Category: Market Action

The FOMC is feeling a little more cheerful:

Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace. Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing.
…
Although inflation in the near term will likely be held down by lower energy prices and other factors, the Committee judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year.

The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month.
…
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. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation.
…
Voting against the action was Narayana Kocherlakota, who believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level.

As the Fed is a competently run central bank, one of the many statistics it publishes is the Ten-Year Breakeven Inflation Rate:

After a brief wail, equities decided it wasn’t really news:

U.S. stocks pared declines, Treasuries retreated and the dollar rallied after the Federal Reserve confirmed it will end its asset-purchase program amid signs of a strengthening economy.

The Standard & Poor’s 500 Index (SPX) slid 0.1 percent at 4 p.m. in New York. The index fell as much as 0.8 percent after the Fed’s policy statement before trimming the slide. The 10-year Treasury note yield rose three basis points to 2.32 percent. The Bloomberg Dollar Spot Index jumped 0.6 percent, erasing earlier losses. Gold prices headed for the biggest drop in three weeks.

Moody’s downgraded Talisman to Baa3:

The Baa3 senior unsecured rating reflects Talisman’s sizable reserves, production and valuable other assets, tempered by the execution risks of an ongoing major shift in strategy and capital spending and dividends that outstrip internal cash flow generation. While production has declined due largely to asset sales, we expect modest production growth in 2015 from existing assets given the use of development capital in Southeast Asia, the Eagle Ford and Columbia. However, we expect an overall decline in reserves and production, cash flow, debt and negative free cash flow over the next 12 to 18 months as asset sales take place. When the strategic re-positioning is complete, we believe that Talisman will be positioned as a Baa3-rated company, with internally generated cash flow that can largely fund its negative free cash flow in the North Sea and an asset base that can provide growth opportunities and improvements in Talisman’s very high finding and development costs and very weak leveraged full-cycle ratio.
…
The stable outlook reflects our expectation that Talisman will complete its restructuring and have size, leverage and return metrics supportive of a Baa3 rating. The rating could be downgraded if capital productivity fails to improve with a leveraged full cycle ratio of at least 1.0x or if retained cash flow to debt appears likely to decline below 30%. The rating could also be downgraded if the proceeds of asset sales are used for shareholder returns and not debt reduction.

A rating upgrade is unlikely in the near term, but possible if Talisman displays a clear focus on core assets that have a positive organic growth profile that can be developed at reasonable costs leading to sustainable sequential growth in production and reserves, and sustainable improvements in both the leveraged full-cycle ratio (above 1.5x) and RCF to debt (above 40%).

Talisman is the proud issuer of TLM.PR.A, which was downgraded to P-3 by S&P earlier this month, and downgraded to Pfd-3 by DBRS in September.

The Canadian preferred share market skyrocketted today, with PerpetualDiscounts winning 45bp, FixedResets up 32bp and DeemedRetractibles gaining 22bp. Volatility was high, with BAM issues prominent in the hightlights. Volume was average, but there were quite a few six-figure volumes; on the other hand, most of those high volumes were due to RBC performing matched pairs of crosses … which may be real, or may indicate that they were mostly ‘internal crosses’ (where the same manager manages both accounts and he’s just rebalancing).

PerpetualDiscounts now yield 5.09%, equivalent to 6.62% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.2%, so the pre-tax interest-equivalent spread is no about 240bp, a significant narrowing from the 270bp reported October 15.

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	3.57 %	3.93 %	18,511	18.74	1	-8.3804 %	2,345.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.1848 %	3,989.0
Floater	2.99 %	3.11 %	63,575	19.43	4	-0.1848 %	2,678.5
OpRet	4.03 %	-0.65 %	104,857	0.08	1	0.0393 %	2,744.3
SplitShare	4.27 %	3.87 %	69,465	3.79	5	0.2767 %	3,167.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0393 %	2,509.4
Perpetual-Premium	5.47 %	-1.27 %	70,599	0.09	18	0.1311 %	2,466.4
Perpetual-Discount	5.26 %	5.09 %	100,719	15.20	18	0.4480 %	2,624.8
FixedReset	4.19 %	3.64 %	171,804	8.49	75	0.3186 %	2,569.6
Deemed-Retractible	5.00 %	2.73 %	101,295	0.32	42	0.2171 %	2,578.8
FloatingReset	2.55 %	1.85 %	70,363	3.58	6	-0.0261 %	2,545.6

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.E	Ratchet	-8.38 %	Not real, since volume on the TSE was a big fat zero. I don’t know whether this Toronto Stock Exchange screw-up is due to horrible market-making or their practice of not selling closing quotes. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 25.00 Evaluated at bid price : 21.01 Bid-YTW : 3.93 %
BAM.PF.E	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 23.22 Evaluated at bid price : 25.25 Bid-YTW : 4.00 %
BAM.PF.A	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.77 Bid-YTW : 3.77 %
BAM.PF.C	Perpetual-Discount	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.55 Evaluated at bid price : 21.85 Bid-YTW : 5.60 %
BAM.PR.M	Perpetual-Discount	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.57 Evaluated at bid price : 21.57 Bid-YTW : 5.57 %
MFC.PR.B	Deemed-Retractible	1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.31 Bid-YTW : 5.62 %
FTS.PR.G	FixedReset	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 23.27 Evaluated at bid price : 25.00 Bid-YTW : 3.59 %
BAM.PF.D	Perpetual-Discount	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.72 Evaluated at bid price : 22.00 Bid-YTW : 5.62 %
BAM.PR.N	Perpetual-Discount	1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.63 Evaluated at bid price : 21.63 Bid-YTW : 5.56 %
BAM.PR.X	FixedReset	1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.50 Evaluated at bid price : 21.87 Bid-YTW : 3.97 %
MFC.PR.C	Deemed-Retractible	1.88 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.77 Bid-YTW : 5.76 %
BAM.PR.R	FixedReset	1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 23.93 Evaluated at bid price : 25.75 Bid-YTW : 3.71 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PR.F	FixedReset	200,005	Nesbitt crossed 20,000 at 24.83. TD crossed two blocks of 20,000 each, both at the same price. RBC crossed four blocks: 50,000 shares, 25,000 shares, 10,000 and 19,900, all at the same price again. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 23.24 Evaluated at bid price : 24.83 Bid-YTW : 3.97 %
TRP.PR.C	FixedReset	152,779	RBC crossed two blocks of 75,000 each, both at 21.43. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.39 Evaluated at bid price : 21.39 Bid-YTW : 3.65 %
HSE.PR.A	FixedReset	143,273	RBC crossed two blocks of 67,500 each, both at 22.53. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 22.22 Evaluated at bid price : 22.60 Bid-YTW : 3.67 %
GWO.PR.N	FixedReset	133,831	RBC crossed two blocks of 65,000 each, both at 21.82. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 4.57 %
PWF.PR.P	FixedReset	111,635	RBC crossed two blocks of 52,900 each, both at 22.23. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.81 Evaluated at bid price : 22.30 Bid-YTW : 3.52 %
NA.PR.W	FixedReset	110,358	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 23.14 Evaluated at bid price : 25.00 Bid-YTW : 3.67 %
TRP.PR.A	FixedReset	108,823	RBC crossed two blocks of 42,000 each, both at 21.72. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 21.44 Evaluated at bid price : 21.74 Bid-YTW : 3.96 %
There were 28 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.E	Ratchet	Quote: 21.01 – 23.55 Spot Rate : 2.5400 Average : 1.5147 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 25.00 Evaluated at bid price : 21.01 Bid-YTW : 3.93 %
W.PR.H	Perpetual-Premium	Quote: 25.05 – 25.50 Spot Rate : 0.4500 Average : 0.2804 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 24.83 Evaluated at bid price : 25.05 Bid-YTW : 5.53 %
MFC.PR.A	OpRet	Quote: 25.46 – 25.81 Spot Rate : 0.3500 Average : 0.2062 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-28 Maturity Price : 25.25 Evaluated at bid price : 25.46 Bid-YTW : -0.65 %
BAM.PR.T	FixedReset	Quote: 24.60 – 24.91 Spot Rate : 0.3100 Average : 0.2079 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-29 Maturity Price : 23.34 Evaluated at bid price : 24.60 Bid-YTW : 3.90 %
MFC.PR.F	FixedReset	Quote: 22.33 – 22.75 Spot Rate : 0.4200 Average : 0.3180 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.33 Bid-YTW : 4.51 %
TD.PR.P	Deemed-Retractible	Quote: 25.84 – 26.11 Spot Rate : 0.2700 Average : 0.1819 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-01 Maturity Price : 25.50 Evaluated at bid price : 25.84 Bid-YTW : -9.60 %

Nothing happened today.

It was a modestly good day for the Canadian preferred share market, with PerpetualDiscounts and DeemedRetractibles both up 5bp and FixedResets winning 9bp. Volatility was modest. Volume was very low.

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	3.26 %	3.27 %	19,340	19.07	1	-2.1277 %	2,560.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.3424 %	3,996.4
Floater	2.99 %	3.11 %	64,412	19.45	4	0.3424 %	2,683.5
OpRet	4.03 %	-0.30 %	105,534	0.08	1	0.0000 %	2,743.3
SplitShare	4.29 %	3.92 %	72,329	3.80	5	0.1829 %	3,158.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,508.4
Perpetual-Premium	5.47 %	-1.10 %	69,035	0.09	18	0.0765 %	2,463.2
Perpetual-Discount	5.28 %	5.12 %	98,182	15.17	18	0.0545 %	2,613.1
FixedReset	4.21 %	3.66 %	171,752	8.61	75	0.0949 %	2,561.5
Deemed-Retractible	5.01 %	2.52 %	100,125	0.32	42	0.0514 %	2,573.2
FloatingReset	2.55 %	1.86 %	72,944	3.59	6	-0.0261 %	2,546.3

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.E	Ratchet	-2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 22.85 Evaluated at bid price : 23.00 Bid-YTW : 3.27 %
CIU.PR.C	FixedReset	-1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 20.46 Evaluated at bid price : 20.46 Bid-YTW : 3.62 %
MFC.PR.C	Deemed-Retractible	-1.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 5.99 %
BAM.PF.E	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 23.14 Evaluated at bid price : 25.00 Bid-YTW : 4.05 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.W	FixedReset	607,573	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 23.13 Evaluated at bid price : 24.96 Bid-YTW : 3.68 %
CM.PR.E	Perpetual-Premium	408,545	Desjardins crossed 398,200 at 25.12. Nice ticket! YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-27 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : -1.10 %
BAM.PF.G	FixedReset	101,540	Scotia crossed 30,000 at 25.25; RBC crossed 14,200 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 23.20 Evaluated at bid price : 25.25 Bid-YTW : 4.24 %
CM.PR.G	Perpetual-Premium	101,355	Desjardins crossed 95,500 at 25.12. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-27 Maturity Price : 25.00 Evaluated at bid price : 25.17 Bid-YTW : -3.20 %
MFC.PR.M	FixedReset	78,180	Desjardins crossed 54,500 at 25.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.83 %
CM.PR.O	FixedReset	74,446	Nesbitt crossed 30,000 at 25.25; RBC crossed 30,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 23.26 Evaluated at bid price : 25.25 Bid-YTW : 3.66 %
There were 15 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.E	Ratchet	Quote: 23.00 – 23.55 Spot Rate : 0.5500 Average : 0.3905 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 22.85 Evaluated at bid price : 23.00 Bid-YTW : 3.27 %
CIU.PR.C	FixedReset	Quote: 20.46 – 20.89 Spot Rate : 0.4300 Average : 0.2960 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 20.46 Evaluated at bid price : 20.46 Bid-YTW : 3.62 %
MFC.PR.C	Deemed-Retractible	Quote: 22.35 – 22.75 Spot Rate : 0.4000 Average : 0.2681 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 5.99 %
CGI.PR.D	SplitShare	Quote: 25.28 – 25.95 Spot Rate : 0.6700 Average : 0.5678 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : 3.68 %
FTS.PR.M	FixedReset	Quote: 25.34 – 25.59 Spot Rate : 0.2500 Average : 0.1642 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 23.26 Evaluated at bid price : 25.34 Bid-YTW : 3.84 %
BAM.PR.N	Perpetual-Discount	Quote: 21.28 – 21.55 Spot Rate : 0.2700 Average : 0.1999 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-28 Maturity Price : 21.28 Evaluated at bid price : 21.28 Bid-YTW : 5.65 %

There is muttering that increased regulation has not only deliquified the corporate market but that the Treasury market is also suffering:

It was still early in the New York trading day on Oct. 15 and investors were already pouring into U.S. government bonds as global financial markets from Asia to Europe buckled. Because yields were falling so fast, Comiskey, the head Treasury dealer at Bank of Nova Scotia, realized that he ran the risk of being stuck with losses or unwanted inventory if his computers automatically generated quotes to buy and sell with customers.

