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MAPF Performance: November 2011

Sunday, December 4th, 2011

The fund underperformed in November, largely due to a steep decline in the prices of SLF issues, which form a significant part of the fund’s holdings.

The fund’s Net Asset Value per Unit as of the close November 30 was $10.4511.

Returns to November 30, 2011
Period MAPF Index CPD
according to
Claymore
One Month -0.39% +0.41% +0.11%
Three Months -4.87% +0.72% +0.10%
One Year +0.56% +6.19% +3.81%
Two Years (annualized) +9.17% +9.21% N/A
Three Years (annualized) +31.70% +17.22% +14.37%
Four Years (annualized) +18.34% +6.23%  
Five Years (annualized) +13.26% +3.54%  
Six Years (annualized) +12.12% +3.68%  
Seven Years (annualized) +11.28% +3.84%  
Eight Years (annualized) +11.73% +4.11%  
Nine Years (annualized) +13.68% +4.50%  
Ten Years (annualized) +12.05% +4.31%  
The Index is the BMO-CM “50”
MAPF returns assume reinvestment of distributions, and are shown after expenses but before fees.
CPD Returns are for the NAV and are after all fees and expenses.
* CPD does not directly report its two-year returns.
Figures for Omega Preferred Equity (which are after all fees and expenses) for 1-, 3- and 12-months are +0.19%, +0.41% and +4.57%, respectively, according to Morningstar after all fees & expenses. Three year performance is +14.91%.
Figures for Jov Leon Frazer Preferred Equity Fund Class I Units (which are after all fees and expenses) for 1-, 3- and 12-months are +0.32%, +0.46% and ++2.22% respectively, according to Morningstar
Figures for Manulife Preferred Income Fund (formerly AIC Preferred Income Fund) (which are after all fees and expenses) for 1-, 3- and 12-months are +0.17%, +0.28% & +3.53%, respectively
Figures for Horizons AlphaPro Preferred Share ETF (which are after all fees and expenses) for 1-, 3- and 12-months are +0.29%, +0.57% & +4.64%, respectively.

MAPF returns assume reinvestment of dividends, and are shown after expenses but before fees. Past performance is not a guarantee of future performance. You can lose money investing in Malachite Aggressive Preferred Fund or any other fund. For more information, see the fund’s main page. The fund is available either directly from Hymas Investment Management or through a brokerage account at Odlum Brown Limited.

The fund’s returns in November were hurt by a steep decline in the price of SLF preferreds, which have been afflicted in recent months by relatively poor financial results and bouts of selling (see Who’s Selling all the SLF Preferreds? and Moody’s puts SLF on Review-Negative).

For example, the difference in the YTWs of GWO.PR.I and SLF.PR.E (which have the same annual dividend of 1.125) are shown below since the OSFI announcement that extant issues without the NVCC clause would not be grandfathered (note that this announcement applied only to banks; there is still no official word on the status of preferreds issued by insurance holding companies, although I continue to expect that the bank rules will eventually apply).


Click for Big

Similarly, we can look at the difference in prices between the two issues:


Click for Big

The charts Yield Difference and Bid Price Difference are available in PDF format.

Another way to look at the situation is compare the SLF issues with PWF and GWO, as was done in the post Who’s Selling All the SLF Preferred?.


Click for Big

Click for Big

Now, I certainly agree that GWO is a better credit than SLF and deserves a little bit of premium pricing – but the current situation goes far beyond what I consider reasonable. What is also very interesting is the observation that the market is sharply differentiating between SLF and GWO, but not between GWO and its unregulated parent, PWF.

Sometimes everything works … sometimes the trading works, but sectoral shifts overwhelm the increment … sometimes nothing works. The fund seeks to earn incremental return by selling liquidity (that is, taking the other side of trades that other market participants are strongly motivated to execute), which can also be referred to as ‘trading noise’. There were a lot of strongly motivated market participants during the Panic of 2007, generating a lot of noise! Unfortunately, the conditions of the Panic may never be repeated in my lifetime … but the fund will simply attempt to make trades when swaps seem profitable, without worrying about the level of monthly turnover.

