PrefBlog

Commodities got smacked yesterday. Today it was technology’s turn:

The biggest technology rally since October was knocked cold, as disappointing earnings reports punished Microsoft Corp. and left Apple Inc. in danger of its worst-ever loss of market value.

Five days after Google Inc.’s earnings sparked the largest one-day increase in market capitalization, computer and software shares are tumbling. Apple, Microsoft and Yahoo! Inc. retreated on disappointing results. Apple, the world’s most valuable company, dropped 6.7 percent, a slump that would wipe more than $50 billion from its value.

Hopes were high for the industry as earnings season began, with shares in the sector leading a rebound in U.S. equities after overseas tensions eased. The Nasdaq Composite Index rallied to an all-time high on July 17 after Google surged 16 percent, adding $65 billion to its market cap.
…
Cracks in the facade appeared before Tuesday. Intel Corp., kicking off earnings by the largest U.S. technology companies last week, said it expects the personal-computer market to fall further than expected, spotlighting the challenges for chipmakers. International Business Machines Corp. dropped 5.9 percent during regular trading Tuesday after sales fell for a 13th quarter.
…
Microsoft slid 3.1 percent following its largest-ever quarterly net loss, hurt by a $7.5 billion writedown after the purchase of Nokia’s handset unit failed to rescue the company’s mobile business.

According to Big Taxi funding recipient de Blasio, New York may have too many taxis:

The New York City Council may vote as soon as this week on Mayor Bill de Blasio’s plan to limit the growth of ride-hailing service Uber Technologies Inc.

No decision has been made on whether the measure will come up at the council’s next scheduled meeting Thursday, said Eric Koch, a spokesman for Speaker Melissa Mark-Viverito. The bill would first have to clear the transportation committee, where it has the support of Chairman Ydanis Rodriguez, an outspoken Uber critic backed by the yellow-taxi industry. De Blasio said Monday that he wanted the council to vote “as quickly as possible.”

The measure would restrict the growth of fleets with 500 or more cars to 1 percent while city officials conduct a study on traffic congestion, which would be due April 30. While the limit would affect all for-hire ride services, including traditional black-car companies like Carmel and Dial 7, the biggest loser would be San Francisco-based Uber, which has grown to include 19,000 vehicles and is expanding about 3 percent a month.
…
The legislation is the latest battle in a fight between the traditional taxi and limousine industry, which gave de Blasio’s 2013 mayoral campaign more than $500,000, and digital ride-sharing companies like Uber and Lyft Inc. The taxi industry also donated more than $150,000 to council members, including more than $27,000 this year to [City Council Speaker] Mark-Viverito. [Transportation committee Chairman Ydanis] Rodriguez received $8,500 in 2013.

It was a mixed, but mostly negative, day for the Canadian preferred share market, with PerpetualDiscounts gaining 5bp, FixedResets down 30bp and DeemedRetractibles off 21bp. The Performance Highlights table continues to illustrate a high level of volatility in the marketplace. Volume was average.

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

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

Here’s TRP:

TRP.PR.E, which resets 2019-10-30 at +128, is bid at 22.30 to be $0.78 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.88 cheap at its bid price of 15.30.

Another good fit today!

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 24.31 to be $0.33 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 22.00 to be $0.22 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-06-30, bid at 18.68 to be $0.83 cheap. BAM.PR.X, resetting at +180bp on 2017-6-30 is bid at 17.20 and appears to be $0.95 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.63, looks $0.79 expensive and resets 2019-3-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 23.00 and is $0.30 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of 0.05%, with one outliers above 1.00%. There is also one junk pair below -1.00%.

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	-0.7243 %	2,057.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.7243 %	3,597.4
Floater	3.57 %	3.62 %	62,440	18.26	3	-0.7243 %	2,187.2
OpRet	0.00 %	0.00 %	0	0.00	0	0.2961 %	2,768.1
SplitShare	4.60 %	4.94 %	67,020	3.19	3	0.2961 %	3,244.1
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2961 %	2,531.1
Perpetual-Premium	5.52 %	3.69 %	74,284	0.28	13	-0.1188 %	2,510.3
Perpetual-Discount	5.33 %	5.31 %	87,558	14.89	22	0.0489 %	2,676.4
FixedReset	4.61 %	3.69 %	221,426	16.29	88	-0.3021 %	2,280.2
Deemed-Retractible	5.03 %	4.97 %	112,282	5.51	34	-0.2071 %	2,613.1
FloatingReset	2.36 %	3.07 %	45,059	6.07	10	-0.1881 %	2,280.1

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.P	FixedReset	-2.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 16.55 Evaluated at bid price : 16.55 Bid-YTW : 3.54 %
TRP.PR.F	FloatingReset	-2.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 3.31 %
ENB.PR.J	FixedReset	-2.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 18.31 Evaluated at bid price : 18.31 Bid-YTW : 4.85 %
IFC.PR.A	FixedReset	-2.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.36 Bid-YTW : 6.91 %
IAG.PR.G	FixedReset	-1.81 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 4.07 %
MFC.PR.L	FixedReset	-1.79 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 4.99 %
ENB.PR.N	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 18.08 Evaluated at bid price : 18.08 Bid-YTW : 4.87 %
BNS.PR.Z	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.92 Bid-YTW : 3.68 %
TRP.PR.G	FixedReset	-1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.78 Evaluated at bid price : 24.06 Bid-YTW : 3.79 %
TRP.PR.E	FixedReset	-1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 21.88 Evaluated at bid price : 22.30 Bid-YTW : 3.68 %
ENB.PF.E	FixedReset	-1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 18.96 Evaluated at bid price : 18.96 Bid-YTW : 4.87 %
MFC.PR.N	FixedReset	-1.45 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.47 Bid-YTW : 4.82 %
BAM.PR.K	Floater	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 13.15 Evaluated at bid price : 13.15 Bid-YTW : 3.62 %
TD.PF.C	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 21.67 Evaluated at bid price : 22.01 Bid-YTW : 3.53 %
ENB.PF.A	FixedReset	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.82 %
BAM.PR.Z	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.81 Evaluated at bid price : 23.51 Bid-YTW : 4.04 %
ENB.PF.C	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.85 %
TRP.PR.D	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 21.31 Evaluated at bid price : 21.60 Bid-YTW : 3.75 %
HSB.PR.C	Deemed-Retractible	-1.22 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 5.15 %
ENB.PR.T	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 17.92 Evaluated at bid price : 17.92 Bid-YTW : 4.77 %
HSB.PR.D	Deemed-Retractible	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 5.23 %
HSE.PR.E	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.72 Evaluated at bid price : 23.83 Bid-YTW : 4.51 %
TRP.PR.C	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 15.27 Evaluated at bid price : 15.27 Bid-YTW : 3.74 %
ENB.PR.Y	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 17.47 Evaluated at bid price : 17.47 Bid-YTW : 4.78 %
MFC.PR.F	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.00 Bid-YTW : 7.07 %
HSE.PR.G	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.67 Evaluated at bid price : 23.75 Bid-YTW : 4.53 %
TRP.PR.H	FloatingReset	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 2.79 %
BNS.PR.Y	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.52 Bid-YTW : 3.50 %
NA.PR.W	FixedReset	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 21.92 Evaluated at bid price : 22.38 Bid-YTW : 3.49 %
CU.PR.G	Perpetual-Discount	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 21.92 Evaluated at bid price : 22.24 Bid-YTW : 5.11 %
HSE.PR.C	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.22 Evaluated at bid price : 22.85 Bid-YTW : 4.36 %
BAM.PR.R	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 18.68 Evaluated at bid price : 18.68 Bid-YTW : 4.19 %
CM.PR.P	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 21.80 Evaluated at bid price : 22.20 Bid-YTW : 3.50 %
IFC.PR.C	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.15 Bid-YTW : 5.04 %
BAM.PR.X	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 3.96 %
FTS.PR.J	Perpetual-Discount	1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 23.84 Evaluated at bid price : 24.25 Bid-YTW : 4.94 %
RY.PR.M	FixedReset	2.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.94 Evaluated at bid price : 24.44 Bid-YTW : 3.43 %
MFC.PR.J	FixedReset	2.62 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.93 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PF.F	Perpetual-Discount	464,790	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 24.29 Evaluated at bid price : 24.66 Bid-YTW : 4.98 %
ENB.PF.A	FixedReset	108,792	Nesbitt crossed 100,000 at 19.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.82 %
ENB.PF.C	FixedReset	80,465	Nesbitt crossed 50,000 at 19.00 and sold 13,000 to RBC at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.85 %
ENB.PR.N	FixedReset	80,040	TD crossed 71,000 at 18.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 18.08 Evaluated at bid price : 18.08 Bid-YTW : 4.87 %
ENB.PR.F	FixedReset	76,866	Secotia crossed three blocks, one of 50,000 and two of 10,000, all at 17.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 17.38 Evaluated at bid price : 17.38 Bid-YTW : 4.87 %
RY.PR.A	Deemed-Retractible	73,225	RBC crossed 50,000 at 25.22. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 4.48 %
There were 30 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
PWF.PR.P	FixedReset	Quote: 16.55 – 17.48 Spot Rate : 0.9300 Average : 0.6637 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 16.55 Evaluated at bid price : 16.55 Bid-YTW : 3.54 %
IAG.PR.G	FixedReset	Quote: 24.40 – 24.96 Spot Rate : 0.5600 Average : 0.3579 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 4.07 %
ELF.PR.G	Perpetual-Discount	Quote: 22.15 – 22.83 Spot Rate : 0.6800 Average : 0.4919 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 21.91 Evaluated at bid price : 22.15 Bid-YTW : 5.39 %
CM.PR.O	FixedReset	Quote: 22.82 – 23.49 Spot Rate : 0.6700 Average : 0.5098 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.23 Evaluated at bid price : 22.82 Bid-YTW : 3.47 %
HSE.PR.E	FixedReset	Quote: 23.83 – 24.45 Spot Rate : 0.6200 Average : 0.4619 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-21 Maturity Price : 22.72 Evaluated at bid price : 23.83 Bid-YTW : 4.51 %
MFC.PR.N	FixedReset	Quote: 22.47 – 23.00 Spot Rate : 0.5300 Average : 0.3888 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.47 Bid-YTW : 4.82 %

