Archive for April, 2019

April 18, 2019

Thursday, April 18th, 2019

On March 28 I highlighted an issue of structured notes from TD. Assiduous Reader AB writes in and provides me with a link to the National Bank Structured Solutions Group page, who issued five separate notes “linked to a Canadian preferred share ETF” between April 10 and April 18.

There was a disorderly close in the market today, as TXPR lost 49bp in the last five minutes to close down 28bp from yesterday on high volume of over 4-million shares.

txpr_190418
Click for Big

One of the hard-working geniuses who are such a feature of Canadian investment management made extensive use of the Market-on-Close facility, which I assume helped him leave early for the long weekend.

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 -1.3731 % 2,108.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.3731 % 3,869.0
Floater 5.55 % 5.86 % 49,194 14.11 3 -1.3731 % 2,229.7
OpRet 0.00 % 0.00 % 0 0.00 0 0.0050 % 3,284.7
SplitShare 4.87 % 4.69 % 75,213 3.82 8 0.0050 % 3,922.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0050 % 3,060.6
Perpetual-Premium 5.58 % -8.49 % 86,667 0.09 10 -0.2043 % 2,953.7
Perpetual-Discount 5.41 % 5.52 % 80,810 14.60 23 -0.4501 % 3,100.4
FixedReset Disc 5.23 % 5.41 % 185,299 14.84 61 -0.2348 % 2,197.7
Deemed-Retractible 5.22 % 5.82 % 99,895 8.13 27 -0.2627 % 3,074.2
FloatingReset 4.23 % 4.35 % 57,414 2.67 5 -0.2798 % 2,414.9
FixedReset Prem 5.08 % 3.93 % 290,390 2.19 23 -0.4817 % 2,579.5
FixedReset Bank Non 1.98 % 4.02 % 149,013 2.69 3 0.0418 % 2,636.8
FixedReset Ins Non 5.02 % 6.89 % 109,903 8.25 22 -0.8244 % 2,246.0
Performance Highlights
Issue Index Change Notes
IAF.PR.G FixedReset Ins Non -5.54 % Not as unreasonable as it looks, as the issue traded 24,769 shares in a range of 20.42-39 before closing at 20.12-21.39. “Range” is kind of a misnomer, since the issue traded at around 21.30 for most of the day, then moved to the 20.42 MOC price with very little in between. The indicated MOC imbalance was a sell of 7,286 shares.

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.12
Bid-YTW : 6.89 %

BAM.PR.K Floater -3.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 11.74
Evaluated at bid price : 11.74
Bid-YTW : 5.95 %
MFC.PR.L FixedReset Ins Non -2.83 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.49
Bid-YTW : 8.11 %
TRP.PR.B FixedReset Disc -2.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 12.52
Evaluated at bid price : 12.52
Bid-YTW : 5.79 %
PWF.PR.Z Perpetual-Discount -2.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 22.96
Evaluated at bid price : 23.27
Bid-YTW : 5.54 %
PWF.PR.L Perpetual-Discount -1.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 22.59
Evaluated at bid price : 22.84
Bid-YTW : 5.59 %
MFC.PR.Q FixedReset Ins Non -1.83 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.40
Bid-YTW : 6.97 %
PWF.PR.S Perpetual-Discount -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.56
Evaluated at bid price : 21.56
Bid-YTW : 5.59 %
BAM.PF.I FixedReset Prem -1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 23.14
Evaluated at bid price : 24.35
Bid-YTW : 5.50 %
BIP.PR.F FixedReset Disc -1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.40
Evaluated at bid price : 21.40
Bid-YTW : 6.02 %
BAM.PR.B Floater -1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 11.91
Evaluated at bid price : 11.91
Bid-YTW : 5.86 %
PWF.PR.K Perpetual-Discount -1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.76
Evaluated at bid price : 22.01
Bid-YTW : 5.63 %
BAM.PF.A FixedReset Disc -1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.62 %
BAM.PR.Z FixedReset Disc -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 5.76 %
MFC.PR.B Deemed-Retractible -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.80
Bid-YTW : 6.39 %
BAM.PR.T FixedReset Disc -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 16.38
Evaluated at bid price : 16.38
Bid-YTW : 5.96 %
BNS.PR.H FixedReset Prem -1.32 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 4.04 %
GWO.PR.R Deemed-Retractible -1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 5.98 %
CU.PR.C FixedReset Disc -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 5.53 %
TRP.PR.K FixedReset Prem -1.25 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : 4.67 %
IFC.PR.G FixedReset Ins Non -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 7.14 %
TRP.PR.G FixedReset Disc -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 19.19
Evaluated at bid price : 19.19
Bid-YTW : 5.97 %
HSE.PR.A FixedReset Disc -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 12.65
Evaluated at bid price : 12.65
Bid-YTW : 6.50 %
MFC.PR.J FixedReset Ins Non -1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.71
Bid-YTW : 6.82 %
CM.PR.Q FixedReset Disc 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 20.12
Evaluated at bid price : 20.12
Bid-YTW : 5.44 %
SLF.PR.A Deemed-Retractible 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.45
Bid-YTW : 6.12 %
BMO.PR.E FixedReset Disc 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 22.08
Evaluated at bid price : 22.64
Bid-YTW : 4.96 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.T FixedReset Prem 271,288 Indicated MOC imbalance was a buy of 61,601 shares.

