Holy smokes. Thirty-year Treasuries hit an all-time low yield in the morning, 3.93%, following overnight carnage in overseas equities. Corporates were hugely wide. Sterling got slaughtered and Denmark bucked the trend hiking the policy rate by 50bp to defend the krone. Trading curbs were imposed on US equity futures after a 6% limit-drop overnight.
All this before the markets opened!
And then it fizzled. It did in Canada, anyway:
The Standard & Poor’s/TSX Composite Index dropped 0.4 percent to 9,294.09 in Toronto after earlier falling 7.5 percent, the most in eight years, to the lowest since September 2004. The S&P/TSX, which derives three-quarters of its value from finance, energy and materials shares, slid 2.8 percent this week and is poised for a 21 percent drop in October, the steepest since the crash of 1987.
… but US Equities tanked:
The Standard & Poor’s 500 Index lost 3.5 percent, a smaller decline than European and Asian equities, even after futures on the U.S. measure fell so far that trading was curbed.
… while Treasuries steepened on a volatile but light day:
The 2 year note is trading at 1.50 percent and is better by 10 basis points for the day. The yield on the 5 year note has tumbled 8 basis points to 2.55 percent. The yield on the 10 year note has declined 1 basis point to 3.66percent (it had traded as low as 3.53 percent this morning). The yield in the Long Bond is unchanged at 4.05 percent. As I noted in a previous posting the yield on the bond reached a modern era low earlier today at 3.88 percent.
The 2year/10 year spread has widened 9 basis points to 216 basis points.
Traders and sales persons report light flows in the Treasury market. Several participants reported that clients who did trade were only doing what they were compelled to do. Most activity seemed directed toward reducing risk and balance sheet.
There’s a report that marketting of the BCE takeover debt will commence next week, but I’m not convinced it means a row of beans. You can bet that on this deal, the lawyers are in charge and if there is the slightest possibility that the deal will fail, all parties want to be able to tell the judge they tried. Who knows? Somebody or other will be taking an immediate massive write-down if the deal proceeds.
Whoosh! And that’s the end of that week!
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30. The Fixed-Reset index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater index. |
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| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | N/A | N/A | N/A | N/A | 0 | N/A | N/A |
| Fixed-Floater | 5.76% | 5.76% | 67,398 | 14.62 | 6 | -1.0222% | 938.8 |
| Floater | 6.55% | 6.63% | 46,228 | 13.02 | 2 | -5.1521% | 524.6 |
| Op. Retract | 5.31% | 6.07% | 129,153 | 4.06 | 14 | +0.3441% | 995.0 |
| Split-Share | 6.36% | 10.99% | 57,135 | 4.00 | 12 | -1.7560% | 924.0 |
| Interest Bearing | 8.19% | 15.03% | 58,670 | 3.28 | 3 | -2.8515% | 860.4 |
| Perpetual-Premium | 6.79% | 6.87% | 48,785 | 12.66 | 1 | -1.1178% | 913.5 |
| Perpetual-Discount | 6.77% | 6.84% | 173,214 | 12.79 | 70 | -1.0176% | 800.2 |
