Category: Market Action

Daniel M. Gallagher has just become my favourite SEC commissioner:

During a fireside chat at today’s Institute of International Bankers’ 26th Annual Washington Conference, I expressed my concern about the number and aggregate impact of regulations that have been imposed on U.S. financial services firms since the enactment of the Dodd-Frank Act in 2010. These regulations come from an alphabet soup of domestic regulators, including the SEC, and many are related to the edicts of non-accountable international bodies such as the Financial Stability Board. Unfortunately, in promulgating many of these myriad regulations, a robust cost-benefit analysis was not required—and therefore none was performed. Even where a cost-benefit analysis was performed (an exercise for the most part limited to rules adopted by the SEC or CFTC, either independently or jointly with other regulators, given their statutory mandate for cost-benefit analysis), such analysis encompassed only the incremental effects of the rule being considered for adoption. No regulator, as far as I know, has considered the overall regulatory burden on financial services firms when determining whether to impose additional costly regulations. We as regulators are, when it comes to the possibility that our rules are causing death by a thousand cuts, the proverbial ostrich—head firmly entrenched in the sand.

There is yet another rate cut:

India’s central bank lowered interest rates in an unscheduled move for the second time this year, a sign of approval for Prime Minister Narendra Modi’s first full-year budget.

Governor Raghuram Rajan cut the benchmark repurchase rate to 7.5 percent from 7.75 percent, the Reserve Bank of India said in a statement on Wednesday. The central bank acted due to weakness in the economy and after it agreed upon a formal inflation target with the government, Rajan said.

“This makes explicit what was implicit before –- that the government and the Reserve Bank have common objectives and that fiscal and monetary policy will work in a complementary way,” Rajan said in the statement, referring to the monetary policy framework agreement. “In sum, then, the government intends to compensate for the delay in fiscal consolidation with a commitment to an improvement in the quality of adjustment.”

The decision came four days after Modi pushed back deficit targets to spur economic growth through corporate tax cuts and increased spending on infrastructure. More than a dozen central banks from Turkey to China have eased policy in 2015 as a slide in oil prices damps inflation.

It was a fine day for the Canadian preferred share market, with both PerpetualDiscounts and FixedResets up 39bp, while DeemedRetractibles gained 17bp. The Performance Highlights table is dominated by FixedReset 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:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.65 to be $1.67 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.21 cheap at its bid price of 24.83.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.84 to be $0.39 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.89 to be $0.57 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 18.15 to be $0.39 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.38 and appears to be $0.75 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.63, looks $1.36 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.80 and is $1.09 rich.

This is rather odd – the investment grade break-even rates are clustered around negative 20bp, with one outlier: the TRP.PR.A / TRP.PR.F pair, clocking in at more reasonable 1.24%.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	1.4136 %	2,380.0
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.4136 %	4,161.4
Floater	3.16 %	3.17 %	77,523	19.25	3	1.4136 %	2,530.2
OpRet	4.08 %	1.59 %	110,955	0.29	1	0.1195 %	2,759.3
SplitShare	4.46 %	4.36 %	54,631	4.46	5	0.2589 %	3,219.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1195 %	2,523.1
Perpetual-Premium	5.29 %	-2.23 %	56,555	0.08	25	0.2210 %	2,522.1
Perpetual-Discount	4.95 %	5.06 %	157,544	15.10	9	0.3907 %	2,812.3
FixedReset	4.42 %	3.43 %	229,811	16.80	80	0.3893 %	2,422.6
Deemed-Retractible	4.90 %	0.79 %	106,008	0.16	37	0.1715 %	2,656.4
FloatingReset	2.50 %	2.92 %	88,523	6.35	8	0.1230 %	2,337.1

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.A	FixedReset	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 19.51 Evaluated at bid price : 19.51 Bid-YTW : 3.62 %
PWF.PR.P	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 18.20 Evaluated at bid price : 18.20 Bid-YTW : 3.40 %
CU.PR.C	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.17 Evaluated at bid price : 24.13 Bid-YTW : 3.31 %
HSE.PR.A	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 17.56 Evaluated at bid price : 17.56 Bid-YTW : 3.77 %
PWF.PR.T	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.34 Evaluated at bid price : 25.25 Bid-YTW : 3.18 %
NA.PR.S	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.24 Evaluated at bid price : 25.05 Bid-YTW : 3.22 %
MFC.PR.B	Deemed-Retractible	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 4.78 %
SLF.PR.H	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.10 Bid-YTW : 4.01 %
GWO.PR.N	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.20 Bid-YTW : 5.83 %
BAM.PR.Z	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.58 Evaluated at bid price : 25.51 Bid-YTW : 3.72 %
POW.PR.G	Perpetual-Premium	1.16 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 26.95 Bid-YTW : 3.94 %
MFC.PR.C	Deemed-Retractible	1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.29 Bid-YTW : 4.86 %
VNR.PR.A	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.18 Evaluated at bid price : 24.31 Bid-YTW : 3.75 %
ENB.PR.N	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 20.99 Evaluated at bid price : 20.99 Bid-YTW : 4.23 %
MFC.PR.K	FixedReset	1.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.61 Bid-YTW : 3.98 %
IFC.PR.C	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 3.73 %
HSE.PR.C	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.25 Evaluated at bid price : 25.25 Bid-YTW : 3.94 %
MFC.PR.M	FixedReset	1.62 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.46 Bid-YTW : 3.78 %
BAM.PR.B	Floater	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 15.95 Evaluated at bid price : 15.95 Bid-YTW : 3.16 %
TRP.PR.F	FloatingReset	2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 3.16 %
TRP.PR.B	FixedReset	2.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 14.47 Evaluated at bid price : 14.47 Bid-YTW : 3.55 %
BAM.PR.C	Floater	2.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 15.90 Evaluated at bid price : 15.90 Bid-YTW : 3.17 %
CIU.PR.C	FixedReset	3.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 3.38 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.G	FixedReset	365,122	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.06 Evaluated at bid price : 24.83 Bid-YTW : 3.66 %
RY.PR.J	FixedReset	175,280	RBC crossed two blocks of 25,000 each, both at 25.00. Scotia crossed two blocks of 20,000 each and one of 10,000, all at 25.00. Scotia sold two blocks of 10,000 each to RBC at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.15 Evaluated at bid price : 25.00 Bid-YTW : 3.42 %
CM.PR.G	Perpetual-Premium	107,624	Called for redemption April 30. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-04-02 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : -2.44 %
BAM.PR.Z	FixedReset	51,285	Desjardins crossed 50,000 at 25.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.58 Evaluated at bid price : 25.51 Bid-YTW : 3.72 %
ENB.PR.D	FixedReset	47,246	TD crossed 25,000 at 19.23. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 19.19 Evaluated at bid price : 19.19 Bid-YTW : 4.29 %
TD.PF.B	FixedReset	42,861	Desjardins crossed 27,100 at 24.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 23.08 Evaluated at bid price : 24.63 Bid-YTW : 3.14 %
There were 34 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
RY.PR.F	Deemed-Retractible	Quote: 25.30 – 26.00 Spot Rate : 0.7000 Average : 0.4517 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.54 %
FTS.PR.G	FixedReset	Quote: 23.66 – 24.30 Spot Rate : 0.6400 Average : 0.4465 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 22.75 Evaluated at bid price : 23.66 Bid-YTW : 3.16 %
BAM.PF.B	FixedReset	Quote: 24.03 – 24.60 Spot Rate : 0.5700 Average : 0.4019 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 22.86 Evaluated at bid price : 24.03 Bid-YTW : 3.67 %
BAM.PR.T	FixedReset	Quote: 22.25 – 22.73 Spot Rate : 0.4800 Average : 0.3125 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 21.76 Evaluated at bid price : 22.25 Bid-YTW : 3.64 %
BAM.PR.K	Floater	Quote: 15.50 – 15.99 Spot Rate : 0.4900 Average : 0.3247 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-03 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.25 %
RY.PR.L	FixedReset	Quote: 26.34 – 26.77 Spot Rate : 0.4300 Average : 0.2707 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.34 Bid-YTW : 2.87 %

The latest hot new financial indicator is: How much European sovereign debt trades at negative yields?:

The European Central Bank’s imminent bond-buying plan has left $1.9 trillion of the euro region’s government securities with negative yields.

Germany sold five-year notes at an average yield of minus 0.08 percent on Wednesday, a euro-area record, meaning investors buying the securities will get less back than they paid when the debt matures in April 2020.

By the next day, German notes with a maturity out to seven years had sub-zero yields, while rates on seven other euro-area nations’ debt were also negative. While some bonds had such yields as far back as 2012, the phenomenon has gathered pace since the ECB’s decision to cut its deposit rate to below zero last year.

And there are more global rate cuts:

The dollar rallied with gold as the yuan slipped to a two-year low after China cut interest rates for the second time in three months. Oil retreated following its first monthly gain since June.

The Bloomberg Dollar Spot Index increased 0.2 percent at 1:22 p.m. in Hong Kong as China’s currency traded at its weakest level since October 2012 and the euro slipped 0.2 percent.
…
China’s second rate cut in 14 weeks was the latest in a wave of global easing that underscores diverging economic outlooks for the U.S. versus the rest of the world. A private measure of factory activity in Asia’s largest economy showed a faster-than-estimated expansion Monday as lawmakers prepare to meet in Beijing. The euro area updates on consumer prices and U.S. private spending data are due.
…
The People’s Bank of China announced a benchmark lending and deposit rate cut of a quarter percentage point Saturday. A day later, a government factory gauge for February signaled contraction for a second month, underscoring the scope for looser policy.

The yuan traded at 6.2732 per dollar after the central bank reduced its reference rate to the weakest since November today. Today’s purchasing managers index from HSBC Holdings Plc and Markit Economics came in at 50.7, beating economists’ estimates for it to hold steady from a preliminary reading of 50.1. Readings above 50 denote expansion.

The Bloomberg gauge of dollar strength traded at 1,174.11, less than one point from its highest level in at least 10 years. The greenback was stronger against 13 of 16 major peers, advancing 0.5 percent against the Australian and New Zealand currencies. The euro bought $1.1179.

There are more worries about corporate bond liquidity:

Investors have a fickle relationship with credit mutual funds lately, pouring cash in one year and yanking it out the next.

As a result, the world’s biggest mutual-fund firms are preparing for when sentiment sours for a prolonged period. They’re increasing the amount of cash in their portfolio and boosting their holdings of corporate-bond exchange-traded fund shares — which trade like stocks instead of the antiquated, telephone-based system of buying and selling debt.
…
Up to 10 percent of some corporate-debt funds’ holdings now consist of ETFs, a proportion that’s been rising for the past two years, according to Tabb Group research.
…
The potential for big outflows from U.S. bonds is all the scarier now because trading volumes have failed to keep pace with the 21 percent growth in outstanding debt since 2007. While taxable bond funds have received $932 billion of deposits since the end of 2007, Wall Street’s biggest banks have cut holdings of the debt previously used to facilitate trading.

“There has, indeed, been a meaningful deterioration in the ability to trade corporate bonds from the pre- to post-crisis period,” Barclays Plc analysts led by Jeffrey Meli and Bradley Rogoff wrote in a Feb. 27 report. “This has resulted in increased investor reliance on products such as ETFs” to manage liquidity.
…
Of course, there are some questions about how well ETFs will work as a liquidity tool in a downturn, too. There’s the potential for ETF shares to move away from the underlying market in a time of stress, forcing fire sales of assets that don’t trade as often.

The fragile new equilibrium stems from “liquidity mismatches between the assets themselves and the instruments being used to manage daily liquidity needs,” Barclays analysts wrote. Well-intentioned regulations and “a growing demand for liquidity may have led to increased instability and fire-sale risk in corporate debt markets.”

This has even attracted the attention of one of the well-intentioned regulators:

A lack of liquidity in corporate-bond markets could pose a “systemic risk” to the economy when interest rates rise, U.S. Securities and Exchange Commission member Daniel Gallagher said.

Gallagher, a Republican, warned that the Financial Stability Oversight Council, a group of U.S. regulators that monitors emerging systemic risks, hasn’t paid enough attention to the $7.3 trillion corporate-bond market, which has ballooned over the past seven years amid low interest rates. He made the remarks Monday at a banking conference in Washington.

The SEC last year began testing whether fixed-income mutual funds could withstand a possible sell-off during a period of financial stress, people with knowledge of the matter have said. The agency hasn’t made its findings public, but some large money managers have warned the market is primed for failure when the Federal Reserve starts raising interest rates.

I’ve said it before … I’ll say it again … it’s one thing to say that the banks’ pool of capital may not be used to inventory corporates, but that pool has to be replaced. The logical replacement source is hedge funds, pension funds and insurance companies starting to act as traders but – given that fantasies of creating liquidity through exchange-like electronic marketplaces is nothing more than the psychedelic dream of morons with no knowledge of the market whatsoever – that means they’ll have to have SEC clearance to act as traders. That is, with a Salesforce (that’s expensive!) and no moronic whimpering about fairness to clients. I’m not going to hold my breath. Instead, I’ll continue to be fearful of what will happen when what happened to sub-prime paper during the Credit Crunch happens to corporate debt in the next crisis, which will kill the market for a few years and do massive damage to the economy. There might be a few bargains, though, for those with dry ammunition and permission from our wise masters at the regulatory agencies to invest in fire-sale corporate debt.