There’s plenty of room for new money left in the fund. I have shown in recent issues of PrefLetter that market pricing for FixedResets is demonstrably stupid and I have lots of confidence – backed up by my bond portfolio management experience in the markets for Canadas and Treasuries, and equity trading on the NYSE & TSX – that there is enough demand for liquidity in any market to make the effort of providing it worthwhile (although the definition of “worthwhile” in terms of basis points of outperformance changes considerably from market to market!) I will continue to exert utmost efforts to outperform but it should be borne in mind that there will almost inevitably be periods of underperformance in the future.

The yields available on high quality preferred shares remain elevated, which is reflected in the current estimate of sustainable income.

Calculation of MAPF Sustainable Income Per Unit
Month NAVPU Portfolio
Average
YTW		 Leverage
Divisor		 Securities
Average
YTW		 Capital
Gains
Multiplier		 Sustainable
Income
per
current
Unit
June, 2007 9.3114 5.16% 1.03 5.01% 1.2857 0.3628
September 9.1489 5.35% 0.98 5.46% 1.2857 0.3885
December, 2007 9.0070 5.53% 0.942 5.87% 1.2857 0.4112
March, 2008 8.8512 6.17% 1.047 5.89% 1.2857 0.4672
June 8.3419 6.034% 0.952 6.338% 1.2857 $0.4112
September 8.1886 7.108% 0.969 7.335% 1.2857 $0.4672
December, 2008 8.0464 9.24% 1.008 9.166% 1.2857 $0.5737
March 2009 $8.8317 8.60% 0.995 8.802% 1.2857 $0.6046
June 10.9846 7.05% 0.999 7.057% 1.2857 $0.6029
September 12.3462 6.03% 0.998 6.042% 1.2857 $0.5802
December 2009 10.5662 5.74% 0.981 5.851% 1.0819 $0.5714
March 2010 10.2497 6.03% 0.992 6.079% 1.0819 $0.5759
June 10.5770 5.96% 0.996 5.984% 1.0819 $0.5850
September 11.3901 5.43% 0.980 5.540% 1.0819 $0.5832
December 2010 10.7659 5.37% 0.993 5.408% 1.0000 $0.5822
March, 2011 11.0560 6.00% 0.994 5.964% 1.0000 $0.6594
June 11.1194 5.87% 1.018 5.976% 1.0000 $0.6645
September 10.2709 6.10%
Note		 1.001 6.106% 1.0000 $0.6271
November, 2011 10.4511 6.02%
Note		 1.004 6.044% 1.0000 $0.6317
NAVPU is shown after quarterly distributions of dividend income and annual distribution of capital gains.
Portfolio YTW includes cash (or margin borrowing), with an assumed interest rate of 0.00%
The Leverage Divisor indicates the level of cash in the account: if the portfolio is 1% in cash, the Leverage Divisor will be 0.99
Securities YTW divides “Portfolio YTW” by the “Leverage Divisor” to show the average YTW on the securities held; this assumes that the cash is invested in (or raised from) all securities held, in proportion to their holdings.
The Capital Gains Multiplier adjusts for the effects of Capital Gains Dividends. On 2009-12-31, there was a capital gains distribution of $1.989262 which is assumed for this purpose to have been reinvested at the final price of $10.5662. Thus, a holder of one unit pre-distribution would have held 1.1883 units post-distribution; the CG Multiplier reflects this to make the time-series comparable. Note that Dividend Distributions are not assumed to be reinvested.
Sustainable Income is the resultant estimate of the fund’s dividend income per current unit, before fees and expenses. Note that a “current unit” includes reinvestment of prior capital gains; a unitholder would have had the calculated sustainable income with only, say, 0.9 units in the past which, with reinvestment of capital gains, would become 1.0 current units.
DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company (definition refined in May). These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31, in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: Seeking NVCC Status and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind this analysis.
Yields for September, 2011, to November, 2011, were calculated by imposing a cap of 10% on the yields of YLO issues held, in order to avoid their extremely high calculated yields distorting the calculation and to reflect the uncertainty in the marketplace that these yields will be realized.

Significant positions were held in DeemedRetractible and FixedReset issues on November 30; all of the former and most of the latter currently have their yields calculated with the presumption that they will be called by the issuers at par prior to 2022-1-31. This presents another complication in the calculation of sustainable yield. The fund also holds a position in a SplitShare (BNA.PR.C) and an OperatingRetractible Scrap (YLO.PR.B) which also have their yields calculated with the expectation of a maturity at par, a somewhat dubious assumption in the latter case.

