Archive for March, 2018

MAPF Portfolio Composition: March, 2018

Saturday, March 31st, 2018

Turnover increased slightly to about 11% in March.

There is extreme segmentation in the marketplace, with OSFI’s NVCC rule changes in February 2011 having had the effect of splitting the formerly relatively homogeneous Straight Perpetual class of preferreds into three parts:

  • Unaffected Straight Perpetuals
  • DeemedRetractibles explicitly subject to the rules (banks)
  • DeemedRetractibles considered by me, but not (yet!) by the market, to be likely to be explicitly subject to the rules in the future (insurers and insurance holding companies)

This segmentation, and the extreme valuation differences between the segments, has cut down markedly on the opportunities for trading.

To make this more clear, it used to be that there were 70-odd Straight Perpetuals and I was more or less indifferent as to which ones I owned (subject, of course, to issuer concentration concerns and other risk management factors). Thus, if any one of these 70 were to go down in price by – say – $0.25, I would quite often have something in inventory that I’d be willing to swap for it. The segmentation means that I am no longer indifferent; in addition to checking the valuation of a potential buy to other Straights, I also have to check its peer group. This cuts down on the potential for trading.

And, of course, the same segmentation has the same effect on trading opportunities between FixedReset issues.

There is no real hope that this situation will be corrected in the near-term. OSFI has indicated that the long-promised “Draft Definition of Capital” for insurers will not be issued “for public consultation in late 2012 or early 2013”, as they fear that it might encourage speculation in the marketplace. It is not clear why OSFI is so afraid of informed speculation, since the constant speculation in the marketplace is currently less informed than it would be with a little bit of regulatory clarity. While the framework has been updated, the modifications focus on the amount of capital required, not the required characteristics of that capital. However, OSFI has recently indicated that it would support a mechanism similar to the NVCC rule for banks, so we may see some developments as the IAIS deliberations regarding insurance capital continue.

As a result of this delay, I have extended the Deemed Maturity date for insurers and insurance holding companies by three years (to 2025-1-31), in the expectation that when OSFI finally does provide clarity, they will allow the same degree of lead-in time for these companies as they did for banks. This had a major effect on the durations of preferred shares subject to the change but, fortunately, not much on their calculated yields as most of these issues were either trading near par when the change was made or were trading at sufficient premium that a par call was expected on economic grounds. However, with the declines in the market over the past nine months, the expected capital gain on redemption of the insurance-issued DeemedRetractibles has become an important component of the calculated yield.

Due to the footdragging by OSFI, I will be extending the DeemedMaturity date for insurance issues by another few years in the near future.

Sectoral distribution of the MAPF portfolio on March 29 was as follows:

MAPF Sectoral Analysis 2018-03-29
HIMI Indices Sector Weighting YTW ModDur
Ratchet 0% N/A N/A
FixFloat 0% N/A N/A
Floater 0% N/A N/A
OpRet 0% N/A N/A
SplitShare 8.7% 4.55% 5.16
Interest Rearing 0% N/A N/A
PerpetualPremium 0% N/A N/A
PerpetualDiscount 11.9% 5.50% 14.70
Fixed-Reset 63.1% 6.27% 9.07
Deemed-Retractible 8.8% 7.34% 5.74
FloatingReset 0% N/A N/A
Scraps (Various) 8.1% 6.98% 13.08
Cash -0.7% 0.00% 0.00
Total 100% 6.22% 9.49
Totals and changes will not add precisely due to rounding. Cash is included in totals with duration and yield both equal to zero.
DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 (banks) or 2025-1-3 (insurers and insurance holding companies), in addition to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind this analysis.

Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue.

Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 2.06% and a constant 3-Month Bill rate of 1.08%

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

Credit distribution is:

MAPF Credit Analysis 2018-03-29
DBRS Rating Weighting
Pfd-1 0
Pfd-1(low) 0
Pfd-2(high) 37.3%
Pfd-2 32.7%
Pfd-2(low) 22.6%
Pfd-3(high) 3.2%
Pfd-3 1.7%
Pfd-3(low) 2.6%
Pfd-4(high) 0%
Pfd-4 0%
Pfd-4(low) 0%
Pfd-5(high) 0.6%
Pfd-5 0.0%
Cash -0.7%
Totals will not add precisely due to rounding.
The fund holds a position in AZP.PR.C, which is rated P-5(high) by S&P and is unrated by DBRS; it is included in the Pfd-5(high) total.
A position held in INE.PR.A is not rated by DBRS, but has been included as “Pfd-3” in the above table on the basis of its S&P rating of P-3.

Liquidity Distribution is:

MAPF Liquidity Analysis 2018-03-29
Average Daily Trading Weighting
<$50,000 22.2%
$50,000 – $100,000 35.5%
$100,000 – $200,000 41.7%
$200,000 – $300,000 1.2%
>$300,000 0%
Cash -0.7%
Totals will not add precisely due to rounding.

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

A similar portfolio composition analysis has been performed on the Claymore Preferred Share ETF (symbol CPD) (and other funds) as of July 31, 2017, and published in the August, 2017, PrefLetter. It is fair to say:

  • MAPF credit quality is much better
  • MAPF liquidity is lower
  • MAPF Yield is higher
  • Weightings
    • MAPF is roughly equally exposed to Straight Perpetuals
      • Much less exposed to PerpetualPremiums
    • Neither portfolio is exposed to Operating Retractibles (there aren’t too many of those any more!)
    • MAPF is more exposed to SplitShares
    • MAPF is less exposed to FixFloat / Floater / Ratchet
    • MAPF is a little higher weighted in FixedResets, but has a greater emphasis on lower-spread issues

March 29, 2018

Thursday, March 29th, 2018

And that’s it for another month!

