Archive for May, 2016

May 31, 2016

Tuesday, May 31st, 2016

Weakness in the Canadian economy late in first quarter is stoking fears of contraction:

Despite the solid growth, the first-quarter result was well below the 2.8 per cent average estimate of economists, and a far cry from forecasts of more than 3 per cent from just a few weeks ago, testament to the disappointingly weak finish to the quarter. March’s real GDP was down 0.2 per cent month over month, even worse than the 0.1-per-cent decline economists had anticipated, marking the second straight month of contraction after a booming start to the year.

In March, the big drag on growth was from the beleaguered energy sector, which slumped 1.5 per cent month over month. A sharp drop in drilling activity sent oil and gas support services down 14 per cent in the month, while oil and gas extraction fell 0.8 per cent. The manufacturing sector dipped 0.2 per cent in March, adding to its 0.9-per-cent slowdown in February. And retail sales fell 1.3 per cent, reversing course after two straight months of gains.

Overall, output from goods-producing industries slumped 0.8 per cent in March, their worst performance in six months. Services-producing industries were flat for the second straight month.

I confess that I’m surprised to see EU boffins say something sensible about the new economy:

European Union governments should not ban services like home-rental site Airbnb or ride-hailing app Uber except as a last resort, the EU says in new guidelines, seeking to rein in a crackdown on the “sharing economy”.

In guidelines seen by Reuters, the European Commission said any restrictions by EU member states on these new online services should be justified and proportionate to the public interest at stake.

“Total bans of an activity constitute a measure of last resort that should be applied only if and where no less restrictive requirements to attain a public interest can be used,” the draft document says.

In the case of room-renting sites like Airbnb, the Commission said banning short-term lets of apartments “appears difficult to justify” when limits on the maximum number of days apartments can be rented out would be more appropriate.

The guidelines will come as good news for the likes of Uber and Airbnb, which have faced outright bans or restrictions in some cities as established industry players complain of unfair competition.

There is fierce competition in the drones market to make the transition from toys to tools:

So Shenzhen-based DJI is pouring money into its development kit, which allows software developers to write their own applications for specific tasks, similar to the way Apple Inc. does for its iPhones.

Up for grabs is a market for aerial mining surveys, pipeline inspection, search and rescue, crop spraying and hundreds of other commercial tasks that’s expected to reach $127 billion by 2020.

Farmers were some of the earliest civil adopters, using drones to identify differences in crop conditions. Yamaha Motor Co. has been dusting crops in Japan with UAVs for more than two decades. With the cost dropping for cargo-carrying drones, DJI and others are building crop-spraying and remote sensing vehicles that can help reduce chemical use and improve yields. It has been estimated that precision agriculture will account for about 80 percent of the U.S. market for commercial UAVs.

The Rwandan government partnered with San Francisco-based Zipline to fly blood bags at 100 kilometers per hour to remote hospitals. Other to watch are Matternet in Menlo Park, California, and startup Flirtey, which said it made the first FAA-approved urban drone delivery of an emergency kit in the U.S. this year.

Steve Denning of Forbes comes up with a provocative but plausible explanation of US malaise:

• A study published in December 2015 by the National Bureau of Economic Research (NBER) shows that start-up activity has been slowing down in the United States for about three decades, dropping sharply over the past 10 years. New firms accounted for about 13% of all companies in the late 1980s, but only about 8% two decades later. In the 1980s and 1990s, small number of young, innovative, and dynamic companies grew at very high rates. But in the post-2000 period, startups contributed less to U.S. job creation than they did in earlier decades.

• The Kauffman Foundation reports that the percentage of adults owning a business has been declining since the 1990s, when the foundation first began to track that number.

• A study by the Brookings Institution found that the start-up rate (the number of new companies as a percentage of all firms) has fallen by nearly half since 1978.

A rather more obvious suspect [for the cause of declining entrepreneurship] is the burden of Americans’ $1.2 trillion in student loan debt.

A 2013 report by the think tank Demos found that student debt has a negative effect on income, by making borrowers more risk-averse and discouraging them from moving to another city or taking gambles on new jobs or launching a new business. Even more seriously, student loan borrowers save less early on in their lives, and they tend to be more conservative with their investments, due to constraints on income and credit. When even investing in a home seems too risky, launching a new business is even less likely.

The student debt crisis is transforming the saving, spending and investment behavior of an entire generation, and is transforming the economy along with it. The trend is not a good one.

Through a set of collective missteps, America has opted to put a crushing debt burden on the segment of society that can least afford it and the group that has the most to contribute the future. This is not just a question of social justice: it is nothing less than an issue of national economic survival.

Unless lawmakers across the country take radical action to address the skyrocketing cost of college, and attendant student debt burden, we can expect U.S. entrepreneurship to continue its frightening decline.

Assiduous Readers who are amused at the emergence of Donald Trump and the Angry White Boys in the US should take a look at the Globe & Mail comments section any time there is a story on Vancouver real-estate. There is a huge population of old-stock Canadians who are entitled to a good career and a detached house in Vancouver. Now that the former is getting more elusive and the latter has roared out of reach for most, they are incensed at the crooks from China who have taken it all away from them; I wouldn’t be surprised to see a fringe party emerge in British Columbia in the next little while.

And finally, for your month-end interest and delectation, is the Official TSX Quote for HSE.PR.B:

HSEPRBquote_160531
Click for Big

Yes, you read that right, 10.55-22.00, 1×5. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.

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 4.66 % 5.65 % 10,803 17.12 1 1.7544 % 1,700.2
FixedFloater 6.51 % 5.65 % 17,398 16.88 1 1.7422 % 3,106.0
Floater 4.34 % 4.49 % 44,162 16.37 4 -0.6838 % 1,790.0
OpRet 0.00 % 0.00 % 0 0.00 0 0.0346 % 2,836.1
SplitShare 4.93 % 5.00 % 81,673 3.91 7 0.0346 % 3,318.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0346 % 2,589.4
Perpetual-Premium 5.73 % -15.97 % 84,703 0.09 6 0.1895 % 2,613.4
Perpetual-Discount 5.42 % 5.45 % 104,971 14.57 33 0.0364 % 2,705.6
FixedReset 5.13 % 4.64 % 159,555 7.43 88 0.0614 % 1,997.3
Deemed-Retractible 5.13 % 5.31 % 132,378 4.98 33 -0.0237 % 2,696.9
FloatingReset 3.15 % 5.01 % 23,896 5.25 17 0.2960 % 2,112.1
Performance Highlights
Issue Index Change Notes
TRP.PR.H FloatingReset -3.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 10.20
Evaluated at bid price : 10.20
Bid-YTW : 4.45 %
BAM.PR.T FixedReset -2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 15.51
Evaluated at bid price : 15.51
Bid-YTW : 5.20 %
BAM.PR.R FixedReset -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 15.20
Evaluated at bid price : 15.20
Bid-YTW : 5.18 %
BMO.PR.Y FixedReset -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 20.40
Evaluated at bid price : 20.40
Bid-YTW : 4.40 %
BAM.PR.C Floater -1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 10.50
Evaluated at bid price : 10.50
Bid-YTW : 4.56 %
TRP.PR.G FixedReset -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 19.14
Evaluated at bid price : 19.14
Bid-YTW : 4.94 %
MFC.PR.F FixedReset -1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.68
Bid-YTW : 10.22 %
BMO.PR.M FixedReset -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.30
Bid-YTW : 4.21 %
BAM.PR.B Floater -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 10.67
Evaluated at bid price : 10.67
Bid-YTW : 4.49 %
W.PR.J Perpetual-Discount -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 23.88
Evaluated at bid price : 24.13
Bid-YTW : 5.88 %
BAM.PF.A FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 19.61
Evaluated at bid price : 19.61
Bid-YTW : 4.93 %
BAM.PR.X FixedReset 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 14.10
Evaluated at bid price : 14.10
Bid-YTW : 4.90 %
BIP.PR.A FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 19.26
Evaluated at bid price : 19.26
Bid-YTW : 5.70 %
MFC.PR.N FixedReset 1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.00
Bid-YTW : 6.49 %
FTS.PR.K FixedReset 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 17.38
Evaluated at bid price : 17.38
Bid-YTW : 4.35 %
TRP.PR.C FixedReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 12.54
Evaluated at bid price : 12.54
Bid-YTW : 4.66 %
SLF.PR.G FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.50
Bid-YTW : 9.44 %
GWO.PR.O FloatingReset 1.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.10
Bid-YTW : 10.24 %
BAM.PR.G FixedFloater 1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 25.00
Evaluated at bid price : 14.60
Bid-YTW : 5.65 %
BAM.PR.E Ratchet 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 25.00
Evaluated at bid price : 14.50
Bid-YTW : 5.65 %
TRP.PR.F FloatingReset 1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 13.85
Evaluated at bid price : 13.85
Bid-YTW : 4.43 %
CIU.PR.C FixedReset 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 12.25
Evaluated at bid price : 12.25
Bid-YTW : 4.42 %
BMO.PR.Q FixedReset 2.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.60
Bid-YTW : 5.69 %
PWF.PR.Q FloatingReset 3.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 12.90
Evaluated at bid price : 12.90
Bid-YTW : 4.18 %
FTS.PR.I FloatingReset 4.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 11.98
Evaluated at bid price : 11.98
Bid-YTW : 4.16 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.J FixedReset 114,764 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 4.89 %
IFC.PR.A FixedReset 72,625 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.85
Bid-YTW : 9.26 %
TD.PF.G FixedReset 63,670 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.13
Bid-YTW : 4.60 %
BNS.PR.G FixedReset 53,485 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-07-25
Maturity Price : 25.00
Evaluated at bid price : 26.18
Bid-YTW : 4.75 %
TD.PR.Y FixedReset 39,900 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.25
Bid-YTW : 4.46 %
RY.PR.H FixedReset 38,232 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 4.37 %
There were 30 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSE.PR.B FloatingReset Quote: 10.55 – 12.55
Spot Rate : 2.0000
Average : 1.3418

