Market Action

May 25, 2012

Cheerful Greek thoughts from the Institute of International Finance (aka the Bankers’ Club):

The cost of Greece exiting the euro would be unmanageable and probably exceed the 1 trillion euros ($1.25 trillion) previously estimated by the Institute of International Finance, the group’s managing director said.

The Washington-based IIF’s projection from earlier this year is “a bit dated now” and “probably on the low side,” Charles Dallara said in an interview in Rome today. “Those who think that Europe, and more broadly the global economy, are really prepared for a Greek exit should think again.”

The European Central Bank’s exposure to Greek liabilities is more than twice as big as the ECB’s capital, said Dallara, who represented banks in their negotiations with the Greek government on its debt restructuring. As a result, he predicted the bank would be unable to provide liquidity and stabilize the euro-area financial sector.
…
For Greece, in its fifth year of recession, it may be more effective to offer extra money to help its battered economy recover, Dallara said. Because Greece’s economy has shrunk so much faster than expected, it may need more time to meet its budget targets and repay its international loans, he said.

Greece’s shrinking economy could be aided “at a cost” of an additional 10 billion euros. “We’re talking about very modest sums compared to what’s already on the table,” he said.

It was a mildly positive day for the Canadian preferred share market, with PerpetualPremiums gaining 1bp, FixedResets up 12bp and DeemedRetractibles winning 14bp. Volatility was muted. Volume was well below average.

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 -0.0372 % 2,465.3
FixedFloater 4.44 % 3.81 % 29,689 17.69 1 0.0000 % 3,551.2
Floater 2.93 % 2.95 % 68,910 19.80 3 -0.0372 % 2,661.9
OpRet 4.80 % 2.88 % 44,534 1.06 5 0.0000 % 2,501.2
SplitShare 5.27 % -5.77 % 51,696 0.56 4 0.3742 % 2,709.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,287.1
Perpetual-Premium 5.46 % 2.36 % 72,175 0.63 25 0.0110 % 2,227.3
Perpetual-Discount 5.12 % 5.25 % 82,858 14.98 8 -0.4084 % 2,422.8
FixedReset 5.05 % 3.17 % 189,041 2.33 69 0.1248 % 2,393.3
Deemed-Retractible 4.98 % 3.52 % 170,986 1.90 45 0.1367 % 2,316.3
Performance Highlights
Issue Index Change Notes
BAM.PR.M Perpetual-Discount -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 22.51
Evaluated at bid price : 22.90
Bid-YTW : 5.25 %
BAM.PR.N Perpetual-Discount -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 22.54
Evaluated at bid price : 22.91
Bid-YTW : 5.25 %
HSE.PR.A FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 23.50
Evaluated at bid price : 25.75
Bid-YTW : 3.17 %
IAG.PR.A Deemed-Retractible 3.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.01
Bid-YTW : 5.65 %
Volume Highlights
Issue Index Shares
Traded		 Notes
MFC.PR.I FixedReset 128,885 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 4.49 %
NA.PR.K Deemed-Retractible 97,138 TD crossed 48,000 at 25.50; Desjardins crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-24
Maturity Price : 25.00
Evaluated at bid price : 25.46
Bid-YTW : -13.92 %
RY.PR.D Deemed-Retractible 77,685 TD crossed blocks of 40,000 and 25,000, both at 25.67.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.66
Bid-YTW : 3.76 %
SLF.PR.A Deemed-Retractible 66,976 Nesbitt crossed 56,400 at 23.76.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.74
Bid-YTW : 5.56 %
SLF.PR.D Deemed-Retractible 63,403 Nesbitt crossed 56,400 at 22.76. Gee, I wonder if that’s related to the cross in SLF.PR.A, above!
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 5.77 %
TD.PR.G FixedReset 59,665 National crossed 48,400 at 26.62.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.63
Bid-YTW : 2.99 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IGM.PR.B Perpetual-Premium Quote: 25.78 – 26.30
Spot Rate : 0.5200
Average : 0.4548

