Archive for February, 2018

February 16, 2018

Friday, February 16th, 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 1.2738 % 2,976.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.2738 % 5,460.8
Floater 3.34 % 3.54 % 82,208 18.38 4 1.2738 % 3,147.1
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0469 % 3,135.7
SplitShare 4.68 % 4.59 % 65,952 4.10 5 -0.0469 % 3,744.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0469 % 2,921.8
Perpetual-Premium 5.44 % 4.92 % 66,456 14.42 20 -0.0598 % 2,832.2
Perpetual-Discount 5.41 % 5.36 % 84,081 14.83 14 -0.2214 % 2,938.6
FixedReset 4.24 % 4.57 % 157,189 4.26 101 -0.0337 % 2,520.2
Deemed-Retractible 5.13 % 5.74 % 91,655 5.74 28 0.1082 % 2,911.5
FloatingReset 3.08 % 3.04 % 37,370 3.72 10 -0.0130 % 2,764.2
Performance Highlights
Issue Index Change Notes
BAM.PR.N Perpetual-Discount -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 5.73 %
BAM.PF.C Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 21.58
Evaluated at bid price : 21.58
Bid-YTW : 5.71 %
MFC.PR.B Deemed-Retractible 1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.27
Bid-YTW : 6.83 %
MFC.PR.M FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 5.10 %
MFC.PR.C Deemed-Retractible 1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.55
Bid-YTW : 7.24 %
BAM.PR.B Floater 1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 3.54 %
MFC.PR.F FixedReset 1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.02
Bid-YTW : 7.34 %
SLF.PR.J FloatingReset 1.49 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.80
Bid-YTW : 6.44 %
PWF.PR.A Floater 2.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 2.88 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.Z FixedReset 258,076 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.96
Bid-YTW : 4.71 %
NA.PR.A FixedReset 104,819 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-15
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 3.96 %
PWF.PR.P FixedReset 80,621 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 19.74
Evaluated at bid price : 19.74
Bid-YTW : 4.40 %
BNS.PR.A FloatingReset 80,000 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-04-25
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 1.08 %
MFC.PR.F FixedReset 72,100 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.02
Bid-YTW : 7.34 %
TD.PF.C FixedReset 69,097 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 22.91
Evaluated at bid price : 23.25
Bid-YTW : 4.59 %
There were 31 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.F FloatingReset Quote: 20.77 – 21.20
Spot Rate : 0.4300
Average : 0.3212

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 20.77
Evaluated at bid price : 20.77
Bid-YTW : 3.82 %

CU.PR.D Perpetual-Discount Quote: 23.19 – 23.50
Spot Rate : 0.3100
Average : 0.2021

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-16
Maturity Price : 22.75
Evaluated at bid price : 23.19
Bid-YTW : 5.28 %

HSE.PR.G FixedReset Quote: 25.07 – 25.35
Spot Rate : 0.2800
Average : 0.1750

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 4.77 %

GWO.PR.H Deemed-Retractible Quote: 22.68 – 22.98
Spot Rate : 0.3000
Average : 0.2050

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.68
Bid-YTW : 6.69 %

SLF.PR.A Deemed-Retractible Quote: 22.47 – 22.78
Spot Rate : 0.3100
Average : 0.2206

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.47
Bid-YTW : 6.75 %

PVS.PR.B SplitShare Quote: 25.33 – 25.66
Spot Rate : 0.3300
Average : 0.2494

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 25.33
Bid-YTW : 3.83 %

February 15, 2018

Thursday, February 15th, 2018

Most central banks cherish their independence; the Bank of Canada is not so defiant:

The Bank of Canada is facing a series of emerging risks that could make monetary policy less effective when the next shock hits, deputy governor Lawrence Schembri warned in a speech Thursday to the Manitoba Association for Business Economists.

Higher levels of household and government debt, a long-term decline in interest rates and slow growth are all making the job of central banks more difficult, Mr. Schembri pointed out. Real – or after-inflation – interest rates have slumped to near zero from more than 6 per cent in the early 1990s.

Among the options on the table to strengthen the bank’s “monetary policy framework” is to have “more explicit” co-ordination of interest rate moves with government spending plans, he said.

