PrefBlog

New Issues

New Issue: Two Series of RY Preferreds, USD, Issued As Merger Consideration

Royal Bank of Canada has announced:

it has completed the acquisition of City National Corporation (“City National”).
…
Based on the closing price on the New York Stock Exchange of RBC’s common shares on October 30, 2015 of US$ 56.83, the total transaction value is US$ 5.0 billion and will be paid with US$ 2.6 billion in cash and 41.6 million RBC common shares. In addition, RBC will issue US$ 275 million of RBC first preferred shares in exchange for all outstanding shares of City National preferred stock. The transaction is expected to reduce the Q1/2016 Common Equity Tier 1 ratio of RBC by approximately 70 basis points. RBC continues to forecast a strong capital position going forward.

There are two issues of City National preferreds that have been converted. The first is CYN.PRC, a 5.50% Straight Perpetual USD:

We will pay dividends on the Preferred Stock, when, as, and if declared by our board of directors or a duly authorized committee of the board. If declared, dividends will accrue and be payable on the liquidation preference amount, on a non-cumulative basis, from the date of issuance at a rate of 5.50% per annum, payable quarterly, in arrears. See also “Dividend Payment Dates” on page S-9. Upon the payment of any dividends on the Preferred Stock, holders of depositary shares will receive a related proportionate payment.

The second is CYN.PRD, a 6.75%+405.2 FixedFloater USD:

We will pay dividends on the Preferred Stock, when, as, and if declared by our board of directors or a duly authorized committee of the board, out of funds legally available to pay dividends, (i) from the date of issuance of the Preferred Stock to, but excluding November 7, 2023, at an annual rate of 6.750% on the liquidation preference amount of $1,000 per share of Preferred Stock, quarterly in arrears, on February 7, May 7, August 7 and November 7 of each year (each, a “dividend payment date”), beginning on February 7, 2014, and (ii) from, and including, November 7, 2023, at an annual rate equal to three-month LIBOR plus 4.052% on the liquidation preference amount of $1,000 per share of Preferred Stock, quarterly in arrears, on each dividend payment date, beginning on February 7, 2024. Upon the payment of any dividends on the Preferred Stock, holders of depositary shares will receive a related proportionate payment.

Neither new series is yet listed on RY’s preferred share page. If they are listed, they will be known as Series C-1 and Series C-2:

In addition, upon the consummation of the Merger, each outstanding share of City National’s 5.5% Non-Cumulative Perpetual Preferred Stock, Series C will be cancelled and RBC will issue to the former holder, in respect of each such outstanding share of preferred stock, one 5.50% Non-Cumulative Perpetual Preferred share, Series C-1 (“Series C-1 Preferred Share”) of RBC and each outstanding share of City National’s 6.75% Fixed Rate/Floating Rate Non-Cumulative Preferred Stock, Series D will be cancelled and RBC will issue to the former holder, in respect of each such outstanding share of preferred stock, one 6.75% Fixed Rate/Floating Rate Non-Cumulative Preferred Share, Series C-2 (“Series C-2 Preferred Share”) of RBC. In consideration for the issuance of Series C-1 Preferred Shares and Series C-2 Preferred Shares, Holdco will issue to RBC a number of shares in the capital stock of Holdco for each Series C-1 Preferred Share and Series C-2 Preferred Share, respectively, having a fair market value equal to the fair market value of a Series C-1 Preferred Share and a Series C-2 Preferred Share, respectively, on the date of issuance.

As is typical with take-overs, various matters of great pith and moment are not spelled out, but it appears that the new series C-1 and C-2 are not NVCC-compliant:

Conversion Rights. New RBC Preferred Shares are not convertible into or exchangeable for any other class or series of shares or securities of, or any other interests in, RBC.

In addition I can find no mention in RY’s definitive filing with the SEC a discussion of tax considerations for Canadian residents; there is no such description in any of the various attachments, either. However, given that DBRS has assigned a bond-style rating to these new series … :

DBRS Limited (DBRS) has today assigned a rating of A (low) with a Stable trend to Royal Bank of Canada’s (RBC or the Bank) 5.50% Non-Cumulative Perpetual First Preferred Shares, Series C-1 (Preferred Shares, Series C-1) and 6.750% Fixed Rate/Floating Rate Noncumulative Perpetual First Preferred Shares, Series C-2 (Preferred Shares, Series C-2).

RBC has closed its acquisition of City National Corporation (City National) and will issue $275 million of RBC First Preferred Shares in exchange for all outstanding shares of City National’s Preferred Stock. RBC will issue $175 million of Preferred Shares, Series C-1 and $100 million of Preferred Shares, Series C-2. These new RBC preferred shares rank pari passu with all existing preferred shares of the Bank.

… I strongly suspect that Canadian shareholders will not receive benefit of the Dividend Tax Credit and Gross-Up; i.e., that these things are preferred securities not, by my definition, preferred shares.

These things are listed on NASDAQ with the symbols RY.PRS and RY.PRT.

Market Action

November 2, 2015

The West’s fear of competition is leading for calls to recruit more Secret Policemen to enforce the laws of foreign countries:

Moving money in small increments to avoid reporting requirements is called “smurfing,” after the little blue cartoon characters who as small individuals constitute a larger whole. A record $194 billion exited China in September, according to a Bloomberg gauge estimating capital flows. The Chinese use numerous tactics to transfer money abroad, and smurfing is routine, with some of the cash flowing into overheated property markets in Vancouver, Hong Kong, New York and Sydney.

Now, as Chinese citizens bypass the country’s limit of converting $50,000 a person per year by enlisting friends, relatives and even employees to send out cash on their behalf, banks and regulators around the world are being forced to decide: Is it okay to knowingly allow Chinese citizens to evade their government’s controls if it doesn’t break your own country’s laws?

In Vancouver, a Supreme Court case showed that one lender, Canadian Imperial Bank of Commerce, had assisted such transactions. The case arose when a CIBC financial adviser allowed a wealthy Chinese client to route two deposits of $50,000 through her private accounts to buy a home, leading to the dismissal of the banker for “commingling” her own funds with her client’s.
..
Elsewhere in China, examples include a company that ordered employees to use their accounts to wire money to Canada for private property purchases, according to Christine Duhaime, a Canadian lawyer specializing in financial crime.

China’s rules are being “made a mockery of,” she said. “I wouldn’t do it if I ran the banks.”

Coming up next – banks will be put in charge of Canada’s efforts to stamp out Falun Gong. After all, if the Chinese government says something’s the right thing to do, how could it possibly be wrong? Another Bloomberg story illustrates other ways of getting money out of China, for those interested in a new career. However, it’s an an ill wind that blows nobody any good:

The Royal Bank of Canada scrapped an internal limit on mortgage-loan size for immigrants in the spring to tap into surging demand for financing on multi-million-dollar houses from newcomers to Vancouver.

Wealthy buyers, mostly from China, are fuelling a booming mortgage business in Vancouver, where the median price for a detached home in the desirable west side jumped 31 per cent to $2.87-million in the last two years.

RBC, Canada’s largest bank, removed its $1.25-million cap on loans to borrowers with no local credit history in May, said Christine Shisler, the bank’s director of multicultural markets, who works with an immigrant clientele.

“We’re seeing a lot of affluent newcomers looking to buy high purchase-price homes,” she said. “Now we can actually service any mortgage amount.”

Nevertheless, it’s clear that anti-money-laundering laws, foisted on a gullible public on the basis of Fighting Crime and Eliminating Terrorism, are actually being used as a non-tariff impediment to real-estate transactions. So what else is new?

Regulators in six provinces have announced a Finalized Offering Memorandum Exemption:

The following are some of the key investor protection measures included in the offering memorandum exemption:

•Non-reporting issuers will be required to, among other measures, provide investors with audited annual financial statements and an annual notice describing how the proceeds raised under the offering memorandum exemption were used.
•Any marketing materials will be required to be incorporated by reference in the offering memorandum so that they are subject to the same liability as the disclosure provided in the offering memorandum in the event of a misrepresentation.
•Individual investors relying on the offering memorandum exemption will be subject to investment limits in most cases.
•All investors will be required to sign a risk acknowledgement form.

The offering memorandum exemption was designed to facilitate capital-raising by allowing issuers to solicit investments from a wider range of investors than they would be able to under other prospectus exemptions, provided that certain conditions are met.

Provided all necessary ministerial approvals are obtained, the final amendments will come into force in Ontario on January 13, 2016 and in Alberta, New Brunswick, Nova Scotia, Québec and Saskatchewan on April 30, 2016.

The final amendments do not modify the OM exemption that exists in any CSA jurisdiction other than the participating jurisdictions.

The list of amendments to NI 45-106 notes:

The participating jurisdictions have adopted investment limits for both eligible and non-eligible investors that are individuals (other than those that qualify as accredited investors or under the family, friends and business associates exemption). These limits will not apply to non-individual investors, whether eligible or non-eligible. The final amendments permit a higher investment threshold for eligible investors when a portfolio manager, investment dealer or exempt market dealer has made a positive suitability assessment.

The investment limits will apply to all securities acquired under the OM exemption as follows:

• in the case of a non-eligible investor that is an individual, the acquisition cost of all securities acquired by the purchaser under the OM exemption in the preceding 12 months cannot exceed $10,000,
• in the case of an eligible investor that is an individual, the acquisition cost of all securities acquired by the purchaser under the OM exemption in the preceding 12 months cannot exceed $30,000, and
• in the case of an eligible investor that is an individual and that receives advice from a portfolio manager, investment dealer or exempt market dealer that the investment above $30,000 is suitable, the acquisition cost of all securities acquired by the purchaser under the OM exemption in the preceding 12 months cannot exceed $100,000.

I’m not sure whether there are any possible implications for Malachite Aggressive Preferred Fund, but you can bet I’ll be asking my lawyer! Davies Ward Phillips & Vineberg LLP comments:

The OM Exemption reflects a balancing of interests: issuers are provided with the opportunity to tap into a larger pool of investors, but must have in place the financial and human resources to prepare an offering memorandum and produce audited annual financial statements. For non-reporting issuers, the OM Exemption can best be thought of as a stepping stone to becoming a public company.

One impediment for non-reporting issuers is that the offering memorandum and marketing materials filed with the Ontario Securities Commission will be publicly filed and therefore available to all of the issuer’s employees, customers, suppliers and competitors. In addition, small, early-stage issuers may not find the OM Exemption attractive due to the costs associated with preparing an offering memorandum and audited financial statements, ongoing disclosure obligations and potentially being designated as a market participant.

Reporting issuers, particularly junior issuers, may find the OM Exemption to be a cheaper and less time-consuming alternative to a prospectus offering.

The OM Exemption does not limit or affect the availability to issuers of other prospectus exemptions, such as the accredited investor or minimum amount exemptions.

Time will tell whether the OM Exemption is adopted and accepted by the capital markets. Although using the OM Exemption could help smaller issuers tap into a larger market, it comes at a cost that may be too high for some issuers to entertain.

I’ll be most interested in reading a comparison between this regime and the SEC’s crowdfunding initiative discussed on October 30; if anybody sees such a thing, be sure to let me know!

It would seem that the Fed’s proposed rules on ‘bail-in’ capital (discussed October 30) may well have the intended effect, according to S&P:

•Following the release last week of the Federal Reserve’s notice of proposed rulemaking, Standard & Poor’s is reviewing the resolution regime for U.S. banks to consider its effectiveness and impact on our ratings.
•We expect the outcome of the review will be that extraordinary government support will no longer be factored into the ratings on the eight U.S. global systemically important banks (GSIBs) and that this will result in lower ratings on these banks’ nonoperating holding companies (NOHCs). As a result, we are placing on CreditWatch with negative implications our NOHC ratings on the U.S. GSIBs: Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corp., The Goldman Sachs Group, and Wells Fargo & Co.
•But, due to the construct of the U.S. resolution regime, in which NOHC creditors could ultimately provide capital support to the operating entity, we are taking no negative actions on these banks’ operating entities, and, on certain banks taking positive rating actions, despite
the likely removal of extraordinary government support.

•As part of our review of the U.S. resolution regime, we are also
reviewing our current treatment of nondeferrable subordinated debt (NDSD) in the U.S. and considering whether it can absorb losses in advance of an entity’s nonviability or as part of a resolution without senior unsecured creditors being in default. A change in our treatment of NDSD would extend to all rated U.S. banks, and not just the GSIBs, but would have
limited ratings impact

It was a mixed day for the Canadian preferred share market, with PerptualDiscounts off 10bp, FixedResets down 71bp and DeemedRetractibles gaining 1bp. MFC FixedResets were prominent on the bad side of a lengthy Performance Highlights table. Volume was a touch on the low side.

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

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

Here’s TRP:

Click for Big

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 12.90 to be $0.54 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.52 cheap at its bid price of 13.31.

Click for Big

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 20.07 to be 0.63 rich, while MFC.PR.I resetting at +286bp on 2017-9-19, is bid at 21.28 to be 0.42 cheap.

Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.26 to be $1.27 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 21.01 and appears to be $0.70 rich.

Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 18.70, looks $0.58 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.30 and is $0.31 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.72%, with one outlier above 0.00% and one below -2.00%. The distribution is just barely bimodal, with bank NVCC non-compliant pairs averaging -0.84% and other issues averaging -0.51%. There are four junk outliers above 0.00% and one below -2.00%.

Click for Big

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	1	1.5705 %	1,762.3
FixedFloater	0.00 %	0.00 %	0	0.00	1	1.5705 %	3,081.3
Floater	4.21 %	4.27 %	61,610	16.84	3	1.5705 %	1,873.5
OpRet	0.00 %	0.00 %	0	0.00	1	0.0000 %	2,719.7
SplitShare	4.77 %	5.95 %	163,399	2.92	5	0.0000 %	3,187.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0000 %	2,486.8
Perpetual-Premium	5.84 %	5.78 %	84,579	2.73	6	-0.0665 %	2,486.7
Perpetual-Discount	5.56 %	5.69 %	81,763	14.35	33	-0.1021 %	2,567.1
FixedReset	4.97 %	4.47 %	212,285	15.43	76	-0.7121 %	2,054.9
Deemed-Retractible	5.19 %	5.60 %	110,366	5.44	34	0.0099 %	2,576.0
FloatingReset	2.58 %	3.82 %	56,415	5.81	10	-0.1028 %	2,168.5

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.K	FixedReset	-4.19 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.00 Bid-YTW : 7.04 %
MFC.PR.L	FixedReset	-4.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.94 Bid-YTW : 7.17 %
HSE.PR.A	FixedReset	-3.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 13.50 Evaluated at bid price : 13.50 Bid-YTW : 5.04 %
HSE.PR.G	FixedReset	-2.98 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 22.18 Evaluated at bid price : 22.80 Bid-YTW : 4.91 %
MFC.PR.N	FixedReset	-2.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.07 Bid-YTW : 6.48 %
HSE.PR.E	FixedReset	-2.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 21.74 Evaluated at bid price : 22.10 Bid-YTW : 5.10 %
TD.PR.Y	FixedReset	-2.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.67 %
HSE.PR.C	FixedReset	-2.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 21.28 Evaluated at bid price : 21.56 Bid-YTW : 4.84 %
MFC.PR.M	FixedReset	-1.95 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.15 Bid-YTW : 6.50 %
FTS.PR.K	FixedReset	-1.84 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 4.26 %
MFC.PR.J	FixedReset	-1.82 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 6.36 %
NA.PR.W	FixedReset	-1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.02 Evaluated at bid price : 19.02 Bid-YTW : 4.37 %
BAM.PR.X	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 15.41 Evaluated at bid price : 15.41 Bid-YTW : 4.71 %
NA.PR.S	FixedReset	-1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.41 %
TD.PF.C	FixedReset	-1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.16 Evaluated at bid price : 19.16 Bid-YTW : 4.30 %
MFC.PR.H	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.56 Bid-YTW : 5.59 %
VNR.PR.A	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 20.27 Evaluated at bid price : 20.27 Bid-YTW : 4.70 %
TRP.PR.E	FixedReset	-1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.60 %
BAM.PR.R	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 5.09 %
BMO.PR.T	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 4.33 %
RY.PR.M	FixedReset	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 4.37 %
BMO.PR.W	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 18.71 Evaluated at bid price : 18.71 Bid-YTW : 4.37 %
TRP.PR.F	FloatingReset	-1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 14.16 Evaluated at bid price : 14.16 Bid-YTW : 4.11 %
MFC.PR.B	Deemed-Retractible	-1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.27 Bid-YTW : 6.99 %
TRP.PR.D	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 18.66 Evaluated at bid price : 18.66 Bid-YTW : 4.60 %
IFC.PR.C	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.69 Bid-YTW : 7.56 %
CU.PR.D	Perpetual-Discount	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 22.18 Evaluated at bid price : 22.51 Bid-YTW : 5.52 %
BNS.PR.D	FloatingReset	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.30 Bid-YTW : 5.75 %
TD.PF.B	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 4.29 %
BAM.PR.G		1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 25.00 Evaluated at bid price : 15.00 Bid-YTW : 5.57 %
GWO.PR.R	Deemed-Retractible	1.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.30 Bid-YTW : 6.47 %
CU.PR.C	FixedReset	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 21.12 Evaluated at bid price : 21.12 Bid-YTW : 4.04 %
TRP.PR.C	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 13.31 Evaluated at bid price : 13.31 Bid-YTW : 4.61 %
BAM.PR.E		1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 25.00 Evaluated at bid price : 15.50 Bid-YTW : 5.30 %
BAM.PR.C	Floater	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 11.16 Evaluated at bid price : 11.16 Bid-YTW : 4.27 %
IAG.PR.G	FixedReset	1.70 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 5.93 %
TRP.PR.H	FloatingReset	2.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 11.56 Evaluated at bid price : 11.56 Bid-YTW : 3.64 %
BAM.PR.B	Floater	3.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 11.41 Evaluated at bid price : 11.41 Bid-YTW : 4.18 %
MFC.PR.F	FixedReset	4.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.60 Bid-YTW : 9.37 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BMO.PR.S	FixedReset	77,983	Nesbitt crossed blocks of 31,800 and 35,000, both at 19.37. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.36 Evaluated at bid price : 19.36 Bid-YTW : 4.36 %
RY.PR.Z	FixedReset	67,389	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 4.18 %
RY.PR.H	FixedReset	46,951	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.38 Evaluated at bid price : 19.38 Bid-YTW : 4.27 %
BAM.PR.B	Floater	36,348	TD crossed 13,500 at 11.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 11.41 Evaluated at bid price : 11.41 Bid-YTW : 4.18 %
PVS.PR.E	SplitShare	33,090	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-10-31 Maturity Price : 25.00 Evaluated at bid price : 24.41 Bid-YTW : 5.95 %
BAM.PF.H	FixedReset	29,961	YTW SCENARIO Maturity Type : Call Maturity Date : 2020-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 4.80 %
There were 27 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.K	Floater	Quote: 11.06 – 11.76 Spot Rate : 0.7000 Average : 0.4775 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 11.06 Evaluated at bid price : 11.06 Bid-YTW : 4.31 %
BAM.PF.E	FixedReset	Quote: 19.51 – 20.47 Spot Rate : 0.9600 Average : 0.7715 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.51 Evaluated at bid price : 19.51 Bid-YTW : 4.79 %
TRP.PR.G	FixedReset	Quote: 21.75 – 22.26 Spot Rate : 0.5100 Average : 0.3505 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 21.45 Evaluated at bid price : 21.75 Bid-YTW : 4.47 %
FTS.PR.H	FixedReset	Quote: 14.13 – 14.59 Spot Rate : 0.4600 Average : 0.3666 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 14.13 Evaluated at bid price : 14.13 Bid-YTW : 4.29 %
CU.PR.F	Perpetual-Discount	Quote: 21.14 – 21.60 Spot Rate : 0.4600 Average : 0.3774 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 21.14 Evaluated at bid price : 21.14 Bid-YTW : 5.42 %
NA.PR.W	FixedReset	Quote: 19.02 – 19.34 Spot Rate : 0.3200 Average : 0.2378 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-11-02 Maturity Price : 19.02 Evaluated at bid price : 19.02 Bid-YTW : 4.37 %

MAPF

MAPF Performance: October, 2015

The fund underperformed the indices in October, as several of the insurance sector low-spread FixedResets held gave up their relative out-performance over the prior two months.

When I wrote eMail To A Client towards the end of July, one had to go back to January, 2011, to find a starting point that would give you a positive return through the holding period. As of the end of September, the required starting point moved back again, to July month-end, 2010. Readers will be happy to learn that, according to the TXPR index, one now sees positive returns for the period August 2010 to October 2015.

The current 62-month total cumulative return of basically zero was only exceeded during the Credit Crunch – and even then, the figure was only negative for seven months, from October 2008 to April 2009 inclusive. The discussion in eMail To A Client still applies … but more so, now!

So why is this happening? I believe that a sudden realization that low Canada yields would be reflected in dividends of FixedResets, that started with the reset of TRP.PR.A announced in early December, 2014, turned into unreasonable fear in the spring of 2015 and escalated into blind panic. The yield of FixedResets has decoupled from the five-year Canada rate (note that this chart was prepared prior to the monster rally of the second half of October):

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This has led to a narrowing spread between PerpetualDiscounts and FixedResets (note that this chart was prepared prior to the monster rally of the second half of October) … :

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n.b.: the spread here is “interest-equivalent”

… which has put pressure on the price of PerpetualDiscounts, raising their spread to long corporate bonds to Credit Crunch proportions (note that this chart was prepared prior to the monster rally of the second half of October):

Click for Big
n.b.: the spread here is “interest equivalent”

So there you have it in a nutshell! Regrettably, I am unable to predict either the timing or the degree of the correction that must happen at some point.

ZPR, is an ETF comprised of FixedResets and Floating Rate issues and a very high proportion of junk issues, returned -%, -% and -% over the past one-, three- and twelve-month periods, respectively (according to the fund’s data), versus returns for the TXPL index of +7.28%, -4.75% and -21.19% respectively. The fund has been able to attract assets of about $1,043-million since inception in November 2012; AUM increased by $144.1-million in September; given an index return of +7.28% an increase of about $65-million was expected, so there was a very significant cash inflow over the month. I feel that the flows into and out of this fund are very important in determining the performance of its constituents. ZPR changed its index provider effective October 2015; I believe that this may have been at least partially motivated by a desire to de-emphasize the horrific performance of the past three years by using an index with a very recent inception date; and that this may be taken – with a grain of salt – as an indication that the BMO Brain Trust thinks FixedResets are at a bottom.

TXPR had returns over one-, three- and twelve-months of +5.74%, -3.95% and -15.45% respectively with CPD performance within expectations.

Returns for the HIMIPref™ investment grade sub-indices for the month were as follows:

HIMIPref™ Indices Performance to August, 2015
Sub-Index	1-Month	3-month
Ratchet	N/A	N/A
FixFloat	N/A	N/A
Floater	+5.68%	-13.49%
OpRet	N/A	N/A
SplitShare	-1.56%	-2.05%
Interest	N/A	N/A
PerpetualPremium	+1.01%	-0.14%
PerpetualDiscount	+2.72%	-1.60%
FixedReset	+4.89%	-7.35%
DeemedRetractible	+1.35%	-0.22%
FloatingReset	+5.04%	-4.21%

It will be noted that the highest sectoral return observed, +4.89%, is less than the performance achieved by the TXPR index! This is due to October’s outperformance by junk issues, which was illustrated in the post Low-Spread FixedResets: October 2015.

Additionally, the poor October performance by the fund’s large holdings of low-spread insurance-related FixedResets has been fingered as the cause for underperformance in October. This is due to the reversion of these issues to ‘normal’ for low-spread issues not subject to OSFI regulation over a three month period, as shown in the table below:

Ticker	October Performance	Three-Month Performance	Regressed Three-Month Performance
GWO.PR.N	-1.01%	-13.34%	-15.85%
PWF.PR.P	-1.29%	-14.77%	-14.15%
MFC.PR.F	-0.85%	-15.98%	-15.23%
SLF.PR.G	+0.13%	-7.64%	-15.23%
The ‘Regressed Three-Month Performance’ is the performance predicted by the regression line in the last chart of the post Low-Spread FixedResets: October 2015

All that being said, however, there is reason to believe these lower-spread issues are currently cheap. We can look at the Implied Volatility calculation for the MFC FixedResets, with MFC.PR.F shown at its actual bid of 14.02, and a counter-factual price of 15.17, which is where it would be if it had achieved an October return of 7.28%, equal to that of the TXPL index. This results in the following chart:

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So, this very significant change in price looks entirely reasonable according to the pattern displayed by the other MFC FixedResets. We will just have to wait and see how it turns out!

Malachite Aggressive Preferred Fund’s Net Asset Value per Unit as of the close October 30, 2015, was $8.0903.

