Archive for December, 2008

December 31, 2008

Wednesday, December 31st, 2008

Well, holy-smokes-and-a-half, that’s all I can say! Preferreds continued to rocket upwards on normal-for-non-tax-loss-selling-season volume. PerpetualDiscounts were at their lowest on December 22; in the five trading days since they they are up 14.29%, with yield coming in from 8.40% to 7.37%. A little over a point! Maybe I’ll stretch a point, and make that holy-smokes-and-three-quarters.

I’ll bet some shops took a week off in the middle of portfolio rebalancing since nothing would be happening – that’ll teach them to whimper about their precious work-life balance!

That was sufficient to bring the monthly return on the PerpetualDiscount subindex to +11.45%, the best month in my records. Unfortunately, I now have to throw out all those abject client letters I was drafting, since I can now point out that preferreds really do go up sometimes and really are different from equities. Thank you Santa!

How about a bond comparison? Long corporates were up 1.64% on the month and down 11.70% on the year (PerpetualDiscounts were down 17.11% on the year), with the bonds continuing to yield 7.50%, or maybe a shade under. The PerpetualDiscount yield of 7.37% at the close today equates to 10.32% at the standard 1.4x equivalency factor, so the spread is still an impressive 282bp.

And so goes another year! Happy New Year, everybody, and good riddance to the old one!