So for about half an hour, as yields on 10-year Treasuries tumbled below 2 percent in the biggest plummet in five years, he executed client orders individually over the phone.
…
Bank of Nova Scotia was hardly alone in taking steps to protect itself in one of the most volatile trading days since the collapse of Lehman Brothers Holdings Inc. in 2008, showing how regulators’ efforts to rein in risk-taking among the world’s biggest banks is causing disruptions in what is supposed to be the deepest, most liquid market in the world — that of U.S. Treasury securities. Because dealers have cut back so much in recent years, concern is deepening that parts of the market have become less efficient in times of turmoil.
…
JPMorgan & Chase Co., a primary dealer, estimates the amount of U.S. debt available to trade at one time without moving prices has plunged 48 percent to $150 million since April. The measure is based on the average size of the best three bids and offers that go through the New York-based bank’s trading desks on a weekly basis.
…
An unprecedented $946 billion of U.S. government debt changed hands through London-based ICAP Plc on Oct. 15, which suggests that concerns over liquidity may be overblown and were due more to the fact buyers couldn’t get the prices they wanted when everyone else wanted to buy at the same time.

Richard Prager, the head of trading and liquidity strategies at BlackRock Inc., the world’s largest asset manager, says regulations are one of the reasons why bond dealers have less incentive to facilitate trades for clients.

To comply with higher capital requirements from the Basel Committee on Banking Supervision, firms with bond trading desks have responded by reducing inventories. Primary dealers have slashed their U.S. debt holdings 56 percent to $64 billion from a record high in October 2013, data compiled by Bloomberg show.

But dealer holdings of junk have fallen off a cliff:

Wall Street’s biggest debt dealers have been dumping speculative-grade securities at the fastest pace on record ahead of annual stress tests by the Fed. They reduced their holdings by 68 percent in the week ended Oct. 15 as the market posted losses of 1.5 percent that week alone, according to data released by the Fed last week.
…
The Fed is homing in on speculative-grade corporate debt in particular because such bonds and loans tend to suffer disproportionately in times of stress.

Under a worst-case scenario being simulated in the latest round of Fed stress tests, “U.S. corporate credit quality deteriorates sharply,” according to an Oct. 23 Fed report. Relative yields on high-yield bonds and loans would “widen to levels the same as the peaks reached in the 2007–2009 recession.”

At 4.38 percentage points, the extra yield investors currently demand to own junk bonds instead of government debt is just a fifth the 21.8-percentage-point spread reached in December 2008, according to Bank of America Merrill Lynch index data.

The ECB is getting serious about deflation:

The European Central Bank said it settled 1.704 billion euros ($2.2 billion) of covered-bond purchases last week as it started its latest effort to revive the euro-area economy.

The Frankfurt-based institution began purchases on Oct. 20, returning to the market for a third time in six years as part of a renewed attempt to stave off deflation and pump life into a moribund recovery.

Investors have been closely watching the ECB’s first week of asset buying to gauge how quickly President Mario Draghi plans to fulfill his pledge of expanding the institution’s balance sheet by as much as 1 trillion euros. Even though the ECB will add asset-backed securities to the purchase plan this year, stimulus may not be enough to revive the region’s economy.
…
German opposition to sovereign-bond purchases means officials have chosen covered bonds and ABS as the latest tools to help expand the balance sheet. While policy makers say their plans will spark new issuance, economists at firms including Morgan Stanley and Commerzbank AG say the central bank will probably need to buy other assets to reach the target.

Of the region’s 2.6 trillion-euro covered-bond market, the ECB will only buy assets acceptable under its collateral framework for refinancing loans. Purchases will be announced weekly, starting today, and the pool of bonds eligible is about 600 billion euros, ECB Vice President Vitor Constancio said this month.

ABS buying is scheduled to begin later this quarter and there are about 400 billion euros of such assets eligible to buy, according to Constancio.

Who remembers Osborne Computer Corporation? Not Ford!:

The problem with high-tech hardware, whether it’s a smartphone or a pickup truck, is that everyone wants the newest thing. When Apple (AAPL) has a new iPhone in the works, would-be buyers delay their purchases until the next iteration hits the market. Turns out, that tricky timing dynamic happens with cars, too.

Ford Motor (F), in particular, is facing a bad bit of product whiplash at the moment. It has 16 vehicle launches next year, ranging from facelifts to entirely new models, in the most aggressive schedule to date of what car folks call “product cadence.”
…
The so-called “product launch effects” drove Ford’s auto-related sales down 3 percent in the recent quarter. Profit plummeted 34 percent, in part because Ford idled factories to retool assembly lines for making its new vehicles. Sales of the Ford Edge slid 18 percent in North America as buyers awaited an all-new version expected to hit dealers in the spring. And some 11 percent fewer Ford Fiestas zipped off lots, a vehicle that hasn’t been changed drastically since 2008.

Nowhere is the product path more fraught than for the F-150 pickup, the long-time best-selling vehicle in North America and Ford’s big metal enchilada. Not only is Ford making a new F-150; it’s making a drastically new one. Huge plates of steel will be replaced with lighter aluminum in a bid for fuel efficiency. It’s a massive overhaul, and truck buyers definitely took notice.

So, Toronto civic election results are beginning to trickle in and it appears heavy turnout is favouring Tory. So every Councillor elected tonight will stay up late to put together a grab-bag list of little projects that will just cost pennies per taxpayer each, and they’ll all get approved. Inclusiveness, you know. An end to divisiveness.

It was a strong day for the Canadian preferred share market, with PerpetualDiscounts winning 24bp, FixedResets up 14bp and DeemedRetractibles gaining 9bp. Volatility was average. Volume was low.

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	3.19 %	3.20 %	19,388	19.24	1	-0.4237 %	2,615.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.2145 %	3,982.8
Floater	3.00 %	3.12 %	65,301	19.42	4	0.2145 %	2,674.3
OpRet	4.03 %	-0.44 %	97,718	0.08	1	0.0000 %	2,743.3
SplitShare	4.29 %	3.92 %	75,303	3.79	5	0.1035 %	3,152.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,508.4
Perpetual-Premium	5.48 %	-0.31 %	69,715	0.08	18	-0.0153 %	2,461.3
Perpetual-Discount	5.28 %	5.13 %	98,102	15.17	18	0.2377 %	2,611.7
FixedReset	4.21 %	3.68 %	171,651	8.61	75	0.1369 %	2,559.0
Deemed-Retractible	5.01 %	2.77 %	102,438	0.25	42	0.0925 %	2,571.8
FloatingReset	2.55 %	1.44 %	75,943	0.16	6	0.0000 %	2,547.0

Performance Highlights
Issue	Index	Change	Notes
HSB.PR.D	Deemed-Retractible	-1.18 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.11 Bid-YTW : 4.64 %
GWO.PR.H	Deemed-Retractible	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.97 Bid-YTW : 5.46 %
FTS.PR.F	Perpetual-Discount	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 24.07 Evaluated at bid price : 24.55 Bid-YTW : 5.04 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CU.PR.C	FixedReset	53,654	Nesbitt crossed 49,000 at 25.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 2.90 %
NA.PR.W	FixedReset	47,650	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 23.13 Evaluated at bid price : 24.95 Bid-YTW : 3.68 %
BAM.PF.E	FixedReset	42,350	RBC crossed 40,000 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 23.05 Evaluated at bid price : 24.74 Bid-YTW : 4.11 %
CM.PR.O	FixedReset	37,944	Desjardins crossed 25,000 at 25.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 23.26 Evaluated at bid price : 25.24 Bid-YTW : 3.67 %
ENB.PR.F	FixedReset	24,352	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 23.20 Evaluated at bid price : 24.73 Bid-YTW : 3.99 %
TD.PR.Q	Deemed-Retractible	23,876	RBC crossed 20,000 at 26.14. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-26 Maturity Price : 25.75 Evaluated at bid price : 26.10 Bid-YTW : -11.40 %
There were 19 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.L	Perpetual-Premium	Quote: 24.86 – 25.22 Spot Rate : 0.3600 Average : 0.2230 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 24.57 Evaluated at bid price : 24.86 Bid-YTW : 5.14 %
TRP.PR.D	FixedReset	Quote: 24.91 – 25.20 Spot Rate : 0.2900 Average : 0.1697 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 23.17 Evaluated at bid price : 24.91 Bid-YTW : 3.80 %
FTS.PR.K	FixedReset	Quote: 24.62 – 24.95 Spot Rate : 0.3300 Average : 0.2219 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-27 Maturity Price : 23.08 Evaluated at bid price : 24.62 Bid-YTW : 3.63 %
IFC.PR.A	FixedReset	Quote: 23.60 – 23.97 Spot Rate : 0.3700 Average : 0.2632 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 4.31 %
MFC.PR.K	FixedReset	Quote: 25.00 – 25.29 Spot Rate : 0.2900 Average : 0.1944 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.81 %
GWO.PR.S	Deemed-Retractible	Quote: 25.57 – 25.80 Spot Rate : 0.2300 Average : 0.1350 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 5.04 %

Amidst all the problems facing the world today, it’s very nice to see that the US National Institute of Health is funding some vital research:

Training minority scientists, improving mentoring, and adjusting university enrollment processes are among the newly funded efforts to increase the diversity of the biomedical workforce. Armed with $31 million from the National Institutes of Health (NIH) Common Fund, a dozen university teams will lead the way in encouraging young students of all racial and ethnic backgrounds to enter a career in scientific research, the agency announced this week (October 22).

On a brighter note, the ECB is getting at least a little more serious about stress tests:

Twenty-five lenders in the European Central Bank’s euro-area bank health check are poised to fail the regulator’s Comprehensive Assessment, according to a draft communique of the final results seen by Bloomberg News.

One-hundred-and-five banks are shown passing the review, according to the draft statement. Of the lenders that failed, about 10 will still face capital shortfalls they need to plug, according to a person with knowledge of the matter, who asked not to be identified because they weren’t authorized to speak publicly. That figure is likely to change as talks continue before the final results are published Oct. 26, said the person.

The two-part review forms one pillar of the ECB’s effort to rekindle confidence in the euro zone after half a decade of financial turmoil. ECB President Mario Draghi has said banks need to fail to prove the losses of the past have been dealt with. After two previous European stress tests didn’t reveal problems at lenders that later failed, the ECB has staked its reputation on getting this exercise right.

“The numbers are consistent with our expectations,” said Alberto Gallo, head of European macro-credit research at Royal Bank of Scotland Group Plc in London. “It’s too early to say the exercise is credible. The key will be to see how much stress the strong banks will take, and how many of them will pass by a narrow margin.” He expects 11 banks will need to plug capital gaps after measures already taken this year.