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 5.44 %
BAM.PR.T FixedReset Quote: 25.06 – 25.24
Spot Rate : 0.1800
Average : 0.1173

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 23.19
Evaluated at bid price : 25.06
Bid-YTW : 3.84 %
IAG.PR.E Deemed-Retractible Quote: 25.87 – 26.30
Spot Rate : 0.4300
Average : 0.3678

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.87
Bid-YTW : 5.30 %
BNA.PR.C SplitShare Quote: 22.81 – 23.00
Spot Rate : 0.1900
Average : 0.1326

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 5.97 %
RY.PR.I FixedReset Quote: 25.64 – 25.87
Spot Rate : 0.2300
Average : 0.1786

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 3.39 %
GWO.PR.P Deemed-Retractible Quote: 25.95 – 26.09
Spot Rate : 0.1400
Average : 0.0986

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 5.11 %
Market Action

May 24, 2012

I may be a little dense, but one point about housing prices has just struck me:

If you had to earn a living predicting home prices and could use just one indicator to do it, which would you choose?

I asked two top economists that question. Their answer was the same: housing affordability.
…
Affordability – a type of debt service ratio – gauges the average percentage of income needed to carry a mortgage. This is closely linked to how much homeowners can borrow.

It’s a rather paradoxical statistic. You would think, for instance, that with home prices doubling in the last 10 years, affordability would be getting worse.

Actually, national affordability is almost the same or better than 20 years ago, according to measures by the Bank of Canada and major economists.

For that, we can thank both falling interest rates and rising incomes. Discounted mortgage rates, for example, have dropped more than five percentage points in the last 20 years.

So, to the extent that affordability, as defined, is an accurate gauge of housing value, then once you strip out the relatively volatile interest rate denominator, you’re left with a linear dependence upon nominal incomes. Which will not only capture inflation but also capture productivity gains. And, what’s more, those aren’t just the productivity gains of the average person, but (in Toronto and Vancouver, anyway) are the productivity gains of professionals. Which have been awesome in the last twenty years and which I would expect will continue to be awesome.

Would anybody happen to have any data that tests this idea?

There are some interesting polls from Greece:

A Greek opinion poll showed the Syriza party, which is opposed to implementing Greece’s international financial rescue, building on its lead in voter support ahead of elections to be held on June 17.

Syriza got 30 percent support, compared with the 28 percent in a previous reading a week earlier, according to a Public Issue poll presented on Athens-based Skai TV today. That was ahead of pro-bailout party New Democracy which polled 26 percent compared to 24 percent a week earlier, according to the survey.
…
The poll showed 85 percent of Greeks wanted to keep the euro, compared with 12 percent who were opposed to keeping the currency.

There could be some bare-knuckle diplomacy coming if Syriza has the twin objectives of renegotiating the bail-out while staying in the Euro!

It was a negative day for the Canadian preferred share market, with PerpetualPremiums off 2bp, FixedResets down 7bp and DeemedRetractibles losing 24bp. There was a good amount of volatility with no clear pattern – although optimists might wish to assert that the IAG new issue prompted a revaluation of that issuer’s extant issues. Volume was quite low.

