Category: Market Action

Canadian inflation was tamer than expected:

Canada’s inflation rate slowed more than economists forecast in November, returning to the central bank’s target on a drop in gasoline prices.

The consumer price index rose 2.0 percent from a year ago following the October pace of 2.4 percent, Statistics Canada said today from Ottawa. The core rate, which excludes eight volatile products including fruit, vegetables and gasoline, slowed to 2.1 percent following the October pace of 2.3 percent, which was the fastest in almost three years.

Economists forecast the total rate would rise 2.2 percent and core by 2.4 percent, according to median responses in separate Bloomberg News surveys.

Bank of Canada Governor Stephen Poloz has said inflation will slow to a 1.4 percent pace in the second quarter of next year, ending a period of faster-than-expected gains linked to temporary factors such as a weaker currency and price increases for products such as meat. Policy makers have kept their benchmark overnight lending rate at 1 percent for more than four years and economists surveyed by Bloomberg predict Poloz won’t tighten for about another year.

… which didn’t do the dollar much good:

Canada’s dollar approached a five-year low after a report showed inflation slowed more than forecast in November, adding to speculation slumping crude-oil prices will damp economic growth and keep interest rates low for longer.

The currency fell for a fourth week as crude, the nation’s biggest export, traded at almost the lowest since 2009. Canadian two-year government bonds’ yield advantage over U.S. peers shrank to the least since 2010 as traders priced in a rate increase by the Federal Reserve in the first half of 2015 and began to push chances for Bank of Canada rate action into 2016.
…
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, weakened 0.2 percent to C$1.1600 per U.S. dollar at 5 p.m. Toronto time. It touched C$1.1674 on Dec. 15, the weakest level since July 2009. One loonie purchases 86.21 U.S. cents.
…
Canada’s two-year debt yielded 37 basis points, or 0.37 percentage point, more than comparable-maturity Treasuries, compared with 63 basis points in October. The Canadian yields have been little changed during the period, while U.S. yields rose as investors sold Treasuries. Two-year securities are more sensitive to expectations for changes in central-bank policy than longer-maturity debt, which tends to reflect expectations for inflation.
…
Canadian retail sales were little changed in October at C$42.8 billion ($36.9 billion), Statistics Canada said in another report. A Bloomberg survey of economists forecast a 0.3 percent decrease.

Ontario, Canada’s most populous province, had its credit rating downgraded to AA- from AA by Fitch Ratings. The company cited the difficult actions needed to meet the province’s goal for a balanced budget by 2017-18.

… but equities seemed pretty happy:

Canadian stocks rose for a fourth day, capping their best week in five years, as energy producers led gains in a rally ignited by the Federal Reserve’s pledge to be patient on boosting borrowing costs.

Energy stocks in the Standard & Poor’s/TSX Composite Index (SPTSX) rose 2.9 percent for a 13 percent gain this week, the most in five years. Trican Well Service Ltd. and TransGlobe Energy Corp. soared more than 8.8 percent. BlackBerry Ltd. dropped 1.2 percent after reporting third-quarter revenue short of analysts’ estimates.

The S&P/TSX index climbed 121.51 points, or 0.9 percent, to 14,468.26 at 4 p.m. in Toronto. The gauge surged 5.6 percent in the past four days as oil prices stabilized and Fed Chair Janet Yellen said the U.S. central bank will probably hold rates near zero at least through the first quarter.

MetLife has been designated a systemically important financial institution – and doesn’t like it:

The Financial Stability Oversight Council voted to designate New York-based MetLife a SIFI, the insurer said today in a statement. The ruling subjects MetLife to stricter Federal Reserve oversight that could include tougher capital, leverage and liquidity requirements. The company can appeal in U.S. district court within 30 days.

“We continue to believe that MetLife is not systemically important,” the insurer said in the statement. “The company will carefully review the designation rationale as it considers its next steps.”
…
The company has said that it wouldn’t pose a risk to the broader financial system even if it were to fail, and Kandarian has called the insurance industry a source of stability. MetLife, based in New York, didn’t take a bailout during the 2008 financial crisis.

MetLife said today that FSOC should focus on activities that pose systemic risks, rather than on individual companies.

“FSOC has already embraced this activities-based approach for the asset-management industry but has rejected it for the life-insurance industry,” MetLife said in its statement.

U.S. lawmakers voted last week to give the Fed more flexibility in how it sets rules after insurers said they shouldn’t be subject to standards set for banks. Kandarian, in a Dec. 10 statement, praised Congress for passing the legislation, which he said would give the central bank the “opportunity to write rules that will preserve competition.”

Simon Kennedy of Bloomberg draws our attention to an interesting parallel to 1956:

The U.K., with France, followed Israel into Egypt in 1956 after President Gamal Abdel Nasser nationalized the global commercial lifeline and kicked out the consortium that had been running the canal.

Britain was exposed when sterling came under speculative attack. Investors targeted its $2.80 peg to the dollar, forcing the Bank of England to run down its reserves to defend it.

For the U.K., “Suez was also a financial crisis,” according to a 2001 study by IMF historian James M. Boughton.

As they struggled to maintain the $2 billion minimum viewed as necessary to stave off devaluation, British officials began looking for assistance. Knowing the U.S. was unlikely to help directly, they turned to the then decade-old IMF.

No dice. U.S. Treasury Secretary George M. Humphrey told the U.K. he would only back it at the IMF when it was “conforming to, rather than defying, the United Nations.”

On the verge of having to reveal its reserves had breached $2 billion, the British government buckled and announced a troop withdrawal from Egypt. That freed up $1.3 billion of international loans. Sterling was saved.

As noted very briefly above, Fitch downgraded Ontari-ari-ari-owe:

RATING DOWNGRADE: Difficult actions will be necessary to achieve the province’s deficit elimination goal of fiscal 2018 and budget options are likely to prove more limited given the extent of actions taken to date and use of one-time actions to achieve targets, in Fitch’s opinion. While the province is considering other fiscal options for fiscal 2016 should economic conditions restrain future revenue growth, the downgrade to ‘AA-‘ reflects Fitch’s concern that risks remain to achieving its goals and both debt burden and the accumulated deficit will remain significantly elevated, reflected in a rating level more consistent with an ‘AA-‘ rating.
…
SIGNIFICANT FINANCIAL IMBALANCE: The province had an accumulated deficit equal to 152% of operating revenues in fiscal 2014 (25.4% of gross domestic product [GDP]) due to, slow revenue growth, and increasing expenditures, and sizable capital borrowing. Annual deficits through the forecast period of fiscal 2018 will contribute to growth in the accumulated deficit.
…
LARGE AND GROWING DEBT BURDEN: The province has a high debt burden (net direct debt to GDP) with net debt to GDP at 38.4% for fiscal 2014, although debt service expense is a manageable 8% of annual expenditures. Fitch expects debt levels to increase through fiscal 2016, and then begin to decrease, given the province’s expectation of an annual deficit through that fiscal year and continued growth in GDP. Pensions are well funded.

RATING SENSITIVITIES

The rating is sensitive to the province’s commitment and success in achieving deficit elimination targets and restoring fiscal balance. Failure to enact budgets that follow a path toward articulated deficit elimination targets would result in negative rating pressure. Reaching deficit elimination targets ahead of forecast, sizable growth in GDP, and steady progress on lowering debt burden and the accumulated deficit would be positive credit factors.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 37bp, FixedResets up 26bp and DeemedRetractibles gaining 13bp. Volatility was high (although low by recent standards!) and dominated by FixedResets – particularly the low-spread and credit-uncertain Enbridge issues which have been hit hard recently. Volume was average.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.40, is $1.24 cheap, but it has already reset (at +192). TRP.PR.D, bid at 25.11 and resetting at +238bp on 2019-4-30 is $0.44 rich and TRP.PR.E, bid at 25.40 and resetting at +235bp on 2019-10-30, is $0.93 rich.

This particular calculation is fascinating because it is apparent that – disregarding the TRP.PR.A outlier – the slope of the line used to calculate implied volatility is negative. I can’t remember seeing one of those since the Credit Crunch!

Here, as has often been the case lately, it is apparent that

• MFC.PR.F, resetting at 141bp on 2016-06-19 is in another world and distorting results again. It’s the only deep-discount issue, bid at 20.65 – everything else is above or near par.
• the slope determined by the higher-spread issues is unreasonably high if these are to be considered perpetual issues and unreasonably low if they are to be considered NVCC non-compliant issues

There continues to be extraordinary cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 20.26 and appears to be $0.95 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.20 and appears to be $1.65 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.60, looks $1.08 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.81, looks $1.02 expensive and resets 2019-3-1

The average break-even rate has declined from 1.80%-2.00% at the time recent conversion decisions were made to a current range of 1.50%-1.60%. This decline means that the estimated profit on TRP.PR.A conversion has declined from $0.48 to a mere $0.16 (at the lower end of the range).

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	1.1782 %	2,479.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.1782 %	3,925.8
Floater	3.06 %	3.16 %	65,591	19.34	4	1.1782 %	2,636.0
OpRet	4.41 %	-2.78 %	26,566	0.08	2	0.0000 %	2,748.8
SplitShare	4.31 %	4.04 %	39,459	3.70	5	-0.1804 %	3,176.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,513.5
Perpetual-Premium	5.44 %	-3.14 %	75,182	0.08	20	-0.0196 %	2,475.1
Perpetual-Discount	5.20 %	5.11 %	110,801	15.26	15	0.3683 %	2,647.5
FixedReset	4.26 %	3.58 %	250,616	16.57	77	0.2554 %	2,519.8
Deemed-Retractible	4.98 %	1.11 %	99,552	0.19	40	0.1252 %	2,610.0
FloatingReset	2.56 %	2.11 %	63,285	3.51	5	-0.1417 %	2,535.4

Performance Highlights
Issue	Index	Change	Notes
ENB.PF.G	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 22.74 Evaluated at bid price : 23.99 Bid-YTW : 4.23 %
GWO.PR.H	Deemed-Retractible	1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.28 Bid-YTW : 5.23 %
TRP.PR.E	FixedReset	1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 23.30 Evaluated at bid price : 25.40 Bid-YTW : 3.63 %
ENB.PF.E	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 22.63 Evaluated at bid price : 23.72 Bid-YTW : 4.27 %
PWF.PR.T	FixedReset	1.49 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.83 Bid-YTW : 3.49 %
ENB.PR.Y	FixedReset	1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 21.71 Evaluated at bid price : 22.08 Bid-YTW : 4.27 %
GWO.PR.N	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.95 Bid-YTW : 5.33 %
FTS.PR.H	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 3.77 %
PWF.PR.A	Floater	5.56 %	Reasonably sort-of real. This reverses yesterday‘s loss, which was reasonably sort of real, but on trivial volume. Volume today was actually respectable, 5,776 shares, with the low for the day being 18.41 at the opening, with all subsequent trades near or above 19.00 – with a high of 19.98 for 500 shares late in the day. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 2.78 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.C	FixedReset	140,825	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 23.07 Evaluated at bid price : 24.76 Bid-YTW : 3.53 %
ENB.PR.Y	FixedReset	127,774	Scotia crossed 100,000 at 21.98. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 21.71 Evaluated at bid price : 22.08 Bid-YTW : 4.27 %
ENB.PR.T	FixedReset	113,374	Scotia crossed 100,000 at 22.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 21.97 Evaluated at bid price : 22.45 Bid-YTW : 4.29 %
SLF.PR.A	Deemed-Retractible	76,340	Desjardins crossed 74,800 at 24.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.17 %
HSE.PR.A	FixedReset	74,639	RBC crossed 46,200 at 19.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 19.66 Evaluated at bid price : 19.66 Bid-YTW : 3.99 %
BMO.PR.S	FixedReset	63,578	RBC crossed 50,000 at 25.53. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 23.36 Evaluated at bid price : 25.50 Bid-YTW : 3.51 %
There were 34 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CGI.PR.D	SplitShare	Quote: 25.16 – 26.08 Spot Rate : 0.9200 Average : 0.7739 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 3.69 %
IAG.PR.A	Deemed-Retractible	Quote: 23.41 – 23.99 Spot Rate : 0.5800 Average : 0.4533 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.41 Bid-YTW : 5.44 %
RY.PR.L	FixedReset	Quote: 26.02 – 26.34 Spot Rate : 0.3200 Average : 0.2162 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.02 Bid-YTW : 3.30 %
FTS.PR.G	FixedReset	Quote: 24.86 – 25.19 Spot Rate : 0.3300 Average : 0.2354 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 23.23 Evaluated at bid price : 24.86 Bid-YTW : 3.44 %
BAM.PR.K	Floater	Quote: 16.55 – 16.95 Spot Rate : 0.4000 Average : 0.3074 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-19 Maturity Price : 16.55 Evaluated at bid price : 16.55 Bid-YTW : 3.17 %
NEW.PR.D	SplitShare	Quote: 32.17 – 33.09 Spot Rate : 0.9200 Average : 0.8327 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.17 Bid-YTW : 3.46 %

US equities were on fire today:

The Dow Jones Industrial Average surged the most since 2011 and the Standard & Poor’s 500 Index capped its best two-day gain in three years as global equities rallied on the Federal Reserve’s pledge to be patient on boosting rates.

The S&P 500 added 2.4 percent to 2,061.23 at 4 p.m. in New York. The index climbed 4.5 percent over two days, the most since November 2011. The Dow gained 421.28 points, or 2.4 percent, to 17,778.15, the biggest one-day jump since December 2011.

Canadian equities too!:

Canadian stocks rose, capping the biggest three-day surge in more than three years, as consumer-staples and health-care companies led gains amid a global rally following the Federal Reserve’s pledge to be patient on boosting rates.

Nine of the 10 main groups in the Standard & Poor’s/TSX Composite Index (SPTSX) advanced. Alimentation Couche-Tard Inc. surged 8.3 percent to pace gains in consumer shares, while raw-materials stocks jumped 2.1 percent.

The S&P/TSX Index increased 132.87 points, or 0.9 percent, to 14,346.75 at 4 p.m. in Toronto. The equity gauge has surged 4.7 percent in the past three days, the most since November 2011. The index is up 5.3 percent for the year.

Junk seems to have hit a bottom:

Demand for junk-rated debt is bouncing back from a selloff triggered by plunging oil prices on optimism that the Federal Reserve will be in no rush to raise interest rates next year.

The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, declined 14.7 basis points to 354.3 basis points. That follows yesterday’s drop resulting in the biggest two-day decline for the index since January 2013. The average yield on speculative-grade debt contracted for the first time this month on Dec. 17 dropping to 7.1 percent, according to Bank of America Merrill Lynch index data.

Treasuries, not so much:

Treasuries fell, with 10-year note yields rising the most during two days in 17 months, after Federal Reserve Chair Janet Yellen suggested a “patient” approach to interest rates may translate into an increase by the middle of next year.

The yield on the 30-year bond touched the highest level in a week as Yellen said yesterday at a news conference that a rate increase won’t take place for “at least the next couple of meetings.” The difference between two- and 30-year yields widened for the first time in six days as longer-maturity Treasuries led declines. Stocks rose by the most in two years. The Treasury auctioned $16 billion of five-year inflation-indexed securities at the highest yield since April 2010.
…
The benchmark 10-year yield rose seven basis points, or 0.07 percentage point, to 2.21 percent at 4:59 p.m. New York time, according to Bloomberg Bond Trader data. The 2.25 percent note maturing in November 2024 fell 20/32, or $6.25 per $1,000 face amount, to 100 3/8. The yield has increased as much as 17 basis points the past two days, the most since July 2013.
…
Thirty-year bond yields added nine basis points to 2.82 percent, reaching the highest level since Dec. 11. Two-year yields gained one basis point to 0.63 percent.

