Issue Comments

Anonymous / RBC Moronize Market!

Well! There’s going to be a little bounce in the tracking error reports next time the ETF figures come out!

TXPR was down 0.81%:

TXPR_150819
Click for Big

See that? Just a tiny little sliver of vertical drop at 3:59pm, from about 676.70 to what the TMX claims is 672.10, although that’s off the chart.

But the ETF based on TXPR, CPD? Down a mere 0.37%:

CPD_150819
Click for Big

TXPL? Down 1.15% … you can just see a little sliver at the end, where the index moves from about 728.25 to a claimed 721.77, which is again off the chart.

TXPL_150819
Click for Big

How about the ETF based on TXPL, ZPR? Down a mere 0.18%:

zpr_150819
Click for Big

It’s rather odd. Unfortunately the Exchange’s indices are based on prices while my indices and all my data are based on quotes, but we’ll see what we can do … let’s look at some of the big losers on a bid/bid basis:

BMO.PR.W FixedReset -5.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 20.44
Evaluated at bid price : 20.44
Bid-YTW : 3.66 %

The day’s range was 21.38-66 (quite reasonable!), but the closing quote was 20.44-50, 40×2, which must be some kind of record for separation between the two measures. There are nine trades timestamped 3:59, totalling 1,680 shares, executed in a range of 21.38-40. Six of these trades are listed with RBC as the seller, three with anonymous.

CM.PR.Q FixedReset -4.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 22.18
Evaluated at bid price : 22.82
Bid-YTW : 3.71 %

The day’s range was 22.64-23.95 (!) with a closing quote of 22.82-24.05 (!), 17×20. There are five trades timestamped 3:59, totalling 600 shares, executed in a range of 22.64-82. Four of these trades have an anonymous seller, one RBC.

BAM.PR.K Floater -4.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 11.75
Evaluated at bid price : 11.75
Bid-YTW : 4.06 %

The day’s range was 11.70-32 with a closing quote of 11.75-24, 19×3. There were no trades timestamped 3:59.

ENB.PR.H FixedReset -4.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 14.18
Evaluated at bid price : 14.18
Bid-YTW : 5.13 %

The day’s range was 14.18-92 with a closing quote of 14.18-55, 8×1. There are 24 trades timestamped 3:59, totalling 2,460 shares, executed in a range of 14.18-50. Fourteen of these trades have an anonymous seller, nine RBC, one Nesbitt.

BAM.PR.X FixedReset -4.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 15.19
Evaluated at bid price : 15.19
Bid-YTW : 4.30 %

The day’s range was 15.23-85 with a closing quote of 15.19-74, 5×3. There are six trades timestamped 3:59, totalling 700 shares, executed in a range of 15.23-38. Five of these trades have an anonymous seller, one RBC.

TD.PF.A FixedReset -3.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 3.62 %

The day’s range was 21.00-91 with a closing quote of 21.00-55, 15×1. There are thirteen trades timestamped 3:59, totalling 1,666 shares, executed in a range of 21.00-70 (!) There is one sale from Laurentian, five from RBC and seven anonymous.

TD.PF.B FixedReset -3.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 3.61 %

The day’s range was 21.00-94 with a closing quote of 21.00-67, 15×1. There are fourteen trades timestamped 3:59, totalling 1,366 shares, executed in a range of 21.00-65 (!). There are two sales from National, four from RBC and eight anonymous.

BAM.PF.E FixedReset -3.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 4.21 %

The day’s range was 20.01-21.54 (!) with a closing quote of 20.65-21.75 (!), 8×56. There are six trades timestamped 3:59, totalling 700 shares, all executed at 20.67 (the day’s low of 20.01 was 400 shares executed at 3:12, seller was National). Five of the last minute sales were anonymous, one RBC.

TRP.PR.D FixedReset -3.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-19
Maturity Price : 18.42
Evaluated at bid price : 18.42
Bid-YTW : 4.29 %

The day’s range was 18.42-10, with a closing quote of 18.42-06, 3×1. There are thirteen trades timestamped 3:59, totalling 2,400 shares, executed in a range of 18.42-95. Seven of these trades are RBC, six anonymous.

*****************************************************

Well, that’s enough examples to be getting along with!

Here’s my guess: a broker from RBC decided to get a lot of his clients out of the preferred share market and his Sales Assistant spent all day inputting the orders for execution at 3:59. Some of these were put in as anonymous, some as RBC (maybe their algorithm input screen has a tick box and default?). The behaviour of BMO.PR.W suggests that these were limit orders (maybe a limit of 20.50 on those?) but other evidence (e.g., CM.PR.Q) suggests that if there was a limit, it was pretty low relative to the day’s trading.

Then the clock ticked 3:59 and presto! The market, being thin, got moronized on relatively tiny volume!

I will emphasize that the above is a guess! I have no way of telling whether the orders listed as anonymous were in fact coming out of RBC. The RBC broker might have been given explicit instructions by clients about how they wanted the trades executed. Each of these tiny little sales that I do know came out of RBC could have been from a different broker. They could also have come directly out of individual investors independently via RBC Direct Investing. It could have been an institutional client with Direct Market Access via RBC (or even RBC’s preferred desk itself), doing something silly with an algorithm. It could have been a lot of things.

Market Action

August 18, 2015

The dong has been devalued:

The State Bank of Vietnam weakened its reference rate by 1 percent to 21,890 dong a dollar effective Wednesday, it said in a statement on its website. The authority also widened the currency’s trading band to 3 percent on either side of the fixing. The dong fell 1.4 percent to 22,408 as of 10:36 a.m. in Hanoi, according to data compiled by Bloomberg.

The devaluation comes after the central bank widened the dong’s trading band to 2 percent from 1 percent on Aug.12, a day after China’s surprise policy shift heightened the risk of a currency war. Prime Minister Nguyen Tan Dung is seeking to safeguard slowing export growth and the State Bank said it’s concerned about the prospect of higher U.S. interest rates.

“After the strong devaluation of the yuan, Vietnam’s domestic market sentiment is still very much concerned about the impact of the U.S. Federal Reserve’s rate increase,” the central bank said in its statement. The reference rate and the trading band are being adjusted “in order to proactively lead the market and preempt negative impacts of the possibility that the Fed will increase rates.”

And there’s pressure on Thailand:

Bangkok’s deadly bomb attack this week is set to hit Thailand’s last remaining growth pillar with travel warnings and canceled trips, adding pressure on authorities to restore confidence and stimulate the economy.

Weaker tourism in the next two to three quarters will probably hurt Thailand’s economic growth and the explosion could have a longer-lasting impact on visitor numbers compared with previous incidents in the past decade, Standard & Poor’s said Tuesday.
…
It also increases the probability that the Bank of Thailand will cut interest rates again this year, according to Credit Suisse, Australia & New Zealand Banking Group Ltd., Nomura Holdings Inc. and BMI.

“It reinforces our view of further monetary easing ahead,” said Weiwen Ng, a Singapore-based economist at ANZ, who estimates tourism accounts for 20 percent of the economy, including indirect effects. “Domestic demand — which is already sluggish — will be derailed. Bank of Thailand will also probably allow some baht weakness to help boost exports.”