Ian McGugan in the Globe writes a piece titled Why decades of inflationary pressure may be ahead of us which drew my attention to a BIS working paper by Mikael Juselius and Elod Takats titled Can Demography Affect Inflation and Monetary Policy?:

Several countries are concurrently experiencing historically low inflation rates and ageing populations. Is there a connection, as recently suggested by some senior central bankers? We undertake a comprehensive test of this hypothesis in a panel of 22 countries over the 1955-2010 period. We find a stable and significant correlation between demography and low-frequency inflation. In particular, a larger share of dependents (ie young and old) is correlated with higher inflation, while a larger share of working age cohorts is correlated with lower inflation. The results are robust to different country samples, time periods, control variables and estimation techniques. We also find a significant, albeit unstable, relationship between demography and monetary policy.
…
Given these developments, some senior central bankers have suggested an alternative to the “pure mistake” view, arguing that low-frequency inflation may be linked to demographic change. Governor Shirakawa of the Bank of Japan (2011a, 2011b, 2012 and 2013) has argued that population ageing can lead to deflationary pressures by lowering expectations of future economic growth. While people might ignore the implications of an ageing population for a while, they revise their expectations when they recognise the extent of the economic impact. The resulting loss of demand and investment might not be easily offset by monetary policy, especially if inflation is already low and policy rates are close to the zero lower bound. President Bullard of the St Louis Federal Reserve Bank has suggested a different explanation focusing on the political economy of central banking. Bullard et al (2012) argue that the old might prefer lower inflation than the young due to the redistributive effects of inflation. Thus, to the degree their policies reflect voter preference, central banks might engineer lower inflation when populations age.

The potential connection between demography and inflation has also sparked interest from researchers at policy institutions such as the International Monetary Fund. Motivated by the experience of Japan, for example, Anderson et al (2014) find that ageing causes deflationary pressures, mainly via slowing growth. Imam (2013) finds that it can weaken monetary transmission. Yoon et al (2014) find, based on a panel regression, that ageing is deflationary.
…
According to our estimates, demography accounts for around one-third of the variation in inflation and for the bulk of the deceleration between the late 1970s and early 1990s. Furthermore, our estimates reveal a stable U-shaped pattern: a larger share of dependents (ie young and old) is correlated with higher inflation, and a larger share of working age cohorts is correlated with lower inflation.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 6bp, FixedResets up 43bp and DeemedRetractibles gaining 1bp. There is a lengthy Performance Highlights table, suitably dominated by winning 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:

The new issue, TRP.PR.G has caused a large change in the curve-fitting for the TRP series of FixedResets. TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.44 to be $1.47 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.22 cheap at its bid price of 24.83.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.70 to be $0.42 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.71 to be $0.56 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 25.22 to be $0.43 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.25 and appears to be $0.74 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.65, looks $1.28 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.68 and is $0.99 rich.

The investment grade break-even rates average close to zero.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	1.9210 %	2,346.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.9210 %	4,103.4
Floater	3.20 %	3.25 %	78,183	19.05	3	1.9210 %	2,494.9
OpRet	4.08 %	1.98 %	112,355	0.30	1	-0.0398 %	2,756.0
SplitShare	4.47 %	4.58 %	53,344	4.49	5	-0.0239 %	3,211.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0398 %	2,520.1
Perpetual-Premium	5.30 %	-1.19 %	56,512	0.08	25	0.0141 %	2,516.6
Perpetual-Discount	4.97 %	5.06 %	146,066	15.33	9	-0.0558 %	2,801.3
FixedReset	4.44 %	3.53 %	233,061	16.91	80	0.4292 %	2,413.2
Deemed-Retractible	4.93 %	0.07 %	101,561	0.16	39	0.0142 %	2,651.9
FloatingReset	2.50 %	2.90 %	89,933	6.35	8	0.3219 %	2,334.2

Performance Highlights
Issue	Index	Change	Notes
CIU.PR.C	FixedReset	-5.78 %	Not real: this is simply another example either of the Exchange’s shoddy reporting or their inability to enforce market-making responsibilities. The day’s low was 16.78, VWAP was 16.90. Volume was 1,156 shares (consolidated exchanges), which probably overwhelmed the systems, poor little dears, on nine trades including four odd lots. A fine way to welcome CIU.PR.C on the first day of its return from the Scraps index, where it had been relegated on volume concerns! YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 15.97 Evaluated at bid price : 15.97 Bid-YTW : 3.49 %
VNR.PR.A	FixedReset	-1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 23.04 Evaluated at bid price : 24.01 Bid-YTW : 3.81 %
ENB.PR.D	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 4.27 %
HSE.PR.A	FixedReset	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 3.73 %
TRP.PR.C	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 3.58 %
PWF.PR.T	FixedReset	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 23.26 Evaluated at bid price : 25.00 Bid-YTW : 3.22 %
BNS.PR.P	FixedReset	1.30 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 2.58 %
BAM.PR.C	Floater	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.25 %
TRP.PR.D	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 22.81 Evaluated at bid price : 23.94 Bid-YTW : 3.41 %
FTS.PR.G	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 22.86 Evaluated at bid price : 23.89 Bid-YTW : 3.12 %
ENB.PF.C	FixedReset	1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 22.16 Evaluated at bid price : 22.80 Bid-YTW : 3.98 %
TRP.PR.E	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 22.98 Evaluated at bid price : 24.44 Bid-YTW : 3.36 %
ENB.PR.F	FixedReset	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 20.12 Evaluated at bid price : 20.12 Bid-YTW : 4.25 %
BNS.PR.Z	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.16 Bid-YTW : 3.60 %
SLF.PR.H	FixedReset	1.60 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.86 Bid-YTW : 4.14 %
CU.PR.C	FixedReset	1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 23.29 Evaluated at bid price : 24.40 Bid-YTW : 3.26 %
BNS.PR.Y	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.22 Bid-YTW : 3.71 %
BAM.PR.B	Floater	1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 15.69 Evaluated at bid price : 15.69 Bid-YTW : 3.21 %
MFC.PR.F	FixedReset	1.88 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.00 Bid-YTW : 5.65 %
TRP.PR.F	FloatingReset	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 3.23 %
IFC.PR.A	FixedReset	2.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.05 Bid-YTW : 5.81 %
IAG.PR.G	FixedReset	2.20 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.98 Bid-YTW : 2.41 %
ENB.PF.A	FixedReset	2.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 22.19 Evaluated at bid price : 22.82 Bid-YTW : 3.98 %
BAM.PR.K	Floater	2.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.25 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.G	FixedReset	1,351,456	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 23.06 Evaluated at bid price : 24.83 Bid-YTW : 3.66 %
RY.PR.J	FixedReset	182,598	TD crossed 50,000 at 24.98; RBC crossed 49,500 at 24.99. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 23.13 Evaluated at bid price : 24.96 Bid-YTW : 3.43 %
CU.PR.C	FixedReset	157,914	RBC crossed 150,000 at 23.92. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 23.29 Evaluated at bid price : 24.40 Bid-YTW : 3.26 %
ENB.PR.P	FixedReset	118,389	TD crossed 10,900 at 20.38; RBC crossed 98,400 at 20.57. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 20.42 Evaluated at bid price : 20.42 Bid-YTW : 4.21 %
TRP.PR.E	FixedReset	104,106	Scotia crossed 100,000 at 24.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 22.98 Evaluated at bid price : 24.44 Bid-YTW : 3.36 %
NA.PR.Q	FixedReset	83,250	RBC crossed 76,700 at 25.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 3.32 %
There were 52 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: 20.05 – 20.78 Spot Rate : 0.7300 Average : 0.4651 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.05 Bid-YTW : 5.81 %
CIU.PR.C	FixedReset	Quote: 15.97 – 17.00 Spot Rate : 1.0300 Average : 0.7693 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 15.97 Evaluated at bid price : 15.97 Bid-YTW : 3.49 %
MFC.PR.K	FixedReset	Quote: 23.28 – 23.81 Spot Rate : 0.5300 Average : 0.3282 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.28 Bid-YTW : 4.15 %
MFC.PR.J	FixedReset	Quote: 25.10 – 25.66 Spot Rate : 0.5600 Average : 0.3676 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.53 %
MFC.PR.H	FixedReset	Quote: 25.71 – 26.10 Spot Rate : 0.3900 Average : 0.2356 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.71 Bid-YTW : 3.06 %
BAM.PF.A	FixedReset	Quote: 25.27 – 25.65 Spot Rate : 0.3800 Average : 0.2443 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-02 Maturity Price : 23.39 Evaluated at bid price : 25.27 Bid-YTW : 3.70 %

European deflation is significant:

Spanish consumer prices plunged for a second month in February, encapsulating the threat facing Mario Draghi as the European Central Bank prepares to unleash quantitative easing.

Prices fell 1.2 percent from a year earlier after a 1.5 percent decline in January, which was the biggest since 1997. The inflation rate was probably also negative in Italy and Germany, economists said before data due later on Friday.

Plunging oil costs have damped inflation across the globe, including in the U.S., where consumer prices posted their first annual decline in more than five years last month. In a positive sign, Spain’s February decline was less than economists had forecast and, with oil rising from its recent low, may indicate the worst of the inflation slump is passing.

However, some some parts of some economies are doing well:

Shares of South Korea’s leading condom maker soared for a second day after the country’s Constitutional Court decriminalized adultery in a ruling that ended a decades-old anti-cheating law.

Unidus Corp. was up 11 percent to 3,475 won at 12:55 p.m. Friday in Seoul. The stock rose 15 percent yesterday, leaving it up almost 30 percent since the ruling. Hyundai Pharmaceutical Co., a maker of morning-after pills, rose 10 percent yesterday to the highest in more than five years. The shares slid 7 percent Friday.

It has been a while since I complained about the ridiculous and economically counter-productive cost of education in the States (especially), so why don’t I complain about the ridiculous and economically counter-productive cost of education in the States (especially)?

Switching one of their dead-tree texts out for an open-source one—a book available for free online or to print at a minimal cost—saves students an average of $128 per course every semester, said the Student Public Interest Research Groups in a report (pdf) published Tuesday.

The Student PIRGs, a group of state student advocacy organizations, crunched data from five colleges that have introduced open textbook programs to estimate how much students save by using open books. With more than 11 million full-time undergraduates in the U.S., and upwards of 160 open textbooks on the market, the group says students would save $1 billion a year if they all replaced a single book with its open-source alternative.

The report, titled OPEN TEXTBOOKS: THE BILLION-DOLLAR SOLUTION, makes an interesting point:

With oft-exceeding $200 price tags, the cost of textbooks has become a serious barrier to college access and a negative impact on student success. A 2014 Student PIRGs studyiv found that 65% of students had skipped buying or renting a textbook because it was too expensive, and 94% of those students felt that doing so would hurt their grade in a course. Additionally, nearly half of students said the cost of textbooks impacted how many courses they were able to take.

Now, I think the analysis regarding potential savings is optimistic to the point of being simplistic. The proposed replacement is ‘Open Textbooks’, which are described as:

Open textbooks are faculty-written, peer-reviewed textbooks that are published under an open license – meaning that they are available free online, they are free to download, and print copies are available at $10-40, or approximately the cost of printing.

So they’re not including any allowance for paying the authors or the reviewers or the editors; there’s also no accounting made for kickbacks to administrators, professors or the institution for choosing and approving the book; there’s no accounting for elegant dinner parties with hot saleschicks from the publisher; and there’s no accounting for the creation and maintenance of the very popular ‘test-banks’, whereby questions and answers for tests are maintained by the publisher so that lazy instructors don’t have to do any work. All these things are vital to the education of young minds, who represent our hope for the future, and regrettably these things require significant investment if they’re going to be done right. So it’s an optimistic analysis, but I find it very difficult to believe that more than a fraction of the charted increase in price since my day is due to quality improvements in second-year organic chemistry or first year calculus texts!

Pembina Pipelines, proud issuer of PPL.PR.A, PPL.PR.C, PPL.PR.E and PPL.PR.G, was confirmed at Pfd-3 by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Notes of Pembina Pipeline Corporation (Pembina or the Company) at BBB, and the Preferred Shares at Pfd-3. The trends remain Stable. The confirmation largely reflects DBRS’s view that the Company’s exposure to fractionation (frac) spreads and seasonal pricing differentials has lowered since the closing of the Provident acquisition (the Acquisition) in 2012 and has been maintained at a manageable level. The confirmation also reflects DBRS’s expectation that Pembina will continue to prudently manage its project expansion risk and to finance its expansion with appropriate debt and equity to maintain its debt-to-capital ratio at around 40% and cash flow-to-debt ratio at or above 25%. However, the rating trends could be changed to Positive if the Company successfully and substantially completes its current major expansion projects (backed by long-term take-or-pay or fee for service (FFS) contracts) while maintaining its credit metrics at or near the current level.

Allbanc Split Corp. II, proud issuer of ALB.PR.B, was confirmed at Pfd-2 by DBRS:

Since the last rating action in February 2014, the performance of the Company has been volatile. The trend seen in the net asset value, however, is in line with the movement seen in the volatile share prices of Canadian banks. Downside protection increased steadily to 64.1% on February 12, 2015, from 60.9% on February 13, 2014, while increases in dividend distributions from underlying banks helped boost the dividend coverage ratio.

It was a positive day for the Canadian preferred share market, with PerpetualDiscounts winning 25bp, FixedResets gaining 5bp and DeemedRetractibles up 6bp. The Performance Highlights table was quite lengthy with the credit-dubious ENB issues prominent on the winning side. 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:

The new issue has caused a large change in the curve-fitting for the TRP series of FixedResets, which is discussed at greater length on the post announcing the new issue. TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.07 to be $1.18 rich, while the new issue, resetting 2020-11-30 at +296, is $1.02 cheap at its issue price of 25.00.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.55 to be $0.43 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.73 to be $0.47 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 25.05 to be $0.52 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.44 and appears to be $0.95 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.64, looks $1.09 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.50 and is $0.97 rich.

