January 19, 2016

All eyes are on the BoC policy rate meeting:

The implied odds of a rate cut according to financial markets stand at just over 50 percent, and private-sector economists are almost evenly divided on whether the nation’s central bank will cut its policy rate to a financial crisis low of 0.25 percent.

During the press conference that followed Stephen Poloz’s first rate decision as governor, he said that “it is the output gap which guides the pressures on inflation through time.”

In that sense, the Bank of Canada’s January 2015 interest cut was proactive, foreseeing a widening of the output gap absent the addition of monetary stimulus following the collapse in oil prices. The July reduction was of a more reactive nature, responding to a drop in activity that turned out to be larger, and ultimately long-lived, than anticipated.

This month, a blend of both dynamics is at play: sluggish fourth-quarter data suggest that there is more economic slack than the Bank of Canada envisioned in October, while declining inflation expectations and subdued hiring plans imply more weakness on the horizon.

Financial stability concerns are nothing new for the central bank, which maintained a tightening bias until October 2013, in part due to worries over household credit growth and elevated indebtedness. But this is the first time in recent memory that economists see threats from multiple angles.

Recently announced macro-prudential measures alleviate some of the concerns, though a rate cut would undoubtedly put downward pressure on borrowing costs, offsetting some of the forces driving borrowing rates higher.

The new threat to financial stability stems from the collapse in the Canadian dollar, whose 25 percent plunge over the past two years marks its worst decline for that time period on record.

The Bank of Canada could be “playing with fire” if it chose to lower rates further and “set off a freefall in the exchange rate,” said CIBC’s [chief economist Avery] Shenfeld, citing the potential negative effects on confidence and consumers’ willingness to spend. Since total spending in an economy is equal to total income, if everyone cut back on expenditures at once, Canada would be adding a household deleveraging process to its current terms of trade shock.

Scotia’s [Vice President of Economics Derek] Holt warns that the central bank would be stimulating unhealthy growth if it delivers a rate cut Wednesday.

“The effects of a rate cut are more likely to be reflected in interest rate sensitive sectors than the ones affected by the terms of trade shock,” he said. “[A cut] can do more to fuel financial imbalances than help the parts of the economy that are under stress.”

This potential conflict between a central bank’s most basic task–to stabilize the business cycle–and the quest to return inflation to target within a normal time frame, make the bank’s decision worth watching for market participants well beyond the nation’s borders.

Meanwhile, there is speculation that the Fed might not be as aggressive as first thought:

Less than three weeks into the new year, two of Wall Street’s biggest bond dealers are already dialing back the 2016 Treasury yield calls they made at the end of 2015.

JPMorgan Chase & Co. and Deutsche Bank AG reduced forecasts for 10-year yields at the end of last week, wagering the Federal Reserve won’t raise interest rates as many times as policy makers expect. The banks, among the 22 primary dealers that trade with the Fed, say pressures will build amid the depreciation of China’s currency, slowing global economic growth, investor flight from risky assets and a dimming inflation outlook.

Deutsche Bank predicts the 10-year yield will end the year at 1.75 percent, down from the 2.25 percent call it made in December, while JPMorgan says 10-year notes will yield 2.45 percent at year-end, down from a previous forecast of 2.75 percent.

But they’re not making much money on fixed income anyway!

Once Wall Street’s most lucrative business, fixed-income trading revenue declined for the third straight year in 2015. Net income from trading bonds, currencies, commodities and derivatives linked to them has fallen between 18 percent and 25 percent at five top banks since 2012.

Fixed-income has been in a slump with interest rates languishing near zero, oil prices falling and regulations making it tougher to place easy bets on future prices. Morgan Stanley said Tuesday that it doesn’t expect a rebound any time soon.

Which will make life interesting if downgrades pop:

More companies were at risk of having their credit ratings cut at the end of December than at the close of any other year since 2009, according to Standard & Poor’s.

The number of potential downgrades was at 655, compared with 824 reported by the finish of 2009, the rating company said in a report on Tuesday. The year-end total for 2015 was “exceptionally” higher than a yearly average of 613, it said. S&P removed 85 issuers from the list in December and added 56, of which 27 are in the U.S.

Here’s some news for the middle class:

Over five million jobs will be lost by 2020 as a result of developments in genetics, artificial intelligence, robotics and other technological change, according to World Economic Forum research.

