{"id":21157,"date":"2013-02-21T01:21:58","date_gmt":"2013-02-21T05:21:58","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=21157"},"modified":"2013-02-21T01:21:58","modified_gmt":"2013-02-21T05:21:58","slug":"february-20-2013","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=21157","title":{"rendered":"February 20, 2013"},"content":{"rendered":"

The lawyers and do-gooders at IIROC are continuing their efforts to destroy the Canadian corporate bond market<\/a>:<\/p>\n

>Four years ago, the head of the investment industry\u2019s self-regulator said that a plan to create surveillance to protect fixed income investors<\/a> was a priority. At last, the final step needed to make that happen appears to be here.<\/p>\n

The regulator has been taking things in bites. First, in 2009, there was a demand for better disclosure of what people were paying banks and securities firms to trade debt. Then, in 2011, a rule demanding that all securities firms \u201censure clients received fair prices on debt transactions.\u201d
…<\/b>
So now, the Investment Industry Regulatory Organization of Canada is amping up trade reporting requirements to create something at least resembling the kind of surveillance that has long been there in equity markets, where a computer system watches every trade to ensure investors are getting the best available price at any given point.<\/p>\n

The new rule will require securities dealers to report every trade, once it\u2019s done. IIROC will use that to build a database<\/a> that is the start of a real surveillance mechanism. It\u2019s still not the real-time computerized flagging of trades that aren\u2019t done at the best possible price, but it\u2019s perhaps the biggest step yet toward that happening.<\/p><\/blockquote>\n

As the linked article in the Globe shows, the IIROC honcho who started this mess was Susan Wolburgh Jenah<\/a> who, as far as I can tell from her official biography, has never traded a security in her life.<\/p>\n

To my chagrin, the proposed rule<\/a> cites a paper promoted by the CFA Institute and published as part of their Codes, Standards and Position Papers<\/a> and comes complete with an “Issue Brief”<\/a>. The paper itself is titled An Examination of Transparency in European Bond Markets<\/a> and I must say I consider it very disappointing in terms of rigour; however, a full rebuttal will require enough work and length that it will be more suitable to PrefLetter<\/a> than PrefBlog.<\/p>\n

The basic problem with this idea is that it makes it less lucrative for bond dealers to hold inventory. This means fewer offerings of individual bonds to retail and it means small size markets being called for institutional players. This in turn leads to a migration of bond issues to the private placement market and decreased functionality of the capital markets in general. Essentially, the problem that fairness brings to bond markets is the same as that of socialisn: in a socialist economy, everything’s cheap but nothing’s available; in a “fair” bond market, all the spreads are narrow, but the market makers won’t back up their quotes – when given – with significant risk capital.<\/p>\n

It was a mixed day for the Canadian bond market, with PerpetualPremiums down 11bp, FixedResets up 9bp and DeemedRetractibles off 9bp. Volatility was low. Volume was extremely high.<\/p>\n