The investment grade break-even rates average close to zero.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

One way or another, that’s it for another month!

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	0.3781 %	2,302.6
FixedFloater	4.39 %	3.53 %	18,581	18.35	1	-0.3683 %	4,026.1
Floater	3.13 %	3.27 %	63,901	19.01	4	0.3781 %	2,447.9
OpRet	4.08 %	1.80 %	110,194	0.31	1	-0.1193 %	2,757.1
SplitShare	4.41 %	4.29 %	28,777	3.55	6	-0.2581 %	3,211.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1193 %	2,521.1
Perpetual-Premium	5.32 %	-2.66 %	56,585	0.08	24	0.0359 %	2,516.2
Perpetual-Discount	4.94 %	4.87 %	106,451	15.13	10	0.2546 %	2,802.9
FixedReset	4.45 %	3.44 %	219,731	16.91	78	0.0453 %	2,402.9
Deemed-Retractible	4.93 %	0.18 %	104,873	0.16	39	0.0567 %	2,651.5
FloatingReset	2.43 %	2.85 %	96,501	6.38	7	0.0062 %	2,326.8

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.H	FixedReset	-4.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.21 %
TRP.PR.B	FixedReset	-2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 14.11 Evaluated at bid price : 14.11 Bid-YTW : 3.43 %
CGI.PR.D	SplitShare	-1.52 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 3.57 %
FTS.PR.H	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 16.64 Evaluated at bid price : 16.64 Bid-YTW : 3.18 %
MFC.PR.M	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.95 Bid-YTW : 3.98 %
PWF.PR.T	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 23.15 Evaluated at bid price : 24.70 Bid-YTW : 3.17 %
SLF.PR.G	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.30 Bid-YTW : 6.28 %
VNR.PR.A	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 23.23 Evaluated at bid price : 24.44 Bid-YTW : 3.61 %
BAM.PF.B	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 22.95 Evaluated at bid price : 24.24 Bid-YTW : 3.52 %
ENB.PR.T	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 4.15 %
BAM.PR.R	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 21.43 Evaluated at bid price : 21.76 Bid-YTW : 3.60 %
FTS.PR.G	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 22.69 Evaluated at bid price : 23.55 Bid-YTW : 3.08 %
BAM.PR.T	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 21.70 Evaluated at bid price : 22.16 Bid-YTW : 3.53 %
ENB.PR.B	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 18.92 Evaluated at bid price : 18.92 Bid-YTW : 4.20 %
ENB.PR.P	FixedReset	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 20.26 Evaluated at bid price : 20.26 Bid-YTW : 4.12 %
ENB.PR.D	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 4.18 %
ENB.PR.N	FixedReset	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 20.62 Evaluated at bid price : 20.62 Bid-YTW : 4.19 %
MFC.PR.C	Deemed-Retractible	1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.94 Bid-YTW : 5.04 %
ENB.PF.G	FixedReset	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 22.11 Evaluated at bid price : 22.75 Bid-YTW : 3.95 %
ENB.PR.Y	FixedReset	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 19.57 Evaluated at bid price : 19.57 Bid-YTW : 4.18 %
ENB.PR.F	FixedReset	2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 19.81 Evaluated at bid price : 19.81 Bid-YTW : 4.19 %
TRP.PR.C	FixedReset	2.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 3.44 %
ENB.PF.E	FixedReset	2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 22.03 Evaluated at bid price : 22.60 Bid-YTW : 3.95 %
BAM.PR.X	FixedReset	4.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 17.99 Evaluated at bid price : 17.99 Bid-YTW : 3.82 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.S	FixedReset	110,811	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 2.75 %
ENB.PR.N	FixedReset	86,411	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 20.62 Evaluated at bid price : 20.62 Bid-YTW : 4.19 %
RY.PR.J	FixedReset	83,900	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 23.13 Evaluated at bid price : 24.95 Bid-YTW : 3.33 %
TD.PF.A	FixedReset	64,674	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 23.04 Evaluated at bid price : 24.59 Bid-YTW : 3.05 %
BMO.PR.S	FixedReset	58,669	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 23.17 Evaluated at bid price : 24.85 Bid-YTW : 3.07 %
NA.PR.W	FixedReset	57,425	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 23.06 Evaluated at bid price : 24.70 Bid-YTW : 3.04 %
There were 51 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
SLF.PR.H	FixedReset	Quote: 22.50 – 23.24 Spot Rate : 0.7400 Average : 0.4519 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.21 %
TRP.PR.E	FixedReset	Quote: 24.07 – 24.50 Spot Rate : 0.4300 Average : 0.2757 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 22.83 Evaluated at bid price : 24.07 Bid-YTW : 3.33 %
TRP.PR.F	FloatingReset	Quote: 18.60 – 19.25 Spot Rate : 0.6500 Average : 0.5039 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 3.20 %
BNS.PR.C	FloatingReset	Quote: 23.83 – 24.14 Spot Rate : 0.3100 Average : 0.1960 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.83 Bid-YTW : 3.07 %
HSE.PR.A	FixedReset	Quote: 17.56 – 17.99 Spot Rate : 0.4300 Average : 0.3274 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 17.56 Evaluated at bid price : 17.56 Bid-YTW : 3.60 %
ENB.PF.A	FixedReset	Quote: 22.25 – 22.59 Spot Rate : 0.3400 Average : 0.2452 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-27 Maturity Price : 21.82 Evaluated at bid price : 22.25 Bid-YTW : 4.00 %

Assiduous Reader DW brings to my attention a piece titled BXF no longer a strip tease, which points out:

When First Asset created Canada’s first strip bond ETF in 2013, they claimed that the ETF was expected to be more tax-efficient than other short term bond products currently available in the marketplace.

With a full tax year behind us, and armed with a new methodology for calculating the after-tax returns of ETFs, we can put First Asset’s claim to the test. Spoiler alert: the results are not only impressive, but they make you wonder why other firms haven’t followed suit by offering their own brand of strip bond ETFs.
…
The results above should not be considered a fluke – as long as the other bond ETFs continue to have an average coupon that is significantly higher than their yield-to-maturity, BXF will be expected to outperform these plain-vanilla ETFs on an after-tax basis (for more information on this concept, please read Why Use a Strip Bond ETF? by Dan Bortolotti).

This has previously been an issue in the preferred share world – see the article Beware the tax trap of these tempting preferreds and the post Tax Impact on FixedResetPremium Yields. Remember the good old days, when FixedResets traded at a premium?

Strips are generally too expensive to hold in any account, let alone a taxable one, but the fact that they are treated as par bonds as of the purchase date is a very useful wrinkle. Regrettably, most strips are governments and to a large extent the tax savings will be offset by the liquidity premium – which retail shouldn’t pay for, because the ability to transact $50-million in one ‘phone call without moving the market isn’t exactly an attribute that should be of much interest to retail.

I have advised many clients in the past to open accounts at full-service brokers with the sole objective of gaining access to current coupon corporate new issues. This has worked out OK for them – the biggest problem is putting the fear of God into the broker so he never calls unless he’s got a new issue that meets pre-defined standards!

US brokers are attempting to whip up some fear-inspired trading in bonds:

While the Federal Reserve considers raising overnight borrowing costs from about zero, where they’ve been since 2008, central banks in Europe are dropping deposit rates into negative territory.

This backdrop has pushed a measure of expected Treasury price swings to levels that are about 40 percent higher this year than in the same period in 2014, according to Bank of America Merrill Lynch’s Option Volatility Estimate MOVE index.

“The risk in bonds has gone up,” Francesco Garzarelli, London-based co-head of macro and markets research at Goldman Sachs Group Inc., said in a Bloomberg Television interview Thursday. “The sensitivity to small changes in yield expectations from here will command very sizable price swings, and I just think that makes fixed income a very dangerous asset class.”
…
While the biggest banks have cut back on their positions in risky, speculative-grade debt, it’s steadily migrated to large institutions, insurance companies and mutual funds. Such firms have boosted their holdings of corporate and foreign bonds to $5.1 trillion, a 65 percent increase since the end of 2008, according to data compiled by UBS.

This has more than offset the $800 billion decline in holdings at banks and securities firms in the period, a regulator-prompted retrenchment that was intended to reinforce the financial system, UBS analysts Matthew Mish and Stephen Caprio wrote in a Feb. 26 report.

What we’re left with instead — ballooning bond funds that own more and more risky debt — may be a less bad option, but one that still threatens to wreak havoc in credit markets.

Rob Carrick highlights a TD publication in his piece What if interest rates never return to ‘normal’?:

I’m on record as having warned many times about rising rates, but I’m now in adjustment mode. What has me reconsidering is the kind of thinking found in a new report by TD Economics titled The New Normal: Low Rates in Advanced Economies for the Long Run. It argues that rates are low today because of weak global economic growth, and that they will move higher as the economy improves. However, rates will not return to levels we used to consider “neutral.” The reason: Aging, and in some cases, shrinking populations across the industrial world. They’ll keep a lid on growth in economic productivity and thereby reduce the need to crank rates higher.

The TD report THE NEW NORMAL: LOW RATES IN ADVANCED ECONOMIES FOR THE LONG RUN forecasts modest rates for years to come:

• • Trend economic growth is likely to remain slower than it has been historically throughout advanced economies. The two key determinants, labor force and labor productivity growth, have been slowing nearly everywhere.
• • Record low interest rates in many advanced economies is a result of both cyclical and structural factors. However, even once they begin to normalize, lower potential GDP growth will keep the long-term equilibrium level of interest rates lower than in the past. By extension, bond yields are also slated to be lower across the maturity spectrum.
• • The equilibrium level of interest rates in the UK is set to be relatively similar to Canada’s and slightly below that of the US. In the euro area, the equilibrium level will be a notch below the UK’s, while it will be substantially lower in Japan.
• • In the near term, it is perfectly clear that interest rates are set to remain far lower than their expected neutral level. Nonetheless, for long-term investors, such as pension funds, investing over multiple business cycles, lower neutral rates will make for a particular challenge.

…
In a recent paper, TD Economics estimated the long-run neutral level of the federal funds rate to be 3.25%, relative to a 1992-2007 average of 4.10%, and the long-run neutral Bank of Canada overnight rate to be 3.00%, compared to an average of 4.20% over the same time frame. This decline reflects slower labor force growth and modest productivity growth. A central question is whether this is a global phenomenon? In this paper, we explore the long-run neutral level of interest rates for the UK, euro area and Japan. Our conclusion is that across the advanced world, the long-term equilibrium level of interest rates will be lower than in the past.

And the paper referenced in the quoted paragraph is DIVERGENT VIEWS ON NEUTRAL INTEREST RATES

• • With the Fed signaling an end to QE in October, financial markets are now debating both the timing of future rate hikes and, more importantly, the level to which interest rates will ultimately rise. The latter requires an understanding of the neutral level of interest rates.
• • Disagreement over how high rates will rise in the future seems to be embedded in different timeframes under discussion. The view of a ‘new neutral’ real fed funds rate of close to zero (2.00% in nominal terms) is usually grounded in a shorter timeframe that is not consistent with the long-run level of rates of an economy in equilibrium – growing at a trend pace with stable inflation.
• • TD Economics believes that the long-run neutral level of the fed funds rate is around 3.25% (1.25% real) and the neutral level of 10-year Treasury yields is close to 4.00% (2.00% real). However, the Fed is expected to reach those points slowly, over the course of more than three years, assuming the economic recovery remains on track. The result is that our real fed funds rate averages -0.5% from 2015 to 2017.

…
For some time, TD Economics has viewed the future long-run neutral level of rates as lower than the pre-recession experience. We forecast a neutral level of interest rates in a range of 3.00% to 3.50% (equal to 1.00%-1.50% real), and we use the middle of that range (3.25%) to anchor our long term interest rate projection.

Meanwhile, preferred share investors are contemplating inspirational public art:

It was a rough day for the Canadian preferred share markets, with PerpetualDiscounts down 18bp, FixedResets losing 40bp and DeemedRetractibles off 10bp. MFC issues of all types are notable on the bad side of a lengthy Performance Highlights table, while ENB issues made an appearance on the good side. Volume was high.

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

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

Here’s TRP:

The new issue has caused a large change in the curve-fitting for the TRP series of FixedResets, which is discussed at greater length on the post announcing the new issue. TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.07 to be $1.24 rich, while the new issue, resetting 2020-11-30 at +296, is $0.87 cheap at its issue price of 25.00.

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

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.18 to be $0.38 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.80 to be $0.46 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.24 to be $0.84 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.39 and appears to be $1.03 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.86, looks $0.83 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.51 and is $0.94 rich.