Today’s technology news is that Uncle Sam is Yelping:

Adding customer satisfaction ratings and reviews to public services just got easier now that Yelp offers a terms of service for official government use.

Yelp, a Web and mobile-based user review platform, hosts insights from “real people giving their honest and personal opinions on everything from restaurants and spas to coffee shops.” With the addition of Public Services and Government under the Yelp umbrella, agencies can continue to find new ways to use customer insights to improve citizen services.

Agencies are now able to use Yelp to potentially:

  • ◾Claim existing pages or launch new pages to listen and respond to customer comments
  • ◾Use customer feedback data to drive improvements in citizen services.

It was yet another poor day for the Canadian preferred share market, with PerpetualDiscounts off 7bp, FixedResets losing 35bp and DeemedRetractibles down 13bp. The Performance Highlights table is again notable for the relatively large number of TRP and ENB issues included in the less desirable neighborhood. Volume was very low.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150818
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 17.00 to be $0.49 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.90 cheap at its bid price of 13.26.

impVol_MFC_150818
Click for Big

Another good fit today!

Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.27 to be 0.38 rich, while MFC.PR.J, resetting at +261bp on 2018-3-19, is bid at 22.60 to be $0.41 cheap.

impVol_BAM_150818
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.43 to be $1.30 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.41 and appears to be $1.13 rich.

impVol_FTS_150818
Click for Big

Not very reliable; the calculated level of Implied Volatility dropped from 17% yesterday, largely due to a highly suspicious bid on FTS.PR.K (see the Performance Highlights table).

FTS.PR.H, with a spread of +145bp, and bid at 15.90, looks $0.79 expensive and resets 2020-6-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 19.36 and is $0.49 cheap.

pairs_FR_150818
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.35%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -0.47% and the unregulated issues averaging -0.10%. There are three junk outliers below -1.00%.

pairs_FF_150818
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -3.4091 % 1,935.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -3.4091 % 3,384.7
Floater 3.79 % 3.88 % 53,434 17.64 3 -3.4091 % 2,057.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.2140 % 2,783.3
SplitShare 4.57 % 4.95 % 55,180 3.11 3 0.2140 % 3,261.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2140 % 2,545.1
Perpetual-Premium 5.72 % 5.53 % 60,165 2.05 9 0.0177 % 2,484.1
Perpetual-Discount 5.43 % 5.51 % 79,409 14.67 29 -0.0745 % 2,602.4
FixedReset 4.79 % 3.94 % 195,840 15.99 87 -0.3467 % 2,204.3
Deemed-Retractible 5.11 % 5.25 % 98,023 5.43 34 -0.1289 % 2,583.6
FloatingReset 2.35 % 3.29 % 45,575 5.99 9 -0.0150 % 2,245.9
Performance Highlights
Issue Index Change Notes
FTS.PR.K FixedReset -4.90 % Not particularly real, since the issue traded 3,800 shares today in a range of 19.53-01 and a VWAP of 19.80. The closing quote was 19.02-20.04. I have not checked whether this lamentable state of affairs is due to inadequate Toronto Stock Exchange reporting or inadequate Toronto Stock Exchange supervision of market-makers
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 19.02
Evaluated at bid price : 19.02
Bid-YTW : 3.75 %
BAM.PR.K Floater -4.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 12.29
Evaluated at bid price : 12.29
Bid-YTW : 3.88 %
ENB.PR.B FixedReset -3.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 14.73
Evaluated at bid price : 14.73
Bid-YTW : 5.20 %
BAM.PR.C Floater -3.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 12.31
Evaluated at bid price : 12.31
Bid-YTW : 3.88 %
TRP.PR.G FixedReset -3.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 21.63
Evaluated at bid price : 22.00
Bid-YTW : 4.06 %
BAM.PR.B Floater -2.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 12.80
Evaluated at bid price : 12.80
Bid-YTW : 3.73 %
MFC.PR.J FixedReset -1.99 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.60
Bid-YTW : 4.65 %
RY.PR.H FixedReset -1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 21.54
Evaluated at bid price : 21.81
Bid-YTW : 3.45 %
ENB.PR.F FixedReset -1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 15.53
Evaluated at bid price : 15.53
Bid-YTW : 5.18 %
BAM.PF.E FixedReset -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 21.41
Evaluated at bid price : 21.41
Bid-YTW : 4.05 %
ENB.PR.H FixedReset -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 14.82
Evaluated at bid price : 14.82
Bid-YTW : 4.89 %
PWF.PR.T FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 22.81
Evaluated at bid price : 23.77
Bid-YTW : 3.23 %
ELF.PR.H Perpetual-Discount -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 23.30
Evaluated at bid price : 23.70
Bid-YTW : 5.86 %
TRP.PR.E FixedReset -1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 19.38
Evaluated at bid price : 19.38
Bid-YTW : 4.15 %
FTS.PR.H FixedReset -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 15.90
Evaluated at bid price : 15.90
Bid-YTW : 3.33 %
MFC.PR.N FixedReset -1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.74
Bid-YTW : 5.08 %
ENB.PR.P FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 16.21
Evaluated at bid price : 16.21
Bid-YTW : 5.01 %
GWO.PR.Q Deemed-Retractible -1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.22
Bid-YTW : 5.71 %
ENB.PF.C FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 17.65
Evaluated at bid price : 17.65
Bid-YTW : 4.96 %
TRP.PR.C FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 13.26
Evaluated at bid price : 13.26
Bid-YTW : 4.04 %
ENB.PF.G FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 18.01
Evaluated at bid price : 18.01
Bid-YTW : 4.94 %
ENB.PR.T FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 16.23
Evaluated at bid price : 16.23
Bid-YTW : 5.02 %
ENB.PF.E FixedReset -1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 17.82
Evaluated at bid price : 17.82
Bid-YTW : 4.96 %
HSE.PR.E FixedReset 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 22.44
Evaluated at bid price : 23.25
Bid-YTW : 4.54 %
HSE.PR.G FixedReset 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 22.26
Evaluated at bid price : 22.95
Bid-YTW : 4.61 %
FTS.PR.F Perpetual-Discount 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 22.49
Evaluated at bid price : 22.75
Bid-YTW : 5.39 %
IAG.PR.G FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.75
Bid-YTW : 3.80 %
SLF.PR.G FixedReset 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.55
Bid-YTW : 7.19 %
PWF.PR.L Perpetual-Discount 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 23.99
Evaluated at bid price : 24.30
Bid-YTW : 5.28 %
HSE.PR.C FixedReset 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 21.94
Evaluated at bid price : 22.40
Bid-YTW : 4.36 %
VNR.PR.A FixedReset 2.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 20.90
Evaluated at bid price : 20.90
Bid-YTW : 4.20 %
BAM.PR.T FixedReset 2.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 4.21 %
Volume Highlights
Issue Index Shares
Traded		 Notes
BMO.PR.T FixedReset 59,300 Scotia crossed 23,300 at 22.47; RBC crossed 22,900 at 22.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 21.96
Evaluated at bid price : 22.40
Bid-YTW : 3.32 %
ENB.PR.Y FixedReset 47,200 RBC crossed blocks of 10,500 and 14,700, both at 16.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 4.83 %
BAM.PF.A FixedReset 28,924 RBC crossed 21,300 at 21.97.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 21.56
Evaluated at bid price : 21.95
Bid-YTW : 4.15 %
W.PR.H Perpetual-Discount 21,773 Desjardins crossed 20,000 at 24.54.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 24.25
Evaluated at bid price : 24.55
Bid-YTW : 5.66 %
ENB.PR.N FixedReset 20,980 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 16.85
Evaluated at bid price : 16.85
Bid-YTW : 4.98 %
ENB.PR.B FixedReset 20,318 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 14.73
Evaluated at bid price : 14.73
Bid-YTW : 5.20 %
There were 18 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.K FixedReset Quote: 19.02 – 20.04
Spot Rate : 1.0200
Average : 0.6269