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 10.55
Evaluated at bid price : 10.55
Bid-YTW : 5.46 %

TRP.PR.B FixedReset Quote: 11.95 – 12.55
Spot Rate : 0.6000
Average : 0.3769

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 11.95
Evaluated at bid price : 11.95
Bid-YTW : 4.37 %

RY.PR.M FixedReset Quote: 19.30 – 19.77
Spot Rate : 0.4700
Average : 0.2957

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 4.50 %

TD.PF.F Perpetual-Discount Quote: 24.40 – 24.78
Spot Rate : 0.3800
Average : 0.2370

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 24.03
Evaluated at bid price : 24.40
Bid-YTW : 5.06 %

GWO.PR.F Deemed-Retractible Quote: 25.55 – 25.99
Spot Rate : 0.4400
Average : 0.2992

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : -24.81 %

PWF.PR.P FixedReset Quote: 13.32 – 13.76
Spot Rate : 0.4400
Average : 0.3099

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-31
Maturity Price : 13.32
Evaluated at bid price : 13.32
Bid-YTW : 4.49 %

May 30, 2016

Monday, May 30th, 2016

Treasury markets, such as they were, were weak today:

Ten-year Treasury futures contracts for September delivery slid 14/32, or $4.38 per $1,000 face amount, to 129 9/32 as of 11:07 a.m. in New York, based on electronic trading at the Chicago Board of Trade. It was the biggest decline since May 18.

The odds of a rate increase in June implied by federal funds futures climbed to 34 percent from 30 percent on May 27. They rise to 80 percent by year-end, up from 74 percent three days previously

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 4.74 % 5.75 % 10,670 17.00 1 -2.0619 % 1,670.9
FixedFloater 6.62 % 5.75 % 17,193 16.75 1 -1.7123 % 3,052.8
Floater 4.31 % 4.43 % 42,538 16.47 4 0.6423 % 1,802.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.0809 % 2,835.1
SplitShare 4.94 % 5.17 % 80,249 3.92 7 0.0809 % 3,317.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0809 % 2,588.5
Perpetual-Premium 5.74 % -14.66 % 85,844 0.09 6 0.0458 % 2,608.4
Perpetual-Discount 5.42 % 5.46 % 105,283 14.57 33 0.2753 % 2,704.6
FixedReset 5.13 % 4.65 % 164,119 7.41 88 0.3287 % 1,996.1
Deemed-Retractible 5.10 % 5.43 % 131,832 4.86 33 0.2356 % 2,697.6
FloatingReset 3.16 % 5.00 % 25,401 5.25 17 -0.1061 % 2,105.9
Performance Highlights
Issue Index Change Notes
BAM.PR.E Ratchet -2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 25.00
Evaluated at bid price : 14.25
Bid-YTW : 5.75 %
BAM.PR.G FixedFloater -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 25.00
Evaluated at bid price : 14.35
Bid-YTW : 5.75 %
TRP.PR.I FloatingReset -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 11.25
Evaluated at bid price : 11.25
Bid-YTW : 4.67 %
FTS.PR.I FloatingReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 11.50
Evaluated at bid price : 11.50
Bid-YTW : 4.33 %
SLF.PR.H FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.49
Bid-YTW : 8.61 %
BAM.PF.E FixedReset 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 18.72
Evaluated at bid price : 18.72
Bid-YTW : 4.85 %
IAG.PR.A Deemed-Retractible 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.85
Bid-YTW : 6.50 %
GWO.PR.I Deemed-Retractible 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.10
Bid-YTW : 6.41 %
CU.PR.C FixedReset 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 4.51 %
FTS.PR.J Perpetual-Discount 1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 22.37
Evaluated at bid price : 22.66
Bid-YTW : 5.25 %
FTS.PR.F Perpetual-Discount 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 23.03
Evaluated at bid price : 23.30
Bid-YTW : 5.27 %
CCS.PR.C Deemed-Retractible 1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.86
Bid-YTW : 6.27 %
TRP.PR.H FloatingReset 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 10.60
Evaluated at bid price : 10.60
Bid-YTW : 4.28 %
MFC.PR.G FixedReset 1.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.15
Bid-YTW : 6.71 %
MFC.PR.N FixedReset 1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.75
Bid-YTW : 6.66 %
TRP.PR.C FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 12.38
Evaluated at bid price : 12.38
Bid-YTW : 4.72 %
BAM.PF.G FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 20.34
Evaluated at bid price : 20.34
Bid-YTW : 4.78 %
BAM.PF.B FixedReset 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 4.97 %
TRP.PR.B FixedReset 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 11.90
Evaluated at bid price : 11.90
Bid-YTW : 4.39 %
BMO.PR.T FixedReset 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 18.34
Evaluated at bid price : 18.34
Bid-YTW : 4.36 %
MFC.PR.M FixedReset 2.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.90
Bid-YTW : 6.62 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.D FixedReset 230,297 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 4.75 %
CU.PR.C FixedReset 125,286 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 4.51 %
POW.PR.D Perpetual-Discount 105,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 22.70
Evaluated at bid price : 22.94
Bid-YTW : 5.52 %
TD.PF.G FixedReset 48,720 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 4.58 %
BMO.PR.K Deemed-Retractible 31,000 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-06-29
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : -10.43 %
RY.PR.C Deemed-Retractible 30,706 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-06-29
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : -4.15 %
There were 12 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
POW.PR.G Perpetual-Discount Quote: 25.39 – 26.50
Spot Rate : 1.1100
Average : 0.6385

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 25.39
Bid-YTW : 5.43 %

BAM.PR.E Ratchet Quote: 14.25 – 15.14
Spot Rate : 0.8900
Average : 0.6597

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 25.00
Evaluated at bid price : 14.25
Bid-YTW : 5.75 %

SLF.PR.G FixedReset Quote: 14.30 – 14.80
Spot Rate : 0.5000
Average : 0.3335

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.30
Bid-YTW : 9.62 %

TD.PF.A FixedReset Quote: 18.51 – 18.98
Spot Rate : 0.4700
Average : 0.3117

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-30
Maturity Price : 18.51
Evaluated at bid price : 18.51
Bid-YTW : 4.37 %

GWO.PR.O FloatingReset Quote: 13.00 – 13.95
Spot Rate : 0.9500
Average : 0.8241

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.00
Bid-YTW : 10.46 %

GWO.PR.N FixedReset Quote: 14.06 – 14.50
Spot Rate : 0.4400
Average : 0.3246

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.06
Bid-YTW : 9.85 %

May 27, 2017

Saturday, May 28th, 2016

Janet Yellen did some modest sabre-rattling:

Federal Reserve Chair Janet Yellen said the ongoing improvement in the U.S. economy would warrant another interest rate increase “in the coming months,” stopping short of giving an explicit hint that the central bank would act in June.

