Despite the best efforts of the Europeans to prohibit criticism, DBRS placed Greece on Review-Negative:
DBRS, Inc. has today placed the Hellenic Republic’s long-term foreign and local currency issuer ratings of B and short-term foreign and local currency issuer ratings of R-4 Under Review with Negative Implications.
As defined in EU Regulation 462/2009, amending Regulation 1060/2009 on credit rating agencies, DBRS’s ratings on Greece are subject to certain publication restrictions, as set out in Article 8a of the Regulation, including publication in accordance with a pre-established calendar (see “2015 Planned Publication Calendar for EU Sovereign Rating Reports,” published 19 December 2014). Under Article 8a, deviation of the publication of sovereign ratings from the calendar must be accompanied by a detailed explanation of the reasons for the deviation. While the next scheduled publication date for our ratings on Greece is 12 June 2015, the deviation has been caused by DBRS’s elevated concern over the potential for a deterioration in Greece’s creditworthiness as a result of actions of the new Greek government following the general elections on 25 January 2015, and subsequent developments. Reviews are typically concluded within three months.
With respect to Greece:
If a bridging program can be agreed to at the Eurogroup meeting, there will then be some months of difficult negotiation ahead for Greece and its lenders. With Varoufakis today saying that he did not even reach an agreement to disagree with Schäuble, all parties still have a long way to go to reach the necessary common ground for a sustainable agreement.
Absent that agreement, Greek banks can continue to rely on ELA funding for the moment. (See an explainer here for how ELA works)
If there is a complete breakdown in negotiations, however, it is likely that the ECB will then take the view that the Greek banks will have become insolvent at that point, due to their holdings of Greek debt.
It was another positive day for the Canadian preferred share market, with PerpetualDiscounts gaining 11bp, FixedResets winning 22bp and DeemedRetractibles up 13bp. Despite the relatively calm index numbers, the Performance Highlights table is quite lengthy, dominated by winning 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
The respite from bad behaviour for the TRP FixedResets is over; TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.30 to be $0.85 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is bid at 16.70 to be $0.48 cheap.
Click for Big
Another excellent fit, but the numbers are 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.N, resetting at +230 on 2020-3-19, bid at 24.50 to be $0.44 rich, while MFC.PR.H, resetting at +313 on 2017-3-19, is bid at 25.71 to be $0.45 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.R, resetting at +230bp on 2016-6-30, bid at 21.49 to be $0.47 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.20 and appears to be $0.66 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 16.90, looks $1.03 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, bid at 24.20, and is $1.22 rich.
Click for Big
All the break-even rates are scattered around zero – which is at least somewhat more reasonable than being negative!
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 | 0.0329 % | 2,195.0 |
| FixedFloater | 4.42 % | 3.59 % | 21,041 | 18.28 | 1 | -0.1393 % | 4,001.9 |
| Floater | 3.28 % | 3.47 % | 59,076 | 18.56 | 4 | 0.0329 % | 2,333.4 |
| OpRet | 4.04 % | 1.78 % | 98,608 | 0.36 | 1 | 0.0790 % | 2,754.2 |
| SplitShare | 4.28 % | 4.19 % | 34,579 | 3.97 | 5 | -0.2126 % | 3,193.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0790 % | 2,518.4 |
| Perpetual-Premium | 5.32 % | -6.19 % | 58,891 | 0.08 | 24 | 0.1176 % | 2,515.1 |
| Perpetual-Discount | 4.95 % | 4.94 % | 143,141 | 15.52 | 10 | 0.1087 % | 2,787.5 |
| FixedReset | 4.41 % | 3.40 % | 221,784 | 17.13 | 79 | 0.2203 % | 2,423.2 |
| Deemed-Retractible | 4.92 % | 1.49 % | 111,046 | 0.22 | 39 | 0.1284 % | 2,643.9 |
| FloatingReset | 2.53 % | 3.03 % | 81,400 | 6.42 | 7 | 0.6444 % | 2,302.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.L | FixedReset | -3.45 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 4.11 % |
