It’s the same the world over: competition by litigation and lobbying:
Aileen Jeffery arrived in Tokyo two years ago and spotted what she thought was the best opportunity of her career: Hotel rooms in Japan’s capital were scarce and a boom in tourism was exacerbating the shortage.
The 26-year-old former real estate analyst took a 21st Century approach to the business, investing in condominiums tailored for customers of Airbnb Inc. rather than travelers inclined to stay at traditional hotels. That let her offer rooms in residential neighborhoods and sidestep Japan’s strict and peculiar seven-decade old rules for hotels, which dictate everything from the length of reception desks to the color of pillow cases. Jeffery’s bet seemed like a good one at the time: Japan is Airbnb’s fastest-growing market in the world.
Perhaps not for much longer though. Under pressure from the hotel industry and a populace concerned with the surge of foreigners in their neighborhoods, Prime Minister Shinzo Abe’s government has released guidelines for home sharing — called minpaku in Japanese — that could make most Airbnb rentals in the country illegal. Airbnb hosts would only be allowed to rent to guests who stay for a week or longer, a minuscule slice of the market. The national guidelines only become law if local municipalities decide to ratify them, but that is beginning to happen. Jeffery is rethinking her expansion plans, while Airbnb is seeking ways to hang on to its business.
There’s an interesting Bloomberg story on ETFs that out-perform their benchmark:
In certain pockets of the industry, ETFs are consistently beating the return on the indexes they’re meant to track. Theoretically, an ETF should lag its index by roughly the amount of its fee to investors. But that doesn’t account for revenue from securities lending. ETFs can lend out as much as 33 percent of their equity holdings to short sellers in return for a small fee. ETFs can then use that revenue to offset the expense ratio.
In some cases, an ETF has securities in its portfolio that are in such high demand from short sellers that the lending fees add up to more than the fund’s expense ratio—so the ETF not only makes up its fees but also pushes returns above those of the index.
The most prominent examples of this phenomenon are in ETFs that track small-cap indexes. State Street Corp., BlackRock Inc.’s iShares, and Vanguard Group Inc. all have small-cap ETFs—with more than $30 billion in collective assets—whose extra revenue from securities lending leads to returns that top those of the indexes they track.
I’m trying to work out potential consequences of that. Say the ETF reduces the number of units outstanding. This will lead to a decline in the amount of stock available for lending (probably not on a 1:1 basis, but it could be pretty close) and therefore could lead to a short squeeze. This will cost the short-sellers a lot of money, and possibly lead to knock-on short-covering if they’re too close to their margin limits. But what will cause a reduction of units outstanding? Most likely, a decline in index level. So this scenario is negative-feedback, which is a Good Thing.
Off the top of my head, I can’t think of any positive feedback loops. But it’s an interesting thought.
Moody’s has confirmed HSE’s bond rating at Baa2. I have updated the post HSE: Trend Negative, says DBRS
It was a modestly positive day for the Canadian preferred share market today, with PerpetualDiscounts up 14bp, FixedResets winning 29bp and DeemedRetractibles gaining 12bp. The Performance Highlights table is lengthy. Volume was on the low side of average.
PerpetualDiscounts now yield 5.83%, equivalent to 7.58% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.2% – OK, maybe a little over – so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 335bp, a significant narrowing from the 350bp reported February 10.
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 16.78 to be $1.20 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.80 cheap at its bid price of 17.63.
Click for Big
This analysis includes the new issue with a deemed price of 25.00.
Most expensive is the new issue, resetting at +497bp on 2021-6-19, deemed at 25.00 to be 1.32 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 16.70 to be 1.57 cheap.
Click for Big
The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 13.11 to be $1.20 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 16.90 and appears to be $1.34 rich.
Click for Big
FTS.PR.K, with a spread of +205bp, and bid at 14.79, looks $0.61 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 14.05 and is $0.51 cheap.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.65%, with one outliers above 0.50% and two below -1.50%. Note that the range of the y-axis has changed. There are two junk outliers above 0.00%. There are no junk outliers.
