April 4, 2012

There are rumours about Rona, too:

In corporate news, Rona Inc. (TSX:RON) has denied that the company is up for sale after stock in the home renovation retailer jumped more than 12 per cent in heavy trading Tuesday on the Toronto Stock Exchange.

The Quebec-based retailer issued the denial in response to movement in its stock after Robert Hull, chief financial officer of Lowe’s Companies Inc., said his U.S.-based rival might be interested if Rona put itself up for sale. On Wednesday, Rona shares lost 42 cents, or four per cent, to $10.06.

The pain in Spain is starting to gain:

Prime Minister Mariano Rajoy said Spain’s situation is one of “extreme difficulty” and signaled that his budget cuts are less painful than a bailout would be, as demand for the nation’s debt slumped at an auction.

Spain sold 2.59 billion euros ($3.4 billion) of bonds today, just above the minimum amount it planned for the auction and below the 3.5 billion-euro maximum target. The average yield on the bonds due in October 2016, which act as the five-year benchmark, rose to 4.319 percent from 3.376 percent at last month’s sale. Secondary-market yields rose to 4.48 percent.

Spain’s 10-year borrowing costs are approaching the levels seen in December, before the European Central Bank said it would make unlimited three-year loans to bank.

The BoC has published a paper by Bruno Feunou, Jean-Sébastien Fontaine, Abderrahim Taamouti and Roméo Tédongap titled Risk Premium, Variance Premium and the Maturity Structure of Uncertainty:

Expected returns vary when investors face time-varying investment opportunities. Longrun risk models (Bansal and Yaron 2004) and no-arbitrage affine models (Duffie, Pan, and Singleton 2000) emphasize sources of risk that are not observable to the econometrician. We show that, for both classes of models, the term structure of risk
implicit in option prices can reveal these risk factors ex-ante. Empirically, we construct the variance term structure implied in SP500 option prices. The variance term structure reveal two important drivers of the bond premium, the equity premium, and the variance premium, jointly. We also consider the term structure of higher-order risks as measured by skewness and kurtosis and still find that two factors are sufficient to summarize the information content from the term structure of risks. Overall, our results bode well for the ability of structural models to explain risk-returns trade-offs across different markets using only very few sources of risk.

Somebody complained to me today that they were getting spam from my company domain, himivest.com. So I found a good article about eMail spoofing:

When this simplistic method is used, you can tell where the mail originated (for example, that it did not come from thewhitehouse.com) by checking the actual mail headers. Many e-mail clients don’t show these by default. In Outlook, open the message and then click View | Options to see the headers, as shown in Figure 3.

In this example, you can see that the message actually originated from a computer named XDREAM and was sent from the mail.augustmail.com SMTP server.

Unfortunately, even the headers don’t always tell you the truth about where the message came from. Spammers and other spoofers often use open relays to send their bogus or malicious messages. An open relay is an SMTP server that is not correctly configured and so allows third-parties to send e-mail through it that is not sent from nor to a local user. In that case, the “Received from” field in the header only points you to the SMTP server that was victimized.

BAM issued ten year CAD notes at 3.95% to pay off a maturing USD obligation.

Enbridge Gas Distribution, proud issuer of ENB.PR.A, ENB.PR.B, ENB.PR.D, ENB.PR.F and ENB.PR.H, was confirmed at Pfd-2(low) by DBRS:

DBRS has today confirmed the Unsecured Debentures & Medium-Term Notes, Commercial Paper, and Cumulative & Cumulative Redeemable Convertible Preferred Share ratings of Enbridge Gas Distribution Inc. (EGD or the Company) at “A”, R-1 (low) and Pfd-2 (low), respectively, all with Stable trends. The rating confirmation is based on EGD’s low business risk operations, stable regulatory environment in Ontario, strong franchise area and stable financial profile.

EGD’s financial profile remained stable in 2011, with all credit metrics being commensurate with DBRS’s “A” rating guidelines. DBRS notes that the Company requires significant liquidity to finance working capital (mostly gas inventory for winter distributions). Given the low gas price environment, EGD’s liquidity remains adequate to meet its operational needs. Over the medium term, moderate cash flow deficits are expected, due to a large capex program. However, EGD’s current debt leverage is well below the regulatory capital structure of 36% equity, providing EGD with significant financial flexibility. DBRS expects the Company to remain prudent in funding its cash shortfalls and maintaining its credit metrics within the “A” rating category. In August 2011, the Company financed its $66 million acquisition of 15-megawatt (MW) solar power assets from its parent, Enbridge Inc., with equity, which was viewed as positive to the financial profile.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums flat, FixedResets gaining 9bp and DeemedRetractibles down 3bp. Volatility was low. Volume was slightly below average.