Commodities got smacked today:

The Bloomberg Commodities Index is holding losses after dropping Monday to a 13-year low, weaker than after the banking meltdown of 2008 and the euro-zone crisis of 2012. From oil to copper to sugar, little has escaped the rout in the year’s worst-performing asset class.
…
Gold, the most heavily-weighted commodity in the index, is the latest to get hit hard, socked by a stronger dollar and concern about a slowdown in China. During a stretch of about 15 minutes in Asian trading hours Monday, gold prices plunged by the most in two years.
…
Investors pulled about $530 million from exchange-traded funds tracking commodities last week, or almost 1 percent of the funds’ market value. Citigroup Inc. analyst Aakash Doshi estimates that $2.3 billion was pulled from investments linked to commodity indexes in the week ended July 14, bringing total withdrawals since June 30 to $2.8 billion.

So guess what happened:

The Standard & Poor’s/TSX Composite Index fell 217.29 points, or 1.5 per cent, to 14,425.55 in Toronto. The benchmark equity gauge has declined 2.1 per cent in two days, after rallying 3.2 per cent in the previous five sessions.

Gold miners bore the brunt of selling Monday, as the metal sank to as low as $1,080 an ounce, the lowest since 2010. Barrick sank 16 per cent to close at a 25-year low, while Goldcorp tumbled 12 per cent to its worst close since 2005.

An index of gold miners retreated 12 per cent to end at the lowest since April 2001, with Yamana Gold Inc. sliding 12 percent and Kinross Gold Corp. plunging 13 per cent.

Raw-materials producers retreated 6.3 per cent for a fourth day of losses that now total 10 percent.

Aston Hill, which was reported on PrefBlog as being for sale on April 16 and losing a portfolio manager on July 3, has now lost its CFO and CEO:

Aston Hill Financial Inc. has been hit by a new wave of executive departures that will see both its CEO and CFO leave.

Eric Tremblay, who co-founded the asset management firm in 2007, is stepping down as chief executive officer effective Aug. 31 to “pursue personal endeavours” the firm said in a release. He is also resigning as chairman of the board but will remain with the firm as a director.

On Aug. 1 Peter Anderson takes over as interim CEO. Mr. Anderson, who earlier in his career worked at CI Financial Corp. for 15 years as chief investment officer and head of institutional sales until 2012, joined Aston Hill as a board member in November, 2014.

Chief financial officer Larry Titley is leaving the firm effective July 31. He had been with Aston Hill for the past 8 years. Derek Slemko, senior VP of finance will take over as CFO in an interim basis.

Aston Hill is also closing down its Calgary office.

In January 2011, Aston Hill renamed its subsidiary, Catapult Financial Management Inc. to Aston Hill Investments Inc.

Catapult was mentioned on PrefBlog in February 2009 as offering a closed-end actively managed preferred share fund, Preferred Share Investment Trust. This fund now has $68.1-million under management and is still managed by Aston Hill Investments Inc. Performance has been disappointing.

It was a reasonably good day for the Canadian preferred share market, with PerpetualDiscounts up 50bp, FixedResets gaining 4bp and DeemedRetractibles off 3bp. The Performance Highlights table is lengthy, with BAM issues doing well. 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:

TRP.PR.E, which resets 2019-10-30 at +128, is bid at 22.66 to be $0.88 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.82 cheap at its bid price of 15.40.

Another good fit today!

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.40 to be $0.42 rich, while MFC.PR.J, resetting at +261bp on 2018-3-19, is bid at 23.69 to be $0.34 cheap.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-06-30, bid at 18.47 to be $0.97 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.90 and appears to be $0.84 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.53, looks $0.77 expensive and resets 2019-3-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 23.00 and is $0.30 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of 0.12%, with two outliers slightly above 1.00%. There are also two junk pairs below -1.00%.

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	-0.9646 %	2,072.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.9646 %	3,623.6
Floater	3.54 %	3.56 %	63,009	18.38	3	-0.9646 %	2,203.2
OpRet	0.00 %	0.00 %	0	0.00	0	-0.7746 %	2,759.9
SplitShare	4.61 %	5.00 %	67,739	3.19	3	-0.7746 %	3,234.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.7746 %	2,523.7
Perpetual-Premium	5.51 %	2.03 %	74,616	0.08	13	-0.0396 %	2,513.3
Perpetual-Discount	5.36 %	5.33 %	87,449	14.89	21	0.4981 %	2,675.0
FixedReset	4.60 %	3.68 %	211,101	16.20	88	0.0448 %	2,287.1
Deemed-Retractible	5.02 %	4.64 %	112,934	0.82	34	-0.0299 %	2,618.5
FloatingReset	2.35 %	3.02 %	46,780	6.07	10	0.2925 %	2,284.4

