Category: Market Action

Assiduous Reader DR alerts me to the Financial Post’s Barry Critchley’s attempt to whip up more hysteria regarding the so-called evils of so-called High Frequency Trading:

At best it may be unintentional consequences. At worst it may be an attempt to encourage high frequency trading in the preferred share market – all of which acts to the detriment of retail investors.

Diane Stibbard and Keith Honeyborne are two retail investors who make part of their living by buying, owning and selling preferred shares – and have concerns about how trades, especially at the market open, occur in that market.
…
Stibbard, an experienced investor, details the means by which the HFTs queue jump. That process starts with a market order from a retail investor – meaning the buyer or seller doesn’t specify a price – that in turn elicits a response from more sophisticated retail investors. The latter group then puts in a limit order that is inside (or between) the bid and ask of the market order. In turn, other more sophisticated retail investors follow which reduces the bid/ask spread.

Then the HFTs pounce. “At approximately one second before the open, a HFT will enter a market order on the ask side for a number of shares slightly lower than the market bid quantity, which because of your [TMX] Rule 4-701, will enable it to queue jump ahead of the prior limit orders,” said Stibbard.

The result of this last-second involvement, Stibbard says, is that at the market open, “the limit price of the lowest ask is used as the clearing price. As a result, the orders of the selling retail investors become the stalking horse for the HFT but that price-setting investor’s order will never be filled.”

At the heart of the matter is Rule 4-701:

Rule 4-701 Execution of Trades at the Opening

(1) Subject to Rule 4-702, securities shall open for trading at the opening time, and any opening trades shall be at the calculated opening price.

Amended (February 24, 2012)

(2) The following orders shall be completely filled at the opening:
(a) market orders and better-priced limit orders; and

(b) MBF orders.

(c) Repealed (October 15, 2012)

(d) Repealed (October 15, 2012)

Amended (October 15, 2012)

(3) The following orders are eligible to participate in the opening but are not guaranteed to be filled:
(a) Repealed (August 7, 2001)

(b) limit orders at the opening price.

(c) Repealed (October 15, 2012)

Amended (October 15, 2012)

(4) Unless otherwise provided, trades shall be allocated among orders at the opening price in the following manner and sequence:
(a) trades shall be allocated to orders guaranteed a fill pursuant to Rule 4-701(2) then;

(b) all possible crosses shall be executed; then

(c) Repealed (August 7, 2001)

(d) to limit orders at the opening price according to time priority.

(5) Repealed (August 7, 2001)

(6) Repealed (August 7, 2001)

(7) Orders at the opening price that are not completely filled at the opening shall remain in the Book, at the opening price.

So my reaction is, in short: Boo-hoo-fucken-hoo.

It is a pity that Critchley did not see fit to publish the “three-page letter” that Stibbard wrote to the Exchange, or to suggest improvements in the rule, but let’s look at the situation more closely.

Firstly, the strategy at issue starts with somebody entering a market order for delayed-execution in a size that is large relative to the usual or expected opening trades (which we may assume, in this market, is a very small number!). Or, to put it bluntly, we need to start the process with a moron.

Stibbard and Honeyborne like to make a little money fleecing morons – nothing wrong with that, that’s why God created morons. So, fine: they take the opposite side of the market with a limit order inside the other limit orders that are in the book at that point – which, no doubt, will fuel a column next week dealing with the complaints of those poor souls who entered their limit orders at 9:15, who are being victimized by predatory trading by the current complainants, who are not-quite-high-but-gee-whiz-pretty-often-you-know frequency traders.

Remember the old adage?

Big fleas have little fleas
On their backs to bite ’em
And them fleas got smaller fleas
And so ad infinitum.

So the predatory Stibbard and Honeyborne are having their lunch eaten by more predatory predators. And so they complain that the rules are unfair, that there should be special rules that will allow them to compete with the big boys, even though they’re conducting their predatory trading by typing orders manually on their ten-bucks-a-throw discount brokers’ screens. Which, boys and girls, is the whole story of the HFT controversy in a nutshell.

Still, it would be interesting to learn just what they propose as a solution. Eliminate the priority of market orders over limit orders? Have a black-out period before the opening, during which market orders will be refused? Criminalize the possession and use of better algorithms and hardware than what they have? Maybe the Exchange should simply deposit money directly into their bank account?

It will also be noted that there is no reason to believe that the fiercer predators are, in fact, HFT. I don’t think HFT will be much interested in the preferred share market, where 40,000 shares in a day will get you on the PrefBlog volume highlights; and besides, I don’t think any preferred share issues are qualified for maker-taker exchange fees, which is a big chunk of HFT profits; and anyway, I don’t know how maker-taker pricing applies to a collision of market orders at the opening and am too lazy to look it up. It’s more likely a prop trader or market-maker at a brokerage, who can get away with using yesterday’s technology because the competition is using last week’s. There is a strong possibility, as discussed below, that it isn’t a professional at all, that it’s just another retail trader committing the unpardonable sin of using a brokerage that isn’t bank-owned, one that offers order types that the Powers That Be have deemed too complex for stupid Canadians. How awful of him!

How would I attempt to compete in this kind of big boy’s game? Interactive Brokers offers iceberg orders, which:

provides a way to submit large volume orders to the market in increments while publicly displaying only a specified portion of the total order size.

These are supported for entry on the Toronto Exchange. And on the Toronto Exchange:

10. How will Icebergs be treated at the opening?

The total volume of an Iceberg order will be included in the calculation of the Calculated Opening Price (COP). If an Iceberg order is a Better Priced Limit order (BPL) or a MKT order, the disclosed volume is guaranteed a fill at the Opening. The reserve volume is not guaranteed to be filled, but will be treated as a Participatory Order for the opening rotation. Any remaining reserve volume will be re-priced at the COP.

So say there’s a market buy order coming in for 5,000 shares. And, say, by looking at the Level 2 book at 9:28 am, you figure the opening price is going to be 24.95, and you’d love to sell a bunch at anywhere north of 24.90.

Well, what you do is you enter your order to sell a bunch at 24.93, but display only 100 shares. So the sharpie with the market order, ignoring your order because it’s so small, figures he’s going to be filled at 24.95, but he’s only going to get 24.93. He’ll still get filled before you do, but the uncertainty is going to make the deal a little less attractive for him.

[To be frank, I’m not completely sure that this will work as planned. I’m not sure precisely what information is visible to clients in the pre-opening. Better check carefully before entering your order!]

And, as a side-benefit, the moron with the initial market order will get a better price, which is the whole point of the rules in the first place. It will be noted that the moron with the initial market order will never, ever get a worse price in the presence of the so-called predatory order than he will in its absence, and will probably get a better one (although you can make an argument that enough of this so-called predation will discourage the entry of limit orders before the open. Let’s see some figures on that first, though). It will also be noted that this entire dispute concerns traders and has nothing to do with investing which are two very different games. As I have often asserted in the past, market microstructure should be evaluated solely on the basis of how it affects investors – traders can look after themselves.

Another strategy, which will cost money but might be worth it in the end, is to create still more uncertainty by entering a market order for 300 shares at the last second. If this works, you might get an unfortunate fill if this small size tips the balance so that the opening is executed on the bid side rather than the ask … and the sharpie with his market order of 4,900 shares isn’t going to like that at all, perhaps to the extent he gives up his (rather simplistic) strategy. You could also do this at Interactive Brokers with their Good After Time order, which according to their example will give time increments down to 1-second. So presumably, you could put in this market order at 9:29:00, with a Good After Time of 9:29:59, although I’ve never tried it and don’t know if the IB system will actually do this. If it does, and if the “approximately one second before opening” estimate of Ms. Stibbard is correct, then there’s a decent chance that Stibbard and Honeyborne are being predated by somebody who’s only one notch up the food chain, not an apex predator. An apex predator would measure the interval between order placement and market opening in milliseconds, and not many of them either.

Note that Canadian banks’ discount brokerages do not – as far as I know – offer these useful order types to retail scum because … they don’t have to! Ha-ha! Suckers!

However, there is a third way to play this new game, and that’s to enter your own pre-emptive market order to sell. It’s 9:20, there’s a market buy order for 5,000 shares and you’ve got your limit sell order for 4,000 shares at 24.90, which you think will set the opening price. Maybe it’s an iceberg, maybe it’s not, whatever. But you’re afraid the competition is going to come in at 9:29, nine minutes from now, with a market order to sell 4,500 and scoop up all the profits. Fine. Get there first. Put it your own market sell order for 4,500 (in addition to your limit order). Now, if the enemy puts in his own market order, he’s going to tip the balance and the opening will be on the bid side, which would be horrible – so, you reason, he probably won’t do it. And hurray, you scoop the entire market buy!

It gets interesting, of course, if the enemy also reads PrefBlog and has been carefully watching the issue in question, because the pattern of orders will make it clear to him just what’s happening. ‘Oh, yeah, tough guy?’ he’ll think to himself, ‘You wanna play cute with me? Eat this!’ as he puts in a market sell for 4,500. And now it’s a fascinating Mexican stand-off, that is very well modelled as a Prisoner’s Dilemma game:

• If you both execute, you both lose a lot of money
• If one party cancels, he’s flat and the executing party makes a lot of money
• If you both cancel, you’re both flat, and somebody else grabs the moron’s cash

Note that there was such a thing as an anti-scooping rule so pro accounts couldn’t play this game after 9:28, but these rules have been repealed. Note also that I am not a trading specialist and rarely, if ever, trade at the opening. Or the close, for that matter. Plain vanilla trading works just fine for me.

In more traditional news, real estate prices rose faster than debt:

Statistics Canada’s quarterly national balance sheet report said household credit debt (consumer credit, mortgages and other loans) rose by 1.3 per cent in the quarter, outpacing the growth in disposable income. As a result, the ratio of credit debt to disposable income, a closely watched measure of the household debt burden, rose to 163.6 per cent, slightly below the record 164.1 per cent in the third quarter of 2013.