About 7 million jobs will be lost and 2 million gained as a result of technological change in 15 major developed and emerging economies, WEF founder Klaus Schwab and managing board member Richard Samans said in “The Future of Jobs.” The findings are taken from a survey of 15 economies covering about 1.9 billion workers, or about 65 percent of the world’s total workforce.
….
To prevent a worst-case scenario — technological change accompanied by talent shortages, mass unemployment and growing inequality — reskilling and upskilling of today’s workers will be critical,” the authors said. “It is simply not possible to weather the current technological revolution by waiting for the next generation’s workforce to become better prepared.”

Administrative and office jobs will account for two-thirds of the losses, with “routine white-collar office functions at risk of being decimated,” and there will be gains in computer, mathematical, architecture and engineering-related fields. Women will be disproportionately hit by the changes because of their low participation in the STEM fields of science, technology, engineering and mathematics.

The full report is obsessed with the gender gap and gives the usual accolades to ‘reskilling and retraining’:

Responses to the Future of Jobs Survey indicate that business leaders are aware of these looming challenges but have been slow to act decisively. Just over two thirds of our respondents believe that future workforce planning and change management features as a reasonably high or very high priority on the agenda of their company’s or organization’s senior leadership, ranging from just over half in the Basic and Infrastructure sector to four out of five respondents in Energy and Healthcare. Across all industries, about two thirds of our respondents also report intentions to invest in the reskilling of current employees as part of their change management and future workforce planning efforts, making it by far the highest-ranked such strategy overall (Figure 13). However, companies that report recognizing future workforce planning as a priority are nearly 50% more likely to plan to invest in reskilling than companies who do not (61% against 39% of respondents).

Well, that might be a good enough survival tactic for individual companies, but I see very little consideration paid to the broader issues. While foretelling the future is something that is notorious for being hilarious even within twenty years, I believe we need to start addressing the topic of what the new world is going to look like.

For one thing, ‘things’ are going to become relatively cheaper and ‘entertainment’ is going to become relatively more expensive – and those are the two basic categories of things that get sold. We may have fewer doctors, as diagnosis becomes increasingly automated, but we will have more nurses, as the population ages and people in general can afford more care.

And this is the basic problem: productivity comes from leverage; you are more productive when you make widgets for ten customers as opposed to merely five. And personal services are very difficult, if not impossible to lever. So I suggest we’re going to end up with a society comprised of the ‘10%’, who have the skills to work on improving the system and the rest, who don’t. How do we address this? I never hear the politicians talking about it; they blithely assume that if we retrain a 55-year-old machine worker to become a programmer, everything will be OK.

Husky Energy, proud issuer of HSE.PR.A, HSE.PR.C, HSE.PR.E and HSE.PR.G, announced after the close today that it:

is taking additional steps to improve its resilience through the extended low commodity price environment.

“We continue to take decisive action in this period of persistent supply-demand imbalance,” said CEO Asim Ghosh. “These actions are in line with the principles we have established, namely, balancing capital spending with cash flow and maintaining a strong balance sheet. Our fundamental goal remains unchanged – the steps we are taking will see Husky emerge from this cycle as a more resilient and more profitable company.”

Updated 2016 Production and Capital Guidance

The capital plan has been revised to a range of $2.1-2.3 billion from a previous range of $2.9-3.1 billion. Savings will be achieved primarily through deferring discretionary activities in Western Canada.

The Company’s overall earnings break-even point is expected to be in the sub-$40s US WTI oil by the end of 2016. Further gains are expected to be achieved through the ongoing reduction of operating and sustaining costs.

Production is now expected to be in the range of 315,000-345,000 barrels of oil equivalent per day (boe/day), compared to the previous guidance of 330,000-360,000 boe/day.

“Within the updated capital plan, the transition into a low sustaining capital business continues unabated. Deferral of capital is in those areas that can be quickly switched on as commodity prices recover,” said Ghosh.

Dividend Update

The Company continues to triangulate its top three business priorities; a strong balance sheet, dividend and transition into a low sustaining capital business. While Husky fully recognizes the importance of the dividend, the balance sheet takes precedence in this environment.

A stock dividend was introduced in the third quarter as an interim measure in lieu of a cash dividend. Given the persistent downward pressure on oil prices and the extended lower for longer outlook, the Board of Directors has suspended the quarterly dividend. No cash or share dividend will be issued for the fourth quarter of 2015.

