BIP.PR.E Settles Firm on Modest Volume

January 23rd, 2018

Brookfield Infrastructure hasn’t announced anything, but their new issue of BIP.PR.E settled today.

BIP.PR.E is a FixedReset, 5.00%+300M500, ROC, announced January 15. It will be tracked by HIMIPref™ and has been assigned to the FixedResets subindex on the basis of its P-2(low) rating from S&P (it is not rated by DBRS).

The issue traded 421,809 shares today in a range of 24.85-00 before closing at 24.93-95. Vital statistics are:

BIP.PR.E FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 23.13
Evaluated at bid price : 24.93
Bid-YTW : 4.96 %

This issue looks quite expensive to me, according to Implied Volatility Analysis:

impvol_bip_180123
Click for Big

We see in this chart many of the same features we saw when reviewing the recent new issues of NA.PR.E, BEP.PR.M and CM.PR.S:

  • The curve is very steep, with Implied Volatility equal to 40% (a ridiculously large figure), and
  • The prior issues are trading relatively near to, or well above par

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; the market seems to be taking the view that since things seem rosy now, they will always be rosy and everything will trade near par in the future.

I balk at ascribing a 100% probability to this outcome. There may still be a few old geezers amongst the Assiduous Readers of this blog who can still (faintly) remember the Great Bear Market of 2014-16, in which quite a few similar assumptions made earlier turned out to be slightly inaccurate.

For the long term, I suggest that any change in the slope of the curve will be a flattening, with a very high degree of confidence. This will imply that the higher-spread issues will outperform the lower-spread issues.

All told, though, I have no hesitation in slapping an ‘Expensive’ label on this issue – according to the Implied Volatility analysis shown above, the theoretical price of the new issue is 23.41, down from the announcement day estimate of 23.50 – and, remember, that is before making any adjustments for the ridiculously steep Implied Volatility calculation curve.

January 23, 2018

January 23rd, 2018
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 -0.7214 % 2,881.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.7214 % 5,287.9
Floater 3.44 % 3.60 % 37,098 18.30 4 -0.7214 % 3,047.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0464 % 3,166.6
SplitShare 4.64 % 4.11 % 67,593 3.38 5 -0.0464 % 3,781.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0464 % 2,950.5
Perpetual-Premium 5.36 % -0.87 % 66,296 0.09 18 0.1551 % 2,864.2
Perpetual-Discount 5.30 % 5.26 % 71,152 14.98 16 0.3304 % 3,000.7
FixedReset 4.21 % 4.48 % 144,838 4.04 101 0.0487 % 2,533.3
Deemed-Retractible 5.05 % 5.42 % 80,959 5.82 28 0.1524 % 2,950.5
FloatingReset 3.04 % 2.91 % 42,028 3.78 10 0.1042 % 2,769.4
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 16.88
Evaluated at bid price : 16.88
Bid-YTW : 3.60 %
TRP.PR.C FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 18.11
Evaluated at bid price : 18.11
Bid-YTW : 4.66 %
GWO.PR.N FixedReset 1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.23
Bid-YTW : 7.09 %
BAM.PF.C Perpetual-Discount 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 22.00
Evaluated at bid price : 22.28
Bid-YTW : 5.49 %
Volume Highlights
Issue Index Shares
Traded
Notes
BIP.PR.E FixedReset 421,809 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 23.13
Evaluated at bid price : 24.93
Bid-YTW : 4.96 %
NA.PR.E FixedReset 241,868 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 23.05
Evaluated at bid price : 24.74
Bid-YTW : 4.57 %
TD.PF.E FixedReset 101,392 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-10-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 4.00 %
BAM.PR.X FixedReset 85,538 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 18.32
Evaluated at bid price : 18.32
Bid-YTW : 4.91 %
CM.PR.S FixedReset 68,803 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 23.13
Evaluated at bid price : 24.92
Bid-YTW : 4.41 %
BAM.PR.T FixedReset 59,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 21.38
Evaluated at bid price : 21.38
Bid-YTW : 4.89 %
There were 38 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.F FixedReset Quote: 19.13 – 19.46
Spot Rate : 0.3300
Average : 0.2247