However, household net worth rose by 2.3 per cent in the second quarter, to a record $8.1-trillion (or $227,000 per person), driven primarily by a continued rise in real estate values. As a result, the ratio of household credit market debt to net worth – another measure of consumers’ capacity for debt – fell to 22.3 per cent from 22.5 per cent, the lowest level in six years.

The rise in household consumer credit came from all sources – mortgages, non-mortgage loans and consumer credit (primarily credit cards). Consumer credit rose 1.4 per cent in the quarter, its biggest increase since the 2012 third quarter. Mortgage debt rose 1.4 per cent, its biggest rise in three quarters.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 24bp, FixedResets down 21bp and DeemedRetractibles off 15bp. Volatility was average. Volume was low.

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	-0.5244 %	2,647.0
FixedFloater	4.14 %	3.40 %	25,692	18.56	1	0.0436 %	4,185.8
Floater	2.91 %	3.03 %	46,759	19.66	4	-0.5244 %	2,737.2
OpRet	4.05 %	0.22 %	93,077	0.08	1	-0.1578 %	2,727.1
SplitShare	4.28 %	3.73 %	111,959	3.93	5	-0.0036 %	3,155.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1578 %	2,493.7
Perpetual-Premium	5.46 %	0.43 %	71,673	0.09	20	-0.0530 %	2,440.0
Perpetual-Discount	5.23 %	5.14 %	106,577	15.19	16	-0.2382 %	2,608.5
FixedReset	4.26 %	3.81 %	181,959	6.58	74	-0.2101 %	2,559.5
Deemed-Retractible	5.00 %	1.87 %	103,420	0.20	42	-0.1509 %	2,564.9
FloatingReset	2.62 %	0.48 %	82,022	0.08	6	-0.1504 %	2,528.5

Performance Highlights
Issue	Index	Change	Notes
FTS.PR.J	Perpetual-Discount	-2.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 23.27 Evaluated at bid price : 23.61 Bid-YTW : 5.05 %
PWF.PR.A	Floater	-1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 2.57 %
IFC.PR.A	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 4.38 %
VNR.PR.A	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 3.91 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PF.E	FixedReset	111,630	Nesbitt crossed three blocks: 11,200 shares, 14,400 and 50,000, all at 25.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 23.14 Evaluated at bid price : 25.05 Bid-YTW : 4.29 %
TD.PF.A	FixedReset	61,430	Desjardins crossed 50,000 at 25.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 23.25 Evaluated at bid price : 25.30 Bid-YTW : 3.81 %
BNS.PR.Y	FixedReset	46,370	TD crossed 40,000 at 24.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.97 Bid-YTW : 3.51 %
RY.PR.D	Deemed-Retractible	38,953	RBC crossed 35,000 at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-24 Maturity Price : 25.25 Evaluated at bid price : 25.60 Bid-YTW : 1.87 %
CM.PR.O	FixedReset	36,300	RBC crossed 25,000 at 25.38. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 3.83 %
SLF.PR.D	Deemed-Retractible	32,207	RBC crossed 25,000 at 22.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.39 Bid-YTW : 5.81 %
There were 16 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
FTS.PR.J	Perpetual-Discount	Quote: 23.61 – 24.08 Spot Rate : 0.4700 Average : 0.3073 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 23.27 Evaluated at bid price : 23.61 Bid-YTW : 5.05 %
BAM.PR.X	FixedReset	Quote: 22.16 – 22.45 Spot Rate : 0.2900 Average : 0.1968 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 21.89 Evaluated at bid price : 22.16 Bid-YTW : 4.10 %
BNS.PR.R	FixedReset	Quote: 25.72 – 25.95 Spot Rate : 0.2300 Average : 0.1382 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-26 Maturity Price : 25.00 Evaluated at bid price : 25.72 Bid-YTW : 3.24 %
RY.PR.B	Deemed-Retractible	Quote: 25.50 – 25.70 Spot Rate : 0.2000 Average : 0.1285 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-12 Maturity Price : 25.25 Evaluated at bid price : 25.50 Bid-YTW : -4.37 %
ELF.PR.G	Perpetual-Discount	Quote: 22.18 – 22.36 Spot Rate : 0.1800 Average : 0.1129 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 21.83 Evaluated at bid price : 22.18 Bid-YTW : 5.42 %
PWF.PR.A	Floater	Quote: 20.50 – 20.86 Spot Rate : 0.3600 Average : 0.2945 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-12 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 2.57 %

The loonie got hit today:

The Canadian dollar fell to the lowest level in five months as crude oil, the nation’s largest export, traded at almost its lowest point in more than a year.

The currency weakened against all its 16 major peers after a report showed home prices were unchanged in July, the second indicator this week to suggest the housing market is fading as a driver of economic growth. The Bank of Canada said last week it is waiting for strong-enough exports to take the burden of economic growth from over-indebted consumers, prompting speculation it would lag behind the U.S. Federal Reserve raising interest rates.
…
The loonie, as the Canadian dollar is called for the image of the aquatic bird on the C$1 coin, fell 0.9 percent to C$1.1035 per U.S. dollar at 5 a.m. in Toronto. It reached C$1.1059, the weakest since April 1. One loonie buys 90.62 U.S. cents.

Crude oil fell as much as 1.4 percent to $90.43 per barrel in New York, the lowest since May 2013, before trading at $93.14, according to data compiled by Bloomberg.

BMO NVCC-compliant sub-debt got a provisional rating of A(low) from DBRS:

DBRS has today assigned a provisional rating of A (low) with a Stable trend to the Bank of Montreal’s (the Bank or BMO) Series H Medium Term-Notes (Subordinated Indebtedness) (NVCC Sub Debt Series H or Series H).

DBRS assigned the NVCC Sub Debt Series H a rating equal to the Bank’s intrinsic assessment, less three rating notches, because Series H has only the Office of the Superintendent of Financial Institutions (OSFI)-required non-viable contingent capital (NVCC) triggers and no additional triggers. Furthermore, in the event of a conversion to common shares, NVCC Sub Debt Series H has a potential for recovery which is sufficiently better than BMO’s existing NVCC Preferred Shares to allow for a differentiation in the Series H rating relative to the NVCC Preferred Shares rating. Please see the DBRS press release entitled “DBRS Provides Guidance on Canadian Bank Non-Viability Contingent Capital Ratings” dated January 10, 2014, for more details.

Those with good memories will remember the rating on the BMO NVCC-compliant preferreds:

DBRS has today provisionally rated Bank of Montreal’s (the Bank) Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 27 (NVCC Preferred Shares Series 27 or Series 27) at Pfd-2 with a Stable trend.

DBRS assigned the NVCC Preferred Shares Series 27 a rating equal to the Bank’s intrinsic assessment less four rating notches because the Series 27 has only an Office of the Superintendent of Financial Institutions (OSFI)-compliant non-viable contingent capital (NVCC) trigger, which is consistent with the OSFI requirements for NVCC instruments, and no additional triggers.

The relative recovery hopes of sub-debt and preferreds were discussed in the posts Royal Bank Issues NVCC-Compliant Sub-Debt and Feds Consulting on Bank Recapitalization Regime.

CU Inc., proud issuer of CIU.PR.A and CIU.PR.C, was confirmed at Pfd-2(high) by DBRS:

DBRS has today confirmed the Issuer Rating, Unsecured Debentures & Medium-Term Notes, Commercial Paper and Cumulative Preferred Shares of CU Inc. (CUI or the Company) at A (high), A (high), R-1 (low) and Pfd-2 (high), respectively. All trends are Stable, reflecting that CUI is on track to complete its heavy capital spending for the 2012 to 2016 period. The rating assumes further weakness in the debt-to-cash flow ratio over the next two years because of the elevated level of capital expenditures (capex), but this ratio is not expected to materially deviate from the current rating category while other key metrics, including the debt-to-capital and interest coverage ratios, may also weaken but will remain within the acceptable range.

CUI’s business risk profile is expected to benefit from the approximately $9.8 billion of capex spent over the 2012 to 2016 period, strengthening the Company’s internally generated cash flow capability. Once completed, the Company’s rate base will be double that of 2011 levels.
…
CUI’s financial risk profile has weakened because of the significant level of capex over the past few years. This has led to deterioration in the Company’s debt-to-capital and cash flow-to-debt ratios, which are expected to be pressured further in 2015. This temporary weakness in CUI’s key metrics is not, however, expected to negatively affect the Company’s current ratings. Following the completion of the transmission build-out in 2016, CUI will benefit from a higher rate base and its key financial ratios should recover to historical levels consistent with the current rating category. The large capex spent on transmission infrastructure is also considered to be a low-risk investment as it will provide stable returns once in service. For the remaining duration of the transmission build-out period, CUI is expected to finance its capex largely through debt issuances, along with continued support from its parent, Canadian Utilities Limited (rated “A” by DBRS), through timely equity injections and lower dividend payout requirements. Although this will likely result in a higher debt-to-capital ratio, the Company is committed to maintaining its leverage at approximately 60% to be in line with its regulatory capital structures and to still be commensurate with the “A” rating range. DBRS also expects the Company’s cash flow-to-debt ratio to remain above 10% during the transmission build-out period.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 30bp, FixedResets up 13bp and DeemedRetractibles gaining 10bp. Volatility was good, comprised entirely of winners and everything except the Floater was issued by BAM. Did people forget that BAM went ex-dividend today? Volume was very low, but notable for a heavy presence of ENB issues in the highlights, presumably due to the new issue announcement.

