Category: Market Action

Market Action

February 2, 2015

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

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

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

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

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

There’s a new estimate for Treasury liquidity:

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

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

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

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

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

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

Here’s TRP:

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

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

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

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

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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 17.07, looks $0.64 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 23.51, and is still $0.82.

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.4114 %	2,187.0
FixedFloater	4.38 %	3.55 %	20,957	18.33	1	1.0713 %	4,037.2
Floater	3.30 %	3.47 %	57,370	18.58	4	-0.4114 %	2,324.9
OpRet	4.05 %	2.06 %	98,674	0.37	1	0.0000 %	2,750.9
SplitShare	4.28 %	4.25 %	30,885	3.98	5	0.3133 %	3,193.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,515.4
Perpetual-Premium	5.33 %	0.19 %	57,305	0.08	24	-0.0212 %	2,510.3
Perpetual-Discount	4.97 %	4.97 %	115,073	15.46	10	0.5379 %	2,770.0
FixedReset	4.46 %	3.46 %	214,817	17.05	79	0.0939 %	2,395.8
Deemed-Retractible	4.93 %	0.96 %	101,421	0.23	39	-0.0648 %	2,635.8
FloatingReset	2.55 %	3.25 %	78,190	6.42	7	0.0314 %	2,281.5

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

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

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

Market Action

January 30, 2015

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

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

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

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

How ’bout that loonie performance, eh?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here’s TRP:

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

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

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

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

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

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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 17.05, looks $0.66 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.50, is still $0.80 expensive after losing $1.71 on the day!

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-3.8601 %	2,196.0
FixedFloater	4.42 %	3.61 %	19,962	18.26	1	-2.4091 %	3,994.4
Floater	3.28 %	3.42 %	54,328	18.68	4	-3.8601 %	2,334.5
OpRet	4.05 %	2.02 %	98,459	0.38	1	-0.0395 %	2,750.9
SplitShare	4.29 %	4.12 %	32,080	3.59	5	0.0893 %	3,184.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0395 %	2,515.4
Perpetual-Premium	5.42 %	-7.76 %	56,337	0.08	19	0.1709 %	2,510.8
Perpetual-Discount	5.03 %	4.90 %	109,890	14.97	16	-0.0180 %	2,755.1
FixedReset	4.46 %	3.64 %	207,362	16.73	78	-1.4896 %	2,393.5
Deemed-Retractible	4.93 %	0.59 %	105,365	0.17	39	0.0365 %	2,637.5
FloatingReset	2.57 %	3.29 %	75,989	6.42	7	-2.2628 %	2,280.7

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

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.J	FixedReset	1,134,296	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 23.12 Evaluated at bid price : 24.95 Bid-YTW : 3.42 %
BNS.PR.Y	FixedReset	66,503	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.20 Bid-YTW : 4.40 %
BMO.PR.Q	FixedReset	62,196	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.84 Bid-YTW : 4.49 %
TRP.PR.D	FixedReset	57,113	RBC bought 12,100 from National at 23.26. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 22.72 Evaluated at bid price : 23.75 Bid-YTW : 3.44 %
BMO.PR.P	FixedReset	43,724	Called for redemption February 25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 3.24 %
TD.PF.B	FixedReset	42,130	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 23.00 Evaluated at bid price : 24.45 Bid-YTW : 3.17 %
There were 48 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.M	FixedReset	Quote: 23.05 – 24.50 Spot Rate : 1.4500 Average : 0.8830 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.05 Bid-YTW : 4.60 %
PWF.PR.A	Floater	Quote: 17.50 – 19.00 Spot Rate : 1.5000 Average : 1.1607 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 2.84 %
HSE.PR.A	FixedReset	Quote: 17.24 – 18.00 Spot Rate : 0.7600 Average : 0.4804 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 17.24 Evaluated at bid price : 17.24 Bid-YTW : 3.83 %
TD.PR.Z	FloatingReset	Quote: 23.09 – 23.71 Spot Rate : 0.6200 Average : 0.4027 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.09 Bid-YTW : 3.41 %
BNS.PR.Z	FixedReset	Quote: 22.20 – 22.78 Spot Rate : 0.5800 Average : 0.3802 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.20 Bid-YTW : 4.24 %
FTS.PR.J	Perpetual-Discount	Quote: 24.41 – 25.09 Spot Rate : 0.6800 Average : 0.4910 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-30 Maturity Price : 24.00 Evaluated at bid price : 24.41 Bid-YTW : 4.92 %

Market Action

January 29, 2014

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

There’s core inflation:

Click for Big

There’s consumer expectations of inflation:

Click for Big

… and there’s trimmed mean inflation:

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Oil, Schmoil!

