Better Communication, Please!

What Is The Reset Rate On ALA.PR.A?

To my surprise and irritation, the reset rate on ALA.PR.A has not yet been announced.

The company’s preferred share page has a link to the Prospectus Supplement for the issue, but this link takes one to SEDAR, so I can’t provide a direct link to the document myself. The regulators are doing a fine job of making access to public documents inconvenient to the investor-scum elements of the public!

However, the relevant parts of the Supplement are:

“Initial Fixed Rate Period” means the period from and including the date of issue of the Series A Shares to, but excluding, September 30, 2015.
…
“Subsequent Fixed Rate Period” means, for the initial Subsequent Fixed Rate Period, the period from and including September 30, 2015 to, but excluding, September 30, 2020, and for each succeeding Subsequent Fixed Rate Period means the period from and including the day immediately following the last day of the immediately preceding Subsequent Fixed Rate Period to, but excluding, September 30 in the fifth year thereafter.
…
“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.
…
On each Fixed Rate Calculation Date, AltaGas shall determine the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period. Each such determination shall, in the absence of manifest error, be final and binding upon AltaGas and upon all holders of Series A Shares. AltaGas shall, on each Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series A Shares.
…
The Series A Shares and Series B Shares will be issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (“CDS Participant”). AltaGas will cause a global certificate or certificates representing any newly issued Series A Shares or Series B Shares to be delivered to, and registered in the name of, CDS or its nominee.

So Altagas has fulfilled the letter of their obligation by sending a billet-doux to CDS, which is:

a wholly owned subsidiary of TMX Group Limited
(TMX Group)

which in turn is substantially owned by:

Each of CIBC World Markets Inc., National Bank Financial & Co. Inc., Scotia Capital Inc., and TD Securities Inc., either directly or through an affiliate, has agreed to maintain a specified minimum ownership interest in TMX Group for a period of five years from September 14, 2012. For the year ended September 14, 2013, each of these investors were required to own at least 6.25%, and for each of the four following years, each of these investors must own at least 5.625%, of our common shares outstanding as
at September 14, 2012″

Assiduous Readers will remember the July 4, 2012 report that the regulators had agreed to permit an extension of the banking oligopoly’s hegemony over the Canadian financial system in return for something the regulators consider very important: extra payments to the regulators.

So what it all boils down to is: investors are scum. If you want to know what the reset rate on ALA.PR.A is, your best bet is to ‘phone your friendly (and probably bank-owned) broker and, after listening to a pitch for GICs while you’re on hold for half an hour, ask your friendly Customer Service Rep if they wouldn’t mind telling you the reset rate on this issue, provided it doesn’t interfere with lunch or anything.

However, hope springs eternal and I have sent the following missive to AltaGas Investor Relations:

Sirs,

It is my understanding from the prospectus supplement that the dividend rate for ALA.PR.A for the period September 30, 2015, to September 29, 2020, has been determined.

What is the new dividend rate?

Will there be any kind of announcement or notification on your website?

Sincerely,

Market Action

September 1, 2015

It was kind of an interesting day, with US equities getting smacked:

U.S. stocks joined a worldwide selloff, after equities’ worst month in more than three years, amid continuing concerns that China’s slowdown will weigh on the global economy.
…
The Standard & Poor’s 500 Index slid 3 percent to 1,913.85 at 4 p.m. in New York, the third-worst drop this year. … The Dow Jones Industrial Average sank 469.68 points, or 2.8 percent, to 16,058.35. The Nasdaq Composite Index lost 2.9 percent.
…
Equities dropped in Asia, with the Shanghai Composite Index slumping as much as 4.8 percent, after manufacturing reports pointed to a deepening Chinese economic slowdown.
…
International Monetary Fund Managing Director Christine Lagarde said Tuesday the global expansion outlook is worse than the lender anticipated less than two months ago. “This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America,” Lagarde said in a speech in Jakarta.

A report today showed U.S. factories expanded in August at the slowest pace since May 2013 as anemic demand from emerging markets such as China translated into leaner factory order books. A measure of exports matched the weakest reading since April 2009. The weak manufacturing data surface ahead of the Federal Reserve’s September policy meeting in which they will debate whether the economy is strong enough to withstand an increase in interest rates in the face of fragile overseas economies.

In somewhat related news, it looks like the deal with Iran will survive not just US Congress, but a very noticeable surge in sponsored content for pro-Israeli groups in my Facebook feed:

President Barack Obama all but wrapped up enough U.S. Senate votes to protect the Iran nuclear deal in Congress as two more Democratic senators said Tuesday they will support the agreement.

The backing from Senators Chris Coons of Delaware and Bob Casey of Pennsylvania brings the president within one vote of the 34 he needs. Eleven Democrats haven’t declared a position, including West Virginia’s Joe Manchin, who said in July he was leaning toward supporting the agreement. An aide has said Manchin remains undecided.

Which is somewhat related because of the effects on the oil market:

The Americas will take the brunt of any cuts in oil production as Iran increases output once international sanctions are lifted, according to a report by A.T. Kearney Inc.’s oil and gas consulting practice in Dubai.

North, South and Central American oil production could fall 1.1 million barrels a day by 2020 because of higher costs as Iran’s output climbs, starting with an increase of 800,000 barrels a day next year, Chicago-based A.T. Kearney said in a report to be issued this week. Brent crude prices are seen trading at $45 to $65 a barrel next year, according to the report. The international benchmark was about $47 a barrel on Tuesday.

So slow economic growth and subdued pricing for oil add up to one thing:

Treasury market analysts are scaling back their forecasts for a selloff as yields show traders expect almost no inflation for the next two years.

Benchmark 10-year yields will hold below 3 percent through September 2016, based on Bloomberg surveys of economists, with the most recent forecasts given the heaviest weightings. In June, the projection was for 3.15 percent.

A bond-market gauge called the break-even rate shows traders expect the average annual rate of inflation to be 0.3 percent over the coming 24 months. The figure has tumbled from more than 1 percent as recently as July. Federal Reserve Bank of Boston President Eric Rosengren said uncertainty over inflation and global growth justifies a modest pace of interest-rate increases, regardless of when the central bank begins.

‘What’s in it for me’, you ask? How about more vacations in Canada?

Canada’s economy shrank again in the second quarter as plunging oil prices triggered a drop in investment, with fresh debate about a recession dealing a blow to Prime Minister Stephen Harper’s bid for re-election.

Gross domestic product declined at a 0.5 percent annualized pace from April to June, Statistics Canada said Tuesday in Ottawa. The agency revised the first-quarter contraction to 0.8 percent from 0.6 percent.

The Group of Seven’s biggest crude oil exporter is struggling as a global commodity slump guts business spending.
…
Canada’s dollar depreciated 0.3 percent to C$1.3173 per U.S. dollar at 11:55 a.m. Toronto time. The currency is down about 12 percent this year. Swaps trading showed the odds of a rate cut next week fell to about 21 percent after Tuesday’s report, down from 24 percent Monday and 36 percent a week ago.

The consecutive GDP declines are milder than any back-to-back contractions since at least 1981, including the last recession in 2009 which saw drops of 3.6 percent and 8.7 percent. The job market also suggests there’s no broad-based slump in the world’s 11th largest economy. The jobless rate of 6.8 percent for July is down from 7 percent a year ago. August labor data is due Sept. 4.

Fortunately, all this gloom is alleviated by more news from the highly entertaining battle between Sprott and the bullion trusts. Sprott recently announced:

the filing of notices of change (the “Notices of Change”) in connection with the offers (together, the “Sprott offers”) by Sprott Asset Management Gold Bid LP and Sprott Asset Management Silver Bid LP to acquire all of the outstanding units of Central GoldTrust (“GTU”) and Silver Bullion Trust (“SBT”), respectively, for units of Sprott Physical Gold Trust and units of Sprott Physical Silver Trust, in each case on a Net Asset Value (“NAV”) to NAV exchange basis.

We can find, after a bit of difficulty, the document on SEDAR, filed under “Silver Bullion Trust Aug 28 2015 17:49:05 ET Notice of change or variation – English PDF 73 K”, a public document that the regulators consider so critical to the efficient and fair functioning of the public markets that they prohibit investor scum and other interested parties from linking to it directly. After accepting the regulators’ terms of use and offering a little prayer of thanksgiving for our transparent capital markets, we find:

The Offeror has (subject to the next two sentences) agreed to pay to each Soliciting Dealer a fee of U.S.$0.0448 for each SBT Unit deposited through such Soliciting Dealer and either: (i) taken-up and paid for by the Offeror under the Offer; or (ii) provided the Merger Transaction is completed, deemed to be withdrawn from the Offer under the Merger Election, based on, among other things, the claims submitted, CDS and DTC participant deposits and the CDS and DTC participant list as at the Expiry Time. The aggregate amount payable with respect to any single beneficial holder of SBT Units will not be less than U.S.$50.00 and not be more than U.S.$1,500.00, provided that no fee will be payable in respect of deposits of less than 1,000 SBT Units per beneficial holder. When SBT Units deposited are beneficially owned by more than one person, only one minimum and maximum amount will be applied. The Offeror may require the Soliciting Dealers to furnish evidence of beneficial ownership satisfactory to the Offeror before payment of such solicitation fees.

Silver Bullion Trust has a NAVPU of USD 8.38 as of September 1, so this payment comes to a little over 50bp on unit value, which is nice work if you can get it. The target has this to say:

The Trustees note the recent announcement by Sprott that they intend to pay financial advisors and brokers to secure tenders to their Offer, a clear indication that the Sprott Offer has thus far been unable to attract sufficient Unitholder support. The Trustees caution Unitholders regarding any advice or recommendations they may receive from their financial advisors or brokers, which may be biased and based on their desire to collect solicitation fees from Sprott. Sprott is paying your broker to convince you to tender. Don’t be talked into tendering!

I continue to scan the news for mention of solicitation fees and new issue commissions being discussed in connection with potential bans on mutual fund trailer commissions, but there’s nothing. The regulators are too busy coming up with new ways to restrict public access to public documents, while self-proclaimed investor advocates concentrate on trying to get their heads out of their asses.

You know what’s good about the internet? This is what’s good about the internet:


Click for Big

In other other news (about chess), Lev Aronian won the 2015 Sinquefield Cup (a ridiculously strong tournament), but the highlights reel has to include So – Nakamura in round 6 and Nakamura – Grischuk in round 9. Fighting chess! Those with a taste for it may wish to watch the Thoresen Chess Engine Competition Season 8, which brings the world’s strongest chess programmes together on some rather high-end hardware.