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 4.79 %

BAM.PR.K Floater 252,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 11.74
Evaluated at bid price : 11.74
Bid-YTW : 5.95 %
CU.PR.G Perpetual-Discount 218,515 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.26
Evaluated at bid price : 21.26
Bid-YTW : 5.37 %
TD.PF.L FixedReset Prem 217,051 Indicated MOC imbalance was a buy of 3,247 shares.

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 4.74 %

GWO.PR.R Deemed-Retractible 140,171 Indicated MOC imbalance was a sell of 154,494 shares.

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 5.98 %

VNR.PR.A FixedReset Prem 118,662 Indicated MOC imbalance was a sell of 55,262 shares.

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 23.26
Evaluated at bid price : 24.85
Bid-YTW : 4.43 %

BIK.PR.A FixedReset Prem 117,120 Indicated MOC imbalance was a buy of 51,183 shares.

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.41
Bid-YTW : 5.57 %

BAM.PF.I FixedReset Prem 109,124 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 23.14
Evaluated at bid price : 24.35
Bid-YTW : 5.50 %
BMO.PR.Y FixedReset Disc 105,784 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.27
Evaluated at bid price : 21.27
Bid-YTW : 5.14 %
There were 88 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAF.PR.G FixedReset Ins Non Quote: 20.12 – 21.39
Spot Rate : 1.2700
Average : 0.7229

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.12
Bid-YTW : 6.89 %

IFC.PR.G FixedReset Ins Non Quote: 20.25 – 21.20
Spot Rate : 0.9500
Average : 0.5626

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.25
Bid-YTW : 7.14 %

CU.PR.I FixedReset Prem Quote: 25.65 – 26.41
Spot Rate : 0.7600
Average : 0.4676

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 3.22 %

PWF.PR.S Perpetual-Discount Quote: 21.56 – 22.27
Spot Rate : 0.7100
Average : 0.4296

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.56
Evaluated at bid price : 21.56
Bid-YTW : 5.59 %

MFC.PR.Q FixedReset Ins Non Quote: 20.40 – 20.90
Spot Rate : 0.5000
Average : 0.3045

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.40
Bid-YTW : 6.97 %

TD.PF.J FixedReset Disc Quote: 21.42 – 22.00
Spot Rate : 0.5800
Average : 0.3899

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-18
Maturity Price : 21.42
Evaluated at bid price : 21.42
Bid-YTW : 5.18 %

BMO.PR.F Strong on Huge Volume

Wednesday, April 17th, 2019

Bank of Montreal has announced:

it has closed its domestic public offering of Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 46 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 46”). The offering was underwritten on a bought-deal basis by a syndicate of underwriters led by BMO Capital Markets. Bank of Montreal issued 14 million Preferred Shares Series 46 at a price of $25.00 per share to raise gross proceeds of $350 million.

The Preferred Shares Series 46 were issued under a prospectus supplement dated April 10, 2019, to the Bank’s short form base shelf prospectus dated May 23, 2018. Such shares will commence trading on the Toronto Stock Exchange today under the ticker symbol BMO.PR.F.

BMO.PR.F is a FixedReset 5.10%+351, NVCC-compliant issue announced April 8. It will be tracked by HIMIPref™ and is assigned to the FixedReset (Premium) subindex.

