Interesting External Papers

TIPS Liqudity

Here’s an interesting paper partly about TIPS liqudity, titled The Microstructure of the TIPS Market by Michael J. Fleming and Neel Krishnan:

  • • The potential advantages of Treasury inflationprotected securities have yet to be fully realized, mainly because TIPS are not as liquid as nominal Treasury securities.
  • • The less liquid nature of TIPS may adversely affect prices relative to those of nominal securities, offsetting the benefits of TIPS having no inflation risk.
  • • A study of TIPS, using novel tick data from the interdealer market, provides new evidence on the liquidity of the securities and how liquidity differs from that of nominal securities.
  • • Analysis of various liquidity measures suggests that trading activity and the incidence of posted quotes may be better cross-sectional gauges of TIPS liquidity than bid-ask spreads or quoted depth.
  • • Differences in intraday trading patterns and announcement effects between TIPS and nominal securities likely reflect the different use, ownership, and cash-flow attributes of the securities

…
These potential benefits have not been fully realized, mainly because TIPS lack market liquidity compared with nominal securities.{2} This lack of liquidity is thought to result in TIPS yields having a liquidity premium relative to nominal securities, which offsets the inflation risk premium.{3} Similarly, the presence of a liquidity premium in TIPS yields complicates inferences of inflation expectations, particularly if the premium changes over time. However, despite the importance of TIPS liquidity and the market’s large size ($728 billion as of November 30, 2011), there has been virtually no quantitative evidence on the securities’ liquidity.

Footnote 2: Market liquidity is defined here as the cost of executing a trade, which can depend on the trade’s size, timing, venue, and counterparties. It is often gauged by various measures, including the bid-ask spread, the price impact of trades, quoted depth, and trading activity.

Footnote 3: D’Amico, Kim, and Wei (2008) estimate that the liquidity premium was about 1 percent in the early years of the TIPS program. Pflueger and Viceira (2011) find that the liquidity premium is around 40 to 70 basis points during normal times, but was more during the early years of TIPS and during the 2008-09 financial crisis. Sack and Elsasser (2004) argue that TIPS have not reduced the Treasury’s financing costs because of several factors, including lower liquidity. Roush (2008) finds that TIPS have saved the government money, except during the early years of the program. Dudley, Roush, and Ezer (2009) show that the ex ante costs of TIPS issuance are about equal to the costs of nominal securities issuance.
…
Our study proceeds as follows. Section 2 discusses institutional features of the market for TIPS. In Section 3, we describe the tick data used in our empirical analysis. Section 4 reports our empirical results, including trading activity by sector, the liquidity of on-the-run and off-the-run securities, price impact estimates, intraday patterns in trading activity and liquidity, and the effects of major announcements. Section 5 concludes.
…
Our analysis of the TIPS market identifies several microstructure features also present in the nominal Treasury securities market, but several unique features as well. As in the nominal market, there is a marked difference in trading activity between on-the-run and off-the-run TIPS, as trading drops sharply when securities go off the run. In contrast to the nominal market, there is little difference in bid-ask spreads or quoted depth between these securities, but there is a difference in the incidence of posted quotes. The results suggest that trading activity and quote incidence may be better crosssectional measures of liquidity in the TIPS market than bid-ask spreads or quoted depth.

Intraday patterns of trading activity are broadly similar in the TIPS and nominal markets, but TIPS activity peaks somewhat later, likely indicating differences in the use and ownership of these securities. Announcement effects are also different, probably reflecting the types of information most important to the particular securities. The employment report is the most important announcement in the nominal market, but it elicits relatively little response in the TIPS market in terms of trading activity. In contrast, announcements of the consumer price index and the results of TIPS auctions precipitate significant increases in TIPS trading activity, likely indicating these announcements’ particular importance to TIPS valuation

There’s also Trading Activity and Price Transparency in the Inflation Swap Market by Michael J. Fleming and John R. Sporn:

  • • Liquidity and price transparency in derivatives markets have become increasingly important concerns, yet a lack of transaction data has made it hard to fully understand how the inflation swap and other derivatives markets work.
  • • This study uses novel transaction data to shed light on trading activity and price transparency in the rapidly growing U.S. inflation swap market.
  • • It reveals that the market is reasonably liquid and transparent, despite its over-the-counter nature and low level of trading activity. Transaction prices are typically near widely available end-of-day quoted prices and realized bid-ask spreads are modest.
  • • The authors also identify concentrations of activity in certain tenors and trade sizes and among certain market participants as well as point to various attributes that explain trade sizes and price deviations.

…
Several recent studies have compared the inflation swap rate with breakeven inflation as calculated from Treasury inflationprotected securities (TIPS) and nominal Treasury bonds.1 The two market-based measures of expected inflation should be equal in the absence of market frictions. In practice, inflation swap rates are almost always higher, with the spread exceeding 100 basis points during the recent financial crisis.
…
Our data set contains 144 U.S. dollar zero-coupon inflation swap transactions, or an average of 2.2 transactions over the 65 trading days in our sample.9 Daily notional trading volume is estimated to average $65 million. Three-quarters (108/144) of the transactions are new trades, 24 percent (35/144) are assignments of existing transactions (whereby one counterparty to a swap steps out of the deal and assigns its position to a new counterparty), and 1 percent (1/144) are cancelations. One new transaction has a forward start date, for which the accrual period begins two years after the trade date, with the remaining 107 new transactions starting two or three business days after the trade date.
…
We also identify a concentration of activity among certain market participants. In particular, 54 percent (78/144) of our trades are between G14 dealers, 39 percent (56/144) are between G14 dealers and customers, and 7 percent (10/144) are between customers. Of the new trades between G14 dealers and customers, the G14 dealer receives fixed 63 percent (19/30) of the time and pays fixed 37 percent (11/30) of the time.11 New trades in which dealers receive fixed are larger, so that dealers receive fixed for 81 percent of new contract volume. That is, dealers are largely paying inflation and receiving fixed in their interactions with customers.
…
Our analysis of a novel transaction data set uncovers relatively few trades—just over two per day –in the U.S. zero-coupon inflation swap market. Trade sizes, however, are large, averaging almost $30 million. Sizes are generally larger for new trades, especially if they are bulk and allocated across subaccounts, and tend to decrease with contract tenor. We also identify concentrations of activity—with 45 percent of trades at the ten-year tenor, and 36 percent of all trades (and 48 percent of new ones) for a notional amount of $25 million. Over half the trades (54 percent) are between G14 dealers, 39 percent are between G14 dealers and other market participants, and 7 percent are between other market participants. We identify just eighteen market participants during our study’s sample period, made up of nine G14 dealers and nine other market participants.

Despite the low level of activity in this over-the-counter market, we find that transaction prices are quite close to widely available end-of-day quoted prices. The differential between transaction prices and end-of-day quoted prices tends to decrease with tenor and increase with trade size and for customer trades. By comparing trades for which customers pay fixed with trades for which they receive fixed, we are able to infer a realized bid-ask spread for customers of 3 basis points, which is consistent with the quoted bid-ask spreads reported by dealers.

In sum, the U.S. inflation swap market appears reasonably liquid and transparent despite the market’s over-the-counter nature and modest activity. This likely reflects the fact that the market is part of a larger market for transferring inflation risk that includes TIPS and nominal Treasury securities. As a result, inflation swap positions can be hedged quickly and with low transaction costs using other instruments, and prices of these other instruments can be used to efficiently price inflation swaps, despite modest swap activity

Not exactly the world’s biggest market! I looked up inflation swaps because I was interested in the question “Who the hell pays inflation”, which came to mind due to this article in the Globe, The government ditched inflation-protected bonds – companies should start issuing their own by JOHN H. COCHRANE AND JON HARTLEY:

If the government won’t do it, corporations, banks and financial institutions should issue these bonds themselves rather than just complain. Not every asset must be provided by the government.
…
If the government won’t do it, however, there is no reason that the government’s critics can’t issue them. Companies can issue real return bonds, as they already issue U.S. dollar bonds. Banks can offer real return accounts and certificates of deposit.

If the government steps out of the market, there’s all the more demand for private issuers to step in. Pension funds desperate to replace vanishing inflation-indexed government bonds are natural clients. Company profits rise and fall with inflation, so they have a natural incentive to issue bonds whose payments rise and fall with inflation. Even mortgage rates could rise and fall with an index of wages.

Why not? Broadly, this reluctance seems one more symptom of an overleveraged, overregulated, government-dependent and not very competitive or innovative banking and financial system. Banks and other financial institutions only want to issue or expand a new product if they can quickly lay off the risk onto the government, and earn steady fees. The model of issuing equity to bear risk and then offering a profitable innovative product to consumers is too out of fashion.

Frankly, I thought the article was naive, but thought: “Who the hell would issue these things? Who’s got a natural hedge against inflation that they might want to offload? Assuming they can recover the ultra-massive liquidity premium there’s gonna be on a, say, 1-billion long-term linker issue from a corporation, that is.” All I could think of was utility companies who have long-term assets currently financed by long-term nominal bonds, with the assets producing commodity-linked revenue. Maybe they could finance with linkers instead? Maybe pipelines? So, I started looking for information on inflation swaps …

I can’t answer the question definitively. The authors of the swaps paper didn’t investigate where the open interest is lodged. But there is enough information in the paper that I’m willing to bet a nickel (a full nickel, mind you, not just a few pennies) that it’s the dealers. The dealers will pay inflation and they buy TIPS to hedge. BORRRRRRR-ING! And it doesn’t work without government-issued linkers.

Market Action

February 10, 2023

Jobs, jobs, jobs!:

The labour market added 150,000 positions last month, following a gain of roughly 69,000 jobs in December, Statistics Canada said in a report published Friday. Financial analysts were expecting an increase of 15,000. The unemployment rate held steady at 5 per cent.

