Archive for September, 2017

VNR.PR.A : Convert or Hold?

Friday, September 22nd, 2017

It will be recalled that VNR.PR.A will reset to 4.62% (paid on par) effective October 15.

Holders of VNR.PR.A have the option to convert to FloatingResets, VNR.PR.B, which will pay 3-month bills plus 281bp on the par value of $25.00, reset quarterly. The deadline for notifying the company of the intent to convert is 5:00 p.m. (Eastern Standard Time) on September 29, 2017; but note that this is a company deadline and that brokers will generally set their deadlines a day or two in advance, so there’s not much time to lose if you’re planning to convert! However, if you miss the brokerage deadline they’ll probably do it on a ‘best efforts’ basis if you grovel in a sufficiently entertaining fashion. The ticker for the new FloatingReset, if it is issued, will be VNR.PR.B.

VNR.PR.A is a FixedReset, 4.35%+281, that commenced trading 2012-6-6 after being announced 2012-5-15. The issue is tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., VNR.PR.A and the FloatingReset, VNR.PR.B, that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_fr_170922
Click for Big

The market appears to have a distaste at the moment for floating rate product; most of the implied rates until the next interconversion are lower than the current 3-month bill rate and the averages for investment-grade and junk issues are both well below current market rates, at +0.71% and +0.69%, respectively! Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the VNR.PR.A FixedReset, we may construct the following table showing consistent prices for its maybe-soon-to-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for VNR.PR.A) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread +1.00% +0.50% 0.00%
VNR.PR.A 22.92 281bp 22.10 21.60 21.09

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to be cheap and trading below the price of their FixedReset counterparts. Therefore, I recommend that holders of VNR.PR.A continue to hold the issue and not to convert. I will note that, given the apparent cheapness of the FloatingResets, it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the new pair will reflect these conditions.

September 22, 2017

Friday, September 22nd, 2017
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 0.7759 % 2,417.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.7759 % 4,435.6
Floater 3.92 % 3.93 % 102,055 17.58 3 0.7759 % 2,556.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.0264 % 3,064.7
SplitShare 4.76 % 4.83 % 90,941 4.43 6 0.0264 % 3,659.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0264 % 2,855.6
Perpetual-Premium 5.43 % 4.93 % 55,566 6.00 16 -0.0470 % 2,775.9
Perpetual-Discount 5.37 % 5.42 % 71,238 14.71 19 0.0366 % 2,892.2
FixedReset 4.36 % 4.62 % 153,055 6.21 99 0.1225 % 2,408.8
Deemed-Retractible 5.14 % 5.69 % 99,899 6.06 31 -0.0420 % 2,852.9
FloatingReset 2.85 % 2.96 % 49,972 4.09 8 0.1530 % 2,654.1
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-22
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 3.90 %
IAG.PR.A Deemed-Retractible 1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.26
Bid-YTW : 6.52 %
PWF.PR.P FixedReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-22
Maturity Price : 17.27
Evaluated at bid price : 17.27
Bid-YTW : 4.72 %
TRP.PR.F FloatingReset 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-22
Maturity Price : 19.92
Evaluated at bid price : 19.92
Bid-YTW : 3.65 %
TRP.PR.A FixedReset 2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-22
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 4.63 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.H FixedReset 203,863 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 3.89 %
BNS.PR.H FixedReset 184,568 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 3.84 %
MFC.PR.R FixedReset 178,550 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.12 %
MFC.PR.F FixedReset 165,422 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.10
Bid-YTW : 8.54 %
RY.PR.D Deemed-Retractible 141,361 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-22
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : -3.74 %
CM.PR.R FixedReset 135,100 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.34
Bid-YTW : 4.43 %
TD.PR.Y FixedReset 102,600 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 3.67 %
BMO.PR.R FloatingReset 100,500 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.38
Bid-YTW : 3.21 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.E FixedReset Quote: 22.30 – 22.60
Spot Rate : 0.3000
Average : 0.1959

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-22
Maturity Price : 22.07
Evaluated at bid price : 22.30
Bid-YTW : 4.74 %

TRP.PR.K FixedReset Quote: 25.78 – 26.00
Spot Rate : 0.2200
Average : 0.1387

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.26 %

IFC.PR.F Deemed-Retractible Quote: 24.45 – 24.73
Spot Rate : 0.2800
Average : 0.2055

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.45
Bid-YTW : 5.80 %

BMO.PR.W FixedReset Quote: 21.88 – 22.05
Spot Rate : 0.1700
Average : 0.1046

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-22
Maturity Price : 21.51
Evaluated at bid price : 21.88
Bid-YTW : 4.60 %

