Press Clippings

Lowly preferred shares an intriguing bet for the brave investor

Rob Carrick was kind enough to quote me in his recent article Lowly preferred shares an intriguing bet for the brave investor:

For some ideas on finding value in the preferred share market, let’s check in with two money managers. One is James Hymas, president of Hymas Investment Management, and the other is Dustin Van Der Hout, a portfolio manager with Richardson GMP. Both suggest investors look to the hardest-hit part of the pref market, rate resets.

Mr. Hymas’s quick and easy option for capturing a rebound in rate resets is the BMO Laddered Preferred Share Index ETF (ZPR), which has fallen almost 43 per cent over the past three years on a cumulative basis and now yields a bit over 6 per cent.

Alternative choices are the iShares S&P/TSX Canadian Preferred Share Index ETF (CPD) and the PowerShares Canadian Preferred Share Index ETF (PPS), which track an index that is dominated by rate resets but also includes other preferred types. “These ETFs are a very good alternative for somebody who does not have enough time to do a lot of research,” Mr. Hymas said.

For investors seeking individual shares, Mr. Hymas highlighted three particular preferred share issues from insurers. Each traded in the $12 to $13 range at midweek, down from their issue price of $25, and each is down for similar reasons. They have either had their dividend reset recently at levels that are much below what they were when the shares were issued, or they will in the not-too-distance future.

Why buy those hard-hit shares from Manulife, or similar issues from Sun Life Financial and Great-West Lifeco?

Mr. Hymas said there’s potential for regulators to change the rules for insurance companies so that it’s less attractive for them to issue preferred shares. If that happens, these shares could be redeemed at $25, which is close to double their current share price. “I can give you chapter and verse on why I think this rule change is going to happen,” he said. “Basically, the market is essentially ignoring the possibility.”

Warning: Mr. Hymas said the price of these shares is heavily influenced by the five-year Canada bond yield. If it goes up, that’s helpful. If bond yields fall further, then there will be more downside for these already hard-hit shares.

Here’s what they came up with based on a mix of dividend yield and the potential to be redeemed at a future date at the issue price of $25.

Share Issue & Ticker Recent Price ($) Curr. Yield (%)* Next Reset Dividend Reset formula is the 5-yr Canada bond yield plus this premium (% points) Yield based on current share price and projected dividend reset using a recent 5-yr Canada bond yield (%)
James Hymas, president of Hymas Investment Management
Great-West Lifeco Series N GWO.PR.N-T 12.82 4.4 Dec. 2020 1.3 3.5
Manulife Financial Series 3 MFC.PR.F-T 12.22 8.4 Jun. 2016 1.41 3.9
Sun Life Financial Series 8R SLF.PR.G-T 13 4.4 Jun. 2020 1.41 3.7
equity_prefs
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Issue Comments

OSP.PR.A Downgraded to Pfd-3 by DBRS

DBRS has announced that it:

has today downgraded the Preferred Shares issued by Brompton Oil Split Corp. (the Company) to Pfd-3 from Pfd-3 (high). On February 24, 2015, the Company issued 2,800,000 Preferred Shares and 2,800,000 Class A Shares at an issue price of $10.00 per Preferred Share and $15.00 per Class A Share for a total of $70,000,000 in gross proceeds. Both classes of shares are scheduled to mature on March 31, 2020.

Net proceeds from the offering were used to invest in common shares of at least 15 large capitalization North American oil and gas issuers (the Portfolio) selected from the S&P 500 Index and the S&P/TSX Composite Index. In addition, the Company may also invest up to 25% of the Portfolio value in the common shares of issuers listed on the S&P 500 Index or the S&P/TSX Composite Index that satisfy its investment criteria, operating in energy subsectors including equipment, services, pipelines, transportation and infrastructure.

Dividends received on the Portfolio are used to pay a fixed cumulative quarterly distribution to holders of the Preferred Shares of $0.1250 per Preferred Share ($0.50 per annum or 5.0% per annum on the initial issue price of $10.00 per Preferred Share). Holders of the Capital Shares are expected to receive a regular monthly non-cumulative cash distribution of $0.10 per Class A Share ($1.20 per annum), subject to the asset coverage test which does not permit any distributions to holders of the Class A Shares if the net asset value (NAV) of the Company falls below $15.00.

As of February 5, 2016, the dividend coverage ratio is 1.36. The downside protection available to holders of the Preferred Shares is approximately 37%. Since the initial rating in February 2015, the oil and energy equity markets have experienced a decline in prices which is reflected in the Company’s NAV. The level of downside protection currently available to the Preferred Shares and the asset coverage test to permit distributions on the Capital Shares support the Pfd-3 rating on the Preferred Shares.

As of February 11, the NAVPU of OSP / OSP.PR.A was 15.08. The issue commenced trading 2015-2-24 after being announced 2015-1-7.

OSP.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Issue Comments

AZP Upgraded To P-5(high) by S&P

Amidst all the wreckage of the past … year, it’s nice to see a little ray of sunshine!

Standard & Poor’s has announced:

  • •U.S. power generator Atlantic Power Corp. (APC) has reduced its debt leverage substantially over the past 18 months.
  • •We are raising our corporate credit ratings on Atlantic Power Corp. (APC)
    and affiliate Atlantic Power Ltd. Partnership (APLP) to ‘B+’ from ‘B’. The outlook is stable.

  • •In addition, we are raising the issue ratings on the $600 million secured term loan facility ($473 million outstanding) and $210 million secured revolving credit facility to ‘BB-‘ from ‘B+’. The recovery rating on this debt remains ‘2’, indicating expectations of substantial (70% to 90%, at the higher end of the range) recovery in a payment default.
  • •At the same time, we raised our rating on the C$210 million 5.95% medium-term notes (MTN) due 2036 to ‘BB’ from ‘BB-‘. The recovery rating on this debt remains ‘1’, indicating expectations of very high (90% to 100%) in a default.
  • •The stable outlook reflects our expectation that the company will use excess cash flow to sweep down debt and its consolidated debt to EBITDA will decline to about 5.75x to 6.0x by year-end 2016.


About $835 million of rated debt is currently outstanding, consisting of about $473 million of the term loan B, $210 million of revolving credit facility and C$210 million (U.S.$151 million) of medium-term notes. There is about $108 million of nonrecourse project level debt and about $288 million of U.S and Canadian dollar denominated convertible unsecured subordinate debentures that we do not rate. The company’s capital structure also has C$225 million of perpetual preferred stock.

The company has sold five non-APLP wind assets along with which about $250 million of nonrecourse project debt was also transferred. The company has also refocused its strategy on maintaining and optimizing its fleet instead of growing its portfolio. As a result of these changes, we believe the company is structured more as a corporate issuer than a developer and now assess Atlantic Power under our corporate rating methodology.

“Our ‘B+’ corporate credit rating on APC reflects our assessment of its business risk profile as fair and a financial risk profile as highly leveraged,” said Standard & Poor’s credit analyst Aneesh Prabhu. Our business risk assessment reflects the company’s reliance on distributions from its underlying portfolio of power generation projects, limited scale, its near-term focus on operational improvements in its existing assets rather than growth projects to increase cash flow, and a portfolio that is mostly contracted in the medium term but has recontracting risk emerging from 2020. The financial risk profile reflects high consolidated debt per kilowatt and credit measures commensurate with an assessment of a highly leveraged financial risk profile.

A deterioration in financials because of operating cost increases in the short term, or an inability to recontract expiring PPAs over the next year, could pressure financial measures. We would lower the ratings if consolidated debt to EBITDA deteriorates above 6.5x with no expectation of an immediate decline.

A ratings upgrade will result if cash flow sweeps result in adjusted FFO to debt improving above 12% on a sustained basis, or if consolidated debt to EBITDA declines below 5.25x. We could see this happen by year-end 2017 if cash flow sweeps occur as expected in our base-case.

Affected issues are AZP.PR.A, AZP.PR.B and AZP.PR.C, which are issued by Atlantic Power Preferred Equity Ltd., a wholly owned subsidiary.

Market Action

February 11, 2016

Assiduous Reader prefobsessed sent me a link to a Barry Critchley piece titled Behind RioCan’s decision to redeem its first-of-its-kind rate reset preferreds. I have updated the post that reported REI.PR.A to be Redeemed.

Meanwhile, Sweden’s gone more deeply negative:

Sweden’s central bank lowered its key interest rate even further below zero and said it’s prepared to use its full toolbox of measures as it battles to revive inflation and keep the krona from appreciating.

The repo rate was reduced to minus 0.50 percent from minus 0.35 percent, the Stockholm-based bank said. A cut was predicted by 10 of the 18 analysts surveyed by Bloomberg, though only three had anticipated this magnitude. The bank said government bond purchases will continue as planned for the first six months of 2016 and that it “will reinvest maturities and coupons from the government bond portfolio until further notice.”

“Uncertainty regarding global developments is still high, with low inflation and several central banks pursuing more expansionary monetary policy,” the Riksbank said. “Swedish monetary policy must relate to this. Otherwise the krona exchange rate is at risk of strengthening at a faster rate than in the forecast, which would make it harder to push up inflation and stabilize it around 2 percent.”

There are fears that this policy will inflate a housing bubble:

HSBC economist James Pomeroy wrote in a recent note:

We’ve long argued that the Swedish economy does not warrant further stimulus, but that the Riksbank would continue to ease given the low inflation rate. The economy is the fastest growing in the developed world (3.9% y-o-y in Q3) and house prices continue to accelerate and are now up 18% y-o-y across the country. Under normal circumstances, one might expect the Riksbank to be hiking rates but – given ultra-loose ECB policy – rates are being kept much lower.

As positive as the story appears for early 2016, there are plenty of reasons to be concerned about the medium term. The pace of acceleration in the housing market points to a bubble.

