Update, 2014-11-30: A large portion of the material previously published in this post has been given its own dedicated post, Prof. Jeffrey MacIntosh on the National Securities Regulator
European inflation is still elusive:
Consumer prices rose 0.3 percent from a year earlier, the European Union’s statistics office in Luxembourg said today. That was in line with the median forecast of 41 economists in a Bloomberg News survey. Unemployment (UMRTEMU) held at 11.5 percent in October, Eurostat said in a separate report.
…
The Eurostat report showed that energy prices fell 2.5 percent in November from a year earlier. Crude oil has plunged more than 30 percent in the past three months. Food, alcohol and tobacco prices increased 0.5 percent.Core inflation, which strips out volatile items such as energy, food, tobacco and alcohol, stayed at 0.7 percent in November, according to Eurostat.
“The only crumb of comfort for the ECB –- and it is not much -– is that November’s renewed drop in inflation was entirely due to an increased year-on-year drop in energy prices,” said Howard Archer, chief European economist at IHS Global Insight in London.
… and at least one pundit is muttering that the oil price graph will not be V-shaped:
But Andy Xie, the often-contrarian former top Asia-Pacific economist for Morgan Stanley, warned that the massive investment overhang in China, valued at more than $6-trillion, will dramatically affect its energy demand growth, and will, as a result, rein in oil prices for a long time to come.
“China’s energy demand, the only source of growth for a decade, has fallen sharply,” he said in an interview. “There are several conspiracy theories out there. None can affect demand supply balance, which determines prices.”
In mid-September, more than a month before Goldman Sachs rocked markets with its prediction that oil prices would fall to $70 a barrel, Mr. Xie told a conference in Kuwait that he expected oil prices to nosedive to $60. The audience laughed. Now, he’s being invited back to speak again.
BMO Capital Trust is redeeming a big slug of Innovative Tier 1 Capital (or AT1, as the cool guys call it):
BMO Capital Trust (the “Trust”), a subsidiary of Bank of Montreal, today announced its intention to redeem at par all of its Trust Capital Securities – Series D (“BMO BOaTS – Series D”), on December 31, 2014. The BMO BOaTS – Series D are redeemable at the Trust’s option from December 31, 2014, at a redemption amount equal to $1,000 plus unpaid indicated distributions. Notice will be delivered to BMO BOaTS – Series D holders in accordance with the terms outlined in the BMO BOaTS – Series D prospectus.
After December 31, 2014, holders of BMO BOaTS – Series D will be entitled only to receiving the redemption price and will no longer be entitled to indicated distributions and exercising any other rights.
According to the 2013 Annual Report:
After December 31, 2014, the distribution [on BOaTS Series D] will be at the Bankers’ Acceptance Rate plus 1.5%.
…
The BMO BOaTS Series D and E and BMO T1Ns – Series A will each be automatically exchanged for 40 Class B non-cumulative preferred shares of the bank, Series 11, 12 and 20, respectively, without the consent of the holders on the occurrence of specific events, such as a wind-up of the bank, a regulatory requirement to increase capital or violations of regulatory capital requirements.
LBS.PR.A was confirmed at Pfd-3(low) by DBRS:
The performance of the Portfolio has experienced some volatility over the past few months, with the downside protection fluctuating between 46.4% and 52.0% from July to October. As of October 31, 2014, the downside protection available to the Preferred Shares is approximately 49.2% and the dividend coverage ratio is about 1.1 times. The Pfd-3 (low) rating of the Preferred Shares is based primarily on the downside protection available and the additional protection provided by an asset coverage test, which does not permit any distributions to holders of the Class A Shares if the NAV of the Company falls below $15.
The main constraints to the rating are (1) the Company’s dependence on the value and dividend policies of the securities in the Portfolio and (2) the reliance on the manager to generate a high yield on the Portfolio to meet distributions and other trust expenses without having to liquidate portfolio securities.
The Asset Coverage Ratio for this issue was 2.1-:1 as of November 27.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 26bp, FixedResets off 9bp and DeemedRetractibles gaining 4bp. Volatility was high, with the winners being exclusively BAM PerpetualDiscounts. Volume was quite low.