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 0.2235 % 2,466.2
FixedFloater 4.44 % 3.81 % 29,855 17.70 1 0.6585 % 3,551.2
Floater 2.93 % 2.96 % 65,950 19.79 3 0.2235 % 2,662.9
OpRet 4.80 % 2.83 % 45,257 1.06 5 0.1625 % 2,501.2
SplitShare 5.29 % -2.35 % 51,938 0.56 4 -0.3827 % 2,699.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1625 % 2,287.1
Perpetual-Premium 5.46 % 1.85 % 73,087 0.63 25 -0.0211 % 2,227.1
Perpetual-Discount 5.10 % 5.16 % 85,910 15.12 8 0.0673 % 2,432.7
FixedReset 5.06 % 3.22 % 188,247 2.19 69 -0.0669 % 2,390.4
Deemed-Retractible 4.99 % 3.67 % 170,712 1.91 45 -0.2361 % 2,313.1
Performance Highlights
Issue Index Change Notes
IAG.PR.A Deemed-Retractible -4.34 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 6.09 %
BNA.PR.E SplitShare -1.41 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 5.22 %
IAG.PR.C FixedReset -1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 3.49 %
SLF.PR.D Deemed-Retractible -1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.61
Bid-YTW : 5.88 %
BAM.PR.R FixedReset 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-24
Maturity Price : 23.57
Evaluated at bid price : 26.15
Bid-YTW : 3.78 %
IAG.PR.F Deemed-Retractible 1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.00
Bid-YTW : 5.33 %
SLF.PR.I FixedReset 1.65 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.21
Bid-YTW : 4.20 %
Volume Highlights
Issue Index Shares
Traded		 Notes
MFC.PR.I FixedReset 263,530 New issue settled today.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.76
Bid-YTW : 4.51 %
BNS.PR.T FixedReset 218,208 National sold 25,000 to RBC at 26.61, then crossed 187,400 at 26.57.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.58
Bid-YTW : 3.09 %
TD.PR.E FixedReset 212,301 National crossed 170,700 at 26.55.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.64
Bid-YTW : 2.97 %
RY.PR.X FixedReset 67,424 National crossed 23,200 at 26.65; RBC crossed 16,900 at 26.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.73
Bid-YTW : 3.07 %
RY.PR.Y FixedReset 56,275 RBC crossed 50,000 at 26.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-24
Maturity Price : 25.00
Evaluated at bid price : 26.82
Bid-YTW : 3.08 %
GWO.PR.H Deemed-Retractible 51,748 TD crossed 50,000 at 24.45.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.35
Bid-YTW : 5.33 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.A Deemed-Retractible Quote: 22.25 – 23.50
Spot Rate : 1.2500
Average : 0.6881

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 6.09 %
IAG.PR.E Deemed-Retractible Quote: 25.87 – 26.30
Spot Rate : 0.4300
Average : 0.2996

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.87
Bid-YTW : 5.30 %
BAM.PR.N Perpetual-Discount Quote: 23.22 – 23.65
Spot Rate : 0.4300
Average : 0.3095

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-24
Maturity Price : 22.81
Evaluated at bid price : 23.22
Bid-YTW : 5.17 %
BNA.PR.E SplitShare Quote: 24.55 – 24.89
Spot Rate : 0.3400
Average : 0.2245

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 5.22 %
HSB.PR.D Deemed-Retractible Quote: 25.65 – 26.00
Spot Rate : 0.3500
Average : 0.2351

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.65
Bid-YTW : 4.41 %
BAM.PR.B Floater Quote: 18.00 – 18.34
Spot Rate : 0.3400
Average : 0.2451

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-24
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 2.94 %
Issue Comments

NPI.PR.C Firm on Good Volume

Northland Power Inc. has announced:

the closing of the previously announced offering of 4.8 million Cumulative Rate Reset Preferred Shares, Series 3 (the “Series 3 Preferred Shares”), at a price of $25.00 per share, for aggregate gross proceeds of $120 million, on a bought deal basis to a syndicate of underwriters led by CIBC, BMO Capital Markets and Scotiabank.

The Series 3 Preferred Shares commence trading on the TSX today under the symbol NPI.PR.C.

Northland intends to use the net proceeds of the offering to fund the equity portion of its first six ground mounted solar projects, fund additional ground mounted solar project development, repay bank indebtedness, replenish working capital, and for general corporate purposes.

NPI.PR.C is a FixedReset, 5.00%+346, announced May 14. It will be tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The issue traded 473,424 shares today in a range of 25.00-09 before closing at 25.04-07, 10×32. Vital statistics are:

NPI.PR.C FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-24
Maturity Price : 23.14
Evaluated at bid price : 25.04
Bid-YTW : 4.84 %
Issue Comments

MFC.PR.I Shows Hints of Softness on Muted Volume

Manulife Financial has announced:

that it has completed its offering of 10 million Non-cumulative Rate Reset Class 1 Shares Series 9 (the “Series 9 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $250 million.

