Nothing happened today.
The Canadian preferred share market closed the year on a very strong note, with PerpetualDiscounts winning 52bp, FixedResets up 42bp and DeemedRetractibles gaining 23bp. The Performance Highlights Table is suitably enormous, with a large complement of winners from the credit-nervous ENB. Volume was tiny.
For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.
Remember that all rich /cheap assessments are:
- based on Implied Volatility Theory only
- are relative only to other FixedResets from the same issuer
- assume constant GOC-5 yield
- assume constant Implied Volatility
- assume constant spread
Here’s TRP:
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So according to this, TRP.PR.A, bid at 20.65, is $1.67 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.50 and resetting at +154bp on 2016-1-30 is $1.79 rich.
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Today’s fine performance (+2.01%!) has brought MFC.PR.F back to the line defined by its peers. Implied Volatility continues to be a conundrum. It is far too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).
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There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.16 and appears to be $0.81 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.25 and appears to be $1.11 rich.
It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.
This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.09, looks $1.05 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.42, looks $1.03 expensive and resets 2019-3-1
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Pairs equivalence is all over the map, but will probably converge as volumes increase in the new year.
And that’s it for another year!
| 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 | -0.4579 % | 2,510.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.4579 % | 3,974.9 |
| Floater | 3.02 % | 3.09 % | 63,986 | 19.48 | 4 | -0.4579 % | 2,669.0 |
| OpRet | 4.41 % | -1.83 % | 23,195 | 0.08 | 2 | 0.0000 % | 2,752.0 |
| SplitShare | 4.26 % | 4.04 % | 34,192 | 3.67 | 5 | 0.0626 % | 3,209.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,516.4 |
| Perpetual-Premium | 5.44 % | -4.91 % | 65,647 | 0.09 | 20 | 0.1942 % | 2,493.3 |
| Perpetual-Discount | 5.14 % | 5.04 % | 107,501 | 15.32 | 15 | 0.5221 % | 2,681.8 |
| FixedReset | 4.17 % | 3.57 % | 231,565 | 8.46 | 77 | 0.4168 % | 2,567.4 |
| Deemed-Retractible | 4.94 % | -1.38 % | 91,140 | 0.09 | 40 | 0.2297 % | 2,633.9 |
| FloatingReset | 2.63 % | -3.31 % | 61,235 | 0.08 | 6 | -1.9589 % | 2,501.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Deemed-Retractible | -1.25 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.65 Bid-YTW : 5.33 % |
| PWF.PR.A | Floater | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 2.78 % |
| ENB.PR.N | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.88 Evaluated at bid price : 24.04 Bid-YTW : 4.16 % |
| ENB.PR.D | FixedReset | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.71 Evaluated at bid price : 23.52 Bid-YTW : 4.03 % |
| GWO.PR.H | Deemed-Retractible | 1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.62 Bid-YTW : 5.07 % |
| POW.PR.G | Perpetual-Premium | 1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-15 Maturity Price : 25.50 Evaluated at bid price : 26.44 Bid-YTW : 4.51 % |
| PWF.PR.T | FixedReset | 1.15 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 2.93 % |
| ENB.PR.P | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.66 Evaluated at bid price : 23.62 Bid-YTW : 4.12 % |
| TRP.PR.B | FixedReset | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 17.92 Evaluated at bid price : 17.92 Bid-YTW : 3.79 % |
| RY.PR.L | FixedReset | 1.26 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.54 Bid-YTW : 2.80 % |
| ENB.PR.F | FixedReset | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.85 Evaluated at bid price : 23.85 Bid-YTW : 4.08 % |
| BAM.PF.B | FixedReset | 1.28 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 3.86 % |
| SLF.PR.D | Deemed-Retractible | 1.32 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.79 Bid-YTW : 5.10 % |
| ENB.PF.C | FixedReset | 1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.97 Evaluated at bid price : 24.50 Bid-YTW : 4.16 % |