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 19.02
Evaluated at bid price : 19.02
Bid-YTW : 3.75 %
BNS.PR.D FloatingReset Quote: 21.37 – 21.79
Spot Rate : 0.4200
Average : 0.2612

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.37
Bid-YTW : 3.92 %
BAM.PR.C Floater Quote: 12.31 – 12.70
Spot Rate : 0.3900
Average : 0.2525

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 12.31
Evaluated at bid price : 12.31
Bid-YTW : 3.88 %
SLF.PR.I FixedReset Quote: 23.08 – 23.50
Spot Rate : 0.4200
Average : 0.2905

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.08
Bid-YTW : 4.56 %
BAM.PF.E FixedReset Quote: 21.41 – 21.70
Spot Rate : 0.2900
Average : 0.1735

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-18
Maturity Price : 21.41
Evaluated at bid price : 21.41
Bid-YTW : 4.05 %
MFC.PR.C Deemed-Retractible Quote: 21.48 – 21.92
Spot Rate : 0.4400
Average : 0.3247

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.48
Bid-YTW : 6.50 %
PrefLetter

August PrefLetter Released!

The August, 2015, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

The regular appendices reporting on DeemedRetractibles and FixedResets are included.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the August, 2015, issue, while the “Next Edition” will be the September, 2015, issue, scheduled to be prepared as of the close September 11 and eMailed to subscribers prior to market-opening on September 14.

PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.

Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.

Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!

Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.

Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!

Note: Assiduous Reader DG informs me:

In case you have any other Apple users: you need to install a free App from the apple store called “FileApp”. It comes with it’s own tutorial and allows you to download and save a PDF file.

However, Assiduous Reader Adrian informs me in the comments to the January 2015 release:

Some nitpicking for DG:
FileApp costs $1.19 in the Apple Store.

Market Action

August 17, 2015

Matt Levine writes a good piece on bond market ethics, whatever those are:

And Edward Jones’s behavior seems to have been even worse than that: It didn’t just put the bonds in inventory, wait until they started trading, and hope to flip them for a profit (which would be bad!); it actually sometimes sold bonds to customers at prices above the offering price while the offering was still going on.5 As far as I can tell, this worked mostly because customers didn’t know any better, and Edward Jones didn’t tell them.6 (There’s no suggestion that Edward Jones lied to the customers about the price it paid, though.)
…
The real point here is that there is a “well-established industry practice” that, if you’re an underwriter for municipal bonds, and you buy bonds from the issuer at the offer price,8 you have to re-sell them to customers at the offer price. You just can’t do what Edward Jones did.

I’d say the party injured by Edward Jones’ misconduct is not the customers – who were buying from the broker as principal and knew this – but the issuer. The underwriters are acting as agents for the issuer and are paid a commission for doing so. If the underwriters then turn around and skimming off the concession for themselves, then it seems to me they have a powerful incentive to give their client – to whom yes, they have a fiduciary obligation – some very gloomy advice about how difficult it will be to sell the issue and how big, therefore, the concession should be.

New Zealand demonstrates good news for Canadian housing markets:

Auckland home prices are up more than 20 percent in the past year. If you’re a buyer from China or the U.S., they’re not.

The slump in New Zealand’s currency has made properties in the country’s largest city a bargain for foreigners, creating a headache for central bank Governor Graeme Wheeler, who has been trying to put a lid on the country’s overheated property market.

“Five years ago I would have estimated two or three percent of Auckland properties were bought from overseas,” said Peter Thompson, managing director of Barfoot & Thompson, which says it sells one-in-three homes in the so-called City of Sails. “These days it’s 10 or 12 percent.”

Wheeler has lowered interest rates to offset faltering economic growth and weaken the currency, but the cuts are stoking Auckland’s housing prices, which are already the second highest relative to income among developed economies. Worse still, with foreign buyers tripling their participation in the city of 1.5 million people, the price surge is starting to spread to cheaper neighboring regions.
…
The main opposition Labour Party last month claimed that 40 percent of Auckland house sales between February and April were purchased by people with Chinese-sounding names, and criticized the government for soaring prices.

While the claim drew accusations of xenophobic politics, a subsequent poll of 1,000 voters showed 61 percent wanted the government to ban non-resident foreigners from buying houses.

Meanwhile, PrefBlog’s Better Living Through Technology Departments highlights a good news story from Saudi Arabia:

If she had chosen the traditional route to opening her accessories business in Jeddah, Rozana al-Daini would have had to enlist a male sponsor to represent her before government agencies and sign official documents on her behalf.

Instead, she sells jewelry, watches and wallets on Instagram, where Saudi businesswomen can avoid the gender restrictions they face in the kingdom. Her two-year-old business, Accessories_ar, has two employees, 67,000 followers and handles up to 25 orders a day. It also provides her with the ultimate empowerment: her own income.
…
Saudis spend an average of 2.65 hours per day social networking, compared to a global average of 1.69 hours, according to a survey this year by London-based market research firm GlobalWebIndex. Saudi Arabia also ranked first in the world for Twitter penetration, according to a 2013 study by Amsterdam-based PeerReach. The GlobalWebIndex survey found that nearly half of Saudi Internet users are members of Instagram, compared with a global average of 23 percent.

While entrepreneurs also use Twitter and other social networks, al-Daini said Instagram’s photo-based interface was a natural fit for her business. “The photography affects people,” she said.

Designed for smartphones, the application provides an easy way for creative Saudis to share their talent, Moustakas said.

It was yet another grim day for the Canadian preferred share market, with PerpetualDiscounts losing 42bp, FixedResets down 41bp and DeemedRetractibles off 9bp. TRP issues continue to be notable in the Performance Highlights table, mostly in a bad way. Volume was very low.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150817
Click for Big

TRP.PR.A, which resets 2019-12-31 at +192, is bid at 17.15 to be $0.51 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.83 cheap at its bid price of 13.41.

impVol_MFC_150817
Click for Big

Another good fit today!

Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.45 to be 0.46 rich, while MFC.PR.M, resetting at +236bp on 2019-12-19, is bid at 21.75 to be $0.31 cheap.

impVol_BAM_150817
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.36 to be $1.36 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.75 and appears to be $1.48 rich.

impVol_FTS_150817
Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 22.48, looks $0.43 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 19.50 and is $0.77 cheap.

pairs_FR_150817A
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.23%, with no outliers. Note that the distribution is bimodal, with NVCC non-compliant bank issues averaging -0.53% and the unregulated issues averaging +0.36%. There are three junk outliers below -1.00% and one above +1.00%.

pairs_FR_150817A
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 1.3613 % 2,004.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.3613 % 3,504.2
Floater 3.66 % 3.72 % 52,700 17.98 3 1.3613 % 2,130.5
OpRet 0.00 % 0.00 % 0 0.00 0 0.0134 % 2,777.4
SplitShare 4.58 % 4.85 % 54,982 3.12 3 0.0134 % 3,254.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0134 % 2,539.6
Perpetual-Premium 5.72 % 5.38 % 60,327 2.06 9 -0.0265 % 2,483.7
Perpetual-Discount 5.43 % 5.48 % 80,043 14.69 29 -0.4176 % 2,604.3
FixedReset 4.77 % 3.91 % 196,690 15.90 87 -0.4096 % 2,211.9
Deemed-Retractible 5.11 % 5.25 % 98,641 5.43 34 -0.0924 % 2,587.0
FloatingReset 2.35 % 3.29 % 47,365 5.99 9 0.0199 % 2,246.3
Performance Highlights
Issue Index Change Notes
TRP.PR.C FixedReset -2.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 13.41
Evaluated at bid price : 13.41
Bid-YTW : 3.99 %
ELF.PR.H Perpetual-Discount -2.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 23.57
Evaluated at bid price : 24.02
Bid-YTW : 5.77 %
ENB.PR.F FixedReset -2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 15.83
Evaluated at bid price : 15.83
Bid-YTW : 5.08 %
HSE.PR.A FixedReset -2.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 14.20
Evaluated at bid price : 14.20
Bid-YTW : 4.24 %
TRP.PR.D FixedReset -1.99 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 19.21
Evaluated at bid price : 19.21
Bid-YTW : 4.11 %
TRP.PR.B FixedReset -1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 12.90
Evaluated at bid price : 12.90
Bid-YTW : 3.74 %
FTS.PR.F Perpetual-Discount -1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.22
Evaluated at bid price : 22.50
Bid-YTW : 5.45 %
GWO.PR.N FixedReset -1.83 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.05
Bid-YTW : 7.37 %
TD.PF.D FixedReset -1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.69
Evaluated at bid price : 23.81
Bid-YTW : 3.51 %
FTS.PR.G FixedReset -1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 3.67 %
ELF.PR.F Perpetual-Discount -1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 23.33
Evaluated at bid price : 23.61
Bid-YTW : 5.67 %
CU.PR.C FixedReset -1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.45
Evaluated at bid price : 22.80
Bid-YTW : 3.30 %
TRP.PR.A FixedReset -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 17.15
Evaluated at bid price : 17.15
Bid-YTW : 3.92 %
MFC.PR.L FixedReset -1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.20
Bid-YTW : 5.28 %
FTS.PR.M FixedReset -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.00
Evaluated at bid price : 22.48
Bid-YTW : 3.58 %
IFC.PR.C FixedReset -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.05
Bid-YTW : 5.60 %
ENB.PR.Y FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 4.81 %
RY.PR.H FixedReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 21.86
Evaluated at bid price : 22.25
Bid-YTW : 3.37 %
MFC.PR.M FixedReset -1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 5.13 %
SLF.PR.C Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.37
Bid-YTW : 6.66 %
BAM.PR.B Floater 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 13.15
Evaluated at bid price : 13.15
Bid-YTW : 3.63 %
BAM.PR.C Floater 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 12.75
Evaluated at bid price : 12.75
Bid-YTW : 3.74 %
TRP.PR.G FixedReset 1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.09
Evaluated at bid price : 22.70
Bid-YTW : 3.91 %
PWF.PR.T FixedReset 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.96
Evaluated at bid price : 24.10
Bid-YTW : 3.17 %
BAM.PR.K Floater 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 12.82
Evaluated at bid price : 12.82
Bid-YTW : 3.72 %
ENB.PF.G FixedReset 1.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 4.89 %
VNR.PR.A FixedReset 2.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 20.43
Evaluated at bid price : 20.43
Bid-YTW : 4.30 %
Volume Highlights
Issue Index Shares
Traded		 Notes
RY.PR.J FixedReset 121,480 RBC crossed 32,200 at 23.85, then another 49,800 at 23.77.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.68
Evaluated at bid price : 23.75
Bid-YTW : 3.46 %
BAM.PR.T FixedReset 109,200 Scotia crossed blocks of 49,100 and 50,000, both at 17.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 17.75
Evaluated at bid price : 17.75
Bid-YTW : 4.32 %
BMO.PR.Z Perpetual-Discount 72,655 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 24.18
Evaluated at bid price : 24.55
Bid-YTW : 5.12 %
TD.PF.D FixedReset 61,525 RBC crossed 50,000 at 24.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.69
Evaluated at bid price : 23.81
Bid-YTW : 3.51 %
TD.PF.E FixedReset 34,200 RBC bought 10,000 from Scotia at 24.70.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 23.01
Evaluated at bid price : 24.61
Bid-YTW : 3.44 %
ENB.PR.H FixedReset 24,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 15.05
Evaluated at bid price : 15.05
Bid-YTW : 4.82 %
There were 18 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.H Perpetual-Discount Quote: 24.02 – 24.75
Spot Rate : 0.7300
Average : 0.4377

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 23.57
Evaluated at bid price : 24.02
Bid-YTW : 5.77 %
GWO.PR.S Deemed-Retractible Quote: 24.86 – 25.45
Spot Rate : 0.5900
Average : 0.3977

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 5.45 %
PWF.PR.O Perpetual-Premium Quote: 25.52 – 26.19
Spot Rate : 0.6700
Average : 0.4989

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.52
Bid-YTW : 5.38 %
TD.PF.D FixedReset Quote: 23.81 – 24.30
Spot Rate : 0.4900
Average : 0.3228

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 22.69
Evaluated at bid price : 23.81
Bid-YTW : 3.51 %
HSB.PR.D Deemed-Retractible Quote: 24.86 – 25.36
Spot Rate : 0.5000
Average : 0.3624

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 5.26 %
SLF.PR.C Deemed-Retractible Quote: 21.37 – 21.82
Spot Rate : 0.4500
Average : 0.3264

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.37
Bid-YTW : 6.66 %
Issue Comments

EMA.PR.B Listed: 36% Conversion From EMA.PR.A

Emera Incorporated has announced:

that 2,135,364 of its 6,000,000 issued and outstanding Cumulative 5-Year Rate Reset First Preferred Shares, Series A (the “Series A Shares”) were tendered for conversion, on a one-for-one basis into Cumulative Floating Rate First Preferred Shares, Series B (the “Series B Shares”). As a result of the conversion, Emera has 3,864,636 Series A Shares and 2,135,364 Series B Shares issued and outstanding. The Series A Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbol EMA.PR.A. The Series B Shares will begin trading on the TSX today under the symbol EMA.PR.B.

EMA.PR.A is a FixedReset with an Issue Reset Spread of 184bp that has just reset at 2.555%. EMA.PR.B is its FloatingReset, paying three month bills +184bp. The next interconversion date is 2020-8-15. I had previously recommended that holders of EMA.PR.A continue to hold the issue as I expect that EMA.PR.B will trade – at least initially – at lower levels than EMA.PR.A.