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.K	Floater	-2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 13.34 Evaluated at bid price : 13.34 Bid-YTW : 3.56 %
ENB.PR.B	FixedReset	-2.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 16.66 Evaluated at bid price : 16.66 Bid-YTW : 4.87 %
BAM.PF.F	FixedReset	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.36 Evaluated at bid price : 23.05 Bid-YTW : 4.06 %
PVS.PR.B	SplitShare	-1.59 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 4.85 %
TRP.PR.C	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 15.44 Evaluated at bid price : 15.44 Bid-YTW : 3.70 %
RY.PR.Z	FixedReset	-1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.37 Evaluated at bid price : 23.02 Bid-YTW : 3.37 %
MFC.PR.J	FixedReset	-1.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.69 Bid-YTW : 4.25 %
CIU.PR.C	FixedReset	-1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 16.05 Evaluated at bid price : 16.05 Bid-YTW : 3.36 %
BAM.PR.R	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 18.47 Evaluated at bid price : 18.47 Bid-YTW : 4.24 %
MFC.PR.G	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 3.84 %
CM.PR.P	FixedReset	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.62 Evaluated at bid price : 21.95 Bid-YTW : 3.54 %
IGM.PR.B	Perpetual-Premium	-1.16 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.60 Bid-YTW : 5.18 %
BMO.PR.S	FixedReset	-1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.39 Evaluated at bid price : 23.07 Bid-YTW : 3.47 %
ENB.PR.D	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 16.95 Evaluated at bid price : 16.95 Bid-YTW : 4.80 %
ENB.PR.Y	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 17.66 Evaluated at bid price : 17.66 Bid-YTW : 4.72 %
BAM.PR.T	FixedReset	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 4.09 %
BAM.PF.A	FixedReset	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.39 Evaluated at bid price : 22.95 Bid-YTW : 4.07 %
BAM.PR.X	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 16.99 Evaluated at bid price : 16.99 Bid-YTW : 4.01 %
BAM.PF.G	FixedReset	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.50 Evaluated at bid price : 23.40 Bid-YTW : 4.00 %
TRP.PR.D	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.60 Evaluated at bid price : 21.87 Bid-YTW : 3.70 %
HSE.PR.C	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.07 Evaluated at bid price : 22.61 Bid-YTW : 4.42 %
BAM.PF.C	Perpetual-Discount	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.77 %
BAM.PF.E	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.58 Evaluated at bid price : 21.90 Bid-YTW : 4.04 %
MFC.PR.N	FixedReset	1.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.80 Bid-YTW : 4.63 %
IFC.PR.C	FixedReset	1.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.88 Bid-YTW : 5.20 %
BAM.PR.N	Perpetual-Discount	1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 20.96 Evaluated at bid price : 20.96 Bid-YTW : 5.73 %
BAM.PF.D	Perpetual-Discount	1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.31 Evaluated at bid price : 21.61 Bid-YTW : 5.71 %
BAM.PR.M	Perpetual-Discount	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 20.98 Evaluated at bid price : 20.98 Bid-YTW : 5.72 %
VNR.PR.A	FixedReset	1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.56 Evaluated at bid price : 21.95 Bid-YTW : 4.10 %
ENB.PR.T	FixedReset	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 18.14 Evaluated at bid price : 18.14 Bid-YTW : 4.71 %
HSE.PR.A	FixedReset	2.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 16.15 Evaluated at bid price : 16.15 Bid-YTW : 3.93 %
TRP.PR.E	FixedReset	3.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.12 Evaluated at bid price : 22.66 Bid-YTW : 3.60 %
BAM.PR.Z	FixedReset	3.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.97 Evaluated at bid price : 23.81 Bid-YTW : 3.98 %
TRP.PR.H	FloatingReset	4.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 14.85 Evaluated at bid price : 14.85 Bid-YTW : 2.81 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.G	FixedReset	136,035	Desjardins crossed 82,000 at 24.45; National sold 10,000 to anonymous and 12,400 to TD at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.94 Evaluated at bid price : 24.45 Bid-YTW : 3.71 %
RY.PR.D	Deemed-Retractible	92,380	RBC crossed blocks of 50,000 and 40,000, both at 25.29. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.27 Bid-YTW : 3.85 %
TD.PF.C	FixedReset	43,908	TD crossed 25,700 at 22.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.87 Evaluated at bid price : 22.30 Bid-YTW : 3.47 %
TD.PF.E	FixedReset	23,100	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 23.11 Evaluated at bid price : 24.90 Bid-YTW : 3.49 %
ENB.PR.A	Perpetual-Discount	20,120	Nesbitt crossed 17,700 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 24.68 Evaluated at bid price : 24.95 Bid-YTW : 5.59 %
PVS.PR.D	SplitShare	18,537	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 5.00 %
There were 23 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.H	FloatingReset	Quote: 14.85 – 25.00 Spot Rate : 10.1500 Average : 5.4998 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 14.85 Evaluated at bid price : 14.85 Bid-YTW : 2.81 %
BAM.PF.F	FixedReset	Quote: 23.05 – 23.75 Spot Rate : 0.7000 Average : 0.4806 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.36 Evaluated at bid price : 23.05 Bid-YTW : 4.06 %
BAM.PR.C	Floater	Quote: 13.10 – 13.77 Spot Rate : 0.6700 Average : 0.4863 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 13.10 Evaluated at bid price : 13.10 Bid-YTW : 3.63 %
CM.PR.P	FixedReset	Quote: 21.95 – 22.50 Spot Rate : 0.5500 Average : 0.3910 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.62 Evaluated at bid price : 21.95 Bid-YTW : 3.54 %
TD.PF.B	FixedReset	Quote: 22.40 – 22.99 Spot Rate : 0.5900 Average : 0.4515 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 21.96 Evaluated at bid price : 22.40 Bid-YTW : 3.46 %
RY.PR.M	FixedReset	Quote: 23.88 – 24.50 Spot Rate : 0.6200 Average : 0.4927 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-20 Maturity Price : 22.70 Evaluated at bid price : 23.88 Bid-YTW : 3.55 %

The loonie got smacked today:

Canada’s currency weakened past C$1.30 per U.S. dollar for the first time since 2009 amid speculation the nation’s central bank will cut interest rates again to fight the economic damage from lower oil prices.

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell to as weak as C$1.3008. It traded at C$1.2965 at 9:26 a.m. in Toronto, and is poised to decline for a fourth week.
…
Monetary easing in Canada contrasts with the U.S. Federal Reserve, which is contemplating its first interest-rate increase in almost a decade.

“For the Canadian dollar, the policy-divergence theme got a strong boost with the Bank of Canada cutting rates, while leaving the door open to more,” Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG in New York, said by e-mail. Declining crude prices may put further pressure on the currency, he said.

Canada’s dollar has fallen 3.3 percent in the last three months, making it the second-worst performer among 10 developed-nation peers, according to data compiled by Bloomberg.

Canadian headline inflation is not an impediment to loose money:

Canada’s annual inflation rate quickened to 1 percent in June as food and shelter costs increased and energy provided less of a drag, providing no impetus for the central bank to change course on loose monetary policy.

Consumer prices accelerated from a 0.9 percent pace in May, Statistics Canada said Friday in Ottawa, as meat, dairy and bakery products and fresh fruit grew dearer.

Bank of Canada policy makers cut interest rates this week, saying a weak economy threatened to keep inflation from returning to its 2 percent target. The currency depreciated to the lowest since 2009 on speculation price gains aren’t enough to eliminate the chance of another central-bank rate cut.
…
The core rate, which excludes eight volatile products such as energy, accelerated to 2.3 percent, close to the March reading of 2.4 percent that was the fastest since 2008.

Canada’s dollar dropped to C$1.3008 per U.S. dollar today. Two-year bond yields rose 1 basis point to 0.43 percent and 30-year securities fell to 2.25 percent from 2.27 percent.

The plunge in crude oil prices has driven down inflation and also triggered four straight monthly declines in output. At the same time, core prices have remained elevated on higher costs for meat and telecommunications products.

Economists surveyed by Bloomberg forecast Friday’s report would show overall inflation at 1 percent and the core rate remaining at 2.2 percent.

Energy costs fell 9 percent in June from 12 months earlier, less than May’s 11.8 percent rate of decline. Excluding energy the inflation rate slowed to 2.1 percent from 2.2 percent.

While the reported core inflation rate is above 2.0%, the July Monetary Policy Report states:

In contrast, core inflation as measured by CPIX has been slightly above 2 per cent, boosted by the pass-through effects of the past depreciation of the Canadian dollar and some sector-specific factors, which have offset the disinflationary force from slack in the economy (Chart 15). Although the impact of pass-through is difficult to gauge precisely, the Bank estimates that it is currently raising CPIX inflation by about 0.4 to 0.6 percentage points (Box 1).2 The underlying trend in inflation is assessed to be 1.5 to 1.7 per cent, a bit lower than in the April Report, consistent with material and increased slack in the Canadian economy.

In an interesting twist, Freddie Mac is selling structured notes:

Freddie Mac is expanding its risk-sharing efforts meant to protect taxpayers and potentially prepare the $9.4 trillion U.S. home-loan market for its future.

In a planned $300 million offering of mortgage-backed securities being managed by Credit Suisse Group AG, the government-backed company will sell $22.5 million of junior-ranking bonds without its guarantees, a person with knowledge of the deal said.
…
The bonds reflect directions that Freddie Mac and rival Fannie Mae have received from their overseer, the Federal Housing Finance Agency, to experiment with different ways of pushing their losses from homeowner defaults to bond buyers and insurers. The FHFA has also pushed them to increase the amount of the risk-sharing.

It will be interesting to see what the ultimate effect of all this is … how much will investors be willing to pay for the company guarantee when they’ve already got the first-loss protection afforded by the Junior Notes?

BCIMC has posted some good returns:

A tactical decision to shift investments into global stock markets paid off last year for British Columbia Investment Management Corp., which earned a 14.2-per-cent return for the year and boosted its total assets to $124-billion.

BCIMC reported it moved more assets into global equities during the fiscal year ended March 31, 2015, while reducing its weighting in fixed income holdings and mortgages, responding to volatility in Canadian stock markets as oil prices declined.

The fund ended the fiscal year with 49.5 per cent of its assets invested in public stock markets, up from 47.6 per cent a year earlier. BCIMC had 21.5 per cent of its holdings in fixed-income securities such as bonds, down slightly from 22 per cent last year, while 14.6 per cent of the portfolio is in real estate, a decline from 17.4 per cent at the end of fiscal 2014.

The fund said its Canadian public equity holdings earned a 7.5-per-cent return last year, while global public equities earned a far higher 23 per cent and emerging markets equities posted 21.4-per-cent gains, illustrating the value of shifting out of Canada’s volatile stock market.
…
BCIMC said investing in passive benchmarks last year would have earned a 12.6-per-cent return, so its active investment strategy added $1.4-billion in additional returns. Over the past 10 years, BCIMC earned an average 8.1-per-cent annualized return, exceeding its benchmark of 7.3 per cent.

