The EU is tightening the screws on Greece:
The European Central Bank heaped pressure on Greece’s new government by restricting access to its direct liquidity lines, citing concerns about the country’s commitment to existing bailout pledges.
The decision marks an escalating standoff between Greek politicians and other officials in the euro area. It came hours after new Greek Finance Minister Yanis Varoufakis met ECB President Mario Draghi to garner support for his government’s plans to tear up its 240 billion-euro ($272 billion) rescue package and renegotiate the nation’s debt.
“The ECB today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic,” the Frankfurt-based central bank said in an e-mailed statement on Wednesday. “The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the program review and is in line with existing Eurosystem rules.”
Greek lenders, who since 2010 had been able to access funds from the ECB against junk-rated collateral, must now apply for funding from their national central bank at higher rates. While a similar shut-off occurred briefly in 2012, the government and its creditors are this time at odds on how to proceed and the current move risks precipitating a Greek exit from the euro.
It was a rip-roaring day for the Canadian preferred share market, with PerpetualDiscounts winning 62bp, FixedResets up 57bp and DeemedRetractibles gaining 13bp. The Performance Highlights table is, well, about what you’d expect, heavily dominated by winning FixedResets. Volume was very high.
[Added 2015-2-5]: PerpetualDiscounts now yield 4.94%, equivalent to 6.42% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.6% (!) so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 280bp, a significant widening from the 260bp reported January 28.
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
Still a very good fit for the TRP FixedResets; the maximum error is for TRP.PR.E, which resets 2019-10-30 at +235, bid at 23.92 to be $0.43 rich.
Click for Big
Another excellent fit, but this time the numbers are more perplexing. Implied Volatility for MFC continues to be a conundrum. It is still 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).
Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.34 to be $0.66 rich, while MFC.PR.H, resetting at +313 on 2017-3-19, is bid at 25.66 to be $0.61 cheap.
Click for Big
Here’s another good fit to reasonable numbers. I hope this market doesn’t start making sense, or I’ll be out of work!
The cheapest issue relative to its peers is now BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.87 to be $0.36 cheap. BAM.PF.B, resetting at +263bp 2019-3-31 is bid at 24.46 and appears to be $0.55 rich.
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 17.00, looks $0.73 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 23.70, and is $0.92 rich.
Click for Big
Three Investment Grade FixedReset/FloatingReset pair are now showing positive break-even average three month bill rates until interconversion!
On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:
Click for Big
Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?
| 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 | 1.6234 % | 2,194.2 |
| FixedFloater | 4.41 % | 3.58 % | 21,918 | 18.29 | 1 | -0.6458 % | 4,007.5 |
| Floater | 3.29 % | 3.47 % | 57,950 | 18.58 | 4 | 1.6234 % | 2,332.6 |
| OpRet | 4.05 % | 1.99 % | 98,225 | 0.37 | 1 | 0.0395 % | 2,752.0 |
| SplitShare | 4.27 % | 4.21 % | 32,030 | 3.97 | 5 | 0.1391 % | 3,200.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0395 % | 2,516.4 |
| Perpetual-Premium | 5.33 % | -3.18 % | 60,740 | 0.08 | 24 | -0.1403 % | 2,512.2 |
| Perpetual-Discount | 4.96 % | 4.94 % | 134,407 | 15.50 | 10 | 0.6183 % | 2,784.4 |
| FixedReset | 4.42 % | 3.39 % | 219,719 | 17.08 | 79 | 0.5747 % | 2,417.9 |
| Deemed-Retractible | 4.92 % | 1.74 % | 108,145 | 0.23 | 39 | 0.1337 % | 2,640.5 |
| FloatingReset | 2.54 % | 3.12 % | 81,490 | 6.42 | 7 | 0.3390 % | 2,287.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.F | FloatingReset | -2.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 18.02 Evaluated at bid price : 18.02 Bid-YTW : 3.45 % |
| PWF.PR.P | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 3.09 % |
| ENB.PR.A | Perpetual-Premium | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 25.03 Evaluated at bid price : 25.23 Bid-YTW : 5.54 % |
| BMO.PR.S | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.18 Evaluated at bid price : 24.90 Bid-YTW : 3.00 % |