However, if the entire portfolio except for the PerpetualDiscounts were to be sold and reinvested in these issues, the yield of the portfolio would be the 5.79% shown in the MAPF Portfolio Composition: November 2011 analysis (which is greater than the 5.32% index yield on November 30). Given such reinvestment, the sustainable yield would be $10.4511 * 0.0579 = $0.6051, down from the $10.4924 * 0.0598 = $0.6274 reported for October, but an increase from the $10.2709 * 0.0584 = $0.5998 reported in September.

Different assumptions lead to different results from the calculation, but the overall positive trend is apparent. I’m very pleased with the results! It will be noted that if there was no trading in the portfolio, one would expect the sustainable yield to be constant (before fees and expenses). The success of the fund’s trading is showing up in

  • the very good performance against the index
  • the long term increases in sustainable income per unit

As has been noted, the fund has maintained a credit quality equal to or better than the index; outperformance is due to constant exploitation of trading anomalies.

Again, there are no predictions for the future! The fund will continue to trade between issues in an attempt to exploit market gaps in liquidity, in an effort to outperform the index and keep the sustainable income per unit – however calculated! – growing.

Posted in MAPF | 1 Comment »

MAPF Portfolio Composition: November, 2011

Sunday, December 4th, 2011

Turnover remained low in November, at about 2%.

Sectoral distribution of the MAPF portfolio on November 30 was as follows:

MAPF Sectoral Analysis 2011-11-30
HIMI Indices Sector Weighting YTW ModDur
Ratchet 0% N/A N/A
FixFloat 0% N/A N/A
Floater 0% N/A N/A
OpRet 0% N/A N/A
SplitShare 9.8% (0) 6.94% 5.96
Interest Rearing 0% N/A N/A
PerpetualPremium 0.0% (0) N/A N/A
PerpetualDiscount 9.1% (-1.5) 5.79% 14.15
Fixed-Reset 11.9% (+1.5) 3.09% 2.80
Deemed-Retractible 59.1% (-0.6) 6.23% 7.79
Scraps (Various) 9.7% (+0.3) 7.87% (see note) 9.01 (see note)
Cash +0.4% (+0.3) 0.00% 0.00
Total 100% 6.02% 7.68
Yields for the YLO preferreds have been set at 10% for calculation purposes, and their durations at 5.00. The extraordinarily low price of these issues has resulted in extremely high calculated yields; I feel that substitution of these values results in a more prudent total indication.
Totals and changes will not add precisely due to rounding. Bracketted figures represent change from October month-end. Cash is included in totals with duration and yield both equal to zero.
DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31, in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind this analysis.

The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.

Credit distribution is:

MAPF Credit Analysis 2011-11-30
DBRS Rating Weighting
Pfd-1 0 (0)
Pfd-1(low) 47.4% (-0.2)
Pfd-2(high) 22.6% (+1.2)
Pfd-2 0 (0)
Pfd-2(low) 20.0% (-1.5)
Pfd-3(high) 2.7% (+0.3)
Pfd-3 2.0% (-1.7)
Pfd-4 2.5% (+2.5)
Pfd-4(low) 2.5% (-1.2)
Cash +0.4% (+0.3)
Totals will not add precisely due to rounding. Bracketted figures represent change from October month-end.
A position held in ELF preferreds has been assigned to Pfd-2(low)
A position held in CSE preferreds has been assigned to Pfd-3

Liquidity Distribution is:

MAPF Liquidity Analysis 2011-11-30
Average Daily Trading Weighting
<$50,000 5.3% (0)
$50,000 – $100,000 19.5% (-1.2)
$100,000 – $200,000 29.0% (+5.4)
$200,000 – $300,000 41.8% (+10.9)
>$300,000 4.0% (-15.4)
Cash +0.4% (+0.3)
Totals will not add precisely due to rounding. Bracketted figures represent change from Octoberber month-end.

MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. The fund may be purchased either directly from Hymas Investment Management or through a brokerage account at Odlum Brown Limited. A “unit trust” is like a regular mutual fund, but is sold by offering memorandum rather than prospectus. This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission) or those who subscribe for $150,000+. Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.