… The housing market continues to pose significant risks for the Swedish economy. With prices now up 18% on the year and no sign of macroprudential measures coming into force, we worry that this is not sustainable. Should the housing market roll over at any point in 2016 (or 2017) the impact on the economy would be severe. Estimates from the National Institute of Economic Research suggest that a 20% fall in house prices would lead to a recession-like impact on consumption and unemployment, with a smaller fall still having severe economic consequences.

swedishHousing
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And Michael Babad of the Globe supplies another chart:

swedendebt
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The Swedish action has been fingered as one of the triggers for today’s debacle:

The latest culprits picked out of the police lineup: The Swedish central bank’s bigger bet on negative interest rates; Fed chief Janet Yellen’s testimony before largely clueless U.S. legislators; and bearish hedge-fund manager Kyle Bass’s assertion that Chinese banks are facing huge losses that dwarf those of the U.S. financial system in the 2008 crash.

All are fanning fears that another U.S. and global recession looms, that central banks have run out of ammunition to fight it the way they did during the previous financial crisis and that more than a few of the world’s major banks aren’t in good enough shape to withstand the ensuing fallout.

… and what a debacle it was!

Fearful investors have turned to the health of the global banking system as the latest fixation in a market frenzy that continues to escalate.

Bank equities were trounced worldwide on Thursday, leading the way for an all-consuming stock market selloff that spared no major benchmark.

An overwhelming demand for safety dominated investor attitudes, as the ability of central banks to fend off economic threats seems increasingly doubtful.

While crude oil has been at the crux of the recent outburst of market volatility, bank valuations have now begun to reflect a grim assessment of the global economy.

Withering risk appetite gripped equities on Thursday, as major Asian and European indexes fell by between 2 per cent and 6 per cent, adding to global equity losses in excess of $15-trillion (U.S.) this year.

In North America, the S&P 500 index dipped to a new two-year low before a late afternoon rally pared back the losses to end the day down by 1.2 per cent. The Nasdaq composite index meanwhile flirted with a 20-per-cent decline conventionally signifying bear market territory. That’s where the S&P/TSX composite index already resides, with Thursday’s 100-point drop adding to a total decline of 23 per cent since September, 2014.

Overnight markets, at time of writing, seem to be getting worse:

The global equity bear market deepened in Asian trading, with Japanese stocks headed for their worst week since 2008 amid anxiety over central banks’ ability to revive the world economy. U.S. crude rose from a 12-year low.

The Topix index slumped 4.1 percent in Tokyo as traders returned from holiday, pushing the regional Asian benchmark toward its steepest weekly drop since gyrations in Chinese assets at the start of the year. The index pared some of its losses as the yen weakened for the first time this week. U.S. index futures indicated gains after losses there helped the MSCI All-Country Index cap a 20 percent slide from its May record.

…and in Korea:

Trading in South Korea’s Kosdaq exchange for smaller stocks was temporarily halted after the benchmark gauge plunged more than 8 percent on concern valuations were excessive relative to earnings prospects.

Trading was suspended for 20 minutes at 11:55 a.m. in Seoul after the measure dropped 8.2 percent. The index pared declines to 6.1 percent at the close. Celltrion Inc. was the biggest drag on the small-cap measure after the stock almost tripled in the past 12 months. The Kospi gauge of larger companies closed at its lowest level since August.

The Kosdaq index of more than 1,100 companies jumped 26 percent to outperform the large-cap gauge last year as investors piled into biotech shares and other smaller companies in search of earnings growth as smokestack industries stagnated. Celltrion, which developed an arthritis medicine, trades at 42 times projected 12 month profits, four times the Kospi’s 10.5 times.

And there are, as I always like to point out … unintended consequences:

It seemed like a good idea at the time: Cut interest rates below zero to revive growth.

But as policy makers from Tokyo to Stockholm embrace the notion, investors are close to panic mode. Far from buoying financial markets this year, negative rates have helped to put global stocks on the brink of a bear market, sent the cost of protection against corporate defaults soaring and driven investors to havens such as U.S. Treasury bonds and gold.

Fueling the turmoil is fear that negative rates will slam the world’s banks. In theory, negative rates could be the panacea to cure sluggish global growth: by charging lenders fees for parking money at central banks, policy makers hope banks will use that cash to make loans, jump-starting their economies. In practice, investors worry it may squeeze bank profits and rattle money markets.

“We’re here in an environment where central banks have to learn one message, and that is that negative interest rates are not desirable and they are not workable,” Hans Redeker, head of global foreign-exchange strategy at Morgan Stanley in London, said in a Bloomberg Television interview. “When you cut into negative interest rates you have to think about the profitability of the banking sector.”

About a quarter of the world economy is now in negative-rate territory with more than $7 trillion of government debt offering yields less than zero.

Last October, BIS published a working paper by Claudio Borio, Leonardo Gambacorta and Boris Hofmann titled The influence of monetary policy on bank profitability:

This paper investigates how monetary policy affects bank profitability. We use data for 109 large international banks headquartered in 14 major advanced economies for the period 1995–2012. Overall, we find a positive relationship between the level of short-term rates and the slope of the yield curve (the “interest rate structure”, for short), on the one hand, and bank profitability – return on assets – on the other. This suggests that the positive impact of the interest rate structure on net interest income dominates the negative one on loan loss provisions and on non-interest income. We also find that the effect is stronger when the interest rate level is lower and the slope less steep, ie that non-linearities are present. All this suggests that, over time, unusually low interest rates and an unusually flat term structure erode bank profitability.

Abstracting from macroeconomic effects, our findings help shed light on the impact of monetary policy on bank profitability after the crisis. Taking our results at face value, we find that the impact, on balance, was positive in the first two years post-crisis (2009–10) but turned negative in the following four years (2011–14). In the first two years, ROA was boosted by an estimated cumulative 0.3 percentage points: the negative effect on bank profitability linked to the decrease in the short-term rate was more than compensated for by the positive one deriving from the increase in the yield curve slope. In contrast, in the following four years, the further decrease in short-term rates and flattening of the yield curve cut ROA by an estimated cumulative 0.6 percentage points. With an average annual ROA of 0.64 over the sample period (1995-2012, Table 1), this means that over 2011–14, the average bank in the sample lost one year of profits as a consequence of low interest rates and compressed yield spreads.

Anybody who finds all this depressing should relax; read a nice book instead:

EndOfTheWorldNews
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It was a horrible day for the Canadian preferred share market, horribler for some sectors than for others, with PerpetualDiscounts off 25bp, FixedResets losing 234bp and DeemedRetractibles down 65bp. Floaters got destroyed. Volume was high.

For those keeping track of Floaters, the all-time low closing bid for BAM.PR.B was 5.90 on 2008-12-19; for BAM.PR.C it was 6.06 on 2008-12-22; and for BAM.PR.K, 6.40 ON 2018-12-18. So we’re still a way off from my positive comments during the Credit Crunch. But some people, I’m sure, are just discovering the answer to the question: Are Floating Prefs Money Market Vehicles?.

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

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

Here’s TRP:

impVol_TRP_160211
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 16.50 to be $1.34 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.80 cheap at its bid price of 17.11.

impVol_MFC_160211
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Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 15.95 to be 0.70 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 16.80 to be 1.33 cheap.

impVol_BAM_160211
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 12.15 to be $1.58 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 15.95 and appears to be $1.00 rich.

impVol_FTS_160211
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FTS.PR.K, with a spread of +205bp, and bid at 14.80, looks $0.49 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 14.25 and is $0.43 cheap.

pairs_FR_160211A
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.56%, with two outliers above 0.00%. There are four junk outliers above 0.00% and one below -2.00%.

pairs_FF_160211
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Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian 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 5.83 % 7.07 % 17,116 15.38 1 -9.2969 % 1,337.6
FixedFloater 7.92 % 6.91 % 24,790 15.28 1 -2.8340 % 2,511.3
Floater 5.33 % 5.46 % 72,273 14.68 4 -11.9821 % 1,439.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.0484 % 2,715.6
SplitShare 4.86 % 6.13 % 74,068 2.68 6 0.0484 % 3,177.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0484 % 2,479.5
Perpetual-Premium 5.87 % 5.85 % 85,307 13.97 6 0.3488 % 2,513.2
Perpetual-Discount 5.82 % 5.86 % 100,435 14.08 33 -0.2549 % 2,483.5
FixedReset 5.77 % 5.07 % 214,342 14.37 83 -2.3397 % 1,758.2
Deemed-Retractible 5.36 % 5.89 % 125,449 5.19 34 -0.6488 % 2,517.8
FloatingReset 3.08 % 4.83 % 50,523 5.53 16 0.3917 % 1,974.5
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -18.37 % Only half real, but many will consider half to be rather more than enough! The issue traded 9,000 shares in a range of 8.99-85 before closing at 8.00-9.01, 5×1. The day’s low had been 9.58 until five trades totalling 600 shares took the price down to the day’s low in the last ten minutes of the day. It’s a good thing there was a market maker on duty to maintain an orderly market, eh? I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 8.00
Evaluated at bid price : 8.00
Bid-YTW : 5.99 %

BAM.PR.B Floater -11.52 % Entirely real. The issue traded 10,420 shares in a range of 9.00-73 before closing at 8.76-00, 1×252. Not a typo! There were 25,200 shares being offered at 9.00 at the close!

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 8.76
Evaluated at bid price : 8.76
Bid-YTW : 5.46 %

BAM.PR.C Floater -10.66 % Totally real. The issue traded 8,990 shares in a range of 8.85-9.65 before closing at 8.72-85, 2×504. Yup … 504. There were 50,400 shares offered at 8.85 at the close.

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 8.72
Evaluated at bid price : 8.72
Bid-YTW : 5.49 %

BAM.PR.E Ratchet -9.30 % Not really all that real, since the issue traded 1,675 shares in a range of 12.40-80 before closing at 11.61-12.86 (!) 12×3. However, the bid probably dropped in sympathy with BAM’s floaters, above.

