PrefBlog

Jobs, jobs …. whoopsy!

Silver linings were tough to come by in the September jobs data. Payrolls came in at a much-weaker-than-forecast 142,000, while August and July figures were revised down. Wage growth was nonexistent for the month, with average hourly earnings actually falling by a penny on average.

The softness in manufacturing endured, with factory payrolls falling by 9,000 when they were expected to show no change. With dollar appreciation and sluggish overseas growth providing headwinds, it was the biggest back-to-back decline since 2010.

Even service industries, which make up the lion’s share of the economy and are more shielded from global weakness, seem to have shifted into a lower gear. Payroll growth there has slowed for four straight months, the longest such streak since 2001.

Dan Gallagher, whose comments on Dodd-Frank were reported on August 4, has reached the end of the line:

Today is my final day as a Commissioner of the U.S. Securities and Exchange Commission. It has been a privilege and an honor to serve the public during such an important time. I thank my fellow Commissioners and the staff for the time spent working together on critical issues facing investors, issuers, and the markets. After having spent so many years at the SEC in various capacities, departing is certainly bittersweet. As a former SEC staffer, I have particularly enjoyed working so closely again with the Commission’s excellent staff.

I must confess that the more I think about the VW diesel emissions scandal, the less I understand it. A piece in the Globe notes:

Volkswagen’s cheating on emissions tests has soured the European car industry’s heavy bet on diesel, with Renault, Peugeot and Fiat Chrysler potentially facing bigger long-term setbacks than the company that sparked the crisis.

In the face of that perceived injustice, tensions are mounting behind the united facade that European manufacturers present to regulators, some of their representatives say.

It will be recalled that the whistle-blower was an independent environmental agency that tested the VWs in the expectation that everything would be peachy keen; the VWs had been selling really well because they got great fuel economy AND low emissions AND good performance.

I’m not an automotive engineer, but to me that sounds like a ‘Pick Two’ problem. But the implication is that not once, at any of VWs three competitors, did a senior vice president pound the table and scream ‘Dammit, Hans, they’re killing us on sales volume! Why can’t we do that?’ And not once did the senior project engineer confess ‘Honestly, Gunther, I just can’t figure it out. Mind if I buy one and take it apart?’

It just doesn’t make sense to me.

It was a moderately good day for the Canadian preferred share market, with PerpetualDiscounts up 31bp, FixedResets gaining 14bp and DeemedRetractibles off 7bp. These figures mask an awful lot of violent churning with respect to individual issues though, as illustrated by the lengthy Performance Highlights table. Volume was average.

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:

Implied Volatility rocketed today, reaching an unreasonable level.

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.30 to be $0.69 rich, while TRP.PR.D (target of a sell programme today; see the Performance Highlights table), resetting 2019-4-30 at +238, is $0.74 cheap at its bid price of 16.04.

Another good fit today for MFC, with Implied Volatility climbing a bit.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 22.80 to be 0.54 rich, while MFC.PR.G resetting at +280bp on 2016-12-19, is bid at 20.82 to be 0.70 cheap.

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PF.A, resetting at +290bp on 2018-9-30, bid at 18.36 to be $0.71 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.50 and appears to be $0.74 rich.

Implied Volatility leaped upwards today, from an unreasonably low to an unreasonably high level, as three of the four issues were featured in the Performance Highlights table – two winners, one loser.

FTS.PR.K, with a spread of +205bp, and bid at 17.10, looks $0.20 expensive and resets 2019-3-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 17.10 and is $0.21 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.20%, with one outlier below -2.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -1.65% and other issues averaging -0.57%. There are three junk outliers above 0.00%.

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	0.00 %	0.00 %	0	0.00	0	0.4266 %	1,603.5
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.4266 %	2,803.7
Floater	4.63 %	4.66 %	63,259	16.16	3	0.4266 %	1,704.7
OpRet	0.00 %	0.00 %	0	0.00	0	-0.3078 %	2,753.4
SplitShare	4.36 %	5.00 %	66,506	4.49	5	-0.3078 %	3,226.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.3078 %	2,517.7
Perpetual-Premium	5.84 %	5.85 %	54,429	13.86	5	-0.0159 %	2,466.2
Perpetual-Discount	5.70 %	5.77 %	74,723	14.24	33	0.3076 %	2,490.7
FixedReset	5.18 %	4.76 %	186,416	15.07	76	0.1436 %	1,966.3
Deemed-Retractible	5.24 %	5.24 %	97,799	5.50	33	-0.0730 %	2,538.8
FloatingReset	2.66 %	4.64 %	62,565	5.84	9	0.2205 %	2,053.2