Most of the investment grade break-even rates are close to zero.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.1262 %	2,294.0
FixedFloater	4.37 %	3.52 %	18,699	18.38	1	1.0233 %	4,041.0
Floater	3.14 %	3.29 %	64,663	18.94	4	0.1262 %	2,438.6
OpRet	4.08 %	1.39 %	110,236	0.31	1	0.0000 %	2,760.4
SplitShare	4.40 %	4.28 %	28,352	3.55	6	0.2370 %	3,220.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,524.1
Perpetual-Premium	5.33 %	-0.17 %	55,716	0.08	24	0.0049 %	2,515.3
Perpetual-Discount	4.95 %	4.92 %	106,817	15.65	10	-0.1791 %	2,795.8
FixedReset	4.45 %	3.41 %	213,018	16.83	78	-0.3973 %	2,401.8
Deemed-Retractible	4.92 %	0.11 %	100,920	0.17	39	-0.0989 %	2,650.0
FloatingReset	2.43 %	2.85 %	94,896	6.38	7	0.1022 %	2,326.6

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.C	Deemed-Retractible	-2.64 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.61 Bid-YTW : 5.22 %
MFC.PR.L	FixedReset	-2.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.42 Bid-YTW : 4.09 %
PWF.PR.P	FixedReset	-2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 18.20 Evaluated at bid price : 18.20 Bid-YTW : 3.23 %
SLF.PR.H	FixedReset	-2.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.66 Bid-YTW : 3.61 %
ENB.PR.F	FixedReset	-2.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.28 %
TRP.PR.C	FixedReset	-1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 16.31 Evaluated at bid price : 16.31 Bid-YTW : 3.52 %
BAM.PR.X	FixedReset	-1.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 17.24 Evaluated at bid price : 17.24 Bid-YTW : 4.00 %
BAM.PF.G	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 23.14 Evaluated at bid price : 25.00 Bid-YTW : 3.67 %
CU.PR.G	Perpetual-Discount	-1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 23.29 Evaluated at bid price : 23.62 Bid-YTW : 4.77 %
TRP.PR.E	FixedReset	-1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 22.83 Evaluated at bid price : 24.07 Bid-YTW : 3.33 %
PWF.PR.A	Floater	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 17.76 Evaluated at bid price : 17.76 Bid-YTW : 2.82 %
MFC.PR.N	FixedReset	-1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.18 Bid-YTW : 3.80 %
VNR.PR.A	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 23.33 Evaluated at bid price : 24.70 Bid-YTW : 3.55 %
MFC.PR.M	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.26 Bid-YTW : 3.82 %
MFC.PR.B	Deemed-Retractible	-1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.00 %
TRP.PR.D	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 22.63 Evaluated at bid price : 23.56 Bid-YTW : 3.37 %
MFC.PR.I	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.63 Bid-YTW : 3.28 %
BAM.PR.G	FixedFloater	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 21.90 Evaluated at bid price : 21.72 Bid-YTW : 3.52 %
TRP.PR.B	FixedReset	1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 14.42 Evaluated at bid price : 14.42 Bid-YTW : 3.35 %
ENB.PF.A	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 21.77 Evaluated at bid price : 22.17 Bid-YTW : 4.01 %
BAM.PR.K	Floater	1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 15.20 Evaluated at bid price : 15.20 Bid-YTW : 3.31 %
ENB.PF.G	FixedReset	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 21.89 Evaluated at bid price : 22.40 Bid-YTW : 4.02 %
ENB.PF.C	FixedReset	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 21.81 Evaluated at bid price : 22.25 Bid-YTW : 3.99 %
CGI.PR.D	SplitShare	1.58 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 3.35 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	144,700	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 23.15 Evaluated at bid price : 25.02 Bid-YTW : 3.32 %
OSP.PR.A	SplitShare	110,207	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2020-03-31 Maturity Price : 10.00 Evaluated at bid price : 10.12 Bid-YTW : 4.77 %
CM.PR.O	FixedReset	73,930	TD crossed 50,000 at 24.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 23.09 Evaluated at bid price : 24.67 Bid-YTW : 3.11 %
ENB.PR.F	FixedReset	65,111	RBC bought 10,100 from Scotia at 19.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.28 %
ENB.PR.N	FixedReset	63,458	Scotia crossed 14,000 at 20.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 20.34 Evaluated at bid price : 20.34 Bid-YTW : 4.24 %
BMO.PR.S	FixedReset	49,288	Scotia crossed blocks of 17,600 and 25,000, both at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 23.20 Evaluated at bid price : 24.93 Bid-YTW : 3.05 %
There were 41 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.C	Deemed-Retractible	Quote: 23.61 – 24.34 Spot Rate : 0.7300 Average : 0.4221 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.61 Bid-YTW : 5.22 %
MFC.PR.L	FixedReset	Quote: 23.42 – 24.25 Spot Rate : 0.8300 Average : 0.6360 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.42 Bid-YTW : 4.09 %
RY.PR.F	Deemed-Retractible	Quote: 25.50 – 25.91 Spot Rate : 0.4100 Average : 0.2356 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-05-24 Maturity Price : 25.25 Evaluated at bid price : 25.50 Bid-YTW : 0.35 %
BAM.PF.G	FixedReset	Quote: 25.00 – 25.39 Spot Rate : 0.3900 Average : 0.2405 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 23.14 Evaluated at bid price : 25.00 Bid-YTW : 3.67 %
BAM.PR.N	Perpetual-Discount	Quote: 23.28 – 23.65 Spot Rate : 0.3700 Average : 0.2318 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 22.86 Evaluated at bid price : 23.28 Bid-YTW : 5.16 %
ENB.PR.F	FixedReset	Quote: 19.40 – 19.85 Spot Rate : 0.4500 Average : 0.3197 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-26 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.28 %

There are many revolving doors in the world … this one is minor:

Michelle Choi, an analyst for Moody’s Investors Service, gave a credit rating to bonds issued by a New Jersey town in September. In October, she switched sides and started working for the town’s underwriter, Morgan Stanley.

Choi is one of hundreds of employees at Moody’s and other credit-rating companies, including Standard & Poor’s and Fitch Ratings, who’ve gone to work for Wall Street since the 2008 financial crisis exposed the conflicts at the heart of the ratings business.

While there’s no evidence that Choi’s job-hunting influenced the grade she gave Evesham Township’s debt, the rising number of job changes in the industry raises a question: can credit analysts be impartial about grading bonds while looking for employment at banks that underwrite them?

The ratings companies say the answer is yes. An academic study by longtime industry observers suggests otherwise.

Meanwhile, the SEC proudly trumpeted its compliance results:

Each year, the BSA Review Group makes hundreds of referrals based on information gleaned initially from SAR reporting. Some statistics drive home the usefulness of the information we receive through SARs:
• In the last six months or so we have been averaging around one temporary restraining order or asset freeze per month that was initiated based upon SARs reviewed by that group.
• In the last year or so, the SEC has brought actions against seven alleged Ponzi or pyramid schemes collectively involving over $100 million, and has opened a number of investigations or examinations into other possible Ponzi schemes, based on information we first obtained from SARs.
• Also in the last year or so, we’ve charged eight people with insider trading in cases where we allege they collectively earned well over $10 million – again based on information we first obtained from SAR reporting.
• Over the past three and a half years, the SEC has initiated hundreds of exams and investigations based on the leads generated by the group from SARs and other BSA reports.
• And the number of investigations or exams that the SEC has opened based on information first discovered in SARs has essentially doubled each of the past two years.

I share these statistics to illustrate the important point that the AML programs you oversee are critical in helping to expose fraud, the exploitation of vulnerable investors, and other misconduct. The quality of the reporting, and the industry expertise that you lend to your reports, often makes it possible for us to act more quickly than we otherwise could. And it increases the chance that we will be able to hold wrongdoers responsible and, we hope, recover investor losses.

It doesn’t sound like much to justify $7-billion in annual costs and the impetus given to terrorists, does it? And, of course, the whole programme was portrayed as an anti-terror weapon, since that is a more popular idea than just another intrusive “crime detection” programme.

And here’s a little more evidence that compliance costs are out of control:

Costs remain a challenge for the [HSBC] Group, with adjusted operating expenditure up by USD 2.2 billion, due to higher regulatory and compliance costs as well as inflationary pressures. Reporting a cost-income ratio of 67% in 2014 (59.6% in 2013), the Group has moved away from its previous target of a cost-income ratio in the mid-50s and is now just aiming to achieve positive jaws on an adjusted basis.

Who cares if any business gets done, as long as regulators are employed?

Here’s a view that the bond market doesn’t care much about the Fed:

Traders are taking the Federal Reserve chair’s comments over the past two days — labor market market isn’t fully healed and inflation is too low — as confirmation that the Fed is very unlikely to raise interest rates in the first half of the year. Economists including UBS Group AG’s Drew Matus and JPMorgan Chase & Co.’s Michael Feroli saw in her message reasons to reaffirm their calls for the first increase to come by June.

But there’s a third view about how Yellen’s testimony applies to the bond market, as expressed by Jim Bianco, the founder of Bianco Research LLC in Chicago: It doesn’t really matter.

In his alternative scenario, “everybody’s right,” Bianco said, in that the Fed could start raising its benchmark rate from near zero, like economists predict, and yields remain low, like traders seem to be anticipating.

With almost $2 trillion of sovereign debt in Europe offering negative yields, demand for U.S. fixed-income assets is unlikely to evaporate regardless of what the Fed does. That demand — coming in part from overseas — will ensure that bond prices remain high and yields low.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 13bp, FixedResets off 7bp and DeemedRetractibles down 10bp. The Performance Highlights table is lengthy, dominated by FixedResets on both sides of the fence. Volume was high.

PerpetualDiscounts now yield 4.93%, equivalent to 6.41% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.65%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 275bp, a sharp widening from the 260bp reported February 18.

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

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

Here’s TRP:

The new issue has caused a large change in the curve-fitting for the TRP series of FixedResets, which is discussed at greater length on the post announcing the new issue. TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.40 to be $1.36 rich, while the new issue, resetting 2020-11-30 at +296, is $1.03 cheap at its issue price of 25.00.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.00 to be $0.57 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.92 to be $0.57 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.51 to be $0.67 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.63 and appears to be $1.11 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.90, looks $0.80 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.63 and is $1.01 rich.

Most of the investment grade break-even rates are a little below zero.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-1.7968 %	2,291.1
FixedFloater	4.42 %	3.57 %	18,906	18.30	1	-1.1494 %	4,000.0
Floater	3.15 %	3.29 %	65,511	18.96	4	-1.7968 %	2,435.6
OpRet	4.08 %	1.38 %	110,211	0.31	1	0.0000 %	2,760.4
SplitShare	4.41 %	4.20 %	28,416	3.55	6	0.4648 %	3,212.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,524.1
Perpetual-Premium	5.33 %	-0.55 %	56,589	0.08	24	0.0768 %	2,515.2
Perpetual-Discount	4.94 %	4.93 %	142,172	15.64	10	0.1293 %	2,800.8
FixedReset	4.42 %	3.37 %	212,278	16.79	79	-0.0655 %	2,411.3
Deemed-Retractible	4.91 %	0.17 %	102,710	0.17	39	-0.0961 %	2,652.6
FloatingReset	2.43 %	2.86 %	93,221	6.39	7	-0.0861 %	2,324.2

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-2.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 14.98 Evaluated at bid price : 14.98 Bid-YTW : 3.36 %
BAM.PR.C	Floater	-2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 15.12 Evaluated at bid price : 15.12 Bid-YTW : 3.33 %
ENB.PF.C	FixedReset	-1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 21.57 Evaluated at bid price : 21.91 Bid-YTW : 4.06 %
BAM.PR.X	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 17.51 Evaluated at bid price : 17.51 Bid-YTW : 3.93 %
BAM.PR.B	Floater	-1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 15.30 Evaluated at bid price : 15.30 Bid-YTW : 3.29 %
ENB.PF.E	FixedReset	-1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 21.67 Evaluated at bid price : 22.06 Bid-YTW : 4.06 %
MFC.PR.F	FixedReset	-1.59 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.55 Bid-YTW : 5.81 %
ENB.PF.A	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 21.58 Evaluated at bid price : 21.90 Bid-YTW : 4.07 %
PWF.PR.A	Floater	-1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 2.78 %
SLF.PR.G	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.41 Bid-YTW : 6.20 %
BAM.PR.G	FixedFloater	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 21.79 Evaluated at bid price : 21.50 Bid-YTW : 3.57 %
MFC.PR.M	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.54 Bid-YTW : 3.68 %
MFC.PR.N	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.64 %
ENB.PR.F	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 4.19 %
MFC.PR.L	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 3.79 %
PVS.PR.B	SplitShare	1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 4.20 %
TRP.PR.A	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 3.49 %
MFC.PR.I	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 2.84 %
TRP.PR.C	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 3.46 %
FTS.PR.H	FixedReset	1.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 3.13 %
CU.PR.C	FixedReset	2.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 23.25 Evaluated at bid price : 24.33 Bid-YTW : 3.16 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.A	FixedReset	118,915	TD crossed blocks of 12,000 at 24.80 and 25,000 at 24.77, sold 11,900 to Desjardins at 24.80 and 25,800 to anonymous at 24.82. Nesbitt crossed 40,000 at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 23.10 Evaluated at bid price : 24.75 Bid-YTW : 3.02 %
BMO.PR.S	FixedReset	113,266	Scotia crossed blocks of 25,000 and 50,000, both at 25.00. TD crossed 15,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 23.20 Evaluated at bid price : 24.92 Bid-YTW : 3.06 %
OSP.PR.A	SplitShare	78,932	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2020-03-31 Maturity Price : 10.00 Evaluated at bid price : 10.10 Bid-YTW : 4.81 %
BMO.PR.T	FixedReset	75,733	RBC crossed 20,000 at 24.70. TD crossed blocks of 25,000 and 15,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 23.05 Evaluated at bid price : 24.57 Bid-YTW : 3.04 %
RY.PR.E	Deemed-Retractible	62,900	Nesbitt crossed 60,000 at 25.53. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-27 Maturity Price : 25.25 Evaluated at bid price : 25.49 Bid-YTW : -6.80 %
SLF.PR.G	FixedReset	44,686	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.41 Bid-YTW : 6.20 %
There were 43 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.T	FixedReset	Quote: 25.04 – 25.59 Spot Rate : 0.5500 Average : 0.3383 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 23.27 Evaluated at bid price : 25.04 Bid-YTW : 3.11 %
NEW.PR.D	SplitShare	Quote: 32.43 – 33.43 Spot Rate : 1.0000 Average : 0.8380 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.43 Bid-YTW : 2.94 %
BAM.PR.G	FixedFloater	Quote: 21.50 – 21.99 Spot Rate : 0.4900 Average : 0.3745 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 21.79 Evaluated at bid price : 21.50 Bid-YTW : 3.57 %
CM.PR.P	FixedReset	Quote: 24.42 – 24.75 Spot Rate : 0.3300 Average : 0.2150 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-25 Maturity Price : 22.96 Evaluated at bid price : 24.42 Bid-YTW : 3.09 %
MFC.PR.B	Deemed-Retractible	Quote: 24.57 – 24.94 Spot Rate : 0.3700 Average : 0.2720 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.57 Bid-YTW : 4.86 %
MFC.PR.G	FixedReset	Quote: 25.54 – 25.77 Spot Rate : 0.2300 Average : 0.1541 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.54 Bid-YTW : 3.02 %

Unintended consequences? Or a simple macro-economic effect on free markets?

