Category: Market Action

These are deflationary times in Europe:

Professional forecasters surveyed by the ECB before the QE announcement saw price growth of 0.3 percent this year and 1.1 percent in 2016. The bond-buying program is seen adding 0.4 percentage point and 0.3 percentage point respectively, according to a euro-area central bank official who has seen the ECB’s internal calculations.

In a Bloomberg News survey of 38 economists, the median forecast for January is for prices to drop 0.5 percent from a year earlier. That would follow a 0.2 percent decline in December and mark the second-biggest decrease since the creation of the euro in 1999. The record drop was in the depths of the recession, when prices fell 0.6 percent in July 2009. The data will be published at 11 a.m. in Luxembourg on Friday.

A separate report will show that unemployment in the region held at 11.5 percent in December, still near its record high of 12 percent. Persistently high joblessness, along with a backlash against austerity, was one of the key factors behind the victory of the Syriza party in elections in Greece on Sunday.

Some investors have become emboldened to justify their holdings of negative-yield debt:

Mike Amey never thought he’d buy bonds from countries like Germany and Switzerland when losses were all but guaranteed.
…
“It’s not a good feeling,” said Amey, whose firm runs the world’s biggest bond fund and is one of the largest investors in nations with negative yields. Others include BlackRock Inc., Deutsche Asset & Wealth Management and Vanguard Group, data compiled by Bloomberg show.

The seemingly insatiable demand for only the safest assets underscores the challenge the European Central Bank faces in convincing bond investors it has the wherewithal to jump-start the euro region after consumer prices fell for the first time in five years. Last week, ECB President Mario Draghi pledged to pump 1.1 trillion euros ($1.2 trillion) into the region’s economies by buying public and private debt.

Although the ECB’s move may push more investors into riskier assets, JPMorgan Asset Management’s David Tan says it’s possible to profit from holding negative-yielding debt.

The central bank’s full-scale quantitative easing, which starts in March, will lift prices of even the most-expensive bonds, while the potential for deflation to persist in the euro area means investors will see their purchasing power increase.

“It still makes sense to hold the bonds” when the alternative is the ECB’s deposit rate of minus 0.2 percent, said Tan, the London-based head of global rates at JPMorgan Asset, which oversees about $1.7 trillion.

Tan purchased German five-year notes when yields plunged to zero this month. The debt has since rallied, pushing yields to an all-time low of minus 0.06 percent last week. The rate was 0.01 percent at 10 a.m. in New York.

Fans of negative yields will be please to note that, given the recent 50bp-odd decline in five-year Canada yields, five year mortgages have come down a whopping 10bp:

Royal Bank of Canada is the first major lender to lower mortgage rates after five-year bond yields fell in the wake of a surprise cut by the Bank of Canada last week, according to rate-monitoring websites.

Royal Bank, the country’s second-biggest lender by assets, offered a five-year fixed rate of 2.84 per cent on Jan. 24, down from 2.94 per cent last week, according to rate-tracking website Ratespy.com. That’s below RBC’s posted rate of 4.84 per cent. The bank also trimmed its three-, seven-, and 10-year rates, according to CanadianMortgageTrends.com, an industry news website.

And S&P cut Russia to junk:

S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement released on Monday, the same as countries including Bulgaria and Indonesia. The ratings firm said the outlook is “negative.” Russian stocks on U.S. exchanges tumbled with the ruble following the announcement which came after the close of equity trading in Moscow.
…
“Russia’s monetary-policy flexibility has become more limited and its economic growth prospects have weakened,” S&P said in a statement. “We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy.”

The ruble, the world’s second-worst performer last year after a 46 percent plunge against the dollar, plummeted after the S&P decision and closed 6.6 percent weaker at 68.7990 versus the U.S. currency on Monday. A Bloomberg index of the most-traded Russian stocks in the U.S. ended a three-day gain, tumbling 5.5 percent.

Bombardier, proud issuer of BBD.PR.B, BBD.PR.C and BBD.PR.D, has been placed on Review-Negative by Moody’s. I have updated the post that reported S&P’s downgrade of BBD earlier this month.

Brookfield Office Properties Inc., proud issuer of BPO.PR.A, BPO.PR.H, BPO.PR.J, BPO.PR.K, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T,BPO.PR.W, BPO.PR.X and BPO.PR.Y, has been confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed the Senior Unsecured Notes of Brookfield Office Properties Inc. (Brookfield or the Company) at BBB and its Cumulative Preferred Shares, Class AAA at Pfd-3, both with Stable trends. The confirmation reflects the successful re-leasing of the Bank of America/Merrill Lynch space at Brookfield Place New York. The confirmation also acknowledges that Brookfield’s coverage ratios will remain under pressure in the near term because of the re-leasing transition period of the aforementioned space. DBRS expects that coverage ratios should recover following this transition period but will remain at weak levels for the current rating category. DBRS notes that a prolonged weakness in operating performance (excluding the lease transition period of Brookfield Place New York) and/or a change in financial policy that results in further deterioration of key credit metrics could result in a Negative trend change.

The current ratings are based on Brookfield’s large, premier office portfolio, its presence in relatively stronger office markets and long-term leases to high quality tenants. DBRS expects these attributes to provide reasonable underlying support to the Company’s earnings profile. In addition, DBRS notes that Brookfield should also benefit from improving office fundamentals in the Company’s major U.S. markets, particularly downtown New York. Lower unemployment levels and a recovering economic environment in the United States should contribute to higher rental rates.

It was another violently mixed day for the Canadian preferred share market, with PerpetualDiscounts off 4bp, FixedResets down 38bp and DeemedRetractibles gaining 9bp. There is what has become the usual lengthy list of performance highlights, dominated by FixedReset losers. Volume was above average.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.80, is $0.77 cheap, but it has already reset (at +192). TRP.PR.C, bid at 18.90 and resetting at +154bp on 2016-1-30 is $0.37 rich.

MFC.PR.F continues to be near 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).

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 $0.46 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 24.63 and appears to be $0.71 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 18.22, looks $0.94 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.16, looks $1.13 expensive and resets 2019-3-1.

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	-0.6627 %	2,437.4
FixedFloater	4.44 %	3.63 %	18,518	18.23	1	0.1404 %	3,981.4
Floater	3.11 %	3.26 %	54,506	19.08	4	-0.6627 %	2,591.2
OpRet	4.06 %	2.47 %	103,651	0.39	1	-0.3549 %	2,745.5
SplitShare	4.29 %	4.08 %	32,373	3.60	5	-0.1059 %	3,185.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.3549 %	2,510.5
Perpetual-Premium	5.42 %	-6.99 %	54,825	0.09	19	-0.0945 %	2,509.7
Perpetual-Discount	5.01 %	4.86 %	108,519	15.14	16	-0.0359 %	2,768.1
FixedReset	4.25 %	3.21 %	206,127	17.31	77	-0.3797 %	2,515.3
Deemed-Retractible	4.91 %	0.26 %	103,019	0.16	39	0.0929 %	2,644.2
FloatingReset	2.44 %	2.58 %	67,041	6.46	7	-0.5450 %	2,400.3

Performance Highlights
Issue	Index	Change	Notes
BNS.PR.Z	FixedReset	-3.72 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.03 Bid-YTW : 3.65 %
BAM.PR.Z	FixedReset	-3.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.48 Evaluated at bid price : 25.25 Bid-YTW : 3.76 %
TRP.PR.C	FixedReset	-2.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 3.20 %
SLF.PR.G	FixedReset	-2.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.10 Bid-YTW : 5.39 %
BAM.PR.X	FixedReset	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.34 %
GWO.PR.P	Deemed-Retractible	-1.58 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.15 Bid-YTW : 4.68 %
FTS.PR.F	Perpetual-Discount	-1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 24.46 Evaluated at bid price : 24.71 Bid-YTW : 5.02 %
BAM.PR.B	Floater	-1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 16.08 Evaluated at bid price : 16.08 Bid-YTW : 3.29 %
TD.PR.Z	FloatingReset	-1.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 2.60 %
PWF.PR.A	Floater	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 2.75 %
TRP.PR.B	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 16.40 Evaluated at bid price : 16.40 Bid-YTW : 3.21 %
RY.PR.H	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.25 Evaluated at bid price : 25.16 Bid-YTW : 3.04 %
TD.PF.A	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.23 Evaluated at bid price : 25.16 Bid-YTW : 3.04 %
TRP.PR.F	FloatingReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 3.05 %
BAM.PR.T	FixedReset	-1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.40 Evaluated at bid price : 24.63 Bid-YTW : 3.21 %
BAM.PF.A	FixedReset	-1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.46 Evaluated at bid price : 25.54 Bid-YTW : 3.63 %
BAM.PF.G	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.31 Evaluated at bid price : 25.55 Bid-YTW : 3.64 %
BAM.PF.E	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.15 Evaluated at bid price : 25.00 Bid-YTW : 3.48 %
BMO.PR.R	FloatingReset	-1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 2.44 %
GWO.PR.R	Deemed-Retractible	1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 4.74 %
IFC.PR.C	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 3.60 %
ENB.PF.G	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 22.81 Evaluated at bid price : 24.15 Bid-YTW : 3.80 %
PWF.PR.P	FixedReset	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 2.94 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.P	FixedReset	559,873	Called for redemption February 25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 1.93 %
RY.PR.I	FixedReset	117,341	National sold 25,000 to Scotia and 14,500 to TD, both at 25.30. Scotia crossed 45,000 and TD crossed 15,000, both at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 2.96 %
TD.PF.C	FixedReset	101,135	TD crossed 25,800 at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.16 Evaluated at bid price : 25.01 Bid-YTW : 3.08 %
TD.PF.B	FixedReset	82,839	TD crossed 31,500 at 25.12. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.23 Evaluated at bid price : 25.10 Bid-YTW : 3.05 %
FTS.PR.M	FixedReset	73,810	Scotia crossed 46,400 at 25.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.31 Evaluated at bid price : 25.42 Bid-YTW : 3.27 %
CM.PR.P	FixedReset	63,750	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 23.16 Evaluated at bid price : 25.01 Bid-YTW : 3.08 %
There were 39 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNS.PR.Z	FixedReset	Quote: 23.03 – 23.80 Spot Rate : 0.7700 Average : 0.4431 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.03 Bid-YTW : 3.65 %
FTS.PR.F	Perpetual-Discount	Quote: 24.71 – 25.15 Spot Rate : 0.4400 Average : 0.2661 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 24.46 Evaluated at bid price : 24.71 Bid-YTW : 5.02 %
TD.PR.Z	FloatingReset	Quote: 24.31 – 24.69 Spot Rate : 0.3800 Average : 0.2615 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 2.60 %
ENB.PR.P	FixedReset	Quote: 22.36 – 22.89 Spot Rate : 0.5300 Average : 0.4146 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-26 Maturity Price : 21.93 Evaluated at bid price : 22.36 Bid-YTW : 3.85 %
CGI.PR.D	SplitShare	Quote: 25.10 – 25.50 Spot Rate : 0.4000 Average : 0.2870 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.77 %
BNS.PR.P	FixedReset	Quote: 25.32 – 25.70 Spot Rate : 0.3800 Average : 0.2719 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : 2.88 %

I continue to be fascinated by negative yields:

Want proof we’re still living in abnormal times? The bond market is telling us that many advanced economies won’t see much in the way of nominal growth over the next decade.

In the wake of the Swiss National Bank’s decision to ditch its currency floor and move deposit rates further into negative territory, investors actually lined up to pay the government for the privilege of holding on to their money for a period of 10 years.

According to Bank of America Merrill Lynch, there is now $7.3-trillion (U.S.) in debt that has a minus sign in front of the yield, courtesy of the euro zone, Japan and Switzerland.
…
While the Swiss move got all the headlines last week, India’s central bank governor Raghuram Rajan also surprised with a rate cut. Although this was cast as a response to sliding inflation in light of the slump in oil prices, the governor’s op-ed published prior to this announcement told a different tale. In fact, his reasons were very similar to those of his counterpart in Switzerland: A desire to prevent a wave of inflows into the nation.

“If not properly managed, these flows can precipitate a credit and asset-price boom and drive up exchange rates,” he wrote. “When developed-country monetary policies are eventually tightened, some of the capital is likely to depart.”

The Economist provides a little colour:

Some banks and institutions are also forced to hold government bonds, regardless of their yield, because of regulations and liquidity requirements.

The final possibility, and the most obvious explanation in the short term, is that investors have been anticipating the introduction of quantitative easing by the European Central Bank. If experience in America and Britain is any guide, purchases by the ECB will eventually drive prices up and yields down. Why worry about the theoretical loss involved in holding a bond till maturity if the investor knows he can offload the bond to his friendly neighbourhood central bank?

