Those who live by the sword…
Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fund after losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm.
Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report. The Miami-based firm, which specializes in emerging markets, still manages seven funds with about $2.2 billion in assets. The global fund, the firm’s oldest, was betting the Swiss franc would decline, said the person, who asked not to be named because the information is private.
…
Last year, the main fund rose 14.1 percent, driven by Chinese equities and bets against currencies, including a wager that the Swiss franc would fall after citizens rejected a referendum that would require the central bank to hold at least 20 percent of its assets in gold, the investor report said.
There may be a Chinese straw in the wind:
A missed $23 million interest payment by Kaisa Group Holdings Ltd. (1638) earlier this month puts it at risk of being the first Chinese real estate company to default on its dollar-denominated bonds. That may signal deeper risks for China’s already fragile and corruption-prone property market, which according to World Bank estimates accounts for about 16 percent of economic growth.
…
Kaisa’s woes began late last year when the government in Shenzhen, less than 25 kilometers (15.5 miles) from Hong Kong, blocked approvals of its property sales and new projects in the city. It’s also being probed over alleged links to Jiang Zunyu, the former security chief of Shenzhen who was taken into custody as part of a graft probe, two people familiar with the matter said last week, asking not to be named because the connection hasn’t been made public.
…
Concern is mounting that increasing financial stress among builders could spill over into a broader credit crisis in China. New-home prices fell in 65 of the 70 cities monitored in December and were unchanged in four, the National Bureau of Statistics said in a statement yesterday. Shenzhen recorded higher prices, the first city to see an increase in four months.
…
Some of Kaisa’s Chinese creditors, meanwhile, have asked a court to freeze the company’s assets. In a statement on Jan. 9, the developer said that “several bank accounts of the group” had been frozen.It’s a reminder of the risks overseas bondholders face when Chinese companies run into trouble. China’s bankruptcy laws favor local creditors while offering fewer protections to foreign debt claims. Kaisa has a 30-day grace period to make its missed payment.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 13bp, FixedResets down 38bp and DeemedRetractibles off 9bp. A lengthy Performance Highlights table is dominated by losing FixedResets. 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 20.55, is $1.18 cheap, but it has already reset (at +192). TRP.PR.C, bid at 20.71 and resetting at +154bp on 2016-1-30 is $1.74 rich.
Click for Big
MFC.PR.F continues to be near the line defined by its peers, although it drifted up by a small amount today. 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 21.53 and appears to be $0.80 cheap, while BAM.PR.R, resetting at +230bp 2016-6-30 is bid at 25.30 and appears to be $0.88 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 18.46, looks $1.11 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp, and bid at 25.36, looks $1.29 expensive and resets 2019-3-1
Click for Big
Pairs equivalence is all over the map, but the investment grade pairs (which are presumably more closely watched and easier to trade) do show a rising trend with increasing time to interconversio which, qualitatively speaking, is entirely reasonable.
And I now have my regular high speed connection back! They tell me that the power supply on my old modem blew. Of course, virtually everything about Bell Canada blows, but that’s another story…
| 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 | 0.3264 % | 2,550.0 |
| FixedFloater | 4.40 % | 3.58 % | 19,647 | 18.32 | 1 | 1.0763 % | 4,018.6 |
| Floater | 2.97 % | 3.09 % | 55,352 | 19.51 | 4 | 0.3264 % | 2,710.8 |
| OpRet | 4.04 % | 1.39 % | 95,344 | 0.41 | 1 | 0.0000 % | 2,756.4 |
| SplitShare | 4.26 % | 4.09 % | 33,295 | 3.62 | 5 | 0.0150 % | 3,208.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,520.4 |
| Perpetual-Premium | 5.43 % | -7.84 % | 57,128 | 0.08 | 19 | -0.1543 % | 2,503.6 |
