{"id":27464,"date":"2015-01-14T02:59:25","date_gmt":"2015-01-14T07:59:25","guid":{"rendered":"http:\/\/prefblog.com\/?p=27464"},"modified":"2015-01-14T02:59:25","modified_gmt":"2015-01-14T07:59:25","slug":"january-13-2015","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=27464","title":{"rendered":"January 13, 2015"},"content":{"rendered":"

So today the Prime Minister’s Office admitted the oil price drop is bad<\/a> via one of its flunkies:<\/p>\n

The plunge in oil prices is \u201con the whole\u201d a negative for Canada\u2019s economy and may delay its return to full potential, Bank of Canada Deputy Governor Tim Lane said.<\/p>\n

\u201cWe will closely monitor its broader impacts on growth and the delay it may cause to the economy\u2019s return to its production potential,\u201d Lane said in a speech today in Madison, Wisconsin.<\/p>\n

Economists are interpreting his remarks as confirmation the central bank will hold off raising interest rates for the time being. Governor Stephen Poloz and fellow members of the bank\u2019s governing council will publish their next rate decision on Jan. 21, along with a quarterly policy report that will provide a detailed impact analysis of falling oil prices.
…<\/b>
Canada\u2019s dollar rose 0.2 percent to C$1.1953 per U.S. dollar at 3:58 p.m. Toronto time. It has depreciated by more than 10 percent in the last six months, as the price of benchmark crude oil has plunged 54 percent. A depreciating currency makes Canadian goods cheaper to foreign customers.<\/p>\n

\u201cDespite the mitigating factors I enumerated, lower oil prices are likely, on the whole, to be bad for Canada,\u201d Lane said. \u201cEstimating the magnitude of that overall impact requires carefully analyzing the interplay between the various effects as they work through the economy.\u201d<\/p><\/blockquote>\n

Suncor agreed<\/a>:<\/p>\n

Suncor Energy Inc. (SU), Canada\u2019s largest oil company, said it will cut 1,000 jobs, lower its 2015 capital budget by about 13 percent and delay projects to weather collapsing prices.<\/p>\n

The company will spend C$1 billion ($836 million) less this year than originally forecast in November, following Canadian Natural Resources Ltd. (CNQ) in revising its budget lower this week. Suncor also plans to reduce operating expenses by C$600 million to C$800 million in two years, according to a company statement today.<\/p><\/blockquote>\n

So what do you do when you have too much oil<\/a>?<\/p>\n

Refiners, tankage firms and traders that invested in oil storage capacity are benefiting as the slump in crude to below $45 a barrel deepened what\u2019s called contango, a relatively rare situation where prices for oil delivery later this year are higher than current prices. Vitol Group, Mercuria Energy Group Ltd. and Gunvor Group Ltd. are among the commodity houses poised to profit by storing oil and petroleum products to sell in the future.<\/p>\n

\u201cThere is significant storage demand from traders wanting to cash in on that specific opportunity,\u201d Martijn den Drijver, an analyst at SNS Securities in Amsterdam, said in an interview.<\/p>\n

Mercuria, the fourth-largest independent oil trader, owns about 40 million barrels of storage in locations from Texas, South Africa and China to Belgium and the Netherlands, according to its website. The firm is looking primarily at its land-based storage facilities to play the contango, said Matt Lauer, a spokesman for the company with major trading operations in Geneva. Mercuria hasn\u2019t moved to secure any floating storage in tankers at sea<\/p><\/blockquote>\n

I mentioned the Caisse’s intention to build transit in Quebec yesterday<\/a>. DBRS is sanguine, but assumes independence<\/a>:<\/p>\n

DBRS Limited (DBRS) today notes that the Caisse de d\u00e9p?t et placement du Qu\u00e9bec (the Caisse) has entered into an agreement with the Government of Qu\u00e9bec (the Government) to execute major infrastructure projects in the province. This new agreement is consistent with the Caisse\u2019s strategy to grow its private market holdings, particularly infrastructure investments, amid the current low interest rate environment. Further, it allows the Caisse to capitalize on its unique understanding of the Qu\u00e9bec market and address growing infrastructure needs in the province. Additionally, the Caisse\u2019s current Qu\u00e9bec concentration levels will not be affected. DBRS notes that the agreement is of a commercial nature, and importantly, the independence of the Caisse is a key feature and is by no means compromised by this agreement. This move has no implications on DBRS\u2019s current ratings of the Caisse or its financing subsidiary, CDP Financial Inc.
…<\/b>
Operationalization of the agreement will be dependent upon the introduction of legislative amendments, which is expected in the coming months. The new legislation will allow for the creation of the new infrastructure subsidiary, CDPQ Infra. Also, it will expand the Caisse\u2019s current practice of merely investing in infrastructure projects, to accommodate the new business model, which will include project planning, development, construction and operation. Once established, it is expected that over time CDPQ Infra will expand its mandate to build, finance and operate infrastructure projects globally.<\/p><\/blockquote>\n

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 8bp, FixedResets down 55bp and DeemedRetractibles off 2bp. The Performance Highlights table is suitably lengthy with quite a few FixedReset losers and one solitary winner – a PerpetualDiscount. Volume was very low.<\/p>\n

For as long as the FixedReset market is so violently unsettled, I\u2019ll keep publishing updates of the more interesting and meaningful series of FixedResets\u2019 Implied Volatilities. This doesn\u2019t 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.<\/p>\n

Remember that all rich \/cheap assessments are:<\/p>\n