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.1107 % 2,983.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1107 % 5,475.2
Floater 3.35 % 3.53 % 108,351 18.45 4 -0.1107 % 3,155.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0079 % 3,158.7
SplitShare 4.70 % 4.38 % 59,477 3.24 5 -0.0079 % 3,772.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0079 % 2,943.2
Perpetual-Premium 5.62 % -0.01 % 75,582 0.09 11 0.0790 % 2,850.0
Perpetual-Discount 5.35 % 5.42 % 85,159 14.68 23 0.2504 % 2,940.7
FixedReset 4.29 % 4.67 % 171,646 5.80 104 0.1687 % 2,512.5
Deemed-Retractible 5.14 % 5.56 % 94,407 5.71 28 0.4176 % 2,941.0
FloatingReset 2.96 % 3.06 % 34,356 3.62 10 -0.0044 % 2,756.0
Performance Highlights
Issue Index Change Notes
W.PR.H Perpetual-Discount -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 23.92
Evaluated at bid price : 24.16
Bid-YTW : 5.70 %
GWO.PR.S Deemed-Retractible 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.79
Bid-YTW : 5.42 %
PWF.PR.T FixedReset 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 23.35
Evaluated at bid price : 23.95
Bid-YTW : 4.65 %
GWO.PR.Q Deemed-Retractible 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.29
Bid-YTW : 5.68 %
MFC.PR.H FixedReset 1.17 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.14
Bid-YTW : 5.07 %
W.PR.M FixedReset 1.37 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 25.86
Bid-YTW : 4.10 %
BAM.PF.D Perpetual-Discount 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 21.44
Evaluated at bid price : 21.70
Bid-YTW : 5.67 %
BAM.PR.N Perpetual-Discount 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 5.66 %
GWO.PR.M Deemed-Retractible 1.59 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-30
Maturity Price : 25.25
Evaluated at bid price : 26.22
Bid-YTW : -34.47 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.S FixedReset 95,330 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 22.93
Evaluated at bid price : 24.33
Bid-YTW : 4.54 %
BAM.PR.N Perpetual-Discount 68,404 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 5.66 %
CM.PR.R FixedReset 56,100 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.04
Bid-YTW : 4.29 %
CU.PR.I FixedReset 52,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 3.08 %
NA.PR.E FixedReset 47,750 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 23.03
Evaluated at bid price : 24.65
Bid-YTW : 4.67 %
MFC.PR.Q FixedReset 45,100 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.13
Bid-YTW : 4.70 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PR.T FloatingReset Quote: 24.70 – 25.80
Spot Rate : 1.1000
Average : 0.6345

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 2.97 %

BMO.PR.R FloatingReset Quote: 24.95 – 25.50
Spot Rate : 0.5500
Average : 0.3573

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-08-25
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 2.18 %

W.PR.H Perpetual-Discount Quote: 24.16 – 24.60
Spot Rate : 0.4400
Average : 0.2813

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 23.92
Evaluated at bid price : 24.16
Bid-YTW : 5.70 %

CU.PR.I FixedReset Quote: 26.00 – 26.46
Spot Rate : 0.4600
Average : 0.3046

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 3.08 %

RY.PR.A Deemed-Retractible Quote: 25.17 – 25.50
Spot Rate : 0.3300
Average : 0.2032

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-28
Maturity Price : 25.00
Evaluated at bid price : 25.17
Bid-YTW : 1.06 %

POW.PR.D Perpetual-Discount Quote: 23.09 – 23.50
Spot Rate : 0.4100
Average : 0.2971

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-29
Maturity Price : 22.81
Evaluated at bid price : 23.09
Bid-YTW : 5.42 %

March 28, 2018

Wednesday, March 28th, 2018

The Bank of Canada has published a useful analytical note by Rohan Arora, Nadeem Merali, Guillaume Ouellet Leblanc titled Did Canadian Corporate Bond Funds Increase their Exposures to Risks?:

Canadian fixed-income mutual funds have grown rapidly over the past 10 years—15 per cent annually compared with 2.6 per cent for equity funds. These investment vehicles direct a growing share of funds from savers to borrowers and now are a large component of the Canadian shadow banking sector (Young Chang et al. 2016). This note focuses on open-ended mutual funds with large holdings of Canadian corporate bonds, a subset of Canadian fixed-income mutual funds.

Canadian corporate bond mutual funds (CCBFs) are more vulnerable than other funds because of the liquidity mismatch between their assets and liabilities: the funds offer daily redemption to investors yet they invest in relatively less-liquid assets (corporate bonds). This mismatch raises concerns that CCBFs may face large redemption requests during periods of stress (Goldstein, Jiang and Ng 2017). Indeed, in 2017, the Financial Stability Board issued policy recommendations to reduce this vulnerability (FSB 2017).

In this note, we show that CCBFs have more than doubled in number and size since 2007. We also find that CCBFs have increased their exposure to interest rate risk, credit risk and liquidity risk. These results suggest an increase in the likelihood of large investor redemptions with higher potential impact on Canadian fixed-income markets.

At the same time, CCBFs still hold, on average, enough cash and liquid assets to meet redemption requests equivalent to the worst outflows observed since 2007. Overall, we assess that the vulnerability of CCBFs for the Canadian financial system appears to be rising—which warrants close monitoring—but remains low.

Arora (forthcoming) analyzes how Canadian mutual fund performance influences redemptions by investors, while Arora and Ouellet Leblanc (forthcoming) document how CCBFs meet redemption requests. Together, these papers lay the foundation to build stress tests quantifying the likelihood and potential impact of CCBFs’ asset sales on the financial system.