EMA.PR.B traded zero shares today (consolidated exchanges) and closed with a quote of 12.13-18.00, 1×5. Zero activity on the first day is normal; retail holders who converted won’t see the new shares in their account until tomorrow and it might also be expected that those who just made the decision to convert are less likely than otherwise to want to sell two weeks later.

EMA.PR.B will be tracked by HIMIPref™ and will be assigned to the Scraps index on credit concerns. Vital statistics are:

EMA.PR.B FloatingReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-17
Maturity Price : 12.13
Evaluated at bid price : 12.13
Bid-YTW : 4.58 %
Issue Comments

DF.PR.A Semi-Annual Report 2015

Dividend 15 Split Corp. II has released its Semi-Annual Report to May 31, 2014.

Figures of interest are:

MER: 1.24% of the whole unit value, “to reflect the normal operating expenses of the Company excluding any one time secondary offering expenses.”.

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $198.6-million, compared to $232.2-million on May 31, so call it an average of $223.8-million.

Underlying Portfolio Yield: Income received of $3.953-million divided by average net assets of $223.8-million, multiplied by two because it’s semiannual is 3.34%.

Income Coverage: Net investment income of $2.300-million divided by preferred share dividends of $3.122-million is 74%.

Note that both the calculated portfolio yield and the income coverage are more than what was calculated according to the 2014 Annual Report. There was a secondary offering during the period but it does not appear to have had much effect on calculated numbers.

Issue Comments

FTN.PR.A Semi-Annual Report 2015

Financial 15 Split Corp has released its Semi-Annual Report to May 31, 2015.

Figures of interest are:

MER: 1.25% of the whole unit value, “presented to reflect the normal operating expenses of the Company
excluding any one time secondary offering expenses.”

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $259.1-million, compared to $287.3-million on May 31, so call it an average of $273.2-million. Preferred share dividends of $4,336,167 were paid over the half year at 0.525 p.a., implying average units outstanding 16.52-million, at an average NAVPU of (17.39 + 17.77)/2 = 17.58, implies $290.4-million. Say the Average Net Assets are the average of the two estimates, $281.8-million.

Underlying Portfolio Yield: Income received of $4,007,070 divided by average net assets of $281.8-million, multiplied by two because it’s semiannual is 2.84%.

Income Coverage: Net investment income of $2,047,004 (before capital gains) divided by preferred share dividends of $4,336,167 is a very low 47%.

The Income Coverage is significantly higher than the calculation performed from the 2014 Annual Report of 33%. There was a secondary offering in 14H2 and another one in 15H1, so it’s fairly difficult to derive precise numbers from the financial statements.

Market Action

August 14, 2015

It will be the end of an era in the Treasury market, with the last double digit coupon bond maturing:

The last Treasury bond with a coupon above 10 percent is older than some government-debt traders. It turns 30 tomorrow.

The bond was issued on Aug. 15, 1985, and is one of just five Treasury bonds left with coupons of 9 percent or higher. All of them mature in the next three years. And as the ranks of high-coupon government bonds have gotten smaller, so has the number of traders and analysts who were on Wall Street desks when high yields and worries about rising prices were the norm.

I still have fond memories of the Canada 10.25% of 2004-2-1 and the good old ‘Porsches’ … 9% March 1, 11. Nowadays, of course, that marks me as an old fogey.

Sesame Street is moving to HBO:

Sesame Workshop, the nonprofit group behind the children’s television program, has struck a five-year deal with HBO, the premium cable network, that will bring first-run episodes of “Sesame Street” exclusively to HBO and its streaming outlets starting in the fall.

The partnership, announced Thursday, will allow the financially challenged Sesame Workshop to significantly increase its production of “Sesame Street” episodes and other new programming. The group will produce 35 new “Sesame Street” episodes a year, up from the 18 it now produces. It will also create a spinoff series based on the “Sesame Street” Muppets along with another new educational series for children.

After nine months of appearing only on HBO, the shows will be available free on PBS, home to “Sesame Street” for the last 45 years.

Naturally, is some carping:

Yes, if we had the lavishly supported BBC-style system that the U.S. never had, PBS and the Corporation for Public Broadcasting might have been able to step in and feather Big Bird’s nest.
…
The Sesame Street is, practically, a good deal. But it is a deal nonetheless, over something that was once a given. It’s one more replacement of a public trust with a public-private arrangement, like a luxury developer given rights and tax breaks to build condos, in exchange for a certain percentage of affordable housing. It’s a deteriorating postal service vs. FedEx, the bus vs. Uber. Everyone still gets to visit Big Bird. Some people just have to use the poor door.

I’m happy to see the deal (and the other deal with Disney) – it helps support one of my long-term speculations, that increased globalization and technology would allow for the production of television with high production values. If you can get global revenue from a really superb show and, what’s more, make it long term global revenue then you can start to justify spending serious money on talent and production. It is, in fact, the BBC model. Sadly, we won’t see any of this money coming into Canada, or see any of our stories going out. Why produce quality, when you get the same government subsidy for garbage?

On August 11 I reported on the SEC takedown of a rather clever global hacking scheme. One of the prime suspects is:

[Vitaly] Korchevsky, 50, is one of nine people charged Tuesday by federal prosecutors and accused of being part of an alliance of hackers and traders who tapped corporate press releases before they became public and traded on the information. He was arrested at his home in Glen Mills, Pennsylvania, amid charges he helped to orchestrate a conspiracy regulators said netted $100 million.

The board of the Slavic Evangelical Baptist Church in Brookhaven, Pennsylvania, about 20 miles (32 kilometers) southwest of Philadelphia, said in a letter Thursday that Korchevsky is a “very respected and connected” member of the community who has served as senior pastor since the church was founded in 2003.

“We cannot comprehend or prevent any of these rumors and lies that have been manipulated over media channels where he has been tagged as a ’flight risk’ and simply plead to this honorable court to allow Rev. Korchevsky to get back to his family, his church and his community,” the church board members said.

Meanwhile, technology marches on – and, as usual, it is introduced with and exclusive focus on the 95% of the population that is honest, with no consideration for the other 5%:

“Keyless” car theft, which sees hackers target vulnerabilities in electronic locks and immobilizers, now accounts for 42 percent of stolen vehicles in London. BMWs and Range Rovers are particularly at-risk, police say, and can be in the hands of a technically minded criminal within 60 seconds.

Security researchers have now discovered a similar vulnerability in keyless vehicles made by several carmakers. The weakness – which affects the Radio-Frequency Identification (RFID) transponder chip used in immobilizers – was discovered in 2012, but carmakers sued the researchers to prevent them from publishing their findings.

This week the paper – by Roel Verdult and Baris Ege from Radboud University in the Netherlands and Flavio Garcia from the University of Birmingham, U.K. – is being presented at the USENIX security conference in Washington, D.C. The authors detail how the cryptography and authentication protocol used in the Megamos Crypto transponder can be targeted by malicious hackers looking to steal luxury vehicles.
…
In this case, however, researchers broke the transponder’s 96-bit cryptographic system, by listening in twice to the radio communication between the key and the transponder. This reduced the pool of potential secret key matches, and opened up the “brute force” option: running through 196,607 options of secret keys until they found the one that could start the car. It took less than half an hour.
…
The research team first took its findings to the manufacturer of the affected chip in February 2012 and then to Volkswagen in May 2013. The car-maker filed a lawsuit to block the publication of the paper – arguing that its vehicles would be placed at risk of theft – and was awarded an injunction in the U.K.’s High Court. Now, after lengthy negotiations, the paper is finally in the public domain – with just one sentence redacted.