The offering was underwritten by a syndicate of investment dealers co-led by Scotiabank, CIBC and RBC Capital Markets. The Series 9 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.I.

The Series 9 Preferred Shares were issued under a prospectus supplement dated May 16, 2012 to Manulife’s short form base shelf prospectus dated September 3, 2010.

MFC.PR.I is a FixedReset, 4.40%+286, announced May 16. The issue will be tracked by HIMIPref™ and assigned to the FixedReset subindex. In accordance with HIMI’s other analysis on DeemedRetractibles, a “DeemedMaturity” on 2022-1-31 at 25.00 has been added to the call schedule.

The issue traded 263,530 shares in a range of 24.85-91 before closing at 24.76-90, 11×246. Vital statistics are:

MFC.PR.I FixedReset YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.76
Bid-YTW : 4.51 %
New Issues

New Issue: IAG FixedReset 4.30%+285

Industrial Alliance Insurance and Financial Services Inc. has announced that it:

has today entered into an agreement with a syndicate of underwriters co-led by Scotiabank and RBC Capital Markets under which the underwriters have agreed to buy, on a bought deal basis, 6,000,000 Non-Cumulative 5-Year Rate Reset Class A Preferred Shares Series G (the “Series G Preferred Shares”) from Industrial Alliance for sale to the public at a price of $25.00 per Series G Preferred Share, representing aggregate gross proceeds of $150 million.

This share offering is expected to close on or about June 1, 2012, subject to certain conditions, including Toronto Stock Exchange and other customary regulatory approvals. The net proceeds of this offering will be used for general corporate purposes and will be added to Industrial Alliance’s capital base. Holders of the Series G Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend of $0.26875 per Series G Preferred Share, yielding 4.30% per annum, as and when declared by the Board of Directors of Industrial Alliance, for the initial period up to but excluding June 30, 2017. On June 30, 2017 and on June 30 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.85%. Holders of the Series G Preferred Shares will have the right, at their option, to convert their shares into Non-Cumulative Floating Rate Class A Preferred Shares Series H (the “Series H Preferred Shares”), subject to certain conditions and the Company’s right to redeem the Series G Preferred Shares as described below, on June 30, 2017 and on June 30 every five years thereafter.

Holders of the Series H Preferred Shares will be entitled to receive a quarterly non-cumulative floating rate dividend, as and when declared by the Board of Directors of Industrial Alliance, equal to the 90-day Government of Canada Treasury Bill Rate plus 2.85%. Holders of the Series H Preferred Shares will have the right, at their option, to convert their shares into Series G Preferred Shares, subject to certain conditions and the Company’s right to redeem the Series H Preferred Shares as described below, on June 30, 2022 and on June 30 every five years thereafter. The Series G Preferred Shares will not be redeemable by Industrial Alliance prior to June 30, 2017. On June 30, 2017 and on June 30 every five years thereafter, Industrial Alliance may, subject to certain conditions (including regulatory approval), redeem all or any part of the Series G Preferred Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends. The Company may redeem all or any part of the Series H Preferred Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends in the case of redemptions on June 30, 2022 and on June 30 every five years thereafter or $25.50 together with all declared and unpaid dividends in the case of redemptions on any other date after June 30, 2017. On a pro forma basis, after giving effect to this Series G Preferred Shares issue, the Company estimates that, as at March 31, 2012, its solvency ratio would increase by 9 percentage points, from 186% to 195%. The offering will be made pursuant to a prospectus supplement to Industrial Alliance’s short form base shelf prospectus dated April 29, 2011. Complete details of the offering will be set out in the prospectus supplement, which will be filed with the Canadian securities regulatory authorities and will be available on SEDAR at www.sedar.com.

