Issue Comments

BBD.PR.D To Reset to 255% of GOC5

Bombardier Inc. has announced:

the basis for resetting the dividend rate on its Series 3 Preferred Shares in accordance with the terms applicable to those shares.

Holders of Bombardier Inc. Series 2 Preferred Shares have the right to convert all or part of their shares, effective on August 1, 2012, on a one-for-one basis into Series 3 Preferred Shares. Holders of Series 3 Preferred Shares have the right to convert all or part of their shares, effective on August 1, 2012, on a one-for-one basis into Series 2 Preferred Shares. Holders who do not convert their shares will retain their Series 2 Preferred Shares or Series 3 Preferred Shares, as the case may be.

In the case of the Series 2 Preferred Shares, starting as of August 1, 2012, holders will continue to receive a monthly floating adjustable cash dividend, as and when declared by the Board of Directors of Bombardier Inc., based on a dividend rate equal to a percentage of the prime rate, subject to certain adjustments in accordance with the terms of such shares.

In the case of the Series 3 Preferred Shares, starting as of August 1, 2012, holders will receive a quarterly fixed cash dividend for the following five years, as and when declared by the Board of Directors of Bombardier Inc., based on a fixed rate equal to 255% of the yield on five-year non-callable Government of Canada bonds determined as at July 11, 2012, in accordance with the terms of such shares. The annual dividend rate applicable to the Series 3 Preferred Shares will be published on July 12, 2012 in several newspapers.

Any registered shareholder who wishes to convert his or her Series 2 and/ or Series 3 Preferred Shares must complete and sign the conversion panel contained on the back of the Series 2 or Series 3 Preferred Share certificate as the case may be, and deliver it, at the latest by 5:00 p.m. (Montréal time) on July 18, 2012, to Computershare Investor Services Inc.

Shareholders who are beneficial owners and who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and follow their instructions. In that case, it is important that they follow such instructions and act in the time frame advised so as to provide enough time to their broker or other nominee to meet the July 18, 2012 deadline.

If, after July 18, 2012, Bombardier Inc. determines that there would be less than one million Series 2 Preferred Shares outstanding after the conversion date (being August 1, 2012), then all remaining Series 2 Preferred Shares will automatically be converted into Series 3 Preferred Shares on a one-for-one basis. However, if, after such date, Bombardier Inc. determines that there would be less than one million Series 3 Preferred Shares outstanding after the conversion date (being August 1, 2012), then all remaining Series 3 Preferred Shares will automatically be converted into Series 2 Preferred Shares on a one-for-one basis. In either case, Bombardier Inc. shall give a written notice to that effect to holders of such remaining shares no later than July 25, 2012.

Subject to the conditions mentioned in the previous paragraph, on August 1, 2017, and every five years thereafter, holders of Series 2 Preferred Shares and holders of Series 3 Preferred Shares will have again the right to convert their shares into shares of the other series.

At the current five-year Canada yield (GOC5) of 1.19% (!) the indicated new yield will be 3.0345% or a little over $0.75 p.a. – a steep decline from the current payment of 5.267%, or $1.31675.

I have expressed astonishment in recent editions of PrefLetter that the price differential between BBD.PR.D and BBD.PR.B (the Ratchet Rate issue with which it is interconvertible) has remained so high for so long (closing prices June 14 were 17.75 and 14.90, respectively). But the preferred share market is an inefficient place!

The last arbitrage opportunity was, of course, five years ago. Both BBD.PR.B and BBD.PR.D are tracked by HIMIPref™; both issues are relegated to the Scraps index on credit concerns.

Interesting External Papers

BoC Releases Spring 2012 Review and June 2012 Financial Destabilization Report

The Bank of Canada has released the Bank of Canada Review – Spring 2012 with articles:

  • On the Adjustment of the Global Economy
  • On the Adjustment of the Global Economy
  • Understanding Systemic Risk in the Banking Sector: A MacroFinancial Risk Assessment Framework
  • Conference Summary: New Developments in Payments and Settlement

They have also released the June 2012 Financial System Review with articles:

The article by Pothik Chatterjee, Lana Embree and Peter Youngman on central clearing chants the familiar slogan:

The introduction of an appropriately risk-controlled CCP for the fixed-income market improves this market’s resilience by mitigating counterparty credit risk, thus reducing the potential for disruptions to be transmitted through the financial system.

… but does admit …

Given the centrality of the underlying market, the Bank considers that CDCS could pose systemic risk if appropriate risk controls are not in place (i.e., it is systemically important).

It has long been a puzzle to me just exactly why all these art-school dweebs who control politics and regulation are in favour of a system subject to single-point failure as opposed to a network. Can networks freeze? Sure:

During the financial crisis, the Canadian fixed-income repo market, like those in other countries, experienced periods of illiquidity as a result of lenders of cash taking measures to reduce their credit exposures to borrowers. When many lenders undertook these measures simultaneously, the amount of financing available was abruptly reduced, creating severe funding pressures in the repo market.

I always thought that reducing exposure to dubious credits was what bankers are paid to do, but I’m just old fashioned that way. I agree that sometimes this can go too far and lead to an unjustified and harmful credit lock-up, but this does not prove that single-point systems are better; if for no other reason than that is the point at which the central bank is supposed to step in and provide liquidity at above market rates – an alternative which is not discussed.

The authors also point out:

The decrease in repo activity was relatively more pronounced in Canada than in other jurisdictions, since repo business accounted for a greater share of the balance sheets of domestic banks than it did for their global competitors.