An interesting sign of the times … Quadravest has published an extra evaluation of LFE.PR.B:

*Oct 17th NAV is being provided to investors in addition to the Oct 15th NAV, due to recent volatility in financial markets.

A pity they didn’t do this during the depths of the Credit Crunch – it would have been helpful.

And, as a parting note, PrefBlog endorses Doug Ford for Mayor of Toronto. He’s the only one who can credibly claim to be concerned about costs; Chow will spend because she has a vision, Tory will spend because it’s so much more inclusive than saying no. As a bonus, it will be great fun to go downtown after Ford is declared winner to watch all they geysers of latte erupt from people’s noses.

It was a positive day for the Canadian preferred share market, with PerpetualDiscounts gaining 3bp, FixedResets up 4bp and DeemedRetractibles winning 13bp. Volatility was minimal. Volume was pathetically, awfully, ridiculously, terribly low.

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	3.18 %	3.18 %	19,257	19.28	1	-1.0067 %	2,627.0
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.7636 %	3,974.2
Floater	3.00 %	3.12 %	65,260	19.41	4	0.7636 %	2,668.6
OpRet	4.03 %	-0.84 %	97,523	0.08	1	0.1969 %	2,743.3
SplitShare	4.30 %	3.91 %	78,398	3.80	5	-0.0875 %	3,149.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1969 %	2,508.4
Perpetual-Premium	5.48 %	-1.80 %	70,733	0.08	18	0.1138 %	2,461.6
Perpetual-Discount	5.29 %	5.14 %	98,563	15.16	18	0.0262 %	2,605.5
FixedReset	4.22 %	3.60 %	164,952	16.72	75	0.0391 %	2,555.5
Deemed-Retractible	5.02 %	1.96 %	100,803	0.19	42	0.1298 %	2,569.5
FloatingReset	2.55 %	-6.10 %	58,483	0.08	6	0.0261 %	2,547.0

Performance Highlights
Issue	Index	Change	Notes
BAM.PF.E	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 23.04 Evaluated at bid price : 24.74 Bid-YTW : 4.04 %
BAM.PR.E	Ratchet	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 23.36 Evaluated at bid price : 23.60 Bid-YTW : 3.18 %
PWF.PR.A	Floater	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 2.68 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.O	FixedReset	60,870	TD bought two blocks from CIBC – 10,000 at 25.16 and 20,700 at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 23.24 Evaluated at bid price : 25.20 Bid-YTW : 3.60 %
ENB.PR.P	FixedReset	53,327	Scotia crossed 40,000 at 24.14. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 22.88 Evaluated at bid price : 24.13 Bid-YTW : 4.03 %
BAM.PR.C	Floater	42,905	Nesbitt crossed 40,000 at 16.72. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 16.74 Evaluated at bid price : 16.74 Bid-YTW : 3.16 %
NA.PR.W	FixedReset	41,420	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 23.11 Evaluated at bid price : 24.91 Bid-YTW : 3.62 %
ENB.PR.J	FixedReset	26,505	Scotia crossed 24,100 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 23.24 Evaluated at bid price : 25.08 Bid-YTW : 3.98 %
ENB.PF.G	FixedReset	22,975	TD bought 10,000 from CIBC at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 23.13 Evaluated at bid price : 25.06 Bid-YTW : 4.07 %
There were 8 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
NEW.PR.D	SplitShare	Quote: 32.65 – 33.65 Spot Rate : 1.0000 Average : 0.6960 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.65 Bid-YTW : 1.94 %
TRP.PR.A	FixedReset	Quote: 21.52 – 21.80 Spot Rate : 0.2800 Average : 0.1712 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 21.52 Evaluated at bid price : 21.52 Bid-YTW : 3.91 %
ELF.PR.G	Perpetual-Discount	Quote: 21.88 – 22.16 Spot Rate : 0.2800 Average : 0.2018 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 21.57 Evaluated at bid price : 21.88 Bid-YTW : 5.45 %
HSE.PR.A	FixedReset	Quote: 22.40 – 22.70 Spot Rate : 0.3000 Average : 0.2228 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 21.87 Evaluated at bid price : 22.40 Bid-YTW : 3.60 %
PVS.PR.D	SplitShare	Quote: 24.30 – 24.60 Spot Rate : 0.3000 Average : 0.2284 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.11 %
CU.PR.F	Perpetual-Discount	Quote: 22.24 – 22.44 Spot Rate : 0.2000 Average : 0.1379 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-24 Maturity Price : 21.91 Evaluated at bid price : 22.24 Bid-YTW : 5.12 %

It would appear that Parakeet Poluz was instructed to say some upleasant things at Wednesday’s aborted press conference:

Our outlook for the global economy continues to show stronger momentum in 2015 and 2016, but the profile has been downgraded since July. The good news for Canada is that the U.S. economy is gaining traction, particularly in sectors that are beneficial to Canada’s exports.

And our exports do appear to be responding, with some additional help from a lower Canadian dollar. Our conversations with exporters indicate that they are seeing a better export outlook from the ground.

However, it is clear that our export sector is less robust than in previous cycles. Last spring, as you may recall, we identified which non-energy subsectors could be expected to lead the recovery in exports, and which would not.

We have since investigated in more detail the subsectors that have been underperforming. After sifting through more than 2,000 product categories, we have found that the value of exports from about a quarter of them has fallen by more than 75 per cent since the year 2000. Had the exports of these products instead risen in line with foreign demand, they would have contributed about $30 billion in additional exports last year.

By correlating these findings with media reports, we could see that many were affected by factory closures or other restructurings. In other words, capacity in these subsectors has simply disappeared. This analysis helps us understand a significant portion of the gap in export performance.

Our research also tells us that most of the sectors expected to lead the non-energy export recovery still have some excess capacity. Our Business Outlook Survey (BOS) interviews indicate that while companies plan to invest in new machinery and equipment, few are planning to expand their capacity, at least so far. This helps explain why business investment might be delayed relative to what would be expected in a normal cycle.
…
Another important building block of our policy framework is the neutral rate of interest. Carolyn discussed this in an important speech last month; there is also a discussion paper about it, and a box in this MPR. The neutral rate, too, is uncertain. We estimate that it now lies between 3 and 4 per cent, which is well below pre-crisis levels. But since the difference between current rates and the neutral rate is our best estimate of monetary stimulus, understanding the risks around this is also important.

After weighing these considerations, it is our judgment at this time that the risks around achieving our inflation objective over a reasonable time frame are roughly balanced. Accordingly, we believe that the current level of monetary stimulus remains appropriate.

Some of you may be wondering why we aren’t being more specific about the likely future stance of monetary policy. Let me answer by saying that forward guidance remains a key element of the policy tool kit – but one that we will reserve for times when we believe there are net benefits to its use. There will no doubt come a day when we will offer forward guidance again – but not this day.

David Parkinson of the Globe is impressed:

Bank of Canada Governor Stephen Poloz has just sat Canadians down and given us a national the-dog-has-died talk. The country lost some things in the Great Recession that ain’t never coming back.
…
Until recently, opening remarks for MPR press conferences were word-for-word regurgitations of the bank’s interest-rate-setting statements released at the same time as the MPR. That all changed in July, when Mr. Poloz used his opening statement to provide a detailed explanation of how the bank was interpreting inflation risks. He has now followed this up with October’s frank statement.
…
For people (including me) who have gone through years and multiple Bank of Canada governors playing “find the hidden meaning” in cryptic central-bank speak, this may take some getting used to. But Mr. Poloz is a pretty folksy guy, at least as far as central bank bosses go. Expect him to continue to pull us aside as a nation once in a while for these friendly and plain-spoken chats, even if the message is sometimes hard to hear.

The Toronto Stock Exchange has issued a corporate plan titled Reshaping Canada’s Equities Trading Landscape:

Today, we again find ourselves at a point where industry challenges require decisive action to preserve the efficiency and integrity of our markets. There are three significant issues that require our attention and action:

• • Canadian order flow is migrating to the United States (U.S.)
• • Technology-driven markets are not optimized to serve all
• • Market complexity is on the rise

We have examined each of these issues at great length and through extensive consultation with our clients and a broad group of other market participants. After careful analysis we are now proposing bold steps to tackle each one.

Huh. It was consultation and deep thought that have led to the current practice of selling Last Quotes instead of Closing Quotes. So their claim of consultation, in and of itself, does not impress me.

The first section is titled Canadian order flow is migrating to the U.S.:

In the U.S., market structure allows wholesalers and other intermediaries to offer attractive options to Canadian securities dealers. In return for the order flow of certain types of natural investors in the most active Canadian securities, dealers receive executions with more favourable economics.

However, the same model cannot be replicated in Canada within the existing regulatory framework including rules governing fair access, banning payment for order flow between dealers and setting minimum standards for price improvement when trading with dark orders.

As a result, some Canadian dealers are considering – or have already begun – changing their order routing practices to execute immediately tradable (active) Canadian retail and institutional flow with U.S. wholesalers, rather than on our domestic public markets. This movement of liquidity to the U.S. represents a serious risk to the quality and vibrancy of Canada’s capital markets as a whole, and may have irreversible consequences.

They’re talking about market orders of retail clients. It’s nice to see some recognition that the regulatory environment is harmful to Canadian interests.

In June 2015, we plan to introduce an innovative trading model on Alpha that will significantly improve the economics and quality of execution for active natural order flow, while improving trading conditions for liquidity providers willing to commit to a minimum order size.

The new Alpha model is built on the premise that most active institutional and retail order flow values certainty and size of execution over speed, and that dealers executing those orders seek to minimize trading costs while meeting best execution obligations.

The superior execution will be achieved by applying an order processing delay (a “speed bump”) for orders that have the potential to remove liquidity from the order book, enforcing a minimum size for liquidity providing orders and providing rebates for active flow.[Footnote: TSX has filed a patent application]
…
A speed bump will be imposed on orders that have the potential to trade with passive liquidity – specifically, all orders not designated as Post Only. The speed bump will be applied equally to these orders of all participants – natural investors and others – and is expected to be set between 5 and 25 milliseconds.

Post Only liquidity providing orders will not be subject to a processing delay, allowing liquidity providers to effectively manage their risk.

The speed bump will discourage latency sensitive active strategies, but will not deter active natural order flow for which a delay in milliseconds is insignificant. This means that providers of passive liquidity will have an increased likelihood of interacting with active orders of natural investors, while being protected against opportunistic, latency sensitive active strategies.

Increased interaction with natural investors combined with the ability to bypass the speed bump when managing passive orders will encourage liquidity provision, better visible prices and an increase in displayed volume, resulting in better execution for natural order flow.
…
In return for bypassing the speed bump, all Post Only orders will be subject to minimum size requirements.

The size threshold will ensure that liquidity providers post sufficient volume against which active orders can execute, contributing to higher average trade sizes, as well as improved fill quality and fill rates for natural active order flow.

This, in turn, will minimize the signaling of liquidity bound for other markets and will reduce market impact. Recognizing that securities exhibit a variety of liquidity profiles, the minimum volume requirement may differ across symbols.

An inverted maker/taker fee model will provide a rebate for active orders, reducing trading fees for retail and institutional dealers and any other non-latency sensitive liquidity taking strategies.

It’s not clear to me whether or not the speed bump will apply to a limit order meeting the Post Only minimum size requirements that can interact with existing resting orders; e.g., what happens if I post a limit order to buy at 25.11 when there’s an extant resting offer at 25.10? And does it matter if my buy is for larger or smaller size than the offer? How about if it’s more than double the size of the offer, so the net change in resting orders would be positive after execution?

The second section is titled Technology-driven markets are not optimized to serve all:

As we embrace this change in technology-driven capital markets, it has become clear that in an environment where some participants increasingly compete on speed, others are challenged and concerned about compromised quality of execution and market integrity.

