{"id":29036,"date":"2015-05-11T22:53:01","date_gmt":"2015-05-12T03:53:01","guid":{"rendered":"http:\/\/prefblog.com\/?p=29036"},"modified":"2015-05-11T22:53:01","modified_gmt":"2015-05-12T03:53:01","slug":"may-11-2015","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=29036","title":{"rendered":"May 11, 2015"},"content":{"rendered":"

Markets are forecasting no changes in the Canadian policy rate<\/a>:<\/p>\n

The bond market is starting to believe Bank of Canada Governor Stephen Poloz\u2019s newfound optimism in the Canadian economy, resetting borrowing costs back to the day of his shock rate cut.<\/p>\n

Traders have almost completely priced out another rate cut in banker\u2019s acceptances contracts, a predictor of interest rates. Contracts due December, 2015, reached 1 per cent this month for the first time since Jan. 21, the day the Bank of Canada lowered its overnight rate to 0.75 per cent to contend with the collapse in the price of oil, the nation\u2019s biggest export.<\/p>\n

So-called Bax contracts have settled about 20 basis points above the central bank\u2019s target rate on average since 1992, data compiled by Bloomberg show. The yield has averaged 0.91 per cent this year.<\/p><\/blockquote>\n

It was another violently mixed day for the Canadian preferred share market, with PerpetualDiscounts down 58bp, FixedResets gaining 18bp and DeemedRetractibles off 6bp. A lengthy Performance Highlights table is dominated by FixedResets, particularly on the good side. Volume was average.<\/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:
\n\u00bb based on Implied Volatility Theory only
\n\u00bb are relative only to other FixedResets from the same issuer
\n\u00bb assume constant GOC-5 yield
\n\u00bb assume constant Implied Volatility
\n\u00bb assume constant spread<\/p>\n

Here\u2019s TRP:<\/p>\n

\"impVol_TRP_150511\"<\/a>
Click for Big<\/i><\/div>\n

TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.24 to be $0.98 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.90 cheap at its bid price of 24.95.<\/p>\n

\"impVol_MFC_150511\"<\/a>
Click for Big<\/i><\/div>\n

Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).<\/p>\n

Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 23.65 to be $0.49 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.16 to be $0.55 cheap.<\/p>\n

\"impVol_BAM_150511\"<\/a>
Click for Big<\/i><\/div>\n

The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.52 to be $0.62 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.98 and appears to be $0.58 rich.<\/p>\n

\"impVol_FTS_150511\"<\/a>
Click for Big<\/i><\/div>\n

FTS.PR.H, with a spread of +145bp, and bid at 16.68, looks $0.95 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 22.40 and is $0.64 rich.<\/p>\n

\"pairs_FR_150511\"<\/a>
Click for Big<\/i><\/div>\n

Investment-grade pairs now predict an average over the next five years of about 0.40%, but TRP.PR.A \/ TRP.PR.F is an outlier at -0.51% and BNS.PR.Y \/ BNS.PR.D is at +0.78%. On the junk side, the FFH.PR.E \/ FFH.PR.F pair is at -1.03% while BRF.PR.A \/ BRF.PR.B is at +1.03%.<\/p>\n