TRP.PR.F FloatingReset Quote: 19.92 – 20.40
Spot Rate : 0.4800
Average : 0.4187

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-22
Maturity Price : 19.92
Evaluated at bid price : 19.92
Bid-YTW : 3.65 %

RY.PR.Q FixedReset Quote: 26.55 – 26.70
Spot Rate : 0.1500
Average : 0.0960

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 26.55
Bid-YTW : 3.82 %

September 21, 2017

Thursday, September 21st, 2017

Ash Alankar has an interesting piece on Bloomberg about Treasury / Junk decoupling:

The Treasury yield curve has inverted ahead of the past six downturns going back to the 1960s, including prior to the last two recessions in 2000 and 2006. But that was before the era of central bank quantitative easing. Years of unconventional monetary accommodation have led to many market distortions, one of which has been the disappearing term premium, which measures the extra compensation investors need to own long-term bonds instead of continuously rolling over short-term debt. By guaranteeing unprecedented levels of liquidity through its asset purchases, the so-called Fed put has taken risk out of the system and the term premium along with it.

But [the flattened yield curve] should not be a reason for concern, because all the above distortions mean the shape of the Treasury yield curve is no longer a reliable indicator of an impending recession. A much truer assessment of the threat of a slowdown can be gleaned from the high-yield credit curve, where the impact of central bank policy is much less pronounced.

The spread between two- and five-year Treasuries is less than half the average since the end of the global financial crisis, at 41 basis points versus a mean of 90 basis points. By contrast, the extra yield enjoyed by sellers of five-year high-yield credit default swaps versus two-year high-yield credit default swaps stands 30 basis points higher than the average.

treasury_2_5_spread_170921
Click for Big
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 -0.4448 % 2,398.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4448 % 4,401.5
Floater 3.95 % 3.95 % 101,632 17.54 3 -0.4448 % 2,536.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.1457 % 3,063.9
SplitShare 4.76 % 4.83 % 85,169 4.44 6 0.1457 % 3,658.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1457 % 2,854.8
Perpetual-Premium 5.43 % 4.86 % 56,055 6.00 16 0.1093 % 2,777.2
Perpetual-Discount 5.37 % 5.43 % 72,179 14.70 19 0.3061 % 2,891.1
FixedReset 4.36 % 4.62 % 154,521 6.22 99 0.0502 % 2,405.9
Deemed-Retractible 5.14 % 5.60 % 100,302 6.06 31 0.1059 % 2,854.1
FloatingReset 2.86 % 2.97 % 50,404 4.09 8 0.2300 % 2,650.1
Performance Highlights
Issue Index Change Notes
MFC.PR.G FixedReset -1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.33
Bid-YTW : 5.36 %
SLF.PR.J FloatingReset 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.02
Bid-YTW : 8.27 %
TRP.PR.B FixedReset 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 15.83
Evaluated at bid price : 15.83
Bid-YTW : 4.69 %
W.PR.H Perpetual-Discount 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 24.50
Evaluated at bid price : 24.75
Bid-YTW : 5.65 %
HSE.PR.A FixedReset 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 16.70
Evaluated at bid price : 16.70
Bid-YTW : 4.98 %
SLF.PR.G FixedReset 1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.45
Bid-YTW : 8.44 %
TRP.PR.F FloatingReset 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 19.62
Evaluated at bid price : 19.62
Bid-YTW : 3.70 %
BAM.PR.T FixedReset 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 20.44
Evaluated at bid price : 20.44
Bid-YTW : 4.87 %
PWF.PR.P FixedReset 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 4.77 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.H FixedReset 805,473 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 3.88 %
RY.PR.F Deemed-Retractible 266,677 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-21
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : -0.64 %
RY.PR.C Deemed-Retractible 246,875 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-21
Maturity Price : 25.00
Evaluated at bid price : 25.21
Bid-YTW : -1.32 %
BNS.PR.B FloatingReset 205,800 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.74
Bid-YTW : 2.90 %
BMO.PR.C FixedReset 174,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.39
Bid-YTW : 4.23 %
TD.PF.G FixedReset 118,300 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.86
Bid-YTW : 3.53 %
TRP.PR.K FixedReset 117,250 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : 4.27 %
RY.PR.R FixedReset 117,060 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 3.76 %
CM.PR.P FixedReset 115,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 21.55
Evaluated at bid price : 21.94
Bid-YTW : 4.61 %
RY.PR.A Deemed-Retractible 102,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-21
Maturity Price : 25.00
Evaluated at bid price : 25.21
Bid-YTW : -1.60 %
BAM.PR.T FixedReset 102,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 20.44
Evaluated at bid price : 20.44
Bid-YTW : 4.87 %
RY.PR.D Deemed-Retractible 101,075 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-21
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : -3.42 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSE.PR.C FixedReset Quote: 23.37 – 23.95
Spot Rate : 0.5800
Average : 0.3508