There are risks involved, of course. If the global economy returns to normal, then losses on government bonds will be substantial. The same would be true if inflation ever reappears. M&G says that if German bond yields merely rose back to the levels that prevailed at their previous trough, in 2012, when it was feared the euro might break up, investors would suffer a capital loss of 7%. Whatever else European government bonds may be, they are not risk-free.

Canadian inflation is lower than expectations:

Canadian inflation slowed to 1.5 percent in December as cheaper gasoline countered accelerating prices on most other items, reinforcing Bank of Canada Governor Stephen Poloz’s argument the economy needs lower interest rates.

The core inflation rate, which excludes eight volatile products such as energy, quickened to 2.2 percent from November’s 2.1 percent pace, Statistics Canada said today from Ottawa. Economists in a Bloomberg News survey forecast the total rate would slow to 1.6 percent from 2.0 percent and core prices would rise 2.3 percent.

Valener Inc., proud issuer of VNR.PR.A, was confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today confirmed Valener Inc.’s (Valener or the Company) Cumulative Rate Reset Preferred Shares, Series A rating at Pfd-2 (low) with a Stable trend. The rating is based on the stability of dividends distributed to the Company from its 29% interest in Gaz Métro Limited Partnership (GMLP), which guarantees the First Mortgage Bonds and Senior Secured Notes (rated “A”) of Gaz Métro inc. (GMi). The rating also reflects Valener’s low non-consolidated leverage. GMi owns the remaining 71% of GMLP.

It was another violently mixed day for the Canadian preferred share market, with PerpetualDiscounts up 41bp, FixedResets down 14bp and DeemedRetractibles off 7bp. Yet another lengthy Performance Highlights table was dominated by losing FixedResets and winning Straight Perpetuals. 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:

So according to this, TRP.PR.A, bid at 20.99, is $0.71 cheap, but it has already reset (at +192). TRP.PR.C, bid at 19.47 and resetting at +154bp on 2016-1-30 is $0.82 rich.

MFC.PR.F continues to be near the line defined by its peers despite its very poor performance today, as Implied Volatility declined again from 24% yesterday to 20% today.

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 21.62 and appears to be $0.35 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 24.91 and appears to be $0.67 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 18.28, looks $0.88 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.15, looks $1.12 expensive and resets 2019-3-1.

Pairs equivalence is all over the map, but 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. The average break-even rate is way down from recent levels again today, reinforcing yesterday’s move. And it’s kinda neat to see that the DC.PR.B / DC.PR.D pair is now priced for a negative three-month bill rate over the next four and a half 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	0.4586 %	2,453.7
FixedFloater	4.45 %	3.63 %	19,270	18.23	1	-0.2800 %	3,975.8
Floater	3.09 %	3.24 %	54,724	19.14	4	0.4586 %	2,608.4
OpRet	4.04 %	1.52 %	95,989	0.40	1	0.0000 %	2,755.3
SplitShare	4.29 %	4.09 %	32,700	3.60	5	-0.1954 %	3,188.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,519.4
Perpetual-Premium	5.42 %	-9.67 %	55,637	0.09	19	-0.2132 %	2,512.1
Perpetual-Discount	5.01 %	4.85 %	107,872	15.30	16	0.4146 %	2,769.1
FixedReset	4.24 %	3.22 %	208,685	17.26	77	-0.1364 %	2,524.9
Deemed-Retractible	4.92 %	0.23 %	101,362	0.09	39	-0.0716 %	2,641.8
FloatingReset	2.46 %	2.49 %	67,147	6.46	7	0.2435 %	2,413.5

Performance Highlights
Issue	Index	Change	Notes
IFC.PR.C	FixedReset	-2.86 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.78 Bid-YTW : 3.78 %
TRP.PR.C	FixedReset	-2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 19.47 Evaluated at bid price : 19.47 Bid-YTW : 3.19 %
ENB.PF.G	FixedReset	-2.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.68 Evaluated at bid price : 23.86 Bid-YTW : 3.92 %
MFC.PR.F	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.65 Bid-YTW : 4.83 %
HSE.PR.A	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 3.37 %
BMO.PR.L	Deemed-Retractible	-1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-25 Maturity Price : 25.50 Evaluated at bid price : 26.00 Bid-YTW : 2.52 %
CGI.PR.D	SplitShare	-1.22 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 3.71 %
ENB.PF.E	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.71 Evaluated at bid price : 23.89 Bid-YTW : 3.89 %
POW.PR.G	Perpetual-Premium	-1.07 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 26.71 Bid-YTW : 4.17 %
BNS.PR.C	FloatingReset	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.77 Bid-YTW : 2.53 %
CU.PR.E	Perpetual-Discount	1.07 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 4.74 %
BAM.PR.Z	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 3.40 %
CU.PR.D	Perpetual-Discount	1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 4.70 %
CU.PR.F	Perpetual-Discount	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 23.35 Evaluated at bid price : 23.70 Bid-YTW : 4.80 %
BAM.PR.N	Perpetual-Discount	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.88 Evaluated at bid price : 23.29 Bid-YTW : 5.13 %
BAM.PR.M	Perpetual-Discount	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.90 Evaluated at bid price : 23.20 Bid-YTW : 5.15 %
GWO.PR.P	Deemed-Retractible	2.35 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.57 Bid-YTW : 4.31 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.P	FixedReset	686,000	Called for Redemption 2015-2-25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 1.76 %
ENB.PF.E	FixedReset	287,930	RBCC crossed 70,200 at 24.25 and 50,000 at 24.22. TD crossed 50,000 at 24.22; Nesbitt crossed 95,400 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.71 Evaluated at bid price : 23.89 Bid-YTW : 3.89 %
ENB.PF.G	FixedReset	83,200	Nesbitt crossed 75,000 at 24.22. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.68 Evaluated at bid price : 23.86 Bid-YTW : 3.92 %
RY.PR.Z	FixedReset	60,855	Desjardins crossed 50,000 at 25.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 23.42 Evaluated at bid price : 25.65 Bid-YTW : 2.98 %
TD.PF.C	FixedReset	56,796	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 23.22 Evaluated at bid price : 25.17 Bid-YTW : 3.11 %
PWF.PR.F	Perpetual-Premium	52,927	Desjardins crossed 47,400 at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-22 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : -15.06 %
There were 26 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ENB.PF.G	FixedReset	Quote: 23.86 – 24.40 Spot Rate : 0.5400 Average : 0.3123 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.68 Evaluated at bid price : 23.86 Bid-YTW : 3.92 %
IFC.PR.C	FixedReset	Quote: 24.78 – 25.20 Spot Rate : 0.4200 Average : 0.2489 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.78 Bid-YTW : 3.78 %
BMO.PR.L	Deemed-Retractible	Quote: 26.00 – 26.45 Spot Rate : 0.4500 Average : 0.2794 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-25 Maturity Price : 25.50 Evaluated at bid price : 26.00 Bid-YTW : 2.52 %
NEW.PR.D	SplitShare	Quote: 32.33 – 33.33 Spot Rate : 1.0000 Average : 0.8586 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.33 Bid-YTW : 3.05 %
ENB.PF.E	FixedReset	Quote: 23.89 – 24.25 Spot Rate : 0.3600 Average : 0.2370 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-23 Maturity Price : 22.71 Evaluated at bid price : 23.89 Bid-YTW : 3.89 %
MFC.PR.B	Deemed-Retractible	Quote: 24.46 – 24.92 Spot Rate : 0.4600 Average : 0.3545 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.46 Bid-YTW : 5.01 %

So the banks are taking advantage of the anti-competitive Bank Act ownership provisions to increase their mortgage margins as well as their margins on Prime:

But now, all in mortgage-land are waiting and wondering if Canada’s major banks will actually pass along that rate cut. The Globe and Mail’s Streetwise reported Wednesday that TD Canada Trust may not reduce its prime rate. (TD sent me a statement this morning confirming that it is not changing prime rate “at this time.”)
…
We’re in a different world this time around. The average home price is 44 per cent higher than 2008, debt levels are at a record, bank revenue is pressured by multi-year lows in mortgage growth, competition has shrunk net interest margins and Ottawa had burdened banks with heaps of regulatory, capital and securitization restrictions. That makes banks and the federal government quite reluctant to see a lower prime rate.

The housing policy factor cannot be underestimated, not with the Bank of Canada admitting that certain regions’ home values may be up to 30 per cent overvalued. I spoke with one capital markets executive Thursday. He said, “I wouldn’t be surprised if the Bank of Canada called all the major banks and said, ‘Don’t use this rate cut as fuel to get more debt in consumers’ hands by lowering rates.”

Yes, if there were more banks, then the bureaucrats at the BoC and the politicians would have to make more than six calls, which would be too much like work. After all, when you’re busily micro-managing the economy and it turns out you need a two-tier interest rate policy like any other proud member of the third world, you don’t have time to waste talking.

Regrettably, there still a few members of the private sector who have not yet been re-educated:

Mortgage brokers, however, say it is only a matter of time – anywhere from a few days to a few weeks – before banks start slashing their rates, with some predicting that as Government of Canada bond yields plummet below 1 per cent, five-year fixed rates could hit a new record-low 2.5 per cent, reigniting a fierce competition for new borrowers.
…
Some small non-bank lenders have already begun cutting their fixed-mortgage offerings, said Drew Donaldson, a mortgage broker and executive vice-president Safebridge Financial Group. Consumers with variable-rate mortgages and preapprovals have been calling Mr. Donaldson’s office in droves looking to find out when their rates might drop.
…
Some industry officials say that while banks will inevitably be forced to drop their fixed mortgage rates if bond yields settle at record lows, they may put off dropping their prime rate, which affects variable-rate mortgages along with a host of non-mortgage lending, such as car loans and personal lines of credit, in order to protect their non-mortgage profits and push borrowers toward longer-term fixed rate mortgage contracts.

Others speculated that federal regulators may be pressuring banks not to lower their rates too drastically by warning that they could introduce tighter lending rules to avoid driving up already high levels of household debt.
…
But with the average five-year rate among the major banks now sitting around 195 basis points above five-year government bond yields, well above the historical range of between 150 and 160 basis points, most expect the banks to eventually bow to consumer pressure to slash their rates, sending potential buyers running back into the housing market.

“You’ll definitely get more interest in homebuying when you see rates go below 2.5 per cent,” Mr. McLister said.

“It’s going to be a huge flood of buyers.”

It was another violently mixed day for the Canadian preferred share market, with PerpetualDiscounts up 74bp, FixedResets off 11bp and DeemedRetractibles down 20bp. Yet another lengthy Performance Highlights table is predictably dominated by FixedReset and Floating Rate losers and Straight Perpetual winners. Volume was average.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.92, is $0.85 cheap, but it has already reset (at +192). TRP.PR.C, bid at 19.96 and resetting at +154bp on 2016-1-30 is $1.19 rich.

MFC.PR.F continues to be near the line defined by its peers despite its very poor performance today, as Implied Volatility declined dramatically from 30% yesterday to 24% today.

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 21.58 and appears to be $0.36 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 24.92 and appears to be $0.74 rich.

Relative value changes were unusual today: the bid for BAM.PR.X gained $0.07 on the day, while BAM.PR.T’s bid is down $0.28, reinforcing yesterday’s moves. Sell on rumour, buy on news?

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 18.11, looks $1.04 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.32, looks $1.30 expensive and resets 2019-3-1

Pairs equivalence is all over the map, but 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. The average break-even rate is way down from recent levels again today, reinforcing yesterday’s move.

