PrefBlog

It looks like we have a few more weeks of the entertaining Sprott-Spicer battle to look forward to, as Silver Bullion Trust points out (bolding from original):

Silver Bullion Trust (“SBT”) (symbol: TSX – SBT.UN (C$) SBT.U (US$)) today noted that Sprott Asset Management LP and Sprott Physical Silver Trust (collectively, “Sprott”) have failed by a substantial margin to achieve sufficient support from SBT Unitholders to complete their offer. As a result, Sprott has yet again extended their inadequate, hostile offer to acquire all of the outstanding Units of SBT. They have made no improvement to the terms of their offer, which is now set to expire on October 9, 2015.

Since May 27th, Sprott has harassed SBT Unitholders and their intermediaries with misleading information about Sprott’s offer and defamatory comments about SBT, its Trustees and its administrator. The majority of SBT Unitholders have consistently said “NO” to Sprott’s offer and have clearly expressed the view that they wish to continue to remain SBT Unitholders.

SBT is concerned that some brokers may have misled their Unitholder clients into believing that they must choose one of the two tendering options, and could not “do nothing” in response to Sprott’s offer. SBT Unitholders are reminded that they are NOT REQUIRED to tender their Units to Sprott, regardless of what brokers may say. If instructed by a broker that tendering is required or that Unitholders cannot “do nothing,” please call D.F. King & Co at 1-800-398-2816 for assistance.
…
Unitholders who have refused to tender are urged to retain their SBT Units and not tender to Sprott’s offer. Sprott’s offer cannot succeed unless 662/3% of the Units are actually tendered, which has not been achieved.

During the Credit Crunch there was a notable amount of “jingle-mail” in the States – that being the sobriquet for the act of abandoning your house and sending the keys to the (underwater) mortgage servicer. I advocated – and continue to advocate – for a mortgage system in which the standard is ‘with recourse’ to the homeowner, i.e., that the homeowner is on the hook for the entire amount and that if the house doesn’t cover his balance due, that’s his tough luck.

But the Mayor of Barcelona points out that this can lead to social unrest in a broad market decline:

Under Spanish law, when a bank forecloses on a mortgage and seizes a house or apartment, only part of the debt is wiped out. The rest remains on the books, and the owner isn’t able to declare bankruptcy to escape the debt. The bank has claim to all assets, not just the house.

“The president of the government had explicitly told the population, ‘You have to buy a house because it’s the most secure investment, the best thing for your country,’ ” says Colau. “Millions of people who weren’t trying to speculate, or to be rich, but who thought they were doing the most responsible thing, the safest thing, discovered that they had done the worst thing in their lives, and that there was no way to escape.”

In 2009, Colau and a handful of other activists formed a grassroots organization called the Platform for People Affected by Mortgages—known by its Spanish acronym PAH. “She’s a natural leader,” says Lucía Martín, one of the group’s founders. “It’s not that she says, ‘OK, I’m going to be the leader.’ It’s that everybody looks around and says, ‘Yes. Her. She looks like she can do it.’ It became really obvious.”

One of the first people PAH assisted was Matías González Barquero, who had taken out a mortgage on his home to soundproof his bar at the request of the municipality. González was forced to close the bar in 2009 after a partner died and another fell sick. As a small-business owner, he was ineligible for unemployment, and soon he couldn’t pay his mortgage.

When he attended his first PAH meeting in 2010, his apartment had already been put up for auction, but it had failed to sell, and he hadn’t moved out. When González was scheduled to be evicted by police in March 2010, the group obtained a period of leniency from a judge. Over the next year and a half, PAH blocked two other eviction attempts, mobilizing some 300 people to block the entrance to his apartment. Colau was with González in his house, coordinating the protest from behind locked doors. “She said, ‘You keep calm, we’re going to make it,’ ” recalls González. “When she was facing the banks, she was very tough. But with me, she was a very close person.”

In other geopolitical news (since preferred shares are, you know, kinda boring) it looks like the group that takes decisive action against ISIS will be one with interests that are almost as antithetical to ours:

President Vladimir Putin, determined to strengthen Russia’s only military outpost in the Middle East, is preparing to launch unilateral airstrikes against Islamic State from inside Syria if the U.S. rejects his proposal to join forces, two people familiar with the matter said.

