{"id":48512,"date":"2017-06-08T20:47:00","date_gmt":"2017-06-09T00:47:00","guid":{"rendered":"https:\/\/prefblog.com\/?p=48512"},"modified":"2025-07-21T20:49:21","modified_gmt":"2025-07-22T00:49:21","slug":"june-8-2017","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=48512","title":{"rendered":"June 8, 2017"},"content":{"rendered":"

A Spanish bank went bust<\/a>, so obviously the sky is falling:<\/p>\n

The collapse of Banco Popular Espanol SA and a subsequent wipeout of its junior debt serves as a reminder for Canadian investors lapping up similar bonds why these securities offer a higher yield than others.<\/p>\n

The 1-euro rescue takeover of what was Spain\u2019s sixth-largest bank by rival Banco Santander SA left holders of its stock and contingent convertible bonds with losses of 3.3 billion euros ($3.7 billion). Senior debt was protected as authorities averted a run on the bank and saved taxpayers from bearing costs.<\/p>\n

The move comes as investors across the ocean have been buying non-viability contingent capital bonds, securities which convert to equity when certain crisis triggers are hit. While no major Canadian lender is anywhere near the trouble Banco Popular was in, the Bank of Canada warned on Thursday of increased financial system vulnerabilities associated with household debt.<\/p>\n<\/blockquote>\n

So a Canadian NVCC bond was highlighted in the story:<\/p>\n

The spread on the 2.982 percent NVCC bonds of Toronto-Dominion Bank, Canada\u2019s largest bank by assets, with a call date in September 2020 has fallen 160 basis points from its peak in February 2016, while that on the lender\u2019s 2.045 percent deposit notes maturing in March 2021 has shrunk 54 basis points over roughly the same period, according to Bloomberg data. <\/p>\n

\u201cIt should be a bit of a wake-up call for Canadian investors,\u201d said Bill Girard, who manages corporate bond portfolios at Bank of Nova Scotia\u2019s 1832 Asset Management, arguing that Canadian investors have been buying higher-yielding NVCC bonds without fully realizing the risk. \u201cBanco Popular investors might have thought the same. You\u2019re safe right until the point you aren\u2019t.\u201d<\/p>\n<\/blockquote>\n

It should be a bit of a wake-up call, but it won’t be. The reason it should be a wake-up call is because … well, first off, let’s take a look at the financial statements for PHILLIPS, HAGER & NORTH SHORT TERM BOND & MORTGAGE FUND<\/a> (I don’t want to pick on Royal Bank’s subsidiary – it was just the first one I found). <\/p>\n

On page four of the document, we find that this fund holds just over $17-million of these things.<\/p>\n

WHAT THE #$$%**@$ IS AN NVCC ISSUE DOING IN A SHORT TERM BOND & MORTGAGE FUND?<\/p>\n

I have noted in the past<\/a> that OSFI wanted this stuff incorporated into bond indices, even though they’re not actually bonds as the term is generally understood. OSFI’s desire for this was publicly reported<\/a> and was consistent with other sleaze-bag regulatory rip-offs of unsophisticated retail bond index investors globally. So, naturally, the bank-owned TSX happily incorporated them in their bond indices. This was a problem for quite some time<\/a>, but I am pleased to report that May, 2017, revision of the FTSE TMX Canada Universe and Maple Bond Indexes<\/a> contains section 3.1.4:<\/p>\n

Exclusions<\/p>\n

The indexes do not include floating-rate notes, convertible bonds (which convert to equity at the option of the holder), Non Viable Contingent Capital bonds (NVCC which convert to equity if the regulator determines a firm is \u201cNon Viable\u201d), residential and commercial mortgage-backed securities (CMBS and MBS), other monthly-pay securities, other prepayable securities, inflation-indexed securities, or securities specifically targeted to the retail market. It also excludes securities that are not priced, which would typically be securities that are closely held and do not trade.<\/p>\n<\/blockquote>\n