Market Action

May 23, 2012

I’m not sure what Spain’s debt maturity profile looks like – but there’s one good reason for issuing long-term debt:

Spain can’t continue much longer with its current high borrowing rates, the prime minister warned Wednesday as he urged a joint European response to keep the region’s debt problems from getting worse.

Mariano Rajoy and newly elected French President Francois Hollande, heading later in the evening to meet other European Union leaders, also stressed their commitment to keeping Greece in the euro despite its political uncertainty.

It was another mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 9bp, FixedResets off 3bp and DeemedRetractibles losing 16bp. Volatility was average. Volume was above average.

PerpetualDiscounts now yield 5.16%, equivalent to 6.71% interest at the standard equivalency factor of 1.3x. Long corporate yields … are delayed.

Update: Long corporates are at about 4.40% (maybe just a hairsbreadth over), so the pre-tax interest-equivalent spread (in this context, the Seniority Spread) is now about 230bp, a sharp widening from the 210bp reported May 9.

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 -0.2416 % 2,460.7
FixedFloater 4.47 % 3.84 % 30,239 17.64 1 -0.7470 % 3,528.0
Floater 2.93 % 2.96 % 66,711 19.79 3 -0.2416 % 2,656.9
OpRet 4.81 % 2.79 % 47,120 1.07 5 -0.0619 % 2,497.1
SplitShare 5.27 % -3.03 % 52,037 0.56 4 -0.0596 % 2,709.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0619 % 2,283.4
Perpetual-Premium 5.45 % 2.03 % 73,256 0.64 25 0.0909 % 2,227.6
Perpetual-Discount 5.10 % 5.16 % 86,836 15.11 8 0.0518 % 2,431.1
FixedReset 5.07 % 3.19 % 187,535 2.19 68 -0.0291 % 2,392.0
Deemed-Retractible 4.98 % 3.62 % 168,457 2.73 45 -0.1621 % 2,318.6
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-23
Maturity Price : 17.78
Evaluated at bid price : 17.78
Bid-YTW : 2.98 %
SLF.PR.I FixedReset -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 4.40 %
BAM.PR.M Perpetual-Discount 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-23
Maturity Price : 22.74
Evaluated at bid price : 23.17
Bid-YTW : 5.18 %
BAM.PR.C Floater 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-23
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 2.96 %
BAM.PR.N Perpetual-Discount 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-23
Maturity Price : 22.84
Evaluated at bid price : 23.25
Bid-YTW : 5.16 %
Volume Highlights
Issue Index Shares
Traded		 Notes
PWF.PR.I Perpetual-Premium 196,260 Nesbitt crossed blocks of 150,000 and 43,200, both at 25.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-22
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : -13.11 %
PWF.PR.R Perpetual-Premium 116,277 Nesbitt crossed 112,900 at 25.90.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 5.10 %
CM.PR.K FixedReset 86,465 Nesbitt crossed 83,000 at 26.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.23
Bid-YTW : 3.19 %
TD.PR.Y FixedReset 62,427 Desjardins crossed 39,800 at 26.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.89
Bid-YTW : 2.81 %
BMO.PR.P FixedReset 61,741 Nesbitt crossed 49,800 at 26.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.66
Bid-YTW : 2.88 %
RY.PR.P FixedReset 45,078 Scotia crossed 10,000 at 26.50; RBC crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.41
Bid-YTW : 2.94 %
There were 36 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.F Deemed-Retractible Quote: 25.65 – 26.37
Spot Rate : 0.7200
Average : 0.4752

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 5.38 %
MFC.PR.A OpRet Quote: 25.12 – 25.49
Spot Rate : 0.3700
Average : 0.2487

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2015-12-18
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 3.88 %
CIU.PR.A Perpetual-Discount Quote: 24.53 – 25.00
Spot Rate : 0.4700
Average : 0.3510

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-23
Maturity Price : 24.23
Evaluated at bid price : 24.53
Bid-YTW : 4.69 %
NA.PR.P FixedReset Quote: 26.33 – 26.70
Spot Rate : 0.3700
Average : 0.2623

