May 29, 2015

May 29th, 2015

There was some unpleasant Canadian economic news:

Canada’s economy shrank between January and March, the first contraction in four years and the largest since the 2009 recession as collapsing energy prices prompted a plunge in business investment.

Gross domestic product fell at a 0.6 percent annualized pace in the first quarter, Statistics Canada said Friday in Ottawa. The drop exceeded all 22 economist forecasts in a Bloomberg News survey, in which the median call was for an expansion of 0.3 percent. The agency revised its fourth-quarter growth estimate to 2.2 percent, from 2.4 percent previously.

Canada’s dollar weakened 0.7 percent to C$1.2521 per U.S. dollar at 9:20 a.m. Toronto time. Government bond yields fell, with debt due in two years down 4 basis points to 0.58 percent.

In the U.S., gross domestic product shrank at a 0.7 percent annualized rate, revised from a previously reported 0.2 percent gain, according to Commerce Department figures issued Friday in Washington.

Business gross fixed capital formation — or business investment — fell at a 9.7 percent annualized pace in the first quarter, the most since the first three months of 2009. Support activities for mining and oil and gas extraction fell by 30 percent.

Consumer spending growth slowed to an annualized 0.4 percent rate, the slowest since the start of 2009, from 2.1 percent in the fourth quarter. Transportation fell for the first time in 10 quarters, as vehicle purchases declined.

Exports fell 1.1 percent, the second straight quarterly decline. Imports dropped 1.5 percent.

Crude oil is Canada’s top export, and lower prices triggered a deterioration in housing markets in Alberta, site of major oil sands deposits.

On a monthly basis, Canada’s gross domestic product fell 0.2 percent in March, the third straight decline. The contraction was led by a 2.6 percent fall in mining, quarrying, and oil and gas extraction. Economists forecast a monthly GDP expansion of 0.2 percent.

Returning to yesterday‘s scandalmongering, there are rumours that Hastert was blackmailed due to a little old-fashioned pederasty in the ’80’s (some might say, “old school”). But what really gets my goat is the smarmy propaganda from the IRS:

The USA PATRIOT Act of 2001 increased the scope of these laws to help trace funds used for terrorism.

Ha! There’s even more bullshit from the FBI, although they now admit the Patriot Act hasn’t accomplished much vis a vis terror. However, that hasn’t stopped the sleazebags in Canada from cranking up the old fearometer, although it doesn’t work as well as it used to.

The month closed with another poor day for the Canadian preferred share market, with PerpetualDiscounts down 12bp, FixedResets losing 27bp and DeemedRetractibles off 9bp. A lengthy Performance Highlights table is notable for the number of FixedReset losers. Volume was slightly below average.

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

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

Here’s TRP:

impVol_TRP_150529
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.70 to be $1.05 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.70 cheap at its bid price of 24.82.

impVol_MFC_150529
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.26 to be $0.49 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.05 to be $0.66 cheap.

impVol_BAM_150529
Click for Big

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.90 to be $0.48 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.90 and appears to be $0.51 rich.

impVol_FTS_150529
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.38, looks $0.65 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.80 and is $0.38 rich.

pairs_FR_150529
Click for Big

Investment-grade pairs predict an average over the next five-odd years of about 0.45%, and the TRP.PR.A / TRP.PR.F pair is no longer an abnormal outlier. On the junk side, four pairs are outside the range of the graph: FFH.PR.E / FFH.PR.F at -1.09%; AIM.PR.A / AIM.PR.B at -0.71%; BRF.PR.A / BRF.PR.B at -0.60%; and FFH.PR.C / FFH.PR.D at +1.12%.

pairs_FF_150529
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.2097 % 2,261.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.2097 % 3,953.4
Floater 3.21 % 3.37 % 54,815 18.76 4 0.2097 % 2,403.6
OpRet 4.44 % -12.58 % 31,193 0.09 2 0.0593 % 2,781.8
SplitShare 4.58 % 4.46 % 69,276 3.33 3 -0.0801 % 3,257.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0593 % 2,543.7
Perpetual-Premium 5.46 % 4.71 % 61,897 0.58 18 0.0524 % 2,519.6
Perpetual-Discount 5.09 % 5.07 % 116,873 15.37 15 -0.1207 % 2,765.1
FixedReset 4.46 % 3.80 % 266,309 16.46 86 -0.2661 % 2,391.3
Deemed-Retractible 4.98 % 3.47 % 108,299 0.58 34 -0.0860 % 2,636.0
FloatingReset 2.55 % 2.93 % 59,748 6.14 7 -0.0304 % 2,338.3
Performance Highlights
Issue Index Change Notes
GWO.PR.N FixedReset -2.99 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.04
Bid-YTW : 7.03 %
TRP.PR.C FixedReset -2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 3.98 %
SLF.PR.H FixedReset -2.34 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.73
Bid-YTW : 5.02 %
MFC.PR.B Deemed-Retractible -2.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.22
Bid-YTW : 5.61 %
BAM.PF.C Perpetual-Discount -1.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 21.96
Evaluated at bid price : 22.28
Bid-YTW : 5.52 %
MFC.PR.K FixedReset -1.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.20
Bid-YTW : 4.38 %
BMO.PR.T FixedReset -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.78
Evaluated at bid price : 23.89
Bid-YTW : 3.50 %
RY.PR.Z FixedReset -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.90
Evaluated at bid price : 24.10
Bid-YTW : 3.45 %
TRP.PR.D FixedReset -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.29
Evaluated at bid price : 22.90
Bid-YTW : 3.85 %
SLF.PR.G FixedReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.99
Bid-YTW : 7.09 %
IFC.PR.C FixedReset -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.26
Bid-YTW : 4.26 %
TRP.PR.B FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 15.24
Evaluated at bid price : 15.24
Bid-YTW : 3.83 %
ENB.PR.H FixedReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 17.95
Evaluated at bid price : 17.95
Bid-YTW : 4.64 %
TD.PF.B FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.72
Evaluated at bid price : 23.74
Bid-YTW : 3.55 %
MFC.PR.C Deemed-Retractible -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.83
Bid-YTW : 5.67 %
CM.PR.O FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.75
Evaluated at bid price : 23.81
Bid-YTW : 3.61 %
NA.PR.W FixedReset -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.86
Evaluated at bid price : 24.15
Bid-YTW : 3.47 %
BMO.PR.W FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.58
Evaluated at bid price : 23.51
Bid-YTW : 3.54 %
BIP.PR.A FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 23.05
Evaluated at bid price : 24.71
Bid-YTW : 4.62 %
TRP.PR.F FloatingReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 3.32 %
ENB.PR.F FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 19.33
Evaluated at bid price : 19.33
Bid-YTW : 4.72 %
BAM.PR.B Floater 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 14.93
Evaluated at bid price : 14.93
Bid-YTW : 3.37 %
CIU.PR.C FixedReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 3.75 %
Volume Highlights
Issue Index Shares
Traded
Notes
HSE.PR.C FixedReset 105,036 TD crossed 88,500 at 24.99.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 23.16
Evaluated at bid price : 24.92
Bid-YTW : 4.21 %
HSE.PR.A FixedReset 96,175 TD crossed 88,500 at 17.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 4.28 %
BNS.PR.Z FixedReset 54,670 RBC bought 15,000 from Nesbitt at 23.69, then crossed 14,700 at 23.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.52
Bid-YTW : 3.60 %
CU.PR.E Perpetual-Discount 50,350 Desjardins crossed 48,200 at 24.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 24.32
Evaluated at bid price : 24.78
Bid-YTW : 4.94 %
RY.PR.D Deemed-Retractible 38,847 Nesbitt crossed 28,000 at 25.32.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-06-28
Maturity Price : 25.25
Evaluated at bid price : 25.32
Bid-YTW : 1.82 %
BMO.PR.M FixedReset 37,165 Scotia crossed 35,700 at 25.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 2.99 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.N FixedReset Quote: 23.91 – 24.65
Spot Rate : 0.7400
Average : 0.5463

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.91
Bid-YTW : 4.13 %

POW.PR.G Perpetual-Premium Quote: 26.10 – 26.59
Spot Rate : 0.4900
Average : 0.3372

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 4.89 %

BAM.PF.C Perpetual-Discount Quote: 22.28 – 22.74
Spot Rate : 0.4600
Average : 0.3288

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 21.96
Evaluated at bid price : 22.28
Bid-YTW : 5.52 %

BMO.PR.T FixedReset Quote: 23.89 – 24.20
Spot Rate : 0.3100
Average : 0.1935

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-29
Maturity Price : 22.78
Evaluated at bid price : 23.89
Bid-YTW : 3.50 %

HSB.PR.C Deemed-Retractible Quote: 25.40 – 25.80
Spot Rate : 0.4000
Average : 0.2839

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-06-28
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : -4.41 %

IFC.PR.C FixedReset Quote: 24.26 – 24.64
Spot Rate : 0.3800
Average : 0.2672

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.26
Bid-YTW : 4.26 %

May 28, 2015

May 28th, 2015

There’s more handwringing about liquidity problems:

Matt King, Citigroup’s global head of credit strategy, believes Hotel Californias – credit investments where underlying liquidity will dry up quickly in the event of a sell-off – are everywhere in the current market. “… [A]lmost every institutional investor, in almost every market, seems worried about liquidity. Even if it’s here today, they fear it will be gone tomorrow. The growing frequency of ‘flash crashes’ and [similar but less severe] ‘air pockets’ – often without obvious cause – adds weight to their fears.”

