Issue Comments

BSC.PR.C Firm On Good Volume

Scotia Managed Companies has announced:

BNS Split Corp. II (the “Company”) is pleased to announce that it has completed its public offering of Class B preferred shares, series 2 (“Preferred Shares”) raising $11,217,809 through the issuance of 569,143 Preferred Shares at a price per share of $19.71. In addition, the Company has redeemed all of its outstanding Class B preferred shares, series 1. The Preferred Shares were offered to the public on a best efforts basis by a syndicate of agents led by Scotiabank, which included CIBC and RBC Capital Markets.

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

The issue is a 4% Five-Year Split Share. It will be tracked by HIMIPref™ and has been assigned to the SplitShare subindex (although, given the size of the issue, I expect it to be permanently relegated to the Scraps subindex on volume concerns in fairly short order).

BSC.PR.C traded 65,570 shares today in a range of 19.71-72 before closing at 19.69-72, 1×103. Vital statistics are:

BSC.PR.C SplitShare YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2020-09-22
Maturity Price : 19.71
Evaluated at bid price : 19.69
Bid-YTW : 4.04 %

Note that BSC.PR.B has been redeemed.

Issue Comments

ALA Purchases Power Plants: New Issue Coming?

AltaGas Ltd. has announced:

that it and its indirect wholly owned subsidiary AltaGas Power Holdings (U.S.) Inc. have entered into a purchase and sale agreement with Highstar Capital IV, L.P. and certain of its affiliates to acquire GWF Energy Holdings LLC, which holds a portfolio of three natural gas-fired electrical generation facilities in northern California totalling 523 MW (the “Acquisition”), including the 330 MW Tracy facility, the 97 MW Hanford facility and the 96 MW Henrietta facility (collectively the “Facilities”). The purchase price of the Acquisition is US$642 million, subject to certain closing adjustments.
…
Acquisition Funding

AltaGas expects the cash to close the Acquisition will be provided from a combination of equity and debt, specifically from: (i) a portion of the proceeds of the Offering; (ii) AltaGas’ existing credit facilities; (iii) future debt and preferred share financings; and (iv) potential dispositions of non-core assets.

The Acquisition will be financed consistent with AltaGas’ current capital structure. AltaGas will continue to maintain its strong balance sheet and financial discipline and is committed to maintaining its investment grade credit rating.

Transaction Closing

The transaction is subject to customary approvals, including regulatory approvals from the Federal Energy Regulatory Commission of the United States government and the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The acquisition is expected to close late in the fourth quarter of 2015.

Common Equity Offering

Pursuant to the Offering, AltaGas has agreed to sell, on a bought deal basis, an aggregate of 8,760,000 common shares at a price of $34.25 per common share (the “Offering Price”) for gross proceeds of approximately $300 million. The common shares will be offered through a syndicate of underwriters co-led by TD Securities Inc. and BMO Capital Markets as joint bookrunners. AltaGas has also granted the underwriters an option to purchase, in whole or part, up to an additional 1,314,000 common shares at the Offering Price to cover over-allotments, if any, for a period of 30 days following the closing of the Offering (the “Over-Allotment Option”). If the Over-Allotment Option is exercised in full, gross proceeds from the Offering will be approximately $345 million.

The Offering will be used, in part, to fund the Acquisition as well as to reduce indebtedness and for general corporate purposes.

DBRS comments:

DBRS views the Acquisition as modestly positive for the Company’s business risk profile as it would diversify AltaGas’ energy infrastructure portfolio through the addition of relatively low-risk, fully contracted and long-life gas-fired power assets in Northern California to its existing power generation assets located in Southern California (507 MW Blythe Energy Centre), thereby expanding its presence in the California power market. The PPAs with PG&E are structured as tolling arrangements for 100% of the energy, capacity and ancillary services, which eliminates price and volume risk. AltaGas benefits from a highly contracted portfolio of power assets, and the commissioning of Forest Kerr (195 MW in 2014) and Volcano Creek (16 MW in 2015) run-of-the-river projects supported by a 60-year PPA with British Columbia Hydro and Power Authority (rated AA (high), Stable, by DBRS) as well as the acquisition of three western U.S. gas-fired power assets (combined 164 MW in January 2015) have partially mitigated the impact of weaker realized Alberta power prices and volumes for the Company. DBRS estimates that, the Acquisition increases AltaGas’ power-generation capacity to 2,035 MW from the current 1,512 MW and, consequently, the Company’s EBITDA contribution from its Power segment is expected to increase to approximately 40% from 31%, resulting in a more diversified lower-risk asset portfolio. DBRS is moderately concerned that there is re-contracting risk on the GWF PPAs which expire in 2022. However, the California Renewable Portfolio Standard Policy requiring utilities to use 33% renewable energy by 2020 and state legislation to boost California’s greenhouse gas reduction target to 40% by 2030 could result in the retirement of coal-fired utilities, thereby supporting the continued existence of gas-fired utilities to ensure adequate power supply.

DBRS expects the Acquisition to have a neutral impact on the Company’s financial risk profile. DBRS notes that the funding for the acquisition is consistent with the Company’s current capital structure and that the Acquisition is expected to provide a stable stream of contracted EBITDA of approximately $95 million annually (approximately 17% of EBITDA for last 12 months ended June 30, 2015). While the Acquisition is being financed with an initial common share offering ($300 million to $345 million), the balance of the purchase price is likely to be financed by a combination of debt and preferred share issuance, resulting in minimal impact on leverage. DBRS does not expect the increase in dividends to $0.165 per share to have a meaningful impact on the Company’s cash flow.

DBRS estimates that, following the Acquisition, DBRS adjusted total debt-to-capital is likely to remain largely unchanged with cash flow and interest coverage ratios improving slightly on a 2015 full-year pro forma basis. Overall, the Acquisition is expected to maintain the Company’s credit metrics consistent with the current ratings.

AltaGas has three preferred share issues outstanding, all FixedResets: ALA.PR.A, ALA.PR.E and ALA.PR.G. ALA.PR.A will reset shortly at 3.38%.

I suspect a new issue will have to yield somewhere around 5.00%-5.25%, with a reset-floor-rate. The company is best known for having the most useless investor relations department on earth.

Market Action

September 21, 2015

Fed officials are busily warning against complacency:

Federal Reserve officials argued that an interest-rate increase is still warranted this year, laying out the case for liftoff in remarks over the weekend that counter bets by traders that the central bank will stay on hold until 2016.

Three policy makers separately explained their rationale for enacting a rate increase at one of the Fed’s two remaining meetings of 2015, citing declines in unemployment and other gains in the U.S. economy that should outweigh headwinds from slower growth abroad and turbulent financial markets.

San Francisco Fed President John Williams, a policy centrist who has worked closely with Chair Janet Yellen, said Sunday that “in my mind, it was a close call” to delay a rate rise at last week’s Federal Open Market Committee meeting.

Williams’ comments on Fox News Channel’s “Sunday Morning Futures with Maria Bartiromo” echoed remarks he made the day before, and chimed with the reasoning of St. Louis Fed President James Bullard and Richmond Fed President Jeffrey Lacker. Both weighed in on Saturday over the FOMC’s vote to leave rates near zero.

Non-voting FOMC members are also weighing in:

Federal Reserve Bank of St. Louis President James Bullard said he pushed against the central bank’s decision this week to delay an interest rate increase, because the economy has more or less fulfilled policy makers’ goals.

“The case for policy normalization is quite strong, since Committee objectives have essentially been met,” Bullard said in slides prepared for a speech in Nashville, Tennessee. “I argued against the decision at the FOMC meeting.”

Bullard is not a voting member of the policy-setting Federal Open Market Committee in 2015, but will vote in 2016.

I’ve said it before, I’ll say it again – I’m sure that most, if not all, of these public statements are deliberately orchestrated by the FOMC as a whole. ‘You made some good points in the meeting, guys. You should speak up in public.’ In that way, the market learns a bit more about the decision than is available in the simple ternary result (up, unchanged, down) and about what elements of the data are considered important and on the cusp of change. It’s a lot better system than the Canadian one, in which (since Dodge retired) Moses descends from the mountain with the Finance Minister’s decision.