A similar portfolio composition analysis has been performed on the Claymore Preferred Share ETF (symbol CPD) as of August 31, 2011, and published in the October, 2011, PrefLetter. While direct comparisons are difficult due to the introduction of the DeemedRetractible class of preferred share (see above) it is fair to say:

  • MAPF credit quality is better
  • MAPF liquidity is a higher
  • MAPF Yield is higher
  • Weightings in
    • MAPF is much more exposed to DeemedRetractibles
    • MAPF is much less exposed to Operating Retractibles
    • MAPF is much more exposed to SplitShares
    • MAPF is less exposed to FixFloat / Floater / Ratchet
    • MAPF weighting in FixedResets is much lower

Posted in MAPF | No Comments »

December 2, 2011

Saturday, December 3rd, 2011

There was a decent US jobs number:

Treasuries pared losses after the U.S. jobless rate unexpectedly fell to 8.6 percent as the workforce shrank, indicating moderate economic growth.

U.S. debt extended the first weekly loss in three weeks as employers added 120,000 jobs in November after an increase of 100,000 positions in the previous month, the Labor Department reported today in Washington. A European proposal to channel central-bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.

There is some hope that the increase is understated:

American households may be signaling the job market is stronger than the payroll numbers indicate.

Employers said they took on 120,000 workers in November, bringing job gains over the past four months to 534,000, Labor Department data showed today in Washington. A separate survey of households showed 278,000 more people were employed last month, pushing the increase during the same period to 1.28 million.

At turning points in the economy, the latter may prove more accurate because it’s more likely to pick up hiring at small companies and new firms that may be under the government’s radar. In another sign of recovery, the payroll figures the last three reports have been revised up by a combined 91,000 on average for the prior two months.

Rotman B-School is discussing the Coventree decision:

Monday, December 19, 2011
Capital Markets Institute @ Rotman Roundtable Discussion

3:00pm to 5:00pm Roundtable Discussion
TOPIC: Disclosure and Materiality: The Coventree Decision
SYNOPSIS: In looking at the Coventree Decision by the OSC our panelists will go through the following questions:
What is materiality? What is a material change? When to disclose? Risks of disclosing too early OR too late; insights from the Coventree decision, securities law, issuers and investors; What does the Coventree decision signal regarding disclosure going forward?
PANELISTS:
Jeremy Fraiberg, Partner, Osler, Hoskin & Harcourt LLP
Paul Halpern, Director, Capital Markets Institute, Professor Emeritus of Finance, Rotman School of Management
Christopher C. Nicholls, Stephen Dattels Chair in Corporate Finance Law at the University of Western Ontario
Sean Vanderpol, Partner, Stikeman Elliott
G. Wesley Voorheis, Partner, Voorheis & Co. LLP and member of the Special Committee established by the Coventree Board of Directors
PLACE: Rotman School (South) Room 209 – 149 College Street, Toronto (ON)
TO REGISTER: www.rotman.utoronto.ca/cmi-dec19
QUESTIONS: 416.978.5654 or email Kathleen.Coulson@Rotman.Utoronto.Ca

Greece is engaged in talkes regarding how to default without defaulting. No doubt they are hoping that Pythagorus will come back to square the circle:

Greece and its private creditors are involved in “complicated” negotiations on a debt-swap agreement and scenarios coming to light shouldn’t be seen as indicative of the final result, said Prime Minister Lucas Papademos.

“Each side has its strategies and has starting positions,” Papademos said today in comments to lawmakers televised live on Vouli TV. “Greece’s national interest is our basic goal and the basis supporting our position. That’s self- evident and a given.”
…
Greece’s 206 billion euros of privately held debt would be reduced by 50 percent under an agreement announced at an Oct. 26 summit of European leaders in Brussels. The accord didn’t resolve details of the swap, such as the reduction in net present value investors would face.
…
Greece and its private creditors are in disagreement over the interest rate on new bonds and how 30 billion euros intended to sweeten the deal will be used, said a person who is on the lenders’ negotiating committee. Greece is pushing for a coupon of 4.5 percent on new 20-year to 30-year bonds, while the banks are seeking a rate of 7 percent to 8 percent, said the person, who declined to be identified because the discussions are private.

The TMX DataLinx service has collywobbles again, so today’s data have been prepared using unofficial data from Yahoo!