| Fixed-Reset | 5.15% | 5.15% | 855,801 | 15.12 | 10 | -0.2786% | 1,078.8 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| BNA.PR.C | SplitShare | -7.7188% | Asset coverage of just under 2.8:1 as of September 30 according to the company. Coverage now of 2.1-:1 based on BAM.A at 21.72 and 2.4 BAM.A held per preferred. Now with a pre-tax bid-YTW of 12.79% based on a bid of 13.39 and a hardMaturity 2019-1-10 at 25.00. Compare with BNA.PR.A (17.51% to 2010-9-30) and BNA.PR.B (10.42% to 2016-3-25). Closing quote 13.39-14.90, 5×10. Day’s range, 13.38-14.97. |
| WFS.PR.A | SplitShare | -7.4720% | Asset coverage of 1.4-:1 as of October 16, according to Mulvihill. On Review-Negative by DBRS. Now with a pre-tax bid-YTW of 18.05% based on a bid of 7.43 and a hardMaturity 2011-6-30 at 10.00. Closing quote of 7.43-66, 3×11. Day’s range of 7.50-69. |
| FIG.PR.A | InterestBearing | -7.2551% | Asset coverage of just under 1.4:1 as of October 15, according to Faircourt. On Review-Negative by DBRS. Now with a pre-tax bid-YTW of 11.86% based on a bid of 7.67 and a hardMaturity 2014-12-31 at 10.00. Closing quote 7.67-70, 1×1. Day’s range of 7.65-27. |
| BAM.PR.K | Floater | -7.0698% | Let’s look at this rationally, shall we? It pays 70% of prime on $25. The perps, BAM.PR.M & BAM.PR.N pay $1.1875. So we set up an equation, 0.7*Prime*25 / Price(Floater) = 1.1875 / Price(Perp). Use $10.00 for the price of the floater, $13.30 for the price of the perp. Solve for Prime=5.10%. At the prices given, the yield will be equal to the fixed-rate issues when Canada Prime is 5.10%. Make whatever other adjustments you like for liquidity and the drawback/benefit it being floating rate … and I say, for the first time I can remember in a LONG time, floaters are getting competitive with straights. Or, at least, this one is. |
| MFC.PR.C | PerpetualDiscount | -6.1494% | Now with a pre-tax bid-YTW of 7.00% based on a bid of 16.33 and a limitMaturity. Closing quote 16.33-49, 3×13. Day’s range 16.20-76. |
| NA.PR.N | FixedReset | -6.1224% | Not particularly meaningful … closing quote 23.00-24.87, 10×3. Day’s range 24.50-60. |
| ELF.PR.G | PerpetualDiscount | -4.0000% | Now with a pre-tax bid-YTW of 8.34% based on a bid of 14.40 and a limitMaturity. Closing Quote 14.40-75, 5×7. Day’s range of 14.75-00. |
| MFC.PR.B | PerpetualDiscount | -3.8462% | Now with a pre-tax bid-YTW of 6.75% based on a bid of 17.50 and a limitMaturity. Closing Quote 17.50-80, 1×10. Day’s range of 17.70-20. |
| FTN.PR.A | SplitShare | -3.4898% | Asset coverage of 2.2+:1 as of September 30 according to the company. Now with a pre-tax bid-YTW of 9.25% based on a bid of 8.02 and a hardMaturity 2015-12-1 at 10.00. Closing quote of 8.02-10, 10×4. Day’s range 8.25-30. |
| BAM.PR.B | Floater | -3.4716% | |
| DFN.PR.A | SplitShare | -3.4115% | Asset coverage of 1.9+:1 as of October 16, according to some guy’s estimate. Now with a pre-tax bid-YTW of 7.30% based on a bid of 9.06 and a hardMaturity 2014-12-1 at 10.00. Closing quote 9.06-44, 3×5. Day’s range 9.05-42. |
| CM.PR.I | PerpetualDiscount | -3.3846% | Now with a pre-tax bid-YTW of 7.55% based on a bid of 15.70 and a limitMaturity. Closing Quote 15.70-83, 9×3. Day’s range of 15.76-24. |
| RY.PR.H | PerpetualDiscount | -3.2373% | Now with a pre-tax bid-YTW of 6.48% based on a bid of 21.82 and a limitMaturity. Closing Quote 21.82-77, 2×1. Day’s range 21.50-23.00 (!). |