Mr. King describes a number of reasons for these liquidity-driven bouts of volatility. These include the low trading volume for the underlying holdings of high-yield bond ETFs, regulations that limit market-making activities for major global banks and the huge global growth in open-ended mutual-fund investments. (Open-ended funds guarantee daily liquidity even if the fund holdings are illiquid and hard to sell.)

Above all, however, Mr. King singles out a familiar target.

“Central bank distortions have forced investors into positions they would not have held otherwise, and forced them to be the ‘same way round’ [similarly positioned in the market with overweights and underweights] to a much greater extent than previously …. Every so often, when they start to doubt their convictions, they find that the clearing price for risk as they try to reverse positions is nowhere near where they’d expected.”

There’s a scandal brewing:

Former Speaker of the U.S. House of Representatives Dennis Hastert was indicted by a federal grand jury on charges that he evaded currency-reporting requirements and lied to the FBI as part of a hush-money scheme.

Hastert, 73, withdrew $952,000 in small increments to avoid a requirement that banks report cash transactions exceeding $10,000, the U.S. Justice Department said Thursday. The withdrawals were part of a plan to give an individual who wasn’t named $3.5 million as a payoff to conceal “prior misconduct,” Chicago U.S. Attorney Zachary Fardon said in a statement.

Hastert, a Republican from Plano, Illinois, served in the House from 1987 to 2007. He became the chamber’s speaker — second in line of succession to the U.S. presidency — in 1999.

Starting in July 2012, Hastert began structuring withdrawals in increments of less than $10,000 to evade currency transaction reports, prosecutors said. Later, when questioned by agents of the Federal Bureau of Investigation, he told them he was keeping the cash, they said.

So it looks like ridiculously intrusive banking laws (and an FBI investigation of something that does not appear to be a crime!) seems to have caught another stupid person. Perhaps he can talk to Elliot Spitzer about his problems; but if he permitted himself to be blackmailed, there’s something really pathetic going on. But look at the indictment! Police snoopery run amok:

In approximately 2013, the Federal Bureau of Investigation and Internal Revenue Service, agencies within the executive branch of the Government of the United States, began investigating defendant JOHN DENNIS HASTERT’s cash withdrawals as possible structuring of currency transactions to evade the reporting requirements described above.

As of December 8, 2014, the following matters, among others, were material to the Federal Bureau of Investigation and Internal Revenue Service regarding possible structuring by defendant JOHN DENNIS HASTERT:

  • i. Whether defendant JOHN DENNIS HASTERT was withdrawing less than $10,000 in cash at a time in order to evade currency transaction reporting requirements;
  • ii. Whether defendant JOHN DENNIS HASTERT was using the cash he was withdrawing to cover up past misconduct;
  • iii. Whether defendant JOHN DENNIS HASTERT was using the cash he was withdrawing for a criminal purpose;
  • iv. Whether defendant JOHN DENNIS HASTERT was the victim of a criminal extortion related to, among other matters, his prior positions in government and was giving the cash to another individual as payment; and
  • v. Whether defendant JOHN DENNIS HASTERT was using the cash for some other purpose, not related to a crime or past misconduct.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 6bp, FixedResets off 8bp and DeemedRetractibles up 29bp. Sun Life and Manulife DeemedRetractibles were notable winners in the Performance Highlights table. Volume was below average.

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

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

Here’s TRP:

impVol_TRP_150528
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.90 to be $1.07 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.66 cheap at its bid price of 24.95.

impVol_MFC_150528
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.41 to be $0.52 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.05 to be $0.79 cheap.

impVol_BAM_150528
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.00 to be $0.51 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.71 and appears to be $0.43 rich.

impVol_FTS_150528
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.31, looks $0.74 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.61 and is $0.30 rich.

pairs_FR_150528
Click for Big

Investment-grade pairs predict an average over the next five-odd years of about 0.50%, including the TRP.PR.A / TRP.PR.F at -0.09%. On the junk side, four pairs are outside the range of the graph: FFH.PR.E / FFH.PR.F at -0.99%; AIM.PR.A / AIM.PR.B at -0.79%; BRF.PR.A / BRF.PR.B at -1.51%; and FFH.PR.C / FFH.PR.D at +1.00%.

pairs_FF_150528
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.9901 % 2,256.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.9901 % 3,945.1
Floater 3.22 % 3.41 % 52,188 18.66 4 -0.9901 % 2,398.6
OpRet 4.45 % -11.04 % 29,269 0.10 2 -0.0198 % 2,780.2
SplitShare 4.57 % 4.48 % 65,909 3.34 3 0.1605 % 3,259.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0198 % 2,542.2
Perpetual-Premium 5.46 % 3.27 % 61,233 0.42 18 -0.0371 % 2,518.3
Perpetual-Discount 5.08 % 5.07 % 118,162 15.38 15 0.0618 % 2,768.4
FixedReset 4.44 % 3.79 % 269,590 16.43 86 -0.0802 % 2,397.7
Deemed-Retractible 4.96 % 3.54 % 107,199 0.73 34 0.2866 % 2,638.3
FloatingReset 2.55 % 2.88 % 60,227 6.15 7 -0.0767 % 2,339.0
Performance Highlights
Issue Index Change Notes
BAM.PR.C Floater -2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 14.55
Evaluated at bid price : 14.55
Bid-YTW : 3.46 %
BAM.PR.B Floater -2.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 14.75
Evaluated at bid price : 14.75
Bid-YTW : 3.41 %
ENB.PR.F FixedReset -2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 4.78 %
FTS.PR.H FixedReset -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 16.31
Evaluated at bid price : 16.31
Bid-YTW : 3.86 %
BAM.PR.K Floater -1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 3.44 %
ENB.PR.D FixedReset -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 18.68
Evaluated at bid price : 18.68
Bid-YTW : 4.72 %
MFC.PR.F FixedReset -1.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.00
Bid-YTW : 6.61 %
MFC.PR.L FixedReset -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.35
Bid-YTW : 4.35 %
TRP.PR.F FloatingReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 3.35 %
BAM.PR.R FixedReset -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 4.19 %
BNS.PR.Z FixedReset -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.45
Bid-YTW : 3.65 %
SLF.PR.B Deemed-Retractible 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 5.25 %
SLF.PR.A Deemed-Retractible 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 5.28 %
SLF.PR.E Deemed-Retractible 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 5.67 %
SLF.PR.C Deemed-Retractible 1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.67
Bid-YTW : 5.69 %
MFC.PR.C Deemed-Retractible 1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.07
Bid-YTW : 5.53 %
MFC.PR.B Deemed-Retractible 1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.70
Bid-YTW : 5.34 %
ENB.PR.J FixedReset 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 20.72
Evaluated at bid price : 20.72
Bid-YTW : 4.58 %
MFC.PR.N FixedReset 1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.02
Bid-YTW : 4.07 %
PWF.PR.A Floater 1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 18.05
Evaluated at bid price : 18.05
Bid-YTW : 2.78 %
SLF.PR.H FixedReset 2.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 4.72 %
GWO.PR.N FixedReset 3.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.80
Bid-YTW : 6.65 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.M FixedReset 87,369 Desjardins crossed 81,600 at 24.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 23.00
Evaluated at bid price : 24.62
Bid-YTW : 3.64 %
ENB.PR.Y FixedReset 83,504 Scotia crossed 75,400 at 18.85.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 18.83
Evaluated at bid price : 18.83
Bid-YTW : 4.75 %
HSE.PR.A FixedReset 49,730 TD crossed 40,000 at 17.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 17.12
Evaluated at bid price : 17.12
Bid-YTW : 4.23 %
HSE.PR.C FixedReset 47,415 TD crossed 37,500 at 24.75.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 23.12
Evaluated at bid price : 24.80
Bid-YTW : 4.24 %
BNS.PR.R FixedReset 35,700 Nesbitt crossed 20,000 at 25.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 3.21 %
BNS.PR.Z FixedReset 26,500 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.45
Bid-YTW : 3.65 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PF.B FixedReset Quote: 24.00 – 24.45
Spot Rate : 0.4500
Average : 0.3081

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 22.84
Evaluated at bid price : 24.00
Bid-YTW : 3.50 %

BNS.PR.Z FixedReset Quote: 23.45 – 23.83
Spot Rate : 0.3800
Average : 0.2391

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.45
Bid-YTW : 3.65 %

TRP.PR.F FloatingReset Quote: 18.80 – 19.28
Spot Rate : 0.4800
Average : 0.3469

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 3.35 %

FTS.PR.H FixedReset Quote: 16.31 – 16.65
Spot Rate : 0.3400
Average : 0.2256

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 16.31
Evaluated at bid price : 16.31
Bid-YTW : 3.86 %

BAM.PF.A FixedReset Quote: 24.51 – 24.79
Spot Rate : 0.2800
Average : 0.1730

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-28
Maturity Price : 23.15
Evaluated at bid price : 24.51
Bid-YTW : 4.09 %

BNS.PR.Y FixedReset Quote: 23.21 – 23.50
Spot Rate : 0.2900
Average : 0.1875

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.21
Bid-YTW : 3.10 %

FFN.PR.A To Get Bigger

May 28th, 2015

Quadravest has announced:

North American Financial 15 Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus in each of the provinces of Canada with respect to an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets, Scotia Capital Inc., and will also include BMO Capital Markets, GMP Securities L.P., Canaccord Genuity Corp., Dundee Securities, Raymond James, Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

The Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% on the issue price and the Class A Shares will be offered at a price of $8.65 per Class A Share to yield 13.87% on the issue price. The closing price on the TSX of each of the Preferred Shares and Class A Shares on May 27, 2015 was $10.08 and $9.19, respectively.

