Category: Market Action

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

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

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

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

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

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

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

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

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

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

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

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

Another hilarious spoofing case in US markets:

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

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

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

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

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

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

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

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.53 and appears to be $0.88 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.30 and appears to be $0.89 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.80, looks $0.85 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.24, looks $1.16 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.3238 %	2,553.6
FixedFloater	4.42 %	3.60 %	20,887	18.30	1	0.4671 %	4,001.9
Floater	2.97 %	3.07 %	55,289	19.57	4	-0.3238 %	2,714.7
OpRet	4.04 %	1.44 %	95,937	0.42	1	0.0000 %	2,755.3
SplitShare	4.26 %	3.96 %	35,237	3.63	5	-0.0473 %	3,211.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,519.4
Perpetual-Premium	5.44 %	-5.17 %	57,116	0.08	19	0.0433 %	2,499.6
Perpetual-Discount	5.16 %	5.00 %	100,957	15.39	16	-0.0713 %	2,688.0
FixedReset	4.20 %	3.47 %	205,816	16.71	77	-0.2204 %	2,543.6
Deemed-Retractible	4.95 %	1.05 %	100,114	0.21	39	-0.0335 %	2,619.6
FloatingReset	2.70 %	2.20 %	60,973	3.43	7	-0.2990 %	2,479.2

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

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

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

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

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

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

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

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

Suncor agreed:

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

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

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

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

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

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

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

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

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

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

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

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.48 and appears to be $0.94 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.41 and appears to be $1.02 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.80, looks $0.96 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.26, looks $1.23 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.9206 %	2,561.9
FixedFloater	4.44 %	3.62 %	21,713	18.27	1	-0.0115 %	3,983.3
Floater	2.96 %	3.07 %	56,883	19.57	4	-0.9206 %	2,723.5
OpRet	4.04 %	1.43 %	97,225	0.43	1	0.0000 %	2,755.3
SplitShare	4.25 %	3.95 %	35,160	3.63	5	0.2187 %	3,212.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,519.4
Perpetual-Premium	5.44 %	-4.90 %	57,908	0.08	19	0.0620 %	2,498.5
Perpetual-Discount	5.15 %	5.03 %	101,405	15.36	16	0.0793 %	2,690.0
FixedReset	4.20 %	3.48 %	203,213	16.70	77	-0.5543 %	2,549.3
Deemed-Retractible	4.95 %	0.85 %	100,479	0.13	39	-0.0244 %	2,620.5
FloatingReset	2.69 %	1.97 %	61,140	3.44	7	-0.3894 %	2,486.7

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

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

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

Assiduous Readers will remember that implementation of the National Securities Regulator has turned out to be an excuse for the creation of arbitrary government powers. Now some pension funds have joined the attack:

The Healthcare of Ontario Pension Plan (HOOPP), the Ontario Municipal Employees Retirement System (OMERS) and the Ontario Teachers’ Pension Plan Board submitted a joint comment letter in December to federal Finance Minister Joe Oliver urging officials to remove pension plans from the draft Capital Markets Stability Act, which is still under review and has not yet been adopted.

HOOPP chief executive officer Jim Keohane said in an interview the act gives the proposed new regulator unprecedented powers to order companies or funds under its control to do anything it deems necessary to prevent systemic risks in the financial system.

“This act, as it reads right now, gives this regulator unbelievable powers that no other regulator in the world has,” he said.

“It can prohibit or restrict any business activities that we undertake. It could force us not to trade securities. The regulator can at its discretion order us to do anything it deems necessary to address systemic risk. It’s completely open-ended,” Mr. Keohane said.

The Caisse is going to build transit in Quebec:

The Caisse de dépôt et placement du Québec is set to boost its bet on infrastructure under a new deal with Quebec that will see the pension fund take over financing and ownership of new public transit projects in the province.

The pension-fund manager, which has assets of $214-billion, has struck an agreement with Quebec’s Liberal government that will see it be the maître d’oeuvre, or project owner, for new transit projects in the French-speaking province. Details of the deal are scheduled to be made public at a news event in Montreal on Tuesday.

Sources familiar with the agreement described it as “a new way of financing and running public transportation infrastructure” for Quebec that will see the Caisse assume ownership over new transit assets and responsibility for building them. Essentially, the province is privatizing the plan for new public transportation projects but with an investor with which it has an established and privileged relationship.

It’s hard to make this out. Is it a plan for current workers to fund current retirees, by overcharging for services? Or is it a plan to pillage the fund by undercharging? All one can really say is that when Big Government jumps into bed with itself, it’s the public who gets screwed.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 10bp, FixedResets up 14bp and DeemedRetractibles gaining 5bp. There is a lengthy performance highlights table notable for BAM FixedResets on the good side. Volume was very low.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.55, is $1.01 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.99 and resetting at +154bp on 2016-1-30 is $1.18 rich.

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

Having reached this point in the report I lost my internet connection. There were “network problems” at Bell Highspeed and there are still problems. I have been working today using my cell phone as a Wi-Fi hotspot; not a very good substitute, but good enough. Since I don’t work for BCE, I am aware of the value of redundancy!

So this report is foreshortened. Sorry!

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

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	1.1856 %	2,585.7
FixedFloater	4.39 %	3.63 %	22,622	18.08	1	-0.2304 %	3,983.7
Floater	2.93 %	3.06 %	57,228	19.59	4	1.1856 %	2,748.8
OpRet	4.04 %	1.42 %	96,010	0.43	1	0.0394 %	2,755.3
SplitShare	4.26 %	4.11 %	36,378	3.64	5	0.1317 %	3,205.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0394 %	2,519.4
Perpetual-Premium	5.45 %	-3.26 %	59,225	0.08	19	0.0289 %	2,497.0
Perpetual-Discount	5.16 %	5.01 %	102,832	15.37	16	-0.0977 %	2,687.8
FixedReset	4.17 %	3.42 %	205,386	8.58	77	0.1426 %	2,563.5
Deemed-Retractible	4.95 %	0.31 %	101,558	0.14	39	0.0498 %	2,621.1
FloatingReset	2.68 %	1.94 %	60,498	3.40	7	-0.0343 %	2,496.4

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.B	FixedReset	-2.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 17.58 Evaluated at bid price : 17.58 Bid-YTW : 3.61 %
CU.PR.E	Perpetual-Discount	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 23.80 Evaluated at bid price : 24.20 Bid-YTW : 5.11 %
GWO.PR.P	Deemed-Retractible	-1.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 5.07 %
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 : 23.44 Bid-YTW : 3.26 %
SLF.PR.G	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.90 Bid-YTW : 4.80 %
BAM.PR.K	Floater	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 17.12 Evaluated at bid price : 17.12 Bid-YTW : 3.08 %
GWO.PR.H	Deemed-Retractible	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.49 Bid-YTW : 5.16 %
BMO.PR.M	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : 2.68 %
FTS.PR.H	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 19.03 Evaluated at bid price : 19.03 Bid-YTW : 3.58 %
PWF.PR.A	Floater	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 2.61 %
BAM.PF.F	FixedReset	1.33 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 3.75 %
IAG.PR.G	FixedReset	1.65 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.47 Bid-YTW : 1.91 %
BAM.PR.B	Floater	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 17.24 Evaluated at bid price : 17.24 Bid-YTW : 3.06 %
MFC.PR.C	Deemed-Retractible	1.93 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 5.19 %
BAM.PR.R	FixedReset	2.05 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.86 Bid-YTW : 3.12 %
BAM.PR.T	FixedReset	2.06 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 3.17 %
BAM.PR.X	FixedReset	2.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 21.53 Evaluated at bid price : 21.91 Bid-YTW : 3.65 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.W	FixedReset	83,650	Nesbitt crossed 40,000 at 25.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 23.16 Evaluated at bid price : 25.03 Bid-YTW : 3.42 %
CM.PR.P	FixedReset	78,370	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 23.17 Evaluated at bid price : 25.05 Bid-YTW : 3.41 %
BMO.PR.P	FixedReset	76,400	RBC crossed 75,000 at 25.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.39 Bid-YTW : -1.63 %
TD.PF.C	FixedReset	75,186	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 23.17 Evaluated at bid price : 25.05 Bid-YTW : 3.42 %
TRP.PR.D	FixedReset	31,400	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 23.26 Evaluated at bid price : 25.13 Bid-YTW : 3.53 %
PWF.PR.H	Perpetual-Premium	28,300	Scotia crossed 25,000 at 25.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-11 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : -14.91 %
There were 16 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: 22.65 – 25.00 Spot Rate : 2.3500 Average : 1.3535 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.65 Bid-YTW : 4.56 %
MFC.PR.I	FixedReset	Quote: 26.16 – 27.20 Spot Rate : 1.0400 Average : 0.5801 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 26.16 Bid-YTW : 2.72 %
BAM.PR.T	FixedReset	Quote: 25.75 – 26.75 Spot Rate : 1.0000 Average : 0.5876 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 3.17 %
CU.PR.E	Perpetual-Discount	Quote: 24.20 – 24.81 Spot Rate : 0.6100 Average : 0.3575 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 23.80 Evaluated at bid price : 24.20 Bid-YTW : 5.11 %
MFC.PR.H	FixedReset	Quote: 26.13 – 26.69 Spot Rate : 0.5600 Average : 0.3310 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 26.13 Bid-YTW : 2.61 %
TRP.PR.B	FixedReset	Quote: 17.58 – 18.19 Spot Rate : 0.6100 Average : 0.4003 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-12 Maturity Price : 17.58 Evaluated at bid price : 17.58 Bid-YTW : 3.61 %