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 25.00
Evaluated at bid price : 11.61
Bid-YTW : 7.07 %

PWF.PR.A Floater -7.83 % Not real, since the issue traded 1,966 shares in a range of 10.19-86 before closing at 10.00-45, 1×1. As above, however, it’s reasonable to assume that bidders backed off when they saw what was happening to BAM’s floaters.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 10.00
Evaluated at bid price : 10.00
Bid-YTW : 4.73 %
BAM.PR.Z FixedReset -7.62 % Not real. The issue traded 7,410 shares in a range of 16.45-34 before closing at 15.89-16.90 (!) 8×5. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.89
Evaluated at bid price : 15.89
Bid-YTW : 5.79 %

SLF.PR.H FixedReset -6.73 % Not real. The issue traded 11,590 shares in a range of 13.75-10 before closing at 13.30-92, 5×6. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.30
Bid-YTW : 11.33 %

FTS.PR.M FixedReset -6.16 % Real enough, as the issue traded 13,016 shares in a range of 15.80-05 before closing at 15.85-25, 2×10.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.85
Evaluated at bid price : 15.85
Bid-YTW : 5.21 %
SLF.PR.I FixedReset -5.37 % Real enough, since the issue traded 3,392 shares in a range of 15.76-58 before closing at 15.85-29, 5×4.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.85
Bid-YTW : 9.66 %
BAM.PF.F FixedReset -4.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 5.31 %
MFC.PR.I FixedReset -4.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.85
Bid-YTW : 8.31 %
BAM.PF.A FixedReset -4.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.78
Evaluated at bid price : 16.78
Bid-YTW : 5.41 %
MFC.PR.J FixedReset -4.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.82
Bid-YTW : 8.87 %
IFC.PR.C FixedReset -4.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.30
Bid-YTW : 10.02 %
MFC.PR.G FixedReset -4.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.80
Bid-YTW : 9.08 %
MFC.PR.H FixedReset -4.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.65
Bid-YTW : 7.92 %
TRP.PR.A FixedReset -3.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 13.12
Evaluated at bid price : 13.12
Bid-YTW : 5.05 %
IFC.PR.A FixedReset -3.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.36
Bid-YTW : 11.26 %
TRP.PR.D FixedReset -3.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 5.02 %
TD.PF.D FixedReset -3.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 4.72 %
BAM.PF.G FixedReset -3.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 5.45 %
MFC.PR.L FixedReset -3.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.95
Bid-YTW : 9.43 %
TRP.PR.B FixedReset -3.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 9.55
Evaluated at bid price : 9.55
Bid-YTW : 4.99 %
HSE.PR.A FixedReset -3.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 8.01
Evaluated at bid price : 8.01
Bid-YTW : 7.13 %
IAG.PR.G FixedReset -3.49 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.15
Bid-YTW : 8.77 %
NA.PR.Q FixedReset -3.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.32
Bid-YTW : 5.34 %
MFC.PR.M FixedReset -3.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.61
Bid-YTW : 9.07 %
BAM.PF.B FixedReset -3.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.60
Evaluated at bid price : 15.60
Bid-YTW : 5.43 %
TD.PF.E FixedReset -3.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 4.59 %
BAM.PR.T FixedReset -3.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 12.70
Evaluated at bid price : 12.70
Bid-YTW : 5.87 %
HSE.PR.G FixedReset -3.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.06
Evaluated at bid price : 15.06
Bid-YTW : 7.09 %
NA.PR.S FixedReset -3.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 4.68 %
RY.PR.M FixedReset -2.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 4.67 %
MFC.PR.N FixedReset -2.94 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.50
Bid-YTW : 9.10 %
BNS.PR.Y FixedReset -2.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.75
Bid-YTW : 6.95 %
SLF.PR.G FixedReset -2.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.48
Bid-YTW : 11.19 %
NA.PR.W FixedReset -2.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.55
Evaluated at bid price : 15.55
Bid-YTW : 4.87 %
BAM.PR.G FixedFloater -2.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 25.00
Evaluated at bid price : 12.00
Bid-YTW : 6.91 %
FTS.PR.G FixedReset -2.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 14.25
Evaluated at bid price : 14.25
Bid-YTW : 5.06 %
MFC.PR.K FixedReset -2.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.50
Bid-YTW : 9.68 %
BNS.PR.Z FixedReset -2.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.40
Bid-YTW : 7.66 %
HSE.PR.E FixedReset -2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 14.80
Evaluated at bid price : 14.80
Bid-YTW : 7.22 %
FTS.PR.K FixedReset -2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 14.80
Evaluated at bid price : 14.80
Bid-YTW : 4.85 %
BMO.PR.T FixedReset -2.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.51
Evaluated at bid price : 16.51
Bid-YTW : 4.50 %
CU.PR.C FixedReset -2.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.30
Evaluated at bid price : 15.30
Bid-YTW : 4.88 %
FTS.PR.H FixedReset -2.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 11.70
Evaluated at bid price : 11.70
Bid-YTW : 4.54 %
TRP.PR.C FixedReset -2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 10.40
Evaluated at bid price : 10.40
Bid-YTW : 5.11 %
PWF.PR.T FixedReset -2.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 3.98 %
HSE.PR.C FixedReset -2.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 13.55
Evaluated at bid price : 13.55
Bid-YTW : 7.27 %
TRP.PR.E FixedReset -2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 4.80 %
BNS.PR.D FloatingReset -2.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.42
Bid-YTW : 7.87 %
TD.PF.A FixedReset -2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.70
Evaluated at bid price : 16.70
Bid-YTW : 4.49 %
CM.PR.Q FixedReset -2.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 18.13
Evaluated at bid price : 18.13
Bid-YTW : 4.69 %
SLF.PR.J FloatingReset -2.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.25
Bid-YTW : 12.12 %
TRP.PR.G FixedReset -2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 17.11
Evaluated at bid price : 17.11
Bid-YTW : 5.31 %
BAM.PR.X FixedReset -2.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 11.25
Evaluated at bid price : 11.25
Bid-YTW : 5.64 %
BIP.PR.A FixedReset -2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 17.27
Evaluated at bid price : 17.27
Bid-YTW : 6.16 %
BMO.PR.W FixedReset -2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.41
Evaluated at bid price : 16.41
Bid-YTW : 4.50 %
RY.PR.I FixedReset -2.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.30
Bid-YTW : 4.30 %
GWO.PR.H Deemed-Retractible -2.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.15
Bid-YTW : 7.35 %
TD.PF.B FixedReset -2.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.61
Evaluated at bid price : 16.61
Bid-YTW : 4.50 %
CM.PR.O FixedReset -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.80
Evaluated at bid price : 16.80
Bid-YTW : 4.56 %
BMO.PR.Q FixedReset -1.92 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.85
Bid-YTW : 7.94 %
BNS.PR.Q FixedReset -1.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.02
Bid-YTW : 4.45 %
BNS.PR.P FixedReset -1.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.55
Bid-YTW : 4.01 %
BMO.PR.R FloatingReset -1.83 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.40
Bid-YTW : 4.83 %
FTS.PR.I FloatingReset -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 9.55
Evaluated at bid price : 9.55
Bid-YTW : 5.00 %
RY.PR.H FixedReset -1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.90
Evaluated at bid price : 16.90
Bid-YTW : 4.42 %
RY.PR.J FixedReset -1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 17.85
Evaluated at bid price : 17.85
Bid-YTW : 4.68 %
CM.PR.P FixedReset -1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 4.63 %
GWO.PR.Q Deemed-Retractible -1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.31
Bid-YTW : 6.91 %
RY.PR.Z FixedReset -1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.92
Evaluated at bid price : 16.92
Bid-YTW : 4.36 %
PWF.PR.P FixedReset -1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 11.51
Evaluated at bid price : 11.51
Bid-YTW : 4.74 %
SLF.PR.E Deemed-Retractible -1.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.98
Bid-YTW : 7.77 %
BMO.PR.M FixedReset -1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.25
Bid-YTW : 4.02 %
BAM.PR.R FixedReset -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 12.15
Evaluated at bid price : 12.15
Bid-YTW : 5.98 %
SLF.PR.D Deemed-Retractible -1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.78
Bid-YTW : 7.86 %
BMO.PR.S FixedReset -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 4.50 %
TD.PR.T FloatingReset -1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 4.69 %
MFC.PR.F FixedReset -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.60
Bid-YTW : 12.07 %
GWO.PR.I Deemed-Retractible -1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.05
Bid-YTW : 7.72 %
BMO.PR.Y FixedReset -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 18.60
Evaluated at bid price : 18.60
Bid-YTW : 4.53 %
SLF.PR.C Deemed-Retractible -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.04
Bid-YTW : 7.67 %
TD.PR.Y FixedReset -1.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.55
Bid-YTW : 3.98 %
SLF.PR.A Deemed-Retractible -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 7.17 %
ELF.PR.H Perpetual-Discount -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 22.28
Evaluated at bid price : 22.57
Bid-YTW : 6.15 %
CCS.PR.C Deemed-Retractible -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.11
Bid-YTW : 7.55 %
TD.PF.C FixedReset -1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.60
Evaluated at bid price : 16.60
Bid-YTW : 4.50 %
RY.PR.L FixedReset -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.51
Bid-YTW : 4.11 %
GWO.PR.R Deemed-Retractible -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.00
Bid-YTW : 7.40 %
BAM.PR.N Perpetual-Discount -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 19.27
Evaluated at bid price : 19.27
Bid-YTW : 6.26 %
BNS.PR.N Deemed-Retractible -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 5.43 %
SLF.PR.B Deemed-Retractible -1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.40
Bid-YTW : 7.12 %
CIU.PR.C FixedReset -1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 9.90
Evaluated at bid price : 9.90
Bid-YTW : 4.75 %
PWF.PR.O Perpetual-Premium 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 24.40
Evaluated at bid price : 24.91
Bid-YTW : 5.85 %
PWF.PR.H Perpetual-Premium 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 24.57
Evaluated at bid price : 24.82
Bid-YTW : 5.83 %
GWO.PR.N FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.32
Bid-YTW : 11.24 %
RY.PR.W Perpetual-Discount 1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 22.66
Evaluated at bid price : 22.90
Bid-YTW : 5.36 %
BAM.PF.E FixedReset 2.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.95
Evaluated at bid price : 15.95
Bid-YTW : 5.38 %
PWF.PR.Q FloatingReset 32.39 % Just a pullback from yesterday‘s nonsense.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 10.75
Evaluated at bid price : 10.75
Bid-YTW : 4.76 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.X FixedReset 167,480 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 23.08
Evaluated at bid price : 24.81
Bid-YTW : 5.47 %
RY.PR.Q FixedReset 167,128 Scotia crossed blocks of 20,000 and 91,500, both at 25.42.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 23.26
Evaluated at bid price : 25.35
Bid-YTW : 5.07 %
TD.PF.G FixedReset 94,653 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 23.26
Evaluated at bid price : 25.35
Bid-YTW : 5.13 %
POW.PR.C Perpetual-Premium 78,100 TD crossed 67,800 at 24.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 24.50
Evaluated at bid price : 24.75
Bid-YTW : 5.92 %
BMO.PR.R FloatingReset 61,900 Scotia crossed blocks of 20,000 and 40,000, both at 21.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.40
Bid-YTW : 4.83 %
BNS.PR.E FixedReset 50,782 Scotia crossed 29,000 at 25.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 23.24
Evaluated at bid price : 25.27
Bid-YTW : 5.07 %
There were 47 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.E Ratchet Quote: 11.61 – 12.86
Spot Rate : 1.2500
Average : 0.6887