I’ve heard a rumour that Volkswagen has a new motto – “Don’t help me!”:

Discrepancies in the European tests on the diesel models of the VW Passat, the VW Jetta and the BMW X5 last year gave Peter Mock an idea.

Mock, European managing director of a little-known clean-air group, suggested replicating the tests in the U.S. The U.S. has higher emissions standards than the rest of the world and a history of enforcing them, so Mock and his American counterpart, John German, were sure the U.S. versions of the vehicles would pass the emissions tests, German said. That way, they reasoned, they could show Europeans it was possible for diesel cars to run clean.

“We had no cause for suspicion,” German, U.S. co-lead of the International Council on Clean Transportation, said in an interview. “We thought the vehicles would be clean.”

So began a series of events that resulted in Volkswagen AG admitting that it built “defeat device” software into a half-million of its diesel cars from 2009 to 2015 that automatically cheated on U.S. air-pollution tests. The world’s second-biggest carmaker now faces billions in fines, possible jail time for its executives and the undoing of its U.S. expansion plans.

Hat tip to Assiduous Reader JP, who brought this to my attention.

It didn’t do their stock price much good:

Volkswagen AG dropped 15 percent, the most in almost six years, after it admitted to cheating on U.S. air pollution tests for years.

The shares declined as much as 23.80 euros and were down 14 percent at 140 euros as of 9:03 a.m. in Frankfurt. The drop extends the fall for the year to 24 percent, valuing the Wolfsburg, Germany-based company at 66.2 billion euros ($74.9 billion).

Volkswagen Chief Executive Officer Martin Winterkorn said on Sunday that the company is cooperating with regulatory investigators and ordered its own external investigation into the issue. The CEO said he was “deeply sorry” for breaking the public’s trust.

Public trust is right!

John Decker bought his 2013 Volkswagen Jetta diesel thinking he was doing his part to improve the environment and reduce his carbon footprint.

Now that the German automaker has admitted its claims about the model’s performance were false, he just wants the company to buy it back from him.

“I feel completely deceived by Volkswagen,” Decker, of Sacramento, California, said in an interview. “I’m extremely upset about it. I feel defrauded.”
…
Decker wants Volkswagen to compensate him for the purchase. He said he has been in contact with the law firm of Hagens Berman Sobol Shapiro LLP in Seattle, which announced Sept. 18 that it was filing a federal lawsuit against Volkswagen. The firm estimates that some consumers paid as much as $7,000 more for a diesel model.

“I don’t want my car anymore, frankly,” Decker said. “I’d like Volkswagen to buy it back from me. I really don’t want it. I don’t want to drive it. I don’t want anything to do with Volkswagen.”

Assiduous Reader JP – who has been very industriously outperforming you other bums who never send me anything – also alerts me to the denouement of a Dutch takeover defence initiated last spring:

Israel’s Teva Pharmaceutical Industries Ltd. said Tuesday it is bidding $40 billion for Mylan NV, a drug company with headquarters in Canonsburg, Pa., but incorporated in the Netherlands. In early April, moving preemptively to thwart such an offer, a Dutch law firm submitted paperwork on Mylan’s behalf to the Netherlands trade registry to create an obscure but powerful legal vehicle called a “stichting.”

The entity, named Stichting Preferred Shares Mylan, is essentially an empty shell. But it possesses special powers, thanks to a shareholder-approved provision tucked into the paperwork for a previous Mylan acquisition: If Mylan ever receives an unsolicited takeover bid, the stichting can get veto rights over any takeover.

Stichtings, which mean “foundations” in Dutch, have been around for hundreds of years, primarily used by Dutch charities. During the World War II, Dutch companies transferred their ownership to stichtings based in the Dutch Antilles in the Caribbean to protect assets from the German occupiers, experts say.
…
Their key attribute is that stichtings, often referred to as orphan foundations, don’t have any legal owners. That means they can be used to put money or other assets outside the reach of government authorities, competitors or shareholders. The stichting’s purpose and the responsibilities of its board of directors can be tailored to the vehicle’s needs.

But management has decided it is sufficiently entrenched:

Mylan said Monday that it has moved to cancel the preferred shares issued to the entity in July, as the threats to the company “have been sufficiently addressed.”

In a bit of fun news that shows Natural Philosophy as a hobby is not yet dead, World Bank economist Kaushik Basu has proved the Pythagorean Theorem. I don’t know if there’s any listing of proofs that might be considered authoritative, but here’s one site with 111 versions. Keep them coming, boys! Should we ever meet aliens, it will be most interesting to learn how many proofs they have and which ones they consider standard.

Meanwhile Russians are voting with their feet:

Official statistics show the number of Russian citizens leaving permanently or for more than nine months reached 53,235 in 2014, up 11 percent and the highest in nine years. Germany, the U.S. and Israel all report increases in the numbers of applications for immigration visas from Russia.

russianEmmigration
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Parakeet Poluz made a good point about Malthusian forecasts and Club of Rome projections:

But history has repeatedly shown that new technologies can quickly upend assumptions about future demand and supply.

For example, back in the 1970s, there were predictions that the world would run out of copper by the end of the century. The people who made that forecast did not foresee that copper wire, long a staple of communications infrastructure, would be replaced by fibre-optic cable, with its glass threads made from silica. This technology helped reduce the demand for copper, in essence extending its supply.

Similarly, digital photography had a dramatic impact on the photo-processing industry. Twenty years ago, the idea that everyone would carry around telephones that were also good-quality cameras was ridiculous. People took pictures with cameras that were loaded with film and took the film to a developer. The processing consumed a lot of silver. Back then, if you didn’t anticipate the emergence of digital photography, you might have expected this source of demand would continue indefinitely. Instead, according to the Washington-based Silver Institute, the use of silver in photography peaked in 1999 and has fallen by almost 80 per cent since.

It would appear that he fulfilled his cheerleading mandate in the question and answer period:

“In terms of being excessively dependent, I don’t buy that. Twenty per cent of our economy is the resource economy. That’s very important; it’s our backbone. It’s always been our history, and the rest is in some way dependent on that continuing to perform,” Mr Poloz told a business audience in Calgary, where the collapse in oil prices has led to deep cuts in spending and thousands of layoffs in the energy sector.

“We’re a highly diversified economy, and we should be thankful that we’ve got resources as part of our diversification, whereas lots of other countries don’t have that.”

During the federal election campaign, there has been considerable debate about the growing emphasis on energy-sector expansion under Conservative Leader Stephen Harper and, subsequently, the broad economic consequences of the industry’s downturn.

Excessively dependent? Bank of Canada research has noted:

Two aspects of the recent monetary history of Canada, Australia, and New Zealand stand out: the sensitivity of their dollars to prices of resource-based commodities, and inflation targeting.

… while less authoritative but still credible research asserts:

In the last ten years, over half of Canada’s total exports consisted of energy and non-energy commodities. Because the Canadian dollar is often called a “commodity currency”, this paper seeks to test the relevance of commodity prices in explaining the variation in the Canadian real exchange rate against the US dollar, the UK pound, and the Japanese yen. The currencies of these countries are chosen for the analysis because of Canada’s strong trade relationships with the United States, the United Kingdom, and Japan. The dynamic empirical model in this research demonstrates that the proportion of the variation in Canada’s real exchange rate that is attributable to a volatile commodity price shock differs depending on the currency pairing. The results also suggest that the relationship between commodity prices and the Canadian dollar has strengthened over the last two decades.

Sounds excessive to me! Meanwhile, Werner Antweiler of UBC has gone so far as to say:

Is the Canadian Dollar a petrodollar? If you had asked me this question in the 1990s, I would have said “only a little”. At the time, commodity prices were not generally thought to be primary drivers of the exchange rate. During that decade, oil prices were relatively flat and thus the observable variation in the exchange rate was driven by other factors. Most international economists, including those at the Bank of Canada who have a professional interest in this question, were indeed puzzled to find that the CAD/USD exchange rate was difficult to predict based on fundamental factors.

While I was researching oil prices for another issue, I had another look at the relationship between oil prices and the CAD/USD exchange rate, and was indeed a bit surprised how much the oil price matters for determining the value of the Canadian Dollar. As two diagrams show below, there can be little question that during the last fifteen years the Canadian Dollar has morphed into a “petrocurrency”.