“It’s appropriate — and I’ve said this in the past — for the Fed to gradually and cautiously increase our overnight interest rate over time,” Yellen said Friday during remarks at Harvard University in Cambridge, Massachusetts. “Probably in the coming months such a move would be appropriate.”

“The economy is continuing to improve,” she said in a discussion with Harvard economics professor Gregory Mankiw. She added that she expects “inflation will move up over the next couple of years to our 2 percent objective,” provided headwinds holding down price pressures, including energy prices and a stronger dollar, stabilize alongside an improving labor market.

Several regional Fed presidents, ranging from Boston Fed President Eric Rosengren to San Francisco’s John Williams, have in recent weeks urged financial market participants to take more seriously the chances of a rate hike in the next two months, pointing to continued signs of steady if unspectacular growth in the U.S. economy and the waning of risks posed by global economic and financial conditions.

hikeChance_160527
Click for Big
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 4.64 % 5.62 % 10,825 17.16 1 0.7328 % 1,706.1
FixedFloater 6.51 % 5.65 % 17,890 16.89 1 3.5461 % 3,106.0
Floater 4.34 % 4.46 % 42,921 16.43 4 1.6321 % 1,790.8
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0489 % 2,832.8
SplitShare 4.94 % 5.18 % 80,930 3.92 7 -0.0489 % 3,314.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0489 % 2,586.4
Perpetual-Premium 5.74 % -14.32 % 86,088 0.09 6 0.1375 % 2,607.2
Perpetual-Discount 5.44 % 5.54 % 106,458 14.53 33 0.2040 % 2,697.2
FixedReset 5.15 % 4.65 % 165,326 7.42 88 0.4436 % 1,989.5
Deemed-Retractible 5.10 % 5.61 % 129,747 4.99 33 0.1107 % 2,691.2
FloatingReset 3.17 % 4.99 % 25,906 5.26 17 0.0215 % 2,108.1
Performance Highlights
Issue Index Change Notes
PWF.PR.Q FloatingReset -3.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 12.52
Evaluated at bid price : 12.52
Bid-YTW : 4.33 %
IAG.PR.A Deemed-Retractible -1.79 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.90
Bid-YTW : 6.65 %
HSE.PR.B FloatingReset -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 10.60
Evaluated at bid price : 10.60
Bid-YTW : 5.46 %
BMO.PR.T FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 4.41 %
BNS.PR.R FixedReset -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.35
Bid-YTW : 4.60 %
CIU.PR.C FixedReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 12.00
Evaluated at bid price : 12.00
Bid-YTW : 4.47 %
MFC.PR.M FixedReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.51
Bid-YTW : 6.88 %
BAM.PF.G FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 20.01
Evaluated at bid price : 20.01
Bid-YTW : 4.84 %
TRP.PR.F FloatingReset 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 13.61
Evaluated at bid price : 13.61
Bid-YTW : 4.53 %
BAM.PF.E FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 18.52
Evaluated at bid price : 18.52
Bid-YTW : 4.88 %
BAM.PR.X FixedReset 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 14.02
Evaluated at bid price : 14.02
Bid-YTW : 4.89 %
BAM.PF.A FixedReset 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 19.29
Evaluated at bid price : 19.29
Bid-YTW : 4.98 %
BMO.PR.Q FixedReset 1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.26
Bid-YTW : 5.98 %
TRP.PR.G FixedReset 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 4.88 %
TRP.PR.H FloatingReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 10.45
Evaluated at bid price : 10.45
Bid-YTW : 4.37 %
BAM.PF.B FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 17.85
Evaluated at bid price : 17.85
Bid-YTW : 5.03 %
TD.PF.D FixedReset 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 4.48 %
NA.PR.Q FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 4.08 %
BAM.PR.B Floater 1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 10.73
Evaluated at bid price : 10.73
Bid-YTW : 4.46 %
BAM.PR.K Floater 1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 10.61
Evaluated at bid price : 10.61
Bid-YTW : 4.51 %
HSE.PR.E FixedReset 1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 19.62
Evaluated at bid price : 19.62
Bid-YTW : 5.68 %
BAM.PF.F FixedReset 1.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 4.83 %
BIP.PR.B FixedReset 2.30 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : 5.22 %
IFC.PR.A FixedReset 2.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.91
Bid-YTW : 9.16 %
BNS.PR.Y FixedReset 2.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.51
Bid-YTW : 5.58 %
BNS.PR.Z FixedReset 2.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.41
Bid-YTW : 5.98 %
BAM.PR.Z FixedReset 3.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 4.99 %
BAM.PR.T FixedReset 3.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 15.75
Evaluated at bid price : 15.75
Bid-YTW : 5.08 %
BAM.PR.G FixedFloater 3.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 25.00
Evaluated at bid price : 14.60
Bid-YTW : 5.65 %
BAM.PR.C Floater 3.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 10.60
Evaluated at bid price : 10.60
Bid-YTW : 4.51 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.J FixedReset 91,027 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 4.88 %
TD.PF.G FixedReset 86,663 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.12
Bid-YTW : 4.59 %
BNS.PR.G FixedReset 58,250 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-07-25
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 4.76 %
BAM.PF.H FixedReset 57,633 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.07
Bid-YTW : 4.18 %
BAM.PR.M Perpetual-Discount 43,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 20.83
Evaluated at bid price : 20.83
Bid-YTW : 5.80 %
MFC.PR.F FixedReset 41,095 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.85
Bid-YTW : 10.01 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.M Deemed-Retractible Believe it or not, the actual quote for GWO.PR.M, sold to me at an enormous price by the Exchange, was 25.55-55.13, 8×2. See the picture below for proof! I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.

Quote: 25.55 – 27.55
Spot Rate : 2.0000
Average : 1.1139

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-31
Maturity Price : 25.25
Evaluated at bid price : 25.55
Bid-YTW : 5.62 %

PWF.PR.T FixedReset Quote: 21.56 – 22.67
Spot Rate : 1.1100
Average : 0.6563

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 21.27
Evaluated at bid price : 21.56
Bid-YTW : 3.83 %

BAM.PF.G FixedReset Quote: 20.01 – 20.87
Spot Rate : 0.8600
Average : 0.5903

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 20.01
Evaluated at bid price : 20.01
Bid-YTW : 4.84 %

CM.PR.Q FixedReset Quote: 20.06 – 20.65
Spot Rate : 0.5900
Average : 0.3605

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 20.06
Evaluated at bid price : 20.06
Bid-YTW : 4.49 %

PWF.PR.Q FloatingReset Quote: 12.52 – 13.39
Spot Rate : 0.8700
Average : 0.6542

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 12.52
Evaluated at bid price : 12.52
Bid-YTW : 4.33 %

BAM.PR.Z FixedReset Quote: 19.50 – 19.95
Spot Rate : 0.4500
Average : 0.3057

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-27
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 4.99 %

GWOPRM_160527
Click for Big

This borrowing-to-invest strategy is no slam dunk

Friday, May 27th, 2016

John Heinzl was kind enough to quote me in his piece This borrowing-to-invest strategy is no slam dunk, which discusses a couple’s proposal to take out a home-equity loan and invest the proceeds in ZPR, the BMO Laddered Preferred Share Index ETF:

If you look up ZPR’s distribution history, however, you’ll see that the monthly payout has been dropping. At the start of 2014 it was 5.3 cents, a year later it was 4.8 cents and currently it’s 4.5 cents. The reason: ZPR holds a basket of rate-reset preferred shares, many of which have cut their dividends because of a steep drop in the five-year Government of Canada bond yield that is used to set the dividends on these shares.