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	-1.5727 %	2,442.5
FixedFloater	4.43 %	3.62 %	19,586	18.25	1	-0.3719 %	3,987.0
Floater	3.11 %	3.27 %	55,245	19.07	4	-1.5727 %	2,596.5
OpRet	4.04 %	1.51 %	95,980	0.40	1	-0.0788 %	2,755.3
SplitShare	4.28 %	4.06 %	30,290	3.61	5	0.1190 %	3,194.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0788 %	2,519.4
Perpetual-Premium	5.40 %	-9.01 %	55,918	0.09	19	0.1778 %	2,517.4
Perpetual-Discount	5.03 %	4.91 %	107,982	15.55	16	0.7393 %	2,757.6
FixedReset	4.23 %	3.18 %	211,047	17.26	77	-0.1115 %	2,528.3
Deemed-Retractible	4.91 %	-0.46 %	101,098	0.09	39	-0.1969 %	2,643.7
FloatingReset	2.47 %	2.55 %	67,443	6.46	7	-0.6313 %	2,407.6

Performance Highlights
Issue	Index	Change	Notes
BMO.PR.Q	FixedReset	-2.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.92 Bid-YTW : 3.24 %
BAM.PR.C	Floater	-2.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 16.05 Evaluated at bid price : 16.05 Bid-YTW : 3.29 %
TD.PR.R	Deemed-Retractible	-2.42 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-21 Maturity Price : 25.75 Evaluated at bid price : 25.86 Bid-YTW : -1.57 %
FTS.PR.H	FixedReset	-2.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 18.11 Evaluated at bid price : 18.11 Bid-YTW : 3.25 %
BAM.PR.K	Floater	-2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 16.02 Evaluated at bid price : 16.02 Bid-YTW : 3.30 %
BAM.PR.B	Floater	-1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 16.17 Evaluated at bid price : 16.17 Bid-YTW : 3.27 %
TRP.PR.C	FixedReset	-1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 19.96 Evaluated at bid price : 19.96 Bid-YTW : 3.11 %
MFC.PR.F	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.05 Bid-YTW : 4.60 %
TD.PR.Q	Deemed-Retractible	-1.65 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-02 Maturity Price : 25.50 Evaluated at bid price : 25.57 Bid-YTW : 1.51 %
BNS.PR.A	FloatingReset	-1.64 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 2.77 %
BNS.PR.C	FloatingReset	-1.61 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 2.69 %
BAM.PR.R	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.90 Evaluated at bid price : 24.29 Bid-YTW : 3.39 %
PWF.PR.O	Perpetual-Premium	-1.39 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-21 Maturity Price : 26.00 Evaluated at bid price : 26.21 Bid-YTW : -5.99 %
TD.PR.P	Deemed-Retractible	-1.31 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-21 Maturity Price : 25.50 Evaluated at bid price : 25.57 Bid-YTW : 0.09 %
MFC.PR.B	Deemed-Retractible	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.46 Bid-YTW : 5.01 %
ENB.PR.P	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 21.88 Evaluated at bid price : 22.29 Bid-YTW : 3.93 %
BNS.PR.Z	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.99 Bid-YTW : 3.06 %
BAM.PR.T	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.51 Evaluated at bid price : 24.92 Bid-YTW : 3.22 %
TRP.PR.B	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 16.58 Evaluated at bid price : 16.58 Bid-YTW : 3.28 %
BAM.PR.N	Perpetual-Discount	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 22.67 Evaluated at bid price : 22.94 Bid-YTW : 5.21 %
GWO.PR.N	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.82 Bid-YTW : 4.98 %
POW.PR.G	Perpetual-Premium	1.12 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 27.00 Bid-YTW : 3.64 %
SLF.PR.G	FixedReset	1.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.63 Bid-YTW : 5.14 %
BAM.PF.C	Perpetual-Discount	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.00 Evaluated at bid price : 23.32 Bid-YTW : 5.24 %
CU.PR.F	Perpetual-Discount	1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.07 Evaluated at bid price : 23.39 Bid-YTW : 4.86 %
BAM.PF.D	Perpetual-Discount	1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.18 Evaluated at bid price : 23.50 Bid-YTW : 5.25 %
CU.PR.G	Perpetual-Discount	2.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.18 Evaluated at bid price : 23.50 Bid-YTW : 4.84 %
BNS.PR.R	FixedReset	3.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.00 %

Volume Highlights
Issue	Index	Shares Traded	Notes
SLF.PR.I	FixedReset	197,187	Desjardins bought blocks of 12,000 shares, 15,000, two of 10,000 each, and 15,900 from RBC, all at 26.20. They also bought blocks of 11,300 shares, 30,000 and 12,900 from TD at the same price. RBC crossed 39,100 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 1.86 %
RY.PR.D	Deemed-Retractible	101,415	Nesbitt crossed blocks of 24,500 and 75,000 at 25.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-24 Maturity Price : 25.25 Evaluated at bid price : 25.56 Bid-YTW : -13.06 %
BNS.PR.Y	FixedReset	89,041	Scotia crossed 85,000 at 22.77. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.78 Bid-YTW : 3.34 %
RY.PR.Z	FixedReset	84,220	Desjardins crossed 75,000 at 25.51. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.38 Evaluated at bid price : 25.53 Bid-YTW : 3.00 %
ENB.PR.J	FixedReset	80,120	RBC crossed blocks of 50,000 and 25,000, both at 23.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 22.78 Evaluated at bid price : 23.85 Bid-YTW : 3.76 %
GWO.PR.R	Deemed-Retractible	61,806	RBC bought 13,900 from anonymous at 25.00, then crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 4.81 %
There were 30 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.N	Perpetual-Discount	Quote: 22.94 – 23.95 Spot Rate : 1.0100 Average : 0.6503 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 22.67 Evaluated at bid price : 22.94 Bid-YTW : 5.21 %
GWO.PR.P	Deemed-Retractible	Quote: 25.96 – 26.68 Spot Rate : 0.7200 Average : 0.4961 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 25.96 Bid-YTW : 4.83 %
POW.PR.G	Perpetual-Premium	Quote: 27.00 – 27.68 Spot Rate : 0.6800 Average : 0.4990 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 27.00 Bid-YTW : 3.64 %
CU.PR.F	Perpetual-Discount	Quote: 23.39 – 23.78 Spot Rate : 0.3900 Average : 0.2679 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 23.07 Evaluated at bid price : 23.39 Bid-YTW : 4.86 %
TD.PR.T	FloatingReset	Quote: 24.50 – 25.00 Spot Rate : 0.5000 Average : 0.3879 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 2.43 %
FTS.PR.H	FixedReset	Quote: 18.11 – 18.49 Spot Rate : 0.3800 Average : 0.2756 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-22 Maturity Price : 18.11 Evaluated at bid price : 18.11 Bid-YTW : 3.25 %

The big news today was the Bank of Canada rate cut:

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent. This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.

Inflation has remained close to the 2 per cent target in recent quarters. Core inflation has been temporarily boosted by sector-specific factors and the pass-through effects of the lower Canadian dollar, which are offsetting disinflationary pressures from slack in the economy and competition in the retail sector. Total CPI inflation is starting to reflect the fall in oil prices.

Oil’s sharp decline in the past six months is expected to boost global economic growth, especially in the United States, while widening the divergences among economies. Persistent headwinds from deleveraging and lingering uncertainty will influence the extent to which some oil-importing countries benefit from lower prices. The Bank’s base-case projection assumes oil prices around US$60 per barrel. Prices are currently lower but our belief is that prices over the medium term are likely to be higher.
…
Although there is considerable uncertainty around the outlook, the Bank is projecting real GDP growth will slow to about 1 1/2 per cent and the output gap to widen in the first half of 2015. The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response. The Bank expects Canada’s economy to gradually strengthen in the second half of this year, with real GDP growth averaging 2.1 per cent in 2015 and 2.4 per cent in 2016. The economy is expected to return to full capacity around the end of 2016, a little later than was expected in October.

Weaker oil prices will pull down the inflation profile. Total CPI inflation is projected to be temporarily below the inflation-control range during 2015, moving back up to target the following year. Underlying inflation will ease in the near term but then return gradually to 2 per cent over the projection horizon.

The oil price shock increases both downside risks to the inflation profile and financial stability risks. The Bank’s policy action is intended to provide insurance against these risks, support the sectoral adjustment needed to strengthen investment and growth, and bring the Canadian economy back to full capacity and inflation to target within the projection horizon.

Prime did not follow, since the banks factor the near-total lack of competition in Canada into their decisions:

It is not clear yet if Canada’s big banks will lower their rates. Historically, Canada’s largest lenders have followed suit when the central bank cut its key interest rate. However, Toronto-Dominion Bank said Wednesday that it now weighs many factors before cutting its prime rate, sending the message that it would like to keep the status quo in order to sustain healthy loan margins. Officially, the remaining Big Six banks declined to comment, but some privately expressed a similar sentiment as TD.

When the overnight rate target was increased to 1% in 2010, prime followed, but things are different now for um, lots of reasons! Yes, lots. So suck it up, turds.

The BoC cut was not widely expected and the bond market went nuts:

The currency reached the weakest level in almost six years after the Bank of Canada reduced economic forecasts and lowered the benchmark rate target to 0.75 percent, from 1 percent, where it’s been since 2010. Government bonds climbed, pushing yields on two-, 10- and 30-year debt to record lows. Crude, Canada’s biggest export, has tumbled more than 50 percent since June amid a global glut.
…
The currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 1.8 percent to C$1.2340 per U.S. dollar at 5 p.m. Toronto time. It slid as much as 2.3 percent, the most since September 2011, to C$1.2394, the weakest level since April 2009. One Canadian dollar buys 81.04 U.S. cents.
…
The yield on Canada’s benchmark 10-year (GCAN10YR) bond dropped to as low as 1.365 percent before trading at 1.43 percent, 0.44 percentage point below the U.S. 10-year note yield. It’s the biggest difference since 2007.

Yields on Canadian two-year securities touched 0.536 percent, and 30-year bond yields reached 2 percent.

None of the 22 economists in a Bloomberg News survey predicted the cut. The interest rate, which influences everything from car loans to mortgages, had been unchanged since September 2010. The last reduction was in April 2009.

At the close yesterday, the five-year was bid at 1.04%, and today’s closing bid was 0.86%. Eighteen basis points on the five year in a day? Twenty-three years I’ve been in the business, and while I no longer keep day-to-day records of Canada yields, I’ll guess I could count the number of days with that sort of move without having to take off my socks.

It’s a global thing:

In Tokyo, BOJ Governor Haruhiko Kuroda and colleagues cut their core inflation forecast to 1 percent for the fiscal year starting in April, from 1.7 percent, and maintained a pledge to increase the monetary base at an annual pace of 80 trillion yen ($674 billion). They also said they will boost the main part of a program to support economic growth to 10 trillion yen from 7 trillion yen. Eligibility for a facility aimed at stimulating bank lending was also widened.

Hours later in London, the Bank of England said policy makers Martin Weale and Ian McCafferty this month stopped voting for a rate increase. That left the nine-member Monetary Policy Committee unanimous for the first time since July as it warned U.K. inflation may drop to zero in the first quarter.

Inflation is slowing around the world. Malaysia on Wednesday reported that consumer prices rose 2.7 percent in December from a year earlier, the second-weakest pace in 2014. New Zealand’s fourth-quarter prices increased 0.8 percent from a year earlier, the slowest rate in six periods.

The Bank of Korea will seek an inflation target that is optimal for the economy, Governor Lee Ju Yeol said on Thursday, adding that the possibility of deflation is “limited.”

And Draghi wants US-style quantitative easing:

Mario Draghi called on the European Central Bank to make its biggest push yet to fend off deflation and revive the economy by unleashing a debt-buying spree of 1.1 trillion euros ($1.3 trillion).

The ECB president and his Executive Board proposed spending 50 billion euros a month through December 2016, two euro-area central-bank officials said. The plan still faces a tense debate in the Governing Council and may change before the final decision on Thursday, the people said, asking not to be identified as the talks are private. An ECB spokesman declined to comment.
…
The council’s debate will be complicated by arguments over whether the risks incurred in the new bond-buying plan should be shared across the region’s 19 central banks or kept within national boundaries. Dutch central-bank Governor Klaas Knot has said any decision to mutualize risk should be taken by elected politicians, not unelected central bankers.

But what about the Danes?

As Denmark tries to silence speculation it may follow Switzerland and abandon its euro peg, the nation’s business leaders are adding their voice to the debate.

The Confederation of Danish Industry, which represents about 10,000 companies, says the long-term cost of discarding the euro peg far outweighs any potential short-term benefit.
…
The central bank fought back speculation it might run out of ammunition to defend its peg by delivering a surprise rate cut on Monday, lowering its benchmark deposit rate to minus 0.2 percent. Danske Bank A/S, the country’s biggest lender, says the rate may be cut again tomorrow, to minus 0.3 percent as the ECB prepares to unveil the details of its bond-purchase program.
…
Denmark relies on trade with the European Union for about 70 percent of its total exports, meaning the country’s de facto euro membership saves its companies billions in exchange-rate hedges.

All these pegs … reminds me of my father’s commentary on political guidance with respect to currency movements under the Bretton Woods regime … “We will not devalue, we will not devalue, we will not devalue, whoops, we will not devalue again, we will not devalue again, we will not devalue again …”. If I ran a FX brokerage, I’d be hiking the margin on pegged currencies instead of all of them. Free markets are more reliable than politicians:

FXCM Inc., the New York-based retail broker, said Wednesday it’s increasing margin requirements for clients who trade currencies and gold after customers’ losses forced it to seek a $300 million lifeline. CME Group Inc., owner of the Chicago Mercantile Exchange, is altering how it handles volatility in emergencies after it was buffeted by trading halts last week.
…
The turmoil shows regulators need to consider boosting oversight of retail trading platforms such as FXCM, a member of the U.S. Commodity Futures Trading Commission said.