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

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

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

It’s not doing the loonie any good:

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

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

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

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

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

Click for Big

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

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

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

Here’s TRP:

Click for Big

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

Click for Big

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

Click for Big

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

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 17.30, looks $1.28 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.21, looks $1.31 expensive and resets 2019-3-1.

Click for Big

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

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-2.4838 %	2,284.2
FixedFloater	4.32 %	3.50 %	20,044	18.43	1	0.1821 %	4,093.0
Floater	3.16 %	3.34 %	54,162	18.89	4	-2.4838 %	2,428.3
OpRet	4.05 %	1.90 %	101,958	0.38	1	0.0395 %	2,752.0
SplitShare	4.30 %	4.12 %	31,975	3.59	5	-0.3032 %	3,181.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,516.4
Perpetual-Premium	5.43 %	-6.99 %	56,222	0.08	19	-0.0638 %	2,506.5
Perpetual-Discount	5.03 %	4.88 %	110,630	15.03	16	-0.1621 %	2,755.6
FixedReset	4.41 %	3.55 %	204,947	17.06	77	-1.7390 %	2,429.7
Deemed-Retractible	4.93 %	0.31 %	100,758	0.15	39	-0.1564 %	2,636.6
FloatingReset	2.51 %	2.85 %	74,515	6.44	7	-0.7000 %	2,333.5

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

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

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

Market Action

January 28, 2015

The FOMC release was ‘steady as she goes’:

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

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

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

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

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

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

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

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

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

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

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

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

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

Meanwhile…:

Click for Big

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

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

Here’s TRP:

Click for Big

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

Click for Big

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

Click for Big

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

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 17.30, looks $1.32 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.05, looks $1.38 expensive and resets 2019-3-1.

Click for Big

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.2155 %	2,342.4
FixedFloater	4.33 %	3.51 %	20,137	18.42	1	0.4575 %	4,085.6
Floater	3.08 %	3.21 %	54,521	19.20	4	-0.2155 %	2,490.1
OpRet	4.05 %	1.99 %	103,584	0.38	1	0.0791 %	2,750.9
SplitShare	4.28 %	4.12 %	29,842	3.59	5	0.0317 %	3,190.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0791 %	2,515.4
Perpetual-Premium	5.42 %	-7.15 %	56,355	0.08	19	0.0432 %	2,508.1
Perpetual-Discount	5.02 %	4.84 %	108,158	14.98	16	0.0283 %	2,760.1
FixedReset	4.33 %	3.42 %	204,899	17.23	77	-0.8338 %	2,472.7
Deemed-Retractible	4.92 %	0.30 %	101,576	0.17	39	-0.0666 %	2,640.7
FloatingReset	2.49 %	2.63 %	69,096	6.45	7	-1.2258 %	2,350.0

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

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

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

Market Action

January 27, 2015

It was a poor day for US equities:

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

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

… but Canada did all right:

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

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

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

Toronto is headed for another round of airport wars:

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

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

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

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

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

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

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

The Globe has some interesting commentary on Canadian corporate issuance:

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

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

Happy preferred share investors held a meeting today:

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

Click for Big

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

Click for Big

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

Click for Big

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

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 17.28 after getting hammered today, looks $1.36 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.95, looks $1.39 expensive and resets 2019-3-1.

Click for Big

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

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-3.6916 %	2,347.4
FixedFloater	4.35 %	3.53 %	19,899	18.39	1	2.1495 %	4,067.0
Floater	3.23 %	3.29 %	54,969	19.02	4	-3.6916 %	2,495.5
OpRet	4.05 %	2.18 %	107,126	0.39	1	0.1187 %	2,748.8
SplitShare	4.28 %	4.07 %	31,080	3.59	5	0.1510 %	3,189.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1187 %	2,513.5
Perpetual-Premium	5.43 %	-6.20 %	54,247	0.08	19	-0.1069 %	2,507.0
Perpetual-Discount	5.02 %	4.92 %	108,601	15.33	16	-0.3155 %	2,759.3
FixedReset	4.29 %	3.27 %	205,621	17.30	77	-0.8660 %	2,493.5
Deemed-Retractible	4.91 %	-0.04 %	102,742	0.16	39	-0.0676 %	2,642.4
FloatingReset	2.46 %	2.58 %	67,705	6.46	7	-0.8815 %	2,379.2