But, we all ask, what are the cool kids doing now?:

Options on indexes made up of credit default swaps (CDS) have been a sleeper hit over the past few years.

While trading indexes comprising CDS tied to a basket of corporate names can give investors a cheap and easy way to trade corporate credit at a time when the cash market is said to be illiquid, options written on those same indexes can do one better. The options give investors the right to buy or sell CDS indexes, such as Markit’s CDX or iTraxx series.
…
In 2005, Citigroup estimated that about $2 billion worth of credit index options were trading per month, or roughly $24 billion over the course of the year. Last December, the same Citi analysts figured that about $1.4 trillion of the instruments had exchanged hands in all of 2014, compared with $573 billion worth in 2013. If correct, that would be more than a 5,000 percent jump in activity over the course of a decade.
…
The risk is that the popularity of options on CDS indexes, combined with a big move in one of the indexes, could spark a flurry of hedging activity by the big dealer-banks as they struggle to get their positions back to neutral. That in turn could end up amplifying the move in the underlying index.

Here’s Barclays:

The relative growth of option volumes will likely make it increasingly more common to have option hedging (by dealers) exerting a meaningful influence on index dynamics—ie, we can expect to see the “option tail wagging the index dog” … This is particularly relevant because anecdotal evidence suggests that the majority of trades executed by investors are without delta as pure directional positions, and if anything, this proportion has been increasing over time. As such, in response to spread moves, the majority of delta-hedging will take place on the dealer side, with limited “natural” offset by investors delta-hedging in the opposite direction. Should the trend of rising relative option volumes continue, we are likely to see more cases of “pin risk” (delta-hedging of options bought by dealers making it more likely that spreads will stay around the strike) or “negative gamma” (delta-hedging of options sold by dealers, leading to amplifications of spread moves wider and tighter).

PDV.PR.A was confirmed at Pfd-3(high) by DBRS:

On July 18, 2014, DBRS upgraded the rating of the Preferred Shares to Pfd-3 (high) mainly based on a significant increase in downside protection to holders of the Preferred Shares. Over the last few months, the NAV of the Company has been declining as a result of high levels of uncertainty in the markets, resulting in a reduction in downside protection to 43% average compared with 45% a year ago. The dividend coverage ratio stands at approximately 0.7 times. Current performance metrics are still commensurate with the rating assigned, and as a result, the rating of the Preferred Shares has been confirmed at Pfd-3 (high).

After all the horror of the past six weeks-odd (not to mention the past six damn months!) the preferred share market has found a better place.

If this keeps up for the rest of the month, we might even break-even year-to-date!

It was a superb day for the Canadian preferred share market, with PerpetualDiscounts up 51bp, FixedResets winning an incredible 138bp and DeemedRetractibles gaining 45bp. The Performance Highlights table is … well, the Performance Highlights table is much as you’d expect, OK? Volume was very high.

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:

TRP.PR.E, which resets 2019-10-30 at +128, is bid at 22.00 to be $0.37 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.59 cheap at its bid price of 15.70.

An extremely good fit today!

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.30 to be $0.31 rich, while MFC.PR.N, resetting at +230bp on 2020-3-19, is bid at 22.48 to be $0.24 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 20.76 to be $0.68 cheap. BAM.PR.X, resetting at +180bp on 2017-6-30 is bid at 16.79 and appears to be $0.68 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.60, looks $0.80 expensive and resets 2019-3-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 22.87 and is $0.32 cheap.

There is only one outlier; one of the junk pairs is below -1.00%.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of 0.05% (which seems a little extreme!).

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	1.7363 %	2,092.6
FixedFloater	0.00 %	0.00 %	0	0.00	0	1.7363 %	3,658.9
Floater	3.51 %	3.49 %	61,881	18.55	3	1.7363 %	2,224.6
OpRet	0.00 %	0.00 %	0	0.00	0	0.1873 %	2,781.5
SplitShare	4.57 %	4.90 %	68,000	3.20	3	0.1873 %	3,259.7
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.1873 %	2,543.4
Perpetual-Premium	5.51 %	2.95 %	74,960	0.29	13	0.0487 %	2,514.3
Perpetual-Discount	5.38 %	5.35 %	87,275	14.86	21	0.5088 %	2,661.8
FixedReset	4.60 %	3.78 %	218,381	16.03	88	1.3821 %	2,286.1
Deemed-Retractible	5.02 %	4.81 %	112,481	3.13	34	0.4508 %	2,619.3
FloatingReset	2.53 %	3.18 %	47,513	6.05	10	0.6075 %	2,277.8

