Civil Forfeiture writ large! There can no longer be any doubt but that the War On Banks is nothing more than a populist tax-grab:
The Manhattan district attorney is sending $38 million taken in civil forfeiture from international banks in New York to cities and counties across the country to pay for testing 56,000 rape kits that have been collecting dust in police storage rooms for years.
…
The money comes from large settlements Mr. Vance’s office reached with international banks charged with violating United States sanctions, among them BNP Paribas, HSBC and Standard Chartered Bank. The office has amassed more than $800 million from these settlements, and Mr. Vance so far has used about $240 million to pay for local criminal justice programs, like providing computerized tablets to police officers and upgrading security in housing projects.
I’m pleased to learn that TSFA limits are becoming a campaign issue:
Just how much Canadians should be allowed to stash in their tax-free savings accounts is expected to become an election issue, after NDP Leader Tom Mulcair and Liberal Leader Justin Trudeau repeated promises this week to roll back a Conservative budget measure that nearly doubled the contribution limit on such accounts.
In interviews with CBC’s Peter Mansbridge broadcast this week, both opposition leaders confirmed they would scrap the Conservative move, unveiled in this year’s federal budget, to increase the limit for a tax-free savings account (TFSA) from $5,500 to $10,000.
“The doubling of it is irresponsible,” Mr. Trudeau said. “It’s only the wealthiest Canadians who have $10,000 laying around at the end of the year that they can put into that.”
I just wish our economically illiterate chatteratti had a more coherent plan than ‘soak the rich’, but if we insist on enthroning politicians whose greatest achievement in life was being born, then we have to take what we get.
I have long been of the view that contribution limits are ridiculously high; the lifetime limit for all tax-advantaged savings should be set so that an annuity purchased at age 65 will replace 75% of the median Canadian family income of about $75,000. So that’s an income requirement of about $56,000, which requires about $1.1-million in capital right now, which implies annual contributions totalling about $23,000 with a constant 3% real growth rate over thirty years. And all this includes CPP!
If you don’t like those numbers, suggest your own and we can talk. But I see no reason why somebody with expectations exceeding these levels should be subsidized.
And, just as some light relief, here’s the latest installment of Spy vs. Spy:
When the Justice Department arrested the chairman of Temple University’s physics department this spring and accused him of sharing sensitive American-made technology with China, prosecutors had what seemed like a damning piece of evidence: schematics of sophisticated laboratory equipment sent by the professor, Xi Xiaoxing, to scientists in China.
The schematics, prosecutors said, revealed the design of a device known as a pocket heater. The equipment is used in semiconductor research, and Dr. Xi had signed an agreement promising to keep its design a secret.
But months later, long after federal agents had led Dr. Xi away in handcuffs, independent experts discovered something wrong with the evidence at the heart of the Justice Department’s case: The blueprints were not for a pocket heater.
It was a reasonably good day for the Canadian preferred share market, with PerpetualDiscounts off 3bp, FixedResets up 46bp and DeemedRetractibles gaining 31bp. MFC FixedResets were notable on the good side of a relatively subdued Performance Highlights table. 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 20.30 to be $0.89 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $1.36 cheap at its bid price of 13.15.
Click for Big
Another good fit today for MFC, with Implied Volatility edging up a bit today.
Most expensive is MFC.PR.M, resetting at +236bp on 2019-12-19, bid at 21.75 to be 0.42 rich, while MFC.PR.J, resetting at +261bp on 2018-3-19, is bid at 22.00 to be 0.38 cheap.
Click for Big
The fit on the BAM issues continues to be horrible.
The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.08 to be $1.24 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.50 and appears to be $0.96 rich.
Click for Big
FTS.PR.K, with a spread of +205bp, and bid at 19.85, looks $0.59 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.98 and is $0.76 cheap.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.11%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -1.26% and the unregulated issues averaging -0.90%. There is one junk outlier below -2.00% and two above 0.00%.
