PrefBlog

Sometimes you just can’t win:

Vladimir Putin is facing a problem few could have anticipated: The ruble is becoming too strong.

Last year’s worst-performing major currency is this year’s best and while that’s buoying the nation’s bonds, driving yields to the lowest in four months, it’s also crimping Russia’s export revenue. Even though oil is little changed in dollars this year, the price when converted to rubles has plunged to the lowest since 2011.

The currency rout in 2014 helped Russia to keep its budget deficit within 1 percent of gross domestic product as the ruble weakened in lockstep with a 50 percent slump in oil. Now, with the cease-fire in Ukraine and the allure of higher-yielding assets attracting investors to ruble debt, the government is seeing the opposite effect.

“The current ruble level is already uncomfortable for the budget considering the oil price in rubles is already low,” Vladimir Bragin, head of research at Alfa Capital in Moscow, said by phone on Thursday. “In order to reach macroeconomic stability, Russia needs to limit its budget deficit and a weaker ruble is an easy way to do that.”

It looks like there will be another triumph for regulatory extortion:

Deutsche Bank AG is close to resolving a multi-year probe by U.S. and U.K. authorities into interest-rate manipulation, with a U.K. subsidiary expected to plead guilty, according to two people familiar with the matter.

Germany’s biggest bank will probably finalize a settlement this month, these people said. The unit expected to plead is Deutsche Bank Group Services, one of the people said.

The bank is also expected to pay penalties of more than $1.5 billion to wrap up probes by the U.S. Justice Department, the Commodity Futures Trading Commission, New York’s Department of Financial Services and the U.K.’s Financial Conduct Authority, according to one of the people. The penalty could be larger than those levied against other global banks for interest-rate rigging claims.
…
In October, the bank said it was in discussions with some authorities about a resolution. The German lender previously was fined 725 million euros ($773 million) by the European Union for manipulating yen Libor and the euro interbank offered rate.
…
Deutsche Bank set aside 3.6 billion euros in legal and operational risk provisions at the end of December. The bank doesn’t provide details on the reserves. Over the last three years, the bank’s litigation expenses totaled about 7.1 billion euros.

As an aside, I confess to being fascinated and horrified by the Valentina Lisitsa / Toronto Symphony Orchestra scandal. In the first place, I agree with Vinay Menon of the Toronto Star:

The TSO sacrificed its own artistic integrity. It was remarkably tone deaf. It set a dangerous precedent and, in doing so, made a mockery of the arts in this city. Canceling these concerts was about as absurd and unwarranted as that time mayor June Rowlands banned the Barenaked Ladies because the band’s name objectified women.

More to the point though is the TSO’s Jeff Melanson’s delusions of grandeur. If – as many fervently believe – she has crossed the line into hate speech … we have laws for that. Publicly available laws, with case law constructed from the precedents. We have a judicial system that will – publicly – make a finding based on the (publicly disclosed) facts of the case; we can attend the trial if we wish to, to verify that the decision is on the up-and-up. We have a police force that will perform any necessary investigation and many crown attorneys who will make a decision as to whether to proceed with charges on the basis of that investigation. We have a judicial system that will – publicly – make a finding based on the (publicly disclosed) facts of the case; we can attend the trial if we wish to, to verify that the decision is on the up-and-up. We do not need Jeff Melanson of the TSO to pin on his Junior Secret Policeman badge and indulge in a little career-wrecking in the apparent belief that artists are supposed to be nice people.

These vitriolic moral crusades harm the body politic more than anything Ms. Lisitsa has said and the promotion of two-bit bureaucrats to Official Moral Arbiters is even worse, as discussed on January 6, 2015 with respect to the Dalhousie dentists.

Update: This is delicious in light of the Valentina Lisitsa scandal with the TSO … at the height of the furor regarding the presence of Queers Against Israeli Apartheid in Toronto’s Gay Pride parade, a few institutions made a joint statement in support of the group:

Delicious.

Inspired by Easter, investors in Canadian preferred shares have participated in other religious ceremonies in the past week:

Click for Big

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 5bp, FixedResets off 51bp and DeemedRetractibles gaining 3bp. The Performance Highlights table is predictably enormous, dominated by low-spread FixedReset losers. Volume was extremely high.

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

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

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.02 to be $0.96 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is $0.76 cheap at its bid price of 13.79.

