Nothing much happened today.
Neil Irwin of the NYT makes a good point in his review of The Big Short (movie to be released Wednesday 23rd):
A lot of people thought a decade ago that there might be a housing bubble. Few of them understood the connections between housing prices and poor lending practices; the connection from poor lending practices to complex, highly rated securities; the connection between those securities to the balance sheets of major banks; and the peril to the economy if just a few of them faltered.
At each link in that chain, there were people aware that something was wrong, but who lacked the ability to put those pieces together and connect bad lending in Florida suburbs with the existential risk being taken by companies like Bear Stearns and Lehman Brothers.
The impossible job for the regulators (and journalists, and credit rating agencies) of the future is to better understand how the pieces within the infinitely complex economy and financial system connect with one another.
“The Big Short” is a powerful reminder of how hard that will be.
It was really just another example of the Law of Unintended Consequences, writ large.
Brookfield Investments Corporation, proud issuer of BRN.PR.A, was confirmed at Pfd-2(low) by DBRS:
DBRS Limited (DBRS) today confirms Brookfield Investments Corporation’s (BIC or the Company) Senior Preferred Shares rating at Pfd-2 (low) with a Stable trend. The confirmation follows the announcement that (1) Brookfield Asset Management (BAM or the Guarantor), BIC’s 100% shareholder, will provide a full and unconditional subordinated guarantee on BIC’s outstanding Senior Preferred Shares, and (2) BIC will rely on continuous disclosure exemption and no longer file its financial statements. DBRS understands that the guarantee will apply to all BIC’s Preferred Shares outstanding other than those held by BAM and its affiliates. Claims under the guarantee will be subordinated to all outstanding senior indebtedness of BAM and will effectively rank pari passu with Preferred Shares issued by BAM.
…
The proposed change will result in BIC’s discontinuing any public disclosure of its financial performance and investment composition. DBRS understands that BAM and BIC intend to maintain similar asset size, composition and financing sources in the foreseeable future. In view of this and so long as BAM’s guarantee remains valid, DBRS will no longer issue separate rating reports on BAM and will report the rating of BIC’s Preferred Shares as a guaranteed issue in future BAM rating reports.
Faircourt Split Trust, proud issuer of FCS.PR.C, has been confirmed at Pfd-3(low) by DBRS:
Based on yields of underlying securities as of December 15, 2015, the Portfolio currently receives dividends to cover 14% of Preferred Security distributions. As of December 14, 2015, downside protection available to holders of the Preferred Securities was 30.2%.
…
The asset coverage test does not permit any cash distributions to the [Capital] unitholders if, after giving effect to the proposed distribution, the total assets of the Portfolio would be less than 1.4 times the outstanding principal amount of the Preferred Securities.The Preferred Share distributions will result in an average annual grind on the net asset value (NAV) of 4.4% in the next 3.5 years.
…
According to the terms of the Trust’s Declaration of Trust, the Trust has the ability to borrow up to 10% of Total Assets (as defined in the Declaration of Trust) under a loan facility in order to meet its investment objectives. Under the terms of the Company’s Trust Indenture, the loan facility is considered Senior Indebtedness, and all amounts owing under the loan facility will be paid in priority to the 6.00% Preferred Securities. There is currently no loan facility in place and, therefore, there are currently no amounts owing under a loan facility; however, to the extent that the Trust borrows under a loan facility, the rating on the 6.00% Preferred Securities could be negatively affected. DBRS will continue to monitor the situation in connection with the ongoing surveillance of the rating on the 6.00% Preferred Securities, and will take appropriate ratings action as necessary.
It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 70bp, FixedResets up 67bp and DeemedRetractibles gaining 37bp. The Performance Highlights table continues to show a lot of churn. Volume remained extremely high.
