MAPF

MAPF Portfolio Composition: September 2016

Turnover continued to be extremely low in September, at about 2%.

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.

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 two years in the near future.

Sectoral distribution of the MAPF portfolio on September 30 was as follows:

MAPF Sectoral Analysis 2016-9-30
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 0% N/A N/A
Interest Rearing 0% N/A N/A
PerpetualPremium 0% N/A N/A
PerpetualDiscount 10.2% 5.01% 15.44
Fixed-Reset 71.6% 7.44% 10.21
Deemed-Retractible 0% N/A N/A
FloatingReset 7.8% 10.95% 7.19
Scraps (Various) 9.7% 6.76% 13.28
Cash +0.7% 0.00% 0.00
Total 100% 7.35% 10.74
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. (all recent editions have a short summary of the argument included in the “DeemedRetractible” section)

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 0.58% and a constant 3-Month Bill rate of 0.53%

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 2016-9-30
DBRS Rating Weighting
Pfd-1 0 (0)
Pfd-1(low) 0 (0)
Pfd-2(high) 29.2%
Pfd-2 34.7%
Pfd-2(low) 25.7%
Pfd-3(high) 1.4%
Pfd-3 4.7%
Pfd-3(low) 3.0%
Pfd-4(high) 0%
Pfd-4 0%
Pfd-4(low) 0%
Pfd-5(high) 0.7%
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
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.
A position held in BIP.PR.A is not rated by DBRS, but has been included as “Pfd-2(low)” in the above table on the basis of its S&P rating of P-2(low).

Liquidity Distribution is:

MAPF Liquidity Analysis 2016-09-30
Average Daily Trading Weighting
<$50,000 11.3%
$50,000 – $100,000 46.5%
$100,000 – $200,000 32.5%
$200,000 – $300,000 3.0%
>$300,000 6.0%
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 August 31, 2012, and published in the October (mainly methodology), November (most funds), and December (ZPR) 2012, PrefLetter. While direct comparisons are difficult due to the introduction of the DeemedRetractible class of preferred share (see above) it is fair to say:

  • MAPF credit quality is better
  • MAPF liquidity is a bit lower
  • MAPF Yield is higher
  • Weightings
    • MAPF is less exposed to Straight Perpetuals (including DeemedRetractibles)
    • MAPF is less exposed to Operating Retractibles
    • MAPF is more exposed to SplitShares
    • MAPF is less exposed to FixFloat / Floater / Ratchet
    • MAPF is overweighted in FixedResets
Market Action

September 30, 2016

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 0.1601 % 1,705.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1601 % 3,115.7
Floater 4.85 % 4.57 % 84,784 16.27 4 0.1601 % 1,795.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1587 % 2,892.9
SplitShare 5.06 % 4.75 % 75,123 2.15 5 -0.1587 % 3,454.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1587 % 2,695.5
Perpetual-Premium 5.50 % 4.63 % 64,566 1.94 12 0.0228 % 2,688.8
Perpetual-Discount 5.12 % 5.00 % 88,673 15.04 26 0.1755 % 2,923.5
FixedReset 4.92 % 4.20 % 148,214 6.98 92 0.2689 % 2,058.4
Deemed-Retractible 5.01 % 4.79 % 111,878 1.20 32 0.1268 % 2,806.2
FloatingReset 2.84 % 4.37 % 32,078 4.98 12 0.2467 % 2,207.9
Performance Highlights
Issue Index Change Notes
RY.PR.M FixedReset 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 20.17
Evaluated at bid price : 20.17
Bid-YTW : 4.12 %
TD.PR.T FloatingReset 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.82
Bid-YTW : 3.95 %
BNS.PR.Q FixedReset 1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.97
Bid-YTW : 3.63 %
CM.PR.Q FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 20.34
Evaluated at bid price : 20.34
Bid-YTW : 4.20 %
RY.PR.J FixedReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 20.47
Evaluated at bid price : 20.47
Bid-YTW : 4.17 %
BIP.PR.A FixedReset 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 20.74
Evaluated at bid price : 20.74
Bid-YTW : 5.11 %
FTS.PR.H FixedReset 1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 14.10
Evaluated at bid price : 14.10
Bid-YTW : 3.79 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.H FixedReset 198,923 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 4.31 %
BIP.PR.C FixedReset 68,011 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 4.88 %
CM.PR.O FixedReset 53,294 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 18.81
Evaluated at bid price : 18.81
Bid-YTW : 4.06 %
BAM.PR.T FixedReset 42,777 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 15.46
Evaluated at bid price : 15.46
Bid-YTW : 4.79 %
BNS.PR.G FixedReset 42,553 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-07-25
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 3.87 %
BNS.PR.H FixedReset 38,985 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.82
Bid-YTW : 4.22 %
There were 24 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
EML.PR.A FixedReset Quote: 26.31 – 26.75
Spot Rate : 0.4400
Average : 0.3145