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.33
Bid-YTW : 3.51 %
ENB.PR.D FixedReset Quote: 25.12 – 25.40
Spot Rate : 0.2800
Average : 0.1792

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-23
Maturity Price : 23.16
Evaluated at bid price : 25.12
Bid-YTW : 3.71 %
RY.PR.L FixedReset Quote: 26.04 – 26.34
Spot Rate : 0.3000
Average : 0.2181

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.04
Bid-YTW : 3.15 %
Issue Comments

ENB.PF.U Closes a Little Soft on Good Volume

Enbridge Inc. has announced:

it has closed its previously announced public offering of Cumulative Redeemable Preference shares, Series L (the “Series L Preferred Shares”) by a syndicate of underwriters led by Scotiabank, RBC Capital Markets, & TD Securities Inc. Enbridge issued 16 million Series L Preferred Shares for gross proceeds of US$400 million. The Series L Preferred Shares will begin trading on the TSX today under the symbol ENB.PF.U. The proceeds will be used for capital expenditures, to repay indebtedness and for other general corporate purposes.

ENB.PF.U is a FixedReset, US Pay, 4.00%+315, announced May 11. The issue traded 761,310 shares in a range of 24.80-95 before closing at 24.87-90, 20×15.

The issue will not be tracked by HIMIPref™; regrettably, there are not enough US-Pay issues available to form an analyzable universe.

Issue Comments

TRI Put on Trend-Negative by S&P

Standard & Poor’s has announced:

  • We are revising our outlook on New York-based information solutions 1provider Thomson Reuters Corp. to negative from stable due to the weaker-than-expected operating performance of the company’s Financial & Risk (F&R) segment.
  • We are also affirming all our ratings on the company, including our ‘A-‘ long-term corporate credit rating.
  • The negative outlook reflects Standard & Poor’s view of the weaker-than-expected operating performance within the F&R segment and hurdles Thomson Reuters faces in returning this business to healthy and sustainable revenue growth given the slow economic recovery and intensely competitive operating conditions.

The negative outlook reflects Standard & Poor’s view of the weaker-than-expected operating performance within the F&R segment and hurdles Thomson Reuters faces in returning this business to healthy and sustainable revenue growth given the slow economic recovery and intensely competitive operating conditions. A downgrade could result from further execution issues in the F&R segment; weak revenue and EBITDA growth trends for the company as a whole or specifically in F&R; or adjusted debt to EBITDA at or above 2.5x on a consistent basis. Alternatively, we could revise the outlook to stable if Thomson Reuters demonstrates sustainable improvement in F&R’s operating performance, as well as its other business segments, while maintaining adjusted debt to EBITDA below 2.5x.

Thomson Reuters is the issuer of TRI.PR.B. This issue is tracked by HIMIPref™ but is relegated to the Scraps index on volume concerns.

Market Action

May 22, 2012

BC Hydro couldn’t care less about operating on a cost-recovery basis. That’s not important:

Energy Minister Rich Coleman says he has cut expected BC Hydro rate increases by 50 per cent over three years.

Mr. Coleman says he made the decision based on a government-ordered review of hydro services and because the government wants to keep rates affordable for families.

DBRS put Spain, Italy, Portugal and Ireland on Review-Negative:

This action reflects DBRS’s assessment that downside risks to growth in the Euro area have intensified as a result of systemic concerns emanating from Greece. Recent political developments have called into question the Greek government’s willingness and capacity to comply with its EU-IMF adjustment programme and sustain its membership in the European Monetary Union. DBRS will assess, over the next three months, the risks stemming from Greece and to what extent uncertainty over the future of Greece, combined with concerns over sovereign debt sustainability and financial sector fragility in the Euro area, may adversely affect Ireland’s efforts to stabilise its public debt.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums down 9bp, FixedResets winning 12bp and DeemedRetractibles gaining 4bp. The Performance Highlights table was well populated, entirely with winners. Volume was below average.