“The experience during the crisis, when both aggressive monetary and fiscal stimulus were used, highlighted the benefits of simultaneous policy action,” Mr. Schembri explained.

Mr. Schembri acknowledged, however, that the prospect of the independent central bank working more closely with the federal government raises “governance issues” for both Ottawa and the bank.

James Coyne is spinning in his grave. Surprisingly, his obituary provides a better description of ‘The Coyne Affair’ than Wikipedia.

All good things come from conflict. In Canada, we have conflict between the government and the opposition; between the Commons and Senate; between the feds and the provinces; between the politicians and the judiciary; lots of conflict, albeit less dramatic than the more formalized conflict of the States. The country needs conflict, lots of it, between the government and the central bank: the Coyne Affair was an excellent example of this. It is very sad that Coyne’s defining contribution to the country’s welfare was not mentioned in Schembri’s speech.

Oh, well. At least some Canadian traditions continue:

A shortage of rail cars in Canada is leaving grain and oil shipments stranded on the Prairies, sending crude prices plummeting and leaving farmers in a cash crunch.

The nation’s biggest railways haven’t been able to deliver enough cars after harsh winter conditions and as a sudden boom in energy production sparked a swell of demand. Some farmers have been waiting for months to deliver wheat and canola to elevators before they can get paid. The squeeze also means that crude supplies are piling up in Alberta, pushing prices to the biggest discount relative to New York futures in more than four years.

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 -0.0140 % 2,938.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.0140 % 5,392.2
Floater 3.38 % 3.58 % 75,829 18.29 4 -0.0140 % 3,107.5
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1794 % 3,137.2
SplitShare 4.68 % 4.60 % 62,853 4.10 5 -0.1794 % 3,746.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1794 % 2,923.1
Perpetual-Premium 5.44 % 4.92 % 67,060 14.28 20 -0.0956 % 2,833.9
Perpetual-Discount 5.40 % 5.36 % 84,124 14.83 14 -0.2020 % 2,945.2
FixedReset 4.24 % 4.55 % 156,988 4.26 101 0.0976 % 2,521.0
Deemed-Retractible 5.14 % 5.69 % 92,596 5.75 28 -0.0931 % 2,908.4
FloatingReset 3.08 % 3.07 % 37,738 3.73 10 0.2528 % 2,764.6
Performance Highlights
Issue Index Change Notes
MFC.PR.C Deemed-Retractible -1.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.29
Bid-YTW : 7.45 %
PVS.PR.F SplitShare -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.40
Bid-YTW : 4.71 %
BAM.PR.R FixedReset 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-15
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 4.94 %
BAM.PR.X FixedReset 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-15
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 4.94 %
TRP.PR.H FloatingReset 1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-15
Maturity Price : 17.35
Evaluated at bid price : 17.35
Bid-YTW : 3.64 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.R FixedReset 284,419 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.44
Bid-YTW : 3.73 %
BNS.PR.Q FixedReset 169,243 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.98
Bid-YTW : 3.83 %
TD.PR.S FixedReset 157,774 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 3.77 %
PWF.PR.A Floater 68,784 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-15
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 2.95 %
MFC.PR.H FixedReset 51,000 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 5.36 %
SLF.PR.E Deemed-Retractible 44,800 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 7.24 %
There were 36 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BIP.PR.D FixedReset Quote: 25.18 – 25.49
Spot Rate : 0.3100
Average : 0.1799

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 5.00 %

TRP.PR.G FixedReset Quote: 24.07 – 24.60
Spot Rate : 0.5300
Average : 0.4023

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-15
Maturity Price : 23.04
Evaluated at bid price : 24.07
Bid-YTW : 4.96 %

MFC.PR.C Deemed-Retractible Quote: 21.29 – 21.70
Spot Rate : 0.4100
Average : 0.2887

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.29
Bid-YTW : 7.45 %

PWF.PR.O Perpetual-Premium Quote: 25.39 – 25.68
Spot Rate : 0.2900
Average : 0.1892

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-17
Maturity Price : 25.25
Evaluated at bid price : 25.39
Bid-YTW : 1.67 %

PWF.PR.L Perpetual-Discount Quote: 23.40 – 23.75
Spot Rate : 0.3500
Average : 0.2494