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 23.07
Evaluated at bid price : 23.37
Bid-YTW : 5.23 %

IAG.PR.G FixedReset Quote: 22.65 – 23.11
Spot Rate : 0.4600
Average : 0.3180

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 5.66 %

MFC.PR.G FixedReset Quote: 23.33 – 23.61
Spot Rate : 0.2800
Average : 0.1800

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.33
Bid-YTW : 5.36 %

TRP.PR.F FloatingReset Quote: 19.62 – 20.07
Spot Rate : 0.4500
Average : 0.3514

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 19.62
Evaluated at bid price : 19.62
Bid-YTW : 3.70 %

EML.PR.A FixedReset Quote: 26.20 – 26.74
Spot Rate : 0.5400
Average : 0.4496

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 4.19 %

TRP.PR.A FixedReset Quote: 19.53 – 19.94
Spot Rate : 0.4100
Average : 0.3230

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-21
Maturity Price : 19.53
Evaluated at bid price : 19.53
Bid-YTW : 4.73 %

September 20, 2017

Wednesday, September 20th, 2017

PerpetualDiscounts now yield 5.43%, equivalent to 7.06% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.05%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 300bp, a significant tightening from the 310bp reported September 13.

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 -1.1569 % 2,409.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.1569 % 4,421.2
Floater 3.93 % 3.93 % 105,045 17.57 3 -1.1569 % 2,547.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1851 % 3,059.4
SplitShare 4.77 % 4.81 % 85,529 4.43 6 -0.1851 % 3,653.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1851 % 2,850.7
Perpetual-Premium 5.42 % 4.87 % 54,541 6.00 16 0.0791 % 2,774.2
Perpetual-Discount 5.38 % 5.43 % 66,867 14.63 19 -0.1303 % 2,882.3
FixedReset 4.36 % 4.62 % 156,212 6.22 99 0.0091 % 2,404.7
Deemed-Retractible 5.15 % 5.71 % 101,220 6.06 31 -0.0705 % 2,851.1
FloatingReset 2.87 % 2.97 % 51,542 4.09 8 -0.0110 % 2,644.0
Performance Highlights
Issue Index Change Notes
BAM.PR.K Floater -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 14.19
Evaluated at bid price : 14.19
Bid-YTW : 3.94 %
BAM.PR.B Floater -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 14.23
Evaluated at bid price : 14.23
Bid-YTW : 3.93 %
CU.PR.E Perpetual-Discount -1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 22.44
Evaluated at bid price : 22.80
Bid-YTW : 5.41 %
BAM.PR.T FixedReset -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 4.93 %
VNR.PR.A FixedReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 22.12
Evaluated at bid price : 22.73
Bid-YTW : 5.15 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.E FixedReset 154,326 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 21.72
Evaluated at bid price : 22.19
Bid-YTW : 4.74 %
TD.PF.G FixedReset 104,493 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.82
Bid-YTW : 3.57 %
BNS.PR.B FloatingReset 104,200 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.74
Bid-YTW : 2.90 %
BAM.PF.J FixedReset 102,247 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.13
Bid-YTW : 4.68 %
BNS.PR.E FixedReset 92,852 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.74
Bid-YTW : 3.68 %
TRP.PR.J FixedReset 90,507 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 3.91 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.B FixedReset Quote: 15.65 – 16.49
Spot Rate : 0.8400
Average : 0.4946

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 15.65
Evaluated at bid price : 15.65
Bid-YTW : 4.75 %

EML.PR.A FixedReset Quote: 26.20 – 26.75
Spot Rate : 0.5500
Average : 0.3506

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 4.19 %

BAM.PR.T FixedReset Quote: 20.15 – 20.54
Spot Rate : 0.3900
Average : 0.2363

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 4.93 %

PVS.PR.E SplitShare Quote: 25.60 – 26.00
Spot Rate : 0.4000
Average : 0.2733

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.60
Bid-YTW : 5.04 %

CU.PR.E Perpetual-Discount Quote: 22.80 – 23.23
Spot Rate : 0.4300
Average : 0.3127