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

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.P	FixedReset	780,900	Called for redemption effective February 25. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-27 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 0.01 %
TD.PR.P	Deemed-Retractible	126,255	Called for redemption effective March 2. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-26 Maturity Price : 25.50 Evaluated at bid price : 25.57 Bid-YTW : 0.95 %
TD.PR.Q	Deemed-Retractible	123,270	Called for redemption effective March 2. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-02 Maturity Price : 25.50 Evaluated at bid price : 25.59 Bid-YTW : 0.89 %
MFC.PR.N	FixedReset	90,629	Scotia crossed 30,100 at 25.24. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 3.53 %
MFC.PR.M	FixedReset	75,750	RBC crossed 50,000 at 25.04. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 3.59 %
TD.PF.C	FixedReset	70,655	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 23.13 Evaluated at bid price : 24.90 Bid-YTW : 3.11 %
There were 47 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.A	Floater	Quote: 17.03 – 19.00 Spot Rate : 1.9700 Average : 1.2487 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 17.03 Evaluated at bid price : 17.03 Bid-YTW : 3.07 %
TRP.PR.F	FloatingReset	Quote: 19.45 – 20.50 Spot Rate : 1.0500 Average : 0.6158 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 3.21 %
MFC.PR.L	FixedReset	Quote: 24.06 – 25.06 Spot Rate : 1.0000 Average : 0.6023 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 3.92 %
MFC.PR.F	FixedReset	Quote: 19.62 – 20.30 Spot Rate : 0.6800 Average : 0.4132 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.62 Bid-YTW : 5.38 %
FTS.PR.H	FixedReset	Quote: 17.28 – 17.90 Spot Rate : 0.6200 Average : 0.3759 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 17.28 Evaluated at bid price : 17.28 Bid-YTW : 3.31 %
HSE.PR.A	FixedReset	Quote: 19.50 – 20.05 Spot Rate : 0.5500 Average : 0.3484 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-27 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 3.38 %

Market Action

January 26, 2015

These are deflationary times in Europe:

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

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

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

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

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

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

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

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

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

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

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

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

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

And S&P cut Russia to junk:

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

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

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

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

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

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

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

Click for Big

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

Click for Big

MFC.PR.F continues to be near the line defined by its peers.

Click for Big

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.25 and appears to be $0.46 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 24.63 and appears to be $0.71 rich.

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.22, looks $0.94 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.16, looks $1.13 expensive and resets 2019-3-1.

Click for Big

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.6627 %	2,437.4
FixedFloater	4.44 %	3.63 %	18,518	18.23	1	0.1404 %	3,981.4
Floater	3.11 %	3.26 %	54,506	19.08	4	-0.6627 %	2,591.2
OpRet	4.06 %	2.47 %	103,651	0.39	1	-0.3549 %	2,745.5
SplitShare	4.29 %	4.08 %	32,373	3.60	5	-0.1059 %	3,185.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.3549 %	2,510.5
Perpetual-Premium	5.42 %	-6.99 %	54,825	0.09	19	-0.0945 %	2,509.7
Perpetual-Discount	5.01 %	4.86 %	108,519	15.14	16	-0.0359 %	2,768.1
FixedReset	4.25 %	3.21 %	206,127	17.31	77	-0.3797 %	2,515.3
Deemed-Retractible	4.91 %	0.26 %	103,019	0.16	39	0.0929 %	2,644.2
FloatingReset	2.44 %	2.58 %	67,041	6.46	7	-0.5450 %	2,400.3

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

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

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

Market Action

January 23, 2015

I continue to be fascinated by negative yields:

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

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

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

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

The Economist provides a little colour:

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

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

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

Canadian inflation is lower than expectations:

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

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

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

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

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

Click for Big

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

Click for Big

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

Click for Big

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.62 and appears to be $0.35 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 24.91 and appears to be $0.67 rich.

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.28, looks $0.88 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.15, looks $1.12 expensive and resets 2019-3-1.

Click for Big

Pairs equivalence is all over the map, but the investment grade pairs (which are presumably more closely watched and easier to trade) do show a rising trend with increasing time to interconversio which, qualitatively speaking, is entirely reasonable. The average break-even rate is way down from recent levels again today, reinforcing yesterday’s move. And it’s kinda neat to see that the DC.PR.B / DC.PR.D pair is now priced for a negative three-month bill rate over the next four and a half years-odd.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.4586 %	2,453.7
FixedFloater	4.45 %	3.63 %	19,270	18.23	1	-0.2800 %	3,975.8
Floater	3.09 %	3.24 %	54,724	19.14	4	0.4586 %	2,608.4
OpRet	4.04 %	1.52 %	95,989	0.40	1	0.0000 %	2,755.3
SplitShare	4.29 %	4.09 %	32,700	3.60	5	-0.1954 %	3,188.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,519.4
Perpetual-Premium	5.42 %	-9.67 %	55,637	0.09	19	-0.2132 %	2,512.1
Perpetual-Discount	5.01 %	4.85 %	107,872	15.30	16	0.4146 %	2,769.1
FixedReset	4.24 %	3.22 %	208,685	17.26	77	-0.1364 %	2,524.9
Deemed-Retractible	4.92 %	0.23 %	101,362	0.09	39	-0.0716 %	2,641.8
FloatingReset	2.46 %	2.49 %	67,147	6.46	7	0.2435 %	2,413.5

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

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

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

Market Action

January 22, 2015

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

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

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

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

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

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

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

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

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

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

Click for Big

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

Click for Big

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

Click for Big

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.58 and appears to be $0.36 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 24.92 and appears to be $0.74 rich.