The hiring surge comes a week after the United States reported a gain of 517,000 positions in January, an outsized increase that also surprised analysts.

By now, many economists projected that Canada would be mired in the early weeks of a mild recession. However, Friday’s report shows that employers are continuing to add to their headcounts, despite the potential stress caused by sharply higher borrowing rates.
…
Friday’s report pointed to strength in various parts of the labour market. Jobs with full-time hours increased by 121,000 in January, while the private sector drove a gain of 115,000 positions.

After several months of losses, retail and wholesale trade jumped by 59,000 jobs, the largest gain by industry. Health care and social assistance rose by 40,000.

The labour market is drawing plenty of new participants. In January, an additional 153,000 people joined the labour force – meaning, they either took jobs or are actively looking for one. The participation rate is increasing in most major demographic groups.
…
Average hourly wages rose 4.5 per cent over the past year, down from 4.8 per cent in December. However, the year-over-year comparison was partially a reflection of higher wages in January, 2022, when many lower-paid service workers were temporarily laid off as the Omicron variant of COVID-19 led to a spike of infections.

Liquidity is never important to retail … until it is:

Certain alternative investment funds are facing elevated redemption demands from retail investors — a development that poses possible regulatory and reputational risks to alt fund managers, if not an operational challenge, says Fitch Ratings.

In a new report, the rating agency said certain alt investment vehicles known as “perpetual non-traded” funds (typically REITs or business development corporations) have faced increased redemption requests from investors in recent months.

These vehicles, which aren’t publicly traded and so have no public liquidity, cap redemptions to preserve assets and fund managers’ fee revenues. Typically, funds cap redemptions at 2% of their net asset value per month, or 5% per quarter, it noted.

Recently, several funds have invoked their redemption limits after increased demands from investors hit their pre-determined thresholds, Fitch reported.

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 0.2246 % 2,572.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.2246 % 4,934.4
Floater 8.76 % 8.93 % 49,878 10.39 2 0.2246 % 2,843.7
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0359 % 3,429.0
SplitShare 4.90 % 6.43 % 57,370 2.78 7 -0.0359 % 4,095.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0359 % 3,195.1
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.5495 % 2,856.8
Perpetual-Discount 5.97 % 6.03 % 74,063 13.85 37 -0.5495 % 3,115.2
FixedReset Disc 5.31 % 7.35 % 85,751 12.34 59 -0.2516 % 2,295.0
Insurance Straight 5.81 % 6.00 % 86,599 13.86 20 -0.3160 % 3,093.1
FloatingReset 9.78 % 10.33 % 35,718 9.22 2 0.6639 % 2,584.3
FixedReset Prem 6.47 % 6.36 % 200,197 4.04 2 -2.0276 % 2,346.6
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 -0.2516 % 2,345.9
FixedReset Ins Non 5.29 % 7.14 % 51,029 12.44 14 0.6130 % 2,440.1
Performance Highlights
Issue Index Change Notes
CU.PR.E Perpetual-Discount -4.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 20.21
Evaluated at bid price : 20.21
Bid-YTW : 6.08 %
BIK.PR.A FixedReset Prem -3.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 23.55
Evaluated at bid price : 24.05
Bid-YTW : 7.56 %
CU.PR.F Perpetual-Discount -3.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 5.94 %
CIU.PR.A Perpetual-Discount -2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.04 %
FTS.PR.G FixedReset Disc -1.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 7.63 %
BN.PR.X FixedReset Disc -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 16.59
Evaluated at bid price : 16.59
Bid-YTW : 7.61 %
BN.PR.T FixedReset Disc -1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 15.60
Evaluated at bid price : 15.60
Bid-YTW : 8.31 %
BN.PR.R FixedReset Disc -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 8.42 %
CU.PR.G Perpetual-Discount -1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 19.36
Evaluated at bid price : 19.36
Bid-YTW : 5.83 %
CU.PR.C FixedReset Disc -1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 20.28
Evaluated at bid price : 20.28
Bid-YTW : 6.90 %
TD.PF.E FixedReset Disc -1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 20.18
Evaluated at bid price : 20.18
Bid-YTW : 7.07 %
TRP.PR.C FixedReset Disc -1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 12.07
Evaluated at bid price : 12.07
Bid-YTW : 8.79 %
IFC.PR.K Perpetual-Discount -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 21.56
Evaluated at bid price : 21.87
Bid-YTW : 6.08 %
BIP.PR.F FixedReset Disc -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 7.40 %
CCS.PR.C Insurance Straight -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 21.02
Evaluated at bid price : 21.02
Bid-YTW : 6.04 %
BN.PF.B FixedReset Disc -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 17.64
Evaluated at bid price : 17.64
Bid-YTW : 8.41 %
BIP.PR.B FixedReset Disc -1.23 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 7.35 %
GWO.PR.H Insurance Straight -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 20.52
Evaluated at bid price : 20.52
Bid-YTW : 6.00 %
ELF.PR.H Perpetual-Discount -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 22.21
Evaluated at bid price : 22.48
Bid-YTW : 6.18 %
CM.PR.O FixedReset Disc -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 18.29
Evaluated at bid price : 18.29
Bid-YTW : 7.48 %
SLF.PR.G FixedReset Ins Non 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 13.40
Evaluated at bid price : 13.40
Bid-YTW : 7.99 %
MFC.PR.K FixedReset Ins Non 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 7.14 %
MFC.PR.Q FixedReset Ins Non 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 7.16 %
BNS.PR.I FixedReset Disc 1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 21.15
Evaluated at bid price : 21.15
Bid-YTW : 6.80 %
CM.PR.Q FixedReset Disc 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 19.68
Evaluated at bid price : 19.68
Bid-YTW : 7.14 %
BIP.PR.A FixedReset Disc 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 18.88
Evaluated at bid price : 18.88
Bid-YTW : 8.56 %
SLF.PR.J FloatingReset 1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 15.77
Evaluated at bid price : 15.77
Bid-YTW : 9.68 %
IAF.PR.I FixedReset Ins Non 2.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 22.61
Evaluated at bid price : 23.65
Bid-YTW : 6.46 %
PWF.PR.P FixedReset Disc 4.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 13.65
Evaluated at bid price : 13.65
Bid-YTW : 7.95 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PF.L FixedReset Disc 77,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 23.58
Evaluated at bid price : 24.05
Bid-YTW : 6.78 %
GWO.PR.N FixedReset Ins Non 42,388 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 12.73
Evaluated at bid price : 12.73
Bid-YTW : 8.00 %
BMO.PR.T FixedReset Disc 33,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 18.02
Evaluated at bid price : 18.02
Bid-YTW : 7.48 %
RY.PR.J FixedReset Disc 32,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 7.04 %
IFC.PR.E Insurance Straight 25,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 21.69
Evaluated at bid price : 21.95
Bid-YTW : 6.00 %
TRP.PR.A FixedReset Disc 23,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 14.56
Evaluated at bid price : 14.56
Bid-YTW : 8.71 %
There were 6 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CU.PR.E Perpetual-Discount Quote: 20.21 – 21.20
Spot Rate : 0.9900
Average : 0.6160

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 20.21
Evaluated at bid price : 20.21
Bid-YTW : 6.08 %
CU.PR.F Perpetual-Discount Quote: 19.00 – 20.00
Spot Rate : 1.0000
Average : 0.6553

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 5.94 %
EIT.PR.A SplitShare Quote: 24.78 – 25.57
Spot Rate : 0.7900
Average : 0.4532

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 24.78
Bid-YTW : 6.41 %
BIK.PR.A FixedReset Prem Quote: 24.05 – 24.97
Spot Rate : 0.9200
Average : 0.6382

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 23.55
Evaluated at bid price : 24.05
Bid-YTW : 7.56 %
IFC.PR.K Perpetual-Discount Quote: 21.87 – 22.55
Spot Rate : 0.6800
Average : 0.5045

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-10
Maturity Price : 21.56
Evaluated at bid price : 21.87
Bid-YTW : 6.08 %
PVS.PR.K SplitShare Quote: 22.75 – 23.25
Spot Rate : 0.5000
Average : 0.3434

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2029-05-31
Maturity Price : 25.00
Evaluated at bid price : 22.75
Bid-YTW : 6.40 %
Market Action