Specifically, apprehensions around excessive short-term intermediation, the technology race to zero latency and the disenfranchising of the human trader have eroded some participants’ confidence in a market that is meant to balance the needs of all stakeholders.

“disenfranchising of the human trader”, I bet! Prep School weenies can’t cut it in the new meritocracy. And that kindergarten level drivel about ‘a market that is meant to balance the needs of all stakeholders’ is ridiculous. It’s a market. You buy things, you sell things. If you’re good, you do well. If you’re an ignorant bag of dirt, you whimper to the regulators and hope that one of them’s a relative of a friend of Daddy’s.

In Q4 2015, TSX and TSXV plan to implement changes which will enhance the quality of execution for natural investors and their dealers – both retail and institutional – by rewarding those willing to commit liquidity to the book for a period of time by using the new Long Life 2 order type.

Long Life orders will be committed to a minimum resting time in the book – measured in seconds – and cannot be cancelled during that time. In return for providing committed liquidity, these orders will receive priority over orders at the same price that are not subject to the minimum resting time. Trade allocation therefore becomes Price/Broker/Long Life/Time rather than the current Price/Broker/Time matching sequence.

By choosing to use the Long Life order type, natural investors, their dealers and other non-latency sensitive participants will be able to more effectively and confidently participate in the markets without having to compete on speed.

This is somewhat similar to the concept of minimum order exposure times (MOET), which was discussed extensively on April 3, 2014, although in this case the MOET will be both voluntary and set by the exchange, which is greatly preferable to a mandatory MOET set by regulators. To refresh your memory of that spring discussion:

In fact, I have learned from a paper by Charles M. Jones of Columbia Business School titled What do we know about high-frequency trading? that:
…
He also points out – bless the man – that:

Minimum order exposure times: Under these proposals, submitted orders could not be cancelled for at least some period of time, perhaps 50 milliseconds. This would force large changes in equity markets and could severely discourage liquidity provision. The economic rationale here is particularly suspect, as the overriding goal in market design should be to encourage liquidity provision.

Securities transaction taxes: The evidence indicates that these taxes reduce share prices, increase volatility, reduce price efficiency, worsen liquidity, increase trading costs, and cause trading to move offshore.

…
He is referring to frequent batch auctions, which were discussed on PrefBlog on March 19. It was also given a brief mention in the CFTC Concept Release on Risk Controls and System Safeguards for Automated Trading Environments, which also asked a question dear to Assiduous Reader PL’s heart:

96. Should exchanges impose a minimum time period for which orders must remain on the order book before they can be withdrawn? If so, should this minimum resting time requirement apply to orders of all sizes or be restricted to orders smaller than a specific threshold? If there should be a specific threshold, how should that threshold be determined?
…
99. Would batched order processing increase the number of milliseconds that are necessary for correlations among related securities to be established? If so, what specific costs would result from this change and how do those costs compare to the potential benefits described in recent research?

The comment period on this concept release was extended to Valentine’s Day; fifty-seven comments have been published on the CFTC website. I simply do not have time to comb through all these things, especially since it would seem that this is viewed as simply a preliminary skirmish in a long war, but I did read a comment by Thomas McCabe of One Chicago LLC:

Market participants should be free to enter, cancel, or cancel/replace their orders at will, as they assume the risk of execution or non-execution. Exchanges are in a unique position to understand the strain on their systems caused by orders and should be allowed to independently govern throughput into those systems. Accordingly, we oppose the Commission mandating that exchanges impose minimum time periods for orders.

Anyway, with respect to the Toronto Stock Exchange proposals, the first problem I can see is that “Long Life” orders will go stale. Stale on a time-frame of milliseconds, but still stale; they will therefore find themselves predated by nimbler HFT firms who will make a practice of arbitraging small ticks in highly correlated stocks. Whether or not that will offset the benefits is something I don’t know, although I suspect not.

Another issue, probably minor, is that cash management may become more difficult, because having more limit orders on the board than you actually need to execute in order to achieve your cash objectives may lead to more situations in which you overshoot your target because you can’t cancel quickly enough.

The third section of the Toronto Exchange proposals is titled Market complexity is on the rise:

We plan to close TMX Select and decommission Alpha IntraSpread in June 2015.

With this change, we will reduce complexity, fragmentation and dealer costs without compromising on choice. The mandate
to provide a premium destination for active retail order flow, previously maintained by Alpha IntraSpread and TMX Select,
will now be fulfilled by the new Alpha model.

So this section is just a joke; the bank-owned exchange taking advantage of the monopoly for which it is paying the regulators.

Boyd Erman of the Globe points out:

Because the TMX is heavily regulated, all the changes will require both regulatory review and comment from market users. That will take months, and so [head of the TMX equity trading businesses ] Mr. [Kevan] Cowan said the company is hoping to have the changes in place by June.

I will be most interested in the comment letters. One thing that puzzles me at this point is the distribution of orders by the exchange itself. Say a market buy order comes into Alpha (sender expecting a rebate) and the best offer is on the TMX (limit order placer expecting a rebate). Who gets paid? How will uncertainty over payment factor into the various decisions? Game theory, here we come!

Finally, equities continued bouncing:

U.S. stocks rallied, recovering from yesterday’s loss, as earnings from Caterpillar (CAT) Inc. to 3M Co. exceeded analysts’ estimates and data signaled stronger growth in the European economy.

Benchmark indexes pared gains following a New York Post report that a doctor who had been treating Ebola patients in Africa was rushed to a New York hospital with symptoms of the virus. The paper cited unnamed sources.
…
The S&P 500 gained 1.2 percent to 1,950.82 at 4 p.m. in New York after earlier surging as much as 1.8 percent. The index recouped losses from yesterday, when it slid 0.7 percent.
…
The S&P 500 has risen five times in the past six days, pushing the gauge up 4.7 percent since Oct. 15 and recouping about half the losses from a selloff that began in mid-September. The equity benchmark is still down 3 percent from a record.

Economic data today suggested the euro-area economy may have moved one step away from another recession. A Purchasing Managers’ Index showed manufacturing in the region unexpectedly grew this month, while Spain’s economy showed signs of a further recovery, with third-quarter unemployment dropping to the lowest level since 2011. In Germany, factories rebounded from a slump in September.

Fewer Americans filed applications for unemployment benefits over the past month than at any time in 14 years as an improving economy prompted employers to hold on to staff. The four-week average of jobless claims, a less-volatile measure than the weekly figure, dropped to 281,000, the lowest since May 2000, from 284,000 the week before, a Labor Department report showed.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts up 14bp, FixedResets gaining 12bp and DeemedRetractibles winning 15bp. Volatility was low. Volume was extremely low, with the highlights comprised entirely of FixedResets.

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	3.15 %	3.14 %	20,063	19.35	1	0.1681 %	2,653.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.0972 %	3,944.1
Floater	3.03 %	3.14 %	64,145	19.38	4	-1.0972 %	2,648.3
OpRet	4.04 %	1.42 %	100,999	0.08	1	0.0788 %	2,737.9
SplitShare	4.29 %	3.91 %	81,619	3.81	5	-0.0159 %	3,152.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0788 %	2,503.5
Perpetual-Premium	5.48 %	-0.24 %	71,727	0.08	18	0.0583 %	2,458.8
Perpetual-Discount	5.30 %	5.14 %	95,824	15.15	18	0.1381 %	2,604.8
FixedReset	4.22 %	3.61 %	166,874	16.73	75	0.1202 %	2,554.5
Deemed-Retractible	5.02 %	2.11 %	101,617	0.34	42	0.1480 %	2,566.1
FloatingReset	2.55 %	-6.10 %	58,635	0.08	6	0.0327 %	2,546.3

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.A	Floater	-4.00 %	Moderately real. There were some trades at 19.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 2.72 %
CIU.PR.C	FixedReset	1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 3.46 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.W	FixedReset	70,905	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 23.09 Evaluated at bid price : 24.85 Bid-YTW : 3.63 %
TRP.PR.E	FixedReset	34,090	TD crossed 25,000 at 25.21. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 23.23 Evaluated at bid price : 25.20 Bid-YTW : 3.71 %
BMO.PR.T	FixedReset	20,550	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 23.31 Evaluated at bid price : 25.43 Bid-YTW : 3.58 %
BAM.PF.G	FixedReset	20,159	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 23.16 Evaluated at bid price : 25.10 Bid-YTW : 4.20 %
ENB.PF.A	FixedReset	19,525	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 23.20 Evaluated at bid price : 25.13 Bid-YTW : 4.05 %
TRP.PR.A	FixedReset	16,178	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 3.92 %
There were 13 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: 19.20 – 20.50 Spot Rate : 1.3000 Average : 1.1155 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 2.72 %
NEW.PR.D	SplitShare	Quote: 32.65 – 33.13 Spot Rate : 0.4800 Average : 0.3627 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.65 Bid-YTW : 1.93 %
PVS.PR.B	SplitShare	Quote: 24.81 – 25.12 Spot Rate : 0.3100 Average : 0.1959 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.81 Bid-YTW : 4.72 %
CGI.PR.D	SplitShare	Quote: 25.24 – 25.80 Spot Rate : 0.5600 Average : 0.4530 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.24 Bid-YTW : 3.69 %
ELF.PR.F	Perpetual-Discount	Quote: 24.20 – 24.47 Spot Rate : 0.2700 Average : 0.1738 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-23 Maturity Price : 23.95 Evaluated at bid price : 24.20 Bid-YTW : 5.50 %
BNS.PR.P	FixedReset	Quote: 25.30 – 25.51 Spot Rate : 0.2100 Average : 0.1313 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 2.97 %

With every day, the stock market’s gyrations grow:

U.S. stocks retreated, after the Standard & Poor’s 500 Index rose the most in a year yesterday, as energy shares led losses amid a drop in oil prices.
…
The S&P 500 slipped 0.7 percent to 1,927.11 at 4 p.m. in New York. The Dow Jones Industrial Average slid 153.49 points, or 0.9 percent, to 16,461.32. The Nasdaq Composite Index lost 0.8 percent. Crude oil slid 2.4 percent to $80.52 a barrel, the lowest level on a closing basis in more than two years, after a U.S. report showed inventories increased by 7.11 million barrels last week.
…
Four consecutive advances in the S&P 500 through yesterday pushed the gauge up 4.2 percent since Oct. 15, recouping half the losses from a selloff that began in mid-September. The equity index surged 2 percent yesterday, its best day since October 2013, as speculation the European Central Bank will boost stimulus to spur growth in the region.

The cost of living in the U.S. barely rose in September, leaving inflation below the Federal Reserve’s goal as fuel prices plunge this month. The consumer-price index climbed 0.1 percent after decreasing 0.2 percent in August, a Labor Department report showed.

… and there is chatter about currency wars:

Weak price growth is stifling economies from the euro region to Israel and Japan. Eight of the 10 currencies with the biggest forecasted declines through 2015 are from nations that are either in deflation or pursuing policies that weaken their exchange rates, data compiled by Bloomberg show.

“This beggar-thy-neighbor policy is not about rebalancing, not about growth,” David Bloom, the global head of currency strategy at London-based HSBC Holdings Plc, which does business in 74 countries and territories, said in an Oct. 17 interview. “This is about deflation, exporting your deflationary problems to someone else.”

Bloom puts it in these terms because, when one jurisdiction weakens its exchange rate, another’s gets stronger, making imported goods cheaper. Deflation is a both a consequence of, and contributor to, the global economic slowdown that’s pushing the euro region closer to recession and reducing demand for exports from countries such as China and New Zealand.
…
Hungary and Switzerland entered deflation in the past two months, while Swedish central-bank Deputy Governor Per Jansson last week blamed his country’s falling prices partly on rate cuts the ECB used to boost its own inflation. A policy response may be necessary, he warned.