Returns to October 30, 2015
Period	MAPF	BMO-CM “50” Index	TXPR Total Return	CPD – according to Blackrock
One Month	+3.54%	+5.22%	+5.74%	N/A
Three Months	-8.57%	-4.50%	-3.95%	N/A
One Year	%-19.02	-15.34%	-15.45%	-15.64%
Two Years (annualized)	-5.83%	-5.95%	-5.29%	N/A
Three Years (annualized)	-4.32%	-3.91%	-3.97%	-4.31%
Four Years (annualized)	-0.66%	-1.47%	-1.58%	N/A
Five Years (annualized)	-0.06%	+0.07%	-0.40%	-0.83%
Six Years (annualized)	+3.21%	+2.30%	+1.57%
Seven Years (annualized)	+10.62%	+4.38%	+3.53%
Eight Years (annualized)	+8.44%	+2.15%	+1.33%
Nine Years (annualized)	+7.10%	+1.34%
Ten Years (annualized)	+7.02%	+1.71%
Eleven Years (annualized)	+6.97%	1.91%
Twelve Years (annualized)	+7.65%	+2.21%
Thirteen Years (annualized)	+8.99%	+2.60%
Fourteen Years (annualized)	8.23%	+2.66%
MAPF returns assume reinvestment of distributions, and are shown after expenses but before fees.
CPD Returns are for the NAV and are after all fees and expenses.
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 +3.58%, -3.04% and -11.69%, respectively, according to Morningstar after all fees & expenses. Three year performance is -2.18%; five year is +0.75%
Figures for Manulife Preferred Income Class Adv [into which was merged Manulife Preferred Income Fund (formerly AIC Preferred Income Fund)] (which are after all fees and expenses) for 1-, 3- and 12-months are +5.53%, -4.27% & -15.87, respectively. It will be noted that AIC Preferred Income Fund was in existence prior to August, 2009, but long term performance figures have been suppressed.
Figures for Horizons Active Preferred Share ETF (which are after all fees and expenses) for 1-, 3- and 12-months are +5.15%, -3.36% & -12.88%, respectively. Three year performance is -2.59%
Figures for National Bank Preferred Equity Fund (formerly Altamira Preferred Equity Fund) are +4.98%, -3.60% and -14.29% for one-, three- and twelve months, respectively. Three year performance is -4.37%
The figure for BMO S&P/TSX Laddered Preferred Share Index ETF is +7.03%, -4.89% and -21.45% for one-, three- and twelve-months, respectively. Two year performance is -9.14%.
Figures for NexGen Canadian Preferred Share Tax Managed Fund (Dividend Tax Credit Class, the best performing) are -%, -% and -% for one-, three- and twelve-months, respectively.
Figures for BMO Preferred Share Fund are -3.74% and -14.20% for the past three- and twelve-months, respectively.
Figures for PowerShares Canadian Preferred Share Index Class, Series Fare +4.83%, -3.32% and -15.64% for the past one, three and twelve months, respectively. The three-year figure is -5.23%
Figures for the First Asset Preferred Share Investment Trust (PSF.UN) are +6.36%, -6.80% and -20.57% for the past one, three and twelve months, respectively. The two-, three-, four- and five-year figures are -9.35%, -7.07%, -4.54% and -3.58%, respectively.

MAPF returns assume reinvestment of dividends, and are shown after expenses but before fees. Past performance is not a guarantee of future performance. You can lose money investing in Malachite Aggressive Preferred Fund or any other fund. For more information, see the fund’s main page. The fund is available either directly from Hymas Investment Management or through a brokerage account at Odlum Brown Limited.

A problem that has bedevilled the market over the past four years has been the OSFI decision not to grandfather Straight Perpetuals as Tier 1 bank capital, and their continued foot-dragging regarding a decision on insurer Straight Perpetuals has segmented the market to the point where trading has become much more difficult. Until the market became so grossly segmented, there were many comparables for any given issue – but now banks are not available to swap into (because they are so expensive) and non-regulated companies are likewise deprecated (because they are not DeemedRetractibles; they should not participate in the increase in value that will follow the OSFI decision I anticipate and, in addition, are analyzed as perpetuals). The fund’s portfolio was, in effect ‘locked in’ to the low coupon DeemedRetractibles due to projected long-term gains from a future OSFI decision to the detriment of trading gains, particularly in May, 2013, when the three lowest-coupon SLF DeemedRetractibles (SLF.PR.C, SLF.PR.D and SLF.PR.E) were the worst performing DeemedRetractibles in the sub-index, and in June, 2013, when the insurance-issued DeemedRetractibles behaved like PerpetualDiscounts in a sharply negative market. Nowadays, the fund is ‘locked-in’ to the low-spread FixedResets from these companies: GWO.PR.N, MFC.PR.F, and SLF.PR.G.

In October, insurance DeemedRetractibles outperformed bank DeemedRetractibles:

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… but underperformed Unregulated Straight Perpetuals…

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Correlations were poor for bank DeemedRetractibles (4%, not shown) and insurance (-5%; not shown) but pretty good for unregulated/NVCC-compliant issues (38%).

A lingering effect of the downdraft of 2013 has been the return of measurable Implied Volatility but given my recent updates in recent daily market reports, I will not discuss them further in this post.

Sometimes everything works … sometimes it’s 50-50 … sometimes nothing works. The fund seeks to earn incremental return by selling liquidity (that is, taking the other side of trades that other market participants are strongly motivated to execute), which can also be referred to as ‘trading noise’ – although for quite some time, noise trading has taken a distant second place to the sectoral play on insurance DeemedRetractibles; something that dismays me, particularly given that the market does not yet agree with me regarding the insurance issues! There were a lot of strongly motivated market participants during the Panic of 2007, generating a lot of noise! Unfortunately, the conditions of the Panic may never be repeated in my lifetime … but the fund will simply attempt to make trades when swaps seem profitable, without worrying about the level of monthly turnover.

What has happened over the past year has been – obviously, now! – a very significant re-pricing of the FixedReset market. My analytical software, HIMIPref™ assumes that the market is always right when it comes to pricing asset classes; it seeks to pick off the individual issues that stray too far from the normal price. Two years ago, FixedResets were yielding so little that the system didn’t see much value even in buying the mispriced ones – the weighting of FixedResets in the September, 2013, MAPF Portfolio Composition was only 8%. However, as the market drifted lower, the cheap outliers gradually became more and more attractive, and the weighting increased from 23.4% in the September, 2014, MAPF Portfolio Composition to its current figure of 70.2% in the September, 2015, MAPF Portfolio Composition. So … too early! But who would have thought that the market would be astonished in December, 2014, that the GOC-5 yields that have been so low for years could possibly have had an effect on dividends? Regrettably, when the entire market is blind, so are quantitative systems. Still, while relative performance has been poor lately, it hasn’t been disastrous … although some clients might feel that absolute performance has been quite disastrous enough, thank you very much.

There’s plenty of room for new money left in the fund. I have shown in PrefLetter that market pricing for FixedResets is very often irrational and I have lots of confidence – backed up by my bond portfolio management experience in the markets for Canadas and Treasuries, and equity trading on the NYSE & TSX – that there is enough demand for liquidity in any market to make the effort of providing it worthwhile (although the definition of “worthwhile” in terms of basis points of outperformance changes considerably from market to market!) I will continue to exert utmost efforts to outperform but it should be borne in mind that there will almost inevitably be periods of underperformance in the future.

The yields available on high quality preferred shares remain elevated, which is reflected in the current estimate of sustainable income.

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, 2015	7.8140	6.98%	0.999	6.987%	1.0000	$0.5460
October, 2015	8.0903	6.84%	1.002	6.826%	1.0000	$0.5522
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 (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 2025-1-31 (insurers and insurance holding companies), in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: Seeking NVCC Status and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind this analysis. The same reasoning is also applied to FixedResets from these issuers, other than explicitly defined NVCC from banks.
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.
Calculations of resettable instruments are performed assuming constant contemporary GOC-5 and 3-Month Bill rates. For September 30, 2015, yields of 0.78% and 0.40%, respectively, were assumed; base rates in October, 2015, were 0.80% and 0.36%, respectively.

Significant positions were held in DeemedRetractible, SplitShare and NVCC non-compliant regulated FixedReset issues on September 30; all of these currently have their yields calculated with the presumption that they will be called by the issuers at par prior to 2022-1-31 (banks) or 2025-1-31 (insurers and insurance holding companies) or on a different date (SplitShares) This presents another complication in the calculation of sustainable yield, which also assumes that redemption proceeds will be reinvested at the same rate.

I will also note that the sustainable yield calculated above is not directly comparable with any yield calculation currently reported by any other preferred share fund as far as I am aware. The Sustainable Yield depends on:
i) Calculating Yield-to-Worst for each instrument and using this yield for reporting purposes;
ii) Using the contemporary value of Five-Year Canadas to estimate dividends after reset for FixedResets. The assumption regarding the five-year Canada rate has become more important as the proportion of low-spread FixedResets in the portfolio has increased.
iii) Making the assumption that deeply discounted NVCC non-compliant issues from both banks and insurers, both Straight and FixedResets will be redeemed at par on their DeemedMaturity date as discussed above.

I no longer show calculations that assume the conversion of the entire portfolio into PerpetualDiscounts, as the fund has only a small position in these issues.

Most funds report Current Yield. For instance, ZPR reports a “Dividend Yield” of 4.5% as of August 29, 2014, but this is the Current Yield, a meaningless number. The Current Yield of MAPF was 4.89% as of August 29, but I will neither report that with any degree of prominence nor take any great pleasure in the fact that it’s a little higher than the ZPR number. It’s meaningless; to discuss it in the context of portfolio reporting is misleading.

However, BMO has taken a significant step forward in that they are no longer reporting the “Portfolio Yield” directly on their website; the information is taken from the “Enhanced Fund Profile” which is available only as a PDF link. CPD doesn’t report this metric on the CPD fact sheet or on their website. I may have one less thing to mock the fundcos about!

It should be noted that the concept of this Sustainable Income calculation was developed when the fund’s holdings were overwhelmingly PerpetualDiscounts – see, for instance, the bottom of the market in November 2008. It is easy to understand that for a PerpetualDiscount, the technique of multiplying yield by price will indeed result in the coupon – a PerpetualDiscount paying $1 annually will show a Sustainable Income of $1, regardless of whether the price is $24 or $17.

Things are not quite so neat when maturity dates and maturity prices that are different from the current price are thrown into the mix. If we take a notional Straight Perpetual paying $5 annually, the price is $100 when the yield is 5% (all this ignores option effects). As the yield increases to 6%, the price declines to 83.33; and 83.33 x 6% is the same $5. Good enough.

But a ten year bond, priced at 100 when the yield is equal to its coupon of 5%, will decline in price to 92.56; and 92.56 x 6% is 5.55; thus, the calculated Sustainable Income has increased as the price has declined as shown in the graph:

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The difference is because the bond’s yield calculation includes the amortization of the discount; therefore, so does the Sustainable Income estimate.

Different assumptions lead to different results from the calculation, but the overall positive trend is apparent. I’m very pleased with the long-term results! It will be noted that if there was no trading in the portfolio, one would expect the sustainable yield to be constant (before fees and expenses). The success of the fund’s trading is showing up in

the very good performance against the index
the long term increases in sustainable income per unit

As has been noted, the fund has maintained a credit quality equal to or better than the index; outperformance has generally been due to exploitation of trading anomalies.

Again, there are no predictions for the future! The fund will continue to trade between issues in an attempt to exploit market gaps in liquidity, in an effort to outperform the index and keep the sustainable income per unit – however calculated! – growing.

Issue Comments

Low-Spread FixedResets: October 2015

As noted in MAPF Portfolio Composition: October 2015, the fund now has a large allocation to FixedResets, mostly of relatively low spread.

Many of these were largely purchased with proceeds of sales of DeemedRetractibles from the same issuer; it is interesting to look at the price trend of some of the Straight/FixedReset pairs. We’ll start with GWO.PR.N / GWO.PR.I; the fund sold the latter to buy the former at a takeout of about $1.00 in mid-June, 2014; relative prices over the past year are plotted as:

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Given that the October month-end take-out was $7.49, this is clearly a trade that has not worked out very well.

In July, 2014, I reported sales of SLF.PR.D to purchase SLF.PR.G at a take-out of about $0.15:

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There were similar trades in August, 2014 (from SLF.PR.C) at a take-out of $0.35. The October month-end take-out (bid price SLF.PR.D less bid price SLF.PR.G) was $5.65, so that hasn’t worked very well either.

November saw the third insurer-based sector swap, as the fund sold MFC.PR.C to buy the FixedReset MFC.PR.F at a post-dividend-adjusted take-out of about $0.85 … given a October month-end take-out of $6.62, that’s another regrettable trade, although another piece executed in December at a take-out of $1.57 has less badly.

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This trend is not restricted to the insurance sector, which I expect will become subject to NVCC rules in the relatively near future and are thus subject to the same redemption assumptions I make for DeemedRetractibles. Other pairs of interest are BAM.PR.X / BAM.PR.N:

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… and FTS.PR.H / FTS.PR.J:

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… and PWF.PR.P / PWF.PR.S:

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I will agree that the fund’s trades highlighted in this post may be decried as cases of monumental bad timing, but I should point out that in May, 2014, the fund was 63.9% Straight / 9.5% FixedReset while in May 2015 the fund was 12% Straight / 86% FixedReset, FloatingReset and FixedFloater (The latter figures include allocations from those usually grouped as ‘Scraps’). Given that the indices are roughly 30% Straight / 60% FixedReset & FloatingReset, it is apparent that the fund was extremely overweighted in Straights / underweighted in FixedResets in May 2014 but this situation has now reversed. HIMIPref™ analytics have been heavily favouring low-spread issues and the fund’s holdings are overwhelmingly of this type.

