Last Friday we had good news regarding North American employment – now there is good news from the UK:
The pound had its biggest weekly gain versus the dollar in more than three years as U.K. manufacturing, services and home-price data beat economist forecasts, boosting confidence in the economy.
Sterling appreciated for the first week in six against the euro. It rallied to the strongest level in more than three months versus the greenback, as the U.S. currency dropped versus all but two of its 16 major counterparts. U.K. government bonds fell for a third week after Bank of England policy makers kept stimulus measures unchanged at Governor Mervyn King’s final meeting.
It will be interesting to see what happens to Treasury yields this week:
For the first time since 2009, U.S. bond yields are rising at the same time inflation is slowing, providing a cushion for investors in Treasuries whether or not the Federal Reserve slows the pace of its debt purchases.
While 10-year (USGG10YR) yields reached 2.23 percent May 29, the highest since April 2012, the personal consumption expenditure deflator, the Fed’s preferred gauge of inflation, rose 0.7 percent in April from a year earlier, the smallest increase since 2009. The yield gap between Treasury Inflation-Protected Securities, or TIPS, and non-indexed bonds show investors have cut their expectations for consumer price increases to the lowest level since July.
Ever get the feeling that you were in the wrong business?
To get at the heart of a hearing aid’s cost, we can turn to data data unearthed by a German regulator (PDF) studying the major manufacturers. Based on this information, it costs about $250 to make a device that will get sold to an audiologist retailer for $1,000. Hearing aid makers spend $75 per device on research and development and $250 on marketing and then chalk up $425 in profit. The retailers then mark up the price $2,000 to cover overheard and make a profit, resulting in a $3,000 price tag.
And, with respect to financial repression:
New collateral rules for hedge funds, insurers and others in the $633 trillion over-the-counter derivatives market are poised to boost demand for U.S. Treasuries, potentially slowing rising yields as the Federal Reserve considers scaling back unprecedented stimulus.
Swaps traders will need to come up with $800 billion to $4.6 trillion to meet Dodd-Frank Act regulations requiring that the derivatives be backed by clearinghouses that collect upfront collateral such as cash or Treasuries, according to estimates from the Treasury Borrowing Advisory Committee. The regulations take effect today for the second group of firms designated by the Commodity Futures Trading Commission in the market for interest-rate and credit-default swaps.
DBRS confirmed LCS.PR.A at Pfd-5(high):
On October 25, 2012, DBRS downgraded the ratings of the Preferred Shares to Pfd-5 (high) from Pfd-4 (low), due to the volatility in the NAV of the Company and the insufficient levels of downside protection in the months leading up to the rating action. Since then, the NAV of the Company has recovered, with downside protection available to holders of the Preferred Shares reaching 32.2% as of May 30, 2013. However, the Preferred Share dividend coverage ratio is rather low at 0.6 times and there is less than one year remaining until the Preferred Shares mature. While Canadian life insurance companies have recovered, the industry as a whole continues to experience stress as interest rates remain at all-time lows. As a result, the rating of the Preferred Shares has been confirmed at Pfd-5 (high).
E-L Financial has sold The Dominion to a US insurer:
One of Canada’s oldest insurance companies is being sold for $1.125-billion to a major U.S. insurer, in a deal that will see the business fall into foreign hands for the first time since it was founded by Sir John A. Macdonald in 1887.
Dominion of Canada General Insurance Co. is to be acquired by The Travelers Companies Inc.
…
E-L Financial hasn’t yet decided what it will do with the cash left on its books after the sale closes in the last quarter of the year, pending regulatory approvals and other conditions.