Since inception of the Company, the aggregate dividends paid on the Preferred Shares have been $5.58 per share and the aggregate dividends paid on the Class A Shares have been $8.85 per share (including one special distribution of $0.25 per share), for a combined total of $14.43. All distributions to date have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the secondary offering will be used by the Company to invest in a high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal National Bank of Canada Bank of America Corp.
The Bank of Nova Scotia Manulife Financial Corporation Citigroup Inc.
Canadian Imperial Bank of Commerce Sun Life Financial Services of Canada Inc. Goldman Sachs Group Inc.
Royal Bank of Canada Great-West Lifeco Inc. JP Morgan Chase & Co.
The Toronto-Dominion Bank CI Financial Corp. Wells Fargo & Co.

The Company’s investment objectives are:
Preferred Shares:
i. to provide holders of Preferred Shares with cumulative preferential monthly cash dividends, currently in the amount of 5.25% annually, to be set by the Board of Directors annually subject to a minimum of 5.25% until 2019; and
ii. on or about the termination date of December 1, 2019 (subject to further 5 year extensions thereafter), to pay the holders of the Preferred Shares $10 per Preferred Share.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash distributions in an amount to be determined by the Board of Directors; and
ii. to permit holders to participate in all growth in the net asset value of the Company above $10 per Unit, by paying holders on or about the termination date of December 1, 2019 (subject to further 5 year extensions thereafter) such amounts as remain in the Company after paying $10 per Preferred Share.

The sales period of this overnight offering will end at 9:00 a.m. (Toronto time) on May 29, 2015.

The NAVPU of the fund is 16.97 as of May 27 and the new Whole Units are being flogged at 18.65. When the Split Share structure is working as intended, it’s a thing of beauty! As well as being a counter-example to the Modigliani-Miller hypothesis, last mocked on PrefBlog on March 15, 2013.

FFN.PR.A was last mentioned on PrefBlog when they changed their name to North American Financial 15 Split Corp.; it will also be noted that they got bigger in August, 2014.

FFN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Update, 2015-5-29: It did all right!

North American Financial 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight marketing of up to 1,380,000 Preferred Shares and up to 1,380,000 Class A Shares. Total proceeds of the offering are expected to be approximately $25.7 million.

The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets, Scotia Capital Inc., and will also include BMO Capital Markets, GMP Securities L.P., Canaccord Genuity Corp., Dundee Securities, Raymond James, Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

The sales period of the overnight offering has now ended.

New Issue: RY 4.90% Straight, NVCC-Compliant

May 28th, 2015

Royal Bank of Canada has announced:

a domestic public offering of Non-Cumulative, Preferred Shares Series BH.

Royal Bank of Canada will issue 6 million Preferred Shares Series BH priced at $25 per share to raise gross proceeds of $150 million.

The Preferred Shares Series BH will yield 4.90 per cent annually, payable quarterly, as and when declared by the Board of Directors of Royal Bank of Canada.

Subject to regulatory approval, on or after November 24, 2020, the bank may redeem the Preferred Shares Series BH in whole or in part at a declining premium.

The offering will be underwritten by a syndicate led by RBC Capital Markets. The expected closing date is June 5, 2015.

We routinely undertake funding transactions to maintain strong capital ratios and a cost effective capital structure. Net proceeds from this transaction will be used for general business purposes.

Well! It’s been a long time since we last saw a Straight Perpetual being issued … not since GWO.PR.S, paying 5.25%, announced 2014-5-13 and listed 2014-5-22.

I’m not sure what we can make of this … does this mean that RY’s treasury department thinks FixedResets are cheap? Their recently issued RY.PR.M, FixedReset, 3.60%+262, was hammered on the opening and they might be unwilling to risk a reprise. Or they may simply want to test the waters of the Straight Perpetual market with a small new issue. Or they might feel that they’ve got quite enough capital tied to five-year Canadas, thank you very much, and be willing to pay up a little for diversification of funding.

One way or another, it’s good to see. I’ve been saying for the past six years that I think Straights will always be the ‘little black dress’ of the preferred share market and it’s nice to see a bit of support for that idea.

Update, 2015-5-29: It’s also noteworthy that this issue has a great big fat first dividend, payable in November, that will go ex in late October. There might be some opportunities for dividend capture come October!

May 27, 2015

May 28th, 2015

The Bank of Canada didn’t move today:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

Inflation in Canada continues to track the path outlined in the Bank’s April Monetary Policy Report (MPR). Total CPI inflation is near the bottom of the Bank’s 1 to 3 per cent inflation control range, largely due to the transitory effects of sharply lower energy prices. Core inflation remains above 2 per cent, boosted by the pass-through effects of past depreciation of the Canadian dollar, as well as certain sector-specific factors. Seeing through the various temporary factors, the Bank estimates that the underlying trend of inflation is 1.6 to 1.8 per cent, consistent with persistent slack in the economy.

The outlook for the Canadian economy also remains largely in line with the April MPR. While a weak first quarter in the United States has raised questions about that economy’s underlying strength, the Bank expects a return to solid growth in the second quarter. This will help advance the rotation of demand in Canada toward more exports and business investment. Recent indicators suggest consumption in Canada is holding up relatively well, given the impact of lower oil prices on gross domestic income.

Despite the recent back-up in global bond yields, financial conditions for Canadian households and firms remain highly stimulative. The Canadian dollar has strengthened in recent weeks in the context of higher oil prices and a softer U.S. dollar. If these developments are sustained, their net effect will need to be assessed as more data become available in the months ahead.

Although a number of complex adjustments are under way, the Bank’s assessment of risks to the inflation profile has not materially changed. Risks to financial stability remain elevated, but appear to be evolving as expected. Weighing all of these risks, the Bank judges that the current degree of monetary policy stimulus remains appropriate and therefore the target for the overnight rate remains at 3/4 per cent.

John Heinzl had an interview with Nicolas Normandeau, the manager of the $430-million Horizons Active Preferred Share ETF (HPR):

He was on the other end of the trades scooping up shares at fire-sale prices.

“During the selloff I was buying everything,” said the manager of the $430-million Horizons Active Preferred Share ETF (HPR). “I was buying about $4-million to $5-million a day. That’s a big number.”

Faced with falling shares prices and reduced dividend income, many preferred shareholders panicked – particularly retail investors, Mr. Normandeau said. “They were just selling every issue they have,” he said. That’s when he started aggressively investing the cash he had been accumulating.

His timing worked out well. Preferred share prices have rebounded in recent weeks and, although he’s not buying as aggressively as he was in late 2014 and early 2015, he still thinks many rate-reset preferreds offer attractive potential returns – and acceptable interest rate risks – at current levels.

Market timing, feh. Live by the sword, die by the sword. He’s doing pretty well on a three-year basis … but with market timing you’ve got to be right all the time.

Yesterday I expressed my approbation of the plan to allow voluntary contributions to the Canada Pension Plan. It would seem I’m not the only one:

“We think it’s a good proposal,” said Graham Smith, senior policy adviser at the Investment Funds Institute of Canada, which advocates on behalf of the investment industry.

Ian Russell, president and chief executive of the Investment Industry Association of Canada, also sounded upbeat.

“It provides Canadians with another option,” he said.

Don Drummond, a professor at Queen’s University and former chief economist at Toronto-Dominion Bank, pointed out that mutual fund fees are particularly hard for investors to stomach in a low-return environment.

The industry would likely have to respond to competition for savers’ assets by cutting fees, or creating new genres of investment vehicles that stand apart from what the CPP Fund offers.

Mr. Drummond said people will love the option of contributing extra funds to the CPP, which could override any concerns voiced from the investment industry during the upcoming consultations on the issue.