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.D	FixedReset	-5.26 %	Not real. The issue traded 47,944 shares today (consolidated exchanges) in a range of 16.43-95 before closing at 16.04-50, 9×2. It looks like there was aggressive selling by a programme run via RBC: twenty-five trades in the last twelve minutes, totalling 7,800 shares – we can’t really blame the market maker for suddenly remembering he had a dentist’s appointment. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 16.04 Evaluated at bid price : 16.04 Bid-YTW : 5.19 %
PWF.PR.P	FixedReset	-3.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 4.23 %
TD.PF.D	FixedReset	-2.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.54 %
TRP.PR.E	FixedReset	-2.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 4.88 %
FTS.PR.F	Perpetual-Discount	-2.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 5.88 %
BAM.PR.X	FixedReset	-2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 14.02 Evaluated at bid price : 14.02 Bid-YTW : 4.96 %
FTS.PR.M	FixedReset	-2.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 4.58 %
MFC.PR.N	FixedReset	-1.64 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.18 Bid-YTW : 6.95 %
MFC.PR.G	FixedReset	-1.56 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.82 Bid-YTW : 6.22 %
MFC.PR.C	Deemed-Retractible	-1.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 7.22 %
BAM.PF.B	FixedReset	-1.33 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 5.30 %
BMO.PR.T	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 18.51 Evaluated at bid price : 18.51 Bid-YTW : 4.38 %
RY.PR.I	FixedReset	-1.26 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.50 Bid-YTW : 4.34 %
BMO.PR.Q	FixedReset	-1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.81 Bid-YTW : 6.34 %
PVS.PR.B	SplitShare	-1.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.45 Bid-YTW : 5.22 %
SLF.PR.C	Deemed-Retractible	-1.12 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.30 Bid-YTW : 7.31 %
MFC.PR.M	FixedReset	-1.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.78 Bid-YTW : 6.61 %
TD.PR.Y	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.85 Bid-YTW : 3.98 %
SLF.PR.A	Deemed-Retractible	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.54 Bid-YTW : 6.82 %
BAM.PF.E	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 17.47 Evaluated at bid price : 17.47 Bid-YTW : 5.20 %
BAM.PF.G	FixedReset	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.96 %
GWO.PR.G	Deemed-Retractible	1.00 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.16 Bid-YTW : 6.30 %
HSE.PR.E	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 21.28 Evaluated at bid price : 21.55 Bid-YTW : 5.11 %
TD.PF.F	Perpetual-Discount	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 22.66 Evaluated at bid price : 23.00 Bid-YTW : 5.41 %
RY.PR.N	Perpetual-Discount	1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 22.48 Evaluated at bid price : 22.79 Bid-YTW : 5.51 %
BAM.PF.D	Perpetual-Discount	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 20.49 Evaluated at bid price : 20.49 Bid-YTW : 6.03 %
RY.PR.H	FixedReset	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 18.99 Evaluated at bid price : 18.99 Bid-YTW : 4.28 %
MFC.PR.F	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.21 Bid-YTW : 9.47 %
BMO.PR.W	FixedReset	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 18.32 Evaluated at bid price : 18.32 Bid-YTW : 4.38 %
BNS.PR.Y	FixedReset	1.31 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.49 Bid-YTW : 6.03 %
HSE.PR.G	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 21.99 Evaluated at bid price : 22.50 Bid-YTW : 4.86 %
BAM.PR.K	Floater	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 10.30 Evaluated at bid price : 10.30 Bid-YTW : 4.61 %
FTS.PR.G	FixedReset	1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 4.53 %
TD.PF.C	FixedReset	1.64 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 4.38 %
NA.PR.Q	FixedReset	1.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 4.25 %
RY.PR.W	Perpetual-Discount	1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 5.27 %
TRP.PR.F	FloatingReset	1.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 12.57 Evaluated at bid price : 12.57 Bid-YTW : 4.64 %
W.PR.J	Perpetual-Discount	1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 22.06 Evaluated at bid price : 22.35 Bid-YTW : 6.28 %
W.PR.H	Perpetual-Discount	1.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 21.98 Evaluated at bid price : 22.21 Bid-YTW : 6.21 %
SLF.PR.H	FixedReset	1.90 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.69 Bid-YTW : 7.50 %
SLF.PR.J	FloatingReset	1.93 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.20 Bid-YTW : 9.59 %
FTS.PR.K	FixedReset	1.97 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 4.50 %
SLF.PR.I	FixedReset	2.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.20 Bid-YTW : 6.44 %
TD.PF.E	FixedReset	2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 21.33 Evaluated at bid price : 21.61 Bid-YTW : 4.28 %
TD.PF.B	FixedReset	2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.31 %
CU.PR.H	Perpetual-Discount	2.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 22.65 Evaluated at bid price : 23.00 Bid-YTW : 5.79 %
RY.PR.M	FixedReset	2.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 4.40 %
BAM.PR.T	FixedReset	3.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 4.91 %
TRP.PR.A	FixedReset	3.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 4.76 %
IFC.PR.C	FixedReset	5.59 %	Yes, there were trades at the 19.45 level – and above! However, only 1,350 shares were traded and the VWAP was a mere 19.17. Numbers can get unreliable in a thin market! YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.45 Bid-YTW : 6.81 %
TRP.PR.B	FixedReset	5.90 %	Just a recovery from yesterday‘s shenanigans. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 11.66 Evaluated at bid price : 11.66 Bid-YTW : 4.49 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BAM.PF.H	FixedReset	1,304,995	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 23.13 Evaluated at bid price : 24.96 Bid-YTW : 4.93 %
BMO.PR.R	FloatingReset	100,200	Scotia bought 100,000 from RBC at 21.75. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.40 Bid-YTW : 4.70 %
RY.PR.P	Perpetual-Discount	73,494	New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 24.04 Evaluated at bid price : 24.40 Bid-YTW : 5.39 %
TRP.PR.D	FixedReset	47,944	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 16.04 Evaluated at bid price : 16.04 Bid-YTW : 5.19 %
RY.PR.Z	FixedReset	32,530	TD crossed 15,700 at 19.12. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 18.96 Evaluated at bid price : 18.96 Bid-YTW : 4.25 %
TRP.PR.E	FixedReset	29,350	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 4.88 %
There were 33 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PF.D	FixedReset	Quote: 20.00 – 21.00 Spot Rate : 1.0000 Average : 0.6204 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.54 %
FTS.PR.G	FixedReset	Quote: 17.10 – 17.85 Spot Rate : 0.7500 Average : 0.5031 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 4.53 %
TRP.PR.C	FixedReset	Quote: 12.00 – 12.57 Spot Rate : 0.5700 Average : 0.3515 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 12.00 Evaluated at bid price : 12.00 Bid-YTW : 4.85 %
IFC.PR.A	FixedReset	Quote: 15.70 – 16.30 Spot Rate : 0.6000 Average : 0.3884 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.70 Bid-YTW : 9.09 %
FTS.PR.J	Perpetual-Discount	Quote: 21.10 – 21.61 Spot Rate : 0.5100 Average : 0.3031 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-02 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 5.70 %
MFC.PR.K	FixedReset	Quote: 18.56 – 19.13 Spot Rate : 0.5700 Average : 0.3647 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.56 Bid-YTW : 7.18 %

There is official concern about a sharp rise in buy-to-let investments in the UK:

Buy-to-let lending could pose a risk to financial stability.
The actions of buy-to-let investors affect the broader housing and mortgage markets as individuals compete to buy the same pool of properties. Looser lending standards in the buy-to-let sector could contribute to general house price increases and a broader increase in household indebtedness. And in a downswing, investors selling buy-to-let properties into an illiquid market could amplify falls in house prices, potentially raising losses given default for all mortgages. This could be a particular concern in a rising interest rate environment, if properties become unprofitable given higher debt-servicing costs. Buy-to-let borrowers are potentially more vulnerable to rising interest rates because loans are more likely to be interest only and extended on floating-rate terms, and affordability tends to be tested at lower stressed interest rates
than owner-occupied lending.

The FPC continues to monitor closely conditions in UK property markets given high household indebtedness. Aggregate UK household debt to income, while falling gradually since 2010, remains high compared to historical and international norms (Chart F). The distribution of debt has improved marginally, with the tail of households with debt to income ratios greater than 4.0 falling in early 2015. House prices and activity in the housing market have increased again recently, and mortgage rates on many mortgage products are historically low. House prices grew at an annual rate of 5.6% in the three months to May 2015, compared with 3% in 2014 Q4; and 68,000 mortgages were approved in April, compared with 60,000 per month in 2014 Q4. Given this, the FPC judges that the policies it introduced in June 2014 to insure against the risk of a marked loosening in underwriting standards and a further significant rise in the number of highly indebted households remain warranted. In the buy-to-let mortgage market, lending has continued to grow, with buy-to-let mortgage lending now accounting for 15% of the stock of outstanding mortgages and nearly 20% of the flow in 2015 Q1 (Chart G). As it set out in October 2014, HM Treasury will consult later this year on giving to the FPC the power of Direction to limit residential mortgage lending at high loan to value or high debt to income ratios, including interest coverage ratios, for buy-to-let lending. Parliament provided the equivalent powers to the FPC for owner-occupied lending in April this year.

This has already attracted the interest of the Central Planners:

Landlords are being offered the largest number of buy-to-let mortgage deals since the financial crisis as banks try to profit from older savers cashing in their pensions to buy property.

There are now more than 1,000 buy-to-let products on the market for the first time since April 2008, according to data analyst Moneyfacts.

The rise was attributed to the new pension freedoms introduced in April. Under the rules savers have unlimited access to their funds from age 55, and many older investors have said they will spend the cash on properties to let to students or City workers. Banks are spotting the opportunity to attract wealthy customers and have offered attractive new deals.
…
But experts now believe the entire market could begin to collapse following changes to tax laws which were announced by George Osborne in July.

The Chancellor said that by 2020 higher-rate taxpayers will no longer be able to deduct the cost of their mortgage interest from their rental income when they calculate a profit on which to pay tax. Only basic-rate relief will be available.

BCE Inc., proud issuer of a huge number of preferred shares, has been confirmed at Pfd-3(high) by DBRS:

DBRS Limited (DBRS) has today confirmed the long- and short-term ratings of Bell Canada (Bell Canada or the Company) and its parent company BCE Inc. (BCE) at A (low)/R-1 (low) and BBB (high)/R-1 (low), respectively. DBRS has also confirmed the ratings of Bell Canada’s Subordinated Debentures at BBB. All trends remain Stable. It should be noted that BCE’s ratings are linked to the ratings of Bell Canada and reflect the structural subordination of debt (currently none outstanding) and its preferred share obligations relative to Bell Canada. The ratings acknowledge the increase in financial leverage resulting from the acquisition of Astral Media and privatization of Bell Aliant (which DBRS believes enhanced the Company’s scale and diversification), but also reflect the expectation for deleveraging over the medium term. The ratings continue to be supported by the Company’s large and established subscriber base and quad-play offerings, and also consider intensifying competition and the risks associated with regulatory change.