Sadly, they do not provide a business purpose for this statistic, nor do they discuss the regulatory implications of this preference.

However, they do disclose that a major source of the industry’s enthusiasm for such a move is regulatory arbitrage via elimination of the gross position:

To minimize the potential contraction of the repo market resulting from balance-sheet pressures during future stressful periods, members of the Investment Industry Association of Canada (the industry) sought ways to increase netting efficiencies in order to offset repo and reverse repo transactions on the asset and liability sides of the balance sheet.[footnote] The industry concluded that an appropriately designed CCP would allow them to reduce their balance-sheet exposures to the repo business by netting offsetting positions without changing their underlying repo activity. Using a CCP would therefore create a more resilient and efficient balance sheet that could absorb financial shocks with greater ease.

[Footnote] Without a CCP, if a bank transacts in both a repo and a reverse repo for the same security and term, but with different counterparties, both a liability and an asset are created on the bank’s balance sheet. If both trades are novated by a CCP, however, the bank would have offsetting trades with the same counterparty, allowing the counterparties to net the trades and not create separate assets and liabilities on their balance sheets.

Sure – just like netting out all deposits and loans would help shrink the balance sheet, too.

Credit risk is addressed as follows:

As depicted in Figure 3, in the event that CDCC faced a credit loss in closing out a member’s positions, the defaulter’s variation and initial margin and clearingfund contributions would be used first to absorb these losses. If this were insufficient, CDCC would use its capital to absorb the next $5 million of losses. If these funds were still not enough, residual losses would be borne by the surviving members’ contributions to the clearing fund. Members would be obliged to make an
additional “top-up” contribution to the clearing fund of up to 100 per cent of the value of their original contribution.

So clearly, another incentive to support the scheme is the ability to collectivize credit risk. You want to do a $20-billion deal with the Bank of Porky’s Corners? No problem! Other guys are worrying about credit quality and in the event of default your competitors will bear most of the cost!

But don’t worry about default. Everybody knows that a 22-year-old regulator with a degree in Medieval Horticulture and a certificate in boxtickingology can make much more judicious credit decisions than any dumb old banker.

You don’t actually have the $20-billion you’re lending to the Bank of Porky’s Corners and you have to fund it yourself with a reverse-repo? Again, no problem! You’ll be able to net out your repo positions and the offsetting transactions won’t attract any capital charge! Jack it up to the skies, man! If you can make a margin of a millionth of a beep, it’s all profitable! It’s all free money!

But that’s not the best part. The best part is:

Completion of the second phase will allow interdealer brokers to offer anonymous trading for repos cleared by the CCP, which are known as “blind” repos.

No moral hazard there, no sir!

Should all of CDCC’s private sources of liquidity be insufficient to manage a default, the Bank of Canada has the discretion to act as liquidity provider of last resort on a secured basis.

There’s no mention of this being done at a stiff premium to market (which didn’t happen during the crisis anyway).

Update, 2012-7-14: Note that the provisions for covering losses are equivalent to Unfunded Contingent Capital – whereas the BCBS speaks approvingly of pre-funded Contingent Capital and so does OSFI boss Dickson. The fact that the CCP’s notional capital is unfunded is a serious flaw in the scheme.

Mind you, though, I have no intrinsic objection to the idea of a CCP … but if it lends like a bank and borrows like a bank, it should be capitalized like a bank and regulated like a bank.

Market Action

June 13, 2012

I can’t say I’m against this move – but it does open up a can of worms:

Denmark’s government agreed to ease rules for the country’s pension firms to help reduce their liabilities as record-low bond yields inflate the value of their obligations.

Pension companies and life insurers will be allowed to raise the discount rate they use to calculate their liabilities to better reflect long-term growth and inflation prospects, the Business and Growth Ministry in Copenhagen said in a statement late yesterday. The decision sent yields on longer-maturity bonds soaring as the industry’s need to buy up debt assets to match their pension obligations was reduced.
…
The Danish move follows similar changes in Sweden, where 10-year yields surged 30 basis points on June 7 after the country’s regulator put a floor on the discount rate pension funds use to calculate liabilities. Nordic pension funds had come under pressure to increase their asset purchases as the region’s haven status from the debt crisis sent bond values higher and swelled the value of their liabilities.

The US housing market has a new kind of problem:

Funds planning to invest more than $6 billion to buy and rent foreclosed homes are finding it easy to raise money. The difficulty is spending it.

The number of low-cost foreclosed homes coming to market has dropped, bulk sales have been slow to materialize and prices are recovering in markets such as Phoenix, making it hard for private-equity firms, hedge funds and pension systems to buy as many homes as they need.
…
Investors are trying to spend at least $6.4 billion on single-family rentals, including from funds such as Colony Capital LLC, GTIS Partners, KKR & Co., Oaktree Capital Group LLC (OAK), Och-Ziff Capital Management Group LLC (OZM) and the Alaska Permanent Fund Corp. They want to take advantage of U.S. home prices that are 35 percent below the 2006 peak and growing demand for rentals as the homeownership rate sits at the lowest level since 1997.

There is brinksmanship in Greece:

Alexis Tsipras said he expects the European Union will do all it can to keep Greece in the euro even if he wins elections and carries out his promise to repeal the austerity measures required to receive emergency loans.

“We have no sense that European partners will follow this tactic of blackmail heard from some quarters and stop funding,” Tsipras, whose Syriza party is vying for first place in pre- election polls, said in an interview in Athens today with Bloomberg Television. “Something like that would be catastrophic not only for Greece but for the entire euro area.”