When the federal government tightened mortgage rules in 2012, overheated condo markets in Toronto and Vancouver were widely seen as the main target. But little more than two years later, it’s many smaller cities that are bearing the brunt of stricter regulations.

Winnipeg, Montreal and Moncton are grappling with a surplus of unsold condo units driven by a surge in new construction and a dwindling supply of first-time buyers in the wake of Ottawa’s decision in June, 2012, to limit mortgage insurance to amortization periods of 25 years or less from 30 years.

Meanwhile…:

Home loans from $1 million to $5 million were the fastest growing part of the jumbo market in January, according to purchase application data from the Mortgage Bankers Association. Wealthy borrowers are seeking even bigger loans this year while luxury housing prices rise and lenders lure them with competitive terms.

As first-time homebuyers struggle to qualify for mortgages in a market that’s shrinking after the housing collapse, lenders are providing more multi-million dollar loans to Americans who pose less risk. These borrowers are using the loans to purchase high-end homes in cities such as San Francisco and Miami, where prices have been climbing.

Yellen spoke gentle words of dovish restraint in her Humphrey-Hawkins testimony:

The yield on the benchmark note fell below 2 percent for the first time in a week as Yellen repeated in testimony before Congress a pledge to be “patient” means an increase is unlikely for “at least the next couple” of meetings. She said the labor market wasn’t fully healed and that she saw no evidence that inflation was rising toward the central bank’s 2 percent goal.
…
The benchmark 10-year yield fell eight basis points, or 0.08 percentage point, to 1.98 percent at 1:32 p.m. New York time, according to Bloomberg Bond Trader data. It rose as high as 2.10 percent earlier. The price of the 2 percent note maturing in February 2025 rose 22/32, or $6.88 per $1,000 face amount, to 100 6/32.

Treasuries remained higher after the U.S. sold $26 billion of two-year notes at a yield of 0.603 percent as the Fed’s 22 primary dealers were left with their smallest share of the securities in almost a year.

“It is important to emphasize that a modification of the forward guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings,” Yellen said. “We are reasonably confident that inflation will move back to our 2 percent inflation target over time.”

The Fed’s preferred gauge of inflation, the personal consumption expenditures index, has stayed below 2 percent since April 2012, and it rose just 0.7 percent in the year through December.
…
Traders saw a 45 percent chance the Fed will raise the benchmark rate from between zero to 0.25 percent by its September meeting, according to fed funds futures data compiled by Bloomberg. That’s down from 51 percent prior to Tuesday’s testimony.

Meanwhile, it appears that Lapdog Carney has received instructions to undermine capitalism in order to do his electoral duty for the guys that hired him:

Bank of England chief Mark Carney warned employers on Tuesday not to use near-zero inflation as an excuse to offer staff low wage settlements, as that might derail Britain’s economic recovery.

British wages have only recently started to rise faster than inflation after years of real-term falls.

Many firms will agree 2015 wage deals in coming months amid falling inflation and political uncertainty before national elections in May that are likely to be closely fought.
…
Carney said risks from low inflation in Britain related mainly to the labour market, not to deferred consumption as occurred in Japan, where deflation became entrenched.

Other policy makers are more concerned about the risk of inflation overshooting, however.

MPC member Martin Weale told the same parliamentary panel rates could rise sooner than markets expected. They currently price in a first rise in around a year.

Both Weale and fellow policy maker Ian McCafferty voted five times late last year to raise rates, before dropping this call in January in the face of tumbling oil prices.

Another MPC member, Kristin Forbes, said earlier on Tuesday that there could be a case to start raising rates soon due to potential future pressure from wages, financial stability risks or unsustainable borrowing patterns.

“Any could factor into a case to tighten monetary policy in the near future. But they do not currently appear to be generating a sufficient cost to merit a change in interest rates today,” she said.

This “supply and demand” nonsense is so old fashioned, isn’t it?

Speaking of government policy, it seems that Parakeet Poluz wants to be less accountable:

Stephen Poloz says the time has come for the Bank of Canada and other central banks to reinvent monetary policy by moving beyond solely targeting inflation.

Central bankers need do a better job of making sense of a host of new risks buffeting the financial system, such as exchange rate moves and globalized production chains, the Bank of Canada governor said Tuesday.

“We need to develop a monetary policy framework that integrates inflation risks and financial stability risks, both statically and dynamically, and captures much more accurately the uncertainties we face,” he said.

After all, OSFI is given a free ride on incompetence, as long as the whole system doesn’t blow up. Why shouldn’t everybody else?

However, reduced US expectations of tightening were met with reduced Canadian expectations of loosening:

Market participants, however, keyed in on one statement that strongly suggests another rate cut from the central bank is not as imminent as one would have imagined.

“So the downside risk insurance from the interest rate cut buys us some time to see how the economy actually responds,” Mr. Poloz said in his concluding remarks.

The implication of this statement is that the central bank will wait to determine whether more monetary stimulus is required to offset the “unambiguously negative” effect of the decline in oil prices.

Market participants quickly digested this new information and began to bet against a Bank of Canada rate cut next week.

On Monday, the overnight index swap market was pricing in an 82 per cent chance of 25 basis point reduction in the overnight rate to 0.5 per cent on March 4th. This belief was supported by persistently low oil prices and underwhelming economic data. Soon after Mr. Poloz’s remarks were released, the overnight index swaps suggest the consensus view is for the bank to stand pat: the implied odds of a rate cut, as of the close on Tuesday, stand at 42 per cent.

And the feds continue to make taxation more regressive:

Parliamentary Budget Officer Jean-Denis Fréchette says the Conservative government’s plan to double the contribution limit for tax-free savings accounts would cost Ottawa and the provinces billions in revenue.

In a new report released Tuesday, the PBO notes that if the current annual limit of $5,500 is doubled to $11,000, Ottawa would lose $14.7-billion a year in federal revenue by 2060 and the provinces would lose $7.6-billion a year.

The PBO also notes that doubling the contribution rate would primarily benefit well-off Canadians, making the tax break “much more regressive.”

“By 2060, gains for high wealth households project to be twice the median and ten times that of low-wealth households,” the report states.

The PBO report comes on the same day as a similar report from Simon Fraser University Professor Rhys Kesselman, who also noted that while the program’s cost in terms of lost revenue is relatively small for now, it will grow significantly over time.

“Like a little baby who looks cuddly and cute, this proposed initiative would grow up to be the hulking teenager who eats everyone out of house and home,” Dr. Kesselman’s report for the SFU School of Public Policy states.

I have no objections at all to tax expenditures that encourage Canadians to save for a comfortable retirement – that strikes me as being very good political policy. However, I have seen very little discussion of proposed limits in terms of actual outcomes – and no, I’m not so short-sighted and ignorant as to suggest the outcome is ‘saving a few thousand in tax this year’. The actual outcome is measured in terms of the standard of living in retirement; while I am all in favour of programmes that will help Joe Lunchbucket save a bit so he can have total retirement income of $50,000 p.a., I am firmly opposed to tax expenditures that help Edwin Plutocrat III to have total retirement income of $150,000 p.a. But we never see discussion – by which I mean actual evidence and analysis – of the cost effectiveness of this.

Just as an example – and this is not only not an actuarial study, it’s also not an intensively researched post – look at the OTPP contribution limits:

This chart shows the total contributions that will be deducted in 2015 for your Teachers’ pension based on various gross salaries.

	Annual contributions
Annual salary	2015*	2014**
$30,000	$3,450	$3,450
$40,000	$4,600	$4,600
$50,000	$5,750	$5,750
$60,000	$7,002	$7,020
$70,000	$8,312	$8,330
$80,000	$9,622	$9,640
$90,000	$10,932	$10,950
$100,000	$12,242	$12,260

The Ontario government and other employers match total annual member contributions.

So, making the (possibly erroneous) assumption that the contribution rates are intended to maintain the standard of living implied by the related salary, this leads me to conclude that RRSP contribution limits should be about $14,000 p.a.; and that this limit should be adjusted downward to reflect the impact of TSFAs. Why are we taxing Joe Lunchbucket extra in order to assist Edwin Plutocrat III to achieve retirement income far in excess of the average Canadian salary?

However, just so you know … I think that when retirees downsize their home, the cash they take out on the transaction should be eligible (up to limits reflecting the above principles) for rollover to a TSFA. Saving via mortgage payments is still saving!

S&P has given something called the Floating Rate Investment Grade Preferred Fund a rating of P-2f, but I can’t find anything more regarding this new entrant.

There were modest gains in the Canadian preferred share market today, with PerpetualDiscounts gaining 8bp, FixedResets up 9bp and DeemedRetractibles winning 17bp. The Performance Highlights table continues to be lengthy, with ENB FixedResets prominent among the winners. Volume was above average; it is noteworthy that the larger blocks changed hands well below the closing bids.

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

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

Here’s TRP:

The new issue has caused a large change in the curve-fitting for the TRP series of FixedResets, which is discussed at greater length on the post announcing the new issue. TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.43 to be $1.40 rich, while the new issue, resetting 2020-11-30 at +296, is $1.15 cheap at its issue price of 25.00.

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

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.75 to be $0.65 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.91 to be $0.57 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 25.31 to be $0.46 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.50 and appears to be $0.92 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.57, looks $1.05 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.50 and is $0.96 rich.

Most of the investment grade break-even rates are a little below zero.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-1.4050 %	2,333.0
FixedFloater	4.37 %	3.51 %	18,322	18.38	1	0.0000 %	4,046.5
Floater	3.09 %	3.24 %	66,507	19.09	4	-1.4050 %	2,480.1
OpRet	4.08 %	1.37 %	111,855	0.31	1	0.1992 %	2,760.4
SplitShare	4.42 %	4.50 %	28,270	3.55	6	0.4068 %	3,197.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1992 %	2,524.1
Perpetual-Premium	5.33 %	2.11 %	57,807	0.08	24	-0.0539 %	2,513.3
Perpetual-Discount	4.95 %	4.82 %	111,101	15.29	10	0.0835 %	2,797.2
FixedReset	4.44 %	3.41 %	210,354	16.87	79	0.0931 %	2,412.9
Deemed-Retractible	4.91 %	-0.58 %	106,636	0.10	39	0.1726 %	2,655.2
FloatingReset	2.43 %	2.83 %	88,016	6.39	7	0.1664 %	2,326.2

Performance Highlights
Issue	Index	Change	Notes
ENB.PF.G	FixedReset	-3.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 21.69 Evaluated at bid price : 22.10 Bid-YTW : 4.09 %
BAM.PR.C	Floater	-2.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 15.45 Evaluated at bid price : 15.45 Bid-YTW : 3.26 %
BAM.PR.K	Floater	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 15.31 Evaluated at bid price : 15.31 Bid-YTW : 3.29 %
BAM.PR.B	Floater	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 3.24 %
CGI.PR.D	SplitShare	-1.36 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.70 %
MFC.PR.I	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 3.38 %
MFC.PR.J	FixedReset	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.41 %
ENB.PR.N	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 20.63 Evaluated at bid price : 20.63 Bid-YTW : 4.18 %
ENB.PR.D	FixedReset	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 4.24 %
ENB.PR.B	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 18.71 Evaluated at bid price : 18.71 Bid-YTW : 4.24 %
CU.PR.G	Perpetual-Discount	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 23.56 Evaluated at bid price : 23.92 Bid-YTW : 4.70 %
GWO.PR.G	Deemed-Retractible	1.58 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-26 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : -20.25 %
ENB.PR.F	FixedReset	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.23 %
ENB.PR.T	FixedReset	1.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 20.08 Evaluated at bid price : 20.08 Bid-YTW : 4.17 %
MFC.PR.F	FixedReset	1.89 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.85 Bid-YTW : 5.61 %
PVS.PR.B	SplitShare	2.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 4.50 %
PWF.PR.P	FixedReset	2.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 3.18 %