PerpetualDiscounts now yield 4.90%, equivalent to 6.37% interest at the standard equivalency factor of 1.3x. Long Corporates<\/a> now yield about 4.35%, so the pre-tax interest-equivalent spread is now about 200bp, a small rebound from the 195bp reported February 6<\/a>.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.2245 %<\/td>\n2,599.4<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.11 %<\/td>\n3.44 %<\/td>\n25,710<\/td>\n18.42<\/td>\n1<\/td>\n-0.2591 %<\/td>\n3,954.6<\/td>\n<\/tr>\n
Floater<\/td>\n2.56 %<\/td>\n2.85 %<\/td>\n78,416<\/td>\n20.08<\/td>\n5<\/td>\n0.2245 %<\/td>\n2,806.6<\/td>\n<\/tr>\n
OpRet<\/td>\n4.78 %<\/td>\n1.56 %<\/td>\n45,219<\/td>\n0.35<\/td>\n5<\/td>\n-0.1691 %<\/td>\n2,606.8<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.58 %<\/td>\n4.13 %<\/td>\n40,572<\/td>\n4.29<\/td>\n2<\/td>\n0.4249 %<\/td>\n2,943.3<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1691 %<\/td>\n2,383.6<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.25 %<\/td>\n0.64 %<\/td>\n82,627<\/td>\n0.09<\/td>\n29<\/td>\n-0.1099 %<\/td>\n2,354.2<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n4.85 %<\/td>\n4.90 %<\/td>\n129,545<\/td>\n15.60<\/td>\n4<\/td>\n-0.0507 %<\/td>\n2,647.9<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.89 %<\/td>\n2.55 %<\/td>\n273,057<\/td>\n3.06<\/td>\n78<\/td>\n0.0917 %<\/td>\n2,503.3<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.87 %<\/td>\n1.93 %<\/td>\n145,739<\/td>\n0.26<\/td>\n45<\/td>\n-0.0851 %<\/td>\n2,438.4<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
IAG.PR.G<\/td>\nFixedReset<\/td>\n1.13 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-06-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.74
\nBid-YTW : 2.76 %<\/td>\n<\/tr>\n
PWF.PR.A<\/td>\nFloater<\/td>\n1.26 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-02-20
\nMaturity Price : 23.03
\nEvaluated at bid price : 23.30
\nBid-YTW : 2.23 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
CM.PR.D<\/td>\nPerpetual-Premium<\/td>\n115,455<\/td>\nTD crossed 49,700 at 26.11 and 50,000 at 26.07.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-03-22
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.02
\nBid-YTW : -35.71 %<\/td>\n<\/tr>\n
BMO.PR.H<\/td>\nDeemed-Retractible<\/td>\n103,763<\/td>\nCalled for redemption<\/a>.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-03-27
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.00
\nBid-YTW : 4.59 %<\/td>\n<\/tr>\n
TRP.PR.A<\/td>\nFixedReset<\/td>\n83,025<\/td>\nDesjardins crossed two blocks of 31,000 each, both at 25.99.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.90
\nBid-YTW : 2.97 %<\/td>\n<\/tr>\n
BMO.PR.Q<\/td>\nFixedReset<\/td>\n68,286<\/td>\nNesbitt crossed 35,600 at 25.35; Nesbitt bought 15,000 from TD at 25.37.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.41
\nBid-YTW : 2.91 %<\/td>\n<\/tr>\n
SLF.PR.I<\/td>\nFixedReset<\/td>\n52,328<\/td>\nScotia sold two blocks of 10,000 each to anonymous, both at 26.68.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.66
\nBid-YTW : 2.61 %<\/td>\n<\/tr>\n
ENB.PR.F<\/td>\nFixedReset<\/td>\n52,195<\/td>\nNesbitt crossed 19,300 at 25.75.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-06-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.65
\nBid-YTW : 3.45 %<\/td>\n<\/tr>\n
There were 61 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Wide Spread Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nQuote Data and Yield Notes<\/td>\n<\/tr>\n
CIU.PR.B<\/td>\nFixedReset<\/td>\nQuote: 26.71 – 27.05
\nSpot Rate : 0.3400
\nAverage : 0.2418<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-06-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.71
\nBid-YTW : 1.17 %<\/td>\n<\/tr>\n

BAM.PR.G<\/td>\nFixedFloater<\/td>\nQuote: 23.10 – 23.49
\nSpot Rate : 0.3900
\nAverage : 0.2972<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-02-20
\nMaturity Price : 23.31
\nEvaluated at bid price : 23.10
\nBid-YTW : 3.44 %<\/td>\n<\/tr>\n

BNS.PR.L<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.92 – 26.14
\nSpot Rate : 0.2200
\nAverage : 0.1343<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-04-26
\nMaturity Price : 25.75
\nEvaluated at bid price : 25.92
\nBid-YTW : 1.93 %<\/td>\n<\/tr>\n

W.PR.J<\/td>\nPerpetual-Premium<\/td>\nQuote: 25.42 – 25.62
\nSpot Rate : 0.2000
\nAverage : 0.1196<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2013-03-22
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.42
\nBid-YTW : -7.87 %<\/td>\n<\/tr>\n

IFC.PR.C<\/td>\nFixedReset<\/td>\nQuote: 26.61 – 26.84
\nSpot Rate : 0.2300
\nAverage : 0.1511<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-09-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.61
\nBid-YTW : 2.51 %<\/td>\n<\/tr>\n

ENB.PR.F<\/td>\nFixedReset<\/td>\nQuote: 25.65 – 25.87
\nSpot Rate : 0.2200
\nAverage : 0.1510<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-06-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.65
\nBid-YTW : 3.45 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

The lawyers and do-gooders at IIROC are continuing their efforts to destroy the Canadian corporate bond market: >Four years ago, the head of the investment industry\u2019s self-regulator said that a plan to create surveillance to …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-21157","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21157"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/21157\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}