Performance Highlights
Issue	Index	Change	Notes
RY.PR.J	FixedReset	-1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.80 Evaluated at bid price : 24.02 Bid-YTW : 3.65 %
CU.PR.D	Perpetual-Discount	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.91 Evaluated at bid price : 23.25 Bid-YTW : 5.33 %
BAM.PR.C	Floater	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 13.13 Evaluated at bid price : 13.13 Bid-YTW : 3.62 %
MFC.PR.H	FixedReset	1.06 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.84 Bid-YTW : 2.75 %
CU.PR.F	Perpetual-Discount	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.89 Evaluated at bid price : 22.19 Bid-YTW : 5.12 %
GWO.PR.H	Deemed-Retractible	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.78 Bid-YTW : 5.58 %
PWF.PR.P	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 3.58 %
HSE.PR.A	FixedReset	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 15.70 Evaluated at bid price : 15.70 Bid-YTW : 4.20 %
TD.PF.E	FixedReset	1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 23.17 Evaluated at bid price : 25.09 Bid-YTW : 3.53 %
BAM.PF.G	FixedReset	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.35 Evaluated at bid price : 23.12 Bid-YTW : 4.14 %
ENB.PF.G	FixedReset	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 19.43 Evaluated at bid price : 19.43 Bid-YTW : 4.88 %
HSB.PR.D	Deemed-Retractible	1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.07 %
TRP.PR.A	FixedReset	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 19.09 Evaluated at bid price : 19.09 Bid-YTW : 3.75 %
SLF.PR.C	Deemed-Retractible	1.23 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.30 Bid-YTW : 6.01 %
GWO.PR.N	FixedReset	1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.19 Bid-YTW : 7.49 %
GWO.PR.Q	Deemed-Retractible	1.26 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.22 %
SLF.PR.B	Deemed-Retractible	1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.54 Bid-YTW : 5.66 %
BMO.PR.T	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.16 Evaluated at bid price : 22.71 Bid-YTW : 3.54 %
CM.PR.Q	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 23.00 Evaluated at bid price : 24.55 Bid-YTW : 3.55 %
TD.PF.B	FixedReset	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.89 Evaluated at bid price : 22.30 Bid-YTW : 3.57 %
BMO.PR.W	FixedReset	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.90 Evaluated at bid price : 22.33 Bid-YTW : 3.58 %
SLF.PR.A	Deemed-Retractible	1.60 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 5.60 %
RY.PR.H	FixedReset	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.10 Evaluated at bid price : 22.61 Bid-YTW : 3.57 %
BAM.PF.A	FixedReset	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.22 Evaluated at bid price : 22.69 Bid-YTW : 4.22 %
HSE.PR.C	FixedReset	1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.89 Evaluated at bid price : 22.33 Bid-YTW : 4.57 %
BMO.PR.Q	FixedReset	1.74 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.40 Bid-YTW : 3.49 %
HSB.PR.C	Deemed-Retractible	1.76 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-16 Maturity Price : 25.00 Evaluated at bid price : 25.44 Bid-YTW : -12.85 %
TD.PF.C	FixedReset	1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.93 Evaluated at bid price : 22.39 Bid-YTW : 3.54 %
BMO.PR.S	FixedReset	1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.53 Evaluated at bid price : 23.32 Bid-YTW : 3.51 %
BAM.PR.Z	FixedReset	1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.57 Evaluated at bid price : 23.10 Bid-YTW : 4.22 %
BAM.PF.E	FixedReset	1.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.32 Evaluated at bid price : 21.60 Bid-YTW : 4.19 %
ENB.PF.C	FixedReset	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 19.21 Evaluated at bid price : 19.21 Bid-YTW : 4.86 %
PWF.PR.K	Perpetual-Discount	1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 23.68 Evaluated at bid price : 23.95 Bid-YTW : 5.17 %
BIP.PR.A	FixedReset	2.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.85 Evaluated at bid price : 22.30 Bid-YTW : 4.94 %
BNS.PR.D	FloatingReset	2.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.68 Bid-YTW : 3.77 %
ENB.PR.F	FixedReset	2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 17.56 Evaluated at bid price : 17.56 Bid-YTW : 4.94 %
FTS.PR.K	FixedReset	2.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.31 Evaluated at bid price : 21.60 Bid-YTW : 3.55 %
MFC.PR.J	FixedReset	2.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.02 Bid-YTW : 4.15 %
BAM.PR.N	Perpetual-Discount	2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 20.63 Evaluated at bid price : 20.63 Bid-YTW : 5.82 %
BAM.PR.M	Perpetual-Discount	2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 20.61 Evaluated at bid price : 20.61 Bid-YTW : 5.82 %
BAM.PF.C	Perpetual-Discount	2.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 20.96 Evaluated at bid price : 20.96 Bid-YTW : 5.85 %
ENB.PF.E	FixedReset	2.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 4.88 %
ENB.PR.J	FixedReset	2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 18.71 Evaluated at bid price : 18.71 Bid-YTW : 4.85 %
BNS.PR.Z	FixedReset	2.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.39 Bid-YTW : 3.43 %
ENB.PF.A	FixedReset	2.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 19.10 Evaluated at bid price : 19.10 Bid-YTW : 4.90 %
NA.PR.W	FixedReset	2.54 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.80 Evaluated at bid price : 22.20 Bid-YTW : 3.61 %
MFC.PR.C	Deemed-Retractible	2.61 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.76 Bid-YTW : 5.81 %
BAM.PF.F	FixedReset	2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.57 Evaluated at bid price : 23.45 Bid-YTW : 4.06 %
ENB.PR.H	FixedReset	2.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 4.84 %
RY.PR.Z	FixedReset	2.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.56 Evaluated at bid price : 23.37 Bid-YTW : 3.39 %
ENB.PR.P	FixedReset	2.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 4.90 %
BAM.PR.R	FixedReset	2.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 4.32 %
BAM.PF.B	FixedReset	3.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 20.76 Evaluated at bid price : 20.76 Bid-YTW : 4.36 %
ENB.PR.Y	FixedReset	3.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 17.84 Evaluated at bid price : 17.84 Bid-YTW : 4.78 %
BAM.PF.D	Perpetual-Discount	3.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.82 %
BAM.PR.T	FixedReset	3.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 19.24 Evaluated at bid price : 19.24 Bid-YTW : 4.25 %
BAM.PR.X	FixedReset	3.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 16.79 Evaluated at bid price : 16.79 Bid-YTW : 4.20 %
TRP.PR.C	FixedReset	3.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 15.68 Evaluated at bid price : 15.68 Bid-YTW : 3.80 %
CIU.PR.C	FixedReset	3.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 3.46 %
BAM.PR.K	Floater	3.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 13.70 Evaluated at bid price : 13.70 Bid-YTW : 3.47 %
ENB.PR.N	FixedReset	4.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 18.39 Evaluated at bid price : 18.39 Bid-YTW : 4.90 %
ENB.PR.D	FixedReset	4.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 17.13 Evaluated at bid price : 17.13 Bid-YTW : 4.88 %
MFC.PR.M	FixedReset	4.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.80 Bid-YTW : 4.75 %
IFC.PR.A	FixedReset	4.44 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.81 Bid-YTW : 6.67 %
MFC.PR.K	FixedReset	4.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.11 Bid-YTW : 4.89 %
ENB.PR.B	FixedReset	4.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 17.01 Evaluated at bid price : 17.01 Bid-YTW : 4.90 %
MFC.PR.N	FixedReset	4.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.48 Bid-YTW : 4.86 %
TRP.PR.F	FloatingReset	5.88 %	Reversing a good-sized chunk of yesterday‘s nonsense. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 3.41 %
MFC.PR.L	FixedReset	6.70 %	Nothing wrong with this! Each of the last 25 trades were above the closing bid and the high for the day was 22.61. The VWAP on 7,504 shares was 22.18. After making the Performance Highlights Table (and not in a good way) on each of July 7, July 8, July 9 and July 10, it was about time the issue caught a break. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.30 Bid-YTW : 4.87 %

Volume Highlights
Issue	Index	Shares Traded	Notes
NA.PR.M	Deemed-Retractible	220,933	Scotia crossed 220,000 at 25.52. Nice ticket! YTW SCENARIO Maturity Type : Call Maturity Date : 2015-08-16 Maturity Price : 25.50 Evaluated at bid price : 25.50 Bid-YTW : 0.20 %
BNS.PR.Y	FixedReset	150,667	Scotia crossed 130,000 at 22.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.27 Bid-YTW : 3.70 %
SLF.PR.I	FixedReset	70,939	Nesbitt crossed 43,000 at 23.80. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 4.36 %
RY.PR.F	Deemed-Retractible	58,300	TD crossed 55,000 at 25.41. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 3.26 %
HSE.PR.G	FixedReset	43,617	Nesbitt crossed 24,700 at 23.99. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.76 Evaluated at bid price : 23.95 Bid-YTW : 4.56 %
BAM.PF.E	FixedReset	38,016	RBC crossed 35,000 at 21.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.32 Evaluated at bid price : 21.60 Bid-YTW : 4.19 %
There were 53 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TRP.PR.E	FixedReset	Quote: 22.00 – 23.00 Spot Rate : 1.0000 Average : 0.6436 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.67 Evaluated at bid price : 22.00 Bid-YTW : 3.83 %
PWF.PR.L	Perpetual-Discount	Quote: 24.22 – 24.98 Spot Rate : 0.7600 Average : 0.4906 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 23.95 Evaluated at bid price : 24.22 Bid-YTW : 5.27 %
RY.PR.J	FixedReset	Quote: 24.02 – 24.64 Spot Rate : 0.6200 Average : 0.3973 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.80 Evaluated at bid price : 24.02 Bid-YTW : 3.65 %
CU.PR.D	Perpetual-Discount	Quote: 23.25 – 23.89 Spot Rate : 0.6400 Average : 0.4494 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 22.91 Evaluated at bid price : 23.25 Bid-YTW : 5.33 %
GWO.PR.S	Deemed-Retractible	Quote: 25.65 – 26.18 Spot Rate : 0.5300 Average : 0.3627 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 4.97 %
TRP.PR.D	FixedReset	Quote: 21.60 – 22.10 Spot Rate : 0.5000 Average : 0.3356 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-17 Maturity Price : 21.31 Evaluated at bid price : 21.60 Bid-YTW : 3.84 %

The treasury curve flattened today:

Enough distractions! Treasury investors are turning their attention back to the business of when U.S. interest rates go up.

The yield curve has flattened the most in four months in a week when Greece signed a deal to secure more bailout aid and a bear-market rout in Chinese stocks stabilized, allaying concern that turmoil abroad would delay the Federal Reserve’s first rate increase since 2006. Fed Chair Janet Yellen made it plain over two days of testimony before Congress this week that she believes the central bank can raise interest rates in 2015.
…
The difference between yields on two- and 30-year government debt has narrowed 9.4 percentage points this week to 246 basis points. It reached 244 basis points Thursday, the least since July 9.

Yellen’s testimony preached restraint:

Speaking Thursday before the Senate Banking Committee, Yellen said that raising rates prematurely could derail the recovery. Waiting too long, on the other hand, might force the Fed to tighten at a faster pace to keep the economy from overheating.

“My own preference would be to be able proceed to tighten in a prudent and gradual manner,” she said.

Yellen’s comments this week were consistent with her often-stated advice to investors: the date of liftoff matters less than the subsequent pace of increases. And she has assured them that those increases would be measured.

The concern that tightening prematurely could throw the recovery off track is one reason why the federal funds rate has been kept near zero as long it has, Yellen said.

“We also want to be careful not to tighten too late because, if we do that, arguably we could overshoot both of our goals and be faced with this situation where we would then need to tighten monetary policy in a very sharp way that could be disruptive,” she told lawmakers.
…
Yellen offered other reasons for an upbeat assessment of the economy in her testimony Thursday. She said the job market is returning to a “more normal state,” even though the 5.3 percent unemployment rate understates the degree of slack. And she expects to see further gains in wages.

Fed officials say they will let the latest data on employment and inflation guide their decision on when to raise rates. To drive the point home, the San Francisco Fed has printed T-shirts with the message: “Monetary Policy — It’s Data Dependent.”

Only in America would the central bank print t-shirts!

By way of context, here’s the historical 2-year and 30-year Treasury yields from FRED:

and the spread between the two:

Note that there’s a gap in the 30-year series during the period in which they didn’t exist. That was the peace dividend.

