Kerr-rrash! Equities got hammered today and the damage is spreading:
Crude oil’s slide below $50 sent the Standard & Poor’s 500 Index (SPX) to its biggest drop since October, as selling spread from the energy industry amid concern that cuts in capital spending will hurt earnings.
Energy shares in the S&P 500 plunged 4 percent as West Texas Intermediate sank to the lowest since April 2009. Exxon Mobil Corp. lost 2.7 percent and Chevron Corp. retreated 4 percent. Caterpillar (CAT) Inc. declined 5.3 percent and an index of railroad stocks lost 3.2 percent on concern that the energy slump may hurt spending on capital equipment and crude transportation.
The S&P 500 dropped 1.8 percent to 2,020.58 for its first four-day losing streak since 2013. The gauge fell below its average price for the last 50 days. The Dow Jones Industrial Average retreated 331.34 points, or 1.9 percent, to 17,501.65. More than 7.1 billion shares changed hands on U.S. exchanges, 2.9 percent above the three-month average.
Canadian stocks posted the steepest plunge since 2013, joining a global selloff, as banks and energy producers tumbled after oil prices slumped below $50 a barrel for the first time in five years amid concern over Greece.
MEG Energy Corp. and Legacy Oil & Gas (LEG) Inc. sank at least 19 percent as energy stocks fell 5.5 percent as a group. Toronto-Dominion Bank and National Bank of Canada slumped more than 2.3 percent as bank shares declined a fourth day. First Quantum Minerals Ltd. lost 8.3 percent with copper at a four-year low.
The Standard & Poor’s/TSX Composite Index (SPTSX) fell 360.95 points, or 2.5 percent, to 14,392.70 at 4 p.m. in Toronto, the biggest decline since June 2013. The benchmark equity gauge rose 7.4 percent in 2014.
Oil prices? Yes, oil prices:
Benchmark U.S. oil prices dropped below $50 a barrel for the first time since April 2009 as surging supply signaled that the global glut that drove crude into a bear market will persist.
West Texas Intermediate slid 5 percent in New York while Brent fell below $55 in London for the first time since May 2009. Russia’s output rose to a post-Soviet high while Iraq, the second-largest producer in OPEC, plans to boost crude exports to a record this month. The price drop accelerated as the dollar climbed against the euro amid investor concern Greece might leave the currency union
Oil is in a race with the Euro, the Loonie and the Ruble:
The euro weakened to an almost nine-year low versus the dollar amid investor concern Greece might leave the currency union and on speculation the European Central Bank has moved closer to large-scale sovereign-bond purchases.
A gauge of the dollar reached the strongest in nine years with the Federal Reserve moving toward raising interest rates. The yen gained to an eight-week high against the euro as a slide in Asian stocks boosted haven demand. The Russian ruble and Canadian dollar slipped as oil fell. Brazil’s real dropped after economists boosted inflation forecasts and cut growth estimates. Volatility jumped to the highest in more than a year.
…
The euro dropped 0.6 percent to $1.1933 as of 5 p.m. in New York after sliding to $1.1864, the least since March 2006. The shared currency fell 1.3 percent to 142.76 yen and earlier reached 142.30, lowest since Nov. 10. The dollar depreciated 0.7 percent to 119.64 yen.The Bloomberg Dollar Spot Index (BCOM), which tracks the U.S. currency against 10 major peers, rose 0.2 percent to 1,143.40 and touched 1,146.49, the highest in data going back to 2005.
The Canadian preferred share market was also hit on the day, with PerpetualDiscounts off 12bp, FixedResets down 22bp and DeemedRetractibles losing 37bp. The performance highlights table is suitably lengthy, with insurance DeemedRetractibles prominent on the downside. Volume was extremely low.
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:
Click for Big
So according to this, TRP.PR.A, bid at 21.23, is $1.35 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.25 and resetting at +154bp on 2016-1-30 is $1.31 rich.
Click for Big
MFC.PR.F continues to be on 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).
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 21.35 and appears to be $0.87 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.16 and appears to be $0.98 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.
Click for Big
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 19.06, looks $0.98 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.32, looks $1.04 expensive and resets 2019-3-1
Click for Big
Pairs equivalence is all over the map.