Putin’s preferred course of action, though, is for America and its allies to agree to coordinate their campaign against the terrorist group with Russia, Iran and the Syrian army, which the Obama administration has so far resisted, according to a person close to the Kremlin and an adviser to the Defense Ministry in Moscow.

Russian diplomacy has shifted into overdrive as Putin seeks to avoid the collapse of the embattled regime of Bashar al-Assad, a longtime ally who’s fighting both a 4 1/2 year civil war and Sunni extremists under the banner of Islamic State. Israeli Prime Minister Benjamin Netanyahu flew to Moscow for talks with Putin on Monday, followed by Turkish President Recep Tayyip Erdogan on Tuesday.

Stop dilly-dallying! Smash ISIS now!

There was carnage for the Canadian preferred share market today, with PerpetualDiscounts down 61bp, FixedResets losing 70bp and DeemedRetractibles off 16bp. As one might expect, the Performance Highlights table is both enormous and dominated by losing FixedResets. Volume was very low.

PerpetualDiscounts now yield 5.61%, equivalent to 7.29% interest at the standard equivalency factor of 1.3x. Long corporates now yield a hair under 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 310bp, a significant rise from the 300bp reported September 9.

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 19.86 to be $1.21 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.29 cheap at its bid price of 12.60.

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Another good fit today for MFC, with Implied Volatility unchanged today.

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 22.60 to be 0.52 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 22.80 to be 0.57 cheap.

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The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.Z (with a lousy bid, discussed in the Performance Highlights table), resetting at +296bp on 2017-12-31, bid at 19.40 to be $2.26 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.40 and appears to be $1.47 rich.

Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 21.70, looks $0.77 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.30 and is $0.40 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.87%, with no outliers. The distribution’s bimodality has returned, with bank NVCC non-compliant pairs averaging -1.06% and other issues averaging -0.59%. There are two junk outliers above 0.00%.

Click for Big

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

Well, here’s another nail in Keystone’s coffin:

Ending years of declining to take a side on the issue because of her role in the Obama administration, Hillary Clinton on Tuesday announced her opposition to the construction of the Keystone XL oil pipeline.

“I don’t think we need to have a pipeline bringing very dirty oil, exploiting the tar sands in western Canada, across our border,” she told the Des Moines Register’s editorial board.

At a town hall in Des Moines beforehand, she expressed an eagerness to end the debate over Keystone, which had become a “distraction” from the broader fight against climate change. “I don’t think it’s in the best interest of what we need to do to combat climate change, ” she said in response to a question from a Drake University student.

Power Corporation, proud issuer of myriad preferred shares issues, has been confirmed at Pfd-2(high) by DBRS:

DBRS Limited (DBRS) has today confirmed the Senior Debt as well as the Non-Cumulative First Preferred Shares and Cumulative Redeemable First Preferred Shares, 1986 Series ratings of Power Corporation of Canada (POW or the Company) at A (high) and Pfd-2 (high), respectively. The trend on the ratings remains Stable. The credit strength of POW is directly tied to its 65.6% equity interest in Power Financial Corporation (PWF), which represents a substantial majority of the Company’s earnings and cash flow as well as the vast majority of the Company’s estimated net asset value. The Senior Debt rating of the Company is A (high) or one notch below the AA (low) rating on the Senior Debentures of PWF, reflecting the structural subordination of the holding company’s obligations.

Should PWF be upgraded, then POW could also benefit. Conversely, a shift in the Company’s risk profile resulting from a major divestiture or acquisition, a material increase in financial leverage or increased adoption of double leverage, deteriorating earnings and prolonged distress at the major operating subsidiaries, a downgrade of the rating of Great-West Lifeco Inc. (GWO) or PWF, or evidence of governance and control difficulties could have negative rating implications.

Similarly, Power Financial Corporation, issuer of myriad preferred share issues of its own, was confirmed at Pfd-1(low) by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Debentures rating of Power Financial Corporation (PWF or the Company) at AA (low), along with the Non-Cumulative First Preferred Shares and Cumulative First Preferred Shares (Series A) ratings at Pfd-1 (low). All trends remain Stable. The Company’s ratings are largely derived from its controlling interests in two of Canada’s leading financial service providers: Great-West Lifeco Inc. (GWO; Senior Debt rated AA (low) by DBRS), one of the three largest life insurance concerns in Canada, and IGM Financial Inc. (IGM; Senior Debt rated A (high) by DBRS), one of the largest mutual fund complexes in Canada as measured by long-term assets under management (AUM).