| BAM.PR.R | FixedReset | -1.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 21.49 Evaluated at bid price : 21.49 Bid-YTW : 3.60 % |
| SLF.PR.H | FixedReset | -1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 3.34 % |
| BAM.PF.B | FixedReset | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.89 Evaluated at bid price : 24.12 Bid-YTW : 3.48 % |
| CGI.PR.D | SplitShare | -1.37 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2023-06-14 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 3.73 % |
| MFC.PR.K | FixedReset | -1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.44 Bid-YTW : 4.04 % |
| TRP.PR.B | FixedReset | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 3.25 % |
| CU.PR.F | Perpetual-Discount | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 23.49 Evaluated at bid price : 23.85 Bid-YTW : 4.70 % |
| MFC.PR.F | FixedReset | 1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.01 Bid-YTW : 4.97 % |
| ENB.PR.A | Perpetual-Premium | 1.07 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-07 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : -6.32 % |
| ENB.PF.A | FixedReset | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.30 Evaluated at bid price : 23.02 Bid-YTW : 3.84 % |
| BMO.PR.L | Deemed-Retractible | 1.19 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-07 Maturity Price : 25.75 Evaluated at bid price : 26.26 Bid-YTW : -20.84 % |
| TRP.PR.F | FloatingReset | 1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 3.40 % |
| PWF.PR.P | FixedReset | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.05 % |
| ENB.PR.P | FixedReset | 1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 21.19 Evaluated at bid price : 21.19 Bid-YTW : 3.93 % |
| TD.PR.T | FloatingReset | 1.41 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.71 Bid-YTW : 2.90 % |
| ENB.PF.C | FixedReset | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.33 Evaluated at bid price : 23.10 Bid-YTW : 3.82 % |
| TRP.PR.E | FixedReset | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.92 Evaluated at bid price : 24.30 Bid-YTW : 3.22 % |
| FTS.PR.K | FixedReset | 1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.90 Evaluated at bid price : 24.12 Bid-YTW : 2.94 % |
| BMO.PR.Q | FixedReset | 2.26 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 3.79 % |
| HSE.PR.A | FixedReset | 2.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 3.55 % |
| GWO.PR.N | FixedReset | 3.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.01 Bid-YTW : 5.21 % |
| BAM.PF.E | FixedReset | 3.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 22.85 Evaluated at bid price : 24.20 Bid-YTW : 3.49 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.J | FixedReset | 301,478 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-05 Maturity Price : 23.16 Evaluated at bid price : 25.05 Bid-YTW : 3.26 % |
| BNS.PR.A | FloatingReset | 89,998 | Desjardins crossed 74,800 at 24.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.03 % |
| BNS.PR.R | FixedReset | 80,670 | Nesbitt crossed 75,000 at 25.63. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 2.91 % |
| MFC.PR.M | FixedReset | 77,315 | Scotia crossed 51,200 at 24.35. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 3.79 % |
| GWO.PR.S | Deemed-Retractible | 35,143 | Scotia crossed 25,000 at 26.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.30 Bid-YTW : 4.69 % |
| GWO.PR.Q | Deemed-Retractible | 26,273 | Scotia crossed 23,300 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-09-30 Maturity Price : 25.25 Evaluated at bid price : 25.90 Bid-YTW : 4.71 % |
| There were 25 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRP.PR.B | FixedReset | Quote: 14.75 – 15.60 Spot Rate : 0.8500 Average : 0.4853 YTW SCENARIO |
| MFC.PR.L | FixedReset | Quote: 23.50 – 24.45 Spot Rate : 0.9500 Average : 0.6244 YTW SCENARIO |
| BMO.PR.S | FixedReset | Quote: 24.66 – 25.10 Spot Rate : 0.4400 Average : 0.2833 YTW SCENARIO |
| SLF.PR.A | Deemed-Retractible | Quote: 24.92 – 25.39 Spot Rate : 0.4700 Average : 0.3275 YTW SCENARIO |
| IFC.PR.A | FixedReset | Quote: 19.65 – 20.16 Spot Rate : 0.5100 Average : 0.3833 YTW SCENARIO |
| ENB.PR.D | FixedReset | Quote: 20.15 – 20.56 Spot Rate : 0.4100 Average : 0.2834 YTW SCENARIO |