{"id":26633,"date":"2014-10-20T23:22:44","date_gmt":"2014-10-21T04:22:44","guid":{"rendered":"http:\/\/prefblog.com\/?p=26633"},"modified":"2014-10-20T23:22:44","modified_gmt":"2014-10-21T04:22:44","slug":"october-20-2014","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=26633","title":{"rendered":"October 20, 2014"},"content":{"rendered":"

On September 22<\/a> I highlighted the Blackrock publication CORPORATE BOND MARKET STRUCTURE: THE TIME FOR REFORM IS NOW<\/a>, but it turns out they’ve been pushing the ‘scheduled issuance’ idea for a while. It’s also been proposed in their May, 2013, publication Setting New Standards: The Liquidity Challenge II<\/a>, which comes with some great illustrative charts.<\/p>\n

\n

\"concession\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

If the Shitty Price Hypothesis (described in the post TRACE and the Bond Market<\/a> is correct, we expect to see a decrease in the concession from pre-TRACE days, perhaps even going negative.<\/p>\n

\"dealerInventory\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

This one is interesting in conjunction with the Trading Volume chart below. Note that dealer inventories have dropped by about half since 2005.<\/p>\n

\"friction\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

So a bigger proportion of the spread-to-Treasuries is being eaten up by the bid-ask spread.<\/p>\n

\"issuance\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

Issuance is huge relative to outstanding, which may be why the world hasn’t ground to a halt despite the pernicious influence of TRACE.<\/p>\n

\"issuanceTenor\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

But it could be that decreasing liquidity is reducing the tenor of new issues. Investors have to get their liquidity somehow!<\/p>\n

\"liquidityPremium\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

An increasing liquidity premium is consistent with the Shitty Price Hypothesis<\/p>\n

\"newIssueTrading\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

New issues will change hands a few times, then settle into their permanent homes.<\/p>\n

\"tradingVolume\"<\/a>
Click for Big<\/i><\/p>\n

<\/div>\n

This is particularly interesting in conjunction with the Dealer Inventory chart above. Note that although trading volume has decreased, it has decreased less, proportionally, than dealer inventories have, indicating that dealer inventory turnover is increasing. This is consistent with the Shitty Price Hypothesis<\/p>\n

Victoria Stilwell of Bloomberg complains<\/a>:<\/p>\n

Federal Reserve policy makers are missing a key element as they assess the health of the labor market: data that includes whether those who are employed are overqualified for their job or would like to work more hours.<\/p>\n

As a result, the \u201csignificant underutilization of labor resources\u201d that Fed officials highlighted last month as they renewed a pledge to keep interest rates low for a \u201cconsiderable period\u201d is probably even more severe than currently estimated. And the information gap means policy makers may have more difficulty gauging the right moment to raise rates off zero.
…<\/b>
Private surveys have attempted to fill in the gaps. Some 46 percent of workers who graduated from college in 2012 or 2013 said that they were in a job that did not require their degree, according to a study released in May by Accenture Plc. That\u2019s a five percentage point increase from last year, the New York-based management-consulting company\u2019s report showed.<\/p><\/blockquote>\n

So, the study, titled Great Expectations: Insights from the Accenture 2014 College Graduate Employment Survey<\/a> states:<\/p>\n

46 percent of 2012\/2013 grads working today report that they are underemployed (meaning they are working in a job that does not require their college degree). This is a 5 percent increase from last year\u2019s survey.<\/p><\/blockquote>\n

I’m not sure I agree with that, entirely. It has been a long time since somebody asked me to explain the Schr\u00f6dinger Wave Equation for a hydrogen atom, or to whip them up a batch of cis-stilbenes with a 4-substituent. So my chemistry degree hasn’t been required for a while. But I don’t feel underemployed!<\/p>\n

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts up 15bp, FixedResets off 2bp and DeemedRetractibles gaining 4bp. Volatility was average, but enlivened by some sloppy trading at the close in PWF.PR.A. Volume was very low.<\/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>\n3.13 %<\/td>\n3.11 %<\/td>\n22,123<\/td>\n19.40<\/td>\n1<\/td>\n0.0417 %<\/td>\n2,669.3<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-2.6600 %<\/td>\n3,881.2<\/td>\n<\/tr>\n
Floater<\/td>\n3.07 %<\/td>\n3.21 %<\/td>\n64,680<\/td>\n19.22<\/td>\n4<\/td>\n-2.6600 %<\/td>\n2,606.1<\/td>\n<\/tr>\n
OpRet<\/td>\n4.04 %<\/td>\n1.02 %<\/td>\n101,190<\/td>\n0.08<\/td>\n1<\/td>\n0.1577 %<\/td>\n2,737.9<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.31 %<\/td>\n4.03 %<\/td>\n84,793<\/td>\n3.82<\/td>\n5<\/td>\n-0.1994 %<\/td>\n3,136.8<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.1577 %<\/td>\n2,503.5<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.49 %<\/td>\n1.16 %<\/td>\n73,386<\/td>\n0.08<\/td>\n18<\/td>\n0.1272 %<\/td>\n2,455.8<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.32 %<\/td>\n5.15 %<\/td>\n96,596<\/td>\n15.16<\/td>\n18<\/td>\n0.1508 %<\/td>\n2,590.9<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.22 %<\/td>\n3.60 %<\/td>\n170,794<\/td>\n16.73<\/td>\n75<\/td>\n-0.0190 %<\/td>\n2,549.8<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n5.03 %<\/td>\n2.78 %<\/td>\n102,712<\/td>\n0.44<\/td>\n42<\/td>\n0.0382 %<\/td>\n2,558.9<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.55 %<\/td>\n-6.10 %<\/td>\n61,836<\/td>\n0.08<\/td>\n6<\/td>\n-0.0848 %<\/td>\n2,548.6<\/td>\n<\/tr>\n<\/table>\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
PWF.PR.A<\/td>\nFloater<\/td>\n-7.95 %<\/td>\nIt appears<\/a> that Desjardins put in a Market or low-limit order at 3:58, which took out the bid – Five hundred went at 20.00 and 20.01, time-stamped 3:58, then six hundred shares traded at 19.02 and 188 at 19.01, time-stamped 3:59. Whoosh!<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-10-20
\nMaturity Price : 19.11
\nEvaluated at bid price : 19.11
\nBid-YTW : 2.77 %<\/td>\n<\/tr>\n