But there will be no deflation in North America … will there?

The cost of living in the U.S. barely rose in September, restrained by decelerating prices for a broad array of goods and services that signal the Federal Reserve can keep interest rates low well into 2015.

The consumer-price index climbed 0.1 percent after decreasing 0.2 percent in August, a Labor Department report showed today in Washington. Over the past year, costs increased 1.7 percent, the same as in the 12 months through August.

While plunging fuel costs are one reason for the restraint in pricing, clothing retailers, medical-care providers and airlines are also among those keeping a lid on charges. With inflation falling short of the Fed’s goal, policy makers need not rush to raise rates even as the world’s largest economy shows no sign of succumbing to a slowdown in global growth.

… so the Bank of Canada is maintaining its policy rate:

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

Inflation in Canada is close to the 2 per cent target. Core inflation rose more rapidly than was expected in the Bank’s July Monetary Policy Report (MPR), mainly reflecting unexpected sector-specific factors. Total CPI inflation is evolving broadly as expected, as the pickup in core inflation was largely offset by lower energy prices. Underlying inflationary pressures are muted, given the persistent slack in the economy and the continued effects of competition in the retail sector.
…
In this context, Canada’s exports have begun to respond. However, business investment remains weak. Meanwhile, the housing market and consumer spending are showing renewed vigour and auto sales have reached record highs, all fuelled by very low borrowing rates. The lower terms of trade will have a tempering effect on income.

Canada’s real GDP growth is projected to average close to 2 1/2 per cent over the next year before slowing gradually to 2 per cent by the end of 2016, roughly the estimated growth rate of potential output. As global headwinds recede, confidence in the sustainability of domestic and global demand should improve and business investment should pick up. Together with a moderation in the growth of household spending, this is expected to gradually return Canada’s economy to a more balanced growth path. As the economy reaches its full capacity in the second half of 2016, both core and total CPI inflation are projected to be about 2 per cent on a sustained basis.

Weighing all of these factors, the Bank judges that the risks to its inflation projection are roughly balanced. Meanwhile, the financial stability risks associated with household imbalances are edging higher. Overall, the balance of risks falls within the zone for which the current stance of monetary policy is appropriate and therefore the target for the overnight rate remains at 1 per cent.

The Monetary Policy Report highlighted housing:

Housing starts have remained broadly in line with demographic demand in recent months (Chart 24). However, sales of existing homes have picked up noticeably since the beginning of the year, to a four-year high (Chart 25). This is contributing to sizable increases in house prices, although the national picture continues to mask important regional divergences (Chart 26 and Chart 27). In general, with historically low price increases and sales volumes, markets in Eastern Canada appear to show signs consistent with a soft landing. This contrasts with major cities in Ontario, Alberta and British Columbia, where housing markets are generally robust and much tighter.

… and the Globe chimed in with:

According to the Teranet-National house price index, home prices in Canada rose 0.3 per cent in September from August and 4.9 per cent from a year earlier.

Notably, Calgary, Toronto and Vancouver were well above the national average, at 9.5 per cent, 7.4 per cent and 6.5 per cent, respectively.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts up 10bp, FixedResets winning 13bp and DeemedRetractibles gaining 2bp. Volatility was average. Volume was low.

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	3.15 %	3.15 %	20,898	19.34	1	0.0000 %	2,649.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.5452 %	3,987.9
Floater	2.99 %	3.15 %	65,125	19.35	4	0.5452 %	2,677.7
OpRet	4.04 %	2.26 %	101,617	0.08	1	0.0000 %	2,735.7
SplitShare	4.29 %	3.90 %	82,216	3.81	5	-0.0582 %	3,152.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,501.5
Perpetual-Premium	5.48 %	-0.15 %	73,560	0.08	18	-0.0437 %	2,457.4
Perpetual-Discount	5.30 %	5.14 %	95,792	15.15	18	0.0953 %	2,601.2
FixedReset	4.22 %	3.60 %	167,507	16.73	75	0.1301 %	2,551.5
Deemed-Retractible	5.02 %	2.49 %	103,051	0.34	42	0.0200 %	2,562.3
FloatingReset	2.55 %	-6.10 %	60,705	0.08	6	-0.0719 %	2,545.5

Performance Highlights
Issue	Index	Change	Notes
CIU.PR.C	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 3.53 %
TRP.PR.B	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 3.64 %
PWF.PR.A	Floater	1.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 2.61 %
FTS.PR.J	Perpetual-Discount	1.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 23.76 Evaluated at bid price : 24.15 Bid-YTW : 4.97 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.K	Deemed-Retractible	131,289	Scotia crossed 40,000 at 26.05; Nesbitt crossed blocks of 35,000 and 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-25 Maturity Price : 25.50 Evaluated at bid price : 26.03 Bid-YTW : -8.09 %
NA.PR.W	FixedReset	67,325	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 23.09 Evaluated at bid price : 24.85 Bid-YTW : 3.63 %
TD.PF.B	FixedReset	64,463	Scotia crossed 51,000 at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 23.23 Evaluated at bid price : 25.15 Bid-YTW : 3.54 %
BAM.PR.R	FixedReset	53,235	RBC crossed 46,800 at 25.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 23.74 Evaluated at bid price : 25.18 Bid-YTW : 3.74 %
GWO.PR.N	FixedReset	39,397	Nesbitt crossed 35,000 at 21.82. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 4.47 %
ENB.PF.G	FixedReset	34,284	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 23.14 Evaluated at bid price : 25.08 Bid-YTW : 4.07 %
There were 19 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
W.PR.H	Perpetual-Premium	Quote: 25.02 – 25.35 Spot Rate : 0.3300 Average : 0.2080 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 24.80 Evaluated at bid price : 25.02 Bid-YTW : 5.53 %
TRP.PR.B	FixedReset	Quote: 18.80 – 19.20 Spot Rate : 0.4000 Average : 0.2881 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 3.64 %
CGI.PR.D	SplitShare	Quote: 25.25 – 25.68 Spot Rate : 0.4300 Average : 0.3357 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 3.68 %
FTS.PR.H	FixedReset	Quote: 20.11 – 20.40 Spot Rate : 0.2900 Average : 0.2130 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 20.11 Evaluated at bid price : 20.11 Bid-YTW : 3.64 %
TD.PR.S	FixedReset	Quote: 25.07 – 25.34 Spot Rate : 0.2700 Average : 0.1991 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 3.16 %
TRP.PR.C	FixedReset	Quote: 20.92 – 21.19 Spot Rate : 0.2700 Average : 0.2047 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-22 Maturity Price : 20.92 Evaluated at bid price : 20.92 Bid-YTW : 3.63 %

It was a nice day to own equities:

The S&P 500 climbed 2 percent to 1,941.28 at 4 p.m. in New York, its best gain since October 2013. The equity gauge is up 4.2 percent since Oct. 15 in the biggest four-day rally since January 2013. The Dow Jones Industrial Average climbed 215.14 points, or 1.3 percent, to 16,615 today. The Nasdaq 100 surged 2.6 percent, the most since January 2013, as about 7.2 billion shares traded hands in the U.S.
…
The ECB bought Italian covered bonds as it returned to the market for a second day under its asset purchase program, according to two people familiar with the matter. Debt issued by Intesa Sanpaolo SpA was included in the purchases, according to one of the people, who asked not to be identified because the information is private.

The ECB entered the 2.6 trillion-euro ($3.3 trillion) covered bond market after President Mario Draghi unveiled plans last month to bolster companies’ and households’ access to financing. Draghi, who also included asset-backed securities in the program, intends to expand the bank’s balance sheet by as much as 1 trillion euros to stave off deflation in the euro area.

U.S. stocks have rallied after St. Louis Federal Reserve Bank President James Bullard said on Oct. 16 that policy makers should consider delaying the end of bond purchases. He was the first Fed official to publicly suggest the central bank should extend its asset-purchase program when policy makers meet later this month.

CWB.PR.B has been confirmed at Pfd-3 by DBRS:

CWB’s has strong asset quality as evidenced by its history of low write-off rates, a proven niche strategy using relationship-based lending, a favourable efficiency ratio that reflects its business mix and strong internal capital generation. Challenges remain, though, particularly concentration in the loan book, both geographically (Alberta and British Columbia) and by industry (commercial, construction and real estate lending). Like its Canadian peers, the Bank has exposure to Canadian real estate-supported lending. A slowdown in the real estate markets may slow earnings generation and could hurt asset quality indicators, which ultimately may have an impact on provisioning levels. Funding diversification at CWB has been slowly improving over the past several years, but continues to rely heavily on brokered deposit.

CWB recently reported earnings available to common shareholders of $160 million (a return on equity of 14.7%) for the nine months ended July 31, 2014, an 18% increase over the same period in 2013. The earnings increase was largely due to loan growth year-to-date and higher non-interest income, offset by a narrower net interest margin in the continued low interest environment. CWB’s 105th consecutive profitable quarter was accompanied by low loan loss provisions. Capital levels are viewed as strong with a Basel III Common Equity Tier 1 ratio of 8.0% based on risk-weighted assets calculated using the standardized approach.

I recently came across a very good review of the US TruPS market by Yalman Onaran and Jody Shenn of Bloomberg. An oldie but goodie!

Bloomberg also has a good review of CoCos, by John Glover:

Regulators noted that investors often did a better job of predicting which banks would buckle in the crisis than they had themselves. CoCo bonds are designed to harness this “wisdom of the crowd” by putting bondholders on the front line, giving them a vested interest in the health of wobbly banks. The problem is that they are untested: When the first one goes sour and halts coupon payments, it’s possible investors could suddenly wake up to the inherent risk and flee all CoCos, destabilizing the corporate bond market and possibly even the financial system. Critics charge that the securities are too complex to be properly understood, too varied and too much like equity to be considered bonds. The banks themselves are opaque, definitions of capital vary from bond to bond, and the distance between a bank’s current position and the moment disaster will strike is almost impossible to calculate. When the first one blows, regulators will get a better sense of whether CoCos helped save the banking system, or sink it.

I feel that the current model for CoCos is inherently flawed since the triggers are based on regulatory capital, which didn’t work out all that well during the Credit Crunch; I continue to advocate high-trigger CoCos with a conversion trigger based on the common stock price.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 30bp, FixedResets off 7bp and DeemedRetractibles gaining 11bp. Volatility was high, notable for FixedReset losers and Floating Rate winners. Volume was low.