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30.
The Fixed-Reset index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater index.
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet N/A N/A N/A N/A 0 N/A N/A
Fixed-Floater 7.92% 7.94% 137,402 12.81 7 +3.0001% 674.9
Floater 6.78% 6.82% 92,609 12.76 2 +8.6411% 480.8
Op. Retract 5.43% 6.14% 166,476 3.49 14 +0.0941% 1,005.5
Split-Share 6.32% 10.57% 91,689 3.95 15 +1.6133% 984.3
Interest Bearing 9.12% 17.04% 57,778 2.85 3 +3.2056% 824.5
Perpetual-Premium N/A N/A N/A N/A N/A N/A N/A
Perpetual-Discount 7.27% 7.37% 245,157 12.14 71 +2.9405% 769.3
Fixed-Reset 5.93% 4.94% 979,322 15.00 18 +0.5939% 1,021.3
Major Price Changes
Issue Index Change Notes
BAM.PR.M PerpetualDiscount +4.0816% Now with a pre-tax bid-YTW of 11.82% based on a bid of 10.20 and a limitMaturity. Closing quote 10.20-35, 1×1. Day’s range of 10.01-30.
HSB.PR.D PerpetualDiscount +4.1509% Now with a pre-tax bid-YTW of 7.62% based on a bid of 16.56 and a limitMaturity. Closing quote 16.56-91, 39×23. Day’s range of 16.21-94.
HSB.PR.C PerpetualDiscount +4.2296% Now with a pre-tax bid-YTW of 7.46% based on a bid of 16.51 and a limitMaturity. Closing quote 17.25-73, 1×3. Day’s range of 17.35-80.
BMO.PR.L PerpetualDiscount +4.3617% Now with a pre-tax bid-YTW of 7.52% based on a bid of 19.62 and a limitMaturity. Closing quote 19.62-50, 3×1. Day’s range of 19.40-25.
NA.PR.N FixedReset +4.3821%  
TD.PR.P PerpetualDiscount +4.4421% Now with a pre-tax bid-YTW of 6.78% based on a bid of 19.75 and a limitMaturity. Closing quote 19.75-07, 5×1. Day’s range of 20.00-07.
GWO.PR.G PerpetualDiscount +4.4983% Now with a pre-tax bid-YTW of 7.24% based on a bid of 18.12 and a limitMaturity. Closing quote 18.12-46, 1×1. Day’s range of 17.63-25.
CM.PR.I PerpetualDiscount +4.5541% Now with a pre-tax bid-YTW of 7.13% based on a bid of 16.53 and a limitMaturity. Closing quote 16.53-59, 1×6. Day’s range of 16.40-69.
W.PR.H PerpetualDiscount +4.5934% Now with a pre-tax bid-YTW of 8.22% based on a bid of 16.85 and a limitMaturity. Closing quote 16.85-24, 5×8. Day’s range of 16.45-85.
CU.PR.B PerpetualDiscount +4.6125% Now with a pre-tax bid-YTW of 6.91% based on a bid of 22.00 and a limitMaturity. Closing quote 22.00-45, 5×3. Day’s range of 21.50-00.
BMO.PR.J PerpetualDiscount +4.6224% Now with a pre-tax bid-YTW of 7.12% based on a bid of 16.07 and a limitMaturity. Closing quote 16.03-20, 3×10. Day’s range of 15.96-25.
BNS.PR.M PerpetualDiscount +4.7297% Now with a pre-tax bid-YTW of 6.74% based on a bid of 17.05 and a limitMaturity. Closing quote 17.05-40, 10×19. Day’s range of 16.81-40.
BSD.PR.A InterestBearing (until midnight) +4.8346% Asset coverage of 0.8-:1 as of December 24 according to Brookfield Funds. Now with a (dubious) pre-tax bid-YTW of 25.66% based on a bid of 4.12 and a (dubious) hardMaturity 2015-3-31 at 10.00. Closing quote of 4.12-37, 4×4. Day’s range of 3.99-23.
PWF.PR.K PerpetualDiscount +4.9581% Now with a pre-tax bid-YTW of 7.77% based on a bid of 16.30 and a limitMaturity. Closing quote 16.30-84, 1×10. Day’s range of 16.20-90.
CM.PR.P PerpetualDiscount +5.0200% Now with a pre-tax bid-YTW of 7.49% based on a bid of 16.30 and a limitMaturity. Closing quote 18.41-69, 3×5. Day’s range of 17.12-18.50.
GWO.PR.I PerpetualDiscount +5.0694% Now with a pre-tax bid-YTW of 7.51% based on a bid of 15.13 and a limitMaturity. Closing quote 15.13-25, 5×4. Day’s range of 14.75-65.
POW.PR.C PerpetualDiscount +5.1364% Now with a pre-tax bid-YTW of 7.42% based on a bid of 19.65 and a limitMaturity. Closing quote 19.65-80, 1×4. Day’s range of 19.60-20.75.
BAM.PR.K Floater +5.2326%  
SLF.PR.D PerpetualDiscount +5.3352% Now with a pre-tax bid-YTW of 7.29% based on a bid of 15.40 and a limitMaturity. Closing quote 15.40-77, 7×2. Day’s range of 14.99-79.
BMO.PR.K PerpetualDiscount +5.4701% Now with a pre-tax bid-YTW of 7.21% based on a bid of 18.51 and a limitMaturity. Closing quote 18.51-84, 3×10. Day’s range of 18.46-89.
BCE.PR.A FixFloat +5.6069%  
SLF.PR.A PerpetualDiscount +5.8521% Now with a pre-tax bid-YTW of 7.28% based on a bid of 16.46 and a limitMaturity. Closing quote 16.46-69, 1×9. Day’s range of 15.75-16.75.
ELF.PR.G PerpetualDiscount +5.8824% Now with a pre-tax bid-YTW of 8.74% based on a bid of 13.68 and a limitMaturity. Closing quote 13.68-00, 5×4. No trades.
CM.PR.G PerpetualDiscount +5.9469% Now with a pre-tax bid-YTW of 7.38% based on a bid of 18.35 and a limitMaturity. Closing quote 18.35-39, 6×29. Day’s range of 17.70-39.
BAM.PR.N PerpetualDiscount +6.2245% Now with a pre-tax bid-YTW of 11.57% based on a bid of 10.41 and a limitMaturity. Closing quote 10.41-42, 7×3. Day’s range of 10.17-44.
BCE.PR.F FixFloat +6.3830%  
SBC.PR.A SplitShare +6.6584% Asset coverage of 1.3+:1 as of December 24 according to Brompton. Now with a pre-tax bid-YTW of 9.46% based on a bid of 8.65 and a hardMaturity 2012-11-30 at 10.00. Closing quote of 8.65-24, 10×3. No Trades.
POW.PR.D PerpetualDiscount +7.0130% Now with a pre-tax bid-YTW of 7.63% based on a bid of 16.48 and a limitMaturity. Closing quote 16.48-54, 1×1. Day’s range of 16.03-60.
FIG.PR.A InterestBearing +7.5768% Asset coverage of 1.1-:1 based on Capital Unit NAV of 1.31 as of December 30 and 0.71 Capital Units per Preferred. Now with a pre-tax bid-YTW of 14.87% based on a bid of 6.70 and a hardMaturity 2014-12-31 at 10.00. Closing quote of 6.70-24, 5×7. Day’s range of 6.47-25.
IAG.PR.A PerpetualDiscount +7.5768% Now with a pre-tax bid-YTW of 7.37% based on a bid of 15.76and a limitMaturity. Closing quote 15.76-56, 1×4. Day’s range of 15.51-68.
BAM.PR.B Floater +12.0647%  
Volume Highlights
Issue Index Volume Notes
CM.PR.I PerpetualDiscount 38,175 Now with a pre-tax bid-YTW of 7.13% based on a bid of 16.53 and a limitMaturity.
CM.PR.H PerpetualDiscount 36,149 Now with a pre-tax bid-YTW of 7.30% based on a bid of 16.48 and a limitMaturity.
BCE.PR.I FixFloat 35,062  
BNA.PR.C SplitShare 25,400 Now with a pre-tax bid-YTW of 19.54% based on a bid of 8.75 and a hardMaturity 2019-1-10 at 25.00.
GWO.PR.I PerpetualDiscount 21,275 Now with a pre-tax bid-YTW of 7.51% based on a bid of 15.13 and a limitMaturity.