The Canadian preferred share market commenced the new month on a mixed note, with PerpetualDiscounts gaining 12bp, FixedResets down 6bp and DeemedRetractibles off 2bp. Reported yields for the FixedReset subindex dropped significantly from yesterday due to the mass migration of ENB issues from FixedResets into Scraps due to credit concerns. The Performance Highlights table continues to show a lot of churn amongst the FixedResets. Volume was extremely low.

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

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

Here’s TRP:

impVol_TRP_150901
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.40 to be $0.88 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.00 cheap at its bid price of 12.75.

impVol_MFC_150901
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.M, resetting at +236bp on 2019-12-19, bid at 20.85 to be 0.39 rich, while MFC.PR.J, resetting at +261bp on 2018-3-19, is bid at 21.00 to be 0.44 cheap.

impVol_BAM_150901
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.51 to be $1.68 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.60 and appears to be $1.15 rich.

impVol_FTS_150901
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Implied Volatility reversed yesterday’s precipitous decline, illustrating the perils of relying too heavily on a four-point curve.

FTS.PR.M, with a spread of +248bp, and bid at 20.65, looks $0.26 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.12 and is $0.60 cheap.

pairs_FR_150901
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.94%, with no outliers. Note that the distribution is bimodal (although less than recently), with NVCC non-compliant bank issues averaging -1.05% and the unregulated issues averaging -0.78%. There are four junk outliers below -1.60% and two above +0.40%.

pairs_FF_150901
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -1.6976 % 1,618.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.6976 % 2,829.9
Floater 4.53 % 4.60 % 57,627 16.15 3 -1.6976 % 1,720.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.3791 % 2,764.4
SplitShare 4.66 % 5.11 % 60,978 3.11 3 -0.3791 % 3,239.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3791 % 2,527.8
Perpetual-Premium 5.73 % 5.53 % 61,765 0.08 8 -0.0397 % 2,485.6
Perpetual-Discount 5.49 % 5.55 % 76,999 14.56 30 0.1164 % 2,573.6
FixedReset 4.76 % 4.21 % 180,656 16.09 74 -0.0607 % 2,133.4
Deemed-Retractible 5.17 % 5.29 % 98,575 5.52 33 -0.0152 % 2,570.7
FloatingReset 2.42 % 3.58 % 44,365 5.96 9 -0.4563 % 2,181.7
Performance Highlights
Issue Index Change Notes
HSE.PR.E FixedReset -3.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.55
Evaluated at bid price : 21.55
Bid-YTW : 5.06 %
FTS.PR.M FixedReset -2.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 4.14 %
BAM.PR.B Floater -2.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 10.50
Evaluated at bid price : 10.50
Bid-YTW : 4.56 %
HSE.PR.C FixedReset -2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 4.92 %
TRP.PR.F FloatingReset -2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 13.98
Evaluated at bid price : 13.98
Bid-YTW : 4.03 %
BAM.PF.F FixedReset -2.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 22.10
Evaluated at bid price : 22.61
Bid-YTW : 4.21 %
PWF.PR.P FixedReset -1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 15.47
Evaluated at bid price : 15.47
Bid-YTW : 3.85 %
BMO.PR.Q FixedReset -1.82 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 5.18 %
BAM.PR.X FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 14.76
Evaluated at bid price : 14.76
Bid-YTW : 4.74 %
BAM.PF.A FixedReset -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.27
Evaluated at bid price : 21.55
Bid-YTW : 4.43 %
BAM.PR.C Floater -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 10.41
Evaluated at bid price : 10.41
Bid-YTW : 4.60 %
TRP.PR.G FixedReset -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.31
Evaluated at bid price : 21.31
Bid-YTW : 4.39 %
ENB.PR.A Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 23.75
Evaluated at bid price : 24.06
Bid-YTW : 5.74 %
PVS.PR.D SplitShare -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 5.22 %
GWO.PR.G Deemed-Retractible -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 6.03 %
BMO.PR.R FloatingReset -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.71
Bid-YTW : 3.56 %
RY.PR.N Perpetual-Discount 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 24.27
Evaluated at bid price : 24.64
Bid-YTW : 5.06 %
MFC.PR.K FixedReset 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.58
Bid-YTW : 6.36 %
BAM.PR.R FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 16.51
Evaluated at bid price : 16.51
Bid-YTW : 4.84 %
MFC.PR.G FixedReset 1.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.63
Bid-YTW : 5.01 %
PWF.PR.S Perpetual-Discount 2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 22.25
Evaluated at bid price : 22.61
Bid-YTW : 5.35 %
IFC.PR.C FixedReset 2.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.62
Bid-YTW : 6.08 %
BAM.PF.E FixedReset 2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 4.37 %
MFC.PR.M FixedReset 2.96 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.85
Bid-YTW : 5.81 %
PWF.PR.L Perpetual-Discount 2.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 23.30
Evaluated at bid price : 23.56
Bid-YTW : 5.46 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PR.T FloatingReset 90,200 Nesbitt crossed 70,000 at 22.80.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.62
Bid-YTW : 3.58 %
PWF.PR.I Perpetual-Premium 30,100 TD crossed two blocks of 15,000 each, both at 25.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-10-01
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 0.22 %
BAM.PF.C Perpetual-Discount 21,299 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 5.97 %
PVS.PR.D SplitShare 18,810 Scotia crossed 10,000 at 24.33.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 5.22 %
TD.PF.A FixedReset 18,175 TD crossed 11,500 at 21.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.44
Evaluated at bid price : 21.44
Bid-YTW : 3.72 %
BMO.PR.T FixedReset 17,120 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 3.68 %
There were 11 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BIP.PR.A FixedReset Quote: 21.50 – 25.00
Spot Rate : 3.5000
Average : 1.8989

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 5.06 %
TRP.PR.F FloatingReset Quote: 13.98 – 15.00
Spot Rate : 1.0200
Average : 0.7095

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 13.98
Evaluated at bid price : 13.98
Bid-YTW : 4.03 %
HSE.PR.E FixedReset Quote: 21.55 – 22.50
Spot Rate : 0.9500
Average : 0.6500

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.55
Evaluated at bid price : 21.55
Bid-YTW : 5.06 %
IFC.PR.A FixedReset Quote: 16.83 – 17.55
Spot Rate : 0.7200
Average : 0.4259

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.83
Bid-YTW : 8.22 %
PWF.PR.S Perpetual-Discount Quote: 22.61 – 23.48
Spot Rate : 0.8700
Average : 0.6252

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 22.25
Evaluated at bid price : 22.61
Bid-YTW : 5.35 %
FTS.PR.J Perpetual-Discount Quote: 21.82 – 22.90
Spot Rate : 1.0800
Average : 0.8775

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-01
Maturity Price : 21.48
Evaluated at bid price : 21.82
Bid-YTW : 5.46 %
Issue Comments

NPI.PR.A To Reset At 3.51%

Northland Power Inc. has announced:

that pursuant to the share terms in respect of the Cumulative Rate Reset Preferred Shares, Series 1 (“Series 1 Shares”), it has determined the fixed dividend rate for the five years commencing September 30, 2015 and ending September 29, 2020. The fixed quarterly dividends on the Series 1 Shares during that period will be paid at an annual rate of 3.51% (Cdn. $0.22 per share per quarter).

Holders of Series 1 Shares have the right, at their option, exercisable not later than 5:00 pm (Toronto time) on September 15, 2015, to convert all or part of their Series 1 Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series 2 (the “Series 2 Shares”), effective September 30, 2015. The quarterly floating rate dividends on the Series 2 Shares will be paid at an annual rate, calculated for each quarter, of 2.80% over the annual yield on 90-day Government of Canada treasury bills. The actual quarterly dividend rate in respect of the September 30, 2015 to December 30, 2015 dividend period for the Series 2 Shares will be 0.80% (3.18% on an annualized basis) and the dividend, if and when declared, for such dividend period will be Cdn. $0.20 per share, payable on December 31, 2015.

Holders of Series 1 Shares are not required to elect to convert all or any part of their Series 1 Shares into Series 2 Shares.

As provided in the share conditions of the Series 1 Shares, (i) if Northland determines that there would be fewer than 1,000,000 Series 1 Shares outstanding after September 30, 2015, all remaining Series 1 Shares will be automatically converted into Series 2 Shares on a one-for-one basis effective September 30, 2015; or (ii) if Northland determines that there would be fewer than 1,000,000 Series 2 Shares outstanding after September 30, 2015, no Series 1 Shares will be permitted to be converted into Series 2 Shares. There are currently 6,000,000 Series 1 Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 2 Shares effective upon conversion. Listing of the Series 2 Shares is subject to Northland fulfilling all the listing requirements of the TSX and, upon approval, the Series 2 Shares will be listed on the TSX under the trading symbol “NPI.PR.B”.

NPI.PR.A is a FixedReset with a spread of 280bp over five-year Canadas, which commenced trading July 28, 2015 under the ticker symbol NPP.PR.A after being announced July 6, 2010. The ticker was changed effective January 1, 2011 after conversion from an Income Trust. The original coupon was 5.25%, so the reset rate of 3.51% represents a decline of 33%. Hey, by recent 40%+ standards, that looks good!

As noted in the press release, holders have the option to convert into NPI.PR.B, a FloatingReset, and this option must be exercised prior to 5pm, September 15 before vanishing until the next reset date in 2020. Recent market conditions have been highly unfavourable for FloatingResets and it is likely that I will recommend against conversion. However, conditions can change dramatically and rapidly and I will wait until September 10 to make a more formal recommendation.

Note that the September 15 notification date is for notification of the company, and brokers will generally have an internal deadline a day or two prior to this … so if you’re planning to wait until the last minute, contact your broker and find out precisely when the last minute will be!

Issue Comments

FFH.PR.G To Reset At 3.318%

Fairfax Financial Holdings Limited has announced:

that it has determined the fixed dividend rate on its Cumulative 5-Year Rate Reset Preferred Shares, Series G (“Series G Shares”) (TSX:FFH.PR.G) for the five years commencing October 1, 2015 and ending September 30, 2020. The fixed quarterly dividends on the Series G Shares during that period will be paid at an annual rate of 3.318% (Cdn.$0.207375 per share per quarter).