| Perpetual-Discount | 5.11 % | 4.99 % | 105,644 | 15.42 | 16 | 0.1336 % | 2,714.5 |
| FixedReset | 4.22 % | 3.38 % | 199,803 | 16.89 | 77 | -0.3780 % | 2,536.5 |
| Deemed-Retractible | 4.93 % | 0.80 % | 98,212 | 0.19 | 39 | -0.0930 % | 2,630.1 |
| FloatingReset | 2.70 % | 2.33 % | 62,135 | 3.58 | 7 | 0.1339 % | 2,459.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IFC.PR.A | FixedReset | -3.85 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 5.55 % |
| SLF.PR.G | FixedReset | -2.30 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.51 Bid-YTW : 5.47 % |
| PWF.PR.O | Perpetual-Premium | -2.09 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-18 Maturity Price : 26.00 Evaluated at bid price : 26.20 Bid-YTW : -6.08 % |
| BAM.PR.T | FixedReset | -1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.61 Evaluated at bid price : 25.20 Bid-YTW : 3.38 % |
| ENB.PR.B | FixedReset | -1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 21.59 Evaluated at bid price : 21.99 Bid-YTW : 4.05 % |
| FTS.PR.H | FixedReset | -1.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 3.50 % |
| BNS.PR.Z | FixedReset | -1.50 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 3.05 % |
| CU.PR.C | FixedReset | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.62 Evaluated at bid price : 25.36 Bid-YTW : 3.40 % |
| ENB.PR.D | FixedReset | -1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 21.90 Evaluated at bid price : 22.21 Bid-YTW : 4.01 % |
| ENB.PR.T | FixedReset | -1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 22.04 Evaluated at bid price : 22.55 Bid-YTW : 4.09 % |
| BAM.PR.R | FixedReset | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.86 Evaluated at bid price : 25.30 Bid-YTW : 3.38 % |
| ENB.PR.P | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 22.18 Evaluated at bid price : 22.74 Bid-YTW : 4.04 % |
| BAM.PF.B | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.43 Evaluated at bid price : 25.65 Bid-YTW : 3.58 % |
| IAG.PR.G | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.78 Bid-YTW : 3.08 % |
| BAM.PR.G | FixedFloater | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 21.84 Evaluated at bid price : 21.60 Bid-YTW : 3.58 % |
| FTS.PR.J | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 24.09 Evaluated at bid price : 24.50 Bid-YTW : 4.89 % |
| RY.PR.H | FixedReset | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.37 Evaluated at bid price : 25.56 Bid-YTW : 3.26 % |
| TRP.PR.C | FixedReset | 1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 20.71 Evaluated at bid price : 20.71 Bid-YTW : 3.26 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BAM.PF.G | FixedReset | 121,610 | Nesbitt crossed 119,100 at 25.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.38 Evaluated at bid price : 25.83 Bid-YTW : 3.80 % |
| ENB.PR.F | FixedReset | 118,890 | TD crossed 111,100 at 22.77. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 22.19 Evaluated at bid price : 22.66 Bid-YTW : 4.06 % |
| BAM.PF.E | FixedReset | 106,316 | Desjardins crossed 105,800 at 25.79. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 23.33 Evaluated at bid price : 25.60 Bid-YTW : 3.59 % |
| TRP.PR.A | FixedReset | 92,166 | Nesbitt crossed 69,300 at 20.48; Desjardins crossed 16,100 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 3.76 % |
| ENB.PR.H | FixedReset | 77,595 | Scotia crossed 71,800 at 20.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-01-19 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 4.08 % |
| BAM.PF.A | FixedReset | 63,001 | Desjardins crossed 54,800 at 26.08. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 3.70 % |
| There were 26 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.O | Perpetual-Premium | Quote: 26.20 – 26.75 Spot Rate : 0.5500 Average : 0.3331 YTW SCENARIO |
| ENB.PR.B | FixedReset | Quote: 21.99 – 22.49 Spot Rate : 0.5000 Average : 0.3587 YTW SCENARIO |
| RY.PR.F | Deemed-Retractible | Quote: 25.70 – 26.10 Spot Rate : 0.4000 Average : 0.2761 YTW SCENARIO |
| TD.PR.T | FloatingReset | Quote: 24.91 – 25.20 Spot Rate : 0.2900 Average : 0.1704 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 23.15 – 23.53 Spot Rate : 0.3800 Average : 0.2749 YTW SCENARIO |
| MFC.PR.K | FixedReset | Quote: 25.10 – 25.37 Spot Rate : 0.2700 Average : 0.1733 YTW SCENARIO |