PerpetualDiscounts now yield 5.46%, equivalent to 7.10% interest at the standard equivalency factor of 1.3x. Long corporates now yield a little over 3.85%, so the pre-tax interest-equivalent spread is now about 325bp, a slight (and perhaps spurious) widening from the 320bp reported March 21.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.6464 % 2,987.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.6464 % 5,481.3
Floater 3.34 % 3.52 % 107,150 18.48 4 -0.6464 % 3,158.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0628 % 3,158.9
SplitShare 4.70 % 4.35 % 60,032 3.24 5 -0.0628 % 3,772.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0628 % 2,943.4
Perpetual-Premium 5.62 % 2.25 % 78,390 0.09 11 0.2635 % 2,847.8
Perpetual-Discount 5.37 % 5.46 % 86,213 14.65 23 0.6677 % 2,933.4
FixedReset 4.30 % 4.67 % 173,182 5.82 104 0.2360 % 2,508.3
Deemed-Retractible 5.16 % 5.60 % 95,439 5.71 28 0.8605 % 2,928.8
FloatingReset 2.96 % 3.17 % 34,344 3.63 10 0.0133 % 2,756.1
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 3.55 %
CU.PR.D Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 23.13
Evaluated at bid price : 23.40
Bid-YTW : 5.28 %
GWO.PR.S Deemed-Retractible 1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.54
Bid-YTW : 5.60 %
GWO.PR.G Deemed-Retractible 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.28
Bid-YTW : 5.74 %
PWF.PR.S Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 22.05
Evaluated at bid price : 22.34
Bid-YTW : 5.45 %
CU.PR.F Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 21.38
Evaluated at bid price : 21.38
Bid-YTW : 5.32 %
GWO.PR.H Deemed-Retractible 1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.72
Bid-YTW : 6.55 %
BAM.PR.M Perpetual-Discount 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 21.01
Evaluated at bid price : 21.01
Bid-YTW : 5.69 %
GWO.PR.R Deemed-Retractible 1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.77
Bid-YTW : 6.46 %
MFC.PR.C Deemed-Retractible 1.49 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.09
Bid-YTW : 7.52 %
SLF.PR.B Deemed-Retractible 1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.46
Bid-YTW : 6.70 %
GWO.PR.I Deemed-Retractible 1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.35
Bid-YTW : 7.27 %
SLF.PR.A Deemed-Retractible 1.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.32
Bid-YTW : 6.76 %
SLF.PR.D Deemed-Retractible 1.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.05
Bid-YTW : 7.47 %
GWO.PR.T Deemed-Retractible 1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.56
Bid-YTW : 5.48 %
MFC.PR.G FixedReset 1.79 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-12-19
Maturity Price : 25.00
Evaluated at bid price : 24.39
Bid-YTW : 4.66 %
SLF.PR.C Deemed-Retractible 1.83 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.11
Bid-YTW : 7.42 %
SLF.PR.E Deemed-Retractible 2.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.28
Bid-YTW : 7.33 %
PWF.PR.L Perpetual-Discount 2.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 23.26
Evaluated at bid price : 23.56
Bid-YTW : 5.49 %
MFC.PR.B Deemed-Retractible 3.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.84
Bid-YTW : 7.07 %
BAM.PF.G FixedReset 3.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 22.99
Evaluated at bid price : 23.78
Bid-YTW : 5.08 %
HSE.PR.C FixedReset 3.38 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.77
Bid-YTW : 5.05 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.R Deemed-Retractible 102,320 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.77
Bid-YTW : 6.46 %
W.PR.K FixedReset 69,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 4.26 %
MFC.PR.C Deemed-Retractible 61,400 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.09
Bid-YTW : 7.52 %
TRP.PR.E FixedReset 53,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 21.92
Evaluated at bid price : 22.48
Bid-YTW : 4.93 %
CM.PR.R FixedReset 48,482 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.98
Bid-YTW : 4.34 %
POW.PR.B Perpetual-Discount 46,737 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-28
Maturity Price : 23.88
Evaluated at bid price : 24.13
Bid-YTW : 5.55 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
W.PR.M FixedReset Quote: 25.51 – 26.10
Spot Rate : 0.5900
Average : 0.3809

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 4.52 %

GWO.PR.I Deemed-Retractible Quote: 21.35 – 22.00
Spot Rate : 0.6500
Average : 0.4563

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.35
Bid-YTW : 7.27 %

GWO.PR.M Deemed-Retractible Quote: 25.81 – 26.10
Spot Rate : 0.2900
Average : 0.1743

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-30
Maturity Price : 25.25
Evaluated at bid price : 25.81
Bid-YTW : -18.35 %

IFC.PR.A FixedReset Quote: 20.40 – 20.75
Spot Rate : 0.3500
Average : 0.2386

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.40
Bid-YTW : 6.95 %

W.PR.K FixedReset Quote: 25.60 – 25.99
Spot Rate : 0.3900
Average : 0.2809

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 4.26 %

IAG.PR.A Deemed-Retractible Quote: 22.01 – 22.34
Spot Rate : 0.3300
Average : 0.2464

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.01
Bid-YTW : 6.85 %

New Issue: EIT Retractible, 4.80%, 7-Year

Tuesday, March 27th, 2018

Canoe EIT Income Fund has announced:

that it has entered into an agreement with a syndicate of underwriters (the “Underwriters”) led by Scotia Capital Inc. (“Scotia Capital”) to sell, 2,800,000 Cumulative Redeemable Series 2 Preferred Units (3,220,000 Cumulative Redeemable Series 2 Preferred Units if the over-allotment described below is exercised in full) of the Fund (“Series 2 Preferred Units”), on a “bought deal” basis, at a price of $25.00 per Series 2 Preferred Unit (the “Offering Price”) for gross proceeds of approximately $70 million (approximately $80.5 million if the over-allotment option is exercised in full) (the “Offering”).