The issue traded 2,191,850 shares today in a range of 25.05-24 before closing at 25.22-23. Vital statistics are:

BMO.PR.F FixedReset Prem YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.22
Bid-YTW : 4.93 %

2.2-million shares is an awesome trading volume for a medium-sized issue such as BMO.PR.F, even though the total places it only at #27 on the all-time (well … since 1993, anyway) list. Only thirty-eight entries in my database crack the 2-million mark, an achievement managed only twice in 2017, four times in 2016 and, prior to then, just once in each of 2008 and 2007, with a host of earlier dates. The last 2-million-plus day was June 2, 2017, when CM.PR.R managed the feat.

The new issue is somewhat expensive according to Implied Volatility Analysis:

impvol_bmo_190417
Click for Big

According to this analysis BMO.PR.F is fairly valued at 24.49 (down 0.11 from announcement date) and is therefore 0.73 rich – although holders can take some solace, perhaps, from the fact that BMO.PR.E may be considered 1.28 rich to its fair value of 21.07

It’s interesting to note that the theoretical spread (on a notional non-callable perpetual resettable annuity) of 348bp is roughly the same as the actual issue spread on BMO.PR.F of 351bp – which means that BMO is basically getting the call options on the issue for free.

April 17, 2019

Wednesday, April 17th, 2019

On March 18 I reported:

Assiduous Readers will remember that Manulife was bailed out by the regulators again after a hedge fund claimed the terms of its contract with the firm allowed it to deposit unlimited funds with the firm at a guaranteed rate of up to 5%.

It turns out the bail-out was unnecessary! Manulife won the court case

‘Not so fast!’ scream the plaintiffs:

A pivotal court ruling that dismissed three lawsuits against Canadian life insurers has been formally appealed, extending a battle between the companies and three investment funds over the fine print of decades-old contracts.

This week the funds appealed all three cases, arguing that the core argument made by Justice Brian Scherman of the Court of Queen’s Bench for Saskatchewan when dismissing the lawsuits is incorrect. Justice Scherman ruled that the contracts were designed to be used for insurance purposes only, and that “in the some 30 years since universal life insurance policies have been sold, there is no judicial record of these policies being used in the manner proposed” by the investment funds.

In its appeal of the ruling that related to Manulife, Mosten Investment LP argued “the learned Chambers Judge erred in law in his interpretation of the contract.”

There is a fascinating chart made available in the OECD release of its publication “Taxing Wages”:

figure-1-web-full
Click for Big

Of course, this just refers to taxes on wages; it does not include things like sales tax and property tax. In the interest of avoiding vitriolic attacks by worshippers of the Awesome and Holy United States of Free America, I will also publish a chart more favourable to that glorious nation:

3_1_4_-_figure_1
Click for Big

Of course, neither chart includes the cost of health insurance, which is a big ticket item in the Awesome and Holy United States of Free America, but that’s because health insurance is FREE ENTERPRISE, dammit, and any free citizen has a CHOICE between between buying Health Insurance, dying, or being bankrupted by medical bills.

Reasonable people can argue all day and all night regarding whether a single-payer system like Canada’s is better or worse than the US system. Each has its own advantages and disadvantages. But to take tax rates as a straight-up, single-number meaningful comparison of anything at all is simply ridiculous and annoys me.

PerpetualDiscounts now yield 5.45%, equivalent to 7.08% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.82%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 325bp, unchanged from the figure reported April 10.