Nice lawsuit from the carmakers. Too bad they didn’t spend the money on, you know, security. It would be interesting to read the High Court judgement and I’d poke around for it if it wasn’t PrefLetter weekend. I can see granting a six month injunction … but a permanent injunction seems counterproductive – just another opportunity for lazy Executive Vice Presidents to put off actual work.

It was a mixed day for the Canadian preferred share index, with PerpetualDiscounts gaining 16bp, FixedResets off 21bp and DeemedRetractibles up 19bp. There were no notable patterns in the Performance Highlights table. Volume was low.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150814
Click for Big

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 13.16 to be $0.36 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.76 cheap at its bid price of 13.82.

impVol_MFC_150814
Click for Big

Another good fit today!

Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.48 to be 0.29 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.40 to be $0.20 cheap.

impVol_BAM_150814
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 17.40 to be $1.27 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.70 and appears to be $1.40 rich.

impVol_FTS_150814
Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 23.04, looks $0.50 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.07 and is $0.63 cheap.

pairs_FR_150814
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.32%, with no outliers. There are three junk outliers below -1.00% and one above +1.00%.

pairs_FF_150814
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.6057 % 1,977.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.6057 % 3,457.1
Floater 3.71 % 3.78 % 52,208 17.84 3 0.6057 % 2,101.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0267 % 2,777.0
SplitShare 4.58 % 4.83 % 55,517 3.12 3 -0.0267 % 3,254.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0267 % 2,539.3
Perpetual-Premium 5.72 % 5.42 % 60,301 2.06 9 -0.0353 % 2,484.4
Perpetual-Discount 5.40 % 5.45 % 76,273 14.75 29 0.1618 % 2,615.2
FixedReset 4.75 % 3.87 % 199,356 15.98 87 -0.2123 % 2,221.0
Deemed-Retractible 5.10 % 5.25 % 98,634 5.44 34 0.1876 % 2,589.4
FloatingReset 2.35 % 3.28 % 49,152 6.00 9 -0.0897 % 2,245.8
Performance Highlights
Issue Index Change Notes
VNR.PR.A FixedReset -3.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 20.02
Evaluated at bid price : 20.02
Bid-YTW : 4.38 %
IFC.PR.C FixedReset -3.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.31
Bid-YTW : 5.44 %
IFC.PR.A FixedReset -2.96 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.71
Bid-YTW : 7.32 %
BAM.PR.X FixedReset -2.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 15.80
Evaluated at bid price : 15.80
Bid-YTW : 4.12 %
BAM.PR.R FixedReset -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 4.32 %
MFC.PR.F FixedReset -1.68 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.60
Bid-YTW : 7.05 %
BAM.PR.M Perpetual-Discount -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 21.03
Evaluated at bid price : 21.03
Bid-YTW : 5.73 %
FTS.PR.M FixedReset -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 22.34
Evaluated at bid price : 23.04
Bid-YTW : 3.53 %
FTS.PR.K FixedReset -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 20.18
Evaluated at bid price : 20.18
Bid-YTW : 3.59 %
TRP.PR.F FloatingReset -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 15.80
Evaluated at bid price : 15.80
Bid-YTW : 3.67 %
HSE.PR.A FixedReset -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 14.49
Evaluated at bid price : 14.49
Bid-YTW : 4.15 %
ENB.PR.D FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 15.48
Evaluated at bid price : 15.48
Bid-YTW : 4.97 %
BAM.PF.C Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 21.09
Evaluated at bid price : 21.09
Bid-YTW : 5.84 %
ENB.PR.B FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 15.40
Evaluated at bid price : 15.40
Bid-YTW : 4.97 %
BAM.PR.K Floater 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 12.60
Evaluated at bid price : 12.60
Bid-YTW : 3.78 %
RY.PR.O Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 24.01
Evaluated at bid price : 24.37
Bid-YTW : 5.06 %
SLF.PR.D Deemed-Retractible 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.54
Bid-YTW : 6.55 %
ENB.PR.Y FixedReset 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 16.70
Evaluated at bid price : 16.70
Bid-YTW : 4.75 %
HSE.PR.C FixedReset 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 21.84
Evaluated at bid price : 22.25
Bid-YTW : 4.39 %
RY.PR.N Perpetual-Discount 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 24.29
Evaluated at bid price : 24.66
Bid-YTW : 5.04 %
MFC.PR.C Deemed-Retractible 1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 6.32 %
MFC.PR.L FixedReset 1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 5.09 %
ENB.PR.P FixedReset 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 16.44
Evaluated at bid price : 16.44
Bid-YTW : 4.93 %
ENB.PR.T FixedReset 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 16.46
Evaluated at bid price : 16.46
Bid-YTW : 4.95 %
PWF.PR.S Perpetual-Discount 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 22.41
Evaluated at bid price : 22.80
Bid-YTW : 5.29 %
Volume Highlights
Issue Index Shares
Traded		 Notes
TD.PR.Y FixedReset 40,201 Scotia crossed 35,000 at 25.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.06
Bid-YTW : 2.91 %
SLF.PR.H FixedReset 33,836 Scotia crossed 26,900 at 20.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.30
Bid-YTW : 5.53 %
TD.PF.F Perpetual-Discount 29,831 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 24.22
Evaluated at bid price : 24.59
Bid-YTW : 5.01 %
CU.PR.H Perpetual-Discount 24,360 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 23.48
Evaluated at bid price : 23.80
Bid-YTW : 5.54 %
ENB.PF.G FixedReset 23,950 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 4.98 %
BMO.PR.Z Perpetual-Discount 21,490 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 24.14
Evaluated at bid price : 24.51
Bid-YTW : 5.13 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
VNR.PR.A FixedReset Quote: 20.02 – 21.60
Spot Rate : 1.5800
Average : 1.1142

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 20.02
Evaluated at bid price : 20.02
Bid-YTW : 4.38 %
TRP.PR.G FixedReset Quote: 22.40 – 23.45
Spot Rate : 1.0500
Average : 0.6783

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 21.90
Evaluated at bid price : 22.40
Bid-YTW : 3.97 %
IFC.PR.C FixedReset Quote: 21.31 – 22.05
Spot Rate : 0.7400
Average : 0.4278

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.31
Bid-YTW : 5.44 %
HSE.PR.G FixedReset Quote: 22.82 – 23.69
Spot Rate : 0.8700
Average : 0.6120

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-14
Maturity Price : 22.18
Evaluated at bid price : 22.82
Bid-YTW : 4.64 %
MFC.PR.F FixedReset Quote: 16.60 – 17.19
Spot Rate : 0.5900
Average : 0.3737

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.60
Bid-YTW : 7.05 %
IFC.PR.A FixedReset Quote: 17.71 – 18.10
Spot Rate : 0.3900
Average : 0.2250

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.71
Bid-YTW : 7.32 %
Market Action

August 13, 2015

Politics in the UK may soon get interesting again:

Former U.K. Prime Minister Tony Blair warned that the Labour Party faces “annihilation” if it elects anti-austerity, pro-renationalization lawmaker Jeremy Corbyn as its new leader.