These two interests, accounting for more than 90% of the Company’s earnings, dividends and asset value, are a source of stable recurring earnings and cash flow. Under the strategic leadership of the Company, both GWO and IGM have become increasingly diversified as they have grown, both organically and by acquisition. The Company has correspondingly increased its exposure to the wealth management business in all of its chosen geographies. Both of these subsidiaries in turn benefit from the Company’s hands-on governance and risk-averse culture.

PWF’s ratings currently reflect the ratings of its most highly rated subsidiary, GWO. Should GWO be upgraded, PWF could also benefit. Conversely, a material increase in unconsolidated financial leverage giving rise to deterioration in coverage ratios; any deterioration in the creditworthiness of a major operating subsidiary, particularly a downgrade of the rating of GWO; a shift in the Company’s risk profile resulting from a major divestiture or acquisition; or evidence of governance and control difficulties could have negative rating implications.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts down 27bp, FixedResets losing 57bp and DeemedRetractibles off 10bp. The Performance Highlights table is very long, dominated by losing FixedResets, with only one winner amongst the carnage. Volume was slightly below 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 19.85 to be $1.10 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.16 cheap at its bid price of 12.78.

Click for Big

Another good fit today for MFC, with Implied Volatility falling significantly today.

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 22.65 to be 0.45 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 22.91 to be 0.57 cheap.

Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.70 to be $1.47 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.45 and appears to be $1.15 rich.

Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 21.90, looks $0.56 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.70 and is $0.36 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.92%, with no outliers. The distribution’s bimodality has returned, with bank NVCC non-compliant pairs averaging -1.14% and other issues averaging -0.61%. There are two junk outliers above 0.00%.

Click for Big

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

Fed officials are busily warning against complacency:

Federal Reserve officials argued that an interest-rate increase is still warranted this year, laying out the case for liftoff in remarks over the weekend that counter bets by traders that the central bank will stay on hold until 2016.

Three policy makers separately explained their rationale for enacting a rate increase at one of the Fed’s two remaining meetings of 2015, citing declines in unemployment and other gains in the U.S. economy that should outweigh headwinds from slower growth abroad and turbulent financial markets.

San Francisco Fed President John Williams, a policy centrist who has worked closely with Chair Janet Yellen, said Sunday that “in my mind, it was a close call” to delay a rate rise at last week’s Federal Open Market Committee meeting.

Williams’ comments on Fox News Channel’s “Sunday Morning Futures with Maria Bartiromo” echoed remarks he made the day before, and chimed with the reasoning of St. Louis Fed President James Bullard and Richmond Fed President Jeffrey Lacker. Both weighed in on Saturday over the FOMC’s vote to leave rates near zero.

Non-voting FOMC members are also weighing in:

Federal Reserve Bank of St. Louis President James Bullard said he pushed against the central bank’s decision this week to delay an interest rate increase, because the economy has more or less fulfilled policy makers’ goals.

“The case for policy normalization is quite strong, since Committee objectives have essentially been met,” Bullard said in slides prepared for a speech in Nashville, Tennessee. “I argued against the decision at the FOMC meeting.”

Bullard is not a voting member of the policy-setting Federal Open Market Committee in 2015, but will vote in 2016.

I’ve said it before, I’ll say it again – I’m sure that most, if not all, of these public statements are deliberately orchestrated by the FOMC as a whole. ‘You made some good points in the meeting, guys. You should speak up in public.’ In that way, the market learns a bit more about the decision than is available in the simple ternary result (up, unchanged, down) and about what elements of the data are considered important and on the cusp of change. It’s a lot better system than the Canadian one, in which (since Dodge retired) Moses descends from the mountain with the Finance Minister’s decision.

I’ve heard a rumour that Volkswagen has a new motto – “Don’t help me!”:

Discrepancies in the European tests on the diesel models of the VW Passat, the VW Jetta and the BMW X5 last year gave Peter Mock an idea.

Mock, European managing director of a little-known clean-air group, suggested replicating the tests in the U.S. The U.S. has higher emissions standards than the rest of the world and a history of enforcing them, so Mock and his American counterpart, John German, were sure the U.S. versions of the vehicles would pass the emissions tests, German said. That way, they reasoned, they could show Europeans it was possible for diesel cars to run clean.

