Nothing happened today.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 5bp, FixedResets off 1bp and DeemedRetractibles down 6bp. The Performance Highlights table is shorter than it has been of late, but still much lengthier than prior norms. Volume was very 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
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.90 to be $1.13 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is bid at 16.77 to be $0.75 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.L, resetting at +216 on 2019-6-19, bid at 24.55 to be $0.49 rich, while MFC.PR.H, resetting at +313 on 2017-3-19 is bid at 26.16 to be $0.36 cheap.
Click for Big
The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.
The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 18.02 to be $0.64 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.76 and appears to be $0.87 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 16.70, looks $1.05 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.61 and is $1.08 rich.
Click for Big
All the break-even rates are scattered around negative 10bp – the market has started believing the deflation story again!
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 | 0.7079 % | 2,210.5 |
| FixedFloater | 4.36 % | 3.52 % | 20,442 | 18.38 | 1 | -0.5936 % | 4,050.3 |
| Floater | 3.26 % | 3.47 % | 64,713 | 18.54 | 4 | 0.7079 % | 2,349.9 |
| OpRet | 4.04 % | 1.90 % | 97,536 | 0.34 | 1 | -0.1182 % | 2,754.2 |
| SplitShare | 4.26 % | 4.06 % | 28,941 | 3.55 | 5 | -0.0158 % | 3,204.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1182 % | 2,518.4 |
| Perpetual-Premium | 5.32 % | -6.28 % | 56,673 | 0.08 | 24 | 0.0424 % | 2,518.0 |
| Perpetual-Discount | 4.95 % | 4.81 % | 123,845 | 15.27 | 10 | 0.0543 % | 2,795.2 |
| FixedReset | 4.37 % | 3.35 % | 199,563 | 17.12 | 79 | -0.0135 % | 2,448.0 |
| Deemed-Retractible | 4.91 % | -0.48 % | 108,374 | 0.13 | 39 | -0.0635 % | 2,649.4 |
| FloatingReset | 2.45 % | 2.87 % | 82,658 | 6.42 | 7 | 0.2663 % | 2,316.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.G | FixedReset | -1.93 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.75 Bid-YTW : 6.23 % |
| TRP.PR.B | FixedReset | -1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-13 Maturity Price : 14.85 Evaluated at bid price : 14.85 Bid-YTW : 3.47 % |
| TRP.PR.C | FixedReset | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-13 Maturity Price : 16.77 Evaluated at bid price : 16.77 Bid-YTW : 3.53 % |
| MFC.PR.F | FixedReset | -1.22 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.25 Bid-YTW : 4.98 % |
| ENB.PR.F | FixedReset | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-13 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 4.12 % |
| FTS.PR.F | Perpetual-Discount | 1.04 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.19 Bid-YTW : 3.65 % |
| IFC.PR.A | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.00 Bid-YTW : 5.17 % |
| BAM.PR.R | FixedReset | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-13 Maturity Price : 21.55 Evaluated at bid price : 21.92 Bid-YTW : 3.65 % |
| MFC.PR.N | FixedReset | 1.18 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 3.65 % |
| PWF.PR.A | Floater | 1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-13 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 2.77 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.C | FixedReset | 80,250 | TD crossed 50,000 at 24.85. National bought 10,000 from Desjardins at 24.89. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-13 Maturity Price : 23.11 Evaluated at bid price : 24.85 Bid-YTW : 3.08 % |
| SLF.PR.G | FixedReset | 78,673 | TD crossed 40,000 at 17.82. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.75 Bid-YTW : 6.23 % |
| RY.PR.C | Deemed-Retractible | 69,642 | Desjardins crossed two blocks of 34,500 each, both at 25.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-15 Maturity Price : 25.25 Evaluated at bid price : 25.45 Bid-YTW : -6.61 % |
| MFC.PR.N | FixedReset | 49,550 | RBC crossed 46,700 at 24.83. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 3.65 % |
| MFC.PR.F | FixedReset | 38,140 | TD crossed 10,400 at 20.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.25 Bid-YTW : 4.98 % |
| CM.PR.O | FixedReset | 37,460 | TD crossed 20,000 at 24.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-13 Maturity Price : 23.17 Evaluated at bid price : 24.91 Bid-YTW : 3.12 % |
| There were 19 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.A | Floater | Quote: 18.00 – 18.99 Spot Rate : 0.9900 Average : 0.6168 YTW SCENARIO |
| PVS.PR.C | SplitShare | Quote: 25.76 – 26.50 Spot Rate : 0.7400 Average : 0.5096 YTW SCENARIO |
| GWO.PR.P | Deemed-Retractible | Quote: 26.45 – 26.90 Spot Rate : 0.4500 Average : 0.2725 YTW SCENARIO |
| MFC.PR.I | FixedReset | Quote: 25.86 – 26.25 Spot Rate : 0.3900 Average : 0.2692 YTW SCENARIO |
| MFC.PR.K | FixedReset | Quote: 24.00 – 24.40 Spot Rate : 0.4000 Average : 0.2901 YTW SCENARIO |
| MFC.PR.F | FixedReset | Quote: 20.25 – 20.55 Spot Rate : 0.3000 Average : 0.2083 YTW SCENARIO |