Nothing happened today … well, equities got banged up.
It was a poor day for the Canadian preferred share market, with PerpetualDiscounts off 3bp, FixedResets losing 25bp and DeemedRetractibles down 11bp. The lengthy Performance Highlights table is dominated by losing FixedResets. Volume was 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 23.50 to be $1.14 rich, while TRP.PR.B, which will reset June 30 at 2.152% (+128), is $0.62 cheap at its bid price of 14.77
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). It is clear that the lowest spread issue, MFC.PR.F, is well off the relationship defined by the other issues, but this doesn’t resolve the conundrum – it just makes it more conundrous.
Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.75 to be $0.94 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.00 to be $0.70 cheap.
Click for Big
The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.75 to be $0.40 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.77 and appears to be $0.50 rich.
Click for Big
FTS.PR.H, with a spread of +145bp, and bid at 16.05, looks $1.03 cheap and resets 2020-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.81 and is $0.56 rich.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.45%, including FTS.PR.H / FTS.PR.I at 0.91%. On the junk side, five out of the six pairs are outside the range of the graph: FFH.PR.E / FFH.PR.F at -1.22%; AIM.PR.A / AIM.PR.B at -0.35%; BRF.PR.A / BRF.PR.B at -1.05%; DC.PR.B / DC.PR.D at -0.61%; and FFH.PR.C / FFH.PR.D at +1.24%.
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 |
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| 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 | 0.5381 % | 2,204.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5381 % | 3,853.8 |
| Floater | 3.48 % | 3.52 % | 62,049 | 18.39 | 3 | 0.5381 % | 2,343.1 |
| OpRet | 4.45 % | -10.51 % | 28,215 | 0.08 | 2 | 0.0198 % | 2,780.2 |
| SplitShare | 4.59 % | 4.71 % | 70,391 | 3.31 | 3 | 0.2012 % | 3,251.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0198 % | 2,542.2 |
| Perpetual-Premium | 5.47 % | 4.86 % | 63,976 | 3.19 | 19 | -0.2671 % | 2,510.3 |
| Perpetual-Discount | 5.07 % | 5.08 % | 113,951 | 15.36 | 15 | -0.0310 % | 2,761.3 |
| FixedReset | 4.46 % | 3.87 % | 259,834 | 15.87 | 87 | -0.2472 % | 2,376.3 |
| Deemed-Retractible | 5.00 % | 3.36 % | 109,184 | 0.70 | 34 | -0.1059 % | 2,625.7 |
| FloatingReset | 2.51 % | 2.91 % | 56,279 | 6.13 | 9 | -0.1917 % | 2,333.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.N | FixedReset | -1.98 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.86 Bid-YTW : 7.15 % |
| MFC.PR.F | FixedReset | -1.82 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.77 Bid-YTW : 6.77 % |
| POW.PR.G | Perpetual-Premium | -1.80 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-04-15 Maturity Price : 25.25 Evaluated at bid price : 25.57 Bid-YTW : 5.47 % |
| HSE.PR.A | FixedReset | -1.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 4.36 % |
| IFC.PR.A | FixedReset | -1.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 5.66 % |
| TD.PF.A | FixedReset | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 22.53 Evaluated at bid price : 23.40 Bid-YTW : 3.61 % |
| GWO.PR.I | Deemed-Retractible | -1.32 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.11 Bid-YTW : 5.51 % |
| TD.PF.B | FixedReset | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 22.57 Evaluated at bid price : 23.44 Bid-YTW : 3.59 % |
| TD.PF.C | FixedReset | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 22.41 Evaluated at bid price : 23.20 Bid-YTW : 3.62 % |
| BAM.PF.A | FixedReset | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 23.14 Evaluated at bid price : 24.49 Bid-YTW : 4.08 % |
| CM.PR.P | FixedReset | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 22.46 Evaluated at bid price : 23.30 Bid-YTW : 3.59 % |
| GWO.PR.H | Deemed-Retractible | -1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.85 Bid-YTW : 5.46 % |
| BAM.PF.F | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 23.03 Evaluated at bid price : 24.50 Bid-YTW : 4.06 % |
| PWF.PR.P | FixedReset | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 3.67 % |
| SLF.PR.G | FixedReset | 1.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.35 Bid-YTW : 7.56 % |
| BAM.PR.K | Floater | 1.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 14.31 Evaluated at bid price : 14.31 Bid-YTW : 3.52 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.Y | FixedReset | 187,430 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 23.02 Evaluated at bid price : 24.65 Bid-YTW : 3.70 % |
| RY.PR.N | Perpetual-Discount | 121,736 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 24.42 Evaluated at bid price : 24.80 Bid-YTW : 4.95 % |
| RY.PR.C | Deemed-Retractible | 53,530 | Scotia crossed 33,500 at 25.25; TD crossed 20,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-24 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 2.82 % |
| MFC.PR.A | OpRet | 50,585 | Called for redemption effective June 19. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-07-19 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 3.38 % |
| BAM.PF.G | FixedReset | 36,202 | RBC crossed 25,000 at 24.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 23.08 Evaluated at bid price : 24.77 Bid-YTW : 4.01 % |
| CU.PR.G | Perpetual-Discount | 31,960 | Scotia crossed 30,000 at 22.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-08 Maturity Price : 22.26 Evaluated at bid price : 22.60 Bid-YTW : 4.99 % |
| There were 19 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| POW.PR.G | Perpetual-Premium | Quote: 25.57 – 26.31 Spot Rate : 0.7400 Average : 0.5109 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 16.86 – 17.57 Spot Rate : 0.7100 Average : 0.5030 YTW SCENARIO |
| IFC.PR.A | FixedReset | Quote: 20.75 – 21.26 Spot Rate : 0.5100 Average : 0.3345 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 23.17 – 23.72 Spot Rate : 0.5500 Average : 0.3884 YTW SCENARIO |
| GWO.PR.R | Deemed-Retractible | Quote: 24.40 – 24.89 Spot Rate : 0.4900 Average : 0.3322 YTW SCENARIO |
| GWO.PR.S | Deemed-Retractible | Quote: 26.05 – 26.50 Spot Rate : 0.4500 Average : 0.3033 YTW SCENARIO |