The fourth quarter began with a return to normal in the Canadian preferred share market, by which I mean it was a lousy day, with PerpetualDiscounts losing 74bp, FixedResets down 49bp and DeemedRetractibles off 3bp. It looks like a sell programme kicked in at about 3:40pm – until then, the market was off a little, but nothing too serious:

One really has to wonder how the decision to execute this sell programme was rationalized. On the one hand, it seems very strange to start executing mass sales late in the day in a little backwater market like Canadian preferred shares. On the other hand … for the past nine months, executors of aggressive sell programmes have been patting themselves on the back a little while later, regretting only that they didn’t execute a few days earlier.

The Performance Highlights table is its usually lengthy self, highlighted by four issues that got caught by the late day sales and lost more than 5% (bid/bid). Volume was average.

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:

Implied Volatility dropped significantly today.

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.73 to be $0.96 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.48 cheap at its bid price of 12.10.

Another good fit today for MFC, with Implied Volatility unchanged.

Most expensive is MFC.PR.M, resetting at +236bp on 2019-12-19, bid at 20.00 to be 0.64 rich, while MFC.PR.I, resetting at +286bp on 2017-9-19, is bid at 20.92 to be 0.57 cheap.

The fit on the BAM issues continues to be horrible. Note that the pending new issue has been added with a price of 25.00; the valuation effects of the rate floor have been ignored.

The cheapest issue relative to its peers is BAM.PF.A, resetting at +290bp on 2018-9-30, bid at 18.48 to be $0.63 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.70 and appears to be $0.90 rich.

FTS.PR.H, with a spread of +145bp, and bid at 13.65, looks $0.41 expensive and resets 2020-6-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.85 and is $0.39 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.19%, with one outlier above 0.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -1.74% and other issues averaging -0.42%. There are four junk outliers above 0.00%.

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	0.00 %	0.00 %	0	0.00	0	-2.7450 %	1,596.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-2.7450 %	2,791.8
Floater	4.65 %	4.68 %	62,296	16.13	3	-2.7450 %	1,697.4
OpRet	0.00 %	0.00 %	0	0.00	0	-0.0324 %	2,761.9
SplitShare	4.34 %	4.81 %	67,083	4.49	5	-0.0324 %	3,236.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.0324 %	2,525.4
Perpetual-Premium	5.83 %	5.88 %	55,000	14.00	5	0.1274 %	2,466.5
Perpetual-Discount	5.74 %	5.74 %	73,874	14.24	32	-0.7444 %	2,483.0
FixedReset	5.18 %	4.76 %	189,226	15.17	75	-0.4902 %	1,963.5
Deemed-Retractible	5.23 %	5.26 %	98,669	5.46	33	-0.0307 %	2,540.7
FloatingReset	2.65 %	4.59 %	61,278	5.83	9	-0.8710 %	2,048.7

Performance Highlights
Issue	Index	Change	Notes
TRP.PR.B	FixedReset	-5.66 %	Reasonably real, in that yes, there was a trade at the closing bid of 11.01. However, this is timestamped 3:59pm; there is an oddlot trade also timestamped 3:59bp at the price of 11.67. It looks like algorithmic selling, since all but three of the last 25 trades were for 100 shares and the earliest of these 25 trades was at 3:49. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 11.01 Evaluated at bid price : 11.01 Bid-YTW : 4.76 %
W.PR.J	Perpetual-Discount	-5.63 %	This one is strange and illustrates the kind of things that can happen in a thin market. The last trade, for 100 shares, was at 21.95 so, as above, we can call the quote technically real. But there were three trades timestamped 3:43pm, each of which was for 100 shares, all executed at 22.98. So the thing dropped over a buck in the last 17 minutes! The volume in this time was 1,300 shares! So the market maker – assuming he was awake – got scared, for either good reasons or bad; there’s no way of telling according to the data available to me. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.70 Evaluated at bid price : 21.95 Bid-YTW : 6.40 %
W.PR.H	Perpetual-Discount	-5.50 %	Another Thin Market Special! The closing bid is technically real, since there were two actual trade at 21.91 – both for 100 shares in the closing two minutes. On the other hand, there were trades timestamped 3:43 at 22.84! So again, the market-maker got scared. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.55 Evaluated at bid price : 21.81 Bid-YTW : 6.32 %
TRP.PR.F	FloatingReset	-5.00 %	This looks like another victim of the sell programme, as all but one of the last 25 trades was for 100 shares, taking the trade price from 12.80 at 3:40 to 12.35 at 3:59. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 12.35 Evaluated at bid price : 12.35 Bid-YTW : 4.72 %
BMO.PR.Y	FixedReset	-3.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.73 Evaluated at bid price : 19.73 Bid-YTW : 4.65 %
HSE.PR.E	FixedReset	-3.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.33 Evaluated at bid price : 21.33 Bid-YTW : 5.18 %
BAM.PR.B	Floater	-2.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 10.23 Evaluated at bid price : 10.23 Bid-YTW : 4.65 %
BAM.PR.C	Floater	-2.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 10.08 Evaluated at bid price : 10.08 Bid-YTW : 4.72 %
TRP.PR.A	FixedReset	-2.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 4.92 %
BMO.PR.Z	Perpetual-Discount	-2.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 22.41 Evaluated at bid price : 22.71 Bid-YTW : 5.59 %
FTS.PR.J	Perpetual-Discount	-2.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.02 Evaluated at bid price : 21.02 Bid-YTW : 5.72 %
BAM.PR.K	Floater	-2.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 10.16 Evaluated at bid price : 10.16 Bid-YTW : 4.68 %
CM.PR.Q	FixedReset	-2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.94 Evaluated at bid price : 19.94 Bid-YTW : 4.49 %
RY.PR.M	FixedReset	-2.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.50 %
TD.PF.B	FixedReset	-2.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 18.52 Evaluated at bid price : 18.52 Bid-YTW : 4.40 %
FTS.PR.F	Perpetual-Discount	-1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.33 Evaluated at bid price : 21.60 Bid-YTW : 5.73 %
GWO.PR.H	Deemed-Retractible	-1.81 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.69 Bid-YTW : 6.83 %
CU.PR.H	Perpetual-Discount	-1.75 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 22.15 Evaluated at bid price : 22.50 Bid-YTW : 5.92 %
RY.PR.N	Perpetual-Discount	-1.70 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 22.20 Evaluated at bid price : 22.55 Bid-YTW : 5.57 %
BAM.PR.X	FixedReset	-1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 14.31 Evaluated at bid price : 14.31 Bid-YTW : 4.86 %
TRP.PR.D	FixedReset	-1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 16.93 Evaluated at bid price : 16.93 Bid-YTW : 4.91 %
BNS.PR.Y	FixedReset	-1.53 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.35 Bid-YTW : 6.26 %
BMO.PR.R	FloatingReset	-1.38 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.40 Bid-YTW : 4.70 %
BAM.PF.G	FixedReset	-1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 4.91 %
BAM.PF.B	FixedReset	-1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 17.23 Evaluated at bid price : 17.23 Bid-YTW : 5.22 %
IFC.PR.C	FixedReset	-1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.42 Bid-YTW : 7.54 %
RY.PR.W	Perpetual-Discount	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 22.82 Evaluated at bid price : 23.10 Bid-YTW : 5.36 %
BAM.PF.A	FixedReset	-1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 18.48 Evaluated at bid price : 18.48 Bid-YTW : 5.20 %
GWO.PR.Q	Deemed-Retractible	-1.27 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.61 Bid-YTW : 6.58 %
RY.PR.J	FixedReset	-1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 20.01 Evaluated at bid price : 20.01 Bid-YTW : 4.47 %
BNS.PR.D	FloatingReset	-1.18 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.47 Bid-YTW : 6.51 %
HSB.PR.C	Deemed-Retractible	-1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.51 Bid-YTW : 5.51 %
BMO.PR.W	FixedReset	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 18.09 Evaluated at bid price : 18.09 Bid-YTW : 4.44 %
NA.PR.W	FixedReset	-1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 18.11 Evaluated at bid price : 18.11 Bid-YTW : 4.53 %
NA.PR.S	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 4.41 %
BAM.PF.F	FixedReset	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.33 Evaluated at bid price : 19.33 Bid-YTW : 4.98 %
BNS.PR.Z	FixedReset	-1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.65 Bid-YTW : 6.60 %
TD.PF.C	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 4.45 %
SLF.PR.G	FixedReset	-1.06 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.92 Bid-YTW : 8.65 %
CU.PR.D	Perpetual-Discount	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.52 Evaluated at bid price : 21.52 Bid-YTW : 5.77 %
BAM.PR.N	Perpetual-Discount	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 6.03 %
GWO.PR.N	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.75 Bid-YTW : 9.58 %
PVS.PR.B	SplitShare	1.02 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 4.81 %
TRP.PR.E	FixedReset	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 17.73 Evaluated at bid price : 17.73 Bid-YTW : 4.76 %
SLF.PR.J	FloatingReset	1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.95 Bid-YTW : 9.83 %
FTS.PR.K	FixedReset	1.21 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 16.77 Evaluated at bid price : 16.77 Bid-YTW : 4.59 %
BMO.PR.T	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 4.32 %
IFC.PR.A	FixedReset	1.96 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.60 Bid-YTW : 9.18 %
PWF.PR.P	FixedReset	2.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 4.08 %
FTS.PR.H	FixedReset	2.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 13.65 Evaluated at bid price : 13.65 Bid-YTW : 4.25 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.M	FixedReset	107,934	Scotia crossed 100,000 at 19.90. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.40 Evaluated at bid price : 19.40 Bid-YTW : 4.50 %
BMO.PR.Y	FixedReset	61,975	RBC crossed 48,600 at 20.65. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 19.73 Evaluated at bid price : 19.73 Bid-YTW : 4.65 %
MFC.PR.J	FixedReset	56,748	Scotia crossed 55,300 at 20.35. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.32 Bid-YTW : 6.30 %
FTS.PR.K	FixedReset	44,635	TD crossed 16,700 at 16.94. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 16.77 Evaluated at bid price : 16.77 Bid-YTW : 4.59 %
GWO.PR.N	FixedReset	39,049	Nesbitt crossed 19,400 at 13.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.75 Bid-YTW : 9.58 %
PWF.PR.P	FixedReset	34,115	TD crossed 24,800 at 15.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 4.08 %
There were 34 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
W.PR.J	Perpetual-Discount	Quote: 21.95 – 23.60 Spot Rate : 1.6500 Average : 1.0335 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.70 Evaluated at bid price : 21.95 Bid-YTW : 6.40 %
W.PR.H	Perpetual-Discount	Quote: 21.81 – 23.20 Spot Rate : 1.3900 Average : 0.8409 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.55 Evaluated at bid price : 21.81 Bid-YTW : 6.32 %
BMO.PR.R	FloatingReset	Quote: 21.40 – 21.99 Spot Rate : 0.5900 Average : 0.3948 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.40 Bid-YTW : 4.70 %
TRP.PR.A	FixedReset	Quote: 14.50 – 15.20 Spot Rate : 0.7000 Average : 0.5122 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 4.92 %
IFC.PR.C	FixedReset	Quote: 18.42 – 18.98 Spot Rate : 0.5600 Average : 0.4087 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.42 Bid-YTW : 7.54 %
HSE.PR.E	FixedReset	Quote: 21.33 – 21.90 Spot Rate : 0.5700 Average : 0.4227 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-10-01 Maturity Price : 21.33 Evaluated at bid price : 21.33 Bid-YTW : 5.18 %

