Canadian banks do not own hedge funds, so the TMX announced reductions in maker-taker fees:
TMX Group Ltd., the owner of the Toronto Stock Exchange and other Canadian markets, said Monday that it will cut rebates it pays traders who provide liquidity by an average of 31 percent and trading fees by 26 percent on average.
The rebate-and-fee system — called maker-taker and also deployed by American exchanges — is blamed by critics for skewing incentives for brokers and encouraging needless trading meant to simply collect the rebates. While the New York Stock Exchange’s owner last year talked about changing the system in the U.S., TMX’s statement Monday included concrete plans that are poised to be implemented.
“The maker-taker model has been controversial for a long time,” Kevan Cowan, president of TSX Markets and group head of equities, said in a phone interview from Toronto. “It’s closely linked to issues around electronic trading. We felt, based on primarily customer feedback but also what’s going on in the regulatory and competitive landscape, that now was a good time for us to take a leadership position.”
It will be noted that the banks clear-cut the competitive landscape by buying the Toronto Exchange. This move was permitted by the regulators on the grounds that the banks would pay the regulators extra money.
Treasuries took another hit today:
The 30-year bond yield rose five basis points, or 0.05 percentage point, to 2.88 percent at 5 p.m. New York time. The price of the 2.5 percent security maturing in February 2045 fell 30/32, or $9.38 per $1,000 face amount, to 92 1/2, according to Bloomberg Bond Trader prices. The yield reached the highest level since Dec. 24.
Benchmark 10-year yields rose 21 basis points last week, nearly matching the 22 basis point move in German bunds of comparable maturity, the most since January 2013.
…
The gap between yields on Treasuries maturing in five- and 30-years, known as the yield curve, widened to 1.37 percentage points, the most since December.
The 5-30 spread is – or at least should be! – important for FixedReset pricing. Steepening should(!) imply poor performance by FixedResets.
I found this piece on youthful environment interesting:
Male children who are raised in below-median income families in Baltimore earn 1.4 percent less in adult family income for each year that they’re exposed to the neighborhood. That means a man who spent his entire childhood — 20 years — in Baltimore would earn about 28 percent less relative to the national average as an adult.
That gives Baltimore the worst ranking among the 100 largest counties in the U.S. While a penalty exists for girls, too, it’s less substantial, amounting to 0.3 percent in lost earnings per childhood year.
There are pockets across the U.S. “which seem to produce especially poor outcomes for boys,” Harvard economists Raj Chetty and Nathaniel Hendren wrote in a new study. “Areas with high degrees of segregation and sprawl generate particularly negative outcomes for boys relative to girls.”
The abstract of the paper, The Impacts of Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects and County-Level Estimates, by Raj Chetty and Nathaniel Hendren, reads:
We characterize the effects of neighborhoods on children’s earnings and other outcomes in adulthood by studying more than five million families who move across counties in the U.S. Our analysis consists of two parts. In the first part, we present quasi-experimental evidence that neighborhoods affect intergenerational mobility through childhood exposure effects. In particular, the outcomes of children whose families move to a better neighborhood – as measured by the outcomes of children already living there – improve linearly in proportion to the time they spend growing up in that area. We distinguish the causal effects of neighborhoods from confounding factors by comparing the outcomes of siblings within families, studying moves triggered by displacement shocks, and exploiting sharp variation in predicted place effects across birth cohorts, genders, and quantiles. We also document analogous childhood exposure effects for college attendance, teenage birth rates, and marriage rates. In the second part of the paper, we identify the causal effect of growing up in every county in the U.S. by estimating a fixed effects model identified from families who move across counties with children of different ages. We use these estimates to decompose observed intergenerational mobility into a causal and sorting component in each county. For children growing up in families at the 25th percentile of the income distribution, each year of childhood exposure to a one standard deviation (SD) better county increases income in adulthood by 0.5%. Hence, growing up in a one SD better county from birth increases a child’s income by approximately 10%. Low-income children are most likely to succeed in counties that have less concentrated poverty, less income inequality, better schools, a larger share of two-parent families, and lower crime rates. Boys’ outcomes vary more across areas than girls, and boys have especially poor outcomes in highly-segregated areas. In urban areas, better areas have higher house prices, but our analysis uncovers significant variation in neighborhood quality even conditional on prices.
Fortis still hasn’t announced a reset rate for FTS.PR.H yet, despite the fact that it must have been calculated:
“Fixed Rate Calculation Date” means, for any Subsequent Fixed Rate Period, the 30th day prior to the first day of such Subsequent Fixed Rate Period.
…
“Subsequent Fixed Rate Period” means, for the initial Subsequent Fixed Rate Period, the period commencing on June 1, 2015 to, but excluding, June 1, 2020 and, for each succeeding Subsequent Fixed Rate Period, the period commencing on the first day of June immediately following the end of the immediately preceding Subsequent Fixed Rate Period to, but excluding, June 1 in the fifth year thereafter.
…
The Annual Fixed Dividend Rate applicable to a Subsequent Fixed Rate Period will be determined by the Corporation on the Fixed Rate Calculation Date. Such determination will, in the absence of manifest error, be final and binding upon the Corporation and upon all holders of the Series H First Preference Shares. The Corporation will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series H First Preference Shares.
I assume this figure will be released tomorrow morning:
Fortis Inc. (“Fortis” or the “Corporation”) (TSX:FTS) will release its first quarter 2015 results on Tuesday, May 5, 2015. A teleconference and webcast will be held the same day at 10:00 a.m. (Eastern). Barry Perry, President and Chief Executive Officer, Fortis, and Karl Smith, Executive Vice President, Chief Financial Officer, Fortis, will discuss the Corporation’s first quarter 2015 results.