There were twenty other index-included $25-pv-equivalent issues trading over 10,000 shares today.

HIMIPref™ Preferred Indices: November 2008

Wednesday, December 31st, 2008
HIMI Index Values 2008-11-28
These values reflect the December 2008 Revision
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,030.3 1 2.00 6.92% 14.0 32M 6.37%
FixedFloater 1,483.5 7 2.00 6.98% 13.7 52M 6.62%
Floater 735.2 2 2.00 10.29% 9.2 47M 10.11%
OpRet 1,930.0 14 1.30 4.98% 4.1 126M 5.50%
SplitShare 1,485.7 15 2.00 14.84% 3.5 59M 7.44%
Interest-Bearing 1,800.2 3 2.00 20.87% 4.5 60M 9.15%
Perpetual-Premium 1,325.9 0 N/A N/A N/A N/A N/A
Perpetual-Discount 1,221.1 71 1.24 8.14% 11.3 186M 7.99%
FixedReset 1,722.5 15 1.07 5.64% 14.2 639M 6.11%

For Index Revisions during November 2008, see the post HIMIPref™ Index Rebalancing: November 2008.

Publication of index details is embargoed for six months following index date.

HIMIPref™ Preferred Indices: October 2008

Wednesday, December 31st, 2008
HIMI Index Values 2008-10-31
These values reflect the December 2008 Revision
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,302.5 1 2.00 5.31% 15.3 28M 5.20%
FixedFloater 1,812.0 7 2.00 5.63% 14.9 36M 5.42%
Floater 1,097.8 2 2.00 6.58% 13.1 41M 6.77%
OpRet 1,971.9 15 1.30 5.15% 4.2 110M 5.31%
SplitShare 1,781.6 13 2.00 9.67% 3.7 54M 6.25%
Interest-Bearing 2,085.7 3 2.00 12.81% 4.7 65M 7.84%
Perpetual-Premium 1,544.0 0 N/A N/A N/A N/A N/A
Perpetual-Discount 1,422.0 71 1.24 6.80% 12.8 174M 6.83%
FixedReset 1,940.0 10 1.00 5.12% 15.2 581M 5.38%

For Index Revisions during October 2008, see the post HIMIPref™ Index Rebalancing: October 2008.

Publication of index details is embargoed for six months following index date.

BAM to Offer USD Prefs?

Wednesday, December 31st, 2008

Perhaps intruiged by recent queries about USD Prefs with eligible dividends and distraught at the idea that there is a fragment of the capital markets left untapped, Brookfield Asset Management has issued a Preliminary Short Form Base Shelf Prospectus for USD 1-billion in debt securities and Class A Preference Shares.