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.13
Bid-YTW : 7.15 %

CU.PR.C FixedReset Quote: 22.41 – 22.80
Spot Rate : 0.3900
Average : 0.2864

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 21.95
Evaluated at bid price : 22.41
Bid-YTW : 4.70 %

BAM.PR.M Perpetual-Discount Quote: 21.92 – 22.17
Spot Rate : 0.2500
Average : 0.1774

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-23
Maturity Price : 21.67
Evaluated at bid price : 21.92
Bid-YTW : 5.46 %

IAG.PR.G FixedReset Quote: 24.23 – 24.47
Spot Rate : 0.2400
Average : 0.1727

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-06-30
Maturity Price : 25.00
Evaluated at bid price : 24.23
Bid-YTW : 4.64 %

CCS.PR.C Deemed-Retractible Quote: 24.20 – 24.47
Spot Rate : 0.2700
Average : 0.2084

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 5.65 %

PVS.PR.E SplitShare Quote: 26.60 – 26.89
Spot Rate : 0.2900
Average : 0.2329

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-02-22
Maturity Price : 26.00
Evaluated at bid price : 26.60
Bid-YTW : -13.78 %

AX.PR.U : Probable Call 2018-3-31

January 23rd, 2018

When announcing today’s new issue, Artis Real Estate Investment Trust stated:

Artis intends to use the net proceeds from the Financing to redeem its existing U.S. dollar denominated cumulative redeemable preferred trust units, Series C and for general trust purposes.

This intention (not yet a formal commitment!) was repeated in a later announcement.

AX.PR.U is a FixedReset, 5.25%+446, US Pay, ROC, that commenced trading 2012-9-18 after being announced 2012-9-11. It is callable at par on March 31. The issue has not been tracked by HIMIPref™ as it is US-Pay.

New Issue: AX FixedReset, 6.00%+393M600, ROC

January 23rd, 2018

Artis Real Estate Investment Trust has announced:

that is [sic] has entered into an agreement to sell to a syndicate of underwriters led by TD Securities Inc., RBC Capital Markets and Scotiabank (collectively the “Underwriters”), on a bought deal basis, 4,000,000 Cumulative Minimum Rate Reset Preferred Trust Units, Series I (“Series I Units”) at a price of $25.00 per Series I Unit (the “Issue Price”) for gross proceeds of $100,000,000 (the “Financing”). Artis has also granted the Underwriters an option, exercisable at any time up to 48 hours prior to the closing of the Financing, to purchase a further 1,000,000 Series I Units at the Issue Price, which, if fully exercised, would result in additional gross proceeds of $25,000,000.

The Series I Units will pay fixed cumulative preferential distributions of $1.50 per Series I Unit per annum, yielding 6.00% per annum, payable on the last day of January, April, July and October of each year, as and when declared by the board of trustees of Artis, for the initial period ending on April 30, 2023. The first quarterly distribution, if declared, will be payable on April 30, 2018 and will be $0.3750 per Series I Unit, based on the anticipated closing date of the Financing on January 31, 2018. The distribution rate will be reset on April 30, 2023 and every five years thereafter at a rate equal to the greater of (i) the sum of the then five year Government of Canada bond yield and 3.93% and (ii) 6.00%. The Series I Units are redeemable by Artis, at its option, on April 30, 2023 and on April 30 of every fifth year thereafter.

Holders of Series I Units will have the right to reclassify all or any part of their Series I Units as Cumulative Floating Rate Preferred Trust Units, Series J (the “Series J Units”), subject to certain conditions, on April 30, 2023 and on April 30 of every fifth year thereafter. Such reclassification privilege may be subject to certain tax considerations (to be disclosed in the prospectus supplement for the Financing). Holders of Series J Units will be entitled to receive a floating cumulative preferential distribution, payable on the last day of January, April, July and October of each year, as and when declared by the board of trustees of Artis, at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus a spread of 3.93%.

DBRS Limited has assigned a provisional rating of Pfd-3 (low) to the Series I Units.

The Financing is being made pursuant to the REIT’s base shelf prospectus dated August 8, 2016. The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators. The Financing is expected to close on or about January 31, 2018 and is subject to regulatory approval.

Artis intends to use the net proceeds from the Financing to redeem its existing U.S. dollar denominated cumulative redeemable preferred trust units, Series C and for general trust purposes.

