Politics in the UK may soon get interesting again:
Former U.K. Prime Minister Tony Blair warned that the Labour Party faces “annihilation” if it elects anti-austerity, pro-renationalization lawmaker Jeremy Corbyn as its new leader.
The electorate will punish the party in the 2020 U.K. election for its “self-indulgence” if the bookmakers and pollsters are right and Corbyn wins the party leadership when the result is announced on Sept. 12, Blair said in an article for the Guardian newspaper published Thursday.
“It doesn’t matter whether you’re on the left, right or center of the party, whether you used to support me or hate me. But please understand the danger we are in,” Blair wrote. “The party is walking eyes shut, arms outstretched, over the cliff’s edge to the jagged rocks below. This is not a moment to refrain from disturbing the serenity of the walk on the basis it causes ‘disunity.’ It is a moment for a rugby tackle if that were possible.”
Speaking of the UK, what’s the best way to fight street gangs? Get the kids to believe they can earn a place in the system:
As a teenager, Yasar Ugur spent his time hanging about on east London streets getting into gang fights. Now he’s up before dawn to work on a construction site after a Berkeley Group Holdings Plc project gave him a fresh start.
“This has got a future,” said Ugur, who is now 21 and a trainee site manager for London’s biggest homebuilder. “I’m still young and this is the way I’m going to progress in life.”
Ugur is one of 13 young people hired by the company through its Street Elite program, started in 2012 to address a chronic skills shortage in the construction industry. Almost 1 million building workers will be needed within 10 years in the U.K. as demand for new homes increases and older employees retire, consulting firm EC Harris estimates.
The programme smacks a bit of mollycoddling, with a derisory promise – but the reported end-result seems pretty good:
More than 200 people have completed the Street Elite program, with 80 percent going on to education, training or employment. The project uses sports coaching to prepare participants for work, by mentoring and training them to instruct children in government housing projects. Everybody who completes the nine-month program is offering a two-week internship at Berkeley.
There’s been a bit of a pause, but I’m pleased to see more drone news:
[Nova Scotia-based] Sky Squirrel deploys small drones equipped with infrared cameras to cruise the skies over vineyards, sending back images that help growers monitor for moisture level, disease, rot, insect damage and general crop health – all things that contribute to the quality of the grapes and the resulting wine.
…
In comparison, the company’s drone technology takes as many as 500 images during a single flight. “Our clients send the images to us via the cloud and we combine them into a map,” says van der Put. “Then we use a specialized image algorithm that allows us to assess crop health.” With the help of GPS positioning on their mobile devices, farmers, “can see where they are currently in the field and correlate that with the analysis” to pinpoint areas of concern, van der Put says.The result: One client managed to reduce his water usage by a third. And the system has proven 97 per cent effective at detecting diseases like Flavesence Dorée – which mainly affects European vineyards. It also picks up leafroll – a disease that can devastate vineyards, wiping out 30 to 50 per cent of the crop.
US regulators might not be able to achieve the dream of eliminating the bond market entirely, but they can make incompetence less of a handicap:
The U.S. is expanding an investigation into deceptive sales practices by bond traders even though the first major conviction in the area could be overturned.
Aided by technology that’s allowing unprecedented scrutiny of trades, the Securities and Exchange Commission is looking beyond 10 cases it’s been developing with U.S. prosecutors to examine other instances of bankers potentially lying to clients and booking improper round-trip transactions, said two people with knowledge of the matter. Some criminal charges from the first batch of probes may come as early as next month, another person said.
Going after bond traders, and in the case of the Justice Department, trying to put some of them behind bars, represents the government’s most aggressive effort yet to root out wrongdoing in the opaque world of complex debt securities. The investigations include a focus on bonds tied to mortgages and corporate loans, markets where pricing data is scarce so bank traders have an edge in marking up assets to charge higher fees.