Holders of the Series 2 Preferred Units will be entitled to fixed cumulative preferential cash distributions of $1.20 per Series 2 Preferred Unit per annum, as and when declared, which will accrue from the date of issue and will be payable quarterly on the 15th day of March, June, September and December in each year. On or after March 15, 2025, the Series 2 Preferred Units will be retractable for cash, at the option of the holder, for $25.00 per Series 2 Preferred Unit, together with any accrued and unpaid distribution in respect of such Series 2 Preferred Units, less any tax required by law to be deducted therefrom. The Series 2 Preferred Units are provisionally rated Pfd-2 (high) by Dominion Bond Rating Service Limited.

The Fund has agreed to grant the Underwriters an over-allotment option to purchase up to an additional 420,000 Series 2 Preferred Units at the Offering Price on the same terms and conditions, exercisable in whole or in part at any time for a period of up to 30 days following closing of the Offering.

The Fund intends to use the proceeds from the Offering in accordance with the investment objectives and investment strategies of the Fund, subject to the investment restrictions of the Fund.

DBRS has issued a provisional rating of Pfd-2(high):

DBRS Limited (DBRS) assigned a provisional rating of Pfd-2 (high) to the Cumulative Redeemable Series 2 Preferred Units (the Series 2 Preferred Units) to be issued by Canoe EIT Income Fund (the Fund) that will rank pari passu with the existing Cumulative Redeemable Series 1 Preferred Units (the Series 1 Preferred Units; collectively with the Series 2 Preferred Units, the Preferred Units). The Fund can issue an unlimited number of capital units (the Fund Units) and can also issue in series Preferred Units up to a maximum aggregate amount equal to 25% of the Fund’s total assets after giving effect to the proposed offering of Preferred Units

As of March 14, 2018, assuming no capital distributions or special dividends paid, the net asset value of the Fund would have to fall by approximately 81% for the holders of the Preferred Units to be in a loss position. The Series 1 Preferred Unit holders currently receive quarterly cumulative preferential cash distributions of $0.30 (or $1.20 annually), representing a 4.80% per-annum return on the issue price of $25.00. The holders of the Fund Units receive targeted monthly cash distributions of $0.10, amounting to $1.20 per annum. In addition, up to 10% of the aggregate outstanding Units may be redeemed at the option of the Unit holders each calendar year on a date determined by the Fund. The Series 1 Preferred Units are retractable for cash at the option of the holder on or after March 15, 2024.

In assigning the provisional rating, DBRS has considered the expected level of downside protection available to holders of the Series 2 Preferred Units and the composition and diversification of the portfolio. In addition, DBRS has taken into account the potential grind on the portfolio arising from the distributions to the Units and redemption rights, the potential foreign exchange risk because of some investments in foreign currencies not being hedged and the fact that the lenders under the Credit Facility have priority over the Fund’s assets up to the amount of credit outstanding. Because of the amount of the Credit Facility compared with the current total assets, DBRS does not consider the latter risk to be significant.

Investors should note that distributions will be a mix of eligible dividends, capital gains and return of capital. I anticipate that the following language from the EIT.PR.A prospectus will be essentially repeated:

A Holder will generally be required to include in computing the Holder’s income for tax purposes in each year the amount of income and net taxable capital gains, if any, paid or payable, or deemed to be paid or payable, to the Holder in the year by the Fund to the extent that the Fund deducts such amount in computing its income for tax purposes. The Fund’s income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Preferred Units in the same proportion as the distributions received by such holders.

The amount of the non-taxable portion of any net realized capital gains of the Fund that is paid or payable to a Holder in a taxation year will not be included in computing the Holder’s income for the year. The Holder will not be required to reduce the adjusted cost base of the Holder’s Series 1 Preferred Units by such an amount.

Any other amount in excess of the income for tax purposes of the Fund that is paid or payable to a Holder in that year generally will not be included in the Holder’s income for the year, but the Holder will be required to reduce the adjusted cost base of the Holder’s Series 1 Preferred Units by that amount. To the extent that the adjusted cost base of a Series 1 Preferred Unit would otherwise be a negative amount, the negative amount will be deemed to be a capital gain and the adjusted cost base of the Series 1 Preferred Unit to the Holder will then be nil. The taxation of capital gains is described below (see “Capital Gains and Capital Losses”).

Provided that appropriate designations are made by the Fund, such portion of: (a) the net realized taxable capital gains of the Fund; (b) the foreign source income of the Fund and foreign taxes paid by the Fund eligible for the foreign tax credit; and (c) the taxable dividends (including eligible dividends) received, or deemed received, by the Fund on shares of taxable Canadian corporations, (including distributions from SIFT trusts or SIFT partnerships deemed to be taxable dividends under the SIFT Rules) as is paid or payable to a Holder will effectively retain their character and be treated as such in the hands of the Holder for purposes of the Tax Act. Amounts which retain their character in the hands of a Holder as taxable dividends on shares of taxable Canadian corporations will, in the case of a Holder who is an individual, be eligible for the normal gross-up and dividend tax credit rules under the Tax Act; and will, in the case of a Holder who is a corporation, generally be deducted in computing taxable income.

For the 2017 tax year the breakdown was:

EIT Distribution Taxation
2017
Actual Amount of Eligible Dividends 4.7%
Capital Gains 46.8%
Return of Capital 48.5%

Announcement of this issue knocked hell out of the trading price of EIT.PR.A, (also with a 4.8% coupon, retractible one year prior to the new issue) which commenced trading 2017-3-17 after being announced 2017-3-8 with marketting beginning 2017-2-22. It closed with a quote of 25.55-26.55 yesterday (last price 25.75) and today was 25.35-38, last price 25.28 on volume of 21,200. Today’s relative prices seem about right to me.