February 9, 2023

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 -0.1868 % 2,566.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1868 % 4,923.4
Floater 8.78 % 8.93 % 51,675 10.40 2 -0.1868 % 2,837.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.0120 % 3,430.2
SplitShare 4.90 % 6.55 % 55,405 2.78 7 0.0120 % 4,096.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0120 % 3,196.2
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.3386 % 2,872.6
Perpetual-Discount 5.94 % 6.01 % 76,673 13.85 37 0.3386 % 3,132.5
FixedReset Disc 5.30 % 7.15 % 89,297 12.44 59 0.0706 % 2,300.7
Insurance Straight 5.79 % 5.96 % 89,717 13.93 20 0.6693 % 3,102.9
FloatingReset 9.75 % 10.19 % 35,957 9.33 2 -0.2523 % 2,567.3
FixedReset Prem 6.34 % 6.27 % 194,184 4.04 2 -0.0590 % 2,395.2
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.0706 % 2,351.8
FixedReset Ins Non 5.32 % 7.12 % 51,236 12.56 14 0.3291 % 2,425.3
Performance Highlights
Issue Index Change Notes
BNS.PR.I FixedReset Disc -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 20.87
Evaluated at bid price : 20.87
Bid-YTW : 6.77 %
CM.PR.Q FixedReset Disc -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 19.40
Evaluated at bid price : 19.40
Bid-YTW : 7.13 %
RY.PR.H FixedReset Disc -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 7.22 %
BMO.PR.S FixedReset Disc -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 18.62
Evaluated at bid price : 18.62
Bid-YTW : 7.29 %
SLF.PR.J FloatingReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 9.75 %
BIP.PR.A FixedReset Disc -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 18.59
Evaluated at bid price : 18.59
Bid-YTW : 8.56 %
BN.PF.B FixedReset Disc 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 17.88
Evaluated at bid price : 17.88
Bid-YTW : 8.15 %
BIP.PR.E FixedReset Disc 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 22.12
Evaluated at bid price : 22.75
Bid-YTW : 6.90 %
RY.PR.M FixedReset Disc 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.98 %
BIP.PR.B FixedReset Disc 1.25 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 6.86 %
MFC.PR.J FixedReset Ins Non 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 21.56
Evaluated at bid price : 21.90
Bid-YTW : 6.74 %
MFC.PR.I FixedReset Ins Non 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 22.72
Evaluated at bid price : 23.82
Bid-YTW : 6.40 %
BN.PF.D Perpetual-Discount 1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 20.12
Evaluated at bid price : 20.12
Bid-YTW : 6.19 %
GWO.PR.S Insurance Straight 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 21.80
Evaluated at bid price : 22.05
Bid-YTW : 6.03 %
CIU.PR.A Perpetual-Discount 2.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 19.63
Evaluated at bid price : 19.63
Bid-YTW : 5.88 %
BIP.PR.F FixedReset Disc 3.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 7.17 %
PWF.PR.L Perpetual-Discount 3.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 6.00 %
MFC.PR.C Insurance Straight 9.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 20.29
Evaluated at bid price : 20.29
Bid-YTW : 5.64 %
Volume Highlights
Issue Index Shares
Traded		 Notes
NA.PR.S FixedReset Disc 48,650 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 18.79
Evaluated at bid price : 18.79
Bid-YTW : 7.34 %
RY.PR.M FixedReset Disc 42,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.98 %
GWO.PR.N FixedReset Ins Non 38,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 12.66
Evaluated at bid price : 12.66
Bid-YTW : 7.88 %
FTS.PR.G FixedReset Disc 33,675 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 18.51
Evaluated at bid price : 18.51
Bid-YTW : 7.33 %
TD.PF.M FixedReset Disc 23,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.62
Bid-YTW : 6.33 %
FTS.PR.M FixedReset Disc 20,521 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 18.23
Evaluated at bid price : 18.23
Bid-YTW : 7.65 %
There were 6 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.N FixedReset Ins Non Quote: 17.44 – 18.15
Spot Rate : 0.7100
Average : 0.4866

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 17.44
Evaluated at bid price : 17.44
Bid-YTW : 7.64 %
TD.PF.A FixedReset Disc Quote: 17.90 – 18.35
Spot Rate : 0.4500
Average : 0.3002

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 7.39 %
BNS.PR.I FixedReset Disc Quote: 20.87 – 21.37
Spot Rate : 0.5000
Average : 0.3569

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 20.87
Evaluated at bid price : 20.87
Bid-YTW : 6.77 %
BMO.PR.S FixedReset Disc Quote: 18.62 – 18.99
Spot Rate : 0.3700
Average : 0.2313

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 18.62
Evaluated at bid price : 18.62
Bid-YTW : 7.29 %
CU.PR.D Perpetual-Discount Quote: 20.19 – 21.51
Spot Rate : 1.3200
Average : 1.1911

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-09
Maturity Price : 20.19
Evaluated at bid price : 20.19
Bid-YTW : 6.09 %
PVS.PR.I SplitShare Quote: 24.12 – 24.50
Spot Rate : 0.3800
Average : 0.2590

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-10-31
Maturity Price : 25.00
Evaluated at bid price : 24.12
Bid-YTW : 6.56 %
Issue Comments

BCE.PR.C To Reset To 5.08%; Interconvertible with BCE.PR.D

BCE Inc. has announced (on 2023-1-13):

Holders of fixed-rate BCE Inc. Series AC Preferred Shares have the right to convert all or part of their shares, effective on March 1, 2023, on a one-for-one basis into floating-rate Cumulative Redeemable First Preferred Shares, Series AD of BCE Inc. (the “Series AD Preferred Shares”). In order to convert their shares, holders must exercise their right of conversion during the conversion period which runs from January 15, 2023 until 5:00 p.m. (Eastern time) on February 20, 2023.
…
As of March 1, 2023, the Series AC Preferred Shares, should they remain outstanding, will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be determined by BCE Inc. on February 6, 2023 but which shall not be less than 80% of the five-year Government of Canada Yield (as defined in BCE Inc.’s articles) compounded semi-annually and computed on February 6, 2023 by two investment dealers appointed by BCE Inc. The annual dividend rate applicable to the Series AC Preferred Shares will be published on February 8, 2023 in the national edition of The Globe and Mail, the Montreal Gazette and Le Devoir and will be posted on BCE Inc.’s website at www.bce.ca.

With respect to BCE.PR.D, they announced:

Holders of floating-rate BCE Inc. Series AD Preferred Shares have the right to convert all or part of their shares, effective on March 1, 2023, on a one-for-one basis into fixed-rate Cumulative Redeemable First Preferred Shares, Series AC of BCE Inc. (the “Series AC Preferred Shares”). In order to convert their shares, holders must exercise their right of conversion during the conversion period which runs from January 15, 2023 until 5:00 p.m. (Eastern time) on February 20, 2023.
…
In order to exercise their conversion right in respect of all or part of their Series AD Preferred Shares, registered holders must provide a written notice thereof, accompanied by their Series AD Preferred Share certificates with the transfer form on the back thereof or other appropriate stock transfer power of attorney duly endorsed, and deliver them, at the latest by 5:00 p.m. (Eastern time) on February 20, 2023, to one of the following addresses of TSX Trust Company:…
…
As of March 1, 2023, the Series AD Preferred Shares, should they remain outstanding, will continue to pay a monthly floating dividend based on a dividend rate that will fluctuate over time between 50% and 100% of the Prime rate (“Prime”) for each month computed in accordance with the articles of BCE Inc. Accordingly, from March 1, 2023, the holders of Series AD Preferred Shares will continue to be entitled to receive floating adjustable cash dividends, as and when declared by the Board of Directors of BCE Inc., to be paid on the twelfth day of the subsequent month. The dividend rate will be adjusted upwards or downwards on a monthly basis by an Adjustment Factor (as described below) whenever the Calculated Trading Price, being the market price of the Series AD Preferred Shares computed in accordance with the articles of BCE Inc., is $24.875 or less or $25.125 or more, respectively. …

They have now announced:

BCE Inc. will, on March 1, 2023, continue to have Cumulative Redeemable First Preferred Shares, Series AC (“Series AC Preferred Shares”) outstanding if, following the end of the conversion period on February 20, 2023, BCE Inc. determines that at least 2,500,000 Series AC Preferred Shares would remain outstanding. In such a case, as of March 1, 2023, the Series AC Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on an annual fixed dividend rate equal to 5.08%

BCE.PR.C is a FixedFloater that has been around for years. A conversion notice was sent in 2008 and it reset to 4.60%. About 55% was converted to BCE.PR.D. A conversion notice was sent in 2013 and it reset to 3.55%. A conversion notice was sent in 2018 and it reset to 4.38%. I recommended conversion.

BCE.PR.D is a RatchetRate preferred that was first issued by partial conversion from BCE.PR.C.

Thanks to Assiduous Reader newbiepref for bringing this to my attention

Press Clippings

In this politicized climate, the Bank of Canada needs to be a lot better at communicating

Many thanks to the Globe & Mail for printing my opinion piece, In this politicized climate, the Bank of Canada needs to be a lot better at communicating.

Assiduous Readers may well find part of the article oddly familiar … :

Transparency is also inadequate when announcing policy rate decisions. A recent staff discussion paper compared the bank’s disclosures with those of eight other major central banks. Of particular interest are the voting records (reporting on how committee members voted on the policy), and the diversity of views (reporting on which issues were considered important by a minority of members). The Bank of Canada was among five central banks that did not disclose voting records at all, and one of only three that provided no information regarding diversity of views.

This secrecy must end, together with the policy that decisions be reached via absolute consensus. Predictions are inherently uncertain and reporting of policy rate decisions needs to reflect this. Competent, confident members of the bank’s governing council will be pleased to occasionally accept minority status when they feel that an important point must be made; indeed, a recent article from the International Monetary Fund advocates that policy rate decisions should take a form similar to judicial decisions, with full space given to dissenting views.

This information will be of great value to investors as they form their own views and the resultant market information will in turn inform the bank’s decision-makers. Investors currently place undue confidence in central-bank pronouncements, leading to an echo-chamber effect in which the only feedback the bank receives from the market is a reflection of their most recent prediction.

Update, 2023-2-16: I received an answer to my inquiry to the Department of Finance:

Thank you for your correspondence of February 3, 2023 regarding Canada’s real return bonds (RRBs). The Government of Canada appreciates your interest in this topic and is always open to receiving views.

The Government reviews and assesses programs on a regular basis to ensure they continue to function as expected. As part of a 2019 review of the RRB program, the Government undertook extensive consultations, which showed poor demand for RRBs. This view was reinforced during the Fall 2022 Debt Management Strategy Consultations.

The consultation document for the RRB review, along with its summary, are available on the Bank of Canada’s website at bankofcanada.ca/2019/08/government-canada-real-return-bond-consultations/ and bankofcanada.ca/wp-content/uploads/2020/03/governement-canada-rrb-consultations-summary.pdf. A summary of the Fall 2022 consultations is also available on the Bank of Canada’s website at bankofcanada.ca/2022/11/fall-2022-debt-management-strategy-consultations/.

Market consultations are an integral part of forming the Government’s Debt Management Strategy. The Government seeks to maintain an open dialogue with stakeholders and highly values all the input received.