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	0.7658 %	2,660.9
FixedFloater	4.15 %	3.40 %	26,018	18.56	1	0.0000 %	4,183.9
Floater	2.90 %	3.04 %	45,384	19.64	4	0.7658 %	2,751.6
OpRet	4.04 %	-1.83 %	96,820	0.08	1	0.1580 %	2,731.4
SplitShare	4.28 %	3.82 %	113,393	3.93	5	0.0874 %	3,155.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1580 %	2,497.6
Perpetual-Premium	5.46 %	0.42 %	83,638	0.09	20	0.1729 %	2,441.3
Perpetual-Discount	5.22 %	5.11 %	106,214	15.24	16	0.2951 %	2,614.8
FixedReset	4.25 %	3.74 %	179,672	6.61	74	0.1284 %	2,564.9
Deemed-Retractible	4.99 %	0.60 %	99,809	0.20	42	0.1046 %	2,568.8
FloatingReset	2.62 %	-1.43 %	83,043	0.08	6	0.1178 %	2,532.3

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.N	Perpetual-Discount	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 21.55 Evaluated at bid price : 21.55 Bid-YTW : 5.53 %
BAM.PF.D	Perpetual-Discount	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 21.84 Evaluated at bid price : 22.16 Bid-YTW : 5.53 %
BAM.PF.E	FixedReset	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.16 Evaluated at bid price : 25.09 Bid-YTW : 4.08 %
BAM.PR.M	Perpetual-Discount	1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 21.60 Evaluated at bid price : 21.60 Bid-YTW : 5.52 %
PWF.PR.A	Floater	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 20.86 Evaluated at bid price : 20.86 Bid-YTW : 2.53 %

Volume Highlights
Issue	Index	Shares Traded	Notes
ENB.PF.E	FixedReset	84,700	RBC crossed 50,000 at 25.00; Scotia crossed 80,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.13 Evaluated at bid price : 25.02 Bid-YTW : 4.23 %
BMO.PR.J	Deemed-Retractible	52,376	RBC crossed 50,000 at 25.79. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-11 Maturity Price : 25.50 Evaluated at bid price : 25.75 Bid-YTW : -4.92 %
MFC.PR.M	FixedReset	52,255	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.08 Bid-YTW : 3.91 %
ENB.PF.A	FixedReset	50,100	Scotia crossed 37,000 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.16 Evaluated at bid price : 25.05 Bid-YTW : 4.19 %
ENB.PF.C	FixedReset	36,881	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.14 Evaluated at bid price : 25.03 Bid-YTW : 4.18 %
PWF.PR.S	Perpetual-Discount	34,654	RBC crossed 27,100 at 24.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.65 Evaluated at bid price : 24.01 Bid-YTW : 5.04 %
There were 14 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.G	FixedFloater	Quote: 22.91 – 23.07 Spot Rate : 0.1600 Average : 0.1064 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 22.91 Evaluated at bid price : 22.91 Bid-YTW : 3.40 %
SLF.PR.I	FixedReset	Quote: 26.08 – 26.23 Spot Rate : 0.1500 Average : 0.1182 YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.08 Bid-YTW : 2.23 %
FTS.PR.H	FixedReset	Quote: 20.62 – 20.80 Spot Rate : 0.1800 Average : 0.1503 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 20.62 Evaluated at bid price : 20.62 Bid-YTW : 3.76 %
BNS.PR.B	FloatingReset	Quote: 25.56 – 25.66 Spot Rate : 0.1000 Average : 0.0764 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-11 Maturity Price : 25.50 Evaluated at bid price : 25.56 Bid-YTW : -2.84 %
BMO.PR.S	FixedReset	Quote: 25.30 – 25.38 Spot Rate : 0.0800 Average : 0.0579 YTW SCENARIO Maturity Type : Call Maturity Date : 2019-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 3.78 %
FTS.PR.F	Perpetual-Discount	Quote: 24.23 – 24.43 Spot Rate : 0.2000 Average : 0.1782 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.96 Evaluated at bid price : 24.23 Bid-YTW : 5.08 %

Low policy rates are causing everybody in the world to pile into real-estate. The UK response deals with income, not Loan-to-Value:

[Professional government mouthpiece Mark] Carney’s attempt to reassure consumers and businesses that the BOE benchmark will peak well below the 5 percent seen before the financial crisis has helped to hold down borrowing costs. Five-year gilts are yielding 1.76 percent today compared with 1.86 percent at the end of last year. Traders are betting the BOE will refrain from raising the 0.5 percent benchmark until June, Sonia contracts show.

Financial-stability officials have taken some action to prevent an unsustainable debt buildup, toughening affordability checks in April and then restricting the proportion of mortgages at 4.5 times income to no more than 15 percent of new home loans.

“They’ve picked out this 4.5 times loan-to-income multiple from thin air because it’s one of the few measures where you’re not through the previous peak substantially,” [Talisman Global Asset Management Ltd. Chief Investment Officer Julian] Sinclair said.

Meanwhile, in Canada:

Bank of Montreal has once again lowered its five-year fixed mortgage rate to 2.99 per cent, from 3.29 per cent, a move that could cause more downward pressure on rates at a time when they’re already defying expectations.

BMO’s rate is not the lowest in the market, but it is the lowest that’s currently available from the country’s biggest banks. BMO sparked a mortgage price war among the banks when it first introduced its 2.99 per cent five-year-fixed rate in early 2012. That rate also earned the bank a lecture from then-Finance Minister Jim Flaherty, who had been taking steps to curb growth in the housing market amid fears that a bubble could be forming. BMO has repeatedly brought the rate back since then, most recently this March.

Dog bites man? That’s not news. But man bites dog is news!

Apple Inc. will charge fees from banks every time consumers use their iPhone to make purchases, a move that will give the company a cut of the growing mobile payments market, Bloomberg reported, citing people with knowledge of the arrangement.

Apple unveiled a watch, two larger iPhones and the mobile payments service Apple Pay on Tuesday.

The new iPhones will come equipped with the payments service, which launches in the United States next month and allows users to pay for items in stores with their phones instead of physically presenting their credit or debit cards.

Under the deals struck individually with each bank, Apple will collect a fee for each transaction, the report said.

As far as consumers are concerned, of course, it just means yet another layer of fee-demanding middlemen. That part isn’t news at all.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts down 11bp, FixedResets losing 15bp and DeemedRetractibles off 3bp. Volatility was average, but comprised entirely of FixedReset losers. Volume was low, but the highlights consist entirely of FixedResets.

PerpetualDiscounts now yield 5.13%, equivalent to 6.67% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.25%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 240bp, a significant narrowing from the 250bp reported September 3.

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	0.1108 %	2,640.7
FixedFloater	4.15 %	3.40 %	25,962	18.57	1	0.2626 %	4,183.9
Floater	2.90 %	3.07 %	45,069	19.47	4	0.1108 %	2,730.7
OpRet	4.05 %	-0.05 %	98,060	0.08	1	-0.0395 %	2,727.1
SplitShare	4.28 %	3.81 %	114,773	3.93	5	-0.0317 %	3,152.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0395 %	2,493.7
Perpetual-Premium	5.47 %	0.41 %	74,819	0.09	20	-0.0746 %	2,437.1
Perpetual-Discount	5.22 %	5.13 %	110,342	15.21	16	-0.1122 %	2,607.1
FixedReset	4.25 %	3.74 %	182,443	8.40	74	-0.1453 %	2,561.6
Deemed-Retractible	5.00 %	1.85 %	100,163	0.21	42	-0.0275 %	2,566.1
FloatingReset	2.62 %	1.92 %	80,212	0.16	6	-0.1438 %	2,529.4

Performance Highlights
Issue	Index	Change	Notes
VNR.PR.A	FixedReset	-1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.38 Evaluated at bid price : 25.04 Bid-YTW : 4.35 %
CIU.PR.C	FixedReset	-1.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 20.42 Evaluated at bid price : 20.42 Bid-YTW : 3.73 %
TRP.PR.A	FixedReset	-1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 21.86 Evaluated at bid price : 22.34 Bid-YTW : 3.93 %
TRP.PR.E	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.26 Evaluated at bid price : 25.35 Bid-YTW : 3.87 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.S	FixedReset	147,403	TD crossed two blocks of 10,000 each, both at 25.60. RBC crossed two blocks of 24,200 and 25,000 at 25.60 and another block of 60,000 at 25.64. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-05-15 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 3.61 %
TD.PF.B	FixedReset	108,747	RBC bought 10,000 from Scotia at 25.12 and crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.20 Evaluated at bid price : 25.10 Bid-YTW : 3.74 %
TRP.PR.D	FixedReset	65,592	RBC crossed 25,000 at 25.35; TD crossed 26,300 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.27 Evaluated at bid price : 25.25 Bid-YTW : 3.85 %
MFC.PR.E	FixedReset	61,921	Called for redemption September 19. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-19 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 4.73 %
ENB.PF.E	FixedReset	23,875	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.15 Evaluated at bid price : 25.08 Bid-YTW : 4.22 %
MFC.PR.M	FixedReset	23,150	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 3.92 %
There were 23 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
VNR.PR.A	FixedReset	Quote: 25.04 – 25.49 Spot Rate : 0.4500 Average : 0.2836 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.38 Evaluated at bid price : 25.04 Bid-YTW : 4.35 %
CIU.PR.C	FixedReset	Quote: 20.42 – 21.00 Spot Rate : 0.5800 Average : 0.4395 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 20.42 Evaluated at bid price : 20.42 Bid-YTW : 3.73 %
GWO.PR.M	Deemed-Retractible	Quote: 26.20 – 26.45 Spot Rate : 0.2500 Average : 0.1643 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.20 Bid-YTW : 3.67 %
TRP.PR.E	FixedReset	Quote: 25.35 – 25.60 Spot Rate : 0.2500 Average : 0.1647 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.26 Evaluated at bid price : 25.35 Bid-YTW : 3.87 %
FTS.PR.G	FixedReset	Quote: 24.51 – 24.75 Spot Rate : 0.2400 Average : 0.1708 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-10 Maturity Price : 23.07 Evaluated at bid price : 24.51 Bid-YTW : 3.75 %
POW.PR.G	Perpetual-Premium	Quote: 26.02 – 26.23 Spot Rate : 0.2100 Average : 0.1414 YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 26.02 Bid-YTW : 5.05 %

The Bank for International Settlements has released a paper by Sami Alpanda, Gino Cateau and Césaire Meh, all of the Bank of Canada, titled A policy model to analyze macroprudential regulations and monetary policy:

We construct a small-open-economy, New Keynesian dynamic stochastic general-equilibrium model with real-financial linkages to analyze the effects of financial shocks and macroprudential policies on the Canadian economy. Our model has four key features. First, it allows for non-trivial interactions between the balance sheets of households, firms and banks within a unified framework. Second, it incorporates a risk-taking channel by allowing the risk appetite of investors to depend on aggregate economic activity and funding conditions. Third, it incorporates long-term debt by allowing households and businesses to pay back their stock of debt over multiple periods. Fourth, it incorporates targeted and broader macroprudential instruments to analyze the interaction between macroprudential and monetary policy. The model also features nominal and real rigidities, and is calibrated to match dynamics in Canadian macroeconomic and financial data. We study the transmission of monetary policy and financial shocks in the model economy, and analyze the effectiveness of various policies in simultaneously achieving macroeconomic and financial stability. We find that, in terms of reducing household debt, more targeted tools such as loan-to-value regulations are the most effective and least costly, followed by bank capital regulations and monetary policy, respectively.