| 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 | 0.2296 % | 2,519.7 |
| FixedFloater | 4.39 % | 3.63 % | 24,737 | 18.09 | 1 | 0.0000 % | 3,980.1 |
| Floater | 3.01 % | 3.11 % | 59,692 | 19.48 | 4 | 0.2296 % | 2,678.6 |
| OpRet | 4.05 % | 1.71 % | 102,942 | 0.45 | 1 | -0.0395 % | 2,750.9 |
| SplitShare | 4.27 % | 4.09 % | 34,694 | 3.65 | 5 | -0.0158 % | 3,204.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0395 % | 2,515.4 |
| Perpetual-Premium | 5.43 % | -4.95 % | 62,467 | 0.08 | 19 | -0.1317 % | 2,489.5 |
| Perpetual-Discount | 5.16 % | 5.03 % | 105,253 | 15.31 | 16 | -0.1189 % | 2,680.7 |
| FixedReset | 4.17 % | 3.49 % | 214,503 | 16.72 | 77 | -0.2156 % | 2,559.3 |
| Deemed-Retractible | 4.93 % | 1.04 % | 94,024 | 0.14 | 39 | -0.3705 % | 2,623.7 |
| FloatingReset | 2.68 % | 1.89 % | 60,675 | 3.40 | 7 | -0.8766 % | 2,484.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.F | FloatingReset | -5.22 % | Not really all that real, since the low for the day was 22.01, with transaction prices falling on the basis of 7,200 shares sold in the last half hour. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.31 % |
| HSE.PR.A | FixedReset | -2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.64 % |
| GWO.PR.H | Deemed-Retractible | -2.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 5.24 % |
| FTS.PR.J | Perpetual-Discount | -2.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.87 Evaluated at bid price : 24.27 Bid-YTW : 4.93 % |
| SLF.PR.E | Deemed-Retractible | -1.80 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.46 Bid-YTW : 5.34 % |
| ENB.PR.B | FixedReset | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 22.53 Evaluated at bid price : 23.02 Bid-YTW : 4.04 % |
| SLF.PR.A | Deemed-Retractible | -1.57 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.51 Bid-YTW : 5.04 % |
| SLF.PR.D | Deemed-Retractible | -1.47 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.41 Bid-YTW : 5.31 % |
| SLF.PR.C | Deemed-Retractible | -1.39 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.44 Bid-YTW : 5.29 % |
| MFC.PR.B | Deemed-Retractible | -1.35 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.16 Bid-YTW : 5.14 % |
| GWO.PR.I | Deemed-Retractible | -1.34 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 5.29 % |
| POW.PR.D | Perpetual-Discount | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 24.16 Evaluated at bid price : 24.41 Bid-YTW : 5.13 % |
| TRP.PR.C | FixedReset | -1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.39 % |
| PWF.PR.T | FixedReset | -1.14 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.11 Bid-YTW : 3.24 % |
| ENB.PR.P | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 22.54 Evaluated at bid price : 23.38 Bid-YTW : 4.07 % |
| MFC.PR.C | Deemed-Retractible | -1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 5.20 % |
| ELF.PR.H | Perpetual-Premium | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 24.63 Evaluated at bid price : 25.10 Bid-YTW : 5.48 % |
| PWF.PR.L | Perpetual-Premium | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 24.85 Evaluated at bid price : 25.17 Bid-YTW : 5.14 % |
| PWF.PR.A | Floater | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 2.75 % |
| GWO.PR.P | Deemed-Retractible | 1.28 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.11 Bid-YTW : 4.65 % |
| TRP.PR.A | FixedReset | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.23 Evaluated at bid price : 21.23 Bid-YTW : 3.80 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| FTS.PR.M | FixedReset | 152,325 | RBC crossed blocks of 96,100 and 50,000, both at 25.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.34 Evaluated at bid price : 25.54 Bid-YTW : 3.63 % |
| TRP.PR.A | FixedReset | 133,454 | Nesbitt crossed 114,000 at 21.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.23 Evaluated at bid price : 21.23 Bid-YTW : 3.80 % |
| TD.PF.C | FixedReset | 116,740 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.15 Evaluated at bid price : 24.97 Bid-YTW : 3.47 % |
| TRP.PR.F | FloatingReset | 73,755 | Recent exchange from TRP.PR.A. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 3.31 % |
| CU.PR.F | Perpetual-Discount | 52,620 | RBC crossed 50,000 at 22.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 22.19 Evaluated at bid price : 22.51 Bid-YTW : 5.04 % |
| CM.PR.P | FixedReset | 50,675 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-05 Maturity Price : 23.14 Evaluated at bid price : 24.95 Bid-YTW : 3.47 % |
| There were 7 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRP.PR.F | FloatingReset | Quote: 21.25 – 22.30 Spot Rate : 1.0500 Average : 0.6756 YTW SCENARIO |
| GWO.PR.I | Deemed-Retractible | Quote: 23.55 – 24.00 Spot Rate : 0.4500 Average : 0.2863 YTW SCENARIO |
| GWO.PR.H | Deemed-Retractible | Quote: 24.33 – 24.80 Spot Rate : 0.4700 Average : 0.3367 YTW SCENARIO |
| IAG.PR.A | Deemed-Retractible | Quote: 23.70 – 24.18 Spot Rate : 0.4800 Average : 0.3496 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 24.27 – 24.65 Spot Rate : 0.3800 Average : 0.2612 YTW SCENARIO |
| CU.PR.F | Perpetual-Discount | Quote: 22.51 – 22.90 Spot Rate : 0.3900 Average : 0.2749 YTW SCENARIO |