“We had no cause for suspicion,” German, U.S. co-lead of the International Council on Clean Transportation, said in an interview. “We thought the vehicles would be clean.”

So began a series of events that resulted in Volkswagen AG admitting that it built “defeat device” software into a half-million of its diesel cars from 2009 to 2015 that automatically cheated on U.S. air-pollution tests. The world’s second-biggest carmaker now faces billions in fines, possible jail time for its executives and the undoing of its U.S. expansion plans.

Hat tip to Assiduous Reader JP, who brought this to my attention.

It didn’t do their stock price much good:

Volkswagen AG dropped 15 percent, the most in almost six years, after it admitted to cheating on U.S. air pollution tests for years.

The shares declined as much as 23.80 euros and were down 14 percent at 140 euros as of 9:03 a.m. in Frankfurt. The drop extends the fall for the year to 24 percent, valuing the Wolfsburg, Germany-based company at 66.2 billion euros ($74.9 billion).

Volkswagen Chief Executive Officer Martin Winterkorn said on Sunday that the company is cooperating with regulatory investigators and ordered its own external investigation into the issue. The CEO said he was “deeply sorry” for breaking the public’s trust.

Public trust is right!

John Decker bought his 2013 Volkswagen Jetta diesel thinking he was doing his part to improve the environment and reduce his carbon footprint.

Now that the German automaker has admitted its claims about the model’s performance were false, he just wants the company to buy it back from him.

“I feel completely deceived by Volkswagen,” Decker, of Sacramento, California, said in an interview. “I’m extremely upset about it. I feel defrauded.”
…
Decker wants Volkswagen to compensate him for the purchase. He said he has been in contact with the law firm of Hagens Berman Sobol Shapiro LLP in Seattle, which announced Sept. 18 that it was filing a federal lawsuit against Volkswagen. The firm estimates that some consumers paid as much as $7,000 more for a diesel model.

“I don’t want my car anymore, frankly,” Decker said. “I’d like Volkswagen to buy it back from me. I really don’t want it. I don’t want to drive it. I don’t want anything to do with Volkswagen.”

Assiduous Reader JP – who has been very industriously outperforming you other bums who never send me anything – also alerts me to the denouement of a Dutch takeover defence initiated last spring:

Israel’s Teva Pharmaceutical Industries Ltd. said Tuesday it is bidding $40 billion for Mylan NV, a drug company with headquarters in Canonsburg, Pa., but incorporated in the Netherlands. In early April, moving preemptively to thwart such an offer, a Dutch law firm submitted paperwork on Mylan’s behalf to the Netherlands trade registry to create an obscure but powerful legal vehicle called a “stichting.”

The entity, named Stichting Preferred Shares Mylan, is essentially an empty shell. But it possesses special powers, thanks to a shareholder-approved provision tucked into the paperwork for a previous Mylan acquisition: If Mylan ever receives an unsolicited takeover bid, the stichting can get veto rights over any takeover.

Stichtings, which mean “foundations” in Dutch, have been around for hundreds of years, primarily used by Dutch charities. During the World War II, Dutch companies transferred their ownership to stichtings based in the Dutch Antilles in the Caribbean to protect assets from the German occupiers, experts say.
…
Their key attribute is that stichtings, often referred to as orphan foundations, don’t have any legal owners. That means they can be used to put money or other assets outside the reach of government authorities, competitors or shareholders. The stichting’s purpose and the responsibilities of its board of directors can be tailored to the vehicle’s needs.

But management has decided it is sufficiently entrenched:

Mylan said Monday that it has moved to cancel the preferred shares issued to the entity in July, as the threats to the company “have been sufficiently addressed.”

In a bit of fun news that shows Natural Philosophy as a hobby is not yet dead, World Bank economist Kaushik Basu has proved the Pythagorean Theorem. I don’t know if there’s any listing of proofs that might be considered authoritative, but here’s one site with 111 versions. Keep them coming, boys! Should we ever meet aliens, it will be most interesting to learn how many proofs they have and which ones they consider standard.

Meanwhile Russians are voting with their feet:

Official statistics show the number of Russian citizens leaving permanently or for more than nine months reached 53,235 in 2014, up 11 percent and the highest in nine years. Germany, the U.S. and Israel all report increases in the numbers of applications for immigration visas from Russia.