Crude oil futures fell 2.8 percent to $54.89 a barrel in New York, after reaching $53.60 on Dec. 16, a five-year low.

Pay attention to the slope of the yield curve! While FixedResets are more-or-less immune to changes in five-year rates, the yield they pay has to compete with fixed rate perpetual instruments! It is not impossible that at some point there may be a reprise of what happened to Floaters in the Credit Crunch.

And Credit Crunch capital destruction due to housing prices might even be rivalled by capital destruction due to oil prices:

In a stunning analysis this week, Goldman Sachs found almost $1 trillion in investments in future oil projects at risk. They looked at 400 of the world’s largest new oil and gas fields — excluding U.S. shale — and found projects representing $930 billion of future investment that are no longer profitable with Brent crude at $70. In the U.S., the shale-oil party isn’t over yet, but zombies are beginning to crash it.

Switzerland has a problem that many might like to have:

Switzerland’s franc weakened the most in 18 months versus the euro after the nation’s central bank introduced negative interest rates to defend the currency’s cap.

The shared currency fell for a second day against the dollar as the Swiss National Bank decision boosted speculation the European Central Bank will expand stimulus measures next year.
…
The franc weakened against all of its 16 major peers as the Zurich-based SNB introduced a negative deposit rate for the first time since the 1970s, saying it was prepared to buy unlimited foreign currency to shield the 1.20-per-euro cap and take further measures if needed.

The Swiss currency appreciated to within 0.07 percent of the cap yesterday, reaching the strongest level since September 2012. Pressure on the cap has bolstered speculation the ECB will start a large-scale sovereign-bond buying program, a measure that may weaken the euro against its peers.

SNB President Thomas Jordan cited turmoil in Russia as a “major contributory factor” to its rate decision.

“If money is moving out of these high-risk geopolitical countries, where do they tend to move this money to? Switzerland,” said FXCM’s Song. The rates move was “a way for the SNB to discourage that.”

Is this what they mean by “captive market“?:

Take [journalist Sarah] Koenig’s 40 hours of taped calls with [prisoner Adnan] Syed, a detail she mentions in the second-to-last episode (the finale makes its debut on Thursday morning). In 2013, the top rate for telephone calls to prisons in the U.S. was 89¢ per minute plus a $3.95 per-call charge, according to data collected by the Federal Communications Commission. At that rate, Koenig and Syed conversations could have easily exceeded $2,500. Representatives for “Serial” and Global Tel-Link declined to comment for this story.
…
The market for inmate phone services is unusual, to say the least. The prisons generally sign exclusive contracts with specialized phone carriers. Instead of competing by offering the lowest-priced calls or the best sound quality, companies such as Global Tel-Link win contracts largely by offering to pay the prisons a portion of the money from inmates’ phone bills. Some carriers pay the prisons up to 96 percent of their call revenue, according to the FCC.

There was a good bounce in the Canadian preferred share market today, with PerpetualDiscounts gaining 13bp, FixedResets up 17bp and DeemedRetractibles winning 37bp. There is yet another very lengthy Performance Highlights list. Volume was on the high side of average.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.30, is $1.31 cheap, but it has already reset (at +192). TRP.PR.D, bid at 25.29 and resetting at +238bp on 2019-4-30 is $0.68 rich and TRP.PR.E, bid at 25.06 and resetting at +235bp on 2019-10-30, is $0.65 rich.

It looks like MFC.PR.F, resetting at 141bp on 2016-06-19 is in another world and distorting results again. It’s the only deep-discount issue, bid at 20.65 – everything else is above or near par.

There continues to be extraordinary cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 20.10 and appears to be $0.93 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.20 and appears to be $1.73 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.31, looks $1.37 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.85, looks $1.11 expensive and resets 2019-3-1

The average break-even rate has declined from 1.80%-2.00% at the time recent conversion decisions were made to a current range of 1.50%-1.70%. This decline means that the estimated profit on TRP.PR.A conversion has declined from $0.48 to a mere $0.16 (at the lower end of the range).

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.7600 %	2,450.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.7600 %	3,880.1
Floater	3.09 %	3.14 %	65,153	19.39	4	-0.7600 %	2,605.3
OpRet	4.41 %	-2.93 %	27,667	0.08	2	0.0589 %	2,748.8
SplitShare	4.30 %	4.03 %	41,093	3.71	5	-0.1109 %	3,182.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0589 %	2,513.5
Perpetual-Premium	5.44 %	0.13 %	73,767	0.09	20	0.1569 %	2,475.6
Perpetual-Discount	5.22 %	5.13 %	110,103	15.19	15	0.1268 %	2,637.8
FixedReset	4.27 %	3.61 %	249,079	16.56	77	0.1731 %	2,513.4
Deemed-Retractible	4.99 %	2.78 %	99,638	0.28	40	0.3651 %	2,606.8
FloatingReset	2.56 %	2.12 %	64,099	3.44	5	0.2922 %	2,539.0

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.A	Floater	-5.36 %	This is reasonably real, but on very low volume. Total volume was 1,669 shares, which started the day at 19.26, but there was a trade at 3:06pm for 200 shares at 18.27 and an odd-lot at 18.26. The last quote was 18.00-19.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 2.93 %
TRP.PR.E	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.19 Evaluated at bid price : 25.06 Bid-YTW : 3.70 %
ENB.PR.J	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 22.60 Evaluated at bid price : 23.50 Bid-YTW : 4.22 %
TRP.PR.D	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.31 Evaluated at bid price : 25.29 Bid-YTW : 3.61 %
FTS.PR.H	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 18.31 Evaluated at bid price : 18.31 Bid-YTW : 3.83 %
BAM.PR.C	Floater	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 16.65 Evaluated at bid price : 16.65 Bid-YTW : 3.15 %
SLF.PR.B	Deemed-Retractible	1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 5.16 %
TRP.PR.C	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 3.91 %
BAM.PR.K	Floater	1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 3.14 %
BAM.PR.T	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.29 Evaluated at bid price : 24.43 Bid-YTW : 3.73 %
SLF.PR.E	Deemed-Retractible	1.62 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.20 Bid-YTW : 5.44 %
SLF.PR.D	Deemed-Retractible	1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.12 Bid-YTW : 5.43 %
SLF.PR.C	Deemed-Retractible	1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.11 Bid-YTW : 5.44 %
IGM.PR.B	Perpetual-Premium	1.71 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 26.16 Bid-YTW : 4.85 %
TRP.PR.A	FixedReset	1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 4.00 %
SLF.PR.A	Deemed-Retractible	1.77 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.17 %
PWF.PR.P	FixedReset	1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 20.81 Evaluated at bid price : 20.81 Bid-YTW : 3.64 %
MFC.PR.B	Deemed-Retractible	2.58 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.84 Bid-YTW : 5.28 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.P	FixedReset	364,622	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.05 Evaluated at bid price : 24.70 Bid-YTW : 3.54 %
BMO.PR.S	FixedReset	205,009	Desjardins bought blocks of 10,000 and 28,900 from Scotia at 25.53, then another 20,000 at 25.51. Desjardins then crossed 75,000 at 25.53 and bought 25,300 from RBC at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.36 Evaluated at bid price : 25.50 Bid-YTW : 3.51 %
TD.PF.C	FixedReset	141,790	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.06 Evaluated at bid price : 24.74 Bid-YTW : 3.53 %
MFC.PR.M	FixedReset	90,100	Scotia crossed blocks of 50,000 and 29,000, both at 25.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.27 Bid-YTW : 3.68 %
ENB.PR.F	FixedReset	83,698	Nesbitt bought 30,400 from GMP at 22.60, then crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 22.20 Evaluated at bid price : 22.70 Bid-YTW : 4.24 %
BMO.PR.Q	FixedReset	67,833	Nesbitt bought 55,200 from GMP at 23.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 3.46 %
There were 35 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: 18.00 – 19.00 Spot Rate : 1.0000 Average : 0.6943 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 2.93 %
ELF.PR.H	Perpetual-Premium	Quote: 25.39 – 26.00 Spot Rate : 0.6100 Average : 0.4119 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 24.92 Evaluated at bid price : 25.39 Bid-YTW : 5.49 %
TRP.PR.E	FixedReset	Quote: 25.06 – 25.50 Spot Rate : 0.4400 Average : 0.3003 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.19 Evaluated at bid price : 25.06 Bid-YTW : 3.70 %
NEW.PR.D	SplitShare	Quote: 32.14 – 33.00 Spot Rate : 0.8600 Average : 0.7370 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.14 Bid-YTW : 3.62 %
GWO.PR.P	Deemed-Retractible	Quote: 25.41 – 25.90 Spot Rate : 0.4900 Average : 0.3782 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 5.20 %
FTS.PR.J	Perpetual-Discount	Quote: 23.78 – 24.50 Spot Rate : 0.7200 Average : 0.6131 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-18 Maturity Price : 23.42 Evaluated at bid price : 23.78 Bid-YTW : 5.02 %

Today’s big news was the FOMC release:

Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace. Labor market conditions improved further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices. Market-based measures of inflation compensation have declined somewhat further; survey-based measures of longer-term inflation expectations have remained stable.
…
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.
…
However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.

As always, the votes against and rationales thereof are illuminating:

Voting against the action were Richard W. Fisher, who believed that, while the Committee should be patient in beginning to normalize monetary policy, improvement in the U.S. economic performance since October has moved forward, further than the majority of the Committee envisions, the date when it will likely be appropriate to increase the federal funds rate; Narayana Kocherlakota, who believed that the Committee’s decision, in the context of ongoing low inflation and falling market-based measures of longer-term inflation expectations, created undue downside risk to the credibility of the 2 percent inflation target; and Charles I. Plosser, who believed that the statement should not stress the importance of the passage of time as a key element of its forward guidance and, given the improvement in economic conditions, should not emphasize the consistency of the current forward guidance with previous statements.

We don’t get this kind of detail in Canada because none of us are actual adults and might burst into tears if there was any conflict of opinion.

Yellen elaborated:

Yellen told reporters following a two-day meeting that the Fed is likely to hold rates near zero at least through the first quarter. She also laid out the economic parameters that would need to be met for liftoff to begin later in the year and said that rates probably would be raised gradually thereafter. They may not return to more normal levels until 2017, she added.
…
The dollar and yields on Treasury securities rose in response, as investors in those markets processed the likelihood of rate increases by the Fed. The greenback gained against most currencies, with the Bloomberg Dollar Spot Index increasing to almost a five-year high. The yield on 10-year Treasuries rose eight basis points to 2.14 percent as of 5 p.m. in New York, according to Bloomberg Trader data.

Certainly, US inflation looks tame:

Consumer prices rose 1.3 percent over the past year, the smallest gain since February and down from a 1.7 percent annual advance the prior month, according to the Labor Department.
…
Energy costs decreased 3.8 percent from a month earlier, led by a 6.6 percent plunge in gasoline that was the biggest drop since December 2008. Food prices rose 0.2 percent.

Excluding volatile food and fuel, the so-called core measure rose 0.1 percent in November, bringing the advance over the past year down to 1.7 percent from 1.8 percent in October. The gain matched the median forecast of economists surveyed by Bloomberg and followed a 0.2 percent increase the prior month.

Rising rents, medical care and airline fares were almost completely offset by the biggest drop in clothing costs in 16 years and the largest fall in prices for used cars and trucks since September 2012.

Speaking of inflation, how about that US two-year break-even inflation rate, eh?:

A Treasury market gauge measuring the outlook for inflation turned negative for the first time in five years as oil costs and consumer prices tumble.

The difference between yields on two-year notes and same-maturity Treasury Inflation Protected Securities, which measures trader expectations for consumer prices over the life of the debt, dropped to minus three basis points yesterday. Treasury long-term yields are falling as inflation slows, while shorter maturities lagged behind as the Federal Reserve prepares to raise interest rates, flattening the so-called yield curve.

Here’s a badge of honour!

What do Highland Capital Management, Fortress Investment Group LLC (FIG) and Cerberus Capital Management have in common? The firms, which manage some $110 billion among them, are on a list that says they can never invest in a $155 million loan that’s trading in U.S. markets.

RBS Holding Co., the owner of direct marketer Quadriga Art, banned the three firms and seven others last year from buying parts of the loan, according to two people with knowledge of the matter who asked not to be named because the decision was private. They were deemed, the people said, to be too demanding in debt restructurings, a fate that executives at RBS — which has no relationship to the Scottish bank — considered as Quadriga’s business faltered.
…
The practice poses risks to a market whose size has quadrupled from about $200 billion over the last decade as plunging interest rates fueled investor demand for securities that offer extra yield. Blacklisting reduces the number of potential buyers, which in turn makes the loans difficult to trade, and can exclude the savvier investors who are better able to fight for creditor rights in a default.
…
It took 20 days on average to complete a loan trade in the three months ending in June, according to data compiled by the New York-based Loan Syndications & Trading Association. That’s almost seven times as long as the three-day average in the corporate bond market.
…
Data gathered by Xtract Research show that 77 percent of all loan deals in the third quarter included provisions giving borrowers the ability to block individual lenders, up from 51 percent at the end of last year.

NexGen Financial Corporation has announced:

that at today’s special meeting its shareholders overwhelmingly approved the previously announced plan of arrangement (the “Arrangement”) between a wholly-owned subsidiary of Natixis Global Asset Management, L.P. and NexGen. The Arrangement was approved by 99.97% of the votes cast by NexGen’s shareholders and 99.96% of the votes cast by NexGen’s shareholders who are not receiving a collateral benefit in connection with the Arrangement. A total of 84.85% of the outstanding common shares of NexGen were voted at the meeting. Now that the requisite shareholder approvals have been obtained, a final order of the Ontario Superior Court of Justice approving the Arrangement will be sought on December 18, 2014. If the final order is obtained, management anticipates that the Arrangement will be completed on or about December 22, 2014, subject to receiving all necessary regulatory approvals.

NexGen was founded in 2005 and has about $885-million under management; Natixis is a conglomerator with over twenty firms in its stable and $894-billion under management.

Sun Life Financial, proud issuer of SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D, SLF.PR.E, SLF.PR.G, SLF.PR.H and SLF.PR.I, was confirmed at Pfd-2(high) by DBRS:

Compared to its peers, the Company has a high proportion of BBB and lower-rated bonds to total bonds, at 33.2%. With the Company’s sizable business in the Philippines, it has invested local premium in Philippine government bonds to avoid currency risks.

Return on equity and EBIT fixed-charge coverage ratios are expected to improve with the Company’s efforts to improve profitability toward meeting its 2015 targets. This focus on profitability should have lasting benefits. The five-year historical averages are below the rating level, but improvements are expected.

Financial leverage has declined to near 24% with improved retained earnings and with the Company using the proceeds of the sale of the U.S. business to repay maturing debt. This improved leverage is noted by DBRS, as the Company has had financial leverage ratios above 30%.

