June 13, 2013

Riding the tiger is easy … the hard part is getting off:

Federal Reserve Chairman Ben S. Bernanke has repeatedly said a reduction in the Fed’s $85 billion in monthly bond purchases wouldn’t mean an end to record easing. Investors are behaving as if they don’t believe him.

The yield on the 10-year Treasury note has risen to 2.19 percent, an almost 14-month high, from 1.63 percent on May 2 as investors bet the Fed will begin trimming bond buying. The surge is undermining Bernanke’s unprecedented effort to hold down borrowing costs and combat 7.6 percent unemployment.

Investors interpret policy makers’ talk of reduced bond purchases as a signal the Fed will begin to increase its main interest rate as soon as next year. They see a 47 percent chance the Fed will raise the rate to at least 0.5 percent from zero to 0.25 percent by December 2014, according to prices for federal funds futures contracts.

That’s an increase from about 20 percent probability two months ago. It also contrasts with a majority of 14 Fed officials who forecast in March that the FOMC won’t increase the federal funds rate until 2015 or later. The Fed has held the rate banks charge one another for overnight loans near zero since December 2008.

I mentioned a pseudo-scandal in the FX market yesterday … naturally it is being used as an excuse for more regulation:

Global regulators may start overseeing currency rates in a widening response to benchmark-rate setting scandals that began with revelations on the manipulation of Libor, according to two people familiar with the matter.

The International Organization of Securities Commissions, a Madrid-based group known as Iosco that harmonizes market rules, may propose final guidelines improving transparency and oversight of benchmarks, including the WM/Reuters rates, as soon as next month, said the people, who asked not to be named because the talks aren’t finalized.

There was a bit of a rebound for the Canadian preferred share market today, with PerpetualPremiums winning 13bp, FixedResets up 10bp and DeemedRetractibles gaining 6bp. The lengthy Performance Highlights Table has more winners than losers, for a change, with BAM PerpetualDiscounts continuing to head the loser list. Volume was above average.

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 0.2694 % 2,561.7
FixedFloater 4.02 % 3.35 % 43,222 18.60 1 0.8529 % 4,090.2
Floater 2.61 % 2.91 % 83,063 19.97 5 0.2694 % 2,765.9
OpRet 4.85 % 2.27 % 64,150 0.08 5 0.0156 % 2,616.6
SplitShare 4.64 % 4.06 % 105,869 4.03 6 0.0842 % 2,982.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0156 % 2,392.6
Perpetual-Premium 5.36 % 4.98 % 89,851 14.28 32 0.1347 % 2,317.2
Perpetual-Discount 5.19 % 5.41 % 411,494 14.88 7 -2.0853 % 2,431.7
FixedReset 4.94 % 3.07 % 237,297 3.46 82 0.0972 % 2,492.0
Deemed-Retractible 5.01 % 4.79 % 148,710 6.99 44 0.0636 % 2,403.1
Performance Highlights
Issue Index Change Notes
BAM.PR.N Perpetual-Discount -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 21.71
Evaluated at bid price : 21.96
Bid-YTW : 5.41 %
BAM.PR.M Perpetual-Discount -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 22.02
Evaluated at bid price : 22.02
Bid-YTW : 5.41 %
RY.PR.E Deemed-Retractible -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.55 %
HSE.PR.A FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.42
Evaluated at bid price : 25.02
Bid-YTW : 3.21 %
FTS.PR.F Perpetual-Premium -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 24.17
Evaluated at bid price : 24.50
Bid-YTW : 5.02 %
ELF.PR.H Perpetual-Premium 1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : 5.44 %
SLF.PR.E Deemed-Retractible 1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.03
Bid-YTW : 5.43 %
CU.PR.F Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.08
Evaluated at bid price : 23.50
Bid-YTW : 4.80 %
IFC.PR.C FixedReset 1.26 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.62
Bid-YTW : 3.35 %
IFC.PR.A FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.42
Bid-YTW : 3.43 %
FTS.PR.H FixedReset 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.49
Evaluated at bid price : 24.73
Bid-YTW : 2.93 %
CU.PR.C FixedReset 2.21 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.86
Bid-YTW : 3.12 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PF.D Perpetual-Discount 454,120 New issue settled today.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 21.99
Evaluated at bid price : 22.30
Bid-YTW : 5.51 %
TRP.PR.D FixedReset 255,562 Nesbitt crossed blocks of 40,000 shares, 50,000 shares, 23,600 and 75,000, all at 25.30. RBC crossed 40,000 at 25.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.24
Evaluated at bid price : 25.40
Bid-YTW : 3.68 %
BNS.PR.Z FixedReset 122,001 National crossed blocks of 49,500 and 50,500, both at 24.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.69
Bid-YTW : 3.31 %
PWF.PR.S Perpetual-Premium 97,988 TD crossed 79,800 at 24.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 24.30
Evaluated at bid price : 24.68
Bid-YTW : 4.91 %
ENB.PR.Y FixedReset 81,860 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.09
Evaluated at bid price : 24.96
Bid-YTW : 3.75 %
CM.PR.M FixedReset 68,871 Nesbitt crossed blocks of 24,900 and 25,000, both at 26.39.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.39
Bid-YTW : 2.22 %
There were 42 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: 23.50 – 24.50
Spot Rate : 1.0000
Average : 0.6625

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.20
Evaluated at bid price : 23.50
Bid-YTW : 2.22 %

HSB.PR.D Deemed-Retractible Quote: 24.85 – 25.75
Spot Rate : 0.9000
Average : 0.6047

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 5.08 %

PWF.PR.A Floater Quote: 23.62 – 24.25
Spot Rate : 0.6300
Average : 0.4885

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.33
Evaluated at bid price : 23.62
Bid-YTW : 2.20 %

RY.PR.E Deemed-Retractible Quote: 25.01 – 25.36
Spot Rate : 0.3500
Average : 0.2228

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.55 %

RY.PR.F Deemed-Retractible Quote: 25.35 – 25.65
Spot Rate : 0.3000
Average : 0.1797

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 4.31 %

HSE.PR.A FixedReset Quote: 25.02 – 25.37
Spot Rate : 0.3500
Average : 0.2448

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-06-13
Maturity Price : 23.42
Evaluated at bid price : 25.02
Bid-YTW : 3.21 %

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