Holders of Series G Shares have the right, at their option, exercisable not later than 5:00pm (Toronto time) on September 15, 2015, to convert all or part of their Series G Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series H (the “Series H Shares”), effective September 30, 2015. The quarterly floating rate dividends on the Series H Shares will be paid at an annual rate, calculated for each quarter, of 2.56% over the annual yield on three month Government of Canada treasury bills. The actual quarterly dividend rate in respect of the October 1, 2015 to December 30, 2015 dividend period for the Series H Shares will be 0.731987% (2.936% on an annualized basis) and the dividend for such dividend period, if and when declared, will be Cdn.$0.18300 per share, payable on December 30, 2015.

Holders of Series G Shares are not required to elect to convert all or any part of their Series G Shares into Series H Shares. A holder of Series G Shares who does not so elect will (subject to the next paragraph) retain their Series G Shares.

As provided in the share conditions of the Series G Shares, (i) if Fairfax determines that there would be fewer than 1,000,000 Series G Shares outstanding after September 30, 2015, all remaining Series G Shares will be automatically converted into Series H Shares on a one-for-one basis effective September 30, 2015; and (ii) if Fairfax determines that there would be fewer than 1,000,000 Series H Shares outstanding after September 30, 2015, no Series G Shares will be permitted to be converted into Series H Shares. There are currently 10,000,000 Series G Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series H Shares effective upon conversion. Listing of the Series H Shares is subject to Fairfax fulfilling all the listing requirements of the TSX and, upon approval, the Series H Shares will be listed on the TSX under the trading symbol “FFH.PR.H”.

Fairfax is a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.

FFH.PR.G is a FixedReset with a spread of 256bp over five-year Canadas, which commenced trading July 28, 2010 after being announced July 20, 2010. The original coupon was 5.00%, so the reset rate of 3.318% represents a decline of 34%. Hey, by recent 40%+ standards, that looks good!

As noted in the press release, holders have the option to convert into FFH.PR.H, a FloatingReset, and this option must be exercised prior to 5pm, September 15 before vanishing until the next reset date in 2020. Recent market conditions have been highly unfavourable for FloatingResets and it is likely that I will recommend against conversion. However, conditions can change dramatically and rapidly and I will wait until September 10 to make a more formal recommendation.

Note that the September 15 notification date is for notification of the company, and brokers will generally have an internal deadline a day or two prior to this … so if you’re planning to wait until the last minute, contact your broker and find out precisely when the last minute will be!

Market Action

August 31, 2015

“It doesn’t matter whether a cat is white or black, as long as it throws financial guys in jail after a crash“:

China’s brokerages tumbled after Citic Securities Co. executives were detained and people familiar with the matter said the industry was told to contribute another 100 billion yuan ($15.7 billion) to a market rescue fund.

Four executives of Citic including managing directors Xu Gang and Liu Wei, admitted alleged insider trading, the state-run Xinhua News Agency said. The nation’s largest brokerage fell as much as 8.6 percent in Shanghai and slid to the lowest since May 2014 in Hong Kong. A Citic press officer declined to comment.

The China Securities Regulatory Commission ordered the rescue-fund contributions at a meeting with 50 brokerages on Saturday that was attended by CSRC Chairman Xiao Gang, said the people, who asked not to be identified because the meeting hasn’t been made public. The regulator encouraged listed brokerages to buy back shares worth as much as 10 percent of their total market value, the people said.

Central bankers are feeling some angst:

Mario Draghi may have skipped the Federal Reserve’s Jackson Hole symposium this year, but he can’t dodge its conclusion: central banks can’t steer inflation as well as they thought.

Less than six months into a stimulus program that the European Central Bank president promised would revive consumer-price growth, the euro area is facing renewed disinflationary pressure as China’s economy slows and commodity prices slump. Inflation failed to pick up this month, data showed on Monday, and Draghi may have to downgrade the institution’s forecasts on Thursday.

The newest risk to prices highlights how in the 19-nation currency bloc — as in the U.S., the U.K. and other industrialized nations — headline inflation is still far below target even as the economy recovers.
…
At Jackson Hole, academics effectively delivered a beating to central banks’ confidence in their ability to predict and manage their key variable, by pointing out wide gaps in knowledge about how inflation works.

Harvard University’s Gita Gopinath argued that the relationship between prices and exchange rates isn’t well understood. Boston University’s Simon Gilchrist said that strict inflation targeting can worsen economic outcomes.

Worse still, trying to influence inflation while not understanding it is a “recipe for disaster,” according to MIT Sloan School of Management professor Athanasios Orphanides, himself a former ECB Governing Council member.

I knew American universities were venal, but I didn’t know just how venal they could be:

Bank of America’s relationship with the university extends well beyond marketing at sports events. The bank has an $8.4 million, seven-year contract with Michigan State giving it access to students’ names and addresses and use of the university’s logo. The more students who take the banks’ credit cards, the more money the university gets. Under certain circumstances, Michigan State even stands to receive more money if students carry a balance on these cards.
…
The relationships are reminiscent of those uncovered two years ago between student loan companies and universities. In those, some lenders offered universities an incentive to steer potential borrowers their way.

In Friday’s post I mentioned some interesting things that are happening with barcodes and smartphones … these were interesting enough that I did some poking around.

The Global Food Safety Resource published an interesting article titled Food Regulatory Trends in 2015, which included the interesting note:

In December 2014, Guangdong province piloted an e-traceability system for baby formula. Consumers can use a mobile app and scan a barcode to get information about the product including it’s provenance. But it’s unique to Guangdong and doesn’t translate nationally.

The Grower, a specialty newsletter billing itself as ‘Canada’s Premier Horticultural Publication’, published an article titled How a celery swizzle stick meets its bar code in the field, which contains a bit of insight into Canada’s laws regarding food traceability and how this is implemented at the farm level.

GS1 Canada (the worldwide GS1 organization is mentioned in the Reuters article that got me interested) issued a statement titled Update On Loblaw And Wal-Mart GS1 DataBar™ Pilots (the GS1 Databar was used in one of the examples in the article) that stated:

In June 2006, Loblaw Companies Limited (Loblaw) and Wal-Mart Stores inc. (Wal-Mart) selected several suppliers to pilot the GS1 DataBar™ … on apples and bananas …

To date, Loblaw and Wal-Mart have attributed the following business benefits to their DataBar pilots:
•Decreased out-of-stocks
•Improved shrink control
•Enhanced product replenishment
•Increased customer satisfaction at self-checkouts

So on Saturday evening I visited my local Loblaws and looked at the apples and bananas and lo and behold! They all had GS1 Databars on them!

So it may be concluded that all the data is in place for consumer access to provenance information for apples and bananas at Loblaws. All that is needed is a smartphone App that will read and interpret the information and possibly access to Loblaw’s database – I’m not sure how much, if any, of the data is proprietary.

So you can bet that as soon as Loblaws thinks they can make a dollar out the proposition this traceability will be available – at least as far as Loblaw’s apples and bananas are concerned.

However, I’m not holding my breath waiting for the roll-out. As the comments to the Globe’s republished article so convincingly demonstrate, Canadians as a group are both mentally deficient and terrified of anything developed after 1973. But maybe there’s an App Developer out there who might like to steal a march on the big boys …

I was hoping for some definitive news today on the all-but-certain extensions of NPI.PR.A, FFH.PR.G and ALA.PR.A, which reset 2015-9-30, but there’s nothing.

The Canadian preferred share market closed the month with a good strong day, with PerpetualDiscounts gaining 13bp, FixedResets winning 56bp and DeemedRetractibles up 21bp. There is still a lot of churn in the market, as is demonstrated by yet another lengthy Performance Highlights table. Volume was extremely low.

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

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

Here’s TRP:

impVol_TRP_150831
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.46 to be $0.82 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.00 cheap at its bid price of 12.85.

impVol_MFC_150831
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 20.55 to be 0.48 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 19.37 to be 0.42 cheap.

impVol_BAM_150831
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.27 to be $2.00 cheap. BAM.PF.F, resetting at +286bp on 2019-9-30 is bid at 23.15 and appears to be $1.54 rich.

impVol_FTS_150831
Click for Big

Implied Volatility declined precipitously today, illustrating the perils of relying too heavily on a four-point curve.

FTS.PR.H, with a spread of +145bp, and bid at 14.95, looks $0.50 expensive and resets 2020-6-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.28 and is $0.60 cheap.

pairs_FR_150831
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.68%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -0.82% and the unregulated issues averaging -0.49%. There are two junk outliers below -1.60% and one two above +0.40%..

