Forbes has a nice piece on the Big Pharma / regulatory complex in the States:
Shkreli, if you’ve been trapped on Mars eating potatoes, gained Internet opprobrium when his company, Turing Pharmaceuticals, raised the price of Daraprim, an old drug used to treat toxoplasmosis in AIDS patients, by 5,000% to more than $750 a pill. Yesterday, the Internet lit up when another small drugmaker, Imprimis Pharmaceuticals of San Diego, said that it would make its own version of Daraprim available for just $1 a pill, cheaper than it was before.
…
In February 2011, a company called KV Pharmaceutical got approval from the Food and Drug Administration for a drug called Makena to prevent pre-term birth. Up until that point, doctors had used progesterone-containing drugs made by compounding pharmacies that produce medicines on an as-needed basis. (Simple example: your two-year-old needs an antibiotic pill turned into syrup.) The compounded progesterone cost $15, or $250 per course. But suddenly, because of the FDA approval, all those compounded drugs were illegal — because they’d never been approved. And KV was going to charge $1,500 per injection, or $25,000 per treatment. That’s a 10,000% price increase.
Here’s a bit more colour on the Fed and the Phillips Curve:
For Yellen, the six million people … working part-time because the economy isn’t strong enough, plus the more than 600,000 who’ve become so discouraged about prospects that they’ve stopped looking for a job, signal interest rates can stay low for longer.
Yellen’s focus on the under-employed is steering monetary policy toward a bold experiment: The Federal Open Market Committee will use the big, blunt instrument of low interest rates to push the jobless level low enough to pull more labor-force quitters and part-timers back into full-time work.
The hope is that it will kick-start a virtuous cycle of investment, higher productivity and better pay that will heal the vestiges of the worst recession since the Great Depression.
It’s a “new view of the reach of monetary policy,” said Laurence Meyer, who served on the Fed’s Board of Governors with Yellen in the 1990s. It “goes against everything I taught at the university for 27 years.”
Traditional economics says that, in the long run, monetary policy influences prices, not the size of the labor force, which is determined by long-term forces including population growth.
Should the Fed stimulate enough demand for labor to put a dent in the underemployed, it “would be a fantastic achievement,” says Meyer, and “that might be a gamble worth taking.” The biggest risk is that inflation will exceed the central bank’s 2 percent target by “more than a little,” he said.
The whole conundrum also reflects on the Fed’s dual mandate (low inflation / strong economy), so it will be most interesting to learn how it all turns out.
Click for Big
CU Inc. issued some forty-year paper today:
CU Inc. announced today that it will issue $250,000,000 of 4.211% Debentures maturing on October 29, 2055, at a price of $100.00 to yield 4.211%. This issue was sold by RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., TD Securities Inc., Scotia Capital Inc. and CIBC World Markets Inc. Proceeds from the issue will be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.
This is interesting because one of their preferred share issues is CIU.PR.A, which closed at 20.37-99 yesterday to yield 5.75%-53. This is the interest-equivalent of 7.48% at the bid (at the standard conversion factor of 1.3x), which implies that the Seniority Spread on this particular issue is about 337bp – very high, and illustrative of just how wide this spread has become lately. Assiduous Readers will recall that this Spread (on an index-index basis) was 320bp on October 21.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 34bp, FixedResets off 24bp and DeemedRetractibles gaining 14bp. The Performance Highlights table is its usual enormous self. Volume was very high.
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 19.00 to be $0.51 rich, while TRP.PR.A, resetting 2020-12-31 at +192, is $0.51 cheap at its bid price of 15.56.
Click for Big
Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 19.87 to be 0.79 rich, while MFC.PR.F resetting at +141bp on 2016-6-19, is bid at 14.05 to be 0.78 cheap.
Click for Big
The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.00 to be $1.20 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 20.80 and appears to be $1.35 rich.
Click for Big
FTS.PR.K, with a spread of +205bp, and bid at 19.51, looks $0.89 expensive and resets 2019-3-1. FTS.PR.H, with a spread of +145bp and resetting 2020-6-1, is bid at 14.25 and is $0.48 cheap.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.87%, with no outliers. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -0.99% and other issues averaging -0.47%. There are three junk outliers above 0.00% and two below -2.00%.
