Dallas Fed President Richard Fisher had a good line at the October 2007 FOMC meeting – for which minutes have just been released:
Fisher provoked laughs again in October 2007 after citing a newspaper story reporting that companies stopped buying securities they don’t understand.
“Investors are coming home from lala land,” he said. “If you will forgive me, you might say we have gone from the ridiculous to the subprime.”
“Let the transcript say ‘Groan,’” Richmond Fed President Jeffrey Lacker said.
The enormous liquidity premia in the Canadian government bond market has given rise to an ETF:
Super-safe government of Canada bonds currently yield next to nothing. So what is the yield-hungry but risk-averse retail investor to do?
Toronto-based exchange-traded fund (ETF) purveyor First Asset thinks it has the answer: Provincial government bonds.
First Asset has set up the DEX provincial bond index fund, an ETF designed to capitalize on the fact that the debt of Canada’s provinces yields quite a bit more than similar securities issued by Ottawa.
…
Investors can pick up about one full percentage point in extra yield with Ontario 10-year bonds, for instance, compared with government of Canada bonds with a similar maturity. The Ontario 10-year securities yield about 2.9 per cent, the federal bonds around 1.9 per cent, indicating the approach of going with the provincial bond leads to about 50 per cent more income.
…
The DEX fund, which began trading on the Toronto market Monday, has a yield to maturity of 2.8 per cent, and about 85 per cent of the bonds it holds are from Ontario and Quebec. The balance is split almost equally among British Columbia, New Brunswick and Manitoba debt. The five provinces have a range of credit ratings in the double-A and single-A categories.First Asset charges a management fee of 0.25 percentage point on the DEX ETF.
…
“I don’t think the average Canadian thinks that the federal government is going to let any province default on its debt obligations,” [Barry Gordon, First Asset’s president and chief executive,] says. “Under what circumstances could you see the provinces of Canada defaulting that the government of Canada wasn’t also in default?”
Circumstances like Europe, maybe? The chances of provincial default were discussed by Marc Joffe in a report published by the Macdonald-Laurier Institute. The Panic of 2007 should have hammered into us all the idea that the unthinkable is not necessarily impossible.
I consider the provie ETF to be a much better idea than their Barbell ETFs. The ticker symbol for the fund is PXF / PXF.A. Regretably, the fund is permitted to use derivatives. The Index is the DEX Universe Provincial Bond Index™, but, even more regretably, neither the fund’s website, nor the index provider’s website provide information about Current Yield and Yield To Maturity, which are required in order to calculate the projected tax efficiency of the fund.
Sun Media has been most un-Canadian in promoting a culture of self-reliance, so it’s good to see that they’ve got maple syrup in their veins after all:
The news network, which is owned by Quebecor Inc. and has made a name for itself by slamming rivals such as the Canadian Broadcasting Corp. for relying on government subsidies, has asked the Canadian Radio-television and Telecommunications Commission to grant it “mandatory carriage,” which means it would be included in every basic cable package across the country.
This would generate about $18-million a year for the network, because it would earn 18 cents a month in wholesale revenue from every Canadian household that subscribes to a basic cable, satellite, or IPTV service.
With traditional pricing mark-ups, that would likely translate to $4 a year per consumer.
The network says it needs the money to ensure its survival, because advertising revenue has been difficult to obtain and it is having trouble convincing Canadians to subscribe to the specialty packages that include its signal.
It was a good day for the Canadian preferred share market, with PerpetualPremiums gaining 5bp, FixedResets winning 15bp and DeemedRetractibles up 7bp. Volatility was average. Volume continued to be quite high.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.6071 % | 2,525.2 |
| FixedFloater | 4.30 % | 3.62 % | 27,902 | 18.14 | 1 | 1.3774 % | 3,779.9 |
| Floater | 2.75 % | 3.00 % | 64,235 | 19.73 | 4 | 0.6071 % | 2,726.5 |
| OpRet | 4.62 % | -0.62 % | 54,820 | 0.36 | 4 | 0.2965 % | 2,598.5 |
| SplitShare | 4.58 % | 4.46 % | 43,875 | 4.31 | 2 | 0.1794 % | 2,910.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2965 % | 2,376.1 |
| Perpetual-Premium | 5.25 % | -0.09 % | 77,637 | 0.11 | 30 | 0.0477 % | 2,347.7 |
| Perpetual-Discount | 4.84 % | 4.87 % | 133,757 | 15.68 | 4 | 0.1727 % | 2,650.1 |
| FixedReset | 4.91 % | 2.88 % | 227,511 | 3.58 | 78 | 0.1462 % | 2,479.5 |
| Deemed-Retractible | 4.87 % | 2.36 % | 123,126 | 0.33 | 45 | 0.0655 % | 2,428.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| ENB.PR.N | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.74 Bid-YTW : 3.56 % |
| TRI.PR.B | Floater | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-21 Maturity Price : 23.16 Evaluated at bid price : 23.42 Bid-YTW : 2.22 % |
| BAM.PR.G | FixedFloater | 1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-21 Maturity Price : 22.58 Evaluated at bid price : 22.08 Bid-YTW : 3.62 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PR.G | FixedReset | 279,271 | Nesbitt sold 30,700 to Scotia at 26.25, then crossed four blocks: 35,000 shares, 100,000 shares, 32,700 and 67,000, all at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.25 Bid-YTW : 2.11 % |
| NA.PR.L | Deemed-Retractible | 171,164 | Deleted from TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-20 Maturity Price : 25.50 Evaluated at bid price : 25.51 Bid-YTW : 0.32 % |
| BNS.PR.Y | FixedReset | 129,650 | Nesbitt sold two blocks to RBC, 21,800 at 24.71 and 10,000 at 24.70, then crossed blocks of 33,800 and 37,000, both at 24.70. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 3.06 % |
| BMO.PR.P | FixedReset | 105,652 | Nesbitt crossed 100,000 at 27.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.98 Bid-YTW : 1.95 % |
| RY.PR.A | Deemed-Retractible | 95,091 | Desjardins crossed 90,600 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-24 Maturity Price : 25.50 Evaluated at bid price : 25.95 Bid-YTW : 1.15 % |
| BAM.PF.C | Perpetual-Discount | 81,556 | Added to TXPR. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-21 Maturity Price : 24.56 Evaluated at bid price : 24.95 Bid-YTW : 4.91 % |
| 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.PF.A | FixedReset | Quote: 26.08 – 26.37 Spot Rate : 0.2900 Average : 0.1908 YTW SCENARIO |
| GWO.PR.F | Deemed-Retractible | Quote: 25.80 – 26.19 Spot Rate : 0.3900 Average : 0.2915 YTW SCENARIO |
| NA.PR.N | FixedReset | Quote: 25.34 – 25.60 Spot Rate : 0.2600 Average : 0.1817 YTW SCENARIO |
| BNS.PR.K | Deemed-Retractible | Quote: 25.51 – 25.74 Spot Rate : 0.2300 Average : 0.1659 YTW SCENARIO |
| SLF.PR.F | FixedReset | Quote: 26.45 – 26.83 Spot Rate : 0.3800 Average : 0.3219 YTW SCENARIO |
| HSB.PR.D | Deemed-Retractible | Quote: 25.80 – 26.00 Spot Rate : 0.2000 Average : 0.1446 YTW SCENARIO |