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 -0.4469 % 2,137.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4469 % 3,922.8
Floater 5.48 % 5.76 % 45,645 14.26 3 -0.4469 % 2,260.8
OpRet 0.00 % 0.00 % 0 0.00 0 0.1292 % 3,284.6
SplitShare 4.87 % 4.61 % 75,842 3.82 8 0.1292 % 3,922.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1292 % 3,060.5
Perpetual-Premium 5.57 % -17.16 % 81,232 0.09 10 -0.0079 % 2,959.7
Perpetual-Discount 5.39 % 5.45 % 78,217 14.68 23 0.0019 % 3,114.4
FixedReset Disc 5.22 % 5.42 % 184,836 14.89 61 0.0987 % 2,202.9
Deemed-Retractible 5.20 % 5.80 % 99,151 8.13 27 0.0094 % 3,082.3
FloatingReset 4.22 % 4.34 % 53,154 2.68 5 0.0754 % 2,421.7
FixedReset Prem 5.06 % 3.63 % 282,841 2.19 23 0.1432 % 2,592.0
FixedReset Bank Non 1.98 % 4.02 % 145,072 2.69 3 -0.1809 % 2,635.7
FixedReset Ins Non 4.98 % 6.69 % 106,882 8.27 22 -0.0930 % 2,264.6
Performance Highlights
Issue Index Change Notes
SLF.PR.G FixedReset Ins Non -2.16 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.92
Bid-YTW : 8.87 %
TRP.PR.C FixedReset Disc -1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 13.27
Evaluated at bid price : 13.27
Bid-YTW : 5.84 %
TRP.PR.A FixedReset Disc -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 14.83
Evaluated at bid price : 14.83
Bid-YTW : 6.05 %
MFC.PR.J FixedReset Ins Non -1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.92
Bid-YTW : 6.69 %
HSE.PR.E FixedReset Disc 1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 6.47 %
RY.PR.Z FixedReset Disc 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 18.93
Evaluated at bid price : 18.93
Bid-YTW : 5.17 %
MFC.PR.M FixedReset Ins Non 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.90
Bid-YTW : 7.39 %
TRP.PR.G FixedReset Disc 1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 19.40
Evaluated at bid price : 19.40
Bid-YTW : 5.90 %
IAF.PR.B Deemed-Retractible 1.89 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.16
Bid-YTW : 6.11 %
TRP.PR.B FixedReset Disc 2.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 12.80
Evaluated at bid price : 12.80
Bid-YTW : 5.66 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.F FixedReset Prem 2,191,850 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.22
Bid-YTW : 4.93 %
PWF.PR.K Perpetual-Discount 150,395 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 22.08
Evaluated at bid price : 22.36
Bid-YTW : 5.54 %
IFC.PR.G FixedReset Ins Non 149,035 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.50
Bid-YTW : 6.99 %
POW.PR.G Perpetual-Premium 101,854 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-05-17
Maturity Price : 25.50
Evaluated at bid price : 25.70
Bid-YTW : -3.64 %
PVS.PR.F SplitShare 82,900 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 25.01
Bid-YTW : 4.93 %
TRP.PR.E FixedReset Disc 63,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.90 %
There were 31 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.H Perpetual-Discount Quote: 24.95 – 25.50
Spot Rate : 0.5500
Average : 0.3163

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 24.41
Evaluated at bid price : 24.95
Bid-YTW : 5.52 %

TD.PF.B FixedReset Disc Quote: 18.85 – 19.24
Spot Rate : 0.3900
Average : 0.2480

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 5.20 %

TD.PF.D FixedReset Disc Quote: 21.03 – 21.63
Spot Rate : 0.6000
Average : 0.4699

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 21.03
Evaluated at bid price : 21.03
Bid-YTW : 5.21 %

IFC.PR.E Deemed-Retractible Quote: 23.86 – 24.25
Spot Rate : 0.3900
Average : 0.2818

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.86
Bid-YTW : 5.84 %

BAM.PF.D Perpetual-Discount Quote: 21.85 – 22.20
Spot Rate : 0.3500
Average : 0.2521

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 21.85
Evaluated at bid price : 21.85
Bid-YTW : 5.66 %

NA.PR.C FixedReset Disc Quote: 22.28 – 22.57
Spot Rate : 0.2900
Average : 0.2117

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-17
Maturity Price : 21.91
Evaluated at bid price : 22.28
Bid-YTW : 5.53 %

NA.PR.S To Reset At 4.025%

Wednesday, April 17th, 2019

National Bank of Canada has announced:

the dividend rates applicable to the Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series 30 (the “Series 30 Preferred Shares”) and the Non-Cumulative Floating Rate First Preferred Shares, Series 31 (the “Series 31 Preferred Shares”).

Holders of Series 30 Preferred Shares, should any remain outstanding after May 15, 2019, will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on May 16, 2019 and ending on May 15, 2024 will be 4.025%, being equal to the sum of the five-year Government of Canada Bond yield (1.625%) plus 2.40%, as determined in accordance with the terms of the Series 30 Preferred Shares.

Holders of Series 31 Preferred Shares, should any be issued on May 15, 2019, will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of the Bank and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on May 16, 2019 and ending on August 15, 2019, will be 4.060%, being equal to the sum of the 90-day Government of Canada Treasury Bill yield (1.66%) plus 2.40%, calculated on the basis of actual number of days elapsed in such quarterly floating rate period divided by 365, as determined in accordance with the terms of the Series 31 Preferred Shares.