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 25.00
Evaluated at bid price : 11.61
Bid-YTW : 7.07 %

BAM.PR.K Floater Quote: 8.00 – 9.01
Spot Rate : 1.0100
Average : 0.6016

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 8.00
Evaluated at bid price : 8.00
Bid-YTW : 5.99 %

BAM.PF.G FixedReset Quote: 16.95 – 18.00
Spot Rate : 1.0500
Average : 0.6512

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 5.45 %

RY.PR.K FloatingReset Quote: 22.00 – 22.83
Spot Rate : 0.8300
Average : 0.5400

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.00
Bid-YTW : 4.62 %

BAM.PR.Z FixedReset Quote: 15.89 – 16.90
Spot Rate : 1.0100
Average : 0.7364

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 15.89
Evaluated at bid price : 15.89
Bid-YTW : 5.79 %

FTS.PR.K FixedReset Quote: 14.80 – 15.50
Spot Rate : 0.7000
Average : 0.4491

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 14.80
Evaluated at bid price : 14.80
Bid-YTW : 4.85 %

Issue Comments

BEP.PR.E Listed

BEP.PR.E, which has resulted from a 41% conversion from BRF.PR.E commenced trading today.

“Trading” is perhaps a misnomer, because not a single share changed hands; fortunately, the well compensated and strictly supervised market maker stepped up to the plate and the issue closed 16.00-21.00, 9×2, a mere $5 spread.

BEP.PR.E will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

BEP.PR.E Perpetual-Discount YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-11
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 8.86 %
Publications

Implied Volatility For FixedResets: 2016 Edition

The theory of Implied Volatility for FixedResets was published in the 2013 edition of PrefLetter and made public last year.

It has now been updated with further explanations, examples and discussion and the 2016 edition may be downloaded by clicking here.

The calculator (an Excel Spreadsheet) has been publicly available for some time, linked on the right-hand navigation panel under the heading “Calculators”.

Many readers will wish to read the companion essay Implied Volatility for Straight Perpetuals as it is conceptually similar with fewer parameters.

Market Action

February 10, 2016

Treasuries continued to climb today:

Treasury 10-year notes gained, pushing yields near a one-year low, as Federal Reserve Chair Janet Yellen stuck to her call for gradual interest-rate increases.

Government bonds are surging this year as turmoil in equity and commodity markets boosts demand for fixed-income assets amid concern that global growth is slowing. Declining inflation expectations have supported longer-dated Treasuries, with the gap between yields on two-year notes and 10-year securities falling to the lowest in more than eight years. An auction of 10-year notes drew the lowest yield since 2012.

Yellen emphasized the Fed’s intent to hike rates; the schedule is up in the air:

In presenting the Fed’s semi-annual economic report to Congress, Yellen said the turbulence had “significantly” tightened financial conditions by pushing down stock prices, pushing up the dollar and raising some borrowing costs.

“These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market,” she told the House Financial Services Committee.

Yellen though made clear that the policy-setting Federal Open Market Committee remains committed to gradually raising rates, after increasing them in December for the first time in nine years.

“I do not expect the FOMC is going to be soon in a situation where it’s necessary to cut rates,” she added.

… and she suggested laws need to be clarified to allow for negative rates:

The Federal Reserve has not yet determined whether it would be able to legally implement negative interest rates in the U.S., Chair Janet Yellen said.

“I would say that remains a question that we still would need to investigate more thoroughly,” Yellen said Wednesday in response to questions from the House Financial Services Committee in Washington. “I am not aware of anything that would prevent us from doing it, but I’m saying we have not fully investigated the legal issues — that still needs to be done.”

A 2010 staff memo posted on the central bank’s website late last month cast doubt on whether the law that authorized the Fed to pay interest on excess reserves, or IOER, also would grant it the authority to charge interest.

DBRS put Algonquin Power & Utilities Corp. on Review-Developing; I have updated the post regarding S&P’s negative outlook.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 16bp, FixedResets off 79bp and DeemedRetractibles up 38bp. The Performance Highlights table highlights very poor performance from the FTS issues, presumably as a result of worries regarding their credit quality. Volume was slightly below average.

PerpetualDiscounts now yield 5.85%, equivalent to 7.60% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.1% (maybe a little more) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 350bp, a significant increase from the 335bp reported February 3.

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

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

Here’s TRP:

impVol_TRP_160210
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 16.90 to be $1.28 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.87 cheap at its bid price of 17.50.

impVol_MFC_160210
Click for Big

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 16.55 to be 0.69 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 17.56 to be 1.18 cheap.

impVol_BAM_160210
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 12.33 to be $1.77 cheap. BAM.PF.F, resetting at +286bp on 2019-9-30 is bid at 18.10 and appears to be $1.16 rich.

impVol_FTS_160210
Click for Big

FTS.PR.K, with a spread of +205bp, and bid at 15.21, looks $0.34 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 14.65 and is $0.61 cheap.

pairs_FR_160210
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.01%, with one outlier below -2.00% and one above 0.00%. Note that the range of the y-axis has changed. There are two junk outliers above 0.00%.

pairs_FF_160210
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian 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 5.29 % 6.43 % 17,068 16.14 1 0.0000 % 1,474.7
FixedFloater 7.69 % 6.72 % 24,685 15.52 1 0.0000 % 2,584.5
Floater 4.69 % 4.83 % 72,175 15.77 4 0.4736 % 1,635.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.1177 % 2,714.3
SplitShare 4.87 % 6.18 % 76,727 2.69 6 0.1177 % 3,176.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1177 % 2,478.3
Perpetual-Premium 5.89 % 5.90 % 85,981 13.96 6 -0.2742 % 2,504.5
Perpetual-Discount 5.80 % 5.85 % 98,174 14.06 33 0.1618 % 2,489.9
FixedReset 5.64 % 4.92 % 215,194 14.51 83 -0.7949 % 1,800.3
Deemed-Retractible 5.33 % 5.82 % 126,305 6.90 34 0.3756 % 2,534.2
FloatingReset 3.09 % 4.86 % 49,092 5.54 16 -1.3974 % 1,966.8
Performance Highlights
Issue Index Change Notes
PWF.PR.Q FloatingReset -24.47 % Not real; there was no trading today. Not a single share. In fact, the issue hasn’t traded since February 5, so maybe the market maker took the day off. But I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers.

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 8.12
Evaluated at bid price : 8.12
Bid-YTW : 6.31 %