This conclusion is supported by:

Using our model, we …find that targeted policies such as LTV regulations are the most effective and least costly, followed by bank capital regulations and monetary policy, respectively. In particular, a 5 percentage point (pp) tightening in regulatory LTV decreases household debt by about 7.6 per cent at the peak, while its output impact is about 0.7 per cent. In contrast, a 1 pp increase in capital requirements reduces household debt by about 1.4 per cent and reduces output by about 0.35 per cent at the peak. Hence, an increase of about 2 pp in bank capital would have the same impact on output as a 5 pp reduction in LTV, but its impact on household debt would be about half of LTV at the peak. Similarly, a 100 basis point (bp) temporary increase in the policy rate reduces household debt by about 0.5 per cent at the peak, but this comes at an output cost of about 0.4 per cent, o¤ering an even worse trade-o¤ than capital requirements in terms of reducing household debt.

I’ll admit to being suspicious of this result, but without fully understanding and playing with the model I must also admit that I can’t explain why. I don’t like such finely targeted government policies, with some Pooh-Bah in Ottawa pronouncing on whether a citizen is permitted to buy a house or not. What if they get it wrong? They always do, eventually. Unaddressed in the paper is the effect of CMHC policies, which, in expanding the amount of mortgage insurance outstanding to a gargantuan extent, has thoroughly distorted the market, leading to today’s very high (although not necessarily excessive) debt levels and very high (although not necessarily excessive) housing prices.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 3bp, FixedResets off 7bp and DeemedRetractibles gaining 2bp. Volatility was average. Volume was low.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.1659 %	2,637.8
FixedFloater	4.16 %	3.41 %	25,134	18.55	1	-0.3923 %	4,173.0
Floater	2.91 %	3.07 %	45,746	19.48	4	-0.1659 %	2,727.7
OpRet	4.05 %	-0.67 %	97,938	0.08	1	0.0395 %	2,728.2
SplitShare	4.28 %	3.80 %	115,889	3.94	5	0.0521 %	3,153.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,494.6
Perpetual-Premium	5.46 %	0.41 %	74,441	0.09	20	0.1494 %	2,438.9
Perpetual-Discount	5.21 %	5.13 %	105,153	15.22	16	0.0321 %	2,610.0
FixedReset	4.24 %	3.71 %	181,617	8.40	74	-0.0666 %	2,565.3
Deemed-Retractible	5.00 %	1.45 %	99,717	0.15	42	0.0180 %	2,566.8
FloatingReset	2.62 %	0.00 %	74,741	0.08	6	-0.0653 %	2,533.0

Performance Highlights
Issue	Index	Change	Notes
FTS.PR.H	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-09 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 3.75 %
PWF.PR.A	Floater	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-09 Maturity Price : 20.52 Evaluated at bid price : 20.52 Bid-YTW : 2.57 %
IFC.PR.A	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.24 %
IGM.PR.B	Perpetual-Premium	1.29 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 26.00 Bid-YTW : 5.09 %
MFC.PR.F	FixedReset	1.64 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.89 Bid-YTW : 4.25 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.B	FixedReset	194,678	RBC crossed blocks of 49,600 and 50,000, both at 25.12. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-09 Maturity Price : 23.21 Evaluated at bid price : 25.11 Bid-YTW : 3.74 %
ENB.PF.A	FixedReset	44,113	RBC crossed 40,000 at 25.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-09 Maturity Price : 23.15 Evaluated at bid price : 25.02 Bid-YTW : 4.19 %
BAM.PR.P	FixedReset	39,868	Called for redemption September 30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.20 %
GWO.PR.S	Deemed-Retractible	36,400	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.53 Bid-YTW : 4.98 %
GWO.PR.N	FixedReset	31,160	CIBC crossed 18,000 at 21.77. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.70 Bid-YTW : 4.63 %
TRP.PR.B	FixedReset	27,332	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-09 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 3.70 %
There were 20 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: 24.00 – 24.28 Spot Rate : 0.2800 Average : 0.1802 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.24 %
PVS.PR.C	SplitShare	Quote: 25.81 – 26.90 Spot Rate : 1.0900 Average : 1.0096 YTW SCENARIO Maturity Type : Call Maturity Date : 2015-12-10 Maturity Price : 25.50 Evaluated at bid price : 25.81 Bid-YTW : 3.80 %
TD.PR.T	FloatingReset	Quote: 25.35 – 25.61 Spot Rate : 0.2600 Average : 0.1808 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 2.06 %
BAM.PR.X	FixedReset	Quote: 22.51 – 22.70 Spot Rate : 0.1900 Average : 0.1233 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-09 Maturity Price : 22.14 Evaluated at bid price : 22.51 Bid-YTW : 4.01 %
BAM.PR.M	Perpetual-Discount	Quote: 21.64 – 21.81 Spot Rate : 0.1700 Average : 0.1111 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-09 Maturity Price : 21.64 Evaluated at bid price : 21.64 Bid-YTW : 5.60 %
GWO.PR.N	FixedReset	Quote: 21.70 – 21.95 Spot Rate : 0.2500 Average : 0.1918 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.70 Bid-YTW : 4.63 %

There’s no smoking gun, but staff turnover may have played a role in the JPMorgan data breach:

As hackers pierced JPMorgan Chase & Co.’s (JPM) defenses in June, the bank’s cybersecurity chief was just getting acquainted with his employer and its sprawling technology infrastructure.

Greg Rattray, a former U.S. Air Force commander for information warfare, became JPMorgan’s head of information security that month after upheaval at the highest levels of the bank’s tech division. His predecessor, Anthony Belfiore, had resigned early this year to join at least five JPMorgan leaders at First Data Corp. In between, Anish Bhimani was acting security officer while holding at least one other tech role.
…
JPMorgan’s technology leaders began leaving after April 2013, when the bank’s co-chief operating officer, Frank Bisignano, 55, departed to become CEO of First Data, the Atlanta-based payment processor. He has known Dimon since the 1980s, serving as his longtime deputy. Bisignano’s last job at JPMorgan included a focus on technology and security.

He was joined a few months later by Guy Chiarello, JPMorgan’s chief information officer since 2007, who became First Data’s president. Chiarello is an industry veteran who was previously CIO at Morgan Stanley, where he spent more than two decades.

Tom Higgins, JPMorgan’s head of operational control in charge of physical and technology security, also joined First Data. So did Cindy Armine, JPMorgan’s compliance chief, and Christine Larsen, a JPMorgan executive vice president in charge of process improvement and enterprise-program management.

This is a guy I like:

[Founder of ThinkTank Learning Steven] Ma, a former hedge fund analyst, makes bets on student admissions the way a trader plays the commodities markets. Using 12 variables from a student’s profile—from grades and test scores to extracurricular activities and immigration status—Ma’s software crunches the odds of admission to a range of top-shelf colleges. His proprietary algorithm assigns varying weights to different parameters, derived from his analysis of the successes and failures of thousands of students he’s coached over the years. Ma’s algorithm, for example, predicts that a U.S.-born high school senior with a 3.8 GPA, an SAT score of 2,000 (out of 2,400), moderate leadership credentials, and 800 hours of extracurricular activities, has a 20.4 percent chance of admission to New York University and a 28.1 percent shot at the University of Southern California. Those odds determine the fee ThinkTank charges that student for its guaranteed consulting package: $25,931 to apply to NYU and $18,826 for USC.
…
College admissions officers and other educators scoff at Ma’s guarantees; they say no one can predict acceptances to elite colleges because grades and scores are only one part of the highly subjective process. Ma counters that anything can be quantified. His algorithm runs so-called inference calculations using the profile data from thousands of ThinkTank students who’ve already racked up acceptances and rejections from top schools. “With enough data,” he says, “nothing is subjective.”

It’s an interesting article; I find the current emphasis on extracurricular activities to be very strange. Who cares? Is there any reason to believe that they make you a better person, even supposing that being a good person should have any influence on university acceptance?

It is my belief that whatever might have been the case when precious little extracurricular activities were less pervasive, they now measure little more than willingness to jump through arbitrary hoops – and in many cases, “willingness” is a secondary matter, given that you need forty ‘community hours’ to graduate from high school. I think the emphasis on these things does more to breed hypocrisy and robotic obedience than good citizenship – and Mr. Ma’s systematic gaming of the system is a good illustration!

More regulations imply more games. Some consider this news:

Banks in the European Union that attempt to evade new bonus rules face a “coordinated policy response” from the bloc’s regulators.

Michel Barnier, the EU’s financial-services chief, called for action on the “politically very important matter” of lenders that have turned to so-called allowances to get around an EU ban on bonuses worth more than twice fixed pay.
…
Barclays Plc (BARC), HSBC Holdings Plc (HSBA), Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc are among banks that have introduced allowances in response to the bonus limit. Lenders have warned that the cap will harm their competitiveness and force them to increase fixed pay.