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 | 5.67 % | 6.89 % | 15,368 | 15.58 | 1 | 0.7589 % | 1,376.7 |
| FixedFloater | 7.88 % | 6.89 % | 23,825 | 15.29 | 1 | -0.0829 % | 2,521.8 |
| Floater | 5.18 % | 5.37 % | 80,573 | 14.81 | 4 | 0.3854 % | 1,479.5 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0251 % | 2,747.2 |
| SplitShare | 4.86 % | 5.78 % | 74,293 | 2.70 | 6 | 0.0251 % | 3,214.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0251 % | 2,508.2 |
| Perpetual-Premium | 5.85 % | 5.84 % | 82,455 | 0.08 | 6 | 0.0533 % | 2,523.8 |
| Perpetual-Discount | 5.79 % | 5.83 % | 99,849 | 14.12 | 33 | 0.1406 % | 2,496.6 |
| FixedReset | 5.72 % | 5.11 % | 210,017 | 14.39 | 84 | 0.2942 % | 1,773.7 |
| Deemed-Retractible | 5.33 % | 5.74 % | 122,507 | 6.89 | 34 | 0.1215 % | 2,532.8 |
| FloatingReset | 3.11 % | 5.07 % | 49,890 | 5.51 | 16 | -0.0307 % | 1,967.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.K | Floater | -3.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 8.52 Evaluated at bid price : 8.52 Bid-YTW : 5.63 % |
| BAM.PR.X | FixedReset | -2.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 11.96 Evaluated at bid price : 11.96 Bid-YTW : 5.46 % |
| BAM.PF.E | FixedReset | -2.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 5.16 % |
| TD.PR.Y | FixedReset | -2.19 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.81 Bid-YTW : 4.64 % |
| SLF.PR.G | FixedReset | -2.00 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.25 Bid-YTW : 10.45 % |
| GWO.PR.N | FixedReset | -1.80 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.52 Bid-YTW : 11.09 % |
| MFC.PR.G | FixedReset | -1.71 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.70 Bid-YTW : 9.29 % |
| BAM.PR.Z | FixedReset | -1.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 5.62 % |
| RY.PR.F | Deemed-Retractible | -1.61 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.25 Bid-YTW : 5.88 % |
| TD.PR.Z | FloatingReset | -1.59 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.06 Bid-YTW : 5.19 % |
| TRP.PR.B | FixedReset | -1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 9.63 Evaluated at bid price : 9.63 Bid-YTW : 5.11 % |
| FTS.PR.K | FixedReset | -1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 14.79 Evaluated at bid price : 14.79 Bid-YTW : 4.86 % |
| MFC.PR.M | FixedReset | -1.34 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.90 Bid-YTW : 8.90 % |
| TRP.PR.A | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 13.35 Evaluated at bid price : 13.35 Bid-YTW : 5.09 % |
| MFC.PR.N | FixedReset | -1.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.71 Bid-YTW : 8.99 % |
| RY.PR.W | Perpetual-Discount | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 22.64 Evaluated at bid price : 22.89 Bid-YTW : 5.37 % |
| BIP.PR.A | FixedReset | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 17.35 Evaluated at bid price : 17.35 Bid-YTW : 6.23 % |
| HSE.PR.C | FixedReset | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 13.81 Evaluated at bid price : 13.81 Bid-YTW : 7.25 % |
| CM.PR.P | FixedReset | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 16.20 Evaluated at bid price : 16.20 Bid-YTW : 4.73 % |
| PWF.PR.Q | FloatingReset | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 10.99 Evaluated at bid price : 10.99 Bid-YTW : 4.68 % |
| CU.PR.H | Perpetual-Discount | 1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 22.56 Evaluated at bid price : 22.90 Bid-YTW : 5.74 % |
| CU.PR.C | FixedReset | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 15.71 Evaluated at bid price : 15.71 Bid-YTW : 4.88 % |
| BAM.PR.B | Floater | 1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 8.92 Evaluated at bid price : 8.92 Bid-YTW : 5.37 % |
| TRP.PR.F | FloatingReset | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 11.20 Evaluated at bid price : 11.20 Bid-YTW : 5.34 % |