Sorry I can’t link to it, but that would constitute dissemination of public information to the public, which the regulators have sworn to stamp out. Can’t have just anybody linking to a prospectus, eh? It’s on SEDAR, dated December 30.

There is no indication as to whether the dividends will be eligible for the full dividend tax credit – that will have to wait for the supplementary prospectus for a specific issue.

To my disappointment, the specific terms of the Australian refinancing have still not been disclosed. All it says is:

Also in November 2008, the Company announced that it had finalized an agreement to extend the final maturity of a debt financing of its Australian operations by one year. Under the terms of the agreement, the loan will be US$800 million of which US$140 million will be repaid in April 2009 and the balance in April 2010. The Company also announced its intention to combine all of its European operations into a single operating platform and to refinance it on a longer-term basis in the European markets.

Many thanks to Assiduous Reader MP – who, I suspect, is angling for a job as PrefBlog’s Regulatory Filings Editor – for bringing this to my attention.

HIMIPref™ Preferred Indices: September 2008

Wednesday, December 31st, 2008
HIMI Index Values 2008-9-30
These values reflect the December 2008 Revision
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,474.2 1 2.00 4.70% 16.1 29M 4.68%
FixedFloater 2,064.6 7 2.00 4.81% 15.8 53M 4.72%
Floater 1,704.0 2 2.00 5.05% 15.4 39M 5.18%
OpRet 2,065.3 14 1.34 4.44% 4.1 79M 5.07%
SplitShare 1,927.8 13 2.00 7.65% 3.7 54M 5.80%
Interest-Bearing 2,556.7 2 2.00 6.70% 5.1 42M 6.39%
Perpetual-Premium 1,726.5 1 1.00 6.28% 13.5 56M 6.25%
Perpetual-Discount 1,548.4 70 1.24 6.17% 13.6 172M 6.22%
FixedReset 2,028.5 10 1.00 5.09% 15.3 823M 5.09%

For Index Revisions during September 2008, see the post HIMIPref™ Index Rebalancing: September 2008.

Publication of index details is embargoed for six months following index date.

Update, 2009-03-31: Index Details

SEC Report on Fair Value Accounting

Wednesday, December 31st, 2008

The SEC has announced that it:

today delivered a report to Congress mandated by the Emergency Economic Stabilization Act of 2008 that recommends against the suspension of fair value accounting standards. Rather, the 211-page report by the SEC’s Office of the Chief Accountant and Division of Corporation Finance recommends improvements to existing practice, including reconsidering the accounting for impairments and the development of additional guidance for determining fair value of investments in inactive markets, including situations where market prices are not readily available.

Among key findings, the report notes that investors generally believe fair value accounting increases financial reporting transparency and facilitates better investment decision-making. The report also observes that fair value accounting did not appear to play a meaningful role in the bank failures that occurred in 2008. Rather, the report indicated that bank failures in the U.S. appeared to be the result of growing probable credit losses, concerns about asset quality, and in certain cases, eroding lender and investor confidence.

While the report does not recommend suspending existing fair value standards, it makes eight recommendations to improve their application, including:
  • Development of additional guidance and other tools for determining fair value when relevant market information is not available in illiquid or inactive markets, including consideration of the need for guidance to assist companies and auditors in addressing:
    • How to determine when markets become inactive and whether a transaction or group of transactions are forced or distressed
    • How the impact of a change in credit risk on the value of an asset or liability should be estimated
    • When should observable market information be supplemented with and/or reliance placed on unobservable information in the form of management estimates
    • How to confirm that assumptions utilized are those that would be used by market participants and not just a specific entity
  • Enhancement of existing disclosure and presentation requirements related to the effect of fair value in the financial statements.
  • Educational efforts, including those to reinforce the need for management judgment in the determination of fair value estimates.
  • Examination by the FASB of the impact of liquidity in the measurement of fair value, including whether additional application and/or disclosure guidance is warranted.
  • Assessment by the FASB of whether the incorporation of credit risk in the measurement of liabilities provides useful information to investors, including whether sufficient transparency is provided currently in practice.

The full report is available on-line.

Whoosh! This will take a certain amount of work to understand!