Barring a rebound in bond yields, ZPR’s distribution could fall even further as more rate-reset preferred shares cut their dividends, says James Hymas, president of Hymas Investment Management. Assuming the five-year Canada yield remains at its current level of about 0.8 per cent, the “implied current yield” of ZPR’s underlying portfolio is just 4.74 per cent, according to a BMO document dated April 29. After deducting the ETF’s management expense ratio of 0.5 per cent, ZPR’s net implied yield to investors is about 4.24 per cent, Mr. Hymas says.

That’s not nearly as attractive as the 5.6-per-cent yield for ZPR advertised on BMO’s website.

The document mentioned in the article is available here … for now! Hat tip to MikeFreedom49? on the Financial Wisdom Forum for bringing this document to my attention.

This is probably a good place to make two other points.

First, the document states that the duration of ZPR is 3.11 years, with a footnote indicating that:

Duration is a measure of sensitivity to changes in interest rates. For example, a 5 year duration means the value will decrease by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. Generally, the higher the duration the more volatile the price will be when interest rates change.

This assertion of a 3.11 year duration without any qualifiers is irresponsible, reckless and wrong. Such an answer in the current environment can only be derived by pegging the price on the next reset date at an arbitrary level – it could be the current price, it could be $25.00, it could be anything you like, as long as it’s presumed to be a value unaffected by market yields. These are perpetual instruments trading below par; their duration in the current environment is better in the 20 to 25 year range (with respect to spreads) … or it could even be negative (if we assume yield-to-perpetuity will be constant in the face of a changing 5-year Canada rate)! . Holders of ZPR – and other FixedResets – over the past two years will doubtless be happy to confirm that the price volatility they have experienced far exceeds what they might have expected from an investment with a 3.11 year duration.

Classical bond mathematics is a very useful tool for examining preferred shares, but must be accompanied by a very cautious and explicit statement of assumptions and these assumptions should be disclosed.

Secondly, I note that BMO touts the fund as being “Low to Medium Risk”, which I feel confident will be considered laughable by those who have suffered through the woes of the preferred share market for the past two years.

The whole concept of these risk assessments, with their mandatory reporting on the “Fund Facts” statements is under constant attack by those with even a smidgen of knowledge about risk (which leaves out the regulators), so I won’t go into this further except to say I’d love to see how they justify their claim!

Finally, here’s a chart of expected changes in the dividends of Fixed Resets for which the YTW scenario is perpetuity, taken from the May, 2016, edition of PrefLetter:

PL_160520_App_FR_Chart_30
Click for Big

May 26, 2016

Thursday, May 26th, 2016

An interesting proposal for the stored-energy problem:

But there is another gravity-based energy storage system that does not need any water, and is even less energy and materials intensive. It’s called Advanced Rail Energy Storage (ARES).

Reminiscent of King Sisyphus of Greek mythology, ARES will use surplus wind and solar energy to move millions of pounds of rock uphill in special electric rail cars, converting thousands of megawatt-hours (MWh) to potential energy, enough to power a medium-sized city for several hours. It can sit there storing this energy as long as one wants. When needed, the rail cars roll back downhill, converting this gravitational potential energy to electricity that goes out onto the grid.

ARES bridges the power gap between large scale battery and flywheel installations and the far larger pumped-hydro. With about an 80% efficiency, somewhat greater than pumped-hydro, ARES has a lower life-cycle cost than batteries, a higher energy-to-power ratio than flywheels and a greater efficiency and far faster ramp-rate than pumped-hydro or compressed air.

Too bad this wasn’t developed in Ontario – but we blew the budget on cheap crap.

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 4.66 % 5.67 % 10,847 17.04 1 0.6944 % 1,693.7
FixedFloater 6.74 % 5.86 % 17,921 16.63 1 -1.0526 % 2,999.6
Floater 4.41 % 4.53 % 42,997 16.30 4 0.4450 % 1,762.0
OpRet 0.00 % 0.00 % 0 0.00 0 0.1288 % 2,834.2
SplitShare 4.94 % 4.98 % 79,976 3.93 7 0.1288 % 3,316.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1288 % 2,587.7
Perpetual-Premium 5.75 % -12.44 % 85,883 0.09 6 0.0458 % 2,603.6
Perpetual-Discount 5.45 % 5.54 % 106,796 14.53 33 0.2911 % 2,691.7
FixedReset 5.16 % 4.68 % 164,545 13.82 88 0.5245 % 1,980.7
Deemed-Retractible 5.11 % 5.57 % 130,078 5.00 33 0.1273 % 2,688.3
FloatingReset 3.17 % 4.92 % 26,090 5.26 17 0.5812 % 2,107.7
Performance Highlights
Issue Index Change Notes
HSE.PR.A FixedReset -2.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 11.23
Evaluated at bid price : 11.23
Bid-YTW : 5.60 %
BAM.PR.G FixedFloater -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 25.00
Evaluated at bid price : 14.10
Bid-YTW : 5.86 %
TRP.PR.B FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 11.77
Evaluated at bid price : 11.77
Bid-YTW : 4.47 %
TD.PF.A FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.56
Evaluated at bid price : 18.56
Bid-YTW : 4.33 %
TRP.PR.A FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 14.60
Evaluated at bid price : 14.60
Bid-YTW : 4.90 %
BAM.PR.K Floater 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 10.41
Evaluated at bid price : 10.41
Bid-YTW : 4.60 %
BMO.PR.S FixedReset 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.77
Evaluated at bid price : 18.77
Bid-YTW : 4.34 %
IAG.PR.A Deemed-Retractible 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 6.38 %
BAM.PR.X FixedReset 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 13.85
Evaluated at bid price : 13.85
Bid-YTW : 4.95 %
MFC.PR.I FixedReset 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.66
Bid-YTW : 6.38 %
RY.PR.H FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.43
Evaluated at bid price : 18.43
Bid-YTW : 4.33 %
CM.PR.P FixedReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.22
Evaluated at bid price : 18.22
Bid-YTW : 4.38 %
BMO.PR.T FixedReset 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.26
Evaluated at bid price : 18.26
Bid-YTW : 4.35 %
TD.PF.C FixedReset 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 4.39 %
BNS.PR.Q FixedReset 1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.12
Bid-YTW : 4.52 %
MFC.PR.K FixedReset 1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.45
Bid-YTW : 7.37 %
BAM.PF.E FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.30
Evaluated at bid price : 18.30
Bid-YTW : 4.94 %
PWF.PR.P FixedReset 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 13.30
Evaluated at bid price : 13.30
Bid-YTW : 4.47 %
BMO.PR.Q FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.00
Bid-YTW : 6.22 %
MFC.PR.G FixedReset 1.48 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.83
Bid-YTW : 6.90 %
BNS.PR.Y FixedReset 1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.99
Bid-YTW : 6.07 %
CM.PR.Q FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 19.88
Evaluated at bid price : 19.88
Bid-YTW : 4.53 %
W.PR.H Perpetual-Discount 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 23.85
Evaluated at bid price : 24.10
Bid-YTW : 5.78 %
TRP.PR.C FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 12.30
Evaluated at bid price : 12.30
Bid-YTW : 4.72 %
MFC.PR.N FixedReset 1.71 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.58
Bid-YTW : 6.76 %
BMO.PR.R FloatingReset 1.78 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 4.31 %
BAM.PR.B Floater 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 10.57
Evaluated at bid price : 10.57
Bid-YTW : 4.53 %
BMO.PR.Y FixedReset 1.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 4.36 %
FTS.PR.I FloatingReset 2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 11.70
Evaluated at bid price : 11.70
Bid-YTW : 4.28 %
MFC.PR.M FixedReset 2.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.75
Bid-YTW : 6.70 %
IFC.PR.C FixedReset 2.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.11
Bid-YTW : 8.06 %
CIU.PR.C FixedReset 3.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 12.15
Evaluated at bid price : 12.15
Bid-YTW : 4.42 %
PWF.PR.Q FloatingReset 4.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 13.00
Evaluated at bid price : 13.00
Bid-YTW : 4.17 %
Volume Highlights
Issue Index Shares
Traded
Notes
FTS.PR.M FixedReset 216,343 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 4.58 %
TD.PF.G FixedReset 163,679 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.11
Bid-YTW : 4.60 %
MFC.PR.O FixedReset 123,846 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.04
Bid-YTW : 4.62 %
RY.PR.R FixedReset 118,271 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.18
Bid-YTW : 4.77 %
TRP.PR.J FixedReset 113,227 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 4.88 %
RY.PR.J FixedReset 67,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 4.55 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ALB.PR.C SplitShare Quote: 26.00 – 27.00
Spot Rate : 1.0000
Average : 0.7390