They later announced:

that as a result of strong investor demand for its previously announced offering, the underwriters have exercised their option to increase the size of the offering to 5,000,000 Cumulative Minimum Rate Reset Preferred Trust Units, Series I (“Series I Units”) to be offered on a bought deal basis to a syndicate of underwriters led by TD Securities Inc., RBC Capital Markets and Scotiabank (collectively the “Underwriters”). The Series I Units will be issued at a price of $25.00 per unit, for gross proceeds of $125,000,000 (the “Financing”).

The Financing is being made pursuant to the REIT’s base shelf prospectus dated August 8, 2016. The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators. The Financing is expected to close on or about January 31, 2018 and is subject to regulatory approval.

Artis intends to use the net proceeds from the Financing to redeem its existing U.S. dollar denominated cumulative redeemable preferred trust units, Series C and for general trust purposes.

The issue they intend to redeem is AX.PR.U, a FixedReset, 5.25%+446 US PAY ROC announced 2012-09-11 which commenced trading 2012-9-18, and which is callable at par on 2018-3-31.

The new issue looks quite expensive to me, according to Implied Volatility Analysis:

impvol_ax_180122
Click for Big

This perceived richness has a different source than the other issues discussed here recently, such as the BEP.PR.M issue, the CM.PR.S issue and the NA.PR.E, since the calculated level of Implied Volatility, 11%, is actually quite reasonable.

In this case, the richness is due to the extraordinarily high value that retail – fighting the last war, as always – has placed on the minimum reset guarantee. If, like me, you consider the guarantee to have little or no value, you will expect the new issue to be trading near the price of AX.PR.A, which has an Issue Reset Spread of 406bp (and a current coupon of 5.662%). However, this issue closed today at 23.61, indicating that retail considers the minimum rate guarantee to be worth somewhere around $1.50. Wow! That’s nearly double the value of the call option in this analysis!

NA.PR.E Settles Soft on Modest Volume

January 22nd, 2018

National Bank of Canada has announced:

that it has closed its domestic public offering of non-cumulative 5-year rate reset first preferred shares series 40 (non-viability contingent capital (NVCC)) (the “Series 40 Preferred Shares”). National Bank issued 12 million Series 40 Preferred Shares at a price of $25.00 per share to raise gross proceeds of $300 million.

The offering was underwritten by a syndicate led by National Bank Financial Inc.

The Series 40 Preferred Shares will commence trading on the Toronto Stock Exchange today under the ticker symbol NA.PR.E.

The Series 40 Preferred Shares were issued under a prospectus supplement dated January 15, 2018 to National Bank’s short form base shelf prospectus dated November 21, 2016.

NA.PR.E is a FixedReset, 4.60%+258, NVCC-Compliant, announced January 12. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

The issue traded 357,595 shares today in a range of 24.77-89 before closing at 24.78-80. Vital statistics are:

NA.PR.E FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 23.07
Evaluated at bid price : 24.78
Bid-YTW : 4.56 %

This issue looks quite expensive to me, according to Implied Volatility Analysis:

impvol_na_180122
Click for Big

We see in this chart many of the same features we saw when reviewing the recent BPO new issue and BEP.PR.M and CM.PR.S:

  • The curve is very steep, with Implied Volatility equal to 40% (a ridiculously large figure), and
  • The extant issues are trading relatively near to, or well above par

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; the market seems to be taking the view that since things seem rosy now, they will always be rosy and everything will trade near par in the future.

I balk at ascribing a 100% probability to this outcome. There may still be a few old geezers amongst the Assiduous Readers of this blog who can still (faintly) remember the Great Bear Market of 2014-16, in which quite a few similar assumptions made earlier turned out to be slightly inaccurate.

For the long term, I suggest that any change in the slope of the curve will be a flattening, with a very high degree of confidence. This will imply that the higher-spread issues will outperform the lower-spread issues.

All told, though, I have no hesitation in slapping an ‘Expensive’ label on this issue – according to the Implied Volatility analysis shown above, the theoretical price of the new issue is 23.77, down sharply from the announcement day estimate of 24.01.