Holders of the Series 30 Preferred Shares have, subject to certain conditions, the right to convert all or part of their Series 30 Preferred Shares on a one-for-one basis into Series 31 Preferred Shares on May 15, 2019.

Beneficial owners of Series 30 shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee and ensure that they follow their instructions in order to meet the deadline to exercise such right, which is April 30, 2019 at 5:00 p.m. (EST).

They previously announced (on March 18):

that it does not intend to exercise its right to redeem all or part of the currently outstanding 14,000,000 Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series 30 (the “Series 30 Preferred Shares”) on May 15, 2019. As a result, subject to certain conditions, the holders of the Series 30 Preferred Shares have the right to convert all or part of their Series 30 Preferred Shares on a one-for-one basis into Non-cumulative Floating Rate First Preferred Shares Series 31 (the “Series 31 Preferred Shares”) on May 15, 2019 in accordance with the terms of the Series 30 Preferred Shares described in the prospectus supplement dated January 31, 2014 to the short form base shelf prospectus dated October 5, 2012.

Holders of Series 30 Preferred Shares who do not exercise their right to convert their Series 30 Preferred Shares into Series 31 Preferred Shares on May 15, 2019 will retain their Series 30 Preferred Shares.

The foregoing conversions are subject to the conditions that: (i) if National Bank determines that there would remain outstanding on May 15, 2019 less than 1,000,000 Series 31 Preferred Shares, after having taken into account all Series 30 Preferred Shares tendered for conversion into Series 31 Preferred Shares, then holders of Series 30 Preferred Shares will not be entitled to convert their shares into Series 31 Preferred Shares, and (ii) alternatively, if National Bank determines that there would remain outstanding on May 15, 2019 less than 1,000,000 Series 30 Preferred Shares, after having taken into account all Series 30 Preferred Shares tendered for conversion into Series 31 Preferred Shares, then all remaining Series 30 Preferred Shares will automatically be converted into Series 31 Preferred Shares without the consent of the holders on May 15, 2019.

In either case, National Bank shall give a notice to that effect to all registered holders of Series 30 Preferred Shares no later than May 8, 2019.

On April 15, 2019, National Bank will give notice of:

i. the annual fixed dividend rate applicable to the Series 30 Preferred Shares to which a holder of Series 30 Preferred Shares will be entitled for the 5-year period from May 16, 2019 up to and including May 15, 2024; and

ii. the floating quarterly dividend rate applicable to the Series 31 Preferred Shares to which a holder of Series 31 Preferred Shares will be entitled for the 3-month period from May 16, 2019 up to and including August 15, 2019.

Beneficial owners of Series 30 shares who wish to exercise their conversion right should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which will run from April 15, 2019 until April 30, 2019 at 5:00 p.m. (EST).

NA.PR.S is a NVCC-compliant FixedReset, 4.10%+240, that commenced trading 2014-2-7 after being announced 2014-1-29. It is tracked by HIMIPref™ and assigned to the FixedResets-Discount 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., NA.PR.S and the FloatingReset 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_190416
Click for Big

The market has lost its fleeting enthusiasm for floating rate product; the implied rates until the next interconversion are below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.68% and +1.42%, 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 NA.PR.S FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for NA.PR.S) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
NA.PR.S 18.40 240bp 18.28 17.78 17.28

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to trade below the price of their FixedReset counterparts, NA.PR.S. Therefore, it seems likely that I will recommend that holders of NA.PR.S continue to hold the issue and not to convert, but I will wait until it’s closer to the April 30 notification deadline before making a final pronouncement. I will note that once the FloatingResets commence trading (if, in fact, they do) 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 two new pairs will reflect these conditions.

CWB.PR.B : No Conversion to FloatingReset

Wednesday, April 17th, 2019

Canadian Western Bank has announced:

that after having taken into account all election notices received by the April 15, 2019 deadline for conversion of its currently outstanding 5,000,000 non-cumulative 5-year rate reset First Preferred Shares Series 5 (the “Series 5 Preferred Shares”) (TSX: CWB.PR.B) into non-cumulative floating rate First Preferred Shares Series 6 of CWB (the “Series 6 Preferred Shares”), no Series 5 Preferred Shares will be converted into Series 6 Preferred Shares. There were 294,756 Series 5 Preferred Shares elected for conversion, which is less than the minimum 500,000 shares required to give effect to conversion into Series 6 Preferred Shares.