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-02-28
Maturity Price : 25.67
Evaluated at bid price : 26.00
Bid-YTW : 2.94 %

TRP.PR.H FloatingReset Quote: 10.43 – 11.00
Spot Rate : 0.5700
Average : 0.3821

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 10.43
Evaluated at bid price : 10.43
Bid-YTW : 4.44 %

BNS.PR.B FloatingReset Quote: 21.38 – 21.81
Spot Rate : 0.4300
Average : 0.2655

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.38
Bid-YTW : 5.28 %

BAM.PR.C Floater Quote: 10.21 – 10.58
Spot Rate : 0.3700
Average : 0.2178

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 10.21
Evaluated at bid price : 10.21
Bid-YTW : 4.69 %

IFC.PR.A FixedReset Quote: 15.51 – 15.98
Spot Rate : 0.4700
Average : 0.3178

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.51
Bid-YTW : 9.53 %

BAM.PR.E Ratchet Quote: 14.50 – 15.00
Spot Rate : 0.5000
Average : 0.3603

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-26
Maturity Price : 25.00
Evaluated at bid price : 14.50
Bid-YTW : 5.67 %

GMP.PR.B & GMP.PR.C Downgraded to Pfd-4(high) by DBRS

Thursday, May 26th, 2016

DBRS has announced:

has today downgraded the Cumulative Preferred Shares rating of GMP Capital Inc. (GMP or the Company) to Pfd-4 (high) from Pfd-3 (low). The trend is now Stable. This concludes the review of the rating that was initiated on January 14, 2016, following GMP’s announcement that it is undertaking a series of fundamental organizational changes.

The downgrade reflects DBRS’s view that GMP’s franchise positioning and earnings are weakened relative to past levels at a time when the headwinds facing GMP remain challenging. Indeed, GMP has reported net losses attributable to common shareholders in three out of the past four fiscal years, as well as a loss in Q1 2016. To cope with the difficult operating environment, the Company is executing a restructuring plan to reduce costs and refocus its franchise on its core competencies and markets. While DBRS views the restructuring as prudent, it reduces the scope of the Company’s capital markets franchise and diversity of its revenue streams, both of which had previously supported the rating. Moreover, DBRS expects that the Company will continue to face significant headwinds given its focus on commodities-related sectors, limiting the Company’s ability to generate capital through retained earnings.

The Stable trend reflects DBRS’s view that the restructuring, combined with the run-off of certain guaranteed compensation arrangements in 2016, has better positioned GMP’s franchise to return to sustainable profitability.

This downgrade has been in the wind since the January 2016 restructuring announcement and DBRS Review-Negative. There was recently a 22% conversion from GMP.PR.B to GMP.PR.C.

May 25, 2016

Wednesday, May 25th, 2016

Today’s news is that the BOC Policy Rate remains unchanged:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

The global economy is evolving largely as the Bank projected in its April Monetary Policy Report (MPR). In the United States, despite weakness in the first quarter, a number of indicators, including employment, point to a return to solid growth in 2016. Financial conditions remain accommodative, with ongoing geopolitical factors contributing to fragile market sentiment. Oil prices are higher, in part because of short-term supply disruptions.

In Canada, the economy’s structural adjustment to the oil price shock continues, but is proving to be uneven. Growth in the first quarter of 2016 appears to be in line with the Bank’s April projection, although business investment and intentions remain disappointing. The second quarter will be much weaker than predicted because of the devastating Alberta wildfires. The Bank’s preliminary assessment is that fire-related destruction and the associated halt to oil production will cut about 1 1/4 percentage points off real GDP growth in the second quarter. The economy is expected to rebound in the third quarter, as oil production resumes and reconstruction begins. While the Canadian dollar has been fluctuating in response to shifting expectations of US monetary policy and higher oil prices, it is now close to the level assumed in April.

Inflation is roughly in line with the Bank’s expectations. Total CPI inflation has risen recently, largely due to movements in gasoline prices, but remains slightly below the 2 per cent target. Measures of core inflation remain close to 2 per cent, reflecting the offsetting influences of past exchange rate depreciation and excess capacity.

Canada’s housing market continues to display strong regional divergences, reinforced by the complex adjustment underway in the economy. In this context, household vulnerabilities have moved higher. Meanwhile, the risks to the Bank’s inflation projection remain roughly balanced. Therefore, the Bank’s Governing Council judges that the current stance of monetary policy is still appropriate, and the target for the overnight rate remains at 1/2 per cent.

The Globe’s David Parkinson longs for more detail:

Beyond that, though, the Bank of Canada had surprisingly little to say. Even by the typically parsimonious standards of Bank of Canada rate statements, this one was on the short side. The bank squeezed in a very brief description of the current state of the country’s economy, without clarifying many of the most burning questions.

Most crucially, while the bank said it expects that the economy will “rebound” from the wildfire-related second-quarter slump, it stopped short of discussing the likelihood that this rebound will be enough to keep overall 2016 growth on track for the 1.7 per cent it forecast in April.

Does this delay the economy’s return to full capacity, the most critical variable in charting the Bank of Canada’s interest-rate path? Is that a significant risk that has emerged to the central bank’s outlook? If it is, the bank isn’t saying so.

One thing I really like to see when wandering around and looking at things is evidence that somebody has actually thought about something. There are so many details in life we do most of our activities on auto-pilot, but it is in business that I really like to see a bit of attention to detail. For instance, there’s a restaurant on Yonge Street that has chairs with racks underneath them. It makes all kinds of sense – the restaurant is close to Ryerson, popular with the kids there and one can well imagine that, particularly in winter, the floor’s going to get somewhat wet and dirty and the kids would really like to put their books and backpacks somewhere else. So the owner put in chairs with racks underneath, so this could be accommodated without losing a chair that could be used by another customer.

Yes, it’s a small thing. By itself it’s not going to make or break the business. But it indicates to me that when the owner went out on his chair-buying expedition, he thought about what would be useful and maybe even spent a little extra money addressing the issue. A small thing, but how often do you see it?

Which brings me to Personal Capital Corporation, which I mentioned on May 20 when news broke that IGM had put a chunk of money into the robo-advisor. It was just a short mention, but it did attract some attention … from Personal Capital Corporation, via eMail:

Good morning,

I’m [redacted] with Personal Capital, and I just wanted to thank you for writing that informative article covering IGM Financial’s investment in us!

For something like this where you mention us, would you be able to add a wealth management page link for “wealth management” in the paragraph over the Preferred Indices table? Here’s the URL to make things easier: https://www.personalcapital.com/wealth-management

Thanks so much for your time!

How about that, eh? Clearly, PCC has some kind of web-search robot that sends a list of mentions to somebody and that somebody tries to keep the buzz going in a useful manner … even when the mention is on an obscure specialist blog like this one. I’ve mentioned thousands of companies on this blog over the years and this is the very first time I’ve received an eMail like this. Good for PCC! I have no idea about the quality of their product or much else about them apart from what I’ve said … but if I was looking for a robo-advisor, either for myself or to recommend to friends or clients, Personal Capital Corporation would be on the long-list, for this reason alone.

So, new reader MA, “Content and Social Media” contact at PCC … this one’s for you: Personal Capital Corporation Wealth Management.

Speaking of robo-advisors, PWF’s venture, WealthSimple, is attempting to enter partnerships with advisors:

Toronto-based robo-advisor Wealthsimple Financial Inc. officially launched its platform specifically for financial advisors, dubbed Wealthsimple for Advisors, on Tuesday.

The platform, originally offered earlier this year as a pilot project for 50 advisors, is mainly intended for advisors who have clients with small accounts that don’t meet minimum account requirements, but that advisors don’t want to sever that relationship. Such an example would be a client’s child.