The 2022 Fall Economic Statement announced the decision to cease issuance of RRBs effective immediately. At this time, the Government is not considering a reintroduction of RRBs. All outstanding RRBs will continue to be honoured.

Thank you for contacting the Department of Finance Canada.

Sp, judging from this eMail, there were no estimates made regarding the excess cost, if any, of the RRB programme.

And on 2023-2-14, the Bank of Canada answered my question of 2023-02-04:

Does that Bank of Canada have any information available on the liquidity of Real Return Bonds in the period 2019-2022 (inclusive) and how this liquidity may be determined to affect the prices of these securities in the primary and/or secondary markets?

If so, how may I access this information?

Thank you for your follow-up inquiry and we apologize for the delayed response.

We regret we do not have the information you are looking for.

Update, 2023-2-17: My drafts for this piece included footnotes. I won’t publish the drafts, but here are the footnoted links:
Trump
Erdogan
Poilievre
Importance of public confidence
Confidence and Monetary Policy Transmission
Trust and Transparency
BoC on ‘Printing Money’
Poilievre on ‘Printing Money’
BoC on ‘Understanding Quantitative Easing’ See also Settlement Balances Deconstructed
BoE ‘Quantitative Easing’ and BoE ‘Understanding the Central Bank Balance Sheet’
Canadian Fixed-Income Forum
CFIF Minutes, 2022-11-29
GoC, Debt Management Strategy 2022-3
BoC, Real Return Bond Funding Review, 2003
Government of Canada Real Return Bond Consultations Summary (2019)
GoC RRB programme cancellation
BoC Transparency Comparison
Diverse views important
Can central banks talk too much?

Market Action

February 8, 2023

The BoC published its minutes:

Until Wednesday, the Bank of Canada stood apart from peer central banks in not publishing some form of rate-decision meeting minutes. In a paper published last month, the bank’s own staff ranked it last among nine peer central banks for the depth and breadth of information released after rate announcements.

The bank had long maintained that its consensus form of decision-making made meeting minutes unnecessary. Governing council members don’t formally vote on monetary policy decisions, rather they offer opinions to the governor who has final decision-making authority. That is in contrast to the U.S. Federal Reserve, where monetary policy is decided based on votes by members of the Federal Open Market Committee.

Ultimately, the Bank of Canada changed its mind after a review of its transparency practices by the International Monetary Fund last year. The summary published Wednesday is considerably less detailed than Fed meeting minutes.

The document mostly reiterated comments made by Mr. Macklem in recent speeches and news conferences.

PerpetualDiscounts now yield 6.03%, equivalent to 7.84% interest at the standard equivalency factor of 1.3x. Long corporates yielded 4.89% on 2023-1-27 and since then the closing price has changed from 15.49 to 15.34, a decline of 97bp in price, with a Duration of 12.35 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies an increase in yield of about 8bp since 1/27 to 4.97%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed slightly (and perhaps spuriously) to about 285bp from the 290bp reported February 1.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,571.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0000 % 4,932.6
Floater 8.76 % 8.93 % 53,701 10.40 2 0.0000 % 2,842.7
OpRet 0.00 % 0.00 % 0 0.00 0 0.2397 % 3,429.8
SplitShare 4.90 % 6.45 % 57,274 2.78 7 0.2397 % 4,095.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2397 % 3,195.8
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.1563 % 2,862.9
Perpetual-Discount 5.96 % 6.03 % 77,410 13.85 37 0.1563 % 3,121.9
FixedReset Disc 5.30 % 7.20 % 87,755 12.47 59 0.5545 % 2,299.1
Insurance Straight 5.83 % 5.98 % 89,566 13.86 20 -0.0448 % 3,082.3
FloatingReset 9.72 % 10.24 % 37,363 9.29 2 0.0000 % 2,573.8
FixedReset Prem 6.33 % 6.27 % 195,596 4.05 2 -0.0590 % 2,396.6
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.5545 % 2,350.2
FixedReset Ins Non 5.34 % 7.11 % 51,760 12.56 14 0.6189 % 2,417.3
Performance Highlights
Issue Index Change Notes
MFC.PR.C Insurance Straight -7.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 18.53
Evaluated at bid price : 18.53
Bid-YTW : 6.18 %
CIU.PR.A Perpetual-Discount -2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 6.04 %
BIP.PR.F FixedReset Disc -1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 7.41 %
NA.PR.G FixedReset Disc -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 21.57
Evaluated at bid price : 21.93
Bid-YTW : 6.79 %
PWF.PR.L Perpetual-Discount -1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 6.22 %
TD.PF.J FixedReset Disc 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 22.16
Evaluated at bid price : 22.81
Bid-YTW : 6.50 %
BIP.PR.A FixedReset Disc 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 18.78
Evaluated at bid price : 18.78
Bid-YTW : 8.48 %
BN.PF.C Perpetual-Discount 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 19.71
Evaluated at bid price : 19.71
Bid-YTW : 6.25 %
BIP.PR.B FixedReset Disc 1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 7.34 %
MFC.PR.Q FixedReset Ins Non 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 7.11 %
BMO.PR.W FixedReset Disc 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 7.23 %
TRP.PR.B FixedReset Disc 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 11.82
Evaluated at bid price : 11.82
Bid-YTW : 8.54 %
CU.PR.C FixedReset Disc 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 6.66 %
TD.PF.A FixedReset Disc 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 7.35 %
TRP.PR.D FixedReset Disc 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 16.55
Evaluated at bid price : 16.55
Bid-YTW : 8.31 %
IFC.PR.F Insurance Straight 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 22.17
Evaluated at bid price : 22.44
Bid-YTW : 5.98 %
IFC.PR.K Perpetual-Discount 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 22.06
Evaluated at bid price : 22.35
Bid-YTW : 5.95 %
PWF.PF.A Perpetual-Discount 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 19.52
Evaluated at bid price : 19.52
Bid-YTW : 5.81 %
MFC.PR.L FixedReset Ins Non 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 17.54
Evaluated at bid price : 17.54
Bid-YTW : 7.57 %
BN.PF.A FixedReset Disc 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 7.50 %
PVS.PR.K SplitShare 1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2029-05-31
Maturity Price : 25.00
Evaluated at bid price : 22.85
Bid-YTW : 6.31 %
GWO.PR.N FixedReset Ins Non 1.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 12.69
Evaluated at bid price : 12.69
Bid-YTW : 7.86 %
TD.PF.D FixedReset Disc 2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.99 %
BN.PR.R FixedReset Disc 2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 15.34
Evaluated at bid price : 15.34
Bid-YTW : 8.19 %
BN.PR.X FixedReset Disc 2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 16.79
Evaluated at bid price : 16.79
Bid-YTW : 7.40 %
BN.PR.T FixedReset Disc 2.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 15.95
Evaluated at bid price : 15.95
Bid-YTW : 8.01 %
IFC.PR.G FixedReset Ins Non 2.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 6.91 %
BN.PF.G FixedReset Disc 3.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 8.32 %
RY.PR.J FixedReset Disc 4.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.95 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PF.M FixedReset Disc 89,573 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.60
Bid-YTW : 6.38 %
MFC.PR.M FixedReset Ins Non 50,626 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 17.95
Evaluated at bid price : 17.95
Bid-YTW : 7.56 %
TD.PF.A FixedReset Disc 49,761 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 7.35 %
TD.PF.L FixedReset Disc 35,565 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 23.58
Evaluated at bid price : 24.05
Bid-YTW : 6.67 %
RY.PR.M FixedReset Disc 33,910 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 18.87
Evaluated at bid price : 18.87
Bid-YTW : 7.06 %
MFC.PR.N FixedReset Ins Non 33,075 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 7.63 %
There were 15 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.C Insurance Straight Quote: 18.53 – 20.39
Spot Rate : 1.8600
Average : 1.1488

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 18.53
Evaluated at bid price : 18.53
Bid-YTW : 6.18 %
BN.PR.X FixedReset Disc Quote: 16.79 – 18.60
Spot Rate : 1.8100
Average : 1.1312

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 16.79
Evaluated at bid price : 16.79
Bid-YTW : 7.40 %
BN.PF.B FixedReset Disc Quote: 17.69 – 18.80
Spot Rate : 1.1100
Average : 0.7041

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 17.69
Evaluated at bid price : 17.69
Bid-YTW : 8.23 %
CU.PR.D Perpetual-Discount Quote: 20.19 – 21.59
Spot Rate : 1.4000
Average : 1.0497

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.19
Evaluated at bid price : 20.19
Bid-YTW : 6.09 %
BN.PF.F FixedReset Disc Quote: 17.95 – 18.80
Spot Rate : 0.8500
Average : 0.5393

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 17.95
Evaluated at bid price : 17.95
Bid-YTW : 8.25 %
PWF.PR.L Perpetual-Discount Quote: 20.70 – 22.03
Spot Rate : 1.3300
Average : 1.0301

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-08
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 6.22 %
Market Action

February 7, 2023

Powell gave a speech:

Federal Reserve Chair Jerome Powell said on Tuesday the latest U.S. employment report showed the process for getting inflation back near the central bank’s 2 per cent target will take “quite a bit of time” even though there are indications cost pressures are ebbing, at least for goods.

The nonfarm payrolls report for January, which was published on Friday, was “certainly stronger than anyone I know expected,” Powell said during a question-and-answer session at the Economic Club of Washington.

“We didn’t expect it to be this strong,” Powell said, but it “shows why we think this will be a process that takes quite a bit of time.”

At the same time, Powell declined to equate the surprising strength in the job market shown in the January employment report with an expectation that interest rates would need to be higher than Fed officials estimated late last year.
…
“I think it surprised all of us,” Minneapolis Fed President Neel Kashkari said in an interview broadcast on CNBC earlier on Tuesday, referring to the blowout jobs report last Friday in which the U.S. government reported a gain of more than half a million jobs for January.
…
The numbers were far out of line with the looser labour market the Fed has expected and feels will be needed to ensure that wage growth also slows and inflation, which is still running at more than double the central bank target, continues to fall.