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-15
Maturity Price : 23.14
Evaluated at bid price : 23.40
Bid-YTW : 5.49 %

CU.PR.I FixedReset Quote: 25.43 – 25.80
Spot Rate : 0.3700
Average : 0.2721

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 25.43
Bid-YTW : 3.79 %

L.PR.B : DBRS Reduces Trend to “Stable”

Thursday, February 15th, 2018

DBRS has announced that it has:

confirmed the ratings of Loblaw Companies Limited (Loblaw) and Shoppers Drug Mart Corporation (guaranteed by Loblaw) at BBB after the announcement that Choice Properties Real Estate Investment Trust (CP REIT; rated BBB by DBRS) has entered into an agreement to acquire the assets and assume the liabilities of Canadian Real Estate Investment Trust (CREIT; the Acquisition). The trend on the ratings has been changed to Stable from Positive.

CP REIT is expected to acquire the assets of CREIT for a total value of approximately $6 billion, forming the largest real estate investment trust (REIT) in Canada with a combined gross leasable area of approximately 69 million square feet and pro forma net operating income of approximately $889 million. The Acquisition is expected to be financed using a combination of CP REIT units, the assumption of existing CREIT indebtedness (nearly $1.5 billion of mortgage debt and $450 million unsecured debentures) and incremental debt in the form of a $1.25 billion term loan facility, as well as an $850 million bridge facility.

The trend change to Stable from Positive reflects the increase in leverage attributable to Loblaw and CP REIT (estimated by DBRS at approximately 3.66 times (x) lease-adjusted debt-to-adjusted EBITDAR pro forma the Acquisition versus 3.04x for the last 12 months ended Q3 2017) as a result of the Acquisition and the Company’s ongoing litigation related to tax avoidance claims by the Canada Revenue Agency, combined with ongoing uncertainty surrounding the possible impacts of lawsuits, settlements and other costs related to the bread price-fixing investigation by the Competition Bureau. These factors have been considered in conjunction with headwinds faced by the retail business in 2018 from minimum wage increases and recently announced and possible additional generic-drug pricing and health-care reforms.

If DBRS becomes confident that the ultimate impact of the bread-price fixing investigation and its related costs, as well as the ongoing tax litigation, will not have a material impact on Loblaw, including any effects on future profitability; that the Company’s operating performance will remain sound (in particular the Company’s ability to offset the effects of the minimum wage increase and generic drug pricing reforms in the near term and its capacity to continue to deliver same-store sales and EBITDA growth over the medium term); and credit metrics improve toward the new range considered appropriate for the BBB (high) rating category (i.e., lease-adjusted debt-to-adjusted EBITDAR below 3.50x), a positive rating action could result.

The only affected issue is L.PR.B. Note that DBRS confirmed Weston, Loblaws’ parent, at Pfd-3 [stable] in November, 2017, and there was no further announcement on the Weston issues today.

BCE.PR.C / BCE.PR.D : Convert or Hold?

Wednesday, February 14th, 2018

As previously reported, BCE.PR.C will reset to 4.38% effective 2018-03-01. Prior to the reset announcement, conversion notices were sent to holders of BCE.PR.C and BCE.PR.D. Holders have until 5:00 p.m. (Eastern time) on February 19, 2018 to communicate a desire to exchange to the company (brokerages will want to know a day or two in advance so they can communicate on your behalf), so there’s not much time to waste if you are holding one and wish to convert to the other.

The new rate of 4.38% is a nice improvement over the past five years’ rate of 3.55% and significantly better than the November, 2017, reset of BCE.PR.Z to 3.904%.

In my terminology, BCE.PR.D is a Ratchet Rate preferred, currently paying 100% of Prime, reset quarterly. BCE.PR.C is a FixedFloater with the rate being reset to a somewhat arbitrary number every five years. Both issues have been relegated to the Scraps subindex on credit concerns.

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., BCE.PR.C and BCE.PR.D). 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 FixedFloater / RatchetRate Strong Pair graphically by plotting the implied average Prime rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_ff_180214
Click for Big

The average break-even rate for the BCE pairs is 4.84%, while the average for all FixedFloater – RatchetRate pairs is 5.47% (BAM.PR.G / BAM.PR.E is way out of line!).