“I am concerned that lower standards are putting this industry in a precarious position and placing retail foreign-exchange investors unnecessarily at risk,” said Commissioner Sharon Bowen, a Democrat who joined the CFTC last year. That market “is the least regulated part of the derivatives industry,” she said.

The National Futures Association, the U.S. derivatives industry’s self-funded market overseer, temporarily boosted the amount of money traders must put down to back currency transactions. The more stringent requirements apply to the Swiss franc, Swedish krona and Norwegian krone, the group said in a statement. The changes apply to retail trading.

So fear not. This gross failure of the political class to restrain markets will be lead to increased regulation, because if at first you don’t succeed, it’s the fault of them durn speculators.

It was a violently mixed day for the Canadian preferred share market, with PerpetualDiscounts up 90bp, FixedResets off 17bp and DeemedRetractibles gaining 64bp. A very lengthy Performance Highlights table is dominated by FixedReset and Floating Rate losers and Straight Perpetual winners. Volume was average.

Given the size of the move in the GOC yields, I amended my usual practice and entered a mid-week change in HIMIPref™’s rate assumptions – all yields given in the tables are performed with GOC-5 = 0.85% and 3-Month Bills = 0.59%. Prime remains at 3%, so it’s an ill wind that blows nobody any good!

PerpetualDiscounts now yield 4.94%, equivalent to 6.42% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.75% (!) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 265bp, unchanged from January 14.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.90, is $1.02 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.31 and resetting at +154bp on 2016-1-30 is $1.38 rich.

[Update, 2015-1-22: The wrong chart was here yesterday, being a repeat of the TRP chart. I am considering executing the proofreader.

MFC.PR.F continues to be near the line defined by its peers, although it drifted up today and is having an effect on the calculation. Implied Volatility continues to be a conundrum. It is far 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 21.51 and appears to be $0.53 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 25.20 and appears to be $0.89 rich.

Relative value changes were unusual today: the bid for BAM.PR.X gained $0.11 on the day, while BAM.PR.T’s bid is down $0.49. Sell on rumour, buy on news?

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 18.55, looks $0.83 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.15, looks $1.04 expensive and resets 2019-3-1

Pairs equivalence is all over the map, but 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. The average break-even rate is way down from recent levels.

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	-2.1319 %	2,481.5
FixedFloater	4.42 %	3.60 %	19,907	18.28	1	0.6551 %	4,001.9
Floater	3.06 %	3.20 %	54,600	19.23	4	-2.1319 %	2,638.0
OpRet	4.04 %	1.31 %	90,787	0.40	1	0.0394 %	2,757.5
SplitShare	4.28 %	4.13 %	31,542	3.61	5	-0.3321 %	3,190.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0394 %	2,521.4
Perpetual-Premium	5.41 %	-10.47 %	55,691	0.09	19	0.3295 %	2,513.0
Perpetual-Discount	5.07 %	4.94 %	106,705	15.48	16	0.8978 %	2,737.4
FixedReset	4.23 %	3.20 %	200,525	17.28	77	-0.1740 %	2,531.2
Deemed-Retractible	4.89 %	-1.56 %	95,703	0.10	39	0.6413 %	2,648.9
FloatingReset	2.45 %	2.38 %	64,529	6.47	7	-1.3274 %	2,422.9

Performance Highlights
Issue	Index	Change	Notes
BNS.PR.R	FixedReset	-3.70 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 3.54 %
GWO.PR.N	FixedReset	-2.87 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.60 Bid-YTW : 5.11 %
BAM.PR.B	Floater	-2.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 16.49 Evaluated at bid price : 16.49 Bid-YTW : 3.20 %
TRP.PR.F	FloatingReset	-2.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 3.05 %
BAM.PR.K	Floater	-2.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 16.38 Evaluated at bid price : 16.38 Bid-YTW : 3.22 %
BAM.PR.R	FixedReset	-2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 24.33 Evaluated at bid price : 24.66 Bid-YTW : 3.34 %
BAM.PR.C	Floater	-2.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 3.21 %
BAM.PR.T	FixedReset	-1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 23.61 Evaluated at bid price : 25.20 Bid-YTW : 3.16 %
BNS.PR.B	FloatingReset	-1.72 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.60 Bid-YTW : 2.46 %
PWF.PR.P	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 3.07 %
TD.PR.T	FloatingReset	-1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.57 Bid-YTW : 2.38 %
PWF.PR.A	Floater	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 19.35 Evaluated at bid price : 19.35 Bid-YTW : 2.70 %
IFC.PR.C	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 2.66 %
SLF.PR.G	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.34 Bid-YTW : 5.31 %
TD.PR.Z	FloatingReset	-1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.73 Bid-YTW : 2.36 %
CU.PR.D	Perpetual-Discount	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 24.61 Evaluated at bid price : 25.05 Bid-YTW : 4.94 %
CU.PR.E	Perpetual-Discount	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 24.61 Evaluated at bid price : 25.05 Bid-YTW : 4.94 %
FTS.PR.J	Perpetual-Discount	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 24.42 Evaluated at bid price : 24.85 Bid-YTW : 4.82 %
MFC.PR.B	Deemed-Retractible	1.27 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 4.85 %
SLF.PR.A	Deemed-Retractible	1.33 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 4.79 %
BAM.PF.D	Perpetual-Discount	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 22.67 Evaluated at bid price : 23.07 Bid-YTW : 5.34 %
SLF.PR.B	Deemed-Retractible	1.41 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-20 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : -1.56 %
BAM.PR.N	Perpetual-Discount	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 22.43 Evaluated at bid price : 22.70 Bid-YTW : 5.27 %
ENB.PR.Y	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 21.59 Evaluated at bid price : 21.91 Bid-YTW : 3.92 %
GWO.PR.G	Deemed-Retractible	1.46 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-20 Maturity Price : 25.00 Evaluated at bid price : 25.79 Bid-YTW : -27.06 %
GWO.PR.S	Deemed-Retractible	1.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 4.70 %
SLF.PR.C	Deemed-Retractible	1.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.95 Bid-YTW : 5.05 %
SLF.PR.E	Deemed-Retractible	1.52 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 5.02 %
GWO.PR.R	Deemed-Retractible	1.58 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.86 %
PWF.PR.O	Perpetual-Premium	1.61 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-20 Maturity Price : 26.00 Evaluated at bid price : 26.58 Bid-YTW : -22.03 %
SLF.PR.D	Deemed-Retractible	1.61 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.02 %
BAM.PF.C	Perpetual-Discount	1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 22.55 Evaluated at bid price : 22.95 Bid-YTW : 5.31 %
GWO.PR.Q	Deemed-Retractible	1.72 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-09-30 Maturity Price : 25.25 Evaluated at bid price : 26.00 Bid-YTW : 4.59 %
IFC.PR.A	FixedReset	1.76 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.42 Bid-YTW : 4.98 %
GWO.PR.I	Deemed-Retractible	2.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.02 Bid-YTW : 5.06 %
GWO.PR.H	Deemed-Retractible	2.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.94 %
TRP.PR.A	FixedReset	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 3.48 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.J	FixedReset	55,503	RBC crossed 50,000 at 23.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 22.77 Evaluated at bid price : 23.84 Bid-YTW : 3.77 %
BAM.PF.E	FixedReset	39,345	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 23.23 Evaluated at bid price : 25.25 Bid-YTW : 3.48 %
FTS.PR.H	FixedReset	32,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 3.18 %
TD.PF.A	FixedReset	32,350	Scotia crossed 25,000 at 25.32. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 23.29 Evaluated at bid price : 25.35 Bid-YTW : 3.06 %
SLF.PR.D	Deemed-Retractible	31,709	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.02 %
NA.PR.W	FixedReset	30,800	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 23.21 Evaluated at bid price : 25.16 Bid-YTW : 3.11 %
There were 29 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.S	Deemed-Retractible	Quote: 26.23 – 27.39 Spot Rate : 1.1600 Average : 0.6733 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 4.70 %
BNS.PR.R	FixedReset	Quote: 24.76 – 25.75 Spot Rate : 0.9900 Average : 0.5410 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 3.54 %
GWO.PR.N	FixedReset	Quote: 19.60 – 20.22 Spot Rate : 0.6200 Average : 0.4426 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.60 Bid-YTW : 5.11 %
CU.PR.D	Perpetual-Discount	Quote: 25.05 – 25.43 Spot Rate : 0.3800 Average : 0.2368 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-21 Maturity Price : 24.61 Evaluated at bid price : 25.05 Bid-YTW : 4.94 %
GWO.PR.P	Deemed-Retractible	Quote: 26.19 – 26.56 Spot Rate : 0.3700 Average : 0.2505 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.19 Bid-YTW : 4.63 %
POW.PR.G	Perpetual-Premium	Quote: 26.70 – 27.09 Spot Rate : 0.3900 Average : 0.3006 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 26.70 Bid-YTW : 4.18 %

The loonie got hammered today:

Canada’s dollar weakened to the lowest in more than five years on speculation the central bank may signal it’s more likely to lower interest rates than raise them when it releases a growth outlook tomorrow.

The currency sank as much as 1.5 percent, the most since Jan. 2, before the Bank of Canada updates quarterly inflation and growth projections to factor in the crude-oil slump.
…
The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 1.4 percent to C$1.2113 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.2115, the weakest level since April 2009.
…
One Canadian dollar purchases 82.71 U.S. cents.

Yields on 30-year government bonds touched a record low of 2.04 percent, before trading at 2.05 percent.

Crude oil, Canada’s biggest export, traded below $50 a barrel in New York, from $107.73 in June. The central bank’s October forecast of growth of 2.4 percent this year was underpinned by an assumption U.S. benchmark crude would trade at an average of $85 a barrel.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 5bp, FixedResets off 4bp and DeemedRetractibles gaining 7bp … BORRRR-RING! However, the Performance Highlights table, while shorter than it has generally been for the past few weeks, still manages to produce an entertaining list with FixedResets highlighted for volatility. 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:

So according to this, TRP.PR.A, bid at 20.46, is $1.30 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.51 and resetting at +154bp on 2016-1-30 is $1.54 rich.

MFC.PR.F continues to be near the line defined by its peers, although it drifted up today and is having an effect on the calculation. Implied Volatility continues to be a conundrum. It is far 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 21.50 and appears to be $0.90 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 25.69 and appears to be $1.24 rich.

It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.

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 18.55, looks $1.03 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.35, looks $1.23 expensive and resets 2019-3-1

Pairs equivalence is all over the map, but 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.

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	-0.5658 %	2,535.6
FixedFloater	4.45 %	3.63 %	19,964	18.23	1	-1.0648 %	3,975.8
Floater	2.99 %	3.11 %	53,346	19.44	4	-0.5658 %	2,695.5
OpRet	4.04 %	1.40 %	91,943	0.41	1	0.0000 %	2,756.4
SplitShare	4.27 %	4.13 %	32,033	3.61	5	-0.2122 %	3,201.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,520.4
Perpetual-Premium	5.43 %	-9.31 %	56,485	0.09	19	0.0453 %	2,504.7
Perpetual-Discount	5.11 %	4.99 %	105,766	15.41	16	-0.0523 %	2,713.0
FixedReset	4.22 %	3.34 %	201,755	16.86	77	-0.0353 %	2,535.6
Deemed-Retractible	4.92 %	0.16 %	97,222	0.19	39	0.0729 %	2,632.0
FloatingReset	2.70 %	2.38 %	62,203	3.58	7	-0.1744 %	2,455.5

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.F	FixedReset	-1.87 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 4.56 %
BAM.PF.E	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.24 Evaluated at bid price : 25.28 Bid-YTW : 3.66 %
BAM.PF.B	FixedReset	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.34 Evaluated at bid price : 25.35 Bid-YTW : 3.64 %
GWO.PR.H	Deemed-Retractible	-1.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.43 Bid-YTW : 5.21 %
BAM.PR.G	FixedFloater	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 21.73 Evaluated at bid price : 21.37 Bid-YTW : 3.63 %
IAG.PR.A	Deemed-Retractible	1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.02 %
IFC.PR.A	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.05 Bid-YTW : 5.37 %
BAM.PR.T	FixedReset	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.76 Evaluated at bid price : 25.69 Bid-YTW : 3.28 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PF.E	FixedReset	170,820	RBC crossed 166,000 at 25.73. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.24 Evaluated at bid price : 25.28 Bid-YTW : 3.66 %
TD.PF.C	FixedReset	63,169	RBC crossed 39,900 at 25.13. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.20 Evaluated at bid price : 25.13 Bid-YTW : 3.30 %
SLF.PR.I	FixedReset	43,313	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 2.04 %
ENB.PR.N	FixedReset	34,390	Scotia crossed 29,300 at 23.36. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 22.55 Evaluated at bid price : 23.36 Bid-YTW : 4.04 %
CU.PR.C	FixedReset	33,434	TD crossed 20,000 at 25.58. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 3.18 %
NA.PR.W	FixedReset	25,245	RBC crossed 20,000 at 25.24. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 23.22 Evaluated at bid price : 25.20 Bid-YTW : 3.28 %
There were 24 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.N	Perpetual-Discount	Quote: 22.38 – 22.82 Spot Rate : 0.4400 Average : 0.2732 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 21.93 Evaluated at bid price : 22.38 Bid-YTW : 5.33 %
GWO.PR.H	Deemed-Retractible	Quote: 24.43 – 24.94 Spot Rate : 0.5100 Average : 0.3490 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.43 Bid-YTW : 5.21 %
TRP.PR.B	FixedReset	Quote: 16.65 – 17.15 Spot Rate : 0.5000 Average : 0.3547 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-20 Maturity Price : 16.65 Evaluated at bid price : 16.65 Bid-YTW : 3.61 %
MFC.PR.F	FixedReset	Quote: 21.50 – 21.92 Spot Rate : 0.4200 Average : 0.2760 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 4.56 %
CGI.PR.D	SplitShare	Quote: 25.75 – 26.20 Spot Rate : 0.4500 Average : 0.3098 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 3.40 %
PWF.PR.O	Perpetual-Premium	Quote: 26.16 – 26.78 Spot Rate : 0.6200 Average : 0.4831 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-19 Maturity Price : 26.00 Evaluated at bid price : 26.16 Bid-YTW : -4.09 %

Those who live by the sword…

Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fund after losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm.

Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report. The Miami-based firm, which specializes in emerging markets, still manages seven funds with about $2.2 billion in assets. The global fund, the firm’s oldest, was betting the Swiss franc would decline, said the person, who asked not to be named because the information is private.
…
Last year, the main fund rose 14.1 percent, driven by Chinese equities and bets against currencies, including a wager that the Swiss franc would fall after citizens rejected a referendum that would require the central bank to hold at least 20 percent of its assets in gold, the investor report said.

There may be a Chinese straw in the wind:

A missed $23 million interest payment by Kaisa Group Holdings Ltd. (1638) earlier this month puts it at risk of being the first Chinese real estate company to default on its dollar-denominated bonds. That may signal deeper risks for China’s already fragile and corruption-prone property market, which according to World Bank estimates accounts for about 16 percent of economic growth.
…
Kaisa’s woes began late last year when the government in Shenzhen, less than 25 kilometers (15.5 miles) from Hong Kong, blocked approvals of its property sales and new projects in the city. It’s also being probed over alleged links to Jiang Zunyu, the former security chief of Shenzhen who was taken into custody as part of a graft probe, two people familiar with the matter said last week, asking not to be named because the connection hasn’t been made public.
…
Concern is mounting that increasing financial stress among builders could spill over into a broader credit crisis in China. New-home prices fell in 65 of the 70 cities monitored in December and were unchanged in four, the National Bureau of Statistics said in a statement yesterday. Shenzhen recorded higher prices, the first city to see an increase in four months.
…
Some of Kaisa’s Chinese creditors, meanwhile, have asked a court to freeze the company’s assets. In a statement on Jan. 9, the developer said that “several bank accounts of the group” had been frozen.

It’s a reminder of the risks overseas bondholders face when Chinese companies run into trouble. China’s bankruptcy laws favor local creditors while offering fewer protections to foreign debt claims. Kaisa has a 30-day grace period to make its missed payment.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 13bp, FixedResets down 38bp and DeemedRetractibles off 9bp. A lengthy Performance Highlights table is dominated by losing 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:

So according to this, TRP.PR.A, bid at 20.55, is $1.18 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.71 and resetting at +154bp on 2016-1-30 is $1.74 rich.

MFC.PR.F continues to be near the line defined by its peers, although it drifted up by a small amount today. Implied Volatility continues to be a conundrum. It is far 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 21.53 and appears to be $0.80 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.30 and appears to be $0.88 rich.

It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.

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 18.46, looks $1.11 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.36, looks $1.29 expensive and resets 2019-3-1

Pairs equivalence is all over the map, but 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.

And I now have my regular high speed connection back! They tell me that the power supply on my old modem blew. Of course, virtually everything about Bell Canada blows, but that’s another story…

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	0.3264 %	2,550.0
FixedFloater	4.40 %	3.58 %	19,647	18.32	1	1.0763 %	4,018.6
Floater	2.97 %	3.09 %	55,352	19.51	4	0.3264 %	2,710.8
OpRet	4.04 %	1.39 %	95,344	0.41	1	0.0000 %	2,756.4
SplitShare	4.26 %	4.09 %	33,295	3.62	5	0.0150 %	3,208.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,520.4
Perpetual-Premium	5.43 %	-7.84 %	57,128	0.08	19	-0.1543 %	2,503.6
Perpetual-Discount	5.11 %	4.99 %	105,644	15.42	16	0.1336 %	2,714.5
FixedReset	4.22 %	3.38 %	199,803	16.89	77	-0.3780 %	2,536.5
Deemed-Retractible	4.93 %	0.80 %	98,212	0.19	39	-0.0930 %	2,630.1
FloatingReset	2.70 %	2.33 %	62,135	3.58	7	0.1339 %	2,459.8

Performance Highlights
Issue	Index	Change	Notes
IFC.PR.A	FixedReset	-3.85 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 5.55 %
SLF.PR.G	FixedReset	-2.30 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.51 Bid-YTW : 5.47 %
PWF.PR.O	Perpetual-Premium	-2.09 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-18 Maturity Price : 26.00 Evaluated at bid price : 26.20 Bid-YTW : -6.08 %
BAM.PR.T	FixedReset	-1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.61 Evaluated at bid price : 25.20 Bid-YTW : 3.38 %
ENB.PR.B	FixedReset	-1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 21.59 Evaluated at bid price : 21.99 Bid-YTW : 4.05 %
FTS.PR.H	FixedReset	-1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 3.50 %
BNS.PR.Z	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.05 %
CU.PR.C	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.62 Evaluated at bid price : 25.36 Bid-YTW : 3.40 %
ENB.PR.D	FixedReset	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 21.90 Evaluated at bid price : 22.21 Bid-YTW : 4.01 %
ENB.PR.T	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 22.04 Evaluated at bid price : 22.55 Bid-YTW : 4.09 %
BAM.PR.R	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.86 Evaluated at bid price : 25.30 Bid-YTW : 3.38 %
ENB.PR.P	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 22.18 Evaluated at bid price : 22.74 Bid-YTW : 4.04 %
BAM.PF.B	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.43 Evaluated at bid price : 25.65 Bid-YTW : 3.58 %
IAG.PR.G	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.78 Bid-YTW : 3.08 %
BAM.PR.G	FixedFloater	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 21.84 Evaluated at bid price : 21.60 Bid-YTW : 3.58 %
FTS.PR.J	Perpetual-Discount	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 24.09 Evaluated at bid price : 24.50 Bid-YTW : 4.89 %
RY.PR.H	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.37 Evaluated at bid price : 25.56 Bid-YTW : 3.26 %
TRP.PR.C	FixedReset	1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 20.71 Evaluated at bid price : 20.71 Bid-YTW : 3.26 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PF.G	FixedReset	121,610	Nesbitt crossed 119,100 at 25.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.38 Evaluated at bid price : 25.83 Bid-YTW : 3.80 %
ENB.PR.F	FixedReset	118,890	TD crossed 111,100 at 22.77. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 22.19 Evaluated at bid price : 22.66 Bid-YTW : 4.06 %
BAM.PF.E	FixedReset	106,316	Desjardins crossed 105,800 at 25.79. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.33 Evaluated at bid price : 25.60 Bid-YTW : 3.59 %
TRP.PR.A	FixedReset	92,166	Nesbitt crossed 69,300 at 20.48; Desjardins crossed 16,100 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 3.76 %
ENB.PR.H	FixedReset	77,595	Scotia crossed 71,800 at 20.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 4.08 %
BAM.PF.A	FixedReset	63,001	Desjardins crossed 54,800 at 26.08. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 3.70 %
There were 26 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.O	Perpetual-Premium	Quote: 26.20 – 26.75 Spot Rate : 0.5500 Average : 0.3331 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-18 Maturity Price : 26.00 Evaluated at bid price : 26.20 Bid-YTW : -6.08 %
ENB.PR.B	FixedReset	Quote: 21.99 – 22.49 Spot Rate : 0.5000 Average : 0.3587 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 21.59 Evaluated at bid price : 21.99 Bid-YTW : 4.05 %
RY.PR.F	Deemed-Retractible	Quote: 25.70 – 26.10 Spot Rate : 0.4000 Average : 0.2761 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-24 Maturity Price : 25.25 Evaluated at bid price : 25.70 Bid-YTW : 1.14 %
TD.PR.T	FloatingReset	Quote: 24.91 – 25.20 Spot Rate : 0.2900 Average : 0.1704 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-07-31 Maturity Price : 25.00 Evaluated at bid price : 24.91 Bid-YTW : 2.39 %
ELF.PR.G	Perpetual-Discount	Quote: 23.15 – 23.53 Spot Rate : 0.3800 Average : 0.2749 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 22.88 Evaluated at bid price : 23.15 Bid-YTW : 5.15 %
MFC.PR.K	FixedReset	Quote: 25.10 – 25.37 Spot Rate : 0.2700 Average : 0.1733 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.50 %

News is starting to trickle in regarding casualties of the Swiss Franc move yesterday:

The Swiss National Bank’s abrupt move on Thursday to abandon its cap on the Swiss franc led to massive losses, and at least one insolvency, among retail foreign exchange brokers and trading houses across the globe.

Alpari UK

Online foreign exchange Broker Alpari UK said on Friday it had entered into insolvency after clients sustained losses on the Swiss franc. It said volatility and lack of liquidity had “resulted in the majority of clients sustaining losses which exceeded their account equity.”

FXCM Inc
…
Global Brokers NZ Ltd

The New Zealand foreign exchange dealer was forced to close due to hefty losses incurred due to the SNB’s policy reversal. It said the franc’s move had wiped out the equity of most of its clients with franc positions and left it without the ability to meet minimum capital requirements of 1 million New Zealand dollars ($780,000). New Zealand’s regulator is seeking a status update on client funds from the broker.
…
Swissquote
…
OANDA
…
Saxo Bank
…
IG Group

… and at least one fund:

IG Group shares fell 4.4 percent yesterday. The U.K. spread-betting firm said the financial impact from the surge in the Swiss franc was partially dependent on its ability to recover client debts.

The market turmoil turned the $1.9 billion John Hancock Absolute Return Currency Fund into the biggest loser among U.S. peers. It tumbled 8.7 percent yesterday, the steepest drop on record and the most among more than 2,000 U.S.-domiciled funds tracked by Bloomberg with at least $1 billion under management. The fund had its second-biggest short position in the franc at the end of November, according to the latest fact sheet on John Hancock’s website.

The FXCM problem is attracting some notice:

FXCM Inc. (FXCM), the brokerage facing a shortfall of nearly a quarter-billion dollars after highly-leveraged investors made losing bets on the Swiss franc, pushed back against U.S. regulatory efforts that likely would have left it less vulnerable.

In 2010, the Commodity Futures Trading Commission sought to force individual investors trading currencies to give their broker 10 cents in capital to back every $1 in positions. The regulator failed to accomplish that amid pressure from New York -based FXCM and other brokers, meaning only 2 cents must be pledged.
…
The client losses are shining a spotlight on U.S. regulators’ oversight of retail currency trading and whether they stopped short of necessary curbs to protect customers. In contrast to other markets, investors buying stock with borrowed money must put up at least 50 percent of the purchase price under Federal Reserve rules. The CFTC will probably move to review past efforts to limit currency-trading risks, former officials say.

“Leverage is a big issue that CFTC probably will want to look at as well as increasing transparency and maybe the capital buffer,” Sharon Brown-Hruska, a former commissioner at the CFTC and vice president at the NERA Economic Consulting firm, said in a phone interview.
…
While FXCM announced the customer losses and possible breach of capital requirements Thursday, GAIN Capital Holdings Inc. (GCAP) said it generated a profit. GAIN said in a statement that it had reduced traders’ ability to use leverage last September for Euro-Swiss Franc trades.

We can only hope that the regulators are not able to use this fiasco as a cause celebre to destroy the retail FX market. I see no problem with a 2% margining requirement for FX … but it also seems to me that FXCM had absolutely no protection against a big move … a deep out-of-the-money call, for instance.

Even with Goldman’s exemplary conduct in hedging risk during the crunch as an example (as discussed on July 26, 2010), FXCM managed to screw things up. So the sharks smile:

Leucadia National Corp. gave FXCM Inc. a $300 million cash infusion, extending a lifeline to the currency brokerage hobbled by the Swiss central bank’s decision to let the franc trade freely against the euro.