…
Litvak’s deception allowed him to sell mortgage bonds at inflated prices, bilking customers out of $2 million, U.S. prosecutors successfully argued during his trial. Litvak’s lawyers said it didn’t matter that he misrepresented the markup as long as his sophisticated buyers — consisting of hedge funds and money managers — paid what they felt was an appropriate price.In July 2014, Litvak was sentenced to two years in prison. A three-judge panel is expected to make a decision on his appeal in the coming months.
So how about them corporate bond spreads, eh?:
The last time investors in the $11 trillion corporate-bond market were so risk-averse, it was 2013 and the Federal Reserve’s move to unwind its crisis-era stimulus had triggered what became known as the “taper tantrum.”
A little more selling and the market will be at its worst since the fourth quarter of 2012, when the world was still recovering from Europe’s sovereign debt crisis.
The extra yield investors worldwide demand to own corporate bonds instead of government securities has climbed to 2.34 percentage points, according to Bank of America Merrill Lynch index data. That’s right around the peak in June 2013, and just 0.04 percentage point from levels last reached in November 2012.
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And it’s always interesting to see what market timers have to say:
The bond market’s best and brightest keep walking back their bets on how fast Treasury yields will rise.
Even with the Federal Reserve poised to begin raising interest rates for the first time in almost a decade, economists at the world’s biggest bond shops now say they don’t see benchmark yields reaching 3 percent until the fourth quarter of next year, according to a Bloomberg News survey. As recently as December they were calling for Treasury 10-year yields to top 3 percent by year-end.
Bond gurus continue to cut their expectations for how high yields will go amid signs of global economic malaise and persistently weak inflation. China’s devaluation of the yuan this week is the latest development to boost the allure of U.S. government bonds and drag Treasury yields lower, complicating Fed Chair Janet Yellen’s efforts to boost rates.
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It was another mixed day for the Canadian preferred share market, with PerpetualDiscounts up 11bp, FixedResets off 28bp and DeemedRetractibles gaining 1bp. TRP issues were again notable on the down side of the Performance Highlights table, joined today by ENB issues. 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:
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TRP.PR.B, which resets 2020-6-30 at +128, is bid at 13.21 to be $0.44 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.80 cheap at its bid price of 13.75.
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Another good fit today!
Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.75 to be 0.45 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.49 to be $0.35 cheap.
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The fit on the BAM issues continues to be horrible.
The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 21.82 to be $1.13 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.75 and appears to be $1.36 rich.
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FTS.PR.M, with a spread of +248bp, and bid at 23.35, looks $0.38 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.17 and is $0.75 cheap.
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.27%, with no outliers. There are one junk outliers below -1.00% and one above +1.00%.
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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 | -0.1052 % | 1,965.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1052 % | 3,436.3 |
| Floater | 3.73 % | 3.78 % | 52,477 | 17.85 | 3 | -0.1052 % | 2,089.3 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0401 % | 2,777.8 |
| SplitShare | 4.58 % | 4.80 % | 57,745 | 3.13 | 3 | -0.0401 % | 3,255.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0401 % | 2,540.0 |
| Perpetual-Premium | 5.72 % | 5.41 % | 62,833 | 2.07 | 9 | 0.0486 % | 2,485.2 |
| Perpetual-Discount | 5.41 % | 5.44 % | 77,568 | 14.74 | 29 | 0.1085 % | 2,611.0 |
| FixedReset | 4.73 % | 3.96 % | 201,980 | 15.92 | 87 | -0.2785 % | 2,225.7 |
