Interesting article in the Globe about global real estate flows:
In June, Citigroup Inc. paid a record HK$5.4-billion ($697-million) for a Hong Kong office tower that will bring most of its 5,000 employees under one roof. Canada’s Manulife Financial Corp. last year paid HK$4.5-billion for a similar-size tower and development in the city’s Kowloon district.
“Canadians are buying everywhere,” said Ross Moore, director of Canada research at CBRE Group Inc., the biggest commercial broker. “They are shopping the world. What’s happened in the last five to 10 years is the big pension funds pretty well own everything of quality in Canada. They love real estate and have all this money coming in and they have to put it somewhere.”
Toronto-based Brookfield Asset Management Inc. has started investing in European warehouse properties and Indian offices after accumulating the biggest holdings of office buildings in both the U.S. and Canada. The real estate unit of Ontario Teachers’ Pension Plan has been investing in Brazil as well as the U.K. and Australia. Canadian Pension Plan Investment Board has bought London residential, retail and office properties.
Europe’s trying everything to stimulate:
The European Central Bank cut interest rates and will start buying assets, in a bid to boost the flow of funding for the euro-area economy while stopping short of broad-based quantitative easing.
ECB President Mario Draghi’s plan to buy asset-backed securities and covered bonds pushed the euro below $1.30 for the first time since July 2013 as he said the inflation outlook had worsened. Germany’s Jens Weidmann opposed the rate cut and ABS plan, according to two officials.
The ECB “will purchase a broad portfolio of simple and transparent securities,” Draghi said at a press conference in Frankfurt today. “Some of our council were in favor of doing more than presented.”
…
The European Commission is considering allowing banks to hold a wider range of asset-backed securities to meet liquidity requirements than foreseen by global regulators, according to an EU document obtained by Bloomberg News. Banks will be allowed to use securitizations backed by assets from car loans to small business and consumer debt under the EU rule, whereas the Basel Committee on Banking Supervision sought to limit securitizations to those backed by residential mortgage debt.
… and contagion is important:
Draghi’s stimulus is helping keep a lid on borrowing costs in the U.S. even as the growth outlook continues to improve. The nation’s joblessness fell to 6.2 percent in July from 6.7 percent in December, yet yields on the benchmark 10-year Treasury note have also tumbled from 3.03 percent at year-end. The securities yielded 2.45 percent at 10:59 a.m. in New York, up 0.05 percentage point from yesterday.
Instead of girding for rising interest rates as the economy strengthens, investors have been pouring cash into long-dated U.S. debt.
They’ve funneled $3.9 billion into BlackRock Inc. (BLK)’s iShares 7-10 Year Treasury Bond exchange-traded fund this year, the most among U.S. fixed income ETFs, Bloomberg data show. The fourth-biggest winner has been the iShares 20+ Year Treasury Bond ETF (TLT), with $1.7 billion of deposits.
Analysts keep cutting their predictions for how much borrowing costs will rise, too. They now forecast a 2.89 percent yield on the 10-year Treasury note at year-end, down from a July call of 3 percent, according to a Bloomberg survey.
Today’s mail brought me a wonderful book, Contingent Convertibles [CoCos], by George M. von Furstenberg. I’ve only skimmed it, but it does include a phrase that most of us will have hoped was obvious:
A [Conversion Price] should be part of the cocos covenant so that the number of common shares issued at conversion is known already from the time the cocos are initially offered.
Sadly, that ain’t how they’ll work in Canada.
