trades of the day (twenty four of which happened after 3:40pm) were all executed at 17.30 and lower. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 17.28 Evaluated at bid price : 17.28 Bid-YTW : 3.31 %
TRP.PR.F	FloatingReset	-5.12 %	This is real enough, since the last trade of the day was for 1,000 shares at 19.46. All the trading on and after 2:59pm (there wasn’t much of it, but there was some) was executed below 20.00. So say ‘real, but with light volume’. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 3.21 %
MFC.PR.F	FixedReset	-4.66 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.62 Bid-YTW : 5.38 %
TRP.PR.B	FixedReset	-4.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 15.71 Evaluated at bid price : 15.71 Bid-YTW : 3.35 %
IFC.PR.A	FixedReset	-3.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 5.48 %
MFC.PR.L	FixedReset	-3.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 3.92 %
GWO.PR.N	FixedReset	-3.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.01 Bid-YTW : 5.40 %
SLF.PR.G	FixedReset	-3.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.50 Bid-YTW : 5.77 %
ENB.PR.Y	FixedReset	-2.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 21.55 Evaluated at bid price : 21.55 Bid-YTW : 3.95 %
HSE.PR.A	FixedReset	-2.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 3.38 %
ENB.PR.B	FixedReset	-2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 21.26 Evaluated at bid price : 21.54 Bid-YTW : 3.84 %
NA.PR.S	FixedReset	-1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 23.26 Evaluated at bid price : 25.12 Bid-YTW : 3.20 %
TRP.PR.C	FixedReset	-1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 3.26 %
BAM.PR.K	Floater	-1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 15.93 Evaluated at bid price : 15.93 Bid-YTW : 3.32 %
FTS.PR.G	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 23.11 Evaluated at bid price : 24.51 Bid-YTW : 3.06 %
BAM.PR.C	Floater	-1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 15.92 Evaluated at bid price : 15.92 Bid-YTW : 3.32 %
BAM.PR.N	Perpetual-Discount	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 22.66 Evaluated at bid price : 22.93 Bid-YTW : 5.22 %
PWF.PR.P	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 20.71 Evaluated at bid price : 20.71 Bid-YTW : 2.99 %
CU.PR.E	Perpetual-Discount	-1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 24.71 Evaluated at bid price : 25.15 Bid-YTW : 4.92 %
SLF.PR.I	FixedReset	-1.35 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 3.03 %
BNS.PR.Y	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 3.47 %
MFC.PR.B	Deemed-Retractible	-1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.34 Bid-YTW : 5.08 %
MFC.PR.K	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.72 Bid-YTW : 3.51 %
ENB.PR.F	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 22.03 Evaluated at bid price : 22.43 Bid-YTW : 3.82 %
SLF.PR.B	Deemed-Retractible	-1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 4.85 %
HSE.PR.C	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 23.08 Evaluated at bid price : 24.75 Bid-YTW : 4.03 %
BAM.PF.D	Perpetual-Discount	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 23.00 Evaluated at bid price : 23.30 Bid-YTW : 5.30 %
ENB.PR.D	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 21.80 Evaluated at bid price : 22.08 Bid-YTW : 3.75 %
BAM.PF.C	Perpetual-Discount	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 22.81 Evaluated at bid price : 23.11 Bid-YTW : 5.29 %
SLF.PR.A	Deemed-Retractible	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 4.80 %
BMO.PR.Q	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.62 Bid-YTW : 3.39 %
PWF.PR.S	Perpetual-Discount	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 24.53 Evaluated at bid price : 24.95 Bid-YTW : 4.81 %
BNS.PR.Z	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 3.43 %
GWO.PR.P	Deemed-Retractible	1.45 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.53 Bid-YTW : 4.36 %
BAM.PR.G	FixedFloater	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 21.97 Evaluated at bid price : 21.86 Bid-YTW : 3.53 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.P	FixedReset	780,900	Called for redemption effective February 25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-27 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 0.01 %
TD.PR.P	Deemed-Retractible	126,255	Called for redemption effective March 2. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-26 Maturity Price : 25.50 Evaluated at bid price : 25.57 Bid-YTW : 0.95 %
TD.PR.Q	Deemed-Retractible	123,270	Called for redemption effective March 2. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-02 Maturity Price : 25.50 Evaluated at bid price : 25.59 Bid-YTW : 0.89 %
MFC.PR.N	FixedReset	90,629	Scotia crossed 30,100 at 25.24. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 3.53 %
MFC.PR.M	FixedReset	75,750	RBC crossed 50,000 at 25.04. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 3.59 %
TD.PF.C	FixedReset	70,655	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 23.13 Evaluated at bid price : 24.90 Bid-YTW : 3.11 %
There were 47 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: 17.03 – 19.00 Spot Rate : 1.9700 Average : 1.2487 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 17.03 Evaluated at bid price : 17.03 Bid-YTW : 3.07 %
TRP.PR.F	FloatingReset	Quote: 19.45 – 20.50 Spot Rate : 1.0500 Average : 0.6158 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 3.21 %
MFC.PR.L	FixedReset	Quote: 24.06 – 25.06 Spot Rate : 1.0000 Average : 0.6023 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 3.92 %
MFC.PR.F	FixedReset	Quote: 19.62 – 20.30 Spot Rate : 0.6800 Average : 0.4132 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.62 Bid-YTW : 5.38 %
FTS.PR.H	FixedReset	Quote: 17.28 – 17.90 Spot Rate : 0.6200 Average : 0.3759 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 17.28 Evaluated at bid price : 17.28 Bid-YTW : 3.31 %
HSE.PR.A	FixedReset	Quote: 19.50 – 20.05 Spot Rate : 0.5500 Average : 0.3484 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 3.38 %