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	3.15 %	3.15 %	21,768	19.34	1	-0.7506 %	2,649.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	2.1920 %	3,966.2
Floater	3.00 %	3.15 %	65,855	19.35	4	2.1920 %	2,663.2
OpRet	4.04 %	2.12 %	100,680	0.08	1	-0.0787 %	2,735.7
SplitShare	4.29 %	3.88 %	85,593	3.82	5	0.5594 %	3,154.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0787 %	2,501.5
Perpetual-Premium	5.48 %	-0.10 %	74,099	0.08	18	0.1095 %	2,458.5
Perpetual-Discount	5.31 %	5.12 %	96,031	15.14	18	0.3012 %	2,598.7
FixedReset	4.23 %	3.61 %	169,544	16.73	75	-0.0664 %	2,548.2
Deemed-Retractible	5.02 %	2.62 %	103,192	0.34	42	0.1147 %	2,561.8
FloatingReset	2.55 %	-6.10 %	61,142	0.08	6	-0.0522 %	2,547.3

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.B	FixedReset	-2.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 18.52 Evaluated at bid price : 18.52 Bid-YTW : 3.70 %
TRP.PR.A	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 21.47 Evaluated at bid price : 21.77 Bid-YTW : 3.84 %
FTS.PR.K	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 23.09 Evaluated at bid price : 24.65 Bid-YTW : 3.54 %
IAG.PR.A	Deemed-Retractible	1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.10 Bid-YTW : 5.65 %
CIU.PR.C	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 20.65 Evaluated at bid price : 20.65 Bid-YTW : 3.48 %
CGI.PR.D	SplitShare	1.56 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 3.60 %
BAM.PR.B	Floater	1.70 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 3.15 %
BAM.PR.C	Floater	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 16.68 Evaluated at bid price : 16.68 Bid-YTW : 3.17 %
BAM.PR.K	Floater	1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 3.15 %
PWF.PR.A	Floater	3.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 2.68 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PF.G	FixedReset	115,860	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 23.13 Evaluated at bid price : 25.06 Bid-YTW : 4.07 %
NA.PR.W	FixedReset	78,851	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 23.10 Evaluated at bid price : 24.87 Bid-YTW : 3.62 %
RY.PR.Y	FixedReset	71,482	There is still nothing on their website about the upcoming call date. C’mon, Royal, hurry up and call this thing so I don’t have to check any more! CIBC bought 20,000 from RBC at 25.40, and blocks of 10,000 and 25,000 from TD at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 1.02 %
BAM.PF.G	FixedReset	56,256	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 23.17 Evaluated at bid price : 25.14 Bid-YTW : 4.19 %
TRP.PR.A	FixedReset	26,123	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 21.47 Evaluated at bid price : 21.77 Bid-YTW : 3.84 %
ENB.PF.C	FixedReset	23,592	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 23.16 Evaluated at bid price : 25.05 Bid-YTW : 4.05 %
There were 17 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ELF.PR.H	Perpetual-Discount	Quote: 25.00 – 25.50 Spot Rate : 0.5000 Average : 0.2965 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 24.56 Evaluated at bid price : 25.00 Bid-YTW : 5.52 %
FTS.PR.F	Perpetual-Discount	Quote: 24.30 – 24.74 Spot Rate : 0.4400 Average : 0.2923 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 24.04 Evaluated at bid price : 24.30 Bid-YTW : 5.10 %
BAM.PR.E	Ratchet	Quote: 23.80 – 24.46 Spot Rate : 0.6600 Average : 0.5666 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 23.46 Evaluated at bid price : 23.80 Bid-YTW : 3.15 %
TRP.PR.B	FixedReset	Quote: 18.52 – 18.77 Spot Rate : 0.2500 Average : 0.1653 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-21 Maturity Price : 18.52 Evaluated at bid price : 18.52 Bid-YTW : 3.70 %
NEW.PR.D	SplitShare	Quote: 32.59 – 32.99 Spot Rate : 0.4000 Average : 0.3262 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.59 Bid-YTW : 2.19 %
MFC.PR.B	Deemed-Retractible	Quote: 22.88 – 23.14 Spot Rate : 0.2600 Average : 0.1921 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.88 Bid-YTW : 5.85 %

On September 22 I highlighted the Blackrock publication CORPORATE BOND MARKET STRUCTURE: THE TIME FOR REFORM IS NOW, but it turns out they’ve been pushing the ‘scheduled issuance’ idea for a while. It’s also been proposed in their May, 2013, publication Setting New Standards: The Liquidity Challenge II, which comes with some great illustrative charts.

If the Shitty Price Hypothesis (described in the post TRACE and the Bond Market is correct, we expect to see a decrease in the concession from pre-TRACE days, perhaps even going negative.

This one is interesting in conjunction with the Trading Volume chart below. Note that dealer inventories have dropped by about half since 2005.

So a bigger proportion of the spread-to-Treasuries is being eaten up by the bid-ask spread.

Issuance is huge relative to outstanding, which may be why the world hasn’t ground to a halt despite the pernicious influence of TRACE.

But it could be that decreasing liquidity is reducing the tenor of new issues. Investors have to get their liquidity somehow!

An increasing liquidity premium is consistent with the Shitty Price Hypothesis

New issues will change hands a few times, then settle into their permanent homes.

This is particularly interesting in conjunction with the Dealer Inventory chart above. Note that although trading volume has decreased, it has decreased less, proportionally, than dealer inventories have, indicating that dealer inventory turnover is increasing. This is consistent with the Shitty Price Hypothesis

Victoria Stilwell of Bloomberg complains:

Federal Reserve policy makers are missing a key element as they assess the health of the labor market: data that includes whether those who are employed are overqualified for their job or would like to work more hours.

As a result, the “significant underutilization of labor resources” that Fed officials highlighted last month as they renewed a pledge to keep interest rates low for a “considerable period” is probably even more severe than currently estimated. And the information gap means policy makers may have more difficulty gauging the right moment to raise rates off zero.
…
Private surveys have attempted to fill in the gaps. Some 46 percent of workers who graduated from college in 2012 or 2013 said that they were in a job that did not require their degree, according to a study released in May by Accenture Plc. That’s a five percentage point increase from last year, the New York-based management-consulting company’s report showed.

So, the study, titled Great Expectations: Insights from the Accenture 2014 College Graduate Employment Survey states:

46 percent of 2012/2013 grads working today report that they are underemployed (meaning they are working in a job that does not require their college degree). This is a 5 percent increase from last year’s survey.

I’m not sure I agree with that, entirely. It has been a long time since somebody asked me to explain the Schrödinger Wave Equation for a hydrogen atom, or to whip them up a batch of cis-stilbenes with a 4-substituent. So my chemistry degree hasn’t been required for a while. But I don’t feel underemployed!

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 15bp, FixedResets off 2bp and DeemedRetractibles gaining 4bp. Volatility was average, but enlivened by some sloppy trading at the close in PWF.PR.A. Volume was very low.

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	3.13 %	3.11 %	22,123	19.40	1	0.0417 %	2,669.3
FixedFloater	0.00 %	0.00 %	0	0.00	0	-2.6600 %	3,881.2
Floater	3.07 %	3.21 %	64,680	19.22	4	-2.6600 %	2,606.1
OpRet	4.04 %	1.02 %	101,190	0.08	1	0.1577 %	2,737.9
SplitShare	4.31 %	4.03 %	84,793	3.82	5	-0.1994 %	3,136.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1577 %	2,503.5
Perpetual-Premium	5.49 %	1.16 %	73,386	0.08	18	0.1272 %	2,455.8
Perpetual-Discount	5.32 %	5.15 %	96,596	15.16	18	0.1508 %	2,590.9
FixedReset	4.22 %	3.60 %	170,794	16.73	75	-0.0190 %	2,549.8
Deemed-Retractible	5.03 %	2.78 %	102,712	0.44	42	0.0382 %	2,558.9
FloatingReset	2.55 %	-6.10 %	61,836	0.08	6	-0.0848 %	2,548.6

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.A	Floater	-7.95 %	It appears that Desjardins put in a Market or low-limit order at 3:58, which took out the bid – Five hundred went at 20.00 and 20.01, time-stamped 3:58, then six hundred shares traded at 19.02 and 188 at 19.01, time-stamped 3:59. Whoosh! YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-20 Maturity Price : 19.11 Evaluated at bid price : 19.11 Bid-YTW : 2.77 %
CGI.PR.D	SplitShare	-1.54 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.81 %
MFC.PR.F	FixedReset	-1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.10 Bid-YTW : 4.54 %
PWF.PR.F	Perpetual-Premium	1.12 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-19 Maturity Price : 25.00 Evaluated at bid price : 25.21 Bid-YTW : -6.75 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.A	FixedReset	207,140	RBC crossed two blocks of 100,000 each, both at 21.97. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-20 Maturity Price : 21.63 Evaluated at bid price : 22.00 Bid-YTW : 3.79 %
NA.PR.W	FixedReset	163,450	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-20 Maturity Price : 23.06 Evaluated at bid price : 24.77 Bid-YTW : 3.64 %
FTS.PR.M	FixedReset	90,638	Scotia crossed blocks of 22,000 and 16,100, both at 25.20. Nesbitt bought 17,500 from RBC at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-20 Maturity Price : 23.20 Evaluated at bid price : 25.15 Bid-YTW : 3.81 %
FTS.PR.H	FixedReset	81,452	RBC crossed two blocks of 40,000 each, both at 20.39. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-20 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 3.60 %
ENB.PF.G	FixedReset	61,675	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-20 Maturity Price : 23.13 Evaluated at bid price : 25.06 Bid-YTW : 4.07 %
IFC.PR.C	FixedReset	54,411	RBC crossed 50,000 at 25.54. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.27 %
There were 18 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: 19.11 – 20.75 Spot Rate : 1.6400 Average : 0.9689 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-20 Maturity Price : 19.11 Evaluated at bid price : 19.11 Bid-YTW : 2.77 %
CGI.PR.D	SplitShare	Quote: 25.01 – 25.60 Spot Rate : 0.5900 Average : 0.3772 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.81 %
HSB.PR.D	Deemed-Retractible	Quote: 25.20 – 25.78 Spot Rate : 0.5800 Average : 0.3743 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 2.34 %
TD.PR.Q	Deemed-Retractible	Quote: 25.92 – 26.24 Spot Rate : 0.3200 Average : 0.2030 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-19 Maturity Price : 25.75 Evaluated at bid price : 25.92 Bid-YTW : -4.52 %
MFC.PR.F	FixedReset	Quote: 22.10 – 22.50 Spot Rate : 0.4000 Average : 0.3095 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.10 Bid-YTW : 4.54 %
BNS.PR.N	Deemed-Retractible	Quote: 25.78 – 26.00 Spot Rate : 0.2200 Average : 0.1367 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-28 Maturity Price : 25.50 Evaluated at bid price : 25.78 Bid-YTW : 0.57 %

Today’s Toronto Stock Exchange Screw-Up regards BCE.PR.K:

Look that that quote on the Toronto Stock Exchange – which, together with its Venture sibling, comprise Canada’s premier equities markets: 8.55-21.35, a small spread of only $12.80. Since the Exchange refuses to sell me closing quotes, instead selling me “Last” quotes, I’m not sure what the actual closing quote might have been – since I don’t feel like spending extra money to get the detail of the last few minutes. So it might have been a post-4pm bid cancellation, it might be another shining example of how TSX’s Market Maker system maximizes market efficiency. I’ll let youse guys figure it out.

Anyway, HIMPref™ threw up when I tried to tell it the reported bid price, so I have substituted $20.50, which is the bid on Pure.

Meanwhile, Capital Power, proud issuer of CPX.PR.A, CPX.PR.C and CPX.PR.E, issued a profit warning:

Capital Power Corporation (Capital Power, or the Company) (TSX:CPX) provided an update today on its third quarter 2014 financial results and its financial guidance for 2014.

In the third quarter of 2014, Capital Power’s owned plants achieved strong plant availability of 97% which was consistent with expectations. However, due to lower plant availability at the acquired Sundance PPA units, other plant derates, and lower Alberta wind generation, overall electricity generation production was below expectations. Accordingly, the Company expects third quarter net income and funds from operations to be below previous expectations. These non-Capital Power operated plant outages occurred primarily in July coinciding with a period of pricing volatility with Alberta spot power prices averaging $122 per megawatt hour (MWh) in the month compared with $45 per MWh in August and $24 per MWh in September. As a result, with commercial production 100% sold forward in July, the Company was required to cover a short market position that negatively impacted its portfolio optimization position in the quarter.

The Company has updated its outlook for funds from operations for the year, which are now expected at the low end of the forecast range of $360 million to $400 million.