Summarizing the charts above in tabular form, we see:

FixedReset	Straight	Take-out December 2013	Take-out MAPF Trade	Take-out December 2014	September 2015	October 2015
GWO.PR.N 3.65%+130	GWO.PR.I 4.5%	($0.04)	$1.00	$2.95	7.21	7.49
SLF.PR.G 4.35%+141	SLF.PR.D 4.45%	($1.29)	$0.25	$2.16	5.17	5.65
MFC.PR.F 4.20%+141	MFC.PR.C 4.50%	($1.29)	$0.86	$1.20	6.62	6.88
BAM.PR.X 4.60%+180	BAM.PR.N 4.75%	($2.06)		$0.17	5.51	5.18
FTS.PR.H 4.25%+145	FTS.PR.J 4.75%	$0.60		$5.68	8.20	8.04
PWF.PR.P 4.40%+160	PWF.PR.S 4.80%	($0.67)		$3.00	6.72	7.99
The ‘Take-Out’ is the bid price of the Straight less the bid price of the FixedReset; approximate execution prices are used for the “MAPF Trade” column. Bracketted figures in the ‘Take-Out’ columns indicate a ‘Pay-Up’

In January, a slow decline due to fears of deflation got worse with Canada yields plummeting after the Bank of Canada rate cut with speculation rife about future cuts although this slowly died away.

And in late March / early April it got worse again, with one commenter attributing at least some of the blame to the John Heinzl piece in which I pointed out the expected reduction in dividend payouts! In May, a rise in the markets in the first half of the month was promptly followed by a slow decline in the latter half; perhaps due to increased fears that a lousy Canadian economy will delay a Canadian tightening. Changes in June varied as the markets were in an overall decline.

In August we saw increased fear of global deflation emanating from China, although the ‘China Effect’ is disputed.

In September the market just collapsed for no apparent reason; in October the market reversed the September collapse for no apparent reason.

All in all, I take the view that we’ve seen this show before: during the Credit Crunch, Floaters got hit extremely badly (to the point at which their fifteen year total return was negative) because (as far as I can make out) their dividend rate was dropping (as it was linked to Prime) while the yields on other perpetual preferred instruments were skyrocketing (due to credit concerns). Thus, at least some investors insisted on getting long term corporate yields from rates based (indirectly and with a lag, in the case of FixedResets) on short-term government policy rates. And it’s happening again!

There is further discussion of the extremely poor performance in the seven months to July 31 of FixedResets in the post eMail to a Client. Things haven’t really changed since that was written; they’ve just gotten ever so much more so.

Here’s the October performance for FixedResets that had a YTW Scenario of ‘To Perpetuity’ at mid-month.:

Click for Big

The market was very disorderly in October and correlations of performance are negligible, whether against spread or term-to-reset. However, I have added the regression line for the Pfd-3 group to the above chart, not because the correlation is so great (at only 8%, it isn’t) but because it shows that to the extent that there is a correlation between spreads and returns, the slope is negative.

Click for Big

Interestingly, though, three month performance is well correlated for the Pfd-2 group (40%), although no significant relationship is found for the Pfd-3 group:

Click for Big

MAPF

MAPF Portfolio Composition: October 2015

Turnover edged up in October, to about 7%.

There is extreme segmentation in the marketplace, with OSFI’s NVCC rule changes in February 2011 having had the effect of splitting the formerly relatively homogeneous Straight Perpetual class of preferreds into three parts:

Unaffected Straight Perpetuals
DeemedRetractibles explicitly subject to the rules (banks)
DeemedRetractibles considered by me, but not (yet!) by the market, to be likely to be explicitly subject to the rules in the future (insurers and insurance holding companies)

This segmentation, and the extreme valuation differences between the segments, has cut down markedly on the opportunities for trading.

To make this more clear, it used to be that there were 70-odd Straight Perpetuals and I was more or less indifferent as to which ones I owned (subject, of course, to issuer concentration concerns and other risk management factors). Thus, if any one of these 70 were to go down in price by – say – $0.25, I would quite often have something in inventory that I’d be willing to swap for it. The segmentation means that I am no longer indifferent; in addition to checking the valuation of a potential buy to other Straights, I also have to check its peer group. This cuts down on the potential for trading.

And, of course, the same segmentation has the same effect on trading opportunities between FixedReset issues.

There is no real hope that this situation will be corrected in the near-term. OSFI has indicated that the long-promised “Draft Definition of Capital” for insurers will not be issued “for public consultation in late 2012 or early 2013”, as they fear that it might encourage speculation in the marketplace. It is not clear why OSFI is so afraid of informed speculation, since the constant speculation in the marketplace is currently less informed than it would be with a little bit of regulatory clarity.

As a result of this delay, I have extended the Deemed Maturity date for insurers and insurance holding companies by three years (to 2025-1-31), in the expectation that when OSFI finally does provide clarity, they will allow the same degree of lead-in time for these companies as they did for banks. This had a major effect on the durations of preferred shares subject to the change but, fortunately, not much on their calculated yields as most of these issues were either trading near par when the change was made or were trading at sufficient premium that a par call was expected on economic grounds. However, with the declines in the market over the past nine months, the expected capital gain on redemption of the insurance-issued DeemedRetractibles has become an important component of the calculated yield.

Due to further footdragging by OSFI, I will be extending the DeemedMaturity date for insurance issues by another two years in the near future.

Sectoral distribution of the MAPF portfolio on October 30 was as follows:

MAPF Sectoral Analysis 2015-10-30
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	6.2% (+0.5)	5.62%	14.46
Fixed-Reset	71.0% (+1.8)	7.10%	10.46
Deemed-Retractible	8.5% (+0.6)	6.86%	7.28
FloatingReset	3.2% (-0.6)	4.01%	17.38
Scraps (Various)	11.4% (-0.8)	6.48%	13.49
Cash	-0.2% (-0.3)	0.00%	0.00
Total	100%	6.84%	11.03
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from September month-end. Cash is included in totals with duration and yield both equal to zero.
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. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 (banks) or 2025-1-3 (insurers and insurance holding companies), in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind this analysis. (all recent editions have a short summary of the argument included in the “DeemedRetractible” section) 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.
Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 0.80% and a constant 3-Month Bill rate of 0.36%

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 2015-9-30
DBRS Rating	Weighting
Pfd-1	0 (0)
Pfd-1(low)	16.8% (-1.1)
Pfd-2(high)	38.2% (+2.7)
Pfd-2	1.2% (-1.9)
Pfd-2(low)	32.6% (+0.8)
Pfd-3(high)	5.8% (0)
Pfd-3	3.1% (-0.2)
Pfd-3(low)	2.0% (0)
Pfd-4(high)	0% (0)
Pfd-4	0%
Pfd-4(low)	0% (0)
Pfd-5(high)	0% (0)
Pfd-5	0.5% (0)
Cash	-0.2% (-0.3)
Totals will not add precisely due to rounding. Bracketted figures represent change from September month-end.
The fund holds a position in AZP.PR.C, which is rated P-5 by S&P and is unrated by DBRS
A position held in NPI.PR.C is not rated by DBRS, but has been included as “Pfd-3(high)” in the above table on the basis of its S&P rating of P-3(high).
A position held in INE.PR.A is not rated by DBRS, but has been included as “Pfd-3” in the above table on the basis of its S&P rating of P-3.

Liquidity Distribution is:

MAPF Liquidity Analysis 2015-10-30
Average Daily Trading	Weighting
<$50,000	2.3% (-0.3)
$50,000 – $100,000	9.7% (-10.6)
$100,000 – $200,000	67.4% (+5.7)
$200,000 – $300,000	13.1% (+7.6)
>$300,000	7.8% (-2.0)
Cash	-0.2% (-0.3)
Totals will not add precisely due to rounding. Bracketted figures represent change from September month-end.

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 either directly from Hymas Investment Management or through a brokerage account at Odlum Brown Limited. A “unit trust” is like a regular mutual fund, but is sold by offering memorandum rather than 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.

A similar portfolio composition analysis has been performed on the Claymore Preferred Share ETF (symbol CPD) (and other funds) as of August 31, 2012, and published in the October (mainly methodology), November (most funds), and December (ZPR) 2012, PrefLetter. While direct comparisons are difficult due to the introduction of the DeemedRetractible class of preferred share (see above) it is fair to say:

MAPF credit quality is better
MAPF liquidity is a bit lower
MAPF Yield is higher
Weightings
- MAPF is less exposed to Straight Perpetuals (including DeemedRetractibles)
- MAPF is less exposed to Operating Retractibles
- MAPF is more exposed to SplitShares
- MAPF is less exposed to FixFloat / Floater / Ratchet
- MAPF is overweighted in FixedResets

Market Action

October 30, 2015

In today’s economy, the absence of bad news is greeted ecstatically:

Canada’s economy grew for a third month in August, cementing a rebound from an oil shock that had pulled the nation toward recession in the first half of this year.

Gross domestic product increased 0.1 percent to an annualized C$1.66 trillion ($1.26 trillion), Statistics Canada said Friday in Ottawa, following gains of 0.4 percent and 0.3 percent in June and July.

The August increase was led by manufacturing, which grew 0.4 percent to C$175 billion on production of chemicals and paper. Oil and gas extraction rose by 0.3 percent and retailing increased 0.6 percent led by food, automobiles and furniture.
…
Gross domestic product has grown 0.9 percent in August from the same month in 2014, Statistics Canada said.

According to my fingers and toes, these numbers are exceeded by inflation, but let’s ignore that and accentuate the positive! Like, for instance, what Canada does best:

Quebec plans to ask Canada’s federal government to match the province’s $1-billion (U.S.) investment in Bombardier Inc.’s C Series program to round out the funding for the troubled jet and assuage any lingering customer concerns.

“If the federal government comes in, the notion of risk completely changes,” Economy Minister Jacques Daoust said Friday in a telephone interview from Montreal. “If the federal government also put in $1 billion, that would mean the C Series financing package would be complete.”

His comments underscored Quebec’s determination to prop up the marquee aircraft model at Montreal-based Bombardier, which has been draining cash amid missed deadlines, cost overruns and scant interest among major airlines. Bombardier said Thursday that the jet will need an additional $2 billion during the next five years.

But let’s be fair, there are some exciting new businesses growing in Canada:

In granting Mr. Dhaliwal a conditional licence, Carolyn Rogers, head of the provincial Financial Institutions Commission, put the blame [for a mortgage fraud] on Mr. Dhaliwal’s former employer, TD Bank, for putting intense pressure on Mr. Dhaliwal, whom she described as poorly trained and financially naive.

What little coaching Mr. Dhaliwal received on how to properly conduct business, she wrote, “was overwhelmed by a focus on the volume of mortgage business Mr. Dhaliwal was bringing to the bank and relentless pressure to sell creditor protection insurance to as many borrowers as possible.”
…
In an online presentation on fraud and identity theft from 2012, mortgage insurer Canada Guaranty notes that “one in 10 mortgage applications will have some element of fraud.” Credit bureau Equifax says it had been able to flag nearly $1-billion worth of attempted mortgage fraud among its lender clients since 2013.

“It’s happening on such a level that the consumer is aware that this is something that can be done,” says an Ontario mortgage broker who didn’t want his name used and who once complained to federal and provincial regulators after being referred a deal that involved a family looking to buy three homes without any reportable income. “It’s happening on such a level that some bank reps, mobile mortgage reps, have said: Call a mortgage broker, they can probably find a way to make your income higher.”
…
Equifax has noticed the trend of people coming into its offices looking to upgrade their credit score with new employment details using fake job letters. “They’ll use the same template which has the same words spelled incorrectly,” says John Russo, Equifax’s legal counsel and chief privacy officer. Such attempts at “soft fraud” are up 15 to 20 per cent this year, he says. “We’ve seen many instances, in the thousands, come across our desks.”

The Fed has published a bail-in debt rule for comment:

However, several features distinguish eligible internal LTD [Long Term Debt] from eligible external LTD: It would be required to be issued to a parent foreign entity that controls the covered IHC [Intermediate Holding Company], to be contractually subordinated to all third-party liabilities of the covered IHC, and to include a contractual trigger pursuant to which the Board [Board of Governors of the Federal Reserve System] could require the covered IHC to cancel the eligible internal LTD or convert or exchange it into tier 1 common equity on a going-concern basis (that is, without the covered IHC’s entry into a resolution proceeding) if: (a) the Board determines that the covered IHC is “in default or in danger of default”; and (b) any of the following circumstances apply (i) the top-tier foreign banking organization or any subsidiary outside the United States is placed into resolution proceedings, (ii) the home country supervisory authority consents to the cancellation, exchange, or conversion, or does not object to the cancellation, exchange, or conversion following 48 hours’ notice, or (iii) the Board has made a written recommendation to the Secretary of the Treasury that the FDIC should be appointed as receiver of the covered IHC.