BAM.PF.E FixedReset -6.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 5.54 %
FTS.PR.G FixedReset -5.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 14.65
Evaluated at bid price : 14.65
Bid-YTW : 4.92 %
FTS.PR.M FixedReset -4.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 16.89
Evaluated at bid price : 16.89
Bid-YTW : 4.87 %
FTS.PR.K FixedReset -4.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 15.21
Evaluated at bid price : 15.21
Bid-YTW : 4.71 %
TRP.PR.C FixedReset -4.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 10.66
Evaluated at bid price : 10.66
Bid-YTW : 4.98 %
TRP.PR.A FixedReset -3.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 13.66
Evaluated at bid price : 13.66
Bid-YTW : 4.84 %
TRP.PR.B FixedReset -3.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 9.90
Evaluated at bid price : 9.90
Bid-YTW : 4.80 %
TRP.PR.E FixedReset -3.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 16.90
Evaluated at bid price : 16.90
Bid-YTW : 4.68 %
CU.PR.C FixedReset -3.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 15.70
Evaluated at bid price : 15.70
Bid-YTW : 4.76 %
TRP.PR.G FixedReset -3.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 5.19 %
TRP.PR.H FloatingReset -3.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 8.70
Evaluated at bid price : 8.70
Bid-YTW : 4.97 %
BAM.PR.T FixedReset -3.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 13.10
Evaluated at bid price : 13.10
Bid-YTW : 5.68 %
FTS.PR.H FixedReset -3.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 12.00
Evaluated at bid price : 12.00
Bid-YTW : 4.42 %
GWO.PR.N FixedReset -3.26 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.15
Bid-YTW : 11.42 %
FTS.PR.I FloatingReset -2.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 9.72
Evaluated at bid price : 9.72
Bid-YTW : 4.91 %
SLF.PR.I FixedReset -2.79 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.75
Bid-YTW : 8.87 %
TRP.PR.D FixedReset -2.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 16.11
Evaluated at bid price : 16.11
Bid-YTW : 4.82 %
BAM.PR.X FixedReset -2.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 11.50
Evaluated at bid price : 11.50
Bid-YTW : 5.51 %
HSE.PR.C FixedReset -2.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 13.88
Evaluated at bid price : 13.88
Bid-YTW : 7.09 %
MFC.PR.G FixedReset -2.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.56
Bid-YTW : 8.45 %
MFC.PR.F FixedReset -2.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.76
Bid-YTW : 11.87 %
MFC.PR.J FixedReset -2.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.59
Bid-YTW : 8.23 %
CIU.PR.C FixedReset -1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 10.00
Evaluated at bid price : 10.00
Bid-YTW : 4.70 %
BAM.PR.R FixedReset -1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 12.33
Evaluated at bid price : 12.33
Bid-YTW : 5.88 %
BAM.PF.B FixedReset -1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 16.10
Evaluated at bid price : 16.10
Bid-YTW : 5.25 %
VNR.PR.A FixedReset -1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 16.47
Evaluated at bid price : 16.47
Bid-YTW : 5.25 %
RY.PR.J FixedReset -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 4.60 %
BAM.PF.G FixedReset -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 5.24 %
BAM.PR.K Floater -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 9.80
Evaluated at bid price : 9.80
Bid-YTW : 4.88 %
PWF.PR.P FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 11.70
Evaluated at bid price : 11.70
Bid-YTW : 4.66 %
IFC.PR.C FixedReset -1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.00
Bid-YTW : 9.38 %
SLF.PR.G FixedReset -1.15 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.85
Bid-YTW : 10.79 %
W.PR.K FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 22.78
Evaluated at bid price : 24.00
Bid-YTW : 5.50 %
BMO.PR.S FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 17.19
Evaluated at bid price : 17.19
Bid-YTW : 4.43 %
CIU.PR.A Perpetual-Discount 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 19.40
Evaluated at bid price : 19.40
Bid-YTW : 5.95 %
BAM.PF.F FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 18.10
Evaluated at bid price : 18.10
Bid-YTW : 5.05 %
SLF.PR.B Deemed-Retractible 1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.62
Bid-YTW : 6.97 %
RY.PR.L FixedReset 1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 3.88 %
SLF.PR.A Deemed-Retractible 1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.52
Bid-YTW : 6.98 %
FTS.PR.F Perpetual-Discount 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 21.54
Evaluated at bid price : 21.80
Bid-YTW : 5.72 %
SLF.PR.C Deemed-Retractible 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.30
Bid-YTW : 7.48 %
GWO.PR.R Deemed-Retractible 1.63 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.24
Bid-YTW : 7.23 %
FTS.PR.J Perpetual-Discount 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 5.75 %
GWO.PR.Q Deemed-Retractible 1.89 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.68
Bid-YTW : 6.67 %
BMO.PR.T FixedReset 2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 16.95
Evaluated at bid price : 16.95
Bid-YTW : 4.38 %
TD.PF.A FixedReset 2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 4.38 %
GWO.PR.H Deemed-Retractible 2.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.60
Bid-YTW : 7.04 %
MFC.PR.K FixedReset 2.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.93
Bid-YTW : 9.28 %
PWF.PR.A Floater 3.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 10.85
Evaluated at bid price : 10.85
Bid-YTW : 4.36 %
Volume Highlights
Issue Index Shares
Traded
Notes
HSE.PR.A FixedReset 270,860 RBC crossed 256,900 at 8.25. Nice ticket! At just under one-third of par value!
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 8.30
Evaluated at bid price : 8.30
Bid-YTW : 6.87 %
FTS.PR.M FixedReset 146,598 Scotia crossed 20,000 at 17.56 and 111,000 at 17.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 16.89
Evaluated at bid price : 16.89
Bid-YTW : 4.87 %
BMO.PR.Z Perpetual-Discount 106,708 Nesbitt crossed 50,000 at 22.45; Scotia crossed 47,700 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 22.09
Evaluated at bid price : 22.41
Bid-YTW : 5.58 %
NA.PR.X FixedReset 102,491 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 23.10
Evaluated at bid price : 24.88
Bid-YTW : 5.45 %
BMO.PR.Q FixedReset 101,900 Scotia crossed 91,300 at 18.45.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.20
Bid-YTW : 7.58 %
BNS.PR.E FixedReset 60,415 TD crossed 23,000 at 25.48; RBC crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 23.28
Evaluated at bid price : 25.43
Bid-YTW : 5.03 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.Q FloatingReset Quote: 8.12 – 11.75
Spot Rate : 3.6300
Average : 2.7545

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 8.12
Evaluated at bid price : 8.12
Bid-YTW : 6.31 %

BAM.PF.E FixedReset Quote: 15.50 – 16.67
Spot Rate : 1.1700
Average : 0.7248

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 5.54 %

TRP.PR.G FixedReset Quote: 17.50 – 18.18
Spot Rate : 0.6800
Average : 0.5011

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 5.19 %

RY.PR.P Perpetual-Discount Quote: 24.25 – 24.74
Spot Rate : 0.4900
Average : 0.3127

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 23.90
Evaluated at bid price : 24.25
Bid-YTW : 5.42 %

PWF.PR.E Perpetual-Discount Quote: 23.33 – 23.89
Spot Rate : 0.5600
Average : 0.3847

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 23.07
Evaluated at bid price : 23.33
Bid-YTW : 5.94 %

RY.PR.W Perpetual-Discount Quote: 22.50 – 22.98
Spot Rate : 0.4800
Average : 0.3272

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-10
Maturity Price : 22.22
Evaluated at bid price : 22.50
Bid-YTW : 5.45 %

Market Action

February 9, 2016

So it was another crummy day for equities:

Canadian bank stocks were down more than 3.5 per cent during the day, marking the biggest decline for the group since August, 2009, when stock markets were emerging fitfully from the global financial crisis.

Stocks recovered some lost ground later in the day, but over all, Canadian bank stocks have tumbled more than 7 per cent this year.

While that is relatively mild next to the double-digit declines among U.S. and European bank stocks, Tuesday’s downturn suggests investors are starting to lump the big banks together with their global peers.

The backdrop to the day’s market turbulence certainly pointed to indiscriminate alarm among investors. European stocks fell 1.8 per cent and Japanese stocks fell 5.4 per cent. The Toronto Stock Exchange tumbled 2 per cent.

And the Canadian short-term yield curve inverted:

The Canadian yield curve was briefly inverted out to five years on Tuesday before recovering to roughly flat levels. This is bad news for domestic investors. Just how bad things will get depends on how much faith remains in central bank monetary policy and the extent to which “it’s different this time.”

Supported by Federal Reserve research studies, inverted yield curves are a widely accepted, long-standing indicator of economic recessions. In Canada, the last time the yield curve was inverted out to five years (the five-year Government of Canada bond yielded less than the three-month T-bill yield) was in January, 2015, just as the domestic technical recession began.

… and oil’s in the tank:

Crude tumbled the most in five months in London as price volatility climbed to a seven-year high and Goldman Sachs Group Inc. warned of wider swings to come.

Brent futures fell 7.8 percent as global equities neared a bear market. Volatility is set to “spike” as prices seek an equilibrium, which could drag oil below $20 a barrel, Goldman Sachs said. The CBOE Crude Oil Volatility Index, which measures expectations of price swings, rose as high as 73.52, almost the highest since 2009. The world oil surplus will be bigger in the first half of this year than previously estimated, according to the International Energy Agency.

… and overnight markets are grim:

Japanese stocks extended losses and Singaporean shares tumbled following a two-day break, as persistent concern over market volatility helped the yen solidify its ascent. Oil climbed back above $28 a barrel before an update on U.S. stockpiles.

The Topix index headed for the biggest two-day drop since the aftermath of the March 2011 earthquake in Tokyo as a gauge of Japanese equity volatility soared. The Straits Times Index in Singapore sank the most in three weeks while the yen strengthened a third day and gold resumed its advance. U.S. index futures reversed some early gains as Vermont Senator Bernie Sanders defeated Hillary Clinton in the New Hampshire Democratic Primary, while Donald Trump prevailed over a crowded Republican field.

But cheer up! The regulators are making investing safer!

New proposals from the U.S. securities watchdog aimed at reducing risks in exchange-traded funds (ETFs) may end up being the best thing that ever happened to rival exchange-traded notes (ETNs).

ETFs holding some $225 billion worth of assets are likely to violate the new rules suggested by the Securities and Exchange Commission (SEC), and could ironically spark a mass migration of investors into riskier products.

The first rule proposal attempts to address liquidity concerns by requiring that no more than 15 percent of a fund’s holdings take longer than seven days to liquidate without moving the market. This effectively means that “every broad corporate and high-yield bond fund and every broad emerging markets fund would be in trouble,” according to Nadig, who ran the numbers using his own trading estimates of how many ETFs would be in violation.

The other proposal attempts to address derivatives usage by limiting the leverage in 40 Act funds to 150 percent. That puts a majority of the two-times and three-times levered ETFs in violation. While the issuers may be able to find clever workarounds to get to the two- and three-times exposure while still remaining in compliance, it does put another $25 billion at risk of being in violation, leaving many investors searching to find other ways to get this exposure, such as ETNs.

Unlike ETFs, exchange-traded notes involve investors taking on significant credit risk to the ETN’s issuers.