The Board will continue to review the dividend on a quarterly basis.

I saw some preferred share investors coming home from work tonight:

celebration
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Those suffering from market-induced shell-shock may have trouble believing this, but it was a superb day for the Canadian preferred share market today, with PerpetualDiscounts gaining 105bp, FixedResets winning 329bp and DeemedRetractibles up 142bp. The Performance Highlights table is extraordinarily lengthy and, for a change, almost everything’s on the good side, with only one loser. Volume was very high.

So it’s clear somebody put a bit of money to work today, but we’ve been fooled on rallies before – in the second half of October and the second half of December. Will we look back on the second half of January as just another in a long series of false rallies? I don’t know – I advise everybody to invest according to the long-term properties of the asset class and leave the market timing to those who can afford the losses.

The overnight news doesn’t look too good!

U.S. index futures tumbled as the selloff in global equities intensified after oil dropped below $28 a barrel to extend a 12-year low.

Contracts on the Standard & Poor’s 500 Index due in March dropped 1.5 percent to 1,844.25 as of 7:21 a.m. in London, while Nasdaq 100 Index futures retreated 1.8 percent. West Texas Intermediate slumped 3.3 percent to $27.52 a barrel, heading for the lowest close since September 2003 and driving stock declines across Asia that sent Japanese shares into a bear market.

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:

impVol_TRP_160119
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TRP.PR.E, which resets 2019-10-30 at +235, is bid at 15.85 to be $0.87 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.38 cheap at its bid price of 10.73.

impVol_MFC_160119
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Most expensive is MFC.PR.L, resetting at +216bp on 2019-6-19, bid at 16.43 to be 1.10 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 17.10 to be 1.04 cheap.

impVol_BAM_160119
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The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.54 to be $1.41 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 17.23 and appears to be $0.98 rich.

impVol_FTS_160119
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FTS.PR.K, with a spread of +205bp, and bid at 15.59, looks $0.52 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 14.70 and is $0.79 cheap.

pairs_FR_160119
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Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.35%, with two outliers above +1.00%. There is one junk outlier below -1.00% and one above 1.00%.