Kashkari, who has been more aggressive than almost all his colleagues in his assessment of how high interest rates need to go, had said a month ago that he forecast the central bank’s policy rate should rise to 5.4 per cent. The jobs report consolidated that view.

“It tells me that so far, we’re not seeing much of an imprint … on the labour market,” Kashkari said. “It’s pretty muted so far, so I haven’t seen anything yet to lower my rate path.”
…
On Monday, Atlanta Fed President Raphael Bostic was one of those who said the central bank may need to lift borrowing costs higher than previously anticipated given the job gains. He noted that while a half-percentage-point rate hike was not his base case for the next policy meeting in March, it could be considered.

“It’ll probably mean we have to do a little more work,” Bostic told Bloomberg News. “And I would expect that that would translate into us raising interest rates more than I have projected right now.” Bostic had previously forecast that the federal funds rate would top out in the 5.00 per cent-5.25 per cent range, like almost all his colleagues.

Macklem also gave a speech:

Bank of Canada Governor Tiff Macklem said on Tuesday that he does not expect to continue raising interest rates, reinforcing that the central bank has entered a new phase in its year-long battle with inflation.
…
“If new evidence begins to accumulate that inflation is not declining in line with our forecast, we are prepared to raise our policy rate further,” Mr. Macklem told a Quebec City audience on Tuesday, according to the English text of the speech. “But if new data are broadly in line with our forecast and inflation comes down as predicted, then we won’t need to raise rates further.”
…
“Our preferred measures of core inflation have been stuck at about 5 per cent. But timelier three-month rates have come down below 5 per cent. That suggests core inflation will start to decline in the months ahead,” Mr. Macklem said.

The bank’s latest forecast shows the annual rate of inflation slowing to around 3 per cent by the middle of the year, and reaching 2.5 per cent by the fourth quarter.

The IMF published an excellent opinion piece, by which I mean I agree with it:

Decision-making procedures are also crucial to fostering individual accountability and mitigating the risk of groupthink. In the past, the phrase decision-making by consensus had largely positive connotations. However, modern organizational management recognizes that such practices tend to discourage innovative thinking and marginalize anyone with a different viewpoint (outside the consensus). Consequently, every MPC policy decision should be subject to a vote, and all MPC members should be held accountable for their own individual views.

In analyzing the inflationary episodes of the 1970s, one key lesson learned was that monetary policy decisions need to be insulated from political interference. Indeed, that lesson led to the strengthening of the central bank’s statutory independence in many jurisdictions—most notably, regulations ensuring that central bank officials cannot be terminated except for malfeasance. Such independence is enhanced by staggering the terms of MPC members, appointing each member to a single nonrenewable term, and ensuring that the appointment process is systematic and transparent rather than relying on the discretion of any single government official (Archer and Levin 2019).

MPC members should not be constrained to speak with one voice in their public communications; rather, they should be accountable for conveying their own individual views regarding complex judgments on which reasonable experts may disagree. To avoid cacophony, the MPC should follow the standard practice in the judicial system, where a panel of judges conveys each decision by issuing the ruling of the majority together with concurring opinions and dissenting views. Such an approach has a long track record of providing clarity about the rationale for the majority’s decision as well as the reasoning behind alternative views. Likewise, this mode of communicating monetary policy decisions can strengthen public confidence that decisions are being made by a diverse team of experts.

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 -0.2237 % 2,571.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.2237 % 4,932.6
Floater 8.76 % 8.92 % 55,792 10.41 2 -0.2237 % 2,842.7
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1436 % 3,421.6
SplitShare 4.91 % 6.49 % 54,805 2.78 7 -0.1436 % 4,086.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1436 % 3,188.2
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.4631 % 2,858.5
Perpetual-Discount 5.96 % 6.05 % 79,011 13.82 37 -0.4631 % 3,117.0
FixedReset Disc 5.33 % 7.24 % 88,835 12.47 59 0.5337 % 2,286.4
Insurance Straight 5.82 % 5.93 % 92,978 13.97 20 -0.0424 % 3,083.7
FloatingReset 9.72 % 10.24 % 38,897 9.30 2 1.4395 % 2,573.8
FixedReset Prem 6.33 % 6.22 % 196,251 4.05 2 0.1970 % 2,398.0
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.5337 % 2,337.2
FixedReset Ins Non 5.37 % 7.19 % 52,478 12.45 14 0.2173 % 2,402.4
Performance Highlights
Issue Index Change Notes
CU.PR.D Perpetual-Discount -4.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.19
Evaluated at bid price : 20.19
Bid-YTW : 6.09 %
GWO.PR.S Insurance Straight -2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 6.20 %
PWF.PR.L Perpetual-Discount -2.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 6.11 %
IFC.PR.G FixedReset Ins Non -2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 7.11 %
PWF.PR.Z Perpetual-Discount -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.43
Evaluated at bid price : 21.43
Bid-YTW : 6.06 %
CIU.PR.A Perpetual-Discount -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 19.52
Evaluated at bid price : 19.52
Bid-YTW : 5.91 %
PWF.PR.F Perpetual-Discount -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.55
Evaluated at bid price : 21.81
Bid-YTW : 6.06 %
PWF.PR.S Perpetual-Discount -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.18
Evaluated at bid price : 20.18
Bid-YTW : 6.00 %
PWF.PR.E Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 22.60
Evaluated at bid price : 22.85
Bid-YTW : 6.06 %
BN.PF.B FixedReset Disc 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 17.73
Evaluated at bid price : 17.73
Bid-YTW : 8.21 %
MFC.PR.J FixedReset Ins Non 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.38
Evaluated at bid price : 21.65
Bid-YTW : 6.82 %
BN.PR.R FixedReset Disc 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 15.03
Evaluated at bid price : 15.03
Bid-YTW : 8.35 %
BN.PR.T FixedReset Disc 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 15.55
Evaluated at bid price : 15.55
Bid-YTW : 8.21 %
BIP.PR.B FixedReset Disc 1.28 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-12-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 7.73 %
BMO.PR.S FixedReset Disc 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 18.84
Evaluated at bid price : 18.84
Bid-YTW : 7.20 %
NA.PR.G FixedReset Disc 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.83
Evaluated at bid price : 22.32
Bid-YTW : 6.66 %
BN.PR.X FixedReset Disc 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 16.44
Evaluated at bid price : 16.44
Bid-YTW : 7.56 %
CU.PR.C FixedReset Disc 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.46
Evaluated at bid price : 20.46
Bid-YTW : 6.73 %
MFC.PR.M FixedReset Ins Non 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 17.80
Evaluated at bid price : 17.80
Bid-YTW : 7.63 %
BMO.PR.Y FixedReset Disc 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 7.00 %
MFC.PR.K FixedReset Ins Non 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 7.11 %
BN.PR.Z FixedReset Disc 1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.75
Evaluated at bid price : 22.15
Bid-YTW : 7.03 %
BIP.PR.F FixedReset Disc 1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 7.27 %
CM.PR.O FixedReset Disc 2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 18.55
Evaluated at bid price : 18.55
Bid-YTW : 7.24 %
TRP.PR.F FloatingReset 3.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 10.24 %
NA.PR.S FixedReset Disc 3.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 7.37 %
MFC.PR.C Insurance Straight 3.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 5.69 %
Volume Highlights
Issue Index Shares
Traded		 Notes
MFC.PR.N FixedReset Ins Non 150,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 17.43
Evaluated at bid price : 17.43
Bid-YTW : 7.64 %
GWO.PR.N FixedReset Ins Non 100,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 12.46
Evaluated at bid price : 12.46
Bid-YTW : 7.99 %
RY.PR.J FixedReset Disc 41,103 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 19.13
Evaluated at bid price : 19.13
Bid-YTW : 7.26 %
MFC.PR.Q FixedReset Ins Non 40,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.33
Evaluated at bid price : 20.33
Bid-YTW : 7.19 %
MFC.PR.J FixedReset Ins Non 33,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.38
Evaluated at bid price : 21.65
Bid-YTW : 6.82 %
PWF.PR.Z Perpetual-Discount 30,525 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.43
Evaluated at bid price : 21.43
Bid-YTW : 6.06 %
There were 9 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CM.PR.Q FixedReset Disc Quote: 19.67 – 23.70
Spot Rate : 4.0300
Average : 2.3514

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 19.67
Evaluated at bid price : 19.67
Bid-YTW : 7.03 %
GWO.PR.T Insurance Straight Quote: 21.58 – 22.99
Spot Rate : 1.4100
Average : 0.8675

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.58
Evaluated at bid price : 21.58
Bid-YTW : 6.06 %
IFC.PR.G FixedReset Ins Non Quote: 20.50 – 21.49
Spot Rate : 0.9900
Average : 0.6337

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 7.11 %
CU.PR.D Perpetual-Discount Quote: 20.19 – 21.20
Spot Rate : 1.0100
Average : 0.6657

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.19
Evaluated at bid price : 20.19
Bid-YTW : 6.09 %
GWO.PR.S Insurance Straight Quote: 21.50 – 22.27
Spot Rate : 0.7700
Average : 0.4795

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 6.20 %
MFC.PR.B Insurance Straight Quote: 20.52 – 21.25
Spot Rate : 0.7300
Average : 0.4406

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-07
Maturity Price : 20.52
Evaluated at bid price : 20.52
Bid-YTW : 5.76 %
Market Action

February 6, 2023

The New York Fed released the Global Supply Chain Pressure Index (GSCPI):