Great-West Lifeco, proud issuer of GWO.PR.F, GWO.PR.G, GWO.PR.H, GWO.PR.I, GWO.PR.L, GWO.PR.M, GWO.PR.N, GWO.PR.P, GWO.PR.Q, GWO.PR.R and GWO.PR.S, was confirmed at Pfd-1(low) by DBRS:

With the employed leverage combined with stable profits, the Company has been able to produce an above-peer return on equity in the mid-teens for several years running. As the Company is the largest insurer in Canada, top-line growth will be limited largely to total market growth. Growth by acquisition within Canada is limited, given the dominance of the big three insurers. Achieving a full turnaround with the Putnam investment subsidiary has proven elusive, but recently the funds have achieved high-ranking performance statistics, which should allow a shift toward better results.

Financial leverage at September 30, 2014, is 30.1%, which is better than its prior highs near 34%. As compared with recent leverage reduction achievements of its peers, the Company has been slow in reducing leverage toward its long-term target of 25%. The current leverage ratio is higher than desirable for the rating level.

Industrial Alliance Insurance and Financial Services Inc., proud issuer of IAG.PR.A, IAG.PR.E (soon to be redeemed), IAG.PR.F and IAG.PR.G, was confirmed at Pfd-2(high) by DBRS:

Despite the largely unfavourable market environment, the Company’s return on equity has generally been in the 12% to 13% range for most of the last five years.

The Company has a more aggressive risk appetite compared with other industry players, as demonstrated by its higher tolerance for interest rate and equity market sensitivity and willingness to pursue niche opportunities in the property and casualty space. The Company has rapidly reduced its financial leverage ratio to 25.9% as at September 30, 2014, from a ratio near 36% in 2012 by raising equity and paying down debt. EBIT fixed- charge coverage ratios have been improving and are now in the 5 times coverage range. Both leverage and coverage ratios now sit within or are near the range for an A-rated company.

The minimum continuing capital and surplus requirement at September 30, 2014, is 215%, which is satisfactory for the rating, but considering the sensitivity to interest rates and equities, the Company needs to maintain the ratio in the higher levels.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 1bp, FixedResets down 10bp and DeemedRetractibles off 5bp. There is yet another very lengthy list of performance highlights, with both winners and losers dominated by FixedResets. Volume was average, but the highlights are notable for the presence of two floaters, which usually trade by appointment only and performed poorly – probably due to a dovish interpretation of the FOMC release.

PerpetualDiscounts now yield 5.14%, equivalent to 6.68% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.0%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 270bp, a significant widening from the 255bp reported December 10.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 19.95, is $1.51 cheap, but it has already reset (at +192). TRP.PR.D, bid at 25.00 and resetting at +238bp on 2019-4-30 is $0.52 rich and TRP.PR.E, bid at 25.36 and resetting at +235bp on 2019-10-30, is $1.08 rich.

It looks like MFC.PR.F, resetting at 141bp on 2016-06-19 is in another world and distorting results again. It’s the only deep-discount issue, bid at 20.65 – everything else is above or near par.

There continues to be extraordinary cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, is bid at 20.02 and appears to be $0.91 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.00 and appears to be $1.57 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.10, looks $1.45 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.87, looks $1.21 expensive and resets 2019-3-1

Given all today’s speculation on policy rates – and the performance of Floaters – I thought I’d have another look at the break-even bill rates for the FixedReset/FloatingReset Strong Pairs.

The average break-even rate has declined from 1.80%-2.00% at the time recent conversion decisions were made to a current range of 1.50%-1.70%. This decline means that the estimated profit on TRP.PR.A conversion has declined from $0.48 to a mere $0.16 (at the lower end of the range).

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-1.4405 %	2,469.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.4405 %	3,909.8
Floater	3.07 %	3.17 %	64,422	19.30	4	-1.4405 %	2,625.3
OpRet	4.41 %	-2.62 %	27,577	0.08	2	-0.0588 %	2,747.2
SplitShare	4.29 %	4.06 %	41,675	3.71	5	0.4192 %	3,185.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0588 %	2,512.0
Perpetual-Premium	5.45 %	1.35 %	74,676	0.08	20	-0.0843 %	2,471.7
Perpetual-Discount	5.22 %	5.14 %	110,760	15.19	15	0.0144 %	2,634.5
FixedReset	4.28 %	3.63 %	234,962	16.57	77	-0.0978 %	2,509.0
Deemed-Retractible	5.01 %	2.66 %	98,405	0.60	40	-0.0479 %	2,597.3
FloatingReset	2.56 %	2.13 %	63,301	3.51	5	0.0079 %	2,531.6

Performance Highlights
Issue	Index	Change	Notes
IFC.PR.A	FixedReset	-2.65 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 4.93 %
GWO.PR.N	FixedReset	-2.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.57 Bid-YTW : 5.55 %
BAM.PR.K	Floater	-2.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 3.18 %
MFC.PR.B	Deemed-Retractible	-1.94 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.24 Bid-YTW : 5.60 %
IGM.PR.B	Perpetual-Premium	-1.76 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.72 Bid-YTW : 5.34 %
BAM.PR.C	Floater	-1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 3.18 %
MFC.PR.F	FixedReset	-1.67 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.65 Bid-YTW : 5.21 %
BAM.PF.A	FixedReset	-1.40 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 4.02 %
PWF.PR.A	Floater	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 19.02 Evaluated at bid price : 19.02 Bid-YTW : 2.78 %
BAM.PR.T	FixedReset	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 23.12 Evaluated at bid price : 24.05 Bid-YTW : 3.80 %
PWF.PR.P	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 20.41 Evaluated at bid price : 20.41 Bid-YTW : 3.71 %
FTS.PR.H	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 18.10 Evaluated at bid price : 18.10 Bid-YTW : 3.87 %
NEW.PR.D	SplitShare	1.06 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.46 Bid-YTW : 1.67 %
ENB.PR.N	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 22.37 Evaluated at bid price : 23.05 Bid-YTW : 4.29 %
TRP.PR.E	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 23.29 Evaluated at bid price : 25.36 Bid-YTW : 3.64 %
ENB.PR.H	FixedReset	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.31 %
FTS.PR.K	FixedReset	2.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 23.18 Evaluated at bid price : 24.87 Bid-YTW : 3.40 %
TRP.PR.A	FixedReset	2.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 4.07 %
PWF.PR.T	FixedReset	2.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 23.35 Evaluated at bid price : 25.35 Bid-YTW : 3.63 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.C	FixedReset	140,075	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 23.08 Evaluated at bid price : 24.78 Bid-YTW : 3.53 %
CM.PR.P	FixedReset	133,810	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 23.05 Evaluated at bid price : 24.71 Bid-YTW : 3.53 %
BAM.PR.K	Floater	93,724	Desjardins crossed 83,400 at 16.37. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 3.18 %
BAM.PR.B	Floater	89,653	Desjardins crossed 85,300 at 16.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 3.17 %
MFC.PR.N	FixedReset	67,100	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.91 Bid-YTW : 3.79 %
TRP.PR.C	FixedReset	58,489	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.97 %
There were 29 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.B	Deemed-Retractible	Quote: 23.24 – 23.97 Spot Rate : 0.7300 Average : 0.5425 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.24 Bid-YTW : 5.60 %
SLF.PR.E	Deemed-Retractible	Quote: 22.83 – 23.36 Spot Rate : 0.5300 Average : 0.3429 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.83 Bid-YTW : 5.65 %
ELF.PR.G	Perpetual-Discount	Quote: 22.90 – 23.48 Spot Rate : 0.5800 Average : 0.4147 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 22.61 Evaluated at bid price : 22.90 Bid-YTW : 5.26 %
IGM.PR.B	Perpetual-Premium	Quote: 25.72 – 26.30 Spot Rate : 0.5800 Average : 0.4180 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.72 Bid-YTW : 5.34 %
CGI.PR.D	SplitShare	Quote: 25.25 – 25.93 Spot Rate : 0.6800 Average : 0.5192 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 3.63 %
ENB.PR.Y	FixedReset	Quote: 21.70 – 22.15 Spot Rate : 0.4500 Average : 0.2903 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-17 Maturity Price : 21.43 Evaluated at bid price : 21.70 Bid-YTW : 4.35 %

How ’bout that ruble, eh?

After the single worst day in Russia’s nine-month-old financial crisis, the fallout is spreading across global markets.

Pacific Investment Management Co. (PEBIX) is facing mounting losses on its Russian bond holdings; almost every bullish ruble option contract registered in the U.S. has been made worthless; and foreign-exchange brokers in New York and London told clients they’re no longer taking ruble trades. Sergey Shvetsov, a first deputy central bank governor, expressed astonishment at the scope of the collapse during a business conference in Moscow.

“We couldn’t imagine what’s happening in our worst nightmare even a year ago,” Shvetsov, who oversees financial markets at the central bank, said yesterday. He said the bank’s surprise interest-rate increase in the middle of the night, a 6.5 percentage-point move that failed to stem the run on the ruble yesterday, was a choice between a “very bad” option and and a “very, very bad” option.

The ruble sank beyond 80 per dollar, a record low, as panic swept across Moscow’s financial markets before it rebounded after Economy Minister Alexei Ulyukayev denied speculation the government would impose restrictions to stop Russians from converting cash into dollars. The currency ended the day at 67.9 per dollar, down 5.4 percent on the day, while bonds and stocks also tumbled, sending the RTS equity gauge down the most since 2008.

Russians have long experience of state-run media:

Russians like Vladimir Rudenkov from Voronezh, a city about 500 kilometers (311 miles) from Moscow, were ignoring the government-media assurances and taking action. Rudenkov transfered a portion of his savings into dollars this morning and said he regretted that he didn’t transfer it all.

“The situation is catastrophic,” said Rudenkov, a 35-year-old manager. “I don’t believe that the ruble collapse is happening only due to the falling oil prices. The government is the one to blame as it didn’t defend the national currency.”

The BoC has published a paper by George J. Jiang, Ingrid Lo and Giorgio Valente titled High-Frequency Trading around Macroeconomic News Announcements: Evidence from the U.S. Treasury Market:

This paper investigates high-frequency (HF) market and limit orders in the U.S. Treasury market around major macroeconomic news announcements. BrokerTec introduced i-Cross at the end of 2007 and we use this exogenous event as an instrument to analyze the impact of HF activities on liquidity and price efficiency. Our results show that HF activities have a negative effect on liquidity around economic announcements: they widen spreads during the pre-announcement period and lower depth on the order book during the post-announcement period. The negative impact on liquidity mainly derives from HF trades. Nonetheless, HF trades improve price efficiency during both the preannouncement and post-announcement periods.

Intact Financial Corporation, proud issuer of IFC.PR.A and IFC.PR.C, has been confirmed at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today confirmed Intact Financial Corporation’s (Intact or the Company) Issuer Rating at A (low), Senior Unsecured Debt at A (low) and Non-Cumulative Preferred Shares at Pfd-2 (low). The trends are Stable.

The Company’s operating subsidiaries are among the strongest performers in the Canadian property and casualty insurance industry, achieving underwriting profits and obtaining above-industry return on capital results. The Company’s overall underwriting performance hinges on tightening benefits, reducing exposures, scale and analysis, which allows it to identify and price risks by mining its extensive database. Scale also enhances the ability of the Company to keep claims costs lower than those of its peer group and to more efficiently service its multi-channel distribution networks. Recent efforts to increase pricing in firmer commercial markets, to tighten benefits and to reduce earthquake exposures should improve the Company’s performance after three years of elevated catastrophic claims. An efficient capital structure keeps the Company’s overall financial leverage within bounds, and it has seen improving financial leverage ratios since 2011. There is a possibility of acquisition activity increasing the financial leverage if financed with debt.

DBRS calculates Intact’s annualized return on equity for the first nine months of 2014 to be 16.2%, a positive result benefiting from lower catastrophic claims so far this year compared with 2013 and generally improved underwriting results with higher premiums and reduced benefit obligations. The important Ontario auto insurance market, which comprises the largest segment of Intact’s business, is challenging with the provincial government’s desire to lower auto insurance premiums. To achieve the desired premium reductions, the industry is asking for a reduction in benefit costs and greater ability to discourage fraud.

It was (yet another) poor day for the Canadian preferred share market, with PerpetualDiscounts down 9bp, FixedResets losing 22bp and DeemedRetractibles off 8bp. There is (yet another) lengthy list of Performance Highlights, dominated (yet again) by losing FixedResets with (yet more) heavy representation from the credit-dubious Enbridge. Volume was above average, enlivened by the two new issues, CM.PR.P and TD.PF.C.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 19.45, is $1.84 cheap, but it has already reset (at +192). TRP.PR.D, bid at 25.00 and resetting at +238bp on 2019-4-30 is $0.66 rich and TRP.PR.E, bid at 25.04 and resetting at +235bp on 2019-10-30, is $0.90 rich. The TRP issues seem to be rationalizing, but there continues to be pressure on TRP.PR.A.

Now, this is really interesting. TRP.PR.A will pay 3.266%, which is to say $0.8165, until its next reset date 2019-12-31. TRP.PR.E will continue to pay its initial dividend of $1.0625 until it resets 2019-10-30 at +235. See that? Two month’s difference in reset. I think we can disregard forecasts of changes in GOC-5 yield that get that precise. That is to say, over the next five years, TRP.PR.E will pay a total of about $1.25 more than TRP.PR.A. Then it will reset at 46bp more, which is to say $0.115 p.a., forever.

And yet the difference in price is $5.59! That seems to me to be a lot to pay for a short term payment of $1.25, leaving $4.34, to earn $0.115, or 2.65%. But some people, it would seem, find this quite reasonable. It will be noted as well that TRP.PR.A is exposed to possible capital gains if the Market Reset Spread narrows; so it could gain up to $5.55 in price while TRP.PR.E got nothing.

It looks like MFC.PR.F, resetting at 141bp on 2016-06-19 is in another world and distorting results again.