It’s very fashionable to send people to special classes when they’re caught doing something naughty, with the apparent attitude that there’s no such thing as badness, only ignorance. I’ve always thought this was a wonderful example of preciousness and now I’ve got a perfect counterexample:

Dartmouth College accused 64 students of cheating in a sports ethics class last semester, the latest in a string of cases of academic dishonesty involving athletes at elite U.S. colleges.

Students used a hand-held device known as a clicker to answer questions for classmates who were absent, according to Randall Balmer, who teaches the class, “Sports, Ethics and Religion.”

DF.PR.A was confirmed at Pfd-3(low) by DBRS:

Since the last rating confirmation in January 2014, the NAV of the Company has been increasing. As of December 31, 2014, the downside protection available to the Preferred Shares is approximately 40.6%, and the dividend coverage ratio is 0.81 times. The Pfd-3 (low) rating of the Preferred Shares is based primarily on the downside protection available and the additional protection provided by an asset coverage test, which does not permit any distributions to holders of the Class A Shares if the NAV of the Company falls below $15.

FTN.PR.A was confirmed at Pfd-4(high) by DBRS:

Since the last rating confirmation in January 2014, the NAV of the Company has improved slightly, despite volatility in the markets during the year. Downside protection available to holders of the Preferred Shares rose to 43.4% as of December 31, 2014, from 42.2% on December 31, 2013. Despite the increased downside protection, the current dividend coverage ratio of around 0.46 and the reinstatement of Class A Share distributions result in an average grind of approximately 11% over the next two years. As a result, the rating has been confirmed at Pfd-4 (high).

It was a mixed day for the Canadian preferred shares market, with both PerpetualDiscounts and DeemedRetractibles off 5bp, while FixedResets were up 22bp. The volatility table was longer than normal, but indicative of nothing like the extreme volatility of the past month-odd. Volume was below average.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.66, is $1.07 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.01 and resetting at +154bp on 2016-1-30 is $0.95 rich.

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.46 and appears to be $0.97 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.34 and appears to be $1.01 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.80, looks $1.07 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.25, looks $1.09 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

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	-0.0846 %	2,555.4
FixedFloater	4.38 %	3.61 %	23,479	18.11	1	0.2309 %	3,992.9
Floater	2.96 %	3.11 %	57,639	19.47	4	-0.0846 %	2,716.6
OpRet	4.04 %	1.48 %	95,379	0.44	1	0.0790 %	2,754.2
SplitShare	4.27 %	3.91 %	36,950	3.64	5	-0.1666 %	3,201.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0790 %	2,518.4
Perpetual-Premium	5.45 %	-4.72 %	60,078	0.08	19	0.0724 %	2,496.3
Perpetual-Discount	5.15 %	5.02 %	103,523	15.38	16	-0.0475 %	2,690.5
FixedReset	4.18 %	3.43 %	206,838	16.79	77	0.2173 %	2,559.8
Deemed-Retractible	4.95 %	-0.40 %	96,268	0.13	39	-0.0467 %	2,619.8
FloatingReset	2.68 %	1.95 %	61,373	3.40	7	0.1548 %	2,497.2

Performance Highlights
Issue	Index	Change	Notes
NA.PR.M	Deemed-Retractible	-1.40 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-08 Maturity Price : 25.75 Evaluated at bid price : 26.05 Bid-YTW : -14.88 %
SLF.PR.G	FixedReset	-1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.21 Bid-YTW : 4.62 %
HSB.PR.D	Deemed-Retractible	-1.18 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-08 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 1.63 %
IFC.PR.A	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.64 %
TRP.PR.E	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.30 Evaluated at bid price : 25.40 Bid-YTW : 3.51 %
GWO.PR.P	Deemed-Retractible	1.16 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.15 Bid-YTW : 4.63 %
BAM.PF.B	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.38 Evaluated at bid price : 25.49 Bid-YTW : 3.72 %
TRP.PR.B	FixedReset	2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 17.99 Evaluated at bid price : 17.99 Bid-YTW : 3.52 %
HSE.PR.A	FixedReset	2.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 3.59 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PF.C	FixedReset	151,000	TD crossed 150,000 at 24.35. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 22.81 Evaluated at bid price : 24.09 Bid-YTW : 4.11 %
TD.PF.C	FixedReset	139,810	TD sold 10,000 to RBC at 25.05, then crossed blocks of 20,000 shares, 10,000 and 39,600 at the same price. Scotia crossed 40,000 at the same price again. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.17 Evaluated at bid price : 25.05 Bid-YTW : 3.42 %
TD.PF.A	FixedReset	77,235	TD crossed 40,000 at 25.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.30 Evaluated at bid price : 25.39 Bid-YTW : 3.35 %
HSE.PR.C	FixedReset	58,705	Scotia crossed 50,000 at 25.13. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.22 Evaluated at bid price : 25.16 Bid-YTW : 4.28 %
TD.PF.B	FixedReset	54,475	Scotia crossed 52,000 at 25.24. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.26 Evaluated at bid price : 25.20 Bid-YTW : 3.38 %
BMO.PR.T	FixedReset	50,920	RBC crossed 18,500 at 25.27. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.27 Evaluated at bid price : 25.26 Bid-YTW : 3.41 %
There were 23 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IGM.PR.B	Perpetual-Premium	Quote: 26.00 – 26.50 Spot Rate : 0.5000 Average : 0.3110 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-08 Maturity Price : 26.00 Evaluated at bid price : 26.00 Bid-YTW : 1.33 %
TD.PR.S	FixedReset	Quote: 25.40 – 25.77 Spot Rate : 0.3700 Average : 0.2410 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 2.84 %
BNS.PR.Z	FixedReset	Quote: 24.40 – 24.73 Spot Rate : 0.3300 Average : 0.2015 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 3.10 %
GWO.PR.H	Deemed-Retractible	Quote: 24.24 – 24.69 Spot Rate : 0.4500 Average : 0.3273 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.24 Bid-YTW : 5.29 %
IFC.PR.A	FixedReset	Quote: 22.50 – 22.88 Spot Rate : 0.3800 Average : 0.2609 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.64 %
FTS.PR.H	FixedReset	Quote: 18.80 – 19.15 Spot Rate : 0.3500 Average : 0.2402 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 3.62 %

Hurray! The S&P 500 is even on the year!

The Standard & Poor’s 500 Index rallied a second day, wiping out its losses for the year, on speculation central banks will support growth even as the American economy shows signs of strength.