pairs_FF_150831
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.9201 % 1,646.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.9201 % 2,878.8
Floater 4.46 % 4.53 % 58,030 16.29 3 0.9201 % 1,750.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.3260 % 2,774.9
SplitShare 4.64 % 5.01 % 58,636 3.11 3 0.3260 % 3,252.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3260 % 2,537.4
Perpetual-Premium 5.72 % 5.67 % 61,999 14.03 9 0.3319 % 2,486.6
Perpetual-Discount 5.50 % 5.57 % 77,670 14.54 29 0.1270 % 2,570.6
FixedReset 4.95 % 4.35 % 195,597 15.56 87 0.5555 % 2,134.7
Deemed-Retractible 5.17 % 5.26 % 97,775 5.54 34 0.2128 % 2,571.1
FloatingReset 2.36 % 3.51 % 45,996 5.95 9 0.2358 % 2,191.7
Performance Highlights
Issue Index Change Notes
PWF.PR.L Perpetual-Discount -2.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.63
Evaluated at bid price : 22.88
Bid-YTW : 5.63 %
SLF.PR.I FixedReset -2.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.72
Bid-YTW : 5.37 %
BMO.PR.Y FixedReset -2.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.39
Evaluated at bid price : 23.20
Bid-YTW : 3.81 %
MFC.PR.L FixedReset -1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.33
Bid-YTW : 6.63 %
IFC.PR.C FixedReset -1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.15
Bid-YTW : 6.39 %
PWF.PR.S Perpetual-Discount -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.88
Evaluated at bid price : 22.16
Bid-YTW : 5.47 %
FTS.PR.G FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 18.28
Evaluated at bid price : 18.28
Bid-YTW : 4.15 %
ELF.PR.H Perpetual-Discount -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 23.57
Evaluated at bid price : 24.02
Bid-YTW : 5.79 %
BMO.PR.K Deemed-Retractible 1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-09-30
Maturity Price : 25.50
Evaluated at bid price : 25.85
Bid-YTW : -10.17 %
TRP.PR.F FloatingReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 3.93 %
BMO.PR.W FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 3.79 %
GWO.PR.L Deemed-Retractible 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 5.65 %
ENB.PF.C FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.65
Evaluated at bid price : 17.65
Bid-YTW : 5.17 %
ENB.PF.A FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 5.24 %
BAM.PR.N Perpetual-Discount 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 5.82 %
PWF.PR.T FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.72
Evaluated at bid price : 23.59
Bid-YTW : 3.44 %
ENB.PR.J FixedReset 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 5.11 %
TD.PF.A FixedReset 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 3.75 %
W.PR.H Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 24.05
Evaluated at bid price : 24.30
Bid-YTW : 5.74 %
HSE.PR.C FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.02
Evaluated at bid price : 21.02
Bid-YTW : 4.78 %
W.PR.J Perpetual-Discount 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 24.06
Evaluated at bid price : 24.32
Bid-YTW : 5.84 %
BAM.PR.B Floater 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 10.80
Evaluated at bid price : 10.80
Bid-YTW : 4.43 %
PVS.PR.D SplitShare 1.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 5.01 %
TD.PF.B FixedReset 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 3.74 %
FTS.PR.F Perpetual-Discount 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.33
Evaluated at bid price : 22.60
Bid-YTW : 5.44 %
TRP.PR.C FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 12.85
Evaluated at bid price : 12.85
Bid-YTW : 4.53 %
NA.PR.S FixedReset 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 3.92 %
NA.PR.W FixedReset 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.53
Evaluated at bid price : 20.53
Bid-YTW : 3.90 %
BMO.PR.T FixedReset 1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 3.69 %
BAM.PF.B FixedReset 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 4.45 %
BAM.PR.X FixedReset 1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 4.66 %
RY.PR.K FloatingReset 2.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.33
Bid-YTW : 3.39 %
ENB.PR.P FixedReset 2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 5.26 %
HSE.PR.G FixedReset 2.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.14
Evaluated at bid price : 22.75
Bid-YTW : 4.73 %
FTS.PR.J Perpetual-Discount 2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.69
Evaluated at bid price : 22.00
Bid-YTW : 5.41 %
ENB.PR.H FixedReset 2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 14.85
Evaluated at bid price : 14.85
Bid-YTW : 5.16 %
MFC.PR.G FixedReset 2.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.29
Bid-YTW : 5.21 %
TRP.PR.G FixedReset 2.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.33
Evaluated at bid price : 21.60
Bid-YTW : 4.31 %
GWO.PR.S Deemed-Retractible 2.52 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 5.31 %
ENB.PR.Y FixedReset 2.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.91
Evaluated at bid price : 15.91
Bid-YTW : 5.24 %
FTS.PR.M FixedReset 2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 4.02 %
TRP.PR.A FixedReset 2.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 4.25 %
ENB.PR.F FixedReset 2.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.99
Evaluated at bid price : 15.99
Bid-YTW : 5.29 %
ENB.PR.B FixedReset 3.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 15.10
Evaluated at bid price : 15.10
Bid-YTW : 5.36 %
BAM.PF.F FixedReset 3.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.42
Evaluated at bid price : 23.15
Bid-YTW : 4.09 %
MFC.PR.N FixedReset 3.74 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.55
Bid-YTW : 5.93 %
Volume Highlights
Issue Index Shares
Traded		 Notes
HSB.PR.D Deemed-Retractible 261,800 Scotia crossed blocks of 50,000 and 210,700, both at 24.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.90
Bid-YTW : 5.26 %
TRP.PR.D FixedReset 26,010 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 18.83
Evaluated at bid price : 18.83
Bid-YTW : 4.40 %
TD.PF.C FixedReset 23,150 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 3.73 %
ENB.PR.N FixedReset 19,420 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 5.31 %
ENB.PF.C FixedReset 19,180 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.65
Evaluated at bid price : 17.65
Bid-YTW : 5.17 %
ENB.PR.J FixedReset 18,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 5.11 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.M FixedReset Quote: 20.25 – 22.30
Spot Rate : 2.0500
Average : 1.2798

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 6.19 %
BAM.PF.G FixedReset Quote: 22.70 – 24.12
Spot Rate : 1.4200
Average : 0.8188

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.11
Evaluated at bid price : 22.70
Bid-YTW : 4.21 %
BAM.PF.E FixedReset Quote: 20.27 – 21.80
Spot Rate : 1.5300
Average : 1.0370

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 4.47 %
RY.PR.M FixedReset Quote: 22.40 – 23.85
Spot Rate : 1.4500
Average : 1.0600

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 21.90
Evaluated at bid price : 22.40
Bid-YTW : 3.79 %
TRP.PR.E FixedReset Quote: 19.46 – 20.25
Spot Rate : 0.7900
Average : 0.5126

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 19.46
Evaluated at bid price : 19.46
Bid-YTW : 4.33 %
PWF.PR.L Perpetual-Discount Quote: 22.88 – 23.65
Spot Rate : 0.7700
Average : 0.5216

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-31
Maturity Price : 22.63
Evaluated at bid price : 22.88
Bid-YTW : 5.63 %
Market Action

August 28, 2015

Strange goings-on in FundLand:

Since July, American households — which account for almost all mutual fund investors — have pulled money both from mutual funds that invest in stocks and those that invest in bonds. It’s the first time since 2008 that both asset classes have recorded back-to-back monthly withdrawals, according to a report by Credit Suisse.

Credit Suisse estimates $6.5 billion left equity funds in July as $8.4 billion was pulled from bond funds, citing weekly data from the Investment Company Institute as of Aug. 19. Those outflows were followed up in the first three weeks of August, when investors withdrew $1.6 billion from stocks and $8.1 billion from bonds, said economist Dana Saporta.

Meanwhile, US incomes are ticking up:

Consumer purchases climbed in July as incomes grew, showing the biggest part of the U.S. economy was off to a good start to the quarter.

The 0.3 percent advance matched the prior month’s gain, a Commerce Department report showed Friday in Washington. The median forecast in a Bloomberg survey of 77 economists called for a 0.4 percent increase. Wages rose by the most this year.
…
Total incomes rose 0.4 percent in July for a fourth month, matching the median forecast in the Bloomberg survey. Wages and salaries increased 0.5 percent, the biggest gain since November.

Because spending increased less than incomes, the saving rate rose to 4.9 percent from 4.7 percent.
…
The report showed inflation remained tame. The price gauge based on the personal consumption expenditures index increased 0.1 percent from the prior month and was up 0.3 percent from a year earlier.

The core price measure, which excludes food and fuel, also rose 0.1 percent from the prior month and was up 1.2 percent from July 2014, the smallest year-to-year gain in four years.

If it doesn’t continue, they’ll blame Canada:

“When Canada hurts, U.S. exporters do, too,” Bricklin Dwyer, an economist at BNP Paribas in New York, wrote in an Aug. 27 note to clients titled “Canada (not China) matters more.”

Economy-watchers and investors have been spooked by fears of a worse-than-expected Chinese slowdown after the nation devalued its currency Aug. 11 in a surprise move. Yet the direct effects on U.S. trade from slowing Chinese growth and the yuan move are probably fairly contained — far more so than the potential fallout from faltering Canadian demand.

Canada counts for 19 percent of total U.S. exports, followed by Mexico at 16 percent, each more than double China’s 7 percent share. And the Canadian dollar is sliding much faster: It has fallen about 12 percent against the U.S. dollar since the start of the year, while China’s yuan has dropped just about 3 percent.

And, too bad for Canada, we have a high domestic sensitivity to FX rate changes:

The central banker’s task of keeping inflation just right has become a permanent tussle with the global currency markets. Too weak a currency equals too rapid price gains. Too strong, and disinflation looms.

That’s the well-worn argument under the microscope Friday at the Jackson Hole Symposium, the U.S. Federal Reserve’s annual policy getaway. Gita Gopinath, a scholar at Harvard University, says that it just isn’t that simple.

“The greater the fraction of a country’s imports invoiced in a foreign currency, the greater its inflation sensitivity to exchange rate fluctuations at both short and long horizons,” she says. Because the dollar is by far the dominant currency in world trade, “U.S. inflation is consequently more insulated from exchange rate shocks, while other countries are highly sensitive to it.”

FXPassThrough
Click for Big

The Ukraine has issued GDP warrants:

The warrants included in a debt deal reached between Ukraine and its biggest creditors on Thursday offer bondholders annual payments for 20 years if economic growth crosses certain thresholds, Finance Minister Natalie Jaresko said at a briefing with journalists late on Thursday.

How are payments determined?

  • •No payment will be made if growth is less than 3 percent
  • •For growth between 3-4 percent, the payment will be 15 percent of the real GDP growth exceeding 3 percent
  • •For growth faster than 4 percent, Ukraine will pay holders 40 percent of the expansion beyond 4 percent, in addition to amount for 3-4 percent growth

And today’s technology news is a pending revolution in bar codes:

The most ubiquitous barcodes allow an eight to 14 digit number to be read by a laser scanner. For example, barcode 4-003994-111000 identifies a box as being a 375 gram pack of Kellogg’s Corn Flakes.

However, that number does not directly capture any other information that might interest a shopper – such as ingredients, allergens or country of origin – nor does it provide a retailer with useful details such as the batch number or sell-by date.

That data is usually printed on the pack, but consumers increasingly want to read it online, or with a smartphone app such as one that measures calories. Retailers want data that can be scanned for tasks such as quickly locating faulty goods for recall or about-to-expire products for mark downs.

GS1, the non-profit organization that assigns the unique numbers in barcodes, has developed a double-layered barcode it calls the “data bar” which can carry some extra details such as expiry date, quantity, batch or lot number.

That has allowed German retailer Metro MEOG.DE to launch PRO Trace, a smartphone app that shows, for example, that a filet of salmon on sale at a store in Berlin on Aug. 25 was caught at the Bremnes Seashore fish farm off the coast of Norway on Aug. 17 and processed in Germany on Aug. 21.

The app also displays a map highlighting the fishing area of the catch and a detailed description of the Atlantic salmon.

Metro says the app helps customers at its cash-and-carry stores such as professional chefs from hotels and restaurants, as they can now embellish their menus with information about the exact origin of pricey delicacies such as wagyu beef.

It was a very strong day for the Canadian preferred share market, with PerpetualDiscounts gaining 12bp, FixedResets winning 81bp and DeemedRetractibles up 50bp. The Performance Highlights table is again very lengthy, but this time there are only a handful of losers. Volume was below average.

