There are continued dovish expectations regarding the Fed’s next move:
The October rebound in global equities resumed, with U.S. stocks rising to a eight-week high amid bank earnings and growing speculation the Federal Reserve will delay raising interest rates until 2016. Treasuries fell and gold erased its loss for the year.
…
The probability of a Fed interest rate increase by the December policy meeting has dropped to 30 percent, down from 70 percent at the start of August, according to futures data compiled by Bloomberg. The slide worsened even after a gauge of U.S. core consumer prices advanced more than projected in September, while hiring data provided evidence of labor-market resilience.
My old buddy Doug Grieve, of long-time Nesbitt fame, mentioned on June 26 as becoming the manager of Lysander-Slater Preferred Share Dividend Fund, has now also been named as the manager of the Lysander-Slater Preferred Share ActivETF which has the awesome symbol PR.
Husky Energy, proud issuer of HSE.PR.A, HSE.PR.C, HSE.PR.E and HSE.PR.G, was confirmed at Pfd-2(low) by DBRS:
DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Notes and Debentures rating of Husky Energy Inc. (Husky or the Company) at A (low) as well as its Commercial Paper rating at R-1 (low) and its Preferred Shares – Cumulative rating at Pfd-2 (low), all with Stable trends. DBRS believes that Husky is in a good position to ride the challenging commodity price environment among its domestic peers given (a) Husky’s relatively low leverage; (b) reasonable liquidity and no material long-term debt refinancing risk over the next three years; (c) strong earnings and cash flow contributions from the Liwan Gas Project (Liwan) offshore China and the Company’s downstream business, which are not tied directly to oil prices; and (d) the near completion of the major capital-intensive projects – Liwan and Sunrise Energy (Sunrise) – reducing capital expenditure (capex) commitments going forward. The Stable trend incorporates DBRS’s expectation that key credit metrics will weaken materially in 2015, but will remain above average among DBRS-rated investment-grade peers in Canada; however, a negative rating action could be taken if key credit metrics remain under pressure on a sustained basis.
It was a whole new world for Canadian preferred share investors today!
Click for Big
It was a very good day for the Canadian preferred share market, with PerpetualDiscounts gaining 28bp, FixedResets up 73bp and DeemedRetractibles winning 109bp. FixedResets dominated the nicer side of the Performance Highlights table. Volume was enormous.
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
Implied Volatility declined today but remains high.
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.24 to be $0.93 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.66 cheap at its bid price of 11.68.
Click for Big
Implied Volatility remained at the highest level I am willing to consider today.
Most expensive is MFC.PR.F, resetting at +141bp on 2016-6-19, bid at 14.50 to be 0.91 rich, while MFC.PR.K resetting at +222bp on 2018-9-19, is bid at 16.32 to be 0.66 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 14.70 to be $0.90 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.30 and appears to be $0.69 rich.
Click for Big
Implied Volatility edged down today but remains ridiculously high.
FTS.PR.M, with a spread of +248bp, and bid at 18.09, looks $0.34 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.03 and is $0.46 cheap.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.55%, with no outliers after I changed the y-axis limits. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.85% and other issues averaging -0.14%. There are two junk outliers above 0.50%.
