PrefLetter

February Edition of PrefLetter Released!

The February, 2010, 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 February edition contains an appendix examining the concept of Strong Pairs of FixedFloater / Ratchet Rate preferreds, the implications of their pairing, and the market inefficiency in pricing these instruments.

As previously announced, PrefLetter is now available to residents of Alberta, British Columbia and Manitoba, as well as Ontario and to entities registered with the Quebec Securities Commission.

Until further notice, the “Previous Edition” will refer to the February 2010, issue, while the “Next Edition” will be the March, 2010, issue, scheduled to be prepared as of the close March 12 and eMailed to subscribers prior to market-opening on March 15.

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: A recent enhancement to the PrefLetter website is the Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter, being delivered to clients as a large attachment by eMail, 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. 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.

PrefLetter

February PrefLetter Now in Preparation!

The markets have closed and the February 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 February edition will contain an appendix discussing the concept of Strong Pairs, their strange and unjustifiable treatment by the marketplace and how investors may exploit the pricing inefficiencies that thereby occur.

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

PrefLetter is available to residents of Ontario, Alberta, British Columbia and Manitoba as well as Quebec residents registered with their securities commission.

The February issue will be eMailed to clients and available for single-issue purchase with immediate delivery prior to the opening bell on Tuesday. Note that Monday is a holiday. 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 February issue.

Market Action

February 12, 2010

Looks like Toyota learned lessons from the securities industry:

Former regulators hired by Toyota Motor Corp. helped end at least four U.S. investigations of unintended acceleration by company vehicles in the last decade, warding off possible recalls, court and government records show.

Comrade Peace-Prize’s regulatory reforms are bogging down:

Senator Bob Corker, the lead Republican negotiator on legislation to overhaul financial regulation, said he is considering removing the Federal Reserve’s power to oversee banks.
…
Corker made clear that his agreement to work with Senator Christopher Dodd, the Connecticut Democrat who leads the Senate Banking Committee, would require President Barack Obama to make significant concessions to get his long-stalled financial reform proposal through the Senate.

Beyond reducing the Fed’s bank supervisory role, Corker said he could not support a standalone Consumer Financial Protection Agency, a top priority for Obama. In addition, Corker appeared unwilling to back the president’s call for mandatory limits on banks’ size and trading activities. And he suggested he was nearing agreement with Dodd on using bankruptcy laws to wind down large, failing companies, rather than the out-of-court resolution process Obama prefers.

There’s moral hazard in Greece:

BlackRock Inc., the world’s biggest asset manager, increased its Greek bond holdings, betting the European Union won’t allow the nation to default as Prime Minister George Papandreou cuts the bloc’s biggest deficit.
…
“They won’t allow a Lehman-type crisis,” said [Blackrock co-head of European fixed-income Michael] Krautzberger, who helps oversee BlackRock’s $3.35 trillion of assets. “The market has worried too much about an imminent government default in Europe that will not happen because of the solidarity.”

I wonder if countries will be required to produce “living wills”, hold liquid assets, have their management removed, vilified and investigated for fraud, or any of the other fun games we’ve had recently?

Light volume today, as traders were too busy watching money be thrown away to be bothered trying to make any. PerpetualDiscounts were off 6bp, but FixedResets were up 11bp, with yields on the latter issues again beginning to flirt with the 3.50% level.