So the trigger is Fed fiat. This is very disappointing in light of the fact that:

In general, if a major U.S. bank holding company or non-bank financial company were to fail, it would be resolved under the U.S. Bankruptcy Code.17 Congress recognized, however, that such a company might fail under extraordinary circumstances that would prevent it from being resolved in bankruptcy without serious adverse effects on the financial stability of the United States. Title II therefore provides the Secretary of the Treasury, upon recommendation from other government agencies, with the authority to place a major financial company into an FDIC receivership, rather than bankruptcy.

A sensible feature of the proposal is:

Eligible external LTD would be required to be paid in and issued directly by the covered BHC [Bank Holding Company] itself—that is, by the banking organization’s top-tier holding company. Thus, debt instruments issued by a subsidiary would not qualify as eligible external LTD, even if they do qualify as regulatory capital.

So, presumably, the holding company can go bankrupt without affecting the operating subsidiaries.

It could be quite a significant market:

The largest U.S. banks would face a $120 billion total shortfall of long-term debt under a Federal Reserve proposal aimed at ensuring their failure wouldn’t hurt the broader financial system.

Banks such as Wells Fargo & Co. and JPMorgan Chase & Co. will be required to hold enough debt that could be converted into equity if they were to falter, according to a Fed rule that was approved by a unanimous vote on Friday. The Fed’s proposal, which applies to eight of the biggest U.S. banks, requires debt and a capital cushion equal to at least 16 percent of risk-weighted assets by 2019 and 18 percent by 2022.

Perhaps of greater ultimate import is today’s SEC announcement of rules to permit equity crowdfunding:

The new crowdfunding rules and forms will be effective 180 days after they are published in the Federal Register. The forms enabling funding portals to register with the Commission will be effective Jan. 29, 2016.
…
More specifically, the recommended rules would:

• Permit a company to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period;
• Permit individual investors, over a 12-month period, to invest in the aggregate across all crowdfunding offerings up to:

◦ If either their annual income or net worth is less than $100,000, than the greater of:

◾ $2,000 or
◾ 5 percent of the lesser of their annual income or net worth.

◦ If both their annual income and net worth are equal to or more than $100,000, 10 percent of the lesser of their annual income or net worth; and

• During the 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.

Regrettably, as Commissioner Kara M. Stein points out approvingly, there is a requirement for deputized policemen:

Moreover, as the preamble makes clear, the Commission takes seriously the intermediary’s obligations to assess whether it may reasonably rely on the representations. To quote, “the specific steps an intermediary should take to determine whether it can rely on an issuer representation may vary, but should be influenced by and tailored according to the intermediary’s knowledge and comfort with each particular issuer.”[5] In short, an intermediary will need to do a little bit of work to gain confidence that the small business is what it says it is. Intermediaries will also need to develop written policies and procedures for how they will execute these obligations.

There are other incentives built into the structure of the law itself that should also encourage intermediaries to conduct some level of due diligence on issuers.[6] Thus, I am comfortable supporting the measured approach put forward today, and I look forward to seeing how market practice evolves. We may also learn from the examination work of the Commission staff and self-regulatory organizations (SRO) — one of the major benefits of utilizing regulated intermediaries. As we gain experience, we should be prepared to adjust requirements in this area.

But to compensate, she also highlights a rule recognizing the cash position of start-ups:

Surprising as it may seem, another challenge is how to protect crowdfunding investors when a business actually does well. Angel and venture investors are able to protect their interests through a variety of levers. However, the crowd may be unable, practically speaking, to negotiate for or utilize the same types of levers. As a result, the crowd could see its investments heavily diluted in follow-on offerings.

To address this, today’s rules give the crowd a little extra help by aligning the interests of the intermediary with that of the crowd. Specifically, the rules enable an intermediary to take a position in the issuer as compensation for the offering, provided that the securities it takes have the same terms, conditions, and rights as the crowd.[7] This approach has multiple benefits as it also responds to the demands of small businesses that wanted to be able to compensate intermediaries by allowing them to take a stake in the company.

Commissioner Luis Aguilar, who never saw paperwork he didn’t like also approves of deputy policemen:

Importantly, Regulation Crowdfunding also provides a framework to govern how Crowdfunding intermediaries—such as a registered broker-dealer or a funding portal—can conduct securities offerings. Because these intermediaries essentially act as “gatekeepers” for these offerings, this framework should provide additional investor protection. Moreover, since these gatekeepers are indispensable for making Crowdfunding viable, it is critical for the registration regime for funding portals to be ready as soon as today’s Crowdfunding rules go into effect.

Commissioner Michael S. Piwowar issued a dissenting statement:

A number of concerns have already been raised as to whether our rules are too restrictive or too burdensome. In fact, many of these restrictions are embedded in the statute itself. For instance, even if you are Warren Buffet or Bill Gates, you are limited to investing no more than $100,000 during any 12-month period in all crowdfunding investments.[4]

In other cases, the majority of the Commission has exercised discretion to make capital raising using crowdfunding even more difficult. In a change from the proposal, the rules will limit the ability to invest in crowdfunding opportunities based on the lesser of annual income or net worth. Because the majority of the Commission cannot trust ordinary Americans – the non-accredited investors – to be able to exercise appropriate judgment in how to spend or invest their resources, our rules will now place smaller limits on the amounts that can be invested.[5] Rather than actually protecting investors, these smaller limits will discourage legitimate companies from engaging in crowdfunding, while simultaneously encouraging less reputable actors to use affinity-based solicitation methods akin to multi-level marketing, a development that could stifle crowdfunding efforts.
…
Throughout this process, our staff put in an incredible amount of effort on these important issues and I commend their exceptionally fine work. The original draft of the crowdfunding rules was consistent with the statute and the original draft to modernize Rule 147 and Rule 504 was thoughtful and sensible. I also acknowledge the extensive interest and involvement of the state securities regulators and the North American Securities Administrators Association, which helped to shape the staff’s work.

This collaboration resulted in two perfect alley-oop passes to the Commission for seemingly can’t-miss slam dunks. However, the majority of the Commission decided to take a few extra unnecessary steps on the crowdfunding rules and the Rule 147 proposal and overshot on both.

For these reasons, I am unable to support the two items we are voting on today. Thank you and I have no questions.

Isn’t the US system great? Look at that … commissioners disagreeing with each other publicly and not mincing their words in public statements while they’re at it. We need this culture in Canada.

Portugal has announced a new defence to economic criticism:

Portuguese prosecutors have asked for Canadian academic Peter Boone to be put on trial after he wrote articles predicting a debt crisis in Portugal similar to Greece’s and then, they say, made nearly $1-million from price moves in that market.
…
Portuguese bond yields started to spike in April 2010 and forced the country to request an international bailout a year later, which it exited last year after stringent austerity measures that put public finances on a stronger footing.

The Lisbon District Prosecutor’s Office said that after a long investigation it had decided to ask for criminal proceedings against the suspect for market manipulation. A judge would have to evaluate the case before any trial is set.

The prosecution says it has evidence that the suspect had a vested interest in Portuguese debt weakening “as only such depreciation allowed the closing of a short position with gains to crystallise his profit” of 819,099.82 euros.

S&P had some things to say about the Valeant/Philidor scandal:

•Valeant Pharmaceuticals International Inc. has severed ties with its affiliate, specialty pharmacy network Philidor RX Services, after leading pharmacy benefit managers (PBMs) terminated their relationships with Philidor, citing noncompliance with the terms of their agreements.
•We believe reports of wrongdoing at Philidor weakens Valeant management’s credibility, further harms the company’s already tarnished reputation,
and that these developments exacerbate potential legal, regulatory, and reputational headwinds for the company. We also believe the reputational issues could potentially compromise the company’s ability to effectively market its products to doctors, beyond this channel.

•We are lowering our ratings by one notch, including lowering the corporate credit rating to ‘B+’ from ‘BB-‘. Our rating outlook is negative. We are lowering the rating on the senior secured debt to ‘BB’ from ‘BB+’ and lowering the rating on the senior unsecured debt to ‘B-‘ from ‘B’.
•The negative outlook reflects heightened uncertainty relating to the financial impact from reputational, legal, and regulatory risks associated with the company’s aggressive marketing and drug pricing strategies, as well as potential legal and credibility issues stemming from the lack of earlier disclosure about its relationship with Philador. At the same time, we believe the company can likely absorb these headwinds at the current rating.

There’s been a nice breakthrough in battery technology:

Scientists have developed a working laboratory demonstrator of a lithium-oxygen battery which has very high energy density, is more than 90% efficient, and, to date, can be recharged more than 2000 times, showing how several of the problems holding back the development of these devices could be solved.
…
However, as is the case with other next-generation batteries, there are several practical challenges that need to be addressed before lithium-air batteries become a viable alternative to gasoline.

Now, researchers from the University of Cambridge have demonstrated how some of these obstacles may be overcome, and developed a lab-based demonstrator of a lithium-oxygen battery which has higher capacity, increased energy efficiency and improved stability over previous attempts.

Their demonstrator relies on a highly porous, ‘fluffy’ carbon electrode made from graphene (comprising one-atom-thick sheets of carbon atoms), and additives that alter the chemical reactions at work in the battery, making it more stable and more efficient. While the results, reported in the journal Science, are promising, the researchers caution that a practical lithium-air battery still remains at least a decade away.

Naturally, this work was not done in Ontario. We blew the budget on not-ready-for-prime-time technology.

New York’s hotels are showing us all how to compete effectively:

Airbnb accounted for $451.4 million in gross revenue in New York alone in the 12 months through Aug. 31, according a report commissioned by the Hotel Association of New York City. That number will jump to $805.3 million in 2018, the group said Friday.
…
Airbnb accounted for 2.9 million, or 7.8 percent, of overnight stays in New York in the latest fiscal year, compared with 33.9 million, or 92 percent, of nightly rentals among hotels, according to the Hotel Association of New York City. Yet hotels brought in a larger portion of sales — 95 percent of gross revenue, or $9.4 billion, thanks to a higher average cost per room.
…
While Airbnb’s share might seem small, consider that the startup didn’t exist seven years ago. It’s now valued at $25.5 billion and enmeshed in a political fight in New York, where the attorney general has scrutinized rentals on Airbnb and pressed the company to crack down on rentals that are run more like unregulated hotels. In its hometown of San Francisco, Airbnb is facing a vote next week on a proposition that would impose regulations and cap rentals at 75 days a year.

The Hotel Association of New York City has donated $25,000 to an organization supporting San Francisco’s Proposition F. Airbnb’s internal polling shows the company leading the measure by 19 percentage points.

Maybe they should hire some consultants from Canada’s banking industry! The most important thing is the effective display of crocodile tears when talking about the burden of regulation.

It was yet another mixed day in a familiar pattern in the Canadian preferred share market, with PerpetualDiscounts up 24bp, FixedResets off 38bp and DeemedRetractibles gaining 10bp. A very lengthy Performance Highlights table is dominated by losers. Volume was average.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.15 to be $0.60 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.76 cheap at its bid price of 13.15.

Click for Big

Most expensive is MFC.PR.N, resetting at +230bp on 2020-3-19, bid at 20.60 to be 0.86 rich, while MFC.PR.F resetting at +141bp on 2016-6-19, is bid at 14.02 to be 1.01 cheap.

Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.47 to be $1.10 cheap. BAM.PR.X, resetting at +180bp on 2017-6-30 is bid at 15.65 and appears to be $0.83 rich.

Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 19.05, looks $0.83 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.15 and is $0.57 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.87%, with no outliers. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.97% and other issues averaging -0.67%. There are four junk outliers above 0.00% and one below -2.00%.