Apparently, somebody important has told Lapdog Carney to talk about climate change:

Mark Carney, the governor of the Bank of England, declared that the warming climate presented major risks for the global economy and global financial stability, and that businesses and regulators needed to move more quickly to try to contain the potential economic damage even though it may seem uncertain and far off.

His warning, delivered in a 4,400-word speech with ample footnotes on Tuesday, is the latest example of how climate change has moved beyond theoretical scientific debates to the start of practical planning for safeguarding the economy and business.

“We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors — imposing a cost on future generations that the current generation has no direct incentive to fix,” he said. “In other words, once climate change becomes a defining issue for financial stability, it may already be too late.”

SEC Commissioner Kara M. Stein has displayed total ignorance of the practical side of software development with her speech titled Market Structure in the 21st Century: Bringing Light to the Dark:

In addressing this challenge, I come back to the basic fact that behind every algorithm, order type, and electronic trading network are human beings: individuals program computers, individuals design trading algorithms, and individuals market products. Individuals supervise and design compliance structures. Regardless of the advancement of technology and innovation in our securities markets, humans – individuals – are necessary to what we do each and every day.

All market participants need to be responsible for their work and, at the same time, its collateral consequences. To do that, every individual within a securities organization – from the coder to the cybersecurity officer, the salesperson to the CEO – needs to understand the new electronic marketplace. Everyone needs to be cognizant of how the work he or she is doing could affect the market as a whole, including from a technological and operational perspective.

Everyone involved also needs to know the rules of the road. Without that, we lose transparency, we do not know who to trust, and confidence in the system diminishes. Just as we license drivers and ensure that vehicles have basic requirements of safety and soundness, we should consider whether certain personnel are so vital in our increasingly “robotic” securities market that they should be licensed. In a world where programming errors are just as damaging to investors as improper sales practices, our regulatory approach may need to evolve.

Complex organizational charts should not shield individuals from accountability. It cannot continue to be the case that so-called “technological glitches” set off a series of finger pointing within firms. Opacity must be replaced with transparency, including within firms themselves. I will be following this issue closely and would like to see firms take it upon themselves to make these changes proactively.

So she wants everybody, from some teeny-bopper programmer to the salesman pushing the button, to “understand the new electronic marketplace”. A laudable objective, but in practice totally divorced from reality.

My strength as a programmer is that I’m also a portfolio manager. My strength as a portfolio manager is that I’m also a programmer. Twenty-five-odd years in the business have given me a pretty good feel for just how rare that combination is.

The things she dismisses as ‘so-called “technological glitches”‘ are, more often than not, just that. They’re bugs. Bugs are inevitable in any complex software project. What does she intend, to hold some $50,000 p.a. teeny-bopper programmer 100% accountable for a bug that bursts the market some day? She’s going to really enjoy destroying some helpless scapegoat for typing “<" when he should have typed ">“?

Bugs is bugs is bugs. I will certainly agree that accountability should exist, but it is entirely appropriate for this accountability – as far as the SEC and the justice system are concerned – to remain at firm level. Nail the firm for not having sufficiently robust error checking and debugging. It is not realistic to hold any individual on any given level of the pyramid 100% accountable for a bug. Theoretically, sure it’s possible. Practically? Give me a break. It’s a recipe for either never getting anything done or for scapegoating some poor sucker who made a good faith effort. Put this woman in charge of the European Space Agency – and then, finally, somebody body will be HELD ACCOUNTABLE for the problems with the Philae Lander.

This is not to say there should be a total carte-blanche for software, of course. Salesmen should have a “reasonable” knowledge of what their software does; there must be “reasonable” documentation of who told who to do what when; and there will, from time to time, be clear indications that somebody was deliberately doing something naughty with software, as discussed on August 12 … but total individual accountability is nothing more than a pipe dream.