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Parakeet Poluz made a good point about Malthusian forecasts and Club of Rome projections:

But history has repeatedly shown that new technologies can quickly upend assumptions about future demand and supply.

For example, back in the 1970s, there were predictions that the world would run out of copper by the end of the century. The people who made that forecast did not foresee that copper wire, long a staple of communications infrastructure, would be replaced by fibre-optic cable, with its glass threads made from silica. This technology helped reduce the demand for copper, in essence extending its supply.

Similarly, digital photography had a dramatic impact on the photo-processing industry. Twenty years ago, the idea that everyone would carry around telephones that were also good-quality cameras was ridiculous. People took pictures with cameras that were loaded with film and took the film to a developer. The processing consumed a lot of silver. Back then, if you didn’t anticipate the emergence of digital photography, you might have expected this source of demand would continue indefinitely. Instead, according to the Washington-based Silver Institute, the use of silver in photography peaked in 1999 and has fallen by almost 80 per cent since.

It would appear that he fulfilled his cheerleading mandate in the question and answer period:

“In terms of being excessively dependent, I don’t buy that. Twenty per cent of our economy is the resource economy. That’s very important; it’s our backbone. It’s always been our history, and the rest is in some way dependent on that continuing to perform,” Mr Poloz told a business audience in Calgary, where the collapse in oil prices has led to deep cuts in spending and thousands of layoffs in the energy sector.

“We’re a highly diversified economy, and we should be thankful that we’ve got resources as part of our diversification, whereas lots of other countries don’t have that.”

During the federal election campaign, there has been considerable debate about the growing emphasis on energy-sector expansion under Conservative Leader Stephen Harper and, subsequently, the broad economic consequences of the industry’s downturn.

Excessively dependent? Bank of Canada research has noted:

Two aspects of the recent monetary history of Canada, Australia, and New Zealand stand out: the sensitivity of their dollars to prices of resource-based commodities, and inflation targeting.

… while less authoritative but still credible research asserts:

In the last ten years, over half of Canada’s total exports consisted of energy and non-energy commodities. Because the Canadian dollar is often called a “commodity currency”, this paper seeks to test the relevance of commodity prices in explaining the variation in the Canadian real exchange rate against the US dollar, the UK pound, and the Japanese yen. The currencies of these countries are chosen for the analysis because of Canada’s strong trade relationships with the United States, the United Kingdom, and Japan. The dynamic empirical model in this research demonstrates that the proportion of the variation in Canada’s real exchange rate that is attributable to a volatile commodity price shock differs depending on the currency pairing. The results also suggest that the relationship between commodity prices and the Canadian dollar has strengthened over the last two decades.

Sounds excessive to me! Meanwhile, Werner Antweiler of UBC has gone so far as to say:

Is the Canadian Dollar a petrodollar? If you had asked me this question in the 1990s, I would have said “only a little”. At the time, commodity prices were not generally thought to be primary drivers of the exchange rate. During that decade, oil prices were relatively flat and thus the observable variation in the exchange rate was driven by other factors. Most international economists, including those at the Bank of Canada who have a professional interest in this question, were indeed puzzled to find that the CAD/USD exchange rate was difficult to predict based on fundamental factors.

While I was researching oil prices for another issue, I had another look at the relationship between oil prices and the CAD/USD exchange rate, and was indeed a bit surprised how much the oil price matters for determining the value of the Canadian Dollar. As two diagrams show below, there can be little question that during the last fifteen years the Canadian Dollar has morphed into a “petrocurrency”.

In simple terms, a petrocurrency is a currency of an oil-producing country—such as Canada—whose oil exports as a share of total exports are sufficiently large that the value of that country’s currency rises and falls along with the price of oil. In other words, a petrocurrency appreciates when the oil price rises and depreciates when the oil price falls.

Perhaps Mr. Poluz will explain how a deeply rooted manufacturing complex is supposed to survive, when our currency fluctuates so much against our number one trading partner with such alarming amplitude?

