December 31, 2014

Nothing happened today.

The Canadian preferred share market closed the year on a very strong note, with PerpetualDiscounts winning 52bp, FixedResets up 42bp and DeemedRetractibles gaining 23bp. The Performance Highlights Table is suitably enormous, with a large complement of winners from the credit-nervous ENB. Volume was tiny.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:

  • based on Implied Volatility Theory only
  • are relative only to other FixedResets from the same issuer
  • assume constant GOC-5 yield
  • assume constant Implied Volatility
  • assume constant spread

Here’s TRP:

impVol_TRP_141231
Click for Big

So according to this, TRP.PR.A, bid at 20.65, is $1.67 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.50 and resetting at +154bp on 2016-1-30 is $1.79 rich.

impVol_MFC_141231
Click for Big

Today’s fine performance (+2.01%!) has brought MFC.PR.F back to the line defined by its peers. Implied Volatility continues to be a conundrum. It is far too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).

impVol_BAM_141231
Click for Big

There continues to be cheapness in the lowest-spread issue, BAM.PR.X, resetting at +180bp on 2017-6-30, which is bid at 21.16 and appears to be $0.81 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.25 and appears to be $1.11 rich.

It seems clear that the higher-spread issues define a curve with significantly more Implied Volatility than is calculated when the low-spread outlier is included.
impVol_FTS_141231

This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 19.09, looks $1.05 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.42, looks $1.03 expensive and resets 2019-3-1

pairs_FR_141231
Click for Big

Pairs equivalence is all over the map, but will probably converge as volumes increase in the new year.

And that’s it for another year!

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 -0.4579 % 2,510.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4579 % 3,974.9
Floater 3.02 % 3.09 % 63,986 19.48 4 -0.4579 % 2,669.0
OpRet 4.41 % -1.83 % 23,195 0.08 2 0.0000 % 2,752.0
SplitShare 4.26 % 4.04 % 34,192 3.67 5 0.0626 % 3,209.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,516.4
Perpetual-Premium 5.44 % -4.91 % 65,647 0.09 20 0.1942 % 2,493.3
Perpetual-Discount 5.14 % 5.04 % 107,501 15.32 15 0.5221 % 2,681.8
FixedReset 4.17 % 3.57 % 231,565 8.46 77 0.4168 % 2,567.4
Deemed-Retractible 4.94 % -1.38 % 91,140 0.09 40 0.2297 % 2,633.9
FloatingReset 2.63 % -3.31 % 61,235 0.08 6 -1.9589 % 2,501.4
Performance Highlights
Issue Index Change Notes
IAG.PR.A Deemed-Retractible -1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.65
Bid-YTW : 5.33 %
PWF.PR.A Floater -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 19.01
Evaluated at bid price : 19.01
Bid-YTW : 2.78 %
ENB.PR.N FixedReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.88
Evaluated at bid price : 24.04
Bid-YTW : 4.16 %
ENB.PR.D FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.71
Evaluated at bid price : 23.52
Bid-YTW : 4.03 %
GWO.PR.H Deemed-Retractible 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.62
Bid-YTW : 5.07 %
POW.PR.G Perpetual-Premium 1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-15
Maturity Price : 25.50
Evaluated at bid price : 26.44
Bid-YTW : 4.51 %
PWF.PR.T FixedReset 1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : 2.93 %
ENB.PR.P FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.66
Evaluated at bid price : 23.62
Bid-YTW : 4.12 %
TRP.PR.B FixedReset 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 17.92
Evaluated at bid price : 17.92
Bid-YTW : 3.79 %
RY.PR.L FixedReset 1.26 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.54
Bid-YTW : 2.80 %
ENB.PR.F FixedReset 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.85
Evaluated at bid price : 23.85
Bid-YTW : 4.08 %
BAM.PF.B FixedReset 1.28 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 3.86 %
SLF.PR.D Deemed-Retractible 1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.79
Bid-YTW : 5.10 %
ENB.PF.C FixedReset 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.97
Evaluated at bid price : 24.50
Bid-YTW : 4.16 %
MFC.PR.L FixedReset 1.39 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-06-19
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 3.46 %
GWO.PR.P Deemed-Retractible 1.40 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-03-31
Maturity Price : 25.25
Evaluated at bid price : 26.01
Bid-YTW : 4.72 %
BAM.PF.D Perpetual-Discount 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 21.65
Evaluated at bid price : 21.99
Bid-YTW : 5.59 %
ENB.PR.J FixedReset 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 23.07
Evaluated at bid price : 24.55
Bid-YTW : 4.07 %
SLF.PR.E Deemed-Retractible 1.49 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 5.09 %
CU.PR.E Perpetual-Discount 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 24.47
Evaluated at bid price : 24.90
Bid-YTW : 4.95 %
CU.PR.D Perpetual-Discount 1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 24.49
Evaluated at bid price : 24.92
Bid-YTW : 4.95 %
ENB.PR.T FixedReset 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.58
Evaluated at bid price : 23.50
Bid-YTW : 4.15 %
ENB.PF.A FixedReset 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 23.03
Evaluated at bid price : 24.60
Bid-YTW : 4.15 %
MFC.PR.F FixedReset 2.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.35
Bid-YTW : 4.37 %
FTS.PR.J Perpetual-Discount 2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 24.35
Evaluated at bid price : 24.77
Bid-YTW : 4.82 %
TRP.PR.C FixedReset 2.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 3.49 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.P FixedReset 100,450 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 23.13
Evaluated at bid price : 24.93
Bid-YTW : 3.57 %
FTS.PR.J Perpetual-Discount 41,518 ITG (who?) bought blocks of 19,400 and 19,100 from Nesbitt, both at 24.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 24.35
Evaluated at bid price : 24.77
Bid-YTW : 4.82 %
TRP.PR.F FloatingReset 37,025 Newly exchanged from TRP.PR.A.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.00
Evaluated at bid price : 22.26
Bid-YTW : 3.11 %
MFC.PR.L FixedReset 32,700 Nesbitt crossed 31,700 at 25.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-06-19
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 3.46 %
TD.PF.C FixedReset 32,025 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 23.14
Evaluated at bid price : 24.95
Bid-YTW : 3.57 %
ENB.PF.E FixedReset 13,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 22.98
Evaluated at bid price : 24.56
Bid-YTW : 4.16 %
There were 0 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PVS.PR.C SplitShare Quote: 25.65 – 30.00
Spot Rate : 4.3500
Average : 2.3280

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 4.04 %

PWF.PR.A Floater Quote: 19.01 – 20.00
Spot Rate : 0.9900
Average : 0.7269

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 19.01
Evaluated at bid price : 19.01
Bid-YTW : 2.78 %

BAM.PR.N Perpetual-Discount Quote: 21.43 – 22.02
Spot Rate : 0.5900
Average : 0.4210

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 21.43
Evaluated at bid price : 21.43
Bid-YTW : 5.58 %

TRP.PR.E FixedReset Quote: 25.21 – 25.74
Spot Rate : 0.5300
Average : 0.4173

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 23.24
Evaluated at bid price : 25.21
Bid-YTW : 3.69 %

CU.PR.C FixedReset Quote: 25.87 – 26.60
Spot Rate : 0.7300
Average : 0.6227

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.87
Bid-YTW : 2.66 %

ENB.PR.Y FixedReset Quote: 22.46 – 22.82
Spot Rate : 0.3600
Average : 0.2564

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-12-31
Maturity Price : 21.97
Evaluated at bid price : 22.46
Bid-YTW : 4.27 %

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