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 3.01 % 3.64 % 28,817 20.24 1 0.3200 % 1,836.1
FixedFloater 5.69 % 3.77 % 36,589 19.26 1 0.2625 % 2,776.8
Floater 2.02 % 1.75 % 42,050 23.16 4 0.5795 % 2,279.6
OpRet 4.84 % -2.36 % 103,655 0.09 13 0.0324 % 2,325.0
SplitShare 6.31 % 3.63 % 134,610 0.08 2 0.0871 % 2,130.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0324 % 2,126.0
Perpetual-Premium 5.75 % 5.26 % 87,366 2.00 7 -0.1072 % 1,901.3
Perpetual-Discount 5.83 % 5.86 % 166,945 14.08 69 -0.0601 % 1,810.2
FixedReset 5.41 % 3.52 % 313,411 3.78 42 0.1109 % 2,186.1
Performance Highlights
Issue Index Change Notes
PWF.PR.K Perpetual-Discount -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-12
Maturity Price : 20.86
Evaluated at bid price : 20.86
Bid-YTW : 5.99 %
BAM.PR.K Floater 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-12
Maturity Price : 16.55
Evaluated at bid price : 16.55
Bid-YTW : 2.39 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TRI.PR.B Floater 226,700 Nesbitt crossed three blocks, one of 125,000 and two of 50,000, all at 22.35.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-12
Maturity Price : 22.01
Evaluated at bid price : 22.25
Bid-YTW : 1.75 %
RY.PR.A Perpetual-Discount 128,619 Nesbitt crossed 100,000 at 20.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-12
Maturity Price : 19.96
Evaluated at bid price : 19.96
Bid-YTW : 5.60 %
BNS.PR.P FixedReset 78,256 RBC crossed 20,000 at 26.45, then Desjardins crossed 49,600 at 26.42.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-25
Maturity Price : 25.00
Evaluated at bid price : 26.42
Bid-YTW : 3.21 %
SLF.PR.C Perpetual-Discount 49,985 Nesbitt crossed 40,000 at 19.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-12
Maturity Price : 19.25
Evaluated at bid price : 19.25
Bid-YTW : 5.87 %
TD.PR.E FixedReset 32,625 National crossed 25,000 at 27.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.95
Bid-YTW : 3.38 %
TD.PR.N OpRet 31,720 RBC crossed 30,000 at 26.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-03-14
Maturity Price : 26.00
Evaluated at bid price : 26.18
Bid-YTW : -2.36 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Issue Comments

XMF.PR.A Announces Reorg Details

M-Split Corp. has announced:

In connection with the reorganization, the Company’s investment manager, Quadravest Capital Management Inc. (“Quadravest”), will be lowering its annual management fee from 0.55% to 0.45% per annum of the net asset value of the Company. In addition, the discount to net asset value applicable to monthly redemptions of Class I Preferred Shares, Class II Preferred Shares and Capital Shares will be decreased from 4% to 3% and this discount will be paid to Quadravest and not retained by the Company. These measures are intended to lower ongoing expenses of the Company and improve trading prices of the Class I Preferred Shares, Class II Preferred Shares and Capital Shares relative to net asset value for the Company.

Shareholders are being given a special retraction right as a result of the approval of this capital reorganization, which is in addition to the regular monthly retraction at the end of February and the dissent rights which Shareholders had in respect of the special meeting under the Business Corporations Act (Ontario).

Shareholders who do not wish to remain invested in the Company under its reorganized share structure will have until 5:00 p.m. (Toronto time) on February 26, 2010 to provide the Company with notice through their CDS participant that they wish to have their Priority Equity Shares or Class A Shares redeemed pursuant to this special retraction right. On such a special retraction, each holder of a Priority Equity Share will receive the lesser of (i) 96% of the net asset value per Unit of the Company at the retraction date, and (ii) $7.63 per Priority Equity Share (representing the volume weighted average trading price (“VWAP”) of the Priority Equity Shares on the Toronto Stock Exchange (“TSX”) for the 20 trading days ending on February 2, 2010); while holders of Class A Shares will receive the lesser of (i) 4% of the net asset value per Unit of the Company at the retraction date, and (ii) $0.46 per Class A Share (representing the VWAP of the Class A Shares on the TSX for the 20 trading days ending on February 2, 2010). Shareholders interested in exercising such retraction right should contact the CDS Participant through which they hold the Shares for further information and instructions as to how to exercise this right. Shareholders should note that the requirements of any particular CDS Participant may vary, and that Shareholders may need to inform their CDS Participant of any intention to exercise this retraction right in advance of the February 26 deadline.

If more Class A Shares are tendered for retraction under the special retraction right than Priority Equity Shares, the outstanding Priority Equity Shares will be consolidated so that following the retraction pursuant to this special retraction right there would be an equal number of Priority Equity Shares and Class A Shares outstanding. Similarly, if more Priority Equity Shares are tendered for retraction than Class A Shares, the outstanding Class A Shares will be consolidated so that again there would be an equal number of Priority Equity Shares and Class A Shares outstanding following implementation of the special retraction. The Company may implement this consolidation by adjusting the number of Class I Preferred Shares, Class II Preferred Shares, 2011 Warrants and 2012 Warrants to be issued to holders of Priority Equity Shares (in the event a consolidation of Priority Equity Shares is required) or by adjusting the number of Capital Shares to be issued to holders of Class A Shares (in the event a consolidation of Capital Shares is required).