Click for Big

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.45 to be $0.60 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.16 to be $0.91 cheap. The lowest spread issue, MFC.PR.F, is noticeably off the curve defined by its peers.

Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.07 to be $1.26 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.30 and appears to be $1.03 rich.

Click for Big

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 15.40, looks $1.65 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.59 and is $0.95 rich.

Click for Big

Investment-grade pairs other than TRP.PR.A / TRP.PR.F now predict an average over the next five years of about 0.25%, a slight decrease from yesterday’s value of 0.30%. TRP.PR.A / TRP.PR.F remains an outlier, predicting 1.46%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -2.05%.

Click for Big

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

Shareholder activism is rearing its head:

Bond investors face growing risk as activist shareholders are targeting more companies in 2015 than last year, threatening further damage to corporate credit quality, according to Moody’s Investors Service.
…
Investors have sought change at 54 companies including General Motors Co. and MGM Resorts International this year, up from 43 during the same period in 2014, Moody’s said. The record 222 companies targeted last year was up from 220 in 2013. Assets managed by activist hedge funds increased to about $120 billion in 2014 from about $105 billion in 2013, according to Hedge Fund Research data cited by Moody’s.

They’re lured by the “huge cash pile” at U.S. non-financial companies, which had $1.65 trillion on their balance sheets in October 2014, according to the report. Technology companies, which as of October carried more than half of the cash held by the largest non-financial U.S. companies, accounted for 20 percent of shareholder activism last year. Along with its cash, the sector’s minimal dividends and low debt levels will continue to draw attention from these investors, Moody’s said.

The bureaucrats at the IMF have recommended hiring more bureaucrats:

Bond funds may be exposing customers and the financial system to more risk than some investors realize as money managers seek higher returns in less liquid assets, the International Monetary Fund said in a report recommending improved oversight.

“The role of fixed-income funds, which entail larger contagion risks than traditional equity investment, has expanded considerably,” the IMF said Wednesday in a chapter on asset managers in its latest Global Financial Stability Report.
…
While the U.S. mutual fund industry’s regulation regime is based primarily on disclosure, the IMF proposed enhancing “liquidity rules, the definition of liquid assets, investment restrictions, and reporting and disclosure rules.” Not enough is known about the use of leverage and derivatives, said Gaston Gelos, chief of the IMF division that worked on the chapter.
…
While asset managers act as a “spare tire” in world’s financial system, providing financing even when banks are distressed, the industry raises risks that call for changes in regulated and oversight, the IMF said.

“Easy redemption options can create risks of runs because of the presence of a first-mover advantage,” the IMF said. “The destabilization of prices in certain asset segments (particularly bonds) can affect other parts of the financial system through funding markets and balance sheet and collateral channels.”

I have tried several times to download the report, but it appears that all their technology budget got spent on junkets; the download hangs pretty quickly. It might work in a couple of days.

Meanwhile it appears that yes, next time might be different:

The gap between how easy it is to trade mutual-fund shares and how hard it is to buy and sell assets such as high-yield bonds and leveraged loans is widening.

In 2015 alone, a year in which the Federal Reserve says it’s still planning to raise interest rates, investors have poured $46 billion into mutual funds and exchange-traded funds focused on corporate bonds, according to data compiled by Wells Fargo & Co.

They now own about 22 percent of outstanding high-yield bonds, up from about 12 percent in 2006, data compiled by JPMorgan Chase & Co. show.

While the size of the U.S. bond market has swelled 23 percent since the end of 2007 through the end of last year, trading has fallen 28 percent in the period, according to data compiled by the Securities Industry & Financial Markets Association.

Warnings about potential scarcity of liquidity when it’s at a premium have moved from academic circles and crackpot blogs to the mainstream:

JPMorgan Chase & Co. head Jamie Dimon said last year’s volatility in U.S. Treasuries is a “warning shot” to investors and that the next financial crisis could be exacerbated by a shortage of the securities.

The Oct. 15 gyration, when Treasury yields fluctuated by almost 0.4 percentage point, was an “unprecedented move” that would have serious consequences in a stressed environment, Dimon, the New York-based bank’s chairman and chief executive officer, said in a letter Wednesday to shareholders. Treasuries are supposed to be among the most stable securities.

Dimon, 59, cited the incident as he waded into a debate about whether bank regulations implemented after the 2008 financial crisis exacerbate price declines by limiting the ability of Wall Street banks to make markets. It’s just a matter of time until some political, economic or market event triggers another financial crisis, he said, without predicting one is imminent.