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 | -0.8932 % | 1,570.0 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.8932 % | 2,745.1 |
| Floater | 4.73 % | 4.76 % | 63,130 | 15.95 | 3 | -0.8932 % | 1,669.0 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2755 % | 2,768.5 |
| SplitShare | 4.33 % | 5.03 % | 74,138 | 2.98 | 5 | 0.2755 % | 3,244.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2755 % | 2,531.5 |
| Perpetual-Premium | 6.00 % | 6.03 % | 63,252 | 13.89 | 5 | -0.0409 % | 2,425.2 |
| Perpetual-Discount | 5.80 % | 5.90 % | 80,199 | 14.05 | 33 | 0.2827 % | 2,458.2 |
| FixedReset | 5.45 % | 4.96 % | 197,459 | 14.88 | 76 | 0.7331 % | 1,870.2 |
| Deemed-Retractible | 5.34 % | 5.45 % | 102,739 | 5.45 | 33 | 1.0899 % | 2,493.6 |
| FloatingReset | 2.67 % | 4.86 % | 67,564 | 5.81 | 9 | -0.0407 % | 2,035.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| FTS.PR.J | Perpetual-Discount | -2.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 20.31 Evaluated at bid price : 20.31 Bid-YTW : 5.94 % |
| RY.PR.Z | FixedReset | -1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.11 Evaluated at bid price : 17.11 Bid-YTW : 4.83 % |
| HSE.PR.C | FixedReset | -1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 20.77 Evaluated at bid price : 20.77 Bid-YTW : 5.00 % |
| BMO.PR.Q | FixedReset | -1.55 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.11 Bid-YTW : 7.11 % |
| BAM.PR.C | Floater | -1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 9.90 Evaluated at bid price : 9.90 Bid-YTW : 4.81 % |
| BNS.PR.D | FloatingReset | -1.46 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.23 Bid-YTW : 6.68 % |
| RY.PR.H | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.04 Evaluated at bid price : 17.04 Bid-YTW : 4.90 % |
| RY.PR.C | Deemed-Retractible | 1.07 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.61 Bid-YTW : 5.04 % |
| MFC.PR.C | Deemed-Retractible | 1.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.51 Bid-YTW : 7.98 % |
| RY.PR.E | Deemed-Retractible | 1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.62 Bid-YTW : 4.93 % |
| BMO.PR.Y | FixedReset | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 19.03 Evaluated at bid price : 19.03 Bid-YTW : 4.91 % |
| CU.PR.F | Perpetual-Discount | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 19.82 Evaluated at bid price : 19.82 Bid-YTW : 5.76 % |
| W.PR.J | Perpetual-Discount | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 23.10 Evaluated at bid price : 23.36 Bid-YTW : 6.02 % |
| SLF.PR.J | FloatingReset | 1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.30 Bid-YTW : 9.52 % |
| BAM.PF.B | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.40 Evaluated at bid price : 17.40 Bid-YTW : 5.28 % |
| CM.PR.O | FixedReset | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 4.84 % |
| PWF.PR.K | Perpetual-Discount | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 21.25 Evaluated at bid price : 21.52 Bid-YTW : 5.76 % |
| MFC.PR.I | FixedReset | 1.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.39 Bid-YTW : 7.34 % |
| BAM.PF.E | FixedReset | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.21 Evaluated at bid price : 17.21 Bid-YTW : 5.39 % |
| RY.PR.I | FixedReset | 1.31 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.15 Bid-YTW : 4.68 % |
| SLF.PR.B | Deemed-Retractible | 1.32 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.70 Bid-YTW : 7.47 % |
| BAM.PR.N | Perpetual-Discount | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 5.94 % |
| MFC.PR.M | FixedReset | 1.36 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.17 Bid-YTW : 8.63 % |
| TD.PF.C | FixedReset | 1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 16.94 Evaluated at bid price : 16.94 Bid-YTW : 4.82 % |
| TD.PF.B | FixedReset | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.12 Evaluated at bid price : 17.12 Bid-YTW : 4.79 % |
| GWO.PR.P | Deemed-Retractible | 1.49 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.20 Bid-YTW : 6.52 % |
| CM.PR.P | FixedReset | 1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 4.84 % |
| RY.PR.B | Deemed-Retractible | 1.52 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 5.04 % |
| SLF.PR.E | Deemed-Retractible | 1.60 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.64 Bid-YTW : 7.87 % |
| FTS.PR.M | FixedReset | 1.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 18.09 Evaluated at bid price : 18.09 Bid-YTW : 4.93 % |
| IAG.PR.G | FixedReset | 1.88 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.95 Bid-YTW : 7.57 % |