In any case, he noted, the investment industry tends to chase people who have savings of more than $600,000 – a relatively small slice of the population that might not be significantly swayed by the potential for a bigger CPP contribution.

Mr. Drummond is an optimist. It would be far more logical to raise mutual fund fees so salesmen can be paid a bigger trailer.

As far as industry reaction is concerned, I’m looking forward to competition from deferred annuities, with a little head-to-head competition between the CPPIB and the insurance companies.

However, opinion is not unanimous, or at least it wasn’t five years ago:

The Conservative government rejected a voluntary expansion of the Canada Pension Plan five years ago as overly expensive and misguided, a history that is raising questions as to why it is now proposing that very idea.

The call for consultations is in spite of the fact that Finance Canada held detailed talks and contracted policy experts throughout 2009 and 2010 to weigh in on the state of retirement saving in Canada.

After the study, then-finance minister Jim Flaherty said it was clear that “some sort of voluntary new CPP method” wouldn’t work.

“This was rejected unanimously by our partners in the federation when we met and discussed the issue because it would not work and because the CPP would be unable to administer it,” he told the House of Commons in September 2010.

Ted Menzies, who was then the Conservative minister responsible for the pensions file, went further.

“The verdict was unanimous. This was not a good idea,” Mr. Menzies told the House in November 2010. “The consensus of governments and public-interest groups from across the political spectrum has been that this would be costly, ineffective and, ultimately, a misguided solution.”

It’s good to see some bio-octane being produced:

Global Bioenergies (Alternext Paris: ALGBE) and Audi announce that the first batch of renewable gasoline has been produced. It will be presented to Audi by Global Bioenergies during a press conference to be held in Pomacle on the 21st of May.

The first isobutene batch produced from renewable resources (here: corn-derived glucose) at Global Bioenergies’ industrial pilot in Pomacle-Bazancourt, near Reims in France, had been delivered to the chemical company Arkema early May 2015. Subsequent isobutene batches have been converted into isooctane by the Fraunhofer Institute at the Leuna refinery near Leipzig where Global Bioenergies is now building its demo plant.

Reiner Mangold, Head of sustainable product development at Audi declares: “The confirmation that Global Bioenergies’ renewable isobutene is compatible with a commonly used fossil isobutene to isooctane conversion technology represents a key step on our way to Audi ‘ebenzin’. We are now looking forward to working together with Global Bioenergies on a technology allowing the production of renewable isooctane not derived from biomass sources, following Audi’s ‘e-fuels’ strategy.”

It’s a pity that they didn’t put more meat in the press release. What’s the efficiency of this process vs. gasohol production? And where do they stand in the project not to use biomass?

Canadian General Investments, Limited, proud issuer of CGI.PR.C and CGI.PR.D, was confirmed at Pfd-1(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the ratings of the 3.90% Cumulative Redeemable Class A Preference Shares, Series 3 (the Series 3 Preference Shares) and the 3.75% Cumulative Redeemable Class A Preference Shares, Series 4 (the Series 4 Preference Shares; collectively, with the Series 3 Preference Shares, the Preference Shares) issued by Canadian General Investments, Limited (the Company) at Pfd-1 (low). The Series 3 Preference Shares and Series 4 Preference Shares rank pari passu and will be retractable at the option of their holders on or after June 15, 2016, and June 15, 2023, respectively.

The Company holds a well-diversified portfolio consisting primarily of common shares of Canadian companies (the Portfolio). Since the last rating confirmation in May 2014, the performance of the portfolio has been stable. The current downside protection available to the portfolio is approximately 79.8%. Holders of the Series 3 Preference Shares are entitled to receive fixed cumulative preferential cash dividends of $0.975 per annum, yielding 3.90% on the initial issue price, while holders of the Series 4 Preference Shares are entitled to cash dividends of $0.9375 per annum, yielding 3.75% per annum on the initial issue price. Income received on the Portfolio will be able to cover approximately 65% of distributions to all series of Preference Shares, based on the Portfolio holdings as of May 15, 2015. Despite the grind caused by the drop in the distribution coverage ratio and the regular distributions to holders of the common shares of the Company, downside protection remains commensurate with the current ratings of the Preference Shares.

It was a positive day for the Canadian preferred share market, with PerpetualDiscounts up 10bp, FixedResets gaining 6bp and DeemedRetractibles winning 28bp. The Performance Highlights table is very lengthy, with ENB issues prominent winners. Volume was below average.

PerpetualDiscounts now yield 5.07%, equivalent to 6.59% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.95%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 265bp, unchanged from the May 20 report.

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

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

Here’s TRP:

impVol_TRP_150527
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.10 to be $1.07 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.75 cheap at its bid price of 25.00.

impVol_MFC_150527
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.65 to be $0.69 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.05 to be $0.63 cheap.

impVol_BAM_150527
Click for Big

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.76 to be $0.57 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.81 and appears to be $0.53 rich.

impVol_FTS_150527
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.65, looks $0.49 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.75 and is $0.32 rich.

pairs_FR_150527
Click for Big

Investment-grade pairs predict an average over the next five-odd years of about 0.45%, including the TRP.PR.A / TRP.PR.F at 0.01%. On the junk side, four pairs are showing negative breakeven rates and are not shown: FFH.PR.E / FFH.PR.F at -1.15%; DC.PR.B / DC.PR.D at -1.39%; AIM.PR.A / AIM.PR.B at -1.01% and BRF.PR.A / BRF.PR.B at -0.63%.

pairs_FF_150527
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 1.2941 % 2,278.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.2941 % 3,984.5
Floater 3.19 % 3.34 % 51,933 18.84 4 1.2941 % 2,422.6
OpRet 4.45 % -11.12 % 29,708 0.10 2 0.0198 % 2,780.8
SplitShare 4.58 % 4.47 % 65,105 3.34 3 0.4164 % 3,254.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0198 % 2,542.7
Perpetual-Premium 5.46 % 3.09 % 61,776 0.42 18 0.1202 % 2,519.3
Perpetual-Discount 5.09 % 5.07 % 119,276 15.36 15 0.0956 % 2,766.7
FixedReset 4.44 % 3.78 % 269,552 16.08 86 0.0619 % 2,399.6
Deemed-Retractible 4.97 % 3.45 % 103,825 0.73 34 0.2787 % 2,630.7
FloatingReset 2.55 % 2.91 % 57,617 6.15 7 0.0364 % 2,340.8
Performance Highlights
Issue Index Change Notes
GWO.PR.N FixedReset -4.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.28
Bid-YTW : 7.02 %
PWF.PR.A Floater -1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 2.83 %
SLF.PR.G FixedReset -1.71 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.25
Bid-YTW : 6.90 %
PWF.PR.P FixedReset -1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 18.21
Evaluated at bid price : 18.21
Bid-YTW : 3.77 %
TD.PF.C FixedReset -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 22.56
Evaluated at bid price : 23.50
Bid-YTW : 3.58 %
TRP.PR.A FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 20.51
Evaluated at bid price : 20.51
Bid-YTW : 3.76 %
MFC.PR.F FixedReset -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.28
Bid-YTW : 6.42 %
TRP.PR.B FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 15.55
Evaluated at bid price : 15.55
Bid-YTW : 3.80 %
RY.PR.M FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 22.95
Evaluated at bid price : 24.50
Bid-YTW : 3.67 %
ENB.PR.T FixedReset 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 19.47
Evaluated at bid price : 19.47
Bid-YTW : 4.71 %
SLF.PR.B Deemed-Retractible 1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.85
Bid-YTW : 5.39 %
ENB.PR.H FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 18.31
Evaluated at bid price : 18.31
Bid-YTW : 4.55 %
ENB.PR.F FixedReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 4.68 %
ENB.PR.N FixedReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 20.21
Evaluated at bid price : 20.21
Bid-YTW : 4.67 %
BAM.PR.R FixedReset 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 4.14 %
SLF.PR.A Deemed-Retractible 1.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.70
Bid-YTW : 5.42 %
FTS.PR.H FixedReset 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 16.65
Evaluated at bid price : 16.65
Bid-YTW : 3.78 %
ENB.PR.P FixedReset 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 19.51
Evaluated at bid price : 19.51
Bid-YTW : 4.69 %
BAM.PR.X FixedReset 1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.18 %
HSE.PR.A FixedReset 1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 17.15
Evaluated at bid price : 17.15
Bid-YTW : 4.22 %
BAM.PR.C Floater 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 14.91
Evaluated at bid price : 14.91
Bid-YTW : 3.38 %
ENB.PR.D FixedReset 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 4.64 %
ENB.PR.B FixedReset 1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 19.14
Evaluated at bid price : 19.14
Bid-YTW : 4.60 %
MFC.PR.B Deemed-Retractible 2.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.39
Bid-YTW : 5.51 %
MFC.PR.L FixedReset 2.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.65
Bid-YTW : 4.19 %
BAM.PR.B Floater 2.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 15.08
Evaluated at bid price : 15.08
Bid-YTW : 3.34 %
BAM.PR.K Floater 3.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 14.93
Evaluated at bid price : 14.93
Bid-YTW : 3.37 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.S FixedReset 226,190 Scotia crossed 200,000 at 24.50. Nice ticket!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 23.06
Evaluated at bid price : 24.48
Bid-YTW : 3.48 %
RY.PR.G Deemed-Retractible 75,750 TD crossed 75,000 at 25.35.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-06-26
Maturity Price : 25.25
Evaluated at bid price : 25.32
Bid-YTW : 1.53 %
BMO.PR.Q FixedReset 47,150 Nesbitt crossed 32,700 at 23.58.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.55
Bid-YTW : 3.51 %
BNS.PR.Z FixedReset 37,700 TD crossed two blocks of 16,000 each, both at 23.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.71
Bid-YTW : 3.46 %
TRP.PR.A FixedReset 35,430 TD crossed 30,000 at 20.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 20.51
Evaluated at bid price : 20.51
Bid-YTW : 3.76 %
TRP.PR.F FloatingReset 32,700 TD crossed 30,000 at 19.35. Perhaps related to the above?
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 19.21
Evaluated at bid price : 19.21
Bid-YTW : 3.32 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.N FixedReset Quote: 17.28 – 17.90
Spot Rate : 0.6200
Average : 0.4160