BIS has released a working paper by Mathias Drehmann, Claudio Borio and Kostas Tsatsaronis titled Characterising the financial cycle: don’t lose sight of the
medium term!:

We characterise empirically the financial cycle using two approaches: analysis of turning points and frequency-based filters. We identify the financial cycle with the medium-term component in the joint fluctuations of credit and property prices; equity prices do not fit this picture well. We show that financial cycle peaks are very closely associated with financial crises and that the length and amplitude of the financial cycle have increased markedly since the mid-1980s. We argue that this reflects, in particular, financial liberalisation and changes in monetary policy frameworks. So defined, the financial cycle is much longer than the
traditional business cycle. Business cycle recessions are much deeper when they coincide with the contraction phase of the financial cycle. We also draw attention to the “unfinished recession” phenomenon: policy responses that fail to take into account the length of the financial cycle may help contain recessions in the short run but at the expense of larger recessions down the road.
…
Against this backdrop, if the policymakers “overreact” to short-term developments and lose sight of the (medium-term) financial cycle that may lie behind them, they can store up bigger trouble down the road. Arguably, this is what happened both in the mid-1980s/early 1990s and in the period 2001-2007. In both cases, policymakers reacted strongly to collapses in
equity prices – the global stock market crashes of 1987 and 2001, which ushered in slowdowns in economic growth and/or actual recessions. As we have seen, however, equity prices are not a reliable indicator of the medium-term financial cycle. In fact, in both episodes credit and property prices continued to increase, benefiting from a second breath of life. A few years later, the credit and property price booms in turn collapsed, causing serious financial disruptions and dragging down the economy with them. From the perspective of the medium-term financial and business cycles, the slowdowns or contractions in 1987 and 2001 can thus be regarded as “unfinished recessions”.

We might be headed into one of the periodic outbreaks of handwringing about productivity:

Canada can’t live off its resource wealth forever and must get serious about chronically lagging productivity and innovation, says the Organization for Economic Co-operation and Development.
…
“Canada is blessed with abundant natural resources, but it needs to do more to develop other sectors of the economy if it is to maintain a high level of employment and equitable distribution of the fruits of growth,” said Peter Jarrett, head of the OECD’s Canada division and one of the authors of the study.
…
But the 128-page report’s main focus is productivity and innovation policy. The OECD pointed out that while per capita incomes are growing, productivity has stagnated for decades, and has actually declined since 2002.

Canada’s productivity and innovation conundrum isn’t a new theme for Canada. Those challenges were at the heart of last year’s federal task force report on research and development policies, chaired by Open text Corp. chairman Tom Jenkins. Ottawa moved to address several of the report’s recommendations in its March 29 budget.

R&D policies are a joke – they do nothing for productivity, they reward businesses who are willing to jump through the bureaucratic hoops – and reward the specialist lawyers and accountants who help with the application. That’s not productivity, that’s welfare. The three major impediments to Canadian productivity are a coddled financial sector, a coddled transportation sector and a coddled telecommunication sector, but these aren’t the best examples of anti-productive government policy.

I’ll believe that a Canadian government has started to care about about productivity when dairy farmers are told that 50-cow herds, and their massive indirect subsidy granted by import restrictions and dairy quotas, are nothing more than a national cash drain. Dairy farming is the most egregious Canadian example of low productivity.

There’s an interesting funding gap at Deutsche Bank:

Deutsche Bank AG (DBK) has a funding gap of as much as 14 billion euros ($17.5 billion) at its Italian and Spanish units which could reduce capital levels at the firm if those countries leave the euro, according to analysts at Espirito Santo Investment Bank.

Deutsche Bank’s loans amount to 205 percent of deposits at the Italian unit and 314 percent in Spain, according to London- based analyst Andrew Lim, who cited company filings. If those countries exit the euro and the new currencies fall 30 percent, the Frankfurt-based lender could lose as much as 4.2 billion euros of equity as the value of assets at those divisions declines while some funding remains in euros, he said.

Such cross-border funding gaps can be dangerous:

The government forced commercial banks to swallow exchange- rate losses on foreign-currency denominated mortgages by giving borrowers the option to repay their loans in a lump sum at below-market rates. Two-thirds of housing loans were denominated in foreign currencies, mostly in Swiss francs, and installments on them soared as the forint weakened.

Hungarians repaid 170,000 mortgages under the plan in a value of 1.4 trillion forint ($6.3 billion), cutting the total amount of outstanding foreign-currency mortgages by 23.3 percent, the financial market authority said in a report today.

It was a surprisingly uneventful day on the Canadian preferred share market, despite an enormous number of dividends going ex. PerpetualPremiums were off 3bp, FixedResets down 1bp and DeemedRetractibles gained 3bp. Volatility was non-existent, but volume was very high.

PerpetualDiscounts now yield 5.04%, equivalent to 6.55% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.4%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 215 bp, a significant decline from the 225bp reported June 6.