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 26.31
Bid-YTW : 4.43 %

VNR.PR.A FixedReset Quote: 18.43 – 18.89
Spot Rate : 0.4600
Average : 0.3435

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 18.43
Evaluated at bid price : 18.43
Bid-YTW : 4.77 %

IGM.PR.B Perpetual-Premium Quote: 25.30 – 25.59
Spot Rate : 0.2900
Average : 0.1968

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 5.13 %

ELF.PR.F Perpetual-Discount Quote: 24.72 – 25.05
Spot Rate : 0.3300
Average : 0.2501

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-30
Maturity Price : 24.49
Evaluated at bid price : 24.72
Bid-YTW : 5.37 %

BMO.PR.R FloatingReset Quote: 22.41 – 22.70
Spot Rate : 0.2900
Average : 0.2239

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.41
Bid-YTW : 4.37 %

GWO.PR.G Deemed-Retractible Quote: 25.00 – 25.19
Spot Rate : 0.1900
Average : 0.1302

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 5.23 %

Market Action

September 29, 2016

UPS is attempting to catch up in the drone wars:

UPS, despite its decades of delivery experience, is a latecomer to the drone delivery game. Drone startup Flirtey demonstrated a ship-to-shore drone delivery of medical supplies off the coast of New Jersey earlier this summer, and drone delivery company Zipline declared its intent to delivery needed blood to rural populations in Washington State’s San Juan islands.

And it’s not just startups that are already doing delivery. Amazon’s drone program is perhaps the most famous, but Europe’s own DHL delivery giant experimented with drones in difficult mountain terrain. Chinese online retailer JD.com is also exploring drone delivery in marshy and channel-crossed provinces, where flying drones can fly easily over the car-impassible waterways. That UPS is experimenting with drone technology is more a testament to the technology’s broad appeal than any particular innovation by the company itself.

On a related note, Tyler Cowen of Bloomberg claims that technology favours suburbia:

Self-driving vehicles are also likely to help the suburbs most. One of the worst things about the suburbs is the commute to the city or to other parts of the suburbs. But what if you could read, text or watch TV – safely — during that commuting time? What if you could tackle your day’s work just as you do on a train or plane? Commuting would seem a lot less painful. As driverless vehicles evolve to accommodate work and leisure uses of the automobile space, pleasure will replace commuting stress.

What about drones? They too would seem to favor remote areas where it is harder to access useful goods and services. Drones may do more for exurbs and rural areas than for the suburbs, but it seems cities will gain least. Walking or biking to nearby shops is a potential substitute for drone delivery. Rolling sidewalk drones might find it harder to negotiate crowded cities, and cities with a dense network of tall buildings may be less friendly to flying drones. Population density may increase the risk of a drone falling on someone.

Jared Dillian writes in Forbes about the message we’re sending to the Chinese:

Shockwaves reverberated through Canada last week as the government announced that negotiations would commence on an extradition treaty between Canada and China.

Make no mistake about it–from Canada’s perspective, this has everything to do with money laundering–and the torrid housing market. In fact, supporters of the extradition treaty directly cite the inability of middle class Canadian families to buy homes that have become prohibitively expensive, due to foreign capital pouring into the country.

But Canada should really reflect on whether they want a reversal of those capital flows. History has not been kind to countries that have slammed the door shut on foreign investment. And money always goes to where it is treated best. So if Canada becomes hostile to Chinese money, it will find somewhere else to go. And I’m sure lots of countries would be happy to take it.