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 | 1.5962 % | 1,659.6 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.5962 % | 2,901.8 |
| Floater | 4.48 % | 4.45 % | 57,633 | 16.54 | 3 | 1.5962 % | 1,764.3 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0135 % | 2,782.4 |
| SplitShare | 4.63 % | 4.92 % | 63,045 | 3.08 | 3 | -0.0135 % | 3,260.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0135 % | 2,544.2 |
| Perpetual-Premium | 5.72 % | 5.50 % | 57,276 | 1.99 | 8 | 0.0940 % | 2,493.6 |
| Perpetual-Discount | 5.43 % | 5.50 % | 70,742 | 14.59 | 30 | -0.0311 % | 2,606.7 |
| FixedReset | 4.67 % | 4.16 % | 177,528 | 16.22 | 74 | 0.4648 % | 2,181.0 |
| Deemed-Retractible | 5.13 % | 4.46 % | 93,582 | 0.85 | 33 | 0.3059 % | 2,593.3 |
| FloatingReset | 2.93 % | 4.29 % | 52,847 | 5.84 | 9 | 0.4498 % | 2,180.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.H | FixedReset | -3.27 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.62 Bid-YTW : 6.76 % |
| GWO.PR.N | FixedReset | -2.38 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.15 Bid-YTW : 8.24 % |
| PWF.PR.P | FixedReset | -1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 15.78 Evaluated at bid price : 15.78 Bid-YTW : 3.83 % |
| SLF.PR.J | FloatingReset | -1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.77 Bid-YTW : 9.50 % |
| MFC.PR.K | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.36 Bid-YTW : 5.89 % |
| TD.PF.D | FixedReset | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 22.62 Evaluated at bid price : 23.65 Bid-YTW : 3.73 % |
| BAM.PF.B | FixedReset | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 4.35 % |
| BAM.PR.T | FixedReset | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 17.86 Evaluated at bid price : 17.86 Bid-YTW : 4.49 % |
| IFC.PR.A | FixedReset | 1.22 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.30 Bid-YTW : 7.69 % |
| MFC.PR.F | FixedReset | 1.44 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.25 Bid-YTW : 7.64 % |
| HSE.PR.E | FixedReset | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 22.09 Evaluated at bid price : 22.65 Bid-YTW : 4.80 % |
| GWO.PR.I | Deemed-Retractible | 1.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.92 Bid-YTW : 6.26 % |
| TRP.PR.A | FixedReset | 1.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 4.03 % |
| MFC.PR.G | FixedReset | 1.80 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.17 Bid-YTW : 4.75 % |
| BAM.PR.B | Floater | 1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 10.67 Evaluated at bid price : 10.67 Bid-YTW : 4.42 % |
| TRP.PR.D | FixedReset | 1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 4.19 % |
| BIP.PR.A | FixedReset | 1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 21.79 Evaluated at bid price : 22.20 Bid-YTW : 4.90 % |
| BAM.PR.K | Floater | 2.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 10.60 Evaluated at bid price : 10.60 Bid-YTW : 4.45 % |
| TRP.PR.F | FloatingReset | 2.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 14.90 Evaluated at bid price : 14.90 Bid-YTW : 4.49 % |
| BAM.PR.R | FixedReset | 2.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 17.08 Evaluated at bid price : 17.08 Bid-YTW : 4.61 % |
| IFC.PR.C | FixedReset | 2.86 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.08 Bid-YTW : 5.68 % |
| MFC.PR.L | FixedReset | 3.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.45 Bid-YTW : 5.93 % |
| BAM.PR.X | FixedReset | 3.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 15.47 Evaluated at bid price : 15.47 Bid-YTW : 4.45 % |
| MFC.PR.M | FixedReset | 3.52 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 5.30 % |
| MFC.PR.N | FixedReset | 3.59 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.37 Bid-YTW : 5.46 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.P | FixedReset | 59,490 | TD crossed 25,000 at 21.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 3.77 % |
| BAM.PF.G | FixedReset | 51,095 | RBC bought 37,500 from TD at 22.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 21.99 Evaluated at bid price : 22.50 Bid-YTW : 4.21 % |
| TD.PF.A | FixedReset | 49,308 | TD crossed 10,000 at 21.74. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 21.37 Evaluated at bid price : 21.68 Bid-YTW : 3.69 % |
| RY.PR.I | FixedReset | 44,646 | Desjardins crossed 39,700 at 24.82. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 3.33 % |
| BAM.PF.E | FixedReset | 37,762 | National bought 28,900 from Scotia at 20.32. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 20.37 Evaluated at bid price : 20.37 Bid-YTW : 4.40 % |
| BMO.PR.T | FixedReset | 37,720 | Scotia crossed 30,000 at 21.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-11 Maturity Price : 21.51 Evaluated at bid price : 21.51 Bid-YTW : 3.72 % |
| There were 24 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.G | FixedReset | Quote: 23.17 – 23.79 Spot Rate : 0.6200 Average : 0.3989 YTW SCENARIO |
| TRP.PR.G | FixedReset | Quote: 22.00 – 22.95 Spot Rate : 0.9500 Average : 0.7555 YTW SCENARIO |
| HSE.PR.G | FixedReset | Quote: 22.85 – 23.50 Spot Rate : 0.6500 Average : 0.4699 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 25.40 – 26.06 Spot Rate : 0.6600 Average : 0.4890 YTW SCENARIO |
| SLF.PR.H | FixedReset | Quote: 18.62 – 19.05 Spot Rate : 0.4300 Average : 0.2731 YTW SCENARIO |
| MFC.PR.L | FixedReset | Quote: 20.45 – 20.95 Spot Rate : 0.5000 Average : 0.3640 YTW SCENARIO |