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 0.7043 % 2,318.8
FixedFloater 4.46 % 3.84 % 24,677 17.61 1 0.9000 % 3,534.7
Floater 3.14 % 3.13 % 68,287 19.42 3 0.7043 % 2,503.7
OpRet 4.82 % 2.39 % 40,842 1.02 5 -0.1387 % 2,505.6
SplitShare 5.26 % -8.67 % 47,456 0.52 4 -0.0893 % 2,719.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1387 % 2,291.1
Perpetual-Premium 5.45 % 2.56 % 77,560 0.58 26 -0.0316 % 2,228.7
Perpetual-Discount 5.04 % 5.04 % 121,683 15.39 7 -0.0567 % 2,450.7
FixedReset 5.05 % 3.19 % 201,254 4.52 71 -0.0127 % 2,390.7
Deemed-Retractible 5.03 % 3.95 % 157,068 2.89 45 0.0266 % 2,300.7
Performance Highlights
Issue Index Change Notes
No individual gains or losses exceeding 1%!
Volume Highlights
Issue Index Shares
Traded		 Notes
MFC.PR.D FixedReset 110,515 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.19
Bid-YTW : 4.10 %
TD.PR.G FixedReset 78,400 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.69
Bid-YTW : 2.95 %
TD.PR.Y FixedReset 76,790 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.59
Bid-YTW : 3.08 %
BNS.PR.O Deemed-Retractible 75,900 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-26
Maturity Price : 26.00
Evaluated at bid price : 26.82
Bid-YTW : 2.48 %
RY.PR.R FixedReset 62,750 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.37
Bid-YTW : 3.14 %
SLF.PR.D Deemed-Retractible 62,472 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.71
Bid-YTW : 6.30 %
There were 50 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.B Deemed-Retractible Quote: 22.37 – 22.97
Spot Rate : 0.6000
Average : 0.4011

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.37
Bid-YTW : 6.14 %
MFC.PR.D FixedReset Quote: 26.19 – 26.47
Spot Rate : 0.2800
Average : 0.1593

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.19
Bid-YTW : 4.10 %
NA.PR.M Deemed-Retractible Quote: 26.52 – 26.90
Spot Rate : 0.3800
Average : 0.2831

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-15
Maturity Price : 26.00
Evaluated at bid price : 26.52
Bid-YTW : 4.04 %
ELF.PR.F Perpetual-Discount Quote: 24.72 – 25.06
Spot Rate : 0.3400
Average : 0.2478

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-13
Maturity Price : 24.41
Evaluated at bid price : 24.72
Bid-YTW : 5.44 %
BAM.PR.N Perpetual-Discount Quote: 23.62 – 23.98
Spot Rate : 0.3600
Average : 0.2681

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-13
Maturity Price : 23.16
Evaluated at bid price : 23.62
Bid-YTW : 5.01 %
CM.PR.K FixedReset Quote: 26.15 – 26.49
Spot Rate : 0.3400
Average : 0.2545

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 3.44 %
Market Action

June 12, 2012

Play the exciting new Spanish Shell Game!

Spanish bond yields surged the most in four months in the first trading after the government in Madrid sought a bailout for its banks. Investors speculated the 100 billion euros ($125 billion) may not be enough.

The lifeline from the euro area, aimed at loosening the connection between banks and the state, risks doing the opposite as foreign investors continue to shun the nation’s bonds and Prime Minister Mariano Rajoy’s government grows increasingly dependent on domestic lenders.

“This 100 billion will be added to the public finances of Spain so it just reinforces the link between banks and the sovereign,” Olly Burrows, credit analyst at Rabobank International, said in a phone interview from London. “Spain is receiving funds to bail out its banks, which have been buying Spanish debt while everyone else has been getting out.”
…
Spanish banks were among the biggest beneficiaries of 1 trillion euros of three-year emergency loans from the ECB, which were recycled into sovereign bonds in a trend Economy Minister Luis de Guindos said in April “increased the correlation between sovereign risk and banking risk.” The ECB may need to offer another round of that financing to ensure local banks can fund the sovereign, [co-chief economist at Deutsche Bank AG in London Gilles] Moec said.

Meanwhile:

French securities slid with benchmark German bunds as Fitch Ratings said it may cut credit grades across Europe because policy makers are failing to demonstrate they can bring the debt crisis under control. The yield on Italian 10-year securities jumped to the most since January as the country prepared to sell bonds on June 14. Germany will offer 10-year bunds, Europe’s benchmark securities, tomorrow, after Austria and the Netherlands auctioned debt today.

Most governments do all they can to attract high-earning migrants. Not the UK:

U.K. lawyers are fielding a flood of questions from multinational firms as a government shake-up of visa rules threatens to cut short the careers of top traders and other executives transferred from overseas.

Changes in the past two years include a five-year cap on how long employees who moved to the U.K. under the Intra Company Transfer system can stay, and the removal of their right to settle permanently. The introduction of a cooling-off period between visa applications means employees have to spend at least 12 months out of the country once their permit expires.

“We’ve seen quite significant panic among a number of clients,” said Ben Sheldrick, a partner with Magrath LLP Solicitors in London. “The government wants to be seen to be tough on immigration and one of the only groups they can be seen to be reducing is the skilled migrants sponsored by multinational firms.”

Canadian banks are worrying about appraisals:

Several Canadian banks have been quietly re-evaluating their appraisal strategies amid increased worries about the accuracy of property values in a market deemed at risk of overheating.

Lenders use a variety of techniques, including full appraisals, so-called “drive-by” appraisals based on the exterior of the home, and databases of market prices, to evaluate homes. The values they arrive at help determine how much money they should lend to mortgage borrowers. They are also key for measures such as the loan-to-value ratio that are used to track the health of loan portfolios and borrowers’ debt loads.