The Company has the discretion not to proceed with this capital reorganization, notwithstanding it has been approved by Shareholders. The Company expects that it will exercise its discretion in this regard only if the number of Priority Equity Shares or Class A Shares being retracted pursuant to the special retraction right is such that the number of Shareholders remaining, or the number of Class I Preferred Shares, Class II Preferred Shares and Capital Shares to be issued and outstanding following implementation of the capital reorganization, is insufficient to meet the listing requirements of the TSX in respect of the Class I Preferred Shares, Class II Preferred Shares and Capital Shares.

The NAVPU as of January 29 is 8.50 net of accrued dividends for the preferred shareholders according to the company, so the ability to retract at 7.63 is no great shakes. It is a total disgrace that the capital unitholders are being allowed to retract at over thirty cents; this displays the spinelessness of preferred shareholders who voted for this plan.

XMF.PR.A was last mentioned on PrefBlog when the reorganization was approved. XMF.PR.A is not tracked by HIMIPref™.

Issue Comments

XCM.PR.A Announces Reorg Details

Commerce Split Corp. has announced:

In order to elect one of the two investment options, Shareholders must ensure that they make their election through their CDS Participant, in accordance with such participant’s election process and timing, so that the election is received by Computershare Investor Services Inc. no later than 5:00 p.m. (Toronto Time) on February 26, 2010 (the “Notice Deadline”).

Shareholder should note that the requirements of any particular CDS Participant may vary, and that Shareholders may need to inform their CDS Participant of any intention to elect in advance of the February 26 deadline.

If an Election Notice is not received from a Shareholder by the Notice Deadline, the Shareholder will be deemed to have elected to transfer to into the New Commerce Split Fund. Shareholders are advised to contact their financial advisers if they need assistance in making an investment decision in respect of this election.

Assiduous Readers will remember I recommended against the Reorg but that it passed anyway. Bloodied but unbowed, I now recommend that holders of XCM.PR.A elect to receive units in the “Original Commerce Split Fund”, since I don’t really see any financial advantage on a portfolio perspective that would justify the recapitalization of the company with preferred share-holder money without the extant capital unitholders being wiped out.

XCM.PR.A is not tracked by HIMIPref™.

Issue Comments

ALB.PR.A: Partial Call for Redemption

Allbanc Split Corp. II has announced:

that it has called 441,030 Preferred Shares for cash redemption on February 26, 2010 (in accordance with the Company’s Articles) representing approximately 11.683% of the outstanding Preferred Shares as a result of the special annual retraction of 882,060 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 February 25, 2010 will have approximately 11.683% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $25.00 per share.

In addition, holders of a further 911,822 Capital Shares and 455,911 Preferred Shares have deposited such shares concurrently for retraction on February 26, 2010. As a result, a total of 1,793,882 Capital Shares and 896,941 Preferred Shares, or approximately 21.201% 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 February 26, 2010.

Payment of the amount due to holders of Preferred Shares will be made by the Company on February 26, 2010. From and after February 26, 2010 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.

ALB.PR.A was last mentioned on PrefBlog when it was upgraded to Pfd-3(high) by DBRS. ALB.PR.A is tracked by HIMIPref™, but is relegated to the Scraps subindex on credit concerns.

Market Action

February 11, 2010

The Fed is plotting its exit strategy:

The Federal Reserve is in talks with money-market mutual funds on agreements to help drain as much as $1 trillion from the financial system as policy makers prepare for the first interest-rate increase since June 2006, according to a person familiar with the discussions.

The central bank is looking to the $3.2 trillion money- market mutual-fund industry because the 18 so-called primary dealers that trade directly with the Fed have a capacity limited to about $100 billion, estimates Joseph Abate, a money-market strategist at Barclays Capital in New York.
…
The Fed is also considering reverse repurchase agreements with mortgage lenders Fannie Mae and Freddie Mac, said the person familiar with the discussions. Freddie Mac spokeswoman Sharon McHale declined to comment. Fannie Mae spokesman Brian Faith also declined to comment.