March 27, 2018

Tuesday, March 27th, 2018

Which way is the wind blowing? It looks like the world’s about to end again:

A selloff in technology shares sent U.S. equity benchmarks lower, with losses accelerating late in the day. Bonds surged on demand for safe havens, pushing the yield on 10-year Treasuries below a key level.

Trade angst weighed on leading tech companies with the Nasdaq 100 Index erasing most of Monday’s gain after a report the Trump administration is considering a crackdown on Chinese investments in technologies the U.S. considers sensitive. Facebook’s woes mounted and Nvidia Corp. spooked investors in chipmakers. The Chicago Board Options Exchange Volatility Index — Wall Street’s fear gauge — spiked.

The equity selling bled into the Treasury market, sending the 10-year yield below 2.8 percent as investors sought havens.

•The S&P 500 slumped 1.7 percent as of the close of trading in New York.
•The Nasdaq 100 Index fell 3.3 percent, while the Dow Jones Industrial Average slipped 1.4 percent.


•The yield on 10-year Treasuries declined eight basis points to 2.77 percent.

I hadn’t realized that some US public employee pension funds were so grossly underfunded:

The state hasn’t done a particularly good job running public pensions. According to S&P Global Ratings, New Jersey’s pension funding ratio is the worst in the nation, having saved enough to cover about 31 percent of the benefits that have been promised. The police and fire system is relatively strong by comparison, with about 65 cents for every dollar it’s on the hook for down the road, according to NJ.com.

States and municipalities from coast to coast are now living with the consequences of the 1990s tech boom, which brought public pension funding levels to 100 percent and allowed politicians to sweeten the pot for union members.

The subsequent bust — and the Great Recession a few years after that — took its toll on the funds backing those promised benefits. The aggregate state and local government pension funding ratio is now 73 percent, up from 67 percent at year-end 2016, according to Patrick Luby of CreditSights, who cites Federal Reserve data.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.6287 % 3,006.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.6287 % 5,516.9
Floater 3.32 % 3.49 % 106,641 18.53 4 -0.6287 % 3,179.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2114 % 3,160.9
SplitShare 4.70 % 4.16 % 59,533 3.25 5 -0.2114 % 3,774.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2114 % 2,945.3
Perpetual-Premium 5.62 % 4.48 % 79,223 0.09 11 0.2051 % 2,840.3
Perpetual-Discount 5.39 % 5.50 % 80,902 14.61 23 0.0075 % 2,913.9
FixedReset 4.31 % 4.68 % 174,437 5.87 104 -0.0931 % 2,502.4
Deemed-Retractible 5.20 % 5.79 % 89,162 5.70 28 0.1157 % 2,903.8
FloatingReset 2.96 % 3.14 % 35,765 3.63 10 -0.0664 % 2,755.7
Performance Highlights
Issue Index Change Notes
BAM.PF.G FixedReset -2.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-27
Maturity Price : 22.55
Evaluated at bid price : 23.02
Bid-YTW : 5.27 %
HSE.PR.C FixedReset -2.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-27
Maturity Price : 23.60
Evaluated at bid price : 23.96
Bid-YTW : 5.35 %
MFC.PR.B Deemed-Retractible -1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.15
Bid-YTW : 7.64 %
MFC.PR.G FixedReset -1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 5.12 %
IFC.PR.C FixedReset -1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.06
Bid-YTW : 5.37 %
MFC.PR.M FixedReset 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.39
Bid-YTW : 5.46 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.R FixedReset 78,400 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.11 %
GWO.PR.I Deemed-Retractible 71,659 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.02
Bid-YTW : 7.55 %
NA.PR.E FixedReset 65,928 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-27
Maturity Price : 23.03
Evaluated at bid price : 24.65
Bid-YTW : 4.67 %
TD.PF.D FixedReset 59,221 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-27
Maturity Price : 23.22
Evaluated at bid price : 24.30
Bid-YTW : 4.82 %
SLF.PR.A Deemed-Retractible 52,722 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.97
Bid-YTW : 7.04 %
GWO.PR.Q Deemed-Retractible 50,600 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.82
Bid-YTW : 6.02 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.G FixedReset Quote: 23.02 – 23.83
Spot Rate : 0.8100
Average : 0.4832

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-27
Maturity Price : 22.55
Evaluated at bid price : 23.02
Bid-YTW : 5.27 %

HSE.PR.C FixedReset Quote: 23.96 – 24.78
Spot Rate : 0.8200
Average : 0.5512

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-27
Maturity Price : 23.60
Evaluated at bid price : 23.96
Bid-YTW : 5.35 %

TRP.PR.F FloatingReset Quote: 20.28 – 21.70
Spot Rate : 1.4200
Average : 1.2058

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-27
Maturity Price : 20.28
Evaluated at bid price : 20.28
Bid-YTW : 3.70 %

MFC.PR.B Deemed-Retractible Quote: 21.15 – 21.63
Spot Rate : 0.4800
Average : 0.3006

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.15
Bid-YTW : 7.64 %

CCS.PR.C Deemed-Retractible Quote: 23.16 – 23.70
Spot Rate : 0.5400
Average : 0.3612

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.16
Bid-YTW : 6.37 %

GWO.PR.I Deemed-Retractible Quote: 21.02 – 21.44
Spot Rate : 0.4200
Average : 0.2439

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.02
Bid-YTW : 7.55 %

March 26, 2018

Monday, March 26th, 2018

Some people think the world might not end after all:

U.S. equities surged back from the biggest weekly rout in two years, with major benchmarks climbing more than 2.7 percent on signs that an escalation of trade tensions was beginning to ease.