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 29bp, FixedResets up 3bp and DeemedRetractibles gaining 17bp. Volatility was reasonable. Volume was 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 -1.3690 % 2,060.5
FixedFloater 4.90 % 4.63 % 31,463 17.08 1 0.4661 % 3,147.0
Floater 3.21 % 3.53 % 65,776 18.38 3 -1.3690 % 2,224.8
OpRet 4.90 % 1.01 % 52,664 1.45 6 -0.1408 % 2,473.5
SplitShare 5.85 % 6.67 % 57,976 5.13 3 0.1567 % 2,509.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1408 % 2,261.8
Perpetual-Premium 5.53 % 3.20 % 99,167 1.07 18 0.0839 % 2,156.9
Perpetual-Discount 5.25 % 5.19 % 107,797 15.05 12 0.2880 % 2,303.0
FixedReset 5.12 % 3.05 % 222,946 2.45 63 0.0287 % 2,337.6
Deemed-Retractible 5.05 % 4.47 % 192,694 3.83 46 0.1732 % 2,220.5
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater -2.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-02
Maturity Price : 15.02
Evaluated at bid price : 15.02
Bid-YTW : 3.53 %
BAM.PR.K Floater -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-02
Maturity Price : 14.96
Evaluated at bid price : 14.96
Bid-YTW : 3.55 %
HSB.PR.C Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 5.15 %
TD.PR.Q Deemed-Retractible 1.28 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 26.00
Evaluated at bid price : 26.97
Bid-YTW : 2.53 %
CIU.PR.A Perpetual-Discount 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-02
Maturity Price : 23.95
Evaluated at bid price : 24.45
Bid-YTW : 4.70 %
Volume Highlights
Issue Index Shares
Traded		 Notes
ENB.PR.D FixedReset 173,843 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-02
Maturity Price : 23.15
Evaluated at bid price : 25.15
Bid-YTW : 3.73 %
BAM.PR.Z FixedReset 66,648 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-02
Maturity Price : 23.17
Evaluated at bid price : 25.20
Bid-YTW : 4.41 %
BNS.PR.T FixedReset 55,325 Desjardins crossed 20,000 at 27.10; TD crossed 24,700 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 27.08
Bid-YTW : 2.88 %
TD.PR.I FixedReset 42,754 Scotia crossed 25,000 at 27.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.28
Bid-YTW : 2.90 %
SLF.PR.I FixedReset 37,948 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.08
Bid-YTW : 4.70 %
CM.PR.G Perpetual-Discount 37,315 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-02
Maturity Price : 24.74
Evaluated at bid price : 25.06
Bid-YTW : 5.44 %
There were 34 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: 21.65 – 22.09
Spot Rate : 0.4400
Average : 0.2454

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.65
Bid-YTW : 6.48 %
BAM.PR.J OpRet Quote: 26.87 – 27.51
Spot Rate : 0.6400
Average : 0.4543

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.87
Bid-YTW : 4.11 %
TCA.PR.Y Perpetual-Premium Quote: 52.85 – 53.39
Spot Rate : 0.5400
Average : 0.3963

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 52.85
Bid-YTW : 3.20 %
HSB.PR.C Deemed-Retractible Quote: 25.18 – 25.68
Spot Rate : 0.5000
Average : 0.3773

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 5.15 %
HSB.PR.E FixedReset Quote: 27.20 – 27.60
Spot Rate : 0.4000
Average : 0.3036

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 27.20
Bid-YTW : 3.50 %
BAM.PR.M Perpetual-Discount Quote: 23.32 – 23.66
Spot Rate : 0.3400
Average : 0.2529

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-02
Maturity Price : 22.89
Evaluated at bid price : 23.32
Bid-YTW : 5.16 %

Posted in Market Action | No Comments »

December 1, 2011

Friday, December 2nd, 2011

Sorry this is so late, folks!