\"pairs_FF_150511\"<\/a>
Click for Big<\/i><\/div>\n

Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?<\/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>\n-0.9378 %<\/td>\n2,306.5<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.9378 %<\/td>\n4,032.9<\/td>\n<\/tr>\n
Floater<\/td>\n3.15 %<\/td>\n3.26 %<\/td>\n55,736<\/td>\n19.05<\/td>\n4<\/td>\n-0.9378 %<\/td>\n2,452.0<\/td>\n<\/tr>\n
OpRet<\/td>\n4.42 %<\/td>\n-2.04 %<\/td>\n38,273<\/td>\n0.14<\/td>\n2<\/td>\n-0.0785 %<\/td>\n2,768.6<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.56 %<\/td>\n4.66 %<\/td>\n59,622<\/td>\n3.35<\/td>\n3<\/td>\n0.1600 %<\/td>\n3,233.2<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0785 %<\/td>\n2,531.6<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.45 %<\/td>\n2.00 %<\/td>\n66,427<\/td>\n0.08<\/td>\n18<\/td>\n-0.0697 %<\/td>\n2,520.5<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.04 %<\/td>\n5.03 %<\/td>\n119,119<\/td>\n15.36<\/td>\n15<\/td>\n-0.5779 %<\/td>\n2,789.5<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.38 %<\/td>\n3.72 %<\/td>\n270,070<\/td>\n16.39<\/td>\n86<\/td>\n0.1805 %<\/td>\n2,425.6<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.91 %<\/td>\n3.22 %<\/td>\n110,721<\/td>\n0.53<\/td>\n35<\/td>\n-0.0569 %<\/td>\n2,647.4<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.58 %<\/td>\n2.92 %<\/td>\n62,894<\/td>\n6.19<\/td>\n7<\/td>\n0.2251 %<\/td>\n2,338.7<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\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
BAM.PR.C<\/td>\nFloater<\/td>\n-1.95 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 15.10
\nEvaluated at bid price : 15.10
\nBid-YTW : 3.33 %<\/td>\n<\/tr>\n
CU.PR.F<\/td>\nPerpetual-Discount<\/td>\n-1.72 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 22.46
\nEvaluated at bid price : 22.85
\nBid-YTW : 4.91 %<\/td>\n<\/tr>\n
CIU.PR.C<\/td>\nFixedReset<\/td>\n-1.48 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 16.02
\nEvaluated at bid price : 16.02
\nBid-YTW : 3.80 %<\/td>\n<\/tr>\n
RY.PR.Z<\/td>\nFixedReset<\/td>\n-1.45 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 23.08
\nEvaluated at bid price : 24.54
\nBid-YTW : 3.32 %<\/td>\n<\/tr>\n
TRP.PR.D<\/td>\nFixedReset<\/td>\n-1.29 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 22.71
\nEvaluated at bid price : 23.69
\nBid-YTW : 3.65 %<\/td>\n<\/tr>\n
PWF.PR.S<\/td>\nPerpetual-Discount<\/td>\n-1.24 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 24.21
\nEvaluated at bid price : 24.62
\nBid-YTW : 4.89 %<\/td>\n<\/tr>\n
TRP.PR.A<\/td>\nFixedReset<\/td>\n-1.23 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 20.88
\nEvaluated at bid price : 20.88
\nBid-YTW : 3.64 %<\/td>\n<\/tr>\n
CU.PR.G<\/td>\nPerpetual-Discount<\/td>\n-1.16 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 22.55
\nEvaluated at bid price : 22.95
\nBid-YTW : 4.89 %<\/td>\n<\/tr>\n
BAM.PR.B<\/td>\nFloater<\/td>\n-1.09 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 15.41
\nEvaluated at bid price : 15.41
\nBid-YTW : 3.26 %<\/td>\n<\/tr>\n
ENB.PR.F<\/td>\nFixedReset<\/td>\n-1.08 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 20.23
\nEvaluated at bid price : 20.23
\nBid-YTW : 4.53 %<\/td>\n<\/tr>\n
FTS.PR.M<\/td>\nFixedReset<\/td>\n-1.03 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 23.16
\nEvaluated at bid price : 24.89
\nBid-YTW : 3.57 %<\/td>\n<\/tr>\n
BMO.PR.T<\/td>\nFixedReset<\/td>\n1.04 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 22.96
\nEvaluated at bid price : 24.30
\nBid-YTW : 3.38 %<\/td>\n<\/tr>\n
MFC.PR.N<\/td>\nFixedReset<\/td>\n1.10 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.96
\nBid-YTW : 4.18 %<\/td>\n<\/tr>\n
FTS.PR.K<\/td>\nFixedReset<\/td>\n1.17 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 21.98
\nEvaluated at bid price : 22.40
\nBid-YTW : 3.64 %<\/td>\n<\/tr>\n
MFC.PR.M<\/td>\nFixedReset<\/td>\n1.29 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.31
\nBid-YTW : 4.07 %<\/td>\n<\/tr>\n
BNS.PR.Z<\/td>\nFixedReset<\/td>\n1.51 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.60
\nBid-YTW : 3.48 %<\/td>\n<\/tr>\n
TRP.PR.C<\/td>\nFixedReset<\/td>\n1.61 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 18.30
\nEvaluated at bid price : 18.30
\nBid-YTW : 3.57 %<\/td>\n<\/tr>\n
GWO.PR.N<\/td>\nFixedReset<\/td>\n1.97 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 18.15
\nBid-YTW : 6.27 %<\/td>\n<\/tr>\n
SLF.PR.G<\/td>\nFixedReset<\/td>\n2.04 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 18.03
\nBid-YTW : 6.38 %<\/td>\n<\/tr>\n
FTS.PR.G<\/td>\nFixedReset<\/td>\n2.07 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 21.85
\nEvaluated at bid price : 22.16
\nBid-YTW : 3.72 %<\/td>\n<\/tr>\n
RY.PR.H<\/td>\nFixedReset<\/td>\n2.19 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 23.11
\nEvaluated at bid price : 24.70
\nBid-YTW : 3.32 %<\/td>\n<\/tr>\n
MFC.PR.L<\/td>\nFixedReset<\/td>\n2.20 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.65
\nBid-YTW : 4.28 %<\/td>\n<\/tr>\n
TD.PF.B<\/td>\nFixedReset<\/td>\n2.28 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 23.12
\nEvaluated at bid price : 24.69
\nBid-YTW : 3.33 %<\/td>\n<\/tr>\n
HSE.PR.A<\/td>\nFixedReset<\/td>\n2.69 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 17.92
\nEvaluated at bid price : 17.92
\nBid-YTW : 3.97 %<\/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.B<\/td>\nFixedReset<\/td>\n122,714<\/td>\nTD crossed four blocks: 35,000 shares, 17,500 shares, 30,000 and 29,500, all at 15.91.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 15.80
\nEvaluated at bid price : 15.80
\nBid-YTW : 3.67 %<\/td>\n<\/tr>\n
RY.PR.I<\/td>\nFixedReset<\/td>\n85,880<\/td>\nNesbitt crossed two blocks of 35,000 each and one of 15,000, all at 25.35.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.41
\nBid-YTW : 2.99 %<\/td>\n<\/tr>\n
TRP.PR.G<\/td>\nFixedReset<\/td>\n68,982<\/td>\nTD crossed 20,000 at 25.07.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 23.11
\nEvaluated at bid price : 24.95
\nBid-YTW : 3.81 %<\/td>\n<\/tr>\n
BNS.PR.O<\/td>\nDeemed-Retractible<\/td>\n63,250<\/td>\nRBC crossed 61,100 at 26.00.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2015-06-10
\nMaturity Price : 25.50
\nEvaluated at bid price : 25.82
\nBid-YTW : -7.56 %<\/td>\n<\/tr>\n
TRP.PR.A<\/td>\nFixedReset<\/td>\n58,801<\/td>\nTD crossed 35,000 at 21.40 and 15,000 at 21.20.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 20.88
\nEvaluated at bid price : 20.88
\nBid-YTW : 3.64 %<\/td>\n<\/tr>\n
BMO.PR.M<\/td>\nFixedReset<\/td>\n45,800<\/td>\nRBC crossed 45,200 at 25.23.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.25
\nBid-YTW : 2.85 %<\/td>\n<\/tr>\n
There were 31 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
FTS.PR.K<\/td>\nFixedReset<\/td>\nQuote: 22.40 – 22.98
\nSpot Rate : 0.5800
\nAverage : 0.3664<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 21.98
\nEvaluated at bid price : 22.40
\nBid-YTW : 3.64 %<\/td>\n<\/tr>\n