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

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

Here’s TRP:

impVol_TRP_150828
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.40 to be $1.01 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.02 cheap at its bid price of 12.65.

impVol_MFC_150828
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit again today.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 23.01 to be 0.36 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 21.76 to be 0.26 cheap.

impVol_BAM_150828
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.30 to be $1.75 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.50 and appears to be $1.24 rich.

impVol_FTS_150828
Click for Big

Implied Volatility increased a bit today and remains unreasonably high.

FTS.PR.K, with a spread of +205bp, and bid at 18.55, looks $0.14 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.50 and is $0.34 cheap.

pairs_FR_150828
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.63%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -0.84% and the unregulated issues averaging -0.35%. There is one junk outlier below -1.60%.

pairs_FF_150828
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.1907 % 1,631.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1907 % 2,852.6
Floater 4.50 % 4.57 % 57,945 16.21 3 0.1907 % 1,734.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0679 % 2,765.9
SplitShare 4.65 % 5.19 % 57,953 3.12 3 -0.0679 % 3,241.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0679 % 2,529.1
Perpetual-Premium 5.74 % 5.67 % 62,665 14.03 9 -0.1591 % 2,478.3
Perpetual-Discount 5.50 % 5.57 % 78,408 14.56 29 0.1241 % 2,567.4
FixedReset 4.98 % 4.28 % 200,504 15.76 87 0.8109 % 2,122.9
Deemed-Retractible 5.16 % 5.32 % 101,213 5.56 34 0.4990 % 2,565.6
FloatingReset 2.38 % 3.52 % 47,730 5.96 9 0.4220 % 2,186.6
Performance Highlights
Issue Index Change Notes
HSE.PR.C FixedReset -1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 4.73 %
MFC.PR.F FixedReset -1.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.11
Bid-YTW : 7.53 %
TRP.PR.B FixedReset -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 12.10
Evaluated at bid price : 12.10
Bid-YTW : 4.03 %
PVS.PR.D SplitShare -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 5.27 %
TD.PR.Y FixedReset -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 3.21 %
BAM.PF.B FixedReset -1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 4.41 %
RY.PR.N Perpetual-Discount 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 24.23
Evaluated at bid price : 24.60
Bid-YTW : 5.06 %
TD.PF.A FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.04
Evaluated at bid price : 21.04
Bid-YTW : 3.67 %
MFC.PR.I FixedReset 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.09
Bid-YTW : 5.26 %
PWF.PR.T FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 22.57
Evaluated at bid price : 23.31
Bid-YTW : 3.38 %
HSE.PR.G FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.82
Evaluated at bid price : 22.25
Bid-YTW : 4.75 %
FTS.PR.K FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 18.55
Evaluated at bid price : 18.55
Bid-YTW : 3.92 %
PVS.PR.B SplitShare 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 4.60 %
GWO.PR.H Deemed-Retractible 1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.63
Bid-YTW : 6.35 %
TD.PF.B FixedReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 3.67 %
SLF.PR.A Deemed-Retractible 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.80
Bid-YTW : 6.57 %
ENB.PR.H FixedReset 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 5.11 %
MFC.PR.C Deemed-Retractible 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.96
Bid-YTW : 6.85 %
NA.PR.S FixedReset 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 20.90
Evaluated at bid price : 20.90
Bid-YTW : 3.87 %
ENB.PR.J FixedReset 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 17.09
Evaluated at bid price : 17.09
Bid-YTW : 5.03 %
RY.PR.M FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.97
Evaluated at bid price : 22.50
Bid-YTW : 3.67 %
FTS.PR.H FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 14.90
Evaluated at bid price : 14.90
Bid-YTW : 3.64 %
BMO.PR.S FixedReset 1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.65
Evaluated at bid price : 21.93
Bid-YTW : 3.56 %
GWO.PR.R Deemed-Retractible 1.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.40
Bid-YTW : 6.44 %
RY.PR.Z FixedReset 1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.40
Evaluated at bid price : 21.40
Bid-YTW : 3.56 %
CM.PR.Q FixedReset 1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 22.29
Evaluated at bid price : 23.01
Bid-YTW : 3.73 %
GWO.PR.G Deemed-Retractible 1.83 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.93
Bid-YTW : 5.95 %
GWO.PR.Q Deemed-Retractible 1.95 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.04
Bid-YTW : 5.84 %
BIP.PR.A FixedReset 1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.44
Evaluated at bid price : 21.72
Bid-YTW : 4.88 %
ENB.PR.Y FixedReset 1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 5.22 %
TD.PF.E FixedReset 2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 22.80
Evaluated at bid price : 24.08
Bid-YTW : 3.60 %
HSE.PR.A FixedReset 2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 13.90
Evaluated at bid price : 13.90
Bid-YTW : 4.33 %
MFC.PR.M FixedReset 2.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.26
Bid-YTW : 6.11 %
MFC.PR.N FixedReset 2.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.81
Bid-YTW : 6.34 %
ENB.PF.A FixedReset 2.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 5.16 %
ENB.PF.C FixedReset 2.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 5.10 %
TD.PF.C FixedReset 2.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 3.61 %
ENB.PR.F FixedReset 2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 15.53
Evaluated at bid price : 15.53
Bid-YTW : 5.28 %
TRP.PR.G FixedReset 2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.08
Evaluated at bid price : 21.08
Bid-YTW : 4.33 %
ENB.PF.E FixedReset 2.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 17.44
Evaluated at bid price : 17.44
Bid-YTW : 5.15 %
MFC.PR.K FixedReset 2.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.41
Bid-YTW : 6.37 %
ENB.PR.B FixedReset 2.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 14.66
Evaluated at bid price : 14.66
Bid-YTW : 5.33 %
TRP.PR.F FloatingReset 2.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 14.20
Evaluated at bid price : 14.20
Bid-YTW : 3.98 %
ENB.PR.P FixedReset 2.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 15.85
Evaluated at bid price : 15.85
Bid-YTW : 5.22 %
GWO.PR.I Deemed-Retractible 3.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.05
Bid-YTW : 6.32 %
ENB.PF.G FixedReset 3.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 17.69
Evaluated at bid price : 17.69
Bid-YTW : 5.11 %
TRP.PR.A FixedReset 3.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 4.22 %
ENB.PR.N FixedReset 3.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 16.48
Evaluated at bid price : 16.48
Bid-YTW : 5.18 %
HSE.PR.E FixedReset 4.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 22.00
Evaluated at bid price : 22.50
Bid-YTW : 4.70 %
ENB.PR.D FixedReset 4.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 15.12
Evaluated at bid price : 15.12
Bid-YTW : 5.20 %
ENB.PR.T FixedReset 5.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 5.04 %
Volume Highlights
Issue Index Shares
Traded		 Notes
SLF.PR.I FixedReset 106,543 TD crossed 100,000 at 22.26.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.26
Bid-YTW : 4.94 %
CM.PR.P FixedReset 83,470 TD crossed 49,800 at 20.80; Scotia crossed 15,000 at 20.81.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 3.71 %
TRP.PR.D FixedReset 36,364 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 4.28 %
ENB.PR.Y FixedReset 31,011 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 5.22 %
BAM.PR.T FixedReset 28,650 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 17.04
Evaluated at bid price : 17.04
Bid-YTW : 4.60 %
MFC.PR.F FixedReset 24,347 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.11
Bid-YTW : 7.53 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.K Floater Quote: 10.40 – 13.24
Spot Rate : 2.8400
Average : 1.6026

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 10.40
Evaluated at bid price : 10.40
Bid-YTW : 4.60 %
FTS.PR.J Perpetual-Discount Quote: 21.51 – 22.90
Spot Rate : 1.3900
Average : 0.8039

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.51
Evaluated at bid price : 21.51
Bid-YTW : 5.55 %
TRP.PR.G FixedReset Quote: 21.08 – 23.00
Spot Rate : 1.9200
Average : 1.3507

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.08
Evaluated at bid price : 21.08
Bid-YTW : 4.33 %
RY.PR.M FixedReset Quote: 22.50 – 23.50
Spot Rate : 1.0000
Average : 0.6325

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 21.97
Evaluated at bid price : 22.50
Bid-YTW : 3.67 %
MFC.PR.G FixedReset Quote: 21.76 – 22.79
Spot Rate : 1.0300
Average : 0.6957

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.76
Bid-YTW : 5.40 %
NA.PR.W FixedReset Quote: 20.20 – 21.15
Spot Rate : 0.9500
Average : 0.6260

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-28
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 3.85 %
Market Action

August 27, 2015

Remember all that gloomy stuff posted for the past week? Well, don’t. We’re rich!

What you need to know about Thursday’s [US] economic data:

GROSS DOMESTIC PRODUCT (2Q REVISED)

  • •Climbed at a revised 3.7 percent annualized rate, exceeding all forecasts in a Bloomberg survey and up from an initial estimate of 2.3 percent
  • •All four components — consumer spending, business investment, trade and government outlays — contributed more to growth than first estimated
  • •Inventories showed biggest back-to-back quarterly increases on record
  • •Gross domestic income grew at a 0.6 percent pace in second quarter

…
JOBLESS CLAIMS (WEEK ENDED AUG. 22)

  • •Applications fell by 6,000 to 271,000 with Michigan and Kansas posting biggest drops
  • •Claims hovering close to mid-July level of 255,000 that was fewest since 1973

Just ignore the inevitable carpers:

The federal government today released two very different estimates of the U.S. economy’s growth rate in the second quarter. The one that got all the attention was the robust 3.7 percent annual rate of increase in gross domestic product. Not many people noticed that gross domestic income increased at an annual rate of just 0.6 percent.

That’s a big discrepancy for two numbers that should theoretically be the same, since they’re two ways of measuring the same thing: the size of the economy. If you believe the GDP number, you’re happy. If you believe the GDI number, you’re thinking the U.S. is skating close to a recession.

The Bureau of Economic Analysis always gives more prominence to the GDP number in its quarterly press release. But today, for the second time in a quarterly report, it released an average of GDP and GDI growth rates. That average came in at 2.1 percent after rounding—and in this case, that’s probably closer to the truth than either number alone.

So oil popped:

Oil jumped the most in more than six years, caught up in a relief rally that swept the globe as the U.S. economy grew more than predicted.