Meanwhile, the situation in Europe is having knock-on effects:

Investment-grade debt sales are drying up and returns on high-yield bonds have turned negative for the year as investors wait to see whether Europe will bail out Greece.

Borrowers in the U.S. and Europe sold $3.94 billion of high-grade securities this week, the least this year and less than … the average $52.9 billion, according to data compiled by Bloomberg.
…
Investors are avoiding credit risk as European Union leaders meet to hammer out an aid package for Greece. While relative borrowing costs in the U.S. remained steady yesterday and prices to insure against defaults fell, Huntsville, Alabama- based telephone service provider ITC Deltacom Inc. canceled a $325 million bond sale, citing “current market conditions.”
…
Corporate bonds have returned 1.39 percent this year, according to the Merrill index. Junk bonds lost 1.58 percent so far this month, the most in a year, the bank’s U.S. High Yield Master II Index shows.

The High Frequency Traders are taking over!:

Getco LLC, the high-frequency trading specialist founded a decade ago, agreed to become a so- called designated market maker at the New York Stock Exchange, a move that will add liquidity as the biggest U.S. equity venue seeks to halt share losses.

Getco purchased rights to handle floor trading in 350 stocks from Barclays Plc, according to a statement today from NYSE Euronext, owner of the New York Stock Exchange. The designation means Getco will be obligated to buy and sell shares at the national best bid and offer price, as well as participate in opening and closing trading sessions.

The agreement formalizes Getco’s role as a market maker with the NYSE after acting as one on electronic platforms through computer-driven strategies that produce hundreds of buy and sell orders every second.

This is a pleasant change from the usual state of affairs; normally it would be a big bank buying a private technology firm, rather than selling a chunk of their business to it. As far as I can tell from Getco’s website it’s a private company founded by two guys who, being capable of thought, were not suitable for employment at a big bank.

Off Topic! Giambrone has decided he does not wish to be laughingstock of Toronto for the next ten months, but will concentrate his efforts on solidifying his status as laughingstock of the TTC. Despite his young age, he has a distinguished record of sticking his hand up when Mayor Miller tells him to.

Another good day for the Canadian preferred share market, as PerpetualDiscounts gained 16bp while FixedResets squeezed out a gain of 1bp. Volume was relatively light and the market was well-behaved, with only four entries in the Performance highlights table – two of them BAM Floaters.

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 3.02 % 3.66 % 28,664 20.22 1 -0.0533 % 1,830.3
FixedFloater 5.71 % 3.78 % 36,626 19.24 1 0.1577 % 2,769.5
Floater 2.03 % 1.76 % 38,858 23.14 4 0.7656 % 2,266.5
OpRet 4.84 % -2.50 % 104,903 0.09 13 0.0501 % 2,324.3
SplitShare 6.31 % 3.87 % 139,570 0.08 2 0.2181 % 2,128.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0501 % 2,125.3
Perpetual-Premium 5.75 % 5.09 % 90,251 2.00 7 0.3623 % 1,903.4
Perpetual-Discount 5.82 % 5.85 % 167,620 14.07 69 0.1596 % 1,811.3
FixedReset 5.42 % 3.54 % 314,315 3.78 42 0.0131 % 2,183.7
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-11
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 2.40 %
BAM.PR.K Floater 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-11
Maturity Price : 16.37
Evaluated at bid price : 16.37
Bid-YTW : 2.42 %
CU.PR.A Perpetual-Premium 1.32 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 5.09 %
POW.PR.D Perpetual-Discount 1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-11
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 6.02 %
Volume Highlights
Issue Index Shares
Traded		 Notes
BNS.PR.P FixedReset 432,970 I hadn’t realized these things were going out of style! Nesbitt bought two blocks from RBC, of 15,400 and 31,900 shares, both at 26.40, then bought 10,000 from Desjardins at the same price. RBC crossed 18,500 at 26.40, then Nesbitt bought blocks of 10,000 and 50,000 shares from Desjardins at the same price. RBC crossed 24,000 at 26.40, then Nesbitt bought 10,000 from Desjardins at the same price. RBC crossed 24,000 and Desjardins crossed 120,000 at … the same price. Nesbitt bought 30,000 from anonymous at 26.40, then RBC bought 20,000 from Desjardins at … the same price. Finally, Nesbitt at last showed some initiative and crossed 40,000 at 26.45. Maybe a PM somewhere has decided that 3.21% to call isn’t really all that hot a yield.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-25
Maturity Price : 25.00
Evaluated at bid price : 26.41
Bid-YTW : 3.21 %
BMO.PR.P FixedReset 89,784 Nesbitt crossed 75,000 at 27.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-27
Maturity Price : 25.00
Evaluated at bid price : 27.00
Bid-YTW : 3.62 %
RY.PR.A Perpetual-Discount 62,602 Nesbitt crossed 20,000 at 20.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-11
Maturity Price : 19.97
Evaluated at bid price : 19.97
Bid-YTW : 5.60 %
TD.PR.K FixedReset 62,530 TD crossed 35,000 at 27.92.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.89
Bid-YTW : 3.57 %
BNS.PR.X FixedReset 57,190 Desjardins bought 17,000 from CIBC at 27.92 and crossed the same number at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 27.89
Bid-YTW : 3.44 %
RY.PR.F Perpetual-Discount 40,720 Desjardins crossed 31,600 at 20.05.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-11
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 5.59 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Issue Comments