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 2.0288 % 2,466.7
FixedFloater 4.44 % 3.81 % 29,182 17.71 1 0.0000 % 3,554.6
Floater 2.93 % 2.94 % 61,752 19.83 3 2.0288 % 2,663.4
OpRet 4.81 % 2.92 % 48,954 1.07 5 -0.3315 % 2,498.7
SplitShare 5.27 % -1.88 % 51,801 0.57 4 -0.1686 % 2,711.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3315 % 2,284.8
Perpetual-Premium 5.46 % 2.02 % 74,560 0.64 25 -0.0924 % 2,225.5
Perpetual-Discount 5.11 % 5.24 % 87,909 15.00 8 0.5517 % 2,429.8
FixedReset 5.06 % 3.13 % 189,087 2.16 68 0.1175 % 2,392.7
Deemed-Retractible 4.96 % 3.64 % 174,398 1.38 45 0.0436 % 2,322.3
Performance Highlights
Issue Index Change Notes
BAM.PF.A FixedReset 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-22
Maturity Price : 23.19
Evaluated at bid price : 25.30
Bid-YTW : 4.27 %
TD.PR.P Deemed-Retractible 1.26 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-11-01
Maturity Price : 26.00
Evaluated at bid price : 26.54
Bid-YTW : 1.05 %
BAM.PR.M Perpetual-Discount 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-22
Maturity Price : 22.51
Evaluated at bid price : 22.90
Bid-YTW : 5.24 %
MFC.PR.D FixedReset 1.73 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 3.37 %
BAM.PR.N Perpetual-Discount 1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-22
Maturity Price : 22.53
Evaluated at bid price : 22.90
Bid-YTW : 5.25 %
BAM.PR.K Floater 5.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-22
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 2.91 %
Volume Highlights
Issue Index Shares
Traded		 Notes
PWF.PR.I Perpetual-Premium 103,259 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-21
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : -13.29 %
GWO.PR.G Deemed-Retractible 87,700 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 5.37 %
BNS.PR.Q FixedReset 75,770 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.66
Bid-YTW : 3.13 %
ENB.PR.F FixedReset 75,085 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.41
Bid-YTW : 3.69 %
RY.PR.Y FixedReset 70,760 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-24
Maturity Price : 25.00
Evaluated at bid price : 26.81
Bid-YTW : 3.09 %
MFC.PR.D FixedReset 66,995 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 3.37 %
There were 24 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TCA.PR.Y Perpetual-Premium Quote: 52.15 – 52.65
Spot Rate : 0.5000
Average : 0.3696

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 52.15
Bid-YTW : 3.29 %
FTS.PR.E OpRet Quote: 26.20 – 26.65
Spot Rate : 0.4500
Average : 0.3579

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.20
Bid-YTW : 2.92 %
BNS.PR.T FixedReset Quote: 26.59 – 26.85
Spot Rate : 0.2600
Average : 0.1729

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.59
Bid-YTW : 3.06 %
TRP.PR.C FixedReset Quote: 25.81 – 26.09
Spot Rate : 0.2800
Average : 0.1993

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-22
Maturity Price : 23.53
Evaluated at bid price : 25.81
Bid-YTW : 2.95 %
TCA.PR.X Perpetual-Premium Quote: 52.06 – 52.49
Spot Rate : 0.4300
Average : 0.3497

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.06
Bid-YTW : 2.85 %
PWF.PR.R Perpetual-Premium Quote: 25.77 – 26.00
Spot Rate : 0.2300
Average : 0.1543

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.77
Bid-YTW : 5.15 %
Publications

Research: Split Share Credit Quality

This was published some time ago, but for some reason I forgot to put it on the Web!

Anyway, the credit quality of SplitShare corporation preferreds is subject to numerous factors – the NAV of the underlying portfolio is only the most obvious. These influences can be quantified; an introduction to this quantification is presented in this article.

Click on the research link!