West Texas Intermediate futures rose 10 percent, the biggest gain since March 2009. U.S. gross domestic product grew at a 3.7 percent annualized rate in the second quarter, exceeding all estimates of economists surveyed by Bloomberg. The Standard & Poor’s 500 Index headed for its biggest two-day gain since 2009 as Chinese shares snapped a five-day losing streak.

Prices extended gains after Royal Dutch Shell Plc issued a force majeure on Bonny Light exports from Nigeria as it worked to repair two crude pipelines shut because of thefts and a leak.

And everybody was happy, happy, happy:

A relief rally swept around the globe, with the Dow Jones Industrial Average capping its biggest two-day gain since 2008 and Chinese shares snapping a five-day tumble. Oil jumped the most in more than six years after data showed the U.S. economy grew more than forecast in the second quarter.

American stocks briefly spiked lower in late afternoon trading, as the Standard & Poor’s 500 Index cut an advance of as much as 2.5 percent to less than 0.5 percent before reversing course and rallying again, indicating markets are still vulnerable to sudden swings.

Shares surged from Asia to the U.S. after the biggest advance in the S&P 500 in four years on Wednesday helped restore some appetite for riskier assets. The rally halted the selloff that’s engulfed markets since China devalued its currency on Aug. 11, an unexpected move that ignited concern that the slowdown in the world’s second largest economy may threaten global growth.

… except maybe bond investors:

Treasury notes fell for a third straight day on a report showing U.S. economic growth exceeded forecasts last quarter and as global stocks rallied.
…
The benchmark two-year yield rose two basis points, or 0.02 percentage point, to 0.69 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader data. The 0.625 percent security due in August 2017 fell 1/32, or 31 cents per $1,000 face amount, to 99 7/8.

The 30-year bond advanced, halting a three-day decline. The prospect of the Fed’s first interest-rate increase in nearly a decade damped expectations for inflation, and can erode longer-maturity bonds’ fixed payments.
…
Traders are pricing in a 53 percent chance of a Fed boost before the end of this year, up from 46 percent two days ago, assuming the benchmark will average 0.375 percent after the first rise.

Here’s a story a like for a lot of reasons. First, the little gal sticks it to the big boys. Second, it’s an illustration of a trend I predict towards customization and personal services (since “things” are so easy to make in a mechanical way nowadays). And, of course, pictures of women in underwear, which is always pleasant. Indie lingerie in Canada:

Uncomfortable watching intimates being developed cheaply and in a rush, and fatigued by taking direction from “men talking about what’s really hot on a woman and what women want… and then [asking me] to cut the ass out of a panty,” Russell broke out on her own in 2010. After careful planning and with strong connections in her pocket, she decided to make underwear on her own terms – and to make it better.

As it turns out, Russell is one of several young indie entrepreneurs in Canada who are applying a slow-living, small-batch ethic to underwear and, in the process, overturning established ideas about what lingerie is, how it should fit and who it’s really for.

Alesha Frederickson started March & August Underthings on January 1, 2014, with a resolution to shift the panty paradigm. She believed the lingerie available in her hometown, Winnipeg, left a lot to be desired: It was off-the-rack, unflattering and there wasn’t much variety between babydoll-style teen-focused items and the offerings from fast-fashion brands. Both, according to Frederickson, were “designed to be like a present to unwrap, like a gift to the person who was viewing, not wearing, it.”
…
In 2011, [former La Senza technical designer Sofia Sokoloff] started Sokoloff Lingerie for the middle market. She was 23 years old at the time and studying industrial management at the École supérieur de mode de Montréal. In the past four years, her brand has grown quickly: She now has two seamstresses and her own production floor that regularly makes more than 1,000 units per month. She went from two points of sale in 2011 to nearly 30 today, and most recently found a distributor in Dubai to sell her collections come fall.
…
Sokoloff was recently recognized as an industry leader when she was named the Les Offices jeunesse internationaux du Québec 2015 prizewinner – a provincial award for young entrepreneurs who are helping to make a name for Quebec on the international market. She also represented Canada earlier this month at the Curve Expo lingerie and swimwear showcase in New York City.

It was a fine day for the Canadian preferred share market, with PerpetualDiscounts up 41bp, FixedResets winning 63bp and DeemedRetractibles gaining 21bp. Yet another very lengthy Performance Highlights table is dominated by FixedReset winners with ENB issues at the top of the pile. Volume was average.

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

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

Here’s TRP:

impVol_TRP_150827
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.21 to be $1.04 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.82 cheap at its bid price of 12.75.

impVol_MFC_150827
Click for Big

Another good fit today for MFC, with Implied Volatility dropping a bit today.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 23.22 to be 0.78 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, bid at 18.92 to be 0.65 cheap.

impVol_BAM_150827
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.40 to be $1.61 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.41 and appears to be $1.20 rich.

impVol_FTS_150827
Click for Big

Implied Volatility fell substantially today but remains unreasonably high.

FTS.PR.M, with a spread of +248bp, and bid at 20.65, looks $0.16 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.45 and is $0.25 cheap.

pairs_FR_150827
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.65%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -1.00% and the unregulated issues averaging -0.15%. There are no junk outliers.

pairs_FF_150827
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 1.5822 % 1,628.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.5822 % 2,847.1
Floater 4.51 % 4.58 % 58,478 16.20 3 1.5822 % 1,731.1
OpRet 0.00 % 0.00 % 0 0.00 0 0.3269 % 2,767.8
SplitShare 4.65 % 5.04 % 57,880 3.12 3 0.3269 % 3,243.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3269 % 2,530.8
Perpetual-Premium 5.73 % 5.56 % 63,094 2.03 9 0.2436 % 2,482.3
Perpetual-Discount 5.51 % 5.57 % 78,914 14.55 29 0.4087 % 2,564.2
FixedReset 5.02 % 4.30 % 197,369 15.62 87 0.6251 % 2,105.8
Deemed-Retractible 5.18 % 5.27 % 104,080 5.56 34 0.2125 % 2,552.9
FloatingReset 2.39 % 3.61 % 47,921 5.96 9 -0.2059 % 2,177.4
Performance Highlights
Issue Index Change Notes
HSE.PR.E FixedReset -3.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 21.34
Evaluated at bid price : 21.63
Bid-YTW : 4.99 %
TRP.PR.G FixedReset -2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 4.44 %
FTS.PR.H FixedReset -2.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 14.66
Evaluated at bid price : 14.66
Bid-YTW : 3.70 %
TRP.PR.B FixedReset -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 12.25
Evaluated at bid price : 12.25
Bid-YTW : 3.98 %
IAG.PR.A Deemed-Retractible -1.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 6.59 %
MFC.PR.K FixedReset -1.51 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.92
Bid-YTW : 6.71 %
PWF.PR.P FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 15.57
Evaluated at bid price : 15.57
Bid-YTW : 3.63 %
BMO.PR.Q FixedReset -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.41
Bid-YTW : 4.73 %
TRP.PR.D FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 4.30 %
GWO.PR.N FixedReset 1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.15
Bid-YTW : 8.20 %
TD.PR.Y FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.96
Bid-YTW : 3.02 %
W.PR.H Perpetual-Discount 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 23.63
Evaluated at bid price : 23.90
Bid-YTW : 5.83 %
MFC.PR.B Deemed-Retractible 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.35
Bid-YTW : 6.77 %
PWF.PR.K Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 22.39
Evaluated at bid price : 22.65
Bid-YTW : 5.51 %
PVS.PR.D SplitShare 1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 5.04 %
W.PR.J Perpetual-Discount 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 23.63
Evaluated at bid price : 23.90
Bid-YTW : 5.94 %
POW.PR.B Perpetual-Discount 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 23.54
Evaluated at bid price : 23.81
Bid-YTW : 5.69 %
ELF.PR.F Perpetual-Discount 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 22.66
Evaluated at bid price : 22.90
Bid-YTW : 5.86 %
CM.PR.Q FixedReset 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 22.04
Evaluated at bid price : 22.60
Bid-YTW : 3.81 %
PWF.PR.T FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 22.42
Evaluated at bid price : 23.05
Bid-YTW : 3.43 %
TRP.PR.A FixedReset 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 15.42
Evaluated at bid price : 15.42
Bid-YTW : 4.38 %
BAM.PR.X FixedReset 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 14.72
Evaluated at bid price : 14.72
Bid-YTW : 4.55 %
NA.PR.S FixedReset 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 20.61
Evaluated at bid price : 20.61
Bid-YTW : 3.92 %
RY.PR.M FixedReset 1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 21.73
Evaluated at bid price : 22.15
Bid-YTW : 3.74 %
ELF.PR.H Perpetual-Discount 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 23.78
Evaluated at bid price : 24.25
Bid-YTW : 5.73 %
PWF.PR.F Perpetual-Discount 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 24.00
Evaluated at bid price : 24.25
Bid-YTW : 5.46 %
ENB.PR.B FixedReset 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 14.27
Evaluated at bid price : 14.27
Bid-YTW : 5.48 %
HSE.PR.C FixedReset 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 21.13
Evaluated at bid price : 21.13
Bid-YTW : 4.73 %
MFC.PR.N FixedReset 2.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.40
Bid-YTW : 6.62 %
ENB.PR.D FixedReset 2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 14.41
Evaluated at bid price : 14.41
Bid-YTW : 5.46 %
RY.PR.H FixedReset 2.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 3.63 %
FTS.PR.G FixedReset 2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 18.45
Evaluated at bid price : 18.45
Bid-YTW : 3.96 %
BAM.PR.C Floater 2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 10.45
Evaluated at bid price : 10.45
Bid-YTW : 4.58 %
BAM.PR.T FixedReset 2.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 17.03
Evaluated at bid price : 17.03
Bid-YTW : 4.60 %
BAM.PR.K Floater 2.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 10.40
Evaluated at bid price : 10.40
Bid-YTW : 4.60 %
BIP.PR.A FixedReset 2.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.00 %
ENB.PR.F FixedReset 2.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 15.16
Evaluated at bid price : 15.16
Bid-YTW : 5.41 %
ENB.PR.P FixedReset 2.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 15.40
Evaluated at bid price : 15.40
Bid-YTW : 5.37 %
ENB.PF.A FixedReset 3.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 16.86
Evaluated at bid price : 16.86
Bid-YTW : 5.28 %
ENB.PF.C FixedReset 3.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 5.22 %
MFC.PR.G FixedReset 3.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.80
Bid-YTW : 5.38 %
FTS.PR.M FixedReset 3.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 4.02 %
ENB.PF.E FixedReset 3.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.28 %
ENB.PR.N FixedReset 3.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 15.85
Evaluated at bid price : 15.85
Bid-YTW : 5.39 %
ENB.PR.T FixedReset 3.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 15.65
Evaluated at bid price : 15.65
Bid-YTW : 5.30 %
ENB.PR.J FixedReset 4.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 16.85
Evaluated at bid price : 16.85
Bid-YTW : 5.10 %
ENB.PR.H FixedReset 5.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 14.30
Evaluated at bid price : 14.30
Bid-YTW : 5.18 %
Volume Highlights
Issue Index Shares
Traded		 Notes
GWO.PR.P Deemed-Retractible 121,057 Nesbitt crossed 120,000 at 24.55.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 5.81 %
PWF.PR.L Perpetual-Discount 119,900 Nesbitt crossed 119,900 at 23.75.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 23.25
Evaluated at bid price : 23.51
Bid-YTW : 5.47 %
BNS.PR.Q FixedReset 82,500 TD crossed blocks of 39,900 and 40,000, both at 24.87.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.82
Bid-YTW : 3.16 %
TD.PF.B FixedReset 65,490 TD crossed 40,000 at 20.73.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 20.74
Evaluated at bid price : 20.74
Bid-YTW : 3.72 %
ENB.PR.Y FixedReset 62,688 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 15.20
Evaluated at bid price : 15.20
Bid-YTW : 5.33 %
ENB.PF.C FixedReset 54,355 RBC crossed 40,000 at 17.02.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 5.22 %
There were 34 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: 21.35 – 22.22
Spot Rate : 0.8700
Average : 0.5029