The S&P 500 added 1.8 percent to 2,062.14 at 4 p.m. in New York, after rallying 1.2 percent yesterday to halt a five-day selloff. The Dow Jones Industrial Average jumped 323.35 points, or 1.8 percent, to 17,907.87, also erasing its loss for 2015. The Nasdaq 100 Index soared 1.9 percent and the Dow Jones Transportation Average climbed the most since October. More than 7.3 billion shares changed hands on U.S. exchanges, 4.8 percent above the three-month average.
…
Stocks extended gains after European Central Bank President Mario Draghi said in a letter published today that central bank stimulus measures may include sovereign-bond buying. Producer prices slid more than analysts anticipated in the euro area and German factory orders fell more than forecast in November, underlining the fragile state of Europe’s economy and strengthened the case for more stimulus.

The next interest-rate decision by the ECB is scheduled for Jan. 22 when officials will consider a quantitative-easing package that will probably include buying government bonds. Policy makers disagree about whether action is required, with some arguing deflation risks have increased and others pointing to the stimulating effects of lower prices on the economy.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 11bp, FixedResets off 4bp and DeemedRetractibles gaining 6bp. The Performance Highlights table is surprisingly short and dominated by TRP issues. Volume was low.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.60, is $0.92 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.02 and resetting at +154bp on 2016-1-30 is $1.13 rich.

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.41 and appears to be $0.90 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.17 and appears to be $0.95 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.77, looks $1.04 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.16, looks $1.11 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

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	0.6958 %	2,557.6
FixedFloater	4.39 %	3.62 %	23,860	18.09	1	-0.8700 %	3,983.7
Floater	2.96 %	3.09 %	58,422	19.52	4	0.6958 %	2,718.9
OpRet	4.05 %	1.65 %	96,479	0.44	1	0.0000 %	2,752.0
SplitShare	4.26 %	4.15 %	38,190	3.65	5	-0.0587 %	3,206.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,516.4
Perpetual-Premium	5.45 %	-3.53 %	60,963	0.08	19	0.0103 %	2,494.5
Perpetual-Discount	5.15 %	5.02 %	107,376	15.37	16	-0.1107 %	2,691.7
FixedReset	4.19 %	3.48 %	208,988	16.75	77	-0.0399 %	2,554.3
Deemed-Retractible	4.95 %	-0.43 %	94,331	0.13	39	0.0564 %	2,621.0
FloatingReset	2.67 %	1.92 %	59,978	3.41	7	0.0976 %	2,493.4

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.B	FixedReset	-1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 17.63 Evaluated at bid price : 17.63 Bid-YTW : 3.67 %
TRP.PR.A	FixedReset	1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 21.32 Evaluated at bid price : 21.60 Bid-YTW : 3.71 %
TRP.PR.F	FloatingReset	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 21.54 Evaluated at bid price : 21.86 Bid-YTW : 3.19 %
PWF.PR.A	Floater	2.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 2.64 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.C	FixedReset	102,836	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 23.17 Evaluated at bid price : 25.03 Bid-YTW : 3.46 %
TD.PF.B	FixedReset	78,930	Scotia crossed 27,700 at 25.26. RBC crossed 50,000 at 25.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 23.24 Evaluated at bid price : 25.15 Bid-YTW : 3.43 %
CM.PR.P	FixedReset	71,230	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 23.16 Evaluated at bid price : 25.01 Bid-YTW : 3.46 %
BNS.PR.N	Deemed-Retractible	63,661	Nesbitt crossed 34,900 at 25.75. Scotia crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-27 Maturity Price : 25.50 Evaluated at bid price : 25.75 Bid-YTW : -4.41 %
BMO.PR.S	FixedReset	55,992	Scotia crossed blocks of 27,700 and 25,000 at 25.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 23.38 Evaluated at bid price : 25.55 Bid-YTW : 3.48 %
SLF.PR.H	FixedReset	52,210	RBC crossed 52,000 at 25.65. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 2.60 %
There were 18 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: 24.52 – 24.99 Spot Rate : 0.4700 Average : 0.2982 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 24.26 Evaluated at bid price : 24.52 Bid-YTW : 5.05 %
ENB.PR.F	FixedReset	Quote: 23.63 – 24.07 Spot Rate : 0.4400 Average : 0.3011 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 22.74 Evaluated at bid price : 23.63 Bid-YTW : 4.02 %
POW.PR.G	Perpetual-Premium	Quote: 26.11 – 26.50 Spot Rate : 0.3900 Average : 0.2819 YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 4.78 %
BAM.PF.G	FixedReset	Quote: 25.62 – 25.99 Spot Rate : 0.3700 Average : 0.2654 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 23.32 Evaluated at bid price : 25.62 Bid-YTW : 3.98 %
BAM.PR.M	Perpetual-Discount	Quote: 22.04 – 22.36 Spot Rate : 0.3200 Average : 0.2261 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-08 Maturity Price : 21.71 Evaluated at bid price : 22.04 Bid-YTW : 5.41 %
BNS.PR.O	Deemed-Retractible	Quote: 26.01 – 26.30 Spot Rate : 0.2900 Average : 0.1999 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-07 Maturity Price : 25.75 Evaluated at bid price : 26.01 Bid-YTW : -10.84 %

Buy on dips? Not if you’re a central banker!

The total amount of reserves held in euros fell 8.1 percent in the third quarter, more than the currency’s 7.8 percent decline in the period against the dollar, according to the most recent figures from the International Monetary Fund. The last two times the euro depreciated 7 percent or more in a quarter, 2011 and 2010, holdings declined much less.

The data suggest reserve managers are passing up the chance to buy euros while they’re cheap, removing a key pillar of support. In August, European Central Bank President Mario Draghi cited the drop in central banks’ euro holdings as a factor that would help weaken the exchange rate and ultimately boost the region’s faltering economy.
…
The ECB has experimented with negative interest rates on deposits in an attempt to draw money out of safe government debt and into the broader economy. Yields on two-year notes in Germany, the Netherlands and France are all below zero on speculation the ECB is losing the battle against deflation.

Negative yields on twos? Well … consider inflation:

The inflation rate in the euro area fell below zero for the first time in more than five years, bolstering the case for more European Central Bank stimulus.

Prices dropped 0.2 percent in December, the European Union’s statistics office in Luxembourg said today. That’s the lowest rate since September 2009. Economists in a Bloomberg survey predicted a decline of 0.1 percent. Unemployment held at 11.5 percent in November, Eurostat said in a separate report.
…
Joblessness in Italy rose to a record 13.4 percent in November, separate data showed. German unemployment, calculated under a national measure, fell to 6.5 percent in December, the lowest in more than two decades.

Here’s another idiotic regulation story:

Each year a bank wins the mandate to convert about 3.4 billion euros ($4.1 billion) of subsidies to sterling. The rate they use has less to do with free-market economics than self-interest, according to four traders and salespeople interviewed by Bloomberg News who said their goal was to make the most money they could for their firms to the detriment of their clients.
…
The EU requires the U.K. government to exchange the currency at the European Central Bank benchmark rate on the last trading day of September. The price, set at 1:15 p.m. in London, is derived from a snapshot of trades and is supposed to be an independent measure of the value of currencies. It’s anything but, the traders said.

When London-based Barclays Plc (BARC) won the job for 2011, the first thing its foreign-exchange desk did was to place bets with its own money that the euro would fall against the pound, knowing that the transaction would move the market lower, said one trader with direct knowledge of the deal who asked not to be identified because he still works in banking.
…
Salespeople at Barclays, the world’s third-biggest currency dealer, also told their best customers, including some of the largest hedge funds, that the bank would be selling euros in the expectation the clients would adopt the same trading strategy, turbocharging efforts to push the exchange rate lower, the former employees said.

Well, of course they did. What would anybody with half a brain do? Just think of it … all these high-frequency trading firms spend millions to extract very short-term market movement predictions from the order book, so in order to avoid HFT, the European Union basically announces that Euros will be sold for Sterling in big size at the price determined in a specific way at a specific time.

I haven’t yet been able to figure out a more brain-dead method of trading. Just why the EU insists on conversion at all is a mystery to me, but if they do insist on conversion, surely it could be handled better … ‘exchange it however you like between this time on this date and that time on that date. Open market operations, an auction, whatever. A single auction will still experience disadvantageous price moves in the market during the run up to it … JUST LIKE BONDS. JUST LIKE STOCKS. JUST LIKE EVERY OTHER DAMN THING ON THE MARKET. You really don’t need to be very sophisticated to be able to work this out and observe it for yourself. Are strawberries cheaper in December or June?

