The loonie got hit today:
The Canadian dollar fell to the lowest level in five months as crude oil, the nation’s largest export, traded at almost its lowest point in more than a year.
The currency weakened against all its 16 major peers after a report showed home prices were unchanged in July, the second indicator this week to suggest the housing market is fading as a driver of economic growth. The Bank of Canada said last week it is waiting for strong-enough exports to take the burden of economic growth from over-indebted consumers, prompting speculation it would lag behind the U.S. Federal Reserve raising interest rates.
…
The loonie, as the Canadian dollar is called for the image of the aquatic bird on the C$1 coin, fell 0.9 percent to C$1.1035 per U.S. dollar at 5 a.m. in Toronto. It reached C$1.1059, the weakest since April 1. One loonie buys 90.62 U.S. cents.Crude oil fell as much as 1.4 percent to $90.43 per barrel in New York, the lowest since May 2013, before trading at $93.14, according to data compiled by Bloomberg.
BMO NVCC-compliant sub-debt got a provisional rating of A(low) from DBRS:
DBRS has today assigned a provisional rating of A (low) with a Stable trend to the Bank of Montreal’s (the Bank or BMO) Series H Medium Term-Notes (Subordinated Indebtedness) (NVCC Sub Debt Series H or Series H).
DBRS assigned the NVCC Sub Debt Series H a rating equal to the Bank’s intrinsic assessment, less three rating notches, because Series H has only the Office of the Superintendent of Financial Institutions (OSFI)-required non-viable contingent capital (NVCC) triggers and no additional triggers. Furthermore, in the event of a conversion to common shares, NVCC Sub Debt Series H has a potential for recovery which is sufficiently better than BMO’s existing NVCC Preferred Shares to allow for a differentiation in the Series H rating relative to the NVCC Preferred Shares rating. Please see the DBRS press release entitled “DBRS Provides Guidance on Canadian Bank Non-Viability Contingent Capital Ratings” dated January 10, 2014, for more details.
Those with good memories will remember the rating on the BMO NVCC-compliant preferreds:
DBRS has today provisionally rated Bank of Montreal’s (the Bank) Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 27 (NVCC Preferred Shares Series 27 or Series 27) at Pfd-2 with a Stable trend.
DBRS assigned the NVCC Preferred Shares Series 27 a rating equal to the Bank’s intrinsic assessment less four rating notches because the Series 27 has only an Office of the Superintendent of Financial Institutions (OSFI)-compliant non-viable contingent capital (NVCC) trigger, which is consistent with the OSFI requirements for NVCC instruments, and no additional triggers.
The relative recovery hopes of sub-debt and preferreds were discussed in the posts Royal Bank Issues NVCC-Compliant Sub-Debt and Feds Consulting on Bank Recapitalization Regime.
CU Inc., proud issuer of CIU.PR.A and CIU.PR.C, was confirmed at Pfd-2(high) by DBRS:
DBRS has today confirmed the Issuer Rating, Unsecured Debentures & Medium-Term Notes, Commercial Paper and Cumulative Preferred Shares of CU Inc. (CUI or the Company) at A (high), A (high), R-1 (low) and Pfd-2 (high), respectively. All trends are Stable, reflecting that CUI is on track to complete its heavy capital spending for the 2012 to 2016 period. The rating assumes further weakness in the debt-to-cash flow ratio over the next two years because of the elevated level of capital expenditures (capex), but this ratio is not expected to materially deviate from the current rating category while other key metrics, including the debt-to-capital and interest coverage ratios, may also weaken but will remain within the acceptable range.
CUI’s business risk profile is expected to benefit from the approximately $9.8 billion of capex spent over the 2012 to 2016 period, strengthening the Company’s internally generated cash flow capability. Once completed, the Company’s rate base will be double that of 2011 levels.
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CUI’s financial risk profile has weakened because of the significant level of capex over the past few years. This has led to deterioration in the Company’s debt-to-capital and cash flow-to-debt ratios, which are expected to be pressured further in 2015. This temporary weakness in CUI’s key metrics is not, however, expected to negatively affect the Company’s current ratings. Following the completion of the transmission build-out in 2016, CUI will benefit from a higher rate base and its key financial ratios should recover to historical levels consistent with the current rating category. The large capex spent on transmission infrastructure is also considered to be a low-risk investment as it will provide stable returns once in service. For the remaining duration of the transmission build-out period, CUI is expected to finance its capex largely through debt issuances, along with continued support from its parent, Canadian Utilities Limited (rated “A” by DBRS), through timely equity injections and lower dividend payout requirements. Although this will likely result in a higher debt-to-capital ratio, the Company is committed to maintaining its leverage at approximately 60% to be in line with its regulatory capital structures and to still be commensurate with the “A” rating range. DBRS also expects the Company’s cash flow-to-debt ratio to remain above 10% during the transmission build-out period.