William C Dudley of the New York Fed made a speech titled Regulation and Liquidity Provision, which makes some points about corporate bond liquidity:

To investigate corporate bond market liquidity in more detail, let’s examine three liquidity measures: the average trade size, “effective” bid-ask spreads and price impact. The evidence on the average trade size for investment grade corporate bonds indicates a slight reduction from between $700,000 to $800,000 in the early 2000s to around $500,000 in the last few years. (Exhibit 6) However, price measures of corporate bond liquidity do not substantiate the trend in this quantity measure. The effective bid-ask spread has been trending down since the early 2000s, around the same time that TRACE reporting was introduced. The spread spiked during the financial crisis, but is now lower than its pre-crisis levels. (Exhibit 7) Similarly, price impact—the effect on price from a $1 million trade—has also been trending down since the early 2000s apart from the jump during the financial crisis. (Exhibit 8)

One metric he leaves out of his assessment is trading intensity, which might also be described as market turnover:

At the moment, trading indicators give the appearance of robust normality. Trading volumes are high, particularly in bonds where they are at record levels. Spreads (the difference between the bid and offer price for a security) are small. The emergence of electronic trading and also a variety of investors gives the impression of a highly liquid market.

But market turnover – the volume of trading relative to outstanding securities – in bonds and shares has fallen significantly.

Government and corporate bond turnover is down about 50 percent, in part reflecting the massive growth in issuance.

In other words, maybe price impact is holding steady because traders and managers are taking longer to do their trades. It is reasonable to suppose that, for instance, if you really want to extend duration in your GE bonds but that costs too much, you’ll extend duration somewhere else, instead – like Treasuries, for instance. You won’t do the GE trade because it’s too expensive – so price impact remains unchanged, but GE market turnover goes down. Liquidity is a very tricky thing to define; what’s worse, it means different things to different people, according to their individual objectives.

Sometimes even different things to the same person! Say I have a PerpetualDiscount that I can trade in size within ten cents, either way, of the midpoint. Well, that’s a liquid issue, right? But it’s yielding 310bp over long term bonds! That’s a great big liquidity premium!

It has also been claimed, quite reasonably, that:

Since 2009 the number of issuers in the high-grade corporate bond market has almost doubled. These “new issuers” tend to have less overall debt outstanding (almost four times less), fewer securities, and don’t trade as frequently. For example, within the JP Morgan U.S. Liquid Corporate Bond Index, bonds that represent over 0.5% of the index had a 31% higher turnover ratio than issuers that fell below the 0.5% threshold.

So what are we to conclude about that?

This was all brought to my attention by Assiduous Reader JP (you know, he’s the guy who sends me interesting links, while the rest of bums think Deep Thoughts with your eyes closed), who sent me a link to a story titled Market Moves That Aren’t Supposed to Happen Keep Happening:

While the New York Fed president argued that there’s little evidence so far that new financial regulation has cut into the ease of trading U.S. Treasuries, TD analysts Priya Misra and Gennadiy Goldberg think otherwise. They point to daily, wild swings in the bond market as evidence of diminished liquidity.

Our findings show that daily changes in 10-year Treasury yields exceeded one standard deviation (σ) 58% of the time so far in 2015—considerably higher than the 49% observed last year (Figure 2). The 58% measure is the highest reading going back to 1975, suggesting that recent volatility in Treasury markets is unprecedented. As if a record number of “choppy” days were not enough, 10-year yield movements also exceeded 3σ in as many as 9% of trading days this year. This is higher than the average of 6% of days since 1975.

…
While Dudley finds little evidence of average bond market liquidity having deteriorated, TD reckons the problem lies in so-called “tail events,” in which increased regulation and changes to market structure exacerbate the potential for extreme moves. Looking at average liquidity conditions won’t show much evidence of a problem, therefore. That might go some way toward explaining why all those market moves that are supposed to not happen very often keep occurring with some regularity.

Here’s TD’s thinking:

The issue, as reflected by our sigma measure, may very well be one of “fat tails problems” and lower liquidity during these tail events due to lower dealer risk appetite. The argument is that an unexpected macro event or large-sized risk transfer has the potential of creating much larger market moves today compared with the past. This would be consistent with a greater number of days in recent months exhibiting 1σ or 3σ sigma moves.

I hope everybody is sitting down because … it was actually a pretty good day for the Canadian preferred share market! PerpetualDiscounts gained 55bp, FixedResets were up 64bp and DeemedRetractibles won 82bp. There’s good representation of each group on the good side of the lengthy Performance Highlights table. Volume was above average.

PerpetualDiscounts now yield 5.74%, equivalent to 7.46% interest at the standard equivalency factor of 1.3x. Long corporates yield about 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 325bp, a significant rise from the 310bp reported September 23. It was a good day, but one swallow doesn’t make a summer!

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:

Implied Volatility edged up again today.

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 17.55 to be $0.58 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.65 cheap at its bid price of 12.21.

Another good fit today for MFC, with Implied Volatility edging downward.

Most expensive is MFC.PR.M, resetting at +236bp on 2019-12-19, bid at 20.00 to be 0.60 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 21.14 to be 0.53 cheap.

The fit on the BAM issues continues to be horrible. Note that the pending new issue has been added with a price of 25.00; the valuation effects of the rate floor have been ignored.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 19.00 to be $0.62 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.97 and appears to be $0.98 rich.

FTS.PR.M, with a spread of +248bp, and bid at 19.37, looks $0.21 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.85 and is $0.26 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.11%, with one outlier above 0.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -1.57% and other issues averaging -0.47%. There are three junk outliers above 0.00%, including all three of the new Strong Pairs that came into existence today.

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	0.00 %	0.00 %	0	0.00	0	-0.4765 %	1,641.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.4765 %	2,870.6
Floater	4.52 %	4.55 %	61,744	16.32	3	-0.4765 %	1,745.3
OpRet	0.00 %	0.00 %	0	0.00	0	0.0508 %	2,762.8
SplitShare	4.49 %	4.73 %	64,971	3.02	4	0.0508 %	3,237.8
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0508 %	2,526.3
Perpetual-Premium	5.82 %	5.87 %	68,535	14.03	8	0.1461 %	2,463.4
Perpetual-Discount	5.68 %	5.74 %	72,000	14.22	30	0.5517 %	2,501.7
FixedReset	5.16 %	4.65 %	182,272	15.33	75	0.6440 %	1,973.1
Deemed-Retractible	5.23 %	5.28 %	98,396	5.47	33	0.8215 %	2,541.4
FloatingReset	2.63 %	4.48 %	60,623	5.84	9	0.5265 %	2,066.7