And there’s more squabbling over the ORPP:

Ottawa is putting Queen’s Park on notice that it will not help set up a provincial pension plan.

Finance Minister Joe Oliver wrote to his provincial counterpart on Thursday afternoon saying that Ottawa would not help collect contributions or make the legislative changes the province would likely require.

“The Ontario Government’s proposed [plan] would take money from workers and their families, kill jobs, and damage the economy,” Mr. Oliver wrote in the letter, which was obtained by The Globe and Mail.

“Furthermore, it would impose a one-size-fits-all scheme on Ontarians and their families, without consideration for their age, family situation or financial circumstance.”
…
According to Mr. Oliver’s letter, Ontario officials have approached federal civil servants in recent months to discuss the possibility of having the federal government involved in the administration of the new provincial plan.

“We will not assist the Ontario government in the implementation of the ORPP,” Mr. Oliver wrote to Ontario Finance Minister Charles Sousa.

“This includes any legislative changes to allow the ORPP to be treated like the Canada Pension Plan for tax purposes, or to integrate the ORPP within the [registered retirement savings plan] contribution limits. Administration of the ORPP will be the sole responsibility of the Ontario Government, including the collection of contributions and any required information. We will be pleased to discuss with the Ontario Government the potential for voluntary contributions to the CPP, which we believe would better serve the interests of Ontarians and all Canadians.”

DBRS kept the ratings of the Big-6 banks’ senior debt on Trend-Negative today, confirming their conclusion reported in May:

• BMO
• BNS
• CM
• NA
• RY
• TD

Preferred share ratings and trends are unaffected.

It was a different sort of day for preferreds than it has been lately. In fact…

It was a superb day for the Canadian preferred share market, with PerpetualDiscounts gaining 43bp, FixedResets up 86bp and DeemedRetractibles off 7bp. The Performance Highlights table was fairly lengthy, but shorter than I expected given the overall index numbers. Volume was very high.

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:

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 14.65 to be $0.55 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.77 cheap at its bid price of 15.20.

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 17.10 to be $0.82 rich, while MFC.PR.N, resetting at +230bp on 2020-3-19, is bid at 21.43 to be $0.57 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 20.15 to be $0.77 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.20 and appears to be $0.79 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.14, looks $0.44 expensive and resets 2019-3-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 22.85 and is $0.25 cheap.

There is only one outlier; one of the junk pairs is below -1.00%.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of 0.01% (which seems a little extreme!).

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	-0.0503 %	2,056.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.0503 %	3,596.5
Floater	3.57 %	3.61 %	61,454	18.29	3	-0.0503 %	2,186.7
OpRet	0.00 %	0.00 %	0	0.00	0	0.4975 %	2,776.3
SplitShare	4.58 %	4.83 %	68,287	3.20	3	0.4975 %	3,253.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.4975 %	2,538.6
Perpetual-Premium	5.51 %	2.77 %	74,115	0.29	13	0.0640 %	2,513.0
Perpetual-Discount	5.41 %	5.38 %	88,640	14.87	21	0.4303 %	2,648.3
FixedReset	4.66 %	3.84 %	218,979	16.05	88	0.8061 %	2,254.9
Deemed-Retractible	5.05 %	4.98 %	110,268	3.32	34	-0.0661 %	2,607.5
FloatingReset	2.54 %	3.12 %	49,205	6.06	10	-0.2981 %	2,264.0

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.F	FloatingReset	-7.10 %	Technically this is real, since the low for the day was, in fact, 17.00. On the other hand, that was one trade, for 100 shares, at 3:54pm, when the trade immediately before it was done at 17.91 which was the low for the day for two minutes before being superseded. At one point, I know, there was no bid for the issue, which tells me first that the market maker is incompetent and second that nobody in all of Canada is running an algorithm to make a market arbitraging this issue against its Strong Pair TRP.PR.A. The day’s volume was 3,900 shares in a range of 17.00-18.41, and the VWAP was 18.272821. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.61 %
CIU.PR.C	FixedReset	-3.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 15.70 Evaluated at bid price : 15.70 Bid-YTW : 3.59 %
BNS.PR.D	FloatingReset	-1.80 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.24 Bid-YTW : 4.11 %
VNR.PR.A	FixedReset	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.46 Evaluated at bid price : 21.46 Bid-YTW : 4.33 %
HSB.PR.C	Deemed-Retractible	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.17 %
SLF.PR.H	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.08 Bid-YTW : 5.86 %
CU.PR.G	Perpetual-Discount	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.87 Evaluated at bid price : 22.17 Bid-YTW : 5.13 %
BNS.PR.B	FloatingReset	1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.67 Bid-YTW : 3.04 %
BAM.PF.C	Perpetual-Discount	1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 5.98 %
BAM.PR.K	Floater	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 13.18 Evaluated at bid price : 13.18 Bid-YTW : 3.61 %
RY.PR.M	FixedReset	1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.90 Evaluated at bid price : 24.35 Bid-YTW : 3.53 %
BAM.PR.R	FixedReset	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 18.16 Evaluated at bid price : 18.16 Bid-YTW : 4.45 %
BAM.PF.B	FixedReset	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 20.15 Evaluated at bid price : 20.15 Bid-YTW : 4.49 %
CM.PR.O	FixedReset	1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.02 Evaluated at bid price : 22.49 Bid-YTW : 3.62 %
BAM.PF.A	FixedReset	1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.97 Evaluated at bid price : 22.32 Bid-YTW : 4.30 %
BAM.PR.M	Perpetual-Discount	1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 20.16 Evaluated at bid price : 20.16 Bid-YTW : 5.95 %
TD.PF.C	FixedReset	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.66 Evaluated at bid price : 22.00 Bid-YTW : 3.62 %
BAM.PR.N	Perpetual-Discount	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 20.18 Evaluated at bid price : 20.18 Bid-YTW : 5.95 %
BAM.PR.X	FixedReset	1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 4.34 %
BMO.PR.W	FixedReset	1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.67 Evaluated at bid price : 22.00 Bid-YTW : 3.64 %
BMO.PR.T	FixedReset	1.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.97 Evaluated at bid price : 22.42 Bid-YTW : 3.59 %
HSE.PR.G	FixedReset	1.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.67 Evaluated at bid price : 23.75 Bid-YTW : 4.60 %
TD.PF.B	FixedReset	1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.67 Evaluated at bid price : 21.98 Bid-YTW : 3.64 %
ENB.PR.N	FixedReset	1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 17.68 Evaluated at bid price : 17.68 Bid-YTW : 5.10 %
SLF.PR.J	FloatingReset	1.91 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.00 Bid-YTW : 7.24 %
BAM.PF.G	FixedReset	1.96 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.19 Evaluated at bid price : 22.85 Bid-YTW : 4.20 %
BMO.PR.S	FixedReset	2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.30 Evaluated at bid price : 22.91 Bid-YTW : 3.59 %
MFC.PR.J	FixedReset	2.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 4.42 %
RY.PR.H	FixedReset	2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.86 Evaluated at bid price : 22.25 Bid-YTW : 3.64 %
ENB.PR.J	FixedReset	2.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 18.26 Evaluated at bid price : 18.26 Bid-YTW : 4.97 %
CM.PR.P	FixedReset	2.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.67 Evaluated at bid price : 22.02 Bid-YTW : 3.62 %
RY.PR.Z	FixedReset	2.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.20 Evaluated at bid price : 22.74 Bid-YTW : 3.51 %
BAM.PF.F	FixedReset	2.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.24 Evaluated at bid price : 22.85 Bid-YTW : 4.19 %
MFC.PR.K	FixedReset	2.57 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.12 Bid-YTW : 5.48 %
NA.PR.W	FixedReset	2.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.35 Evaluated at bid price : 21.65 Bid-YTW : 3.71 %
ENB.PF.G	FixedReset	2.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.94 %
NA.PR.S	FixedReset	2.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.66 Evaluated at bid price : 23.56 Bid-YTW : 3.49 %
GWO.PR.N	FixedReset	2.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.99 Bid-YTW : 7.64 %
ENB.PR.T	FixedReset	2.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 4.95 %
TD.PF.A	FixedReset	3.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.85 Evaluated at bid price : 22.25 Bid-YTW : 3.59 %
BAM.PR.Z	FixedReset	3.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.30 Evaluated at bid price : 22.69 Bid-YTW : 4.31 %
ENB.PR.Y	FixedReset	3.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 4.94 %
HSE.PR.E	FixedReset	4.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.77 Evaluated at bid price : 23.95 Bid-YTW : 4.56 %