In simple terms, a petrocurrency is a currency of an oil-producing country—such as Canada—whose oil exports as a share of total exports are sufficiently large that the value of that country’s currency rises and falls along with the price of oil. In other words, a petrocurrency appreciates when the oil price rises and depreciates when the oil price falls.

Perhaps Mr. Poluz will explain how a deeply rooted manufacturing complex is supposed to survive, when our currency fluctuates so much against our number one trading partner with such alarming amplitude?

One of the more entertaining corporate battles of recent times may have ended in a draw:

Sprott Asset Management LP (“Sprott” or “Sprott Asset Management”), together with Sprott Physical Gold Trust (NYSE:PHYS) (TSX:PHY.U) and Sprott Physical Silver Trust (NYSE:PSLV) (TSX:PHS.U), today announced that it has filed notices of extension in connection with the offers by Sprott Asset Management Gold Bid LP and Sprott Asset Management Silver Bid LP to acquire all of the outstanding units of Central GoldTrust (“GTU”) (TSX: GTU.UN) (TSX:GTU.U) (NYSEMKT:GTU) and Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (TSX:SBT.U), respectively, for units of Sprott Physical Gold Trust and units of Sprott Physical Silver Trust, in each case on a net asset value (NAV) to NAV exchange basis (collectively, the “Sprott offers”). The notices of extension extend the expiry time of the Sprott offers to 5 p.m. (Toronto time) on October 9, 2015.
…
As of 5:00 p.m. (Toronto time) on September 18, 2015, there were 9,928,736 GTU units (51.45% of all outstanding units) and 2,065,574 SBT units (37.78% of all outstanding units) tendered into the respective Sprott offers.

IGM Financial, proud issuer of IGM.PR.B, has been confirmed at Pfd-2(high) by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Unsecured Debentures rating of IGM Financial Inc. (IGM or the Company) at A (high) and the First Preferred Shares rating at Pfd-2 (high). The trends are Stable.
…
In addition to strong profitability, the Company’s credit rating also benefits from strong cash flows (which comfortably cover the upfront distribution costs of mutual fund sales), strong liquidity and a conservative financial profile. The Company’s ratio of debt plus preferred shares-to-total capitalization remains appropriate for the rating.

As a member of the Power Financial Corporation (Power) group of companies, IGM benefits from the additional financial flexibility of having a strategic shareholder and the associated strong governance and risk avoidance management model that is typical of Power subsidiaries.

It was a day of little overall movement for the Canadian preferred share market, with PerpetualDiscounts and DeemedRetractibles both off 6bp, while FixedResets gained 4bp. The placidity of the indices masked a lot of churn, though, as reported on the Performance Highlights table. Volume was very low.

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

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

Here’s TRP:

impVol_TRP_150921
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 20.00 to be $1.04 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.17 cheap at its bid price of 13.00.

impVol_MFC_150921
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Another good fit today for MFC, with Implied Volatility falling a bit today.

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 22.65 to be 0.44 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 23.03 to be 0.44 cheap.

impVol_BAM_150921
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The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.50 to be $1.63 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.60 and appears to be $1.31 rich.

impVol_FTS_150921
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FTS.PR.M, with a spread of +248bp, and bid at 22.15, looks $0.54 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.79 and is $0.53 cheap.

pairs_FR_150921
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.93%, with no outliers. The distribution’s bimodality has returned, with bank NVCC non-compliant pairs averaging -1.08% and other issues averaging -0.71%. There are two junk outliers above 0.00%.

pairs_FF_150921
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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 -0.0954 % 1,647.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.0954 % 2,879.8
Floater 4.51 % 4.54 % 59,940 16.36 3 -0.0954 % 1,750.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.3382 % 2,767.8
SplitShare 4.65 % 5.03 % 63,501 3.05 3 -0.3382 % 3,243.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3382 % 2,530.8
Perpetual-Premium 5.71 % 1.09 % 53,552 0.08 8 0.0840 % 2,496.2
Perpetual-Discount 5.45 % 5.55 % 67,270 14.55 30 -0.0619 % 2,600.4
FixedReset 4.75 % 4.24 % 180,340 15.86 74 0.0365 % 2,142.2
Deemed-Retractible 5.15 % 4.68 % 91,108 5.49 33 -0.0606 % 2,578.9
FloatingReset 2.49 % 4.12 % 49,353 5.88 9 0.1700 % 2,148.3
Performance Highlights
Issue Index Change Notes
BIP.PR.A FixedReset -2.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 21.65
Evaluated at bid price : 22.00
Bid-YTW : 5.00 %
GWO.PR.N FixedReset -2.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.68
Bid-YTW : 8.74 %
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 : 15.22
Bid-YTW : 8.58 %
TRP.PR.A FixedReset -1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 4.36 %
IFC.PR.C FixedReset -1.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.69
Bid-YTW : 6.65 %
BMO.PR.R FloatingReset -1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.07
Bid-YTW : 4.12 %
BNS.PR.Y FixedReset -1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.30
Bid-YTW : 4.58 %
BAM.PR.R FixedReset -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 16.53
Evaluated at bid price : 16.53
Bid-YTW : 4.84 %
CU.PR.C FixedReset -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 3.99 %
PWF.PR.F Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 23.63
Evaluated at bid price : 23.90
Bid-YTW : 5.57 %
BMO.PR.Y FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 22.47
Evaluated at bid price : 23.35
Bid-YTW : 3.86 %
MFC.PR.N FixedReset 1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.78
Bid-YTW : 5.87 %
MFC.PR.J FixedReset 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 4.88 %
TRP.PR.B FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 12.66
Evaluated at bid price : 12.66
Bid-YTW : 4.17 %
VNR.PR.A FixedReset 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 4.68 %
MFC.PR.I FixedReset 1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.19
Bid-YTW : 4.84 %
BAM.PR.X FixedReset 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 4.52 %
HSE.PR.G FixedReset 1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 22.08
Evaluated at bid price : 22.65
Bid-YTW : 4.84 %
SLF.PR.H FixedReset 1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.75
Bid-YTW : 7.46 %
BNS.PR.D FloatingReset 1.45 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.30
Bid-YTW : 4.83 %
BMO.PR.M FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 3.56 %
TRP.PR.C FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 13.00
Evaluated at bid price : 13.00
Bid-YTW : 4.65 %
BNS.PR.P FixedReset 1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.52
Bid-YTW : 3.51 %
SLF.PR.J FloatingReset 1.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.25
Bid-YTW : 9.46 %
FTS.PR.K FixedReset 1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 4.09 %
TRP.PR.F FloatingReset 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 14.70
Evaluated at bid price : 14.70
Bid-YTW : 3.89 %
PWF.PR.P FixedReset 2.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 15.62
Evaluated at bid price : 15.62
Bid-YTW : 3.96 %
Volume Highlights
Issue Index Shares
Traded		 Notes
FTS.PR.K FixedReset 112,520 Desjardins crossed blocks of 85,200 and 10,000, both at 18.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 4.09 %
TRP.PR.E FixedReset 59,776 TD crossed blocks of 17,000 and 20,000, both at 20.05.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.31 %
RY.PR.J FixedReset 36,284 TD crossed 17,000 at 22.62.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 22.49
Evaluated at bid price : 23.36
Bid-YTW : 3.78 %
RY.PR.I FixedReset 33,900 Desjardins crossed blocks of 15,400 and 15,000, both at 24.80.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.62
Bid-YTW : 3.50 %
MFC.PR.G FixedReset 32,593 Nesbitt crossed 30,000 at 23.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.03
Bid-YTW : 4.89 %
TRP.PR.D FixedReset 28,912 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-21
Maturity Price : 19.29
Evaluated at bid price : 19.29
Bid-YTW : 4.40 %
There were 16 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: 21.10 – 21.85
Spot Rate : 0.7500
Average : 0.5086

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.10
Bid-YTW : 5.74 %
IFC.PR.C FixedReset Quote: 19.69 – 20.15
Spot Rate : 0.4600
Average : 0.3114

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.69
Bid-YTW : 6.65 %
GWO.PR.R Deemed-Retractible Quote: 22.25 – 22.60
Spot Rate : 0.3500
Average : 0.2038

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 6.40 %
TD.PR.Z FloatingReset Quote: 22.40 – 22.74
Spot Rate : 0.3400
Average : 0.2227

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.40
Bid-YTW : 3.90 %
GWO.PR.L Deemed-Retractible Quote: 25.15 – 25.50
Spot Rate : 0.3500
Average : 0.2367

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 5.59 %
BMO.PR.R FloatingReset Quote: 22.07 – 22.50
Spot Rate : 0.4300
Average : 0.3167

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.07
Bid-YTW : 4.12 %
Market Action

September 18, 2015

Nothing happened today, except that bonds had a good day:

The S&P 500 retreated 1.6 percent at 4 p.m. in New York, erasing its gain for the week. The gauge ended lower yesterday by 0.4 percent, erasing a gain of as much as 1.3 percent after Yellen indicated that global developments overshadowed signs of strength in America.
…
U.S. two-year Treasuries extended their biggest one-day rally since 2009, while Pacific Investment Management Co. said policy makers may wait until next year before raising rates. JPMorgan Asset Management said the Fed’s statement was good for bonds and they still like debt due between seven and 10 years.