Click for Big

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-0.3311 %	1,735.1
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.3311 %	3,033.7
Floater	4.28 %	4.31 %	62,536	16.77	3	-0.3311 %	1,844.5
OpRet	0.00 %	0.00 %	0	0.00	0	-0.3808 %	2,719.7
SplitShare	4.60 %	5.52 %	91,266	2.93	6	-0.3808 %	3,187.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.3808 %	2,486.8
Perpetual-Premium	5.85 %	5.62 %	69,959	0.08	5	0.0080 %	2,488.3
Perpetual-Discount	5.56 %	5.66 %	81,896	14.37	33	0.2418 %	2,569.7
FixedReset	4.94 %	4.39 %	213,655	15.63	76	-0.3775 %	2,069.6
Deemed-Retractible	5.19 %	5.15 %	112,436	5.45	33	0.0980 %	2,575.8
FloatingReset	2.47 %	3.82 %	61,101	5.82	9	-0.0654 %	2,170.7

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.T	FixedReset	-4.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 4.81 %
PWF.PR.P	FixedReset	-3.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 14.21 Evaluated at bid price : 14.21 Bid-YTW : 4.26 %
HSE.PR.E	FixedReset	-2.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 22.07 Evaluated at bid price : 22.60 Bid-YTW : 4.89 %
BAM.PF.E	FixedReset	-2.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.68 %
BAM.PF.B	FixedReset	-2.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 4.84 %
MFC.PR.I	FixedReset	-2.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.25 Bid-YTW : 6.07 %
MFC.PR.L	FixedReset	-2.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.73 Bid-YTW : 6.54 %
IFC.PR.C	FixedReset	-1.66 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.90 Bid-YTW : 7.29 %
BNS.PR.Q	FixedReset	-1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 3.61 %
BAM.PF.A	FixedReset	-1.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 20.68 Evaluated at bid price : 20.68 Bid-YTW : 4.68 %
FTS.PR.G	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 4.30 %
BAM.PR.K	Floater	-1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 11.05 Evaluated at bid price : 11.05 Bid-YTW : 4.31 %
TRP.PR.A	FixedReset	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 15.60 Evaluated at bid price : 15.60 Bid-YTW : 4.62 %
IAG.PR.G	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.14 Bid-YTW : 6.06 %
BNS.PR.R	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.36 Bid-YTW : 3.78 %
MFC.PR.G	FixedReset	-1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 5.71 %
BAM.PF.G	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 21.03 Evaluated at bid price : 21.03 Bid-YTW : 4.63 %
MFC.PR.K	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.83 Bid-YTW : 6.38 %
CM.PR.P	FixedReset	-1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 19.10 Evaluated at bid price : 19.10 Bid-YTW : 4.22 %
PVS.PR.D	SplitShare	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 6.00 %
BAM.PR.N	Perpetual-Discount	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 20.83 Evaluated at bid price : 20.83 Bid-YTW : 5.77 %
SLF.PR.J	FloatingReset	1.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.50 Bid-YTW : 9.33 %
TRP.PR.C	FixedReset	1.70 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 13.15 Evaluated at bid price : 13.15 Bid-YTW : 4.49 %
TD.PF.E	FixedReset	2.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 21.59 Evaluated at bid price : 21.93 Bid-YTW : 4.19 %
TRP.PR.G	FixedReset	2.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 21.42 Evaluated at bid price : 21.71 Bid-YTW : 4.39 %
PWF.PR.T	FixedReset	2.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 21.47 Evaluated at bid price : 21.47 Bid-YTW : 3.91 %
TRP.PR.B	FixedReset	3.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 4.12 %
MFC.PR.J	FixedReset	3.98 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.88 Bid-YTW : 6.02 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PVS.PR.E	SplitShare	121,330	Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-10-31 Maturity Price : 25.00 Evaluated at bid price : 24.32 Bid-YTW : 6.01 %
RY.PR.Z	FixedReset	80,294	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 19.62 Evaluated at bid price : 19.62 Bid-YTW : 4.06 %
BNS.PR.Z	FixedReset	57,435	Desjardins crossed 50,000 at 20.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 5.75 %
TRP.PR.E	FixedReset	41,272	RBC crossed 12,000 at 19.48. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 19.15 Evaluated at bid price : 19.15 Bid-YTW : 4.44 %
TRP.PR.D	FixedReset	40,718	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 18.87 Evaluated at bid price : 18.87 Bid-YTW : 4.44 %
NA.PR.S	FixedReset	35,353	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 4.24 %
There were 35 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PR.T	FixedReset	Quote: 17.02 – 17.80 Spot Rate : 0.7800 Average : 0.4590 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 4.81 %
BAM.PF.E	FixedReset	Quote: 19.50 – 20.35 Spot Rate : 0.8500 Average : 0.5648 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.68 %
TRP.PR.D	FixedReset	Quote: 18.87 – 19.45 Spot Rate : 0.5800 Average : 0.3922 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 18.87 Evaluated at bid price : 18.87 Bid-YTW : 4.44 %
IAG.PR.G	FixedReset	Quote: 21.14 – 21.62 Spot Rate : 0.4800 Average : 0.3444 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.14 Bid-YTW : 6.06 %
MFC.PR.L	FixedReset	Quote: 19.73 – 20.10 Spot Rate : 0.3700 Average : 0.2465 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.73 Bid-YTW : 6.54 %
W.PR.J	Perpetual-Discount	Quote: 24.31 – 24.70 Spot Rate : 0.3900 Average : 0.2715 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-30 Maturity Price : 24.06 Evaluated at bid price : 24.31 Bid-YTW : 5.80 %

Market Action

October 29, 2015

There are more rumblings about Toronto’s housing market:

In a new quarterly forecast on the housing market, Canada Mortgage and Housing Corp. said it saw scant evidence of serious problems in the Canadian housing market over all, but warned that home prices are now outstripping economic fundamentals in 11 out of 15 major markets and that four cities – Toronto, Winnipeg, Regina and now Saskatoon – face serious headwinds because of high prices and a surge in the supply of new homes under construction.

CMHC previously warned in August that the housing market in the Greater Toronto Area was at “high risk” for a correction amid soaring home prices that have outstripped income growth, along with a glut of unsold condos. Since then, resale prices, particularly of single-detached homes, have continued to soar at double-digit annual rates. At the same time, the region is also faced with high levels of unsold, newly built condos, although the number of units under construction has fallen from earlier in the year and now appears to be manageable, the housing agency said.

It’s a bit strange talking about “the” Toronto housing market – there are at least two: condos and houses. The two segments have certainly decoupled over the past years, but whether this is evidence of an overheated market or simply a reflection of realities such as lack of possible new supply (for houses), growing congestion and increases in the relative incomes of people who can afford houses in the first place is a matter for speculation and conjecture. Everything will be perfectly obvious once it has happened; and the newspapers will heap accolades on the people who guessed right.

It was another mixed day for the Canadian preferred share market in a pattern that is becoming familiar, with PerpetualDiscounts up 39bp, FixedResets off 12bp and DeemedRetractibles gaining 23bp. The Performance Highlights table is relatively manageable today, but still of inordinate length considering the overall market activity when compared to more normal times. Volume was above average.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.00 to be $0.66 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.85 cheap at its bid price of 12.93.

Click for Big

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 20.14 to be 0.97 rich, while MFC.PR.J resetting at +261bp on 2018-3-19, is bid at 20.08 to be 1.14 cheap.

Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.46 to be $1.36 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 20.00 and appears to be $0.87 rich.

Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 19.01, looks $0.75 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 14.05 and is $0.48 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.84%, with no outliers. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -1.03% and other issues averaging -0.45%. There are four junk outliers above 0.00% and one below -2.00%.

Click for Big

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	-1.0721 %	1,740.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.0721 %	3,043.8
Floater	4.27 %	4.29 %	63,570	16.82	3	-1.0721 %	1,850.6
OpRet	0.00 %	0.00 %	0	0.00	0	-0.6350 %	2,730.0
SplitShare	4.58 %	5.52 %	89,967	2.94	6	-0.6350 %	3,199.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.6350 %	2,496.4
Perpetual-Premium	5.85 %	5.43 %	69,226	0.08	5	0.0080 %	2,488.1
Perpetual-Discount	5.57 %	5.68 %	82,233	14.34	33	0.3935 %	2,563.5
FixedReset	4.92 %	4.45 %	213,977	15.89	76	-0.1240 %	2,077.4
Deemed-Retractible	5.19 %	5.14 %	111,057	5.44	33	0.2294 %	2,573.2
FloatingReset	2.47 %	3.74 %	60,686	5.83	9	-0.0112 %	2,172.2

Performance Highlights
Issue	Index	Change	Notes
MFC.PR.J	FixedReset	-3.51 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.08 Bid-YTW : 6.54 %
CU.PR.C	FixedReset	-2.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 3.96 %
BAM.PF.E	FixedReset	-2.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.56 %
BAM.PR.B	Floater	-2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 11.11 Evaluated at bid price : 11.11 Bid-YTW : 4.29 %
BNS.PR.Y	FixedReset	-2.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.32 Bid-YTW : 5.39 %
BAM.PR.Z	FixedReset	-1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.53 Evaluated at bid price : 20.53 Bid-YTW : 4.80 %
BAM.PR.R	FixedReset	-1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 16.46 Evaluated at bid price : 16.46 Bid-YTW : 4.87 %
VNR.PR.A	FixedReset	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.74 Evaluated at bid price : 20.74 Bid-YTW : 4.48 %
SLF.PR.J	FloatingReset	-1.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.30 Bid-YTW : 9.52 %
FTS.PR.K	FixedReset	-1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 4.07 %
BAM.PR.T	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 4.60 %
BAM.PR.C	Floater	-1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 10.91 Evaluated at bid price : 10.91 Bid-YTW : 4.37 %
FTS.PR.G	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 4.24 %
BAM.PR.X	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 15.65 Evaluated at bid price : 15.65 Bid-YTW : 4.48 %
BAM.PF.G	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 21.27 Evaluated at bid price : 21.27 Bid-YTW : 4.58 %
MFC.PR.M	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.64 Bid-YTW : 6.11 %
GWO.PR.S	Deemed-Retractible	1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.35 Bid-YTW : 5.71 %
TRP.PR.F	FloatingReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 14.45 Evaluated at bid price : 14.45 Bid-YTW : 3.98 %
CU.PR.D	Perpetual-Discount	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 22.41 Evaluated at bid price : 22.69 Bid-YTW : 5.48 %
TD.PF.B	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 19.69 Evaluated at bid price : 19.69 Bid-YTW : 4.10 %
CM.PR.P	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 19.31 Evaluated at bid price : 19.31 Bid-YTW : 4.17 %
GWO.PR.P	Deemed-Retractible	1.32 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.49 Bid-YTW : 5.79 %
RY.PR.J	FixedReset	1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 4.26 %
CM.PR.O	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 4.15 %
MFC.PR.F	FixedReset	1.81 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.10 Bid-YTW : 9.69 %
PWF.PR.S	Perpetual-Discount	2.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 21.99 Evaluated at bid price : 22.30 Bid-YTW : 5.40 %
BMO.PR.M	FixedReset	2.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 2.95 %
RY.PR.M	FixedReset	2.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 4.22 %
CU.PR.G	Perpetual-Discount	4.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 5.35 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.B	Deemed-Retractible	71,243	Nesbitt crossed 50,000 at 24.94. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-28 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 4.58 %
BMO.PR.L	Deemed-Retractible	34,686	RBC bought 17,100 from anonymous at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-28 Maturity Price : 25.50 Evaluated at bid price : 25.45 Bid-YTW : 2.98 %
NA.PR.S	FixedReset	33,996	Desjardins bought 18,600 from anonymous at 20.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 4.19 %
BAM.PR.X	FixedReset	23,812	RBC crossed 19,900 at 15.66. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 15.65 Evaluated at bid price : 15.65 Bid-YTW : 4.48 %
PVS.PR.E	SplitShare	23,300	New issue settled today. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-10-31 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 5.86 %
RY.PR.N	Perpetual-Discount	23,169	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 22.85 Evaluated at bid price : 23.22 Bid-YTW : 5.26 %
There were 39 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.M	FixedReset	Quote: 20.64 – 21.78 Spot Rate : 1.1400 Average : 0.8725 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.64 Bid-YTW : 6.11 %
CU.PR.C	FixedReset	Quote: 20.90 – 21.69 Spot Rate : 0.7900 Average : 0.5332 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 3.96 %
MFC.PR.J	FixedReset	Quote: 20.08 – 20.88 Spot Rate : 0.8000 Average : 0.5925 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.08 Bid-YTW : 6.54 %
MFC.PR.N	FixedReset	Quote: 20.58 – 21.29 Spot Rate : 0.7100 Average : 0.5043 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.58 Bid-YTW : 6.08 %
PWF.PR.S	Perpetual-Discount	Quote: 22.30 – 22.90 Spot Rate : 0.6000 Average : 0.4017 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 21.99 Evaluated at bid price : 22.30 Bid-YTW : 5.40 %
PWF.PR.T	FixedReset	Quote: 20.86 – 21.56 Spot Rate : 0.7000 Average : 0.5083 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-29 Maturity Price : 20.86 Evaluated at bid price : 20.86 Bid-YTW : 4.02 %

Issue Comments

PVS.PR.E Sinks on Lousy Volume

Partners Value Split Inc. has announced:

the completion of its previously announced issue of 4,000,000 Class AA Preferred Shares, Series 7 (the “Series 7 Preferred Shares”) at an offering price of $25.00 per Series 7 Preferred Share, raising gross proceeds of $100,000,000. The Series 7 Preferred Shares carry quarterly fixed cumulative preferential dividends representing a 5.50% annualized yield on the offering price and have a final maturity of October 31, 2022. The Series 7 Preferred Shares have been listed and posted for trading on the Toronto Stock Exchange under the symbol PVS.PR.E. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA Preferred Shares, Series 1 no later than March 25, 2016, in accordance with the terms of the Series 1 Preferred Shares, and to pay a special dividend to holders of the Company’s capital shares.

Prior to the closing of the offering, the Company subdivided the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

The Company owns a portfolio consisting of 79,740,966 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Shares.