The electorate will punish the party in the 2020 U.K. election for its “self-indulgence” if the bookmakers and pollsters are right and Corbyn wins the party leadership when the result is announced on Sept. 12, Blair said in an article for the Guardian newspaper published Thursday.

“It doesn’t matter whether you’re on the left, right or center of the party, whether you used to support me or hate me. But please understand the danger we are in,” Blair wrote. “The party is walking eyes shut, arms outstretched, over the cliff’s edge to the jagged rocks below. This is not a moment to refrain from disturbing the serenity of the walk on the basis it causes ‘disunity.’ It is a moment for a rugby tackle if that were possible.”

Speaking of the UK, what’s the best way to fight street gangs? Get the kids to believe they can earn a place in the system:

As a teenager, Yasar Ugur spent his time hanging about on east London streets getting into gang fights. Now he’s up before dawn to work on a construction site after a Berkeley Group Holdings Plc project gave him a fresh start.

“This has got a future,” said Ugur, who is now 21 and a trainee site manager for London’s biggest homebuilder. “I’m still young and this is the way I’m going to progress in life.”

Ugur is one of 13 young people hired by the company through its Street Elite program, started in 2012 to address a chronic skills shortage in the construction industry. Almost 1 million building workers will be needed within 10 years in the U.K. as demand for new homes increases and older employees retire, consulting firm EC Harris estimates.

The programme smacks a bit of mollycoddling, with a derisory promise – but the reported end-result seems pretty good:

More than 200 people have completed the Street Elite program, with 80 percent going on to education, training or employment. The project uses sports coaching to prepare participants for work, by mentoring and training them to instruct children in government housing projects. Everybody who completes the nine-month program is offering a two-week internship at Berkeley.

There’s been a bit of a pause, but I’m pleased to see more drone news:

[Nova Scotia-based] Sky Squirrel deploys small drones equipped with infrared cameras to cruise the skies over vineyards, sending back images that help growers monitor for moisture level, disease, rot, insect damage and general crop health – all things that contribute to the quality of the grapes and the resulting wine.
…
In comparison, the company’s drone technology takes as many as 500 images during a single flight. “Our clients send the images to us via the cloud and we combine them into a map,” says van der Put. “Then we use a specialized image algorithm that allows us to assess crop health.” With the help of GPS positioning on their mobile devices, farmers, “can see where they are currently in the field and correlate that with the analysis” to pinpoint areas of concern, van der Put says.

The result: One client managed to reduce his water usage by a third. And the system has proven 97 per cent effective at detecting diseases like Flavesence Dorée – which mainly affects European vineyards. It also picks up leafroll – a disease that can devastate vineyards, wiping out 30 to 50 per cent of the crop.

US regulators might not be able to achieve the dream of eliminating the bond market entirely, but they can make incompetence less of a handicap:

The U.S. is expanding an investigation into deceptive sales practices by bond traders even though the first major conviction in the area could be overturned.

Aided by technology that’s allowing unprecedented scrutiny of trades, the Securities and Exchange Commission is looking beyond 10 cases it’s been developing with U.S. prosecutors to examine other instances of bankers potentially lying to clients and booking improper round-trip transactions, said two people with knowledge of the matter. Some criminal charges from the first batch of probes may come as early as next month, another person said.

Going after bond traders, and in the case of the Justice Department, trying to put some of them behind bars, represents the government’s most aggressive effort yet to root out wrongdoing in the opaque world of complex debt securities. The investigations include a focus on bonds tied to mortgages and corporate loans, markets where pricing data is scarce so bank traders have an edge in marking up assets to charge higher fees.
…
Litvak’s deception allowed him to sell mortgage bonds at inflated prices, bilking customers out of $2 million, U.S. prosecutors successfully argued during his trial. Litvak’s lawyers said it didn’t matter that he misrepresented the markup as long as his sophisticated buyers — consisting of hedge funds and money managers — paid what they felt was an appropriate price.

In July 2014, Litvak was sentenced to two years in prison. A three-judge panel is expected to make a decision on his appeal in the coming months.

So how about them corporate bond spreads, eh?:

The last time investors in the $11 trillion corporate-bond market were so risk-averse, it was 2013 and the Federal Reserve’s move to unwind its crisis-era stimulus had triggered what became known as the “taper tantrum.”

A little more selling and the market will be at its worst since the fourth quarter of 2012, when the world was still recovering from Europe’s sovereign debt crisis.

The extra yield investors worldwide demand to own corporate bonds instead of government securities has climbed to 2.34 percentage points, according to Bank of America Merrill Lynch index data. That’s right around the peak in June 2013, and just 0.04 percentage point from levels last reached in November 2012.

corporateSpreads
Click for Big

And it’s always interesting to see what market timers have to say:

The bond market’s best and brightest keep walking back their bets on how fast Treasury yields will rise.

Even with the Federal Reserve poised to begin raising interest rates for the first time in almost a decade, economists at the world’s biggest bond shops now say they don’t see benchmark yields reaching 3 percent until the fourth quarter of next year, according to a Bloomberg News survey. As recently as December they were calling for Treasury 10-year yields to top 3 percent by year-end.

Bond gurus continue to cut their expectations for how high yields will go amid signs of global economic malaise and persistently weak inflation. China’s devaluation of the yuan this week is the latest development to boost the allure of U.S. government bonds and drag Treasury yields lower, complicating Fed Chair Janet Yellen’s efforts to boost rates.

bondPredictions
Click for Big

It was another mixed day for the Canadian preferred share market, with PerpetualDiscounts up 11bp, FixedResets off 28bp and DeemedRetractibles gaining 1bp. TRP issues were again notable on the down side of the Performance Highlights table, joined today by ENB issues. Volume was low.

For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.

Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread

Here’s TRP:

impVol_TRP_150813
Click for Big

TRP.PR.B, which resets 2020-6-30 at +128, is bid at 13.21 to be $0.44 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is $0.80 cheap at its bid price of 13.75.

impVol_MFC_150813
Click for Big

Another good fit today!

Most expensive is MFC.PR.I, resetting at +286bp on 2017-9-19, bid at 24.75 to be 0.45 rich, while MFC.PR.K, resetting at +222bp on 2018-9-19, is bid at 21.49 to be $0.35 cheap.

impVol_BAM_150813
Click for Big

The fit on the BAM issues continues to be horrible.