pairs_FF_160119
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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 5.47 % 6.65 % 23,899 15.86 1 0.8130 % 1,421.8
FixedFloater 7.60 % 6.63 % 30,159 15.68 1 3.9069 % 2,615.9
Floater 4.90 % 4.94 % 76,117 15.62 4 0.0000 % 1,559.9
OpRet 0.00 % 0.00 % 0 0.00 0 1.1200 % 2,689.6
SplitShare 4.91 % 7.02 % 68,197 2.74 6 1.1200 % 3,147.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 1.1200 % 2,455.6
Perpetual-Premium 5.99 % 5.99 % 85,950 13.88 6 0.9218 % 2,464.3
Perpetual-Discount 5.94 % 6.00 % 99,035 13.91 33 1.0474 % 2,420.4
FixedReset 5.85 % 5.02 % 242,960 14.79 82 3.2909 % 1,763.0
Deemed-Retractible 5.40 % 5.96 % 134,095 6.94 34 1.4195 % 2,491.2
FloatingReset 2.82 % 4.94 % 64,410 5.61 13 1.7033 % 1,974.3
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 9.43
Evaluated at bid price : 9.43
Bid-YTW : 5.06 %
RY.PR.G Deemed-Retractible 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.09
Bid-YTW : 5.38 %
FTS.PR.G FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 14.70
Evaluated at bid price : 14.70
Bid-YTW : 4.95 %
BNS.PR.Z FixedReset 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.50
Bid-YTW : 7.38 %
BAM.PF.H FixedReset 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 23.15
Evaluated at bid price : 24.95
Bid-YTW : 4.95 %
POW.PR.C Perpetual-Premium 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 24.01
Evaluated at bid price : 24.26
Bid-YTW : 6.01 %
RY.PR.B Deemed-Retractible 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.19
Bid-YTW : 5.51 %
ELF.PR.G Perpetual-Discount 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 20.04
Evaluated at bid price : 20.04
Bid-YTW : 5.97 %
PWF.PR.P FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 11.25
Evaluated at bid price : 11.25
Bid-YTW : 4.84 %
BMO.PR.R FloatingReset 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.25
Bid-YTW : 4.88 %
GWO.PR.Q Deemed-Retractible 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.03
Bid-YTW : 7.03 %
POW.PR.G Perpetual-Discount 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 23.26
Evaluated at bid price : 23.70
Bid-YTW : 5.93 %
IFC.PR.C FixedReset 1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.45
Bid-YTW : 9.86 %
BNS.PR.Y FixedReset 1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.00
Bid-YTW : 6.65 %
GWO.PR.F Deemed-Retractible 1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.04
Bid-YTW : 5.96 %
GWO.PR.R Deemed-Retractible 1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.58
Bid-YTW : 7.63 %
CM.PR.P FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 4.72 %
RY.PR.K FloatingReset 1.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.15
Bid-YTW : 5.27 %
ELF.PR.H Perpetual-Discount 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 22.14
Evaluated at bid price : 22.40
Bid-YTW : 6.17 %
POW.PR.A Perpetual-Discount 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 23.35
Evaluated at bid price : 23.64
Bid-YTW : 5.96 %
FTS.PR.H FixedReset 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 11.98
Evaluated at bid price : 11.98
Bid-YTW : 4.50 %
VNR.PR.A FixedReset 1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 15.91
Evaluated at bid price : 15.91
Bid-YTW : 5.49 %
NA.PR.Q FixedReset 1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.56
Bid-YTW : 5.97 %
TD.PF.E FixedReset 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.80
Evaluated at bid price : 17.80
Bid-YTW : 4.94 %
GWO.PR.H Deemed-Retractible 1.76 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.77
Bid-YTW : 7.55 %
IGM.PR.B Perpetual-Premium 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 24.08
Evaluated at bid price : 24.54
Bid-YTW : 6.02 %
RY.PR.I FixedReset 1.89 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.14
Bid-YTW : 5.42 %
BAM.PR.C Floater 1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 9.65
Evaluated at bid price : 9.65
Bid-YTW : 4.94 %
POW.PR.B Perpetual-Discount 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 22.27
Evaluated at bid price : 22.54
Bid-YTW : 5.97 %
CU.PR.C FixedReset 2.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.01
Evaluated at bid price : 16.01
Bid-YTW : 4.82 %
SLF.PR.J FloatingReset 2.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.00
Bid-YTW : 10.96 %
GWO.PR.N FixedReset 2.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.80
Bid-YTW : 11.76 %
GWO.PR.I Deemed-Retractible 2.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.77
Bid-YTW : 7.86 %
BAM.PF.D Perpetual-Discount 2.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 6.46 %
TD.PF.B FixedReset 2.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.57
Evaluated at bid price : 16.57
Bid-YTW : 4.56 %
TD.PF.C FixedReset 2.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.53
Evaluated at bid price : 16.53
Bid-YTW : 4.57 %
GWO.PR.P Deemed-Retractible 2.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.35
Bid-YTW : 6.46 %
HSE.PR.E FixedReset 2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 14.89
Evaluated at bid price : 14.89
Bid-YTW : 7.20 %
BMO.PR.M FixedReset 2.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 4.45 %
PWF.PR.S Perpetual-Discount 2.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 20.62
Evaluated at bid price : 20.62
Bid-YTW : 5.85 %
BAM.PR.Z FixedReset 2.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.23
Evaluated at bid price : 17.23
Bid-YTW : 5.37 %
CCS.PR.C Deemed-Retractible 2.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.75
Bid-YTW : 7.74 %
W.PR.J Perpetual-Discount 2.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 22.05
Evaluated at bid price : 22.34
Bid-YTW : 6.31 %
PVS.PR.C SplitShare 2.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.60
Bid-YTW : 6.12 %
BAM.PR.M Perpetual-Discount 2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 18.72
Evaluated at bid price : 18.72
Bid-YTW : 6.42 %
MFC.PR.B Deemed-Retractible 2.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.84
Bid-YTW : 8.01 %
MFC.PR.C Deemed-Retractible 2.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.44
Bid-YTW : 8.13 %
MFC.PR.H FixedReset 2.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.16
Bid-YTW : 8.29 %
BAM.PR.N Perpetual-Discount 2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 18.83
Evaluated at bid price : 18.83
Bid-YTW : 6.38 %
RY.PR.Z FixedReset 2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.82
Evaluated at bid price : 16.82
Bid-YTW : 4.52 %
W.PR.H Perpetual-Discount 2.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 21.86
Evaluated at bid price : 22.10
Bid-YTW : 6.26 %
TD.PF.A FixedReset 2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.72
Evaluated at bid price : 16.72
Bid-YTW : 4.53 %
BNS.PR.Q FixedReset 2.72 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.29
Bid-YTW : 5.02 %
CU.PR.I FixedReset 2.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 23.07
Evaluated at bid price : 24.70
Bid-YTW : 4.51 %
BAM.PF.C Perpetual-Discount 2.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 19.08
Evaluated at bid price : 19.08
Bid-YTW : 6.43 %
BMO.PR.W FixedReset 2.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.48
Evaluated at bid price : 16.48
Bid-YTW : 4.61 %
HSE.PR.C FixedReset 2.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 14.10