Leucadia, which owns New York-based investment bank Jefferies Group, extended FXCM a two-year, $300 million senior secured term loan with an initial coupon of 10 percent, according to a statement Friday. The transaction allows FXCM, the largest U.S. retail foreign-exchange broker, to “continue normal operations,” according to the statement.

Shares of New York-based FXCM had tumbled as much as 92 percent to 98 cents Friday morning before they were halted. After the Leucadia deal was released, FXCM’s stock rebounded to $4.44 as of 5:40 p.m. New York time. That’s still down from the prior day’s closing price of $12.63

… and, just so we can keep up to date on an old story, Moody’s cut Russia to Baa3:

Moody’s lowered the country to Baa3, one step above junk, from Baa2. The credit grade matches those of Standard & Poor’s and Fitch Ratings. The rating, on par with India and Turkey, is on review for a further reduction, the ratings company said in a statement.

“The severe — and likely to be sustained — oil price shock, alongside Russian borrowers’ highly restricted international market access due to ongoing sanctions, is undermining economic fundamentals and increasing financial stresses on both the public and private sectors,” Moody’s said in a report

Holy smokaramaville, it was a hot day for the Canadian preferred share market! PerpetualDiscounts won 61bp, FixedResets gained 21bp and DeemedRetractibles were up 46bp. The Performance Highlights table is enormous, with a great many low-spread FixedResets on the bad side, with the good side containing Straight Perpetuals of all flavours and a fair smattering of high-spread FixedResets. Volume was very high.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.45, is $1.29 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.35 and resetting at +154bp on 2016-1-30 is $1.36 rich.

MFC.PR.F continues to be near the line defined by its peers, although it drifted up by a small amount today. Implied Volatility continues to be a conundrum. It is far 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 21.56 and appears to be $0.89 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.59 and appears to be $0.97 rich.

It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.

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 18.75, looks $0.89 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.35, looks $1.22 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

And, yeah, Bell claims there’s no network problem in Toronto, but I am still forced to use my ‘phone as a Wi-Fi hotspot. But don’t worry! Our beloved government will continue to protect us from the evils of American competition, so nobody will lose his job over this fiasco.

I’m spending $25 a day on cell phone data charges. I wonder if Bell will give me a refund.

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	0.2846 %	2,541.7
FixedFloater	4.45 %	3.63 %	19,831	18.24	1	-0.4194 %	3,975.8
Floater	2.98 %	3.09 %	55,411	19.51	4	0.2846 %	2,702.0
OpRet	4.04 %	1.36 %	96,624	0.42	1	0.0000 %	2,756.4
SplitShare	4.26 %	4.04 %	34,656	3.62	5	0.0474 %	3,207.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,520.4
Perpetual-Premium	5.42 %	-10.24 %	59,484	0.09	19	0.3302 %	2,507.5
Perpetual-Discount	5.11 %	4.98 %	106,922	15.43	16	0.6141 %	2,710.8
FixedReset	4.20 %	3.43 %	201,534	16.65	77	0.2121 %	2,546.1
Deemed-Retractible	4.92 %	1.01 %	98,618	0.20	39	0.4592 %	2,632.5
FloatingReset	2.72 %	2.38 %	62,157	3.59	7	-0.9568 %	2,456.5

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.A	FixedReset	-5.02 %	This is actually real, as the closing bid of 20.45 was also the low for the day and the VWAP of 20.566496 was achieved on a high volume of 166,641 shares (consolidated exchanges). A lot of 100 share sales at the end of the day came out of Credit Suisse. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.91 %
TRP.PR.B	FixedReset	-1.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 16.59 Evaluated at bid price : 16.59 Bid-YTW : 3.83 %
SLF.PR.G	FixedReset	-1.82 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.97 Bid-YTW : 5.34 %
TRP.PR.F	FloatingReset	-1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 3.32 %
ENB.PR.F	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 22.19 Evaluated at bid price : 22.67 Bid-YTW : 4.18 %
ENB.PR.H	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.24 %
BMO.PR.R	FloatingReset	-1.18 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.09 Bid-YTW : 2.38 %
BNS.PR.C	FloatingReset	-1.14 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-26 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 2.44 %
ENB.PR.Y	FixedReset	-1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 21.66 Evaluated at bid price : 22.01 Bid-YTW : 4.23 %
TD.PR.T	FloatingReset	-1.03 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-07-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 2.36 %
BAM.PR.T	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 23.74 Evaluated at bid price : 25.62 Bid-YTW : 3.42 %
IFC.PR.C	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.08 Bid-YTW : 1.74 %
BAM.PF.C	Perpetual-Discount	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 22.15 Evaluated at bid price : 22.47 Bid-YTW : 5.43 %
POW.PR.D	Perpetual-Discount	1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 24.68 Evaluated at bid price : 24.99 Bid-YTW : 5.02 %
BAM.PF.B	FixedReset	1.21 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.92 Bid-YTW : 3.32 %
SLF.PR.I	FixedReset	1.26 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.46 Bid-YTW : 1.32 %
PWF.PR.S	Perpetual-Discount	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 24.16 Evaluated at bid price : 24.57 Bid-YTW : 4.88 %
SLF.PR.A	Deemed-Retractible	1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.84 Bid-YTW : 4.89 %
BAM.PR.N	Perpetual-Discount	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 21.94 Evaluated at bid price : 22.40 Bid-YTW : 5.32 %
POW.PR.G	Perpetual-Premium	1.41 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 26.66 Bid-YTW : 4.22 %
BAM.PR.M	Perpetual-Discount	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 22.03 Evaluated at bid price : 22.39 Bid-YTW : 5.33 %
BNS.PR.Z	FixedReset	1.52 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.68 Bid-YTW : 2.92 %
BAM.PR.R	FixedReset	1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 23.95 Evaluated at bid price : 25.59 Bid-YTW : 3.46 %
MFC.PR.B	Deemed-Retractible	1.78 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.59 Bid-YTW : 4.93 %
MFC.PR.C	Deemed-Retractible	1.79 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.94 Bid-YTW : 5.12 %
SLF.PR.E	Deemed-Retractible	1.89 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 5.20 %
BAM.PR.X	FixedReset	2.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 21.27 Evaluated at bid price : 21.56 Bid-YTW : 3.72 %
PWF.PR.P	FixedReset	2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 21.07 Evaluated at bid price : 21.07 Bid-YTW : 3.43 %
PWF.PR.O	Perpetual-Premium	2.33 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-15 Maturity Price : 26.00 Evaluated at bid price : 26.76 Bid-YTW : -29.98 %
GWO.PR.I	Deemed-Retractible	2.52 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 5.28 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.C	Deemed-Retractible	238,349	Nesbitt crossed blocks of 140,700 and 94,200, both at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-15 Maturity Price : 25.25 Evaluated at bid price : 25.55 Bid-YTW : -1.84 %
TRP.PR.B	FixedReset	208,866	Scotia crossed 50,000 at 16.58 and 25,000 at 16.59. Desjardins crossed blocks of 12,000 and 25,000 at 16.59, as well as 38,000 at 16.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 16.59 Evaluated at bid price : 16.59 Bid-YTW : 3.83 %
TD.PF.C	FixedReset	177,723	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 23.21 Evaluated at bid price : 25.15 Bid-YTW : 3.40 %
TRP.PR.A	FixedReset	158,041	Scotia crossed 115,000 at 20.48. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 3.91 %
MFC.PR.N	FixedReset	155,835	RBC crossed 25,000 at 25.27. Desjardins crossed 10,000 at 25.30. TD crossed blocks of 39,400 and 50,000, both at 25.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.60 %
BNS.PR.R	FixedReset	93,888	Nesbitt crossed 83,500 at 25.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.55 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
IFC.PR.A	FixedReset	Quote: 21.58 – 22.82 Spot Rate : 1.2400 Average : 0.9895 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.58 Bid-YTW : 5.16 %
NEW.PR.D	SplitShare	Quote: 32.30 – 33.30 Spot Rate : 1.0000 Average : 0.8218 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.30 Bid-YTW : 3.13 %
RY.PR.H	FixedReset	Quote: 25.26 – 25.68 Spot Rate : 0.4200 Average : 0.2820 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 23.28 Evaluated at bid price : 25.26 Bid-YTW : 3.43 %
BAM.PR.C	Floater	Quote: 16.92 – 17.28 Spot Rate : 0.3600 Average : 0.2300 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 16.92 Evaluated at bid price : 16.92 Bid-YTW : 3.12 %
ENB.PR.H	FixedReset	Quote: 20.70 – 21.11 Spot Rate : 0.4100 Average : 0.2901 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-16 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.24 %
IAG.PR.A	Deemed-Retractible	Quote: 24.07 – 24.45 Spot Rate : 0.3800 Average : 0.2687 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.07 Bid-YTW : 5.13 %

There’s some disinflationary news from India:

Reserve Bank of India Governor Raghuram Rajan cut interest rates in an unscheduled review to revive growth in Asia’s third-largest economy after inflation eased. Stocks, bonds and the rupee surged.

Rajan lowered the benchmark repurchase rate to 7.75 percent from 8 percent, he said in a statement today, the first reduction since May 2013. Consumer-price inflation will probably be below the central bank’s target of 6 percent by January 2016, he said.
…
Rajan has focused on quelling inflation since taking office in September 2013, and today’s move signals confidence that price pressures will remain under control. It sets India on a different path from Brazil and Russia, which raised rates in December to tame inflation and support their currencies.

And here’s a new twist to currency wars:

At 9:30 a.m. today, trading floors across the City of London erupted.

Outbursts of obscenities and confusion followed the Swiss central bank’s surprise decision to abolish its three-year-old policy of capping the Swiss franc against the euro, according to traders in London’s financial district. The U-turn sent the franc as much as 41 percent up against the euro, the biggest gain on record, a move that one trader estimated may cause billions of dollars of losses for banks and their customers.
…
As the franc spiked, investors said they found themselves unable to trade it amid a lack of price quotes.

“There was a good hour when euro-swiss was untradeable,” said Chris Morrison, London-based head of strategy at Omni Macro Fund, a hedge fund which oversees $550 million. “Clearly there was no liquidity.”

Forex.com, a currency-trading website, said it halted services briefly “until we get confirmation from our liquidity providers that we can get Swissie liquidity.” Dealing resumed at about 10:30 a.m. London time.
…
Anthony Peters, a broker at Swiss Investment Corp., said firms that were selling options tied to the Swiss franc may be among today’s losers. They would have lost money as volatility surged.

“Selling puts or vol on the franc was deemed to be SNB guaranteed money for old rope,” he wrote in a note to clients today. “There will be some very red faces around as it begins to transpire who should not have been playing that game.”

Sometimes we have to leave Never-Never Land:

“The decision has been a surprise for markets — you can’t do it in any other way,” SNB President Jordan told reporters in Zurich today. “We came to conclusion that it’s not a sustainable policy.”

The change comes just one week before ECB policy makers meet to discuss new stimulus, including quantitative easing, a move that may add to pressure on the franc against the euro.

The SNB spent billions defending the cap after introducing it in September 2011. Jordan said today it may intervene again.

“The SNB doesn’t see any future any more for their floor with the strong U.S. dollar and the QE ahead at the ECB,” said Alessandro Bee, strategist at Bank J Safra Sarasin AG in Zurich.

I tip my hat to those who followed the example of George Soros and decided that the CHF/EUR rate was unsustainable. Sometimes the politicians and bureaucrats just need to be TOLD!

It looks like Canada is off Target:

Target Corp. (TGT) will walk away from Canada less than two years after opening stores there, putting an end to a mismanaged expansion that racked up billions in losses.

The Canadian division, which employs 17,600 people, is seeking court approval to begin liquidation, the Minneapolis-based retailer said today in a statement. Dismantling operations north of the border will lead to a $5.4 billion writedown this quarter, though it will boost profit by next year, Target said.

Fixing the Canada unit, which had amassed more than $2 billion in operating losses since 2011, has been a top priority for Chief Executive Officer Brian Cornell. After taking the reins in August, he spent a portion of his early days at the company touring operations in the country. The woes plaguing the chain’s 133 stores there ranged from empty shelves to prices being higher than at locations in the U.S.

“We were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021,” Cornell said today. “This was a very difficult decision, but it was the right decision for our company.”