PerpetualDiscounts now yield 5.17%, equivalent to 6.72% interest at the current conversion factor of 1.3x. Long corporates now yield about 4.6%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 215bp, a dramatic drop from the 230bp reported March 30.

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 -0.5476 % 2,414.4
FixedFloater 4.52 % 3.91 % 38,876 17.39 1 -2.1860 % 3,451.9
Floater 2.99 % 3.00 % 46,437 19.76 3 -0.5476 % 2,606.9
OpRet 4.93 % 3.59 % 66,569 1.20 6 0.1614 % 2,498.5
SplitShare 5.24 % -5.34 % 86,294 0.70 4 0.0099 % 2,695.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1614 % 2,284.6
Perpetual-Premium 5.46 % 1.37 % 90,986 0.16 23 -0.0008 % 2,214.6
Perpetual-Discount 5.19 % 5.17 % 134,456 15.10 10 0.1120 % 2,399.3
FixedReset 5.02 % 2.98 % 191,208 2.20 67 0.0942 % 2,392.3
Deemed-Retractible 4.97 % 3.88 % 205,549 2.02 46 -0.0315 % 2,302.8
Performance Highlights
Issue Index Change Notes
BAM.PR.G FixedFloater -2.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-04
Maturity Price : 21.81
Evaluated at bid price : 21.03
Bid-YTW : 3.91 %
BAM.PR.B Floater -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-04
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 2.99 %
TD.PR.P Deemed-Retractible 1.20 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-11-01
Maturity Price : 26.00
Evaluated at bid price : 26.59
Bid-YTW : 0.48 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.O Deemed-Retractible 118,797 Desjardins crossed blocks of 48,200 and 30,400, both at 26.00. TD crossed 30,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-04
Maturity Price : 25.75
Evaluated at bid price : 25.78
Bid-YTW : -0.79 %
RY.PR.W Perpetual-Premium 78,659 Nesbitt sold 10,000 to TD at 25.41, then sold blocks o 10,000 and 19,800 to Scotia at 25.40, and finally crossed 29,700 at 25.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.38
Bid-YTW : 4.38 %
ENB.PR.H FixedReset 63,030 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-04
Maturity Price : 23.14
Evaluated at bid price : 25.15
Bid-YTW : 3.60 %
BMO.PR.M FixedReset 55,160 TD crossed 48,500 at 26.05.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.96
Bid-YTW : 2.60 %
RY.PR.D Deemed-Retractible 48,675 Desjardins crossed 40,000 at 25.79.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 3.88 %
RY.PR.B Deemed-Retractible 47,630 Desjardins crossed 40,000 at 26.12.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-24
Maturity Price : 25.75
Evaluated at bid price : 26.02
Bid-YTW : 3.19 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.G FixedFloater Quote: 21.03 – 21.60
Spot Rate : 0.5700
Average : 0.4184

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-04-04
Maturity Price : 21.81
Evaluated at bid price : 21.03
Bid-YTW : 3.91 %

GWO.PR.M Deemed-Retractible Quote: 26.04 – 26.55
Spot Rate : 0.5100
Average : 0.4202

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.04
Bid-YTW : 5.30 %

BNS.PR.K Deemed-Retractible Quote: 25.55 – 25.84
Spot Rate : 0.2900
Average : 0.2091

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-05-28
Maturity Price : 25.50
Evaluated at bid price : 25.55
Bid-YTW : 1.29 %

IGM.PR.B Perpetual-Premium Quote: 26.25 – 26.70
Spot Rate : 0.4500
Average : 0.3759

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.25
Bid-YTW : 4.98 %

SLF.PR.I FixedReset Quote: 25.35 – 25.60
Spot Rate : 0.2500
Average : 0.1793

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 3.95 %

IAG.PR.C FixedReset Quote: 26.36 – 26.65
Spot Rate : 0.2900
Average : 0.2233

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.36
Bid-YTW : 3.02 %

One Response to “April 4, 2012”

  1. […] PerpetualDiscounts now yield 5.07%, equivalent to 6.59% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.45%, so the pre-tax interest-equivalent spread (in this context, the Seniority Spread) is now about 215bp, unchanged from the report of April 4. […]

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