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

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.11, looks $1.04 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.32, looks $1.30 expensive and resets 2019-3-1

Click for Big

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-1.5727 %	2,442.5
FixedFloater	4.43 %	3.62 %	19,586	18.25	1	-0.3719 %	3,987.0
Floater	3.11 %	3.27 %	55,245	19.07	4	-1.5727 %	2,596.5
OpRet	4.04 %	1.51 %	95,980	0.40	1	-0.0788 %	2,755.3
SplitShare	4.28 %	4.06 %	30,290	3.61	5	0.1190 %	3,194.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0788 %	2,519.4
Perpetual-Premium	5.40 %	-9.01 %	55,918	0.09	19	0.1778 %	2,517.4
Perpetual-Discount	5.03 %	4.91 %	107,982	15.55	16	0.7393 %	2,757.6
FixedReset	4.23 %	3.18 %	211,047	17.26	77	-0.1115 %	2,528.3
Deemed-Retractible	4.91 %	-0.46 %	101,098	0.09	39	-0.1969 %	2,643.7
FloatingReset	2.47 %	2.55 %	67,443	6.46	7	-0.6313 %	2,407.6

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

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

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

Market Action

January 21, 2015

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It’s a global thing:

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

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

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

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

And Draghi wants US-style quantitative easing:

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

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

But what about the Danes?

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

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

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

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

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

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

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

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

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

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

Click for Big

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

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

MFC.PR.F continues to be near the line defined by its peers, although it drifted up today and is having an effect on the calculation. Implied Volatility continues to be a conundrum. It is far too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Click for Big

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.51 and appears to be $0.53 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 25.20 and appears to be $0.89 rich.

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

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This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.55, looks $0.83 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.15, looks $1.04 expensive and resets 2019-3-1

Click for Big

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-2.1319 %	2,481.5
FixedFloater	4.42 %	3.60 %	19,907	18.28	1	0.6551 %	4,001.9
Floater	3.06 %	3.20 %	54,600	19.23	4	-2.1319 %	2,638.0
OpRet	4.04 %	1.31 %	90,787	0.40	1	0.0394 %	2,757.5
SplitShare	4.28 %	4.13 %	31,542	3.61	5	-0.3321 %	3,190.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0394 %	2,521.4
Perpetual-Premium	5.41 %	-10.47 %	55,691	0.09	19	0.3295 %	2,513.0
Perpetual-Discount	5.07 %	4.94 %	106,705	15.48	16	0.8978 %	2,737.4
FixedReset	4.23 %	3.20 %	200,525	17.28	77	-0.1740 %	2,531.2
Deemed-Retractible	4.89 %	-1.56 %	95,703	0.10	39	0.6413 %	2,648.9
FloatingReset	2.45 %	2.38 %	64,529	6.47	7	-1.3274 %	2,422.9

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

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

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

Market Action

January 20, 2015

The loonie got hammered today:

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

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

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

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

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

Click for Big

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

Click for Big

Click for Big

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.50 and appears to be $0.90 cheap, while BAM.PR.T, resetting at +231bp 2017-3-31 is bid at 25.69 and appears to be $1.24 rich.

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

Click for Big

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.55, looks $1.03 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.35, looks $1.23 expensive and resets 2019-3-1

Click for Big

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.5658 %	2,535.6
FixedFloater	4.45 %	3.63 %	19,964	18.23	1	-1.0648 %	3,975.8
Floater	2.99 %	3.11 %	53,346	19.44	4	-0.5658 %	2,695.5
OpRet	4.04 %	1.40 %	91,943	0.41	1	0.0000 %	2,756.4
SplitShare	4.27 %	4.13 %	32,033	3.61	5	-0.2122 %	3,201.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,520.4
Perpetual-Premium	5.43 %	-9.31 %	56,485	0.09	19	0.0453 %	2,504.7
Perpetual-Discount	5.11 %	4.99 %	105,766	15.41	16	-0.0523 %	2,713.0
FixedReset	4.22 %	3.34 %	201,755	16.86	77	-0.0353 %	2,535.6
Deemed-Retractible	4.92 %	0.16 %	97,222	0.19	39	0.0729 %	2,632.0
FloatingReset	2.70 %	2.38 %	62,203	3.58	7	-0.1744 %	2,455.5

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

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

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

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