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-20
Maturity Price : 22.44
Evaluated at bid price : 22.80
Bid-YTW : 5.41 %

MFC.PR.O FixedReset Quote: 26.76 – 27.05
Spot Rate : 0.2900
Average : 0.1973

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.76
Bid-YTW : 3.61 %

September 19, 2017

Tuesday, September 19th, 2017

Bloomberg ran a piece by Maciej Onoszko regarding the Canadian term spread:

The premium investors demand to hold 30-year bonds over two-year securities shrank to as little as 82 basis points this month, the least since 2008, as yields on shorter maturities shot up to a six-year high after the Bank of Canada tightened policy twice in a row. Yields on longer-maturity bonds remain depressed and are trading close to their six-year average.

canada_230_spread_170919
Click for Big
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 1.0521 % 2,437.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.0521 % 4,472.9
Floater 3.89 % 3.88 % 106,331 17.68 3 1.0521 % 2,577.8
OpRet 0.00 % 0.00 % 0 0.00 0 0.1191 % 3,065.1
SplitShare 4.76 % 4.82 % 86,793 4.44 6 0.1191 % 3,660.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1191 % 2,856.0
Perpetual-Premium 5.43 % 4.89 % 54,640 6.00 16 0.0569 % 2,772.0
Perpetual-Discount 5.38 % 5.43 % 64,170 14.63 19 0.0183 % 2,886.1
FixedReset 4.36 % 4.61 % 157,388 6.22 99 0.0711 % 2,404.5
Deemed-Retractible 5.14 % 5.65 % 101,530 6.07 31 0.1522 % 2,853.1
FloatingReset 2.87 % 2.97 % 52,329 4.09 8 -0.0219 % 2,644.3
Performance Highlights
Issue Index Change Notes
BMO.PR.Y FixedReset 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 22.93
Evaluated at bid price : 23.88
Bid-YTW : 4.60 %
BAM.PR.B Floater 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 14.42
Evaluated at bid price : 14.42
Bid-YTW : 3.88 %
BAM.PR.K Floater 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 14.39
Evaluated at bid price : 14.39
Bid-YTW : 3.89 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PF.J FixedReset 174,010 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 4.71 %
MFC.PR.L FixedReset 170,048 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.98
Bid-YTW : 6.80 %
RY.PR.B Deemed-Retractible 148,450 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-19
Maturity Price : 25.00
Evaluated at bid price : 25.09
Bid-YTW : 4.41 %
BNS.PR.B FloatingReset 130,369 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.73
Bid-YTW : 2.91 %
BNS.PR.A FloatingReset 104,900 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-25
Maturity Price : 25.00
Evaluated at bid price : 24.97
Bid-YTW : 2.77 %
NA.PR.W FixedReset 103,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 21.39
Evaluated at bid price : 21.71
Bid-YTW : 4.69 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.E FixedReset Quote: 22.12 – 22.45
Spot Rate : 0.3300
Average : 0.2156

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 21.68
Evaluated at bid price : 22.12
Bid-YTW : 4.76 %

VNR.PR.A FixedReset Quote: 22.44 – 22.75
Spot Rate : 0.3100
Average : 0.2413

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 21.93
Evaluated at bid price : 22.44
Bid-YTW : 5.22 %

PWF.PR.F Perpetual-Discount Quote: 24.48 – 24.70
Spot Rate : 0.2200
Average : 0.1628

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 24.22
Evaluated at bid price : 24.48
Bid-YTW : 5.43 %

BAM.PR.N Perpetual-Discount Quote: 21.25 – 21.47
Spot Rate : 0.2200
Average : 0.1688

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.62 %

MFC.PR.F FixedReset Quote: 17.02 – 17.20
Spot Rate : 0.1800
Average : 0.1323

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.02
Bid-YTW : 8.60 %

HSE.PR.A FixedReset Quote: 16.49 – 16.89
Spot Rate : 0.4000
Average : 0.3528

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-19
Maturity Price : 16.49
Evaluated at bid price : 16.49
Bid-YTW : 5.04 %

PVS.PR.F Soft on Modest Volume

Monday, September 18th, 2017

Partners Value Split Corp. has announced (although not yet on their website; maybe not ever on their website, since the lazy turds haven’t even published the new issue announcement yet):

the completion of its previously announced issue of 6,000,000 Class AA Preferred Shares, Series 8 (the “Series 8 Preferred Shares”) at an offering price of $25.00 per Series 8 Preferred Share, raising gross proceeds of $150,000,000. The Series 8 Preferred Shares carry quarterly fixed cumulative preferential dividends representing a 4.80% annualized yield on the offering price and have a final maturity of September 30, 2024. The Series 8 Preferred Shares have been listed and posted for trading on the Toronto Stock Exchange under the symbol PVS.PR.F. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA Preferred Shares, Series 5 (the “Series 5 Preferred Shares”) on December 10, 2017 in accordance with the terms of the Series 5 Preferred Shares and to pay a special dividend to holders of the Company’s capital shares.