Bonds gained from Australia to Germany, while Treasuries added to an advance from Thursday. The yield on 10-year German bunds, the euro region’s benchmark sovereign securities, dropped 12 basis points to 0.66 percent, set for its biggest decline since July 7, on prospects for further easing by the European Central Bank.

Rates on similar-maturity Italian bonds fell 14 basis points to 1.76 percent, while those on Spain’s declined 15 basis points to 1.94 percent. The yield on U.S. 10-year Treasuries fell six basis points to 2.13 percent on Friday, after sliding 10 basis points the previous day.

It was yet another negative day for the Canadian preferred share market, with PerpetualDiscounts gaining 5bp, FixedResets down 48bp and DeemedRetractibles off 6bp. The Performance Highlights table is comprised entirely of losers, mostly FixedResets. Volume was extremely low.

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

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

Here’s TRP:

impVol_TRP_150918
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 20.06 to be $1.05 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.32 cheap at its bid price of 12.81.

impVol_MFC_150918
Click for Big

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

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.41 to be 0.32 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 23.03 to be 0.30 cheap.

impVol_BAM_150918
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.80 to be $1.42 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.54 and appears to be $1.17 rich.

impVol_FTS_150918
Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 22.20, looks $0.66 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.79 and is $0.43 cheap.

pairs_FR_150918
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’s bimodality has vanished. There are two junk outliers above 0.00%.

pairs_FR_150918
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 -1.1003 % 1,648.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.1003 % 2,882.5
Floater 4.51 % 4.54 % 58,288 16.37 3 -1.1003 % 1,752.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.0812 % 2,777.2
SplitShare 4.63 % 4.95 % 61,117 3.06 3 0.0812 % 3,254.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0812 % 2,539.4
Perpetual-Premium 5.71 % 2.95 % 53,691 0.08 8 0.1138 % 2,494.1
Perpetual-Discount 5.45 % 5.52 % 66,304 14.59 30 0.0476 % 2,602.0
FixedReset 4.75 % 4.21 % 178,672 15.99 74 -0.4801 % 2,141.4
Deemed-Retractible 5.15 % 4.75 % 91,336 5.50 33 -0.0580 % 2,580.4
FloatingReset 2.49 % 3.96 % 49,480 5.90 9 -0.5021 % 2,144.7
Performance Highlights
Issue Index Change Notes
TRP.PR.C FixedReset -4.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 12.81
Evaluated at bid price : 12.81
Bid-YTW : 4.62 %
HSE.PR.A FixedReset -2.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 13.80
Evaluated at bid price : 13.80
Bid-YTW : 4.65 %
TRP.PR.A FixedReset -2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 4.22 %
SLF.PR.J FloatingReset -2.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.03
Bid-YTW : 9.65 %
TRP.PR.F FloatingReset -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 3.96 %
SLF.PR.H FixedReset -1.96 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.50
Bid-YTW : 7.59 %
MFC.PR.F FixedReset -1.96 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.50
Bid-YTW : 8.27 %
BAM.PR.K Floater -1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 10.42
Evaluated at bid price : 10.42
Bid-YTW : 4.54 %
SLF.PR.G FixedReset -1.73 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.35
Bid-YTW : 8.23 %
TD.PR.S FixedReset -1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.97
Bid-YTW : 3.66 %
VNR.PR.A FixedReset -1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.68 %
BAM.PR.Z FixedReset -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 4.62 %
TRP.PR.B FixedReset -1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 12.52
Evaluated at bid price : 12.52
Bid-YTW : 4.14 %
BMO.PR.T FixedReset -1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 20.94
Evaluated at bid price : 20.94
Bid-YTW : 3.82 %
PWF.PR.T FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 22.21
Evaluated at bid price : 22.70
Bid-YTW : 3.65 %
IFC.PR.C FixedReset -1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.00
Bid-YTW : 6.39 %
IAG.PR.G FixedReset -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 5.11 %
FTS.PR.K FixedReset -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.11 %
GWO.PR.N FixedReset -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.05
Bid-YTW : 8.35 %
BAM.PR.R FixedReset -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 4.70 %
HSE.PR.G FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 21.89
Evaluated at bid price : 22.35
Bid-YTW : 4.87 %
MFC.PR.I FixedReset -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 4.96 %
FTS.PR.F Perpetual-Discount -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 22.24
Evaluated at bid price : 22.51
Bid-YTW : 5.48 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PF.F Perpetual-Discount 65,100 RBC crossed 48,200 at 24.35.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 24.03
Evaluated at bid price : 24.39
Bid-YTW : 5.09 %
NA.PR.S FixedReset 52,575 TD crossed 46,700 at 21.75.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 21.31
Evaluated at bid price : 21.60
Bid-YTW : 3.87 %
MFC.PR.G FixedReset 36,160 Nesbitt crossed 34,600 at 23.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.03
Bid-YTW : 4.84 %
GWO.PR.N FixedReset 32,586 Nesbitt crossed 28,700 at 15.30.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.05
Bid-YTW : 8.35 %
BNS.PR.Q FixedReset 27,200 RBC crossed 25,000 at 24.32.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.29
Bid-YTW : 3.65 %
SLF.PR.J FloatingReset 27,038 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.03
Bid-YTW : 9.65 %
There were 12 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
RY.PR.J FixedReset Quote: 23.35 – 24.00
Spot Rate : 0.6500
Average : 0.4263

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 22.49
Evaluated at bid price : 23.35
Bid-YTW : 3.74 %
TRP.PR.F FloatingReset Quote: 14.40 – 15.20
Spot Rate : 0.8000
Average : 0.5885

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 3.96 %
HSE.PR.G FixedReset Quote: 22.35 – 22.99
Spot Rate : 0.6400
Average : 0.4319

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 21.89
Evaluated at bid price : 22.35
Bid-YTW : 4.87 %
MFC.PR.N FixedReset Quote: 20.56 – 21.18
Spot Rate : 0.6200
Average : 0.4233

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.56
Bid-YTW : 5.98 %
TD.PR.S FixedReset Quote: 23.97 – 24.55
Spot Rate : 0.5800
Average : 0.3843

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.97
Bid-YTW : 3.66 %
TRP.PR.C FixedReset Quote: 12.81 – 13.30
Spot Rate : 0.4900
Average : 0.2972

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-18
Maturity Price : 12.81
Evaluated at bid price : 12.81
Bid-YTW : 4.62 %
Regulation

CSA To Commence Crippling Canadian Corporate Bond Market

The Canadian Securities Administrators have announced that they have:

published for comment CSA Staff Notice 21-315 Next Steps in Regulation and Transparency of the Fixed Income Market, which describes the CSA’s plan to enhance fixed income regulation.

The Notice sets out the steps CSA staff are taking to improve market integrity, evaluate access to the fixed income market and facilitate more informed decision making among market participants.
…
The CSA Staff Notice can be found on CSA members’ websites. The 45-day comment period will close on November 1, 2015.