Volume Highlights
Issue	Index	Shares Traded	Notes
PWF.PR.T	FixedReset	64,136	Desjardins crossed 15,000 at 24.60; TD crossed 44,800 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 23.12 Evaluated at bid price : 24.50 Bid-YTW : 3.30 %
BNS.PR.M	Deemed-Retractible	55,162	TD crossed 52,000 at 25.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-27 Maturity Price : 25.00 Evaluated at bid price : 25.17 Bid-YTW : 3.65 %
TD.PF.C	FixedReset	47,952	TD crossed 20,000 at 21.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.66 Evaluated at bid price : 22.00 Bid-YTW : 3.62 %
ENB.PR.B	FixedReset	40,209	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 16.22 Evaluated at bid price : 16.22 Bid-YTW : 5.14 %
RY.PR.I	FixedReset	34,895	Scotia crossed 15,000 at 25.17. Nesbitt crossed 15,000 at 25.18. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.18 Bid-YTW : 3.15 %
NA.PR.S	FixedReset	34,867	Desjardins crossed 25,000 at 23.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 22.66 Evaluated at bid price : 23.56 Bid-YTW : 3.49 %
There were 53 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ENB.PR.P	FixedReset	Quote: 17.31 – 18.19 Spot Rate : 0.8800 Average : 0.5277 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 5.05 %
TRP.PR.F	FloatingReset	Quote: 17.00 – 17.83 Spot Rate : 0.8300 Average : 0.5397 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.61 %
IFC.PR.A	FixedReset	Quote: 18.01 – 19.00 Spot Rate : 0.9900 Average : 0.7250 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.01 Bid-YTW : 7.24 %
CIU.PR.C	FixedReset	Quote: 15.70 – 16.74 Spot Rate : 1.0400 Average : 0.7837 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 15.70 Evaluated at bid price : 15.70 Bid-YTW : 3.59 %
NA.PR.W	FixedReset	Quote: 21.65 – 22.40 Spot Rate : 0.7500 Average : 0.5259 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 21.35 Evaluated at bid price : 21.65 Bid-YTW : 3.71 %
ENB.PF.A	FixedReset	Quote: 18.63 – 19.35 Spot Rate : 0.7200 Average : 0.5205 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-16 Maturity Price : 18.63 Evaluated at bid price : 18.63 Bid-YTW : 5.02 %

The rate cut has caused increased concern over housing prices:

The move overrides concerns from real estate executives and some economists that lower rates will lead to increased borrowing, skyrocketing prices and put housing markets in Toronto and Vancouver at risk of a correction.

“The risks are growing. We get more of a speculative run-up in prices, especially in Vancouver and Toronto,” Robert Kavcic, senior economist at Bank of Montreal, said by phone after the rate announcement. “In the last six months, price activity has gotten heated, especially in those two markets. This would only reinforce that.”
…
“It’s going to put more fuel on the fire for potentially people who may not really have the ability to buy real estate,” Ross McCredie, CEO of Sotheby’s International Realty Canada said in an interview July 8. “When they’re buying, the baseline is that interest rates are going to stay this low for a very long period of time. It’s a scary place to be a buyer.’

Toronto and Vancouver home prices have defied expectations. The average cost of purchasing a condo, townhouse or low-rise property in Toronto, Canada’s largest city, has jumped 38 percent in the five years to June, according to the Canadian Real Estate Association. Toronto sales reached a record in each of the last three months. In Vancouver, single-family home prices rallied 35 percent to C$1.1 million in June from June 2010.

… and there was an immediate effect on the dollar:

Commodity currencies slumped amid speculation an interest-rate cut from the Bank of Canada may augur more monetary stimulus by resource-producing nations.

The Canadian dollar fell to its lowest since 2009 as policy makers lowered borrowing costs to stimulate an economy struggling with the declining price of oil, its major export. The New Zealand and Australian currencies also tumbled to multi-year lows.
…
Canada’s dollar, known as the loonie for the image of aquatic bird on the C$1 coin, slid as much as 1.8 percent.

The New Zealand dollar slumped as much as 1.7 percent while Australia’s currency lost as much as 1.3. South Africa’s rand, the Norwegian krone and Mexico’s peso also slid.

However, there is some encouraging news from the cult of the start-up:

It seems barely a week goes by without news of another Canadian startup scoring a huge venture capital financing deal. Preliminary data published today by Thomson Reuters backs that up: The venture capital scene is enjoying its biggest financing boom in over a decade.

Thomson Reuters said Tuesday the second quarter of 2015 was the best three-month period for VC investments in Canadian companies in 10 years. In fact, the last 12 months through June 30 rank as the best one-year period for VC investments into Canadian companies since 2002, when the country was at the dawn of a long, bleak stretch of relative quiet on the startup financing scene in Canada. Venture capital-backed companies raised $2.6-billion during the past 12 months, compared to $2.4-billion in calendar 2014 and less than $1.6-billion in each of 2011 and 2012.

Greater Toronto Area companies dominated the top five list of biggest disclosed VC deals in the first half of 2015, led by financial software firm Real Matters ($60-million raised), pharma company Northern Biologics ($36-million) and ex-Montreal e-commerce firm VarageSale ($34-million).

Assiduous Readers will remember that I attribute a great deal of the increase in Treasury volatility to the increased transparency that has come about with electronic trading and an increase in the use of exchange-traded futures contracts. So naturally, since the problem has been caused by increased transparency, the regulators want to solve the problem with increased transparency, but there is some pushback:

“It’s the market for U.S. government debt — how is there not more transparency in the trading and pricing we have today?” said Kevin McPartland, head of research for market structure and technology at Greenwich Associates, a Stamford, Connecticut-based financial-services consulting firm. “Of course, the next conversation that starts is about what impact that has on liquidity.”
…
Michael Spencer, chief executive officer of interdealer broker ICAP Plc, warned this week about the potential for more volatility in Treasuries. He attributed the price swings to the scaling back of trading by Wall Street banks known as primary dealers and an increase in electronic trading.
…
Some of the largest investors in company debt say too much transparency can hinder their ability to trade large blocks. AllianceBernstein Holding LP, BlackRock Inc. and Pacific Investment Management Co. urged regulators in a May letter to consider loosening time requirements for disclosing large transactions because the information could tip off rivals.

Turnover of interest-rate-linked securities in other markets that publicly report trades has surged. Trading in interest-rate futures has climbed 81 percent in the past 10 years. This year, a record $335 billion of the contracts has changed hands on average each day, according to CME Group Inc. data. The comparable figure for Treasuries is $430 billion.

One idea that keeps coming up is GDP-linked bonds:

This study proposes that the Government of Canada issue a new debt security, the “Trill,” which would essentially offer Canadian investors an equity stake in the Canadian economy. The Trill is so-named because its coupon payment would be one-trillionth of Canada’s GDP. Similar to shares issued by corporations paying a fraction of corporate earnings in dividends, the Trill would pay a fraction of the “earnings” of Canada. Coupon payments would rise and fall with the GDP.

For average investors, the Trill would be a useful new source of income, offering both exposure to income growth and protection against inflation. This security would also appeal to large institutional investors. Pension funds have a need to match their long-term liabilities with assets that can provide stable, long-term cash flows. Currently, a large part of fund assets are held in nominal fixed-coupon Government of Canada securities. These securities do not provide protection from inflation and the limited numbers of real return bonds the government issues do not provide exposure to income growth.

The BoC has published a discussion paper by Martin Brooke, Rhys Mendes, Alex Pienkowski and Eric Santor titled Sovereign Default and State-Contingent Debt:

The sovereign debt restructuring in Greece and the events surrounding the IMF-EU support packages for Ireland, Portugal and Cyprus have exposed fault lines in the existing practices for sovereign debt crisis resolution – perhaps most importantly, an overreliance on official sector liquidity support. This paper argues that the current approach is suboptimal for five main reasons: i) it increases the risk of moral hazard; ii) it incentivises short-term lending, which can increase the risk of liquidity crises; iii) it puts an inequitable amount of taxpayer resources at risk; iv) substantial official sector holdings of an insolvent sovereign’s debt can complicate negotiated debt writedowns; and, v) it can delay necessary reforms, thereby requiring larger policy adjustments to be implemented when action is eventually taken.
In response to these deficiencies, this paper argues that, for reasons of equity and efficiency, private creditors should play a greater role in risk-sharing and helping to resolve sovereign debt crises. We propose the introduction of two complementary types of state-contingent bonds – ‘sovereign cocos’ and ‘GDP-linked bonds’.

Sovereign cocos are bonds that would automatically extend in repayment maturity when a country receives official sector emergency liquidity assistance. This predictable and transparent means of bailing-in creditors would increase market discipline on sovereigns to prudently manage their debt, ex ante, thus reducing the incidence of crises. And, it would reduce the size of official sector support packages once a crisis has hit, as amortising debt would no longer need to be covered by program financing.