Predictions are difficult, particularly when they are about the future! It will be remembered that Prime is currently at 3.45%; therefore, if we assume that future hikes are evenly sized and spaced, an average of 4.85% implies an end-value in five years of about 6.25%. I’m inclined to believe that it will turn out to be a little less than that, but if you disagree I won’t put up much of an argument!

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 (when it comes to FixedReset / FloatingReset pairs, anyway, with their greater number of issues).

If we plug in the current bid price of the BCE.PR.C FixedFloater, we may construct the following table showing consistent prices for its BCE.PR.D FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of BCE.PR.D (received in exchange for BCE.PR.C) Trading Price In Current Conditions
  Assumed RatchetRate
Price if Implied Prime
is equal to
FixedFloater Bid Price Fixed Rate +4.25% 4.75% 5.25%
BCE.PR.C 21.12 4.38% 21.08 21.58 22.08

Based on current market conditions and the 4.38% reset rate for the BCE.PR.C FixedFloater, I consider it likely that the FixedFloater BCE.PR.C will trade at somewhat less than the price of BCE.PR.D, its RatchetRate counterpart. Therefore, I recommend holders retain, or switch to, BCE.PR.D. Those with strong convictions regarding future movements in Prime may, of course, wish to emerge from the Exchange holding BCE.PR.D with the intent of swapping for BCE.PR.C in the market place on better terms than offered by the company; other investors may wish to select which of the pair they wish to hold for the next five years based on their personal circumstances (e.g., if you’re hedging a prime-linked mortgage with this issue [not a wise move], you will want to hold BCE.PR.D). Holders have until 5:00 p.m. (Eastern time) on February 19, 2018 to communicate a desire to exchange to the company (brokerages will want to know a day or two in advance so they can communicate on your behalf), so there’s not much time to waste if you are holding one and wish to convert to the other.

February 14, 2018

Wednesday, February 14th, 2018

PerpetualDiscounts now yield 5.36%, equivalent to 6.97% interest at the standard equivalency factor of 1.3x. Long corporates now yield slightly under 4.0%, so the pre-tax interest-equivalent spread (in the context, the “Seniority Spread”) is now about 300bp, unchanged from February 7.

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 0.3511 % 2,939.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3511 % 5,392.9
Floater 3.38 % 3.57 % 70,001 18.31 4 0.3511 % 3,108.0
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0312 % 3,142.8
SplitShare 4.67 % 4.49 % 65,348 4.10 5 -0.0312 % 3,753.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0312 % 2,928.4
Perpetual-Premium 5.43 % 4.92 % 63,986 14.28 20 -0.0418 % 2,836.6
Perpetual-Discount 5.39 % 5.36 % 77,923 14.83 14 -0.2644 % 2,951.1
FixedReset 4.24 % 4.55 % 158,551 4.11 101 -0.0375 % 2,518.6
Deemed-Retractible 5.14 % 5.72 % 92,260 5.75 28 -0.1184 % 2,911.1
FloatingReset 3.09 % 3.06 % 38,303 3.73 10 -0.2999 % 2,757.6
Performance Highlights
Issue Index Change Notes
CU.PR.G Perpetual-Discount -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 21.06
Evaluated at bid price : 21.06
Bid-YTW : 5.36 %
TRP.PR.F FloatingReset -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 20.79
Evaluated at bid price : 20.79
Bid-YTW : 3.81 %
TRP.PR.H FloatingReset -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 17.06
Evaluated at bid price : 17.06
Bid-YTW : 3.70 %
CU.PR.C FixedReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 21.65
Evaluated at bid price : 21.97
Bid-YTW : 4.79 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.K FixedReset 401,013 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.08 %
BMO.PR.W FixedReset 154,146 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 22.86
Evaluated at bid price : 23.23
Bid-YTW : 4.55 %
BAM.PF.J FixedReset 108,871 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 4.75 %
CM.PR.S FixedReset 106,140 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 23.05
Evaluated at bid price : 24.68
Bid-YTW : 4.51 %
BAM.PF.I FixedReset 84,330 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.87
Bid-YTW : 4.05 %
BMO.PR.M FixedReset 81,870 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.81
Bid-YTW : 3.87 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BMO.PR.Q FixedReset Quote: 22.53 – 22.98
Spot Rate : 0.4500
Average : 0.2665