Naturally the CSA can’t put actual links on the press release announcing their existence. That would be too simple, but after some poking around we find on the OSC website CSA Staff Notice and Request for Comment 21-315 Next Steps in Regulation and Transparency of the Fixed Income Market:

On April 23, 2015, staff of the Ontario Securities Commission (OSC) published a report titled The Canadian Fixed Income Market 2014 (the Report).{2} The Report presented a fact-based snapshot of the $2 trillion fixed income market in Canada, with particular emphasis on the $500 billion in corporate debt outstanding.{3} The Report also highlighted the following:

1. fixed income data available is limited and fragmented across a number of sources, which makes it difficult to conduct a comprehensive assessment of the fixed income market;

2. the secondary fixed income market is a decentralized, over-the-counter market where large investors have significantly more bargaining power than small investors;

3. there is limited adoption of electronic trading and alternative trading systems, especially for corporate bonds; and

4. direct retail participation in the primary and secondary fixed income market is low and retail investors typically access the fixed income market by purchasing investment funds.

The purpose of this notice is to set out the CSA staff’s plan to enhance fixed income regulation to:

1. facilitate more informed decision-making among all market participants, regardless of their size;

2. improve market integrity; and

3. evaluate whether access to the fixed income market is fair and equitable for all investors.

Each of these steps is discussed in the sections below.

The report was discussed on PrefBlog in the post The Canadian Fixed Income Market: 2014.

It is noteworthy that not one of the objectives involves answering the question “What is the corporate bond market for?”. If this question was ever asked and it was decided that the purpose of the corporate bond market was to give Granny a good place to invest her $5,000 in a single particular bond at a good price then the other objectives make sense. If, however, the purpose of the market is to give corporations access to debt funding that is less constraining and cheaper than bank funding, so they can invest money, help the economy grow and create jobs, then other conclusions might be drawn.

However, CSA staff already has jobs, currently on the public payroll and quite often with the banks afterwards, so job creation by other corporations is hardly a meaningful concern.

As they are on the public payroll, they have very prudently not commenced crippling the government bond market:

NI 21-101 sets out transparency requirements for government debt securities. Specifically, marketplaces and inter-dealer bond brokers are required to report order or trade information, or both, to an information processor. However, an exemption from these transparency requirements is in place and was recently extended until January 1, 2018, through amendments to NI 21-101. As indicated in the notice published with the amendments,{9} no other jurisdiction has mandated transparency for government debt securities. The extension was granted in order to allow CSA staff to monitor international developments, including the expected implementation of the transparency regime that will be established across the European Union by the new Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instrument Regulation (MiFIR) adopted by the European Commission,{10} and to determine whether the NI 21-101 transparency requirements for government debt securities should be implemented or whether changes are appropriate.

It is laughable that CSA staff boasts about the wonders of public dissemination of information via SEDAR without permitting direct links to these public documents, but the funniest part of this diktat is their lip service to liquidity:

As noted above, it is CSA staff’s goal to achieve transparency for trades in all corporate debt securities by the end of 2017. We have considered how to achieve this goal in light of:

• the fact that IIROC will be implementing the IIROC Debt Reporting Rule in two phases (described below); and

• concerns that have been raised globally about a decrease in the liquidity in corporate debt markets, and the potential impact of additional transparency on liquidity.{19}

It is intended that transparency for all corporate debt securities will be phased in over the next two years in two phases, as follows:

• in Phase I (expected to occur in mid-2016), IIROC, as an information processor, will disseminate post-trade information for all trades in the Designated Corporate Debt Securities and for retail trades{20} for all other corporate debt securities reported to IIROC; and

• in Phase II (expected to occur in mid-2017), IIROC will disseminate information for all trades in all corporate debt securities and for new issues of corporate debt.

Footnote 19 reads: Specifically, concerns have been raised globally about a potential decrease in the liquidity of the fixed income markets due to a number of factors, including an increase in corporate bond issuances coupled with, some believe, decreases in dealers’ inventories resulting from changes in regulation. We have also heard these concerns raised by Canadian buy-side and sell-side firms during our discussions regarding liquidity and transparency.

Oh, isn’t that just the sweetest thing you can imagine! They’ve “heard these concerns” and, of course, having heard them we can rely on our Wise Masters to have made the correct decision. Just what these concerns were and just why certain decisions were made is none of your business – not only are you mere investor scum but you’re not even government employees, so dry up and blow away, vermin.

I have written about liquidity ant transparency many times on this blog and provided some of the links in my review of the OSC literature survey that is being used as cover for the CSA’s shenanigans. The short version is: increasing transparency leads to markets with a narrower bid-ask spread, but less depth. This has been shown time and time again by academics studying all sorts of markets. Naturally, the regulators are focussing on a definition of liquidity that emphasizes the bid-ask spread; Granny will be able to trade her $5,000 worth of bonds much more cheaply. Investors who trade corporates in $1-million+ sized chunks, however, experience a sharp decline in liquidity. This, naturally, increases the risk of flash-crashes and ‘crowded-trades’ as retail dumps ETFs … but who cares? That will merely give the regulators another excuse for some crocodile tears and another expensive study.

Institutional level liquidity is not a joke and it’s not trivial. When investments are more volatile and less liquid, you want to get paid more for holding them. That is to say, you demand more yield. It is the issuers who are paying that yield and increases in this yield increase their costs, and make building that new factory just that much less attractive.

But nobody cares and the regulators can’t even be bothered to ask ‘What is the corporate bond market for?’.

I’ve had it with this sham. However, for those who are interested, there was a story in the Globe about this issue titled Canadian regulators unveil new system to report corporate bond trading data. The plan has been greeted with rapturous applause from non-investors.

Coming up next: industry regulators take on the Ontario Food Terminal. It is disgusting that purchase of food at wholesale prices is restricted! Let’s see some FAIRNESS!!!

Update, 2015-9-19: Other press mentions have been Canada to Boost Corporate Bond Market Transparency by 2017 and CSA seeks comments on enhancing fixed-income transparency. The former article is notable for the paragraph:

“The steps we have set out to enhance regulation in the fixed income market will improve market transparency and better protect investor interests,” Tracey Stern, head of market regulation at the Ontario Securities Commission, said in an e- mailed statement. “With increased transparency, investors will be in a better position to assess the quality of their executions.”

Do I really need to point out that the concept of judging “quality of their executions” is a concept that applies only to brokered trades, while virtually all bond transactions are done on a principal basis? It would appear that I do.

Press Clippings

Enbridge shares are popular – but heavily shorted

Many thanks to Larry MacDonald, who very kindly quoted me (via PrefBlog) in his recent article Enbridge shares are popular – but heavily shorted:

The floating of preferred shares has been particularly substantial. As James Hymas, manager of the Malachite Aggressive Preferred Fund, noted in his blog (prefblog.com) in late 2014, Enbridge’s issuance “comprises roughly 10 per cent of the Canadian preferred share market, virtually all of which has come out since … [2011].”

The post quoted was Rating Agencies Unhappy With Enbridge.

Market Action

September 17, 2015

Today’s big news was the FOMC release:

Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.
…
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 how long to maintain this target range, 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.
…
The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
…
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.

Meanwhile, in Canada:

The number of EI beneficiaries rose 2 per cent to 545,200 in July from a month earlier, Statistics Canada said Thursday, led by increases in British Columbia, Ontario and Alberta. That level is 7.1 per cent higher than a year ago.

In Alberta, the province most exposed to lower oil prices, the number of EI beneficiaries climbed for the ninth straight month. EI numbers rose 1.8 per cent from a month earlier – a slower pace than in previous months – and are 72.2 per cent higher than in July of last year.

British Columbia and Ontario saw the biggest monthly percentage increases while Quebec and Saskatchewan also registered gains. Numbers fell in Manitoba and Newfoundland.

It was a mildly negative day for the Canadian preferred share market, with PerpetualDiscounts gaining 5bp, FixedResets off 8bp and DeemedRetractibles down 19bp. The Performance Highlights table is reasonably balanced. Volume was low.