HIMIPref™ Preferred Indices: August 2008

Wednesday, December 31st, 2008
HIMI Index Values 2008-8-29
These values reflect the December 2008 Revision
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,471.3 1 2.00 4.64% 16.2 27M 4.62%
FixedFloater 2,118.5 7 2.00 4.61% 16.0 45M 4.58%
Floater 2,025.0 2 2.00 4.34% 16.7 51M 4.30%
OpRet 2,109.2 14 1.35 3.95% 3.2 77M 4.93%
SplitShare 2,084.0 15 2.00 5.38% 4.5 45M 5.35%
Interest-Bearing 2,677.3 2 2.00 6.38% 5.1 54M 6.25%
Perpetual-Premium 1,751.4 1 1.00 5.40% 2.2 64M 6.16%
Perpetual-Discount 1,585.6 70 1.24 6.07% 13.8 187M 6.05%
FixedReset 2,040.4 6 1.00 4.84% 15.6 660M 5.04%

For Index Revisions during August 2008, see the post HIMIPref™ Index Rebalancing: August 2008.

Publication of index details is embargoed for six months following index date.

Update, 2009-03-04: Index Details

December 30, 2008

Tuesday, December 30th, 2008

As far as I can tell, the market has decided that there is a faint possibility that not every financial institution in Canada will go bankrupt in 2008. But we’ll see what tomorrow brings.

Best day for PerpetualDiscounts since 2006-6-30 at latest, which is the earliest date for which I have convenient daily return figures. How ’bout them SunLifes, eh?