In addition, net income for the third quarter of 2014 was negatively impacted by a non-cash write-down of deferred tax assets of $73 million. The write-down related to the accounting impact of U.S. income tax loss carry forwards that can no longer be recognized for accounting purposes based on the Company’s current long term forecast for U.S. taxable income. The forecast showed a decline in taxable income over the latter years of the forecast. For income tax purposes, these U.S net operating losses do not expire until the 2027 to 2033 period. Accordingly, they retain economic value and could result in the Company recording deferred tax assets in the future. The Company continues to pursue U.S. contracted power opportunities and the U.S. business development pipeline is active. Importantly, the write-down is a non-cash item and has no impact on operations or other key performance measures.

Capital Power will be releasing its third quarter 2014 results on October 24, 2014 after the TSX market closes.

I haven’t seen anything yet from the Credit Rating Agencies as to whether or not they consider this serious.

Advantaged Preferred Share Trust (PFR), which made it into one of my articles, was confirmed at STA-2 (middle) by DBRS:

DBRS has today confirmed the stability rating of STA-2 (middle) to the retractable units (the Units) issued by Advantaged Preferred Share Trust (the Trust).

Proceeds from the Trust’s offerings have been used to enter into a forward agreement with Royal Bank of Canada in order to gain exposure to a diversified portfolio of preferred shares (the Portfolio). The forward agreement provides Unitholders with a return equivalent to a direct investment in the Portfolio. The Portfolio is passively managed by RBC Dominion Securities Inc. (the Administrator).

On August 26, 2010, DBRS assigned a stability rating of STA-2 (middle) to the Units issued by the Trust in accordance with the new methodology for rating structured income funds published in May 2010. The rating was mainly based on the strong credit quality of the Trust’s preferred share portfolio and the limited flexibility of the Administrator to invest in riskier assets. The rating was last confirmed on October 18, 2013, at STA-2 (middle).

Since October 2013, the performance of the Portfolio has been fairly stable. The weighted-average yield of the Portfolio is approximately 5.01% as of September 30, 2014. The Trust’s current net income (including a regular additional payment under the forward agreement to offset operating expenses) covers 98.6% of the distribution paid out to Unitholders. As a result, the rating of STA-2 (middle) on the Units has been confirmed. The main constraints to the rating are the interest rate risk of the Portfolio and the potential for capital losses and reductions in income resulting from underlying securities being called for redemption by their respective issuers.

We’re always hearing about Chinese property buyers in Vancouver, but they’re all over the States as well:

This flood of money, arriving from China despite strict currency controls, has helped the city build a $20 million high school performing arts center and the local Mercedes dealership expand. “Thank God for them coming over here,” says Peggy Fong Chen, a broker in Arcadia for many years. “They saved our recession.” The new residents are from China’s rising millionaire class—entrepreneurs who’ve made fortunes building railroads in Tibet, converting bioenergy in Beijing, and developing real estate in Chongqing. One co-owner of a $6.5 million house is a 19-year-old college student, the daughter of the chief executive of a company the state controls.

Arcadia is a concentrated version of what’s happening across the U.S. The Hurun Report, a magazine in Shanghai about China’s wealthy elite, estimates that almost two-thirds of the country’s millionaires have already emigrated or plan to do so. They’re scooping up homes from Seattle to New York, buying luxury goods on Fifth Avenue, and paying full freight to send their kids to U.S. colleges. Chinese nationals hold roughly $660 billion in personal wealth offshore, according to Boston Consulting Group, and the National Association of Realtors says $22 billion of that was spent in the past year acquiring U.S. homes.

It was a strong day for the Canadian preferred share market, with PerpetualDiscounts gaining 6bp, FixedResets winning 32bp and DeemedRetractibles up 11bp. Volatility was high, highlighted by losing Floating Rate issues and winning FixedResets. Volume was well above average (so there, prefQC!).

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	3.13 %	3.12 %	22,087	19.40	1	-1.2768 %	2,668.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.8156 %	3,987.2
Floater	2.99 %	3.19 %	63,568	19.26	4	-1.8156 %	2,677.3
OpRet	4.04 %	2.55 %	102,222	0.08	1	0.0394 %	2,733.6
SplitShare	4.31 %	4.10 %	85,562	3.82	5	-0.4050 %	3,143.0
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0394 %	2,499.6
Perpetual-Premium	5.49 %	0.14 %	72,621	0.08	18	0.1977 %	2,452.7
Perpetual-Discount	5.33 %	5.15 %	95,278	15.11	18	0.0647 %	2,587.0
FixedReset	4.22 %	3.69 %	169,202	16.44	75	0.3170 %	2,550.3
Deemed-Retractible	5.03 %	2.54 %	102,803	0.44	42	0.1062 %	2,557.9
FloatingReset	2.55 %	-4.24 %	62,578	0.08	6	0.1830 %	2,550.8

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.C	Floater	-2.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 16.48 Evaluated at bid price : 16.48 Bid-YTW : 3.20 %
BAM.PR.B	Floater	-2.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 16.53 Evaluated at bid price : 16.53 Bid-YTW : 3.19 %
BAM.PR.K	Floater	-2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 16.53 Evaluated at bid price : 16.53 Bid-YTW : 3.19 %
BAM.PR.E	Ratchet	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 23.56 Evaluated at bid price : 23.97 Bid-YTW : 3.12 %
PVS.PR.B	SplitShare	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 4.71 %
FTS.PR.H	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 20.36 Evaluated at bid price : 20.36 Bid-YTW : 3.72 %
POW.PR.G	Perpetual-Premium	1.27 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 4.75 %
MFC.PR.F	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 4.50 %
SLF.PR.I	FixedReset	1.36 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 2.21 %
IFC.PR.A	FixedReset	1.84 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.83 Bid-YTW : 4.19 %
FTS.PR.K	FixedReset	2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 23.22 Evaluated at bid price : 25.03 Bid-YTW : 3.55 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.O	Deemed-Retractible	331,587	TD crossed blocks of 300,000 and 13,400, both at 24.98, and sold 15,000 to Nesbitt at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-30 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 4.00 %
BMO.PR.W	FixedReset	231,516	RBC crossed 50,000 at 25.02. Nesbitt crossed blocks of 50,000 and 100,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 23.21 Evaluated at bid price : 25.16 Bid-YTW : 3.64 %
MFC.PR.M	FixedReset	182,128	Nesbitt crossed 33,200 at 25.35; TD crossed 99,900 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.33 Bid-YTW : 3.78 %
TD.PR.S	FixedReset	171,393	Nesbitt crossed 45,000 at 25.15; RBC crossed 105,400 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 3.14 %
CU.PR.D	Perpetual-Discount	155,587	Desjardins crossed 153,400 at 24.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 23.66 Evaluated at bid price : 24.04 Bid-YTW : 5.15 %
RY.PR.I	FixedReset	151,473	Nesbitt crossed 33,000 at 25.57, then another 111,100 at 25.63. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.58 Bid-YTW : 3.09 %
NA.PR.W	FixedReset	133,285	Scotia crossed 50,000 at 24.75, then bought 12,100 from National at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 23.05 Evaluated at bid price : 24.75 Bid-YTW : 3.73 %
TD.PF.B	FixedReset	100,325	RBC crossed blocks of 29,900 and 32,000, both at 25.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 23.23 Evaluated at bid price : 25.15 Bid-YTW : 3.63 %
There were 40 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.P	FixedReset	Quote: 22.16 – 22.75 Spot Rate : 0.5900 Average : 0.3901 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 21.71 Evaluated at bid price : 22.16 Bid-YTW : 3.56 %
BAM.PR.B	Floater	Quote: 16.53 – 16.99 Spot Rate : 0.4600 Average : 0.2650 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 16.53 Evaluated at bid price : 16.53 Bid-YTW : 3.19 %
BAM.PR.C	Floater	Quote: 16.48 – 16.91 Spot Rate : 0.4300 Average : 0.2626 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 16.48 Evaluated at bid price : 16.48 Bid-YTW : 3.20 %
CIU.PR.C	FixedReset	Quote: 20.42 – 21.23 Spot Rate : 0.8100 Average : 0.6474 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 20.42 Evaluated at bid price : 20.42 Bid-YTW : 3.65 %
SLF.PR.I	FixedReset	Quote: 26.15 – 26.55 Spot Rate : 0.4000 Average : 0.2442 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 2.21 %
TRP.PR.C	FixedReset	Quote: 20.63 – 21.20 Spot Rate : 0.5700 Average : 0.4149 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-17 Maturity Price : 20.63 Evaluated at bid price : 20.63 Bid-YTW : 3.80 %

The SEC is gleefully trumpeting its contribution to market inefficiency:

An SEC investigation found that Athena Capital Research used an algorithm that was code-named Gravy to engage in a practice known as “marking the close” in which stocks are bought or sold near the close of trading to affect the closing price. The massive volumes of Athena’s last-second trades allowed Athena to overwhelm the market’s available liquidity and artificially push the market price – and therefore the closing price – in Athena’s favor. Athena was acutely aware of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails.
…
The SEC’s order finds that Athena’s manipulative scheme focused on trading in order imbalances in securities at the close of the trading day. Imbalances occur when there are more orders to buy shares than to sell shares (or vice versa) at the close for any given stock. Every day at the close of trading, NASDAQ runs a closing auction to fill all on-close orders at the best price, one that is not too distant from the price of the stock just before the close. Athena placed orders to fill imbalances in securities at the close of trading, and then traded or “accumulated” shares on the continuous market on the opposite side of its order.

According to the SEC’s order, Athena’s algorithmic strategies became increasingly focused on ensuring that the firm was the dominant firm – and sometimes the only one – trading desirable stock imbalances at the end of each trading day. The firm implemented additional algorithms known as “Collars” to ensure that Athena’s orders received priority over other orders when trading imbalances. These eventually resulted in Athena’s imbalance-on-close orders being at least partially filled more than 98 percent of the time. Athena’s ability to predict that it would get filled on almost every imbalance order allowed the firm to unleash its manipulative Gravy algorithm to trade tens of thousands of stocks right before the close of trading. As a result, these stocks traded at artificial prices that NASDAQ then used to set the closing prices for on-close orders as part of its closing auction. Athena’s high frequency trading scheme enabled its orders to be executed at more favorable prices.

Athena did not admit or deny the charges, so in the first place this is clearly just another example of regulatory extortion.

But in addition I fail to see anything wrong with the substance of the matter. In order for this to work, we need a situation at the end of the day where the total density of offers (bids) is small relative to the number of imbalanced buy-on-close (sell-on-close) orders; that is to say, if there is only 100 shares buy-on-close imbalance, then it makes no sense to buy 1,000 shares immediately prior to move the price by a dime. On the other hand, it makes all kinds of sense the other way ’round.

So think about it. There’s an issue that might have – for instance – ten blocks of 500 shares each offered at penny increments. And somebody puts in a buy-on-close order for 10,000 shares. There’s a technical term that may be used for a person like this: “moron”.

I cannot think of any legitimate reason for a portfolio manager – even if it’s granny, managing her $20,000 portfolio – to use ‘on close’ orders. The best illegitimate reason I can think of is the manager of an index fund wanting to make absolutely certain that his trade will not affect the tracking error of the portfolio; and what this does is cost his investors money, not because of tracking error, but because the index itself has lost money relative to what otherwise would have been the case. So the PM and his moronic investors (one party or the other has to be moronic!) are getting burned due to the pursuit of a trading strategy that pays no attention whatsoever to the fundamentals of what they are doing.

And, I claim, that is a Good Thing.

This happens all the time with the major indices due to pre-announcement of index changes. Say an issue gets added to the index. The price should go up, right? Supply and demand. But what happens is that it’s pre-announced, so the price goes up during the interim period and the index funds can buy in gradually, while the index itself buys at the higher price. So what we get is reduced, possibly even negative, tracking costs … but the index underperforms what its returns would have been had there been no pre-announcement.

But the index fund sponsor can then take out large advertisements touting their low tracking errors and investors can hide their heads in the sand regarding the performance of their index relative to an honestly calculated meta-inde, which is always a very popular investment strategy.