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 -0.2307 % 1,702.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.2307 % 3,110.7
Floater 4.86 % 4.59 % 88,221 16.24 4 -0.2307 % 1,792.7
OpRet 0.00 % 0.00 % 0 0.00 0 0.1749 % 2,897.5
SplitShare 5.05 % 4.67 % 75,682 2.15 5 0.1749 % 3,460.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1749 % 2,699.8
Perpetual-Premium 5.50 % 4.63 % 64,580 1.94 12 -0.0781 % 2,688.1
Perpetual-Discount 5.13 % 5.02 % 91,923 15.08 26 0.0435 % 2,918.4
FixedReset 4.96 % 4.25 % 148,773 6.98 92 0.1850 % 2,052.8
Deemed-Retractible 5.02 % 4.52 % 111,994 1.21 32 0.0178 % 2,802.7
FloatingReset 2.84 % 4.40 % 32,262 4.97 12 0.1226 % 2,202.4
Performance Highlights
Issue Index Change Notes
ELF.PR.G Perpetual-Discount -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 22.42
Evaluated at bid price : 22.68
Bid-YTW : 5.24 %
TRP.PR.F FloatingReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 13.95
Evaluated at bid price : 13.95
Bid-YTW : 4.40 %
PWF.PR.T FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 19.59
Evaluated at bid price : 19.59
Bid-YTW : 4.02 %
BAM.PF.G FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 20.43
Evaluated at bid price : 20.43
Bid-YTW : 4.47 %
BAM.PR.R FixedReset 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 15.94
Evaluated at bid price : 15.94
Bid-YTW : 4.60 %
TRP.PR.C FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 13.45
Evaluated at bid price : 13.45
Bid-YTW : 4.00 %
BAM.PF.A FixedReset 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 19.25
Evaluated at bid price : 19.25
Bid-YTW : 4.69 %
BAM.PF.B FixedReset 1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 17.72
Evaluated at bid price : 17.72
Bid-YTW : 4.77 %
CU.PR.C FixedReset 1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 18.07
Evaluated at bid price : 18.07
Bid-YTW : 4.21 %
MFC.PR.F FixedReset 2.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.75
Bid-YTW : 10.33 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.H FixedReset 299,386 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 4.30 %
BNS.PR.H FixedReset 168,425 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.77
Bid-YTW : 4.26 %
BMO.PR.L Deemed-Retractible 69,657 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-29
Maturity Price : 25.25
Evaluated at bid price : 25.71
Bid-YTW : -9.38 %
BNS.PR.O Deemed-Retractible 54,300 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-29
Maturity Price : 25.25
Evaluated at bid price : 25.68
Bid-YTW : -4.00 %
RY.PR.R FixedReset 53,800 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.85
Bid-YTW : 3.98 %
RY.PR.I FixedReset 51,750 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.15
Bid-YTW : 3.77 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.A Deemed-Retractible Quote: 23.06 – 23.50
Spot Rate : 0.4400
Average : 0.3330

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.06
Bid-YTW : 5.82 %

FTS.PR.F Perpetual-Discount Quote: 24.67 – 24.95
Spot Rate : 0.2800
Average : 0.1857

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 24.43
Evaluated at bid price : 24.67
Bid-YTW : 5.01 %

MFC.PR.O FixedReset Quote: 26.66 – 26.91
Spot Rate : 0.2500
Average : 0.1739

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.66
Bid-YTW : 4.11 %

BNS.PR.E FixedReset Quote: 26.80 – 27.00
Spot Rate : 0.2000
Average : 0.1272

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 4.02 %

BNS.PR.A FloatingReset Quote: 23.11 – 23.36
Spot Rate : 0.2500
Average : 0.1789

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.11
Bid-YTW : 4.17 %

CU.PR.D Perpetual-Discount Quote: 24.56 – 24.80
Spot Rate : 0.2400
Average : 0.1739

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-29
Maturity Price : 24.08
Evaluated at bid price : 24.56
Bid-YTW : 5.02 %

Market Action

September 28, 2016

PerpetualDiscounts now yield 5.01%, equivalent to 6.51% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.6%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 290bp, unchanged from September 14.