It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 14bp, FixedResets down 10bp and DeemedRetractibles off 6bp. Volatility was high. Volume was low.
| 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 | -0.1107 % | 2,635.2 |
| FixedFloater | 4.15 % | 3.40 % | 25,775 | 18.57 | 1 | 0.0437 % | 4,180.3 |
| Floater | 2.91 % | 3.07 % | 51,057 | 19.48 | 4 | -0.1107 % | 2,725.0 |
| OpRet | 4.05 % | -1.82 % | 97,510 | 0.08 | 1 | 0.1186 % | 2,729.3 |
| SplitShare | 4.29 % | 3.93 % | 118,197 | 3.95 | 5 | -0.2035 % | 3,151.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1186 % | 2,495.6 |
| Perpetual-Premium | 5.46 % | 0.13 % | 79,676 | 0.08 | 20 | -0.0177 % | 2,438.7 |
| Perpetual-Discount | 5.22 % | 5.15 % | 109,891 | 15.19 | 16 | -0.1391 % | 2,604.2 |
| FixedReset | 4.24 % | 3.69 % | 181,601 | 6.55 | 74 | -0.0998 % | 2,566.3 |
| Deemed-Retractible | 5.00 % | 1.18 % | 107,333 | 0.16 | 42 | -0.0550 % | 2,566.3 |
| FloatingReset | 2.62 % | 2.00 % | 78,653 | 3.77 | 6 | 0.1705 % | 2,528.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TD.PF.B | FixedReset | -4.22 % | There’s a bid at 25.01 on the consolidated tape, but no bid, not even one, as of the “last” quote on the Toronto Exchange tape. There may have been a closing bid, but the Exchange refuses to sell closing quotes. Rather than “zero”, HIMIPref™ has substituted a bid one dollar below the ask. I thought the TMX was supposed to have market makers! This is just more idiocy brought to you by the morons in charge of the TMX. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.81 Evaluated at bid price : 24.05 Bid-YTW : 3.94 % |
| TRP.PR.E | FixedReset | -1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 23.22 Evaluated at bid price : 25.21 Bid-YTW : 3.88 % |
| FTS.PR.F | Perpetual-Discount | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 24.06 Evaluated at bid price : 24.33 Bid-YTW : 5.05 % |
| GWO.PR.S | Deemed-Retractible | -1.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 5.09 % |
| BAM.PR.R | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 23.84 Evaluated at bid price : 25.61 Bid-YTW : 3.87 % |
| TRP.PR.C | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.27 Evaluated at bid price : 22.66 Bid-YTW : 3.54 % |
| VNR.PR.A | FixedReset | 1.17 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.87 Bid-YTW : 3.39 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PR.O | Deemed-Retractible | 152,443 | TD crossed 149,900 at 25.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.24 Bid-YTW : 1.67 % |
| BAM.PR.P | FixedReset | 83,006 | Called for redemption September 30. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : 2.88 % |
| TRP.PR.D | FixedReset | 57,835 | RBC crossed 49,900 at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 3.81 % |
| MFC.PR.M | FixedReset | 34,025 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.92 % |
| TD.PF.B | FixedReset | 30,867 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.81 Evaluated at bid price : 24.05 Bid-YTW : 3.94 % |
| TRP.PR.A | FixedReset | 29,377 | Nesbitt crossed 25,000 at 23.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-04 Maturity Price : 22.22 Evaluated at bid price : 22.93 Bid-YTW : 3.78 % |
| There were 24 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TD.PF.B | FixedReset | Quote: 24.05 – 25.05 Spot Rate : 1.0000 Average : 0.5582 YTW SCENARIO |
| TD.PR.S | FixedReset | Quote: 25.50 – 25.92 Spot Rate : 0.4200 Average : 0.2432 YTW SCENARIO |
| TRP.PR.E | FixedReset | Quote: 25.21 – 25.60 Spot Rate : 0.3900 Average : 0.2393 YTW SCENARIO |
| IAG.PR.A | Deemed-Retractible | Quote: 23.00 – 23.30 Spot Rate : 0.3000 Average : 0.1959 YTW SCENARIO |
| BAM.PR.R | FixedReset | Quote: 25.61 – 25.88 Spot Rate : 0.2700 Average : 0.1685 YTW SCENARIO |
| GWO.PR.S | Deemed-Retractible | Quote: 25.30 – 25.58 Spot Rate : 0.2800 Average : 0.1819 YTW SCENARIO |