{"id":23633,"date":"2013-11-13T22:06:04","date_gmt":"2013-11-14T02:06:04","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=23633"},"modified":"2013-11-13T22:06:04","modified_gmt":"2013-11-14T02:06:04","slug":"november-12-2013-2","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=23633","title":{"rendered":"November 12, 2013"},"content":{"rendered":"

Good times to be in corporate finance<\/a>:<\/p>\n

Canadian companies are borrowing more than ever, breaking records for selling new debt in a push to lock in low interest rates before borrowing costs rise.<\/p>\n

Corporations and financial institutions have set a new mark for fixed-income sales this year by issuing more than $100-billion in debt, higher than the full-year record set in 2012.
…<\/b>
As usual, Canadian banks dominate bond sales this year, raising $47-billion, up 23 per cent from 2012, according to CIBC. However, non-bank borrowers have increased their game, raising an usually large amount of debt, helping to push total issuance to sky-high levels.<\/p><\/blockquote>\n

ETFs and mutual funds have the great virtue of increasing liquidity for retail investors – I often recommend bond ETFs to clients. But the mismatch between retail liquidity and underlying liquidity is getting worrisome<\/a>:<\/p>\n

A recent presentation by Citi\u2019s Matt King, includes a chart entitled \u201cEntrance with No Exit\u201d that has been costing me sleep. Mr. King\u2019s chart asserts that if and when a significant percentage of the holders of almost $900-billion (U.S.) invested in U.S. corporate debt mutual funds and ETFs (investment grade plus high yield debt) want to sell, there may not be anyone to bid for them.<\/p>\n

In the past, large banks carried enormous portfolios of both investment grade and high yield debt issues and provided liquidity to the market \u2013 buying bonds when the market was weak and selling when it was strong.<\/p>\n

Since the financial crisis, however, U.S. banks have responded to regulatory pressure over proprietary trading and capital requirements by drastically reducing their holdings \u2013 from about $300-billion to less than $100-billion \u2013 while mutual fund and ETF fixed income assets have almost doubled from just under $500-billion.<\/p>\n

There\u2019s $900-billion in corporate debt funds and ETFs and a tenth of that in the banking system so, there is no way the banks can offset a buyers strike in bond funds if it occurs.<\/p><\/blockquote>\n

\"\"<\/a>
Click for Big<\/i><\/div>\n

If an apocalypse happens due to this, it will be bargain season for long term investors, but those who need the cash – or even the margin – might find themselves a little embarrassed.<\/p>\n

Decreased liquidity in corporate bonds was discussed on November 5<\/a>, while US regulatory moves to extend their power over asset managers was discussed November 6<\/a>. Does anybody else see a pattern here? Mark my words, there will be enforced ‘gating’ of mutual fund and ETF redemptions soon (ETF redemptions coming in big blocks from arbitrageurs). All that power has to go somewhere! We will then see ETFs trading at a discount to NAV, and a lot of very unhappy mutual fund fund clients.<\/p>\n

So what’s the solution? As far as I can tell, there ain’t one. Companies will have to keep a little extra cash on hand in case the markets decide to shut down for a while; investors will have to keep a little more cash on hand than otherwise for the same reason. Ultimately, the benefits of allowing retail decent access to the corporate bond markets outweighs the harms … but you can bet the regulators won’t see it that way. Nobody must be hurt! If anybody is ever hurt by anything, it’s because of a Wall Street conspiracy!<\/p>\n

