TD.PF.E, a FixedReset, 3.70%+287, announced April 15 has settled. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.
The issue traded 832,925 shares today (consolidated exchanges) in a range of 24.79-93 before closing at 24.91-92.
Vital statistics are:
| TD.PF.E |
FixedReset |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-04-24
Maturity Price : 23.10
Evaluated at bid price : 24.91
Bid-YTW : 3.62 % |
The calculation for Implied Volatility is a mess with a very poor fit, but this is due to the presence of two NVCC non-compliant issues that are, quite correctly, priced by the market using a different paradigm than the five NVCC compliant issues:
Click for BigThe fit is greatly improved when only NVCC-compliant issues are used for the calculation:
Click for BigHowever, as was found at the time of announcement, it is clear that the Implied Volatility of the TD series of FixedResets is unreasonably high and that we have reason to fear severe underperformance by the lower-spread issues, should spreads increase sufficiently to give pause to those who feel that any TD issue will be near par forever, regardless of its terms.
This entry was posted on Saturday, April 25th, 2015 at 12:36 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.
TD.PF.E Settles: A Little Soft On Moderate Volume
TD.PF.E, a FixedReset, 3.70%+287, announced April 15 has settled. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.
The issue traded 832,925 shares today (consolidated exchanges) in a range of 24.79-93 before closing at 24.91-92.
Vital statistics are:
Maturity Type : Limit Maturity
Maturity Date : 2045-04-24
Maturity Price : 23.10
Evaluated at bid price : 24.91
Bid-YTW : 3.62 %
The calculation for Implied Volatility is a mess with a very poor fit, but this is due to the presence of two NVCC non-compliant issues that are, quite correctly, priced by the market using a different paradigm than the five NVCC compliant issues:
Click for Big
The fit is greatly improved when only NVCC-compliant issues are used for the calculation:
Click for Big
However, as was found at the time of announcement, it is clear that the Implied Volatility of the TD series of FixedResets is unreasonably high and that we have reason to fear severe underperformance by the lower-spread issues, should spreads increase sufficiently to give pause to those who feel that any TD issue will be near par forever, regardless of its terms.
This entry was posted on Saturday, April 25th, 2015 at 12:36 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.