There continues to be extraordinary cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, is bid at 20.01 and appears to be $0.96 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 24.90 and appears to be $1.39 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.30, looks $1.05 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.30, looks $0.77 expensive and resets 2019-3-1

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.1438 %	2,505.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.1438 %	3,966.9
Floater	3.03 %	3.12 %	60,256	19.44	4	-0.1438 %	2,663.7
OpRet	4.41 %	-3.71 %	27,354	0.08	2	-0.0196 %	2,748.8
SplitShare	4.31 %	4.02 %	43,390	3.71	5	-0.0294 %	3,172.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0196 %	2,513.5
Perpetual-Premium	5.44 %	1.18 %	74,181	0.09	20	-0.0020 %	2,473.8
Perpetual-Discount	5.22 %	5.14 %	111,245	15.18	15	-0.0864 %	2,634.1
FixedReset	4.28 %	3.60 %	233,669	16.45	77	-0.2249 %	2,511.5
Deemed-Retractible	5.00 %	1.37 %	98,170	0.29	40	-0.0837 %	2,598.5
FloatingReset	2.56 %	2.10 %	64,191	3.51	5	-0.0868 %	2,531.4

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.T	FixedReset	-4.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 23.11 Evaluated at bid price : 24.64 Bid-YTW : 3.77 %
IFC.PR.A	FixedReset	-1.82 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.61 Bid-YTW : 4.61 %
ENB.PR.B	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 22.21 Evaluated at bid price : 22.56 Bid-YTW : 4.16 %
BNS.PR.P	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.62 Bid-YTW : 2.71 %
MFC.PR.F	FixedReset	-1.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.00 Bid-YTW : 5.01 %
GWO.PR.N	FixedReset	-1.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.01 Bid-YTW : 5.29 %
ENB.PR.N	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 22.23 Evaluated at bid price : 22.80 Bid-YTW : 4.34 %
BAM.PF.F	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 23.26 Evaluated at bid price : 25.25 Bid-YTW : 4.08 %
ENB.PR.F	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 22.20 Evaluated at bid price : 22.70 Bid-YTW : 4.24 %
TRP.PR.A	FixedReset	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 4.17 %
BAM.PF.A	FixedReset	1.70 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 3.60 %
HSE.PR.A	FixedReset	2.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 4.01 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.C	FixedReset	749,016	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 23.11 Evaluated at bid price : 24.87 Bid-YTW : 3.51 %
CM.PR.P	FixedReset	692,550	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 23.07 Evaluated at bid price : 24.75 Bid-YTW : 3.53 %
FTS.PR.M	FixedReset	269,800	Desjardins crossed blocks of 197,100 and 60,000 at 25.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 23.25 Evaluated at bid price : 25.25 Bid-YTW : 3.71 %
TRP.PR.E	FixedReset	116,806	RBC crossed 114,600 at 25.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 23.18 Evaluated at bid price : 25.04 Bid-YTW : 3.70 %
CM.PR.E	Perpetual-Premium	66,242	Called for redemption January 31. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-15 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : -0.24 %
ENB.PR.A	Perpetual-Premium	56,250	RBC crossed 42,700 at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 24.68 Evaluated at bid price : 24.99 Bid-YTW : 5.54 %
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.T	FixedReset	Quote: 24.64 – 25.44 Spot Rate : 0.8000 Average : 0.5662 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 23.11 Evaluated at bid price : 24.64 Bid-YTW : 3.77 %
ENB.PR.A	Perpetual-Premium	Quote: 24.99 – 25.63 Spot Rate : 0.6400 Average : 0.4751 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 24.68 Evaluated at bid price : 24.99 Bid-YTW : 5.54 %
NEW.PR.D	SplitShare	Quote: 32.12 – 33.12 Spot Rate : 1.0000 Average : 0.8457 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.12 Bid-YTW : 3.71 %
SLF.PR.A	Deemed-Retractible	Quote: 23.91 – 24.35 Spot Rate : 0.4400 Average : 0.2925 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.91 Bid-YTW : 5.32 %
PWF.PR.A	Floater	Quote: 19.25 – 20.00 Spot Rate : 0.7500 Average : 0.6105 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 2.74 %
FTS.PR.K	FixedReset	Quote: 24.30 – 24.95 Spot Rate : 0.6500 Average : 0.5176 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-16 Maturity Price : 22.96 Evaluated at bid price : 24.30 Bid-YTW : 3.51 %

STRIPS are taking off!

An obscure corner of the $12.4 trillion market for U.S. government debt is providing one of the clearest signs yet that bond investors are writing off the threat of inflation for years, if not decades, to come.

Demand for Strips, created when Wall Street banks separate the interest payments from the principal of U.S. debt and sell each at a discount, has boosted the amount outstanding to an average $211 billion this year, the most since 1999, data from the Treasury Department show. The securities, the most vulnerable to inflation of all U.S. government bonds, posted the biggest returns this year by rallying almost 50 percent.

This is particularly impressive given that the yield curve is relatively flat; the STRIPS term curve will always (by inexorable mathematics) be steeper than the bond term curve, on an accelerating basis as the bond curve gets steeper … some of these investors might find themselves bankrupt and bewildered if the curve steepens; which, theoretically, it should do as the market starts pricing in policy rate hikes (cf. 1994).

There is much wailing over drops in the CAD:

The Canadian dollar slumped below the 86-cent mark today as oil prices slipped again.

And don’t expect it to get much better, though there may be some higher points along the way.

The loonie, as Canada’s dollar coin is known, closed at 85.79 cents U.S. today, down more than half a cent.

This came as oil prices, which had stabilized, tumbled yet again, continuing the weeks of turmoil.

But it ain’t got nuthin’ on the ruble:

The ruble tumbled the most since 1998, sliding past 60 for the first time, as traders tested Russia’s willingness to defend the currency amid an oil slump that’s pushing the economy toward recession.

The ruble weakened 9.1 percent to 64.0005 per dollar at 7:57 p.m. in Moscow, the steepest slide on a closing basis since the year Russia defaulted on local-currency debt. The 10-year government bond yield rose 23 basis points to 13.23 percent. Three-month implied volatility for the ruble climbed to a six-year high as the rout triggered the Bank of Russia to sell foreign exchange, according to BCS Financial Group and MDM Bank.

Traders are pressing the central bank to buy more rubles to limit a selloff that has wiped out 22 percent of the currency’s value this month. Oil’s slide toward $60 a barrel in London and sanctions over the conflict in Ukraine are undermining confidence in Russian assets as evidence mounts that the economy is entering a recession. Industrial output fell the most in more than a year in November, data showed today.

Assiduous Reader JP, who continues to send me interesting stuff when youse guys can’t be bothered, sends me a picture, and tells me to note the high and low:

Faced with this, Russia’s central bank had little choice but to acknowledge Russia’s third world status:

The central bank increased the key rate to 17 percent from 10.5 percent effective today, it said in a statement on its website. Policy makers gathered for an unscheduled meeting after a one-point increase on Dec. 11.

“This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,” the bank said in the statement.

Russia’s central bank raised interest rates for the sixth time in 2014 after more than $80 billion spent from its reserves failed to stop a 49 percent selloff of the ruble, the world’s worst-performing currency this year. President Vladimir Putin, whose incursion into Ukraine’s Crimea peninsula in March prompted the U.S. and its allies to strike back with sanctions, this month called for “harsh” measures to deter currency speculators.
…
The ruble yesterday tumbled past 60 for the first time on record, losing 9.7 percent to 64.4455 a dollar. That extended its plunge this year to 49 percent, which overtook the Ukrainian hryvnia’s drop. Brent, the grade of oil traders look at for pricing Russia’s main export blend, slipped 79 cents, or 1.3 percent, to end the session at $61.06 a barrel on the London-based ICE Futures Europe exchange.

Basically, nobody knows what’s going on:

Canadian stocks fell, extending losses after the worst week in three years, as declines among materials and energy shares offset gains in consumer stocks.

Materials companies lost 3.3 percent as gold and silver fell on speculation the Federal Reserve is moving closer to raising U.S. interest rates amid an improving economy. Energy shares lost 0.9 percent as oil fell to the lowest level in more than five years. Talisman Energy Inc. rallied 18 percent as people familiar with the matter said Canada Pension Plan Investment Board is weighing a bid for the oil-and-gas explorer.

The Standard & Poor’s/TSX Composite Index (SPTSX) lost 25.91 points, or 0.2 percent, to 13,705.14 at 4 p.m. in Toronto, after rising as much as 0.9 percent and then falling 0.7 percent. The equity gauge dropped 5.1 percent last week, its worst weekly decline since September 2011. Trading in S&P/TSX stocks was 31 percent below the 30-day average at closing time.

Canadian equities have pared their gain for the year to 0.6 percent, after rallying as much as 15 percent to a record in September. Oil, bank and raw-material shares, which collectively account for two-thirds of the S&P/TSX, are the worst performers among 10 groups this year, led by a 20 percent slump in energy, according to data compiled by Bloomberg.

Rumours regarding Repsol / Talisman are getting very specific:

Spain’s Repsol SA has submitted an $8.3-billion (U.S.) takeover bid for Talisman Energy Inc. amid falling oil prices and questions about Talisman’s long-term prospects, a source familiar with the situation said on Monday.

Under the offer, Repsol would pay $8 (U.S.) per share of Calgary-base‎d Talisman, the source said.

It was a deceptively mixed day for the Canadian preferred share market, with PerpetualDiscounts up 13bp, FixedResets gaining 4bp and DeemedRetractibles off 1bp, but the modest averages masked a lot of turmoil. There’s yet another very lengthy list of performance highlights, dominated by losing low-spread FixedResets. We may even have entered a period of self-feeding tax-loss selling (many of the losers are also volume highlights), but we won’t know until the season ends! Volume was above average.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 19.20, is $2.13 cheap (!), but it has already reset (at +192). TRP.PR.D, bid at 25.15 and resetting at +238bp on 2019-4-30 is $0.81 rich and TRP.PR.E, bid at 25.20 and resetting at +235bp on 2019-10-30, is $1.00 rich. The TRP issues seem to be steadily rationalizing, but there continues to be pressure on TRP.PR.A.

Now, this is really interesting. TRP.PR.A will pay 3.266%, which is to say $0.8165, until its next reset date 2019-12-31. TRP.PR.E will continue to pay its initial dividend of $1.0625 until it resets 2019-10-30 at +235. See that? Two month’s difference in reset. I think we can disregard forecasts of changes in GOC-5 yield that get that precise. That is to say, over the next five years, TRP.PR.E will pay a total of about $1.25 more than TRP.PR.A. Then it will reset at 46bp more, which is to say $0.115 p.a., forever.

And yet the difference in price is … is … SIX DOLLARS! That seems to me to be a lot to pay for a short term payment of $1.25, leaving $4.75, to earn $0.115, or 2.42%. But some people, it would seem, find this quite reasonable.

MFC has a very good fit to theory, but the Implied Volatility is very high.

There continues to be extraordinary cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, is bid at 20.12 and appears to be $0.89 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.00 and appears to be $1.49 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.40, looks $1.01 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.20, looks $0.66 expensive and resets 2019-3-1

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.3030 %	2,509.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.3030 %	3,972.6
Floater	3.02 %	3.11 %	59,635	19.45	4	0.3030 %	2,667.5
OpRet	4.41 %	-3.87 %	27,159	0.08	2	-0.0979 %	2,749.3
SplitShare	4.31 %	4.11 %	45,189	3.71	5	-0.0531 %	3,173.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0979 %	2,514.0
Perpetual-Premium	5.44 %	-0.36 %	73,710	0.08	20	-0.0509 %	2,473.9
Perpetual-Discount	5.22 %	5.14 %	109,492	15.21	15	0.1326 %	2,636.3
FixedReset	4.28 %	3.64 %	225,234	16.44	75	0.0382 %	2,517.2
Deemed-Retractible	5.00 %	1.81 %	97,526	0.20	40	-0.0080 %	2,600.7
FloatingReset	2.56 %	2.10 %	64,904	3.52	5	0.0079 %	2,533.6

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.A	FixedReset	-3.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.22 %
FTS.PR.H	FixedReset	-2.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 3.81 %
ENB.PR.T	FixedReset	-2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 21.82 Evaluated at bid price : 22.23 Bid-YTW : 4.34 %
HSE.PR.A	FixedReset	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 19.04 Evaluated at bid price : 19.04 Bid-YTW : 4.11 %
ENB.PR.A	Perpetual-Premium	-1.74 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 24.56 Evaluated at bid price : 24.81 Bid-YTW : 5.58 %
FTS.PR.K	FixedReset	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 22.92 Evaluated at bid price : 24.20 Bid-YTW : 3.53 %
ENB.PR.H	FixedReset	-1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 20.48 Evaluated at bid price : 20.48 Bid-YTW : 4.36 %
ENB.PF.G	FixedReset	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 22.55 Evaluated at bid price : 23.59 Bid-YTW : 4.32 %
BMO.PR.Q	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.74 Bid-YTW : 3.67 %
GWO.PR.G	Deemed-Retractible	-1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 5.39 %
PWF.PR.S	Perpetual-Discount	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 23.58 Evaluated at bid price : 23.95 Bid-YTW : 5.06 %
PWF.PR.T	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 23.45 Evaluated at bid price : 25.70 Bid-YTW : 3.56 %
BNS.PR.P	FixedReset	1.17 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 2.24 %
BNS.PR.Y	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.15 Bid-YTW : 3.00 %
MFC.PR.J	FixedReset	1.54 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 3.16 %
TRP.PR.D	FixedReset	2.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 23.26 Evaluated at bid price : 25.15 Bid-YTW : 3.64 %

Volume Highlights
Issue	Index	Shares Traded	Notes
FTS.PR.H	FixedReset	214,150	Desjardins crossed 188,300 at 18.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 3.81 %
TRP.PR.A	FixedReset	120,518	Will reset at 3.266%. Desjardins crossed 20,800 at 19.33. RBC crossed blocks of 28,200 and 24,200 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.22 %
ENB.PR.Y	FixedReset	79,491	Scotia bought 10,700 from National at 21.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 21.59 Evaluated at bid price : 21.92 Bid-YTW : 4.30 %
CM.PR.E	Perpetual-Premium	36,275	Called for redemption 2015-1-31. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-14 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : -0.42 %
TRP.PR.C	FixedReset	33,937	RBC crossed 13,200 at 18.96. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 18.71 Evaluated at bid price : 18.71 Bid-YTW : 3.97 %
BNS.PR.Q	FixedReset	29,083	RBC crossed 25,000 at 25.77. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-25 Maturity Price : 25.00 Evaluated at bid price : 25.72 Bid-YTW : 2.95 %
There were 36 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CGI.PR.D	SplitShare	Quote: 25.05 – 26.14 Spot Rate : 1.0900 Average : 0.6202 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.74 %
PWF.PR.A	Floater	Quote: 19.25 – 20.00 Spot Rate : 0.7500 Average : 0.4576 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 2.74 %
ENB.PF.G	FixedReset	Quote: 23.59 – 24.15 Spot Rate : 0.5600 Average : 0.3519 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 22.55 Evaluated at bid price : 23.59 Bid-YTW : 4.32 %
ENB.PR.A	Perpetual-Premium	Quote: 24.81 – 25.30 Spot Rate : 0.4900 Average : 0.2943 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 24.56 Evaluated at bid price : 24.81 Bid-YTW : 5.58 %
BAM.PF.A	FixedReset	Quote: 25.33 – 25.75 Spot Rate : 0.4200 Average : 0.2618 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-15 Maturity Price : 23.38 Evaluated at bid price : 25.33 Bid-YTW : 4.09 %
MFC.PR.B	Deemed-Retractible	Quote: 23.62 – 24.07 Spot Rate : 0.4500 Average : 0.3005 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.62 Bid-YTW : 5.39 %

Well, that was a week and a half!

U.S. stocks sank, with the Dow Jones Industrial Average capping its biggest weekly drop in three years, as oil continued to slide and Chinese industrial data raised concern over a global economic slowdown.

Materials stocks declined the most in the Standard & Poor’s 500 Index, losing 2.9 percent as a group, while energy shares dropped 2.2 percent. International Business Machines Corp., DuPont Co. and Exxon Mobil Corp. sank at least 2.9 percent to lead declines in all 30 Dow stocks.

The S&P 500 lost 1.6 percent to 2,002.33 at 4 p.m. in New York, extending losses in the final hour to cap a weekly drop of 3.5 percent. The Dow sank 315.51 points, or 1.8 percent, to 17,280.83. The Dow slid 3.8 percent for the week, its biggest decline since November 2011.

Canada did worse:

Canadian stocks tumbled with equities around the world, capping the worst week in three years, as the continuing selloff in oil fueled concerns over a global economic slowdown.

Energy stocks dropped with oil prices as RMP Energy Inc. and Pacific Rubiales Energy Corp. slid at least 7.9 percent. Consumer-discretionary stocks sank as Amaya Inc. plunged 18 percent. Talisman Energy Inc. soared 17 percent on speculation of a deal with Repsol SA.

The Standard & Poor’s/TSX Composite Index (SPTSX) fell 173.22 points, or 1.3 percent, to 13,731.9 at 4 p.m. in Toronto. The equity gauge dropped 5.1 percent over five days, its worst weekly decline since September 2011. Trading in S&P/TSX stocks was 12 percent above the 30-day average at this time of day.