The cheapest issue relative to its peers is BAM.PR.Z, resetting at +296bp on 2017-12-31, bid at 21.82 to be $1.13 cheap. BAM.PF.E, resetting at +255bp on 2020-3-31 is bid at 21.75 and appears to be $1.36 rich.

impVol_FTS_150813
Click for Big

FTS.PR.M, with a spread of +248bp, and bid at 23.35, looks $0.38 expensive and resets 2019-12-1. FTS.PR.G, with a spread of +213bp and resetting 2018-9-1, is bid at 20.17 and is $0.75 cheap.

pairs_FR_150813
Click for Big

Investment-grade pairs predict an average three-month bill yield over the next five-odd years of -0.27%, with no outliers. There are one junk outliers below -1.00% and one above +1.00%.

pairs_FF_150813
Click for Big

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices
Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)		 Median
YTW		 Median
Average
Trading
Value		 Median
Mod Dur
(YTW)		 Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.1052 % 1,965.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1052 % 3,436.3
Floater 3.73 % 3.78 % 52,477 17.85 3 -0.1052 % 2,089.3
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0401 % 2,777.8
SplitShare 4.58 % 4.80 % 57,745 3.13 3 -0.0401 % 3,255.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0401 % 2,540.0
Perpetual-Premium 5.72 % 5.41 % 62,833 2.07 9 0.0486 % 2,485.2
Perpetual-Discount 5.41 % 5.44 % 77,568 14.74 29 0.1085 % 2,611.0
FixedReset 4.73 % 3.96 % 201,980 15.92 87 -0.2785 % 2,225.7
Deemed-Retractible 5.11 % 5.21 % 102,315 5.44 34 0.0110 % 2,584.5
FloatingReset 2.32 % 3.26 % 48,978 6.00 9 0.0798 % 2,247.8
Performance Highlights
Issue Index Change Notes
TRP.PR.B FixedReset -3.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 13.21
Evaluated at bid price : 13.21
Bid-YTW : 3.81 %
VNR.PR.A FixedReset -3.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 20.82
Evaluated at bid price : 20.82
Bid-YTW : 4.33 %
TRP.PR.G FixedReset -2.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 21.96
Evaluated at bid price : 22.50
Bid-YTW : 4.04 %
ENB.PR.T FixedReset -2.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 16.21
Evaluated at bid price : 16.21
Bid-YTW : 5.16 %
PWF.PR.T FixedReset -2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 22.72
Evaluated at bid price : 23.61
Bid-YTW : 3.36 %
TRP.PR.C FixedReset -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 13.75
Evaluated at bid price : 13.75
Bid-YTW : 4.09 %
BAM.PR.B Floater -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 12.90
Evaluated at bid price : 12.90
Bid-YTW : 3.70 %
ENB.PR.P FixedReset -1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 5.15 %
ENB.PR.F FixedReset -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 16.15
Evaluated at bid price : 16.15
Bid-YTW : 5.12 %
ENB.PR.Y FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 4.94 %
GWO.PR.G Deemed-Retractible -1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.14
Bid-YTW : 5.80 %
TRP.PR.D FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 19.71
Evaluated at bid price : 19.71
Bid-YTW : 4.11 %
BAM.PF.D Perpetual-Discount -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 21.39
Evaluated at bid price : 21.39
Bid-YTW : 5.82 %
NA.PR.S FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 22.31
Evaluated at bid price : 22.91
Bid-YTW : 3.51 %
BMO.PR.Y FixedReset 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 22.90
Evaluated at bid price : 24.30
Bid-YTW : 3.52 %
FTS.PR.J Perpetual-Discount 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 22.23
Evaluated at bid price : 22.61
Bid-YTW : 5.33 %
ELF.PR.G Perpetual-Discount 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 21.75
Evaluated at bid price : 21.99
Bid-YTW : 5.45 %
TRP.PR.F FloatingReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 16.00
Evaluated at bid price : 16.00
Bid-YTW : 3.59 %
BAM.PR.K Floater 2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 12.47
Evaluated at bid price : 12.47
Bid-YTW : 3.82 %
Volume Highlights
Issue Index Shares
Traded		 Notes
RY.PR.I FixedReset 154,960 TD crossed 150,000 at 25.05.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 3.09 %
PWF.PR.P FixedReset 107,350 TD bought blocks of 25,00 and 23,400 from Scotia at 17.05, then crossed 49,500 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 3.39 %
CU.PR.H Perpetual-Discount 95,455 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 23.44
Evaluated at bid price : 23.75
Bid-YTW : 5.55 %
BNS.PR.P FixedReset 73,020 Desjardins crossed 30,000 at 25.07; TD crossed 26,600 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.04
Bid-YTW : 2.99 %
ENB.PR.D FixedReset 48,604 TD crossed 35,700 at 15.71.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 15.65
Evaluated at bid price : 15.65
Bid-YTW : 5.07 %
BNS.PR.B FloatingReset 32,526 TD crossed 25,000 at 23.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.20
Bid-YTW : 3.25 %
There were 22 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
VNR.PR.A FixedReset Quote: 20.82 – 21.68
Spot Rate : 0.8600
Average : 0.6035

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 20.82
Evaluated at bid price : 20.82
Bid-YTW : 4.33 %
HSE.PR.C FixedReset Quote: 21.98 – 22.74
Spot Rate : 0.7600
Average : 0.5604

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 21.65
Evaluated at bid price : 21.98
Bid-YTW : 4.55 %
GWO.PR.G Deemed-Retractible Quote: 24.14 – 24.66
Spot Rate : 0.5200
Average : 0.3720

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.14
Bid-YTW : 5.80 %
ENB.PR.P FixedReset Quote: 16.20 – 16.64
Spot Rate : 0.4400
Average : 0.3050

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 16.20
Evaluated at bid price : 16.20
Bid-YTW : 5.15 %
FTS.PR.J Perpetual-Discount Quote: 22.61 – 23.09
Spot Rate : 0.4800
Average : 0.3602

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 22.23
Evaluated at bid price : 22.61
Bid-YTW : 5.33 %
TRP.PR.C FixedReset Quote: 13.75 – 14.11
Spot Rate : 0.3600
Average : 0.2589

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-08-13
Maturity Price : 13.75
Evaluated at bid price : 13.75
Bid-YTW : 4.09 %
Issue Comments

BRF NCIB Was Real!

Brookfield Renewable Energy Partners L.P. has published its 15Q2 Quarterly Report:

Brookfield Renewable entered into an automatic purchase plan to allow for purchases of its Series 1, Series 2, and Series 3 Class A Preference Shares. The automatic purchase plan commenced on July 1, 2015 and will terminate on August 6, 2015. Subsequent to June 30, 2015, 75,537 Class A Preference Shares and 22,900 LP Units were repurchased and cancelled.

News of their Normal Course Issuer Bid was reported on PrefBlog on June 23 and the automatic purchase plan reported June 29; neither announcement was given its own post because these things are usually just window dressing.

In this case however, things actually got done. Poking around on the System for Electronic Disclosure by Insiders website enabled me to prepare a summary of their actions, which may be condensed into the following table:

Ticker Date Price
Range		 Cancelled
Shares
BRF.PR.A 2015-7-15 17.41-18.61 11,300
BRF.PR.A 2015-7-31 17.37-17.95 13,700
BRF.PR.B 2015-7-15 16.06-16.85 2,800
BRF.PR.B 2015-7-31 15.57-16.35 3,100
BRF.PR.C 2015-7-15 20.80-21.35 9,767
BRF.PR.C 2015-7-31 19.80-20.80 21,534
Total 62,201

The total is less than the seventy-five thousand odd disclosed in their quarterly report; I assume that this is a result of cancellations of shares purchased subsequent to July 31.

Remaining Holdings as of 2015-7-31 are:

Ticker Holdings
BRF.PR.A 3,618
BRF.PR.B 600
BRF.PR.C 3,900

So … seventy-five thousand shares at $20 comes to about $1.5-million. This is not the most earthshaking corporate action ever announced, but NCIBs that are actually executed by operating companies are very rare!