April 12, 2011

The US regulatory agencies are seeking comment on Swap Margin and Capital Requirements:

The amount of margin that would be required under the proposed rule would vary based on the relative risk of the counterparty and of the swap or security-based swap. A swap entity would not be required to collect margin from a commercial end user as long as its margin exposure is below an appropriate credit exposure limit established by the swap entity. A swap entity would also not be required to collect margin from low-risk financial end users as long as its margin exposure does not exceed a specific threshold. The proposed margin requirements would apply to new, non-cleared swaps or security-based swaps entered into after the proposed rule’s effective date. The proposal also seeks comment on several alternative approaches to establishing margin requirements.

The BoC did not adjust the overnight rate:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

Overall, the Bank projects that the economy will expand by 2.9 per cent in 2011 and 2.6 per cent in 2012. Growth in 2013 is expected to equal that of potential output, at 2.1 per cent. The Bank expects that the economy will return to capacity in the middle of 2012, two quarters earlier than had been projected in the January MPR.

While underlying inflation is subdued, a number of temporary factors will boost total CPI inflation to around 3 per cent in the second quarter of 2011 before total CPI inflation converges to the 2 per cent target by the middle of 2012. This short-term volatility reflects the impact of recent sharp increases in energy prices and the ongoing boost from changes in provincial indirect taxes. Core inflation has fallen further in recent months, in part due to temporary factors. It is expected to rise gradually to 2 per cent by the middle of 2012 as excess supply in the economy is slowly absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored.

The persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts losing 9bp, FixedResets gaining 11bp and DeemedRetractibles being smacked for a lossof 28bp. Still not too much volatility, with only three entries in the Performance Highlights table. Good volume featured total domination of the highlights table by FixedResets.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,408.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0000 % 3,622.1
Floater 2.50 % 2.27 % 41,531 21.56 4 0.0000 % 2,600.4
OpRet 4.92 % 3.47 % 56,552 2.09 8 0.0724 % 2,409.5
SplitShare 5.21 % -1.07 % 113,733 0.67 6 -0.2537 % 2,492.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0724 % 2,203.3
Perpetual-Premium 5.80 % 5.55 % 122,326 1.16 8 0.0497 % 2,050.1
Perpetual-Discount 5.58 % 5.58 % 132,385 14.40 16 -0.0945 % 2,120.4
FixedReset 5.17 % 3.45 % 202,911 2.95 57 0.1102 % 2,291.9
Deemed-Retractible 5.26 % 5.21 % 296,655 8.19 53 -0.2850 % 2,080.7
Performance Highlights
Issue Index Change Notes
TDS.PR.C SplitShare -1.23 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-12-15
Maturity Price : 10.00
Evaluated at bid price : 10.47
Bid-YTW : -1.07 %
IAG.PR.F Deemed-Retractible -1.10 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.22
Bid-YTW : 5.83 %
NA.PR.O FixedReset 1.08 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-17
Maturity Price : 25.00
Evaluated at bid price : 28.00
Bid-YTW : 2.21 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.L FixedReset 53,700 Nesbitt crossed 10,000 at 27.51. RBC crossed blocks of 15,000 and 18,500, both at 27.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.45
Bid-YTW : 3.16 %
MFC.PR.D FixedReset 50,498 TD crossed 41,600 at 27.41.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-19
Maturity Price : 25.00
Evaluated at bid price : 27.45
Bid-YTW : 3.61 %
BMO.PR.Q FixedReset 40,803 Nesbitt crossed 20,000 at 24.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.86
Bid-YTW : 4.03 %
HSE.PR.A FixedReset 38,301 Recent new issue.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 4.09 %
MFC.PR.E FixedReset 37,230 RBC crossed 25,000 at 26.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-19
Maturity Price : 25.00
Evaluated at bid price : 26.85
Bid-YTW : 3.50 %
BNS.PR.X FixedReset 36,332 TD crossed 30,000 at 27.13.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-25
Maturity Price : 25.00
Evaluated at bid price : 27.13
Bid-YTW : 3.36 %
There were 42 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
NA.PR.N FixedReset Quote: 26.81 – 28.94
Spot Rate : 2.1300
Average : 1.1542

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-09-14
Maturity Price : 25.00
Evaluated at bid price : 26.81
Bid-YTW : 2.05 %

NA.PR.O FixedReset Quote: 28.00 – 28.41
Spot Rate : 0.4100
Average : 0.2567

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-17
Maturity Price : 25.00
Evaluated at bid price : 28.00
Bid-YTW : 2.21 %

BMO.PR.K Deemed-Retractible Quote: 25.08 – 25.48
Spot Rate : 0.4000
Average : 0.2495

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.08
Bid-YTW : 5.33 %

POW.PR.C Perpetual-Discount Quote: 24.90 – 25.15
Spot Rate : 0.2500
Average : 0.1425

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2041-04-12
Maturity Price : 24.64
Evaluated at bid price : 24.90
Bid-YTW : 5.85 %

BNA.PR.E SplitShare Quote: 24.50 – 24.80
Spot Rate : 0.3000
Average : 0.1998

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 5.33 %

GWO.PR.H Deemed-Retractible Quote: 22.58 – 22.93
Spot Rate : 0.3500
Average : 0.2591

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.58
Bid-YTW : 6.14 %

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