Hat tip to Assiduous Reader JP for bringing the above to my attention. JP sends me many interesting links, unlike you other bums.

Power Financial sees an opportunity in the robo-advisor business:

Power Financial Corp., which has built an empire around financial planning and investment advice, is now plugging into the world of robots by investing up to $30-million in Wealthsimple Financial Inc.

The partnership of the robo-adviser firm and a major financial institution is the first of its kind in Canada. It will help Power Financial to target more millennials and other Canadians who are less likely to invest through traditional channels, and instead opt for low-cost robo-advisers that provide automated online portfolio management. Under the agreement, pending regulatory approval, Power Financial will initially invest $10-million into Wealthsimple, with an option to put in another $20-million over the next 12 months. Power Financial could potentially make further investments over the next three years under the deal.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 12bp FixedResets down 15bp and DeemedRetractibles gaining 2bp. The Performance Highlights table continues to reflect a lot of churn in the market. Volume was slightly above average.

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

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

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.18 to be $0.89 rich, while TRP.PR.C, resetting 2016-01-30 at +154, is $0.69 cheap at its bid price of 15.90.

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

Most expensive is MFC.PR.M, resetting at +236 on 2019-12-19, bid at 24.25 to be $0.49 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.20 to be $0.93 cheap.

Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.14 to be $1.32 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.51 and appears to be $1.38 rich.

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 15.35, looks $1.73 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.60 and is $0.91 rich.

Click for Big

Investment-grade pairs other than TRP.PR.A / TRP.PR.F now predict an average over the next five years of about 0.30%, a slight decrease from yesterday’s value of 0.35%. TRP.PR.A / TRP.PR.F remains an outlier, predicting 1.24%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -1.66%.

Click for Big

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

Another day in which nothing happened, including me getting caught up on my responses to comments.

But I did get a call from a novice investor. His discount brokerage gave him my number and told him that I was the guy who could tell him about the dividend specifications for IGM.PR.B. I’m sure I’ll get my commission cheque shortly.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 37bp, FixedResets up 4bp and DeemedRetractibles gaining 2bp. The Performance Highlights table is quite lengthy, considering the modest nature of the overall movement. Volume was high.

PerpetualDiscounts now yield 5.02%, equivalent to 6.53% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.6% (maybe a little over) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 290bp, unchanged from the April 1 report.

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

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

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.25 to be $1.00 rich, while TRP.PR.C, resetting 2016-01-30 at +154, is $0.92 cheap at its bid price of 15.67.

Click for Big

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.72 to be $0.64 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.15 to be $0.91 cheap.

Click for Big

The fit on this series has suddenly become atrocious. It will be most interesting to see how long it takes for things to readjust.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.12 to be $1.32 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.70 and appears to be $1.59 rich.

Click for Big

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 15.40, looks $1.73 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.78 and is $0.97 rich.

Click for Big

Investment-grade pairs other than TRP.PR.A / TRP.PR.F now predict an average over the next five years of about 0.35%, holding the increase of last week. TRP.PR.A / TRP.PR.F is an outlier, predicting 1.08%. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -2.12%.

Click for Big

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

Nothing happened today, but there’s a rumour that preferred shares will soon come with warning labels:

Click for Big

It was another rough day for the Canadian preferred share market, with PerpetualDiscounts off 5bp, FixedResets losing 53bp and DeemedRetractibles down 16bp. The Performance Highlights table is comprised entirely of losers, notably Floaters and FixedResets from TRP, ENB and BAM. Volume was extremely high.

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

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

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 22.86 to be $0.66 rich, while TRP.PR.C, resetting 2016-01-30 at +154, is $1.00 cheap at its bid price of 15.55.

Click for Big

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.68 to be $0.69 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.11 to be $0.90 cheap.

Click for Big

The fit on this series has suddenly become atrocious. It will be most interesting to see how long it takes for things to readjust.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.06 to be $1.27 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.53 and appears to be $1.53 rich.

Click for Big

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 15.62, looks $1.68 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.00 and is $0.99 rich.

Click for Big

Investment-grade pairs now predict an average over the next five years of a little under 0.40%, continuing the increase of last week; the TRP.PR.A / TRP.PR.F pair is again an outlier, but this time on the high side. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -1.55%.