ETNs are unsecured debt obligations regulated under the less-stringent Securities Act of 1933, and are not required to physically hold anything. As such, there is a risk that the issuer could default and investors would lose some or all of their investment. This is very different to the structure of a high-yield bond ETF or even a leveraged ETF, both of which physically hold the securities or derivatives involved. Shareholders have ownership of those assets even if the issuer goes out of business.

I continue to feel that the best option is to allow for staggered redemptions, so that ETF (and mutual fund) investors get a break on fees if they agree to a delayed redemption schedule; e.g., you have to give 20 trading day’s notice of redemption and your cash redemption value is based on the equally weighted mean average of the redemption prices on each of those days. Perhaps a third class of share would not be redeemable or exchangeable at all; at the core of an ETF would be a CEF.

But really, requiring that 85% of ETF holdings have a reasonable probability of being liquidated in seven days with ABSOLUTELY ZERO MARKET IMPACT is going way too far. But how else can the public be forced to buy government bonds at yields below the inflation rate?

It’s also going to force people into direct corporate bond holdings, as well. Just wait until Joe Lunchbucket finds that one of his five holdings has gone bust!

I really suggest that preferred share investors relax a little. Maybe watch a nice movie:

apocalypsenow
Click for Big

It was a horrible day for the Canadian preferred share market, with PerpetualDiscounts off 89bp, FixedResets down 150bp and DeemedRetractibles losing 151bp. The Performance highlights table is, of course, ridiculous; all four of the FTS FixedResets are down over 150bp on the day in the wake of the company’s ambitious takeover announcement. Volume was average.

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

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

Here’s TRP:

impVol_TRP_160209
Click for Big

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.55 to be $1.36 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.85 cheap at its bid price of 18.15.

impVol_MFC_160209
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Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 16.60 to be 0.68 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 18.00 to be 0.79 cheap.

impVol_BAM_160209
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 12.57 to be $1.77 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 16.66 and appears to be $1.05 rich.

impVol_FTS_160209
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FTS.PR.K, with a spread of +205bp, and bid at 15.90, looks $0.31 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 15.50 and is $0.50 cheap.

pairs_FR_160209
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.95%, with two outliers below -1.50%. There is one junk outlier below -1.50% and one above +0.50%.

pairs_FF_160209
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Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian 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 5.29 % 6.43 % 17,696 16.14 1 -0.6982 % 1,474.7
FixedFloater 7.69 % 6.72 % 25,764 15.52 1 -1.2000 % 2,584.5
Floater 4.71 % 4.81 % 74,939 15.81 4 -0.0249 % 1,627.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.2220 % 2,711.1
SplitShare 4.87 % 6.27 % 77,398 2.69 6 0.2220 % 3,172.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2220 % 2,475.3
Perpetual-Premium 5.88 % 5.88 % 83,066 13.94 6 -0.1603 % 2,511.4
Perpetual-Discount 5.81 % 5.85 % 99,218 14.07 33 -0.8904 % 2,485.8
FixedReset 5.59 % 4.78 % 215,725 14.59 83 -1.3007 % 1,814.7
Deemed-Retractible 5.35 % 5.55 % 127,752 5.20 34 -1.5051 % 2,524.7
FloatingReset 3.05 % 4.69 % 49,492 5.55 16 -0.9230 % 1,994.7
Performance Highlights
Issue Index Change Notes
PWF.PR.Q FloatingReset -6.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 10.75
Evaluated at bid price : 10.75
Bid-YTW : 4.76 %
BAM.PR.R FixedReset -4.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 12.57
Evaluated at bid price : 12.57
Bid-YTW : 5.77 %
BMO.PR.S FixedReset -4.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 4.48 %
TRP.PR.F FloatingReset -4.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 11.27
Evaluated at bid price : 11.27
Bid-YTW : 5.28 %
BAM.PR.X FixedReset -4.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 11.80
Evaluated at bid price : 11.80
Bid-YTW : 5.37 %
FTS.PR.J Perpetual-Discount -3.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 20.76
Evaluated at bid price : 20.76
Bid-YTW : 5.84 %
CM.PR.O FixedReset -3.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 4.50 %
HSE.PR.C FixedReset -3.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 14.23
Evaluated at bid price : 14.23
Bid-YTW : 6.90 %
BMO.PR.T FixedReset -3.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.61
Evaluated at bid price : 16.61
Bid-YTW : 4.47 %
MFC.PR.N FixedReset -3.51 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.03
Bid-YTW : 8.64 %
MFC.PR.K FixedReset -3.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.57
Bid-YTW : 9.60 %
CM.PR.P FixedReset -3.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 4.54 %
PWF.PR.T FixedReset -3.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 20.01
Evaluated at bid price : 20.01
Bid-YTW : 3.86 %
FTS.PR.F Perpetual-Discount -3.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 5.82 %
CU.PR.C FixedReset -3.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.30
Evaluated at bid price : 16.30
Bid-YTW : 4.58 %
GWO.PR.R Deemed-Retractible -3.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.90
Bid-YTW : 7.46 %
BNS.PR.F FloatingReset -3.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.83
Bid-YTW : 7.92 %
RY.PR.M FixedReset -3.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 4.53 %
TD.PF.A FixedReset -3.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.75
Evaluated at bid price : 16.75
Bid-YTW : 4.47 %
GWO.PR.H Deemed-Retractible -2.98 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.14
Bid-YTW : 7.35 %
SLF.PR.B Deemed-Retractible -2.95 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.36
Bid-YTW : 7.15 %
HSE.PR.E FixedReset -2.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 15.30
Evaluated at bid price : 15.30
Bid-YTW : 6.98 %
GWO.PR.Q Deemed-Retractible -2.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.26
Bid-YTW : 6.94 %
PWF.PR.A Floater -2.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 10.50
Evaluated at bid price : 10.50
Bid-YTW : 4.50 %
GWO.PR.L Deemed-Retractible -2.82 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 6.31 %
SLF.PR.C Deemed-Retractible -2.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.02
Bid-YTW : 7.68 %
FTS.PR.I FloatingReset -2.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 10.02
Evaluated at bid price : 10.02
Bid-YTW : 4.76 %
SLF.PR.D Deemed-Retractible -2.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.88
Bid-YTW : 7.78 %
SLF.PR.A Deemed-Retractible -2.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.24
Bid-YTW : 7.17 %
RY.PR.J FixedReset -2.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 4.54 %
BAM.PF.E FixedReset -2.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.66
Evaluated at bid price : 16.66
Bid-YTW : 5.14 %
MFC.PR.H FixedReset -2.61 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.43
Bid-YTW : 7.34 %
MFC.PR.B Deemed-Retractible -2.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.51
Bid-YTW : 7.59 %
BIP.PR.A FixedReset -2.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 6.02 %
NA.PR.W FixedReset -2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 15.95
Evaluated at bid price : 15.95
Bid-YTW : 4.74 %
BAM.PR.Z FixedReset -2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 5.33 %
HSE.PR.G FixedReset -2.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 15.62
Evaluated at bid price : 15.62
Bid-YTW : 6.83 %
TD.PF.B FixedReset -2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.86
Evaluated at bid price : 16.86
Bid-YTW : 4.43 %
MFC.PR.C Deemed-Retractible -2.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.15
Bid-YTW : 7.67 %
NA.PR.S FixedReset -2.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.29
Evaluated at bid price : 17.29
Bid-YTW : 4.53 %
RY.PR.H FixedReset -2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.13
Evaluated at bid price : 17.13
Bid-YTW : 4.36 %
RY.PR.Z FixedReset -2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.07
Evaluated at bid price : 17.07
Bid-YTW : 4.32 %
BAM.PF.B FixedReset -2.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.33
Evaluated at bid price : 16.33
Bid-YTW : 5.17 %
GWO.PR.I Deemed-Retractible -2.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 7.57 %
GWO.PR.G Deemed-Retractible -2.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.58
Bid-YTW : 6.78 %
ELF.PR.G Perpetual-Discount -2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 5.90 %
GWO.PR.P Deemed-Retractible -2.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.47
Bid-YTW : 6.44 %
HSE.PR.A FixedReset -2.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 8.32
Evaluated at bid price : 8.32
Bid-YTW : 6.85 %
SLF.PR.E Deemed-Retractible -2.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.10
Bid-YTW : 7.68 %
TD.PF.D FixedReset -2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 4.50 %
CM.PR.Q FixedReset -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 18.71
Evaluated at bid price : 18.71
Bid-YTW : 4.54 %
BMO.PR.Y FixedReset -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 18.91
Evaluated at bid price : 18.91
Bid-YTW : 4.45 %
MFC.PR.M FixedReset -1.95 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.11
Bid-YTW : 8.64 %
BMO.PR.Z Perpetual-Discount -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 22.09
Evaluated at bid price : 22.41
Bid-YTW : 5.58 %
SLF.PR.H FixedReset -1.86 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.28
Bid-YTW : 10.32 %
BAM.PF.A FixedReset -1.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.52
Evaluated at bid price : 17.52
Bid-YTW : 5.18 %
CU.PR.F Perpetual-Discount -1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 19.48
Evaluated at bid price : 19.48
Bid-YTW : 5.79 %
BMO.PR.W FixedReset -1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.80
Evaluated at bid price : 16.80
Bid-YTW : 4.39 %
TD.PR.S FixedReset -1.58 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.60
Bid-YTW : 3.74 %
IFC.PR.A FixedReset -1.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.94
Bid-YTW : 10.64 %
SLF.PR.I FixedReset -1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.23
Bid-YTW : 8.47 %
TRP.PR.H FloatingReset -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 9.01
Evaluated at bid price : 9.01
Bid-YTW : 4.80 %
POW.PR.B Perpetual-Discount -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 22.54
Evaluated at bid price : 22.79
Bid-YTW : 5.93 %
FTS.PR.H FixedReset -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 12.41
Evaluated at bid price : 12.41
Bid-YTW : 4.27 %
CU.PR.E Perpetual-Discount -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 21.08
Evaluated at bid price : 21.08
Bid-YTW : 5.83 %
TD.PF.C FixedReset -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.91
Evaluated at bid price : 16.91
Bid-YTW : 4.41 %
BNS.PR.M Deemed-Retractible -1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.91
Bid-YTW : 5.41 %
CIU.PR.A Perpetual-Discount -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 19.18
Evaluated at bid price : 19.18
Bid-YTW : 6.02 %
BAM.PF.G FixedReset -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.84
Evaluated at bid price : 17.84
Bid-YTW : 5.17 %
MFC.PR.F FixedReset -1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.01
Bid-YTW : 11.58 %
FTS.PR.M FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.75
Evaluated at bid price : 17.75
Bid-YTW : 4.63 %
TRP.PR.A FixedReset -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 14.20
Evaluated at bid price : 14.20
Bid-YTW : 4.65 %
RY.PR.E Deemed-Retractible -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.92
Bid-YTW : 5.35 %
RY.PR.W Perpetual-Discount -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 22.43
Evaluated at bid price : 22.69
Bid-YTW : 5.41 %
CCS.PR.C Deemed-Retractible -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.57
Bid-YTW : 7.23 %
TD.PF.E FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 4.48 %
TD.PF.F Perpetual-Discount -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 22.00
Evaluated at bid price : 22.30
Bid-YTW : 5.52 %
FTS.PR.G FixedReset -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 4.63 %
RY.PR.A Deemed-Retractible -1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.80
Bid-YTW : 5.40 %
BAM.PR.G FixedFloater -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 25.00
Evaluated at bid price : 12.35
Bid-YTW : 6.72 %
RY.PR.L FixedReset -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 4.11 %
CU.PR.D Perpetual-Discount -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 21.15
Evaluated at bid price : 21.15
Bid-YTW : 5.81 %
RY.PR.B Deemed-Retractible -1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.29
Bid-YTW : 5.25 %
MFC.PR.L FixedReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.60
Bid-YTW : 8.84 %
BNS.PR.L Deemed-Retractible -1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.88
Bid-YTW : 5.44 %
RY.PR.O Perpetual-Discount -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 21.82
Evaluated at bid price : 22.15
Bid-YTW : 5.53 %
MFC.PR.I FixedReset -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.74
Bid-YTW : 7.61 %
MFC.PR.G FixedReset -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.00
Bid-YTW : 8.09 %
RY.PR.G Deemed-Retractible -1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.85
Bid-YTW : 5.41 %
BNS.PR.B FloatingReset -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.42
Bid-YTW : 4.86 %
BAM.PF.F FixedReset -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.89
Evaluated at bid price : 17.89
Bid-YTW : 5.11 %
RY.PR.F Deemed-Retractible -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.84
Bid-YTW : 5.36 %
PVS.PR.D SplitShare 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 6.87 %
BAM.PR.K Floater 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 9.93
Evaluated at bid price : 9.93
Bid-YTW : 4.81 %
BNS.PR.D FloatingReset 1.71 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.80
Bid-YTW : 7.46 %
BAM.PR.B Floater 1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 9.94
Evaluated at bid price : 9.94
Bid-YTW : 4.81 %
TRP.PR.D FixedReset 3.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 4.69 %
BMO.PR.Q FixedReset 4.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.32
Bid-YTW : 7.45 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.H FixedReset 132,012 Desjardins crossed 126,200 at 17.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 17.13
Evaluated at bid price : 17.13
Bid-YTW : 4.36 %
NA.PR.X FixedReset 111,975 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 23.13
Evaluated at bid price : 24.96
Bid-YTW : 5.43 %
PWF.PR.A Floater 100,508 Desjardins bought 96,500 from anonymous at 10.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 10.50
Evaluated at bid price : 10.50
Bid-YTW : 4.50 %
BMO.PR.Q FixedReset 78,800 TD crossed 50,000 at 18.35; Scotia crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.32
Bid-YTW : 7.45 %
TD.PF.G FixedReset 76,371 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 23.27
Evaluated at bid price : 25.40
Bid-YTW : 5.12 %
BNS.PR.E FixedReset 65,032 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 23.28
Evaluated at bid price : 25.42
Bid-YTW : 5.03 %
There were 30 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.L Deemed-Retractible Quote: 24.10 – 24.82
Spot Rate : 0.7200
Average : 0.4782