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

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

Here’s TRP:

impVol_TRP_150917
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 20.00 to be $0.81 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.04 cheap at its bid price of 13.39.

impVol_MFC_150917
Click for Big

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

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.36 to be 0.25 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 23.07 to be 0.28 cheap.

impVol_BAM_150917
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.00 to be $1.30 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.48 and appears to be $1.06 rich.

impVol_FTS_150917
Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 22.20, looks $0.61 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.79 and is $0.50 cheap.

pairs_FR_150917
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.89%, with no outliers. The distribution’s bimodality has vanished. There are two junk outliers above 0.00%.

pairs_FF_150917
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 0.0944 % 1,666.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0944 % 2,914.6
Floater 4.46 % 4.45 % 57,298 16.54 3 0.0944 % 1,772.1
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2970 % 2,774.9
SplitShare 4.64 % 4.94 % 60,339 3.06 3 -0.2970 % 3,252.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2970 % 2,537.4
Perpetual-Premium 5.72 % 4.73 % 54,130 0.08 8 -0.1087 % 2,491.2
Perpetual-Discount 5.45 % 5.53 % 67,104 14.59 30 0.0511 % 2,600.8
FixedReset 4.73 % 4.10 % 173,820 16.12 74 -0.0843 % 2,151.7
Deemed-Retractible 5.15 % 5.08 % 93,885 5.50 33 -0.1926 % 2,581.9
FloatingReset 2.47 % 3.88 % 49,687 5.91 9 -0.0764 % 2,155.5
Performance Highlights
Issue Index Change Notes
SLF.PR.J FloatingReset -2.84 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.35
Bid-YTW : 9.34 %
IFC.PR.A FixedReset -1.80 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.34
Bid-YTW : 8.48 %
IAG.PR.G FixedReset -1.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 4.93 %
PWF.PR.T FixedReset -1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 22.41
Evaluated at bid price : 23.02
Bid-YTW : 3.59 %
SLF.PR.B Deemed-Retractible -1.48 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.02
Bid-YTW : 6.54 %
FTS.PR.K FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 4.06 %
HSE.PR.E FixedReset -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 22.06
Evaluated at bid price : 22.60
Bid-YTW : 4.82 %
PWF.PR.S Perpetual-Discount -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 21.99
Evaluated at bid price : 22.31
Bid-YTW : 5.44 %
BMO.PR.M FixedReset -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 3.63 %
BNS.PR.P FixedReset -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 3.81 %
NA.PR.S FixedReset -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 21.52
Evaluated at bid price : 21.52
Bid-YTW : 3.91 %
RY.PR.I FixedReset -1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 3.56 %
TD.PF.F Perpetual-Discount -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 23.83
Evaluated at bid price : 24.17
Bid-YTW : 5.13 %
PVS.PR.D SplitShare -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 5.29 %
TD.PF.D FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 22.37
Evaluated at bid price : 23.16
Bid-YTW : 3.83 %
GWO.PR.S Deemed-Retractible -1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.25
Bid-YTW : 5.68 %
MFC.PR.N FixedReset 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.76
Bid-YTW : 5.85 %
MFC.PR.J FixedReset 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 5.06 %
SLF.PR.G FixedReset 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.62
Bid-YTW : 8.01 %
MFC.PR.I FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.15
Bid-YTW : 4.81 %
HSE.PR.C FixedReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 4.89 %
SLF.PR.H FixedReset 1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.85
Bid-YTW : 7.32 %
GWO.PR.N FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.25
Bid-YTW : 8.18 %
FTS.PR.M FixedReset 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 21.82
Evaluated at bid price : 22.20
Bid-YTW : 3.85 %
MFC.PR.M FixedReset 1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.20
Bid-YTW : 5.64 %
POW.PR.B Perpetual-Discount 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 23.88
Evaluated at bid price : 24.13
Bid-YTW : 5.54 %
TRP.PR.F FloatingReset 2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 14.70
Evaluated at bid price : 14.70
Bid-YTW : 3.87 %
Volume Highlights
Issue Index Shares
Traded		 Notes
RY.PR.L FixedReset 45,613 RBC crossed 38,000 at 25.65.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.49
Bid-YTW : 3.61 %
TD.PF.F Perpetual-Discount 41,450 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 23.83
Evaluated at bid price : 24.17
Bid-YTW : 5.13 %
FTS.PR.G FixedReset 40,390 Scotia crossed 40,000 at 18.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 18.79
Evaluated at bid price : 18.79
Bid-YTW : 4.07 %
BAM.PR.B Floater 36,847 Nesbitt crossed 25,000 at 10.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 10.71
Evaluated at bid price : 10.71
Bid-YTW : 4.41 %
PWF.PR.P FixedReset 31,282 Scotia crossed 22,800 at 15.40.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 15.36
Evaluated at bid price : 15.36
Bid-YTW : 3.94 %
BAM.PF.A FixedReset 31,000 RBC crossed 24,400 at 21.72.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 21.32
Evaluated at bid price : 21.62
Bid-YTW : 4.38 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.K FixedReset Quote: 18.75 – 19.59
Spot Rate : 0.8400
Average : 0.6315

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 4.06 %
BNS.PR.P FixedReset Quote: 24.05 – 24.47
Spot Rate : 0.4200
Average : 0.2499

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 3.81 %
SLF.PR.B Deemed-Retractible Quote: 22.02 – 22.45
Spot Rate : 0.4300
Average : 0.2965

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.02
Bid-YTW : 6.54 %
FTS.PR.G FixedReset Quote: 18.79 – 19.25
Spot Rate : 0.4600
Average : 0.3417

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-17
Maturity Price : 18.79
Evaluated at bid price : 18.79
Bid-YTW : 4.07 %
MFC.PR.C Deemed-Retractible Quote: 21.18 – 21.62
Spot Rate : 0.4400
Average : 0.3260

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.18
Bid-YTW : 6.76 %
PVS.PR.D SplitShare Quote: 24.05 – 24.40
Spot Rate : 0.3500
Average : 0.2443

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 5.29 %
New Issues

New Issue: BSC 4% Five-Year Split-Share

There was no formal announcement, but the final short form prospectus for the new BSC refunding issue has been released on SEDAR and may be found by searching for }BNS Split Corp. II Sep 15 2015 16:59:32 ET Final short form prospectus – English PDF 276 K”. I am not permitted to link directly to this document because the regulators feel that access to public documents by investor scum should be inconvenient.

The issue has a monthly retraction, but it’s pretty lousy:

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

Additionally, there is the potential for annual redemptions at par and redemption any time at a small premium:

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

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

The dividend is, as noted, 4%:

Holders of Series 2 Preferred Shares will be entitled to receive quarterly fixed cumulative preferential distributions equal to $0.1971 per Series 2 Preferred Share. Quarterly distributions on the Series 2 Preferred Shares are expected to be paid by the Company on or before the 22nd day of December, March, June and September in each year. On an annualized basis, this would represent a yield on the offering price of the Series 2 Preferred Shares of 4.0%. Based on the expected closing date of September 22, 2015, the initial dividend will be $0.1971 per Series 2 Preferred Share and is expected to be payable on or about December 22, 2015.

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

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

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

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

The issue is rated Pfd-2(low) by DBRS:

DBRS Limited (DBRS) has today finalized the provisional rating of Pfd-2 (low) of the Class B Preferred Shares, Series 2 (the Preferred Shares) to be issued by BNS Split Corp. II (the Company).
…
Dividends received from the BNS Shares will be used to pay fixed cumulative quarterly distributions to the holders of the Preferred Shares in the amount of $0.1971 per quarter, which represents an annual yield of 4.0% on the offering price. Excess dividends net of all expenses of the Company and after the preferred cumulative dividends have been paid to the holders of the Preferred Shares may be paid as dividends on the Capital Shares or re-invested by the Company in additional BNS Shares as determined by the Board of Directors of the Company.
…
The initial downside protection available to the holders of the Preferred Shares is expected to be approximately 62% (after offering expenses). Based on the current dividend yield on the Portfolio and the initial offering size, the Preferred Share Dividend coverage ratio is expected to be approximately 2.6 times.

The issue was previously discussed in the post BSC.PR.B Refunding Issue Moves Closer.

Market Action

September 16, 2015

The OECD is not impressed with Canada’s growth:

In the quarterly update of its global outlook, the Organization for Economic Co-operation and Development cut its forecast for Canadian gross domestic product growth to 1.1 per cent this year, down from 1.5 per cent in its June outlook. For 2016, it reduced its GDP growth projection to 2.1 per cent from 2.3 per cent.

The OECD report underlines Canada’s underperformance this year relative to other major world economies, even as its neighbour and biggest trading partner, the United States, continues to gain momentum. The OECD upgraded its projection for U.S. GDP growth this year to 2.4 per cent, up from 2 per cent in its June report. Among the G7 major industrialized countries, Canada’s forecast 2015 growth is in the middle of the pack, ahead of Japan (0.6 per cent), Italy (0.7 per cent) and France (1.0 per cent). But Canada’s slowdown this year is the worst in G7, and the cut in its OECD forecast is the largest in the group.