Prior to the closing of the offering, the Company subdivided the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

The Company owns a portfolio consisting of 79,740,966 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Shares. Brookfield Asset Management Inc. is a global alternative asset manager with over US$250 billion in assets under management. For more than 100 years Brookfield has owned and operated assets on behalf of shareholders and clients with a focus on property, renewable energy, infrastructure and private equity. Brookfield has a range of public and private investment products and services which leverage its expertise and experience. Brookfield Shares are co-listed on the New York Stock Exchange under the symbol “BAM”, the TSX under the symbol “BAM.A” and the NYSE Euronext under the symbol “BAMA”.

David Clare, Vice President, will be available at (647) 503-6516 to answer any questions regarding the offering.

PVS.PR.F is a SplitShare, 4.80%, maturing 2024-9-30, announced 2017-09-07. It will be tracked by HIMIPref™ and has been assigned to the SplitShare subindex.

The issue traded 234,295 shares today in a range of 24.79-98 before closing at 24.93-94. Vital statistics are:

PVS.PR.F SplitShare YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 24.93
Bid-YTW : 4.86 %

The issue’s rating has been finalized at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) assigned a new rating of Pfd-2 (low) to the Class AA Preferred Shares, Series 8 (the Series 8 Preferred Shares) to be issued by Partners Value Split Corp. (the Company) and confirmed the ratings of the previously issued Class AA Preferred Shares, Series 3 (the Series 3 Preferred Shares); Class AA Preferred Shares, Series 5 (the Series 5 Preferred Shares); Class AA Preferred Shares, Series 6 (the Series 6 Preferred Shares); Class AA Preferred Shares, Series 7 (the Series 7 Preferred Shares; collectively, the Class AA Preferred Shares) at Pfd-2 (low).

Proceeds from the Series 8 Preferred Share offering will be used to fund the redemptions of the previously issued Series 5 Preferred Shares no later than their scheduled maturity date of December 10, 2017. To the extent that net proceeds from the offering exceed funding requirements associated with the redemptions, the Company will distribute such net proceeds to holders of the Capital Shares as a special dividend.

September 18, 2017

Monday, September 18th, 2017
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 -0.5580 % 2,412.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.5580 % 4,426.3
Floater 3.93 % 3.92 % 106,931 17.59 3 -0.5580 % 2,550.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1899 % 3,061.4
SplitShare 4.76 % 4.81 % 86,270 4.45 6 -0.1899 % 3,656.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1899 % 2,852.6
Perpetual-Premium 5.43 % 4.93 % 55,052 6.11 16 -0.0074 % 2,770.4
Perpetual-Discount 5.38 % 5.43 % 63,852 14.63 19 -0.0251 % 2,885.6
FixedReset 4.36 % 4.63 % 146,072 6.22 99 0.0316 % 2,402.8
Deemed-Retractible 5.15 % 5.72 % 97,412 6.06 31 -0.0937 % 2,848.8
FloatingReset 2.86 % 2.97 % 48,441 4.10 8 0.2690 % 2,644.9
Performance Highlights
Issue Index Change Notes
MFC.PR.N FixedReset 1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.99
Bid-YTW : 6.08 %
BMO.PR.S FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-18
Maturity Price : 22.17
Evaluated at bid price : 22.51
Bid-YTW : 4.62 %
TRP.PR.B FixedReset 1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-18
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 4.79 %
Volume Highlights
Issue Index Shares
Traded
Notes
PVS.PR.F SplitShare 234,295 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 24.93
Bid-YTW : 4.86 %
BMO.PR.D FixedReset 209,210 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-08-25
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 4.63 %
BMO.PR.C FixedReset 102,720 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.35 %
TD.PR.T FloatingReset 100,800 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 2.84 %
TD.PF.I FixedReset 88,400 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.43 %
BAM.PF.J FixedReset 75,039 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 4.70 %
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.X FixedReset Quote: 17.27 – 17.70
Spot Rate : 0.4300
Average : 0.2814