This platform allows advisors to maintain a relationship with those smaller account clients without spending time on the day-to-day management of the account, says Jason Goldlist, chief marketing officer with Wealthsimple. Instead, advisors can focus on accounts that better fit their business and minimum requirements.

Advisors interested in working with the robo-advisor can invite clients via email to sign up for a Wealthsimple account. Wealthsimple then handles the investment management of those accounts. Advisors cannot create their own investment portfolios for clients on the platform or recommend their own products.

And I mentioned the automaker and mobility provider jostling yesterday – this also caught the attention of Bloomberg’s Justin Fox:

During a visit to Bloomberg last year, Renault and Nissan Chief Executive Officer Carlos Ghosn grumbled that Alphabet’s (at that point it was still Google’s) self-driving car was a “box” devoid of “seduction and attractiveness,” and said “the car industry will do everything it can to make sure that the product does not become a commodity.”

But auto executives are also familiar with Harvard Business School professor Clayton M. Christensen’s argument that if an innovation comes along that disrupts your way of doing business, there’s often not a whole lot you can do to stop it. The automakers cutting deals with ride-hailing companies are hoping that they can figure out an on-demand business model if it turns out they need to.

Can they? Tom Bartman, a senior researcher at Christensen’s Forum for Growth and Innovation at HBS, is dubious. “Business models can’t change,” he says. Once a business learns how to make money one way, it’s almost impossible to shift gears. Still, there is one slender reed of hope: “While businesses can’t change, corporations can.”

Assiduous Reader BarleyandHops provides two very good links in the comments to May 24. The first of these discusses massive factory automation in China:

One factory has “reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots”, a government official told the South China Morning Post.

Xu Yulian, head of publicity for the Kunshan region, added: “More companies are likely to follow suit.”

China is investing heavily in a robot workforce.

In a statement to the BBC, Foxconn Technology Group confirmed that it was automating “many of the manufacturing tasks associated with our operations” but denied that it meant long-term job losses.

Former McDonald’s chief executive Ed Rensi recently told the US’s Fox Business programme a minimum-wage increase to $15 an hour would make companies consider robot workers.

“It’s cheaper to buy a $35,000 robotic arm than it is to hire an employee who is inefficient, making $15 an hour bagging French fries,” he said.

And fast-food is indeed being robotically served up in innovation-crazy Japan:

But Pizza Hut in Japan will be the first major chain to utilize robots to actually serve customers in its pilot program later this year.

According to the Wall Street Journal, the company has ordered several models of Pepper, a humanoid robot that is also being tested in the cruise and airline industries, to take orders and accept payment. The program will be tested in select Japanese franchise locations by the end of the year. It’s powered by MasterPass, MasterCard’s digital wallet and mobile payment platform.

To place an order, customers can simply say hello to Pepper to begin the process. They can either tap an icon within the MasterPass digital wallet app through their phone or scan a QR code on a tablet the robot holds. As the customer orders, the robot responds by lighting up and using hand gestures– just like a real human.

An article in the Globe unabashedly discloses the actual reason for Proportional Representation’s popularity amongst certain members of the elite: backroom deals can be cut allowing the top end of the parties’ lists to be populated by those who are otherwise unelectable. They seem quite proud of this end-run around democracy. So … start hob-nobbing and donating now!

“We definitely want any reform that will increase our ability to affect who is being [elected] and to make sure we choose people who will actually promote women’s rights and other oppressed groups’ rights,” said Hilla Kerner, spokeswoman for the Vancouver Rape Relief and Women’s Shelter.

Some European countries with proportional representation systems, for example, have more women in their legislatures than Canada. Ms. Blomme, a political scientist with the Broadbent Institute, said academic studies have shown that the system increases by up to 8 per cent the proportion of women in legislatures.

8%? In Canada, that’s about 27 seats … get those chequebooks ready!

PerpetualDiscounts now yield 5.56%, equivalent to 7.23% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.00% – OK, maybe just a smidge over – so the pre-tax interest-equivalent spread is now about 320bp, a slight (and perhaps spurious) narrowing from the 325bp reported May 18.

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 4.69 % 5.71 % 11,226 17.00 1 1.0526 % 1,682.0
FixedFloater 6.67 % 5.79 % 17,998 16.71 1 0.0000 % 3,031.5
Floater 4.43 % 4.61 % 43,592 16.15 4 2.1287 % 1,754.2
OpRet 0.00 % 0.00 % 0 0.00 0 0.2202 % 2,830.6
SplitShare 4.94 % 5.14 % 83,039 3.93 7 0.2202 % 3,312.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2202 % 2,584.4
Perpetual-Premium 5.75 % -12.62 % 85,249 0.09 6 -0.0327 % 2,602.5
Perpetual-Discount 5.47 % 5.56 % 104,733 14.51 33 0.0380 % 2,683.9
FixedReset 5.19 % 4.65 % 163,096 13.77 88 0.1143 % 1,970.4
Deemed-Retractible 5.12 % 5.56 % 129,910 5.00 33 0.1009 % 2,684.8
FloatingReset 3.19 % 5.05 % 25,836 5.26 17 -0.0385 % 2,095.5
Performance Highlights
Issue Index Change Notes
FTS.PR.I FloatingReset -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 11.47
Evaluated at bid price : 11.47
Bid-YTW : 4.36 %
BAM.PR.X FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 13.70
Evaluated at bid price : 13.70
Bid-YTW : 5.01 %
BAM.PR.E Ratchet 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 25.00
Evaluated at bid price : 14.40
Bid-YTW : 5.71 %
MFC.PR.B Deemed-Retractible 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.48
Bid-YTW : 6.15 %
FTS.PR.K FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 4.39 %
PWF.PR.A Floater 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 11.75
Evaluated at bid price : 11.75
Bid-YTW : 4.05 %
TD.PF.B FixedReset 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 18.27
Evaluated at bid price : 18.27
Bid-YTW : 4.39 %
NA.PR.S FixedReset 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 18.35
Evaluated at bid price : 18.35
Bid-YTW : 4.55 %
VNR.PR.A FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 18.45
Evaluated at bid price : 18.45
Bid-YTW : 5.00 %
PWF.PR.T FixedReset 1.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 3.89 %
BNS.PR.R FixedReset 1.87 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.43
Bid-YTW : 4.53 %
TRP.PR.B FixedReset 2.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 11.65
Evaluated at bid price : 11.65
Bid-YTW : 4.51 %
GWO.PR.N FixedReset 2.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.05
Bid-YTW : 9.83 %
BAM.PR.K Floater 2.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 10.30
Evaluated at bid price : 10.30
Bid-YTW : 4.65 %
BAM.PR.C Floater 2.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 10.27
Evaluated at bid price : 10.27
Bid-YTW : 4.66 %
BAM.PR.B Floater 2.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 10.38
Evaluated at bid price : 10.38
Bid-YTW : 4.61 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PR.K Floater 154,476 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 10.30
Evaluated at bid price : 10.30
Bid-YTW : 4.65 %
PWF.PR.E Perpetual-Discount 150,869 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 24.55
Evaluated at bid price : 24.80
Bid-YTW : 5.60 %
PWF.PR.L Perpetual-Discount 128,169 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 22.93
Evaluated at bid price : 23.20
Bid-YTW : 5.54 %
TD.PF.C FixedReset 113,877 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 18.02
Evaluated at bid price : 18.02
Bid-YTW : 4.44 %
MFC.PR.M FixedReset 95,379 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.35
Bid-YTW : 6.99 %
RY.PR.R FixedReset 66,192 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.25
Bid-YTW : 4.70 %
There were 62 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CIU.PR.C FixedReset Quote: 11.72 – 12.44
Spot Rate : 0.7200
Average : 0.5454

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 11.72
Evaluated at bid price : 11.72
Bid-YTW : 4.58 %

MFC.PR.H FixedReset Quote: 21.50 – 21.92
Spot Rate : 0.4200
Average : 0.2565

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 6.04 %

GWO.PR.F Deemed-Retractible Quote: 25.70 – 26.12
Spot Rate : 0.4200
Average : 0.2734

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-06-24
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : -16.50 %

MFC.PR.K FixedReset Quote: 18.20 – 18.59
Spot Rate : 0.3900
Average : 0.2615

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.20
Bid-YTW : 7.56 %

GWO.PR.O FloatingReset Quote: 13.01 – 13.79
Spot Rate : 0.7800
Average : 0.6515

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.01
Bid-YTW : 10.44 %

BAM.PF.E FixedReset Quote: 18.05 – 18.40
Spot Rate : 0.3500
Average : 0.2323

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 18.05
Evaluated at bid price : 18.05
Bid-YTW : 5.01 %

BEP.PR.I Soft On Good Volume

Wednesday, May 25th, 2016

Brookfield Renewable Partners L.P. has announced that it has:

completed its previously announced issue of Cumulative Minimum Rate Reset Class A Preferred Limited Partnership Units, Series 9 (the “Series 9 Preferred Units”). The offering was underwritten by a syndicate led by CIBC Capital Markets, RBC Capital Markets, Scotiabank and TD Securities Inc.