But even when aware that they’re being (quite rightfully) penalized for telegraphing their trades, the bureaucrats still insist on using arbitrary quotations:

The U.K. now has the option of exchanging currency using an average of all ECB fixes in September, which will make it harder for banks to rig the rate.

It all fits in with the “Prevention” self-regulatory focus discussed yesterday. If a trader was given the job of conversion, he might underperform some benchmark, whatever it was … so the bureaucrats conclude that paying a fee to convert at that benchmark is a better idea. Then they cannot be criticized for allowing underperformance – even though a large conversion at a small benchmark is a really, really stupid and expensive way to trade, the costs are invisible.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 57bp, FixedResets up 13bp and DeemedRetractibles gaining 3bp. The Performance Highlights table is again quite lengthy, this time heavily skewed towards winners. Volume was very low.

PerpetualDiscounts now yield 5.02%, equivalent to 6.53% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 3.9% so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 265bp, a significant widening from the 245bp reported December 24.

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 21.31, is $1.26 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.02 and resetting at +154bp on 2016-1-30 is $0.98 rich.

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.42 and appears to be $0.84 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.11 and appears to be $0.88 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.81, looks $1.06 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.23, looks $1.07 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

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	0.1280 %	2,539.9
FixedFloater	4.35 %	3.58 %	23,734	18.16	1	0.8776 %	4,018.7
Floater	2.98 %	3.09 %	59,190	19.52	4	0.1280 %	2,700.1
OpRet	4.05 %	1.64 %	98,048	0.44	1	0.0000 %	2,752.0
SplitShare	4.26 %	4.18 %	37,861	4.05	5	0.2848 %	3,208.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,516.4
Perpetual-Premium	5.45 %	-3.16 %	61,743	0.09	19	0.2680 %	2,494.2
Perpetual-Discount	5.15 %	5.02 %	106,092	15.39	16	0.5714 %	2,694.7
FixedReset	4.18 %	3.48 %	209,987	16.72	77	0.1253 %	2,555.3
Deemed-Retractible	4.95 %	-0.32 %	95,504	0.14	39	0.0346 %	2,619.5
FloatingReset	2.67 %	1.93 %	60,669	3.41	7	0.2589 %	2,491.0

Performance Highlights
Issue	Index	Change	Notes
HSE.PR.A	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 20.72 Evaluated at bid price : 20.72 Bid-YTW : 3.74 %
BNS.PR.Z	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.34 Bid-YTW : 3.18 %
GWO.PR.G	Deemed-Retractible	1.00 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-06 Maturity Price : 25.00 Evaluated at bid price : 25.21 Bid-YTW : -3.75 %
IFC.PR.C	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 2.20 %
CU.PR.F	Perpetual-Discount	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 22.43 Evaluated at bid price : 22.80 Bid-YTW : 4.97 %
CGI.PR.D	SplitShare	1.16 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 3.17 %
POW.PR.D	Perpetual-Discount	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 24.34 Evaluated at bid price : 24.65 Bid-YTW : 5.08 %
BAM.PF.D	Perpetual-Discount	1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 22.21 Evaluated at bid price : 22.52 Bid-YTW : 5.47 %
PWF.PR.P	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 3.42 %
BAM.PF.C	Perpetual-Discount	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 21.93 Evaluated at bid price : 22.26 Bid-YTW : 5.47 %
SLF.PR.B	Deemed-Retractible	1.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.39 Bid-YTW : 5.16 %
ENB.PR.Y	FixedReset	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 22.00 Evaluated at bid price : 22.51 Bid-YTW : 4.15 %
CU.PR.G	Perpetual-Discount	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 22.44 Evaluated at bid price : 22.80 Bid-YTW : 4.97 %
ELF.PR.H	Perpetual-Premium	1.91 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-17 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 5.06 %
TRP.PR.B	FixedReset	3.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 3.60 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.C	FixedReset	272,890	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 23.16 Evaluated at bid price : 25.02 Bid-YTW : 3.46 %
BMO.PR.P	FixedReset	251,818	Scotia crossed 100,000 at 25.35. Desjardins crossed blocks of 100,000 and 50,000, both at 25.36. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : -0.29 %
CM.PR.P	FixedReset	130,475	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 23.16 Evaluated at bid price : 25.00 Bid-YTW : 3.46 %
NA.PR.W	FixedReset	62,200	TD crossed 50,000 at 25.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 23.25 Evaluated at bid price : 25.31 Bid-YTW : 3.48 %
MFC.PR.K	FixedReset	47,398	TD crossed 43,200 at 25.35. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 3.53 %
BMO.PR.L	Deemed-Retractible	45,278	RBC bought 10,000 from Scotia at 26.55 and another 10,000 from TD at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-06 Maturity Price : 25.75 Evaluated at bid price : 26.44 Bid-YTW : -17.73 %
There were 16 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: 19.50 – 20.79 Spot Rate : 1.2900 Average : 1.0443 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 2.71 %
ELF.PR.G	Perpetual-Discount	Quote: 22.86 – 23.19 Spot Rate : 0.3300 Average : 0.1992 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 22.58 Evaluated at bid price : 22.86 Bid-YTW : 5.20 %
MFC.PR.B	Deemed-Retractible	Quote: 24.00 – 24.41 Spot Rate : 0.4100 Average : 0.3028 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.23 %
ENB.PR.N	FixedReset	Quote: 23.75 – 24.09 Spot Rate : 0.3400 Average : 0.2365 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-07 Maturity Price : 22.75 Evaluated at bid price : 23.75 Bid-YTW : 4.12 %
GWO.PR.P	Deemed-Retractible	Quote: 25.96 – 26.25 Spot Rate : 0.2900 Average : 0.1968 YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 25.96 Bid-YTW : 4.79 %
SLF.PR.D	Deemed-Retractible	Quote: 23.09 – 23.41 Spot Rate : 0.3200 Average : 0.2286 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.09 Bid-YTW : 5.49 %

Nothing happened today except for the the usual decline in equities and related decline in government bond yields, so instead I will devote this post to the Dalhouse Dental Disaster.

For those of you unfamiliar with the news, the basic story is that a group of male Dalhousie dental students started a private group on Facebook, in which they made a lot of juvenile remarks about sex and women, and some that crossed the line into offensive territory, with a poll on which of their female peers should be ‘hate-fucked’. An informer took 70+ screenshots of this stuff and distributed it and it has now become a major talking point – to the point at which dental regulators are opining on the topic:

Also Tuesday, the Alberta Dental Association and College joined Ontario’s dental regulatory body to call on Dalhousie’s dentistry faculty to release the names of the 13 students who posted misogynist comments, “if and when they graduate.”

In a statement, the college said it is “profoundly disturbed about the alleged inappropriate behaviour of some dental students” at Dalhousie and expects dentists who want to practise in Alberta to supply evidence of their good character.

On Monday, the Royal College of Dental Surgeons of Ontario, which regulates 9,000 dentists, said it had asked Dalhousie for the names of the 13 men.

In a statement Tuesday, Dalhousie said “it will not be releasing the names of the individuals involved. The university has an obligation to protect the privacy and confidentiality of our students.”

Irwin Fefergrad, the college’s registrar, had warned that if Dalhousie does not provide the names, the College will ask each Dal graduate if they have been the subject of a university complaint or inquiry. “My members have been appalled and disgusted by the students. I’ve had more e-mails on this issue than I can remember on anything else,” he said.

The Provincial Dental Board of Nova Scotia has also said in a statement it will consider the outcome of the inquiries at Dalhousie in any decision to allow the students to practise.

The men have been suspended from clinical activities while an academic committee considers further penalties, such as academic suspension or expulsion.

Now, by me this is just craziness. The stuff was definitely puerile, but the fact that it’s gotten to the point that it’s career threatening is indicative of a hysterical over-reaction. Regrettably, I’ve seen only one column in the media that agrees with my view but even that went too far in advocating “serious consequences”.

I mean, really, why should the university – or any other authority – be involved at all? It strikes me as much more rational and natural that the women involved should tell the men what goofs they are, receive shamefaced apologies, and then everybody gets on with their lives.