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 | 3.2059 % | 1,754.5 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 3.2059 % | 3,067.6 |
| Floater | 4.23 % | 4.27 % | 60,599 | 16.87 | 3 | 3.2059 % | 1,865.1 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0570 % | 2,743.7 |
| SplitShare | 4.37 % | 5.54 % | 84,450 | 2.95 | 5 | -0.0570 % | 3,215.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0570 % | 2,508.8 |
| Perpetual-Premium | 5.85 % | 5.70 % | 67,372 | 2.75 | 5 | 0.1998 % | 2,488.1 |
| Perpetual-Discount | 5.61 % | 5.71 % | 80,344 | 14.31 | 33 | 0.3378 % | 2,544.8 |
| FixedReset | 4.90 % | 4.37 % | 214,949 | 15.93 | 76 | -0.2402 % | 2,082.6 |
| Deemed-Retractible | 5.21 % | 4.69 % | 113,178 | 5.45 | 33 | 0.1354 % | 2,563.8 |
| FloatingReset | 2.47 % | 3.84 % | 60,720 | 5.81 | 9 | 0.6517 % | 2,174.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| RY.PR.J | FixedReset | -3.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 4.35 % |
| BAM.PF.F | FixedReset | -3.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.88 Evaluated at bid price : 20.88 Bid-YTW : 4.64 % |
| CM.PR.O | FixedReset | -3.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.10 Evaluated at bid price : 19.10 Bid-YTW : 4.32 % |
| RY.PR.M | FixedReset | -2.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.26 Evaluated at bid price : 20.26 Bid-YTW : 4.28 % |
| MFC.PR.H | FixedReset | -1.91 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.07 Bid-YTW : 5.19 % |
| IFC.PR.A | FixedReset | -1.88 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.15 Bid-YTW : 8.80 % |
| SLF.PR.J | FloatingReset | -1.82 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.50 Bid-YTW : 9.32 % |
| MFC.PR.J | FixedReset | -1.81 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.60 Bid-YTW : 6.20 % |
| TD.PF.E | FixedReset | -1.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.42 Evaluated at bid price : 21.70 Bid-YTW : 4.23 % |
| NA.PR.W | FixedReset | -1.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.07 Evaluated at bid price : 19.07 Bid-YTW : 4.25 % |
| FTS.PR.K | FixedReset | -1.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.51 Evaluated at bid price : 19.51 Bid-YTW : 3.96 % |
| TRP.PR.C | FixedReset | -1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 13.49 Evaluated at bid price : 13.49 Bid-YTW : 4.37 % |
| BAM.PR.X | FixedReset | -1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 15.44 Evaluated at bid price : 15.44 Bid-YTW : 4.54 % |
| BAM.PF.G | FixedReset | -1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.31 Evaluated at bid price : 21.59 Bid-YTW : 4.48 % |
| TRP.PR.G | FixedReset | -1.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.36 Evaluated at bid price : 21.36 Bid-YTW : 4.48 % |
| CM.PR.P | FixedReset | -1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.24 % |
| BNS.PR.Z | FixedReset | -1.29 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.59 Bid-YTW : 5.66 % |
| FTS.PR.M | FixedReset | -1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 4.20 % |
| GWO.PR.S | Deemed-Retractible | -1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 5.91 % |
| BMO.PR.W | FixedReset | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 18.89 Evaluated at bid price : 18.89 Bid-YTW : 4.29 % |
| CU.PR.H | Perpetual-Discount | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 23.29 Evaluated at bid price : 23.59 Bid-YTW : 5.67 % |
| PWF.PR.R | Perpetual-Discount | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 23.55 Evaluated at bid price : 24.01 Bid-YTW : 5.74 % |
| BNS.PR.Y | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.77 Bid-YTW : 5.00 % |
| RY.PR.W | Perpetual-Discount | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 22.71 Evaluated at bid price : 23.00 Bid-YTW : 5.32 % |
| FTS.PR.J | Perpetual-Discount | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.69 Evaluated at bid price : 22.00 Bid-YTW : 5.47 % |