Brookfield Renewable issued 8,000,000 Series 9 Preferred Units at a price of $25.00 per unit, for total gross proceeds of $200,000,000.

The Series 9 Preferred Units will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BEP.PR.I.

BEP.PR.I is a FixedReset, 5.75%+501M575, announced 2016-5-16. The issue will be tracked by HIMIPref™ but has been relegated to the Scraps subindex on credit concerns.

The prospectus supplement (a public document) is available on the regulator-owned SEDAR with the identifiers “Brookfield Renewable Partners L.P. May 17 2016 19:33:41 ET Prospectus supplement – English PDF 276 K” but I am not permitted to link to it directly since I am mere investor scum without even enough dignity to get a government job. The prospectus notes:

For Canadian federal income tax purposes, holders of Series 9 Preferred Units will be allocated a portion of the taxable income of the Partnership based on their proportionate share of distributions received on their units. The allocation of taxable income to such holders may be less than the distributions received. This difference is commonly referred to as a tax deferred return of capital (i.e., returns that are initially non-taxable but which reduce the adjusted cost base of the holder’s units). See “Certain Canadian Federal Income Tax Considerations” in this Prospectus Supplement for further details. As shown in the table below, the historical 3 year average per unit Canadian dividends, ordinary income and return of capital (i.e., excess of distributions over allocated taxable income) expressed as a percentage of the annual distributions in respect of units of the Partnership for the period 2013 through 2015 were approximately 61%, 20%, and 19%, respectively. Management anticipates the 5 year average per unit Canadian dividend, ordinary income and return of capital will be 50%, 25%, and 25%, respectively, for the period between 2016 and 2021; however, no assurance can be provided this will occur.

So be careful! This isn’t your usual distribution taxation status! See the coverage of the first day of trading of BEP.PR.G for an analytical framework.

BEP.PR.I traded 745,122 shares today (consolidated exchanges) in a range of 24.85-97 before closing at 24.92-95, 5×28. Vital statistics are:

BEP.PR.I FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-25
Maturity Price : 23.12
Evaluated at bid price : 24.92
Bid-YTW : 5.74 %

The TXPR index is up about 35bp since the announcement date, so closing below par suggest a very slight softness in the market’s reception of the issue.

MFC.PR.F To Reset at 2.178%

Wednesday, May 25th, 2016

Manulife Financial Corporation has announced:

the applicable dividend rates for its Non-cumulative Rate Reset Class 1 Shares Series 3 (the “Series 3 Preferred Shares”) (TSX: MFC.PR.F) and Non-cumulative Floating Rate Class 1 Shares Series 4 (the “Series 4 Preferred Shares”).

With respect to any Series 3 Preferred Shares that remain outstanding after June 20, 2016, commencing as of such date, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on June 20, 2016, and ending on June 19, 2021, will be 2.17800% per annum or $0.136125 per share per quarter, being equal to the sum of the five-year Government of Canada bond yield as at May 24, 2016, plus 1.41%, as determined in accordance with the terms of the Series 3 Preferred Shares.

With respect to any Series 4 Preferred Shares that may be issued on June 20, 2016 in connection with the conversion of the Series 3 Preferred Shares into the Series 4 Preferred Shares, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the three-month period commencing on June 20, 2016, and ending on September 19, 2016, will be 0.49125% (1.94900% on an annualized basis) or $0.122814 per share, being equal to the sum of the three-month Government of Canada Treasury bill yield as at May 24, 2016, plus 1.41%, as determined in accordance with the terms of the Series 4 Preferred Shares.

Beneficial owners of Series 3 Preferred Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (EDT) on June 6, 2016. The news release announcing such conversion right was issued on May 9, 2016 and can be viewed on SEDAR or Manulife’s website. Conversion inquiries should be directed to Manulife’s Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 4 Preferred Shares effective upon conversion. Listing of the Series 4 Preferred Shares is subject to Manulife fulfilling all the listing requirements of the TSX and, upon approval, the Series 4 Preferred Shares will be listed on the TSX under the trading symbol “MFC.PR.P”.

The earlier announcement of the extension was reported on PrefBlog.

MFC.PR.F is a FixedReset, 4.20%+141, that commenced trading 2011-3-11 after being announced 2011-3-7

The new rate therefore represents a 48% cut in dividends. Ouch!

As noted, the deadline to notify the company is 5 p.m. (Toronto time) on June 6, 2016.; brokers will have internal deadlines a day or two in advance.

I will post a recommendation regarding whether or not to convert closer to the deadline.

May 24, 2016

Wednesday, May 25th, 2016

Hurray! Food delivery robots!

When the staff at Starship Technologies in Tallinn, Estonia are ready for lunch, they’ll order a few pizzas just like any other office. But they don’t have a human do the pickup or delivery. Instead, a two-foot high, forty-pound, self-driving robot on wheels will get the job.

The staff made up of engineers and project managers sometimes use a credit line with the local pizzeria. Or they’ll just put cash inside the robot itself. The machine is covered with carefully concealed sensors and nine cameras, so that on a bank of screens in the office, they can get a first-person view of its journey from a couple feet off the ground, traversing pavements and passing by pedestrians to pick up their order. Once they see the robot is in the pizzeria, they’ll hit a button to unlock the hatch so the restaurant can get the cash and put in the hot pizzas.

This is the future of delivery, according to Starship, whose robots are 90-99% automated, according to its CFO, Allan Martinson.

A fascinating example of technological disruption is blockchains in finance:

The risk posed by fraud in the $4 trillion trade-financing industry has prompted banks to start exploring distributed-ledger technology like the one that underpins bitcoin.

Standard Chartered Plc, which lost almost $200 million from a fraud at China’s Qingdao port two years ago, has teamed up with DBS Group Holdings Ltd. to develop an electronic ledger of invoices that uses a parallel platform to the blockchain employed in bitcoin transactions. Lenders such as Bank of America Corp. and HSBC Holdings Plc say they’re looking at blockchain for trade finance and other banking applications.

Blockchain proponents argue that the technology will change the face of banking, helping lenders cut billions of dollars in costs. Trade financing, a centuries-old banking mainstay, may become ground zero for blockchain adoption because it promises to do away with paper invoices and the fraud that accompanies them — if banks can come together around a joint platform.

There was a nice article on Bloomberg about Treasury duration management:

To lock in historically low interest rates, Belgium, Canada, France, Mexico, Spain, Switzerland and the U.K. have all sold debt maturing in 40 to 100 years since 2014, even if infrequently. Not the U.S., which in the interest of keeping sales regular has stuck to securities of three decades or less. That policy has made the globe’s biggest debtor a laggard in a key bond-market metric related to the average maturity of its securities. By this measure, the gap between the U.S. and its peers has never been wider.

Yet by a gauge known as modified duration, a measure of debt’s price sensitivity to interest-rate changes that rises with maturity, it’s still trailing global peers. Typically, bonds with longer duration gain more when rates fall, and suffer steeper losses when rates rise.