But it is the regulatory involvement that fascinates me, because if juvenile sexual remarks made in supposed privacy are career threatening then basically everybody in the securities industry is about to get fired. So it occurred to me that all of this nonsense about rules and official involvement might be related to the increasing number of women in the workforce in general and in the regulatory industry in particular. My rationale for this is not dependent upon ‘women sticking up for each other’, but on my perception that women in general like process, rules and consequences. But does this perception make me a sexist pig?

I am relieved to state that as far as I can tell it does not. I discovered something called Regulatory Focus Theory:

Regulatory focus theory (RFT) is a goal pursuit theory[1] formulated by Columbia University psychology professor and researcher E. Tory Higgins regarding peoples’ perceptions in the decision making process. RFT examines the relationship between the motivation of a person and the way in which they go about achieving their goal.[2] RFT posits two separate and independent self-regulatory orientations: prevention and promotion (Higgins, 1997).

This psychological theory, like many others, is applied in communication, specifically in the subfields of nonverbal communication and persuasion.Chronic regulatory focus is measured using the Regulatory Focus Questionnaire (Higgins et al., 2001) or the Regulatory Strength measure. Momentary regulatory focus can be primed or induced.

To understand RFT, it is important to understand another of E. Tory Higgins’ theories, Regulatory Fit Theory. When a person believes that there is “fit”, they will involve themselves more in what they are doing and “feel right” about it.[3] Regulatory fit should not directly affect the hedonic occurrence of a thing or occasion, but should influence a person’s assurance in their reaction to the object or event.

Regulatory fit theory suggests that a match between orientation to a goal and the means used to approach that goal produces a state of regulatory fit that both creates a feeling of rightness about the goal pursuit and increases task engagement (Higgins, 2001, 2005). Regulatory fit intensifies responses, such as the value of a chosen object, persuasion, and job satisfaction (Kruglanski, Pierro, & Higgins, 2007).

And in confirmation of my bias, there’s an interesting paper by Sassenberg, Brazy, Jonas and Shah titled When gender fits self-regulatory preferences: The impact of regulatory fit on gender-based ingroup favoritism, which is available here in full. It interests me more for the introductory literature review than for the specifics of the study:

Females are perceived to have less power than males. These differences in perceived power might render different self-regulatory strategies appropriate: women should (as member of other low power groups) care about security, whereas men should (as members of other high power groups) strive for accomplishment. These regulatory implications of gender provide the basis for regulatory fit between individuals’ gender and their regulatory focus. Higher fit should lead to stronger gender-based in group favoritism: Prevention focused females and promotion focused males were expected to show more ingroup favoritism than both genders in the respective other regulatory focus. According to the regulatory fit hypothesis this effect should occur for evaluative but not stereotype based ingroup favoritism. Three studies supported these hypotheses.
…
Regulatory focus theory (Higgins, 1997, 1998) distinguishes two motivational systems: promotion and prevention focus. These foci differ in their underlying needs(achievement in a promotion focus vs. security in a prevention focus) and in turn imply the pursuit of differing types of goals (ideals, wishes, and aspirations in a promotion focus vs. oughts, duties, and responsibilities in a prevention focus). Individuals in a promotion focus tend to think global and are primarily concerned with the absence and presence of positive outcomes. Individuals in a prevention focus strive to avoid errors, follow rules and are primarily concerned with the absence and presence of negative outcomes. Regulatory focus may vary between situations and between persons.
…
Nonetheless, we assume that the impact of regulatory focus and power on ingroup favoritism generalizes to gender, as females and males share the features of high and low power groups which provide the opportunity for experiencing regulatory fit. Sassenberg et al. (2007) argued that the crucial difference between high and low power groups is that high power groups are perceived to provide the opportunity to apply promotion strategies whereas low power groups are perceived to come with the necessity to apply prevention strategies. Such perceptions also exist for females and males. Gender roles and gender stereotypes indicate that females are(among other things) sensitive, caring, dependent, and submissive, which indicates that a security-oriented strategy is perceived as appropriate for them. Male roles and stereotypes include (among other things) the characteristics daring, competitive, ambitious, and persistent(Bem, 1974; Deaux & Lewis, 1983; Oswald & Lindstedt, 2006; Williams & Best, 1982),suggesting that an achievement-oriented strategy is perceived as appropriate for males. Hence, the roles, stereotypes, and the implied behavioral strategies ascribed to the genders suggest a regulatory fit between females and a prevention focus as well as males and a promotion focus. Therefore, we assume that the fit between regulatory focus and group power also occurs for the genders.

So my interpretation of all this is:

• Women are disproportionately drawn towards regulatory work because it involves rulemaking and process
• Therefore the culture of the regulatory bodies becomes more feminine – i.e., is more strongly tilted towards the ‘prevention focus’
• Therefore more rules get invented and the power of the regulatory body increases

Let’s just hope that broader public regulation does not become as intrusive and vindictive as that exemplified by the Dalhousie dentist fiasco!

It was another poor day for the Canadian preferred share market, with PerpetualDiscounts off 5bp, FixedResets losing 28bp and DeemedRetractibles down 19bp. FixedResets and insurance DeemedRetractibles were prominent on the bad side of the lengthy Performance Highlights table. Volume was low.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.36, is $1.06 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.02 and resetting at +154bp on 2016-1-30 is $1.26 rich.

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.24 and appears to be $0.80 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.01 and appears to be $0.86 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 18.81, looks $1.04 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.26, looks $1.10 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

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	0.6728 %	2,536.7
FixedFloater	4.39 %	3.62 %	23,825	18.10	1	0.0925 %	3,983.7
Floater	2.99 %	3.10 %	59,006	19.49	4	0.6728 %	2,696.6
OpRet	4.05 %	1.63 %	101,372	0.44	1	0.0395 %	2,752.0
SplitShare	4.27 %	4.18 %	35,681	4.05	5	-0.1426 %	3,199.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,516.4
Perpetual-Premium	5.43 %	-2.45 %	61,589	0.08	19	-0.0783 %	2,487.5
Perpetual-Discount	5.17 %	5.05 %	105,806	15.29	16	-0.0503 %	2,679.4
FixedReset	4.19 %	3.49 %	213,130	16.71	77	-0.2800 %	2,552.1
Deemed-Retractible	4.95 %	1.28 %	93,213	0.23	39	-0.1947 %	2,618.6
FloatingReset	2.68 %	1.92 %	60,496	3.41	7	-0.0067 %	2,484.5