| Deemed-Retractible | 5.11 % | 5.21 % | 102,315 | 5.44 | 34 | 0.0110 % | 2,584.5 |
| FloatingReset | 2.32 % | 3.26 % | 48,978 | 6.00 | 9 | 0.0798 % | 2,247.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.B | FixedReset | -3.93 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 13.21 Evaluated at bid price : 13.21 Bid-YTW : 3.81 % |
| VNR.PR.A | FixedReset | -3.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 20.82 Evaluated at bid price : 20.82 Bid-YTW : 4.33 % |
| TRP.PR.G | FixedReset | -2.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 21.96 Evaluated at bid price : 22.50 Bid-YTW : 4.04 % |
| ENB.PR.T | FixedReset | -2.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 16.21 Evaluated at bid price : 16.21 Bid-YTW : 5.16 % |
| PWF.PR.T | FixedReset | -2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 22.72 Evaluated at bid price : 23.61 Bid-YTW : 3.36 % |
| TRP.PR.C | FixedReset | -1.93 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 13.75 Evaluated at bid price : 13.75 Bid-YTW : 4.09 % |
| BAM.PR.B | Floater | -1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 12.90 Evaluated at bid price : 12.90 Bid-YTW : 3.70 % |
| ENB.PR.P | FixedReset | -1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 16.20 Evaluated at bid price : 16.20 Bid-YTW : 5.15 % |
| ENB.PR.F | FixedReset | -1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 16.15 Evaluated at bid price : 16.15 Bid-YTW : 5.12 % |
| ENB.PR.Y | FixedReset | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 4.94 % |
| GWO.PR.G | Deemed-Retractible | -1.23 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.14 Bid-YTW : 5.80 % |
| TRP.PR.D | FixedReset | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 19.71 Evaluated at bid price : 19.71 Bid-YTW : 4.11 % |
| BAM.PF.D | Perpetual-Discount | -1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 21.39 Evaluated at bid price : 21.39 Bid-YTW : 5.82 % |
| NA.PR.S | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 22.31 Evaluated at bid price : 22.91 Bid-YTW : 3.51 % |
| BMO.PR.Y | FixedReset | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 22.90 Evaluated at bid price : 24.30 Bid-YTW : 3.52 % |
| FTS.PR.J | Perpetual-Discount | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 22.23 Evaluated at bid price : 22.61 Bid-YTW : 5.33 % |
| ELF.PR.G | Perpetual-Discount | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 21.75 Evaluated at bid price : 21.99 Bid-YTW : 5.45 % |
| TRP.PR.F | FloatingReset | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 3.59 % |
| BAM.PR.K | Floater | 2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 12.47 Evaluated at bid price : 12.47 Bid-YTW : 3.82 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.I | FixedReset | 154,960 | TD crossed 150,000 at 25.05. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.09 % |
| PWF.PR.P | FixedReset | 107,350 | TD bought blocks of 25,00 and 23,400 from Scotia at 17.05, then crossed 49,500 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 17.01 Evaluated at bid price : 17.01 Bid-YTW : 3.39 % |
| CU.PR.H | Perpetual-Discount | 95,455 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 23.44 Evaluated at bid price : 23.75 Bid-YTW : 5.55 % |
| BNS.PR.P | FixedReset | 73,020 | Desjardins crossed 30,000 at 25.07; TD crossed 26,600 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 2.99 % |
| ENB.PR.D | FixedReset | 48,604 | TD crossed 35,700 at 15.71. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-08-13 Maturity Price : 15.65 Evaluated at bid price : 15.65 Bid-YTW : 5.07 % |
| BNS.PR.B | FloatingReset | 32,526 | TD crossed 25,000 at 23.20. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.20 Bid-YTW : 3.25 % |
| There were 22 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: 20.82 – 21.68 Spot Rate : 0.8600 Average : 0.6035 YTW SCENARIO |
| HSE.PR.C | FixedReset | Quote: 21.98 – 22.74 Spot Rate : 0.7600 Average : 0.5604 YTW SCENARIO |
| GWO.PR.G | Deemed-Retractible | Quote: 24.14 – 24.66 Spot Rate : 0.5200 Average : 0.3720 YTW SCENARIO |
| ENB.PR.P | FixedReset | Quote: 16.20 – 16.64 Spot Rate : 0.4400 Average : 0.3050 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 22.61 – 23.09 Spot Rate : 0.4800 Average : 0.3602 YTW SCENARIO |
| TRP.PR.C | FixedReset | Quote: 13.75 – 14.11 Spot Rate : 0.3600 Average : 0.2589 YTW SCENARIO |