Evaluated at bid price : 14.10
Bid-YTW : 7.01 %
SLF.PR.G FixedReset 2.86 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.60
Bid-YTW : 11.00 %
SLF.PR.H FixedReset 2.89 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.90
Bid-YTW : 10.68 %
RY.PR.H FixedReset 3.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.90
Evaluated at bid price : 16.90
Bid-YTW : 4.56 %
BMO.PR.Q FixedReset 3.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.55
Bid-YTW : 7.44 %
BMO.PR.T FixedReset 3.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.56
Evaluated at bid price : 16.56
Bid-YTW : 4.63 %
TD.PR.Z FloatingReset 3.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.66
Bid-YTW : 4.47 %
PWF.PR.T FixedReset 3.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 18.81
Evaluated at bid price : 18.81
Bid-YTW : 4.17 %
BNS.PR.P FixedReset 3.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 4.58 %
RY.PR.J FixedReset 3.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.68
Evaluated at bid price : 17.68
Bid-YTW : 4.84 %
BAM.PR.R FixedReset 3.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 13.54
Evaluated at bid price : 13.54
Bid-YTW : 5.42 %
BNS.PR.R FixedReset 3.46 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.72
Bid-YTW : 4.94 %
BAM.PR.X FixedReset 3.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 13.00
Evaluated at bid price : 13.00
Bid-YTW : 4.92 %
IAG.PR.A Deemed-Retractible 3.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.68
Bid-YTW : 7.33 %
PVS.PR.D SplitShare 3.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2021-10-08
Maturity Price : 25.00
Evaluated at bid price : 22.15
Bid-YTW : 7.11 %
IAG.PR.G FixedReset 3.52 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.35
Bid-YTW : 8.59 %
MFC.PR.L FixedReset 3.59 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.43
Bid-YTW : 8.96 %
BMO.PR.S FixedReset 3.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 4.62 %
SLF.PR.A Deemed-Retractible 3.71 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.66
Bid-YTW : 7.51 %
MFC.PR.I FixedReset 3.82 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.38
Bid-YTW : 8.67 %
SLF.PR.B Deemed-Retractible 3.86 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.74
Bid-YTW : 7.51 %
BAM.PR.G FixedFloater 3.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 25.00
Evaluated at bid price : 12.50
Bid-YTW : 6.63 %
FTS.PR.K FixedReset 3.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 15.59
Evaluated at bid price : 15.59
Bid-YTW : 4.64 %
SLF.PR.C Deemed-Retractible 3.99 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.56
Bid-YTW : 7.95 %
MFC.PR.N FixedReset 3.99 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.41
Bid-YTW : 9.12 %
SLF.PR.D Deemed-Retractible 4.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.45
Bid-YTW : 8.03 %
MFC.PR.J FixedReset 4.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.88
Bid-YTW : 8.79 %
TD.PF.D FixedReset 4.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.38
Evaluated at bid price : 17.38
Bid-YTW : 4.93 %
MFC.PR.G FixedReset 4.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.10
Bid-YTW : 8.81 %
SLF.PR.I FixedReset 4.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.95
Bid-YTW : 9.55 %
FTS.PR.M FixedReset 4.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 4.81 %
W.PR.K FixedReset 4.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 22.72
Evaluated at bid price : 23.88
Bid-YTW : 5.50 %
NA.PR.S FixedReset 4.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 4.89 %
MFC.PR.M FixedReset 4.62 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.75
Bid-YTW : 8.90 %
SLF.PR.E Deemed-Retractible 4.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.66
Bid-YTW : 7.94 %
MFC.PR.K FixedReset 4.77 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.24
Bid-YTW : 8.97 %
BMO.PR.Y FixedReset 4.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 18.39
Evaluated at bid price : 18.39
Bid-YTW : 4.70 %
RY.PR.M FixedReset 4.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 4.78 %
HSE.PR.G FixedReset 4.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 15.03
Evaluated at bid price : 15.03
Bid-YTW : 7.13 %
BNS.PR.B FloatingReset 5.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 5.04 %
TD.PR.S FixedReset 5.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.85
Bid-YTW : 4.33 %
NA.PR.W FixedReset 5.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 15.76
Evaluated at bid price : 15.76
Bid-YTW : 4.84 %
TRP.PR.B FixedReset 5.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 9.89
Evaluated at bid price : 9.89
Bid-YTW : 4.89 %
TD.PR.Y FixedReset 6.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.02
Bid-YTW : 4.39 %
TRP.PR.A FixedReset 6.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 12.76
Evaluated at bid price : 12.76
Bid-YTW : 5.26 %
BAM.PF.A FixedReset 6.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.97
Evaluated at bid price : 17.97
Bid-YTW : 5.08 %
BAM.PR.T FixedReset 6.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 14.42
Evaluated at bid price : 14.42
Bid-YTW : 5.21 %
BAM.PF.B FixedReset 7.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.07
Evaluated at bid price : 17.07
Bid-YTW : 4.98 %
TRP.PR.D FixedReset 7.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 15.09
Evaluated at bid price : 15.09
Bid-YTW : 5.22 %
TRP.PR.E FixedReset 7.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 15.85
Evaluated at bid price : 15.85
Bid-YTW : 5.05 %
BAM.PF.G FixedReset 7.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 5.08 %
TRP.PR.F FloatingReset 8.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 11.39
Evaluated at bid price : 11.39
Bid-YTW : 4.94 %
BAM.PF.F FixedReset 8.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 18.55
Evaluated at bid price : 18.55
Bid-YTW : 4.95 %
BAM.PF.E FixedReset 9.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.23
Evaluated at bid price : 17.23
Bid-YTW : 4.99 %
TRP.PR.G FixedReset 10.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 5.31 %
TRP.PR.C FixedReset 14.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 10.73
Evaluated at bid price : 10.73
Bid-YTW : 4.93 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.G FixedReset 222,335 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 23.25
Evaluated at bid price : 25.32
Bid-YTW : 5.16 %
TRP.PR.A FixedReset 137,607 TD crossed 122,500 at 12.65.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 12.76
Evaluated at bid price : 12.76
Bid-YTW : 5.26 %
RY.PR.Q FixedReset 126,716 RBC crossed 25,000 at 25.28.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 23.25
Evaluated at bid price : 25.36
Bid-YTW : 5.08 %
BAM.PR.Z FixedReset 106,495 Scotia crossed 100,000 at 17.30.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.23
Evaluated at bid price : 17.23
Bid-YTW : 5.37 %
HSE.PR.C FixedReset 102,098 RBC crossed 85,000 at 14.10.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 14.10
Evaluated at bid price : 14.10
Bid-YTW : 7.01 %
MFC.PR.I FixedReset 100,510 Nesbitt crossed blocks of 30,000 and 50,000, both at 17.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.38
Bid-YTW : 8.67 %
There were 59 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.O FloatingReset Quote: 11.40 – 14.00
Spot Rate : 2.6000
Average : 1.8433