Estimates for January 2023

  • Global supply chain pressures decreased moderately in January and the index was revised upward in December.
  • The largest contributing factors to supply chain pressures were declines in Korean delivery times, Chinese delivery times, and Euro Area backlogs.
  • The GSCPI’s recent movements suggest that the Asia developments that were interrupting the index’s normalization may have been a transitory factor.
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 -0.3344 % 2,577.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.3344 % 4,943.7
Floater 8.74 % 8.88 % 56,376 10.45 2 -0.3344 % 2,849.1
OpRet 0.00 % 0.00 % 0 0.00 0 -0.3637 % 3,426.5
SplitShare 4.91 % 6.47 % 53,678 2.79 7 -0.3637 % 4,092.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3637 % 3,192.8
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.2816 % 2,871.8
Perpetual-Discount 5.94 % 5.99 % 80,282 13.90 37 -0.2816 % 3,131.5
FixedReset Disc 5.36 % 7.26 % 88,837 12.40 59 0.6533 % 2,274.3
Insurance Straight 5.82 % 5.96 % 90,868 13.94 20 -0.5247 % 3,085.0
FloatingReset 9.86 % 9.61 % 28,351 9.80 2 -1.6362 % 2,537.2
FixedReset Prem 6.34 % 6.31 % 198,580 4.05 2 0.0197 % 2,393.3
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.6533 % 2,324.8
FixedReset Ins Non 5.38 % 7.20 % 49,964 12.49 14 0.2694 % 2,397.2
Performance Highlights
Issue Index Change Notes
CU.PR.H Perpetual-Discount -9.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.57
Evaluated at bid price : 20.57
Bid-YTW : 6.40 %
MFC.PR.C Insurance Straight -3.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 5.88 %
TRP.PR.F FloatingReset -3.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 15.55
Evaluated at bid price : 15.55
Bid-YTW : 10.57 %
RY.PR.J FixedReset Disc -1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.13
Evaluated at bid price : 19.13
Bid-YTW : 7.26 %
MIC.PR.A Perpetual-Discount -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 6.88 %
PVS.PR.K SplitShare -1.52 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2029-05-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 6.47 %
CU.PR.C FixedReset Disc -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 6.83 %
PVS.PR.H SplitShare -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2027-02-28
Maturity Price : 25.00
Evaluated at bid price : 23.70
Bid-YTW : 6.44 %
MFC.PR.M FixedReset Ins Non -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 17.53
Evaluated at bid price : 17.53
Bid-YTW : 7.74 %
TRP.PR.C FixedReset Disc -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 12.06
Evaluated at bid price : 12.06
Bid-YTW : 8.63 %
NA.PR.S FixedReset Disc -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 18.10
Evaluated at bid price : 18.10
Bid-YTW : 7.61 %
CU.PR.J Perpetual-Discount -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 5.89 %
SLF.PR.C Insurance Straight -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 5.64 %
MFC.PR.B Insurance Straight -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.53
Evaluated at bid price : 20.53
Bid-YTW : 5.76 %
IFC.PR.F Insurance Straight -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 21.86
Evaluated at bid price : 22.21
Bid-YTW : 6.04 %
TRP.PR.A FixedReset Disc 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 8.49 %
TD.PF.E FixedReset Disc 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 6.97 %
BN.PR.R FixedReset Disc 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 14.87
Evaluated at bid price : 14.87
Bid-YTW : 8.43 %
BIP.PR.F FixedReset Disc 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 7.41 %
MFC.PR.N FixedReset Ins Non 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 17.47
Evaluated at bid price : 17.47
Bid-YTW : 7.62 %
CM.PR.Q FixedReset Disc 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.53
Evaluated at bid price : 19.53
Bid-YTW : 7.08 %
RY.PR.Z FixedReset Disc 1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 18.30
Evaluated at bid price : 18.30
Bid-YTW : 7.24 %
NA.PR.G FixedReset Disc 1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 21.64
Evaluated at bid price : 22.03
Bid-YTW : 6.76 %
BIP.PR.E FixedReset Disc 2.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 22.00
Evaluated at bid price : 22.55
Bid-YTW : 6.96 %
MFC.PR.K FixedReset Ins Non 3.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 7.22 %
IFC.PR.C FixedReset Disc 31.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 18.42
Evaluated at bid price : 18.42
Bid-YTW : 7.26 %
Volume Highlights
Issue Index Shares
Traded		 Notes
MFC.PR.N FixedReset Ins Non 112,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 17.47
Evaluated at bid price : 17.47
Bid-YTW : 7.62 %
PWF.PR.E Perpetual-Discount 94,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 22.81
Evaluated at bid price : 23.09
Bid-YTW : 5.99 %
MFC.PR.Q FixedReset Ins Non 77,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.30
Evaluated at bid price : 20.30
Bid-YTW : 7.20 %
RY.PR.J FixedReset Disc 31,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.13
Evaluated at bid price : 19.13
Bid-YTW : 7.26 %
BMO.PR.W FixedReset Disc 29,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 7.31 %
POW.PR.G Perpetual-Discount 20,750 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 23.10
Evaluated at bid price : 23.36
Bid-YTW : 6.05 %
There were 11 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.K FixedReset Ins Non Quote: 19.00 – 20.80
Spot Rate : 1.8000
Average : 1.1360

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 7.22 %
MIC.PR.A Perpetual-Discount Quote: 19.95 – 20.95
Spot Rate : 1.0000
Average : 0.6362

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 6.88 %
CU.PR.H Perpetual-Discount Quote: 20.57 – 22.65
Spot Rate : 2.0800
Average : 1.7245

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 20.57
Evaluated at bid price : 20.57
Bid-YTW : 6.40 %
MFC.PR.C Insurance Straight Quote: 19.45 – 20.34
Spot Rate : 0.8900
Average : 0.5541

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 5.88 %
MFC.PR.M FixedReset Ins Non Quote: 17.53 – 18.23
Spot Rate : 0.7000
Average : 0.4875

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 17.53
Evaluated at bid price : 17.53
Bid-YTW : 7.74 %
NA.PR.S FixedReset Disc Quote: 18.10 – 18.75
Spot Rate : 0.6500
Average : 0.4675

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-02-06
Maturity Price : 18.10
Evaluated at bid price : 18.10
Bid-YTW : 7.61 %
MAPF

MAPF Performance : January, 2023

Malachite Aggressive Preferred Fund’s Net Asset Value per Unit as of the close January 31, 2023, was $8.5200.

Performance was hurt by the fund’s overweight holdings in FixedResets, which underperformed PerpetualDiscounts during the month (the Solactive Laddered Canadian Preferred Share Index returned +6.42% while TXPR, which includes a significant weight in Straight Preferreds, returned +7.27%). More particularly, MFC.PR.F [again!] (+2.83%), TRP.PR.A [again!] (+4.34%) and GWO.PR.N (+4.73%) underperformed while this was mitigated by good performance by MIC.PR.A [again!] (+11.78%), FTS.PR.K (+9.32%) and FTS.PR.M [rebounding!] (+8.55%) [small holdings are not considered for mention here].

There is still a pronounced ‘risk-off’ sentiment in the market, but I feel it is only a matter of time before investors start paying attention to the fundamental risk of these instruments compared to their eye-popping interest-equivalent yields.

Returns to January 31, 2023
Period MAPF TXPR*
Total Return		 CPD – according to Blackrock
One Month +6.61% +7.27% N/A
Three Months +5.08% +4.72% N/A
One Year -18.65% -12.11% -12.52%
Two Years (annualized) +3.02% +1.12% N/A
Three Years (annualized) +6.99% +3.63% +3.05%
Four Years (annualized) +5.36% +3.73% N/A
Five Years (annualized) +0.73% +0.87% +0.28%
Six Years (annualized) +3.79% +2.48% N/A
Seven Years (annualized) +7.89% +5.34% N/A
Eight Years (annualized) +3.02% +1.75% N/A
Nine Years (annualized) +3.21% +1.68% N/A
Ten Years (annualized) +2.51% +1.26% +0.78%
Eleven Years (annualized) +2.91% +1.54%  
Twelve Years (annualized) +3.05% +1.96%  
Thirteen Years (annualized) +4.12% +2.48%  
Fourteen Years (annualized) +7.04% +3.79%  
Fifteen Years (annualized) +6.89% +2.49%  
Sixteen Years (annualized) +6.49%    
Seventeen Years (annualized) +6.43%    
Eighteen Years (annualized) +6.39%    
Nineteen Years (annualized) +6.66%    
Twenty Years (annualized) +7.61%    
Twenty-One Years (annualized) +7.37%    
MAPF returns assume reinvestment of distributions, and are shown after expenses but before fees.
The BMO Capital Markets “50” Preferred Share Index is no longer being calculated. The final performance report incorporating this venerable index was published as of December, 2020.
“TXPR” is the S&P/TSX Preferred Share Index. It is calculated without accounting for fees, but does assume reinvestment of dividends.
CPD Returns are for the NAV and are after all fees and expenses. Reinvestment of dividends is assumed.
Figures for National Bank Preferred Equity Income Fund (formerly Omega Preferred Equity) (which are after all fees and expenses) for 1-, 3- and 12-months are +6.73%, +5.05% and -14.05%, respectively, according to Globe & Mail / Fundata after all fees & expenses. Three year performance is +4.78%; five year is +1.72%; ten year is +2.19%

Figures from Morningstar are no longer conveniently available.
Manulife Preferred Income Class Adv has been terminated by Manulife. The performance of this fund was last reported here in March, 2018.
Figures for Horizons Active Preferred Share ETF (HPR) (which are after all fees and expenses) for 1-, 3- and 12-months are +6.72%, +4.83% & -13.67%, respectively. Three year performance is +4.65%, five-year is +0.63%, ten year is +1.97%
Figures for National Bank Preferred Equity Fund (formerly Altamira Preferred Equity Fund) are +6.83%, +4.77% and -13.70% for one-, three- and twelve months, respectively. Three year performance is +4.84%; five-year is +0.77%; ten-year is +1.79%

Acccording to the fund’s fact sheet as of June 30, 2016, the fund’s inception date was October 30, 2015. I do not know how they justify this nonsensical statement, but will assume that prior performance is being suppressed in some perfectly legal manner that somebody at National considers ethical.