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 -0.3011 % 2,089.1
FixedFloater 4.92 % 4.66 % 29,261 17.05 1 -1.2781 % 3,132.4
Floater 3.17 % 3.43 % 65,803 18.61 3 -0.3011 % 2,255.7
OpRet 4.90 % 1.00 % 52,320 1.45 6 -0.0895 % 2,477.0
SplitShare 5.86 % 6.67 % 58,609 5.14 3 -0.3690 % 2,505.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0895 % 2,264.9
Perpetual-Premium 5.53 % 3.24 % 99,203 1.77 18 0.0229 % 2,155.1
Perpetual-Discount 5.26 % 5.20 % 109,363 15.05 12 0.1146 % 2,296.4
FixedReset 5.12 % 3.13 % 218,702 2.45 63 -0.0482 % 2,336.9
Deemed-Retractible 5.06 % 4.46 % 192,643 3.84 46 0.0184 % 2,216.7
Performance Highlights
Issue Index Change Notes
IAG.PR.A Deemed-Retractible -1.87 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.05
Bid-YTW : 6.16 %
SLF.PR.G FixedReset -1.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 4.50 %
PWF.PR.M FixedReset -1.50 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 3.93 %
BAM.PR.G FixedFloater -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-01
Maturity Price : 25.00
Evaluated at bid price : 19.31
Bid-YTW : 4.66 %
PWF.PR.A Floater -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-01
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 2.78 %
BNA.PR.D SplitShare -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2014-07-09
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 5.58 %
ELF.PR.G Perpetual-Discount 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-01
Maturity Price : 21.15
Evaluated at bid price : 21.15
Bid-YTW : 5.70 %
Volume Highlights
Issue Index Shares
Traded		 Notes
RY.PR.I FixedReset 260,654 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.10 %
MFC.PR.A OpRet 151,710 YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.05 %
BNS.PR.Z FixedReset 130,940 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 3.24 %
CM.PR.I Deemed-Retractible 65,773 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-31
Maturity Price : 25.25
Evaluated at bid price : 25.70
Bid-YTW : 4.20 %
ENB.PR.D FixedReset 56,101 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-01
Maturity Price : 23.14
Evaluated at bid price : 25.13
Bid-YTW : 3.73 %
RY.PR.E Deemed-Retractible 54,008 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 4.49 %
There were 30 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.L Deemed-Retractible Quote: 25.45 – 25.90
Spot Rate : 0.4500
Average : 0.3082

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.45
Bid-YTW : 5.39 %
PWF.PR.M FixedReset Quote: 26.20 – 26.59
Spot Rate : 0.3900
Average : 0.2561

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 3.93 %
TD.PR.R Deemed-Retractible Quote: 27.02 – 27.34
Spot Rate : 0.3200
Average : 0.1963

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-30
Maturity Price : 26.00
Evaluated at bid price : 27.02
Bid-YTW : 2.86 %
PWF.PR.A Floater Quote: 19.00 – 20.48
Spot Rate : 1.4800
Average : 1.3616

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-12-01
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 2.78 %
BAM.PR.H OpRet Quote: 25.50 – 25.73
Spot Rate : 0.2300
Average : 0.1455

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : -6.44 %
GWO.PR.I Deemed-Retractible Quote: 22.52 – 22.88
Spot Rate : 0.3600
Average : 0.2792

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.52
Bid-YTW : 5.79 %

Posted in Market Action | No Comments »

November 30, 2011

Thursday, December 1st, 2011

The Competition Bureau is leaning against TMX / Maple:

Dealing a major blow to the proposed acquisition of TMX Group, Canada’s Competition Bureau has informed the 13 financial institutions behind the takeover that it has “serious concerns” with their plan.

On Tuesday competition commissioner Melanie Aitken privately informed the consortium, named Maple Group Acquisition Corp., that she has concerns “about the likely competitive effects of the proposed transactions in the current environment, primarily in connection with equities trading and clearing and settlement services in Canada,” according to a statement from Maple Group.

The central banks are mitigating market discipline:

Six central banks led by the Federal Reserve made it cheaper for banks to borrow dollars in emergencies in a global effort to ease Europe’s sovereign-debt crisis.

Stocks rallied worldwide, commodities surged and yields on most European debt fell on the show of force from central banks aimed at easing strains in financial markets. The cost for European banks to borrow dollars dropped from the highest in three years, tempering concerns about the euro’s worsening crisis after leaders said they’d failed to boost the region’s bailout fund as much as planned.
…
The premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points, the Fed said today in a statement in Washington. The so- called dollar swap lines will be extended by six months to Feb. 1, 2013. The Fed coordinated the move with the European Central Bank and the central banks of Canada, Switzerland, Japan and the U.K.

The six central banks also agreed to create temporary bilateral swap programs so funding can be provided in any of the currencies “should market conditions so warrant.” Those swap lines were also authorized through Feb. 1, 2013.