January 22, 2018

January 22nd, 2018
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 -0.1694 % 2,902.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1694 % 5,326.3
Floater 3.42 % 3.55 % 35,475 18.40 4 -0.1694 % 3,069.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.3339 % 3,168.1
SplitShare 4.63 % 4.15 % 66,251 3.39 5 0.3339 % 3,783.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3339 % 2,951.9
Perpetual-Premium 5.37 % -0.07 % 64,785 0.09 18 0.2101 % 2,859.7
Perpetual-Discount 5.32 % 5.26 % 72,074 14.98 16 0.2342 % 2,990.8
FixedReset 4.20 % 4.46 % 144,249 3.83 100 0.0906 % 2,532.1
Deemed-Retractible 5.06 % 5.43 % 79,434 5.83 28 0.1556 % 2,946.0
FloatingReset 3.05 % 2.92 % 40,234 3.79 10 0.0261 % 2,766.5
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 16.96
Evaluated at bid price : 16.96
Bid-YTW : 3.58 %
BNS.PR.Z FixedReset -1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.00
Bid-YTW : 4.57 %
GWO.PR.N FixedReset 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.00
Bid-YTW : 7.28 %
PWF.PR.A Floater 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 19.70
Evaluated at bid price : 19.70
Bid-YTW : 3.09 %
EIT.PR.A SplitShare 1.14 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.82
Bid-YTW : 4.31 %
BAM.PR.X FixedReset 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 18.21
Evaluated at bid price : 18.21
Bid-YTW : 4.94 %
PWF.PR.L Perpetual-Discount 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 23.73
Evaluated at bid price : 24.04
Bid-YTW : 5.31 %
RY.PR.N Perpetual-Premium 1.31 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-11-24
Maturity Price : 25.00
Evaluated at bid price : 25.43
Bid-YTW : 4.77 %
PWF.PR.T FixedReset 1.63 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.08 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.E FixedReset 357,595 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 23.07
Evaluated at bid price : 24.78
Bid-YTW : 4.56 %
TRP.PR.K FixedReset 211,554 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.13
Bid-YTW : 3.96 %
CM.PR.S FixedReset 136,969 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 23.14
Evaluated at bid price : 24.93
Bid-YTW : 4.41 %
POW.PR.G Perpetual-Premium 84,500 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-04-15
Maturity Price : 25.25
Evaluated at bid price : 25.42
Bid-YTW : 5.31 %
MFC.PR.I FixedReset 83,823 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-09-19
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : 4.29 %
NA.PR.C FixedReset 80,195 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 4.24 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSE.PR.G FixedReset Quote: 25.24 – 25.56
Spot Rate : 0.3200
Average : 0.2149

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.24
Bid-YTW : 4.33 %

PVS.PR.B SplitShare Quote: 25.31 – 25.63
Spot Rate : 0.3200
Average : 0.2370

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 25.31
Bid-YTW : 3.64 %

BAM.PR.B Floater Quote: 16.96 – 17.25
Spot Rate : 0.2900
Average : 0.2151

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 16.96
Evaluated at bid price : 16.96
Bid-YTW : 3.58 %

GWO.PR.R Deemed-Retractible Quote: 23.00 – 23.25
Spot Rate : 0.2500
Average : 0.1768

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.00
Bid-YTW : 6.32 %

W.PR.M FixedReset Quote: 26.15 – 26.39
Spot Rate : 0.2400
Average : 0.1674

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 3.92 %

TRP.PR.E FixedReset Quote: 24.03 – 24.25
Spot Rate : 0.2200
Average : 0.1505

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-22
Maturity Price : 23.68
Evaluated at bid price : 24.03
Bid-YTW : 4.54 %

Toronto Rock Lacrosse Ticket Giveaway – Update #1

January 21st, 2018

I have seven more pairs of Toronto Rock Lacrosse tickets to give away!

The games take place at the Air Canada Centre and the seats are very good. Just tell me which ones you would like. A decision regarding who gets tickets will be made two weeks before each game and I will mail them to the lucky winner; while preference will be given to customers and those who tell me they’ve got a kid who plays lacrosse, anybody can win. If you win and don’t want your name publicized, that’s fine.