Analysts, members of the media and other interested parties in North America are invited to participate by calling 1.877.223.4471. International participants may participate by calling 647.788.4922. Please dial in 10 minutes prior to the start of the call. No pass code is required.
It was a positive day for the Canadian preferred share market, with PerpetualDiscounts up 17bp, FixedResets winning 17bp and DeemedRetractibles gaining 1bp. The Performance Highlights table calmed down a bit, but is still 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
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.32 to be $1.21 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.96 cheap at its bid price of 25.00.
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 23.31 to be $0.40 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.48 to be $0.50 cheap.
Click for Big
The cheapest issue relative to its peers is BAM.PF.R, resetting at +230bp on 2016-6-30, bid at 20.43 to be $0.60 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.16 and appears to be $0.61 rich.
Click for Big
FTS.PR.H, with a spread of +145bp, and bid at 16.75, looks $0.65 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.03 and is $0.52 rich.
Click for Big
Investment-grade pairs now predict an average over the next five years of about 0.25%, but TRP.PR.A / TRP.PR.F is an outlier at -0.62%. The DC.PR.B / DC.PR.D pair retains its customary outlier status, with a breakeven rate of -1.39%, while the new data point for BRF.PR.A / BRF.PR.B is at -1.22% … but there has still been no trading yet for BRF.PR.B.
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 | 0.0792 % | 2,298.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0792 % | 4,018.3 |
| Floater | 3.16 % | 3.28 % | 53,773 | 19.02 | 4 | 0.0792 % | 2,443.1 |
| OpRet | 4.42 % | -1.06 % | 38,133 | 0.16 | 2 | 0.0786 % | 2,767.5 |
| SplitShare | 4.57 % | 4.90 % | 68,087 | 3.37 | 3 | -0.0134 % | 3,222.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0786 % | 2,530.6 |
| Perpetual-Premium | 5.45 % | 0.70 % | 68,360 | 0.08 | 18 | 0.0959 % | 2,522.5 |
| Perpetual-Discount | 5.02 % | 4.98 % | 114,596 | 15.44 | 15 | 0.1499 % | 2,790.1 |
| FixedReset | 4.40 % | 3.86 % | 273,131 | 16.35 | 86 | 0.1686 % | 2,413.2 |
| Deemed-Retractible | 4.93 % | 2.98 % | 113,370 | 0.30 | 36 | 0.0111 % | 2,648.4 |
| FloatingReset | 2.61 % | 2.99 % | 69,505 | 6.20 | 7 | 0.0184 % | 2,320.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IFC.PR.A | FixedReset | -1.52 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.68 Bid-YTW : 5.63 % |
| MFC.PR.M | FixedReset | -1.46 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.65 Bid-YTW : 4.45 % |
| BAM.PR.X | FixedReset | -1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 18.52 Evaluated at bid price : 18.52 Bid-YTW : 4.19 % |
| FTS.PR.H | FixedReset | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 3.84 % |
| PWF.PR.P | FixedReset | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 3.69 % |
| MFC.PR.K | FixedReset | 1.38 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.44 Bid-YTW : 4.36 % |
| GWO.PR.N | FixedReset | 1.44 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.36 Bid-YTW : 6.19 % |
| ENB.PR.F | FixedReset | 1.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 20.69 Evaluated at bid price : 20.69 Bid-YTW : 4.49 % |
| PWF.PR.A | Floater | 2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 2.83 % |
| SLF.PR.G | FixedReset | 2.54 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.20 Bid-YTW : 6.33 % |
| CIU.PR.C | FixedReset | 3.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.76 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.E | FixedReset | 52,830 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 3.69 % |
| GWO.PR.R | Deemed-Retractible | 37,100 | TD crossed 30,000 at 25.03. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.88 % |
| SLF.PR.H | FixedReset | 36,246 | RBC crossed 30,000 at 22.07. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 4.84 % |
| CM.PR.Q | FixedReset | 31,504 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 23.08 Evaluated at bid price : 24.82 Bid-YTW : 3.75 % |
| TD.PF.B | FixedReset | 30,413 | TD crossed 25,000 at 24.28. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-05-04 Maturity Price : 22.95 Evaluated at bid price : 24.28 Bid-YTW : 3.46 % |
| TRP.PR.G | FixedReset | 29,900 | RBC crossed 17,500 at 25.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-11-30 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 3.76 % |
| There were 26 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| VNR.PR.A | FixedReset | Quote: 24.13 – 24.83 Spot Rate : 0.7000 Average : 0.4552 YTW SCENARIO |
| IFC.PR.A | FixedReset | Quote: 20.68 – 21.26 Spot Rate : 0.5800 Average : 0.4049 YTW SCENARIO |
| RY.PR.H | FixedReset | Quote: 24.08 – 24.45 Spot Rate : 0.3700 Average : 0.2201 YTW SCENARIO |
| BAM.PR.Z | FixedReset | Quote: 24.41 – 24.84 Spot Rate : 0.4300 Average : 0.3154 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 18.20 – 18.50 Spot Rate : 0.3000 Average : 0.1925 YTW SCENARIO |
| PWF.PR.T | FixedReset | Quote: 24.86 – 25.25 Spot Rate : 0.3900 Average : 0.2836 YTW SCENARIO |