| TRP.PR.B | FixedReset | 1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 11.20 Evaluated at bid price : 11.20 Bid-YTW : 4.82 % |
| SLF.PR.A | Deemed-Retractible | 1.93 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.64 Bid-YTW : 7.46 % |
| VNR.PR.A | FixedReset | 1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 18.30 Evaluated at bid price : 18.30 Bid-YTW : 5.15 % |
| CU.PR.C | FixedReset | 2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 4.58 % |
| W.PR.H | Perpetual-Discount | 2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 22.89 Evaluated at bid price : 23.16 Bid-YTW : 5.97 % |
| MFC.PR.L | FixedReset | 2.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.20 Bid-YTW : 9.25 % |
| SLF.PR.D | Deemed-Retractible | 2.36 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.55 Bid-YTW : 7.87 % |
| SLF.PR.I | FixedReset | 2.41 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.26 Bid-YTW : 7.93 % |
| SLF.PR.H | FixedReset | 2.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.10 Bid-YTW : 8.90 % |
| GWO.PR.H | Deemed-Retractible | 2.50 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.30 Bid-YTW : 7.13 % |
| MFC.PR.K | FixedReset | 2.90 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.32 Bid-YTW : 9.04 % |
| MFC.PR.B | Deemed-Retractible | 2.95 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.25 Bid-YTW : 7.64 % |
| TRP.PR.G | FixedReset | 2.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 18.44 Evaluated at bid price : 18.44 Bid-YTW : 5.25 % |
| TRP.PR.C | FixedReset | 3.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 11.68 Evaluated at bid price : 11.68 Bid-YTW : 5.17 % |
| TRP.PR.D | FixedReset | 3.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 16.62 Evaluated at bid price : 16.62 Bid-YTW : 5.12 % |
| BAM.PR.Z | FixedReset | 3.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 19.13 Evaluated at bid price : 19.13 Bid-YTW : 5.22 % |
| TRP.PR.E | FixedReset | 4.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.24 Evaluated at bid price : 17.24 Bid-YTW : 5.01 % |
| PWF.PR.P | FixedReset | 4.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 14.10 Evaluated at bid price : 14.10 Bid-YTW : 4.39 % |
| PWF.PR.T | FixedReset | 6.27 % | Quite real! It looks like a buy programme commenced at 2pm on the dot as the issue traded 18,033 shares in a range of 18.50-19.70. All but one of the last 25 trades were for 100 shares; all of them listed RBC as the buyer. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.37 % |
| HSB.PR.C | Deemed-Retractible | 7.91 % | Simply reverses most – but not quite all! – of yesterday‘s nonsense. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.69 Bid-YTW : 5.41 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.J | FixedReset | 179,867 | RBC crossed blocks of 47,300 and 50,300, both at 18.15. Desjardins crossed 32,800 at 18.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 4.98 % |
| CM.PR.O | FixedReset | 127,586 | RBC crossed blocks of 50,000 and 24,600, both at 17.04. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 4.84 % |
| SLF.PR.I | FixedReset | 120,680 | Desjardins crossed 81,100 at 17.95. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.26 Bid-YTW : 7.93 % |
| RY.PR.M | FixedReset | 109,938 | RBC crossed 91,800 at 17.80. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 4.97 % |
| RY.PR.H | FixedReset | 104,375 | RBC crossed 10,000 at 17.05. Nesbitt crossed blocks of 16,900 and 37,700 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 17.04 Evaluated at bid price : 17.04 Bid-YTW : 4.90 % |
| CM.PR.P | FixedReset | 99,424 | Nesbitt crossed 30,000 1 16.60; Scotia crossed 36,200 at 16.58. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-15 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 4.84 % |
| There were 70 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BNS.PR.Q | FixedReset | Quote: 22.72 – 23.67 Spot Rate : 0.9500 Average : 0.5547 YTW SCENARIO |
| SLF.PR.G | FixedReset | Quote: 14.02 – 15.00 Spot Rate : 0.9800 Average : 0.5874 YTW SCENARIO |
| IFC.PR.C | FixedReset | Quote: 17.65 – 18.49 Spot Rate : 0.8400 Average : 0.5483 YTW SCENARIO |
| FTS.PR.M | FixedReset | Quote: 18.09 – 18.79 Spot Rate : 0.7000 Average : 0.4495 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 20.31 – 20.86 Spot Rate : 0.5500 Average : 0.3995 YTW SCENARIO |
| BAM.PR.M | Perpetual-Discount | Quote: 19.85 – 20.18 Spot Rate : 0.3300 Average : 0.2251 YTW SCENARIO |