Meanwhile, US inflation is moderate:

Prices paid by American households declined in August as cheaper gasoline helped keep inflation below the objective of Federal Reserve policy makers.

The consumer-price index fell 0.1 percent, the first decrease since January, after a 0.1 percent gain in July, Labor Department figures showed Wednesday. The so-called core measure, which strips out often-volatile fuel and food costs, rose 0.1 percent for a second month. Goods prices declined, while services barely rose.
…
The consumer price gauge increased 0.2 percent in the 12 months ended in August, the same as in July.

The core CPI measure, which excludes volatile food and fuel costs, rose 1.8 percent from August 2014, matching the prior month’s year-over-year gain.

In the comments to yesterday’s post, Assiduous Reader gimlimike brings to my attention a perpetual Dutch bond issued in 1648. I love perpetuals! If I’m reading the Dutch in the photograph correctly, the bond pays 25 guilders annually on an initial investment of 1,000 guilders, or 2.5%.

A similar bond was auctioned by Christies in 2000 with some interesting historical notes:

The Lekdijk Bovendams was incorporated in 1971 into a larger municipal organization, the Waterschap Kromme Rijn, which took over the payment of annual interest on the handful of extant original bonds. According to a 1978 report of the Waterschap’s Secretary, the corporation had issued a total of 48 bonds in the 17th and 18th century; their denominations ranged from 400 to 8,000 Guilders. Only 4 bonds were issued in the amount of 1200 Guilders. In 1978, only 22 of the 48 issued were still traceable (most in the hands of banks and other institutions, a few in private hands). According to a recent communication from C. Vanema, Archivist of the Streekarchief “Rijnstreek,” where the papers of the Waterschaap are deposited, there are today only five of these early bonds still active. Only one, issued in 1624 and owned since 1938 by the New York Stock Exchange, pre-dates the present bond, and only two of bonds issued in the 17th century are still active.

The good effects of centuries of such care may be observed via Google Maps. Given that one Guilder is 0.453780 Euros, the bond pays 11.34 Euros per year; given that Yale paid 24,000 Euros for it in 2003, the yield is 0.05% and the duration is therefore 2,000.

Yet another candidate has been dropped from the ballot over past indiscretions, and rewarded for his willingness to serve by being publicly vilified. At some point, we’re going to have to learn that not everybody has been a saint since birth; and that those who have been may not necessarily make the best legislators. But it makes us feel better about ourselves to scapegoat those unlucky enough to have been caught … meanwhile, I will continue to quite adequately represented provincially by Cheri DiNovo, who doubtless wouldn’t even be called for an interview in these puritanical times.

It was a negative day for the Canadian preferred share market, with PerpetualDiscounts off 5bp, FixedResets losing 25bp and DeemedRetractibles down 9bp. The Performance Highlights table is dominated by losing FixedResets, mostly of the low-spread variety. Volume was well below average.

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

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

Here’s TRP:

impVol_TRP_150916
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 20.02 to be $0.89 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.02 cheap at its bid price of 13.45.

impVol_MFC_150916
Click for Big

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

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.49 to be 0.49 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 23.00 to be 0.23 cheap.

impVol_BAM_150916
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.80 to be $1.48 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.33 and appears to be $0.95 rich.

impVol_FTS_150916
Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 21.89, looks $0.41 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.73 and is $0.52 cheap.

pairs_FR_150916
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.03%, with no outliers. The distribution has become bimodal again, with bank NVCC non-compliant issues averaging -1.17% and other issues averaging -0.82%. There are no junk outliers below -2.00%, but one above 0.00%.

pairs_FF_150916
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 0.1260 % 1,665.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1260 % 2,911.8
Floater 4.46 % 4.46 % 57,556 16.52 3 0.1260 % 1,770.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.0135 % 2,783.2
SplitShare 4.62 % 4.99 % 62,832 3.07 3 0.0135 % 3,261.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0135 % 2,544.9
Perpetual-Premium 5.71 % 2.47 % 54,398 0.08 8 0.0494 % 2,494.0
Perpetual-Discount 5.45 % 5.55 % 69,525 14.53 30 -0.0504 % 2,599.5
FixedReset 4.73 % 4.11 % 180,377 16.10 74 -0.2528 % 2,153.6
Deemed-Retractible 5.14 % 4.76 % 94,987 5.50 33 -0.0931 % 2,586.9
FloatingReset 2.47 % 3.97 % 50,398 5.91 9 -0.1851 % 2,157.1
Performance Highlights
Issue Index Change Notes
FTS.PR.H FixedReset -3.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 14.61
Evaluated at bid price : 14.61
Bid-YTW : 3.93 %
SLF.PR.G FixedReset -3.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.45
Bid-YTW : 8.14 %
FTS.PR.K FixedReset -2.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 19.01
Evaluated at bid price : 19.01
Bid-YTW : 4.00 %
SLF.PR.H FixedReset -2.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.62
Bid-YTW : 7.49 %
TRP.PR.F FloatingReset -1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 14.36
Evaluated at bid price : 14.36
Bid-YTW : 3.97 %
IFC.PR.C FixedReset -1.84 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 6.22 %
BMO.PR.Y FixedReset -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 22.34
Evaluated at bid price : 23.10
Bid-YTW : 3.87 %
BNS.PR.Q FixedReset -1.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 3.63 %
W.PR.H Perpetual-Discount -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 23.59
Evaluated at bid price : 23.86
Bid-YTW : 5.86 %
BNS.PR.R FixedReset -1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.64
Bid-YTW : 3.65 %
TD.PF.A FixedReset -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 3.80 %
BMO.PR.T FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 3.79 %
TD.PR.S FixedReset 1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 3.27 %
FTS.PR.M FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 21.59
Evaluated at bid price : 21.89
Bid-YTW : 3.91 %
VNR.PR.A FixedReset 1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 20.21
Evaluated at bid price : 20.21
Bid-YTW : 4.60 %
SLF.PR.J FloatingReset 3.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.74
Bid-YTW : 8.97 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PF.E FixedReset 31,255 Scotia crossed 24,000 at 24.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 22.85
Evaluated at bid price : 24.20
Bid-YTW : 3.71 %
BAM.PR.B Floater 26,982 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 10.71
Evaluated at bid price : 10.71
Bid-YTW : 4.41 %
MFC.PR.J FixedReset 23,798 RBC crossed 21,000 at 22.04.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.01
Bid-YTW : 5.20 %
BNS.PR.Q FixedReset 22,175 RBC crossed 20,300 at 24.32.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 3.63 %
BNS.PR.Y FixedReset 21,745 Desjardins crossed 18,200 at 21.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.72
Bid-YTW : 4.22 %
PVS.PR.D SplitShare 21,130 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 5.09 %
There were 20 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.K FixedReset Quote: 19.01 – 19.59
Spot Rate : 0.5800
Average : 0.4029

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 19.01
Evaluated at bid price : 19.01
Bid-YTW : 4.00 %
BMO.PR.Y FixedReset Quote: 23.10 – 23.55
Spot Rate : 0.4500
Average : 0.2895

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 22.34
Evaluated at bid price : 23.10
Bid-YTW : 3.87 %
IAG.PR.G FixedReset Quote: 23.19 – 23.60
Spot Rate : 0.4100
Average : 0.2640

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.19
Bid-YTW : 4.71 %
BNS.PR.R FixedReset Quote: 24.64 – 25.00
Spot Rate : 0.3600
Average : 0.2261

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.64
Bid-YTW : 3.65 %
TD.PF.D FixedReset Quote: 23.40 – 23.79
Spot Rate : 0.3900
Average : 0.2660

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 22.50
Evaluated at bid price : 23.40
Bid-YTW : 3.78 %
TD.PF.A FixedReset Quote: 21.24 – 21.64
Spot Rate : 0.4000
Average : 0.2827

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-16
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 3.80 %
Market Action

September 15, 2015

“Markets, schmarkets!” says the US consumer, “Where can I spend what I just saved on gas?“:

Retail sales in the U.S. climbed for a second straight month, a sign consumers may be looking past recent volatility in financial markets.