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.28
Bid-YTW : 7.02 %

GWO.PR.S Deemed-Retractible Quote: 26.26 – 26.75
Spot Rate : 0.4900
Average : 0.3126

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.26
Bid-YTW : 4.73 %

PWF.PR.A Floater Quote: 17.70 – 18.35
Spot Rate : 0.6500
Average : 0.4894

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 2.83 %

HSB.PR.C Deemed-Retractible Quote: 25.40 – 25.80
Spot Rate : 0.4000
Average : 0.2515

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-06-26
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : -4.74 %

CIU.PR.C FixedReset Quote: 16.35 – 17.00
Spot Rate : 0.6500
Average : 0.5149

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-27
Maturity Price : 16.35
Evaluated at bid price : 16.35
Bid-YTW : 3.80 %

GWO.PR.R Deemed-Retractible Quote: 24.81 – 25.19
Spot Rate : 0.3800
Average : 0.2491

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.81
Bid-YTW : 5.03 %

New Issue: BMO FixedReset, 3.80%+271, NVCC-Compliant

May 27th, 2015

Bank of Montreal has announced:

a domestic public offering of $200 million of Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 33 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 33”). The offering will be underwritten on a bought-deal basis by a syndicate of underwriters led by BMO Capital Markets. The Bank has granted to the underwriters an option to purchase up to an additional $50 million of the Preferred Shares Series 33 exercisable at any time up to 48 hours before closing.

The Preferred Shares Series 33 will be issued to the public at a price of $25.00 per share. Holders will be entitled to receive non-cumulative preferential fixed quarterly dividends for the initial period ending August 25, 2020, as and when declared by the Board of Directors of the Bank, payable in the amount of $0.2375 per share, to yield 3.80 per cent annually.

Subject to regulatory approval, on or after August 25, 2020, the Bank may redeem the Preferred Shares Series 33 in whole or in part at par. On August 25, 2020, the dividend rate will reset and will reset thereafter every five years to be equal to the 5-Year Government of Canada Bond Yield plus 2.71 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 33 into an equal number of Non-Cumulative Floating Rate Class B Preferred Shares Series 34 (Non-Viability Contingent Capital (NVCC)) (“Preferred Shares Series 34”) on August 25, 2020, and on August 25 of every fifth year thereafter. Holders of the Preferred Shares Series 34 will be entitled to receive non-cumulative preferential floating rate quarterly dividends, as and when declared by the Board of Directors of the Bank, equal to the then 3-month Government of Canada Treasury Bill Yield plus 2.71 per cent. Subject to certain conditions, holders may elect to convert any or all of their Preferred Shares Series 34 into an equal number of Preferred Shares Series 33 on August 25, 2025, and on August 25 of every fifth year thereafter.

The anticipated closing date is June 5, 2015. The net proceeds from the offering will be used by the Bank for general corporate purposes.

This issue comes with a great big fat first dividend, payable November 25, 2015, which should go ex sometime around the end of October. October might bring a few opportunities for dividend capture!

This issue actually looks reasonably good according to Implied Volatility theory:

impVol_BMO_150527
Click for Big

Note that the very high level of Implied Volatility is also calculated when only the NVCC-compliant issues are considered – for these issues alone, I get a spread of 93bp and Implied Volatility of 40%. This level of Implied Volatility is silly and will generally arise when the issues concerned are trading with an expectation of directionality in prices; I suggest that there are a lot of investors who figure that anything with the BMO brand name on it will trade somewhere near par forever.

This has the effect of making the lower spread issues vulnerable to a decline in credit quality and/or an increase in spreads; in other words, the higher-spread issues (such as this new issue) are getting a boatload of downside protection for free (when compared to other BMO issues ONLY!).

Jov Leon Frazer Preferred Equity Fund? What’s up?

May 26th, 2015

As most of you know, I report the returns of my competitors when I report the returns of Malachite Aggressive Preferred Fund; one of these competitors is Jov Leon Frazer Preferred Equity Fund.

I had problems in April, however – the Morningstar reporting page wasn’t updated and, in fact, the last price they had was dated 2015-4-17.

Similarly, the Globe & Mail reporting page has the last price dated 2015-4-17, although due to a hole in the space-time continuum, they report “Returns as at April 30, 2015”. Mind you, though, the index returns they report to this end-date look nothing like anything else I’ve seen to April 30, so I’ll deem it unreliable.

When in doubt, go to the horse’s mouth! The Jov Financial Solutions reporting page provides numbers to April 30, but they seem a little … suspicious. Like, for instance, the one-year return for the Class A units is reported as -11.00%, but the one-year return for the Class F units is reported as +1.96%. Now, we’re all familiar with high MERs and how they can be avoided by use of Class F units, but a difference of almost 13% over a one year period seems a little … extreme. Even for the Canadian Market.

It’s not just their web-server gone momentarily berserk. Here’s the PDF, which reports the same enormous difference. I’m considering having it framed.

Oddly, this PDF reports the same one year TXPR return to 2015-4-30 as the Globe does: -7.70%. Well, according to me and according to Blackrock, the one year return for TXPR to April 30 was -3.19%. I’m not showing their -7.70% one-year return anywhere in my records. The closest I get is -7.73% for the year ended 2010-12-31.

So I send an email to info@jovfunds.com asking them what’s going on:

Can you explain the performance reporting of the captioned fund?

The Morningstar page at http://cart.morningstar.ca/QuickTakes/fund/Performance/f_Perf.aspx?t=F000005I49&region=CAN&culture=en-CA appears to be no longer updated.

The Jov Financial Solutions page at http://jovian.transmissionmedia.ca/fundprofile_jov.aspx?f=JOV110 contains figures for returns which are so wildly different for different classes of fund units that I have great difficulty believing any of the numbers.

The Globe & Mail page at http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=59829 reports figures which appear to have ceased being updated on April 17.

Where may I find performance reporting for the fund? If it is the Jov Financial Solutions page, please help me to understand how the reported figures for the different classes are so wildly different (e.g., 1-Year for Series A is reported as -11.00%, 1-Year for Series F is reported as +1.96%).

Sincerely,

Well, I got an answer surprisingly fast:

MailEnable: Message could not be delivered to some recipients.
The following recipient(s) could not be reached:

Recipient: [SMTP:info@jovfunds.com]
Reason: Remote SMTP Server Returned: 554 5.1.2 Recipient address rejected: User unknown

Huh! So, I go to SEDAR and look for documents from Jov Leon Frazer Preferred Equity Fund. The last filing was “Amended and restated final fund facts – English”, dated March 11, 2015. No luck there!

So let’s check the Leon Frazer website. Success! I found a mention that might go a long way towards explaining the mess!

The JOV Leon Frazer Dividend Fund, the JOV Leon Frazer Bond Fund and the JOV Leon Frazer Preferred Equity Fund are all available through JovFinancial Solutions Inc., an affiliate of Leon Frazer. Industrial Alliance has indicated that it intends to merge JovFinancial Solutions Inc. with IA Clarington Investments Inc. in early 2014.

So now let’s go to the IA Clarington Website and browse funds by Asset Class …. nothing! The word “preferred” is not found on this page.

So I’m confused. I’ve been in the business for nearly thirty years and I’m confused. God knows what Mom and Pop must think. If anybody can tell me a story about this fund, please let me know.

Update: Roger in the comments found the answer! The public parts of the fund were closed and folded into an IA Clarington Money-Market Fund. The private parts (!) continue as some kind of pooled fund for Leon Frazer clients.