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.53
Bid-YTW : 4.73 %

IGM.PR.B Perpetual-Premium Quote: 25.45 – 25.85
Spot Rate : 0.4000
Average : 0.2364

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-16
Maturity Price : 25.25
Evaluated at bid price : 25.45
Bid-YTW : -1.26 %

PWF.PR.F Perpetual-Discount Quote: 24.10 – 24.48
Spot Rate : 0.3800
Average : 0.2570

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 23.85
Evaluated at bid price : 24.10
Bid-YTW : 5.48 %

PVS.PR.E SplitShare Quote: 26.21 – 26.55
Spot Rate : 0.3400
Average : 0.2351

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 4.62 %

CU.PR.G Perpetual-Discount Quote: 21.06 – 21.57
Spot Rate : 0.5100
Average : 0.4130

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 21.06
Evaluated at bid price : 21.06
Bid-YTW : 5.36 %

TRP.PR.A FixedReset Quote: 20.91 – 21.33
Spot Rate : 0.4200
Average : 0.3249

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-14
Maturity Price : 20.91
Evaluated at bid price : 20.91
Bid-YTW : 4.73 %

February 13, 2018

Tuesday, February 13th, 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 0.4515 % 2,928.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.4515 % 5,374.0
Floater 3.39 % 3.58 % 70,356 18.29 4 0.4515 % 3,097.1
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1557 % 3,143.8
SplitShare 4.67 % 4.46 % 65,133 4.11 5 -0.1557 % 3,754.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1557 % 2,929.3
Perpetual-Premium 5.43 % 4.92 % 64,266 5.87 20 -0.0298 % 2,837.8
Perpetual-Discount 5.38 % 5.37 % 72,192 14.84 14 0.0882 % 2,959.0
FixedReset 4.24 % 4.54 % 160,838 4.09 101 0.1430 % 2,519.5
Deemed-Retractible 5.13 % 5.61 % 90,490 5.75 28 0.1396 % 2,914.6
FloatingReset 3.08 % 3.05 % 38,828 3.73 10 0.4584 % 2,765.9
Performance Highlights
Issue Index Change Notes
IAG.PR.A Deemed-Retractible -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 6.70 %
W.PR.H Perpetual-Premium -1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 24.34
Evaluated at bid price : 24.65
Bid-YTW : 5.63 %
BAM.PR.Z FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 23.08
Evaluated at bid price : 24.73
Bid-YTW : 4.95 %
MFC.PR.M FixedReset 1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.87
Bid-YTW : 5.19 %
SLF.PR.J FloatingReset 1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.56
Bid-YTW : 6.64 %
IFC.PR.A FixedReset 1.43 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.61
Bid-YTW : 6.81 %
VNR.PR.A FixedReset 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 23.05
Evaluated at bid price : 24.62
Bid-YTW : 4.84 %
BAM.PR.K Floater 3.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 16.98
Evaluated at bid price : 16.98
Bid-YTW : 3.59 %
TRP.PR.H FloatingReset 3.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 3.66 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.M FixedReset 187,600 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.84
Bid-YTW : 3.84 %
CM.PR.S FixedReset 145,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 23.07
Evaluated at bid price : 24.72
Bid-YTW : 4.50 %
TRP.PR.D FixedReset 115,133 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 22.57
Evaluated at bid price : 23.04
Bid-YTW : 4.80 %
CM.PR.Q FixedReset 112,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 23.18
Evaluated at bid price : 24.25
Bid-YTW : 4.78 %
RY.PR.D Deemed-Retractible 74,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-15
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : -2.96 %
TRP.PR.F FloatingReset 59,904 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 21.03
Evaluated at bid price : 21.03
Bid-YTW : 3.77 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PF.I FixedReset Quote: 24.95 – 25.30
Spot Rate : 0.3500
Average : 0.2404

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 4.61 %

TRP.PR.G FixedReset Quote: 24.03 – 24.50
Spot Rate : 0.4700
Average : 0.3634

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 23.02
Evaluated at bid price : 24.03
Bid-YTW : 5.05 %