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30.
The Fixed-Reset index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater index.
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet N/A N/A N/A N/A 0 N/A N/A
Fixed-Floater 8.15% 8.19% 137,589 12.55 7 +2.9854% 655.3
Floater 7.36% 7.41% 94,465 12.04 2 +7.0109% 442.6
Op. Retract 5.44% 5.27% 169,660 3.95 14 +0.8548% 1,004.6
Split-Share 6.42% 11.07% 93,532 3.95 15 +1.4025% 968.6
Interest Bearing 9.40% 17.50% 58,851 2.76 3 +3.1991% 798.9
Perpetual-Premium N/A N/A N/A N/A N/A N/A N/A
Perpetual-Discount 7.48% 7.58% 248,661 11.90 71 +4.9072% 747.3
Fixed-Reset 5.96% 4.97% 1,013,355 14.95 18 +0.5626% 1,015.2
Major Price Changes
Issue Index Change Notes
RY.PR.B PerpetualDiscount +6.0366% Now with a pre-tax bid-YTW of 6.87% based on a bid of 17.39 and a limitMaturity. Closing quote 17.39-73. Day’s range of 17.00-75.
BNS.PR.K PerpetualDiscount +6.0699% Now with a pre-tax bid-YTW of 7.09% based on a bid of 17.30 and a limitMaturity. Closing quote 17.30-58, 5×7. Day’s range of 16.55-01.
CM.PR.I PerpetualDiscount +6.1786% Now with a pre-tax bid-YTW of 7.45% based on a bid of 15.81 and a limitMaturity. Closing quote 15.81-46, 1×1. Day’s range of 14.98-16.31.
DF.PR.A SplitShare +6.2963% Asset coverage of 1.3+:1 as of December 15 according to the company. Now with a pre-tax bid-YTW of 8.33% based on a bid of 8.61 and a hardMaturity 2014-12-1 at 10.00. Closing quote of 8.61-98, 2×5. Day’s range of 8.49-60.
BAM.PR.J OpRet +6.3401% Now with a pre-tax bid-YTW of 13.32% based on a bid of 14.76 and a softMaturity 2018-3-30. Closing quote of 14.76-15.80, 6×1. Day’s range of 14.00-15.80.
HSB.PR.C PerpetualDiscount +6.4309% Now with a pre-tax bid-YTW of 7.78% based on a bid of 16.55 and a limitMaturity. Closing quote 16.55-00, 13×3. Day’s range of 16.00-85.
BNS.PR.J PerpetualDiscount +6.4928% Now with a pre-tax bid-YTW of 6.99% based on a bid of 19.19 and a limitMaturity. Closing quote 19.19-54, 5×1. Day’s range of 19.00-55.
RY.PR.W PerpetualDiscount +6.5242% Now with a pre-tax bid-YTW of 6.57% based on a bid of 18.94 and a limitMaturity. Closing quote 18.94-99, 1×2. Day’s range of 18.00-19.00.
BAM.PR.B Floater +6.6313%  
MFC.PR.B PerpetualDiscount +6.6667% Now with a pre-tax bid-YTW of 6.87% based on a bid of 17.12 and a limitMaturity. Closing quote 17.12-75, 3×8. Day’s range of 16.60-17.75.
IAG.PR.A PerpetualDiscount +6.8563% Now with a pre-tax bid-YTW of 7.92% based on a bid of 14.65 and a limitMaturity. Closing quote 14.65-15.65 (!). Day’s range of 13.80-15.29.
RY.PR.F PerpetualDiscount +7.3472% Now with a pre-tax bid-YTW of 6.85% based on a bid of 16.51 and a limitMaturity. Closing quote 16.51-77, 3×10. Day’s range of 16.40-79.
BAM.PR.K Floater +7.3658%  
BAM.PR.M PerpetualDiscount +7.6923% Now with a pre-tax bid-YTW of 12.30% based on a bid of 9.80 and a limitMaturity. Closing quote 9.80-14, 12×3. Day’s range of 9.20-10.22.
PWF.PR.L PerpetualDiscount +8.0235% Now with a pre-tax bid-YTW of 7.88% based on a bid of 16.56 and a limitMaturity. Closing quote 16.56-25, 5×10. Day’s range of 16.00-49.
RY.PR.E PerpetualDiscount +8.2245% Now with a pre-tax bid-YTW of 6.90% based on a bid of 16.58 and a limitMaturity. Closing quote 16.58-76, 3×19. Day’s range of 15.60-16.70.
BAM.PR.N PerpetualDiscount +8.5271% Now with a pre-tax bid-YTW of 12.30% based on a bid of 9.80 and a limitMaturity. Closing quote 9.80-39, 1×3. Day’s range of 9.25-10.41.
SLF.PR.D PerpetualDiscount +8.6181% Now with a pre-tax bid-YTW of 8.62% based on a bid of 14.62 and a limitMaturity. Closing quote 14.62-85, 2×5. Day’s range of 13.99-80.
ELF.PR.F PerpetualDiscount +8.6708% Now with a pre-tax bid-YTW of 8.83% based on a bid of 15.10 and a limitMaturity. Closing quote 15.10-69, 10×15. Day’s range of 14.51-00.
GWO.PR.G PerpetualDiscount +8.9881% Now with a pre-tax bid-YTW of 7.57% based on a bid of 17.34 and a limitMaturity. Closing quote 17.34-97, 5×1. Day’s range of 16.13-18.40 (!).
SLF.PR.A PerpetualDiscount +9.8940% Now with a pre-tax bid-YTW of 7.71% based on a bid of 15.55 and a limitMaturity. Closing quote 15.55-09, 1×5. Day’s range of 14.31-15.75.
SLF.PR.C PerpetualDiscount +10.2206% Now with a pre-tax bid-YTW of 7.49% based on a bid of 14.99 and a limitMaturity. Closing quote 14.99-39, 5×5. Day’s range of 14.20-15.53.
MFC.PR.C PerpetualDiscount +10.3034% Now with a pre-tax bid-YTW of 6.5154% based on a bid of 17.45 and a limitMaturity. Closing quote 17.45-98, 2×13. Day’s range of 16.25-17.99.
SLF.PR.B PerpetualDiscount +11.4466% Now with a pre-tax bid-YTW of 7.63% based on a bid of 15.87 and a limitMaturity. Closing quote 15.87-00, 4×5. Day’s range of 14.53-15.87.
SLF.PR.E PerpetualDiscount +13.1835% Now with a pre-tax bid-YTW of 7.52% based on a bid of 15.11 and a limitMaturity. Closing quote 15.11-39, 1×4. Day’s range of 14.00-15.11.
Volume Highlights
Issue Index Volume Notes
SLF.PR.E PerpetualDiscount 50,525 Nesbitt crossed 40,000 at 14.90. Now with a pre-tax bid-YTW of 7.52% based on a bid of 15.11 and a limitMaturity.
BCE.PR.I FixFloat 45,922 RBC crossed 10,700 at 13.50, then another 10,000 at the same price.
CM.PR.H PerpetualDiscount 45,738 Now with a pre-tax bid-YTW of 7.55% based on a bid of 15.94 and a limitMaturity.
BNA.PR.C SplitShare 42,400 Now with a pre-tax bid-YTW of 19.81% based on a bid of 8.61 and a hardMaturity 2019-1-10 at 25.00.
BMO.PR.J PerpetualDiscount 34,046 Now with a pre-tax bid-YTW of 7.45% based on a bid of 15.36 and a limitMaturity.