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 11.40
Bid-YTW : 11.47 %

PWF.PR.T FixedReset Quote: 18.81 – 20.16
Spot Rate : 1.3500
Average : 0.9088

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 18.81
Evaluated at bid price : 18.81
Bid-YTW : 4.17 %

BNS.PR.D FloatingReset Quote: 17.52 – 18.61
Spot Rate : 1.0900
Average : 0.7587

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.52
Bid-YTW : 7.53 %

RY.PR.P Perpetual-Discount Quote: 23.65 – 24.88
Spot Rate : 1.2300
Average : 0.9068

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 23.35
Evaluated at bid price : 23.65
Bid-YTW : 5.69 %

SLF.PR.G FixedReset Quote: 12.60 – 13.52
Spot Rate : 0.9200
Average : 0.6184

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.60
Bid-YTW : 11.00 %

BAM.PR.Z FixedReset Quote: 17.23 – 18.01
Spot Rate : 0.7800
Average : 0.5046

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-01-19
Maturity Price : 17.23
Evaluated at bid price : 17.23
Bid-YTW : 5.37 %

3 Responses to “January 19, 2016”

  1. somenoob says:

    Re: the Husky announcement, does this apply to “HSE.PR.A, HSE.PR.C, HSE.PR.E and HSE.PR.G” or just to the common stock?