The last time Altamira Preferred Equity Fund’s performance was reported here was April, 2014; performance under the National Bank banner was first reported here May, 2014.
The figures for the NAV of BMO S&P/TSX Laddered Preferred Share Index ETF (ZPR) is -12.68% for the past twelve months. Two year performance is +2.23%, three year is +4.74%, five year is +0.75%, ten year is +0.31%
Figures for Fiera Canadian Preferred Share Class Cg Series F, (formerly Natixis Canadian Preferred Share Class Series F) (formerly NexGen Canadian Preferred Share Tax Managed Fund) are no longer available as the Fund is now the property of Canoe Financial. The last reported performance for the merged fund was May 2020.
Figures for BMO Preferred Share Fund (advisor series) according to BMO are +6.47%, +3.73% and -13.65% for the past one-, three- and twelve-months, respectively. Two year performance is -1.21%; three year is +2.01%; five-year is -1.69%.
Figures for PowerShares Canadian Preferred Share Index Class, Series F (PPS) are -10.42% for the past twelve months. The three-year figure is +4.43%; five years is +0.63%; ten-year is +1.44%
Figures for the First Asset Preferred Share Investment Trust (PSF.UN) are no longer available since the fund has merged with First Asset Preferred Share ETF (FPR).

Performance for the fund was last reported here in September, 2016; the first report of unavailability was in October, 2016.
Figures for Lysander-Slater Preferred Share Dividend Fund (Class F) according to the company are +7.2%, +4.5% and -13.1% for the past one, three and twelve months, respectively. Three year performance is +3.9%, five-year is 0.0%.
Figures for the Desjardins Canadian Preferred Share Fund A Class (A Class), as reported by the company are +6.72%, +4.93% and -13.37% for the past one, three and twelve months, respectively. Two year performance is +0.46%, three-year is +2.85%, five-year is -0.65%
Figures for the RBC Canadian Preferred Share ETF (RPF) as reported by Morningstar are +6.32%, +3.17% and -13.45% for the past one, three and twelve months, respectively. Three-year performance is +4.55%; five-year is +0.24%
Figures for the Dynamic Active Preferred Shares ETF (DXP) are +6.7%, +6.0% and -10.3% for the past one, three and twelve months, respectively. Three-year performance is +7.0%; five-year is +2.2%

The five-year Canada yield continued its drop that started in late October, with the five-year Canada yield (“GOC-5”) declining from 3.37% at December month-end to 3.07% at January month-end.

The Seniority Spread (between long-term corporate bonds and interest-equivalent PerpetualDiscounts) has recently declined to 290bp (as of 2023-2-1) and is very volatile (chart end-date 2023-1-13) :

The situation with FixedResets is interesting, with the spread between GOC-5 and the interest-adjusted FixedReset (Discount) rate widening significantly from its 2021-11-10 low of 344bp to its current level of 638bp (as of 2023-2-1) … (chart end-date 2023-1-13):

…while at the same time the interest-equivalent spread between FixedReset (Discounts) and PerpetualDiscounts has narrowed to -153bp (as of 2023-1-31) from its 2021-7-28 level of +170bp (chart end-date 2023-1-13):

There is no significant correlation between the Issue Reset Spread and 1-month performance for discounted FixedResets for either the Pfd-2 or Pfd-3 Group issues, which is normal because there is a lot of noise in this inefficient market.

However, the normally moderate correlations between Issue Reset Spread and three-month performance have disappeared again in this month’s check:

There was no significant correlation for either groups for 1-Month performance against term-to-reset, despite the change in the GOC-5 yield from 3.37% to 3.07%) during the period:

… and for three-month performance, there was again no correlation for either group; here, the change in GOC-5 was from 3.45% to 3.07%:

It should be noted that to some extent such a dependence (of performance on term-to-reset) can be justified as the nearer-term issues will receive the benefit of higher projected dividend rates sooner as a result of higher GOC-5 yields and therefore, perhaps, for longer. Equations for the relationship between correlation slope and change in GOC-5 were derived in the August PrefLetter.

I keep talking about ‘Sustainable Income’ and nowadays it’s far higher than the dividends that are currently being distributed. This is because Sustainable Income is the average yield-to-worst (YTW) of the portfolio when the YTW is calculated to perpetuity (or to redemption, of course, if the yield to redemption is lower), including resets at the current GOC-5 rate. The sharp increase in GOC-5 in the past year has caused the difference between YTW and Current Yield to skyrocket, but one way or another I expect that these two values will become much closer – slowly at first, but quickening in about two years. We have to wait for the reset date of the MAPF portfolio securities before we see a change in actual cash receipts – and, of course, there is no guarantee whatsoever that the rate used for estimation purposes now will be used for the actual calculation in the future (chart prepared as of 2023-01-13).

Calculation of MAPF Sustainable Income Per Unit
Month NAVPU Portfolio
Average
YTW		 Leverage
Divisor		 Securities
Average
YTW		 Capital
Gains
Multiplier		 Sustainable
Income
per
current
Unit
June, 2007 9.3114 5.16% 1.03 5.01% 1.3240 0.3524
September 9.1489 5.35% 0.98 5.46% 1.3240 0.3773
December, 2007 9.0070 5.53% 0.942 5.87% 1.3240 0.3993
March, 2008 8.8512 6.17% 1.047 5.89% 1.3240 0.3938
June 8.3419 6.034% 0.952 6.338% 1.3240 $0.3993
September 8.1886 7.108% 0.969 7.335% 1.3240 $0.4537
December, 2008 8.0464 9.24% 1.008 9.166% 1.3240 $0.5571
March 2009 $8.8317 8.60% 0.995 8.802% 1.3240 $0.5872
June 10.9846 7.05% 0.999 7.057% 1.3240 $0.5855
September 12.3462 6.03% 0.998 6.042% 1.3240 $0.5634
December 2009 10.5662 5.74% 0.981 5.851% 1.1141 $0.5549
March 2010 10.2497 6.03% 0.992 6.079% 1.1141 $0.5593
June 10.5770 5.96% 0.996 5.984% 1.1141 $0.5681
September 11.3901 5.43% 0.980 5.540% 1.1141 $0.5664
December 2010 10.7659 5.37% 0.993 5.408% 1.0298 $0.5654
March, 2011 11.0560 6.00% 0.994 5.964% 1.0298 $0.6403
June 11.1194 5.87% 1.018 5.976% 1.0298 $0.6453
September 10.2709 6.10%
Note		 1.001 6.106% 1.0298 $0.6090
December, 2011 10.0793 5.63%
Note		 1.031 5.805% 1.0000 $0.5851
March, 2012 10.3944 5.13%
Note		 0.996 5.109% 1.0000 $0.5310
June 10.2151 5.32%
Note		 1.012 5.384% 1.0000 $0.5500
September 10.6703 4.61%
Note		 0.997 4.624% 1.0000 $0.4934
December, 2012 10.8307 4.24% 0.989 4.287% 1.0000 $0.4643
March, 2013 10.9033 3.87% 0.996 3.886% 1.0000 $0.4237
June 10.3261 4.81% 0.998 4.80% 1.0000 $0.4957
September 10.0296 5.62% 0.996 5.643% 1.0000 $0.5660
December, 2013 9.8717 6.02% 1.008 5.972% 1.0000 $0.5895
March, 2014 10.2233 5.55% 0.998 5.561% 1.0000 $0.5685
June 10.5877 5.09% 0.998 5.100% 1.0000 $0.5395
September 10.4601 5.28% 0.997 5.296% 1.0000 $0.5540
December, 2014 10.5701 4.83% 1.009 4.787% 1.0000 $0.5060
March, 2015 9.9573 4.99% 1.001 4.985% 1.0000 $0.4964
June, 2015 9.4181 5.55% 1.002 5.539% 1.0000 $0.5217
September 7.8140 6.98% 0.999 6.987% 1.0000 $0.5460
December, 2015 8.1379 6.85% 0.997 6.871% 1.0000 $0.5592
March, 2016 7.4416 7.79% 0.998 7.805% 1.0000 $0.5808
June 7.6704 7.67% 1.011 7.587% 1.0000 $0.5819
September 8.0590 7.35% 0.993 7.402% 1.0000 $0.5965
December, 2016 8.5844 7.24% 0.990 7.313% 1.0000 $0.6278
March, 2017 9.3984 6.26% 0.994 6.298% 1.0000 $0.5919
June 9.5313 6.41% 0.998 6.423% 1.0000 $0.6122
September 9.7129 6.56% 0.998 6.573% 1.0000 $0.6384
December, 2017 10.0566 6.06% 1.004 6.036% 1.0000 $0.6070
March, 2018 10.2701 6.22% 1.007 6.177% 1.0000 $0.6344
June 10.2518 6.22% 0.995 6.251% 1.0000 $0.6408
September 10.2965 6.62% 1.018 6.503% 1.0000 $0.6696
December, 2018 8.6875 7.16% 0.997 7.182% 1.0000 $0.6240
March, 2019 8.4778 7.09% 1.007 7.041% 1.0000 $0.5969
June 8.0896 7.33% 0.996 7.359% 1.0000 $0.5953
September 7.7948 7.96% 0.998 7.976% 1.0000 $0.6217
December, 2019 8.0900 6.03% 0.995 6.060% 1.0000 $0.4903
March 5.5596 7.04% 1.006 6.998% 1.0000 $0.3891
June 6.3568 6.10% 0.9900 6.162% 1.0000 $0.3917
September 7.2852 5.32% 1.00 5.320% 1.0000 $0.3876
December, 2020 8.3947 4.46% 0.999 4.464% 1.0000 $0.3747
March, 2021 9.6473 4.48% 0.996 4.498% 1.0000 $0.4339
June 10.3712 3.92% 0.985 3.980% 1.0000 $0.4127
September 10.7572 4.08% 1.017 4.012% 1.0000 $0.4316
December, 2021 10.7432 4.31% 0.999 4.314% 1.0000 $0.4635
March, 2022 10.5040 5.53% 1.004 5.508% 1.0000 $0.5786
June 9.3115 7.04% 0.993 7.090% 1.0000 $0.6672
September 8.4093 8.10% 0.997 8.124% 1.0000 $0.6916
December, 2022 7.9921 8.47% 0.996 8.504% 1.0000 $0.6796
January, 2023 8.5200 7.71% 0.996 7.741% 1.0000 $0.6595
NAVPU is shown after quarterly distributions of dividend income and annual distribution of capital gains.
Portfolio YTW includes cash (or margin borrowing), with an assumed interest rate of 0.00%
The Leverage Divisor indicates the level of cash in the account: if the portfolio is 1% in cash, the Leverage Divisor will be 0.99
Securities YTW divides “Portfolio YTW” by the “Leverage Divisor” to show the average YTW on the securities held; this assumes that the cash is invested in (or raised from) all securities held, in proportion to their holdings.
The Capital Gains Multiplier adjusts for the effects of Capital Gains Dividends. On 2009-12-31, there was a capital gains distribution of $1.989262 which is assumed for this purpose to have been reinvested at the final price of $10.5662. Thus, a holder of one unit pre-distribution would have held 1.1883 units post-distribution; the CG Multiplier reflects this to make the time-series comparable. Note that Dividend Distributions are not assumed to be reinvested.
Sustainable Income is the resultant estimate of the fund’s dividend income per current unit, before fees and expenses. Note that a “current unit” includes reinvestment of prior capital gains; a unitholder would have had the calculated sustainable income with only, say, 0.9 units in the past which, with reinvestment of capital gains, would become 1.0 current units.
DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator (definition refined in May, 2011). These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 (banks) or the Deemed Maturity date for insurers and insurance holding companies (see below)), in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis.