But it’s an ill wind…:

Inflation is moribund and bond buyers love it.

As crude oil leads a collapse in commodity prices, a German gauge of the outlook for inflation over the next five years has fallen below zero. With no increases in consumer prices in sight, bondholders’ interest and repayments are worth more, inflaming demand for fixed income. The longest maturities are setting the pace from Europe to the U.S.

The rush for bonds pushed yields in Germany and six other euro-area nations to record lows today, while in the U.S, 30-year yields closed at the lowest level since 2012, according to data compiled by Bloomberg. Adding to the momentum is the prospect that central-bank measures to rekindle inflation would involve efforts to keep down borrowing costs, including so-called quantitative easing from the European Central Bank

… and Treasuries…:

Treasuries rallied, with 10-year yields reaching the lowest in eight weeks, as a plunge in crude oil raised concern global inflation is slipping further below central-bank targets before the Federal Reserve meets next week.

The notes posted the biggest weekly decline in yield since June 2012 as crude oil futures fell below $58 a barrel in New York. Fed policy makers will review whether to retain the vow to hold interest rates at virtually zero for a “considerable time.” The biggest U.S. jobs gains in November since January 2012 fueled speculation last week of quicker interest-rate increases, while reports showing slowing factory output in China’s and financial turmoil in Greece represent additional economic headwinds for the U.S.
…
Treasury 10-year note yields fell eight basis points, or 0.08 percentage point, to 2.08 percent at 5 p.m. in New York, according to Bloomberg Bond Trader prices, after reaching the lowest level since Oct. 16. The 2.25 percent security rose 23/32 or $7.19 per $1,000 face amount, to 101 15/32. The yield has fallen 22 basis points this week, the most since June 2012.

So it seems as if the CSE is introducing market-makers:

Following the successful completion of a pilot project with two symbols, the CSE is now accepting applications for Market Makers for all CSE-listed securities. As outlined in the November 14 notice the CSE is modifying its market making programme to improve execution quality and service for retail investors. Market Makers will have the following responsibilities in their assigned stocks:

• •Maintain a bid/ask spread goal
• •Provide a Guaranteed Minimum Fill for eligible orders
• •Provide automatic odd lot execution, so that all incoming market or better limit odd lot orders will be auto traded at the bid/ask if they cannot be filled by booked odd lot orders;
• •Ensure a reasonable bid/ask in the context of current market conditions
• •Undergo periodic performance reviews

If the Toronto Stock Exchange is any guide, then:

• The bid/ask spread goal will neither be publicized nor enforced
• The size of the Guaranteed Minimum Fill will be top secret information, available only to those who pay for it
• Automatic odd lot execution will be fine. Yay!
• A reasonable bid/ask spread will be good fodder for jokes
• performance reviews will not be public and nobody will ever lose their assignment

DBRS downgraded Timmy’s:

DBRS Limited (DBRS) has today downgraded the Issuer Rating of Tim Hortons Inc. (THI or the Company) to BB (low) and its Senior Unsecured Debt to B, with a recovery rating of RR6; the trends are Stable. This action follows the Company’s announcement that it has received regulatory approval for and its shareholders have voted in favour of the proposed transaction to create a new global quick-service restaurant leader that would own both THI and Burger King Worldwide, Inc. (Burger King) under a new parent company, Restaurant Brands International (RBI). DBRS has removed the ratings from Under Review with Negative Implications.
…
Financial Risk Profile
In terms of financial profile, RBI is expected to have balance sheet debt of over $9 billion and preferred shares of $3 billion. Combined with pro forma earnings, DBRS estimates the combined entity will have lease-adjusted debt-to-EBITDAR excluding the preferred shares of approximately 6.23 times (x) and fixed-charge coverage of 1.96x, including the preferred dividend, credit metrics considered at the lower-end of the B range of ratings. That said, the combined entity should nevertheless generate meaningful levels of free cash flow (based on solid operating cash flow and low maintenance capex) beginning in 2016 and could deleverage significantly through a combination of debt repayment and earnings growth.

But, wonder of wonders, the Canadian preferred share market had a very good day, with PerpetualDiscounts up 8bp, FixedResets rocketing up 62bp and DeemedRetractibles gaining 3bp. Not surprisingly, given the averages, the lengthy Performance Highlights table is dominated by FixedReset winners. Volume was high.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 19.90, is $1.29 cheap, but it has already reset. TRP.PR.B, bid at 17.20, resetting 2015-6-30 is about 0.21 rich and TRP.PR.C, bid at 18.65, resetting 2016-1-30 is fairly priced. The TRP issues seem to be steadily rationalizing, but there continues to be pressure on TRP.PR.A.

It looks like we’re back in the situation in which eight of the nine issues are well-behaved in accordance with theory, but extraordinary pressure on the lowest-spread issue, MFC.PR.F, is distorting the whole calculation. According to the distorted fit, MFC.PR.F, resetting at +141 on 2016-6-19 is about $0.62 cheap, while MFC.PR.L, resetting at +216 on 2019-6-19, is about $0.61 rich.

BAM is a little difficult to figure out:

As with MFC, it looks as if extraordinary cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, may be throwing off the Implied Volatility calculation; be that as it may, BAM.PR.X is bid at 20.10 and appears to be $0.99 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.02 and appears to be $1.43 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.90, looks $0.81 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.62, looks $0.82 expensive and resets 2019-3-1

And now it’s time for PrefLetter!

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.8015 %	2,501.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.8015 %	3,960.6
Floater	3.03 %	3.13 %	61,910	19.42	4	-0.8015 %	2,659.4
OpRet	4.41 %	-5.72 %	28,284	0.08	2	-0.1369 %	2,752.0
SplitShare	4.30 %	4.07 %	44,928	3.72	5	-0.1096 %	3,175.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1369 %	2,516.4
Perpetual-Premium	5.44 %	1.31 %	74,566	0.08	20	0.0137 %	2,475.1
Perpetual-Discount	5.23 %	5.15 %	111,129	15.21	15	0.0750 %	2,632.9
FixedReset	4.28 %	3.64 %	224,047	16.51	75	0.6184 %	2,516.2
Deemed-Retractible	5.00 %	1.32 %	97,795	0.21	40	0.0279 %	2,600.9
FloatingReset	2.56 %	2.12 %	64,801	3.53	5	-0.3147 %	2,533.4

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.A	FixedReset	-2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 4.07 %
TRP.PR.C	FixedReset	-2.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 18.65 Evaluated at bid price : 18.65 Bid-YTW : 3.98 %
BAM.PR.C	Floater	-1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 3.14 %
BAM.PR.B	Floater	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 16.61 Evaluated at bid price : 16.61 Bid-YTW : 3.15 %
FTS.PR.H	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 3.70 %
CU.PR.C	FixedReset	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.56 Evaluated at bid price : 25.25 Bid-YTW : 3.60 %
BNS.PR.R	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 3.25 %
IFC.PR.C	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 2.26 %
MFC.PR.C	Deemed-Retractible	1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.90 Bid-YTW : 5.62 %
BAM.PR.R	FixedReset	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.72 Evaluated at bid price : 25.02 Bid-YTW : 3.64 %
BNS.PR.Q	FixedReset	1.26 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-25 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 2.97 %
FTS.PR.K	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.09 Evaluated at bid price : 24.62 Bid-YTW : 3.44 %
ENB.PR.T	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 22.12 Evaluated at bid price : 22.69 Bid-YTW : 4.23 %
BAM.PF.F	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.53 Bid-YTW : 3.98 %
NA.PR.S	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.35 Evaluated at bid price : 25.45 Bid-YTW : 3.60 %
TRP.PR.E	FixedReset	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.24 Evaluated at bid price : 25.20 Bid-YTW : 3.67 %
IFC.PR.A	FixedReset	1.72 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 4.39 %
MFC.PR.L	FixedReset	1.87 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 3.66 %
BMO.PR.M	FixedReset	1.91 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 3.15 %
MFC.PR.F	FixedReset	1.93 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.15 Bid-YTW : 4.92 %
BAM.PF.A	FixedReset	1.96 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 3.87 %
BNS.PR.P	FixedReset	2.15 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 2.60 %
BAM.PF.B	FixedReset	2.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.18 Evaluated at bid price : 24.88 Bid-YTW : 3.90 %
GWO.PR.N	FixedReset	2.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.16 Bid-YTW : 5.19 %
MFC.PR.H	FixedReset	2.93 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 26.01 Bid-YTW : 2.72 %
PWF.PR.T	FixedReset	5.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.37 Evaluated at bid price : 25.44 Bid-YTW : 3.61 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IAG.PR.E	Deemed-Retractible	148,462	Nesbitt crossed 148,400 at 25.98. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 26.00 Evaluated at bid price : 25.97 Bid-YTW : 4.43 %
ENB.PR.Y	FixedReset	122,022	RBC crossed 97,800 at 21.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 21.58 Evaluated at bid price : 21.91 Bid-YTW : 4.30 %
FTS.PR.M	FixedReset	106,445	Scotia crossed blocks of 53,200 and 40,000, both at 25.15. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.23 Evaluated at bid price : 25.20 Bid-YTW : 3.71 %
MFC.PR.N	FixedReset	71,890	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.74 %
TRP.PR.A	FixedReset	53,405	Will reset at 3.266%. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 4.07 %
CM.PR.E	Perpetual-Premium	48,584	Called for redemption 2015-1-31. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-11 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : -0.97 %
There were 45 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: 32.47 – 33.35 Spot Rate : 0.8800 Average : 0.6946 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.47 Bid-YTW : 3.52 %
PWF.PR.P	FixedReset	Quote: 20.60 – 21.18 Spot Rate : 0.5800 Average : 0.4300 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 3.67 %
TRP.PR.D	FixedReset	Quote: 24.59 – 25.16 Spot Rate : 0.5700 Average : 0.4215 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 23.06 Evaluated at bid price : 24.59 Bid-YTW : 3.75 %
TRP.PR.C	FixedReset	Quote: 18.65 – 19.10 Spot Rate : 0.4500 Average : 0.3112 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 18.65 Evaluated at bid price : 18.65 Bid-YTW : 3.98 %
IGM.PR.B	Perpetual-Premium	Quote: 26.05 – 26.50 Spot Rate : 0.4500 Average : 0.3421 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 4.96 %
TRP.PR.B	FixedReset	Quote: 17.20 – 17.49 Spot Rate : 0.2900 Average : 0.1856 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-12 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 3.81 %

The war on markets continues:

Citigroup Inc. (C) and Goldman Sachs Group Inc. were among 10 banks fined for failing to shield analysts from pressure to promote stocks a decade after a U.S. crackdown sought to end Wall Street conflicts of interest.

The investment banks promised favorable research to Toys “R” Us Inc. and its private-equity owners in 2010 to win roles in its initial public offering, the Financial Industry Regulatory Authority said today in a statement. The regulator fined the firms a total of $43.5 million, faulting them for “implicitly or explicitly” making promises that their analysts would give positive coverage. Six of the 10 firms didn’t have adequate supervisory procedures to prevent the practice.

Such silliness. Everything needs to be sold and brokerages are sales organizations; pretending otherwise just leads to problems and building an incentive to get around the rules right into the rules. The tension inherent in the current pretense of objectivity is unsustainable; however, as with all other unsustainable financial market tensions, it is impossible to tell just how the situation will eventually resolve.

Rob Carrick of the Globe writes a piece titled Preferred shares will not protect you like bonds will :

Where preferreds do not deliver is in a stock market decline. As the example of the past month shows, you get only a modest buffer against the broader market’s losses. Bonds, by contrast, will often rise in price as stocks sink.

Investors who hold preferred shares have to ask themselves the same question as people who have migrated from bonds to dividend-paying common shares. The question is this: What’s my priority – protecting my portfolio by hedging against stock market risk, or generating an attractive flow of income? If you’re in preferred shares for the income and can live with sliding share prices, then consider them as a bond substitute or companion. If portfolio buoyancy is your goal, then look to bonds and move your preferred shares over the equity side of your portfolio.

Let’s look at part of that again:

Bonds, by contrast, will often rise in price as stocks sink.

What kind of bonds? Long, short, corporate, government? How often will they rise in price as stocks sink? How much? What was the trigger for the decline in stocks? This is all very vague, but ever since Ben Graham made his silly mistake it’s been a very popular fallacy.

As mentioned yesterday, I read through the BoC Financial Stability Report article by Ian Foucher and Kyle Gray titled Exchange-Traded Funds: Evolution of Benefits, Vulnerabilities and Risks:

• The global market for exchange-traded funds (ETFs) has exhibited strong growth in recent years, reaching US$2.3 trillion by the end of 2013. ETFs have clear advantages for investors, such as low-cost portfolio diversification and the liquidity of an exchange-traded product. However, recent disruptions in certain ETF products have highlighted the need to better understand the vulnerabilities and risks associated with this market.
• ETFs are generally perceived by investors as having equity-like liquidity, but in times of stress, this liquidity may prove illusory for some funds. Synthetic ETFs also carry additional counterparty and collateral risk. If any of these risks materialized, it could trigger an investor run, which could negatively impact the underlying market as well as other similar funds.
• The synthetic ETF market in Canada has a high concentration of counterparty risk compared with other jurisdictions. However, given the small size of this market segment, it does not represent a significant vulnerability for the Canadian financial system. Nonetheless, rapid changes in the ETF market imply that authorities need to monitor developments closely.

Well, it’s nice to have Canadian data and Canada-centric discussion, but there’s nothing really new that I can see. See the post Synthetic ETFs a Threat to Financial Stability? for links to a paper on the subject by Srichander Ramaswamy.

And let’s look at another part:

If portfolio buoyancy is your goal, then look to bonds and move your preferred shares over the equity side of your portfolio

Well, for most people that’s a pretty stupid goal, frankly. Ask not what you can do for your portfolio. Ask rather what your portfolio can do for you.

Q: Why did you scrimp and save for forty years?

A: Well, you see, my investment objective is portfolio buoyancy.

If portfolio buoyancy is your goal – for some bizarre reason that almost certainly has nothing to do with your actual life – even CAPM will tell you the right answer: reduce market exposure.

What kind of bonds? Maybe junk energy bonds?

The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.

Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year.

“Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”

But after the series of bad days we’ve been having, insurance sure would be nice!

Well, according to my figures it was a mixed day on the Canadian preferred share market, but it will be remembered from yesterday that the Toronto Stock Exchange sold me moronic data for FTS.PR.F, making it down 11.87% on a bid/bid basis; today it has bounced back 11.16% and that has screwed up the figures again, which are PerpetualDiscounts up 60bp, FixedResets down 54bp and DeemedRetractibles gaining 4bp. The S&P/TSX indices, which use price/price to calculate returns, are TXPR down 54bp and TXPL down 81bp, so it was a pretty rough day. There is yet another lengthy list of performance highlights which is yet again dominated by losing FixedResets – although it is nice to see SLF.PR.G and MFC.PR.F, recent heavy heavy heavy losers, on the plus side of the ledger for a change. Volume was very high.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.40, is $1.08 cheap, but it has already reset. TRP.PR.B, bid at 17.25, resetting 2015-6-30 and TRP.PR.C, bid at 19.11, resetting 2016-1-30 are both fairly priced. The TRP issues seem to be steadily rationalizing, but there continues to be pressure on TRP.PR.A.