GDP-linked bonds are debt instruments that directly link principal and interest payments to the level of a country’s nominal GDP. They provide a natural complement to sovereign cocos. While sovereign cocos are primarily designed to tackle liquidity crises, GDP-linked bonds help reduce the likelihood of solvency crises. This is because GDP-linked bonds provide a form of ‘recession insurance’ that reduces principal and interest payments when a country is hit by a negative growth shock. This helps to both stabilise the debt-to-GDP ratio and increase a sovereign’s capacity to borrow at sustainable interest rates. While all countries might experience some benefit from the use of GDP-linked debt, economies with higher GDP growth volatility (such as emerging market economies) or countries where monetary policy is constrained (such as those in a monetary union) are likely to benefit most.

Should ‘sovereign Cocos’ ever be issued in the UK, it will be interesting to see whether UK investors would be permitted to buy them! But this is all by way of introduction, since there may be a new example of GDP-linkers:

As debt talks intensify between Ukraine and its creditors, securities that pay out if economic growth exceeds expectations will probably be on the agenda, echoing deals done by Argentina and Greece in the past decade.

Ukraine’s restructuring proposal includes a “value-recovery instrument,” the Finance Ministry said last month, while a person familiar with a bondholder plan submitted in May said it has a debt-for-equity swap element. Both securities feature interest payments linked to gross domestic product and are also referred to as GDP-linked warrants.

For most of the day it was looking as if the preferred share market was taking the rate cut in stride; then 2pm happened.

CPD

ZPR

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 13bp, FixedResets down 47bp and DeemedRetractibles gaining 5bp. Floaters got whacked again. The Performance Highlights table is enormous again, stuffed full of FixedReset losers. Volume was average.

PerpetualDiscounts now yield 5.39%, equivalent to 7.01% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.1%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 290bp, a bit of a bounce-back from the 305bp reported July 8.

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:

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 21.98 to be $0.51 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.77 cheap at its bid price of 15.30.

Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 17.00 to be $1.02 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 20.59 to be $0.83 cheap.

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 19.85 to be $0.78 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.17 and appears to be $1.02 rich.

FTS.PR.K, with a spread of +205bp, and bid at 21.19, looks $0.44 expensive and resets 2019-3-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 22.86 and is $0.28 cheap.

There is only one outlier; one of the junk pairs is below -1.00%.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of 0.01% (which seems a little extreme!).

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	-1.5354 %	2,058.0
FixedFloater	0.00 %	0.00 %	0	0.00	0	-1.5354 %	3,598.3
Floater	3.76 %	3.84 %	61,068	17.78	3	-1.5354 %	2,187.8
OpRet	0.00 %	0.00 %	0	0.00	0	-0.3217 %	2,762.5
SplitShare	4.61 %	4.88 %	68,464	3.20	3	-0.3217 %	3,237.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.3217 %	2,526.0
Perpetual-Premium	5.52 %	3.87 %	73,790	0.29	13	-0.0670 %	2,511.4
Perpetual-Discount	5.43 %	5.39 %	89,306	14.85	21	-0.1260 %	2,637.0
FixedReset	4.70 %	3.84 %	221,991	15.82	88	-0.4660 %	2,236.9
Deemed-Retractible	5.04 %	4.97 %	111,295	3.13	34	0.0505 %	2,609.2
FloatingReset	2.53 %	3.23 %	49,887	6.06	10	-0.2784 %	2,270.8

Performance Highlights
Issue	Index	Change	Notes
GWO.PR.N	FixedReset	-4.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.54 Bid-YTW : 8.00 %
VNR.PR.A	FixedReset	-4.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.44 Evaluated at bid price : 21.78 Bid-YTW : 4.24 %
BAM.PR.C	Floater	-3.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 13.07 Evaluated at bid price : 13.07 Bid-YTW : 3.84 %
BAM.PR.Z	FixedReset	-3.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.61 Evaluated at bid price : 22.02 Bid-YTW : 4.44 %
BIP.PR.A	FixedReset	-2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.54 Evaluated at bid price : 21.86 Bid-YTW : 5.05 %
SLF.PR.J	FloatingReset	-2.48 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.70 Bid-YTW : 7.47 %
ENB.PR.Y	FixedReset	-2.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 5.12 %
MFC.PR.K	FixedReset	-2.37 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.59 Bid-YTW : 5.81 %
MFC.PR.N	FixedReset	-2.28 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.40 Bid-YTW : 5.49 %
PWF.PR.P	FixedReset	-2.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 16.73 Evaluated at bid price : 16.73 Bid-YTW : 3.65 %
NA.PR.W	FixedReset	-2.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 3.84 %
IFC.PR.A	FixedReset	-1.97 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.94 Bid-YTW : 7.29 %
TRP.PR.C	FixedReset	-1.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 15.25 Evaluated at bid price : 15.25 Bid-YTW : 3.90 %
HSE.PR.E	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 22.29 Evaluated at bid price : 23.00 Bid-YTW : 4.78 %
BMO.PR.Q	FixedReset	-1.72 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.80 Bid-YTW : 3.93 %
BAM.PF.F	FixedReset	-1.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.88 Evaluated at bid price : 22.30 Bid-YTW : 4.31 %
PWF.PR.S	Perpetual-Discount	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 22.82 Evaluated at bid price : 23.13 Bid-YTW : 5.19 %
SLF.PR.I	FixedReset	-1.54 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.63 Bid-YTW : 4.42 %
BNS.PR.D	FloatingReset	-1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.63 Bid-YTW : 3.81 %
MFC.PR.J	FixedReset	-1.41 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 4.70 %
BAM.PR.B	Floater	-1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 13.69 Evaluated at bid price : 13.69 Bid-YTW : 3.66 %
BAM.PR.X	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 15.98 Evaluated at bid price : 15.98 Bid-YTW : 4.42 %
CU.PR.G	Perpetual-Discount	-1.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.60 Evaluated at bid price : 21.91 Bid-YTW : 5.19 %
ENB.PR.D	FixedReset	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 16.39 Evaluated at bid price : 16.39 Bid-YTW : 5.10 %
BAM.PR.R	FixedReset	-1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 4.51 %
MFC.PR.M	FixedReset	-1.04 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.80 Bid-YTW : 5.32 %
TRP.PR.A	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 3.81 %
BAM.PF.A	FixedReset	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.71 Evaluated at bid price : 21.97 Bid-YTW : 4.38 %

Volume Highlights
Issue	Index	Shares Traded	Notes
SLF.PR.G	FixedReset	72,336	Nesbitt crossed blocks of 40,000 and 20,000, both at 16.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.20 Bid-YTW : 7.51 %
RY.PR.I	FixedReset	54,200	RBC crossed 50,000 at 25.21. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.16 Bid-YTW : 3.16 %
RY.PR.H	FixedReset	48,160	Scotia crossed 24,200 at 21.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.50 Evaluated at bid price : 21.76 Bid-YTW : 3.74 %
TRP.PR.A	FixedReset	44,098	RBC crossed 23,300 at 18.90; TD crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 3.81 %
BAM.PF.C	Perpetual-Discount	43,920	RBC crossed 35,000 at 20.26. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 20.23 Evaluated at bid price : 20.23 Bid-YTW : 6.06 %
ENB.PR.H	FixedReset	32,870	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 15.85 Evaluated at bid price : 15.85 Bid-YTW : 4.98 %
There were 33 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: 21.78 – 22.65 Spot Rate : 0.8700 Average : 0.5330 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.44 Evaluated at bid price : 21.78 Bid-YTW : 4.24 %
BAM.PR.Z	FixedReset	Quote: 22.02 – 22.70 Spot Rate : 0.6800 Average : 0.4535 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.61 Evaluated at bid price : 22.02 Bid-YTW : 4.44 %
IFC.PR.A	FixedReset	Quote: 17.94 – 18.57 Spot Rate : 0.6300 Average : 0.4345 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.94 Bid-YTW : 7.29 %
GWO.PR.N	FixedReset	Quote: 15.54 – 16.08 Spot Rate : 0.5400 Average : 0.3524 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.54 Bid-YTW : 8.00 %
MFC.PR.K	FixedReset	Quote: 20.59 – 21.35 Spot Rate : 0.7600 Average : 0.6063 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.59 Bid-YTW : 5.81 %
BIP.PR.A	FixedReset	Quote: 21.86 – 22.25 Spot Rate : 0.3900 Average : 0.2450 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-07-15 Maturity Price : 21.54 Evaluated at bid price : 21.86 Bid-YTW : 5.05 %