DBRS: YPG's Reorganization Harmless

Dominion Bond Rating Service has announced:

that Yellow Media’s conversion, as described, is not expected to have any impact on its current R-1 (low), BBB (high), BBB and Pfd-3 (high) credit ratings. DBRS notes that its credit ratings remain supported by: (1) a manageable business risk profile to date, with Yellow Media’s Directories segment (more than 90% of EBITDA) exhibiting stable results, while cyclical pressure remains evident in its Vertical Media segment (less than 10% of EBITDA), and (2) the improvement in its financial risk profile, which has been a direct result of debt reduction efforts afforded by its reduced distribution rate in May 2009.
…
Additionally, DBRS notes that since Yellow Media lowered its distribution in 2009, the Company has improved its financial risk profile by reducing leverage to end 2009 with debt-to-EBITDA of roughly 2.57 times, down from 2.91 times at the end of 2008. The Company also announced that it plans to continue deleveraging during this transitional period.
…
While reduced leverage helps to support Yellow Media’s financial risk profile, DBRS notes that its ratings are largely based on its business risk profile. While there are significant risks on the horizon as the Company repositions its businesses to adapt to an increasingly digital world, to date DBRS has seen no evidence that this transformation has materially changed the Company’s business risk profile – that is, it retains its leading position as the incumbent directory company across Canada, servicing more than 400,000 local small and medium-sized enterprises.

YPG’s press release is titled Yellow Pages Income Fund Provides Clarity on Path to Conversion to a Corporation

YPG has four preferred share issues outstanding: YPG.PR.A & YPG.PR.B (Operating Retractible) and YPG.PR.C & YPG.PR.D (FixedReset). All are tracked by HIMIPref™ and all are relegated to the Scraps subindex on credit concerns.

Market Action

February 10, 2010

PrefBlog’s influence over global capital markets is proved yet again as Temasek is setting up an in-house investment firm:

Temasek Holdings Pte, Singapore’s state investment firm, is setting up a wholly owned multibillion dollar investment company with its own money, three people with knowledge of the matter said.

Seatown Holdings International will employ a multistrategy to invest in assets from stocks to bonds, targeting absolute returns, the people said, asking not to be identified because the information is private.

In-house is the only way to go for outfits that are big enough. Hire the best people, hold them accountable for results, let all layers of management concentrate on returns … you’ll do fine.

This is completely off-topic, but Toronto Distric School Board trustee Josh Matlow is in trouble again:

The showdown began last week when trustee Josh Matlow, the outspoken rogue of the TDSB, accused the board of going on a “drunken spending binge.”

The TDSB’s new sheriff, chair Bruce Davis, promptly demanded an apology and attached a deadline, Monday at 4 p.m., leaving Mr. Matlow the weekend to contemplate his fate.

Bruce Davis should take a civics course – he doesn’t appear to understand that cabinet solidarity only applies if one is in cabinet. However, I’m sure his responsibilities in ensuring seven-year olds are properly punished if they should, for instance, throw a snowball against a wall preclude any useful or intelligent use of time.