Excellent performance by MFC.PR.F today restored the Implied Volatility calculation to approximately what is was on December 8. Implied Volatility is very high at 38% – which indicates to me that the market accepts a relatively high degree of directionality (towards par) in future prices – MFC.PR.F, resetting at +141 on 2016-6-19 is about $0.85 cheap, while MFC.PR.H, resetting at +313 on 2017-3-19, is about $1.02 cheap.

As shown by the next two charts, the curve-fitting for MFC is much less ambiguous than it has been for the past two days.

BAM is a little hard to figure out.

As with MFC on December 9 and December 10, it looks as if extraordinary cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, may be throwing off the Implied Volatility calculation; but that would leave the remaining issues trading at an very high Implied Volatility without any reason – whereas the MFC issues have, at a minimum, a chance of becoming subject to NVCC rules.

As calculated, though, BAM.PR.X, bid at 20.10, seems about $0.84 cheap while BAM.PR.R, resetting at +230 on 2016-6-30 and bid at 24.72, seems $1.40 rich.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.10, looks $0.66 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.31, looks $0.66 expensive and resets 2019-3-1

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.1226 %	2,521.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.1226 %	3,992.6
Floater	3.01 %	3.10 %	62,468	19.50	4	-0.1226 %	2,680.9
OpRet	4.40 %	-9.95 %	27,474	0.08	2	0.1567 %	2,755.8
SplitShare	4.29 %	4.03 %	41,608	3.72	5	0.2125 %	3,178.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1567 %	2,519.9
Perpetual-Premium	5.44 %	-1.15 %	74,743	0.08	20	0.0118 %	2,474.8
Perpetual-Discount	5.23 %	5.13 %	110,442	15.23	15	0.5967 %	2,630.9
FixedReset	4.31 %	3.79 %	215,621	16.45	75	-0.5437 %	2,500.7
Deemed-Retractible	5.00 %	-1.37 %	101,195	0.21	40	0.0430 %	2,600.2
FloatingReset	2.55 %	2.03 %	63,755	3.46	5	-0.1100 %	2,541.4

Performance Highlights
Issue	Index	Change	Notes
IFC.PR.A	FixedReset	-5.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.61 Bid-YTW : 4.70 %
PWF.PR.T	FixedReset	-4.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.89 Evaluated at bid price : 24.12 Bid-YTW : 4.00 %
MFC.PR.H	FixedReset	-2.24 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.27 Bid-YTW : 4.07 %
BMO.PR.M	FixedReset	-2.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.52 %
TRP.PR.A	FixedReset	-2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 4.14 %
CU.PR.C	FixedReset	-1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.48 Evaluated at bid price : 25.00 Bid-YTW : 3.78 %
BMO.PR.Q	FixedReset	-1.85 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 3.67 %
BAM.PF.B	FixedReset	-1.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.96 Evaluated at bid price : 24.30 Bid-YTW : 4.14 %
BAM.PR.Z	FixedReset	-1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.44 Evaluated at bid price : 25.20 Bid-YTW : 4.33 %
MFC.PR.L	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.58 Bid-YTW : 3.96 %
ENB.PR.T	FixedReset	-1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 21.94 Evaluated at bid price : 22.40 Bid-YTW : 4.42 %
BAM.PR.X	FixedReset	-1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 4.27 %
FTS.PR.M	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.16 Evaluated at bid price : 25.00 Bid-YTW : 3.87 %
TRP.PR.E	FixedReset	-1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.10 Evaluated at bid price : 24.80 Bid-YTW : 3.86 %
BNS.PR.P	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 3.27 %
BAM.PF.A	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.28 Evaluated at bid price : 25.02 Bid-YTW : 4.27 %
FTS.PR.K	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.97 Evaluated at bid price : 24.31 Bid-YTW : 3.62 %
NA.PR.S	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.24 Evaluated at bid price : 25.10 Bid-YTW : 3.79 %
BNS.PR.Y	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 3.50 %
BNS.PR.Z	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.11 Bid-YTW : 3.59 %
FTS.PR.J	Perpetual-Discount	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.39 Evaluated at bid price : 23.75 Bid-YTW : 5.02 %
BNS.PR.R	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.39 Bid-YTW : 3.47 %
SLF.PR.G	FixedReset	2.77 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.05 Bid-YTW : 5.49 %
MFC.PR.F	FixedReset	5.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 5.28 %
FTS.PR.F	Perpetual-Discount	11.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.70 Evaluated at bid price : 24.01 Bid-YTW : 5.13 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.A	FixedReset	275,974	Will reset at 3.266% effective December 31. Desjardins crossed 200,000 at 20.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 4.14 %
MFC.PR.N	FixedReset	189,774	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 3.79 %
ENB.PR.N	FixedReset	63,796	TD crossed 21,800 at 23.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.36 Evaluated at bid price : 23.02 Bid-YTW : 4.42 %
ENB.PR.B	FixedReset	58,272	TD crossed 39,700 at 23.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.44 Evaluated at bid price : 22.90 Bid-YTW : 4.22 %
TRP.PR.E	FixedReset	56,600	RBC crossed 50,000 at 25.27. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.10 Evaluated at bid price : 24.80 Bid-YTW : 3.86 %
BAM.PR.Z	FixedReset	47,893	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 23.44 Evaluated at bid price : 25.20 Bid-YTW : 4.33 %
There were 53 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IFC.PR.A	FixedReset	Quote: 22.61 – 24.07 Spot Rate : 1.4600 Average : 0.8330 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.61 Bid-YTW : 4.70 %
PWF.PR.T	FixedReset	Quote: 24.12 – 25.56 Spot Rate : 1.4400 Average : 0.9067 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.89 Evaluated at bid price : 24.12 Bid-YTW : 4.00 %
TD.PR.S	FixedReset	Quote: 25.23 – 26.35 Spot Rate : 1.1200 Average : 0.6319 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : 3.15 %
BAM.PF.B	FixedReset	Quote: 24.30 – 24.92 Spot Rate : 0.6200 Average : 0.3781 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.96 Evaluated at bid price : 24.30 Bid-YTW : 4.14 %
MFC.PR.H	FixedReset	Quote: 25.27 – 25.94 Spot Rate : 0.6700 Average : 0.4360 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.27 Bid-YTW : 4.07 %
FTS.PR.K	FixedReset	Quote: 24.31 – 24.96 Spot Rate : 0.6500 Average : 0.4235 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-11 Maturity Price : 22.97 Evaluated at bid price : 24.31 Bid-YTW : 3.62 %

The Boston Fed published a paper by Daniel Cooper and J. Christina Wang titled Student Loan Debt and Economic Outcomes:

This policy brief advances the growing literature on how student loan debt affects individuals’ other economic decisions. Specifically, it examines the impact of student loan liabilities on individuals’ homeownership status and wealth accumulation. The analysis employs a rich set of financial and demographic control variables that are not available in many of the existing studies that use credit bureau data. Overall, student debt lowers the likelihood of homeownership for a group of students who attended college during the 1990s. There is also a fairly strong negative correlation between student loan debt and wealth (excluding student loan debt) for a group of households with at least some college experience.
…
Indeed, student loan debt has now surpassed credit card debt to become the second largest amount of household debt outstanding after mortgage debt (see Figure 1). Unlike credit card debt and other household liabilities, however, student debt cannot be discharged in bankruptcy.
…
Consistent with the previous literature on socio-economic inequality in the United States, African Americans and Hispanics have substantially less wealth than Caucasians. This negative effect is largely reversed, however, among those minority homeowners with student loan debt outstanding. This result likely reflects the fact that, among minorities, those who pursued higher education—even if they had to borrow to do so—likely have greater earning power and can accumulate more assets while they are young than minorities who did not attend college.

They also published an interesting paper by Claire Greene and Scott Schuh titled U.S. Consumers’ Holdings and Use of $100 Bills:

Conventional wisdom asserts that $100 bills are often associated with crime and foreign cash holdings, leading some commentators to call for their elimination; in light of this view, it is useful to examine the legal, domestic use of cash. This report uses new data from the 2012 Diary of Consumer Payment Choice (DCPC) to evaluate consumer use of $100 bills as a means of payment. On a typical day in the United States, 5.2 percent of consumers have a $100 bill in their pocket, purse, or wallet. But only 22 percent of U.S. consumers have at least $100 in their wallet, pocket, or purse. Of these cash-intensive consumers, the main association with holding a $100 bill is the amount of cash carried. A consumer who carries $400 to $699 has a 64 percent probability of carrying at least one $100 bill.
…
Recently, Harvard economist Kenneth Rogoff called for the total elimination of $100 bills.4 According to Rogoff (2014), the evidence suggests that, in most countries, more than 50 percent of currency is used to facilitate anonymous transactions for tax evasion or other illegal activities.
…
The DCPC shows that consumers still use cash heavily as a means of payment. U.S. consumers age 18 and older carry an average of $56 on their person (pocket, purse, or wallet), and the median consumer carries $22. Cash is still the most common method of payment for consumers (40.3 percent of the number of payments per month), even though the dollar value of these payments is relatively low (14.2 percent of value per month) because the average cash payment is small ($20.73). Only 6.6 percent of reported cash payments by number of transactions (12.3 percent by value) were in categories that were not well defined or documented and, therefore, might be more likely to be associated with criminal or underground economic activity.
…
Over the last three decades, the value of 100s shipped by the Fed to depository institutions has increased dramatically relative to other denominations. This could be due in part to inflation, to the elimination of the larger denominations, and/or to an increase in demand for U.S. currency outside the United States. Hundreds represented just about 10 percent of the value of cash shipped in January 1974, compared with 45 percent in 2010.8 In 2013, the value of $100 bills in circulation was $925 billion—enough for every person in the United States (including children) to hold $3,000 in $100 bills.
…
On any given day in October 2012, 5.2 percent of U.S. consumers carried at least one $100 bill in their pocket, purse, or wallet (on person). This statistic is somewhat incomplete because only consumers carrying at least $100 of cash (total of all denominations) could be carrying a $100 bill. As shown in Figure 6, cash holdings on person by U.S. consumers are skewed toward values much less than $100: 78 percent of consumers carried $99 or less, including 28 percent who carried $19 or less. A small proportion of consumers carry the largest amounts of cash in value. Only 22 percent of U.S. consumers carried $100 or more; just 8 percent carried $200 or more. Therefore, it is necessary to ask who carries $100 before asking who carries a $100 bill.
…
Among consumers who carry $100 or more, about one in six (17.6 percent) carries at least one $100 bill. The probability of carrying a $100 bill rises as a consumer’s total cash on person increases, as shown in Figure 8. For consumers carrying between $400 and $699, the probability of carrying $100 bill is more than 60 percent. The probability jumps to 94 percent when cash holdings exceed $700. In addition, as cash on person increases, consumers carry more $100 bills (Figure 9).
…
If they are carrying at least $100 and all other factors are equal, women are more likely than men to carry a $100 bill or bills and people younger than 25 are more likely than people 25 years old or older to carry a $100 bill or bills. No other demographic characteristics are helpful in explaining the probability of holding a $100 bill by a consumer who carries at least $100.

Patricia L. Olasker and Mindy Gilbert of Davies Ward Phillips & Vineberg LLP have submitted a comment letter on the National Securities Regulator legislation:

The PCMA introduces numerous substantive changes from the current securities law of Ontario. These include:

• •change to the long-standing and widely used definition of “misrepresentation”;
• •the broadening of the insider trading prohibition to include conduct that stops short of a sale of a security and to include transactions in securities of non-reporting companies;
• •change to the exception to the tipping prohibition;
• •introduction of a novel fiduciary relationship between underwriters and their clients;
• •unprecedented regulation of shareholders holding 20% or more of a public company as if they were “market participants”; and
• •introduction of a novel “obstruction” prohibition prohibiting the withholding of information from the regulatory authority and potentially intruding on the solicitor/client relationship.

…
We are also concerned about the extent to which the PCMA takes a platform approach to legislation. Not only are entire areas of the law proposed to be addressed in regulations, but the legislation omits a number of well-established elements of securities law. We believe that fundamental established elements of the existing law should be enshrined in the legislation itself. The commentary accompanying the release of the draft legislation noted that the platform approach was intended to promote “regulatory flexibility allowing the Authority to respond to market developments in a timely manner”. Our concern with this is threefold:

• 1.It allows for legislation by regulatory fiat with limited political accountability.
• 2.It undermines one of the key features of a sound capital market − namely, stability and predictability in the legal and regulatory regime, which are essential to transaction planning. With vast sections of the law, including key cornerstone elements, being left to regulation, there is significant risk of instability in the law, with the potential for substantive changes to be effected through a process subject to no more discipline than a 90-day request for comments.
• 3.We are sceptical of the premise that more regulatory flexibility is required than exists under the current regime. In fact, with the introduction of the federal Capital Markets Stability Act, which will allow the cooperative regulator to act to address systemic risks to the capital markets, one could argue that less rather than more regulatory flexibility is necessary at the PCMA level.

This echoes many of the concerns raised by Jeffrey MacIntosh.

And the BOC has published a paper by Gregory Bauer titled International House Price Cycles, Monetary Policy and Risk Premiums:

Using a panel logit framework, the paper provides an estimate of the likelihood of a house price correction in 18 OECD countries. The analysis shows that a simple measure of the degree of house price overvaluation contains a lot of information about subsequent price reversals. Corrections are typically triggered by a sharp tightening in the monetary policy interest rate relative to a baseline level in each country. Two different assessments of the current and future baseline estimates of monetary policy interest rates are provided: a simple Taylor rule and one extracted from a term structure model. A case study based on the Canadian housing market is presented.
…
In this paper, we construct a model to forecast house price corrections in the national housing markets of 18 OECD countries. We focus on large corrections: the (real) national house price index must decline by at least 10 per cent and the correction must last at least four quarters. There are 43 such corrections in our post-1975 sample, which highlights the advantage of an international data set. More importantly for policy-makers, the corrections appear to be triggered by increases in central bank policy rates.
…
In theory, it should be possible to estimate the degree of house price overvaluation and the consequent likelihood of a correction using the data from a single country only. However, it will be di¢ cult to estimate the degree of overvaluation in a given country if the values of homes in the markets are already away from their fundamental values. Regressing one upward-trending series (such as real house prices) on another trending series (such as real per capita income) will always produce a coefficient that can justify most of the current level of valuation. The addition of many other countries, with housing market cycles that may be different from that of Canada, will impose more discipline on the estimation of such a coefficient.
…
Figure 2 displays the real house price index in each country along with the periods that have been identified as corrections. The country with the highest number of corrections is Spain, at six corrections between 1975Q1 and 2014Q2. Denmark has experienced …five corrections over its history. Japan records the longest duration of a housing market correction at 61 quarters, or 15 years. Other notable countries with long correction durations are Spain (26 quarters), Germany (25 quarters), Italy (25 quarters) and Sweden (25 quarters).