DBRS has rated the issue Pfd-2(low):

DBRS Limited (DBRS) has today finalized the provisional rating of Pfd-2 (low) on the Class AA Preferred Shares, Series 7 (the Series 7 Preferred Shares) issued by Partners Value Split Corp. (the Company) and has confirmed the ratings of the previously issued Class AA Preferred Shares, Series 1; Class AA Preferred Shares, Series 3; Class AA Preferred Shares, Series 5; and Class AA Preferred Shares, Series 6 (collectively, with the Series 7 Preferred Shares, the Class AA Preferred Shares) at Pfd-2 (low).
…
Following the redemption of the Series 1 Preferred Shares, the downside protection available to the Class AA Preferred Shares is expected to be approximately 83% (based on the closing price of BAM shares as of October 22, 2015) and the dividend coverage ratio is expected to be above 1.7 times (based on the Canadian dollar and U.S. dollar exchange rate as of October 22, 2015). BAM declares its dividend in U.S. dollars, so there is the risk that an appreciating Canadian dollar will cause the dividend coverage ratio to fall below 1.0 times. In the event of a shortfall, the Company may sell some of the BAM Shares, engage in security lending or write covered call options to generate sufficient income to satisfy its obligations to pay the Class AA Preferred Shares dividends. If the Company chooses to lend its holdings, the Portfolio would be exposed to the potential losses in the event that the borrower defaults on its obligations to return the borrowed securities.

The rating is based on the same rating rationale and rating considerations as all other series of Class AA Preferred Shares.

PVS.PR.E is a seven-year 5.50% SplitShare announced October 20. It will be tracked by HIMIPref™ and has been assigned to the SplitShares subindex.

The issue traded a miserable 23,300 shares today in a range of 24.50-80 before settling at 24.52-55, 4×57. Vital statistics are:

PVS.PR.E

SplitShare

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 24.52
Bid-YTW : 5.86 %

Market Action

October 28, 2015

Today’s news was the FOMC release:

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.
…
Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.

Jeanna Smialek of Bloomberg notes:

The Fed removed a line from September’s statement saying that global economic and financial developments “may restrain economic activity somewhat,” saying Wednesday only that the central bank is monitoring the international situation. The committee also added a reference to the possibility of increasing the rate “at its next meeting” based on “realized and expected” progress in reaching goals.

“The Fed is clearly signaling that the default plan is to raise rates in December,” said Dean Maki, chief economist at Point72 Asset Management in Stamford, Connecticut. “It signals that something needs to prevent them from hiking in December rather than that something needs to happen for them to raise.”

And clearly, a lot of players agreed with that analysis … at least, for today:

Traders see a 46 percent chance that the central bank will raise its benchmark rate from near zero at its next meeting, according to data compiled by Bloomberg. That’s up from 37 percent before policy makers said Wednesday that they kept the target unchanged and planned to assess whether to lift it in December. The calculation assumes the effective fed funds rate averages 0.375 percent after the first hike.

Deutsche Bank has provided a lesson to all bank dividend worshippers:

Deutsche Bank AG said it plans to suspend dividends for two years as co-Chief Executive Officer John Cryan seeks to improve capital levels and returns by cutting costs.

The bank, which has paid a dividend since Germany’s postwar reconstruction, plans to recommend resuming payouts from fiscal year 2017, Deutsche Bank said in a statement from Frankfurt on Wednesday. The bank wants to lift its common equity Tier 1 ratio, a key measure of financial strength, to at least 12.5 percent by the end of 2018.

The Canadian Securities Administrators have released a report by Prof. Douglas Cumming titled A Dissection of Mutual Fund Fees, Flows, and Performance which has attracted the usual outrage from the usual suspects:

The report, coupled with the regulatory changes outlined in CRM2, is expected to put additional pressure on advisers to consider switching from a commission-based business model to fee-based practices.

Currently, 32 per cent of advisers say investors question their fees, according to research by Accenture. With the investment landscape starting to shift, the number of advisers moving to a fee-based platform will start to rise, says Kendra Thompson, Accenture’s North America lead for Wealth and Asset Management Services.

Sadly, what has not yet been investigated is whether investment outcomes on an investor basis are better or worse with a direct payment model; that’s the crucial part. Joe Lunchbucket will not pay his advisor to do nothing; therefore, he will have to go to a robo-advisor if he wants any advice at all, which he doesn’t (he’ll just buy a GIC). And, says the report:

Funds that sell more through affiliated dealers tend to perform worse.

Regression analyses comparing across funds and over the sample period indicate that funds which receive higher levels of affiliated dealer flows experience lower future alpha on average. Funds that were in the top quartile in terms of receiving affiliated dealer flows on average experienced a reduction in future monthly alpha by 0.2% relative to those funds that did not receive any affiliated dealer flows. The regression analyses indicate similar findings for stand-alone funds that can be purchased directly, and for fund-of-funds that can and cannot be purchased directly, but there were some differences in these effects at different points in time.

And why should advisors be competent anyway? This is Canada. Competence doesn’t matter:

The Quebec government and its giant pension fund are coming to the rescue of Bombardier Inc. with a significant investment in its C Series airliner program, a move designed to soothe investor fears over the plane maker’s cash situation and get the jet to market.

Quebec’s Liberal government and the Caisse de dépôt et placement du Québec will together commit more than $1-billion to Bombardier in an announcement expected Thursday morning ahead of the company’s latest earnings report, said one person with knowledge of the situation. The exact amount remained unclear. “You can’t move the needle with less than that,” the person said.

We can all sleep sounder in our beds knowing that anti-terrorism laws are having their intended effect:

J. Dennis Hastert, the former speaker of the House, pleaded guilty on Wednesday to trying to evade federal banking laws, telling a district judge here that he had known what he was doing was wrong.

The plea brought a quick, quiet finish to a proceeding that had startled many in Washington who once knew Mr. Hastert as one of the nation’s most powerful leaders, and in Yorkville, Ill., his rural hometown, who remembered Mr. Hastert as their winning high school wrestling coach.

Prosecutors said they believed that federal guidelines called for a sentence of up to six months in prison. But the judge, Thomas M. Durkin of Federal District Court, indicated that he would not decide on Mr. Hastert’s punishment before reading a presentencing report. Sentencing was scheduled for Feb. 29.

Mr. Hastert told the judge why he had structured bank withdrawals in an attempt to avoid detection. “I didn’t want them to know how I would spend the money,” he said. Asked whether he understood at the time that his conduct was wrong, he said yes.

Well, OK, Hastert may not exactly be a terrorist. Not technically, if you want to get pedantic about it, like some of those effete elites. But being a blackmail victim is pretty close to being a terrorist, right? Indistinguishable for all practical, real-world, common-sense purposes. It just shows the need for more intrusive laws and a larger budget for our wise masters in the security forces.

And here’s a great story to finish off – drones ‘n’ guns:

A judge on Monday decided that William Merideth, the Kentucky, US, man who got busted for shooting down a drone that had been flying over his property, had a right to take that thing out.

The hearing, in Bullitt County, lasted just over 2 hours.

The incident happened in July.

Merideth’s sunbathing daughters had come in from the back garden to tell their father about a drone flying overhead.

After police arrested Merideth for taking the drone out with his shotgun and three blasts of Number 8 birdshot, he claimed that the drone’s operator, neighbor David Boggs, was violating his privacy by hovering his drone over Merideth’s property and spying on his family.

Police in the town of Hillview arrested Merideth and charged him with wanton endangerment and criminal mischief for firing his gun within city limits.

It was another mixed day for the Canadian preferred share market, with PerpetualDiscounts up 34bp, FixedResets off 13bp and DeemedRetractibles gaining 14bp. The Performance Highlights table is its usual enormous self. Volume was well above average.

PerpetualDiscounts now yield 5.71%, equivalent to 7.42% interest at the standard equivalency factor of 7.42%. Long corporates now yield about 4.3%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 310bp, a significant narrowing from the 320bp reported October 21.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.00 to be $0.58 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.79 cheap at its bid price of 12.96.

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Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 20.09 to be 0.87 rich, while MFC.PR.F resetting at +141bp on 2016-6-19, is bid at 13.85 to be 1.13 cheap.

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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.75 to be $1.30 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 20.50 and appears to be $1.14 rich.

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FTS.PR.K, with a spread of +205bp, and bid at 19.28, looks $0.93 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 14.02 and is $0.57 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.79%, with no outliers. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.97% and other issues averaging -0.43%. There are four junk outliers above 0.00% and one below -2.00%.

Click for Big

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	0.2987 %	1,759.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.2987 %	3,076.8
Floater	4.22 %	4.25 %	60,723	16.89	3	0.2987 %	1,870.7
OpRet	0.00 %	0.00 %	0	0.00	0	0.1386 %	2,747.5
SplitShare	4.37 %	5.53 %	83,552	2.94	5	0.1386 %	3,219.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1386 %	2,512.3
Perpetual-Premium	5.85 %	5.78 %	69,169	2.74	5	-0.0080 %	2,488.0
Perpetual-Discount	5.59 %	5.71 %	79,179	14.32	33	0.3419 %	2,553.5
FixedReset	4.91 %	4.40 %	215,443	15.94	76	-0.1263 %	2,080.0
Deemed-Retractible	5.20 %	5.19 %	112,648	5.45	33	0.1378 %	2,567.3
FloatingReset	2.47 %	3.74 %	60,904	5.82	9	-0.0816 %	2,172.4

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.C	FixedReset	-3.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 12.96 Evaluated at bid price : 12.96 Bid-YTW : 4.55 %
PWF.PR.T	FixedReset	-3.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 4.02 %
TRP.PR.B	FixedReset	-2.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 12.43 Evaluated at bid price : 12.43 Bid-YTW : 4.26 %
BAM.PF.B	FixedReset	-2.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.72 %
GWO.PR.N	FixedReset	-2.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.81 Bid-YTW : 9.64 %
BAM.PR.Z	FixedReset	-2.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 20.91 Evaluated at bid price : 20.91 Bid-YTW : 4.71 %
HSE.PR.E	FixedReset	-2.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 22.40 Evaluated at bid price : 23.16 Bid-YTW : 4.75 %
BAM.PF.E	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 4.45 %
FTS.PR.H	FixedReset	-1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 14.02 Evaluated at bid price : 14.02 Bid-YTW : 4.18 %
FTS.PR.G	FixedReset	-1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 4.19 %
BAM.PR.R	FixedReset	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 4.79 %
FTS.PR.M	FixedReset	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 4.26 %
MFC.PR.F	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.85 Bid-YTW : 9.93 %
BAM.PF.A	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 4.60 %
BMO.PR.M	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.54 Bid-YTW : 3.33 %
FTS.PR.K	FixedReset	-1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 4.01 %
MFC.PR.J	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.81 Bid-YTW : 6.06 %
NA.PR.W	FixedReset	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.27 Evaluated at bid price : 19.27 Bid-YTW : 4.21 %
BNS.PR.O	Deemed-Retractible	1.10 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-27 Maturity Price : 25.50 Evaluated at bid price : 25.73 Bid-YTW : -5.91 %
MFC.PR.L	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.09 Bid-YTW : 6.29 %
GWO.PR.R	Deemed-Retractible	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.10 Bid-YTW : 6.59 %
SLF.PR.H	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.45 Bid-YTW : 7.78 %
SLF.PR.A	Deemed-Retractible	1.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.92 Bid-YTW : 6.64 %
MFC.PR.M	FixedReset	1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.85 Bid-YTW : 5.97 %
W.PR.H	Perpetual-Discount	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 23.69 Evaluated at bid price : 23.96 Bid-YTW : 5.78 %
TRP.PR.D	FixedReset	1.55 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.41 %
BMO.PR.W	FixedReset	2.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 4.20 %
CM.PR.O	FixedReset	2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 4.22 %
BAM.PR.X	FixedReset	2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 15.82 Evaluated at bid price : 15.82 Bid-YTW : 4.43 %
MFC.PR.K	FixedReset	3.24 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.10 Bid-YTW : 6.19 %
W.PR.J	Perpetual-Discount	3.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 24.22 Evaluated at bid price : 24.48 Bid-YTW : 5.76 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IFC.PR.A	FixedReset	261,020	Desjardins crossed blocks of 151,800 shares, 81,500 and 23,200, all at 16.33. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.16 Bid-YTW : 8.80 %
NA.PR.S	FixedReset	236,830	Nesbitt crossed 148,100 at 19.90 and 80,000 at 20.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.21 %
RY.PR.Z	FixedReset	160,125	Scotia crossed 50,000 at 19.72. Nesbitt crossed 75,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.65 Evaluated at bid price : 19.65 Bid-YTW : 4.06 %
TRP.PR.D	FixedReset	103,595	Scotia crossed 80,000 at 18.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.41 %
TRP.PR.E	FixedReset	92,740	Scotia crossed 80,000 at 19.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.47 %
BMO.PR.S	FixedReset	64,701	Scotia crossed 50,000 at 19.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 4.23 %
There were 43 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
MFC.PR.M	FixedReset	Quote: 20.85 – 21.73 Spot Rate : 0.8800 Average : 0.5792 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.85 Bid-YTW : 5.97 %
HSE.PR.E	FixedReset	Quote: 23.16 – 23.70 Spot Rate : 0.5400 Average : 0.3735 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 22.40 Evaluated at bid price : 23.16 Bid-YTW : 4.75 %
ELF.PR.H	Perpetual-Discount	Quote: 23.85 – 24.25 Spot Rate : 0.4000 Average : 0.2552 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 23.41 Evaluated at bid price : 23.85 Bid-YTW : 5.79 %
TRP.PR.C	FixedReset	Quote: 12.96 – 13.40 Spot Rate : 0.4400 Average : 0.3107 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 12.96 Evaluated at bid price : 12.96 Bid-YTW : 4.55 %
BAM.PR.Z	FixedReset	Quote: 20.91 – 21.35 Spot Rate : 0.4400 Average : 0.3134 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 20.91 Evaluated at bid price : 20.91 Bid-YTW : 4.71 %
CU.PR.G	Perpetual-Discount	Quote: 20.50 – 21.00 Spot Rate : 0.5000 Average : 0.3737 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-28 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 5.59 %