Performance Highlights
Issue	Index	Change	Notes
CM.PR.Q	FixedReset	-1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 4.39 %
W.PR.H	Perpetual-Discount	-1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 22.80 Evaluated at bid price : 23.08 Bid-YTW : 5.97 %
CU.PR.H	Perpetual-Discount	-1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 22.57 Evaluated at bid price : 22.90 Bid-YTW : 5.81 %
GWO.PR.N	FixedReset	-1.49 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.89 Bid-YTW : 9.44 %
FTS.PR.M	FixedReset	-1.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 19.37 Evaluated at bid price : 19.37 Bid-YTW : 4.49 %
BAM.PR.B	Floater	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 10.54 Evaluated at bid price : 10.54 Bid-YTW : 4.49 %
PWF.PR.T	FixedReset	-1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 21.73 Evaluated at bid price : 22.01 Bid-YTW : 3.81 %
PVS.PR.B	SplitShare	1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 5.14 %
GWO.PR.R	Deemed-Retractible	1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.75 Bid-YTW : 6.74 %
GWO.PR.L	Deemed-Retractible	1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.57 Bid-YTW : 5.93 %
SLF.PR.G	FixedReset	1.07 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.08 Bid-YTW : 8.51 %
BAM.PR.M	Perpetual-Discount	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 5.97 %
SLF.PR.H	FixedReset	1.11 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.25 Bid-YTW : 7.83 %
RY.PR.H	FixedReset	1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 18.86 Evaluated at bid price : 18.86 Bid-YTW : 4.31 %
SLF.PR.B	Deemed-Retractible	1.17 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.63 Bid-YTW : 6.82 %
BAM.PF.A	FixedReset	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 18.72 Evaluated at bid price : 18.72 Bid-YTW : 5.13 %
GWO.PR.G	Deemed-Retractible	1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.85 Bid-YTW : 6.48 %
BAM.PR.Z	FixedReset	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 18.98 Evaluated at bid price : 18.98 Bid-YTW : 5.16 %
SLF.PR.D	Deemed-Retractible	1.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.25 Bid-YTW : 7.34 %
POW.PR.D	Perpetual-Discount	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 21.55 Evaluated at bid price : 21.81 Bid-YTW : 5.74 %
RY.PR.Z	FixedReset	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 18.87 Evaluated at bid price : 18.87 Bid-YTW : 4.27 %
CU.PR.F	Perpetual-Discount	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 20.01 Evaluated at bid price : 20.01 Bid-YTW : 5.69 %
FTS.PR.K	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 16.57 Evaluated at bid price : 16.57 Bid-YTW : 4.65 %
NA.PR.S	FixedReset	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.36 %
BMO.PR.T	FixedReset	1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 4.38 %
TD.PF.B	FixedReset	1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.30 %
TRP.PR.F	FloatingReset	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 13.00 Evaluated at bid price : 13.00 Bid-YTW : 4.47 %
BNS.PR.P	FixedReset	1.42 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.21 Bid-YTW : 3.73 %
GWO.PR.Q	Deemed-Retractible	1.46 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.90 Bid-YTW : 6.40 %
GWO.PR.P	Deemed-Retractible	1.50 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 6.15 %
RY.PR.N	Perpetual-Discount	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 22.61 Evaluated at bid price : 22.94 Bid-YTW : 5.47 %
PWF.PR.K	Perpetual-Discount	1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 21.85 Evaluated at bid price : 22.09 Bid-YTW : 5.69 %
BAM.PR.N	Perpetual-Discount	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 20.06 Evaluated at bid price : 20.06 Bid-YTW : 5.96 %
BAM.PR.T	FixedReset	1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 16.01 Evaluated at bid price : 16.01 Bid-YTW : 5.07 %
MFC.PR.G	FixedReset	1.68 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.14 Bid-YTW : 6.01 %
GWO.PR.I	Deemed-Retractible	1.69 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.10 Bid-YTW : 6.82 %
FTS.PR.F	Perpetual-Discount	1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 21.75 Evaluated at bid price : 22.00 Bid-YTW : 5.62 %
BAM.PR.R	FixedReset	1.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 15.60 Evaluated at bid price : 15.60 Bid-YTW : 5.10 %
SLF.PR.E	Deemed-Retractible	1.93 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.62 Bid-YTW : 7.14 %
SLF.PR.A	Deemed-Retractible	2.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.58 Bid-YTW : 6.79 %
GWO.PR.S	Deemed-Retractible	2.05 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 6.23 %
MFC.PR.B	Deemed-Retractible	2.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.40 Bid-YTW : 6.82 %
POW.PR.B	Perpetual-Discount	2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 23.09 Evaluated at bid price : 23.35 Bid-YTW : 5.74 %
MFC.PR.N	FixedReset	2.25 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.56 Bid-YTW : 6.68 %
SLF.PR.C	Deemed-Retractible	2.26 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.40 Bid-YTW : 7.23 %
PWF.PR.P	FixedReset	2.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 14.68 Evaluated at bid price : 14.68 Bid-YTW : 4.17 %
MFC.PR.M	FixedReset	2.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.00 Bid-YTW : 6.46 %
SLF.PR.J	FloatingReset	2.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.80 Bid-YTW : 9.97 %
FTS.PR.G	FixedReset	2.43 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 16.85 Evaluated at bid price : 16.85 Bid-YTW : 4.60 %
RY.PR.D	Deemed-Retractible	2.55 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 4.68 %
FTS.PR.J	Perpetual-Discount	2.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 21.55 Evaluated at bid price : 21.55 Bid-YTW : 5.58 %
TRP.PR.E	FixedReset	2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 4.81 %
TRP.PR.A	FixedReset	2.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 14.90 Evaluated at bid price : 14.90 Bid-YTW : 4.79 %
TRP.PR.C	FixedReset	2.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 12.21 Evaluated at bid price : 12.21 Bid-YTW : 4.76 %
FTS.PR.H	FixedReset	2.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 13.35 Evaluated at bid price : 13.35 Bid-YTW : 4.34 %
GWO.PR.H	Deemed-Retractible	3.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.09 Bid-YTW : 6.58 %
HSE.PR.E	FixedReset	3.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 21.66 Evaluated at bid price : 22.00 Bid-YTW : 5.00 %
SLF.PR.I	FixedReset	3.39 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.85 Bid-YTW : 6.67 %
MFC.PR.C	Deemed-Retractible	3.49 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.76 Bid-YTW : 7.07 %
TRP.PR.D	FixedReset	3.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 4.83 %

Volume Highlights
Issue	Index	Shares Traded	Notes
IFC.PR.C	FixedReset	71,388	Scotia crossed 54,900 at 18.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.66 Bid-YTW : 7.36 %
TRP.PR.D	FixedReset	58,645	TD crossed 30,000 at 17.21. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 4.83 %
TRP.PR.E	FixedReset	52,342	TD crossed 30,000 at 18.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 4.81 %
MFC.PR.K	FixedReset	50,050	Scotia crossed 39,200 at 18.55. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.58 Bid-YTW : 7.16 %
BMO.PR.R	FloatingReset	49,700	RBC crossed 48,400 at 21.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.70 Bid-YTW : 4.46 %
BMO.PR.K	Deemed-Retractible	34,388	Scotia crossed 25,000 at 25.54. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-11-25 Maturity Price : 25.00 Evaluated at bid price : 25.38 Bid-YTW : 4.37 %
There were 39 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
IAG.PR.G	FixedReset	Quote: 20.17 – 20.95 Spot Rate : 0.7800 Average : 0.5161 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.17 Bid-YTW : 6.61 %
FTS.PR.H	FixedReset	Quote: 13.35 – 13.95 Spot Rate : 0.6000 Average : 0.4362 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 13.35 Evaluated at bid price : 13.35 Bid-YTW : 4.34 %
PVS.PR.D	SplitShare	Quote: 23.80 – 24.20 Spot Rate : 0.4000 Average : 0.2954 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 5.53 %
MFC.PR.K	FixedReset	Quote: 18.58 – 18.92 Spot Rate : 0.3400 Average : 0.2380 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.58 Bid-YTW : 7.16 %
PWF.PR.T	FixedReset	Quote: 22.01 – 22.40 Spot Rate : 0.3900 Average : 0.2923 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 21.73 Evaluated at bid price : 22.01 Bid-YTW : 3.81 %
POW.PR.G	Perpetual-Discount	Quote: 24.16 – 24.50 Spot Rate : 0.3400 Average : 0.2489 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-30 Maturity Price : 23.69 Evaluated at bid price : 24.16 Bid-YTW : 5.79 %

There are high level worries about the Hong Kong property market:

Hong Kong home prices are the highest relative to shares of the city’s publicly-traded developers in almost two decades. For Bocom International Holdings Co. analyst Alfred Lau, that’s a sign that the property market’s about to drop as much as 20 percent.
…
While home values kept rising in August, sales showed signs of a slowdown. The number of transactions tumbled 37 percent from a year earlier amid concern about China’s economic outlook and the prospect of higher borrowing costs as the Federal Reserve prepares to raise interest rates. Analysts including JPMorgan Chase & Co.’s Cusson Leung and Morgan Stanley’s Praveen K. Choudhary are calling for Hong Kong property prices to slide as much as 10 percent next year.
…
The Hong Kong Monetary Authority said in a report Friday the risk of a “downward adjustment” in home prices is increasing amid volatility in global and domestic financial markets.