Canada’’s historical record shows two such corrections. Prices declined by a total of 30 per cent over a period of six quarters starting in 1981Q3, and by 17 per cent over a one-year period beginning in 1990Q2. For comparison, the United States also saw two housing market corrections. The first occurred in 2006Q4 and lasted seven quarters, and the second began in 2009Q1 and ended …five quarters later. During these two periods, the country experienced house price declines of 10 per cent and 14 per cent, respectively.
…
The Canadian and other country average amounts of overvaluation are shown in Figure 3. The average amount of overvaluation across the other 17 OECD countries (black line) shows considerable variation over time, reaching approximately 15 per cent at the height of the latest boom period. Canadian house prices (red line) were considered to be “fairly” valued in 2004, but are now estimated to be overvalued by slightly over 20 per cent (as of 2014Q2). The interquartile range of the 18 country estimates (the 25th and 75th percentile of overvaluation at each point in time) is shown in dotted lines.
…
There are a number of conclusions of interest to policy-makers. First, the relatively simple way of assessing house price overvaluation has good forecasting power for subsequent corrections. The variable is signifi…cant in all specifi…cations and at all horizons. Second, while the two methods of estimating the monetary policy stance of the central banks produce similar results, the method of extracting a global risk premium from the long-term interest rate has some advantages. The expectations component is forward looking and rises well in advance of the corrections. This may be quite useful to policy-makers today who face the zero lower bound on current policy rates while the long-term rates incorporate expectations of future rate increases.

Third, there is a distinct forecast-horizon aspect to the results. Attempting to forecast a house price decline that is going to start in the next quarter is extremely difficult. The signals from this modelling approach are very weak and would be engulfed by the noise.

The BoC warned of rising illiquidity in the Canadian corporate bond market:

The Bank of Canada warned that investors in the nation’s corporate bond market may be underestimating the difficulty of selling the securities in a market downturn, putting them at risk of greater losses.

Rising holdings of corporate bonds in mutual and exchange-traded funds could exacerbate price swings if the funds are forced to sell in a rout, the central bank said in its semi-annual Financial System Review. Some market participants also “believe” dealers are reducing market-making activity, or acting as the middleman between trades, which may make it harder to unwind large positions, the bank said.

“A potential deterioration of liquidity in Canadian corporate bond markets may not be fully priced in,” according to the report. “Market trends suggest that more sizable price swings might be observed in the future than previously, should investors seek to simultaneously unwind large positions.”

The greater role of ETFs and mutual funds in the market could cause “price dislocations” if investors cash out and funds are forced to sell underlying corporate bond holdings at lower prices, the report said.

I’ll try to review the Review in a while.

Update: The Financial System Review, December 2014 isn’t really all that interesting, although I may review their article on ETFs tomorrow. The Bloomberg story is a fair synopsis of what is said about corporate bonds on pp. 21-22 of the publication, except that the bank is concerned that rising holdings by foreigners could increase exposure to external shocks.

And, oh yeah, there was a little bit of action in the equities market:

Canadian stocks sank the most in 17 months, sending the benchmark gauge to the lowest level since February, as crude resumed a selloff after OPEC said demand will drop next year.

Penn West Petroleum Ltd. and Crescent Point Energy Corp. plunged at least 9.8 percent as energy producers sank to a 2012 low. Laurentian Bank of Canada (LB) dropped 5.3 percent to pace declines among financial services stocks. All 10 main groups in the benchmark index lost at least 0.4 percent.

The Standard & Poor’s/TSX Composite Index (SPTSX) fell 342.78 points, or 2.4 percent, to 13,852.95 at 4 p.m. in Toronto. The equity gauge has dropped 4.3 percent this week, paring its advance this year to 1.7 percent. Trading volume was 38 percent above the 30-day average.

Oil, bank and raw-materials are the biggest laggards in Canada for the first time since at least 1988, fueling concern the nation’s economy is fading just as the U.S. is taking off. The three industries, which collectively account for two-thirds of the S&P/TSX, are the worst performers among 10 groups this year, led by a 18 percent slump in energy, according to data compiled by Bloomberg.

Which is kind of tough news for preferred share investors who have tried to escape the downturn.

Technically, it was a mixed day for the Canadian preferred share market, with PerpetualDiscounts losing 92bp, FixedResets down 25bp and DeemedRetractibles squeaking out a gain of 3bp; PUT THAT GUN DOWN, IT WASN’T THAT BAD! The loss for PerpetualDiscounts is grossly overstated due to some more Toronto Stock Exchanges idiocy (either with respect to its market makers, or its reporting, I’m not sure which). About 60bp of the reported tumble in PerpetualDiscounts is due to an overstatement of the bad day experienced by FTS.PR.F; see the Performance Highlights table for an explanation. The Performance Highlights table is, again, dominated by lower-spread FixedResets and has a good contingent of credit-nervous ENB issues. Volume was average.

PerpetualDiscounts now yield 5.14% (the mispricing of FTS.PR.H is not a disaster, since this is a median figure), equivalent to 6.68% interest at the standard conversion factor of 1.3x. Long corporates now yield about 4.05%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 255bp, a significant increase from the 235bp reported November 26.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 20.84, is $0.76 cheap, but it has already reset. TRP.PR.B, bid at 17.35, resetting 2015-6-30 and TRP.PR.C, bid at 19.01, resetting 2016-1-30 are both fairly priced. The TRP issues seem to be steadily rationalizing, but there continues to be pressure on TRP.PR.A.

The MFC series continues to be weird.

Clearly MFC.PR.F, resetting at +141 on 2016-06-19, is out of step with the others and is screwing up the calculation. To the extent that one can trust both Implied Volatility Theory AND the market’s reasonably more-or-less consistent application of it, MFC.PR.F should be bid significantly higher than its current 19.75 and the calculated Implied Volatility should be higher than the distorted value of 14%. The fit is pretty poor – all one can really tell is that the Spread is more than about 80bp and the Implied Volatility is more than about 12%.

The BAM series is now also a little out of whack:

BAM.PR.X, with a +180bp spread, bid at 20.70, looks $0.80 cheap and doesn’t reset until 2017-6-30 while BAM.PR.R, with a +230bp spread, bid at 25.23, looks $1.36 rich and resets 2016-6-30. So go figure that one out, wise guy. As with the MFC series above, it seems that the extreme cheapness of the lowest-spread issue is materially distorting the calculation of Implied Volatility.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.16, looks $0.71 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.62, looks $0.75 expensive and resets 2019-3-1

Oddly, the fit for BCE is pretty good, with the model having no problem fitting BCE.PR.K, resetting at +188bp on 2016-12-30, to the curve formed by the other BCE 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	0.00 %	0.00 %	0	0.00	0	0.0711 %	2,525.0
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0711 %	3,997.5
Floater	2.99 %	3.11 %	61,290	19.38	4	0.0711 %	2,684.2
OpRet	4.41 %	-6.03 %	28,395	0.08	2	-0.0196 %	2,751.5
SplitShare	4.30 %	4.02 %	38,826	3.73	5	-0.2087 %	3,171.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0196 %	2,515.9
Perpetual-Premium	5.44 %	-1.34 %	72,943	0.08	20	-0.0959 %	2,474.5
Perpetual-Discount	5.24 %	5.14 %	111,527	15.23	15	-0.9199 %	2,615.3
FixedReset	4.28 %	3.75 %	206,125	16.26	75	-0.2491 %	2,514.4
Deemed-Retractible	5.00 %	1.75 %	101,180	0.14	40	0.0319 %	2,599.1
FloatingReset	2.55 %	1.89 %	60,563	3.47	5	-0.2508 %	2,544.2

Performance Highlights
Issue	Index	Change	Notes
FTS.PR.F	Perpetual-Discount	-11.87 %	The “Last” quote, sold to me by the Toronto Stock Exchange of 21.60-24.82 is nonsensical, since there were a number of tiny trades at 3:55pm at about 24.20 (thirteen, all of 100 shares, plus one 95-share odd-lot). The low for the day was 24.19. It is not clear whether this huge burst of market activity overwhelmed the market maker who ran home crying before the bell, or whether a bid was cancelled between the “Close” and the “Last” and I’m not going to spend time and money figuring it out either because, frankly, I’m sick of these clowns. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 21.60 Evaluated at bid price : 21.60 Bid-YTW : 5.72 %
FTS.PR.H	FixedReset	-3.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 19.16 Evaluated at bid price : 19.16 Bid-YTW : 3.83 %
TRP.PR.C	FixedReset	-2.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 4.09 %
TRP.PR.A	FixedReset	-2.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 20.84 Evaluated at bid price : 20.84 Bid-YTW : 4.06 %
ENB.PF.C	FixedReset	-2.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 22.46 Evaluated at bid price : 23.36 Bid-YTW : 4.44 %
ENB.PF.E	FixedReset	-2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 22.47 Evaluated at bid price : 23.41 Bid-YTW : 4.44 %
ENB.PR.N	FixedReset	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 22.43 Evaluated at bid price : 23.16 Bid-YTW : 4.38 %
FTS.PR.J	Perpetual-Discount	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 23.62 Evaluated at bid price : 24.00 Bid-YTW : 4.96 %
ENB.PF.A	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 22.57 Evaluated at bid price : 23.56 Bid-YTW : 4.40 %
ENB.PF.G	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 22.54 Evaluated at bid price : 23.56 Bid-YTW : 4.43 %
MFC.PR.F	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.75 Bid-YTW : 5.87 %
SLF.PR.G	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.51 Bid-YTW : 5.81 %
BNS.PR.Z	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.37 Bid-YTW : 3.42 %
BAM.PR.X	FixedReset	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.22 %
MFC.PR.B	Deemed-Retractible	1.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.26 Bid-YTW : 5.58 %
GWO.PR.N	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.61 Bid-YTW : 5.66 %
MFC.PR.L	FixedReset	3.91 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.75 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PF.C	FixedReset	180,591	Nesbitt sold 10,700 to RBC at 23.89 and crossed 146,700 at 23.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 22.46 Evaluated at bid price : 23.36 Bid-YTW : 4.44 %
BAM.PR.X	FixedReset	105,958	Nesbitt crossed 94,700 at 20.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.22 %
TRP.PR.A	FixedReset	94,514	Will reset at 3.266% effective December 31. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 20.84 Evaluated at bid price : 20.84 Bid-YTW : 4.06 %
HSE.PR.C	FixedReset	79,500	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 23.15 Evaluated at bid price : 24.98 Bid-YTW : 4.47 %
ENB.PR.A	Perpetual-Premium	65,438	Scotia bought two blocks from Nesbitt, of 26,000 and 20,000, both at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-09 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : -4.93 %
ENB.PR.D	FixedReset	59,120	Nesbitt crossed 40,000 at 23.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 22.31 Evaluated at bid price : 22.83 Bid-YTW : 4.21 %
There were 33 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.F	Perpetual-Discount	Quote: 21.60 – 24.80 Spot Rate : 3.2000 Average : 1.7894 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 21.60 Evaluated at bid price : 21.60 Bid-YTW : 5.72 %
HSE.PR.A	FixedReset	Quote: 19.41 – 20.21 Spot Rate : 0.8000 Average : 0.5156 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 4.20 %
FTS.PR.H	FixedReset	Quote: 19.16 – 19.74 Spot Rate : 0.5800 Average : 0.3744 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 19.16 Evaluated at bid price : 19.16 Bid-YTW : 3.83 %
MFC.PR.G	FixedReset	Quote: 25.60 – 26.10 Spot Rate : 0.5000 Average : 0.3390 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.13 %
NEW.PR.D	SplitShare	Quote: 32.51 – 33.23 Spot Rate : 0.7200 Average : 0.5696 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.51 Bid-YTW : 3.22 %
FTS.PR.J	Perpetual-Discount	Quote: 24.00 – 24.50 Spot Rate : 0.5000 Average : 0.3510 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-10 Maturity Price : 23.62 Evaluated at bid price : 24.00 Bid-YTW : 4.96 %

Securities market participants will be gratified to learn that the tradition of administrative efficiency in Canadian securities regulation will be continued by the national securities regulator:

Canada’s new securities regulator is facing another delay on the bumpy road to its launch in 2015.

The group of participating provinces announced Friday that the regulations to outline the operating details of the new Cooperative Capital Markets Regulator will now be delayed until early spring and will not be out by Dec. 19, as previously anticipated.

Greek markets are beginning to resemble Canadian ones:

Greek stocks suffered their steepest daily fall in more than a quarter century on Tuesday and its bond yields jumped after Prime Minister Antonis Samaras brought forward a presidential election in a gamble over his, and the country’s future.

If Mr. Samaras fails to secure victory in parliament for his presidential candidate, snap national elections will be called that the leftist Syriza party – a fierce opponent of Greece’s bailout deal with the European Union and IMF – is likely to win.
…
The Athens general stock index tumbled 12.8 pe rcent, its biggest loss in a day since 1987. An index of Greece’s listed banks fell 14.7 per cent, with Attica Bank down 27.5 per cent.

The decision sent 10-year Greek government bond yields up 74 basis points to 8.09 per cent.

Canadian preferred share investors are currently looking for indicators to guide them through current market turmoil:

The Canadian preferred share market took another good whacking today, with PerpetualDiscounts losing 41bp, FixedResets down 39bp and DeemedRetractibles off 20bp. The performance highlights table contains its usual lengthy list of FixedReset losers, but it is of interest to note that a large number of the credit-uncertain Enbridge issues were included. Volume was above average.

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

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.37, is $0.44 cheap, but it has already reset. TRP.PR.B, bid at 17.46, is $0.18 cheap, but it resets 2015-6-30. TRP.PR.C, bid at 19.55, is $0.21 expensive, but it resets 2016-1-30. The TRP issues seem to be steadily rationalizing.

The MFC series is just weird.

Clearly MFC.PR.F, resetting at +141 on 2016-06-19, is out of step with the others and is screwing up the calculation. To the extent that one can trust both Implied Volatility Theory AND the market’s reasonably more-or-less consistent application of it, MFC.PR.F should be bid significantly higher than its current 20.00 and the calculated Implied Volatility should be higher than the distorted value of 28%. The fit is pretty poor – all one can really tell is that the Spread is more than about 80bp and the Implied Volatility is more than about 13%.