The games are:

Toronto Rock Lacrosse Ticket Giveaway
Date Opponent
Saturday
2018-1-27
7pm
New England Black Wolves
Saturday
2018-2-3
7pm
Calgary Roughnecks
Saturday
2018-3-3
7pm
Georgia Swarm
Sunday
2018-3-11
3pm
New England Black Wolves
Friday
2018-3-30
7:30pm
Colorado Mammoth
Friday
2018-4-13
7:30pm
Rochester Knighthawks
???
???
???
Home Playoff Game 1
If there is one!
???
???
???
Coupons Redeemable for available tickets
Expires 2018-4-14

The tickets for the January 27 game were given to a non-client … see, anybody can win! There’s not much time left until the game against Calgary on February 3 … get your eMails in!

The games are a lot of fun. One thing that has impressed me is that these guys’ technical skills are so good they can concentrate on strategy … there are a lot fewer loose balls than I remember from my days of box lacrosse at age 10!

The redeemable coupons can be exchanged for tickets for any game, but there are no guarantees regarding just what seats you will get. Still, if you would like to plan an outing for four, rather than just a pair, let me know and … you might get two ‘real’ tickets and the two coupons!

The play-off game? There’s no guarantee that there will be one, but you could always try your luck and ask for them.

To try your luck at receiving a pair of tickets, just eMail me or comment on this post.

January 19, 2018

January 19th, 2018
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 0.1414 % 2,907.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1414 % 5,335.4
Floater 3.41 % 3.53 % 35,924 18.45 4 0.1414 % 3,074.8
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1628 % 3,157.5
SplitShare 4.65 % 4.03 % 66,775 3.39 5 -0.1628 % 3,770.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1628 % 2,942.1
Perpetual-Premium 5.38 % 0.68 % 65,028 0.09 18 -0.1268 % 2,853.7
Perpetual-Discount 5.33 % 5.28 % 72,777 14.94 16 -0.1532 % 2,983.8
FixedReset 4.20 % 4.42 % 142,604 4.05 99 0.0368 % 2,529.8
Deemed-Retractible 5.07 % 5.44 % 79,965 5.83 28 -0.0622 % 2,941.5
FloatingReset 3.04 % 2.92 % 41,876 3.80 10 -0.0391 % 2,765.8
Performance Highlights
Issue Index Change Notes
IFC.PR.C FixedReset -1.67 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.50
Bid-YTW : 5.00 %
TRP.PR.C FixedReset -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 17.96
Evaluated at bid price : 17.96
Bid-YTW : 4.64 %
BNS.PR.Z FixedReset -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.30
Bid-YTW : 4.21 %
BAM.PF.F FixedReset -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 23.53
Evaluated at bid price : 24.65
Bid-YTW : 4.85 %
TRP.PR.H FloatingReset -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 3.64 %
RY.PR.N Perpetual-Premium -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 24.67
Evaluated at bid price : 25.10
Bid-YTW : 4.93 %
PWF.PR.L Perpetual-Discount -1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 23.44
Evaluated at bid price : 23.73
Bid-YTW : 5.38 %
NA.PR.S FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 23.06
Evaluated at bid price : 23.53
Bid-YTW : 4.61 %
BAM.PR.R FixedReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 4.91 %
SLF.PR.J FloatingReset 1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.76
Bid-YTW : 6.35 %
GWO.PR.N FixedReset 1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.81
Bid-YTW : 7.40 %
BAM.PR.T FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 21.26
Evaluated at bid price : 21.26
Bid-YTW : 4.87 %
TRP.PR.G FixedReset 1.74 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-11-30
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 4.69 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.B FloatingReset 377,974 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.69
Bid-YTW : 3.03 %
POW.PR.G Perpetual-Premium 228,678 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 24.83
Evaluated at bid price : 25.17
Bid-YTW : 5.59 %
POW.PR.C Perpetual-Premium 226,257 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-02-18
Maturity Price : 25.00
Evaluated at bid price : 25.69
Bid-YTW : -24.90 %
PWF.PR.L Perpetual-Discount 209,698 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 23.44
Evaluated at bid price : 23.73
Bid-YTW : 5.38 %
CM.PR.S FixedReset 191,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 23.15
Evaluated at bid price : 24.96
Bid-YTW : 4.36 %
BNS.PR.Q FixedReset 141,500 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-10-25
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 3.54 %
TD.PR.T FloatingReset 127,183 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 2.92 %
SLF.PR.J FloatingReset 125,476 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.76
Bid-YTW : 6.35 %
BNS.PR.D FloatingReset 118,802 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.79
Bid-YTW : 3.47 %
TRP.PR.K FixedReset 107,895 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 3.93 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.I Deemed-Retractible Quote: 21.91 – 22.32
Spot Rate : 0.4100
Average : 0.2596