| MFC.PR.L | FixedReset | 1.39 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.46 % |
| GWO.PR.P | Deemed-Retractible | 1.40 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.01 Bid-YTW : 4.72 % |
| BAM.PF.D | Perpetual-Discount | 1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 21.65 Evaluated at bid price : 21.99 Bid-YTW : 5.59 % |
| ENB.PR.J | FixedReset | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.07 Evaluated at bid price : 24.55 Bid-YTW : 4.07 % |
| SLF.PR.E | Deemed-Retractible | 1.49 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 5.09 % |
| CU.PR.E | Perpetual-Discount | 1.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.47 Evaluated at bid price : 24.90 Bid-YTW : 4.95 % |
| CU.PR.D | Perpetual-Discount | 1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.49 Evaluated at bid price : 24.92 Bid-YTW : 4.95 % |
| ENB.PR.T | FixedReset | 1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.58 Evaluated at bid price : 23.50 Bid-YTW : 4.15 % |
| ENB.PF.A | FixedReset | 1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.03 Evaluated at bid price : 24.60 Bid-YTW : 4.15 % |
| MFC.PR.F | FixedReset | 2.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.35 Bid-YTW : 4.37 % |
| FTS.PR.J | Perpetual-Discount | 2.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.35 Evaluated at bid price : 24.77 Bid-YTW : 4.82 % |
| TRP.PR.C | FixedReset | 2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 3.49 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.P | FixedReset | 100,450 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.13 Evaluated at bid price : 24.93 Bid-YTW : 3.57 % |
| FTS.PR.J | Perpetual-Discount | 41,518 | ITG (who?) bought blocks of 19,400 and 19,100 from Nesbitt, both at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 24.35 Evaluated at bid price : 24.77 Bid-YTW : 4.82 % |
| TRP.PR.F | FloatingReset | 37,025 | Newly exchanged from TRP.PR.A. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.00 Evaluated at bid price : 22.26 Bid-YTW : 3.11 % |
| MFC.PR.L | FixedReset | 32,700 | Nesbitt crossed 31,700 at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.46 % |
| TD.PF.C | FixedReset | 32,025 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 23.14 Evaluated at bid price : 24.95 Bid-YTW : 3.57 % |
| ENB.PF.E | FixedReset | 13,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-12-31 Maturity Price : 22.98 Evaluated at bid price : 24.56 Bid-YTW : 4.16 % |
| There were 0 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PVS.PR.C | SplitShare | Quote: 25.65 – 30.00 Spot Rate : 4.3500 Average : 2.3280 YTW SCENARIO |
| PWF.PR.A | Floater | Quote: 19.01 – 20.00 Spot Rate : 0.9900 Average : 0.7269 YTW SCENARIO |
| BAM.PR.N | Perpetual-Discount | Quote: 21.43 – 22.02 Spot Rate : 0.5900 Average : 0.4210 YTW SCENARIO |
| TRP.PR.E | FixedReset | Quote: 25.21 – 25.74 Spot Rate : 0.5300 Average : 0.4173 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 25.87 – 26.60 Spot Rate : 0.7300 Average : 0.6227 YTW SCENARIO |
| ENB.PR.Y | FixedReset | Quote: 22.46 – 22.82 Spot Rate : 0.3600 Average : 0.2564 YTW SCENARIO |
AZP.PR.C Weakly Bid On Zero Volume
Thursday, January 1st, 2015There are now about 1.66-million shares of AZP.PR.C outstanding following a 42% conversion from AZP.PR.B – which are going to be a nightmare for novices to trace, since this was issued as EPP.PR.B, then changed to CZP.PR.B, then changed to AZP.PR.B and finally converted to AZP.PR.C.
AZP.PR.C is a FloatingReset, paying the three-month bill rate +418bp, reset quarterly. It is convertible back to AZP.PR.B on 2019-12-31 at the option of the holder.
This issue will be tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.
The Toronto Stock Exchange reports no volume on its debut.
Vital statistics are:
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 12.50
Evaluated at bid price : 12.50
Bid-YTW : 10.22 %
The Pair Equivalency of AZP.PR.C to its FixedReset sibling AZP.PR.B shows it to be very cheaply bid at 12.50, compared to the 13.30 bid on the latter issue; but given that there was no volume at all and that the quote was 12.50-14.00, no real conclusions can be drawn. At the bid prices, three-month bills need only average 0.42% over the next five years to achieve equivalent total returns.
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