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 0.4995 % 1,706.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.4995 % 3,117.9
Floater 4.85 % 4.55 % 89,473 16.32 4 0.4995 % 1,796.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.3063 % 2,892.4
SplitShare 5.06 % 4.46 % 76,540 2.16 5 0.3063 % 3,454.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3063 % 2,695.1
Perpetual-Premium 5.50 % 4.64 % 65,468 1.94 12 0.1594 % 2,690.2
Perpetual-Discount 5.12 % 5.01 % 93,077 15.06 26 0.1724 % 2,917.1
FixedReset 4.97 % 4.24 % 152,550 6.98 92 0.1825 % 2,049.0
Deemed-Retractible 5.02 % 2.24 % 110,411 0.33 32 0.0827 % 2,802.2
FloatingReset 2.84 % 4.45 % 40,814 4.97 12 0.1931 % 2,199.7
Performance Highlights
Issue Index Change Notes
GRP.PR.A SplitShare 1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : -13.73 %
BAM.PR.R FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 15.77
Evaluated at bid price : 15.77
Bid-YTW : 4.65 %
FTS.PR.M FixedReset 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 4.17 %
TRP.PR.C FixedReset 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 13.30
Evaluated at bid price : 13.30
Bid-YTW : 4.04 %
ELF.PR.G Perpetual-Discount 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 22.82
Evaluated at bid price : 23.10
Bid-YTW : 5.14 %
TRP.PR.F FloatingReset 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 14.12
Evaluated at bid price : 14.12
Bid-YTW : 4.34 %
TRP.PR.H FloatingReset 2.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 10.70
Evaluated at bid price : 10.70
Bid-YTW : 4.23 %
SLF.PR.G FixedReset 2.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.33
Bid-YTW : 9.76 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.N Deemed-Retractible 463,100 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-01-27
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 1.61 %
W.PR.J Perpetual-Discount 302,450 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 2.44 %
POW.PR.B Perpetual-Discount 235,518 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : -2.53 %
GWO.PR.F Deemed-Retractible 214,389 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : -26.24 %
PWF.PR.F Floater 199,860 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 24.68
Evaluated at bid price : 25.00
Bid-YTW : 5.32 %
PWF.PR.F Floater 199,860 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 24.68
Evaluated at bid price : 25.00
Bid-YTW : 5.32 %
HSB.PR.D Deemed-Retractible 177,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 2.24 %
BNS.PR.H FixedReset 175,110 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.25 %
BNS.PR.O Deemed-Retractible 140,047 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.25
Evaluated at bid price : 25.68
Bid-YTW : -4.18 %
TD.PF.H FixedReset 117,195 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 4.30 %
TRP.PR.J FixedReset 109,369 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.61
Bid-YTW : 4.10 %
FTS.PR.M FixedReset 100,235 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 4.17 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GRP.PR.A SplitShare Quote: 25.35 – 25.99
Spot Rate : 0.6400
Average : 0.4465

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : -13.73 %

FTS.PR.G FixedReset Quote: 17.55 – 17.95
Spot Rate : 0.4000
Average : 0.2397

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-28
Maturity Price : 17.55
Evaluated at bid price : 17.55
Bid-YTW : 4.06 %

HSB.PR.D Deemed-Retractible Quote: 25.05 – 25.36
Spot Rate : 0.3100
Average : 0.1979

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-28
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 2.24 %

BNS.PR.D FloatingReset Quote: 19.54 – 19.88
Spot Rate : 0.3400
Average : 0.2304

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.54
Bid-YTW : 6.43 %

MFC.PR.H FixedReset Quote: 21.30 – 21.58
Spot Rate : 0.2800
Average : 0.1769

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.30
Bid-YTW : 6.09 %

TD.PR.Z FloatingReset Quote: 22.35 – 22.64
Spot Rate : 0.2900
Average : 0.1959

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.35
Bid-YTW : 4.46 %

Market Action

September 27, 2016

Here’s a US story we probably won’t see in Canada!

In a startling development, almost unheard of outside a recession, food prices have fallen for nine straight months in the U.S. It’s the longest streak of food deflation since 1960 — with the exception of 2009, when the financial crisis was winding down. Analysts credit low oil and grain prices, as well as cutthroat competition from discounters. Consumers are winning out; grocery chains, not so much. Their margins and, in some cases, their stock prices, are taking a hit.

Eggs and beef have have grown especially inexpensive, and it isn’t only an American phenomenon: In England, Aldi recently offered its prized 8-ounce wagyu steaks from New Zealand for about $6.50 — a little more than the price of a pint of beer.

[Analyst at Wolfe Research Scott] Mushkin, who researches local markets, recently found that prices of a typical basket of grocery items in Houston, had fallen almost 5 percent over the past year.

foodPrice_160927
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 0.00 % 0.00 % 0 0.00 0 0.1429 % 1,698.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1429 % 3,102.4
Floater 4.87 % 4.59 % 86,171 16.25 4 0.1429 % 1,787.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.0953 % 2,883.6
SplitShare 5.05 % 4.59 % 77,227 2.16 5 0.0953 % 3,443.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0953 % 2,686.8
Perpetual-Premium 5.50 % 4.63 % 65,665 1.95 12 -0.0293 % 2,686.0
Perpetual-Discount 5.12 % 5.08 % 87,153 15.08 26 0.1092 % 2,912.1
FixedReset 4.98 % 4.26 % 149,058 6.98 92 -0.0016 % 2,045.3
Deemed-Retractible 5.02 % 4.85 % 111,042 0.33 32 0.0178 % 2,799.8
FloatingReset 2.85 % 4.43 % 32,492 4.97 12 0.1934 % 2,195.5
Performance Highlights
Issue Index Change Notes
BMO.PR.A FloatingReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 5.13 %
TRP.PR.C FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-27
Maturity Price : 13.24
Evaluated at bid price : 13.24
Bid-YTW : 4.12 %
W.PR.K FixedReset 1.55 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 26.17
Bid-YTW : 4.34 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.H FixedReset 305,167 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 4.40 %
RY.PR.L FixedReset 92,319 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.08
Bid-YTW : 3.75 %
W.PR.M FixedReset 57,560 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.56 %
BMO.PR.S FixedReset 54,230 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-27
Maturity Price : 19.26
Evaluated at bid price : 19.26
Bid-YTW : 4.01 %
TD.PF.H FixedReset 52,355 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.52
Bid-YTW : 4.50 %
HSB.PR.C Deemed-Retractible 42,100 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-27
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 5.13 %
There were 37 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.M FixedReset Quote: 19.32 – 19.65
Spot Rate : 0.3300
Average : 0.2061