Banks are emphasizing on-site visits to value properties, especially those above a certain price or in rural areas. They are also paying closer attention to who does the appraisal.
…
TD lends 80 per cent loan-to-value up to $900,000, but after that only lends 50 per cent, to protect itself against inflated values on expensive homes.
…
California-based First American Financial Corp. had been selling Canadian banks a “guaranteed valuation” product that guaranteed the valuation of a property was accurate on the day a mortgage was issued. If it turned out later that it wasn’t, the bank could make a claim.

But First American posted a first-quarter loss in 2011 as it took a $45-million reserve strengthening charge relating to this obscure Canadian product.

Policies that were experiencing claims had been written mostly in 2007 and 2008. Sources say the issue stemmed mainly from Alberta, where the housing market underwent a correction starting in 2007, and problems became apparent as default rates increased, leading banks to seize more homes as collateral.

If I were worried about an overheated property market, I’d convert today’s appraisal into 2008’s equivalent and lend against that – which is much the same thing as lowering the LTV ratio.

It was a positive day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets winning 11bp and DeemedRetractibles up 7bp. Volatility was low. Volume was well below average.

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 0.3396 % 2,302.6
FixedFloater 4.50 % 3.87 % 25,691 17.52 1 -0.1419 % 3,503.1
Floater 3.14 % 3.17 % 69,272 19.22 3 0.3396 % 2,486.2
OpRet 4.79 % 2.20 % 37,824 1.01 5 -0.0077 % 2,509.1
SplitShare 5.26 % -6.23 % 47,375 0.52 4 0.4036 % 2,722.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0077 % 2,294.3
Perpetual-Premium 5.45 % 3.14 % 79,638 0.62 26 0.0361 % 2,229.4
Perpetual-Discount 5.02 % 5.05 % 121,297 15.29 7 -0.0177 % 2,452.1
FixedReset 5.04 % 3.16 % 195,476 7.80 71 0.1052 % 2,391.0
Deemed-Retractible 5.02 % 3.89 % 145,446 2.96 45 0.0707 % 2,300.0
Performance Highlights
Issue Index Change Notes
IGM.PR.B Perpetual-Premium -1.07 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.77
Bid-YTW : 5.50 %
SLF.PR.F FixedReset 1.69 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 2.82 %
FBS.PR.C SplitShare 1.99 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-15
Maturity Price : 10.00
Evaluated at bid price : 10.74
Bid-YTW : -9.25 %
Volume Highlights
Issue Index Shares
Traded		 Notes
BNS.PR.X FixedReset 273,623 Scotia crossed 10,000 at 26.61; National crossed 50,000 at 26.65. RBC crossed two blocks of 100,000 each, one at 26.67, the other at 26.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.65
Bid-YTW : 3.03 %
RY.PR.T FixedReset 137,158 National crossed blocks of 77,600 and 45,000, both at 26.74.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 3.11 %
RY.PR.N FixedReset 101,144 Desjardins crossed 99,000 at 26.35.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.38
Bid-YTW : 3.11 %
GWO.PR.J FixedReset 80,538 Nesbitt crossed 25,000, TD crossed 20,000 and RBC crossed 30,000, all at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 3.30 %
BMO.PR.M FixedReset 62,445 Nesbitt crossed 60,800 at 25.60.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.58
Bid-YTW : 2.93 %
BNS.PR.K Deemed-Retractible 55,769 RBC crossed 50,000 at 25.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-12
Maturity Price : 25.50
Evaluated at bid price : 25.80
Bid-YTW : -2.52 %
There were 21 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CIU.PR.A Perpetual-Discount Quote: 24.42 – 24.98
Spot Rate : 0.5600
Average : 0.3532

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-12
Maturity Price : 23.98
Evaluated at bid price : 24.42
Bid-YTW : 4.72 %
IAG.PR.C FixedReset Quote: 26.13 – 26.50
Spot Rate : 0.3700
Average : 0.2149

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.13
Bid-YTW : 3.02 %
RY.PR.B Deemed-Retractible Quote: 25.68 – 25.99
Spot Rate : 0.3100
Average : 0.1990

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-08-24
Maturity Price : 25.00
Evaluated at bid price : 25.68
Bid-YTW : 3.89 %
HSB.PR.C Deemed-Retractible Quote: 25.76 – 26.10
Spot Rate : 0.3400
Average : 0.2499

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-30
Maturity Price : 25.25
Evaluated at bid price : 25.76
Bid-YTW : 4.10 %
BAM.PR.G FixedFloater Quote: 21.11 – 21.40
Spot Rate : 0.2900
Average : 0.2326

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-12
Maturity Price : 21.82
Evaluated at bid price : 21.11
Bid-YTW : 3.87 %
IAG.PR.G FixedReset Quote: 25.16 – 25.38
Spot Rate : 0.2200
Average : 0.1638

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.16
Bid-YTW : 4.17 %
Issue Comments

NEW.PR.C Partial Call for Redemption

Scotia Managed Companies has announced:

NewGrowth Corp. (the “Company”) announced today that it has called 62,784 Preferred Shares for cash redemption on June 26, 2012 (in accordance with the Company’s Articles) representing approximately 2.284% of the outstanding Preferred Shares as a result of the special annual retraction of 62,784 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on June 22, 2012 will have approximately 2.284% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $13.70 per share.

In addition, holders of a further 30 Capital Shares and 30 Preferred Shares have deposited such shares concurrently for retraction on June 26, 2012. As a result, a total of 62,814 Capital Shares and 62,814 Preferred Shares, or approximately 2.285% of both classes of shares currently outstanding, will be redeemed.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including June 26, 2012.