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.B	Deemed-Retractible	-2.51 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 5.33 %
TRP.PR.B	FixedReset	-2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 17.41 Evaluated at bid price : 17.41 Bid-YTW : 3.71 %
ENB.PR.Y	FixedReset	-1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 21.77 Evaluated at bid price : 22.17 Bid-YTW : 4.23 %
SLF.PR.A	Deemed-Retractible	-1.84 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 5.28 %
SLF.PR.C	Deemed-Retractible	-1.75 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.03 Bid-YTW : 5.52 %
ENB.PR.F	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 22.63 Evaluated at bid price : 23.41 Bid-YTW : 4.06 %
MFC.PR.C	Deemed-Retractible	-1.60 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.37 Bid-YTW : 5.41 %
FTS.PR.F	Perpetual-Discount	-1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 24.24 Evaluated at bid price : 24.49 Bid-YTW : 5.05 %
BNS.PR.Y	FixedReset	-1.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.71 Bid-YTW : 3.12 %
FTS.PR.H	FixedReset	-1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 18.81 Evaluated at bid price : 18.81 Bid-YTW : 3.68 %
HSE.PR.A	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 3.69 %
ENB.PR.B	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 22.36 Evaluated at bid price : 22.76 Bid-YTW : 4.09 %
TRP.PR.D	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 23.17 Evaluated at bid price : 24.86 Bid-YTW : 3.62 %
TRP.PR.C	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 21.02 Evaluated at bid price : 21.02 Bid-YTW : 3.43 %
IAG.PR.A	Deemed-Retractible	1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.96 Bid-YTW : 5.17 %
PWF.PR.A	Floater	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 2.71 %
PWF.PR.S	Perpetual-Discount	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 24.24 Evaluated at bid price : 24.65 Bid-YTW : 4.93 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.C	FixedReset	171,110	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 23.17 Evaluated at bid price : 25.03 Bid-YTW : 3.46 %
CM.PR.P	FixedReset	149,360	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 23.13 Evaluated at bid price : 24.93 Bid-YTW : 3.47 %
PVS.PR.D	SplitShare	44,850	National bought blocks of 10,000 and 25,000 from Scotia, both at 24.70. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 4.84 %
CU.PR.G	Perpetual-Discount	41,362	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 22.14 Evaluated at bid price : 22.45 Bid-YTW : 5.06 %
FTS.PR.M	FixedReset	40,662	Nesbitt crossed 33,200 at 25.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 23.34 Evaluated at bid price : 25.55 Bid-YTW : 3.63 %
FTS.PR.J	Perpetual-Discount	31,177	ITG bought 11,700 from Nesbitt at 24.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 23.92 Evaluated at bid price : 24.32 Bid-YTW : 4.92 %
There were 20 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
SLF.PR.A	Deemed-Retractible	Quote: 24.06 – 24.59 Spot Rate : 0.5300 Average : 0.3269 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.06 Bid-YTW : 5.28 %
NEW.PR.D	SplitShare	Quote: 32.11 – 33.00 Spot Rate : 0.8900 Average : 0.7339 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-06-26 Maturity Price : 32.07 Evaluated at bid price : 32.11 Bid-YTW : 4.18 %
SLF.PR.B	Deemed-Retractible	Quote: 24.05 – 24.48 Spot Rate : 0.4300 Average : 0.2742 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 5.33 %
ENB.PR.Y	FixedReset	Quote: 22.17 – 22.60 Spot Rate : 0.4300 Average : 0.2860 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 21.77 Evaluated at bid price : 22.17 Bid-YTW : 4.23 %
BAM.PF.G	FixedReset	Quote: 25.65 – 26.00 Spot Rate : 0.3500 Average : 0.2282 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 23.33 Evaluated at bid price : 25.65 Bid-YTW : 3.97 %
ELF.PR.H	Perpetual-Premium	Quote: 25.12 – 25.56 Spot Rate : 0.4400 Average : 0.3349 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-06 Maturity Price : 24.65 Evaluated at bid price : 25.12 Bid-YTW : 5.48 %

Kerr-rrash! Equities got hammered today and the damage is spreading:

Crude oil’s slide below $50 sent the Standard & Poor’s 500 Index (SPX) to its biggest drop since October, as selling spread from the energy industry amid concern that cuts in capital spending will hurt earnings.

Energy shares in the S&P 500 plunged 4 percent as West Texas Intermediate sank to the lowest since April 2009. Exxon Mobil Corp. lost 2.7 percent and Chevron Corp. retreated 4 percent. Caterpillar (CAT) Inc. declined 5.3 percent and an index of railroad stocks lost 3.2 percent on concern that the energy slump may hurt spending on capital equipment and crude transportation.

The S&P 500 dropped 1.8 percent to 2,020.58 for its first four-day losing streak since 2013. The gauge fell below its average price for the last 50 days. The Dow Jones Industrial Average retreated 331.34 points, or 1.9 percent, to 17,501.65. More than 7.1 billion shares changed hands on U.S. exchanges, 2.9 percent above the three-month average.

Canada, too:

Canadian stocks posted the steepest plunge since 2013, joining a global selloff, as banks and energy producers tumbled after oil prices slumped below $50 a barrel for the first time in five years amid concern over Greece.

MEG Energy Corp. and Legacy Oil & Gas (LEG) Inc. sank at least 19 percent as energy stocks fell 5.5 percent as a group. Toronto-Dominion Bank and National Bank of Canada slumped more than 2.3 percent as bank shares declined a fourth day. First Quantum Minerals Ltd. lost 8.3 percent with copper at a four-year low.

The Standard & Poor’s/TSX Composite Index (SPTSX) fell 360.95 points, or 2.5 percent, to 14,392.70 at 4 p.m. in Toronto, the biggest decline since June 2013. The benchmark equity gauge rose 7.4 percent in 2014.

Oil prices? Yes, oil prices:

Benchmark U.S. oil prices dropped below $50 a barrel for the first time since April 2009 as surging supply signaled that the global glut that drove crude into a bear market will persist.

West Texas Intermediate slid 5 percent in New York while Brent fell below $55 in London for the first time since May 2009. Russia’s output rose to a post-Soviet high while Iraq, the second-largest producer in OPEC, plans to boost crude exports to a record this month. The price drop accelerated as the dollar climbed against the euro amid investor concern Greece might leave the currency union

Oil is in a race with the Euro, the Loonie and the Ruble:

The euro weakened to an almost nine-year low versus the dollar amid investor concern Greece might leave the currency union and on speculation the European Central Bank has moved closer to large-scale sovereign-bond purchases.

A gauge of the dollar reached the strongest in nine years with the Federal Reserve moving toward raising interest rates. The yen gained to an eight-week high against the euro as a slide in Asian stocks boosted haven demand. The Russian ruble and Canadian dollar slipped as oil fell. Brazil’s real dropped after economists boosted inflation forecasts and cut growth estimates. Volatility jumped to the highest in more than a year.
…
The euro dropped 0.6 percent to $1.1933 as of 5 p.m. in New York after sliding to $1.1864, the least since March 2006. The shared currency fell 1.3 percent to 142.76 yen and earlier reached 142.30, lowest since Nov. 10. The dollar depreciated 0.7 percent to 119.64 yen.

The Bloomberg Dollar Spot Index (BCOM), which tracks the U.S. currency against 10 major peers, rose 0.2 percent to 1,143.40 and touched 1,146.49, the highest in data going back to 2005.

The Canadian preferred share market was also hit on the day, with PerpetualDiscounts off 12bp, FixedResets down 22bp and DeemedRetractibles losing 37bp. The performance highlights table is suitably lengthy, with insurance DeemedRetractibles prominent on the downside. Volume was extremely low.

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

Remember that all rich /cheap assessments are:

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

Here’s TRP:

So according to this, TRP.PR.A, bid at 21.23, is $1.35 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.25 and resetting at +154bp on 2016-1-30 is $1.31 rich.

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.35 and appears to be $0.87 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.16 and appears to be $0.98 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.06, looks $0.98 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.32, looks $1.04 expensive and resets 2019-3-1

Pairs equivalence is all over the map.

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	0.2296 %	2,519.7
FixedFloater	4.39 %	3.63 %	24,737	18.09	1	0.0000 %	3,980.1
Floater	3.01 %	3.11 %	59,692	19.48	4	0.2296 %	2,678.6
OpRet	4.05 %	1.71 %	102,942	0.45	1	-0.0395 %	2,750.9
SplitShare	4.27 %	4.09 %	34,694	3.65	5	-0.0158 %	3,204.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0395 %	2,515.4
Perpetual-Premium	5.43 %	-4.95 %	62,467	0.08	19	-0.1317 %	2,489.5
Perpetual-Discount	5.16 %	5.03 %	105,253	15.31	16	-0.1189 %	2,680.7
FixedReset	4.17 %	3.49 %	214,503	16.72	77	-0.2156 %	2,559.3
Deemed-Retractible	4.93 %	1.04 %	94,024	0.14	39	-0.3705 %	2,623.7
FloatingReset	2.68 %	1.89 %	60,675	3.40	7	-0.8766 %	2,484.7

