DBRS commented on the Federal budget:
As anticipated at the time of DBRS’s last review, Canada’s debt burden appears to have reached an inflection point and reducing debt remains a long-term goal of the government. Gross market debt (the measure tracked by DBRS) is projected to fall by 3.1% to $647 billion by March 31, 2014, resulting in a debt-to-GDP ratio of roughly 35%, down from 37% a year earlier. For 2014-15, market debt is expected to remain relatively flat, pointing to a debt-to-GDP ratio of 34%. Total borrowing requirements are forecast at $232 billion in 2014-2015, comprised almost entirely of refinancing needs. The government plans to continue to reduce refinancing risk by replacing maturing treasury bills with longer-term bonds, which should lengthen the average term to maturity of the debt portfolio. In addition, the issuance of 50-year bonds is being contemplated, after having considered 40-year issuance in the previous budget.
… but there were also some cogent words from Konrad Yakabuski of the Globe:
Hence, Mr. Flaherty’s latest, and perhaps last, budget includes another $500-million for Ottawa’s so-called Automotive Innovation Fund, increasing the total to $1-billion. The funds are supposed to be doled out in “repayable contributions to automotive firms that are undertaking strategic large-scale research and development projects focused on new vehicle technologies.”
Don’t be fooled. About as much R&D goes on in Canada’s auto sector as in my kitchen. The AIF is a slush fund used to subsidize the wages of auto workers whose “quality,” according to a 2012 study by the Institute for Research on Public Policy, has “not proven to be an important factor in productivity growth in motor-vehicle assembly over the past 45 years.” Yet, Chrysler reportedly wants up to $700-million from Ottawa and Ontario to assemble a “new generation” of minivans in Windsor.
…
According to the IRPP study by economists Leslie Shiell of the University of Ottawa and Robin Somerville of the Centre for Spatial Economics, the rescues cost Canadian taxpayers more than $500,000 for every job saved.
At least there’s a little good news for granny:
Canadian banks are slashing the trading fees charged by their online investing platforms, a sudden about-face after years of ignoring intense competition from independent rivals with cheaper prices.
In the past month, Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal each cut their discount brokerage prices. Now any of their clients, regardless of their portfolio size, can buy or sell a stock for $9.95 to $9.99 – a low fee historically reserved for clients with tens of thousands of dollars to invest.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 22bp, FixedResets gaining 6bp and DeemedRetractibles flat. Volatility was minimal. Several issues saw heavy volume, but overall it was a light trading day.
PerpetualDiscounts now yield 5.61%, equivalent to 7.29% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.6%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 270bp, a slight (and perhaps spurious) narrowing from the 275bp reported February 5.
| 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 | 0.8723 % | 2,391.3 |
| FixedFloater | 4.74 % | 4.33 % | 27,587 | 17.76 | 1 | -0.1993 % | 3,578.1 |
| Floater | 3.03 % | 3.13 % | 53,373 | 19.37 | 4 | 0.8723 % | 2,582.0 |
| OpRet | 4.61 % | -3.11 % | 71,673 | 0.13 | 3 | 0.1614 % | 2,687.8 |
| SplitShare | 4.87 % | 5.07 % | 61,744 | 4.34 | 5 | -0.0322 % | 3,011.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1614 % | 2,457.7 |
| Perpetual-Premium | 5.67 % | 1.41 % | 96,322 | 0.08 | 12 | -0.0945 % | 2,333.9 |
| Perpetual-Discount | 5.56 % | 5.61 % | 151,125 | 14.46 | 26 | -0.2229 % | 2,386.8 |
| FixedReset | 4.91 % | 3.72 % | 212,474 | 6.24 | 82 | 0.0598 % | 2,486.2 |
| Deemed-Retractible | 5.12 % | 4.06 % | 162,985 | 1.94 | 42 | 0.0029 % | 2,421.8 |
| FloatingReset | 2.65 % | 2.61 % | 166,636 | 7.12 | 6 | -0.0335 % | 2,442.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| ELF.PR.F | Perpetual-Discount | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-12 Maturity Price : 22.67 Evaluated at bid price : 22.91 Bid-YTW : 5.84 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.F | FixedReset | 300,600 | TD crossed 300,000 at 25.51. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 2.46 % |
| FTS.PR.H | FixedReset | 222,567 | Desjardins crossed 210,700 at 20.90, I think – there’s a cancellation listed, but no replacement. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-12 Maturity Price : 20.93 Evaluated at bid price : 20.93 Bid-YTW : 3.73 % |
| FTS.PR.F | Perpetual-Discount | 220,100 | Desjardins crossed 216,500 at 23.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-12 Maturity Price : 22.59 Evaluated at bid price : 22.87 Bid-YTW : 5.36 % |
| FTS.PR.J | Perpetual-Discount | 194,890 | Desjardins crossed 188,900 at 22.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-12 Maturity Price : 21.85 Evaluated at bid price : 22.17 Bid-YTW : 5.35 % |
| BAM.PR.P | FixedReset | 112,210 | Scotia crossed 54,800 at 25.88. TD crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 3.20 % |
| NA.PR.S | FixedReset | 109,246 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-12 Maturity Price : 23.14 Evaluated at bid price : 24.97 Bid-YTW : 3.92 % |
| PWF.PR.H | Perpetual-Premium | 103,638 | Nesbitt crossed two blocks of 50,000 each, both at 25.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-14 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 1.52 % |
| GWO.PR.F | Deemed-Retractible | 102,004 | TD crossed 94,500 at 25.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-14 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : -5.46 % |
| There were 22 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| ELF.PR.F | Perpetual-Discount | Quote: 22.91 – 23.31 Spot Rate : 0.4000 Average : 0.3021 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 22.99 – 23.27 Spot Rate : 0.2800 Average : 0.1987 YTW SCENARIO |
| FTS.PR.F | Perpetual-Discount | Quote: 22.87 – 23.14 Spot Rate : 0.2700 Average : 0.1980 YTW SCENARIO |
| HSB.PR.C | Deemed-Retractible | Quote: 25.25 – 25.53 Spot Rate : 0.2800 Average : 0.2083 YTW SCENARIO |
| FTS.PR.K | FixedReset | Quote: 24.40 – 24.65 Spot Rate : 0.2500 Average : 0.1797 YTW SCENARIO |
| TRP.PR.C | FixedReset | Quote: 22.12 – 22.33 Spot Rate : 0.2100 Average : 0.1418 YTW SCENARIO |