TD.PF.H FixedReset Quote: 25.85 – 26.10
Spot Rate : 0.2500
Average : 0.1705

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 3.93 %

CM.PR.Q FixedReset Quote: 24.25 – 24.53
Spot Rate : 0.2800
Average : 0.2087

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 23.18
Evaluated at bid price : 24.25
Bid-YTW : 4.78 %

SLF.PR.I FixedReset Quote: 24.66 – 24.84
Spot Rate : 0.1800
Average : 0.1226

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.66
Bid-YTW : 4.34 %

W.PR.H Perpetual-Premium Quote: 24.65 – 24.90
Spot Rate : 0.2500
Average : 0.1962

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-13
Maturity Price : 24.34
Evaluated at bid price : 24.65
Bid-YTW : 5.63 %

New Issue: MFC FixedReset, 4.70%+255

Monday, February 12th, 2018

Manulife Financial Corporation has announced:

a Canadian public offering of Non-cumulative Rate Reset Class 1 Shares Series 25 (“Series 25 Preferred Shares”). Manulife will issue 10 million Series 25 Preferred Shares priced at $25 per share to raise gross proceeds of $250 million. The offering will be underwritten by a syndicate of investment dealers co-led by RBC Capital Markets, Scotiabank and TD Securities and is anticipated to qualify as Tier 1 capital for Manulife. Manulife has also granted the underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing, to purchase up to an additional 2 million Series 25 Preferred Shares at the same offering price. The gross proceeds raised under the offering will be $300 million should this option be exercised in full. The expected closing date for the offering is February 20, 2018. Manulife intends to file a prospectus supplement to its December 15, 2017 base shelf prospectus in respect of this issue.

Holders of the Series 25 Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend yielding 4.70 per cent annually, as and when declared by the Board of Directors of Manulife, for the initial period ending June 19, 2023. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 2.55 per cent.

Holders of Series 25 Preferred Shares will have the right, at their option, to convert their shares into Non-cumulative Floating Rate Class 1 Shares Series 26 (“Series 26 Preferred Shares”), subject to certain conditions, on June 19, 2023 and on June 19 every five years thereafter. Holders of the Series 26 Preferred Shares will be entitled to receive non-cumulative quarterly floating dividends, as and when declared by the Board of Directors of Manulife, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 2.55 per cent.

Manulife intends to use the net proceeds from the offering for general corporate purposes, including funding the recently announced redemption of The Manufacturers Life Insurance Company’s outstanding $200 million principal amount of 2.819% Fixed/Floating Subordinated Debentures due February 26, 2023.

As this issue is not NVCC compliant and it is an insurance issue, it is analyzed as having a Deemed Retraction, effective 2025-1-31 (this date may change in the future).

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

impvol_mfc_180212
Click for Big

We see in this chart many of the same features we saw when reviewing the recent BIP.PR.E, BEP.PR.M, CM.PR.S and NA.PR.E: the curve is very steep, with Implied Volatility equal to 40% (a ridiculously large figure).

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.

If the MFC series were an isolated example of this behaviour, I would grin smugly to myself and declare that the implied directionality was a strong indication that the market is starting to take my predictions of Deemed Retraction seriously; but it’s not isolated. In addition, if the market was accounting for future redemption, I would expect the projected yields-to-deemed-retraction to be lower.

In the absence of DeemedRetraction, I balk at ascribing a 100% probability to the ‘all issues will be called, or at least exhibit price stability’ hypothesis. 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. The extra cushion implied by an Issue Reset Spread that is well over the market spread is worth something, even if nothing gets called.

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 without any accounting for the potential of a DeemedRetraction is 24.00. Mind you, the Implied Volatility cap rate of 40% is arbitrary; perhaps if I allowed 50% or so the new issue would sit on the curve … but in that case, Implied Volatility has become a completely arbitrary meaningless number.