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-27
Maturity Price : 19.32
Evaluated at bid price : 19.32
Bid-YTW : 4.22 %

GWO.PR.N FixedReset Quote: 14.27 – 14.58
Spot Rate : 0.3100
Average : 0.2047

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.27
Bid-YTW : 9.71 %

SLF.PR.G FixedReset Quote: 14.04 – 14.45
Spot Rate : 0.4100
Average : 0.3078

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.04
Bid-YTW : 10.05 %

BAM.PR.K Floater Quote: 10.35 – 10.60
Spot Rate : 0.2500
Average : 0.1592

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-27
Maturity Price : 10.35
Evaluated at bid price : 10.35
Bid-YTW : 4.57 %

TRP.PR.G FixedReset Quote: 20.27 – 20.65
Spot Rate : 0.3800
Average : 0.2983

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-27
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 4.48 %

GWO.PR.L Deemed-Retractible Quote: 25.35 – 25.64
Spot Rate : 0.2900
Average : 0.2089

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.35
Bid-YTW : 5.27 %

Market Action

September 26, 2016

Mark Gilbert of Bloomberg writes about his experience playing a game published by the Fed:

The San Francisco branch of the Federal Reserve has a game on its website that lets you play at being Chair of the Federal Reserve. After tinkering with it, I’ve come to some conclusions: Modeling the economy is a mug’s game, short-term interest rates are a poor tool for steering the economy, and I should never be given the job of running a central bank.

The website sets out the objectives:

Your job is to set monetary policy to achieve full employment and low price inflation. Your term will last four years (16 quarters). Keep unemployment close to its natural rate of 5 percent. Keep inflation near the Fed’s 2 percent inflation target. Pay attention to the headlines for information about the economy.

Here’s how I did:

ChairtheFedGame_160926
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 0.00 % 0.00 % 0 0.00 0 -0.1783 % 1,695.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1783 % 3,098.0
Floater 4.88 % 4.62 % 87,257 16.20 4 -0.1783 % 1,785.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,880.8
SplitShare 5.05 % 4.67 % 80,091 2.16 5 0.0000 % 3,440.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,684.3
Perpetual-Premium 5.50 % 4.65 % 62,963 1.95 12 0.0098 % 2,686.7
Perpetual-Discount 5.13 % 5.13 % 87,257 15.00 26 0.0934 % 2,908.9
FixedReset 4.98 % 4.27 % 148,525 6.98 92 0.1106 % 2,045.3
Deemed-Retractible 5.02 % 4.77 % 112,122 1.21 32 0.0789 % 2,799.3
FloatingReset 2.86 % 4.47 % 32,969 4.97 12 -0.1054 % 2,191.3
Performance Highlights
Issue Index Change Notes
TRP.PR.G FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 20.26
Evaluated at bid price : 20.26
Bid-YTW : 4.48 %
BAM.PR.T FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 15.38
Evaluated at bid price : 15.38
Bid-YTW : 4.81 %
TRP.PR.C FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 13.38
Evaluated at bid price : 13.38
Bid-YTW : 4.08 %
NA.PR.Q FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.22 %
BMO.PR.Q FixedReset 1.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.15
Bid-YTW : 6.16 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.H FixedReset 233,115 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 4.47 %
MFC.PR.G FixedReset 65,768 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.76
Bid-YTW : 6.87 %
CM.PR.Q FixedReset 43,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 20.02
Evaluated at bid price : 20.02
Bid-YTW : 4.27 %
TRP.PR.E FixedReset 40,516 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 18.73
Evaluated at bid price : 18.73
Bid-YTW : 4.27 %
TRP.PR.J FixedReset 37,100 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.59
Bid-YTW : 4.11 %
BNS.PR.O Deemed-Retractible 36,560 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-26
Maturity Price : 25.25
Evaluated at bid price : 25.61
Bid-YTW : -1.26 %
There were 29 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IFC.PR.A FixedReset Quote: 15.34 – 15.63
Spot Rate : 0.2900
Average : 0.1960