I won’t go so far as to say I don’t like it, but I will say that I’m deeply suspicious. Central Bank financing should be available, certainly, for solvent but illiquid banks, but these loans should be at punitive, not concessionary rates.

With overnight money so cheap, the cost of failing a trade is derisory, so the Fed’s Treasury Market Practice Group has suggested a surcharge that effectively puts a floor of 3% on fail money. It is strictly voluntary, of course, BUT THE FED WOULD REALLY, REALLY LIKE YOU TO DO THIS!

It was a modestly down day for the Canadian preferred share market, with PerpetualDiscounts losing 12bp, FixedResets off 3bp and DeemedRetractibles down 8bp. Volatility was good. Volume was above average.

PerpetualDiscounts now yield 5.32%, equivalent to 6.92% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.8% so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 210bp, a significant widening from the 195bp reported November 23 as PerpetualDiscounts got smacked for 17bp dividend yield on the week, while long corporates edged up only 5bp.

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 -0.3259 % 2,095.4
FixedFloater 4.86 % 4.59 % 29,148 17.15 1 1.2422 % 3,172.9
Floater 3.43 % 3.45 % 151,508 18.57 2 -0.3259 % 2,262.5
OpRet 4.96 % 0.93 % 53,144 1.46 7 0.0165 % 2,479.2
SplitShare 5.84 % 6.75 % 59,497 5.14 3 -0.3253 % 2,515.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0165 % 2,267.0
Perpetual-Premium 5.58 % 3.32 % 98,470 0.41 13 -0.0135 % 2,154.6
Perpetual-Discount 5.31 % 5.32 % 103,649 14.66 17 -0.1159 % 2,293.8
FixedReset 5.12 % 3.08 % 214,440 2.46 64 -0.0315 % 2,338.0
Deemed-Retractible 5.06 % 4.44 % 195,756 3.85 46 0.0755 % 2,216.3
Performance Highlights
Issue Index Change Notes
BAM.PR.M Perpetual-Discount -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 22.97
Evaluated at bid price : 23.41
Bid-YTW : 5.13 %
POW.PR.D Perpetual-Discount -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 23.92
Evaluated at bid price : 24.37
Bid-YTW : 5.18 %
MFC.PR.F FixedReset -1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.02
Bid-YTW : 3.97 %
SLF.PR.G FixedReset -1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.20
Bid-YTW : 4.28 %
IAG.PR.A Deemed-Retractible -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.47
Bid-YTW : 5.92 %
ELF.PR.F Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 22.87
Evaluated at bid price : 23.15
Bid-YTW : 5.80 %
BAM.PR.G FixedFloater 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 25.00
Evaluated at bid price : 19.56
Bid-YTW : 4.59 %
GWO.PR.G Deemed-Retractible 1.52 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 5.31 %
BAM.PR.R FixedReset 1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 23.61
Evaluated at bid price : 26.51
Bid-YTW : 3.75 %
Volume Highlights
Issue Index Shares
Traded		 Notes
CM.PR.G Perpetual-Discount 257,712 Nesbitt crossed 132,800 at 24.90; Scotia crossed 30,000 at the same price.YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 24.57
Evaluated at bid price : 24.90
Bid-YTW : 5.47 %
ENB.PR.D FixedReset 89,995 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 23.13
Evaluated at bid price : 25.10
Bid-YTW : 3.74 %
RY.PR.Y FixedReset 52,274 TD crossed 48,800 at 27.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-24
Maturity Price : 25.00
Evaluated at bid price : 27.25
Bid-YTW : 2.99 %
CM.PR.E Perpetual-Discount 50,595 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 24.74
Evaluated at bid price : 25.05
Bid-YTW : 5.64 %
CM.PR.J Deemed-Retractible 42,460 TD crossed 25,000 at 25.30.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.31 %
CM.PR.D Perpetual-Premium 38,926 Scotia crossed 30,000 at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.41
Bid-YTW : 2.86 %
There were 37 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.C FixedReset Quote: 26.11 – 26.70
Spot Rate : 0.5900
Average : 0.4182

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.11
Bid-YTW : 3.73 %
BNA.PR.E SplitShare Quote: 22.71 – 23.17
Spot Rate : 0.4600
Average : 0.3013

