December 22, 2021

A little bit of good news alongside the Christmas gloom … settlement times may decrease:

Industry measures mitigate these risks. Notably, the clearinghouse that guarantees trade completion collects collateral from the dealers that are party to the transaction. These collateral requirements reached unprecedented levels during the frenzied trading of 2020 when Canada’s central securities depository, CDS Clearing and Depository Services Inc., cleared 637 million trades — 31% more than in 2019.

A simpler defence against settlement risk is to shorten the settlement cycle itself, thereby narrowing the window of opportunity for default. In doing so, the industry would benefit, including through lower collateral needs, while further protecting investors.

When the U.S. House Committee on Financial Services examined events of last January that prompted some U.S. dealers to curtail trading in GameStop and other meme stocks, the clearing and settlement process was a key area of focus. Embroiled U.S. industry executives who testified before the committee described a flawed settlement system and pointed to the billions of dollars in additional collateral that their firms needed to sustain customers’ trading. These witnesses suggested eliminating collateral requirements altogether by moving to real-time settlement.

While real-time settlement was considered during the U.S.’s recent deliberations, it would have introduced many complications to current market structure, potentially reducing some of the efficiencies dealers and investors benefit from today. Hence the decision to move to T+1 instead.

The U.S. can autonomously amend its settlement cycle, having one of the world’s deepest, most liquid and efficient financial markets. Canadian markets are so interconnected with those south of the border that failing to align our settlement practices risks severe disruption and inefficiencies to Canadian investors and capital markets. Therefore, as in 2017, Canada will need to mirror the U.S. approach.

PerpetualDiscounts now yield 4.81%, equivalent to 6.25% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.40%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened a little to 285bp from the 275bp reported December 15.

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 3.11 % 3.63 % 39,738 19.90 1 0.9729 % 2,809.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.7493 % 5,078.8
Floater 3.14 % 3.09 % 66,642 19.50 3 -1.7493 % 2,926.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.0455 % 3,668.2
SplitShare 4.68 % 4.35 % 42,779 3.58 6 0.0455 % 4,380.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0455 % 3,418.0
Perpetual-Premium 5.16 % -8.16 % 43,490 0.09 23 0.2705 % 3,255.3
Perpetual-Discount 4.77 % 4.81 % 56,572 15.83 11 0.1666 % 3,854.1
FixedReset Disc 4.06 % 3.90 % 110,566 17.18 42 1.3281 % 2,774.4
Insurance Straight 4.97 % 4.53 % 85,390 15.70 19 0.0862 % 3,653.1
FloatingReset 2.65 % 3.02 % 30,281 19.69 2 0.0000 % 2,621.7
FixedReset Prem 4.75 % 3.53 % 117,850 2.27 28 -0.1277 % 2,709.0
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 1.3281 % 2,836.0
FixedReset Ins Non 4.14 % 3.71 % 83,911 17.65 18 0.0754 % 2,921.7
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -4.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 13.26
Evaluated at bid price : 13.26
Bid-YTW : 3.23 %
BNS.PR.I FixedReset Prem -4.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 23.13
Evaluated at bid price : 24.00
Bid-YTW : 3.88 %
BAM.PF.G FixedReset Disc -3.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 4.62 %
BAM.PF.E FixedReset Disc -2.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.64 %
MFC.PR.F FixedReset Ins Non -1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 3.64 %
FTS.PR.H FixedReset Disc -1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 16.06
Evaluated at bid price : 16.06
Bid-YTW : 3.90 %
TD.PF.D FixedReset Disc -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 23.01
Evaluated at bid price : 24.25
Bid-YTW : 3.90 %
CM.PR.Y FixedReset Prem -1.09 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 3.53 %
CM.PR.T FixedReset Prem -1.03 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 3.78 %
IFC.PR.I Perpetual-Premium 1.24 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2029-03-31
Maturity Price : 25.00
Evaluated at bid price : 26.23
Bid-YTW : 4.60 %
CM.PR.O FixedReset Disc 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 22.78
Evaluated at bid price : 23.50
Bid-YTW : 3.74 %
FTS.PR.M FixedReset Disc 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 22.15
Evaluated at bid price : 22.55
Bid-YTW : 4.10 %
BAM.PR.T FixedReset Disc 1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 19.58
Evaluated at bid price : 19.58
Bid-YTW : 4.46 %
BAM.PF.C Perpetual-Premium 1.79 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.43 %
SLF.PR.H FixedReset Ins Non 3.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 21.83
Evaluated at bid price : 22.26
Bid-YTW : 3.63 %
TD.PF.A FixedReset Disc 4.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 22.97
Evaluated at bid price : 23.95
Bid-YTW : 3.56 %
PWF.PR.P FixedReset Disc 4.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 3.77 %
TRP.PR.G FixedReset Disc 90.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 22.43
Evaluated at bid price : 23.15
Bid-YTW : 4.26 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.B FixedReset Prem 150,300 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-02-25
Maturity Price : 25.00
Evaluated at bid price : 25.23
Bid-YTW : 1.68 %
BNS.PR.H FixedReset Prem 130,400 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.27
Bid-YTW : 1.33 %
NA.PR.C FixedReset Prem 52,650 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 25.46
Bid-YTW : 2.90 %
TRP.PR.E FixedReset Disc 46,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 4.41 %
CU.PR.J Perpetual-Discount 37,570 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 24.60
Evaluated at bid price : 24.99
Bid-YTW : 4.77 %
PWF.PF.A Perpetual-Discount 19,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 24.69
Evaluated at bid price : 25.10
Bid-YTW : 4.53 %
There were 6 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BNS.PR.I FixedReset Prem Quote: 24.00 – 25.60
Spot Rate : 1.6000
Average : 1.1308

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 23.13
Evaluated at bid price : 24.00
Bid-YTW : 3.88 %

BAM.PR.K Floater Quote: 13.26 – 14.30
Spot Rate : 1.0400
Average : 0.7988

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 13.26
Evaluated at bid price : 13.26
Bid-YTW : 3.23 %

TD.PF.D FixedReset Disc Quote: 24.25 – 24.90
Spot Rate : 0.6500
Average : 0.4232

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 23.01
Evaluated at bid price : 24.25
Bid-YTW : 3.90 %

BAM.PF.G FixedReset Disc Quote: 21.00 – 21.90
Spot Rate : 0.9000
Average : 0.6939

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 4.62 %

TRP.PR.F FloatingReset Quote: 16.30 – 18.50
Spot Rate : 2.2000
Average : 2.0093

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 16.30
Evaluated at bid price : 16.30
Bid-YTW : 3.02 %

MFC.PR.F FixedReset Ins Non Quote: 17.45 – 18.24
Spot Rate : 0.7900
Average : 0.6266

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-12-22
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 3.64 %

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