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.35
Bid-YTW : 6.77 %
IAG.PR.A Deemed-Retractible Quote: 21.50 – 22.18
Spot Rate : 0.6800
Average : 0.3913

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 6.59 %
RY.PR.J FixedReset Quote: 22.62 – 23.41
Spot Rate : 0.7900
Average : 0.5158

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 22.06
Evaluated at bid price : 22.62
Bid-YTW : 3.74 %
HSE.PR.C FixedReset Quote: 21.13 – 22.05
Spot Rate : 0.9200
Average : 0.6783

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 21.13
Evaluated at bid price : 21.13
Bid-YTW : 4.73 %
IFC.PR.C FixedReset Quote: 20.55 – 21.20
Spot Rate : 0.6500
Average : 0.4603

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.55
Bid-YTW : 6.00 %
PWF.PR.S Perpetual-Discount Quote: 22.65 – 23.26
Spot Rate : 0.6100
Average : 0.4409

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-27
Maturity Price : 22.28
Evaluated at bid price : 22.65
Bid-YTW : 5.34 %
Market Action

August 26, 2015

Well, it was another day-and-a-half for equities:

Two things that have supported U.S. stocks in the past, dovish words from the Federal Reserve and improving economic data, triggered the biggest rally since 2011 and halted a plunge that erased $2.2 trillion from share values.

Technology companies led the gains with Apple Inc., Google Inc. and Intel Inc. rising at least 5.5 percent. Amazon.com Inc. surged 7.4 percent, and Netflix Inc. posted a two-day gain of 14 percent. JPMorgan Chase & Co. and Citigroup Inc. increased more than 4.8 percent. Cameron International Corp. soared 41 percent after agreeing to be bought by Schlumberger Ltd. in a $14.8 billion deal.

Gains in equities accelerated in the final hour as the Standard & Poor’s 500 Index climbed 3.9 percent to 1,940.51 at 4 p.m. in New York, halting a six-day slide that was its steepest in four years. The Dow Jones Industrial Average added 619.07 points, or 4 percent, to 16,285.51. The Nasdaq Composite Index rose 4.2 percent for its strongest increase since August 2011. About 10.7 billion shares traded hands on U.S. exchanges, 55 percent above the three-month average.

Dovish words from the Fed? Dudley pointed out that financial markets are important:

Global stock-market turmoil has weakened the case for raising interest rates in September, Federal Reserve Bank of New York President William C. Dudley said, cautioning it’s important not to overreact to short-term developments.

“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” Dudley told a news conference Wednesday at the New York Fed.

“Normalization could become more compelling by the time of the meeting as we get additional information on how the U.S. economy is performing, and more information on international and financial market developments.”

Treasuries got whacked:

Treasuries suffered their biggest two-day tumble in six weeks as an unexpected jump in durable-goods orders and a recovery in stocks suppressed demand.

Losses deepened after an auction of five-year Treasuries drew the least interest since 2009, signaling that investors’ safe-haven appetite may have waned.

Debt found only temporary support after Federal Reserve Bank of New York President William Dudley said the case for increasing interest rates in September is less compelling because of worldwide market turmoil. Buyers demurred without evidence that the turbulence will slow the U.S. economy.

Real world effects of financial markets? There are fears that oil prices and currency turmoil are favouring ISIS:

Any currency crisis usually comes with dire consequences for a country, and the threat of one in Iraq shows how the impact can go beyond the economy and markets.

A foreign-exchange crunch because of a drop in oil prices could force a devaluation of the dinar and risk making the fight against Islamic State militants even tougher. The nation, currently OPEC’s biggest producer after Saudi Arabia, is dependent on oil revenue to fund its operations on the battlefield and quell growing unrest over the economy.

Dollar reserves tumbled about 20 percent to $59 billion as of July 23 since the fighting escalated a year before, and the losses are accelerating. In the first 25 days of August, the central bank sold $4.6 billion of currency to keep the dinar at a pegged rate, a daily outflow of about $184 million, data compiled by Bloomberg show.
…
Saudi Arabia’s central bank this week said it’s committed to the riyal’s dollar peg, the Saudi-owned Al Arabiya television reported, amid speculation the country would devalue its currency after the plunge in oil prices.

Canadian Utilities Limited, proud issuer of CU.PR.C, CU.PR.D, CU.PR.E, CU.PR.F, CU.PR.G and CU.PR.H, has been confirmed at Pfd-2(high) by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Unsecured Debentures rating of Canadian Utilities Limited (CU or the Company) at “A,” the Commercial Paper rating at R-1 (low), and the Cum. Preferred Shares rating at Pfd-2 (high). All trends are Stable. The ratings of CU are supported by predictable earnings from its regulated subsidiaries, which are expected to account for approximately 80% of consolidated earnings over the next several years. However, the ratings assume that earnings contribution from the regulated business will gradually decrease to around 70% (but still higher than its historical weighting of 60%) of consolidated earnings over the long term with (1) the downshifting of Alberta’s economy and expected completion of the “big build” associated with electric transmission infrastructure over the next two years and (2) the Company’s focus on contracted, non-regulated business opportunities in Canada, Mexico and Australia. Although CU’s non-regulated segment provides a source of earnings growth and diversification benefits, it also entails higher business risk than that of the regulated utility business. CU’s non-regulated business is challenged by lower long-term earnings visibility and recontracting risk.

The Canadian preferred share market had a bit of rebound today, with both PerpetualDiscounts and FixedResets gaining 10bp and DeemedRetractibles up 28bp. Floaters got hammered again though, so at least something is familiar! The Performance Highlights table continues to show a lot of churning, with 21 losers and 22 winners. Volume was on the low side of average.

PerpetualDiscounts now yield 5.57%, equivalent to 7.24% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.0%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 325bp, a sharp rise from the 310bp reported August 12.

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

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

Here’s TRP:

impVol_TRP_150826
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.20 to be $0.82 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.81 cheap at its bid price of 12.84.

impVol_MFC_150826
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Another good fit today for MFC, while the series maintains its high level of Implied Volatility.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 23.31 to be 1.07 rich, while MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 19.00 to be 0.81 cheap.

impVol_BAM_150826
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.45 to be $1.51 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.23 and appears to be $1.05 rich.

impVol_FTS_150826
Click for Big

Implied Volatility jumped today and is unreasonably high.

FTS.PR.K, with a spread of +205bp, and bid at 18.26, looks $0.26 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.01 and is $0.37 cheap.

pairs_FR_150826
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.60%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -0.88% and the unregulated issues averaging -0.22%. There is one junk outlier below -1.60%.