CGI.PR.D<\/td>\nSplitShare<\/td>\n-1.54 %<\/td>\nYTW SCENARIO
\nMaturity Type : Soft Maturity
\nMaturity Date\t: 2023-06-14
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.01
\nBid-YTW : 3.81 %<\/td>\n<\/tr>\n
MFC.PR.F<\/td>\nFixedReset<\/td>\n-1.12 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.10
\nBid-YTW : 4.54 %<\/td>\n<\/tr>\n
PWF.PR.F<\/td>\nPerpetual-Premium<\/td>\n1.12 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-11-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.21
\nBid-YTW : -6.75 %<\/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
TRP.PR.A<\/td>\nFixedReset<\/td>\n207,140<\/td>\nRBC crossed two blocks of 100,000 each, both at 21.97.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-10-20
\nMaturity Price : 21.63
\nEvaluated at bid price : 22.00
\nBid-YTW : 3.79 %<\/td>\n<\/tr>\n
NA.PR.W<\/td>\nFixedReset<\/td>\n163,450<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-10-20
\nMaturity Price : 23.06
\nEvaluated at bid price : 24.77
\nBid-YTW : 3.64 %<\/td>\n<\/tr>\n
FTS.PR.M<\/td>\nFixedReset<\/td>\n90,638<\/td>\nScotia crossed blocks of 22,000 and 16,100, both at 25.20. Nesbitt bought 17,500 from RBC at the same price.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-10-20
\nMaturity Price : 23.20
\nEvaluated at bid price : 25.15
\nBid-YTW : 3.81 %<\/td>\n<\/tr>\n
FTS.PR.H<\/td>\nFixedReset<\/td>\n81,452<\/td>\nRBC crossed two blocks of 40,000 each, both at 20.39.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-10-20
\nMaturity Price : 20.30
\nEvaluated at bid price : 20.30
\nBid-YTW : 3.60 %<\/td>\n<\/tr>\n
ENB.PF.G<\/td>\nFixedReset<\/td>\n61,675<\/td>\nRecent new issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-10-20
\nMaturity Price : 23.13
\nEvaluated at bid price : 25.06
\nBid-YTW : 4.07 %<\/td>\n<\/tr>\n
IFC.PR.C<\/td>\nFixedReset<\/td>\n54,411<\/td>\nRBC crossed 50,000 at 25.54.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-09-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.50
\nBid-YTW : 3.27 %<\/td>\n<\/tr>\n
There were 18 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
PWF.PR.A<\/td>\nFloater<\/td>\nQuote: 19.11 – 20.75
\nSpot Rate : 1.6400
\nAverage : 0.9689<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2044-10-20
\nMaturity Price : 19.11
\nEvaluated at bid price : 19.11
\nBid-YTW : 2.77 %<\/td>\n<\/tr>\n

CGI.PR.D<\/td>\nSplitShare<\/td>\nQuote: 25.01 – 25.60
\nSpot Rate : 0.5900
\nAverage : 0.3772<\/p>\n

YTW SCENARIO
\nMaturity Type : Soft Maturity
\nMaturity Date\t: 2023-06-14
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.01
\nBid-YTW : 3.81 %<\/td>\n<\/tr>\n

HSB.PR.D<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.20 – 25.78
\nSpot Rate : 0.5800
\nAverage : 0.3743<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.20
\nBid-YTW : 2.34 %<\/td>\n<\/tr>\n

TD.PR.Q<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.92 – 26.24
\nSpot Rate : 0.3200
\nAverage : 0.2030<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-11-19
\nMaturity Price : 25.75
\nEvaluated at bid price : 25.92
\nBid-YTW : -4.52 %<\/td>\n<\/tr>\n

MFC.PR.F<\/td>\nFixedReset<\/td>\nQuote: 22.10 – 22.50
\nSpot Rate : 0.4000
\nAverage : 0.3095<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.10
\nBid-YTW : 4.54 %<\/td>\n<\/tr>\n

BNS.PR.N<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.78 – 26.00
\nSpot Rate : 0.2200
\nAverage : 0.1367<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2015-01-28
\nMaturity Price : 25.50
\nEvaluated at bid price : 25.78
\nBid-YTW : 0.57 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

On September 22 I highlighted the Blackrock publication CORPORATE BOND MARKET STRUCTURE: THE TIME FOR REFORM IS NOW, but it turns out they’ve been pushing the ‘scheduled issuance’ idea for a while. It’s also been …<\/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-26633","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/26633","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=26633"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/26633\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=26633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=26633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=26633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}