The 0.2 percent increase in August followed a 0.7 percent gain in July that was larger than previously reported, Commerce Department figures showed Tuesday in Washington. The median forecast of 84 economists surveyed by Bloomberg called for a 0.3 percent advance.

Although confidence has taken a hit from stock-market turmoil and global-growth concerns, the data show households are still putting their savings from cheap energy to work. More jobs and higher pay would go a long way in supporting household spending, which Federal Reserve policy makers are watching as they consider raising interest rates as soon as this week.

The news whacked Treasuries:

Treasuries tumbled, lifting the two-year note yield to the highest since April 2011, as gains in U.S. retail sales prompted investors to retreat from the securities that would be most affected if the Federal Reserve raises interest rates.

Sell orders in two- and five-year Treasury futures helped accelerate the move higher in yields amid investors’ concern that the Fed may raise rates as soon as Thursday for the first time since 2006. Yields rose the most in almost three weeks after data showed retail sales increased 0.2 percent in August while July’s gain was larger than previously reported. The figures signal consumers may be looking past recent financial-market volatility.
…
Treasury two-year note yields rose eight basis points, or 0.08 percentage point, to 0.80 percent as of 5 p.m. in New York, based on Bloomberg Bond Trader data. The price of the 0.625 percent security due in August 2017 fell 5/32, or $1.56 per $1,000 face amount, to 99 21/32.

Benchmark 10-year note yields rose 10 basis points to 2.29 percent.

Futures contracts show a 28 percent probability that the Fed will boost rates when it meets Sept. 16-17, according to data compiled by Bloomberg.The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase, versus the current target of zero to 0.25 percent.

It was a mostly lousy day for the Canadian preferred share market, with PerpetualDiscounts gaining 1bp, FixedResets down 58bp and DeemedRetractibles off 14bp. The Performance Highlights table is comprised almost entirely of losers. Volume was below average.

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

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

Here’s TRP:

impVol_TRP_150915
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 20.00 to be $0.79 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.05 cheap at its bid price of 13.35.

impVol_MFC_150915
Click for Big

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

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.41 to be 0.48 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 19.95 to be 0.29 cheap.

impVol_BAM_150915
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.90 to be $1.37 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.44 and appears to be $0.99 rich.

impVol_FTS_150915
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 19.50, looks $0.57 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.74 and is $0.69 cheap.

pairs_FR_150915
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.08%, with no outliers. The distribution is no longer bimodal. There are no junk outliers below -2.00%, but two above 0.00%.

pairs_FF_150915
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 0.0315 % 1,663.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0315 % 2,908.2
Floater 4.47 % 4.46 % 56,225 16.53 3 0.0315 % 1,768.2
OpRet 0.00 % 0.00 % 0 0.00 0 0.2572 % 2,782.8
SplitShare 4.62 % 5.03 % 63,003 3.07 3 0.2572 % 3,261.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2572 % 2,544.6
Perpetual-Premium 5.72 % 3.85 % 54,940 0.08 8 0.0198 % 2,492.7
Perpetual-Discount 5.45 % 5.55 % 69,845 14.55 30 0.0130 % 2,600.8
FixedReset 4.72 % 4.14 % 176,254 16.16 74 -0.5779 % 2,159.0
Deemed-Retractible 5.13 % 5.08 % 94,906 5.50 33 -0.1431 % 2,589.3
FloatingReset 2.47 % 3.89 % 50,759 5.91 9 -0.5791 % 2,161.1
Performance Highlights
Issue Index Change Notes
TRP.PR.G FixedReset -2.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.70
Evaluated at bid price : 22.10
Bid-YTW : 4.23 %
MFC.PR.N FixedReset -2.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.62
Bid-YTW : 5.94 %
TD.PR.S FixedReset -2.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.21
Bid-YTW : 3.48 %
NA.PR.S FixedReset -2.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.42
Evaluated at bid price : 21.75
Bid-YTW : 3.84 %
SLF.PR.C Deemed-Retractible -2.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.07
Bid-YTW : 6.75 %
BNS.PR.P FixedReset -1.98 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 3.63 %
FTS.PR.H FixedReset -1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 15.10
Evaluated at bid price : 15.10
Bid-YTW : 3.80 %
IAG.PR.G FixedReset -1.94 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.30
Bid-YTW : 4.65 %
MFC.PR.F FixedReset -1.94 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.71
Bid-YTW : 8.09 %
HSE.PR.G FixedReset -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.95
Evaluated at bid price : 22.45
Bid-YTW : 4.84 %
MFC.PR.M FixedReset -1.73 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.00
Bid-YTW : 5.76 %
TRP.PR.F FloatingReset -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 3.89 %
HSE.PR.C FixedReset -1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 4.96 %
SLF.PR.D Deemed-Retractible -1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.10
Bid-YTW : 6.73 %
BAM.PR.T FixedReset -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 17.36
Evaluated at bid price : 17.36
Bid-YTW : 4.63 %
MFC.PR.G FixedReset -1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.10
Bid-YTW : 4.80 %
NA.PR.W FixedReset -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.37
Evaluated at bid price : 21.37
Bid-YTW : 3.78 %
SLF.PR.H FixedReset -1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.02
Bid-YTW : 7.19 %
BMO.PR.M FixedReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 3.41 %
BNS.PR.D FloatingReset -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.21
Bid-YTW : 4.88 %
PWF.PR.F Perpetual-Discount -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 23.67
Evaluated at bid price : 23.94
Bid-YTW : 5.55 %
TRP.PR.C FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 13.35
Evaluated at bid price : 13.35
Bid-YTW : 4.43 %
BMO.PR.S FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.39
Evaluated at bid price : 21.71
Bid-YTW : 3.75 %
BNS.PR.A FloatingReset -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.16
Bid-YTW : 3.69 %
GWO.PR.N FixedReset 1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.10
Bid-YTW : 8.30 %
BAM.PF.D Perpetual-Discount 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.43
Evaluated at bid price : 21.77
Bid-YTW : 5.63 %
Volume Highlights
Issue Index Shares
Traded		 Notes
NA.PR.M Deemed-Retractible 95,150 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-10-15
Maturity Price : 25.50
Evaluated at bid price : 25.79
Bid-YTW : -1.86 %
FTS.PR.G FixedReset 86,685 Scotia crossed 25,000 at 18.90. Nesbitt crossed 25,000 at the same price.; RBC crossed 29,000 at the same price again.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 18.74
Evaluated at bid price : 18.74
Bid-YTW : 4.08 %
BMO.PR.T FixedReset 71,390 Scotia crossed 60,000 at 21.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.32
Evaluated at bid price : 21.32
Bid-YTW : 3.75 %
BMO.PR.Q FixedReset 51,048 RBC crossed 45,000 at 21.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.30
Bid-YTW : 5.00 %
BNS.PR.O Deemed-Retractible 50,768 Nesbitt crossed 50,000 at 25.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-04-27
Maturity Price : 25.25
Evaluated at bid price : 25.65
Bid-YTW : 4.04 %
BAM.PR.R FixedReset 39,990 RBC crossed 30,800 at 16.99.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 16.94
Evaluated at bid price : 16.94
Bid-YTW : 4.65 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
VNR.PR.A FixedReset Quote: 19.89 – 20.95
Spot Rate : 1.0600
Average : 0.6101

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 19.89
Evaluated at bid price : 19.89
Bid-YTW : 4.68 %
MFC.PR.M FixedReset Quote: 21.00 – 21.90
Spot Rate : 0.9000
Average : 0.6707

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.00
Bid-YTW : 5.76 %
SLF.PR.H FixedReset Quote: 18.02 – 18.55
Spot Rate : 0.5300
Average : 0.3767

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.02
Bid-YTW : 7.19 %
TD.PR.S FixedReset Quote: 24.21 – 24.64
Spot Rate : 0.4300
Average : 0.2794

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.21
Bid-YTW : 3.48 %
BNS.PR.D FloatingReset Quote: 20.21 – 20.65
Spot Rate : 0.4400
Average : 0.2898

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.21
Bid-YTW : 4.88 %
BAM.PF.G FixedReset Quote: 22.44 – 22.81
Spot Rate : 0.3700
Average : 0.2284

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-15
Maturity Price : 21.95
Evaluated at bid price : 22.44
Bid-YTW : 4.23 %