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.34
Bid-YTW : 9.55 %

RY.PR.M FixedReset Quote: 20.00 – 20.26
Spot Rate : 0.2600
Average : 0.1800

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.15 %

HSE.PR.A FixedReset Quote: 11.88 – 12.14
Spot Rate : 0.2600
Average : 0.1946

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 11.88
Evaluated at bid price : 11.88
Bid-YTW : 4.94 %

POW.PR.G Perpetual-Premium Quote: 25.64 – 25.84
Spot Rate : 0.2000
Average : 0.1348

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-15
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 4.93 %

VNR.PR.A FixedReset Quote: 18.36 – 18.70
Spot Rate : 0.3400
Average : 0.2801

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 18.36
Evaluated at bid price : 18.36
Bid-YTW : 4.79 %

HSE.PR.C FixedReset Quote: 19.15 – 19.42
Spot Rate : 0.2700
Average : 0.2122

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-26
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 5.07 %

Market Action

September 23, 2016

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 -0.4968 % 1,698.9
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4968 % 3,103.5
Floater 4.87 % 4.60 % 90,578 16.24 4 -0.4968 % 1,788.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0159 % 2,880.8
SplitShare 5.05 % 4.73 % 81,363 2.17 5 -0.0159 % 3,440.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0159 % 2,684.3
Perpetual-Premium 5.50 % 4.61 % 66,703 1.96 12 0.0098 % 2,686.5
Perpetual-Discount 5.13 % 5.14 % 87,017 15.01 26 0.0127 % 2,906.2
FixedReset 4.98 % 4.46 % 149,265 6.94 92 0.0150 % 2,043.1
Deemed-Retractible 5.03 % 4.91 % 112,929 4.66 32 -0.0038 % 2,797.1
FloatingReset 2.85 % 4.47 % 33,004 4.98 12 -0.4024 % 2,193.6
Performance Highlights
Issue Index Change Notes
TRP.PR.F FloatingReset -2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 13.71
Evaluated at bid price : 13.71
Bid-YTW : 4.47 %
TRP.PR.H FloatingReset -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 10.47
Evaluated at bid price : 10.47
Bid-YTW : 4.32 %
PWF.PR.T FixedReset -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 19.61
Evaluated at bid price : 19.61
Bid-YTW : 4.19 %
BMO.PR.A FloatingReset -1.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 4.89 %
BAM.PR.B Floater -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 10.37
Evaluated at bid price : 10.37
Bid-YTW : 4.56 %
BIP.PR.B FixedReset 1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.59
Bid-YTW : 4.89 %
VNR.PR.A FixedReset 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.94 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.H FixedReset 214,830 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 4.49 %
TD.PF.H FixedReset 213,511 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 4.55 %
NA.PR.W FixedReset 126,350 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 4.37 %
RY.PR.Z FixedReset 55,250 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.90
Evaluated at bid price : 18.90
Bid-YTW : 4.12 %
PWF.PR.T FixedReset 51,950 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 19.61
Evaluated at bid price : 19.61
Bid-YTW : 4.19 %
BAM.PF.D Perpetual-Discount 43,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 23.01
Evaluated at bid price : 23.36
Bid-YTW : 5.25 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
NA.PR.W FixedReset Quote: 18.20 – 18.48
Spot Rate : 0.2800
Average : 0.1765

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 4.37 %

BMO.PR.A FloatingReset Quote: 21.25 – 21.90
Spot Rate : 0.6500
Average : 0.5564

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 4.89 %

GWO.PR.M Deemed-Retractible Quote: 25.92 – 26.25
Spot Rate : 0.3300
Average : 0.2479

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-10-23
Maturity Price : 25.75
Evaluated at bid price : 25.92
Bid-YTW : -3.67 %

BAM.PF.H FixedReset Quote: 26.74 – 26.99
Spot Rate : 0.2500
Average : 0.1734

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.74
Bid-YTW : 3.24 %

W.PR.K FixedReset Quote: 25.69 – 26.07
Spot Rate : 0.3800
Average : 0.3048

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.69
Bid-YTW : 4.82 %

HSE.PR.G FixedReset Quote: 21.05 – 21.33
Spot Rate : 0.2800
Average : 0.2125

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-23
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 5.16 %