The optimism toward U.S. stocks emerged after the limits of the Trump administration’s willingness to embrace protectionism came into view over the weekend. Treasury Secretary Steven Mnuchin told Fox News that he’s “cautiously hopeful” that China will reach a deal to avoid tariffs on $50 billion of U.S. exports, while European leaders demanded a permanent exclusion at the threat of retaliation and a deal was struck with South Korea.

The yield on 10-year Treasuries climbed four basis points to 2.85 percent.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.7296 % 3,025.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.7296 % 5,551.8
Floater 3.30 % 3.46 % 101,188 18.61 4 0.7296 % 3,199.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.0000 % 3,167.6
SplitShare 4.69 % 4.16 % 58,167 3.25 5 0.0000 % 3,782.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,951.5
Perpetual-Premium 5.63 % 5.11 % 79,561 0.74 11 -0.1043 % 2,834.5
Perpetual-Discount 5.39 % 5.52 % 82,186 14.60 23 -0.4377 % 2,913.7
FixedReset 4.30 % 4.68 % 175,779 5.83 104 0.0904 % 2,504.7
Deemed-Retractible 5.21 % 5.84 % 90,486 5.70 28 -0.1383 % 2,900.5
FloatingReset 2.95 % 3.08 % 35,279 3.63 10 0.1064 % 2,757.5
Performance Highlights
Issue Index Change Notes
BAM.PR.M Perpetual-Discount -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 20.64
Evaluated at bid price : 20.64
Bid-YTW : 5.79 %
BAM.PF.C Perpetual-Discount -1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 21.15
Evaluated at bid price : 21.15
Bid-YTW : 5.77 %
BAM.PF.D Perpetual-Discount -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 5.77 %
BAM.PR.N Perpetual-Discount -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 5.77 %
PWF.PR.E Perpetual-Discount -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 24.50
Evaluated at bid price : 24.75
Bid-YTW : 5.64 %
NA.PR.E FixedReset 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 23.04
Evaluated at bid price : 24.68
Bid-YTW : 4.66 %
TD.PF.B FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 22.67
Evaluated at bid price : 23.12
Bid-YTW : 4.68 %
PWF.PR.A Floater 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 2.89 %
MFC.PR.G FixedReset 1.46 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-12-19
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 4.75 %
TRP.PR.C FixedReset 1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 17.88
Evaluated at bid price : 17.88
Bid-YTW : 4.80 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.A FloatingReset 417,442 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.13
Bid-YTW : -6.22 %
W.PR.M FixedReset 51,112 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 25.82
Bid-YTW : 4.53 %
TD.PF.J FixedReset 37,250 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 23.18
Evaluated at bid price : 25.09
Bid-YTW : 4.64 %
TD.PF.D FixedReset 30,524 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 23.20
Evaluated at bid price : 24.25
Bid-YTW : 4.83 %
CM.PR.R FixedReset 27,366 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.22
Bid-YTW : 4.37 %
BMO.PR.S FixedReset 25,986 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 23.06
Evaluated at bid price : 23.57
Bid-YTW : 4.65 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.F FloatingReset Quote: 20.18 – 21.70
Spot Rate : 1.5200
Average : 0.9710

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 20.18
Evaluated at bid price : 20.18
Bid-YTW : 3.71 %

EIT.PR.A SplitShare Quote: 25.55 – 26.55
Spot Rate : 1.0000
Average : 0.6456

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 4.43 %

BAM.PF.E FixedReset Quote: 22.90 – 23.45
Spot Rate : 0.5500
Average : 0.4115

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-26
Maturity Price : 22.58
Evaluated at bid price : 22.90
Bid-YTW : 5.01 %

IFC.PR.E Deemed-Retractible Quote: 24.31 – 24.75
Spot Rate : 0.4400
Average : 0.3034

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 5.71 %

BMO.PR.Q FixedReset Quote: 22.25 – 22.60
Spot Rate : 0.3500
Average : 0.2171

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 5.22 %

TRP.PR.K FixedReset Quote: 25.55 – 25.85
Spot Rate : 0.3000
Average : 0.1801

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 4.44 %

March 23, 2018

Friday, March 23rd, 2018

How about that Canadian inflation, eh?:

Canadian inflation picked up more than analysts expected in February to the fastest in more than three years as signs point to price pressures continuing to build.

Consumer prices accelerated to an annual pace of 2.2 percent in February, the most since 2014, from 1.7 percent a month earlier. Economists had anticipated a 1.9 percent increase. Core prices — which exclude more volatile items like energy and are considered a gauge of inflation pressures — inched higher for a fifth month to 2.03 percent, which is the fastest since 2012.

The budding inflation could add pressure on the Bank of Canada — which has kept the expansion going with low interest rates — to keep hiking borrowing costs to more normal levels.

All this is happening during renewed NAFTA huffing and puffing:

U.S. President Donald Trump has put new pressure on Nafta negotiations with an order saying he’ll impose steel and aluminum tariffs on Canada and Mexico on May 1 if he’s not satisfied with talks.

Trump’s presidential proclamation Thursday sets tariffs for some countries as of Friday while excluding others such as Canada and Mexico. The document specifies for the first time when those exclusions will run out, adding to pressure for a deal to be reached on the North American Free Trade Agreement around the same time.

A White House statement said Trump will decide by May 1 “whether to continue to exempt these countries from tariffs, based on the status of discussions.” Mexico has said it needs a deal by the end of April, or that talks might as well stretch past the country’s summer election, and then U.S. midterm elections this fall.

All this Trumpism is having an effect:

Spring has sprung — just not in U.S. stocks, where a harrowing week has walloped traders with echoes of February’s correction.

In the past five years, there have been only two other stretches with losses of this magnitude. The S&P 500 Index is down 6 percent. And the picture looks just as bad for the Dow Jones Industrial Average, which sank to a four-month low by the Friday close. Both indexes suffered their steepest weekly drop in more than two years.