Payment of the amount due to holders of Preferred Shares will be made by the Company on June 26, 2012. From and after June 26, 2012 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

NewGrowth Corp. is a mutual fund corporation whose investment portfolio consists primarily of publicly listed securities of selected Canadian chartered banks, telecommunication, pipeline and utility issuers. The Capital Shares and Preferred Shares of NewGrowth Corp. are both listed for trading on The Toronto Stock Exchange under the symbols NEW.A and NEW.PR.C respectively.

NEW.PR.C was last mentioned on PrefBlog with respect to last year’s partial call for redemption. NEW.PR.C is tracked by HIMIPref™ but is assigned to the Scraps index on volume concerns.

Market Action

June 11, 2012

Red letter day! For the first time in a long time, somebody’s talking about the flip side of safe banking:

Mr. Flaherty boasts about Ottawa’s strict supervision and holds up the banks’ conservative lending culture as a virtue. What he fails to mention to his audiences in places such as Istanbul, London and Washington is that Canada’s entrepreneurs and smaller businesses are starved for cash.
…
According to the Organization for Economic Co-operation and Development, the outstanding debt of Canadian small and medium-sized enterprises (SMEs) essentially has been unchanged since 2000. Lending to smaller companies decreased 0.1 per cent in 2008, increased 3.7 per cent in 2009 and dropped 0.9 per cent in 2010, the 34-member OECD said earlier this year in its first annual scorecard of financing for SMEs and entrepreneurs.
…
While there is no longer an outright ban on international lenders setting up in Canada, the rules are structured in such a way that there is little incentive to do so. No investor can hold more than 20 per cent of the voting shares in a bank with equity of more than $12-billion and a majority of the directors must be Canadians.

So the lenders that are large enough to shake the Canadian banks’ entrenched position – the Wells Fargos of the world – either stay small in Canada, or avoid the country altogether.
…
There are more than 7,000 banks in the United States insured by the Federal Deposit Insurance Corp. Most of those institutions are small, confining their lending to a specific community. The result is a more competitive credit market. SMEs accounted for 29 per cent of all business lending in the United States in 2010, compared with 18 per cent in Canada.

Canada’s banks were left relatively unscathed by the Credit Crunch and that’s a good thing. But next time you hear a regulator boasting about how wonderful the safe Canadian system is, ask what the costs are. All the costs, all the indirect costs of a comfortable oligopoly, not the relatively trivial direct costs. A Lamborghini is a great car … but I wouldn’t pay $10-million for one.

You can talk about billions, and you can talk about percentages, but sometimes it’s most graphic to talk about the impact on the average guy:

The average American family lost 38.8 percent of its wealth from 2007 to 2010, with the biggest losses concentrated among households with the most assets tied to their homes, a Federal Reserve study shows.

Median net worth declined to $77,300 in 2010, an 18-year low, from $126,400 in 2007, the central bank said in its Survey of Consumer Finances. Mean net worth fell 14.7 percent to a nine-year low of $498,800 from $584,600, the central bank said today in Washington.

I do enjoy taking pokes at CalPERS, the $200-billion+ fund that doesn’t do its own credit analysis! Their ten-year 90bp underperformance vs. their benchmark makes it easy, as the press has noticed:

The California Public Employees’ Retirement System, the largest U.S. pension, has seen its market value decline 4.8 percent this year after stocks fell amid the brewing fiscal crisis in Europe and slowing of the U.S. economic recovery.
…
If the trend continues, it would mark the third time in five years that the fund has lost money, including a 23 percent decline in fiscal 2009, the worst on record. While Calpers spreads its return over 15 years to smooth taxpayers’ burden, another loss may make it hard for the fund to meet its assumption of 7.5 percent earnings annually to cover benefits to 1.6 million retired employees and their families.

It was rather a dull day for the Canadian preferred share market, with PerpetualPremiums down 3bp, FixedResets flat and DeemedRetractibles off 2bp. Volatility was muted. Volume was quite low.

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 -0.4375 % 2,294.8
FixedFloater 4.49 % 3.86 % 25,788 17.53 1 0.0000 % 3,508.1
Floater 3.15 % 3.17 % 69,898 19.23 3 -0.4375 % 2,477.8
OpRet 4.79 % 1.92 % 38,288 1.02 5 0.0848 % 2,509.3
SplitShare 5.28 % -4.19 % 47,301 0.52 4 0.0449 % 2,711.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0848 % 2,294.5
Perpetual-Premium 5.45 % 3.21 % 78,274 0.58 26 -0.0256 % 2,228.6
Perpetual-Discount 5.02 % 5.06 % 122,910 15.26 7 0.1888 % 2,452.6
FixedReset 5.05 % 3.20 % 189,679 7.81 71 -0.0027 % 2,388.5
Deemed-Retractible 5.03 % 3.92 % 145,859 2.89 45 -0.0194 % 2,298.4
Performance Highlights
Issue Index Change Notes
MFC.PR.B Deemed-Retractible -1.51 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.14
Bid-YTW : 6.27 %
BAM.PR.B Floater -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 16.57
Evaluated at bid price : 16.57
Bid-YTW : 3.20 %
POW.PR.D Perpetual-Discount 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 24.57
Evaluated at bid price : 24.90
Bid-YTW : 5.08 %
GWO.PR.H Deemed-Retractible 1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.41
Bid-YTW : 5.16 %
Volume Highlights
Issue Index Shares
Traded		 Notes
PWF.PR.G Perpetual-Premium 154,340 TD crossed 150,000 at 25.45.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-11
Maturity Price : 25.00
Evaluated at bid price : 25.41
Bid-YTW : -5.65 %
VNR.PR.A FixedReset 51,183 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 23.20
Evaluated at bid price : 25.20
Bid-YTW : 3.99 %
FTS.PR.G FixedReset 37,286 RBC crossed blocks of 29,000 and 14,900, both at 25.67.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 23.99
Evaluated at bid price : 25.43
Bid-YTW : 3.33 %
RY.PR.N FixedReset 32,747 National crossed 31,000 at 26.33.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.33
Bid-YTW : 3.22 %
RY.PR.E Deemed-Retractible 31,915 TD crossed 25,000 at 25.60.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.56
Bid-YTW : 3.93 %
ENB.PR.B FixedReset 31,825 RBC crossed 30,000 at 25.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 23.25
Evaluated at bid price : 25.26
Bid-YTW : 3.57 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.B Floater Quote: 16.57 – 17.88
Spot Rate : 1.3100
Average : 0.7444