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.91
Bid-YTW : 6.82 %

RY.PR.N Perpetual-Premium Quote: 25.10 – 25.50
Spot Rate : 0.4000
Average : 0.2564

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 24.67
Evaluated at bid price : 25.10
Bid-YTW : 4.93 %

CM.PR.O FixedReset Quote: 23.71 – 24.09
Spot Rate : 0.3800
Average : 0.2421

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 23.29
Evaluated at bid price : 23.71
Bid-YTW : 4.48 %

PWF.PR.T FixedReset Quote: 24.61 – 25.03
Spot Rate : 0.4200
Average : 0.2951

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 24.18
Evaluated at bid price : 24.61
Bid-YTW : 4.40 %

BAM.PF.F FixedReset Quote: 24.65 – 25.00
Spot Rate : 0.3500
Average : 0.2400

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 23.53
Evaluated at bid price : 24.65
Bid-YTW : 4.85 %

POW.PR.G Perpetual-Premium Quote: 25.17 – 25.45
Spot Rate : 0.2800
Average : 0.1766

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-19
Maturity Price : 24.83
Evaluated at bid price : 25.17
Bid-YTW : 5.59 %

CM.PR.S Settles Firm on Good Volume

January 19th, 2018

Canadian Imperial Bank of Commerce has announced:

that it has completed the offering of 18 million Basel III-compliant Non-cumulative Rate Reset Class A Preferred Shares Series 47 (Non-Viability Contingent Capital (NVCC)) (the “Series 47 Shares”) priced at $25.00 per share to raise gross proceeds of $450 million.

The offering was made through a syndicate of underwriters led by CIBC Capital Markets. The Series 47 Shares commence trading on the Toronto Stock Exchange today under the ticker symbol CM.PR.S.

The Series 47 Shares were issued under a prospectus supplement dated January 11, 2018, to CIBC’s short form base shelf prospectus dated March 16, 2016.

CIBC has designated the Series 47 Shares as eligible to participate in the CIBC Shareholder Investment Plan along with Series 41, 43 and 45. Holders of eligible shares may elect to have dividends on those preferred shares reinvested in common shares if they reside in Canada, or may elect stock dividends if they reside in the U.S. See “CIBC Shareholder Investment Plan” at www.cibc.com for more information.

The CIBC Shareholder Investment Plan – hard to find on their website! – is described here.

CM.PR.S is a FixedReset, 4.50%+245, NVCC-compliant, announced January 10. It will be tracked by HIMIPref™ and is assigned to the FixedReset subindex.

The issue traded 734,395 shares today in a range of 24.94-00 before closing at 24.96-97. Vital statistics are:

CM.PR.S FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 23.15
Evaluated at bid price : 24.96
Bid-YTW : 4.36 %

This issue looks quite expensive to me, but quantifying the degree of richness is difficult. According to Implied Volatility Analysis:

impvol_cm_180118
Click for Big

Well, it’s starting to get monotonous, but we see in this chart many of the same features we saw when reviewing the recent BIP new issue as well as last week’s BEP.PR.M issue, the CM issue and NA issue:

  • The curve is very steep, with Implied Volatility equal to 40% (a ridiculously large figure), and
  • The extant issues are trading relatively near to par

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; in turn, I suggest that this reflects a rather touching faith that the existence of a minimum rate guarantee on reset also indicates that the issues will never, ever trade below par. There will be a lot of long faces when this test gets failed in the future! All it will take is a spread-widening, whether market-wide or company-specific.

However, for the long term, I suggest that any change in the slope of the curve will be a flattening, with a very high degree of confidence. This will imply that the higher-spread issues will outperform the lower-spread issues.

I cannot even begin to imagine what the buyers of this issue must have been thinking. For example, CM.PR.O is a FixedReset, 3.90%+232, that commenced trading 2014-6-11 after being announced 2014-6-2. It resets 2019-7-31. It closed today at 23.71, very close to the fair value calculated by the above analysis of 23.68. How in the name of God’s Green Earth can anybody reconcile the prices of these two issues? [Hint: Maybe the 3% stockbrokers’ selling commission has something to do with it.]