February 12, 2018

Monday, February 12th, 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 0.7391 % 2,915.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.7391 % 5,349.9
Floater 3.41 % 3.57 % 64,949 18.32 4 0.7391 % 3,083.2
OpRet 0.00 % 0.00 % 0 0.00 0 0.1247 % 3,148.7
SplitShare 4.66 % 4.35 % 65,474 4.11 5 0.1247 % 3,760.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1247 % 2,933.9
Perpetual-Premium 5.43 % 4.90 % 64,986 5.87 20 0.0617 % 2,838.6
Perpetual-Discount 5.38 % 5.36 % 73,050 14.86 14 0.1483 % 2,956.3
FixedReset 4.24 % 4.56 % 162,427 4.12 101 0.3711 % 2,515.9
Deemed-Retractible 5.14 % 5.76 % 91,698 5.75 28 0.2166 % 2,910.5
FloatingReset 3.10 % 3.02 % 40,300 3.73 10 -0.2395 % 2,753.3
Performance Highlights
Issue Index Change Notes
TRP.PR.H FloatingReset -4.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 16.59
Evaluated at bid price : 16.59
Bid-YTW : 3.80 %
BAM.PR.K Floater -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 16.48
Evaluated at bid price : 16.48
Bid-YTW : 3.70 %
BAM.PF.H FixedReset 1.01 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.06
Bid-YTW : 3.67 %
SLF.PR.H FixedReset 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.00
Bid-YTW : 5.67 %
BAM.PR.T FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 21.27
Evaluated at bid price : 21.27
Bid-YTW : 4.96 %
BAM.PR.R FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 5.00 %
BMO.PR.B FixedReset 1.21 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-02-25
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 3.86 %
PWF.PR.T FixedReset 1.21 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.37 %
RY.PR.M FixedReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 23.15
Evaluated at bid price : 24.32
Bid-YTW : 4.59 %
SLF.PR.A Deemed-Retractible 1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.55
Bid-YTW : 6.67 %
BAM.PR.C Floater 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 16.99
Evaluated at bid price : 16.99
Bid-YTW : 3.58 %
BAM.PR.B Floater 1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 17.06
Evaluated at bid price : 17.06
Bid-YTW : 3.57 %
TRP.PR.B FixedReset 1.74 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 16.98
Evaluated at bid price : 16.98
Bid-YTW : 4.75 %
PWF.PR.A Floater 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 2.96 %
TRP.PR.C FixedReset 2.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 4.69 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.K FixedReset 118,400 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.20
Bid-YTW : 5.64 %
BAM.PF.J FixedReset 86,050 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.06
Bid-YTW : 4.85 %
BMO.PR.T FixedReset 64,975 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 23.20
Evaluated at bid price : 23.62
Bid-YTW : 4.51 %
BNS.PR.E FixedReset 60,789 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.30
Bid-YTW : 3.86 %
RY.PR.J FixedReset 57,875 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 23.17
Evaluated at bid price : 24.15
Bid-YTW : 4.78 %
BAM.PF.A FixedReset 54,742 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 24.02
Evaluated at bid price : 24.61
Bid-YTW : 5.06 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.H FloatingReset Quote: 16.59 – 17.40
Spot Rate : 0.8100
Average : 0.5235

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 16.59
Evaluated at bid price : 16.59
Bid-YTW : 3.80 %

BAM.PR.Z FixedReset Quote: 24.48 – 24.99
Spot Rate : 0.5100
Average : 0.3129

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 22.98
Evaluated at bid price : 24.48
Bid-YTW : 5.01 %

BIP.PR.C FixedReset Quote: 25.45 – 25.95
Spot Rate : 0.5000
Average : 0.3090

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 5.03 %

BAM.PR.K Floater Quote: 16.48 – 17.06
Spot Rate : 0.5800
Average : 0.4020

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 16.48
Evaluated at bid price : 16.48
Bid-YTW : 3.70 %

CU.PR.C FixedReset Quote: 22.21 – 22.60
Spot Rate : 0.3900
Average : 0.2604

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-12
Maturity Price : 21.82
Evaluated at bid price : 22.21
Bid-YTW : 4.73 %

PWF.PR.O Perpetual-Premium Quote: 25.46 – 25.79
Spot Rate : 0.3300
Average : 0.2196

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-14
Maturity Price : 25.25
Evaluated at bid price : 25.46
Bid-YTW : -2.25 %