It was a day of small gains for the Canadian preferred share market, with PerpetualDiscounts winning 10bp, FixedResets gaining 5bp and DeemedRetractibles up 7bp. Surprisingly, the Performance Highlights table is relatively lengthy. FloatingResets traded up a storm today on big blocks through Nesbitt, with an assist from Scotia, although there is no way of telling whether or not they were ‘real’ crosses or internal crosses; volume was above average.<\/p>\n\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>\n0.2622 %<\/td>\n2,522.0<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.16 %<\/td>\n3.44 %<\/td>\n30,800<\/td>\n18.47<\/td>\n1<\/td>\n-0.7391 %<\/td>\n4,033.7<\/td>\n<\/tr>\n
Floater<\/td>\n2.94 %<\/td>\n2.97 %<\/td>\n59,658<\/td>\n19.78<\/td>\n3<\/td>\n0.2622 %<\/td>\n2,723.0<\/td>\n<\/tr>\n
OpRet<\/td>\n4.61 %<\/td>\n1.19 %<\/td>\n67,910<\/td>\n0.37<\/td>\n3<\/td>\n0.1868 %<\/td>\n2,660.4<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.74 %<\/td>\n5.13 %<\/td>\n65,290<\/td>\n3.92<\/td>\n6<\/td>\n0.0807 %<\/td>\n2,961.3<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.1868 %<\/td>\n2,432.7<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.57 %<\/td>\n3.88 %<\/td>\n124,296<\/td>\n0.09<\/td>\n11<\/td>\n0.1290 %<\/td>\n2,309.0<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.57 %<\/td>\n5.55 %<\/td>\n176,877<\/td>\n14.51<\/td>\n27<\/td>\n0.1010 %<\/td>\n2,364.9<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.96 %<\/td>\n3.33 %<\/td>\n231,281<\/td>\n3.31<\/td>\n82<\/td>\n0.0504 %<\/td>\n2,485.5<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n5.07 %<\/td>\n4.02 %<\/td>\n189,766<\/td>\n1.47<\/td>\n42<\/td>\n0.0677 %<\/td>\n2,413.9<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.61 %<\/td>\n2.38 %<\/td>\n305,823<\/td>\n4.49<\/td>\n5<\/td>\n0.0952 %<\/td>\n2,458.7<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
CIU.PR.A<\/td>\nPerpetual-Discount<\/td>\n-2.17 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 21.20
\nEvaluated at bid price : 21.20
\nBid-YTW : 5.44 %<\/td>\n<\/tr>\n
BAM.PR.X<\/td>\nFixedReset<\/td>\n-1.69 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 21.79
\nEvaluated at bid price : 22.12
\nBid-YTW : 4.36 %<\/td>\n<\/tr>\n
CU.PR.C<\/td>\nFixedReset<\/td>\n-1.34 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-06-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.71
\nBid-YTW : 3.11 %<\/td>\n<\/tr>\n
FTS.PR.G<\/td>\nFixedReset<\/td>\n1.06 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 22.77
\nEvaluated at bid price : 23.96
\nBid-YTW : 4.04 %<\/td>\n<\/tr>\n
FTS.PR.F<\/td>\nPerpetual-Discount<\/td>\n1.10 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 22.96
\nEvaluated at bid price : 23.25
\nBid-YTW : 5.27 %<\/td>\n<\/tr>\n
IAG.PR.A<\/td>\nDeemed-Retractible<\/td>\n1.62 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.56
\nBid-YTW : 5.90 %<\/td>\n<\/tr>\n
MFC.PR.C<\/td>\nDeemed-Retractible<\/td>\n1.78 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 21.69
\nBid-YTW : 6.28 %<\/td>\n<\/tr>\n
TRP.PR.B<\/td>\nFixedReset<\/td>\n1.91 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 20.81
\nEvaluated at bid price : 20.81
\nBid-YTW : 3.88 %<\/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
TD.PR.Z<\/td>\nFloatingReset<\/td>\n256,885<\/td>\nNesbitt crossed 200,000 at 25.00; Scotia crossed 50,000 at 25.03.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.03
\nBid-YTW : 2.52 %<\/td>\n<\/tr>\n
BMO.PR.R<\/td>\nFloatingReset<\/td>\n251,600<\/td>\nNesbitt crossed 200,000 at 25.03; Scotia crossed 50,000 at the same price.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-08-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.04
\nBid-YTW : 2.38 %<\/td>\n<\/tr>\n
TD.PR.T<\/td>\nFloatingReset<\/td>\n208,816<\/td>\nNesbitt crossed 200,000 at 25.10.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-07-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.16
\nBid-YTW : 2.26 %<\/td>\n<\/tr>\n
BNS.PR.B<\/td>\nFloatingReset<\/td>\n207,987<\/td>\nNesbitt crossed 200,000 at 25.02.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.03
\nBid-YTW : 2.54 %<\/td>\n<\/tr>\n
BNS.PR.Z<\/td>\nFixedReset<\/td>\n115,587<\/td>\nNesbitt crossed 100,000 at 23.70.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.66
\nBid-YTW : 4.15 %<\/td>\n<\/tr>\n
TRP.PR.C<\/td>\nFixedReset<\/td>\n44,454<\/td>\nDesjardins crossed 30,000 at 22.80.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 22.37
\nEvaluated at bid price : 22.74
\nBid-YTW : 3.83 %<\/td>\n<\/tr>\n
There were 42 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
CU.PR.E<\/td>\nPerpetual-Discount<\/td>\nQuote: 23.37 – 23.82
\nSpot Rate : 0.4500
\nAverage : 0.3462<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 23.06
\nEvaluated at bid price : 23.37
\nBid-YTW : 5.24 %<\/td>\n<\/tr>\n

BAM.PF.D<\/td>\nPerpetual-Discount<\/td>\nQuote: 19.69 – 19.96
\nSpot Rate : 0.2700
\nAverage : 0.1909<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-11-13
\nMaturity Price : 19.69
\nEvaluated at bid price : 19.69
\nBid-YTW : 6.33 %<\/td>\n<\/tr>\n

MFC.PR.F<\/td>\nFixedReset<\/td>\nQuote: 23.30 – 23.49
\nSpot Rate : 0.1900
\nAverage : 0.1302<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.30
\nBid-YTW : 4.36 %<\/td>\n<\/tr>\n

CU.PR.C<\/td>\nFixedReset<\/td>\nQuote: 25.71 – 25.94
\nSpot Rate : 0.2300
\nAverage : 0.1704<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-06-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.71
\nBid-YTW : 3.11 %<\/td>\n<\/tr>\n

MFC.PR.I<\/td>\nFixedReset<\/td>\nQuote: 26.07 – 26.28
\nSpot Rate : 0.2100
\nAverage : 0.1516<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-09-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.07
\nBid-YTW : 3.41 %<\/td>\n<\/tr>\n

BNA.PR.C<\/td>\nSplitShare<\/td>\nQuote: 24.26 – 24.43
\nSpot Rate : 0.1700
\nAverage : 0.1177<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2019-01-10
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.26
\nBid-YTW : 5.22 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Good times to be in corporate finance: Canadian companies are borrowing more than ever, breaking records for selling new debt in a push to lock in low interest rates before borrowing costs rise. Corporations and …<\/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-23633","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/23633","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=23633"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/23633\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=23633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=23633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=23633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}