All told, though, I have no hesitation in slapping a ‘Very Expensive’ label on this issue. According to the analysis illustrated by the above chart, the fair price is 23.94.

January 18, 2018

January 19th, 2018
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 0.3405 % 2,903.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3405 % 5,327.8
Floater 3.41 % 3.55 % 35,366 18.41 4 0.3405 % 3,070.5
OpRet 0.00 % 0.00 % 0 0.00 0 0.4125 % 3,162.7
SplitShare 4.64 % 4.01 % 64,907 3.40 5 0.4125 % 3,776.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.4125 % 2,946.9
Perpetual-Premium 5.37 % 1.21 % 62,859 0.09 18 0.1445 % 2,857.4
Perpetual-Discount 5.32 % 5.29 % 73,476 14.97 16 0.1589 % 2,988.4
FixedReset 4.20 % 4.44 % 142,181 4.05 99 0.1569 % 2,528.9
Deemed-Retractible 5.07 % 5.36 % 79,272 5.84 28 0.1795 % 2,943.3
FloatingReset 3.04 % 2.88 % 38,775 1.00 10 -0.0651 % 2,766.9
Performance Highlights
Issue Index Change Notes
TRP.PR.G FixedReset -1.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 23.05
Evaluated at bid price : 24.13
Bid-YTW : 4.93 %
TRP.PR.B FixedReset -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 17.07
Evaluated at bid price : 17.07
Bid-YTW : 4.60 %
TRP.PR.C FixedReset -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 18.21
Evaluated at bid price : 18.21
Bid-YTW : 4.57 %
TRP.PR.A FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 20.61
Evaluated at bid price : 20.61
Bid-YTW : 4.69 %
GWO.PR.N FixedReset -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.55
Bid-YTW : 7.63 %
BAM.PR.T FixedReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 20.93
Evaluated at bid price : 20.93
Bid-YTW : 4.94 %
IFC.PR.A FixedReset 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.50
Bid-YTW : 6.80 %
BAM.PF.F FixedReset 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 23.65
Evaluated at bid price : 24.95
Bid-YTW : 4.78 %
IFC.PR.C FixedReset 1.62 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-30
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.71 %
BAM.PF.I FixedReset 2.49 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 3.94 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.S FixedReset 734,395 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 23.15
Evaluated at bid price : 24.96
Bid-YTW : 4.36 %
TRP.PR.K FixedReset 161,668 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 3.93 %
BMO.PR.R FloatingReset 152,813 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 2.91 %
CU.PR.C FixedReset 57,720 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 21.91
Evaluated at bid price : 22.35
Bid-YTW : 4.67 %
TD.PF.H FixedReset 48,788 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.02
Bid-YTW : 3.66 %
TRP.PR.J FixedReset 37,520 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.55
Bid-YTW : 3.78 %
There were 24 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.A FixedReset Quote: 20.61 – 21.17
Spot Rate : 0.5600
Average : 0.3637

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 20.61
Evaluated at bid price : 20.61
Bid-YTW : 4.69 %

TRP.PR.G FixedReset Quote: 24.13 – 24.57
Spot Rate : 0.4400
Average : 0.3190

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 23.05
Evaluated at bid price : 24.13
Bid-YTW : 4.93 %

CU.PR.G Perpetual-Discount Quote: 21.96 – 22.28
Spot Rate : 0.3200
Average : 0.2011

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 21.63
Evaluated at bid price : 21.96
Bid-YTW : 5.18 %

NA.PR.S FixedReset Quote: 23.29 – 23.59
Spot Rate : 0.3000
Average : 0.1963

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 22.83
Evaluated at bid price : 23.29
Bid-YTW : 4.66 %

HSE.PR.E FixedReset Quote: 25.05 – 25.33
Spot Rate : 0.2800
Average : 0.1774

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 4.53 %

BMO.PR.T FixedReset Quote: 23.82 – 24.09
Spot Rate : 0.2700
Average : 0.1689

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-01-18
Maturity Price : 23.42
Evaluated at bid price : 23.82
Bid-YTW : 4.44 %