pairs_FF_150826
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -2.4567 % 1,603.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -2.4567 % 2,802.8
Floater 4.58 % 4.69 % 58,355 15.99 3 -2.4567 % 1,704.1
OpRet 0.00 % 0.00 % 0 0.00 0 0.0272 % 2,758.8
SplitShare 4.66 % 5.26 % 57,966 3.12 3 0.0272 % 3,233.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0272 % 2,522.6
Perpetual-Premium 5.74 % 5.71 % 63,469 14.06 9 0.0754 % 2,476.2
Perpetual-Discount 5.53 % 5.57 % 79,770 14.54 29 0.1050 % 2,553.8
FixedReset 5.05 % 4.30 % 199,096 15.50 87 0.1005 % 2,092.7
Deemed-Retractible 5.19 % 5.29 % 99,660 5.56 34 0.2804 % 2,547.4
FloatingReset 2.38 % 3.52 % 47,501 5.96 9 -0.3427 % 2,181.9
Performance Highlights
Issue Index Change Notes
MFC.PR.N FixedReset -4.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.00
Bid-YTW : 6.89 %
BAM.PR.K Floater -3.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 10.12
Evaluated at bid price : 10.12
Bid-YTW : 4.73 %
BAM.PR.C Floater -3.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 10.20
Evaluated at bid price : 10.20
Bid-YTW : 4.69 %
NA.PR.S FixedReset -2.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 20.30
Evaluated at bid price : 20.30
Bid-YTW : 3.98 %
TRP.PR.F FloatingReset -2.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 14.00
Evaluated at bid price : 14.00
Bid-YTW : 4.10 %
MFC.PR.K FixedReset -2.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.21
Bid-YTW : 6.51 %
FTS.PR.J Perpetual-Discount -2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 21.28
Evaluated at bid price : 21.55
Bid-YTW : 5.53 %
IAG.PR.G FixedReset -1.93 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.85
Bid-YTW : 4.34 %
BNS.PR.D FloatingReset -1.80 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.14
Bid-YTW : 4.89 %
RY.PR.H FixedReset -1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 3.72 %
BAM.PR.X FixedReset -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 4.62 %
VNR.PR.A FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 4.58 %
BMO.PR.Y FixedReset -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 22.59
Evaluated at bid price : 23.60
Bid-YTW : 3.62 %
NA.PR.W FixedReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 20.05
Evaluated at bid price : 20.05
Bid-YTW : 3.88 %
BIP.PR.A FixedReset -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.16 %
GWO.PR.N FixedReset -1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.00
Bid-YTW : 8.32 %
MFC.PR.G FixedReset -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.07
Bid-YTW : 5.82 %
BAM.PF.E FixedReset -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 20.33
Evaluated at bid price : 20.33
Bid-YTW : 4.34 %
MFC.PR.L FixedReset -1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.50
Bid-YTW : 6.42 %
POW.PR.B Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 23.21
Evaluated at bid price : 23.51
Bid-YTW : 5.76 %
MFC.PR.J FixedReset -1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.74
Bid-YTW : 5.82 %
FTS.PR.M FixedReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 4.17 %
HSE.PR.G FixedReset 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 21.61
Evaluated at bid price : 21.95
Bid-YTW : 4.82 %
BAM.PR.M Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 20.38
Evaluated at bid price : 20.38
Bid-YTW : 5.93 %
BAM.PF.F FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 21.86
Evaluated at bid price : 22.25
Bid-YTW : 4.18 %
CM.PR.Q FixedReset 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 21.85
Evaluated at bid price : 22.30
Bid-YTW : 3.87 %
IFC.PR.A FixedReset 1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.43
Bid-YTW : 8.42 %
HSE.PR.E FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 21.86
Evaluated at bid price : 22.30
Bid-YTW : 4.83 %
PWF.PR.P FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 15.79
Evaluated at bid price : 15.79
Bid-YTW : 3.58 %
ENB.PR.J FixedReset 1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 16.19
Evaluated at bid price : 16.19
Bid-YTW : 5.32 %
BAM.PF.A FixedReset 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 21.29
Evaluated at bid price : 21.58
Bid-YTW : 4.30 %
ENB.PR.B FixedReset 1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 14.03
Evaluated at bid price : 14.03
Bid-YTW : 5.57 %
TRP.PR.A FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 15.40
Evaluated at bid price : 15.40
Bid-YTW : 4.47 %
ENB.PR.A Perpetual-Discount 1.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 24.25
Evaluated at bid price : 24.55
Bid-YTW : 5.62 %
BAM.PR.R FixedReset 2.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 4.67 %
HSE.PR.A FixedReset 2.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 13.55
Evaluated at bid price : 13.55
Bid-YTW : 4.57 %
ENB.PR.Y FixedReset 2.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 15.06
Evaluated at bid price : 15.06
Bid-YTW : 5.38 %
ENB.PF.G FixedReset 3.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.33 %
ENB.PF.C FixedReset 3.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 5.40 %
SLF.PR.B Deemed-Retractible 3.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.70
Bid-YTW : 6.68 %
TD.PF.E FixedReset 3.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 22.69
Evaluated at bid price : 23.82
Bid-YTW : 3.65 %
PWF.PR.S Perpetual-Discount 4.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 22.16
Evaluated at bid price : 22.50
Bid-YTW : 5.37 %
FTS.PR.H FixedReset 5.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 14.99
Evaluated at bid price : 14.99
Bid-YTW : 3.62 %
Volume Highlights
Issue Index Shares
Traded		 Notes
NA.PR.M Deemed-Retractible 184,940 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-09-25
Maturity Price : 25.50
Evaluated at bid price : 25.77
Bid-YTW : -4.76 %
RY.PR.B Deemed-Retractible 168,722 RBC crossed two blocks of 50,000 each and one of 49,900, all at 25.00.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.94
Bid-YTW : 4.77 %
RY.PR.J FixedReset 68,048 RBC crossed 50,000 at 22.55.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 22.11
Evaluated at bid price : 22.70
Bid-YTW : 3.72 %
ENB.PF.E FixedReset 45,964 TD crossed 18,000 at 16.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 16.40
Evaluated at bid price : 16.40
Bid-YTW : 5.49 %
ENB.PF.G FixedReset 35,530 TD crossed 18,600 at 16.85.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.33 %
TRP.PR.B FixedReset 31,097 Nesbitt crossed 25,000 at 12.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 12.60
Evaluated at bid price : 12.60
Bid-YTW : 3.93 %
There were 29 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.G FixedReset Quote: 21.07 – 21.99
Spot Rate : 0.9200
Average : 0.6245

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.07
Bid-YTW : 5.82 %
VNR.PR.A FixedReset Quote: 19.50 – 20.35
Spot Rate : 0.8500
Average : 0.6013

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 4.58 %
BAM.PR.X FixedReset Quote: 14.50 – 14.95
Spot Rate : 0.4500
Average : 0.2670

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 4.62 %
MFC.PR.N FixedReset Quote: 19.00 – 19.80
Spot Rate : 0.8000
Average : 0.6283

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.00
Bid-YTW : 6.89 %
POW.PR.B Perpetual-Discount Quote: 23.51 – 23.96
Spot Rate : 0.4500
Average : 0.2919

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 23.21
Evaluated at bid price : 23.51
Bid-YTW : 5.76 %
RY.PR.H FixedReset Quote: 20.73 – 21.30
Spot Rate : 0.5700
Average : 0.4125

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-26
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 3.72 %
New Issues

BSC.PR.B Refunding Issue Moves Closer

The Bank of Nova Scotia has announced:

BNS Split Corp. II (the “Company”) announced today that the final condition required to extend the term of the Company for an additional five years to September 22, 2020, has been met as holders of 89.2% of Class A Capital Shares (“Capital Shares”) have elected to extend. Holders of Capital Shares previously approved the extension of the term of the Company subject to a minimum of 800,000 Capital Shares remain outstanding after giving effect to the special retraction right (the “Special Retraction Right”).

Under the Special Retraction Right, 137,506 Capital Shares were tendered to the Company for payment on September 22, 2015. The holders of the remaining 1,138,286 Capital Shares will continue to enjoy the benefits of a leveraged participation in the capital appreciation of the Company’s portfolio of common shares of The Bank of Nova Scotia while potentially deferring any capital gains tax liability which would otherwise be realized on the redemption of their Capital Shares.
The Company’s Class B Preferred Shares, Series 1 will be redeemed by the Company on September 22, 2015 in accordance with the redemption provisions at a price per share equal to the lesser of $18.85 and the Net Asset Value per Unit. In order to maintain the leveraged “split share” structure of the Company, the Company intends to create and issue a new series of Class B Preferred Shares to be called the Series 2 Preferred Shares, which are expected to be issued immediately following this redemption.

BNS Split Corp. II is a mutual fund corporation created to hold a portfolio of common shares of The Bank of Nova Scotia. Capital Shares and Preferred Shares of BNS Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols BSC and BSC.PR.B respectively.

… and the new issue was assigned a provisional rating of Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today assigned a provisional rating of Pfd-2 (low) to the Class B Preferred Shares, Series 2 (the Preferred Shares) to be issued by BNS Split Corp. II (the Company). The Preferred Shares will be issued as part of a share capital reorganization, which permits holders of Class A Capital Shares (the Capital Shares) to extend their investment in the Company beyond the redemption date of September 22, 2015, for an additional five years to September 22, 2020. The Preferred Shares will be issued to maintain the leveraged split share structure of the Company, so that the number of issued and outstanding Capital Shares are twice the number of issued and outstanding Preferred Shares. The Preferred Shares and Capital Shares will be redeemed by the Company on September 22, 2020.

There is a preliminary short form prospectus available on SEDAR dated August 25, which I am not permitted to link to directly since the Canadian Securities Administrators think it’s bad enough that investor scum have any access at all to public documents and are doing their level best to make access inconvenient.

The critical bits of information, such as coupon rate, have not yet been filled in but there are some items of interest:

The Series 2 Preferred Shares may be surrendered for retraction at any time by the holders. Retraction payments for Series 2 Preferred Shares will be made on the 22nd day of a month or, where such day is not a business day, on the preceding business day (a “Retraction Payment Date”) provided the Series 2 Preferred Shares have been surrendered for retraction no later than the first business day before the 8th day of that month.

A holder who surrenders a Series 2 Preferred Share for retraction will receive on the Retraction Payment Date the amount, if any, by which 95% of the Unit Value exceeds the aggregate of (i) the average cost to the Company, including commissions, of purchasing two Capital Shares in the market; and (ii) $1.00.

That’s a pretty awful retraction price; it won’t support the preferred share value very much in the event of a crash in the underlying portfolio of BNS common.

Any Series 2 Preferred Shares still outstanding on the Redemption Date will be redeemed by the Company on the Redemption Date at a price per share equal to the lesser of the issue price of a Series 2 Preferred Share and the Unit Value. See “Description of the Securities Distributed – Attributes of the Series 2 Preferred Shares”.

In addition, the Company may also redeem Series 2 Preferred Shares on any Annual Retraction Payment Date (defined herein) at a price per share equal to the issue price of a Series 2 Preferred Share. The Company will only redeem Series 2 Preferred Shares in these circumstances to the extent that unmatched Capital Shares have been tendered for retraction under the Special Annual Retraction (defined herein). Where less than all the Series 2 Preferred Shares are to be so redeemed, Series 2 Preferred Shares shall be redeemed on a pro rata basis or in such other manner as is approved by the Board of Directors of the Company. The Company may also redeem Series 2 Preferred Shares in the circumstances described under “Changes Affecting Portfolio Securities.”

In addition to the annual redemption right as described above, Series 2 Preferred Shares may be redeemed by the Company at any time prior to the Redemption Date at a price (the “Premium Redemption Price”) which, until September 2016, will equal
the issue price of the Series 2 Preferred Shares multiplied by a premium which will initially be 4% and which will decline by 1% each year to nil after September 22, 2019.

And that’s a pretty onerous redemption condition. Split Shares which can be redeemed annually at par are rarely a good investment unless they’re pretty well discounted, since there’s a lot of uncertainty about redemption and less possibility of capital gain.

There is no NAV test for Capital Unit distributions, but according to the July Information Circular:

Holders of Class A Capital Shares are entitled to receive dividends as declared by the Board of Directors.

The policy of the Board of Directors is to only pay a dividend on the Class A Capital Shares provided that the Unit Value ras herein described) at the time of declaration of such dividend is, after giving effect to the dividend, greater than or equal to the original issue price of the Series 1 Preferred Shares. The current running yield on the Class A Capital Shares is 2.97% based on the closing price of the Class A Capital Shares of $19.85 on June 26, 2015.

Policies are nice things to have. Contractual obligations are better.