It’s nice to see an intelligently run bond ETF:
The Market Vectors Fallen Angel High Yield Bond ETF (ANGL) is up 28 percent since its April 2012 inception, which is double the performance of the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), as seen in the chart below.
…
Generally speaking, it really comes down to a value factor in bonds that ANGL has tapped into. When these bonds — typically issued by large companies such as Alcoa, Sprint, and Nokia — get downgraded from investment grade to high-yield, they tend to get oversold leading up to the downgrade. Much of this selling is from active managers and institutions getting rid of these bonds that they owned to keep up with their investment-grade benchmarks. This means extra selling pressure.
It was a poor day for the Canadian preferred share market today, with PerpetualDiscounts down 24bp, FixedResets losing 43bp and DeemedRetractibles off 1bp. There is a fairly long Performance Highlights table dominated by losing FixedResets, but three TRP issues did well. 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 20.05 to be $0.61 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.91 cheap at its bid price of 13.50.
Click for Big
Another good fit today for MFC, with Implied Volatility falling a bit today.
Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 24.36 to be 0.34 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 19.83 to be 0.63 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 16.90 to be $1.40 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 22.64 and appears to be $1.11 rich.
Click for Big
FTS.PR.K, with a spread of +205bp, and bid at 19.48, looks $0.41 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 18.75 and is $0.80 cheap.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.14%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -1.28% and the unregulated issues averaging -0.95%. There are no junk outliers below -2.00%, but 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 | 0.1895 % | 1,662.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1895 % | 2,907.3 |
| Floater | 4.47 % | 4.43 % | 56,826 | 16.58 | 3 | 0.1895 % | 1,767.6 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2431 % | 2,775.7 |
| SplitShare | 4.64 % | 5.08 % | 63,895 | 3.07 | 3 | -0.2431 % | 3,252.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2431 % | 2,538.1 |
| Perpetual-Premium | 5.72 % | 2.56 % | 55,347 | 0.08 | 8 | -0.0544 % | 2,492.2 |
| Perpetual-Discount | 5.45 % | 5.51 % | 70,806 | 14.60 | 30 | -0.2400 % | 2,600.4 |
| FixedReset | 4.69 % | 4.09 % | 174,744 | 16.16 | 74 | -0.4339 % | 2,171.6 |
| Deemed-Retractible | 5.13 % | 4.73 % | 93,237 | 5.49 | 33 | -0.0100 % | 2,593.0 |
| FloatingReset | 2.45 % | 3.81 % | 50,703 | 5.91 | 9 | -0.3237 % | 2,173.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IFC.PR.A | FixedReset | -3.47 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.70 Bid-YTW : 8.18 % |
| SLF.PR.J | FloatingReset | -3.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.34 Bid-YTW : 9.34 % |
| MFC.PR.K | FixedReset | -2.60 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.83 Bid-YTW : 6.24 % |
| CU.PR.C | FixedReset | -2.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 20.89 Evaluated at bid price : 20.89 Bid-YTW : 3.89 % |
| TRP.PR.D | FixedReset | -2.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 19.49 Evaluated at bid price : 19.49 Bid-YTW : 4.29 % |
| IFC.PR.C | FixedReset | -2.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.63 Bid-YTW : 5.97 % |
| SLF.PR.H | FixedReset | -1.99 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.25 Bid-YTW : 7.02 % |
| BAM.PF.D | Perpetual-Discount | -1.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 21.51 Evaluated at bid price : 21.51 Bid-YTW : 5.72 % |
| MFC.PR.L | FixedReset | -1.96 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.05 Bid-YTW : 6.20 % |
| FTS.PR.K | FixedReset | -1.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 19.48 Evaluated at bid price : 19.48 Bid-YTW : 3.90 % |
| ENB.PR.A | Perpetual-Discount | -1.83 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 23.95 Evaluated at bid price : 24.20 Bid-YTW : 5.72 % |