And that’s it for November!
| 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 | 0.0565 % | 2,543.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0565 % | 4,026.5 |
| Floater | 2.96 % | 3.08 % | 63,165 | 19.47 | 4 | 0.0565 % | 2,703.7 |
| OpRet | 4.04 % | -3.56 % | 98,179 | 0.08 | 1 | 0.0000 % | 2,760.1 |
| SplitShare | 4.27 % | 3.89 % | 49,223 | 3.76 | 5 | -0.2898 % | 3,198.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,523.8 |
| Perpetual-Premium | 5.44 % | -8.19 % | 71,631 | 0.09 | 19 | -0.0123 % | 2,485.6 |
| Perpetual-Discount | 5.11 % | 5.01 % | 110,753 | 15.41 | 16 | 0.2586 % | 2,682.2 |
| FixedReset | 4.16 % | 3.57 % | 184,950 | 4.90 | 73 | -0.0873 % | 2,587.3 |
| Deemed-Retractible | 4.95 % | -1.48 % | 99,875 | 0.09 | 40 | 0.0414 % | 2,617.4 |
| FloatingReset | 2.55 % | -4.71 % | 59,284 | 0.08 | 6 | -0.0456 % | 2,555.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.G | FixedReset | -1.28 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.52 Bid-YTW : 3.23 % |
| CGI.PR.D | SplitShare | -1.16 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.47 % |
| TRP.PR.A | FixedReset | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-28 Maturity Price : 21.46 Evaluated at bid price : 21.46 Bid-YTW : 3.98 % |
| PWF.PR.F | Perpetual-Premium | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-28 Maturity Price : 24.69 Evaluated at bid price : 25.01 Bid-YTW : 5.29 % |
| BAM.PF.C | Perpetual-Discount | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-28 Maturity Price : 22.14 Evaluated at bid price : 22.46 Bid-YTW : 5.48 % |
| BAM.PR.M | Perpetual-Discount | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-28 Maturity Price : 21.98 Evaluated at bid price : 22.36 Bid-YTW : 5.38 % |
| BAM.PR.N | Perpetual-Discount | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-28 Maturity Price : 21.88 Evaluated at bid price : 22.36 Bid-YTW : 5.37 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| HSB.PR.D | Deemed-Retractible | 62,900 | RBC bought 11,000 from Desjardins at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : -0.18 % |
| BNS.PR.M | Deemed-Retractible | 62,674 | Nesbitt crossed blocks of 28,600 and 30,000, both at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-28 Maturity Price : 25.50 Evaluated at bid price : 25.84 Bid-YTW : -7.48 % |
| BAM.PF.F | FixedReset | 37,330 | Desjardins crossed 31,000 at 25.76. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : 4.02 % |
| FTS.PR.M | FixedReset | 30,180 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 3.54 % |
| BAM.PF.A | FixedReset | 26,000 | Nesbitt crossed 22,000 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.81 Bid-YTW : 3.81 % |
| TRP.PR.B | FixedReset | 24,537 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-28 Maturity Price : 18.54 Evaluated at bid price : 18.54 Bid-YTW : 3.76 % |
| There were 19 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.G | FixedReset | Quote: 25.52 – 25.93 Spot Rate : 0.4100 Average : 0.2564 YTW SCENARIO |
| W.PR.J | Perpetual-Premium | Quote: 25.20 – 25.46 Spot Rate : 0.2600 Average : 0.1694 YTW SCENARIO |
| SLF.PR.B | Deemed-Retractible | Quote: 24.45 – 24.69 Spot Rate : 0.2400 Average : 0.1601 YTW SCENARIO |
| ENB.PR.F | FixedReset | Quote: 24.54 – 24.79 Spot Rate : 0.2500 Average : 0.1778 YTW SCENARIO |
| IAG.PR.A | Deemed-Retractible | Quote: 23.61 – 23.95 Spot Rate : 0.3400 Average : 0.2720 YTW SCENARIO |
| TD.PR.R | Deemed-Retractible | Quote: 26.46 – 26.77 Spot Rate : 0.3100 Average : 0.2423 YTW SCENARIO |