As announced by CWB on April 1, 2019, after April 30, 2019, holders of Series 5 Preferred Shares will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of CWB and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on May 1, 2019, and ending on April 30, 2024, will be 4.301% per annum or $0.2688125 per share per quarter, being equal to the sum of the five-year Government of Canada bond yield as at April 1, 2019, plus 2.76%, as determined in accordance with the terms of the Series 5 Preferred Shares. The quarterly cash dividend was previously $0.275 per Series 5 Preferred Share up to and including the dividend to be paid on April 30, 2019 to shareholders of record on April 23, 2019.

Subject to certain conditions described in the prospectus supplement dated February 3, 2014 relating to the issuance of the Series 5 Preferred Shares, CWB may redeem the Series 5 Preferred Shares, in whole or in part, on April 30, 2024 and on April 30 every five years thereafter.

CWB.PR.B is a FixedReset, 4.40%+276, that commenced trading 2014-2-10 after being announced 2014-1-31. The extension was announced 2019-3-11. It will reset at 4.301% effective May 1, 2019. I recommended against conversion. The issue is tracked by HIMIPref™ but relegated to the Scraps – FixedReset (Discount) index on credit concerns.

RY.PR.Z To Be Extended

Wednesday, April 17th, 2019

Royal Bank of Canada has announced (on April 12):

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Non-Viability Contingent Capital (NVCC) Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series AZ (the “Series AZ shares”) on May 24, 2019. There are currently 20,000,000 Series AZ shares outstanding.

Subject to certain conditions set out in the prospectus supplement dated January 23, 2014 relating to the issuance of the Series AZ shares, the holders of the Series AZ shares have the right to convert all or part of their Series AZ shares, on a one-for-one basis, into NVCC Non-Cumulative Floating Rate First Preferred Shares, Series BA (the “Series BA shares”) on May 24, 2019. On such date, holders who do not exercise their right to convert their Series AZ shares into Series BA shares, will continue to hold their Series AZ shares. The foregoing conversion rights are subject to the following:
if Royal Bank of Canada determines that there would be less than 1,000,000 Series BA shares outstanding after taking into account all shares tendered for conversion on May 24, 2019, then holders of Series AZ shares will not be entitled to convert their shares into Series BA shares, and
alternatively, if Royal Bank of Canada determines that there would remain outstanding less than 1,000,000 Series AZ shares after May 24, 2019, then all remaining Series AZ shares will automatically be converted into Series BA shares on a one-for-one basis on May 24, 2019.

In either case, Royal Bank of Canada will give written notice to that effect to holders of Series AZ shares no later than May 17, 2019.

The dividend rate applicable for the Series AZ shares for the 5-year period from and including May 24, 2019 to but excluding May 24, 2024, and the dividend rate applicable to the Series BA shares for the 3-month period from and including May 24, 2019 to but excluding August 24, 2019, will be determined and announced by way of a press release on April 24, 2019.

Beneficial owners of Series AZ shares who wish to exercise their conversion rights should instruct their broker or other nominee to exercise such rights during the conversion period, which runs from April 24, 2019 until 5:00 p.m. (EST) on May 9, 2019.

Inquiries should be directed to Shareholder Relations Officer, Shirley Boudreau, at 416-955-7806.

RY.PR.Z is a NVCC-compliant FixedReset, 4.00%+221, that commenced trading 2014-1-30 after being announced 2014-1-21. This issue is tracked by HIMIPref™ and is assigned to the FixedReset-Discount subindex.

I will have more commentary when the reset rate is announced on April 24.

April 16, 2019

Tuesday, April 16th, 2019

I noticed another recent corporate long bond issue, this one some thirty-year notes from Pembina:

Pembina Pipeline Corporation (“Pembina” or the “Company”) (TSX: PPL; NYSE: PBA) is pleased to announce that it has closed its previously announced offering of $800 million of senior unsecured medium-term notes (the “Offering”). The Offering was conducted in two tranches consisting of $400 million in senior unsecured medium-term notes, series 12 (the “Series 12 Notes”) having a fixed coupon of 3.62% per annum, paid semi-annually, and maturing on April 3, 2029, and $400 million in senior unsecured medium-term notes, series 13 (the “Series 13 Notes”) having a fixed coupon of 4.54% per annum, paid semi-annually, and maturing on April 3, 2049.