Allowances, also known as role-based pay, are a regularly adjustable part of employees’ pay packets. They are considered by the banks to be part of salary unaffected by the bonus cap.

Some consider enormous housing-related consumer debt to be a problem. Some don’t.:

Sweden’s Social Democrats are heading for a national election victory backed by housing plans that could dig the country deeper into debt.

Magdalena Andersson, the party’s economic spokeswoman and the likely finance minister if the Social Democrat-led opposition prevails in this month’s election, has proposed using state-owned bank SBAB to bring down mortgage rates, already at four-year lows, to make housing more affordable. Andersson, whose party would boost spending on healthcare and education as well as housing, also suggested relaxing some rules designed to stem the growth in household debt, which is at an all-time high.
…
The country’s housing shortage, a consequence of a growing population and strict regulations that stymie new construction, has caused prices to more than double since 2000. As home values have jumped, so has household borrowing. It increased 5.5 percent in July — the most in 34 months — driven by a 5.8 percent increase in mortgage borrowing, Statistics Sweden said Aug. 27. Swedish households with mortgages owe their creditors an average of almost four times their disposable income while the overall average debt load of Swedes is about 175 percent.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 4bp, FixedResets down 8bp and DeemedRetractibles off 3bp. Volatility was below average. Volume was extremely low.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.0967 %	2,642.2
FixedFloater	4.14 %	3.39 %	25,268	18.58	1	0.2622 %	4,189.4
Floater	2.90 %	3.07 %	47,642	19.47	4	-0.0967 %	2,732.2
OpRet	4.05 %	-0.32 %	97,880	0.08	1	0.0000 %	2,727.1
SplitShare	4.29 %	3.85 %	116,203	3.94	5	-0.0238 %	3,152.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,493.7
Perpetual-Premium	5.47 %	0.40 %	86,904	0.09	20	-0.0805 %	2,435.2
Perpetual-Discount	5.21 %	5.13 %	106,777	15.21	16	0.0401 %	2,609.2
FixedReset	4.24 %	3.71 %	181,956	6.62	74	-0.0780 %	2,567.1
Deemed-Retractible	5.00 %	1.30 %	103,410	0.14	42	-0.0323 %	2,566.3
FloatingReset	2.62 %	0.00 %	74,717	0.08	6	0.0719 %	2,534.7

Performance Highlights
Issue	Index	Change	Notes
IGM.PR.B	Perpetual-Premium	-1.91 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.67 Bid-YTW : 5.39 %
MFC.PR.F	FixedReset	-1.83 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.52 Bid-YTW : 4.44 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.E	FixedReset	241,461	Called for redemption September 19. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 4.86 %
BAM.PR.P	FixedReset	191,225	Called for redemption September 30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.13 %
MFC.PR.M	FixedReset	47,476	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.03 Bid-YTW : 3.95 %
SLF.PR.H	FixedReset	33,580	RBC crossed 19,100 at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 3.17 %
BMO.PR.T	FixedReset	20,940	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-08 Maturity Price : 23.25 Evaluated at bid price : 25.27 Bid-YTW : 3.74 %
BAM.PR.M	Perpetual-Discount	19,284	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-08 Maturity Price : 21.65 Evaluated at bid price : 21.65 Bid-YTW : 5.60 %
There were 12 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: 25.67 – 26.50 Spot Rate : 0.8300 Average : 0.5810 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.67 Bid-YTW : 5.39 %
PVS.PR.C	SplitShare	Quote: 25.78 – 26.90 Spot Rate : 1.1200 Average : 0.9214 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.78 Bid-YTW : 3.85 %
RY.PR.C	Deemed-Retractible	Quote: 25.62 – 25.99 Spot Rate : 0.3700 Average : 0.2353 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.25 Evaluated at bid price : 25.62 Bid-YTW : -1.48 %
MFC.PR.F	FixedReset	Quote: 22.52 – 22.80 Spot Rate : 0.2800 Average : 0.1761 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.52 Bid-YTW : 4.44 %
PWF.PR.A	Floater	Quote: 20.75 – 21.28 Spot Rate : 0.5300 Average : 0.4381 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-08 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 2.54 %
GWO.PR.L	Deemed-Retractible	Quote: 25.70 – 25.95 Spot Rate : 0.2500 Average : 0.1803 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.70 Bid-YTW : 4.93 %

US jobs numbers disappointed:

Payrolls climbed by 142,000 workers, less than the 230,000 median forecast of economists surveyed by Bloomberg and the smallest gain this year, data from the Labor Department showed today. The unemployment rate fell to 6.1 percent from 6.2 percent in July as people left the workforce.

… but it’s an ill wind that blows nobody any good:

U.S. stocks rose a fifth week, giving the Standard & Poor’s 500 Index (SPX) its longest rally this year, as investors speculated weaker jobs growth will prevent the Federal Reserve from raising rates sooner than anticipated.

European shares rallied for a fourth week after the region’s central bank boosted stimulus. Emerging-market equities advanced, led by Russia’s Micex Index, after Ukraine and rebels agreed to a cease-fire. Producers of consumer products led U.S. stocks higher, while energy shares sank as oil tumbled for the sixth time in seven weeks. Apple Inc. (AAPL) dropped the most since February after a competitor introduced new smartphones.

The S&P 500 rose 0.2 percent to a record 2,007.71, reversing losses on the final day after three straight declines. The Dow Jones Industrial Average (INDU) added 38.91 points, or 0.2 percent, to 17,137.36, ending the week less than one point from an all-time high.

Canadian numbers were even worse:

Employment in Canada’s private sector is at a standstill.

While monthly employment readings have seesawed through the year, one trend is clear: Private companies are in no mood to hire, having shed a record 111,800 jobs in August, according to Statistics Canada.

Month-to-month measures have been volatile but the longer-term view shows full-time and private positions have barely budged in a year, while eight in 10 new jobs have been part-time.
…
Private-sector hiring tumbled as the manufacturing, trade and professional services sectors cut jobs. The share of people working in manufacturing has ebbed to a record low this summer. The public sector added 14,000 jobs and self employment rose by 86,900, a record gain.

The outsized readings on private-sector losses and self-employment gains raised eyebrows. Bank of Nova Scotia economists Derek Holt and Dov Zigler called the numbers “very fishy” and advised clients to be “very careful” in drawing conclusions from the monthly data.

Skepticism over the data comes after the agency was forced to correct its July jobs numbers. That month saw a gain of 41,700 positions rather than the 200 jobs it had originally reported, a mistake attributed to an incomplete understanding of changes that occurred in the redesign of its survey.

The broader picture shows employment levels in the private sector “has been relatively flat since the fall of 2013,” Statistics Canada observed.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 15bp, FixedResets up 11bp and DeemedRetractibles gaining 3bp. Volatility was good, dominated by winning FixedResets. Volume was low.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.3603 %	2,644.7
FixedFloater	4.15 %	3.40 %	24,948	18.57	1	-0.0437 %	4,178.5
Floater	2.90 %	3.06 %	49,230	19.50	4	0.3603 %	2,734.9
OpRet	4.05 %	-0.73 %	96,539	0.08	1	-0.0790 %	2,727.1
SplitShare	4.28 %	3.89 %	120,421	3.95	5	0.0311 %	3,152.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0790 %	2,493.7
Perpetual-Premium	5.47 %	0.38 %	76,722	0.09	20	-0.0609 %	2,437.2
Perpetual-Discount	5.21 %	5.15 %	105,951	15.19	16	0.1527 %	2,608.1
FixedReset	4.24 %	3.69 %	180,462	6.63	74	0.1059 %	2,569.1
Deemed-Retractible	4.99 %	0.92 %	103,588	0.15	42	0.0332 %	2,567.1
FloatingReset	2.62 %	1.92 %	75,688	0.08	6	0.1703 %	2,532.8

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.A	Floater	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 2.54 %
TRP.PR.E	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 23.31 Evaluated at bid price : 25.50 Bid-YTW : 3.82 %
CIU.PR.C	FixedReset	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 20.83 Evaluated at bid price : 20.83 Bid-YTW : 3.63 %
MFC.PR.F	FixedReset	1.91 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.94 Bid-YTW : 4.20 %
BAM.PR.X	FixedReset	1.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 22.27 Evaluated at bid price : 22.70 Bid-YTW : 3.95 %
TD.PF.B	FixedReset	4.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 23.20 Evaluated at bid price : 25.10 Bid-YTW : 3.72 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.Q	FixedReset	106,214	Nesbitt crossed 100,000 at 24.75. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.73 Bid-YTW : 3.25 %
TD.PF.B	FixedReset	43,004	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 23.20 Evaluated at bid price : 25.10 Bid-YTW : 3.72 %
IFC.PR.A	FixedReset	29,850	Nesbitt crossed 11,100 at 24.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 4.13 %
BMO.PR.W	FixedReset	25,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 23.17 Evaluated at bid price : 25.06 Bid-YTW : 3.69 %
BAM.PR.P	FixedReset	25,189	Called for redemption September 30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 2.93 %
ENB.PF.E	FixedReset	24,833	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 23.16 Evaluated at bid price : 25.12 Bid-YTW : 4.19 %
There were 15 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: 25.74 – 26.74 Spot Rate : 1.0000 Average : 0.7037 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 25.74 Bid-YTW : 3.89 %
VNR.PR.A	FixedReset	Quote: 25.62 – 25.89 Spot Rate : 0.2700 Average : 0.1862 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.62 Bid-YTW : 3.73 %
ENB.PF.A	FixedReset	Quote: 24.85 – 25.06 Spot Rate : 0.2100 Average : 0.1322 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-05 Maturity Price : 23.10 Evaluated at bid price : 24.85 Bid-YTW : 4.21 %
SLF.PR.G	FixedReset	Quote: 22.46 – 22.67 Spot Rate : 0.2100 Average : 0.1401 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.46 Bid-YTW : 4.29 %
MFC.PR.B	Deemed-Retractible	Quote: 23.20 – 23.44 Spot Rate : 0.2400 Average : 0.1711 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.20 Bid-YTW : 5.58 %
GWO.PR.S	Deemed-Retractible	Quote: 25.26 – 25.58 Spot Rate : 0.3200 Average : 0.2541 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 5.11 %

Interesting article in the Globe about global real estate flows:

In June, Citigroup Inc. paid a record HK$5.4-billion ($697-million) for a Hong Kong office tower that will bring most of its 5,000 employees under one roof. Canada’s Manulife Financial Corp. last year paid HK$4.5-billion for a similar-size tower and development in the city’s Kowloon district.