There was carnage for the Canadian preferred share market today, with PerpetualPremiums down 55bp, FixedResets off 41bp and DeemedRetractibles losing 73bp. As might be expected, the Performance Highlights table is very lengthy, with only a single winner – ELF.PR.F, which merely recovered some of Friday’s extraordinary loss. Volume was quite high, though not – yet! – sufficient to indicate widespread panic.
| 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 | -0.0498 % | 2,548.1 |
| FixedFloater | 4.02 % | 3.35 % | 40,835 | 18.60 | 1 | -0.0846 % | 4,083.2 |
| Floater | 2.62 % | 2.95 % | 84,381 | 19.78 | 5 | -0.0498 % | 2,751.3 |
| OpRet | 4.83 % | 2.21 % | 61,785 | 0.08 | 5 | -0.0776 % | 2,614.5 |
| SplitShare | 4.65 % | 4.32 % | 99,117 | 4.03 | 6 | -0.1117 % | 2,973.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0776 % | 2,390.8 |
| Perpetual-Premium | 5.33 % | 4.72 % | 90,360 | 3.06 | 32 | -0.5475 % | 2,330.8 |
| Perpetual-Discount | 5.02 % | 5.06 % | 392,596 | 15.31 | 6 | -1.8293 % | 2,528.7 |
| FixedReset | 4.92 % | 3.03 % | 237,901 | 3.27 | 82 | -0.4060 % | 2,496.9 |
| Deemed-Retractible | 4.99 % | 4.35 % | 144,531 | 2.08 | 44 | -0.7305 % | 2,415.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CU.PR.D | Perpetual-Premium | -3.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 24.13 Evaluated at bid price : 24.51 Bid-YTW : 5.01 % |
| CU.PR.E | Perpetual-Premium | -3.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 24.14 Evaluated at bid price : 24.52 Bid-YTW : 5.01 % |
| MFC.PR.C | Deemed-Retractible | -2.80 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.26 Bid-YTW : 5.33 % |
| CU.PR.G | Perpetual-Discount | -2.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.18 Evaluated at bid price : 23.60 Bid-YTW : 4.79 % |
| SLF.PR.D | Deemed-Retractible | -2.26 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.95 Bid-YTW : 5.41 % |
| CU.PR.F | Perpetual-Discount | -2.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.08 Evaluated at bid price : 23.50 Bid-YTW : 4.80 % |
| BAM.PF.C | Perpetual-Discount | -2.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 22.72 Evaluated at bid price : 23.08 Bid-YTW : 5.34 % |
| SLF.PR.C | Deemed-Retractible | -2.05 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.95 Bid-YTW : 5.41 % |
| PWF.PR.K | Perpetual-Premium | -1.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 24.21 Evaluated at bid price : 24.50 Bid-YTW : 5.10 % |
| SLF.PR.B | Deemed-Retractible | -1.92 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.07 Bid-YTW : 5.23 % |
| MFC.PR.B | Deemed-Retractible | -1.86 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.70 Bid-YTW : 5.27 % |
| IGM.PR.B | Perpetual-Premium | -1.81 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-12-31 Maturity Price : 25.25 Evaluated at bid price : 26.01 Bid-YTW : 5.29 % |
| SLF.PR.A | Deemed-Retractible | -1.76 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.03 Bid-YTW : 5.20 % |
| FTS.PR.H | FixedReset | -1.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.44 Evaluated at bid price : 24.61 Bid-YTW : 2.95 % |
| SLF.PR.G | FixedReset | -1.75 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.67 Bid-YTW : 3.24 % |
| NA.PR.Q | FixedReset | -1.73 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-11-15 Maturity Price : 25.00 Evaluated at bid price : 25.62 Bid-YTW : 3.27 % |
| GWO.PR.H | Deemed-Retractible | -1.63 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.22 % |
| GWO.PR.Q | Deemed-Retractible | -1.62 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 5.22 % |
| GWO.PR.I | Deemed-Retractible | -1.55 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.48 Bid-YTW : 5.20 % |
| GWO.PR.P | Deemed-Retractible | -1.49 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 25.71 Bid-YTW : 5.01 % |
| BNS.PR.Y | FixedReset | -1.49 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.53 Bid-YTW : 3.04 % |