One wonders what implications that will have for Vancouver and, to a lesser extent, for Toronto.

We may see more rights offerings in Canada:

On September 24, 2015, the Canadian Securities Administrators (CSA) announced the adoption of a streamlined prospectus-exempt rights offering process, which is aimed at providing reporting issuers with greater access to this prospectus exemption. Rights offerings permit issuers to distribute to their existing securityholders rights to purchase securities, generally at a discount to the prevailing market price. These offerings are often viewed as a fair way to raise capital because they protect existing investors from dilution. The rights offering prospectus exemption has historically not been frequently used in Canada, owing to the time and cost associated with the current regime. Under the new regime, none of the materials provided to securityholders will be reviewed by regulators prior to their use, substantially reducing the time frame in which an issuer can complete a rights offering. The new rights offering prospectus exemption will be available only to reporting issuers (other than investment funds) issuing an existing class of securities.

The process for completing a rights offering under the streamlined new prospectus exemption and the required documentation are set out below.

• •Prior to the commencement of the exercise period for the rights, the issuer files a rights offering notice on SEDAR and sends it to all securityholders resident in Canada holding the class of securities to be issued on the exercise of the rights. The notice contains only basic information about the offering, such as the size of the offering, the steps required to participate in the offering and how to access the rights offering circular electronically. The CSA does not expect a rights offering notice to be longer than two pages.
• •Concurrently with the filing of the rights offering notice, the issuer files a rights offering circular on SEDAR (the issuer is not required to send the circular to securityholders). The rights offering circular includes, in question-and-answer format, limited disclosure regarding the distribution, such as information relating to the particulars of the offering, the sources and uses of funds available after the offering and insider participation in the offering. The issuer must also disclose in the circular any material facts or material changes that have not yet been disclosed and include a statement that there are no undisclosed material facts or materials changes in respect of the issuer. The circular also must be certified not to contain a misrepresentation by the issuer’s CEO, CFO and two of its directors. The CSA does not expect a rights offering circular to be longer than 10 pages.
• •The exercise period for the rights must be at least 21 days but not more than 90 days.
• •On the closing date of the offering, the issuer must issue and file on SEDAR a news release setting out, among other things, the aggregate proceeds of the distribution and the number of securities issued under the basic subscription privilege, any additional subscription privilege and stand-by commitment.

Under this new rights offering prospectus exemption, the permitted dilution under an exempt rights offering will be increased from the current 25% to 100% in any 12-month period, which should make the exemption more attractive to smaller issuers. Rights offerings that result in greater dilution will have to be conducted by way of a prospectus.
…
We expect that the new rights offering prospectus exemption will be well received by reporting issuers because it should reduce the time and cost associated with rights offerings, thereby making such offerings a more practical means of raising capital. Issuers that are not reporting issuers and that wish to raise capital from existing securityholders will now have to rely on the existing shareholder exemption or one of the other exemptions available under Canadian provincial securities laws, such as the accredited investor exemption or the private issuer exemption.

DBRS downgraded 31 European banks due to removal of systemic support:

DBRS Ratings Limited and DBRS Inc., collectively DBRS, have downgraded the senior debt and deposit ratings of 31 banking groups in Europe that had previously benefited from some uplift for systemic support. The short-term debt ratings of 13 banking groups were also downgraded. At the same time, positive fundamental trends have led to an upgrade of the Intrinsic Assessment of 10 banks, which has offset the removal of support uplift for these banks.

These rating actions conclude the reviews that were initiated on 20 May 2015. They reflect DBRS’s view that developments in European regulation and legislation mean that there is less certainty about the likelihood of timely systemic support. Overall, DBRS views this as negative for European banks’ senior bondholders, whilst noting that certain fundamental improvements – particularly in capitalisation – have offset some of the impact from these developments.

DBRS has reviewed and changed the support assessment for 46 banking groups to reflect DBRS’s view of the reduction in the predictability of systemic support. This has led to the removal of systemic support uplift from the senior debt ratings for a total of 31 banking groups, removing 1 notch of uplift from 29 banks and 2 notches of uplift from 2 banks. At the same time the Intrinsic Assessments (IAs) of 10 banks were raised by 1 notch, offsetting the impact of the removal of support uplift. In addition, the senior debt ratings of 5 banks were unaffected by the change in the support assessment, because their Intrinsic Assessments were already at the same level as or higher than the respective sovereign rating.

HSBC Holdings and hence HSBC Bank Canada, proud issuer of HSB.PR.C and HSB.PR.D, was caught in the sweep but preferred share ratings are unaffected:

DBRS Limited (collectively with DBRS Ratings Limited and DBRS Inc., DBRS) has today downgraded the Long-Term Deposits and Senior Debt of HSBC Bank Canada to A (high) from AA (low) and its Subordinated Debt ratings to “A” from A (high). The trend is now Stable. Today’s rating actions follow DBRS’s lowering of the ratings of HSBC Holdings plc, HSBC Bank Canada’s ultimate parent. DBRS has also removed the ratings from Under Review with Negative Implications, where they were placed on May 20, 2015. There is no change to the Short-Term Instruments rating nor to the Non-Cumulative Preferred Shares Class I rating of HSBC Bank Canada as a result of today’s actions.

Today’s rating actions are driven by DBRS’s having downgraded the senior debt and deposit ratings of a number of banking groups in Europe, including HSBC Holdings plc, that had previously benefited from some uplift for systemic support. These rating actions conclude the review that was initiated on May 20, 2015, and reflect DBRS’s view that developments in European regulation and legislation mean that there is less certainty about the likelihood of timely systemic support. Given HSBC Bank Canada’s position in HSBC’s global franchise, DBRS has assigned an SA1 designation to the bank, which implies strong and predictable support from the parent, should it be required. As a supported rating with a SA1 designation, HSBC Bank Canada’s rating will generally move in tandem with HSBC Holdings plc’s rating.

As part of a continuing series on well-known Canadian preferred share investors, PrefBlog proudly introduces the Wicked Witch of the East:

In a startling turn of events, not all classes of Canadian preferred share had a bad day today, as PerpetualDiscounts were off 23bp, FixedResets down 69bp and DeemedRetractibles gained 12bp. The Performance Highlights table continues to be absurdly long. Volume was very high.

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:

Implied Volatility jumped again today.

TRP.PR.B, which resets 2020-6-30 at +235, is bid at 11.67 to be $0.55 rich, while TRP.PR.C, resetting 2016-1-30 at +164, is $0.64 cheap at its bid price of 11.87.

Another good fit today for MFC, with Implied Volatility edging upward.

Most expensive is MFC.PR.H, resetting at +313bp on 2017-3-19, bid at 22.75 to be 0.48 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 20.79 to be 0.73 cheap.

The fit on the BAM issues continues to be horrible. Note that the pending new issue has been added with a price of 25.00; the valuation effects of the rate floor have been ignored.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 15.30 to be $0.77 cheap. BAM.PF.G, resetting at +284bp on 2020-6-30 is bid at 19.90 and appears to be $1.02 rich.

FTS.PR.M, with a spread of +248bp, and bid at 19.65, looks $0.65 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 16.45 and is $0.51 cheap.

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -1.03%, with one outlier above 0.00%. The distribution is bimodal, with bank NVCC non-compliant pairs averaging -1.46% and other issues averaging -0.43%. There are two junk outliers above 0.00%.