JovFinancial Solutions Inc. (“JovFinancial”) and T.E. Investment Counsel Inc. (“TEIC” and together with JovFinancial, the “Managers”) are announcing a proposal to terminate certain series of Jov Leon Frazer Bond Fund, Jov Leon Frazer Dividend Fund and Jov Leon Frazer Preferred Equity Fund (the “Jov Leon Frazer Funds”) and Jov Prosperity Canadian Fixed Income Fund, Jov Prosperity Canadian Equity Fund, Jov Prosperity U.S. Equity Fund and Jov Prosperity International Equity Fund (the “Jov Prosperity Funds”) and, subject to regulatory approval, merge such terminating series with IA Clarington Money Market Fund. Managed accounts of Leon Frazer & Associates Inc. clients hold Series I units of the Jov Leon Frazer Funds, which will not be merged, and managed accounts of TEIC clients hold Series B and O units of the Jov Prosperity Funds, which will not be merged, and as a result such managed accounts will be unaffected by this merger.

Effective immediately, any Series A, F, O and T of the Jov Leon Frazer Funds are closed to new purchases. Series A, F and I of the Jov Prosperity Funds were closed to new purchases on January 6, 2012.

Subject to regulatory approval, the Managers propose that on or about January 23, 2015:
(a) Series A, F and O of the Jov Leon Frazer Funds will be merged with IA Clarington Money Market Fund, and securityholders thereof will receive units of Series A, F and O, respectively, of IA Clarington Money Market Fund on a dollar for dollar basis. Securityholders of Series T of Jov Leon Frazer Preferred Equity Fund will receive units of Series A of the IA Clarington Money Market Fund; and
(b) Series A, F and I of the Jov Prosperity Funds will be merged with IA Clarington Money Market Fund, and securityholders thereof will receive units of Series A, DF and I, respectively, of IA Clarington Money Market Fund on a dollar for dollar basis.

If regulatory approval for the mergers is not obtained, the affected series will be terminated.

It’s very surprising that this information is so obscure. Just a simple note and somewhat more explicit link on the fund’s web-page (which is linked from the JovFunds Products Page) would have saved a lot of aggravation. I will cheerfully admit that a draft of the press release quoted above is also linked on the products page … but not too obviously and Holy Smokes! If I find the fund name and click the word “Profile” right beside it, shouldn’t that be enough? And were they really so cheap that they had to shut down the “info@jovfunds.com” account, instead of putting in an auto-responder with a brief explanation?

Update, 2015-5-31: Actually, it appears that holders were cashed out:

JovFinancial Solutions Inc. and T.E. Investment Counsel Inc. Wednesday provided an update on their previously announced proposal to terminate certain series of several Jov Funds.

The affected funds are: Jov Leon Frazer Bond Fund; Jov Leon Frazer Dividend Fund; and Jov Leon Frazer Preferred Equity Fund (the Jov Leon Frazer Funds); and Jov Prosperity Canadian Fixed Income Fund; Jov Prosperity Canadian Equity Fund; Jov Prosperity U.S. Equity Fund; and Jov Prosperity International Equity Fund (the Jov Prosperity Funds).

Series A, F, O and T of the Jov Leon Frazer Funds were closed to new purchases on Oct. 23, 2014 and Series A, F and I of the Jov Prosperity Funds were closed to new purchases on Jan. 6, 2012.

On Oct. 23, 2014, the companies announced a proposal to merge the affected series with IA Clarington Money Market Fund on Jan. 23, 2015. However, the regulatory exemptions necessary to permit the issuance of units of the IA Clarington Money Market Fund have not been granted.

As a result, unitholders will receive cash proceeds on the termination of the affected series. In order to provide unitholders sufficient time to respond to this change, the companies have elected to defer the terminations until April 17.

May 26, 2015

May 26th, 2015

Fischer doesn’t want the Fed to trigger a global depression:

Federal Reserve Vice Chairman Stanley Fischer said policy makers will consider global growth as they begin to raise interest rates, and that they could increase them more gradually should the world economy falter.

“If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” Fischer said in a speech prepared for delivery Tuesday at Tel Aviv University.

The Fed will weigh how raising rates will affect other nations, said Fischer, 71, a former governor of the Bank of Israel. While tightening will probably will cause spillovers, the Fed is working to communicate policy changes clearly to smooth the transition, and emerging market economies are in better shape to endure the shift than in recent years, he said.

Meanwhile the all-important data seems to be strengthening the hands of Fed hawks:

U.S. stocks fell the most in three weeks, as better-than-forecast economic data and comments by Federal Reserve officials bolstered bets for an interest-rate increase this year.

A better-than-forecast increase in capital goods orders and new-home sales came after Federal Reserve Chair Janet Yellen indicated the central bank will raise borrowing costs this year if the economy improves as she expects. Fed Bank of Cleveland President Loretta Mester echoed her comments on Monday, saying the U.S. economy is close to the point where it can support higher rates.

But there’s always a counter-argument:

For years, the $12.6 trillion U.S. Treasury market has signaled — correctly — that the Federal Reserve was too optimistic in its outlook for the economy and interest rates.

That’s no different now even though policy makers have moved closer to how traders view the world, which is to say that it wouldn’t be surprising if the central bank failed to lift borrowing costs this year.

Despite the backup in yields in recent weeks, bond prices still signal the unexpected slowdown in the economy was more than just the result of some bad weather that kept Americans indoors and idled factories in the first quarter. Regardless of when the first increase comes, futures show traders don’t see rates exceeding 1 percent by the end of 2016, versus the Fed’s estimate of 1.875 percent.

I can’t say I’m very happy about Yellen’s deprecation of the Jackson Hole conference:

It turns out that being the first woman to head the Federal Reserve is not the only tradition Janet Yellen is breaking. The Fed said Tuesday that she plans on skipping this year’s gathering of the world’s central bankers at Jackson Hole, Wyoming.

The faithful attendance of Yellen’s three predecessors — Paul Volcker, Alan Greenspan and Ben Bernanke — made the conference sponsored by the Kansas City Federal Reserve Bank a widely sought invitation by central bankers from around the globe. Kansas City Fed officials said they would have no comment on Yellen’s decision.

There’s a rather opaque story on Bloomberg about corporate bonds – I think it’s just a little chatter about capturing new issue concessions:

However, one place where alpha can be generated is in the corporate bond market where big companies sell their debt. The reason is simple. When companies sell a new bond there is typically a lag between the bond being issued and when it’s included in benchmark fixed income indexes.

If the bonds perform well during that one month, then investment managers lucky enough to have purchased the debt have an immediate leg-up on the benchmark, or pure alpha.

Citigroup credit strategist Jason Shoup estimates that investors can add 20 basis points of alpha, as measured by annual excess returns, to their portfolios just by purchasing new-issue bonds. In a world of low and even negative interest rates, that is a not insignificant opportunity and it’s one that investors have been eager to take advantage of in recent years.

newIssueConcessionCapture
Click for Big

So my first thought is that it’s about capturing the new issue concession … the extra yield the issuers have to pay in order for investors to bother buying the issue. It is also possible that there is a duration effect – for instance, somebody investing in medium term bonds is restricted to 5-10 years maturity (maybe with some cheating) and new issues will tend to be at the top of that range. But it’s not clear!

Note that there is typically a new issue concession for Canadian preferred shares … but typically it’s the investors who pay it!

I don’t know if I can take much more of this. Yesterday a financial regulator did something useful; today, the Federal Conservatives have had a good idea:

Sorry, finding money to save for retirement remains strictly your problem. But choosing the right investments for your retirement savings would be radically simplified under the government’s proposal to allow people to voluntarily contribute additional money to the Canada Pension Plan beyond the required amounts.

Baffled by the choice of mutual funds, exchange-traded funds, closed-end funds, hedge funds, structured products, term deposits and individual stocks and bonds? Put some extra money into the CPP instead.

Mr. [Fred] Vettese [chief actuary at the benefits consulting firm Morneau Shepell] said voluntary extra payments would especially look good in comparison to investing in mainstream mutual funds, where the cost of ownership can run between 2 and 3 per cent. “My estimate would be that over a lifetime, the additional pension that people would be able to earn [through the voluntary CPP option] would be an extra 25 to 30 per cent on the same level of contributions.”

Yes, post-secondary education costs are going through the roof. And yes, I am highly indignant about this. But it’s an ill wind…:

Ivy League presidential pay is looking more like the big leagues.

Columbia University paid President Lee Bollinger $4.6 million in 2013, a 36 percent increase from the year before, according to a tax filing released Tuesday. Yale University recently revealed it paid former President Richard Levin a bonus of $8.5 million when he retired in 2013 after 20 years.

Presidential pay at elite universities is increasingly resembling that of corporate America, with performance bonuses and exit packages.