Equities are now teetering near — and for blue chips, below — levels seen at the worst point in February’s volatility-fueled meltdown. At the epicenter this time is U.S. President Donald Trump, with his China tariffs driving Boeing Co. down more than 5 percent in a single session on Thursday and losses rippling across industries from technology to banks.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.6429 % 3,003.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.6429 % 5,511.6
Floater 3.32 % 3.48 % 100,759 18.58 4 -0.6429 % 3,176.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.0078 % 3,167.6
SplitShare 4.69 % 4.15 % 57,540 3.26 5 0.0078 % 3,782.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0078 % 2,951.5
Perpetual-Premium 5.63 % 2.45 % 79,181 0.08 11 -0.0611 % 2,837.4
Perpetual-Discount 5.37 % 5.48 % 82,372 14.60 23 -0.0934 % 2,926.5
FixedReset 4.30 % 4.65 % 177,170 5.88 104 -0.2139 % 2,502.4
Deemed-Retractible 5.20 % 5.88 % 90,903 5.71 28 -0.0714 % 2,904.5
FloatingReset 2.91 % 3.04 % 34,985 3.64 10 -0.1814 % 2,754.6
Performance Highlights
Issue Index Change Notes
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 : 23.96
Bid-YTW : 5.08 %
TD.PF.B FixedReset -1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 22.44
Evaluated at bid price : 22.86
Bid-YTW : 4.65 %
SLF.PR.G FixedReset -1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.28
Bid-YTW : 7.31 %
TRP.PR.C FixedReset -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 4.78 %
MFC.PR.M FixedReset -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.15
Bid-YTW : 5.57 %
PWF.PR.A Floater -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 2.93 %
PWF.PR.F Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 23.53
Evaluated at bid price : 23.80
Bid-YTW : 5.59 %
PWF.PR.T FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 23.20
Evaluated at bid price : 23.80
Bid-YTW : 4.59 %
IAG.PR.G FixedReset -1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.31
Bid-YTW : 5.36 %
TRP.PR.B FixedReset -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 16.65
Evaluated at bid price : 16.65
Bid-YTW : 4.71 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.B Deemed-Retractible 76,624 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.54
Bid-YTW : 7.30 %
MFC.PR.C Deemed-Retractible 67,225 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.83
Bid-YTW : 7.73 %
BAM.PR.R FixedReset 47,178 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 20.07
Evaluated at bid price : 20.07
Bid-YTW : 5.07 %
CM.PR.R FixedReset 46,556 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.16
Bid-YTW : 4.43 %
TD.PF.J FixedReset 40,820 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 23.18
Evaluated at bid price : 25.09
Bid-YTW : 4.58 %
BAM.PF.F FixedReset 34,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 23.65
Evaluated at bid price : 24.05
Bid-YTW : 5.00 %
There were 11 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.G FixedReset Quote: 23.96 – 24.80
Spot Rate : 0.8400
Average : 0.4933

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 5.08 %

MFC.PR.N FixedReset Quote: 22.97 – 23.70
Spot Rate : 0.7300
Average : 0.4187

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.97
Bid-YTW : 5.61 %

TRP.PR.F FloatingReset Quote: 20.22 – 20.84
Spot Rate : 0.6200
Average : 0.3690

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 20.22
Evaluated at bid price : 20.22
Bid-YTW : 3.66 %

PWF.PR.A Floater Quote: 20.75 – 21.34
Spot Rate : 0.5900
Average : 0.3883

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 2.93 %

W.PR.H Perpetual-Discount Quote: 24.75 – 25.22
Spot Rate : 0.4700
Average : 0.2810

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 24.50
Evaluated at bid price : 24.75
Bid-YTW : 5.65 %

RY.PR.H FixedReset Quote: 23.35 – 23.77
Spot Rate : 0.4200
Average : 0.2457

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-23
Maturity Price : 22.91
Evaluated at bid price : 23.35
Bid-YTW : 4.53 %

BNS.PR.P & BNS.PR.A To Be Redeemed

Friday, March 23rd, 2018

The Bank of Nova Scotia has announced:

that it intends to exercise its right to redeem all outstanding Non-cumulative Preferred Shares Series 18 of Scotiabank (the “Series 18 Shares”) and Non-cumulative Preferred Shares Series 19 of Scotiabank (the “Series 19 Shares”) on April 26, 2018, at a price equal to $25.00 per share, together with all declared and unpaid dividends. Formal notice will be issued to holders of the Series 18 Shares and Series 19 Shares in accordance with the share conditions.

The redemption has been approved by the Office of the Superintendent of Financial Institutions and will be financed out of the general funds of Scotiabank.

On February 27, 2018, the Board of Directors of Scotiabank announced a quarterly dividend of $0.209375 per Series 18 Share, and $0.181788 per Series 19 Share. This will be the final dividend on the Series 18 Shares and Series 19 Shares, and will be paid in the usual manner on April 26, 2018, to shareholders of record at the close of business on April 3, 2018, as previously announced. After April 26, 2018, the Series 18 Shares and Series 19 Shares will cease to be entitled to dividends.

BNS.PR.P is a FixedReset, that commenced trading 2008-03-26 as a 5.00%+205 issue after being announced 2008-03-06. At the 2013 Exchange Date it reset to 3.35%.

BNS.PR.A is the FloatingReset that resulted from the 2013 partial exchange from BNS.PR.P, and hence paid 3-month bills +205bp, reset quarterly.

Neither issue was NVCC-compliant.