Volume Highlights
Issue	Index	Shares Traded	Notes
OSP.PR.A	SplitShare	351,334	New issue settled today. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2020-03-31 Maturity Price : 10.00 Evaluated at bid price : 10.11 Bid-YTW : 4.78 %
ENB.PR.N	FixedReset	286,126	Nesbitt crossed 250,000 at 20.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 20.63 Evaluated at bid price : 20.63 Bid-YTW : 4.18 %
IFC.PR.A	FixedReset	181,890	RBC crossed 164,200 at 19.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.85 Bid-YTW : 5.83 %
PWF.PR.P	FixedReset	68,678	RBC crossed 47,100 at 18.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 3.18 %
NA.PR.W	FixedReset	54,825	Nesbitt crossed 11,300 at 24.86. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 23.11 Evaluated at bid price : 24.85 Bid-YTW : 3.01 %
BNS.PR.Y	FixedReset	47,949	RBC crossed 28,600 at 22.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 3.72 %
There were 38 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: 22.10 – 22.79 Spot Rate : 0.6900 Average : 0.4260 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 21.69 Evaluated at bid price : 22.10 Bid-YTW : 4.09 %
HSB.PR.D	Deemed-Retractible	Quote: 25.37 – 25.95 Spot Rate : 0.5800 Average : 0.3867 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-26 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : -3.77 %
CGI.PR.D	SplitShare	Quote: 25.30 – 26.05 Spot Rate : 0.7500 Average : 0.5644 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.70 %
ENB.PR.J	FixedReset	Quote: 21.31 – 21.84 Spot Rate : 0.5300 Average : 0.3812 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 21.31 Evaluated at bid price : 21.31 Bid-YTW : 4.08 %
MFC.PR.I	FixedReset	Quote: 25.56 – 25.94 Spot Rate : 0.3800 Average : 0.2370 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 3.38 %
VNR.PR.A	FixedReset	Quote: 24.90 – 25.40 Spot Rate : 0.5000 Average : 0.3672 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-24 Maturity Price : 23.41 Evaluated at bid price : 24.90 Bid-YTW : 3.51 %

Charles Kenny, a Senior Fellow with the Center for Global Development (a quite respectably ranked think-tank) writes a very good piece on Bloomberg about money laundering and regulations thereof:

In the best of cases, anti-money-laundering efforts are likely to do no more than raise the cost of transactions. A system that misses all but a fraction of a percent of criminal financial flows is almost guaranteed to miss terrorism finance in particular, which involves very small sums: The Madrid and London terror bombings cost no more than $10,000 to finance; the Sept. 11 attacks, less than $500,000. That may be one reason why none of the reported money laundering prosecutions to date have involved terror finance.

Though the regulations have limited impact on criminal activities, they still cost money. Tracking illicit money flows requires a considerable bureaucracy. Enforcing the regulations cost an estimated $7 billion in the U.S., and probably far more. Mauritius, a small, middle-income country of just 1.3 million people, has 25 government officials working on FATF implementation. That’s more people than are listed as opticians in the country. Each bank in Mauritius will also have staff tasked with carrying out customer investigations.

Perhaps most insidious, the regulations have disproportionately affected the kinds of business transactions that serve small, poor economies. FATF rules are why Merchants Bank of California cut off money transfers to Somalia last week, the last U.S. financial institution to do so. Between $160 million and $180 million of remittances will be affected by Merchants Bank’s action, but from its point of view, cutting services is the only safe course. It faced immense potential liabilities if it turned out that one of the accounts receiving funds in Somalia was linked to terrorist activity. Yet there’s no evidence any of the remittances were going to fund terror groups; most were being used to support schooling, housing, food, and other living costs for Somalis. The country is one of the poorest in the world and remittances are equal to about one-third of the country’s GDP.

No doubt, Somali expatriates will find other ways to send the money, but they will cost more and are likely to involve less savory financial institutions as intermediaries. Given that, and the link between people losing their livelihoods and terror recruitment, it is all too possible the FATF regulations will give rise to better-funded and larger terrorist groups.

Does anybody else remember 1994? And Orange County’s infamous carry-trades? It will be interesting to see what happens when policy rates rise:

Growth is on a tear, hiring is the strongest in decades and households are the most upbeat since 2011. Yet banks such as Bank of America Corp. keep plowing their burgeoning deposits into U.S. government and related debt — pushing the industry’s holdings past $2 trillion — instead of lending it all out.

Part of the buildup has to do with rules that require banks to hold more high-quality assets in the wake of the worst financial crisis since the Great Depression. But it also reflects how borrowers, particularly among Americans scarred by the housing bust, are still repairing their finances rather than going into debt to splurge on big-ticket items. And that may mean the U.S. recovery isn’t quite as robust as all the upbeat data would suggest.
…
Investing in government bonds is proving to be a profitable move for banks. They’re making over a full percentage point more by purchasing five-year Treasuries instead of leaving the idle cash parked at the Fed, where they earn only 0.25 percent. U.S. commercial banks held $2.83 trillion in cash as of Feb. 11, versus $2.57 trillion at the end of last year.

Having cash invested in five-year Treasuries is also netting banks an attractive spread over what they are paying depositors. The yield advantage for the notes over the average deposit rate for the four largest U.S. banks is above the norm over the past decade.

For Bank of America, the spread is about 1.44 percentage points, data compiled by Bloomberg show.

Pension troubles in New Jersey are getting harder to defer:

New Jersey Governor Chris Christie must make a $1.57 billion payment this year to the state pension system, a judge ruled while decrying the failure of the state to address a looming crisis.
…
“Because the state will now make nearly 70 percent less than the statutorily required $2.25 billion payment,” the expectations of workers have been “substantially impaired,” the judge ruled. “In short, the aim of the legislation is not being met.”

Jacobson’s ruling contrasts with her decision days before the last fiscal year ended June 30, when Christie said he faced a fiscal emergency. Workers sued then as well, and the judge said Christie acted reasonably in paying $696 million to the pension system to cover current employees while deferring $887 million to help close the gap left by previous governors.

The legislative and executive branches “have now had almost 10 months to find a solution to the pensions crisis for FY 2015,” Jacobson said in the latest ruling.

DBRS has confirmed Fairfax with a stable trend. I have updated the post regarding S&P’s revision to ‘Outlook Negative’.

Preferred share investors rushed to their monitors this morning to see what would happen at the start of a new week:

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts down 3bp, FixedResets losing 67bp and DeemedRetractibles off 2bp. ENB and TRP issues are prominent on the bad side of a suitably lengthy Performance Highlights table. Volume was high, with ENB issues again prominent – it looks like people are getting increasingly nervous about a possible downgrade.

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

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

Here’s TRP:

The new issue has caused a large change in the curve-fitting for the TRP series of FixedResets, which is discussed at greater length on the post announcing the new issue. TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.28 to be $1.37 rich, while the new issue, resetting 2020-11-30 at +296, is $1.07 cheap at its issue price of 25.00.

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

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.68 to be $0.55 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.97 to be $0.62 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 25.45 to be $0.41 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.52 and appears to be $0.97 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.61, looks $1.01 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.50 and is $0.96 rich.

Most of the investment grade break-even rates are scattered around zero.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.9080 %	2,366.2
FixedFloater	4.37 %	3.52 %	18,990	18.38	1	0.0000 %	4,046.5
Floater	3.05 %	3.18 %	67,125	19.23	4	-0.9080 %	2,515.5
OpRet	4.08 %	1.99 %	112,950	0.32	1	-0.1722 %	2,754.9
SplitShare	4.32 %	4.62 %	28,133	3.55	5	-1.0670 %	3,184.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1722 %	2,519.1
Perpetual-Premium	5.33 %	1.52 %	56,568	0.08	24	0.0327 %	2,514.6
Perpetual-Discount	4.95 %	4.82 %	115,235	15.25	10	-0.0334 %	2,794.8
FixedReset	4.45 %	3.30 %	206,478	16.90	79	-0.6720 %	2,410.7
Deemed-Retractible	4.91 %	0.02 %	104,901	0.10	39	-0.0215 %	2,650.6
FloatingReset	2.43 %	2.86 %	89,472	6.39	7	-0.0308 %	2,322.4

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.P	FixedReset	-3.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 18.03 Evaluated at bid price : 18.03 Bid-YTW : 3.26 %
ENB.PR.T	FixedReset	-3.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 19.72 Evaluated at bid price : 19.72 Bid-YTW : 4.25 %
PVS.PR.B	SplitShare	-3.80 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.29 Bid-YTW : 5.15 %
PWF.PR.A	Floater	-3.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 18.26 Evaluated at bid price : 18.26 Bid-YTW : 2.74 %
ENB.PR.N	FixedReset	-3.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 20.42 Evaluated at bid price : 20.42 Bid-YTW : 4.22 %
MFC.PR.F	FixedReset	-3.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.50 Bid-YTW : 5.84 %
ENB.PR.P	FixedReset	-3.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.17 %
ENB.PF.C	FixedReset	-3.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 21.84 Evaluated at bid price : 22.30 Bid-YTW : 3.98 %
ENB.PR.J	FixedReset	-2.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 21.15 Evaluated at bid price : 21.15 Bid-YTW : 4.11 %
ENB.PF.A	FixedReset	-2.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 21.81 Evaluated at bid price : 22.23 Bid-YTW : 4.00 %
TRP.PR.C	FixedReset	-2.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 16.28 Evaluated at bid price : 16.28 Bid-YTW : 3.53 %
TRP.PR.A	FixedReset	-2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 3.55 %
TRP.PR.B	FixedReset	-2.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 14.44 Evaluated at bid price : 14.44 Bid-YTW : 3.44 %
ENB.PR.Y	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 19.37 Evaluated at bid price : 19.37 Bid-YTW : 4.22 %
ENB.PR.F	FixedReset	-1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 4.30 %
PVS.PR.C	SplitShare	-1.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 4.62 %
BAM.PR.T	FixedReset	-1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 21.52 Evaluated at bid price : 21.90 Bid-YTW : 3.58 %
ENB.PR.B	FixedReset	-1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 4.29 %
HSE.PR.A	FixedReset	-1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 3.61 %
ENB.PR.D	FixedReset	-1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 4.28 %
TRP.PR.D	FixedReset	-1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 22.66 Evaluated at bid price : 23.62 Bid-YTW : 3.36 %
PWF.PR.T	FixedReset	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 23.26 Evaluated at bid price : 25.02 Bid-YTW : 3.11 %
GWO.PR.G	Deemed-Retractible	-1.25 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-25 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -2.44 %
VNR.PR.A	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 23.41 Evaluated at bid price : 24.90 Bid-YTW : 3.51 %
BAM.PR.R	FixedReset	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 21.45 Evaluated at bid price : 21.45 Bid-YTW : 3.68 %
BAM.PF.E	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 22.98 Evaluated at bid price : 24.52 Bid-YTW : 3.49 %
HSE.PR.C	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 23.22 Evaluated at bid price : 25.14 Bid-YTW : 3.86 %
MFC.PR.K	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.62 Bid-YTW : 3.89 %
BAM.PF.B	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 22.85 Evaluated at bid price : 24.00 Bid-YTW : 3.57 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	140,313	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 23.19 Evaluated at bid price : 25.13 Bid-YTW : 3.30 %
ENB.PR.T	FixedReset	63,228	RBC crossed 33,000 at 19.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 19.72 Evaluated at bid price : 19.72 Bid-YTW : 4.25 %
TD.PR.T	FloatingReset	60,470	TD crossed 41,400 at 23.82 and bought 11,500 from Scotia at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.83 Bid-YTW : 2.78 %
ENB.PF.C	FixedReset	40,945	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 21.84 Evaluated at bid price : 22.30 Bid-YTW : 3.98 %
TRP.PR.C	FixedReset	31,658	RBC crossed 10,000 at 16.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 16.28 Evaluated at bid price : 16.28 Bid-YTW : 3.53 %
ENB.PR.F	FixedReset	28,981	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 4.30 %
There were 40 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PVS.PR.B	SplitShare	Quote: 24.29 – 25.30 Spot Rate : 1.0100 Average : 0.5591 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.29 Bid-YTW : 5.15 %
NEW.PR.D	SplitShare	Quote: 32.40 – 33.40 Spot Rate : 1.0000 Average : 0.7593 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.40 Bid-YTW : 3.17 %
PWF.PR.A	Floater	Quote: 18.26 – 18.96 Spot Rate : 0.7000 Average : 0.5045 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 18.26 Evaluated at bid price : 18.26 Bid-YTW : 2.74 %
MFC.PR.L	FixedReset	Quote: 23.80 – 24.50 Spot Rate : 0.7000 Average : 0.5105 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 3.89 %
ENB.PF.A	FixedReset	Quote: 22.23 – 22.72 Spot Rate : 0.4900 Average : 0.3063 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-23 Maturity Price : 21.81 Evaluated at bid price : 22.23 Bid-YTW : 4.00 %
GWO.PR.G	Deemed-Retractible	Quote: 25.35 – 25.75 Spot Rate : 0.4000 Average : 0.2751 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-25 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -2.44 %

Nothing happened today.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 7bp, FixedResets off 31bp and DeemedRetractibles gaining 3bp. The Performance Highlights table is its usual lengthy self, with Enbridge FixedResets prominent on the downside and Floaters, of all things, prominent winners. Volume was below average, but Enbridge issues were again prominent.

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

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

Here’s TRP:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.52 to be $0.91 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is bid at 16.68 to be $0.66 cheap.

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

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.30 to be $0.35 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 26.15 to be $0.52 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.84 to be $0.54 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.80 and appears to be $1.15 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.70, looks $0.98 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.62 and is $1.05 rich.

Most of the investment grade break-even rates are scattered around negative 10bp, but the BNS.PR.P/BNS.PR.A pair is an outlier at +36bp.