    If it doesn’t apply to the prefs, is your impression that this makes the pref dividends that much safer because they’ve made this ‘prudent but difficult’ move?

    Or does it scream “run away, don’t touch these with a 10 foot pole”?

  2. somenoob says:

    Clarified with Investor Relations that it only applies to the common stock, and not issuing that dividend saves their cash flow $1.2 billion per year. But those savings actually began a quarter or so ago when the converted it to a stock dividend from a cash dividend, so it’s just less dilutive for the common going forward… (until they find other ways to dilute, if needed) — HSE.PR.E is yielding over 8% today, but do you think that is just one for the brave or for the foolhardy?

  3. jiHymas says:

    does this apply to “HSE.PR.A, HSE.PR.C, HSE.PR.E and HSE.PR.G” or just to the common stock?

    Well, you should always check just in case, but in general companies will continue to pay their preferred share dividends until they are actually on the courthouse steps with their CCCA application in hand.

    Although they are permitted to suspend preferred share dividends once common share dividends have gone to zero, in practice this would be taken by the market as a sign that things are unbearably grim: they would lose all access to the bond markets instantly and in addition their suppliers would be demanding cash up front and, perhaps, their customers would be demanding discounts for prompt payment.

    is your impression that this makes the pref dividends that much safer because they’ve made this ‘prudent but difficult’ move?

    Or does it scream “run away, don’t touch these with a 10 foot pole”?

    The magic of financial markets is that it means both things!

    On the one hand, a suspension of the common dividend means that the company will be keeping more cash on its balance sheet that it would otherwise, therefore the preferred share dividend (and all claims senior to the preferred share dividend) are safer than they would be otherwise.

    On the other hand, taking such a drastic measure as dividend suspension may be taken as a signal that, yes, things really are this bad; and that the people with access to all aspects of the firm’s operations have decided to take this very unpalatable step (cratering their common price) because it’s the lesser of several evils.

    The company is saying, in effect: ‘Yes, it really is as bad as it looks. This is not a temporary hiccup, this bad business environment is something that will continue for quite some time, long enough that we don’t think it would be prudent to draw on our reserves’.

    The pain was added to on February 9, when I finally got around to responding to this comment – there has been another round of layoffs:

    Calgary-based Husky Energy Inc. laid off workers on Tuesday, adding to the elimination of 1,400 jobs or 22 per cent of its workforce it confirmed last fall.

    “These are difficult decisions and we will continue to take the steps necessary to ensure the company’s resilience through this cycle and beyond,” said spokesman Mel Duvall in an email Tuesday afternoon.

    “We are not providing specific numbers. The staff reductions were across the company’s operations.”

    On social media, posts from Husky employees suggested up to 500 jobs had been eliminated.

    There have been no actual downgrades from the credit rating agencies (yet!) but DBRS slapped a ‘Trend-Negative’ on the company at the end of January and it has been on Watch-Negative from S&P since mid-October 2015.

    From an investment perspective there is the consideration that most of the damage has already been done, as far as a downgrade is concerned.

    In the January PrefLetter I did a regression of YTW against Issue Reset Spread for all FixedResets for which the YTW scenario is to perpetuity; I looked at ‘Pfd-2 Group’ and ‘Pfd-3 Group’ issues separately.

    Results were as follows:
    Issue …………. YTW ………… Pfd-2 Comparable …….. Pfd-3 Comparable
    HSE.PR.A ……. 5.40% ………… 4.35%…………………….. 5.28%
    HSE.PR.C ……. 5.62%…………. 4.86%…………………….. 6.12%
    HSE.PR.E ……. 5.89%…………… 5.01% …………………… 6.39%
    HSE.PR.G…….. 5.76%………….. 5.00%……………………. 6.36%

    So, looking at it strictly from a credit rating perspective, it appears that the HSE issues have already priced in a significant portion of the effect of a potential downgrade. Naturally, your views on how significant this might be will be informed by your feelings about the adequacy of credit ratings in general and the oil pricing scenarios that have been assumed by the agencies in particular.

    I wouldn’t put a full ‘investment-grade’ allocation into the issue, but I’d put in more than a full ‘junk’ allocation.

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