MFC.PR.J To Be Extended

Monday, February 12th, 2018

Manulife Financial Corporation has announced:

that it does not intend to exercise its right to redeem all or any of its currently outstanding 8,000,000 Non-cumulative Rate Reset Class 1 Shares Series 11 (the “Series 11 Preferred Shares”) (TSX: MFC.PR.J) on March 19, 2018. As a result, subject to certain conditions described in the prospectus supplement dated November 27, 2012 relating to the issuance of the Series 11 Preferred Shares (the “Prospectus”), the holders of the Series 11 Preferred Shares have the right, at their option, to convert all or part of their Series 11 Preferred Shares on a one-for-one basis into Non-cumulative Floating Rate Class 1 Shares Series 12 of Manulife (the “Series 12 Preferred Shares”) on March 19, 2018. A formal notice of the right to convert Series 11 Preferred Shares into Series 12 Preferred Shares will be sent to the registered holders of the Series 11 Preferred Shares in accordance with the share conditions of the Series 11 Preferred Shares. Holders of Series 11 Preferred Shares are not required to elect to convert all or any part of their Series 11 Preferred Shares into Series 12 Preferred Shares. Holders who do not exercise their right to convert their Series 11 Preferred Shares into Series 12 Preferred Shares on such date will retain their Series 11 Preferred Shares, unless automatically converted in accordance with the conditions below.

The foregoing conversion right is subject to the conditions that: (i) if, after March 5, 2018, Manulife determines that there would be less than 1,000,000 Series 11 Preferred Shares outstanding on March 19, 2018, then all remaining Series 11 Preferred Shares will automatically be converted into an equal number of Series 12 Preferred Shares on March 19, 2018, and (ii) alternatively, if, after March 5, 2018, Manulife determines that there would be less than 1,000,000 Series 12 Preferred Shares outstanding on March 19, 2018, then no Series 11 Preferred Shares will be converted into Series 12 Preferred Shares. In either case, Manulife will give written notice to that effect to any registered holders of Series 11 Preferred Shares affected by the preceding minimums on or before March 12, 2018.

The dividend rate applicable to the Series 11 Preferred Shares for the 5-year period commencing on March 20, 2018, and ending on March 19, 2023, and the dividend rate applicable to the Series 12 Preferred Shares for the 3-month period commencing on March 20, 2018, and ending on June 19, 2018, will be determined and announced by way of a news release on February 20, 2018. Manulife will also give written notice of these dividend rates to the registered holders of Series 11 Preferred Shares.

Beneficial owners of Series 11 Preferred Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (Toronto time) on March 5, 2018. Conversion inquiries should be directed to Manulife’s Registrar and Transfer Agent, AST Trust Company (Canada), at 1-800-387-0825.

Subject to certain conditions described in the Prospectus, Manulife may redeem the Series 11 Preferred Shares, in whole or in part, on March 19, 2023 and on March 19 every five years thereafter and may redeem the Series 12 Preferred Shares, in whole or in part, after March 19, 2018.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 12 Preferred Shares effective upon conversion. Listing of the Series 12 Preferred Shares is subject to Manulife fulfilling all the listing requirements of the TSX and, upon approval, the Series 12 Preferred Shares will be listed on the TSX under the trading symbol “MFC.PR.S”.

MFC.PR.J is a FixedReset, 4.00%+261, that commenced trading 2012-12-4 after being announced 2012-11-27. It is tracked by HIMIPref™ and is assigned to the FixedReset sub-index.

As this issue is not NVCC compliant and it is an insurance issue, it is analyzed as having a Deemed Retraction, effective 2025-1-31 (this date may change in the future).

There’s not much point in doing any analysis until the reset rate is announced February 20, 2018.

February PrefLetter Released!

Monday, February 12th, 2018

The February, 2018, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

The February edition contains updated commentary on the FixedReset market.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the February, 2018, issue, while the “Next Edition” will be the March, 2018, issue, scheduled to be prepared as of the close March 9 and eMailed to subscribers prior to market-opening on March 12.

PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.

Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.

Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!

Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.

Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!

Note: Assiduous Reader DG informs me:

In case you have any other Apple users: you need to install a free App from the apple store called “FileApp”. It comes with it’s own tutorial and allows you to download and save a PDF file.

However, Assiduous Reader Adrian informs me in the comments to the January 2015 release:

Some nitpicking for DG:
FileApp costs $1.19 in the Apple Store.

But Adrian2 now advises:

Well, as of now, FileApp is free (again?).