Canadian pension funds saw their funding problems grow dramatically in the third quarter as bond yields tumbled while stock markets went into decline.
Pension consulting firm Mercer said its pension health index slipped to 60 per cent funding at the end of September from 71 per cent at the end of June and 75 per cent at the end of March. The index measures the change in funded status of a typical pension plan with average asset allocations.
…
[Mercer’s pension guy] Mr. [Scott] Clausen said the decrease in bond yields contributed to about 8 percentage points of the drop in the pension health index in the third quarter, while declining investment returns accounted for the other 3 percentage point decline.
There’s a big round of quantitative easing in the UK:
Bank of England Governor Mervyn King has lost faith in European governments’ ability to resolve the region’s debt crisis.
The central bank yesterday announced its biggest stimulus since the depths of the recession, citing “vulnerabilities” related to the euro-area turmoil. King said the move, the first loosening of U.K. monetary policy since 2009, was a response to what may be the worst financial crisis ever.
…
King’s refusal to wait for European governments signals determination to shield the U.K. from a crisis that threatens to tip Britain’s biggest trading partner into recession. It also shows concern that failure to protect bank funding markets risks recreating conditions that led to the collapse of Lehman Brothers Holdings Inc. three years ago.The U.K. central bank, which left its benchmark interest rate at a record-low 0.5 percent, raised the ceiling for so- called quantitative easing to 275 billion pounds ($421 billion) from 200 billion pounds. That’s the biggest expansion since the first round of stimulus in March 2009. Only 11 of 32 economists in a Bloomberg News survey predicted the increase.
DBRS confirmed BBD at Pfd-4.
S&P changed the outlook on TD from positive to stable:
- We are revising the outlook on Toronto-Dominion Bank (TD Bank) to stable
from positive based on our expectations that a weak Canadian economic recovery will provide more challenging operating conditions than had previously been expected.- TD Bank continues to experience consistent and strong core operating performance from domestic operations with a growing contribution from its U.S. retail bank.
- We are affirming our ‘AA-/A-1+’ counterparty credit ratings on TD Bank
and related entities.
S&P changed the outlook on RY from positive to stable:
- We are revising the outlook on Royal Bank of Canada to stable from
positive for a potential upgrade based on our expectations that a weaker Canadian economic recovery will provide more challenging operating conditions than had previously been expected.- We are affirming our ‘AA-/A-1+’ counterparty credit ratings on RBC and related entities.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.3107 % | 1,959.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.3107 % | 2,947.4 |
| Floater | 3.67 % | 3.66 % | 159,540 | 18.18 | 2 | 1.3107 % | 2,116.0 |
| OpRet | 4.89 % | 4.22 % | 60,421 | 1.58 | 8 | -0.1944 % | 2,431.1 |
| SplitShare | 5.48 % | 1.34 % | 54,036 | 0.39 | 4 | -0.2683 % | 2,447.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1944 % | 2,223.0 |
| Perpetual-Premium | 5.72 % | 4.53 % | 109,795 | 1.04 | 13 | 0.2400 % | 2,114.2 |
| Perpetual-Discount | 5.44 % | 5.53 % | 109,329 | 14.64 | 17 | 0.1299 % | 2,217.5 |
| FixedReset | 5.18 % | 3.34 % | 211,229 | 2.69 | 61 | 0.1223 % | 2,312.7 |
| Deemed-Retractible | 5.13 % | 4.64 % | 226,477 | 7.73 | 46 | 0.2166 % | 2,172.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.P | FixedReset | -1.48 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.60 Bid-YTW : 4.76 % |
| BAM.PR.J | OpRet | -1.41 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 25.78 Bid-YTW : 4.88 % |
| SLF.PR.F | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 4.66 % |
| TRP.PR.C | FixedReset | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-06 Maturity Price : 23.24 Evaluated at bid price : 25.07 Bid-YTW : 3.02 % |
| RY.PR.A | Deemed-Retractible | 1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 4.49 % |
| IAG.PR.C | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.45 Bid-YTW : 3.55 % |
| BAM.PR.N | Perpetual-Discount | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-06 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.63 % |
| SLF.PR.C | Deemed-Retractible | 1.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.32 Bid-YTW : 7.09 % |
| TCA.PR.Y | Perpetual-Premium | 1.10 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-05 Maturity Price : 50.00 Evaluated at bid price : 51.66 Bid-YTW : 3.99 % |
| SLF.PR.E | Deemed-Retractible | 1.24 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.45 Bid-YTW : 7.06 % |
| SLF.PR.D | Deemed-Retractible | 1.30 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.30 Bid-YTW : 7.10 % |
| RY.PR.H | Deemed-Retractible | 1.32 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-24 Maturity Price : 26.00 Evaluated at bid price : 26.88 Bid-YTW : 3.69 % |
| MFC.PR.E | FixedReset | 1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 4.64 % |
| HSE.PR.A | FixedReset | 1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-06 Maturity Price : 23.37 Evaluated at bid price : 25.52 Bid-YTW : 3.15 % |
| BAM.PR.R | FixedReset | 2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-06 Maturity Price : 23.45 Evaluated at bid price : 25.90 Bid-YTW : 3.76 % |
| FTS.PR.F | Perpetual-Discount | 2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-06 Maturity Price : 24.70 Evaluated at bid price : 24.99 Bid-YTW : 4.94 % |
| BAM.PR.B | Floater | 2.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-06 Maturity Price : 14.40 Evaluated at bid price : 14.40 Bid-YTW : 3.66 % |
| HSB.PR.E | FixedReset | 2.71 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.91 Bid-YTW : 3.71 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.M | FixedReset | 88,812 | Nesbitt sold 15,000 to TD at 25.90, then crossed 40,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.83 Bid-YTW : 3.09 % |
| CM.PR.L | FixedReset | 70,802 | RBC crossed 49,000 at 27.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.96 Bid-YTW : 3.14 % |
| MFC.PR.A | OpRet | 65,945 | RBC crossed two blocks of 25,000 each, both at 24.95. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.22 % |
| TRP.PR.C | FixedReset | 65,102 | TD crossed 35,000 at 25.30; RBC crossed 14,600 at 25.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-06 Maturity Price : 23.24 Evaluated at bid price : 25.07 Bid-YTW : 3.02 % |
| SLF.PR.D | Deemed-Retractible | 56,312 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.30 Bid-YTW : 7.10 % |
| MFC.PR.E | FixedReset | 38,472 | RBC crossed 25,000 at 25.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 4.64 % |
| There were 25 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.N | Perpetual-Discount | Quote: 21.25 – 22.38 Spot Rate : 1.1300 Average : 0.7040 YTW SCENARIO |
| BAM.PR.J | OpRet | Quote: 25.78 – 26.90 Spot Rate : 1.1200 Average : 0.8849 YTW SCENARIO |
| NA.PR.N | FixedReset | Quote: 25.64 – 26.32 Spot Rate : 0.6800 Average : 0.4669 YTW SCENARIO |
| BNA.PR.D | SplitShare | Quote: 26.35 – 26.86 Spot Rate : 0.5100 Average : 0.3165 YTW SCENARIO |
| IAG.PR.F | Deemed-Retractible | Quote: 25.71 – 26.24 Spot Rate : 0.5300 Average : 0.3454 YTW SCENARIO |
| PWF.PR.G | Perpetual-Premium | Quote: 24.65 – 25.14 Spot Rate : 0.4900 Average : 0.3153 YTW SCENARIO |