Issue Comments

BBD Downgraded to P-5(low) by S&P

S&P Global Ratings has announced:

  • •Bombardier Inc. has cut its 2016 delivery forecast for the C-Series due to jet engine delivery delays by Pratt & Whitney.
  • •In addition, the business and commercial jet portfolios continue to be pressured due to softer end markets, leading us to revise the business risk profile to weak from fair.
  • •As a result, we are lowering our long-term corporate credit and issue ratings on Bombardier to ‘B-‘ from ‘B’.
  • •We are lowering our global scale and Canada scale ratings on the company’s preferred stock to ‘CCC-‘ and ‘P-5(Low)’
  • •The stable outlook reflects our view that the company’s liquidity provides significant financial flexibility to cover cash flow deficits and any unexpected underperformance through 2017.


“The downgrade primarily reflects our view of the company’s increased sensitivity to protracted weakness in its end markets and future delays to its C-Series program,” said S&P Global Ratings credit analyst Aniki Saha-Yannopoulos.

The ratings on Bombardier reflect what we view as the company’s weak business risk profile and highly leveraged financial risk profile. Our ratings take into consideration the company’s competitive market position in the transportation and business aircraft segments, as well as Bombardier’s product diversity. These positives are offset, in part we believe, by the continued risk associated with Bombardier’s production ramp-up of the C-Series jet, high leverage, weakness in the business jet space, and declining cash flow from both the aerospace and transportation divisions.

The stable outlook reflects our view that even though the company faces multiple risks, it has ample liquidity resources to manage its operations.

The most recent news regarding Bombardier’s core competency is:

Canadian government officials should “make up their minds” on a financial aid request by struggling aircraft maker Bombardier Inc., Quebec Finance Minister Carlos Leitao says.

Quebec announced an aid package for the C Series program late last year, which helped stabilize the Montreal-based company and allowed it to secure sales for the jet, Mr. Leitao said at the Bloomberg Canadian Fixed Income Conference in New York. Quebec finalized the deal in June.

Bombardier also sought federal help late last year, though Prime Minister Justin Trudeau’s government has since sought corporate-governance concessions in exchange for any aid package. Bombardier and the federal government remain locked in a standoff over the matter. Mr. Leitao says federal funding would allow the company to start developing new products.

Philip Proulx, a spokesman for federal Innovation Minister Navdeep Bains, who is leading talks with Bombardier on behalf of Mr. Trudeau’s government, declined to comment directly on whether a decision on the aid request is imminent.

“We want to be part of the solution to help set the company up for long term success,” Mr. Proulx said by e-mail. “That is why we continue to be engaged with the company. For us, the priority is to ensure good quality jobs, R&D investments and head office remains in Canada.”

Affected issues are BBD.PR.B, BBD.PR.C and BBD.PR.D.

Market Action

September 22, 2016

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 0.5351 % 1,707.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5351 % 3,119.0
Floater 4.84 % 4.56 % 91,709 16.32 4 0.5351 % 1,797.5
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0238 % 2,881.3
SplitShare 5.05 % 4.69 % 81,472 2.17 5 -0.0238 % 3,440.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0238 % 2,684.7
Perpetual-Premium 5.50 % 4.59 % 63,232 1.06 12 0.0553 % 2,686.2
Perpetual-Discount 5.13 % 5.15 % 89,860 14.99 26 0.0285 % 2,905.9
FixedReset 4.98 % 4.43 % 146,346 6.94 92 -0.0723 % 2,042.8
Deemed-Retractible 5.03 % 4.50 % 111,455 3.20 32 0.0318 % 2,797.2
FloatingReset 2.84 % 4.37 % 33,451 4.99 12 -0.0481 % 2,202.4
Performance Highlights
Issue Index Change Notes
PWF.PR.T FixedReset -1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.12 %
PWF.PR.P FixedReset -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 13.15
Evaluated at bid price : 13.15
Bid-YTW : 4.48 %
BAM.PR.T FixedReset -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 15.47
Evaluated at bid price : 15.47
Bid-YTW : 5.02 %
VNR.PR.A FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 5.03 %
CM.PR.Q FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 20.08
Evaluated at bid price : 20.08
Bid-YTW : 4.47 %
BAM.PR.R FixedReset -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 15.61
Evaluated at bid price : 15.61
Bid-YTW : 4.87 %
TRP.PR.F FloatingReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 14.02
Evaluated at bid price : 14.02
Bid-YTW : 4.37 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.H FixedReset 1,021,288 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.48
Bid-YTW : 4.52 %
BNS.PR.H FixedReset 137,935 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.47
Bid-YTW : 4.50 %
RY.PR.Z FixedReset 130,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.86
Evaluated at bid price : 18.86
Bid-YTW : 4.13 %
FTS.PR.J Perpetual-Discount 103,295 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 23.43
Evaluated at bid price : 23.90
Bid-YTW : 4.99 %
CM.PR.P FixedReset 84,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.42
Evaluated at bid price : 18.42
Bid-YTW : 4.30 %
SLF.PR.A Deemed-Retractible 54,213 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.97
Bid-YTW : 5.39 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
VNR.PR.A FixedReset Quote: 18.20 – 18.63
Spot Rate : 0.4300
Average : 0.3181