| GWO.PR.N | FixedReset | 1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.45 Bid-YTW : 5.56 % |
| CM.PR.O | FixedReset | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.16 Evaluated at bid price : 24.87 Bid-YTW : 3.01 % |
| PWF.PR.T | FixedReset | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.30 Evaluated at bid price : 25.15 Bid-YTW : 3.03 % |
| CM.PR.P | FixedReset | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.02 Evaluated at bid price : 24.60 Bid-YTW : 3.00 % |
| BAM.PR.C | Floater | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 14.42 Evaluated at bid price : 14.42 Bid-YTW : 3.49 % |
| BMO.PR.W | FixedReset | 1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.01 Evaluated at bid price : 24.55 Bid-YTW : 2.95 % |
| IAG.PR.G | FixedReset | 1.38 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 3.34 % |
| HSE.PR.A | FixedReset | 1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 16.83 Evaluated at bid price : 16.83 Bid-YTW : 3.66 % |
| MFC.PR.M | FixedReset | 1.41 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.41 Bid-YTW : 3.81 % |
| BAM.PR.K | Floater | 1.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 14.30 Evaluated at bid price : 14.30 Bid-YTW : 3.52 % |
| SLF.PR.H | FixedReset | 1.44 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.17 % |
| PWF.PR.A | Floater | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 2.84 % |
| BMO.PR.T | FixedReset | 1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.08 Evaluated at bid price : 24.67 Bid-YTW : 2.96 % |
| FTS.PR.G | FixedReset | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 22.67 Evaluated at bid price : 23.53 Bid-YTW : 3.07 % |
| ENB.PF.C | FixedReset | 1.65 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 22.13 Evaluated at bid price : 22.75 Bid-YTW : 3.89 % |
| FTS.PR.H | FixedReset | 1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.09 % |
| BNS.PR.A | FloatingReset | 1.84 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.33 Bid-YTW : 2.95 % |
| MFC.PR.L | FixedReset | 2.05 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.34 Bid-YTW : 3.68 % |
| MFC.PR.N | FixedReset | 2.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 3.72 % |
| FTS.PR.K | FixedReset | 2.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 22.71 Evaluated at bid price : 23.70 Bid-YTW : 3.01 % |
| BAM.PR.B | Floater | 2.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 3.47 % |
| CU.PR.G | Perpetual-Discount | 3.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.50 Evaluated at bid price : 23.85 Bid-YTW : 4.70 % |
| SLF.PR.G | FixedReset | 3.65 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.46 Bid-YTW : 5.58 % |
| MFC.PR.F | FixedReset | 3.94 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.80 Bid-YTW : 5.09 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.J | FixedReset | 271,103 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 23.15 Evaluated at bid price : 25.01 Bid-YTW : 3.26 % |
| BMO.PR.P | FixedReset | 102,200 | TD sold 10,000 to Nesbitt at 24.98, then crossed 90,000 at 24.99. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 3.05 % |
| TD.PR.Q | Deemed-Retractible | 55,840 | Called for redemption March 2. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-06 Maturity Price : 25.50 Evaluated at bid price : 25.59 Bid-YTW : 1.74 % |
| SLF.PR.I | FixedReset | 51,775 | Desjardins crossed 27,100 at 25.74. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.18 % |
| FTS.PR.J | Perpetual-Discount | 43,250 | RBC crossed 40,000 at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 24.69 Evaluated at bid price : 25.12 Bid-YTW : 4.78 % |
| PWF.PR.S | Perpetual-Discount | 36,225 | RBC bought 10,000 from TD at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-04 Maturity Price : 24.54 Evaluated at bid price : 24.96 Bid-YTW : 4.81 % |
| There were 53 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BNS.PR.C | FloatingReset | Quote: 23.59 – 24.85 Spot Rate : 1.2600 Average : 0.7059 YTW SCENARIO |
| BAM.PF.E | FixedReset | Quote: 23.40 – 24.20 Spot Rate : 0.8000 Average : 0.5222 YTW SCENARIO |
| ELF.PR.H | Perpetual-Premium | Quote: 25.60 – 26.31 Spot Rate : 0.7100 Average : 0.4924 YTW SCENARIO |
| PWF.PR.L | Perpetual-Premium | Quote: 25.45 – 25.90 Spot Rate : 0.4500 Average : 0.2955 YTW SCENARIO |
| ENB.PR.A | Perpetual-Premium | Quote: 25.23 – 25.58 Spot Rate : 0.3500 Average : 0.2076 YTW SCENARIO |
| SLF.PR.H | FixedReset | Quote: 24.65 – 25.30 Spot Rate : 0.6500 Average : 0.5135 YTW SCENARIO |