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.F	FloatingReset	-5.22 %	Not really all that real, since the low for the day was 22.01, with transaction prices falling on the basis of 7,200 shares sold in the last half hour. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.31 %
HSE.PR.A	FixedReset	-2.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.64 %
GWO.PR.H	Deemed-Retractible	-2.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 5.24 %
FTS.PR.J	Perpetual-Discount	-2.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.87 Evaluated at bid price : 24.27 Bid-YTW : 4.93 %
SLF.PR.E	Deemed-Retractible	-1.80 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.46 Bid-YTW : 5.34 %
ENB.PR.B	FixedReset	-1.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 22.53 Evaluated at bid price : 23.02 Bid-YTW : 4.04 %
SLF.PR.A	Deemed-Retractible	-1.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.51 Bid-YTW : 5.04 %
SLF.PR.D	Deemed-Retractible	-1.47 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.41 Bid-YTW : 5.31 %
SLF.PR.C	Deemed-Retractible	-1.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.44 Bid-YTW : 5.29 %
MFC.PR.B	Deemed-Retractible	-1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.16 Bid-YTW : 5.14 %
GWO.PR.I	Deemed-Retractible	-1.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 5.29 %
POW.PR.D	Perpetual-Discount	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 24.16 Evaluated at bid price : 24.41 Bid-YTW : 5.13 %
TRP.PR.C	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.39 %
PWF.PR.T	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 3.24 %
ENB.PR.P	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 22.54 Evaluated at bid price : 23.38 Bid-YTW : 4.07 %
MFC.PR.C	Deemed-Retractible	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 5.20 %
ELF.PR.H	Perpetual-Premium	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 24.63 Evaluated at bid price : 25.10 Bid-YTW : 5.48 %
PWF.PR.L	Perpetual-Premium	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 24.85 Evaluated at bid price : 25.17 Bid-YTW : 5.14 %
PWF.PR.A	Floater	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 2.75 %
GWO.PR.P	Deemed-Retractible	1.28 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.11 Bid-YTW : 4.65 %
TRP.PR.A	FixedReset	1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.23 Evaluated at bid price : 21.23 Bid-YTW : 3.80 %

Volume Highlights
Issue	Index	Shares Traded	Notes
FTS.PR.M	FixedReset	152,325	RBC crossed blocks of 96,100 and 50,000, both at 25.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.34 Evaluated at bid price : 25.54 Bid-YTW : 3.63 %
TRP.PR.A	FixedReset	133,454	Nesbitt crossed 114,000 at 21.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.23 Evaluated at bid price : 21.23 Bid-YTW : 3.80 %
TD.PF.C	FixedReset	116,740	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.15 Evaluated at bid price : 24.97 Bid-YTW : 3.47 %
TRP.PR.F	FloatingReset	73,755	Recent exchange from TRP.PR.A. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.31 %
CU.PR.F	Perpetual-Discount	52,620	RBC crossed 50,000 at 22.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 22.19 Evaluated at bid price : 22.51 Bid-YTW : 5.04 %
CM.PR.P	FixedReset	50,675	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.14 Evaluated at bid price : 24.95 Bid-YTW : 3.47 %
There were 7 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.F	FloatingReset	Quote: 21.25 – 22.30 Spot Rate : 1.0500 Average : 0.6756 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.31 %
GWO.PR.I	Deemed-Retractible	Quote: 23.55 – 24.00 Spot Rate : 0.4500 Average : 0.2863 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 5.29 %
GWO.PR.H	Deemed-Retractible	Quote: 24.33 – 24.80 Spot Rate : 0.4700 Average : 0.3367 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 5.24 %
IAG.PR.A	Deemed-Retractible	Quote: 23.70 – 24.18 Spot Rate : 0.4800 Average : 0.3496 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.70 Bid-YTW : 5.31 %
FTS.PR.J	Perpetual-Discount	Quote: 24.27 – 24.65 Spot Rate : 0.3800 Average : 0.2612 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.87 Evaluated at bid price : 24.27 Bid-YTW : 4.93 %
CU.PR.F	Perpetual-Discount	Quote: 22.51 – 22.90 Spot Rate : 0.3900 Average : 0.2749 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 22.19 Evaluated at bid price : 22.51 Bid-YTW : 5.04 %

The loonie got out of the wrong side of bed this year:

The loonie plunged to a level not seen in more than five years Friday amid a strengthening U.S. greenback and weaker crude oil prices.

The Canadian dollar ended the day down 1.18 cents at 85.02 cents (U.S.), The last time it closed below this level was on May 15, 2009.

The currency finished 2014 down about 8 per cent or 7.8 cents against the American currency compared with where it began the year.

It’s in a race with oil:

Oil dropped to the lowest in more than five and a half years amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China.

Futures capped a sixth weekly loss in New York and London. Oil output in Russia and Iraq surged to the highest levels in decades in December, according to data from both countries’ governments. Euro-area factory output expanded less than initially estimated in December. A manufacturing gauge in China, the world’s second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday.

Prices slumped 46 percent in New York in 2014, the steepest drop in six years and second-worst since trading began in 1983, as U.S. producers and the Organization of Petroleum Exporting Countries ceded no ground in their battle for market share. OPEC pumped above its quota for a seventh month in December even as U.S. output expanded to the highest in more than three decades, according to data compiled by Bloomberg.

What I need is a gimmick:

So-called “smart beta” funds, the fastest-growing segment of the exchange-traded fund market, are sold as index funds but are actively – sometimes frenetically – traded portfolios that can whipsaw investors and often fail to deliver the outsized returns their issuers promote.

Over the last one- and three-year periods, they have on average lagged their plain-vanilla counterparts in almost every highly competitive category, according to an analysis performed for Reuters by ETF.com, a research firm. Along the way, many have turned over their portfolios two and three times a year and undershot their own specialized benchmarks by significant margins.

Yet they have become a magnet for investor dollars, pulling in 60 cents of every dollar flowing to ETFs over the last two years, according to Morningstar.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 8bp, FixedResets down 10bp and DeemedRetractibles off 2bp. The modest numbers masked an impressive amount of volatility, but volume was virtually non-existent.

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 21.20, is $1.17 cheap (despite today’s impressive performance), but it has already reset (at +192). TRP.PR.C, bid at 21.11 and resetting at +154bp on 2016-1-30 is $1.37 rich.

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

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.21 and appears to be $0.87 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.10 and appears to be $0.98 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.30, looks $0.93 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.29, looks $0.89 expensive and resets 2019-3-1

Pairs equivalence is all over the map, but is better than yesterday and will probably converge as volumes increase in the new year.

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	0.1294 %	2,513.9
FixedFloater	0.00 %	0.00 %	0	0.00	1	0.1294 %	3,980.1
Floater	3.02 %	3.12 %	61,889	19.46	4	0.1294 %	2,672.5
OpRet	4.05 %	1.68 %	102,319	0.46	1	0.0000 %	2,752.0
SplitShare	4.27 %	4.12 %	32,850	3.66	5	-0.1421 %	3,204.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,516.4
Perpetual-Premium	5.43 %	-5.54 %	63,048	0.08	19	-0.0226 %	2,492.8
Perpetual-Discount	5.17 %	5.03 %	106,390	15.32	16	0.0795 %	2,683.9
FixedReset	4.17 %	3.57 %	222,956	8.41	77	-0.1027 %	2,564.8
Deemed-Retractible	4.92 %	0.53 %	93,980	0.16	39	-0.0157 %	2,633.5
FloatingReset	2.64 %	1.86 %	58,814	3.40	7	0.2097 %	2,506.7