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	3.4764 %	2,387.9
FixedFloater	4.37 %	3.52 %	18,801	18.38	1	0.0000 %	4,046.5
Floater	3.02 %	3.18 %	66,011	19.23	4	3.4764 %	2,538.5
OpRet	4.04 %	1.40 %	105,616	0.32	1	0.2368 %	2,759.6
SplitShare	4.27 %	3.95 %	26,845	3.57	5	-0.1414 %	3,218.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2368 %	2,523.4
Perpetual-Premium	5.33 %	1.98 %	58,737	0.08	24	0.0131 %	2,513.8
Perpetual-Discount	4.95 %	4.81 %	115,417	15.24	10	0.0668 %	2,795.8
FixedReset	4.41 %	3.37 %	201,576	16.93	79	-0.3054 %	2,427.0
Deemed-Retractible	4.90 %	0.10 %	105,779	0.10	39	0.0262 %	2,651.2
FloatingReset	2.44 %	2.88 %	86,516	6.40	7	0.3151 %	2,323.1

Performance Highlights
Issue	Index	Change	Notes
ENB.PR.F	FixedReset	-2.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 19.65 Evaluated at bid price : 19.65 Bid-YTW : 4.30 %
BAM.PF.B	FixedReset	-2.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 22.73 Evaluated at bid price : 23.75 Bid-YTW : 3.69 %
ENB.PR.J	FixedReset	-2.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 21.53 Evaluated at bid price : 21.80 Bid-YTW : 4.03 %
ENB.PR.T	FixedReset	-2.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 20.51 Evaluated at bid price : 20.51 Bid-YTW : 4.16 %
ENB.PR.P	FixedReset	-2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 20.69 Evaluated at bid price : 20.69 Bid-YTW : 4.11 %
ENB.PR.N	FixedReset	-2.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 21.16 Evaluated at bid price : 21.16 Bid-YTW : 4.15 %
ENB.PR.D	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 18.86 Evaluated at bid price : 18.86 Bid-YTW : 4.31 %
ENB.PR.B	FixedReset	-1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 4.31 %
CU.PR.C	FixedReset	-1.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 23.12 Evaluated at bid price : 24.05 Bid-YTW : 3.28 %
ENB.PR.Y	FixedReset	-1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 4.21 %
ENB.PR.H	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 18.22 Evaluated at bid price : 18.22 Bid-YTW : 4.21 %
PVS.PR.C	SplitShare	-1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 3.95 %
BAM.PR.Z	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 23.54 Evaluated at bid price : 25.41 Bid-YTW : 3.70 %
BMO.PR.R	FloatingReset	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 2.85 %
TRP.PR.B	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 3.50 %
TRP.PR.A	FixedReset	2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 19.96 Evaluated at bid price : 19.96 Bid-YTW : 3.54 %
BAM.PR.K	Floater	4.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.25 %
BAM.PR.B	Floater	4.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 15.82 Evaluated at bid price : 15.82 Bid-YTW : 3.18 %
BAM.PR.C	Floater	5.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 15.80 Evaluated at bid price : 15.80 Bid-YTW : 3.18 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.D	FixedReset	253,441	RBC crossed 218,000 at 18.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 18.86 Evaluated at bid price : 18.86 Bid-YTW : 4.31 %
ENB.PR.B	FixedReset	198,930	RBC crossed 10,000 at 19.00, another 10,000 at 18.91 and finally 139,800 at 18.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 4.31 %
TD.PF.C	FixedReset	98,455	TD crossed 14,900 at 24.83 and 50,000 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 23.09 Evaluated at bid price : 24.78 Bid-YTW : 3.10 %
RY.PR.L	FixedReset	82,883	Scotia crossed blocks of 31,400 and 50,000, both at 26.14. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.14 Bid-YTW : 3.05 %
RY.PR.Z	FixedReset	82,001	RBC crossed 65,500 at 25.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 23.24 Evaluated at bid price : 25.06 Bid-YTW : 3.00 %
ENB.PR.H	FixedReset	52,770	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 18.22 Evaluated at bid price : 18.22 Bid-YTW : 4.21 %
There were 25 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.K	Floater	Quote: 15.50 – 16.80 Spot Rate : 1.3000 Average : 0.7751 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.25 %
ENB.PR.T	FixedReset	Quote: 20.51 – 21.05 Spot Rate : 0.5400 Average : 0.3423 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 20.51 Evaluated at bid price : 20.51 Bid-YTW : 4.16 %
PWF.PR.T	FixedReset	Quote: 25.36 – 25.84 Spot Rate : 0.4800 Average : 0.3208 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 23.37 Evaluated at bid price : 25.36 Bid-YTW : 3.12 %
BAM.PR.B	Floater	Quote: 15.82 – 16.20 Spot Rate : 0.3800 Average : 0.2304 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-20 Maturity Price : 15.82 Evaluated at bid price : 15.82 Bid-YTW : 3.18 %
RY.PR.E	Deemed-Retractible	Quote: 25.41 – 25.87 Spot Rate : 0.4600 Average : 0.3382 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-26 Maturity Price : 25.25 Evaluated at bid price : 25.41 Bid-YTW : -2.84 %
MFC.PR.K	FixedReset	Quote: 24.10 – 24.50 Spot Rate : 0.4000 Average : 0.2851 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.10 Bid-YTW : 3.81 %

It’s funny … the standard stock market manipulation in North America is Pump and Dump. In Asia, apparently, it’s Dump and Pump:

Scrutiny of anonymous research has intensified this month after the reports on Noble, a commodities trader, and Sound Global, a Chinese water-treatment firm, alleged accounting irregularities that both companies denied. The Monetary Authority of Singapore, or MAS, said it’s reviewing the report on Noble, produced by a group calling itself Iceberg Research, and will take action if securities laws were breached.

Noble, which said on Monday it “completely rejects the allegations,” lost as much as 15 percent over two days in Singapore trading after the Iceberg report. The stock rose 1.9 percent on Wednesday after the company said directors and management are “comfortable” that its balance sheet “fairly presents its book value.”

Iceberg doesn’t have any short position, or wager on a decline, in Noble securities and doesn’t work in tandem with funds, it said in the report. Iceberg’s website contains no analyst names, phone numbers or links to research notes, apart from the 17-page report on Noble.

The “Contact Us” page has a form for readers to submit comments and a link to follow a Twitter feed. When contacted on the website by Bloomberg News, Iceberg said it “cannot give phone calls” for an “anonymity reason.”
…
“No research should be anonymous,” said Jimmy Ho, president of the Society of Remisiers, Singapore’s biggest association of equity traders. “MAS should make sure analysts do not use their research for their own agenda.”

Thanks, Jimmy Ho, for calling for increased regulation! Will your operatives be combing through the commentary on Stockhouse and making sure nobody’s posting under a pseudonym?

More traders are jumping on the deflation bandwagon:

Federal fund futures give a 20.7 percent probability the central bank will lift borrowing costs at the June gathering, according to data compiled by Bloomberg. That is down from 25 percent yesterday.

Policy makers judged that risks facing the U.S. economy argued for keeping interest rates near record lows for longer, the minutes from the Jan. 27-28 meeting showed. Expectations for a possible June increase had been growing since a government report showed payroll gains in January capped the biggest three-month increase in 17 years.

SNC-Lavalin has been charged with doing business in Libya:

The RCMP has laid corruption and fraud charges against engineering firm SNC-Lavalin Group Inc. and two subsidiaries over alleged criminal acts that occurred doing business in Libya.

There is one count of corruption related to at least $47.7-million in alleged bribes to Libyan public or other officials. A second count is for fraud of about $130-million related to construction projects in Libya, including the Great Man Made River Project.
…
The RCMP, which worked with Swiss authorities, alleged in an affidavit last year that Mr. Ben Aissa funnelled an estimated $160-million in corrupt payments from SNC to Saadi Gadhafi, the son of the late Libyan dictator, and other officials in exchange for billions in engineering contracts.

Canada has an obligation to ensure that Libyan taxpayers are not overcharged for their engineering contracts, because they’re paying us a lot of money to look after their interests. Regrettably I was not able to find a media story specifying exactly how much we’re getting paid for our efforts, but I’m sure it’s billions. Billions!

The company has attempted to justify its conduct on the basis of having a Canadian headquarters:

The head of Canadian engineering giant SNC-Lavalin Group Inc. says any move by authorities to charge the company in connection with an extensive bribery scandal would immediately threaten its future and could force it to close down.

SNC chief executive officer Robert Card, speaking to The Globe and Mail’s editorial board, said he would be “deeply concerned” if the company was charged because it would hurt the business severely. And “if the company can’t do business, you really only have two choices. You are going to do some dismemberment and cease to exist entirely, or you are going to be owned by somebody else.”

A shift to a foreign owner would jeopardize the 5,000 Canadian SNC jobs that are associated with its headquarters, he said.

Our wise tough-on-crime masters consider corruption to be in the same category as wearing a niqab while pledging allegiance:

Anti-corruption experts say Ottawa has created a set of rules that is among the most far-reaching and inflexible anywhere in the world.

“The U.S., EU and World Bank all have a debarment process,” pointed out Peter Dent, president of the Canadian chapter of Transparency International, an organization committed to fighting corruption. “There is predictability, transparency and due process associated with all of them.”

The Canadian rules are “out of step” with regimes in most other countries, Transparency International said in a letter sent this week to Public Work Minister Diane Finley, who is considering possible changes to its regime.

… which brings us to S&P has downgraded the outlook for the company to negative:

• • Federal charges have been laid by the Public Prosecution Service of
  Canada against SNC-Lavalin Group Inc., SNC-Lavalin International Inc., and SNC-Lavalin Construction Inc.

• •Each entity has been charged with one count of fraud and one count of corruption.
• •SNC-Lavalin has stated it will defend itself and plead not guilty
• •There is no change to the company’s right and ability to bid or work on any public or private projects.
• •As a result, we are revising our outlook on SNC-Lavalin to negative from stable and affirming all our ratings on the company, including our ‘BBB’ long-term corporate credit rating.
• •The negative outlook reflects our concern as to the extent and magnitude that SNC’s competitive position will be affected following the charges being laid.

…
Standard & Poor’s is concerned about the effect that the charges will have on SNC-Lavalin’s competitive position, as well as how the company’s operations will be affected by management’s need to address the charges.

However, we continue to expect SNC-Lavalin will maintain strong liquidity over the next 18 months and that net cash will exceed recourse debt preserving the financial flexibility to manage possible financial penalties. We also note that the negative outlook could be maintained until we are confident as to the resolution of the criminal charges, which could take up to a number of years.

We could lower the ratings on the company if governance-related events affect its competitive position or if SNC-Lavalin increased recourse debt such that total debt-to-EBITDA increased beyond 1.5x with poor prospects for deleveraging. We also believe that downward pressure on the ratings could result from significantly weaker liquidity.

And Bombardier’s issuing shares:

Bombardier Inc. said it will issue about C$750 million ($600 million) in stock, fulfilling a pledge made last week when the company unveiled cost overruns on its CSeries family of jets.

Bombardier will sell 339.4 million Class B shares at C$2.21 apiece, 12 percent less than Wednesday’s closing price in Toronto. The offering is expected to be completed on or about Feb. 27, Montreal-based Bombardier said Thursday in a statement.

The company said Feb. 12 it would issue about $600 million of new equity and as much as $1.5 billion in long-term debt, depending on market conditions, to shore up its balance sheet. Bombardier also halted the dividend on its Class A and B shares, and named Alain Bellemare as CEO, replacing Pierre Beaudoin.
…
Together, unidentified members of the Bombardier family plan to place orders for about $50 million in subscription receipts, the company said. Each receipt will entitle the holder to receive one Class B share.

Bombardier’s Class B stock fell 2.4 percent to C$2.46 when trading was halted in late afternoon Toronto trading. The shares have lost 41 percent of their value this year.

Bombardier is the battered but still proud issuer of BBD.PR.B, BBD.PR.C and BBD.PR.D.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 8bp, FixedResets down 18bp and DeemedRetractibles off 2bp. The Performance Highlights table is its usual lengthy self, with Enbridge issues prominent among the 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:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.55 to be $1.13 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is bid at 14.60 to be $0.79 cheap.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.20 to be $0.26 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 26.20 to be $0.52 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.87 to be $0.57 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.85 and appears to be $1.15 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.80, looks $1.02 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.61 and is $1.00 rich.

All the investment grade break-even rates are scattered around zero!