| 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 | 4.85 % | 5.90 % | 33,806 | 16.75 | 1 | 5.5807 % | 1,598.0 |
| FixedFloater | 7.16 % | 6.35 % | 39,135 | 15.80 | 1 | 0.0755 % | 2,723.9 |
| Floater | 4.31 % | 4.41 % | 83,448 | 16.60 | 4 | -2.2707 % | 1,775.0 |
| OpRet | 4.86 % | 4.15 % | 28,440 | 0.68 | 1 | 0.0000 % | 2,738.6 |
| SplitShare | 4.83 % | 5.81 % | 83,800 | 1.86 | 6 | 0.0156 % | 3,200.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0156 % | 2,497.1 |
| Perpetual-Premium | 5.83 % | 5.86 % | 99,151 | 13.93 | 7 | 0.3447 % | 2,495.2 |
| Perpetual-Discount | 5.75 % | 5.83 % | 107,469 | 14.11 | 33 | 0.6970 % | 2,493.5 |
| FixedReset | 5.22 % | 4.59 % | 274,045 | 14.70 | 81 | 0.6674 % | 1,979.1 |
| Deemed-Retractible | 5.23 % | 4.88 % | 141,741 | 5.29 | 33 | 0.3733 % | 2,565.4 |
| FloatingReset | 2.85 % | 4.52 % | 70,566 | 5.65 | 11 | -0.0908 % | 2,084.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.C | Floater | -4.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 10.36 Evaluated at bid price : 10.36 Bid-YTW : 4.56 % |
| BNS.PR.D | FloatingReset | -4.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.71 Bid-YTW : 7.49 % |
| BAM.PR.B | Floater | -2.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 10.71 Evaluated at bid price : 10.71 Bid-YTW : 4.41 % |
| CIU.PR.C | FixedReset | -2.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 12.51 Evaluated at bid price : 12.51 Bid-YTW : 4.25 % |
| SLF.PR.H | FixedReset | -2.24 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.01 Bid-YTW : 8.00 % |
| BAM.PR.K | Floater | -2.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 10.58 Evaluated at bid price : 10.58 Bid-YTW : 4.47 % |
| IFC.PR.C | FixedReset | -2.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.81 Bid-YTW : 7.22 % |
| BAM.PF.H | FixedReset | -1.77 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.54 Bid-YTW : 4.51 % |
| BIP.PR.A | FixedReset | -1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 5.60 % |
| RY.PR.P | Perpetual-Discount | -1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 24.06 Evaluated at bid price : 24.42 Bid-YTW : 5.47 % |
| MFC.PR.N | FixedReset | -1.46 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.51 Bid-YTW : 6.72 % |
| BNS.PR.A | FloatingReset | -1.28 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.32 Bid-YTW : 4.52 % |
| SLF.PR.J | FloatingReset | 1.03 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.80 Bid-YTW : 10.22 % |
| BMO.PR.Y | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.56 % |
| BAM.PF.F | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 20.46 Evaluated at bid price : 20.46 Bid-YTW : 4.62 % |
| VNR.PR.A | FixedReset | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 4.98 % |
| TRP.PR.D | FixedReset | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 17.71 Evaluated at bid price : 17.71 Bid-YTW : 4.68 % |
| PWF.PR.E | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 23.51 Evaluated at bid price : 23.78 Bid-YTW : 5.87 % |
| RY.PR.I | FixedReset | 1.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.37 Bid-YTW : 3.64 % |
| IFC.PR.A | FixedReset | 1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.80 Bid-YTW : 8.91 % |
| BNS.PR.C | FloatingReset | 1.24 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.05 Bid-YTW : 4.55 % |
| HSB.PR.C | Deemed-Retractible | 1.29 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-01-21 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 1.62 % |
| MFC.PR.K | FixedReset | 1.31 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.52 Bid-YTW : 7.20 % |
| GWO.PR.N | FixedReset | 1.35 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.48 Bid-YTW : 9.81 % |
| GWO.PR.G | Deemed-Retractible | 1.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.76 Bid-YTW : 6.54 % |
| CU.PR.C | FixedReset | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 18.63 Evaluated at bid price : 18.63 Bid-YTW : 4.31 % |
| BAM.PR.R | FixedReset | 1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 15.65 Evaluated at bid price : 15.65 Bid-YTW : 4.92 % |
| NA.PR.S | FixedReset | 1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 18.16 Evaluated at bid price : 18.16 Bid-YTW : 4.60 % |
| TD.PF.D | FixedReset | 1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 4.53 % |
| TRP.PR.A | FixedReset | 1.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 15.77 Evaluated at bid price : 15.77 Bid-YTW : 4.41 % |