It’s too bad for Athena, which presumably was offered a choice between paying $1-million to the SEC or paying $2-million to their lawyers and getting randomly chosen for the next 17 completely randomized in-depth compliance examinations. But Assiduous Readers will note the similarities between this case and the various scandal-shock-horror stories about moronic portfolio managers entering stupid orders to be filled at the fixing price in the gold market (discussed February 27, 2014) and in the LIBOR market (discussed December 19, 2012) and in the FX market (discussed September 16, 2014); the regulators needed a villain and chose Athena. After all, stupid, lazy people must be protected. Isn’t that what capital markets are for?

Matt Levine of Bloomberg takes a harsher view:

At 3:50 p.m., Nasdaq tells everyone that, say, there’s a buy imbalance of 224,638 shares of EBay at its current trading price of $23.55. That means that, if trading stopped right there and the closing auction was held at 3:50, there would be more buyers than sellers at $23.55, and the closing price would be $23.60 or $23.65 or $24 or something, and the close would look very volatile.

But trading doesn’t stop right there. There’s still 10 minutes left. And what happens is, people step in to fix the imbalance. They say: OK, if the auction really has 224,638 more buyers than sellers, I will sell those 224,638 shares. (This is called an “Imbalance-Only-On-Close Order.”) And then they go out and buy those 224,638 shares in the continuous market over the next 10 minutes. They buy from people who want to sell now, in order to sell to people who want to buy later.

This is a classic market-making function. The people doing this — and they’re not really people, they’re algorithmic high-frequency trading firms — are intermediating across time. There are sellers now, there are buyers later, and the HFT market-makers buy from the sellers and sell to the buyers, giving everyone a smoother and fairer and more informative price.
…
Basically you’ll notice in what I described that the market maker buys at its average price, and then sells at its final price. It has incentives to make those prices as different as possible. One way to make those prices different is to try to buy really efficiently, so you buy at a low average price. Another way to make the prices different is to make the final price really sloppy and inefficient, so you sell at a high final price. That’s what Athena did: It bought about half of the shares it was going to buy smoothly over the last nine minutes and 58 seconds, getting a reasonable average price on half of the shares. That’s “Meat.” Then it would buy the other half sloppily in the last two seconds, pushing up the final price really high and leading to a high sale price. That’s “Gravy.” Gravy is how it made its money.

Speaking of idiotic regulation, there appears to be some consensus that price transparency for bonds is a good thing:

Arguably, the U.S. already has a big lead on Canada in that regard because of the TRACE system that FINRA runs. Dealers have to report corporate bond trades to TRACE. That data is then available to market users through financial information providers.

Why doesn’t Canada have an equivalent, challenged another panelist, markets entrepreneur Doug Steiner?

The answer, [executive director and chief operating officer of the Ontario Securities Commission] Ms. [Maureen] Jensen said, is twofold. There’s the fragmentation of the regulatory landscape in Canada, and the concentration of dealers.

That of course is a reference to the fact that the biggest bond dealers in Canada are a handful of bank-owned firms. They have every incentive not to share such data, because it will cut into profits.

First, it might be really nice if the implications of transparency were investigated, or thought about, or, hell, I’d be happy with a simple “acknowledge” at this point. Price transparency invariably leads to smaller inventories and thinner, more brittle markets. In the corporate bond market as a whole, it has led to an increased proportion of exempt, non-public, issues and to the rise of Credit Default Swaps. But who cares? Teacher didn’t talk about that in kindergarten; teacher talked about being nice to each other.

I will take some solace in the idea that this is beginning to get noticed:

Corporate bond values are swinging the most in more than a year and here’s one reason why: Wall Street’s biggest banks are following the crowd and selling, too.

Take junk bonds, which have lost 2 percent in the past month. Dealers, which traditionally used their own money to take bonds off clients desperate to sell during sinking markets, sold a net $2 billion of the securities during the period, according to data compiled by Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Banks have cut debt holdings in the face of higher capital requirements and curbs of proprietary trading under the U.S. Dodd-Frank Act’s Volcker Rule. Their lack of desire to take risks has had the unintended consequence of exacerbating price swings amid the rout now, said Jon Breuer, a credit trader at Peridiem Global Investors LLC in Los Angeles, California.
…
Prices will probably keep swinging until it looks like the global economy’s regaining its footing. Or until investors gain faith that central banks can save the day, once again.

Just don’t count on Wall Street dealers to prop up the market. Those days appear to be over.

Soon every day will look like the credit crunch, in which a ridiculously thin market in Asset Backed Securities went ridiculously low … leading to apparent capital problems … leading to a crisis … leading to increased hiring of regulators … oh.

Meanwhile, the economy is looking so dismal there are informed calls for more quantitative easing:

Federal Reserve Bank of St. Louis President James Bullard challenged his fellow central bankers to honor pledges to adjust bond purchases in response to incoming economic reports and to keep inflation stable.

Bullard said the Fed should consider delaying plans to end its bond-buying program at the end of this month to halt a decline in expected inflation. The Fed has tapered purchases to $15 billion a month from $85 billion in December 2012.

“We said the taper was data dependent,” he said in an interview today in Washington. The Fed’s message should be that “we are watching and we’re ready and we are willing to do things to defend our inflation target.”

Bullard’s comments reflect growing concern among Fed policy makers that global economic weakness threatens to push inflation in the U.S. to dangerously low levels. His worries may be reflected in the Fed’s next policy statement, even if his proposal to extend asset purchases isn’t adopted, said Jonathan Wright, a former central bank official.

Assiduous Reader Nestor asked in yesterday’s comments:

James, is is safe to say, all things being equal, that the preferred shares will react positively to the lower treasury and corporate yields?

Yes. No. Maybe. It depends. The correlation between treasury and corporate yields will depend largely on what is driving the changes in yield. If the concern is “interest rates”, then these yields should move together and correlations should increase. If the concern is “credit”, then yields will be unrelated – or even negatively related – and correlations will decrease.

For example, consider this chart originally published in the August, 2009, edition of PrefLetter:

Some changes, eh? Correlation analysis can be useful, but it is all too often used as a substitute for analysis rather than as an aid, with results that are often grievous and always funny.

Another chart that offers hours of amusement is:

In the above chart, “PDIE” stands for “Perpetual Discount Interest Equivalent”. You can see that although the correlation with corporate bonds is generally pretty good, that is not always the case – and certainly not on a day-to-day basis. On the other hand, Assiduous Readers will note that by-and-large, the “Seniority Spread” (interest-equivalent yield of PerpetualDiscounts less yield of long corporate bonds) is generally pretty stable – which is not to say “always” pretty stable, nor is it to say “unchanging for decades”.

Another question resulting from yesterday’s post came from Assiduous Reader prefQC, who asked:

I’ve been following (with interest!) your blogs on a regular basis for over a year now. However, I am struck by the fact that you virtually always qualify the overall daily trading volume as “low”, “very awfully low”, “below average” etc. — it is very rarely “high”. So then, just what is your definition of “average” trading volume ?

I answered the question in a strict definitional sense, but I have two representative pictures I’d like to show you:

So you can see that the Average Daily Volume calculated by HIMIPref™ (an exponential moving average that is adjusted to reduce the impact of single day spikes in volume) for CIU.PR.C and ELF.PR.G has declined precipitously over the past six months odd. While I do not compute more general gauges of daily volume (why would I?) it is my anecdotal hypothesis that these two charts are representative of a large swath of the preferred share market, and thus there have been an increasing number of ‘low volume’ days in 2014. Maybe I’ll have to revise my definitions of ‘low volume’!

********************* Update ****************

Sharp-eyed and cynical Assiduous Readers will have noted that I told a fib in the above paragraph, because I do, in fact, compute (and store!) more general gauges of daily volume, in the form of the “Median Daily Trading Value” that I report every single day on the market summary. Here’s the chart for the last year of DeemedRetractibles … chosen because it’s a reasonably large sample with minimal contamination from new issues and movements of individual issues between indices:

*********************************************

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts flat, FixedResets gaining 6bp and DeemedRetractibles off 6bp. Volatility was muted. Volume … (drum-roll, please!) … was … wait for it … VERY LOW!

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	3.09 %	3.08 %	23,003	19.51	1	1.7176 %	2,702.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0559 %	4,061.0
Floater	2.93 %	3.11 %	62,625	19.46	4	0.0559 %	2,726.8
OpRet	4.04 %	2.90 %	106,133	0.08	1	0.0000 %	2,732.5
SplitShare	4.29 %	4.05 %	82,460	3.83	5	0.3196 %	3,155.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,498.6
Perpetual-Premium	5.50 %	3.37 %	73,366	0.08	18	-0.0461 %	2,447.8
Perpetual-Discount	5.34 %	5.17 %	96,800	15.07	18	-0.0048 %	2,585.4
FixedReset	4.24 %	3.73 %	171,179	16.47	75	0.0568 %	2,542.3
Deemed-Retractible	5.03 %	3.10 %	100,964	0.45	42	-0.0583 %	2,555.2
FloatingReset	2.56 %	-1.43 %	63,002	0.08	6	0.0458 %	2,546.1

Performance Highlights
Issue	Index	Change	Notes
PVS.PR.D	SplitShare	1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 5.13 %
BAM.PR.E	Ratchet	1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-16 Maturity Price : 23.88 Evaluated at bid price : 24.28 Bid-YTW : 3.08 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.M	Deemed-Retractible	84,860	RBC bought two blocks of 10,000 each and one of 14,400 from anonymous at 26.35, and bought 17,900 from Nesbitt at 26.34 and crossed 10,000 at 26.36. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-15 Maturity Price : 25.75 Evaluated at bid price : 26.27 Bid-YTW : -22.92 %
POW.PR.G	Perpetual-Premium	77,839	Nesbitt crossed 75,000 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 4.98 %
ENB.PF.C	FixedReset	55,854	Desjardins crossed 49,200 at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-16 Maturity Price : 23.11 Evaluated at bid price : 24.92 Bid-YTW : 4.16 %
PWF.PR.T	FixedReset	54,500	RBC crossed 50,000 at 25.92. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 3.30 %
NA.PR.W	FixedReset	44,525	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-16 Maturity Price : 23.04 Evaluated at bid price : 24.70 Bid-YTW : 3.74 %
RY.PR.Z	FixedReset	22,420	RBC crossed 11,000 at 25.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-16 Maturity Price : 23.32 Evaluated at bid price : 25.41 Bid-YTW : 3.61 %
There were 16 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PVS.PR.C	SplitShare	Quote: 25.73 – 26.90 Spot Rate : 1.1700 Average : 1.0291 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : 4.05 %
ENB.PR.Y	FixedReset	Quote: 23.45 – 23.79 Spot Rate : 0.3400 Average : 0.2077 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-16 Maturity Price : 22.52 Evaluated at bid price : 23.45 Bid-YTW : 4.16 %
PWF.PR.R	Perpetual-Premium	Quote: 25.57 – 25.95 Spot Rate : 0.3800 Average : 0.2525 YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 5.07 %
PWF.PR.A	Floater	Quote: 20.76 – 21.15 Spot Rate : 0.3900 Average : 0.2802 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-16 Maturity Price : 20.76 Evaluated at bid price : 20.76 Bid-YTW : 2.55 %
BAM.PF.F	FixedReset	Quote: 25.08 – 25.31 Spot Rate : 0.2300 Average : 0.1493 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-16 Maturity Price : 23.19 Evaluated at bid price : 25.08 Bid-YTW : 4.30 %
SLF.PR.E	Deemed-Retractible	Quote: 22.20 – 22.41 Spot Rate : 0.2100 Average : 0.1403 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.20 Bid-YTW : 6.04 %