Today’s Treasury auction didn’t go all that well:

Treasuries tumbled after the U.S. sold a record-tying $25 billion of 10-year securities, the second of three note and bond auctions this week totaling $81 billion, and as investors weighed the prospects of European aid for Greece.
…
The yield on the current 10-year note climbed six basis points, or 0.06 percentage point, to 3.71 percent at 1:30 p.m. in New York, according to BGCantor Market Data. It increased as much as nine basis points yesterday, the most this year. The 30- year bond yield rose six basis points to 4.65 percent.

A marginally good day for Canadian preferred shares today, in constrast to all the recent marginally bad ones. PerpetualDiscounts gained 6bp and FixedResets gained 11bp, taking the yield on the latter down to 3.58%. The market was well-behaved as volume moderated, with only four performance highlights – three of them BAM issues in the Floating Rate class. The best of these, BAM.PR.K, also made it to the volume highlights.

PerpetualDiscounts now yield 5.87%, equivalent to 8.22% interest at the standard equivalency factor of 1.4x. Long Corporates continue to yield about 5.8%, so the pre-tax interest-equivalent spread has now widened to about 240bp, a slight widening from the 235bp reported February 3.

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 3.02 % 3.65 % 29,768 20.23 1 1.4054 % 1,831.3
FixedFloater 5.72 % 3.79 % 33,888 19.23 1 -0.3667 % 2,765.2
Floater 2.04 % 1.76 % 39,238 23.12 4 1.2615 % 2,249.3
OpRet 4.84 % -3.56 % 105,077 0.09 13 0.0236 % 2,323.1
SplitShare 6.32 % 6.00 % 141,377 0.08 2 -0.1959 % 2,124.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0236 % 2,124.3
Perpetual-Premium 5.77 % 4.50 % 88,217 0.78 7 0.2286 % 1,896.5
Perpetual-Discount 5.83 % 5.87 % 168,968 14.06 69 0.0632 % 1,808.4
FixedReset 5.42 % 3.58 % 318,190 3.78 42 0.1136 % 2,183.4
Performance Highlights
Issue Index Change Notes
ENB.PR.A Perpetual-Premium 1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-03-12
Maturity Price : 25.00
Evaluated at bid price : 24.97
Bid-YTW : 3.51 %
BAM.PR.E Ratchet 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-10
Maturity Price : 25.00
Evaluated at bid price : 18.76
Bid-YTW : 3.65 %
BAM.PR.B Floater 2.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-10
Maturity Price : 16.33
Evaluated at bid price : 16.33
Bid-YTW : 2.43 %
BAM.PR.K Floater 2.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-10
Maturity Price : 16.17
Evaluated at bid price : 16.17
Bid-YTW : 2.45 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PR.E FixedReset 127,605 Nesbitt crossed 50,000 at 28.00; TD crossed 35,000 at the same price; then Nesbitt bought 11,000 from National at 27.94.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.94
Bid-YTW : 3.38 %
RY.PR.W Perpetual-Discount 102,730 TD crossed 100,000 at 21.60.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-10
Maturity Price : 21.69
Evaluated at bid price : 21.69
Bid-YTW : 5.67 %
BAM.PR.K Floater 81,060 Nesbitt crossed blocks of 50,000 and 20,000, both at 15.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-02-10
Maturity Price : 16.17
Evaluated at bid price : 16.17
Bid-YTW : 2.45 %
TD.PR.G FixedReset 79,133 RBC crossed 59,900 at 27.95.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.93
Bid-YTW : 3.39 %
GWO.PR.E OpRet 77,842 Nesbitt crossed 75,000 at 25.67.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-04-30
Maturity Price : 25.25
Evaluated at bid price : 25.65
Bid-YTW : -0.23 %
CM.PR.L FixedReset 72,883 RBC crossed 60,000 at 27.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.80
Bid-YTW : 3.75 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Miscellaneous News

DBRS: Pipeline/Utility Regulatory Changes No Big Deal

Dominion Bond Rating Service has released a study titled Recent Regulatory Developments for Canadian Pipeline and Utility Companies:

“None of the decisions rendered in Q4 2009 are viewed by themselves as materially changing any one entity’s financial risk profile,” concludes [DBRS Managing Director] Mr. [Michael] Caranci. “Rather, the improvements are viewed as supportive of current ratings and would improve flexibility within the rating category.”