It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 30bp, FixedResets up 13bp and DeemedRetractibles gaining 10bp. Volatility was good, comprised entirely of winners and everything except the Floater was issued by BAM. Did people forget that BAM went ex-dividend today? Volume was very low, but notable for a heavy presence of ENB issues in the highlights, presumably due to the new issue announcement.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | 0.7658 % | 2,660.9 |
| FixedFloater | 4.15 % | 3.40 % | 26,018 | 18.56 | 1 | 0.0000 % | 4,183.9 |
| Floater | 2.90 % | 3.04 % | 45,384 | 19.64 | 4 | 0.7658 % | 2,751.6 |
| OpRet | 4.04 % | -1.83 % | 96,820 | 0.08 | 1 | 0.1580 % | 2,731.4 |
| SplitShare | 4.28 % | 3.82 % | 113,393 | 3.93 | 5 | 0.0874 % | 3,155.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1580 % | 2,497.6 |
| Perpetual-Premium | 5.46 % | 0.42 % | 83,638 | 0.09 | 20 | 0.1729 % | 2,441.3 |
| Perpetual-Discount | 5.22 % | 5.11 % | 106,214 | 15.24 | 16 | 0.2951 % | 2,614.8 |
| FixedReset | 4.25 % | 3.74 % | 179,672 | 6.61 | 74 | 0.1284 % | 2,564.9 |
| Deemed-Retractible | 4.99 % | 0.60 % | 99,809 | 0.20 | 42 | 0.1046 % | 2,568.8 |
| FloatingReset | 2.62 % | -1.43 % | 83,043 | 0.08 | 6 | 0.1178 % | 2,532.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.N | Perpetual-Discount | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 21.55 Evaluated at bid price : 21.55 Bid-YTW : 5.53 % |
| BAM.PF.D | Perpetual-Discount | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 21.84 Evaluated at bid price : 22.16 Bid-YTW : 5.53 % |
| BAM.PF.E | FixedReset | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.16 Evaluated at bid price : 25.09 Bid-YTW : 4.08 % |
| BAM.PR.M | Perpetual-Discount | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 21.60 Evaluated at bid price : 21.60 Bid-YTW : 5.52 % |
| PWF.PR.A | Floater | 1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 20.86 Evaluated at bid price : 20.86 Bid-YTW : 2.53 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PF.E | FixedReset | 84,700 | RBC crossed 50,000 at 25.00; Scotia crossed 80,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.13 Evaluated at bid price : 25.02 Bid-YTW : 4.23 % |
| BMO.PR.J | Deemed-Retractible | 52,376 | RBC crossed 50,000 at 25.79. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-11 Maturity Price : 25.50 Evaluated at bid price : 25.75 Bid-YTW : -4.92 % |
| MFC.PR.M | FixedReset | 52,255 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.08 Bid-YTW : 3.91 % |
| ENB.PF.A | FixedReset | 50,100 | Scotia crossed 37,000 at 24.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.16 Evaluated at bid price : 25.05 Bid-YTW : 4.19 % |
| ENB.PF.C | FixedReset | 36,881 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.14 Evaluated at bid price : 25.03 Bid-YTW : 4.18 % |
| PWF.PR.S | Perpetual-Discount | 34,654 | RBC crossed 27,100 at 24.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-09-11 Maturity Price : 23.65 Evaluated at bid price : 24.01 Bid-YTW : 5.04 % |
| There were 14 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.G | FixedFloater | Quote: 22.91 – 23.07 Spot Rate : 0.1600 Average : 0.1064 YTW SCENARIO |
| SLF.PR.I | FixedReset | Quote: 26.08 – 26.23 Spot Rate : 0.1500 Average : 0.1182 YTW SCENARIO |
| FTS.PR.H | FixedReset | Quote: 20.62 – 20.80 Spot Rate : 0.1800 Average : 0.1503 YTW SCENARIO |
| BNS.PR.B | FloatingReset | Quote: 25.56 – 25.66 Spot Rate : 0.1000 Average : 0.0764 YTW SCENARIO |
| BMO.PR.S | FixedReset | Quote: 25.30 – 25.38 Spot Rate : 0.0800 Average : 0.0579 YTW SCENARIO |
| FTS.PR.F | Perpetual-Discount | Quote: 24.23 – 24.43 Spot Rate : 0.2000 Average : 0.1782 YTW SCENARIO |