Another day, another slaughter, as us preferred share investors like to say! However it was, technically, a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 23bp, FixedResets down 33bp and DeemedRetractibles gaining 7bp. A lengthy Performance Highlights table is dominated by losers. Volume was quite 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:

impVol_TRP_150526
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.06 to be $1.02 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.85 cheap at its bid price of 24.90.

impVol_MFC_150526
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Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.26 to be $0.51 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.05 to be $0.53 cheap.

impVol_BAM_150526
Click for Big

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.75 to be $0.46 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.65 and appears to be $0.43 rich.

impVol_FTS_150526
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.40, looks $0.76 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.77 and is $0.37 rich.

pairs_FR_150526
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Investment-grade pairs predict an average over the next five-odd years of about 0.45%, including the TRP.PR.A / TRP.PR.F at -0.23%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.22%, while DC.PR.B / DC.PR.D is at -1.01.

pairs_FF_150526
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -1.5762 % 2,249.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.5762 % 3,933.6
Floater 3.23 % 3.42 % 52,565 18.65 4 -1.5762 % 2,391.7
OpRet 4.45 % -10.44 % 30,931 0.10 2 0.0198 % 2,780.2
SplitShare 4.60 % 4.72 % 65,593 3.34 3 -0.0939 % 3,241.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0198 % 2,542.2
Perpetual-Premium 5.47 % 2.92 % 62,382 0.43 18 0.0197 % 2,516.2
Perpetual-Discount 5.09 % 5.04 % 120,522 15.33 15 -0.2300 % 2,764.1
FixedReset 4.44 % 3.76 % 272,260 16.40 86 -0.3268 % 2,398.1
Deemed-Retractible 4.98 % 3.44 % 102,505 0.74 34 0.0680 % 2,623.4
FloatingReset 2.55 % 2.91 % 58,102 6.15 7 0.0243 % 2,340.0
Performance Highlights
Issue Index Change Notes
ENB.PF.G FixedReset -2.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 4.75 %
BAM.PR.K Floater -2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 14.45
Evaluated at bid price : 14.45
Bid-YTW : 3.48 %
SLF.PR.G FixedReset -2.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.55
Bid-YTW : 6.69 %
TRP.PR.B FixedReset -2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 15.72
Evaluated at bid price : 15.72
Bid-YTW : 3.76 %
BAM.PR.B Floater -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 14.71
Evaluated at bid price : 14.71
Bid-YTW : 3.42 %
HSE.PR.A FixedReset -1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 16.87
Evaluated at bid price : 16.87
Bid-YTW : 4.29 %
ENB.PR.Y FixedReset -1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 18.74
Evaluated at bid price : 18.74
Bid-YTW : 4.77 %
ENB.PF.A FixedReset -1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 20.68
Evaluated at bid price : 20.68
Bid-YTW : 4.71 %
MFC.PR.F FixedReset -1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.48
Bid-YTW : 6.28 %
BAM.PR.C Floater -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 3.44 %
ENB.PF.C FixedReset -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 4.69 %
ENB.PF.E FixedReset -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 4.71 %
MFC.PR.N FixedReset -1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 4.21 %
BAM.PF.D Perpetual-Discount -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 22.55
Evaluated at bid price : 22.95
Bid-YTW : 5.40 %
TRP.PR.A FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 3.71 %
BAM.PF.G FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 23.03
Evaluated at bid price : 24.65
Bid-YTW : 4.05 %
BAM.PF.F FixedReset -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 23.00
Evaluated at bid price : 24.42
Bid-YTW : 4.10 %
BAM.PR.M Perpetual-Discount -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 21.85
Evaluated at bid price : 22.13
Bid-YTW : 5.44 %
TD.PF.B FixedReset -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 22.88
Evaluated at bid price : 24.10
Bid-YTW : 3.48 %
BIP.PR.A FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 23.02
Evaluated at bid price : 24.61
Bid-YTW : 4.64 %
CM.PR.P FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 22.66
Evaluated at bid price : 23.70
Bid-YTW : 3.53 %
TD.PR.S FixedReset -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 3.16 %
FTS.PR.G FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 21.73
Evaluated at bid price : 22.00
Bid-YTW : 3.73 %
BAM.PR.T FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 21.31
Evaluated at bid price : 21.60
Bid-YTW : 4.05 %
FTS.PR.J Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 23.89
Evaluated at bid price : 24.30
Bid-YTW : 4.89 %
IAG.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 : 5.51 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.E FixedReset 127,870 TD crossed 50,000 at 25.05. Scotia crossed 40,000 at the same price; RBC crossed 18,000 at the same price again.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 23.13
Evaluated at bid price : 25.00
Bid-YTW : 3.76 %
FTS.PR.M FixedReset 96,330 RBC crossed 71,900 at 24.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 23.10
Evaluated at bid price : 24.71
Bid-YTW : 3.59 %
FTS.PR.G FixedReset 91,359 RBC crossed 75,000 at 22.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 21.73
Evaluated at bid price : 22.00
Bid-YTW : 3.73 %
ENB.PR.T FixedReset 90,999 RBC crossed 50,000 at 19.35.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 19.26
Evaluated at bid price : 19.26
Bid-YTW : 4.76 %
BAM.PF.F FixedReset 85,779 TD crossed 80,000 at 24.60.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 23.00
Evaluated at bid price : 24.42
Bid-YTW : 4.10 %
ENB.PR.F FixedReset 71,619 TD crossed 50,000 at 19.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 19.26
Evaluated at bid price : 19.26
Bid-YTW : 4.74 %
There were 48 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.L FixedReset Quote: 23.10 – 23.88
Spot Rate : 0.7800
Average : 0.5524

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.10
Bid-YTW : 4.49 %

HSE.PR.A FixedReset Quote: 16.87 – 17.43
Spot Rate : 0.5600
Average : 0.3851

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 16.87
Evaluated at bid price : 16.87
Bid-YTW : 4.29 %

MFC.PR.N FixedReset Quote: 23.75 – 24.42
Spot Rate : 0.6700
Average : 0.5094

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 4.21 %

TD.PF.C FixedReset Quote: 23.86 – 24.40
Spot Rate : 0.5400
Average : 0.4025

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 22.74
Evaluated at bid price : 23.86
Bid-YTW : 3.51 %

ENB.PF.G FixedReset Quote: 20.73 – 21.10
Spot Rate : 0.3700
Average : 0.2331

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 4.75 %

ENB.PR.D FixedReset Quote: 18.65 – 19.08
Spot Rate : 0.4300
Average : 0.2941

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-26
Maturity Price : 18.65
Evaluated at bid price : 18.65
Bid-YTW : 4.72 %

May 25, 2015

May 25th, 2015

Knock me down with a feather! A regulatory organization has done something useful:

Some of the country’s top financial minds think you should expect to make 6.3-per-cent a year in Canadian stocks over the long term and 3.9 per cent in bonds.

You’ll find these numbers in a new document created by a pair of financial planning organizations as a reference for planners and advisers. The investment industry works hard to maintain an aura of expertise in matters such as estimating returns, but the truth is that this process can be subject to personal biases and agendas. For example, an adviser might try to wow a new client by insisting big returns are possible.

The new Projection Assumption Guidelines (download the document here) aim to standardize and professionalize the planning process by providing the latest and best thinking on returns, inflation, interest rates and life expectancy.

“Canadians benefit from objective assumptions, and they also benefit from a standardization of assumptions across the industry – firms and planners,” said Joan Yudelson, vice-president of professional practice at the Financial Planning Standards Council, which produced the guidelines in collaboration with the Institut québécois de planification financière. Both the IQPF and the FPSC set standards for financial planners – the IQPF in Quebec, and the FPSC by overseeing the certified financial planner (CFP) designation. The IQPF has been producing the guidelines since 2009 and recently joined forces with the FPSC.

According to the actual report:

These Guidelines were set by combining assumptions from the following sources (each weighted at 20%):

  • assumption used in the most recent QPP actuarial analysis, weighted as follows: 50% of the medium-term assumption (2013 to 2022) and 50% of the long-term assumption (2023 and later)
  • assumption used in the most recent CPP actuarial report (2019 and later)
  • result of the Towers Watson annual portfolio managers’ survey, weighted as follows:1/15 of the short-term projection, 4/15 of the medium-term projection and 10/15 of the long-term projection
  • general assumption of the Aon Hewitt (formerly Aon Consulting) index
  • historic returns on these asset classes over the 50 years ending the previous December 31 (adjusted for inflation according to what follows).

I don’t see the point of including historic returns to estimate future returns of bonds, but the projection of 3.9% may be achieved with a portfolio of long corporates, so I’m not going to complain too loudly.

The Globe also published a table taken from the report of the historical figures:

historicProjections
Click for Legible
I don’t understand why PNGs look so terrible in WordPress

There was carnage on the Canadian preferred share market today, with PerpetualDiscounts down 43bp, FixedResets off 30bp and DeemedRetractibles losing 52bp. DeemedRetractibles of the insurance persuasion got hammered, ENB FixedResets were prominent losers, while the only winners on the lengthy performance highlights table were FixedResets. Volume was low.