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	0.00 %	0.00 %	0	0.00	0	-0.5999 %	1,649.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.5999 %	2,884.4
Floater	4.50 %	4.54 %	61,917	16.33	3	-0.5999 %	1,753.7
OpRet	0.00 %	0.00 %	0	0.00	0	0.0129 %	2,761.4
SplitShare	4.50 %	4.73 %	64,991	3.02	4	0.0129 %	3,236.2
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0129 %	2,525.0
Perpetual-Premium	5.83 %	5.88 %	68,604	13.98	8	-0.2162 %	2,459.8
Perpetual-Discount	5.72 %	5.78 %	71,482	14.18	30	-0.2278 %	2,487.9
FixedReset	5.19 %	4.71 %	179,113	15.19	75	-0.6938 %	1,960.5
Deemed-Retractible	5.27 %	5.15 %	97,431	5.46	33	0.1216 %	2,520.7
FloatingReset	2.65 %	4.55 %	62,346	5.83	9	-0.5407 %	2,055.8

Performance Highlights
Issue	Index	Change	Notes
BAM.PF.B	FixedReset	-4.86 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 17.61 Evaluated at bid price : 17.61 Bid-YTW : 5.11 %
BIP.PR.A	FixedReset	-4.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 5.49 %
SLF.PR.I	FixedReset	-3.52 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.20 Bid-YTW : 7.12 %
TRP.PR.D	FixedReset	-2.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 5.01 %
BAM.PF.A	FixedReset	-2.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 5.20 %
MFC.PR.K	FixedReset	-2.73 %	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 %
BAM.PR.Z	FixedReset	-2.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 5.22 %
BMO.PR.T	FixedReset	-2.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 4.44 %
BAM.PF.F	FixedReset	-2.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 4.94 %
SLF.PR.J	FloatingReset	-2.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.50 Bid-YTW : 10.27 %
TRP.PR.E	FixedReset	-2.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 4.94 %
BAM.PR.R	FixedReset	-2.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 15.31 Evaluated at bid price : 15.31 Bid-YTW : 5.20 %
RY.PR.I	FixedReset	-2.21 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.47 Bid-YTW : 4.35 %
TRP.PR.F	FloatingReset	-2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 12.82 Evaluated at bid price : 12.82 Bid-YTW : 4.53 %
RY.PR.D	Deemed-Retractible	-2.10 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.28 Bid-YTW : 5.15 %
CU.PR.C	FixedReset	-2.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.32 %
BAM.PR.N	Perpetual-Discount	-2.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.74 Evaluated at bid price : 19.74 Bid-YTW : 6.06 %
MFC.PR.H	FixedReset	-1.98 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.75 Bid-YTW : 5.31 %
IAG.PR.G	FixedReset	-1.93 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.30 Bid-YTW : 6.52 %
BAM.PR.K	Floater	-1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 10.40 Evaluated at bid price : 10.40 Bid-YTW : 4.55 %
MFC.PR.G	FixedReset	-1.75 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.79 Bid-YTW : 6.23 %
BAM.PF.G	FixedReset	-1.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 4.86 %
TD.PF.F	Perpetual-Discount	-1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 22.41 Evaluated at bid price : 22.71 Bid-YTW : 5.48 %
TD.PF.E	FixedReset	-1.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 4.34 %
TRP.PR.G	FixedReset	-1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.26 Evaluated at bid price : 19.26 Bid-YTW : 4.93 %
FTS.PR.H	FixedReset	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 12.97 Evaluated at bid price : 12.97 Bid-YTW : 4.47 %
MFC.PR.F	FixedReset	-1.40 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.10 Bid-YTW : 9.56 %
TRP.PR.A	FixedReset	-1.36 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 14.51 Evaluated at bid price : 14.51 Bid-YTW : 4.92 %
MFC.PR.J	FixedReset	-1.35 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 6.18 %
CU.PR.F	Perpetual-Discount	-1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 5.77 %
BNS.PR.P	FixedReset	-1.20 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.87 Bid-YTW : 3.98 %
BAM.PR.M	Perpetual-Discount	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.83 Evaluated at bid price : 19.83 Bid-YTW : 6.03 %
PWF.PR.P	FixedReset	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 14.35 Evaluated at bid price : 14.35 Bid-YTW : 4.27 %
HSE.PR.E	FixedReset	-1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 5.17 %
PWF.PR.O	Perpetual-Premium	-1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 24.78 Evaluated at bid price : 25.07 Bid-YTW : 5.88 %
ELF.PR.G	Perpetual-Discount	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 5.67 %
POW.PR.C	Perpetual-Premium	-1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 24.49 Evaluated at bid price : 24.72 Bid-YTW : 5.88 %
HSE.PR.A	FixedReset	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 13.22 Evaluated at bid price : 13.22 Bid-YTW : 4.90 %
IFC.PR.A	FixedReset	-1.03 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.34 Bid-YTW : 9.40 %
PWF.PR.L	Perpetual-Discount	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 22.20 Evaluated at bid price : 22.47 Bid-YTW : 5.76 %
BMO.PR.Y	FixedReset	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 20.61 Evaluated at bid price : 20.61 Bid-YTW : 4.44 %
GWO.PR.N	FixedReset	1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.10 Bid-YTW : 9.24 %
GWO.PR.L	Deemed-Retractible	1.08 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 6.08 %
MFC.PR.L	FixedReset	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.66 Bid-YTW : 7.20 %
GWO.PR.R	Deemed-Retractible	1.27 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.52 Bid-YTW : 6.88 %
W.PR.H	Perpetual-Discount	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 5.86 %
CM.PR.Q	FixedReset	1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 4.30 %
PWF.PR.F	Perpetual-Discount	1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 22.71 Evaluated at bid price : 23.00 Bid-YTW : 5.80 %
RY.PR.J	FixedReset	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 4.39 %
BMO.PR.Z	Perpetual-Discount	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 22.83 Evaluated at bid price : 23.21 Bid-YTW : 5.46 %
NA.PR.S	FixedReset	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 19.24 Evaluated at bid price : 19.24 Bid-YTW : 4.42 %
RY.PR.F	Deemed-Retractible	1.92 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 4.57 %
FTS.PR.K	FixedReset	2.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 4.71 %
HSE.PR.C	FixedReset	2.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 4.90 %

Volume Highlights
Issue	Index	Shares Traded	Notes
FTS.PR.F	Perpetual-Discount	137,700	Desjardins crossed 135,400 at 21.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 21.33 Evaluated at bid price : 21.60 Bid-YTW : 5.73 %
MFC.PR.G	FixedReset	91,136	Desjardins bought two blocks from RBC, 66,700 and 10,700, both at 20.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.79 Bid-YTW : 6.23 %
TD.PR.Y	FixedReset	67,277	Desjardins crossed 56,200 at 24.30. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.11 Bid-YTW : 3.78 %
CU.PR.I	FixedReset	64,000	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 23.15 Evaluated at bid price : 25.00 Bid-YTW : 4.41 %
GWO.PR.S	Deemed-Retractible	56,011	RBC crossed 38,900 at 22.80. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.88 Bid-YTW : 6.52 %
BNS.PR.A	FloatingReset	47,890	TD crossed 44,100 at 22.20. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.33 Bid-YTW : 4.40 %
There were 58 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
RY.PR.D	Deemed-Retractible	Quote: 24.28 – 24.94 Spot Rate : 0.6600 Average : 0.4225 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.28 Bid-YTW : 5.15 %
TRP.PR.E	FixedReset	Quote: 17.10 – 17.90 Spot Rate : 0.8000 Average : 0.6233 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 4.94 %
RY.PR.I	FixedReset	Quote: 23.47 – 23.98 Spot Rate : 0.5100 Average : 0.3404 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.47 Bid-YTW : 4.35 %
W.PR.J	Perpetual-Discount	Quote: 23.25 – 24.00 Spot Rate : 0.7500 Average : 0.5852 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 6.03 %
BNS.PR.P	FixedReset	Quote: 23.87 – 24.30 Spot Rate : 0.4300 Average : 0.2787 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.87 Bid-YTW : 3.98 %
PWF.PR.O	Perpetual-Premium	Quote: 25.07 – 25.50 Spot Rate : 0.4300 Average : 0.2882 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-09-29 Maturity Price : 24.78 Evaluated at bid price : 25.07 Bid-YTW : 5.88 %