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	1.5585 %	2,307.7
FixedFloater	4.37 %	3.52 %	19,579	18.38	1	-0.0460 %	4,046.5
Floater	3.12 %	3.32 %	66,697	18.89	4	1.5585 %	2,453.2
OpRet	4.04 %	2.12 %	105,426	0.32	1	0.0395 %	2,753.1
SplitShare	4.27 %	3.50 %	26,997	3.57	5	0.1425 %	3,223.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,517.4
Perpetual-Premium	5.33 %	0.36 %	56,781	0.08	24	-0.0065 %	2,513.5
Perpetual-Discount	4.95 %	4.78 %	119,699	15.11	10	0.0794 %	2,793.9
FixedReset	4.40 %	3.35 %	202,127	17.03	79	-0.1831 %	2,434.4
Deemed-Retractible	4.90 %	0.10 %	106,904	0.19	39	-0.0171 %	2,650.5
FloatingReset	2.45 %	2.95 %	85,780	6.40	7	-0.2404 %	2,315.8

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.F	FixedReset	-4.59 %	Desjardins was on the sell side of 12 (3,450 shares) of the last 15 (4,850 shares) trades executed after 3pm, with prices beginning at 19.91 and ending at 19.34. VWAP was 20.31 on 48,445 shares. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.34 Bid-YTW : 5.54 %
TRP.PR.A	FixedReset	-3.84 %	A last minute – literally! – collapse, with an anonymous seller executing twelve trades totalling 3,400 shares at prices beginning at 20.31 and finishing at 19.75. VWAP was 20.36 on 19,270 shares. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 3.63 %
ENB.PF.C	FixedReset	-1.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.15 Evaluated at bid price : 22.79 Bid-YTW : 3.94 %
ENB.PR.Y	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 20.08 Evaluated at bid price : 20.08 Bid-YTW : 4.14 %
ENB.PF.E	FixedReset	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.18 Evaluated at bid price : 22.86 Bid-YTW : 3.96 %
ELF.PR.H	Perpetual-Premium	-1.27 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-04-17 Maturity Price : 25.25 Evaluated at bid price : 25.57 Bid-YTW : 5.31 %
ENB.PF.A	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.27 Evaluated at bid price : 22.96 Bid-YTW : 3.91 %
BAM.PR.R	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 21.37 Evaluated at bid price : 21.67 Bid-YTW : 3.70 %
TRP.PR.B	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 14.57 Evaluated at bid price : 14.57 Bid-YTW : 3.54 %
CU.PR.C	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.31 Evaluated at bid price : 24.48 Bid-YTW : 3.20 %
MFC.PR.L	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.85 %
BNS.PR.C	FloatingReset	-1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.76 Bid-YTW : 3.11 %
BMO.PR.Q	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.85 Bid-YTW : 3.75 %
CU.PR.D	Perpetual-Premium	1.15 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.44 Bid-YTW : 4.59 %
BAM.PF.B	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.01 Evaluated at bid price : 24.40 Bid-YTW : 3.55 %
IFC.PR.A	FixedReset	1.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.04 Bid-YTW : 5.77 %
BAM.PR.C	Floater	1.70 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 14.95 Evaluated at bid price : 14.95 Bid-YTW : 3.37 %
TRP.PR.D	FixedReset	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.84 Evaluated at bid price : 24.00 Bid-YTW : 3.35 %
BAM.PR.B	Floater	1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 15.15 Evaluated at bid price : 15.15 Bid-YTW : 3.32 %
BAM.PR.K	Floater	1.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 14.86 Evaluated at bid price : 14.86 Bid-YTW : 3.39 %

Volume Highlights
Issue	Index	Shares Traded	Notes
HSB.PR.C	Deemed-Retractible	146,545	Nesbitt crossed blocks of 90,000 and 50,000, both at 25.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-21 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : -1.00 %
TD.PF.C	FixedReset	126,910	TD sold 10,000 to Scotia at 24.85, crossed 50,000 at 24.87 and finally crossed 15,600 at 24.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.10 Evaluated at bid price : 24.82 Bid-YTW : 3.09 %
HSB.PR.D	Deemed-Retractible	119,900	Desjardins crossed blocs of 99,500 and 19,900, both at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-21 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : -4.57 %
RY.PR.J	FixedReset	77,843	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.19 Evaluated at bid price : 25.15 Bid-YTW : 3.35 %
ENB.PR.H	FixedReset	71,785	RBC crossed 43,200 at 18.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 18.45 Evaluated at bid price : 18.45 Bid-YTW : 4.16 %
MFC.PR.N	FixedReset	51,300	Scotia crossed 49,500 at 24.80. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 3.67 %
There were 38 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.F	FixedReset	Quote: 19.34 – 20.48 Spot Rate : 1.1400 Average : 0.7539 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.34 Bid-YTW : 5.54 %
ELF.PR.H	Perpetual-Premium	Quote: 25.57 – 26.44 Spot Rate : 0.8700 Average : 0.5581 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-04-17 Maturity Price : 25.25 Evaluated at bid price : 25.57 Bid-YTW : 5.31 %
TRP.PR.A	FixedReset	Quote: 19.52 – 20.51 Spot Rate : 0.9900 Average : 0.6918 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 3.63 %
NEW.PR.D	SplitShare	Quote: 32.37 – 32.95 Spot Rate : 0.5800 Average : 0.3915 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.37 Bid-YTW : 3.35 %
HSE.PR.A	FixedReset	Quote: 17.60 – 18.13 Spot Rate : 0.5300 Average : 0.3709 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 3.70 %
BMO.PR.R	FloatingReset	Quote: 23.56 – 23.87 Spot Rate : 0.3100 Average : 0.1896 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.56 Bid-YTW : 3.01 %

Oh, what joy there is amongst the anti-market crusaders:

Credit trading just isn’t paying like in the old days. That’s why Wall Street dealers are putting less money at risk to broker the debt, and instead are matching buyers and sellers as much as they can before making trades.

Dealers are only acting as middlemen for about 60 percent of high-yield bond transactions bigger than $2 million, moving securities between two sides they already have lined up, according to data compiled by financial-research company Tabb Group LLC. Before the 2008 financial crisis, such trades accounted for an estimated 25 percent of their business.

The downside of this movement is that it takes longer for investment firms to complete bigger trades, because banks used to just buy blocks of bonds with their own money and then opportunistically sell them into the market.

The upside? The trend sets the stage for a dramatic transformation of credit trading, where investors pay less to transact because dealers aren’t taking the same kind of risk.

What a great upside! Now it will be harder, for instance, to sell a new issue, because to make room in their portfolios investors will – as always – have to sell something, and that will take longer (and because it will take longer, yields will go up) and since it will take longer, there will have to be a longer selling period because of deal uncertainty, so yields will go up again! Hurray! And then it will become uneconomic at the margins for companies to issue debt, so they’ll issue less, with the twin results of giving the regulators less work to do and decreasing economic activity, thereby making the benefits of a government job even more beneficial. In addition, an even smaller proportion of the issue universe will be available to retail, because of inventory concerns if retail ever wants to sell, which will result in fewer complaints! It’s a brave new world, all right.

Meanwhile, the war on stockbrokers is yielding benefits to new players:

A growing crop of financial technology services companies have entered the Canadian market in recent months, providing alternatives to consumers looking for lower investment management and borrowing fees.

The country is becoming a hotbed for these “fintech” firms, threatening a dramatic shift in the financial services sector, driven by technology and a set of savvy entrepreneurs.

Last fall, former BMO Nesbitt Burns investment banker Nauvzer Babul launched Smart Money Capital Management, a computer-assisted financial management company. Smart Money invests in exchange-traded funds (ETFs) and charges clients an annual asset-based fee of 0.45 per cent on top of ETF fees, which together totals less than 1 per cent, Mr. Babul says.

Nova Scotia Power, proud issuer of NSI.PR.D, has been confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has confirmed the Issuer Rating and Unsecured Debentures & Medium-Term Notes rating of Nova Scotia Power Inc. (NSPI or the Company) at A (low) as well as its Cumulative Preferred Shares rating at Pfd-2 (low) and its Commercial Paper rating at R-1 (low). All trends are Stable. The rating confirmations reflect the Company’s relatively low business risk profile operating under a reasonable regulatory environment in Nova Scotia (the Province), albeit somewhat below average compared to other provinces that have privatized or deregulated their power sectors. The confirmations also reflect NSPI’s reasonable financial risk profile, with all key credit metrics expected to remain in line with the current rating category and within regulatory parameters.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 2bp, FixedResets down 11bp and DeemedRetractibles gaining 7bp. Volatility continued to be high, with Enbridge FixedResets prominent among the losers. Volume was average.

PerpetualDiscounts now yield 4.92%, equivalent to 6.40% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 3.8%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 260bp, a narrowing from the 270bp reported February 11.

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

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

Here’s TRP:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.52 to be $1.03 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is bid at 14.80 to be $0.66 cheap.

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.45 to be $0.32 rich, while MFC.PR.G, resetting at +290 on 2016-12-19 and MFC.PR.H, resetting at +313bp on 2017-3-19, are bid at 25.86 and 26.27, respectively, to be $0.35 cheap.

The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.

The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.83 to be $0.61 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.75 and appears to be $1.05 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.80, looks $1.08 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.65 and is $1.03 rich.

All the break-even rates are scattered around negative 10bp – the market has started believing the deflation story again!

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

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	1.4357 %	2,272.3
FixedFloater	4.37 %	3.52 %	19,590	18.38	1	0.6475 %	4,048.4
Floater	3.17 %	3.39 %	67,225	18.74	4	1.4357 %	2,415.6
OpRet	4.05 %	2.22 %	97,628	0.33	1	-0.1970 %	2,752.0
SplitShare	4.28 %	3.50 %	28,108	3.57	5	0.5046 %	3,218.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1970 %	2,516.4
Perpetual-Premium	5.33 %	-2.66 %	57,016	0.08	24	-0.1370 %	2,513.6
Perpetual-Discount	4.96 %	4.92 %	120,992	15.66	10	-0.0209 %	2,791.7
FixedReset	4.39 %	3.40 %	202,865	17.08	79	-0.1118 %	2,438.9
Deemed-Retractible	4.90 %	0.10 %	105,520	0.10	39	0.0675 %	2,650.9
FloatingReset	2.44 %	2.94 %	83,763	6.40	7	0.2038 %	2,321.4

Performance Highlights
Issue	Index	Change	Notes
IFC.PR.A	FixedReset	-4.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.73 Bid-YTW : 5.96 %
ENB.PR.B	FixedReset	-2.74 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.22 %
ENB.PR.H	FixedReset	-2.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 4.13 %
ENB.PR.F	FixedReset	-2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 20.01 Evaluated at bid price : 20.01 Bid-YTW : 4.22 %
ENB.PR.D	FixedReset	-2.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 19.32 Evaluated at bid price : 19.32 Bid-YTW : 4.21 %
ENB.PR.Y	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 4.07 %
GWO.PR.N	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.09 Bid-YTW : 5.98 %
TRP.PR.D	FixedReset	-1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 22.62 Evaluated at bid price : 23.55 Bid-YTW : 3.44 %
PWF.PR.A	Floater	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 2.67 %
ENB.PR.N	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 21.31 Evaluated at bid price : 21.60 Bid-YTW : 4.04 %
BAM.PF.E	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 23.07 Evaluated at bid price : 24.75 Bid-YTW : 3.51 %
PVS.PR.D	SplitShare	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.58 Bid-YTW : 4.79 %
BAM.PR.C	Floater	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 14.70 Evaluated at bid price : 14.70 Bid-YTW : 3.42 %
BAM.PR.R	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 21.56 Evaluated at bid price : 21.94 Bid-YTW : 3.65 %
PVS.PR.C	SplitShare	1.14 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-12-10 Maturity Price : 25.50 Evaluated at bid price : 25.77 Bid-YTW : 3.14 %
MFC.PR.K	FixedReset	1.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.22 Bid-YTW : 3.75 %
VNR.PR.A	FixedReset	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 23.51 Evaluated at bid price : 25.20 Bid-YTW : 3.52 %
BAM.PR.B	Floater	1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 14.86 Evaluated at bid price : 14.86 Bid-YTW : 3.39 %
MFC.PR.L	FixedReset	1.88 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 3.72 %
HSE.PR.A	FixedReset	2.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 17.51 Evaluated at bid price : 17.51 Bid-YTW : 3.72 %
BAM.PR.K	Floater	5.27 %	Just a reversal of yesterday‘s collapse. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 14.57 Evaluated at bid price : 14.57 Bid-YTW : 3.45 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.B	Deemed-Retractible	127,371	RBC crossed 125,000 at 25.43. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-20 Maturity Price : 25.25 Evaluated at bid price : 25.42 Bid-YTW : -4.40 %
BMO.PR.S	FixedReset	63,489	RBC crossed 30,000 at 25.12. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 23.25 Evaluated at bid price : 25.10 Bid-YTW : 3.09 %
RY.PR.J	FixedReset	61,753	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 23.19 Evaluated at bid price : 25.15 Bid-YTW : 3.35 %
MFC.PR.M	FixedReset	45,940	Scotia crossed 40,000 at 24.92. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.83 Bid-YTW : 3.68 %
SLF.PR.G	FixedReset	44,158	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.73 Bid-YTW : 6.25 %
TD.PR.S	FixedReset	41,560	TD crossed 39,400 at 25.28. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : 2.73 %
There were 32 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: 19.73 – 20.30 Spot Rate : 0.5700 Average : 0.3964 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.73 Bid-YTW : 5.96 %
TRP.PR.D	FixedReset	Quote: 23.55 – 24.10 Spot Rate : 0.5500 Average : 0.4059 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 22.62 Evaluated at bid price : 23.55 Bid-YTW : 3.44 %
BMO.PR.Q	FixedReset	Quote: 22.61 – 22.90 Spot Rate : 0.2900 Average : 0.1935 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.61 Bid-YTW : 3.92 %
ENB.PR.B	FixedReset	Quote: 19.20 – 19.59 Spot Rate : 0.3900 Average : 0.2942 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.22 %
PWF.PR.O	Perpetual-Premium	Quote: 26.35 – 26.62 Spot Rate : 0.2700 Average : 0.1808 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-20 Maturity Price : 26.00 Evaluated at bid price : 26.35 Bid-YTW : -7.43 %
BAM.PF.B	FixedReset	Quote: 24.06 – 24.39 Spot Rate : 0.3300 Average : 0.2426 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-18 Maturity Price : 22.87 Evaluated at bid price : 24.06 Bid-YTW : 3.62 %