| W.PR.H | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 23.32 Evaluated at bid price : 23.60 Bid-YTW : 5.87 % |
| BNS.PR.B | FloatingReset | 1.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.45 Bid-YTW : 3.84 % |
| GWO.PR.P | Deemed-Retractible | 1.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 5.95 % |
| BMO.PR.M | FixedReset | 1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.84 Bid-YTW : 3.11 % |
| CU.PR.F | Perpetual-Discount | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.83 Evaluated at bid price : 20.83 Bid-YTW : 5.49 % |
| PWF.PR.S | Perpetual-Discount | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 21.43 Evaluated at bid price : 21.76 Bid-YTW : 5.53 % |
| BNS.PR.R | FixedReset | 1.40 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.53 % |
| FTS.PR.F | Perpetual-Discount | 1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 22.07 Evaluated at bid price : 22.35 Bid-YTW : 5.56 % |
| MFC.PR.N | FixedReset | 1.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 6.09 % |
| BNS.PR.D | FloatingReset | 1.44 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.75 Bid-YTW : 5.30 % |
| MFC.PR.L | FixedReset | 1.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.87 Bid-YTW : 6.44 % |
| FTS.PR.H | FixedReset | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 14.25 Evaluated at bid price : 14.25 Bid-YTW : 4.11 % |
| MFC.PR.C | Deemed-Retractible | 1.93 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.10 Bid-YTW : 6.92 % |
| BNS.PR.C | FloatingReset | 2.29 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.82 Bid-YTW : 3.74 % |
| BAM.PR.C | Floater | 2.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 11.02 Evaluated at bid price : 11.02 Bid-YTW : 4.32 % |
| BAM.PF.E | FixedReset | 2.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.84 Evaluated at bid price : 20.84 Bid-YTW : 4.37 % |
| BAM.PR.B | Floater | 2.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 11.29 Evaluated at bid price : 11.29 Bid-YTW : 4.22 % |
| BAM.PR.K | Floater | 4.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 11.17 Evaluated at bid price : 11.17 Bid-YTW : 4.27 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.B | Deemed-Retractible | 163,605 | Nesbitt crossed 148,800 at 24.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-26 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 2.77 % |
| RY.PR.J | FixedReset | 112,563 | RBC crossed 23,900 at 20.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.45 Evaluated at bid price : 20.45 Bid-YTW : 4.35 % |
| BAM.PF.B | FixedReset | 75,967 | RBC crossed blocks of 31,600 and 16,300, both at 19.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 19.69 Evaluated at bid price : 19.69 Bid-YTW : 4.60 % |
| MFC.PR.M | FixedReset | 71,473 | Scotia crossed 31,700 at 20.55. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 6.16 % |
| MFC.PR.N | FixedReset | 68,460 | TD crossed 38,000 at 20.56. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 6.09 % |
| BAM.PF.E | FixedReset | 61,266 | RBC crossed blocks of 19,800 and 30,400, both at 21.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-27 Maturity Price : 20.84 Evaluated at bid price : 20.84 Bid-YTW : 4.37 % |
| There were 59 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PF.F | FixedReset | Quote: 20.88 – 21.44 Spot Rate : 0.5600 Average : 0.3718 YTW SCENARIO |
| BAM.PR.X | FixedReset | Quote: 15.44 – 16.08 Spot Rate : 0.6400 Average : 0.4811 YTW SCENARIO |
| CM.PR.O | FixedReset | Quote: 19.10 – 19.84 Spot Rate : 0.7400 Average : 0.5952 YTW SCENARIO |
| GWO.PR.S | Deemed-Retractible | Quote: 24.00 – 24.74 Spot Rate : 0.7400 Average : 0.6118 YTW SCENARIO |
| SLF.PR.A | Deemed-Retractible | Quote: 21.63 – 21.93 Spot Rate : 0.3000 Average : 0.1763 YTW SCENARIO |
| RY.PR.W | Perpetual-Discount | Quote: 23.00 – 23.33 Spot Rate : 0.3300 Average : 0.2254 YTW SCENARIO |