MFC.PR.H<\/td>\nFixedReset<\/td>\nQuote: 25.79 – 26.24
\nSpot Rate : 0.4500
\nAverage : 0.2931<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-03-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.79
\nBid-YTW : 3.21 %<\/td>\n<\/tr>\n

RY.PR.Z<\/td>\nFixedReset<\/td>\nQuote: 24.54 – 24.88
\nSpot Rate : 0.3400
\nAverage : 0.2403<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2045-05-11
\nMaturity Price : 23.08
\nEvaluated at bid price : 24.54
\nBid-YTW : 3.32 %<\/td>\n<\/tr>\n

MFC.PR.C<\/td>\nDeemed-Retractible<\/td>\nQuote: 23.78 – 24.05
\nSpot Rate : 0.2700
\nAverage : 0.1733<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.78
\nBid-YTW : 5.26 %<\/td>\n<\/tr>\n

IAG.PR.A<\/td>\nDeemed-Retractible<\/td>\nQuote: 23.99 – 24.31
\nSpot Rate : 0.3200
\nAverage : 0.2254<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.99
\nBid-YTW : 5.23 %<\/td>\n<\/tr>\n

BMO.PR.K<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.60 – 25.84
\nSpot Rate : 0.2400
\nAverage : 0.1504<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2015-06-10
\nMaturity Price : 25.50
\nEvaluated at bid price : 25.60
\nBid-YTW : -2.01 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Markets are forecasting no changes in the Canadian policy rate: The bond market is starting to believe Bank of Canada Governor Stephen Poloz\u2019s newfound optimism in the Canadian economy, resetting borrowing costs back to the …<\/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-29036","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/29036","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=29036"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/29036\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=29036"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=29036"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=29036"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}