The same reasoning is also applied to FixedResets from these issuers, other than explicitly defined NVCC from banks.

In November, 2019, the assumption of DeemedRetraction for insurance issues was cancelled in the wake of the IAIS decision included in ICS 2.0. This resulted in a large drop in the yield calculated for these issues
The Deemed Maturity date for insurers was set at 2022-1-31 at the commencement of the process in February, 2011. It was extended to 2025-1-31 in April, 2013 and to 2030-1-31 in December, 2018. In November, 2019, the assumption of DeemedRetraction was cancelled in the wake of the IAIS decision included in ICS 2.0.
Yields for September, 2011, to January, 2012, were calculated by imposing a cap of 10% on the yields of YLO issues held, in order to avoid their extremely high calculated yields distorting the calculation and to reflect the uncertainty in the marketplace that these yields will be realized. From February to September 2012, yields on these issues have been set to zero. All YLO issues held were sold in October 2012.

These calculations were performed assuming constant contemporary GOC-5 and 3-Month Bill rates, as follows:

Canada Yields Assumed in Calculations
Month-end GOC-5 3-Month Bill
September, 2015 0.78% 0.40%
December, 2015 0.71% 0.46%
March, 2016 0.70% 0.44%
June 0.57% 0.47%
September 0.58% 0.53%
December, 2016 1.16% 0.47%
March, 2017 1.08% 0.55%
June 1.35% 0.69%
September 1.79% 0.97%
December, 2017 1.83% 1.00%
March, 2018 2.06% 1.08%
June 1.95% 1.22%
September 2.33% 1.55%
December, 2018 1.88% 1.65%
March, 2019 1.46% 1.66%
June 1.34% 1.66%
September 1.41% 1.66%
December, 2019 1.68% 1.68%
March, 2020 0.57% 0.21%
June 0.37% 0.21%
September 0.35% 0.14%
December, 2020 0.42% 0.08%
March, 2021 0.94% 0.09%
June 0.93% 0.13%
September 1.07% 0.13%
December, 2021 1.31% 0.16%
March, 2022 2.44% 0.53%
June 3.24% 2.11%
September 3.45% 3.60%
December, 2022 3.37% 4.35%
January, 2023 3.07% 4.48%
MAPF

MAPF Portfolio Composition : January, 2023

Turnover was high at 14% in January, due to distortions in relative pricing. Market volumes have been very low for quite some time, having never really recovered from the usual summer decline in 2021.

Sectoral distribution of the MAPF portfolio on January 31, 2023, were:

MAPF Sectoral Analysis 2023-1-31
HIMI Indices Sector Weighting YTW ModDur
Ratchet 0% N/A N/A
FixFloat 0% N/A N/A
Floater 0% N/A N/A
OpRet 0% N/A N/A
SplitShare 0% N/A N/A
Interest Rearing 0% N/A N/A
PerpetualPremium 0% N/A N/A
PerpetualDiscount 7.6% 6.59% 13.06
Fixed-Reset Discount 64.9% 7.76% 12.12
Insurance – Straight 0% N/A N/A
FloatingReset 0% N/A N/A
FixedReset Premium 0% N/A N/A
FixedReset Bank non-NVCC 0% N/A N/A
FixedReset Insurance non-NVCC 17.0% 7.65% 12.64
Scraps – Ratchet 0% N/A N/A
Scraps – FixedFloater 0% N/A N/A
Scraps – Floater 0% N/A N/A
Scraps – OpRet 0% N/A N/A
Scraps – SplitShare 2.9% 8.43% 2.47
Scraps – PerpPrem 0% N/A N/A
Scraps – PerpDisc 0% N/A N/A
Scraps – FR Discount 7.2% 8.74% 11.26
Scraps – Insurance Straight 0% N/A N/A
Scraps – FloatingReset 0% N/A N/A
Scraps – FR Premium 0% N/A N/A
Scraps – Bank non-NVCC 0% N/A N/A
Scraps – Ins non-NVCC 0% N/A N/A
Cash +0.4% 0.00% 0.00
Total 100% 7.71% 11.89
Totals and changes will not add precisely due to rounding. Cash is included in totals with duration and yield both equal to zero.
The various “Scraps” indices include issues with a DBRS rating of Pfd-3(high) or lower and issues with an Average Trading Value (calculated with HIMIPref™ methodology, which is relatively complex) of less than $25,000. The issues considered “Scraps” are subdivided into indices which reflect those of the main indices.
DeemedRetractibles were comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 in the case of banks or normally in the case of insurers and insurance holding companies, in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis and IAIS Says No To DeemedRetractions for the recent change in policy with respect to insurers.

Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue and by a further five years in December, 2018; the estimate was eliminated in November. However, the distinctions are being kept because it is useful to distinguish insurance issues from others.

The name of this subindex has been changed to “Insurance Straight” as of November, 2020
Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 3.07%, a constant 3-Month Bill rate of 4.48% and a constant Canada Prime Rate of 6.70%

The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.

Credit distribution is:

MAPF Credit Analysis 2023-1-31
DBRS Rating MAPF Weighting
Pfd-1 0
Pfd-1(low) 0
Pfd-2(high) 46.4%
Pfd-2 11.3%
Pfd-2(low) 31.8%
Pfd-3(high) 4.2%
Pfd-3 3.1%
Pfd-3(low) 1.2%
Pfd-4(high) 1.1%
Pfd-4 0.4%
Pfd-4(low) 0%
Pfd-5(high) 0%
Pfd-5 0%
Cash +0.4%
Totals will not add precisely due to rounding.
A position held in INE.PR.A is not rated by DBRS nor by S&P, but has been included as “Pfd-4(high)” in the above table on the basis of its last S&P rating of P-4(high) and its BB rating from Fitch. A “BB” rating would normally map to Pfd-3, but the company’s disdain for the two major preferred share agencies makes me nervous.
A position is held in CF.PR.A which is no longer rated by DBRS, but has been included in the table with a deemed rating of Pfd-4; the final DBRS rating was Pfd-4(high), but I’m taking it down a notch for reporting purposes because the lack of a rating makes me nervous.

Liquidity Distribution is:

MAPF Liquidity Analysis 2023-1-31
Average Daily Trading MAPF Weighting
<$50,000 29.3%
$50,000 – $100,000 26.0%
$100,000 – $200,000 36.6%
$200,000 – $300,000 5.7%
>$300,000 2.0%
Cash +0.4%
Totals will not add precisely due to rounding.

The distribution of Issue Reset Spreads is:

Range MAPF Weight
<100bp 0%
100-149bp 16.6%
150-199bp 19.5%
200-249bp 45.8%
250-299bp 5.0%
300-349bp 2.2%
350-399bp 0%
400-449bp 0%
450-499bp 0%
500-549bp 0%
550-599bp 0%
>= 600bp 0%
Undefined 10.9%

Distribution of Floating Rate Start Dates is shown in the table below. This is the date of the next adjustment to the dividend rate, if the issue is currently paying a fixed rate for a limited time; which in practice is successive terms of 5 years. Issues that adjust quarterly are considered “Currently Floating”.

Range MAPF Weight
Currently Floating 0%
0-1 Year 0.4%
1-2 Years 38.9%
2-3 Years 21.7%
3-4 Years 25.6%
4-5 Years 2.4%
5-6 Years 0%
>6 Years 0%
Not Floating Rate 10.9%

MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. The fund may be purchased directly from Hymas Investment Management. A “unit trust” is like a regular mutual fund, but are not sold with a prospectus This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission). Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.