“Canadians are buying everywhere,” said Ross Moore, director of Canada research at CBRE Group Inc., the biggest commercial broker. “They are shopping the world. What’s happened in the last five to 10 years is the big pension funds pretty well own everything of quality in Canada. They love real estate and have all this money coming in and they have to put it somewhere.”

Toronto-based Brookfield Asset Management Inc. has started investing in European warehouse properties and Indian offices after accumulating the biggest holdings of office buildings in both the U.S. and Canada. The real estate unit of Ontario Teachers’ Pension Plan has been investing in Brazil as well as the U.K. and Australia. Canadian Pension Plan Investment Board has bought London residential, retail and office properties.

Europe’s trying everything to stimulate:

The European Central Bank cut interest rates and will start buying assets, in a bid to boost the flow of funding for the euro-area economy while stopping short of broad-based quantitative easing.

ECB President Mario Draghi’s plan to buy asset-backed securities and covered bonds pushed the euro below $1.30 for the first time since July 2013 as he said the inflation outlook had worsened. Germany’s Jens Weidmann opposed the rate cut and ABS plan, according to two officials.

The ECB “will purchase a broad portfolio of simple and transparent securities,” Draghi said at a press conference in Frankfurt today. “Some of our council were in favor of doing more than presented.”
…
The European Commission is considering allowing banks to hold a wider range of asset-backed securities to meet liquidity requirements than foreseen by global regulators, according to an EU document obtained by Bloomberg News. Banks will be allowed to use securitizations backed by assets from car loans to small business and consumer debt under the EU rule, whereas the Basel Committee on Banking Supervision sought to limit securitizations to those backed by residential mortgage debt.

… and contagion is important:

Draghi’s stimulus is helping keep a lid on borrowing costs in the U.S. even as the growth outlook continues to improve. The nation’s joblessness fell to 6.2 percent in July from 6.7 percent in December, yet yields on the benchmark 10-year Treasury note have also tumbled from 3.03 percent at year-end. The securities yielded 2.45 percent at 10:59 a.m. in New York, up 0.05 percentage point from yesterday.

Instead of girding for rising interest rates as the economy strengthens, investors have been pouring cash into long-dated U.S. debt.

They’ve funneled $3.9 billion into BlackRock Inc. (BLK)’s iShares 7-10 Year Treasury Bond exchange-traded fund this year, the most among U.S. fixed income ETFs, Bloomberg data show. The fourth-biggest winner has been the iShares 20+ Year Treasury Bond ETF (TLT), with $1.7 billion of deposits.

Analysts keep cutting their predictions for how much borrowing costs will rise, too. They now forecast a 2.89 percent yield on the 10-year Treasury note at year-end, down from a July call of 3 percent, according to a Bloomberg survey.

Today’s mail brought me a wonderful book, Contingent Convertibles [CoCos], by George M. von Furstenberg. I’ve only skimmed it, but it does include a phrase that most of us will have hoped was obvious:

A [Conversion Price] should be part of the cocos covenant so that the number of common shares issued at conversion is known already from the time the cocos are initially offered.

Sadly, that ain’t how they’ll work in Canada.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 14bp, FixedResets down 10bp and DeemedRetractibles off 6bp. Volatility was high. Volume was low.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.1107 %	2,635.2
FixedFloater	4.15 %	3.40 %	25,775	18.57	1	0.0437 %	4,180.3
Floater	2.91 %	3.07 %	51,057	19.48	4	-0.1107 %	2,725.0
OpRet	4.05 %	-1.82 %	97,510	0.08	1	0.1186 %	2,729.3
SplitShare	4.29 %	3.93 %	118,197	3.95	5	-0.2035 %	3,151.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1186 %	2,495.6
Perpetual-Premium	5.46 %	0.13 %	79,676	0.08	20	-0.0177 %	2,438.7
Perpetual-Discount	5.22 %	5.15 %	109,891	15.19	16	-0.1391 %	2,604.2
FixedReset	4.24 %	3.69 %	181,601	6.55	74	-0.0998 %	2,566.3
Deemed-Retractible	5.00 %	1.18 %	107,333	0.16	42	-0.0550 %	2,566.3
FloatingReset	2.62 %	2.00 %	78,653	3.77	6	0.1705 %	2,528.5

Performance Highlights
Issue	Index	Change	Notes
TD.PF.B	FixedReset	-4.22 %	There’s a bid at 25.01 on the consolidated tape, but no bid, not even one, as of the “last” quote on the Toronto Exchange tape. There may have been a closing bid, but the Exchange refuses to sell closing quotes. Rather than “zero”, HIMIPref™ has substituted a bid one dollar below the ask. I thought the TMX was supposed to have market makers! This is just more idiocy brought to you by the morons in charge of the TMX. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.81 Evaluated at bid price : 24.05 Bid-YTW : 3.94 %
TRP.PR.E	FixedReset	-1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 23.22 Evaluated at bid price : 25.21 Bid-YTW : 3.88 %
FTS.PR.F	Perpetual-Discount	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 24.06 Evaluated at bid price : 24.33 Bid-YTW : 5.05 %
GWO.PR.S	Deemed-Retractible	-1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.09 %
BAM.PR.R	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 23.84 Evaluated at bid price : 25.61 Bid-YTW : 3.87 %
TRP.PR.C	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.27 Evaluated at bid price : 22.66 Bid-YTW : 3.54 %
VNR.PR.A	FixedReset	1.17 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 3.39 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.O	Deemed-Retractible	152,443	TD crossed 149,900 at 25.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.24 Bid-YTW : 1.67 %
BAM.PR.P	FixedReset	83,006	Called for redemption September 30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 2.88 %
TRP.PR.D	FixedReset	57,835	RBC crossed 49,900 at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 3.81 %
MFC.PR.M	FixedReset	34,025	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.92 %
TD.PF.B	FixedReset	30,867	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.81 Evaluated at bid price : 24.05 Bid-YTW : 3.94 %
TRP.PR.A	FixedReset	29,377	Nesbitt crossed 25,000 at 23.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.22 Evaluated at bid price : 22.93 Bid-YTW : 3.78 %
There were 24 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PF.B	FixedReset	Quote: 24.05 – 25.05 Spot Rate : 1.0000 Average : 0.5582 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.81 Evaluated at bid price : 24.05 Bid-YTW : 3.94 %
TD.PR.S	FixedReset	Quote: 25.50 – 25.92 Spot Rate : 0.4200 Average : 0.2432 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 2.92 %
TRP.PR.E	FixedReset	Quote: 25.21 – 25.60 Spot Rate : 0.3900 Average : 0.2393 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 23.22 Evaluated at bid price : 25.21 Bid-YTW : 3.88 %
IAG.PR.A	Deemed-Retractible	Quote: 23.00 – 23.30 Spot Rate : 0.3000 Average : 0.1959 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 5.62 %
BAM.PR.R	FixedReset	Quote: 25.61 – 25.88 Spot Rate : 0.2700 Average : 0.1685 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 23.84 Evaluated at bid price : 25.61 Bid-YTW : 3.87 %
GWO.PR.S	Deemed-Retractible	Quote: 25.30 – 25.58 Spot Rate : 0.2800 Average : 0.1819 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.09 %

The CPPIB is spending more on outside managers:

Five years ago, the investment arm of the Canada Pension Plan had total costs of $665-million, according to a new report from the Fraser Institute. In the CPPIB’s most recent fiscal year, overhead had ballooned to $1.4-billion.

To be sure, part of that increase reflected the swelling size of the fund, which is constantly taking in new money, thanks to pension contributions from millions of Canadian workers. But even against the backdrop of its surging assets, the CPPIB is not showing any tendency to rein in its spending. Its costs amounted to 0.58 per cent of its assets back in 2008-09; in the most recent fiscal year, they stood at 0.84 per cent.
…
The fund likes to focus attention on its relatively modest operating expenses. A more realistic accounting, though, has to encompass other costs, such as hiring external investment managers and the expenses involved in actually implementing the fund’s strategies.

Those costs are now nearly twice as large as the fund’s operating expenses, according to the report’s authors, Philip Cross and Joel Emes. Much of the additional outlay reflects payments to external money managers, which have soared from $25-million six years ago to $782-million last year.

The Fraser Institute’s news release links to the study, titled Accounting for the True Cost of the Canada Pension Plan, which notes that the CPPIB’s assets under management are about $183-billion.

The CPPIB is making a horrible mistake in going to outside managers. Assiduous Readers will remember that I believe that it is possible to outperform benchmarks – any benchmark – over the long term, and that the reason for this is that most investors – including most professionals – are idiots. At least when it comes to actual investing, they’re idiots. They’re really, really good at sales!

In order to outperform, you need a dedicated staff and this staff has to be completely focussed on the nitty-gritty of investment analysis. The organization must have no sales exposure at all if it is to be successfule – which means that the organization must run its own money and only its own money. This necessarily means that consistent outperformance is restricted to organizations with huge amounts of assets, but that’s life. The moronic proposals for an Ontario superfund (discussed on April 21, 2009 and elsewhere on PrefBlog) will lead to a change of culture in the superfund management, from a culture of returns, returns returns! to a culture of clients, clients clients! which are polar opposites with respect to the personalities of the individuals concerned and with respect to the effect on investment performance.

CalPERS is run on the hub and spoke model. Its performance is a disaster. The UofT retirement fund is hub-and-spoke – and it’s a disaster. When you run an investment organization according this model, you are paying for salesmen to have lunch with each other. We are going to pay dearly for the CPPIB’s increasing appetite for good investment stories.

