June 26, 2015

I forgot to mention this earlier: Tiff Macklem has gone through the revolving door:

Bank of Nova Scotia appointed Tiff Macklem, a former Bank of Canada senior deputy governor, to its board of directors.

Macklem stepped down from the Ottawa-based central bank in May 2013 and has been serving as dean of the University of Toronto’s Rotman School of Management since July of that year.

“Tiff’s professional experience and understanding of the financial-services industry makes him a strong addition,” Thomas O’Neill, chairman of the board of directors at Canada’s third-largest bank by assets, said in a statement Monday.

The Russell indices were rebalanced today:

The Russell indexes are about to go through their annual rebalancing, leading to what Convergex, the global brokerage firm that’s based in New York, says will “almost certainly be the busiest trading day of the year.”

What’s more, as much as half of today’s trading volume may come in the last five minutes of the session.

Russell’s large-cap index includes 1,000 corporate names while the small-cap index has 2,000. Together they cover more than 90 percent of “reasonably investable” U.S. stocks, according to Convergex.

It will be interesting to learn whether there is any weeping from the regulators regarding institutional desk ‘trading against their clients’ by accumulating positions in advance. Why not? That’s the sort of idiotic wail we’ve heard about FX fixing.

As it happens, Convergex’ prediction didn’t come true:

About 8.9 billion shares changed hands in the U.S. today, the third-busiest session of the year. Russell’s U.S. stock indexes, including the Russell 1000 Index and the Russell 2000, are used as benchmarks for $5.2 trillion in assets, according to the company’s website.

Bloomberg published a nice chart illustrating Greek bank deposits:

GreekDeposits_150626
Click for Big

My old buddy Doug Grieve, who was on the preferred share institutional desk at Nesbitt for a long, long time, has recently become the Portfolio Manager for Lysander-Slater Preferred Share Dividend Fund.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 10bp, FixedResets gaining 30bp and DeemedRetractibles down 13bp. The Performance Highlights table is dominated by winning FixedResets – we haven’t seen that for a while! 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:

impVol_TRP_150626
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 20.42 to be $0.84 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.82 cheap at its bid price of 16.25.

impVol_MFC_150626
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). The lowest spread issue, MFC.PR.F, is again noticeably off the line defined by the higher-spread issues.

Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 22.75 to be $0.46 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.83 to be $0.31 cheap.

impVol_BAM_150626
Click for Big

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 19.50 to be $0.63 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 22.08 and appears to be $0.51 rich.

impVol_FTS_150626
Click for Big

FTS.PR.H, with a spread of +145bp, and bid at 16.80, looks $0.16 cheap and resets 2020-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.27 and is $0.18 rich.

pairs_FR_150626
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.30%, including the outlier TRP.PR.A / TRP.PR.F at -0.50%. On the junk side there are two outliers: FFH.PR.E / FFH.PR.F at -0.54%; and BRF.PR.A / BRF.PR.B at -0.25%.