| BAM.PR.N | Perpetual-Discount | -1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 22.66 Evaluated at bid price : 23.05 Bid-YTW : 5.23 % |
| BAM.PR.M | Perpetual-Discount | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 22.84 Evaluated at bid price : 23.09 Bid-YTW : 5.23 % |
| IAG.PR.G | FixedReset | -1.32 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.49 Bid-YTW : 3.73 % |
| GWO.PR.R | Deemed-Retractible | -1.30 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 5.12 % |
| ELF.PR.G | Perpetual-Discount | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.43 Evaluated at bid price : 23.75 Bid-YTW : 5.06 % |
| POW.PR.D | Perpetual-Premium | -1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 24.44 Evaluated at bid price : 24.75 Bid-YTW : 5.12 % |
| ENB.PR.H | FixedReset | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.08 Evaluated at bid price : 24.80 Bid-YTW : 3.57 % |
| GWO.PR.M | Deemed-Retractible | -1.18 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 4.97 % |
| PWF.PR.L | Perpetual-Premium | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 24.56 Evaluated at bid price : 24.89 Bid-YTW : 5.17 % |
| CIU.PR.B | FixedReset | -1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.86 Bid-YTW : 3.30 % |
| IFC.PR.A | FixedReset | -1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 3.44 % |
| GWO.PR.N | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.69 Bid-YTW : 3.08 % |
| ENB.PR.F | FixedReset | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.18 Evaluated at bid price : 25.04 Bid-YTW : 3.83 % |
| FTS.PR.J | Perpetual-Premium | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.84 Evaluated at bid price : 24.20 Bid-YTW : 4.92 % |
| IAG.PR.A | Deemed-Retractible | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 4.94 % |
| ELF.PR.F | Perpetual-Premium | 2.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 24.63 Evaluated at bid price : 24.91 Bid-YTW : 5.39 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.Y | FixedReset | 279,805 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.09 Evaluated at bid price : 24.98 Bid-YTW : 3.74 % |
| PWF.PR.S | Perpetual-Premium | 266,042 | RBC bought 10,000 from anonymous at 24.87, 11,600 from TD at 24.74 and another 10,500 from TD at 24.75. They also crossed blocks of 50,000 shares, 34,800 and 50,000, all at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 24.35 Evaluated at bid price : 24.73 Bid-YTW : 4.89 % |
| SLF.PR.D | Deemed-Retractible | 97,560 | Desjardins crossed 50,000 at 23.30 and 25,000 at 23.10. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.95 Bid-YTW : 5.41 % |
| TD.PR.Q | Deemed-Retractible | 97,025 | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-07-10 Maturity Price : 26.00 Evaluated at bid price : 26.34 Bid-YTW : -3.12 % |
| CU.PR.F | Perpetual-Discount | 67,821 | Nesbitt crossed 40,000 at 23.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-06-10 Maturity Price : 23.08 Evaluated at bid price : 23.50 Bid-YTW : 4.80 % |
| RY.PR.E | Deemed-Retractible | 60,954 | Desjardins crossed 48,000 at 25.41. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.22 Bid-YTW : 4.43 % |
| There were 55 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRI.PR.B | Floater | Quote: 23.75 – 24.50 Spot Rate : 0.7500 Average : 0.4366 YTW SCENARIO |
| BNS.PR.Y | FixedReset | Quote: 24.53 – 24.94 Spot Rate : 0.4100 Average : 0.2621 YTW SCENARIO |
| RY.PR.C | Deemed-Retractible | Quote: 25.31 – 25.67 Spot Rate : 0.3600 Average : 0.2131 YTW SCENARIO |
| GWO.PR.P | Deemed-Retractible | Quote: 25.71 – 26.10 Spot Rate : 0.3900 Average : 0.2456 YTW SCENARIO |
| PWF.PR.L | Perpetual-Premium | Quote: 24.89 – 25.28 Spot Rate : 0.3900 Average : 0.2477 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 26.01 – 26.50 Spot Rate : 0.4900 Average : 0.3648 YTW SCENARIO |