The BAM series is now also a little out of whack:

BAM.PR.X, with a +180bp spread, bid at 20.91, looks $0.68 cheap and doesn’t reset until 2017-6-30 – but Implied Volatility continues to drop rapidly (a reduction in Implied Volatility flattens the curve and causes low-spread issues to underperform). BAM.PR.R, with a +230bp spread, bid at 25.34, looks $1.43 rich and resets 2016-6-30. So go figure that one out, wise guy.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.82, looks $0.35 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.62, looks $0.53 expensive and resets 2019-3-1

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.2129 %	2,523.2
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.2129 %	3,994.7
Floater	2.99 %	3.11 %	62,134	19.38	4	-0.2129 %	2,682.3
OpRet	4.41 %	-6.18 %	28,767	0.08	2	-0.2345 %	2,752.0
SplitShare	4.29 %	4.01 %	39,096	3.73	5	0.0202 %	3,178.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.2345 %	2,516.4
Perpetual-Premium	5.44 %	-1.52 %	72,150	0.09	20	0.0196 %	2,476.9
Perpetual-Discount	5.19 %	5.12 %	112,430	15.22	15	-0.4110 %	2,639.6
FixedReset	4.27 %	3.74 %	199,857	16.40	75	-0.3933 %	2,520.7
Deemed-Retractible	5.00 %	1.77 %	102,744	0.21	40	-0.2029 %	2,598.2
FloatingReset	2.54 %	1.89 %	60,996	3.47	5	0.0000 %	2,550.6

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.L	FixedReset	-3.99 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 4.22 %
MFC.PR.F	FixedReset	-3.61 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.00 Bid-YTW : 5.72 %
ENB.PR.H	FixedReset	-3.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 20.68 Evaluated at bid price : 20.68 Bid-YTW : 4.45 %
ENB.PF.C	FixedReset	-2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.73 Evaluated at bid price : 23.93 Bid-YTW : 4.31 %
ENB.PR.Y	FixedReset	-2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 21.65 Evaluated at bid price : 22.00 Bid-YTW : 4.40 %
ENB.PF.G	FixedReset	-2.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.68 Evaluated at bid price : 23.86 Bid-YTW : 4.36 %
ENB.PF.A	FixedReset	-1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.73 Evaluated at bid price : 23.90 Bid-YTW : 4.33 %
ENB.PF.E	FixedReset	-1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.71 Evaluated at bid price : 23.90 Bid-YTW : 4.33 %
ENB.PR.F	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.53 Evaluated at bid price : 23.25 Bid-YTW : 4.24 %
ENB.PR.P	FixedReset	-1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.21 Evaluated at bid price : 22.80 Bid-YTW : 4.33 %
MFC.PR.B	Deemed-Retractible	-1.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 5.72 %
CU.PR.C	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.55 %
BAM.PR.R	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 23.83 Evaluated at bid price : 25.34 Bid-YTW : 3.79 %
CU.PR.D	Perpetual-Discount	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 23.61 Evaluated at bid price : 24.00 Bid-YTW : 5.12 %
GWO.PR.I	Deemed-Retractible	-1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.69 Bid-YTW : 5.71 %
BAM.PR.X	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 20.91 Evaluated at bid price : 20.91 Bid-YTW : 4.18 %
TRP.PR.C	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 3.97 %
SLF.PR.B	Deemed-Retractible	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.92 Bid-YTW : 5.35 %
ENB.PR.J	FixedReset	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.71 Evaluated at bid price : 23.74 Bid-YTW : 4.28 %
ENB.PR.N	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.67 Evaluated at bid price : 23.60 Bid-YTW : 4.28 %
CU.PR.E	Perpetual-Discount	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 23.61 Evaluated at bid price : 24.00 Bid-YTW : 5.12 %
SLF.PR.D	Deemed-Retractible	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 5.71 %
CGI.PR.D	SplitShare	1.09 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.09 Bid-YTW : 3.71 %
MFC.PR.M	FixedReset	1.37 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 3.76 %
TRP.PR.B	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 17.46 Evaluated at bid price : 17.46 Bid-YTW : 3.95 %
SLF.PR.G	FixedReset	3.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.75 Bid-YTW : 5.66 %

Volume Highlights
Issue	Index	Shares Traded	Notes
HSE.PR.C	FixedReset	619,946	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 23.16 Evaluated at bid price : 25.01 Bid-YTW : 4.46 %
BMO.PR.P	FixedReset	133,054	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : 0.37 %
IAG.PR.E	Deemed-Retractible	125,050	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 26.00 Evaluated at bid price : 25.97 Bid-YTW : 4.17 %
TRP.PR.A	FixedReset	113,648	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 21.37 Evaluated at bid price : 21.37 Bid-YTW : 3.95 %
ENB.PR.D	FixedReset	83,910	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 22.41 Evaluated at bid price : 23.00 Bid-YTW : 4.17 %
TD.PF.B	FixedReset	77,745	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 23.21 Evaluated at bid price : 25.07 Bid-YTW : 3.63 %
There were 39 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.L	FixedReset	Quote: 24.06 – 25.06 Spot Rate : 1.0000 Average : 0.5532 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 4.22 %
PVS.PR.C	SplitShare	Quote: 25.61 – 26.83 Spot Rate : 1.2200 Average : 0.8660 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 4.01 %
ELF.PR.H	Perpetual-Premium	Quote: 25.35 – 26.00 Spot Rate : 0.6500 Average : 0.4410 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 24.88 Evaluated at bid price : 25.35 Bid-YTW : 5.49 %
GWO.PR.N	FixedReset	Quote: 19.36 – 19.99 Spot Rate : 0.6300 Average : 0.4257 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.36 Bid-YTW : 5.81 %
TRP.PR.C	FixedReset	Quote: 19.55 – 20.14 Spot Rate : 0.5900 Average : 0.4054 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 3.97 %
TRP.PR.D	FixedReset	Quote: 24.90 – 25.34 Spot Rate : 0.4400 Average : 0.2816 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-09 Maturity Price : 23.18 Evaluated at bid price : 24.90 Bid-YTW : 3.80 %

Assiduous Reader JP, who often sends me interesting snippets, unlike youse other bums, brings to my attention a small preferred share issue from China:

Industrial and Commercial Bank of China will issue US$5.7 billion worth of preferred shares in three currencies in what will be the largest offshore issuance of hybrid securities from a mainland firm.

ICBC proposed issuing US$2.94 billion in dollar-denominated shares, €600 million (HK$5.73 billion) and 12 billion yuan (HK$15.13 billion) all priced at 6 per cent, according to a regulatory filing.

The shares will count as additional tier-1 capital, boosting the bank’s capital adequacy ratio as defined by Basel III, an international accord aimed at raising the viability of banks and avoiding public bailouts.

The record deal also marked the first time a mainland bank issued offshore preferred shares denominated in three currencies.

ICBC International was the sole global coordinator and UBS, Bank of America Merrill Lynch and Goldman Sachs were joint book-runners on the deal.

It’s nice to see some real progress on solar power efficiency:

UNSW’s solar researchers have converted over 40% of the sunlight hitting a solar system into electricity, the highest efficiency ever reported.

The world-beating efficiency was achieved in outdoor tests in Sydney, before being independently confirmed by the National Renewable Energy Laboratory (NREL) at their outdoor test facility in the United States.

The work was funded by the Australian Renewable Energy Agency (ARENA) and supported by the Australia–US Institute for Advanced Photovoltaics (AUSIAPV).

“This is the highest efficiency ever reported for sunlight conversion into electricity,” UNSW Scientia Professor and Director of the Australian Centre for Advanced Photovoltaics (ACAP) Professor Martin Green said.

The price wasn’t mentioned, but the basic idea comes first, right? Then give it to the engineers to make it cheap. Too bad this research wasn’t done in Ontari-ari-ari-owe, but we blew our solar budget on political grandstanding.

After posting the MAPF November statements, I posted the following on the Canada Post Facebook Page:

I just sent a batch of letters with Madonna & Child stamps when a thought struck me and caused me to check your website.

I see your “Holiday 2014” collection is dominated by Santa Claus – rather childish in my view, but the important thing is that they are stamps and you stick them on letters and they get delivered.

But why are there no stamps with an Islamic theme? No Jewish stamps? No stamps for Kwanzai, Bohdi Day, Pancha Ganapati or Yule? It would make things more interesting.

It was an awful day for equities:

Oil, bank and raw-materials are the biggest laggards in Canada for the first time since at least 1988, fueling concern the nation’s economy is fading just as the U.S. is taking off.

The three industries, which collectively account for two-thirds of the Standard & Poor’s/TSX Composite Index, are the worst performers among 10 groups this year, according to data compiled by Bloomberg. The nation’s largest banks joined oil and materials in a rout that erased 4.1 percent from the benchmark index in three days, including the biggest one-day retreat since June 2013.

The selloff in the biggest pillars of the Canadian equity market comes as data showing a weaker jobs market coupled with slowing exports suggest a tentative economic recovery. Banks have slumped as earnings last week collectively missed estimates amid declining trading revenue and sluggish consumer borrowing. Meanwhile, the S&P 500 Index has reached all-time highs on signs of accelerating growth.
…
The S&P 500/TSX tumbled 329.53 points, or 2.3 percent, to 14,144.17 yesterday as the selloff in oil accelerated, with energy companies plunging the most since August 2011 as crude dropped to a five-year low.
…
The Canadian benchmark equity gauge has plunged 9.7 percent since reaching a record on Sept. 3, wiping out more than C$270 billion in market value and reducing its gain for the year to 3.8 percent. The S&P/TSX, which was the second-best performing market among developed nations through the first half of the year, now ranks 16th.

Happy crowds of preferred share investors held parades for their portfolios today.

And with TXPR and TXPL down 0.76% and 0.96%, why not?

It was an appallingly poor day for the Canadian preferred share market, with PerpetualDiscounts off 24bp, FixedResets losing 85bp and DeemedRetractibles down 36bp. There is a very lengthy list of losers, dominated by FixedResets. Volume was high.

And given these massive changes, let’s have another look at some pictures of Implied Volatility. Remember that all rich /cheap assessments are

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.36, is $0.57 cheap, but it has already reset. TRP.PR.B, bid at 17.20, is $0.55 cheap, but it resets 2015-6-30. TRP.PR.C, bid at 19.75, is $0.30 expensive, but it resets 2016-1-30. It looks like the market is beginning to realize that TRP.PR.C is overpriced.

MFC implied volatility is still very high. The low-spread MFC.PR.F looks a little cheap … and it doesn’t reset until 2016-6-19.

BAM.PR.X, with a +180bp spread, bid at 21.15, looks $0.79 cheap and doesn’t reset until 2017-6-30 – but Implied Volatility is still a little high and is dropping rapidly (a reduction in Implied Volatility flattens the curve and causes low-spread issues to underperform). BAM.PR.R, with a +230bp spread, bid at 25.51, looks $1.56 rich and resets 2016-6-30. So go figure that one out, wise guy.

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 20.00, looks $0.41 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 24.70, looks $0.54 expensive and resets 2019-3-1

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.3254 %	2,528.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.3254 %	4,003.2
Floater	2.98 %	3.09 %	62,509	19.42	4	-0.3254 %	2,688.0
OpRet	4.40 %	-11.74 %	26,639	0.08	2	-0.0195 %	2,758.5
SplitShare	4.30 %	3.92 %	40,711	3.73	5	-0.2697 %	3,177.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0195 %	2,522.4
Perpetual-Premium	5.44 %	-1.70 %	70,645	0.08	20	-0.4542 %	2,476.4
Perpetual-Discount	5.17 %	5.11 %	113,618	15.27	15	-0.2392 %	2,650.5
FixedReset	4.25 %	3.71 %	182,150	16.54	74	-0.8512 %	2,530.6
Deemed-Retractible	4.99 %	0.67 %	103,056	0.14	40	-0.3755 %	2,603.5
FloatingReset	2.54 %	1.89 %	60,065	0.08	5	-0.0861 %	2,550.6

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.C	FixedReset	-3.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 3.92 %
ENB.PR.T	FixedReset	-3.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.28 Evaluated at bid price : 22.95 Bid-YTW : 4.30 %
PWF.PR.P	FixedReset	-3.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 3.87 %
MFC.PR.F	FixedReset	-3.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 5.27 %
SLF.PR.G	FixedReset	-3.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.10 Bid-YTW : 6.06 %
ENB.PR.P	FixedReset	-2.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.39 Evaluated at bid price : 23.12 Bid-YTW : 4.26 %
MFC.PR.I	FixedReset	-2.38 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.42 Bid-YTW : 3.73 %
GWO.PR.N	FixedReset	-2.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.33 Bid-YTW : 5.83 %
HSE.PR.A	FixedReset	-2.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 19.35 Evaluated at bid price : 19.35 Bid-YTW : 4.21 %
ENB.PR.J	FixedReset	-2.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.84 Evaluated at bid price : 24.02 Bid-YTW : 4.21 %
ENB.PR.F	FixedReset	-1.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.72 Evaluated at bid price : 23.60 Bid-YTW : 4.17 %
ENB.PF.E	FixedReset	-1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.88 Evaluated at bid price : 24.31 Bid-YTW : 4.24 %
ENB.PF.G	FixedReset	-1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.88 Evaluated at bid price : 24.35 Bid-YTW : 4.25 %
ENB.PF.A	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.92 Evaluated at bid price : 24.35 Bid-YTW : 4.22 %
MFC.PR.M	FixedReset	-1.74 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.81 Bid-YTW : 3.95 %
MFC.PR.C	Deemed-Retractible	-1.67 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.41 Bid-YTW : 5.89 %
BNS.PR.Y	FixedReset	-1.62 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.67 Bid-YTW : 3.44 %
IGM.PR.B	Perpetual-Premium	-1.52 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 5.00 %
ENB.PF.C	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.94 Evaluated at bid price : 24.44 Bid-YTW : 4.19 %
SLF.PR.A	Deemed-Retractible	-1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.11 Bid-YTW : 5.20 %
GWO.PR.Q	Deemed-Retractible	-1.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 5.06 %
BAM.PR.T	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 23.36 Evaluated at bid price : 24.61 Bid-YTW : 3.88 %
SLF.PR.E	Deemed-Retractible	-1.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.77 Bid-YTW : 5.66 %
ENB.PR.D	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.44 Evaluated at bid price : 23.05 Bid-YTW : 4.16 %
POW.PR.G	Perpetual-Premium	-1.30 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 26.65 Bid-YTW : 4.57 %
ENB.PR.H	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 21.36 Evaluated at bid price : 21.36 Bid-YTW : 4.30 %
ELF.PR.H	Perpetual-Premium	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 24.83 Evaluated at bid price : 25.30 Bid-YTW : 5.50 %
PWF.PR.T	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 23.39 Evaluated at bid price : 25.50 Bid-YTW : 3.71 %
SLF.PR.B	Deemed-Retractible	-1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.21 Bid-YTW : 5.20 %
PWF.PR.R	Perpetual-Premium	-1.10 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.06 Bid-YTW : 4.85 %
GWO.PR.I	Deemed-Retractible	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 5.53 %
SLF.PR.I	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.78 Bid-YTW : 2.56 %
BAM.PF.C	Perpetual-Discount	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 21.27 Evaluated at bid price : 21.56 Bid-YTW : 5.72 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.P	FixedReset	259,575	Desjardins crossed 200,000 at 25.32. TD crossed 53,600 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 0.73 %
TRP.PR.A	FixedReset	182,016	Will reset to 3.266% effective December 31. Nesbitt crossed 30,000 at 21.36. TD crossed 25,000 at the same price and Scotia crossed 30,000 at the same price again. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 21.36 Evaluated at bid price : 21.36 Bid-YTW : 3.95 %
ENB.PR.T	FixedReset	102,709	RBC crossed 50,700 at 23.15 and 21,800 at 23.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 22.28 Evaluated at bid price : 22.95 Bid-YTW : 4.30 %
BAM.PF.F	FixedReset	87,304	Desjardins crossed 75,000 at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.68 Bid-YTW : 4.09 %
FTS.PR.M	FixedReset	73,932	RBC crossed 70,000 at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.69 %
MFC.PR.M	FixedReset	54,843	Scotia crossed 35,000 at 25.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.81 Bid-YTW : 3.95 %
There were 41 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 – 20.20 Spot Rate : 1.0000 Average : 0.6772 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-08 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 2.75 %
MFC.PR.I	FixedReset	Quote: 25.42 – 25.95 Spot Rate : 0.5300 Average : 0.3221 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.42 Bid-YTW : 3.73 %
IGM.PR.B	Perpetual-Premium	Quote: 26.00 – 26.46 Spot Rate : 0.4600 Average : 0.2744 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 5.00 %
MFC.PR.M	FixedReset	Quote: 24.81 – 25.23 Spot Rate : 0.4200 Average : 0.2506 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.81 Bid-YTW : 3.95 %
MFC.PR.F	FixedReset	Quote: 20.75 – 21.20 Spot Rate : 0.4500 Average : 0.2812 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 5.27 %
MFC.PR.C	Deemed-Retractible	Quote: 22.41 – 23.10 Spot Rate : 0.6900 Average : 0.5286 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.41 Bid-YTW : 5.89 %