pairs_FF_150626
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 0.3124 % 2,160.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3124 % 3,777.5
Floater 3.58 % 3.60 % 61,691 18.28 3 0.3124 % 2,296.7
OpRet 4.78 % -8.20 % 22,554 0.08 1 0.0000 % 2,781.3
SplitShare 4.58 % 4.81 % 73,896 3.26 3 0.1742 % 3,254.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,543.2
Perpetual-Premium 5.48 % 4.24 % 62,311 0.51 19 0.1339 % 2,516.6
Perpetual-Discount 5.27 % 5.20 % 116,415 15.07 15 -0.0993 % 2,669.4
FixedReset 4.55 % 3.80 % 235,375 16.09 88 0.2959 % 2,333.2
Deemed-Retractible 5.04 % 3.38 % 112,680 0.89 34 -0.1343 % 2,606.7
FloatingReset 2.49 % 2.92 % 56,168 6.09 9 0.0542 % 2,334.7
Performance Highlights
Issue Index Change Notes
BAM.PF.E FixedReset -2.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.70
Evaluated at bid price : 22.08
Bid-YTW : 4.24 %
BAM.PF.B FixedReset -1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.28
Evaluated at bid price : 21.56
Bid-YTW : 4.33 %
MFC.PR.B Deemed-Retractible -1.64 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.24
Bid-YTW : 6.24 %
FTS.PR.J Perpetual-Discount -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 23.07
Evaluated at bid price : 23.41
Bid-YTW : 5.11 %
FTS.PR.K FixedReset -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.27
Evaluated at bid price : 21.27
Bid-YTW : 3.80 %
BAM.PR.C Floater -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 13.51
Evaluated at bid price : 13.51
Bid-YTW : 3.69 %
MFC.PR.N FixedReset 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.83
Bid-YTW : 4.72 %
ENB.PR.D FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 4.92 %
MFC.PR.K FixedReset 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 4.68 %
NA.PR.S FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 23.00
Evaluated at bid price : 24.32
Bid-YTW : 3.55 %
FTS.PR.H FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.80
Evaluated at bid price : 16.80
Bid-YTW : 3.67 %
BMO.PR.T FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.03
Evaluated at bid price : 22.51
Bid-YTW : 3.73 %
TRP.PR.E FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.14
Evaluated at bid price : 22.70
Bid-YTW : 3.83 %
MFC.PR.M FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.12
Bid-YTW : 4.63 %
MFC.PR.F FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.25
Bid-YTW : 7.14 %
BMO.PR.W FixedReset 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.04
Evaluated at bid price : 22.55
Bid-YTW : 3.68 %
BAM.PR.T FixedReset 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 4.17 %
BAM.PR.B Floater 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 3.46 %
IAG.PR.G FixedReset 2.45 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.65
Bid-YTW : 4.13 %
TRP.PR.C FixedReset 3.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.25
Evaluated at bid price : 16.25
Bid-YTW : 3.92 %
TD.PF.A FixedReset 3.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 22.17
Evaluated at bid price : 22.75
Bid-YTW : 3.71 %
HSE.PR.A FixedReset 3.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.25
Evaluated at bid price : 16.25
Bid-YTW : 4.32 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.R FloatingReset 153,921 Desjardins bought blocks of 17,100 and 85,500 from RBC, both at 24.05. TD crossed 50,000 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.02
Bid-YTW : 2.87 %
ENB.PR.N FixedReset 88,870 TD crossed 74,800 at 18.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 18.91
Evaluated at bid price : 18.91
Bid-YTW : 4.94 %
ENB.PR.F FixedReset 77,669 Scotia crossed 41,900 at 18.20; RBC bought 10,000 from Nesbitt at 18.25.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 18.28
Evaluated at bid price : 18.28
Bid-YTW : 4.94 %
BNS.PR.R FixedReset 71,895 Nesbitt crossed 35,000 at 25.51.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 3.18 %
CU.PR.F Perpetual-Discount 45,608 Scotia crossed 40,000 at 21.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.56
Evaluated at bid price : 21.85
Bid-YTW : 5.19 %
ENB.PR.T FixedReset 34,865 Scotia crossed 30,000 at 18.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 18.36
Evaluated at bid price : 18.36
Bid-YTW : 4.94 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.C Deemed-Retractible Quote: 22.13 – 22.99
Spot Rate : 0.8600
Average : 0.5876

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.13
Bid-YTW : 6.15 %

BAM.PF.B FixedReset Quote: 21.56 – 22.00
Spot Rate : 0.4400
Average : 0.2957

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 21.28
Evaluated at bid price : 21.56
Bid-YTW : 4.33 %

MFC.PR.B Deemed-Retractible Quote: 22.24 – 22.64
Spot Rate : 0.4000
Average : 0.2636

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.24
Bid-YTW : 6.24 %

MFC.PR.F FixedReset Quote: 17.25 – 17.84
Spot Rate : 0.5900
Average : 0.4554

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.25
Bid-YTW : 7.14 %

IFC.PR.A FixedReset Quote: 19.26 – 19.84
Spot Rate : 0.5800
Average : 0.4506

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.26
Bid-YTW : 6.46 %

CIU.PR.C FixedReset Quote: 16.56 – 17.23
Spot Rate : 0.6700
Average : 0.5541

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-06-26
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 3.65 %

2 Responses to “June 26, 2015”

  1. Nestor says:

    well, whatever money might have still been in the banking system in Greece is being sucked out as fast as the Greeks can withdraw it.

  2. jiHymas says:

    At sixty euros per day each, as reported June 29; and now I see that the ATMs are pretty much empty anyway:

    Foreigners can take out as much as they want, provided a machine has any cash.

    In a day and age when most tourists go abroad with little more than a credit or debit card, the sudden cash crunch is adding an unexpected wrinkle to holidaymakers’ vacations, just as Greece enters peak tourist season. Kerry Carter and her family, for instance, landed in Athens on Sunday from Boston with little more than $140 and wasn’t able to access more at the airport.

    “It was a real worry when we arrived,” she said, sitting outside the Church of Theotokos Gorgoepikos and Ayios Eleytherios. She tried to pay the cab driver with a credit card, though she said he just laughed. The family was able to access more money Monday.

    Majestic Travel founder Elman Vasileios said his agency has already taken 1,500 cancellations of Greek holidays this week, mostly from Americans.

    “People are scared — the uncertainty,” Vasileios said in his office. “I had to pay for the food of a client the other day. We are talking 20 euros. They just didn’t have it. Six people in Santorini can’t pay the taxi driver. I was just off the phone to them.”

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