DBRS comments:

DBRS therefore believes that Target’s decision to wind down its Canadian business is more reflective of the Company’s inability to achieve its own strategic, operational and financial milestones within this market rather than any indication of broader weakening of the Canadian retail sector.
…
This event, however, has no effect on ratings in the retail sector at the present time because DBRS believes that the business risk profile of the overall sector should remain within its current bandwidth over the near to medium term. This outlook is based on DBRS’s:
— view that new competition will emerge (including the impact of growing online retailing) and that the trend toward equilibrium in the sector will continue after this temporary reduction in competition;
— and concern about Canadian consumers becoming more challenged because of high debt levels as well as potentially higher interest rates and lower residential real estate prices in the future.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 23bp, FixedResets off 12bp and DeemedRetractibles gaining 4bp. The Performance Highlights table is lengthy yet again, dominated by low-spread FixedReset losers as the Canada 5-Year yield dropped to an incredible 1.02%. Will we go below 1%? Place yer bets, gents, place yer bets! 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:

So according to this, TRP.PR.A, bid at 21.53, is $0.69 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.48 and resetting at +154bp on 2016-1-30 is $1.09 rich.

MFC.PR.F continues to be on the line defined by its peers. Implied Volatility continues to be a conundrum. It is far 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 21.12 and appears to be $0.87 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.18 and appears to be $0.89 rich.

It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.

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 18.75, looks $0.79 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.20, looks $1.08 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

And, yeah, Bell is still having network problems, and I am still using my ‘phone as a Wi-Fi hotspot. But don’t worry! Our beloved government will continue to protect us from the evils of American competition, so nobody will lose his job over this fiasco.

I’m spending $25 a day on cell phone data charges. I wonder if Bell will give me a refund.

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	-0.7486 %	2,534.5
FixedFloater	4.43 %	3.61 %	20,589	18.28	1	-0.2325 %	3,992.6
Floater	2.99 %	3.11 %	55,505	19.46	4	-0.7486 %	2,694.3
OpRet	4.04 %	1.35 %	95,742	0.42	1	0.0394 %	2,756.4
SplitShare	4.26 %	4.03 %	36,072	3.63	5	-0.1576 %	3,206.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0394 %	2,520.4
Perpetual-Premium	5.44 %	-6.20 %	57,563	0.08	19	-0.0165 %	2,499.2
Perpetual-Discount	5.15 %	5.00 %	99,777	15.39	16	0.2325 %	2,694.3
FixedReset	4.21 %	3.48 %	203,528	16.68	77	-0.1153 %	2,540.7
Deemed-Retractible	4.95 %	1.11 %	98,567	0.20	39	0.0356 %	2,620.5
FloatingReset	2.70 %	2.05 %	61,774	3.43	7	0.0404 %	2,480.2

Performance Highlights
Issue	Index	Change	Notes
IFC.PR.A	FixedReset	-3.60 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.45 Bid-YTW : 5.23 %
TRP.PR.B	FixedReset	-2.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 3.76 %
SLF.PR.G	FixedReset	-2.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.34 Bid-YTW : 5.12 %
BAM.PR.X	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 21.12 Evaluated at bid price : 21.12 Bid-YTW : 3.83 %
HSE.PR.A	FixedReset	-1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 3.72 %
GWO.PR.N	FixedReset	-1.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.40 Bid-YTW : 5.02 %
BAM.PR.B	Floater	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 16.93 Evaluated at bid price : 16.93 Bid-YTW : 3.12 %
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 : 23.02 Bid-YTW : 5.60 %
MFC.PR.F	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 4.41 %
BAM.PR.K	Floater	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 16.88 Evaluated at bid price : 16.88 Bid-YTW : 3.13 %
TRP.PR.A	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 21.53 Evaluated at bid price : 21.53 Bid-YTW : 3.71 %
NA.PR.Q	FixedReset	1.56 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-11-15 Maturity Price : 25.00 Evaluated at bid price : 26.03 Bid-YTW : 2.19 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PF.G	FixedReset	182,691	RBC crossed 98,200 at 25.76; TD crossed 65,300 at 25.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 23.35 Evaluated at bid price : 25.70 Bid-YTW : 3.93 %
BNS.PR.R	FixedReset	178,218	Nesbitt crossed blocks of 124,900 and 50,000, both at 25.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 3.17 %
GWO.PR.M	Deemed-Retractible	150,240	Scotia crossed blocks of 100,000 and 50,000, both at 26.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.30 Bid-YTW : 1.06 %
TD.PF.C	FixedReset	113,328	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 23.18 Evaluated at bid price : 25.06 Bid-YTW : 3.42 %
W.PR.H	Perpetual-Premium	109,820	RBC crossed 109,000 at 25.05. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-14 Maturity Price : 25.00 Evaluated at bid price : 25.06 Bid-YTW : 2.59 %
MFC.PR.N	FixedReset	106,242	RBC crossed 25,000 at 25.16; TD crossed 56,700 at 25.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.18 Bid-YTW : 3.66 %
NA.PR.W	FixedReset	105,800	Scotia crossed 60,000 at 25.08; TD crossed 35,000 at 25.07. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 23.18 Evaluated at bid price : 25.06 Bid-YTW : 3.42 %
There were 21 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: 16.90 – 17.65 Spot Rate : 0.7500 Average : 0.5061 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-15 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 3.76 %
GWO.PR.N	FixedReset	Quote: 20.40 – 21.00 Spot Rate : 0.6000 Average : 0.3894 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.40 Bid-YTW : 5.02 %
MFC.PR.A	OpRet	Quote: 25.37 – 25.78 Spot Rate : 0.4100 Average : 0.2249 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : 1.35 %
GWO.PR.I	Deemed-Retractible	Quote: 23.02 – 23.63 Spot Rate : 0.6100 Average : 0.4315 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.02 Bid-YTW : 5.60 %
SLF.PR.E	Deemed-Retractible	Quote: 23.31 – 23.73 Spot Rate : 0.4200 Average : 0.2795 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.31 Bid-YTW : 5.44 %
GWO.PR.S	Deemed-Retractible	Quote: 25.82 – 26.22 Spot Rate : 0.4000 Average : 0.2742 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.82 Bid-YTW : 4.89 %

Yessir, one has to admire all those hard-nosed market timers who positioned themselves for “rising interest rates”:

Treasury 30-year bonds yields are tumbling to record lows as the collapse in oil and commodity prices smothers inflation and hampers global economic growth.

Global sovereign yields fell to records in the U.K., France, Canada and Japan as a report showed retail sales in the U.S. slumped in December by the most in almost a year, reflecting a broad-based retreat that may prompt economists to cut growth forecasts. The slide prompted traders to push back expectations for the timing of the first Federal Reserve interest-rate increase into December less than a month after speculating that rates could rise as soon as April.
…
Even at the record low yield of 2.39 percent reached today, 30-year Treasuries are attractive to global investors looking at negative returns on the sovereign debt of nations including German with the European Central Bank expected to add to its bond-buying program as policy makers seek to avert deflation.

The Treasury sold $13 billion of 30-year bonds at an auction-record-low yield of 2.430 percent.

Thirty-year bond yields dropped five basis points, or 0.05 percentage point, to 2.45 percent as of 2:31 p.m. in New York, according to Bloomberg Bond Trader data. The momentum that caused the previous record low of 2.44 percent set on July 26, 2012, to be eclipsed is being driven by the following factors.

• GLOBAL SLOWDOWN THREAT …
• LOW INFLATION …
• RELATIVE RETURNS…
• FED TIMING …

Larry Berman of the Globe passes on chief markets economist at Capital Economics John Higgins’ reasons, one of which was missed in the above:

Two, financial institutions are adapting to stricter regulations regarding leverage and assets, creating more demand for safe government bonds.

JPMorgan’s Jamie Dimon is complaining about the regulatory three-ring circus:

Jamie Dimon, grappling with multibillion-dollar legal costs and rising capital requirements at JPMorgan Chase & Co. (JPM), said overlapping efforts by U.S. regulators place banks “under assault.”

“We have five or six regulators or people coming after us on every different issue,” Dimon, 58, said today on a call with reporters after New York-based JPMorgan reported fourth-quarter results. “It’s a hard thing to deal with.”

JPMorgan, the largest U.S. bank by assets, posted a drop in fourth-quarter profit amid $990 million of legal expenses, about double what some analysts predicted. The legal costs, mostly tied to probes into currency rate-rigging, follow even bigger payments in 2013 related to mortgage bonds sold before the 2008 crisis by JPMorgan and firms it acquired.
…
Dimon, who was lauded during the crisis for JPMorgan’s role in buying Bear Stearns Cos. and Washington Mutual Inc.’s banking operations, has criticized the government for penalizing JPMorgan for those firms’ actions.
…
“In the old days, you dealt with one regulator when you had an issue, maybe two,” said Dimon, 58. “Now it’s five or six. It makes it very difficult and very complicated. You all should ask the question about how American that is. And how fair that is. And how complex that is for companies.”

Another hilarious spoofing case in US markets:

And then there is Aleksander Milrud, who allegedly built his spoofing robot out of lots of human traders in China and Korea and maybe elsewhere. Milrud was charged with spoofing today by federal prosecutors and the Securities and Exchange Commission, making him by my count only the second person to be charged with criminal spoofing. The claim is that Milrud recruited lots of traders in China and Korea, and then assigned them to spoof stocks from two accounts each. In the “dirty” account, a trader would enter lots of spoof orders to move the market. In the “clean” account, he’d enter a few orders the other way, to take advantage of the market move. The connections between those accounts, and between them and Milrud, were then further obscured by a series of tubes or whatever. 2 The traders could move fast because “Milrud worked with a gaming software company to develop ‘hot keys’ that allowed his traders to quickly place and cancel multiple orders via their computers with only a few strokes of their keyboards.” Because the next best thing to being an algorithm is being a human with a really fancy keyboard.

I see no reason that spoofing should be a crime. To the extent that it causes additional limit orders to be on the board, spoofing is good! I’m not concerned about the spoofees, because they’re just traders, playing a traders’ games. A fundamental investor can only be helped by spoofing.

One argument that can be made in favour of outlawing spoofing is that the ‘bad’ orders will drive out the ‘good’ – i.e., that legitimate speculative market makers will exit the market because they don’t understand it any more. I’m not so sure that this will be the case; I haven’t seen any evidence to support this view, although if may very well be that lots exists.

It was another poor day for the Canadian preferred share market, with PerpetualDiscounts down 7bp, FixedResets losing 22bp and DeemedRetractibles off 3bp. There is another lengthy Performance Highlights table, dominated by losing FixedResets. Volume was low.

PerpetualDiscounts now yield 5.00%, equivalent to 6.50% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.85% so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 265bp, unchanged from January 7.

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 21.23, is $0.92 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.47 and resetting at +154bp on 2016-1-30 is $1.08 rich.

MFC.PR.F continues to be on the line defined by its peers. Implied Volatility continues to be a conundrum. It is far 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 21.53 and appears to be $0.88 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.30 and appears to be $0.89 rich.

It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.

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 18.80, looks $0.85 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.24, looks $1.16 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

And, yeah, Bell is still having network problems, and I am still using my ‘phone as a Wi-Fi hotspot. But don’t worry! Our beloved government will continue to protect us from the evils of American competition, so nobody will lose his job over this fiasco.