March 22, 2018

Friday, March 23rd, 2018
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -1.8262 % 3,023.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.8262 % 5,547.3
Floater 3.30 % 3.46 % 101,783 18.62 4 -1.8262 % 3,196.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.0157 % 3,167.4
SplitShare 4.69 % 4.18 % 58,301 3.26 5 0.0157 % 3,782.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0157 % 2,951.3
Perpetual-Premium 5.62 % 2.25 % 79,522 0.08 11 -0.0706 % 2,839.2
Perpetual-Discount 5.37 % 5.49 % 85,606 14.61 23 -0.2371 % 2,929.2
FixedReset 4.30 % 4.59 % 178,093 5.87 104 -0.1199 % 2,507.8
Deemed-Retractible 5.20 % 5.94 % 92,256 5.72 28 -0.3225 % 2,906.6
FloatingReset 2.91 % 3.01 % 36,229 3.65 10 0.0443 % 2,759.6
Performance Highlights
Issue Index Change Notes
PWF.PR.A Floater -2.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 2.89 %
BAM.PR.B Floater -1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 17.32
Evaluated at bid price : 17.32
Bid-YTW : 3.48 %
BAM.PR.C Floater -1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 17.42
Evaluated at bid price : 17.42
Bid-YTW : 3.46 %
BAM.PR.K Floater -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 17.37
Evaluated at bid price : 17.37
Bid-YTW : 3.47 %
BAM.PR.R FixedReset -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 20.19
Evaluated at bid price : 20.19
Bid-YTW : 5.04 %
BAM.PF.B FixedReset -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 22.49
Evaluated at bid price : 23.00
Bid-YTW : 4.98 %
BAM.PF.G FixedReset -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 22.95
Evaluated at bid price : 23.71
Bid-YTW : 5.02 %
SLF.PR.A Deemed-Retractible -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.95
Bid-YTW : 7.04 %
BAM.PF.F FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 23.58
Evaluated at bid price : 23.99
Bid-YTW : 5.01 %
TRP.PR.G FixedReset -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 22.80
Evaluated at bid price : 23.56
Bid-YTW : 5.05 %
BAM.PF.A FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 23.14
Evaluated at bid price : 23.90
Bid-YTW : 5.07 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.C FixedReset 153,050 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 4.53 %
RY.PR.J FixedReset 71,564 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 23.24
Evaluated at bid price : 24.25
Bid-YTW : 4.71 %
TRP.PR.K FixedReset 56,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 4.43 %
RY.PR.G Deemed-Retractible 51,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-21
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : -0.85 %
TD.PF.J FixedReset 43,770 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 23.17
Evaluated at bid price : 25.05
Bid-YTW : 4.59 %
CM.PR.S FixedReset 35,270 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 23.04
Evaluated at bid price : 24.62
Bid-YTW : 4.49 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.G FixedReset Quote: 23.56 – 23.99
Spot Rate : 0.4300
Average : 0.2636

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 22.80
Evaluated at bid price : 23.56
Bid-YTW : 5.05 %

BAM.PF.B FixedReset Quote: 23.00 – 23.43
Spot Rate : 0.4300
Average : 0.2659

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 22.49
Evaluated at bid price : 23.00
Bid-YTW : 4.98 %

BAM.PR.X FixedReset Quote: 17.80 – 18.10
Spot Rate : 0.3000
Average : 0.2033

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 17.80
Evaluated at bid price : 17.80
Bid-YTW : 4.98 %

BAM.PF.F FixedReset Quote: 23.99 – 24.26
Spot Rate : 0.2700
Average : 0.1738

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 23.58
Evaluated at bid price : 23.99
Bid-YTW : 5.01 %

BAM.PR.B Floater Quote: 17.32 – 17.57
Spot Rate : 0.2500
Average : 0.1649

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-03-22
Maturity Price : 17.32
Evaluated at bid price : 17.32
Bid-YTW : 3.48 %

PVS.PR.B SplitShare Quote: 25.20 – 25.62
Spot Rate : 0.4200
Average : 0.3427

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : 3.56 %

FTS : Outlook Negative, says S&P

Wednesday, March 21st, 2018

Standard & Poor’s has announced:

  • •We reviewed the impact of the U.S. tax reform on Fortis Inc. (Fortis), and the company’s consolidated credit metrics are weaker than expected.
  • •There are key pending regulatory decisions that add to the downside risk and could further stress credit metrics.
  • •As a result, we are revising our outlook on Fortis and subsidiaries ITC Holdings Corp., Tucson Electric Power Co., FortisAlberta Inc., and Caribbean Utilities Co. Ltd. to negative from stable.
  • •We are also affirming our ratings on the companies, including our ‘A-‘ long-term issuer credit ratings.


The negative outlook reflects S&P Global Ratings’ view of Fortis’ weak financial metrics over the next 12-24 months and the U.S. tax reform pushing back our expectation for financial improvement. In addition, the outlook reflects the risk that any adverse outcomes from pending regulatory decisions could further depress credit metrics. During our two-year outlook period, we forecast the company’s FFO-to-debt at about 9.5% in 2018 before improving to about 10.5% by 2020.

We could take a negative rating action on Fortis if the company’s FFO-to-debt were projected to stay below 10%. This could happen if the company experiences material delays and cost overruns in executing its capital programs, material adverse regulatory decisions, and significant debt-funded acquisitions or operational difficulties that lead to unexpected cost and debt increase. Any deterioration of business risk, including expansion of unregulated operations or acquisitions that increase the compnay’s reliance on generation within its integrated utility operations, could also lead to a downgrade.

We could revise the outlook to stable if Fortis improves its financial position, with FFO-to-debt remaining consistently around 11% or above, without any increase in business risk. This could happen if Fortis were to gradually improve its cash flow metrics with the benefit of favorable regulatory outcomes while maintaining its current business strategy.

Affected issues are FTS.PR.F, FTS.PR.G, FTS.PR.H, FTS.PR.I, FTS.PR.J, FTS.PR.K and FTS.PR.M.