One of the more entertaining corporate battles of recent times may have ended in a draw:

Sprott Asset Management LP (“Sprott” or “Sprott Asset Management”), together with Sprott Physical Gold Trust (NYSE:PHYS) (TSX:PHY.U) and Sprott Physical Silver Trust (NYSE:PSLV) (TSX:PHS.U), today announced that it has filed notices of extension in connection with the offers by Sprott Asset Management Gold Bid LP and Sprott Asset Management Silver Bid LP to acquire all of the outstanding units of Central GoldTrust (“GTU”) (TSX: GTU.UN) (TSX:GTU.U) (NYSEMKT:GTU) and Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (TSX:SBT.U), respectively, for units of Sprott Physical Gold Trust and units of Sprott Physical Silver Trust, in each case on a net asset value (NAV) to NAV exchange basis (collectively, the “Sprott offers”). The notices of extension extend the expiry time of the Sprott offers to 5 p.m. (Toronto time) on October 9, 2015.
…
As of 5:00 p.m. (Toronto time) on September 18, 2015, there were 9,928,736 GTU units (51.45% of all outstanding units) and 2,065,574 SBT units (37.78% of all outstanding units) tendered into the respective Sprott offers.

IGM Financial, proud issuer of IGM.PR.B, has been confirmed at Pfd-2(high) by DBRS:

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Unsecured Debentures rating of IGM Financial Inc. (IGM or the Company) at A (high) and the First Preferred Shares rating at Pfd-2 (high). The trends are Stable.
…
In addition to strong profitability, the Company’s credit rating also benefits from strong cash flows (which comfortably cover the upfront distribution costs of mutual fund sales), strong liquidity and a conservative financial profile. The Company’s ratio of debt plus preferred shares-to-total capitalization remains appropriate for the rating.

As a member of the Power Financial Corporation (Power) group of companies, IGM benefits from the additional financial flexibility of having a strategic shareholder and the associated strong governance and risk avoidance management model that is typical of Power subsidiaries.

It was a day of little overall movement for the Canadian preferred share market, with PerpetualDiscounts and DeemedRetractibles both off 6bp, while FixedResets gained 4bp. The placidity of the indices masked a lot of churn, though, as reported on the Performance Highlights table. Volume was very low.

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 20.00 to be $1.04 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.17 cheap at its bid price of 13.00.

Click for Big

Another good fit today for MFC, with Implied Volatility falling a bit today.

Most expensive is MFC.PR.J, resetting at +261bp on 2018-3-19, bid at 22.65 to be 0.44 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 23.03 to be 0.44 cheap.

Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.50 to be $1.63 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.60 and appears to be $1.31 rich.

Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 22.15, looks $0.54 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.79 and is $0.53 cheap.

Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.93%, with no outliers. The distribution’s bimodality has returned, with bank NVCC non-compliant pairs averaging -1.08% and other issues averaging -0.71%. There are two junk outliers above 0.00%.

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, except that bonds had a good day:

The S&P 500 retreated 1.6 percent at 4 p.m. in New York, erasing its gain for the week. The gauge ended lower yesterday by 0.4 percent, erasing a gain of as much as 1.3 percent after Yellen indicated that global developments overshadowed signs of strength in America.
…
U.S. two-year Treasuries extended their biggest one-day rally since 2009, while Pacific Investment Management Co. said policy makers may wait until next year before raising rates. JPMorgan Asset Management said the Fed’s statement was good for bonds and they still like debt due between seven and 10 years.

Bonds gained from Australia to Germany, while Treasuries added to an advance from Thursday. The yield on 10-year German bunds, the euro region’s benchmark sovereign securities, dropped 12 basis points to 0.66 percent, set for its biggest decline since July 7, on prospects for further easing by the European Central Bank.

Rates on similar-maturity Italian bonds fell 14 basis points to 1.76 percent, while those on Spain’s declined 15 basis points to 1.94 percent. The yield on U.S. 10-year Treasuries fell six basis points to 2.13 percent on Friday, after sliding 10 basis points the previous day.

It was yet another negative day for the Canadian preferred share market, with PerpetualDiscounts gaining 5bp, FixedResets down 48bp and DeemedRetractibles off 6bp. The Performance Highlights table is comprised entirely of losers, mostly FixedResets. Volume was extremely low.

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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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 20.06 to be $1.05 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.32 cheap at its bid price of 12.81.

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Another good fit today for MFC, with Implied Volatility falling a bit today.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.41 to be 0.32 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 23.03 to be 0.30 cheap.

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The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 16.80 to be $1.42 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.54 and appears to be $1.17 rich.

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FTS.PR.M, with a spread of +248bp, and bid at 22.20, looks $0.66 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.79 and is $0.43 cheap.

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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.87%, with no outliers. The distribution’s bimodality has vanished. There are two junk outliers above 0.00%.

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