It doesn’t happen very often, but sometimes things do get better!<\/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>\n0.8707 %<\/td>\n2,115.2<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.8707 %<\/td>\n3,881.3<\/td>\n<\/tr>\n
Floater<\/td>\n3.71 %<\/td>\n3.75 %<\/td>\n78,070<\/td>\n17.88<\/td>\n3<\/td>\n0.8707 %<\/td>\n2,236.8<\/td>\n<\/tr>\n
OpRet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1022 %<\/td>\n3,046.9<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.72 %<\/td>\n4.42 %<\/td>\n70,925<\/td>\n3.92<\/td>\n5<\/td>\n-0.1022 %<\/td>\n3,638.7<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.1022 %<\/td>\n2,839.1<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.28 %<\/td>\n1.33 %<\/td>\n70,381<\/td>\n0.09<\/td>\n25<\/td>\n0.0875 %<\/td>\n2,795.2<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.08 %<\/td>\n5.09 %<\/td>\n99,995<\/td>\n15.27<\/td>\n12<\/td>\n0.0849 %<\/td>\n3,003.9<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.54 %<\/td>\n4.11 %<\/td>\n198,436<\/td>\n6.53<\/td>\n95<\/td>\n0.5465 %<\/td>\n2,282.8<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.98 %<\/td>\n4.99 %<\/td>\n123,822<\/td>\n6.26<\/td>\n30<\/td>\n0.0449 %<\/td>\n2,902.5<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.52 %<\/td>\n3.12 %<\/td>\n49,051<\/td>\n4.39<\/td>\n10<\/td>\n0.0657 %<\/td>\n2,520.7<\/td>\n<\/tr>\n<\/table>\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
SLF.PR.J<\/td>\nFloatingReset<\/td>\n-1.18 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 15.12
\nBid-YTW : 9.25 %<\/td>\n<\/tr>\n
BAM.PF.F<\/td>\nFixedReset<\/td>\n1.04 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 22.02
\nEvaluated at bid price : 22.27
\nBid-YTW : 4.41 %<\/td>\n<\/tr>\n
MFC.PR.O<\/td>\nFixedReset<\/td>\n1.05 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-06-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.98
\nBid-YTW : 3.46 %<\/td>\n<\/tr>\n
MFC.PR.N<\/td>\nFixedReset<\/td>\n1.06 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 19.96
\nBid-YTW : 6.91 %<\/td>\n<\/tr>\n
BAM.PF.A<\/td>\nFixedReset<\/td>\n1.07 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 21.45
\nEvaluated at bid price : 21.79
\nBid-YTW : 4.50 %<\/td>\n<\/tr>\n
SLF.PR.G<\/td>\nFixedReset<\/td>\n1.07 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 16.03
\nBid-YTW : 8.87 %<\/td>\n<\/tr>\n
MFC.PR.J<\/td>\nFixedReset<\/td>\n1.09 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 21.31
\nBid-YTW : 6.03 %<\/td>\n<\/tr>\n
MFC.PR.K<\/td>\nFixedReset<\/td>\n1.14 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 19.45
\nBid-YTW : 7.08 %<\/td>\n<\/tr>\n
HSE.PR.A<\/td>\nFixedReset<\/td>\n1.19 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 15.22
\nEvaluated at bid price : 15.22
\nBid-YTW : 4.29 %<\/td>\n<\/tr>\n
TRP.PR.C<\/td>\nFixedReset<\/td>\n1.26 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 15.23
\nEvaluated at bid price : 15.23
\nBid-YTW : 4.04 %<\/td>\n<\/tr>\n
MFC.PR.G<\/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 : 22.70
\nBid-YTW : 5.36 %<\/td>\n<\/tr>\n
CU.PR.I<\/td>\nFixedReset<\/td>\n1.31 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2020-12-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.22
\nBid-YTW : 3.05 %<\/td>\n<\/tr>\n
BAM.PR.X<\/td>\nFixedReset<\/td>\n1.74 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 15.78
\nEvaluated at bid price : 15.78
\nBid-YTW : 4.41 %<\/td>\n<\/tr>\n
IFC.PR.A<\/td>\nFixedReset<\/td>\n1.87 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 16.87
\nBid-YTW : 8.95 %<\/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.R<\/td>\nFixedReset<\/td>\n331,425<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 23.14
\nEvaluated at bid price : 24.95
\nBid-YTW : 4.25 %<\/td>\n<\/tr>\n
MFC.PR.O<\/td>\nFixedReset<\/td>\n106,705<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-06-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.98
\nBid-YTW : 3.46 %<\/td>\n<\/tr>\n
SLF.PR.H<\/td>\nFixedReset<\/td>\n102,685<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 18.61
\nBid-YTW : 7.37 %<\/td>\n<\/tr>\n
SLF.PR.I<\/td>\nFixedReset<\/td>\n80,295<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.21
\nBid-YTW : 5.55 %<\/td>\n<\/tr>\n
TRP.PR.D<\/td>\nFixedReset<\/td>\n60,950<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 20.15
\nEvaluated at bid price : 20.15
\nBid-YTW : 4.24 %<\/td>\n<\/tr>\n
BMO.PR.S<\/td>\nFixedReset<\/td>\n30,741<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 21.04
\nEvaluated at bid price : 21.04
\nBid-YTW : 3.99 %<\/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
SLF.PR.J<\/td>\nFloatingReset<\/td>\nQuote: 15.12 – 15.38
\nSpot Rate : 0.2600
\nAverage : 0.1958<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 15.12
\nBid-YTW : 9.25 %<\/td>\n<\/tr>\n

BMO.PR.Q<\/td>\nFixedReset<\/td>\nQuote: 21.18 – 21.40
\nSpot Rate : 0.2200
\nAverage : 0.1591<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 21.18
\nBid-YTW : 5.64 %<\/td>\n<\/tr>\n

GWO.PR.R<\/td>\nDeemed-Retractible<\/td>\nQuote: 23.92 – 24.14
\nSpot Rate : 0.2200
\nAverage : 0.1626<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.92
\nBid-YTW : 5.48 %<\/td>\n<\/tr>\n

BAM.PF.H<\/td>\nFixedReset<\/td>\nQuote: 26.27 – 26.56
\nSpot Rate : 0.2900
\nAverage : 0.2344<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2020-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.27
\nBid-YTW : 3.77 %<\/td>\n<\/tr>\n

CCS.PR.C<\/td>\nDeemed-Retractible<\/td>\nQuote: 24.15 – 24.37
\nSpot Rate : 0.2200
\nAverage : 0.1653<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.15
\nBid-YTW : 5.54 %<\/td>\n<\/tr>\n

PWF.PR.P<\/td>\nFixedReset<\/td>\nQuote: 15.46 – 15.65
\nSpot Rate : 0.1900
\nAverage : 0.1387<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2047-06-08
\nMaturity Price : 15.46
\nEvaluated at bid price : 15.46
\nBid-YTW : 4.06 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

A Spanish bank went bust, so obviously the sky is falling: The collapse of Banco Popular Espanol SA and a subsequent wipeout of its junior debt serves as a reminder for Canadian investors lapping up …<\/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-48512","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/48512","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=48512"}],"version-history":[{"count":1,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/48512\/revisions"}],"predecessor-version":[{"id":48513,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/48512\/revisions\/48513"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48512"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48512"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48512"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}