| POW.PR.D | Perpetual-Discount | 1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 21.91 Evaluated at bid price : 22.15 Bid-YTW : 5.64 % |
| BMO.PR.Q | FixedReset | 1.78 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.12 Bid-YTW : 5.15 % |
| BAM.PF.B | FixedReset | 1.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.14 Evaluated at bid price : 19.14 Bid-YTW : 4.59 % |
| CU.PR.D | Perpetual-Discount | 1.90 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.76 % |
| MFC.PR.H | FixedReset | 1.90 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 5.39 % |
| CU.PR.F | Perpetual-Discount | 1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 20.01 Evaluated at bid price : 20.01 Bid-YTW : 5.68 % |
| BAM.PF.C | Perpetual-Discount | 1.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.73 Evaluated at bid price : 19.73 Bid-YTW : 6.18 % |
| RY.PR.M | FixedReset | 2.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 4.41 % |
| CU.PR.G | Perpetual-Discount | 2.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 5.68 % |
| BMO.PR.S | FixedReset | 2.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 4.27 % |
| MFC.PR.L | FixedReset | 2.47 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.70 Bid-YTW : 7.18 % |
| FTS.PR.K | FixedReset | 2.73 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 17.67 Evaluated at bid price : 17.67 Bid-YTW : 4.24 % |
| PWF.PR.S | Perpetual-Discount | 2.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 21.51 Evaluated at bid price : 21.51 Bid-YTW : 5.67 % |
| FTS.PR.G | FixedReset | 2.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 16.79 Evaluated at bid price : 16.79 Bid-YTW : 4.51 % |
| BAM.PR.Z | FixedReset | 2.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 19.81 Evaluated at bid price : 19.81 Bid-YTW : 4.82 % |
| BAM.PR.T | FixedReset | 3.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 16.39 Evaluated at bid price : 16.39 Bid-YTW : 4.79 % |
| GWO.PR.L | Deemed-Retractible | 3.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.13 Bid-YTW : 5.59 % |
| IAG.PR.G | FixedReset | 3.35 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.05 Bid-YTW : 6.65 % |
| MFC.PR.F | FixedReset | 3.66 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.28 Bid-YTW : 8.46 % |
| BAM.PR.X | FixedReset | 4.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 14.57 Evaluated at bid price : 14.57 Bid-YTW : 4.62 % |
| NA.PR.W | FixedReset | 4.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 17.85 Evaluated at bid price : 17.85 Bid-YTW : 4.50 % |
| TRP.PR.B | FixedReset | 4.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 11.45 Evaluated at bid price : 11.45 Bid-YTW : 4.46 % |
| FTS.PR.I | FloatingReset | 4.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 11.80 Evaluated at bid price : 11.80 Bid-YTW : 4.06 % |
| PWF.PR.P | FixedReset | 5.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 14.20 Evaluated at bid price : 14.20 Bid-YTW : 4.15 % |
| BAM.PR.E | Ratchet | 5.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 25.00 Evaluated at bid price : 14.00 Bid-YTW : 5.90 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.C | Deemed-Retractible | 183,101 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.38 Bid-YTW : 7.37 % |
| RY.PR.Q | FixedReset | 131,502 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 4.99 % |
| NA.PR.S | FixedReset | 120,129 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 18.16 Evaluated at bid price : 18.16 Bid-YTW : 4.60 % |
| BAM.PR.B | Floater | 119,356 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 10.71 Evaluated at bid price : 10.71 Bid-YTW : 4.41 % |
| HSE.PR.G | FixedReset | 87,850 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 5.93 % |
| BAM.PR.K | Floater | 79,527 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-12-22 Maturity Price : 10.58 Evaluated at bid price : 10.58 Bid-YTW : 4.47 % |
| There were 74 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.T | FixedReset | Quote: 21.95 – 24.52 Spot Rate : 2.5700 Average : 1.5060 YTW SCENARIO |
| BAM.PR.E | Ratchet | Quote: 14.00 – 15.84 Spot Rate : 1.8400 Average : 1.1711 YTW SCENARIO |
| BNS.PR.D | FloatingReset | Quote: 17.71 – 18.60 Spot Rate : 0.8900 Average : 0.5109 YTW SCENARIO |
| BAM.PR.T | FixedReset | Quote: 16.39 – 17.40 Spot Rate : 1.0100 Average : 0.6437 YTW SCENARIO |
| BMO.PR.T | FixedReset | Quote: 17.95 – 18.85 Spot Rate : 0.9000 Average : 0.6190 YTW SCENARIO |
| BNS.PR.A | FloatingReset | Quote: 22.32 – 22.99 Spot Rate : 0.6700 Average : 0.4431 YTW SCENARIO |