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.F	FixedReset	-2.82 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.72 Bid-YTW : 4.71 %
TRP.PR.C	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 3.56 %
MFC.PR.L	FixedReset	-1.76 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.73 %
CU.PR.D	Perpetual-Discount	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 24.14 Evaluated at bid price : 24.56 Bid-YTW : 5.02 %
CU.PR.E	Perpetual-Discount	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 24.18 Evaluated at bid price : 24.60 Bid-YTW : 5.01 %
FTS.PR.J	Perpetual-Discount	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 24.10 Evaluated at bid price : 24.51 Bid-YTW : 4.88 %
BAM.PF.C	Perpetual-Discount	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.56 Evaluated at bid price : 21.86 Bid-YTW : 5.57 %
FTS.PR.H	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 3.76 %
HSE.PR.A	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.35 Evaluated at bid price : 21.65 Bid-YTW : 3.69 %
BAM.PR.M	Perpetual-Discount	1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.44 Evaluated at bid price : 21.76 Bid-YTW : 5.48 %
MFC.PR.C	Deemed-Retractible	1.95 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.01 Bid-YTW : 5.06 %
BAM.PR.N	Perpetual-Discount	1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.85 Evaluated at bid price : 21.85 Bid-YTW : 5.47 %
TRP.PR.A	FixedReset	2.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 3.92 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.F	FloatingReset	29,650	Recent exchange from TRP.PR.A. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 22.10 Evaluated at bid price : 22.36 Bid-YTW : 3.11 %
BAM.PF.D	Perpetual-Discount	23,825	ITG (who?) bought 14,300 from CIBC at 22.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.75 Evaluated at bid price : 22.03 Bid-YTW : 5.59 %
TD.PF.C	FixedReset	22,840	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 23.14 Evaluated at bid price : 24.95 Bid-YTW : 3.57 %
BAM.PF.G	FixedReset	15,415	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 4.07 %
BNS.PR.M	Deemed-Retractible	14,075	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-01 Maturity Price : 25.50 Evaluated at bid price : 25.87 Bid-YTW : -16.79 %
BNS.PR.L	Deemed-Retractible	10,476	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-01 Maturity Price : 25.50 Evaluated at bid price : 25.86 Bid-YTW : -16.36 %
There were 0 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PR.T	FloatingReset	Quote: 25.49 – 26.53 Spot Rate : 1.0400 Average : 0.5655 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.49 Bid-YTW : 1.86 %
MFC.PR.F	FixedReset	Quote: 21.72 – 22.40 Spot Rate : 0.6800 Average : 0.4444 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.72 Bid-YTW : 4.71 %
MFC.PR.L	FixedReset	Quote: 25.05 – 25.60 Spot Rate : 0.5500 Average : 0.3612 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.73 %
TRP.PR.C	FixedReset	Quote: 21.11 – 21.69 Spot Rate : 0.5800 Average : 0.4198 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 3.56 %
ELF.PR.G	Perpetual-Discount	Quote: 22.75 – 23.13 Spot Rate : 0.3800 Average : 0.2524 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-02 Maturity Price : 22.46 Evaluated at bid price : 22.75 Bid-YTW : 5.22 %
CGI.PR.D	SplitShare	Quote: 25.75 – 26.15 Spot Rate : 0.4000 Average : 0.2761 YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 3.38 %

Nothing happened today.

The Canadian preferred share market closed the year on a very strong note, with PerpetualDiscounts winning 52bp, FixedResets up 42bp and DeemedRetractibles gaining 23bp. The Performance Highlights Table is suitably enormous, with a large complement of winners from the credit-nervous ENB. Volume was tiny.

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 20.65, is $1.67 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.50 and resetting at +154bp on 2016-1-30 is $1.79 rich.

Today’s fine performance (+2.01%!) has brought MFC.PR.F back to the line defined by its peers. Implied Volatility continues to be a conundrum. It is far too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.16 and appears to be $0.81 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.25 and appears to be $1.11 rich.

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

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.09, looks $1.05 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.42, looks $1.03 expensive and resets 2019-3-1

Pairs equivalence is all over the map, but will probably converge as volumes increase in the new year.

And that’s it for another year!

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	-0.4579 %	2,510.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4579 %	3,974.9
Floater	3.02 %	3.09 %	63,986	19.48	4	-0.4579 %	2,669.0
OpRet	4.41 %	-1.83 %	23,195	0.08	2	0.0000 %	2,752.0
SplitShare	4.26 %	4.04 %	34,192	3.67	5	0.0626 %	3,209.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,516.4
Perpetual-Premium	5.44 %	-4.91 %	65,647	0.09	20	0.1942 %	2,493.3
Perpetual-Discount	5.14 %	5.04 %	107,501	15.32	15	0.5221 %	2,681.8
FixedReset	4.17 %	3.57 %	231,565	8.46	77	0.4168 %	2,567.4
Deemed-Retractible	4.94 %	-1.38 %	91,140	0.09	40	0.2297 %	2,633.9
FloatingReset	2.63 %	-3.31 %	61,235	0.08	6	-1.9589 %	2,501.4

Performance Highlights
Issue	Index	Change	Notes
IAG.PR.A	Deemed-Retractible	-1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.65 Bid-YTW : 5.33 %
PWF.PR.A	Floater	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 2.78 %
ENB.PR.N	FixedReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.88 Evaluated at bid price : 24.04 Bid-YTW : 4.16 %
ENB.PR.D	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.71 Evaluated at bid price : 23.52 Bid-YTW : 4.03 %
GWO.PR.H	Deemed-Retractible	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.62 Bid-YTW : 5.07 %
POW.PR.G	Perpetual-Premium	1.11 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-15 Maturity Price : 25.50 Evaluated at bid price : 26.44 Bid-YTW : 4.51 %
PWF.PR.T	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 2.93 %
ENB.PR.P	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.66 Evaluated at bid price : 23.62 Bid-YTW : 4.12 %
TRP.PR.B	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 17.92 Evaluated at bid price : 17.92 Bid-YTW : 3.79 %
RY.PR.L	FixedReset	1.26 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.54 Bid-YTW : 2.80 %
ENB.PR.F	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.85 Evaluated at bid price : 23.85 Bid-YTW : 4.08 %
BAM.PF.B	FixedReset	1.28 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 3.86 %
SLF.PR.D	Deemed-Retractible	1.32 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.79 Bid-YTW : 5.10 %
ENB.PF.C	FixedReset	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.97 Evaluated at bid price : 24.50 Bid-YTW : 4.16 %
MFC.PR.L	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.46 %
GWO.PR.P	Deemed-Retractible	1.40 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.01 Bid-YTW : 4.72 %
BAM.PF.D	Perpetual-Discount	1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 21.65 Evaluated at bid price : 21.99 Bid-YTW : 5.59 %
ENB.PR.J	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.07 Evaluated at bid price : 24.55 Bid-YTW : 4.07 %
SLF.PR.E	Deemed-Retractible	1.49 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 5.09 %
CU.PR.E	Perpetual-Discount	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.47 Evaluated at bid price : 24.90 Bid-YTW : 4.95 %
CU.PR.D	Perpetual-Discount	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.49 Evaluated at bid price : 24.92 Bid-YTW : 4.95 %
ENB.PR.T	FixedReset	1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.58 Evaluated at bid price : 23.50 Bid-YTW : 4.15 %
ENB.PF.A	FixedReset	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.03 Evaluated at bid price : 24.60 Bid-YTW : 4.15 %
MFC.PR.F	FixedReset	2.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 4.37 %
FTS.PR.J	Perpetual-Discount	2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.35 Evaluated at bid price : 24.77 Bid-YTW : 4.82 %
TRP.PR.C	FixedReset	2.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 3.49 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.P	FixedReset	100,450	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.13 Evaluated at bid price : 24.93 Bid-YTW : 3.57 %
FTS.PR.J	Perpetual-Discount	41,518	ITG (who?) bought blocks of 19,400 and 19,100 from Nesbitt, both at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.35 Evaluated at bid price : 24.77 Bid-YTW : 4.82 %
TRP.PR.F	FloatingReset	37,025	Newly exchanged from TRP.PR.A. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.00 Evaluated at bid price : 22.26 Bid-YTW : 3.11 %
MFC.PR.L	FixedReset	32,700	Nesbitt crossed 31,700 at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.46 %
TD.PF.C	FixedReset	32,025	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.14 Evaluated at bid price : 24.95 Bid-YTW : 3.57 %
ENB.PF.E	FixedReset	13,700	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.98 Evaluated at bid price : 24.56 Bid-YTW : 4.16 %
There were 0 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PVS.PR.C	SplitShare	Quote: 25.65 – 30.00 Spot Rate : 4.3500 Average : 2.3280 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 4.04 %
PWF.PR.A	Floater	Quote: 19.01 – 20.00 Spot Rate : 0.9900 Average : 0.7269 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 2.78 %
BAM.PR.N	Perpetual-Discount	Quote: 21.43 – 22.02 Spot Rate : 0.5900 Average : 0.4210 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 21.43 Evaluated at bid price : 21.43 Bid-YTW : 5.58 %
TRP.PR.E	FixedReset	Quote: 25.21 – 25.74 Spot Rate : 0.5300 Average : 0.4173 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.24 Evaluated at bid price : 25.21 Bid-YTW : 3.69 %
CU.PR.C	FixedReset	Quote: 25.87 – 26.60 Spot Rate : 0.7300 Average : 0.6227 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 2.66 %
ENB.PR.Y	FixedReset	Quote: 22.46 – 22.82 Spot Rate : 0.3600 Average : 0.2564 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 21.97 Evaluated at bid price : 22.46 Bid-YTW : 4.27 %