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 -0.2622 % 2,147.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.2622 % 3,940.5
Floater 5.45 % 5.72 % 45,085 14.33 3 -0.2622 % 2,270.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0397 % 3,280.3
SplitShare 4.88 % 4.66 % 75,844 3.82 8 -0.0397 % 3,917.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0397 % 3,056.5
Perpetual-Premium 5.57 % -16.50 % 81,851 0.09 10 -0.0589 % 2,960.0
Perpetual-Discount 5.39 % 5.43 % 77,151 14.71 23 0.1202 % 3,114.4
FixedReset Disc 5.23 % 5.43 % 183,042 14.88 61 -0.0477 % 2,200.7
Deemed-Retractible 5.21 % 5.74 % 99,449 8.13 27 -0.0739 % 3,082.0
FloatingReset 4.22 % 4.29 % 52,991 2.68 5 0.0215 % 2,419.9
FixedReset Prem 5.06 % 3.71 % 293,626 2.20 22 0.0194 % 2,588.2
FixedReset Bank Non 1.98 % 3.95 % 146,077 2.69 3 -0.0278 % 2,640.4
FixedReset Ins Non 4.97 % 6.55 % 108,241 8.27 22 -0.0861 % 2,266.7
Performance Highlights
Issue Index Change Notes
IAF.PR.B Deemed-Retractible -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 6.34 %
BAM.PF.I FixedReset Prem -1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 24.66
Bid-YTW : 5.40 %
IFC.PR.C FixedReset Ins Non -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.05
Bid-YTW : 7.31 %
TRP.PR.B FixedReset Disc -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 12.50
Evaluated at bid price : 12.50
Bid-YTW : 5.79 %
BAM.PF.J FixedReset Disc -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 22.95
Evaluated at bid price : 24.15
Bid-YTW : 4.89 %
BMO.PR.T FixedReset Disc 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 5.33 %
MFC.PR.J FixedReset Ins Non 1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.15
Bid-YTW : 6.55 %
SLF.PR.H FixedReset Ins Non 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.90
Bid-YTW : 7.47 %
BAM.PF.C Perpetual-Discount 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.76 %
BMO.PR.W FixedReset Disc 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 5.33 %
MFC.PR.L FixedReset Ins Non 1.70 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.94
Bid-YTW : 7.79 %
BAM.PR.Z FixedReset Disc 1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 5.65 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.H FixedReset Disc 116,121 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 19.21
Evaluated at bid price : 19.21
Bid-YTW : 5.16 %
BAM.PF.A FixedReset Disc 84,025 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 21.23
Evaluated at bid price : 21.23
Bid-YTW : 5.56 %
TRP.PR.E FixedReset Disc 45,090 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 16.92
Evaluated at bid price : 16.92
Bid-YTW : 5.93 %
BAM.PR.Z FixedReset Disc 43,519 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 5.65 %
TD.PF.H FixedReset Prem 43,035 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 3.71 %
GWO.PR.I Deemed-Retractible 42,346 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.38
Bid-YTW : 6.44 %
There were 29 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAF.PR.B Deemed-Retractible Quote: 21.75 – 22.21
Spot Rate : 0.4600
Average : 0.3270

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.75
Bid-YTW : 6.34 %

BMO.PR.W FixedReset Disc Quote: 18.40 – 18.84
Spot Rate : 0.4400
Average : 0.3095

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 5.33 %

TRP.PR.D FixedReset Disc Quote: 17.00 – 17.39
Spot Rate : 0.3900
Average : 0.2630

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.94 %

BIP.PR.A FixedReset Disc Quote: 20.21 – 20.72
Spot Rate : 0.5100
Average : 0.3946

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 20.21
Evaluated at bid price : 20.21
Bid-YTW : 6.44 %

CCS.PR.C Deemed-Retractible Quote: 22.91 – 23.41
Spot Rate : 0.5000
Average : 0.3868

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.91
Bid-YTW : 6.13 %

CM.PR.Q FixedReset Disc Quote: 19.90 – 20.28
Spot Rate : 0.3800
Average : 0.2878

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-16
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 5.50 %