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

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

Here’s TRP:

impVol_TRP_150525
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.90 to be $0.84 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.85 cheap at its bid price of 24.88.

impVol_MFC_150525
Click for Big

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

Most expensive is MFC.PR.N, resetting at +230 on 2020-3-19, bid at 24.04 to be $0.44 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.52 to be $0.62 cheap.

impVol_BAM_150525
Click for Big

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.75 to be $0.53 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.94 and appears to be $0.51 rich.

impVol_FTS_150525
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.32, looks $0.88 cheap and resets 2015-6-1. FTS.PR.M, with a spread of +248bp and resetting 2019-12-1, is bid at 24.90 and is $0.59 rich.

pairs_FR_150525
Click for Big

Investment-grade pairs predict an average over the next five-odd years of about 0.35%, including the TRP.PR.A / TRP.PR.F at -0.50%. On the junk side, the FFH.PR.E / FFH.PR.F pair is at -1.14%.

pairs_FF_150525
Click for Big

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

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.2065 % 2,285.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.2065 % 3,996.6
Floater 3.18 % 3.36 % 53,225 18.81 4 -0.2065 % 2,430.0
OpRet 4.45 % -9.80 % 32,099 0.10 2 0.0198 % 2,779.7
SplitShare 4.60 % 4.83 % 62,950 3.35 3 0.1209 % 3,244.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0198 % 2,541.7
Perpetual-Premium 5.47 % 2.92 % 62,866 0.43 18 -0.0808 % 2,515.7
Perpetual-Discount 5.08 % 5.06 % 118,470 15.35 15 -0.4274 % 2,770.5
FixedReset 4.43 % 3.77 % 271,409 16.03 86 -0.3002 % 2,406.0
Deemed-Retractible 4.97 % 3.52 % 107,451 0.82 35 -0.5184 % 2,621.6
FloatingReset 2.55 % 2.92 % 57,019 6.15 7 0.1763 % 2,339.4
Performance Highlights
Issue Index Change Notes
IAG.PR.A Deemed-Retractible -3.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.18
Bid-YTW : 5.71 %
CIU.PR.C FixedReset -2.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 16.35
Evaluated at bid price : 16.35
Bid-YTW : 3.79 %
SLF.PR.B Deemed-Retractible -2.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.53
Bid-YTW : 5.56 %
MFC.PR.B Deemed-Retractible -2.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 5.78 %
SLF.PR.E Deemed-Retractible -2.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.35
Bid-YTW : 5.93 %
SLF.PR.C Deemed-Retractible -2.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.17
Bid-YTW : 5.98 %
MFC.PR.C Deemed-Retractible -1.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 5.63 %
TRP.PR.C FixedReset -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 17.31
Evaluated at bid price : 17.31
Bid-YTW : 3.85 %
MFC.PR.L FixedReset -1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.10
Bid-YTW : 4.48 %
VNR.PR.A FixedReset -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 23.00
Evaluated at bid price : 23.84
Bid-YTW : 4.10 %
SLF.PR.D Deemed-Retractible -1.67 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.24
Bid-YTW : 5.94 %
CU.PR.G Perpetual-Discount -1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 22.29
Evaluated at bid price : 22.64
Bid-YTW : 4.97 %
ENB.PR.J FixedReset -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 20.63
Evaluated at bid price : 20.63
Bid-YTW : 4.60 %
BAM.PF.C Perpetual-Discount -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 22.30
Evaluated at bid price : 22.67
Bid-YTW : 5.42 %
ENB.PR.F FixedReset -1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 19.23
Evaluated at bid price : 19.23
Bid-YTW : 4.74 %
GWO.PR.I Deemed-Retractible -1.34 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 5.42 %
SLF.PR.A Deemed-Retractible -1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.40
Bid-YTW : 5.58 %
PWF.PR.S Perpetual-Discount -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 24.09
Evaluated at bid price : 24.50
Bid-YTW : 4.92 %
ENB.PF.A FixedReset -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 4.62 %
ENB.PR.B FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 18.86
Evaluated at bid price : 18.86
Bid-YTW : 4.67 %
ENB.PF.C FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 4.62 %
ENB.PF.G FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 4.61 %
BAM.PR.N Perpetual-Discount -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 21.94
Evaluated at bid price : 22.32
Bid-YTW : 5.39 %
MFC.PR.F FixedReset -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.80
Bid-YTW : 6.07 %
MFC.PR.N FixedReset -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.04
Bid-YTW : 4.06 %
PWF.PR.P FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 3.67 %
RY.PR.M FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 22.85
Evaluated at bid price : 24.25
Bid-YTW : 3.72 %
MFC.PR.M FixedReset 1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.25
Bid-YTW : 4.02 %
SLF.PR.G FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.98
Bid-YTW : 6.39 %
FTS.PR.H FixedReset 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 16.32
Evaluated at bid price : 16.32
Bid-YTW : 3.85 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.D FixedReset 453,161 Scotia crossed blocks of 245,000 and 194,100 at 18.70. Nice tickets!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 18.78
Evaluated at bid price : 18.78
Bid-YTW : 4.69 %
TRP.PR.C FixedReset 285,118 Nesbitt crossed 275,900 at 17.43. There’s another nice ticket!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 17.31
Evaluated at bid price : 17.31
Bid-YTW : 3.85 %
ENB.PR.T FixedReset 92,041 RBC crossed 25,000 at 19.35. Scotia crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 19.33
Evaluated at bid price : 19.33
Bid-YTW : 4.74 %
ENB.PR.P FixedReset 64,834 Desjardins crossed 50,000 at 19.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 4.74 %
TRP.PR.G FixedReset 63,103 Nesbitt crossed 60,000 at 24.94.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 23.09
Evaluated at bid price : 24.88
Bid-YTW : 3.86 %
TD.PF.E FixedReset 41,400 TD crossed 35,000 at 25.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.06
Bid-YTW : 3.73 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.A Deemed-Retractible Quote: 23.18 – 23.98
Spot Rate : 0.8000
Average : 0.4983

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.18
Bid-YTW : 5.71 %

CIU.PR.C FixedReset Quote: 16.35 – 17.16
Spot Rate : 0.8100
Average : 0.6043

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 16.35
Evaluated at bid price : 16.35
Bid-YTW : 3.79 %

SLF.PR.B Deemed-Retractible Quote: 23.53 – 23.98
Spot Rate : 0.4500
Average : 0.2720

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.53
Bid-YTW : 5.56 %

VNR.PR.A FixedReset Quote: 23.84 – 24.38
Spot Rate : 0.5400
Average : 0.3747

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 23.00
Evaluated at bid price : 23.84
Bid-YTW : 4.10 %

MFC.PR.B Deemed-Retractible Quote: 22.90 – 23.39
Spot Rate : 0.4900
Average : 0.3419

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 5.78 %

CU.PR.G Perpetual-Discount Quote: 22.64 – 23.00
Spot Rate : 0.3600
Average : 0.2274

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-05-25
Maturity Price : 22.29
Evaluated at bid price : 22.64
Bid-YTW : 4.97 %

DGS.PR.A To Get Bigger

May 25th, 2015

Brompton Group has announced:

Dividend Growth Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus with respect to a treasury offering of class A and preferred shares. The offering has been priced at $9.00 per class A share and $10.00 per preferred share. The offering prices were determined so as to be non-dilutive to the net asset value per unit of the Company on May 22, 2015, as adjusted for dividends and certain expenses accrued prior to or upon settlement of the offering.

The Company invests in a portfolio of common shares of high quality, large capitalization companies, which have among the highest dividend growth rates of those companies included in the S&P/TSX Composite Index. Upon closing of the offering, the portfolio will consist of common shares of the following 20 companies:

Great-West Lifeco Inc. The Bank of Nova Scotia CI Financial Corp. Shaw Communications Inc.
Industrial Alliance Insurance and Financial Services Inc. Canadian Imperial Bank of Commerce IGM Financial Inc. TELUS Corporation
Manulife Financial Corporation National Bank of Canada Power Corporation of Canada Canadian Utilities Limited
Sun Life Financial Inc. Royal Bank of Canada BCE Inc. Enbridge Inc.
Bank of Montreal The Toronto-Dominion Bank Rogers Communications Inc. TransCanada Corporation

The investment objectives for the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per class A share, and to provide the opportunity for growth in net asset value per class A share.

The investment objectives for the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions currently in the amount of $0.13125 per preferred share, representing a yield on the original issue price of 5.25% per annum and to return the original issue price to holders of preferred shares on the maturity date of the Company, November 28, 2019.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC, and Scotiabank and includes TD Securities Inc., BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Dundee Securities Ltd., Haywood Securities Inc., Industrial Alliance Securities Inc. and Mackie Research Capital Corporation.

I see the NAVPU as of May 21 is 18.19, while the units are being sold for 19.00 … nice work!

DGS.PR.A was last mentioned on PrefBlog when it got bigger last November. DGS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

Update, 2015-6-5: Offering completed:

Dividend Growth Split Corp. (the “Company”) is pleased to announce that it has completed a treasury offering of 2,200,000 class A shares and 2,200,000 preferred shares for aggregate gross proceeds of $41.8 million. The class A shares and preferred shares will continue to trade on the Toronto Stock Exchange under the existing symbols DGS (class A shares) and DGS.PR.A (preferred shares).