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 6.31 %

TD.PF.F Perpetual-Discount Quote: 22.30 – 22.85
Spot Rate : 0.5500
Average : 0.3472

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 22.00
Evaluated at bid price : 22.30
Bid-YTW : 5.52 %

RY.PR.J FixedReset Quote: 18.40 – 18.93
Spot Rate : 0.5300
Average : 0.3313

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 4.54 %

BMO.PR.T FixedReset Quote: 16.61 – 17.15
Spot Rate : 0.5400
Average : 0.3477

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-02-09
Maturity Price : 16.61
Evaluated at bid price : 16.61
Bid-YTW : 4.47 %

TD.PR.Z FloatingReset Quote: 21.95 – 22.60
Spot Rate : 0.6500
Average : 0.4773

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.95
Bid-YTW : 4.40 %

GWO.PR.O FloatingReset Quote: 11.24 – 13.25
Spot Rate : 2.0100
Average : 1.8387

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.24
Bid-YTW : 11.94 %

Issue Comments

AQN: Outlook Negative, Says S&P

Algonquin Power & Utilities Corp. has announced:

Algonquin Power & Utilities Corp. to Acquire The Empire District Electric Company in C$3.4 Billion (US$2.4 Billion) Transaction

Company Release – 02/09/2016 16:00

Acquisition is expected to be significantly accretive to EPS and FFOPS

Highlights:

  • • Major regulated utility acquisition results in a pro-forma Algonquin Power & Utilities Corp. asset base of C$8.9 billion
  • • Empire shareholders to receive US$34.00 per common share in cash, representing a 21% premium to the closing share price on February 8, 2016
  • • Aggregate purchase price of C$3.4 billion (US$2.4 billion), including assumed debt, represents a 1.49×1 multiple of Empire’s projected rate base and a 9.2×2 multiple of Empire’s 2017 EBITDA
  • • Expected to be immediately accretive to APUC’s earnings per share (EPS) and funds from operations per share (FFOPS), positioning APUC for further growth
  • • Average annual accretion to EPS and FFOPS expected to be approximately 7% to 9% and 12% to 14%, respectively, for the three year period following closing
  • • Acquisition is aligned with APUC’s financial objectives and provides continuing support to APUC’s 10% annual dividend growth rate target
  • • APUC’s financing plan designed to maintain strong investment grade credit rating
  • • Shifts APUC’s overall business mix towards regulated operations, with EBITDA from regulated operations increasing from 51% to 72%2
  • • Empire has complementary operations in the States of Missouri and Arkansas, with regional headquarters located in Joplin, Missouri
  • • Empire has an experienced management team committed to providing customers with safe, reliable, cost effective utility services
  • • Empire will maintain its headquarters in Joplin after the acquisition
  • • APUC expects to retain all existing Empire employees and the Empire management team will lead Liberty Utilities’ Central US Region
  • • Empire’s customer rates unaffected by the acquisition

They later announced:

that APUC [Algonquin Power & Utilities Corp.] and its direct wholly-owned subsidiary, Liberty Utilities (Canada) Corp. (the “Selling Debentureholder”), have entered into an agreement with a syndicate of underwriters (the “Underwriters”) led by CIBC Capital Markets and Scotiabank, under which the Underwriters have agreed to buy, on a bought deal basis, C$1 billion aggregate principal amount of 5.00% convertible unsecured subordinated debentures (“Debentures”) of APUC (the “Offering”). In connection with the Offering, the underwriters have also been granted a 15% over-allotment option to purchase additional Debentures within 30 days from the date of the closing of the Offering solely to cover over-allotments, if any, and for market stabilization purposes.

All Debentures are being sold on an instalment basis at a price of C$1,000 per Debenture, of which C$333 is payable on the closing of the Offering (the “First Instalment”) and the remaining C$667 (the “Final Instalment”) is payable on a date (the “Final Instalment Date”) to be fixed by APUC following satisfaction of all conditions precedent to the closing of APUC’s acquisition of The Empire District Electric Company (NYSE:EDE) (“Empire”).

So S&P has slapped ‘Outlook-Negative’ on them:

  • •On Feb. 9, Algonquin Power & Utilities Corp. announced the US$2.4 billion proposed acquisition of Empire District Electric Co., a Missouri-based utility.
  • •The cash portion of the proposed acquisition is partly being financed with the issuance of convertible debentures, with this additional debt pushing Algonquin’s adjusted funds from operations-to-debt to below 14%.
  • •We are revising our outlook on Algonquin and its subsidiaries Algonquin Power Co. and Liberty Utilities Co. to negative from stable to reflect the execution risk of the transaction and the potential for lower ratings stemming from the limited ability to absorb weaker financial performance.
  • •We are also revising the industry risk score to low from intermediate to reflect the increase in Algonquin’s consolidated cash flow that comes from regulated utilities.
  • •We are also affirming all ratings on the companies, including our ‘BBB’ long-term corporate credit rating on Algonquin.


The debentures have features that encourage holders to convert, such as interest payments ceasing on closing of the acquisition. However, we treat the debentures as debt until they convert. As a result of this analytical treatment, we expect adjusted funds from operations (AFFO)-to-debt to decline to about 10.5% until the debentures are fully converted to equity, which is below our 14% downgrade threshold for the rating.