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 22.71
Bid-YTW : 6.75 %
PWF.PR.E Perpetual-Discount Quote: 25.00 – 25.49
Spot Rate : 0.4900
Average : 0.3619

YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2041-11-30
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 5.57 %
POW.PR.C Perpetual-Premium Quote: 25.21 – 25.51
Spot Rate : 0.3000
Average : 0.2046

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-01-05
Maturity Price : 25.00
Evaluated at bid price : 25.21
Bid-YTW : 4.69 %
MFC.PR.A OpRet Quote: 25.06 – 25.32
Spot Rate : 0.2600
Average : 0.1774

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 25.06
Bid-YTW : 4.00 %
NA.PR.P FixedReset Quote: 26.91 – 27.15
Spot Rate : 0.2400
Average : 0.1624

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.91
Bid-YTW : 3.15 %

Posted in Market Action | 2 Comments »

REI.PR.C Closes at Small Discount on Light Volume

Thursday, December 1st, 2011

RioCan Real Estate Investment Trust has announced:

that it has successfully completed its issuance of an aggregate of 5,980,000 Cumulative Rate Reset Preferred Trust Units, Series C (the “Series C Units”) at a price of $25.00 per Series C Unit for aggregate gross proceeds of $149,500,000. The aggregate offering was comprised of the previously announced issuance of 5,200,000 Series C Units at $25.00 per Series C Unit for gross proceeds of $130,000,000, together with the option granted to underwriters, which was exercised in full, for an issuance of an additional 780,000 Series C Units for $25.00 per Series C Unit for additional gross proceeds of $19,500,000. The underwriting syndicate for the offering was co-led by RBC Capital Markets, CIBC and TD Securities Inc.

The offering was made under RioCan’s amended and restated base shelf short form prospectus dated December 21, 2010 amending and restating the base shelf short form prospectus dated July 6, 2010. The terms of the offering are described in a prospectus supplement dated November 21, 2011, which was filed with Canadian securities regulators.

REI.PR.C is an interest-bearing FixedReset, 4.70%+318 announced November 18. The issue size was announced as $130-million and a greenshoe for 19.5-million, which has been fully exercised. The issue will be tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

The issue traded 101,982 shares in a range of 24.62-00 today before closing at 24.90-94, 28×1. Vital Statistics are:

REI.PR.C FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 23.09
Evaluated at bid price : 24.90
Bid-YTW : 4.75 %

Posted in Issue Comments | 1 Comment »

TA.PR.F Closes at Slight Discount on Low Volume

Thursday, December 1st, 2011

TransAlta Corporation has announced:

it has completed its public offering of 11,000,000 Cumulative Redeemable Rate Reset First Preferred Shares, Series C (the “Series C Shares”) at a price of $25.00 per Series C Share.

The offering, previously announced on November 22, 2011, resulted in gross proceeds to TransAlta of $275 million. The net proceeds of the offering will be used to partially fund capital projects, for other general corporate purposes, and to reduce short term indebtedness of the company and its affiliates. TransAlta may invest funds that it does not immediately require in short term marketable debt securities.

The Series C Shares were offered to the Canadian public through a syndicate of underwriters led by CIBC World Markets Inc., RBC Capital Markets and Scotia Capital Inc. by way of a prospectus supplement that was filed with securities regulatory authorities in Canada under TransAlta’s short form base shelf prospectus dated November 15, 2011.

Holders of Series C Shares are entitled to receive a cumulative quarterly fixed dividend yielding 4.60% annually for the initial period ending June 30, 2017. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 3.10%. Holders of Series C Shares will have the right, at their option, to convert their shares into Cumulative Rate Reset First Preferred Shares, Series D (the “Series D Shares”), subject to certain conditions, on June 30, 2017 and on June 30 every five years thereafter. Holders of Series D Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada Treasury Bill yield plus 3.10%. The Series C Shares are listed on the Toronto Stock Exchange under the ticker symbol TA.PR.F.

TA.PR.F is a FixedReset, 4.60%+310, announced 2011-11-22. TA.PR.F will be tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.

The issue traded 219,150 shares in a range of 24.85-95 today before closing at 24.87-92, 1×13. Vital statistics are:

TA.PR.F FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-11-30
Maturity Price : 23.08
Evaluated at bid price : 24.87
Bid-YTW : 4.50 %

Posted in Issue Comments | No Comments »

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