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 5.03 %

BMO.PR.R FloatingReset Quote: 22.50 – 22.79
Spot Rate : 0.2900
Average : 0.1890

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 4.27 %

SLF.PR.G FixedReset Quote: 14.10 – 14.36
Spot Rate : 0.2600
Average : 0.1711

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.10
Bid-YTW : 10.07 %

MFC.PR.G FixedReset Quote: 19.65 – 19.91
Spot Rate : 0.2600
Average : 0.1838

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.65
Bid-YTW : 7.12 %

TRP.PR.D FixedReset Quote: 17.90 – 18.17
Spot Rate : 0.2700
Average : 0.1943

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 4.59 %

PWF.PR.T FixedReset Quote: 19.90 – 20.23
Spot Rate : 0.3300
Average : 0.2603

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-09-22
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.12 %

New Issues

New Issue: CPX FixedReset 6.00%+526M600

Capital Power Corporation has announced:

that it will issue 6,000,000 Cumulative Minimum Rate Reset Preference Shares, Series 7 (the “Series 7 Shares”) at a price of $25.00 per Series 7 Share (the “Offering”) for aggregate gross proceeds of $150 million on a bought deal basis with a syndicate of underwriters, co-led by TD Securities Inc. and CIBC Capital Markets. In addition, Capital Power has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase up to an additional 2,000,000 Series 7 Shares on the same terms, for additional gross proceeds of up to $50 million.

The Series 7 Shares will pay fixed cumulative dividends of $1.50 per share per annum, yielding 6.00% per annum, payable on the last business day of March, June, September and December of each year, as and when declared by the board of directors of Capital Power, for the initial period ending December 31, 2021. Based on an October 4, 2016 closing, the first quarterly dividend of $0.3616 per share is expected to be paid on December 30, 2016. The dividend rate will be reset on December 31, 2021 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 5.26%, provided that, in any event, such rate shall not be less than 6.00%. The Series 7 Shares are redeemable by Capital Power, at its option, on December 31, 2021 and every five years thereafter.

Holders of Series 7 Shares will have the right to convert all or any part of their shares into Cumulative Floating Rate Preference Shares, Series 8 (the “Series 8 Shares”), subject to certain conditions, on December 31, 2021 and every five years thereafter. Holders of Series 8 Shares will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus 5.26%, as and when declared by the board of directors of Capital Power.

Net proceeds of the offering will be used to reduce indebtedness under Capital Power’s credit facilities.

Standard & Poor’s, a division of the McGraw Hill Companies, Inc. has assigned a provisional rating of P-3 for the Series 7 Shares and DBRS Limited has assigned a preliminary rating of Pfd-3 (low) for the Series 7 Shares.

The Series 7 Shares will be issued pursuant to a prospectus supplement to Capital Power’s short form base shelf prospectus dated May 3, 2016. This prospectus supplement will be filed with securities regulatory authorities in Canada. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

I don’t get it, frankly. This issue looks horrifically expensive. Look at the Implied Volatility analysis, for instance:

impVol_CPX_160922
Click for Big

So look, there’s the new issue, way over on the right hand side with an Expected Future Current Yield of 6.00% – that’s the lowest of all the CPX outstanding FixedResets: CPX.PR.A, 6.18%; CPX.PR.C, 6.59%; CPX.PR.E, 6.57%.

So look, you can pick up over half a point in yield AND have lower call risk AND have increased leverage with respect to future increases in GOC-5 by buying CPX.PR.C or CPX.PR.E. These issues are even relatively liquid – relative to other junk issues – trading about $100,000-worth every day. Why wouldn’t you just buy on the secondary market?

All I can think of is:

  • Liquidity: You can put a million dollars to work with one ‘phone call. Doing this on the secondary market would require you to do some work, like a peon.
  • The Minimum Reset: I don’t understand how it could possibly be so valuable, but it takes two to make a market!