| HSB.PR.D | PerpetualDiscount | -3.1562% | Now with a pre-tax bid-YTW of 6.88% based on a bid of 18.41 and a limitMaturity. Closing Quote 18.41-90, 1×8. One Trade at 19.00. |
| FFN.PR.A | SplitShare | -3.1250% | Asset coverage of 1.6-:1 as of October 15 according to the company. Now with a pre-tax bid-YTW of 10.49% based on a bid of 7.75 and a hardMaturity 2014-12-1 at 10.00. Closing quote of 7.75-06, 19×1. Day’s range of 7.75-81. |
| FBS.PR.B | SplitShare | -3.0168% | Asset coverage of 1.4+:1 as of October 23 according to TD Securities. On Watch-Negative by DBRS. Now with a pre-tax bid-YTW of 10.00% based on a bid of 8.68 and a hardMaturity 2011-12-15 at 10.00. Closing quote of 8.68-85, 10×6. Day’s range of 8.66-67. |
| CM.PR.D | PerpetualDiscount | -2.6536% | Now with a pre-tax bid-YTW of 7.31% based on a bid of 19.81 and a limitMaturity. Closing Quote 19.81-00, 3X1. Day’s range of 19.99-59. |
| BNS.PR.K | PerpetualDiscount | -2.5128% | Now with a pre-tax bid-YTW of 6.35% based on a bid of 19.01 and a limitMaturity. Closing Quote 19.01-50, 5×12. Day’s range 19.00-74. |
| BCE.PR.Z | FixFloat | -2.3902% | |
| BMO.PR.K | PerpetualDiscount | -2.2843% | Now with a pre-tax bid-YTW of 6.97% based on a bid of 19.25 and a limitMaturity. Closing Quote 19.25-75, 3×10. Day’s range 19.18-75. |
| POW.PR.D | PerpetualDiscount | -2.2569% | Now with a pre-tax bid-YTW of 6.94% based on a bid of 18.19 and a limitMaturity. Closing Quote 18.19-25, 4×10. Day’s range 18.25-60. |
| BCE.PR.A | FixFloat | -2.1415% | |
| LBS.PR.A | SplitShare | +3.0952% | Asset coverage of 1.7+:1 as of October 23, according to Brompton Group. Now with a pre-tax bid-YTW of 8.64% based on a bid of 8.66 and a hardMaturity 2013-11-29 at 10.00. Closing quote of 8.66-99, 74×1. Day’s range of 8.45-66. |
| BAM.PR.I | OpRet | +3.7929% | Now with a pre-tax bid-YTW of 10.51% based on a bid of 20.25 and softMaturity 2013-12-30 at 25.00. Compare with BAM.PR.H (11.61% to 2012-3-30), BAM.PR.J (9.39% to 2018-3-30) and BAM.PR.O (10.96% to 2013-6-30). Closing quote 20.25-00, 5×13. Day’s range 19.00-21.00. |
| BNA.PR.B | SplitShare | +3.9773% | See BNA.PR.C, above. Closing Quote 18.30-40, 5×4. Day’s range 18.29-40. |
| TD.PR.Y | FixedReset | +4.8297% | |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| GWO.PR.I | PerpetualDiscount | 291,475 | RBC crossed five blocks: 98,400; 100,000; 29,500; 10,000; and 25,00; all at 16.60. Now with a pre-tax bid-YTW of 6.91% based on a bid of 16.50 and a limitMaturity. |
| BMO.PR.I | OpRet | 86,600 | TD crossed 72,700 at 25.29; Nesbitt crossed 13,500 at the same price. Called for redemption. |
| MFC.PR.B | PerpetualDiscount | 45,150 | Nesbitt bought 11,000 from anonymous at 18.20, then crossed 15,700 at 17.71. Now with a pre-tax bid-YTW of 6.75% based on a bid of 17.50 and a limitMaturity. |
| TD.PR.O | PerpetualDiscount | 41,295 | TD crossed 10,000 at 19.00. Now with a pre-tax bid-YTW of 6.45% based on a bid of 18.92 and a limitMaturity. |
| CM.PR.H | PerpetualDiscount | 31,925 | Now with a pre-tax bid-YTW of 7.47% based on a bid of 16.19 and a limitMaturity. |
There were thirty-seven other index-included $25-pv-equivalent issues trading over 10,000 shares today.