It’s very fashionable to send people to special classes when they’re caught doing something naughty, with the apparent attitude that there’s no such thing as badness, only ignorance. I’ve always thought this was a wonderful example of preciousness and now I’ve got a perfect counterexample:
Dartmouth College accused 64 students of cheating in a sports ethics class last semester, the latest in a string of cases of academic dishonesty involving athletes at elite U.S. colleges.
Students used a hand-held device known as a clicker to answer questions for classmates who were absent, according to Randall Balmer, who teaches the class, “Sports, Ethics and Religion.”
DF.PR.A was confirmed at Pfd-3(low) by DBRS:
Since the last rating confirmation in January 2014, the NAV of the Company has been increasing. As of December 31, 2014, the downside protection available to the Preferred Shares is approximately 40.6%, and the dividend coverage ratio is 0.81 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.
FTN.PR.A was confirmed at Pfd-4(high) by DBRS:
Since the last rating confirmation in January 2014, the NAV of the Company has improved slightly, despite volatility in the markets during the year. Downside protection available to holders of the Preferred Shares rose to 43.4% as of December 31, 2014, from 42.2% on December 31, 2013. Despite the increased downside protection, the current dividend coverage ratio of around 0.46 and the reinstatement of Class A Share distributions result in an average grind of approximately 11% over the next two years. As a result, the rating has been confirmed at Pfd-4 (high).
It was a mixed day for the Canadian preferred shares market, with both PerpetualDiscounts and DeemedRetractibles off 5bp, while FixedResets were up 22bp. The volatility table was longer than normal, but indicative of nothing like the extreme volatility of the past month-odd. Volume was below average.
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 21.66, is $1.07 cheap, but it has already reset (at +192). TRP.PR.C, bid at 21.01 and resetting at +154bp on 2016-1-30 is $0.95 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 21.46 and appears to be $0.97 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.34 and appears to be $1.01 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 18.80, looks $1.07 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.25, looks $1.09 expensive and resets 2019-3-1
Click for Big
Pairs equivalence is all over the map.
And now it’s time for PrefLetter!
| 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 | -0.0846 % | 2,555.4 |
| FixedFloater | 4.38 % | 3.61 % | 23,479 | 18.11 | 1 | 0.2309 % | 3,992.9 |
| Floater | 2.96 % | 3.11 % | 57,639 | 19.47 | 4 | -0.0846 % | 2,716.6 |
| OpRet | 4.04 % | 1.48 % | 95,379 | 0.44 | 1 | 0.0790 % | 2,754.2 |
| SplitShare | 4.27 % | 3.91 % | 36,950 | 3.64 | 5 | -0.1666 % | 3,201.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0790 % | 2,518.4 |
| Perpetual-Premium | 5.45 % | -4.72 % | 60,078 | 0.08 | 19 | 0.0724 % | 2,496.3 |
| Perpetual-Discount | 5.15 % | 5.02 % | 103,523 | 15.38 | 16 | -0.0475 % | 2,690.5 |
| FixedReset | 4.18 % | 3.43 % | 206,838 | 16.79 | 77 | 0.2173 % | 2,559.8 |
| Deemed-Retractible | 4.95 % | -0.40 % | 96,268 | 0.13 | 39 | -0.0467 % | 2,619.8 |
| FloatingReset | 2.68 % | 1.95 % | 61,373 | 3.40 | 7 | 0.1548 % | 2,497.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| NA.PR.M | Deemed-Retractible | -1.40 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-08 Maturity Price : 25.75 Evaluated at bid price : 26.05 Bid-YTW : -14.88 % |
| SLF.PR.G | FixedReset | -1.35 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.21 Bid-YTW : 4.62 % |
| HSB.PR.D | Deemed-Retractible | -1.18 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-08 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 1.63 % |
| IFC.PR.A | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.64 % |
| TRP.PR.E | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.30 Evaluated at bid price : 25.40 Bid-YTW : 3.51 % |
| GWO.PR.P | Deemed-Retractible | 1.16 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.15 Bid-YTW : 4.63 % |
| BAM.PF.B | FixedReset | 1.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.38 Evaluated at bid price : 25.49 Bid-YTW : 3.72 % |
| TRP.PR.B | FixedReset | 2.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 17.99 Evaluated at bid price : 17.99 Bid-YTW : 3.52 % |
| HSE.PR.A | FixedReset | 2.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 3.59 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PF.C | FixedReset | 151,000 | TD crossed 150,000 at 24.35. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 22.81 Evaluated at bid price : 24.09 Bid-YTW : 4.11 % |
| TD.PF.C | FixedReset | 139,810 | TD sold 10,000 to RBC at 25.05, then crossed blocks of 20,000 shares, 10,000 and 39,600 at the same price. Scotia crossed 40,000 at the same price again. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.17 Evaluated at bid price : 25.05 Bid-YTW : 3.42 % |
| TD.PF.A | FixedReset | 77,235 | TD crossed 40,000 at 25.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.30 Evaluated at bid price : 25.39 Bid-YTW : 3.35 % |
| HSE.PR.C | FixedReset | 58,705 | Scotia crossed 50,000 at 25.13. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.22 Evaluated at bid price : 25.16 Bid-YTW : 4.28 % |
| TD.PF.B | FixedReset | 54,475 | Scotia crossed 52,000 at 25.24. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.26 Evaluated at bid price : 25.20 Bid-YTW : 3.38 % |
| BMO.PR.T | FixedReset | 50,920 | RBC crossed 18,500 at 25.27. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-09 Maturity Price : 23.27 Evaluated at bid price : 25.26 Bid-YTW : 3.41 % |
| There were 23 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IGM.PR.B | Perpetual-Premium | Quote: 26.00 – 26.50 Spot Rate : 0.5000 Average : 0.3110 YTW SCENARIO |
| TD.PR.S | FixedReset | Quote: 25.40 – 25.77 Spot Rate : 0.3700 Average : 0.2410 YTW SCENARIO |
| BNS.PR.Z | FixedReset | Quote: 24.40 – 24.73 Spot Rate : 0.3300 Average : 0.2015 YTW SCENARIO |
| GWO.PR.H | Deemed-Retractible | Quote: 24.24 – 24.69 Spot Rate : 0.4500 Average : 0.3273 YTW SCENARIO |
| IFC.PR.A | FixedReset | Quote: 22.50 – 22.88 Spot Rate : 0.3800 Average : 0.2609 YTW SCENARIO |
| FTS.PR.H | FixedReset | Quote: 18.80 – 19.15 Spot Rate : 0.3500 Average : 0.2402 YTW SCENARIO |