| RY.PR.J | FixedReset | 1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 17.66 Evaluated at bid price : 17.66 Bid-YTW : 4.83 % |
| MFC.PR.F | FixedReset | 1.54 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.50 Bid-YTW : 11.19 % |
| HSE.PR.G | FixedReset | 1.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 6.99 % |
| BAM.PR.C | Floater | 1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 8.81 Evaluated at bid price : 8.81 Bid-YTW : 5.44 % |
| TRP.PR.E | FixedReset | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 16.78 Evaluated at bid price : 16.78 Bid-YTW : 4.82 % |
| RY.PR.Z | FixedReset | 1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 4.44 % |
| BNS.PR.D | FloatingReset | 1.71 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.88 Bid-YTW : 7.43 % |
| BMO.PR.S | FixedReset | 1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 4.59 % |
| BMO.PR.Y | FixedReset | 1.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 18.56 Evaluated at bid price : 18.56 Bid-YTW : 4.63 % |
| SLF.PR.I | FixedReset | 1.94 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.82 Bid-YTW : 8.93 % |
| PWF.PR.A | Floater | 2.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 10.22 Evaluated at bid price : 10.22 Bid-YTW : 4.65 % |
| VNR.PR.A | FixedReset | 2.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 5.29 % |
| RY.PR.M | FixedReset | 2.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 17.52 Evaluated at bid price : 17.52 Bid-YTW : 4.75 % |
| CM.PR.Q | FixedReset | 2.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 4.71 % |
| HSE.PR.E | FixedReset | 2.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 6.97 % |
| TRP.PR.C | FixedReset | 3.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 10.71 Evaluated at bid price : 10.71 Bid-YTW : 5.11 % |
| MFC.PR.H | FixedReset | 3.48 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.75 Bid-YTW : 7.95 % |
| TRP.PR.D | FixedReset | 3.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 16.24 Evaluated at bid price : 16.24 Bid-YTW : 4.90 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.I | FixedReset | 167,545 | Desjardins crossed three blocks, two of 50,000 each and one of 48,700, all at 16.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.82 Bid-YTW : 8.93 % |
| TD.PF.G | FixedReset | 128,105 | Desjardins crossed 21,500 at 25.45; RBC crossed blocks of 26,300 and 27,900, both at 25.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 23.25 Evaluated at bid price : 25.33 Bid-YTW : 5.20 % |
| RY.PR.Q | FixedReset | 124,390 | RBC crossed two blocks of 25,000 each, both at 25.50, and bought 11,000 from anonymous. TD crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 23.29 Evaluated at bid price : 25.45 Bid-YTW : 5.11 % |
| NA.PR.X | FixedReset | 101,430 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-02-18 Maturity Price : 23.16 Evaluated at bid price : 25.03 Bid-YTW : 5.48 % |
| BMO.PR.Q | FixedReset | 86,756 | Scotia crossed 25,000 at 17.78 and another 25,000 at 17.70. RBC crossed 25,000 at 17.70. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.74 Bid-YTW : 8.18 % |
| MFC.PR.B | Deemed-Retractible | 39,600 | TD crossed 25,000 at 20.75. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.61 Bid-YTW : 7.55 % |
| There were 28 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| RY.PR.F | Deemed-Retractible | Quote: 23.25 – 23.97 Spot Rate : 0.7200 Average : 0.4107 YTW SCENARIO |
| POW.PR.G | Perpetual-Discount | Quote: 24.33 – 25.00 Spot Rate : 0.6700 Average : 0.4191 YTW SCENARIO |
| GWO.PR.S | Deemed-Retractible | Quote: 23.74 – 24.38 Spot Rate : 0.6400 Average : 0.4281 YTW SCENARIO |
| BNS.PR.R | FixedReset | Quote: 23.21 – 23.89 Spot Rate : 0.6800 Average : 0.4741 YTW SCENARIO |
| TD.PR.Y | FixedReset | Quote: 22.81 – 23.84 Spot Rate : 1.0300 Average : 0.8245 YTW SCENARIO |
| RY.PR.C | Deemed-Retractible | Quote: 24.11 – 24.63 Spot Rate : 0.5200 Average : 0.3430 YTW SCENARIO |