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-18
Maturity Price : 17.27
Evaluated at bid price : 17.27
Bid-YTW : 4.93 %

IAG.PR.G FixedReset Quote: 22.65 – 23.05
Spot Rate : 0.4000
Average : 0.2841

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 5.66 %

IFC.PR.C FixedReset Quote: 22.15 – 22.50
Spot Rate : 0.3500
Average : 0.2418

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.15
Bid-YTW : 5.75 %

PWF.PR.L Perpetual-Discount Quote: 23.37 – 23.70
Spot Rate : 0.3300
Average : 0.2257

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-18
Maturity Price : 23.11
Evaluated at bid price : 23.37
Bid-YTW : 5.53 %

GWO.PR.G Deemed-Retractible Quote: 24.10 – 24.41
Spot Rate : 0.3100
Average : 0.2108

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 5.82 %

CU.PR.H Perpetual-Discount Quote: 24.60 – 25.00
Spot Rate : 0.4000
Average : 0.3152

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-09-18
Maturity Price : 24.19
Evaluated at bid price : 24.60
Bid-YTW : 5.36 %

AX.PR.A : No Conversion to FloatingReset

Monday, September 18th, 2017

Artis Real Estate Investment Trust has announced:

that it has determined, based upon the election of holders of Preferred Units, Series A (“Series A Units”) (AX.PR.A), that less than 500,000 Series B Units would be issued on September 30, 2017 and consequently, no holders of Series A Units are entitled to reclassify their Series A Units to Series B Units on September 30, 2017.

Accordingly, all 3,450,000 Series A Units will remain issued and outstanding following September 30, 2017 and during the subsequent five year period commencing October 1, 2017, holders will be entitled to receive distributions, if, as and when declared by the Board of Trustees of Artis, in an annual amount per Series A Unit determined by multiplying the Annual Fixed Distribution Rate of 5.662% per annum by $25.00, payable quarterly on the last business day of each of March, June, September and December in each year during such period.

It will be recalled that AX.PR.A will reset to 5.662% and that I recommended against conversion.

As a result of all this AX.PR.A is a FixedReset, 5.662%+406, that was announced 2012-7-24 with a 5.25% coupon but only added to HIMIPref™ when the issue was rated by DBRS in 2013. It is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

It is important to note that according to the prospectus supplement (available at SEDAR dated July 25, 2012; I am not permitted to link to it directly due to the cosy little contract the soon-to-be-bank-owned CDS has signed with regulators), taxation is complicated: “Artis’ income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Preferred Units in the same proportion as the distributions received by such holders.” Particulars of the tax status of Artis’ distributions are published by Artis on their website.

TA.PR.H : No Conversion to FloatingReset

Monday, September 18th, 2017

TransAlta Corporation has announced:

that after taking into account all election notices received by the September 15, 2017 deadline for the conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series E (the “Series E Shares”) into Cumulative Redeemable Floating Rate Preferred Shares, Series F (the “Series F Shares”), there were 133,969 Series E Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series F Shares. As a result, none of the Series E Shares will be converted into Series F Shares on September 30, 2017.

It will be recalled that TA.PR.H will reset at 5.194% and that I recommended against conversion.

As a result of all this TA.PR.H is now a FixedReset, 5.194%+365, that commenced trading 2012-8-10 with a 5.00% coupon after being announced 2012-8-2. The issue is tracked by HIMIPref™ but has been assigned to the Scraps index on credit concerns.

VSN.PR.A : No Conversion to FloatingReset

Monday, September 18th, 2017

Veresen Inc. has announced:

that, after having taken into account all conversion notices received from holders of its outstanding Cumulative Redeemable Preferred Shares, Series A (“Series A Shares”) by the September 15, 2017 deadline for the conversion of the Series A Shares into Cumulative Redeemable Preferred Shares, Series B (“Series B Shares”), less than the 1,000,000 Series A Shares required to give effect to conversions into Series B Shares were tendered for conversion. As a result, none of Veresen’s Series A Shares will be converted into Series B Shares on September 30, 2017.

It will be recalled that VSN.PR.A will reset at 4.464% and that I recommended against conversion.

After all of this, VSN.PR.A is a FixedReset, 4.464%+292, that commenced trading 2012-2-14 with a 4.40% coupon after being announced 2012-2-3. The issue is tracked by HIMIPref™ but has been assigned to the Scraps index on credit concerns. As noted in the earlier press release, there is an exchange offer from PPL outstanding that will take effect on closing of the Plan of Arrangement between the companies.