Alert Assiduous readers will note that during the past week of disaster, doom and destruction, the implied three month bill rate from FixedReset pairs has been increasing. This makes no sense, but since when has the preferred market made sense?

Click for Big

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

A weak jobs number pushed up Treasuries:

Treasuries surged, sending yields to two-month lows, after a report showed the economy added the fewest jobs since December 2013, damping the outlook for the timing of interest-rate increases by the Federal Reserve.

Futures showed traders pushed out expectations for central bank to begin tightening monetary policy into next year. The 126,000 increase in March was weaker than the most pessimistic forecast in a Bloomberg survey. Traders had speculated that the Fed could raise rates as soon as September with strength in the labor market offsetting weakness elsewhere.
…
Yields on benchmark 10-year notes fell seven basis points to 1.84 percent at 12:00 p.m. New York time, according to Bloomberg Bond Trader prices. The yield dropped as low as 1.80 percent, the least since Feb. 6. The 2 percent benchmark note due in February 2025 rose 21/32, or $6.56 per $1,000 face value, to 101 14/32.

The rate for fed funds futures for December fell four basis points to 0.34 percent, indicating about one-in-three odds of a rate increase by the Fed’s meeting that month.
…
The median forecast in a Bloomberg survey called for a 245,000 increase. The unemployment rate held steady at 5.5 percent. Average hourly earnings rose 2.1 percent from a year earlier.

Atlanta Fed president Lockhart suggests a Fed hike in late summer:

Federal Reserve Bank of Atlanta President Dennis Lockhart said while recent economic weakness probably won’t persist, he favors pushing out the central bank’s first rate increase beyond the next two meetings.

“I would probably be biased toward the July or September dates as opposed to June,” Lockhart, who votes on monetary policy this year, said in an interview Monday. “We will have more data and we will give the economy a little more time to prove out the thesis that I laid out, that the first quarter was anomalous again, just like a year ago.”
…
“I’m not ready yet to conclude a slowdown is underway,” Lockhart said. He said he still expects “a moderate pace of growth between 2.5 percent and 3 percent” with “continued progress on employment and a firming up of the price data.”

“I’m holding to the view that we will see a rebound in the second quarter and that we will see a resumption of stronger growth,” Lockhart said.

“It is still reasonable” for the Federal Open Market Committee to “deliberate about liftoff in the middle meetings of the year,” with June, July and September each meriting discussion. “I still think they should be on the table.”

New York Fed president Dudley is even more vague:

Federal Reserve Bank of New York President William C. Dudley said the path of interest-rate increases is likely to be “shallow” once the Fed starts to tighten, and recent economic weakness probably won’t persist.

The timing of the first rate increase since 2006 “will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated,” Dudley said in a speech Monday in Newark, New Jersey. “I anticipate that the path will be relatively shallow” as “headwinds in the aftermath of the financial crisis are still in evidence.”
…
If we raise interest rates and portfolios perform poorly, that’s likely to slow us down,” Dudley said in response to a question. On the other hand, “if financial market conditions do not tighten much in response to higher short-term interest rates, we might have to move more quickly,” he said in his prepared remarks.

Stocks rebounded after Dudley’s comments. The Standard & Poor’s 500 Index climbed 0.8 percent to 2,083.87 at 12:23 p.m. after opening 0.5 percent lower.

I’m way behind on responding to comments. I will catch up.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 3bp, FixedResets down 25bp and DeemedRetractibles gaining 7bp. FixedResets were dominant losers on the Performance Highlights table, particularly BAM issues. Volume was high.

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

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

Here’s TRP:

Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 23.25 to be $0.65 rich, while TRP.PR.C, resetting 2016-01-30 at +154, is $1.01 cheap at its bid price of 16.00.

Click for Big

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

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.76 to be $0.64 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.31 to be $0.76 cheap.

Click for Big

The fit on this series has suddenly become atrocious. It will be most interesting to see how long it takes for things to readjust.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.21 to be $1.30 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.90 and appears to be $1.72 rich.

Click for Big

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 16.00, looks $1.65 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.70 and is $1.29 rich.

Click for Big

Investment-grade pairs now predict an average over the next five years of about 0.35%, continuing the increase of last week. The DC.PR.B / DC.PR.D pair is still off the charts and now predicts an average bill rate over the next 4 3/4 years of -2.34%.

Click for Big

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