The negative outlook reflects our expectation that APUC’s credit metrics will materially weaken in 2016 due to the issuance of convertible debentures to finance in part the cash purchase of Empire. Although we expect that the debentures will have a very high likelihood of conversion in 2017 when the transaction closes, in the meantime we expect that credit metrics will be weak for the rating, eliminating any financial cushion at the current rating level. The negative outlook also reflects the execution risk associated with the additional equity and debt necessary to support the transaction and to fund the company’s ongoing development plans.

We could lower the ratings on APUC if the company is unable to execute its development projects and acquisitions with financing arrangements of debt and equity that lead to AFFO to total debt below 14% by 2017 once the convertible debentures have converted.

We could revise the outlook to stable if the proposed equity issuance occurs as contemplated and APUC achieves AFFO to debt of 14% on a consistent basis.

Affected issues are AQN.PR.A and AQN.PR.D. Both are tracked by HIMIPref™ but are relegated to the Scraps index on credit concerns.

Update, 2016-2-11: Review-Developing by DBRS:

DBRS Limited (DBRS) has today placed the BBB (low) Issuer Rating and Pfd-3 (low) Preferred Shares ratings of Algonquin Power & Utilities Corp. (APUC or the Company) Under Review with Developing Implications. This rating action follows the announcement that the Company has entered into an agreement and plan of merger pursuant to which Liberty Utilities Co. (LUC) will indirectly acquire The Empire District Electric Company (Empire) and its subsidiaries (the Transaction).

The rating action reflects DBRS’s view that the Transaction will have a modestly positive impact on APUC’s business risk assessment (BRA). The impact on the financial risk assessment (FRA) is uncertain since the financing plan has not been finalized.

Issue Comments

FTS: Rating Agencies Deprecate Acquisition

Fortis Inc. has announced:

FORTIS INC. TO ACQUIRE ITC HOLDINGS CORP. FOR US$11.3 BILLION

Fortis to increase its 2016 consolidated mid year rate base to approximately
C$26 billion (US$18 billion) with acquisition of the largest independent transmission utility in the United States

Highlights

  • •The acquisition aligns with Fortis’ financial objectives by providing approximately 5% earnings per common share accretion in the first full year following closing, excluding one-time acquisition-related expenses. Fortis continues to target 6% average annual dividend growth through 2020.
  • •ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000 megawatts along approximately 15,600 miles of transmission line.
  • •Fortis will become one of the top 15 North American public utilities ranked by enterprise value.
  • •ITC’s FERC regulated operations, with substantial rate base growth and robust investment opportunities, add a new growth platform.
  • •Following the acquisition, ITC will continue as a stand-alone transmission company, retaining its focus on growth and operational excellence while benefiting from a broader platform that will support its mission to modernize electrical infrastructure in the U.S.
  • •ITC’s average rate base and CWIP is expected to grow at a compounded average annual rate of approximately 7.5% through 2018.
  • •Fortis intends on retaining all of ITC’s employees and maintaining the corporate headquarters in Novi, Michigan.
  • •The per share consideration of cash and Fortis stock payable to ITC shareholders of US$44.90 represents a 33% premium to the unaffected closing share price on November 27, 2015 and a 37% premium to the 30-day average unaffected share price prior to November 27, 2015. Pro forma, upon closing of the transaction, ITC shareholders will own approximately 27% of the combined company and will receive a meaningful increase in their dividend per share.
  • •In connection with the acquisition, Fortis will apply to list its common shares on the NYSE

Shareholders were not impressed:

Fortis, Canada’s largest utility owner, will pay the equivalent of $44.90 for each ITC share, according to a statement Tuesday. That’s a 14 percent premium to Monday’s close, and a 33 percent premium to the close on Nov. 27, before Bloomberg reported that ITC was exploring a sale. The offer, which totals $11.3 billion including assumed debt, will comprise $22.57 in cash and 0.752 Fortis shares apiece.

Fortis fell 10 percent, the biggest one-day decline on record, to close at C$37.14 in Toronto. ITC fell 1.9 percent to $38.65. The premium, or difference between ITC’s price and the per-share deal value, narrowed to 10 percent, according to data compiled by Bloomberg.

Fortis, based in St. John’s, Newfoundland and Labrador, bought Arizona utility owner UNS Energy Corp. for $2.5 billion in cash in 2014 and New York utility owner CH Energy Group Inc. for about $968.5 million in 2013. With ITC, Fortis expects to capitalize on construction of new high-voltage lines as the administration of President Barack Obama encourages development of wind farms and other sources of renewable energy.

Ha! Just another batch of parasites hoping to scoop up some the ‘green energy’ lolly that’s being tossed around with abandon.

Gillian Tan of Bloomberg points out two problems with the deal:

The deal values ITC at $44.90 a share, easily above the consensus analyst price target on the stock, and also represents a forward price-to-earnings multiple of 20. That’s in line with the lofty valuations ascribed to recent deals, and justifies ITC’s decision to seek out a buyer at a time when its larger rivals are starved of growth and debt is cheap. But borrowing isn’t going to be cheap forever, and the fact that Fortis shareholders are fleeing suggests that they aren’t overly enthused about the company lifting its debt burden to more than $15 billion from some $9.1 billion, even though it plans to maintain an investment-grade credit rating.

There’s another wrinkle: As part of the deal financing, Fortis needs to find an infrastructure fund (or funds) to write a check of between $1 billion and $1.4 billion in return for a stake in ITC of between 15 percent and 19.9 percent. While underbidders could step up (Borealis Infrastructure Management is said to be one, according to Bloomberg News), it’s unclear why Fortis didn’t pre-select a partner. If, for whatever reason it is unable to find one, Fortis said it could issue equity (which will dilute existing shareholders) or sell assets (at which time it’ll be a forced seller), both seemingly sub-optimal alternatives.

So S&P assigned the company status of ‘Outlook Negative’:

  • •On Feb. 9, 2016, Fortis Inc. announced the US$11.3 billion proposed
    acquisition of ITC Holdings Corp. (ITC), a U.S.-based electricity transmission operator.

  • •We are revising our outlook on St. John’s, Nfld.-based holding company Fortis Inc. and its subsidiaries FortisAlberta Inc., Maritime Electric Co. Ltd., and Caribbean Utilities Co. Ltd. to negative from stable.
  • •We are also affirming our long-term corporate credit ratings on Fortis and its subsidiaries.
  • •In addition, we are downgrading Fortis’ senior unsecured debentures to ‘BBB+’ from ‘A-‘.
  • •We are revising our competitive position score to strong from excellent.
  • •The negative outlook reflects the execution risks associated with the transaction including selling up to 19.9% of ITC to one or more infrastructure-focused minority investors.
  • •The negative outlook also reflects the limited cushion in the credit metrics for any post-merger integration or operational issues.


The negative outlook reflects the execution and integration risk associated with the ITC acquisition including the sale of up to 19.9% of ITC to one or more infrastructure-focused minority investors. In addition, the outlook reflects that credit metrics have a limited cushion in the two-year outlook period. With the acquisition of ITC, we expect the company will reach 11% AFFO to debt in 2019. However, until then metrics will be about 10%, which leaves little cushion for any operational or post-merger integration errors.

We could take a negative rating action on Fortis by applying a negative comparable rating modifier if the company’s AFFO-to-debt were to fall below 10%, at the low end of the significant financial risk profile during our two-year outlook period. This could happen as a result of cost overruns from the post-merger integration efforts with ITC, material adverse regulatory decisions, or if Fortis encounters operational difficulties.

We could revise the outlook to stable if AFFO-to-debt remains consistently above 10% once the transaction has closed and if the acquisition uncertainties have been resolved.

… and DBRS slapped it with ‘Review-Negative’:

DBRS Limited (DBRS) has today placed the A (low) Issuer Rating, the A (low) Unsecured Debentures rating and the Pfd-2 (low) Preferred Shares rating of Fortis Inc. (Fortis or the Company) Under Review with Negative Implications. This action follows the announcement that the Company has agreed to acquire ITC Holdings Corp. (ITC) for a total consideration of approximately US$11.3 billion, including the assumption of US$4.4 billion of debt on closing (the Acquisition). The rating action reflects DBRS’s view that the Acquisition will have a modestly positive impact on the Company’s business risk profile but a negative impact on its financial risk profile. The Acquisition is expected to close in late 2016 and is subject to both Fortis and ITC shareholder approvals, as well as various regulatory and federal approvals.

Fortis intends to fund the Acquisition by issuing approximately (1) US$3.5 billion to US$3.9 billion of equity, largely satisfied through the share consideration to be paid to ITC shareholders, (2) US$2.0 billion of debt, and by (3) selling 15.0% to 19.9% of ITC to minority investors for approximately US$1.0 billion to US$1.4 billion. DBRS considers the current financing plan to be negative to the Company’s non-consolidated financial risk profile. Based on DBRS’s pro forma 2015 calculations, Fortis had a non-consolidated debt-to-capital ratio of approximately 21.9% and a non-consolidated cash flow-to-debt ratio of 21.4%. Based on the Company’s proposed financing plan and DBRS’s estimate of future dividends from the Acquisition assets to Fortis, DBRS expects a significantly negative impact on the Company’s non-consolidated metrics. As a result, DBRS believes that placing Fortis’s ratings Under Review with Negative Implications is the appropriate rating action at this time.

DBRS will continue to review the final financing plan for the Acquisition and will resolve the Under Review rating action once the transaction closes. The Company’s ratings could be downgraded by one notch if the non-consolidated debt-to-capital ratio following the Acquisition is materially over the 20% threshold and the non-consolidated cash flow-to-debt ratio is significantly below 20%.

Affected issues are: FTS.PR.E, FTS.PR.F, FTS.PR.G, FTS.PR.H, FTS.PR.I, FTS.PR.J, FTS.PR.K and FTS.PR.M. All are tracked by HIMIPref™.