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 16.57
Evaluated at bid price : 16.57
Bid-YTW : 3.20 %
BAM.PR.C Floater Quote: 16.74 – 18.14
Spot Rate : 1.4000
Average : 1.0716

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 16.74
Evaluated at bid price : 16.74
Bid-YTW : 3.17 %
MFC.PR.B Deemed-Retractible Quote: 22.14 – 22.50
Spot Rate : 0.3600
Average : 0.2410

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.14
Bid-YTW : 6.27 %
W.PR.J Perpetual-Premium Quote: 25.45 – 25.75
Spot Rate : 0.3000
Average : 0.1839

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-11
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : -5.51 %
MFC.PR.F FixedReset Quote: 23.68 – 23.96
Spot Rate : 0.2800
Average : 0.1889

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.68
Bid-YTW : 4.02 %
FTS.PR.G FixedReset Quote: 25.43 – 25.74
Spot Rate : 0.3100
Average : 0.2299

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-11
Maturity Price : 23.99
Evaluated at bid price : 25.43
Bid-YTW : 3.33 %
PrefLetter

June PrefLetter Released!

The June, 2012, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

The June edition does not contain an appendix; I did not have time to do justice to the intended topic of Floating Rate trends, but intend to include it in the July edition.

The font for PrefLetter has been changed to Frutiger by popular demand!

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the June, 2012, issue, while the “Next Edition” will be the July, 2012, issue, scheduled to be prepared as of the close July 13 and eMailed to subscribers prior to market-opening on July 16.

PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.

Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.

Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!

Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.

Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!

Issue Comments

LBS.PR.A 2011 Annual Report

Brompton Life & Banc Split Corp. has released its Annual Report to December 31, 2011.

LBS / LBS.PR.A Performance
Instrument One
Year		 Three
Years		 Five
Years
Whole Unit -11.1% +12.3% -2.5%
LBS -32.4% +24.8% -10.7%
LBS.PR.A +5.4% +5.4% +5.4%
S&P/TSX Capped Financial Index -3.8% +15.0% -0.6%

Note that according to the implementation by iShares, the capped financial index is about 76% banks and 19% insurance, so the fund is by design overweight insurers relative to this benchmark – and insurers have underperformed.

Figures of interest are:

MER: 1.02% of the whole unit value, “excluding the cost of leverage and issuance costs.”

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $204.4-million, compared to $190.8-million a year prior (there was an increase in shares outstanding due to a warrant offering), so call it an average of $198-million. This can be checked by examining distributions on preferred shares of $7.164-million, which at $0.525 / share implies an average of 13.6-million units outstanding, which at an average value of $16.75 implies average net assets of 227.8-million. Since the warrants were exercised in late March, 2011, the latter figure seems more appropriate.

Underlying Portfolio Yield: Investment income of $9.232-million received divided by average net assets of $227.8-million is 4.05%.

Income Coverage: Net investment income after expenses of $6.942-million received plus $0.048-million issuance costs added back is $6.990-million, to cover preferred dividends of 7.164-million is about 98%.

LBS.PR.A was last mentioned on PrefBlog when their 12H1 Semi-annual report was discussed.

PrefLetter

June PrefLetter Now in Preparation!

The markets have closed and the June edition of PrefLetter is now being prepared.

PrefLetter is the monthly newsletter recommending individual issues of preferred shares to subscribers. There is at least one recommendation from every major type of preferred share with investment-grade constituents. The recommendations are taylored for “buy-and-hold” investors.

The June edition will contain an appendix dealing with the behaviour of Floaters over time.

Those taking an annual subscription to PrefLetter receive a discount on viewing of my seminars.

PrefLetter is now available to all residents of Canada.

The May issue will be eMailed to clients and available for single-issue purchase with immediate delivery prior to the opening bell on Monday. I will write another post when the new issue has been uploaded to the server … so watch this space carefully if you intend to order “Next Issue” or “Previous Issue”! Until then, the “Next Issue” is the June issue.

Market Action

June 8, 2012

Strains in Greek banking are becoming more obvious:

Credit Agricole SA, the foreign bank with the biggest risks in Greece, reached an accord with Greek authorities that will let its unit in the country access emergency funding should the need arise, two people with knowledge of the matter said.