| PWF.PR.P | FixedReset | -1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.90 % |
| MFC.PR.M | FixedReset | -1.75 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.37 Bid-YTW : 5.53 % |
| GWO.PR.N | FixedReset | -1.52 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.92 Bid-YTW : 8.45 % |
| BAM.PR.T | FixedReset | -1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 4.56 % |
| MFC.PR.I | FixedReset | -1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.98 Bid-YTW : 4.90 % |
| SLF.PR.G | FixedReset | -1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.02 Bid-YTW : 7.68 % |
| MFC.PR.F | FixedReset | -1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.02 Bid-YTW : 7.83 % |
| CU.PR.G | Perpetual-Discount | -1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 20.71 Evaluated at bid price : 20.71 Bid-YTW : 5.48 % |
| TD.PF.E | FixedReset | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 22.83 Evaluated at bid price : 24.15 Bid-YTW : 3.72 % |
| CM.PR.P | FixedReset | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 21.03 Evaluated at bid price : 21.03 Bid-YTW : 3.82 % |
| MFC.PR.N | FixedReset | -1.26 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.10 Bid-YTW : 5.63 % |
| CU.PR.F | Perpetual-Discount | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 5.51 % |
| TRP.PR.E | FixedReset | -1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 4.24 % |
| FTS.PR.G | FixedReset | -1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 4.08 % |
| RY.PR.M | FixedReset | -1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 22.27 Evaluated at bid price : 23.00 Bid-YTW : 3.70 % |
| BAM.PR.R | FixedReset | -1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 4.66 % |
| CU.PR.E | Perpetual-Discount | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 21.78 Evaluated at bid price : 22.12 Bid-YTW : 5.57 % |
| MFC.PR.G | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.41 Bid-YTW : 4.62 % |
| TRP.PR.B | FixedReset | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 12.60 Evaluated at bid price : 12.60 Bid-YTW : 4.11 % |
| TRP.PR.C | FixedReset | 2.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 13.50 Evaluated at bid price : 13.50 Bid-YTW : 4.38 % |
| TRP.PR.G | FixedReset | 3.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 22.12 Evaluated at bid price : 22.75 Bid-YTW : 4.09 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.E | FixedReset | 153,763 | RBC crossed 150,000 at 20.43. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 4.24 % |
| IFC.PR.A | FixedReset | 96,384 | Desjardins crossed 88,000 at 17.35. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.70 Bid-YTW : 8.18 % |
| SLF.PR.G | FixedReset | 72,600 | Scotia crossed 50,000 at 16.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.02 Bid-YTW : 7.68 % |
| BNS.PR.A | FloatingReset | 68,150 | Desjardins crossed 65,900 at 23.36. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.40 Bid-YTW : 3.51 % |
| TD.PF.A | FixedReset | 67,350 | RBC crossed 48,100 at 21.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-14 Maturity Price : 21.27 Evaluated at bid price : 21.55 Bid-YTW : 3.71 % |
| BMO.PR.K | Deemed-Retractible | 60,864 | TD crossed blocks of 45,900 and 10,500, both at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-25 Maturity Price : 25.25 Evaluated at bid price : 25.46 Bid-YTW : 2.41 % |
| There were 25 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IFC.PR.A | FixedReset | Quote: 16.70 – 17.68 Spot Rate : 0.9800 Average : 0.6067 YTW SCENARIO |
| FTS.PR.F | Perpetual-Discount | Quote: 22.75 – 23.49 Spot Rate : 0.7400 Average : 0.4915 YTW SCENARIO |
| BAM.PF.D | Perpetual-Discount | Quote: 21.51 – 22.05 Spot Rate : 0.5400 Average : 0.3461 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 14.92 – 15.39 Spot Rate : 0.4700 Average : 0.3020 YTW SCENARIO |
| MFC.PR.M | FixedReset | Quote: 21.37 – 21.95 Spot Rate : 0.5800 Average : 0.4193 YTW SCENARIO |
| HSE.PR.E | FixedReset | Quote: 22.85 – 23.40 Spot Rate : 0.5500 Average : 0.3911 YTW SCENARIO |