There were twenty-seven other index-included $25-pv-equivalent issues trading over 10,000 shares today.

HIMIPref™ Preferred Indices: July 2008

Tuesday, December 30th, 2008
HIMI Index Values 2008-7-31
These values reflect the December 2008 Revision
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,457.6 N/A N/A N/A N/A N/A N/A
FixedFloater 2,076.7 8 2.00 4.67% 16.0 37M 4.67%
Floater 1,968.1 3 2.00 4.41% 16.6 72M 4.17%
OpRet 2,080.4 17 1.34 3.92% 4.2 68M 5.00%
SplitShare 2,068.0 15 2.00 5.45% 4.6 57M 5.36%
Interest-Bearing 2,656.9 2 2.00 6.38% 5.2 58M 6.25%
Perpetual-Premium 1,728.9 1 1.00 5.79% 2.3 74M 6.15%
Perpetual-Discount 1,527.2 70 1.25 6.23% 13.6 190M 6.26%
FixedReset 2,032.1 6 1.00 5.05% 4.6 1,172M 5.06%

For Index Revisions during July 2008, see the post HIMIPref™ Index Rebalancing: July 2008.

Publication of index details is embargoed for six months following index date.

Update, 2009-2-3: Index Details

Fed Buying up to $500-Billion in MBS

Tuesday, December 30th, 2008

The Federal Reserve has announced:

that it expects to begin operations in early January under the previously announced program to purchase mortgage-backed securities (MBS) and that it has selected private investment managers to act as its agents in implementing the program.

Under the MBS purchase program, the Federal Reserve will purchase MBS backed by Fannie Mae, Freddie Mac, and Ginnie Mae; the program is being established to support the mortgage and housing markets and to foster improved conditions in financial markets more generally.

Of great interest are the published FAQs:

How will purchases under the agency MBS program be financed?
Purchases will be financed through the creation of additional bank reserves.

It is not clear to me just what this means. Will the Fed be getting a deposit from Treasury, financed by sale of Treasuries? Or will they finance it via a bookkeeping entry, aka “printing money”?

One way or another, watching the Fed’s balance sheet has been a lot more interesting than normal lately!

Update, 2008-12-31: Another interesting thing about this is the lack of duration hedging. Players will often hedge the duration hedging of an MBS portfolio by taking market action in Treasuries and entering fixed-receive swaps:

As a consequence of record levels of refinancing in the second half of 2002 and the first half of 2003–which, by our estimates, encompassed roughly 45 percent of the total value of home mortgages outstanding–MBS duration fell to exceptionally low levels. As mortgage and other long-term rates rebounded last summer, a consequence of rapidly improving economic conditions and the fading of deflationary concerns, refinancing fell sharply, removing most downward pressure on duration. Holders of MBS endeavoring to hedge developing interest rate gaps rapidly shed receive-fixed swaps and Treasuries, and these actions markedly aggravated last summer’s long-term interest rate upturn.

There’s a comment on an unsigned blog:

Credit spreads on corporate debt have generally made yet another explosive move higher, as treasury yields have imploded in the recent blow-off move in government notes and bonds. Note in this context that we have once again a case of ‘unintended consequences’ at work here, as the implosion in treasury yields can be attributed directly to the Fed’s decision to [monetize] $800 bn. in MBS and ABS, forcing duration hedging of large MBS portfolios.