Emporiki Bank, the Greek unit of Credit Agricole, will be able to tap so-called Emergency Liquidity Assistance from Greece’s central bank under certain conditions, the people said, declining to be identified because the matter is private. Access will probably be restricted to situations where deposits are declining, the people said. Greek banks without a foreign parent already use the facility.
…
Jean-Paul Chifflet, Credit Agricole’s chief executive officer, said on May 22 that his bank renewed a request for access to ELA funding with Bank of Greece’s governor. France’s third-largest bank “can’t increase significantly” exposures to Greece, Chifflet told investors last month at the company’s annual general meeting. Emporiki’s loans exceed deposits, requiring Credit Agricole to provide cross-border funding to help fill the gap.

Credit Agricole reduced that funding to Athens-based Emporiki to 4.6 billion euros at the end of March from 5.5 billion euros in December, partly as deposits rose, the bank said May 11. Credit Agricole also tapped 1.6 billion euros of ECB funding for Emporiki at the end of March.

The problem in Europe is that highly indebted countries owe money in currency they can’t print, right? It’s a good thing we’re smarter than that in Canada:

  • New Brunswick’s tax-supported debt as a percent of consolidated operating
    revenues has risen rapidly in the past five years.

  • We are lowering our issuer credit and senior unsecured debt ratings on
    the Province of New Brunswick to ‘A+’ from ‘AA-‘.

  • The stable outlook reflects our expectation that New Brunswick’s program
    review initiative will be successful at achieving cost efficiencies and that the province will achieve fiscal balance in the next two fiscal
    years as per its budget plan.

…
The ratings on New Brunswick reflect Standard & Poor’s opinion of the
following credit strengths:

  • The province’s relatively resilient economic performance since the global economic and financial crisis began in 2008 compared with peers’.
  • The province’s sound liquidity support of more than C$700 million in cash and marketable securities available to address potential fiscal pressures. As well, the province has a pool of sinking funds, which
    totaled over C$4.0 billion as at the end of fiscal 2012 that can be used for debt repayment if needed.

Credit concerns include our view of the following:

  • New Brunswick’s very high tax-supported debt burden (net of sinking funds), which rose further in fiscal 2012 to 149% of consolidated operating revenues or about 38% of GDP. We expect its tax-supported debt
    burden to peak at 155% of operating revenues in 2014.

  • Challenges stemming from long-term demographic trends that are likely to
    affect health care demand and revenue growth.

Fortunately, 38% of GDP is still a lot smaller than 120% of GDP.

There was a modest upward move in the Canadian preferred share market today, with PerpetualPremiums up 9bp, FixedResets gaining 2bp and DeemedRetractibles winning 10bp. Volatility was minimal. Volume was quite low.

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 -0.2183 % 2,304.9
FixedFloater 4.49 % 3.86 % 26,187 17.54 1 -0.0945 % 3,508.1
Floater 3.13 % 3.17 % 72,730 19.24 3 -0.2183 % 2,488.6
OpRet 4.79 % 2.48 % 36,066 1.02 5 0.3714 % 2,507.2
SplitShare 5.28 % -4.87 % 47,517 0.52 4 -0.2833 % 2,710.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3714 % 2,292.6
Perpetual-Premium 5.45 % 3.19 % 76,004 0.63 26 0.0874 % 2,229.2
Perpetual-Discount 5.03 % 5.05 % 123,185 15.28 7 0.0177 % 2,447.9
FixedReset 5.05 % 3.23 % 190,551 7.82 71 0.0202 % 2,388.6
Deemed-Retractible 5.03 % 3.86 % 146,980 2.90 45 0.0973 % 2,298.9
Performance Highlights
Issue Index Change Notes
FTS.PR.E OpRet 1.63 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.74
Bid-YTW : 0.92 %
Volume Highlights
Issue Index Shares
Traded		 Notes
CM.PR.L FixedReset 246,838 Scotia crossed 75,000 at 26.80; Nesbitt crossed blocks of 109,700 and 60,000 at 26.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.85
Bid-YTW : 2.85 %
BMO.PR.O FixedReset 156,081 Scotia crossed 149,300 at 26.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 26.73
Bid-YTW : 2.98 %
TD.PR.C FixedReset 122,600 Desjardins crossed 119,800 at 26.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.01
Bid-YTW : 3.45 %
RY.PR.I FixedReset 88,450 Desjardins crossed 70,000 at 25.55.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 3.29 %
TD.PR.K FixedReset 61,580 Nesbitt crossed 60,000 at 26.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.92
Bid-YTW : 2.88 %
BNS.PR.X FixedReset 51,978 RBC crossed 50,000 at 26.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.66
Bid-YTW : 2.99 %
There were 18 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.C Floater Quote: 16.75 – 18.00
Spot Rate : 1.2500
Average : 0.7115

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-08
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 3.17 %
TCA.PR.Y Perpetual-Premium Quote: 52.00 – 52.49
Spot Rate : 0.4900
Average : 0.2933

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 52.00
Bid-YTW : 3.56 %
TCA.PR.X Perpetual-Premium Quote: 51.90 – 52.44
Spot Rate : 0.5400
Average : 0.4137

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 51.90
Bid-YTW : 3.19 %
NA.PR.O FixedReset Quote: 26.90 – 27.25
Spot Rate : 0.3500
Average : 0.2455

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.90
Bid-YTW : 2.26 %
BAM.PR.R FixedReset Quote: 26.22 – 26.60
Spot Rate : 0.3800
Average : 0.3065

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-06-08
Maturity Price : 23.60
Evaluated at bid price : 26.22
Bid-YTW : 3.62 %
GWO.PR.M Deemed-Retractible Quote: 26.24 – 26.47
Spot Rate : 0.2300
Average : 0.1591

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.24
Bid-YTW : 5.13 %