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	-0.3238 %	2,553.6
FixedFloater	4.42 %	3.60 %	20,887	18.30	1	0.4671 %	4,001.9
Floater	2.97 %	3.07 %	55,289	19.57	4	-0.3238 %	2,714.7
OpRet	4.04 %	1.44 %	95,937	0.42	1	0.0000 %	2,755.3
SplitShare	4.26 %	3.96 %	35,237	3.63	5	-0.0473 %	3,211.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,519.4
Perpetual-Premium	5.44 %	-5.17 %	57,116	0.08	19	0.0433 %	2,499.6
Perpetual-Discount	5.16 %	5.00 %	100,957	15.39	16	-0.0713 %	2,688.0
FixedReset	4.20 %	3.47 %	205,816	16.71	77	-0.2204 %	2,543.6
Deemed-Retractible	4.95 %	1.05 %	100,114	0.21	39	-0.0335 %	2,619.6
FloatingReset	2.70 %	2.20 %	60,973	3.43	7	-0.2990 %	2,479.2

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.P	FixedReset	-2.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 20.63 Evaluated at bid price : 20.63 Bid-YTW : 3.51 %
TRP.PR.C	FixedReset	-2.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 20.47 Evaluated at bid price : 20.47 Bid-YTW : 3.46 %
FTS.PR.J	Perpetual-Discount	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 23.76 Evaluated at bid price : 24.15 Bid-YTW : 4.96 %
NA.PR.Q	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-11-15 Maturity Price : 25.00 Evaluated at bid price : 25.63 Bid-YTW : 2.77 %
BNS.PR.Z	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 3.20 %
PWF.PR.A	Floater	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 2.71 %
GWO.PR.N	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 4.81 %
PWF.PR.T	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.82 Bid-YTW : 3.29 %
TD.PR.Y	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.46 Bid-YTW : 2.96 %
FTS.PR.M	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 23.36 Evaluated at bid price : 25.61 Bid-YTW : 3.58 %
ENB.PR.Y	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 21.90 Evaluated at bid price : 22.36 Bid-YTW : 4.15 %
MFC.PR.B	Deemed-Retractible	1.76 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.26 Bid-YTW : 5.10 %
BNS.PR.Y	FixedReset	3.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.20 Bid-YTW : 3.42 %

Volume Highlights
Issue	Index	Shares Traded	Notes
FTS.PR.H	FixedReset	204,551	RBC crossed 191,800 at 18.64. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 3.62 %
BAM.PF.G	FixedReset	155,828	RBC crossed 149,400 at 25.76. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 23.35 Evaluated at bid price : 25.70 Bid-YTW : 3.93 %
CM.PR.P	FixedReset	110,897	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 23.18 Evaluated at bid price : 25.07 Bid-YTW : 3.41 %
TD.PF.C	FixedReset	107,610	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 23.18 Evaluated at bid price : 25.06 Bid-YTW : 3.42 %
HSE.PR.A	FixedReset	52,404	Nesbitt crossed 13,800 at 20.90, then sold 10,000 to anonymous at the same price. TD crossed 21,900 at 20.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 20.87 Evaluated at bid price : 20.87 Bid-YTW : 3.66 %
BNS.PR.N	Deemed-Retractible	37,395	TD crossed 35,000 at 25.79. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-27 Maturity Price : 25.50 Evaluated at bid price : 25.75 Bid-YTW : -5.00 %
There were 22 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.P	FixedReset	Quote: 20.63 – 21.31 Spot Rate : 0.6800 Average : 0.4723 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 20.63 Evaluated at bid price : 20.63 Bid-YTW : 3.51 %
NA.PR.Q	FixedReset	Quote: 25.63 – 26.23 Spot Rate : 0.6000 Average : 0.4084 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-11-15 Maturity Price : 25.00 Evaluated at bid price : 25.63 Bid-YTW : 2.77 %
PWF.PR.A	Floater	Quote: 19.50 – 20.65 Spot Rate : 1.1500 Average : 0.9951 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 2.71 %
BNS.PR.Z	FixedReset	Quote: 24.25 – 24.67 Spot Rate : 0.4200 Average : 0.2771 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 3.20 %
FTS.PR.J	Perpetual-Discount	Quote: 24.15 – 24.68 Spot Rate : 0.5300 Average : 0.3924 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-14 Maturity Price : 23.76 Evaluated at bid price : 24.15 Bid-YTW : 4.96 %
BMO.PR.R	FloatingReset	Quote: 25.37 – 25.70 Spot Rate : 0.3300 Average : 0.2066 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : 2.05 %

So today the Prime Minister’s Office admitted the oil price drop is bad via one of its flunkies:

The plunge in oil prices is “on the whole” a negative for Canada’s economy and may delay its return to full potential, Bank of Canada Deputy Governor Tim Lane said.

“We will closely monitor its broader impacts on growth and the delay it may cause to the economy’s return to its production potential,” Lane said in a speech today in Madison, Wisconsin.

Economists are interpreting his remarks as confirmation the central bank will hold off raising interest rates for the time being. Governor Stephen Poloz and fellow members of the bank’s governing council will publish their next rate decision on Jan. 21, along with a quarterly policy report that will provide a detailed impact analysis of falling oil prices.
…
Canada’s dollar rose 0.2 percent to C$1.1953 per U.S. dollar at 3:58 p.m. Toronto time. It has depreciated by more than 10 percent in the last six months, as the price of benchmark crude oil has plunged 54 percent. A depreciating currency makes Canadian goods cheaper to foreign customers.

“Despite the mitigating factors I enumerated, lower oil prices are likely, on the whole, to be bad for Canada,” Lane said. “Estimating the magnitude of that overall impact requires carefully analyzing the interplay between the various effects as they work through the economy.”

Suncor agreed:

Suncor Energy Inc. (SU), Canada’s largest oil company, said it will cut 1,000 jobs, lower its 2015 capital budget by about 13 percent and delay projects to weather collapsing prices.

The company will spend C$1 billion ($836 million) less this year than originally forecast in November, following Canadian Natural Resources Ltd. (CNQ) in revising its budget lower this week. Suncor also plans to reduce operating expenses by C$600 million to C$800 million in two years, according to a company statement today.

So what do you do when you have too much oil?

Refiners, tankage firms and traders that invested in oil storage capacity are benefiting as the slump in crude to below $45 a barrel deepened what’s called contango, a relatively rare situation where prices for oil delivery later this year are higher than current prices. Vitol Group, Mercuria Energy Group Ltd. and Gunvor Group Ltd. are among the commodity houses poised to profit by storing oil and petroleum products to sell in the future.

“There is significant storage demand from traders wanting to cash in on that specific opportunity,” Martijn den Drijver, an analyst at SNS Securities in Amsterdam, said in an interview.

Mercuria, the fourth-largest independent oil trader, owns about 40 million barrels of storage in locations from Texas, South Africa and China to Belgium and the Netherlands, according to its website. The firm is looking primarily at its land-based storage facilities to play the contango, said Matt Lauer, a spokesman for the company with major trading operations in Geneva. Mercuria hasn’t moved to secure any floating storage in tankers at sea

I mentioned the Caisse’s intention to build transit in Quebec yesterday. DBRS is sanguine, but assumes independence:

DBRS Limited (DBRS) today notes that the Caisse de dép?t et placement du Québec (the Caisse) has entered into an agreement with the Government of Québec (the Government) to execute major infrastructure projects in the province. This new agreement is consistent with the Caisse’s strategy to grow its private market holdings, particularly infrastructure investments, amid the current low interest rate environment. Further, it allows the Caisse to capitalize on its unique understanding of the Québec market and address growing infrastructure needs in the province. Additionally, the Caisse’s current Québec concentration levels will not be affected. DBRS notes that the agreement is of a commercial nature, and importantly, the independence of the Caisse is a key feature and is by no means compromised by this agreement. This move has no implications on DBRS’s current ratings of the Caisse or its financing subsidiary, CDP Financial Inc.
…
Operationalization of the agreement will be dependent upon the introduction of legislative amendments, which is expected in the coming months. The new legislation will allow for the creation of the new infrastructure subsidiary, CDPQ Infra. Also, it will expand the Caisse’s current practice of merely investing in infrastructure projects, to accommodate the new business model, which will include project planning, development, construction and operation. Once established, it is expected that over time CDPQ Infra will expand its mandate to build, finance and operate infrastructure projects globally.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 8bp, FixedResets down 55bp and DeemedRetractibles off 2bp. The Performance Highlights table is suitably lengthy with quite a few FixedReset losers and one solitary winner – a PerpetualDiscount. Volume was very low.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.66, is $1.12 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.00 and resetting at +154bp on 2016-1-30 is $1.39 rich.

MFC.PR.F continues to be on the line defined by its peers. Implied Volatility continues to be a conundrum. It is far 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 21.48 and appears to be $0.94 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.41 and appears to be $1.02 rich.

It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.

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 18.80, looks $0.96 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.26, looks $1.23 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

And, yeah, Bell is still having network problems, and I am still using my ‘phone as a Wi-Fi hotspot. But don’t worry! Our beloved government will continue to protect us from the evils of American competition, so nobody will lose his job over this fiasco.

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	-0.9206 %	2,561.9
FixedFloater	4.44 %	3.62 %	21,713	18.27	1	-0.0115 %	3,983.3
Floater	2.96 %	3.07 %	56,883	19.57	4	-0.9206 %	2,723.5
OpRet	4.04 %	1.43 %	97,225	0.43	1	0.0000 %	2,755.3
SplitShare	4.25 %	3.95 %	35,160	3.63	5	0.2187 %	3,212.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,519.4
Perpetual-Premium	5.44 %	-4.90 %	57,908	0.08	19	0.0620 %	2,498.5
Perpetual-Discount	5.15 %	5.03 %	101,405	15.36	16	0.0793 %	2,690.0
FixedReset	4.20 %	3.48 %	203,213	16.70	77	-0.5543 %	2,549.3
Deemed-Retractible	4.95 %	0.85 %	100,479	0.13	39	-0.0244 %	2,620.5
FloatingReset	2.69 %	1.97 %	61,140	3.44	7	-0.3894 %	2,486.7

Performance Highlights
Issue	Index	Change	Notes
BNS.PR.Y	FixedReset	-4.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 3.90 %
PWF.PR.A	Floater	-2.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 19.76 Evaluated at bid price : 19.76 Bid-YTW : 2.68 %
IFC.PR.A	FixedReset	-2.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.11 Bid-YTW : 4.86 %
ENB.PR.F	FixedReset	-2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.41 Evaluated at bid price : 23.02 Bid-YTW : 4.11 %
PWF.PR.P	FixedReset	-2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 21.23 Evaluated at bid price : 21.23 Bid-YTW : 3.41 %
BAM.PR.X	FixedReset	-1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 21.48 Evaluated at bid price : 21.48 Bid-YTW : 3.76 %
ENB.PR.D	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.09 Evaluated at bid price : 22.48 Bid-YTW : 4.09 %
HSE.PR.A	FixedReset	-1.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 3.67 %
ENB.PR.N	FixedReset	-1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.53 Evaluated at bid price : 23.32 Bid-YTW : 4.17 %
MFC.PR.B	Deemed-Retractible	-1.81 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.84 Bid-YTW : 5.32 %
ENB.PR.Y	FixedReset	-1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 21.67 Evaluated at bid price : 22.02 Bid-YTW : 4.22 %
TRP.PR.F	FloatingReset	-1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 21.34 Evaluated at bid price : 21.62 Bid-YTW : 3.24 %
BAM.PR.T	FixedReset	-1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 23.64 Evaluated at bid price : 25.30 Bid-YTW : 3.48 %
BAM.PR.R	FixedReset	-1.74 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 23.89 Evaluated at bid price : 25.41 Bid-YTW : 3.49 %
IFC.PR.C	FixedReset	-1.65 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 2.86 %
BAM.PF.B	FixedReset	-1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 23.32 Evaluated at bid price : 25.30 Bid-YTW : 3.76 %
TRP.PR.A	FixedReset	-1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.75 %
ENB.PR.T	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.15 Evaluated at bid price : 22.72 Bid-YTW : 4.17 %
FTS.PR.H	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 3.62 %
FTS.PR.M	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 23.25 Evaluated at bid price : 25.25 Bid-YTW : 3.65 %
CU.PR.E	Perpetual-Discount	1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 24.18 Evaluated at bid price : 24.60 Bid-YTW : 5.02 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BNS.PR.Y	FixedReset	202,830	Scotia crossed 200,000 at 23.48. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 3.90 %
ENB.PR.N	FixedReset	124,932	Nesbitt crossed 117,900 at 23.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.53 Evaluated at bid price : 23.32 Bid-YTW : 4.17 %
ENB.PF.G	FixedReset	120,513	Nesbitt crossed 117,900 at 24.57. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.95 Evaluated at bid price : 24.50 Bid-YTW : 4.06 %
BMO.PR.P	FixedReset	107,124	RBC crossed 100,000 at 25.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -0.33 %
POW.PR.G	Perpetual-Premium	91,647	TD crossed 40,000 at 26.25. RBC crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 26.21 Bid-YTW : 4.72 %
GWO.PR.P	Deemed-Retractible	45,825	TD crossed 40,000 at 25.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 25.95 Bid-YTW : 4.81 %
There were 14 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNS.PR.Y	FixedReset	Quote: 22.50 – 23.45 Spot Rate : 0.9500 Average : 0.5676 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 3.90 %
ENB.PR.N	FixedReset	Quote: 23.32 – 23.84 Spot Rate : 0.5200 Average : 0.3432 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.53 Evaluated at bid price : 23.32 Bid-YTW : 4.17 %
PWF.PR.A	Floater	Quote: 19.76 – 20.75 Spot Rate : 0.9900 Average : 0.8253 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 19.76 Evaluated at bid price : 19.76 Bid-YTW : 2.68 %
ENB.PR.D	FixedReset	Quote: 22.48 – 22.85 Spot Rate : 0.3700 Average : 0.2220 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 22.09 Evaluated at bid price : 22.48 Bid-YTW : 4.09 %
BAM.PF.B	FixedReset	Quote: 25.30 – 25.69 Spot Rate : 0.3900 Average : 0.2487 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-13 Maturity Price : 23.32 Evaluated at bid price : 25.30 Bid-YTW : 3.76 %
GWO.PR.I	Deemed-Retractible	Quote: 23.42 – 23.84 Spot Rate : 0.4200 Average : 0.2968 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.42 Bid-YTW : 5.37 %