CU Inc. issued long paper today:

CU Inc. announced today that it will issue $1,000,000,000 of 4.085% Debentures maturing on September 2, 2044, at a price of $100.00 to yield 4.085%. This issue was sold by RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., TD Securities Inc., Scotia Capital Inc. and CIBC World Markets Inc. Proceeds from the issue will be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.

The company has a PerpetualDiscount outstanding, CIU.PR.A, which has a 4.60% coupon and is bid at 22.96 to yield 5.02%. Call it a round 5% for luck. This implies the interest-equivalent yield for CIU.PR.A is 6.5%, which, given the number on the bond issue, imply a Seniority Spread for this company of about 240bp.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 1bp, FixedResets off 7bp and DeemedRetractibles up 6bp. Volatility was average. Volume was a little low, although Fortis issues got a bit of boost from the new issue announcement.

PerpetualDiscounts now yield 5.13%, equivalent to 6.67% interest at the standard equivalency factor of 1.3x. Long corporates now yield a little under 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 250bp, unchanged from the figure reported August 27.

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	0.2081 %	2,638.2
FixedFloater	4.15 %	3.40 %	26,817	18.57	1	0.0000 %	4,178.5
Floater	2.91 %	3.07 %	49,175	19.49	4	0.2081 %	2,728.1
OpRet	4.05 %	-0.52 %	93,749	0.08	1	0.0000 %	2,726.0
SplitShare	4.28 %	3.75 %	117,407	3.95	5	0.3189 %	3,158.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,492.7
Perpetual-Premium	5.46 %	-0.92 %	78,991	0.08	20	-0.0726 %	2,439.1
Perpetual-Discount	5.22 %	5.13 %	110,281	15.23	16	0.0080 %	2,607.8
FixedReset	4.24 %	3.69 %	181,524	8.56	74	-0.0670 %	2,568.9
Deemed-Retractible	4.99 %	1.89 %	106,877	0.23	42	0.0551 %	2,567.7
FloatingReset	2.63 %	2.03 %	79,370	3.77	6	-0.0590 %	2,524.2

Performance Highlights
Issue	Index	Change	Notes
CIU.PR.C	FixedReset	-2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-03 Maturity Price : 20.52 Evaluated at bid price : 20.52 Bid-YTW : 3.68 %
FTS.PR.G	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-03 Maturity Price : 23.14 Evaluated at bid price : 24.69 Bid-YTW : 3.69 %
IAG.PR.A	Deemed-Retractible	1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.16 Bid-YTW : 5.53 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.M	FixedReset	170,355	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.11 Bid-YTW : 3.87 %
FTS.PR.J	Perpetual-Discount	151,305	Nesbitt crossed 150,000 at 24.18. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-03 Maturity Price : 23.77 Evaluated at bid price : 24.15 Bid-YTW : 4.93 %
ENB.PR.P	FixedReset	103,460	Scotia crossed 50,000 at 24.45; RBC crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-03 Maturity Price : 22.98 Evaluated at bid price : 24.40 Bid-YTW : 4.08 %
TD.PR.O	Deemed-Retractible	102,199	TD crossed 100,000 at 25.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.23 Bid-YTW : 1.89 %
BAM.PR.P	FixedReset	89,425	Indicated for redemption September 30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.40 Bid-YTW : 3.08 %
FTS.PR.K	FixedReset	60,570	RBC crossed 25,000 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-03 Maturity Price : 23.16 Evaluated at bid price : 24.88 Bid-YTW : 3.62 %
There were 27 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
RY.PR.F	Deemed-Retractible	Quote: 25.65 – 26.15 Spot Rate : 0.5000 Average : 0.3186 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-03 Maturity Price : 25.50 Evaluated at bid price : 25.65 Bid-YTW : -1.33 %
PWF.PR.A	Floater	Quote: 20.52 – 20.99 Spot Rate : 0.4700 Average : 0.3711 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-03 Maturity Price : 20.52 Evaluated at bid price : 20.52 Bid-YTW : 2.57 %
BAM.PR.T	FixedReset	Quote: 25.41 – 25.65 Spot Rate : 0.2400 Average : 0.1713 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-03 Maturity Price : 23.59 Evaluated at bid price : 25.41 Bid-YTW : 3.85 %
GWO.PR.H	Deemed-Retractible	Quote: 24.23 – 24.45 Spot Rate : 0.2200 Average : 0.1604 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.23 Bid-YTW : 5.22 %
GWO.PR.I	Deemed-Retractible	Quote: 22.67 – 22.89 Spot Rate : 0.2200 Average : 0.1642 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.67 Bid-YTW : 5.69 %
BNS.PR.N	Deemed-Retractible	Quote: 26.05 – 26.32 Spot Rate : 0.2700 Average : 0.2167 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-03 Maturity Price : 25.75 Evaluated at bid price : 26.05 Bid-YTW : -3.25 %

Auto dealers in Georgia are competing with new technology using tried and true methods:

Tesla Motors Inc. (TSLA), which has fought U.S. dealers over its direct sales of electric cars, faces a new challenge in Georgia where auto retailers want the Peach State to bar distribution of sedans from the company’s store.

Tesla sells vehicles in violation of the state’s rules limiting the annual volume of cars it can sell directly to the public, the Georgia Automobile Dealers Association said in a petition filed with the Georgia Department of Revenue.

The group, which represents 500 dealerships, asked that Tesla’s license be revoked and the agency block sales of Tesla’s Model S sedan at its shop in Marietta, near Atlanta.
…
The carmaker’s license in Georgia allows it only to sell vehicles made “in accordance with custom design specifications of the customer” and retail fewer than 150 a year, the group said in the petition. Tesla sold 173 sedans at its suburban Atlanta outlet, its only store in the state, from October to June, according to the petition, a copy of which was obtained by Bloomberg News from the revenue department.

It was a good day for economic news:

The dollar climbed 0.7 percent to 105.10 yen at 4 p.m. in New York and gained 0.8 percent to $1.6472 per British pound. Yields on 10-year Treasury notes increased seven basis points, the most in more than a month, to 2.42 percent. The Standard & Poor’s 500 Index lost less than 0.1 percent after the biggest monthly rally since February, as energy companies tumbled 1.3 percent. Gold slid 1.7 percent and Brent crude slumped to a 16-month low.

U.S. manufacturing expanded in August at the fastest pace in three years as orders grew by the most in a decade, bolstering the case for the Federal Reserve to raise interest rates sooner than anticipated. Gauges of factory output in Europe and China signal slower growth, boosting speculation that policy makers will need to boost stimulus measures. European money markets are pricing in about a 50 percent probability that the European Central Bank will cut interest rates by 10 basis points this week, according to BNP Paribas SA.
…
There’s about a 44 percent chance Fed policy makers will raise the benchmark interest-rate target by June 2015, futures data compiled by Bloomberg showed today. A 36 percent likelihood was seen on Aug. 18.
…
Bond yields across the euro area have tumbled, enhancing the appeal of payments available from Treasuries, since ECB President Mario Draghi said at the Federal Reserve Bank of Kansas City’s annual conference in Jackson Hole, Wyoming, on Aug. 22 that the central bank will use “all the available instruments needed to ensure price stability.”

And, with the 75th anniversary of Canada’s declaration of war on Germany almost upon us, we are getting a flavour of what it was like to live through the Munich Crisis:

[Outgoing president of the European commission, José Manuel] Barroso told the closed meeting that Putin had told him Kiev would be an easy conquest for Russia, according to the Italian newspaper, La Repubblica. According to the account, Barroso asked Putin about the presence of Russian troops in eastern Ukraine. Nato says there are at least 1,000 Russian forces on the wrong side of the border. The Ukrainians put the figure at 1,600.

“The problem is not this, but that if I want I’ll take Kiev in two weeks,” Putin said, according to La Repubblica.

The Kremlin did not deny Putin had spoken of taking Kiev, but instead complained about the leak of the Barroso remarks.

Petro Poroshenko, the Ukrainian president, attended the EU summit and painted an apocalyptic picture of the conflict, with EU leaders dropping their usual public poise in a heated debate.

Dalia Grybauskaite, the Lithuanian president, declared Russia was “at war with Europe”. The German chancellor, Angela Merkel, the main mediator with Putin, was said to be furious with the Russian leader, warning that he was “irrational and unpredictable”, while David Cameron was said to have raised the issue of Britain discussing policy options regarding Putin.

Cameron likened the west’s dilemma with Putin to relations between the then British prime minister, Neville Chamberlain, with Adolf Hitler in Munich in 1938, when Anglo-French appeasement encouraged the Nazi leader to launch the second world war the following year.

“We run the risk of repeating the mistakes made in Munich in 1938. We cannot know what will happen next,” Cameron was reported as saying. “This time we cannot meet Putin’s demands. He has already taken Crimea and we cannot allow him to take the whole country.”

DBRS confirmed Aimia, proud issuer of AIM.PR.A and AIM.PR.C:

DBRS has today confirmed Aimia Inc.’s (Aimia or the Company) Issuer Rating at BBB and the ratings of its Senior Secured Debt and Preferred Shares at BBB and Pfd-3, respectively, all with Stable trends. The confirmation of the ratings is based on the Company’s relatively stable operating performance and credit metrics through 2013 and progress made to date with the Aeroplan program transformation and financial cards agreement with TD Bank Group (TD; rated AA with a Stable trend by DBRS) and Canadian Imperial Bank of Commerce (CIBC; rated AA with a Stable trend by DBRS). The ratings continue to be based on the strength of Aimia’s brands and its strong relationship with key commercial partners. The ratings also reflect the Company’s high exposure to consumer spending and redemption patterns, as well as the significant but moderating degree of revenue concentration.
…
DBRS expects Aimia’s financial profile to remain commensurate with the current rating category, based on strong and stable free cash flow-generating capacity and steady leverage. DBRS believes free cash flow will decline modestly due to slightly higher capex requirements and continued growth in the Company’s dividend payments. Free cash flow is expected to continue to be applied primarily toward small tuck-in acquisitions, most likely in the data analytics business. DBRS anticipates that Aimia will use cash on hand to repay approximately $150 million of debt maturing in 2014. As such, when combined with the expected decline in adjusted EBITDA, key credit metrics should remain appropriate for the current rating category (i.e., gross debt-to-adjusted EBITDA before distributions of approximately 1.75x to 2.25x and adjusted EBITDA coverage around 7.0x).