For Treasuries, the figure is 6.2, compared with 8.9 for an index that tracks the sovereign securities of more than 20 other nations, Bank of America Merrill Lynch data show. This month, the gap between the two reached the widest since at least 2006. One of the starkest contrasts is with the U.K., which issues long-dated bonds for pensions and insurers. Its debt has a duration above 10, Bank of America data show.

sovereignDurationGap
Click for Big

“The Treasury likes to see large, liquid markets, and something like a 50-year bond is not going to be particularly liquid,” said James Moore, head of investment solutions in Newport Beach, California, at Pacific Investment Management Co., which oversees about $1.5 trillion. “The Treasury is thinking about and balancing a multiplicity of objectives when they consider issuance, and liquidity and depth are some of them.”

The U.S. hasn’t exactly stood still. The average lifespan of the government’s debt is now about 69 months, up from 49 in December 2008, when it was ramping up short-term bill issuance as part of emergency spending during the financial crisis, Treasury data show.

treasuryAverageTerm
Click for Big

The Treasury’s Borrowing Advisory Committee, which includes some dealers, voiced concern over that risk in 2011, when the department last asked the group to consider ultra-long bonds. The topic has been discussed several times at quarterly gatherings since.

The primary buyers of very long-dated debt — pensions and insurers — tend to prefer higher-yielding corporate bonds. Microsoft’s 40-year bond last year was priced to yield 1.8 percentage points above 30-year Treasuries. And other investors may deem ultra-long debt too perilous because of the steep losses they’d incur should yields rise.

It’s interesting to see the car manufacturers jockeying for the new opportunities in fleet management – first, there’s Gett and Volkswagen:

Gett Inc., a taxi-ordering application that competes with Uber Technologies Inc., raised $300 million in a strategic investment from German carmaker Volkswagen AG to fund its growth in Europe and New York City.

Gett, based in Tel Aviv, Israel, has offered rides for as low as $1 and expanded its services to include deliveries of goods. The company hired Wells Fargo & Co. to find investors for the round, people familiar with the matter said in February. Volkswagen’s contribution brings total funds raised by Gett to more than $520 million, the taxi service said Tuesday in an e-mailed statement.

Volkswagen made the investment as part of a push to boost digital offerings and move beyond its diesel-engine manipulation scandal. Mobility services promise strong growth prospects and earnings potential in coming years, VW said Tuesday in a statement.

With operations in over 60 cities worldwide, including London, Moscow and New York, Gett is a major ride-hailing provider and services will be expanded further as part of the alliance with VW. Last month, it completed its bid to buy London’s Radio Taxis in a move that brought Gett’s car fleet in the city to 11,500, a number the company says amounts to half of all licensed taxis in the city.

Expanding digital services in connected cars is a cornerstone of VW’s strategy through 2025, which will be presented in mid-June. More than 250 employees are developing the plan, which will comprise eight key initiatives across the group, Mueller said last week at an internal management meeting at the carmaker’s Wolfsburg, Germany, headquarters.

Volkswagen is not the first car manufacturer to get involved in the ride-hailing business. General Motors Co. bought a 9 percent stake in Lyft for $500 million in January and Apple Inc. made a $1 billion investment in China’s Didi this month.

And, of course, Car2Go is a subsidiary of Daimler, while Zipcar is, perhaps more logically, subsidiary of the old-line car rental company Avis Budget, while Hertz is trying to develop the business as a sideline. Meanwhile, Toyota is investing in Uber:

Toyota Motor Corp. said it is making a strategic investment in Uber Technologies Inc. and will offer auto leases to the ride-hailing company’s drivers.

Uber declined to disclose the size of the investment. Toyota wasn’t immediately available for comment. By leasing Toyota cars, Uber will expand its existing program, which also includes Enterprise Holdings Inc.

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 4.74 % 5.77 % 11,622 16.92 1 -1.7241 % 1,664.5
FixedFloater 6.67 % 5.79 % 18,730 16.72 1 1.0638 % 3,031.5
Floater 4.52 % 4.74 % 44,034 15.91 4 -0.1671 % 1,717.7
OpRet 0.00 % 0.00 % 0 0.00 0 0.2113 % 2,824.3
SplitShare 4.96 % 5.17 % 79,136 3.93 7 0.2113 % 3,305.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2113 % 2,578.7
Perpetual-Premium 5.75 % -11.46 % 78,921 0.09 6 0.1180 % 2,603.3
Perpetual-Discount 5.47 % 5.57 % 101,783 14.51 33 0.1485 % 2,682.9
FixedReset 5.20 % 4.68 % 164,828 13.81 88 0.2169 % 1,968.2
Deemed-Retractible 5.12 % 5.57 % 133,036 6.75 33 0.0745 % 2,682.1
FloatingReset 3.19 % 5.00 % 26,062 5.26 17 0.3195 % 2,096.3
Performance Highlights
Issue Index Change Notes
GWO.PR.O FloatingReset -3.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.00
Bid-YTW : 10.45 %
BAM.PR.E Ratchet -1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 25.00
Evaluated at bid price : 14.25
Bid-YTW : 5.77 %
CU.PR.C FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 17.75
Evaluated at bid price : 17.75
Bid-YTW : 4.54 %
BAM.PR.X FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 13.89
Evaluated at bid price : 13.89
Bid-YTW : 4.93 %
BAM.PR.G FixedFloater 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 25.00
Evaluated at bid price : 14.25
Bid-YTW : 5.79 %
TD.PF.F Perpetual-Discount 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 24.16
Evaluated at bid price : 24.54
Bid-YTW : 5.02 %
TRP.PR.F FloatingReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 13.50
Evaluated at bid price : 13.50
Bid-YTW : 4.63 %
SLF.PR.H FixedReset 1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.47
Bid-YTW : 8.79 %
RY.PR.M FixedReset 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 19.12
Evaluated at bid price : 19.12
Bid-YTW : 4.52 %
CM.PR.Q FixedReset 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 19.71
Evaluated at bid price : 19.71
Bid-YTW : 4.57 %
BMO.PR.Y FixedReset 1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 4.43 %
FTS.PR.H FixedReset 2.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 13.20
Evaluated at bid price : 13.20
Bid-YTW : 4.33 %
TRP.PR.I FloatingReset 2.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 11.25
Evaluated at bid price : 11.25
Bid-YTW : 4.69 %
FTS.PR.I FloatingReset 2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 11.67
Evaluated at bid price : 11.67
Bid-YTW : 4.29 %
HSE.PR.B FloatingReset 3.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 10.70
Evaluated at bid price : 10.70
Bid-YTW : 5.40 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.J FixedReset 51,779 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.73
Bid-YTW : 4.85 %
RY.PR.Q FixedReset 38,165 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 26.16
Bid-YTW : 4.48 %
SLF.PR.I FixedReset 36,900 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.60
Bid-YTW : 7.07 %
RY.PR.W Perpetual-Discount 33,222 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 24.23
Evaluated at bid price : 24.53
Bid-YTW : 5.01 %
RY.PR.R FixedReset 30,239 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.26
Bid-YTW : 4.69 %
RY.PR.M FixedReset 26,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 19.12
Evaluated at bid price : 19.12
Bid-YTW : 4.52 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.O FloatingReset Quote: 13.00 – 13.79
Spot Rate : 0.7900
Average : 0.5107

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.00
Bid-YTW : 10.45 %

TRP.PR.D FixedReset Quote: 17.36 – 17.75
Spot Rate : 0.3900
Average : 0.2476

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 17.36
Evaluated at bid price : 17.36
Bid-YTW : 4.78 %

BAM.PR.E Ratchet Quote: 14.25 – 14.75
Spot Rate : 0.5000
Average : 0.3795

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 25.00
Evaluated at bid price : 14.25
Bid-YTW : 5.77 %

TD.PF.B FixedReset Quote: 18.03 – 18.38
Spot Rate : 0.3500
Average : 0.2378

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 18.03
Evaluated at bid price : 18.03
Bid-YTW : 4.45 %

TD.PR.S FixedReset Quote: 22.75 – 23.24
Spot Rate : 0.4900
Average : 0.3841

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.75
Bid-YTW : 4.67 %

ELF.PR.G Perpetual-Discount Quote: 21.10 – 21.50
Spot Rate : 0.4000
Average : 0.2985

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-05-24
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 5.71 %