Market Action

October 27, 2015

Forbes has a nice piece on the Big Pharma / regulatory complex in the States:

Shkreli, if you’ve been trapped on Mars eating potatoes, gained Internet opprobrium when his company, Turing Pharmaceuticals, raised the price of Daraprim, an old drug used to treat toxoplasmosis in AIDS patients, by 5,000% to more than $750 a pill. Yesterday, the Internet lit up when another small drugmaker, Imprimis Pharmaceuticals of San Diego, said that it would make its own version of Daraprim available for just $1 a pill, cheaper than it was before.
…
In February 2011, a company called KV Pharmaceutical got approval from the Food and Drug Administration for a drug called Makena to prevent pre-term birth. Up until that point, doctors had used progesterone-containing drugs made by compounding pharmacies that produce medicines on an as-needed basis. (Simple example: your two-year-old needs an antibiotic pill turned into syrup.) The compounded progesterone cost $15, or $250 per course. But suddenly, because of the FDA approval, all those compounded drugs were illegal — because they’d never been approved. And KV was going to charge $1,500 per injection, or $25,000 per treatment. That’s a 10,000% price increase.

Here’s a bit more colour on the Fed and the Phillips Curve:

For Yellen, the six million people … working part-time because the economy isn’t strong enough, plus the more than 600,000 who’ve become so discouraged about prospects that they’ve stopped looking for a job, signal interest rates can stay low for longer.

Yellen’s focus on the under-employed is steering monetary policy toward a bold experiment: The Federal Open Market Committee will use the big, blunt instrument of low interest rates to push the jobless level low enough to pull more labor-force quitters and part-timers back into full-time work.

The hope is that it will kick-start a virtuous cycle of investment, higher productivity and better pay that will heal the vestiges of the worst recession since the Great Depression.

It’s a “new view of the reach of monetary policy,” said Laurence Meyer, who served on the Fed’s Board of Governors with Yellen in the 1990s. It “goes against everything I taught at the university for 27 years.”

Traditional economics says that, in the long run, monetary policy influences prices, not the size of the labor force, which is determined by long-term forces including population growth.

Should the Fed stimulate enough demand for labor to put a dent in the underemployed, it “would be a fantastic achievement,” says Meyer, and “that might be a gamble worth taking.” The biggest risk is that inflation will exceed the central bank’s 2 percent target by “more than a little,” he said.

The whole conundrum also reflects on the Fed’s dual mandate (low inflation / strong economy), so it will be most interesting to learn how it all turns out.

Click for Big

CU Inc. issued some forty-year paper today:

CU Inc. announced today that it will issue $250,000,000 of 4.211% Debentures maturing on October 29, 2055, at a price of $100.00 to yield 4.211%. This issue was sold by RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., TD Securities Inc., Scotia Capital Inc. and CIBC World Markets Inc. Proceeds from the issue will be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.

This is interesting because one of their preferred share issues is CIU.PR.A, which closed at 20.37-99 yesterday to yield 5.75%-53. This is the interest-equivalent of 7.48% at the bid (at the standard conversion factor of 1.3x), which implies that the Seniority Spread on this particular issue is about 337bp – very high, and illustrative of just how wide this spread has become lately. Assiduous Readers will recall that this Spread (on an index-index basis) was 320bp on October 21.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 34bp, FixedResets off 24bp and DeemedRetractibles gaining 14bp. The Performance Highlights table is its usual enormous self. Volume was very high.

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 19.00 to be $0.51 rich, while TRP.PR.A, resetting 2020-12-31 at +192, is $0.51 cheap at its bid price of 15.56.

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Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 19.87 to be 0.79 rich, while MFC.PR.F resetting at +141bp on 2016-6-19, is bid at 14.05 to be 0.78 cheap.

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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.00 to be $1.20 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 20.80 and appears to be $1.35 rich.

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FTS.PR.K, with a spread of +205bp, and bid at 19.51, looks $0.89 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 14.25 and is $0.48 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.87%, with no outliers. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.99% and other issues averaging -0.47%. There are three junk outliers above 0.00% and two below -2.00%.

Click for Big

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

HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly
Index	Mean Current Yield (at bid)	Median YTW	Median Average Trading Value	Median Mod Dur (YTW)	Issues	Day’s Perf.	Index Value
Ratchet	0.00 %	0.00 %	0	0.00	0	3.2059 %	1,754.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	3.2059 %	3,067.6
Floater	4.23 %	4.27 %	60,599	16.87	3	3.2059 %	1,865.1
OpRet	0.00 %	0.00 %	0	0.00	0	-0.0570 %	2,743.7
SplitShare	4.37 %	5.54 %	84,450	2.95	5	-0.0570 %	3,215.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0570 %	2,508.8
Perpetual-Premium	5.85 %	5.70 %	67,372	2.75	5	0.1998 %	2,488.1
Perpetual-Discount	5.61 %	5.71 %	80,344	14.31	33	0.3378 %	2,544.8
FixedReset	4.90 %	4.37 %	214,949	15.93	76	-0.2402 %	2,082.6
Deemed-Retractible	5.21 %	4.69 %	113,178	5.45	33	0.1354 %	2,563.8
FloatingReset	2.47 %	3.84 %	60,720	5.81	9	0.6517 %	2,174.2

Performance Highlights
Issue	Index	Change	Notes
RY.PR.J	FixedReset	-3.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 4.35 %
BAM.PF.F	FixedReset	-3.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 4.64 %
CM.PR.O	FixedReset	-3.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.10 Evaluated at bid price : 19.10 Bid-YTW : 4.32 %
RY.PR.M	FixedReset	-2.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.26 Evaluated at bid price : 20.26 Bid-YTW : 4.28 %
MFC.PR.H	FixedReset	-1.91 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.07 Bid-YTW : 5.19 %
IFC.PR.A	FixedReset	-1.88 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.15 Bid-YTW : 8.80 %
SLF.PR.J	FloatingReset	-1.82 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.50 Bid-YTW : 9.32 %
MFC.PR.J	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.60 Bid-YTW : 6.20 %
TD.PF.E	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.42 Evaluated at bid price : 21.70 Bid-YTW : 4.23 %
NA.PR.W	FixedReset	-1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.07 Evaluated at bid price : 19.07 Bid-YTW : 4.25 %
FTS.PR.K	FixedReset	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.51 Evaluated at bid price : 19.51 Bid-YTW : 3.96 %
TRP.PR.C	FixedReset	-1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 13.49 Evaluated at bid price : 13.49 Bid-YTW : 4.37 %
BAM.PR.X	FixedReset	-1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 15.44 Evaluated at bid price : 15.44 Bid-YTW : 4.54 %
BAM.PF.G	FixedReset	-1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.31 Evaluated at bid price : 21.59 Bid-YTW : 4.48 %
TRP.PR.G	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.36 Evaluated at bid price : 21.36 Bid-YTW : 4.48 %
CM.PR.P	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.24 %
BNS.PR.Z	FixedReset	-1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.59 Bid-YTW : 5.66 %
FTS.PR.M	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 4.20 %
GWO.PR.S	Deemed-Retractible	-1.15 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.91 %
BMO.PR.W	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 18.89 Evaluated at bid price : 18.89 Bid-YTW : 4.29 %
CU.PR.H	Perpetual-Discount	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 23.29 Evaluated at bid price : 23.59 Bid-YTW : 5.67 %
PWF.PR.R	Perpetual-Discount	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 23.55 Evaluated at bid price : 24.01 Bid-YTW : 5.74 %
BNS.PR.Y	FixedReset	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.77 Bid-YTW : 5.00 %
RY.PR.W	Perpetual-Discount	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 22.71 Evaluated at bid price : 23.00 Bid-YTW : 5.32 %
FTS.PR.J	Perpetual-Discount	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.69 Evaluated at bid price : 22.00 Bid-YTW : 5.47 %
W.PR.H	Perpetual-Discount	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 23.32 Evaluated at bid price : 23.60 Bid-YTW : 5.87 %
BNS.PR.B	FloatingReset	1.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.45 Bid-YTW : 3.84 %
GWO.PR.P	Deemed-Retractible	1.13 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.95 %
BMO.PR.M	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.84 Bid-YTW : 3.11 %
CU.PR.F	Perpetual-Discount	1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.83 Evaluated at bid price : 20.83 Bid-YTW : 5.49 %
PWF.PR.S	Perpetual-Discount	1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.43 Evaluated at bid price : 21.76 Bid-YTW : 5.53 %
BNS.PR.R	FixedReset	1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.53 %
FTS.PR.F	Perpetual-Discount	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 22.07 Evaluated at bid price : 22.35 Bid-YTW : 5.56 %
MFC.PR.N	FixedReset	1.43 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 6.09 %
BNS.PR.D	FloatingReset	1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.75 Bid-YTW : 5.30 %
MFC.PR.L	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.87 Bid-YTW : 6.44 %
FTS.PR.H	FixedReset	1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 14.25 Evaluated at bid price : 14.25 Bid-YTW : 4.11 %
MFC.PR.C	Deemed-Retractible	1.93 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.10 Bid-YTW : 6.92 %
BNS.PR.C	FloatingReset	2.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.82 Bid-YTW : 3.74 %
BAM.PR.C	Floater	2.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 11.02 Evaluated at bid price : 11.02 Bid-YTW : 4.32 %
BAM.PF.E	FixedReset	2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.84 Evaluated at bid price : 20.84 Bid-YTW : 4.37 %
BAM.PR.B	Floater	2.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 11.29 Evaluated at bid price : 11.29 Bid-YTW : 4.22 %
BAM.PR.K	Floater	4.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 11.17 Evaluated at bid price : 11.17 Bid-YTW : 4.27 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.B	Deemed-Retractible	163,605	Nesbitt crossed 148,800 at 24.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-26 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 2.77 %
RY.PR.J	FixedReset	112,563	RBC crossed 23,900 at 20.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 4.35 %
BAM.PF.B	FixedReset	75,967	RBC crossed blocks of 31,600 and 16,300, both at 19.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.69 Evaluated at bid price : 19.69 Bid-YTW : 4.60 %
MFC.PR.M	FixedReset	71,473	Scotia crossed 31,700 at 20.55. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 6.16 %
MFC.PR.N	FixedReset	68,460	TD crossed 38,000 at 20.56. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 6.09 %
BAM.PF.E	FixedReset	61,266	RBC crossed blocks of 19,800 and 30,400, both at 21.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.84 Evaluated at bid price : 20.84 Bid-YTW : 4.37 %
There were 59 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BAM.PF.F	FixedReset	Quote: 20.88 – 21.44 Spot Rate : 0.5600 Average : 0.3718 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 4.64 %
BAM.PR.X	FixedReset	Quote: 15.44 – 16.08 Spot Rate : 0.6400 Average : 0.4811 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 15.44 Evaluated at bid price : 15.44 Bid-YTW : 4.54 %
CM.PR.O	FixedReset	Quote: 19.10 – 19.84 Spot Rate : 0.7400 Average : 0.5952 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.10 Evaluated at bid price : 19.10 Bid-YTW : 4.32 %
GWO.PR.S	Deemed-Retractible	Quote: 24.00 – 24.74 Spot Rate : 0.7400 Average : 0.6118 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.91 %
SLF.PR.A	Deemed-Retractible	Quote: 21.63 – 21.93 Spot Rate : 0.3000 Average : 0.1763 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.63 Bid-YTW : 6.83 %
RY.PR.W	Perpetual-Discount	Quote: 23.00 – 23.33 Spot Rate : 0.3300 Average : 0.2254 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 22.71 Evaluated at bid price : 23.00 Bid-YTW : 5.32 %

PrefBlog

New Issue: Two Series of RY Preferreds, USD, Issued As Merger Consideration

November 2, 2015

MAPF Performance: October, 2015

Low-Spread FixedResets: October 2015

MAPF Portfolio Composition: October 2015

October 30, 2015

October 29, 2015

PVS.PR.E Sinks on Lousy Volume

October 28, 2015

October 27, 2015

Archives

Of Interest