The Canadian preferred share market opened the month on a sour note, with PerpetualDiscounts losing 17bp, FixedResets down 6bp and DeemedRetractibles off 2bp. Volatility was low. Volume was practically non-existent.

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	-0.1524 %	2,632.7
FixedFloater	4.15 %	3.40 %	26,891	18.57	1	0.1313 %	4,178.5
Floater	2.91 %	3.07 %	48,980	19.48	4	-0.1524 %	2,722.4
OpRet	4.05 %	-0.65 %	95,144	0.08	1	-0.1184 %	2,726.0
SplitShare	4.29 %	3.95 %	117,934	3.95	5	-0.0997 %	3,148.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1184 %	2,492.7
Perpetual-Premium	5.46 %	-1.10 %	81,960	0.08	20	0.0118 %	2,440.9
Perpetual-Discount	5.22 %	5.14 %	111,574	15.20	16	-0.1709 %	2,607.6
FixedReset	4.23 %	3.69 %	182,792	6.63	74	-0.0588 %	2,570.6
Deemed-Retractible	5.00 %	1.44 %	107,607	0.17	42	-0.0228 %	2,566.3
FloatingReset	2.63 %	2.05 %	79,920	3.71	6	-0.2289 %	2,525.7

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.P	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-02 Maturity Price : 22.57 Evaluated at bid price : 23.00 Bid-YTW : 3.54 %
CIU.PR.C	FixedReset	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-02 Maturity Price : 20.95 Evaluated at bid price : 20.95 Bid-YTW : 3.61 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.M	FixedReset	84,340	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.11 Bid-YTW : 3.87 %
RY.PR.B	Deemed-Retractible	61,720	RBC crossed 50,000 at 25.51. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-02 Maturity Price : 25.25 Evaluated at bid price : 25.47 Bid-YTW : -4.48 %
MFC.PR.K	FixedReset	52,050	Desjardins crossed 50,000 at 25.14. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 3.70 %
POW.PR.G	Perpetual-Premium	31,307	Desjardins crossed 30,000 at 26.23. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-15 Maturity Price : 25.00 Evaluated at bid price : 26.18 Bid-YTW : 4.92 %
PWF.PR.T	FixedReset	28,957	Desjardins crossed 26,200 at 26.05. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.99 Bid-YTW : 3.33 %
TD.PF.B	FixedReset	23,244	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-02 Maturity Price : 23.22 Evaluated at bid price : 25.16 Bid-YTW : 3.71 %
There were 6 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.B	Deemed-Retractible	Quote: 23.22 – 23.48 Spot Rate : 0.2600 Average : 0.1704 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.22 Bid-YTW : 5.56 %
BAM.PR.X	FixedReset	Quote: 22.43 – 22.70 Spot Rate : 0.2700 Average : 0.1880 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-02 Maturity Price : 22.08 Evaluated at bid price : 22.43 Bid-YTW : 4.00 %
PWF.PR.O	Perpetual-Premium	Quote: 26.21 – 26.48 Spot Rate : 0.2700 Average : 0.1926 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 26.00 Evaluated at bid price : 26.21 Bid-YTW : 3.69 %
BAM.PR.M	Perpetual-Discount	Quote: 21.45 – 21.65 Spot Rate : 0.2000 Average : 0.1302 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-02 Maturity Price : 21.45 Evaluated at bid price : 21.45 Bid-YTW : 5.64 %
HSB.PR.C	Deemed-Retractible	Quote: 25.31 – 25.50 Spot Rate : 0.1900 Average : 0.1280 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-02 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 0.76 %
BAM.PR.Z	FixedReset	Quote: 26.07 – 26.32 Spot Rate : 0.2500 Average : 0.1904 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.07 Bid-YTW : 3.71 %

Times are tough indeed for the gnomes of Zurich:

Zurich’s red-light district is dimming. Bankers who have been core patrons of the city’s sex industry and cabarets are curbing spending.

The venues of Langstrasse — or long street — are closing, replaced by hipster bars, techno clubs and even a backpackers’ hostel. Like the finance industry, the sex trade has opted for a lower profile.

“Times have changed,” said Kevin Joliat, the manager of the Petit Prince nightclub in central Zurich. “Bankers really have to show who the client was, why they spent the money and was it really necessary,” said Joliat, who once worked at Zuercher Kantonalbank, Switzerland’s largest state-owned bank.

The decline of erotic entertainment highlights a changing culture in Zurich as banking jobs ebb and public opinion turns against inflated bonuses. That and smaller budgets for entertaining customers have deprived the clubs and bars of a key customer base

Meanwhile, the West has a problem:

As Russian-backed separatists advance in southeastern Ukraine, the U.S. and European Union are still searching for a sanction that can force Vladimir Putin to stop and think again.

More than 1,000 of the Russian president’s troops are operating inside Ukraine, manning sophisticated weaponry and advising local separatists, the North Atlantic Treaty Organization said yesterday. The escalation, denied by Russia, prompted a warning of “consequences” from U.K. Prime Minister David Cameron, and German Chancellor Angela Merkel said EU leaders would discuss new sanctions this weekend.

The U.S. and EU have been trying since March to come up with measures that would impose sufficient costs to make Putin call off his effort to destabilize eastern Ukraine while causing only minimal harm to Russian citizens and European and U.S. economies and businesses.

Here’s my plan: bar Putin from Disneyland.

The Canadian preferred share market finished the month on a positive note, with PerpetualDiscounts winning 18bp, FixedResets up 12bp and DeemedRetractibles gaining 4bp. Volatility was quite good. Volume was quite low.

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.7254 %	2,636.7
FixedFloater	4.16 %	3.40 %	27,886	18.57	1	0.0000 %	4,173.0
Floater	2.91 %	3.07 %	50,626	19.49	4	0.7254 %	2,726.5
OpRet	4.05 %	-2.62 %	95,556	0.08	1	0.0395 %	2,729.3
SplitShare	4.24 %	3.75 %	60,337	3.96	6	0.0486 %	3,151.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0395 %	2,495.6
Perpetual-Premium	5.48 %	-3.46 %	82,812	0.08	19	0.1302 %	2,440.6
Perpetual-Discount	5.20 %	5.13 %	114,926	15.17	17	0.1830 %	2,612.0
FixedReset	4.23 %	3.64 %	185,120	6.65	74	0.1173 %	2,572.1
Deemed-Retractible	4.99 %	1.04 %	104,472	0.18	42	0.0380 %	2,566.9
FloatingReset	2.63 %	0.48 %	80,882	0.16	6	-0.0131 %	2,531.5

Performance Highlights
Issue	Index	Change	Notes
NA.PR.M	Deemed-Retractible	-1.20 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-28 Maturity Price : 25.75 Evaluated at bid price : 26.33 Bid-YTW : -17.77 %
BAM.PF.B	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 23.26 Evaluated at bid price : 25.20 Bid-YTW : 4.08 %
TRP.PR.E	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 23.29 Evaluated at bid price : 25.45 Bid-YTW : 3.80 %
VNR.PR.A	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.71 Bid-YTW : 3.58 %
FTS.PR.H	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 21.15 Evaluated at bid price : 21.15 Bid-YTW : 3.61 %
PWF.PR.A	Floater	1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 2.55 %
TRP.PR.A	FixedReset	2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 22.29 Evaluated at bid price : 23.06 Bid-YTW : 3.72 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.W	FixedReset	49,700	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 23.18 Evaluated at bid price : 25.11 Bid-YTW : 3.65 %
PWF.PR.H	Perpetual-Premium	41,419	TD crossed 40,000 at 25.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-28 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : -10.20 %
BAM.PF.D	Perpetual-Discount	37,578	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 21.84 Evaluated at bid price : 22.16 Bid-YTW : 5.61 %
TD.PF.B	FixedReset	31,523	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 23.22 Evaluated at bid price : 25.17 Bid-YTW : 3.68 %
BNS.PR.Y	FixedReset	28,948	Nesbitt bought 10,600 from anonymous at 23.93. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.86 Bid-YTW : 3.43 %
CM.PR.O	FixedReset	25,500	YTW SCENARIO Maturity Type : Call Maturity Date : 2019-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.44 Bid-YTW : 3.72 %
There were 17 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CIU.PR.C	FixedReset	Quote: 20.51 – 21.50 Spot Rate : 0.9900 Average : 0.7688 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 20.51 Evaluated at bid price : 20.51 Bid-YTW : 3.65 %
NA.PR.M	Deemed-Retractible	Quote: 26.33 – 26.67 Spot Rate : 0.3400 Average : 0.1980 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-28 Maturity Price : 25.75 Evaluated at bid price : 26.33 Bid-YTW : -17.77 %
TD.PF.B	FixedReset	Quote: 25.17 – 25.48 Spot Rate : 0.3100 Average : 0.1785 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 23.22 Evaluated at bid price : 25.17 Bid-YTW : 3.68 %
BAM.PF.B	FixedReset	Quote: 25.20 – 25.49 Spot Rate : 0.2900 Average : 0.1791 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 23.26 Evaluated at bid price : 25.20 Bid-YTW : 4.08 %
TRP.PR.E	FixedReset	Quote: 25.45 – 25.70 Spot Rate : 0.2500 Average : 0.1442 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-08-29 Maturity Price : 23.29 Evaluated at bid price : 25.45 Bid-YTW : 3.80 %
GWO.PR.F	Deemed-Retractible	Quote: 25.41 – 25.68 Spot Rate : 0.2700 Average : 0.1752 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-28 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : -19.21 %