April 15, 2019

Monday, April 15th, 2019
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 0.1313 % 2,153.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1313 % 3,950.8
Floater 5.44 % 5.70 % 41,793 14.37 3 0.1313 % 2,276.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.2190 % 3,281.6
SplitShare 4.88 % 4.69 % 78,738 3.82 8 0.2190 % 3,919.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2190 % 3,057.7
Perpetual-Premium 5.57 % -16.68 % 85,051 0.09 10 -0.0196 % 2,961.7
Perpetual-Discount 5.39 % 5.47 % 75,937 14.69 23 -0.0469 % 3,110.7
FixedReset Disc 5.22 % 5.42 % 184,858 14.87 61 -0.0393 % 2,201.7
Deemed-Retractible 5.20 % 5.72 % 92,650 8.14 27 -0.1178 % 3,084.3
FloatingReset 4.22 % 4.29 % 54,767 2.68 5 -0.0646 % 2,419.4
FixedReset Prem 5.06 % 3.63 % 304,767 2.20 22 -0.0053 % 2,587.7
FixedReset Bank Non 1.98 % 3.95 % 136,763 2.70 3 0.1393 % 2,641.2
FixedReset Ins Non 4.97 % 6.68 % 111,951 8.26 22 -0.0883 % 2,268.7
Performance Highlights
Issue Index Change Notes
MFC.PR.L FixedReset Ins Non -2.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.64
Bid-YTW : 8.00 %
EMA.PR.F FixedReset Disc -1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 5.72 %
BAM.PR.Z FixedReset Disc -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.25
Evaluated at bid price : 20.25
Bid-YTW : 5.76 %
NA.PR.W FixedReset Disc -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 17.55
Evaluated at bid price : 17.55
Bid-YTW : 5.55 %
MFC.PR.M FixedReset Ins Non -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.80
Bid-YTW : 7.45 %
TD.PF.J FixedReset Disc -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.35
Evaluated at bid price : 21.65
Bid-YTW : 5.10 %
BAM.PF.C Perpetual-Discount -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.01
Evaluated at bid price : 21.01
Bid-YTW : 5.83 %
BMO.PR.W FixedReset Disc -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 5.40 %
PWF.PR.S Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.91
Evaluated at bid price : 21.91
Bid-YTW : 5.50 %
CU.PR.D Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 22.25
Evaluated at bid price : 22.60
Bid-YTW : 5.48 %
BAM.PF.A FixedReset Disc 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.54 %
GWO.PR.R Deemed-Retractible 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.10
Bid-YTW : 5.81 %
NA.PR.G FixedReset Disc 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.61
Evaluated at bid price : 21.94
Bid-YTW : 5.16 %
HSE.PR.E FixedReset Disc 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.11
Evaluated at bid price : 20.11
Bid-YTW : 6.50 %
HSE.PR.A FixedReset Disc 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 12.81
Evaluated at bid price : 12.81
Bid-YTW : 6.41 %
GWO.PR.N FixedReset Ins Non 1.92 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.89
Bid-YTW : 8.67 %
HSE.PR.C FixedReset Disc 2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 6.42 %
MFC.PR.F FixedReset Ins Non 2.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.10
Bid-YTW : 8.57 %
HSE.PR.G FixedReset Disc 3.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 19.85
Evaluated at bid price : 19.85
Bid-YTW : 6.52 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.Z FixedReset Bank Non 93,550 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 3.95 %
RY.PR.J FixedReset Disc 68,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.56
Evaluated at bid price : 20.56
Bid-YTW : 5.35 %
RY.PR.M FixedReset Disc 49,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 5.28 %
BMO.PR.E FixedReset Disc 39,913 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.96
Evaluated at bid price : 22.45
Bid-YTW : 5.01 %
MFC.PR.Q FixedReset Ins Non 36,400 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.75
Bid-YTW : 6.75 %
HSE.PR.C FixedReset Disc 34,740 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 6.42 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.Z FixedReset Disc Quote: 20.25 – 20.90
Spot Rate : 0.6500
Average : 0.4100

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.25
Evaluated at bid price : 20.25
Bid-YTW : 5.76 %

MFC.PR.L FixedReset Ins Non Quote: 17.64 – 18.20
Spot Rate : 0.5600
Average : 0.3951

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.64
Bid-YTW : 8.00 %

PWF.PR.L Perpetual-Discount Quote: 23.15 – 23.60
Spot Rate : 0.4500
Average : 0.3178

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 22.88
Evaluated at bid price : 23.15
Bid-YTW : 5.51 %

CU.PR.D Perpetual-Discount Quote: 22.60 – 23.07
Spot Rate : 0.4700
Average : 0.3407

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 22.25
Evaluated at bid price : 22.60
Bid-YTW : 5.48 %

TRP.PR.A FixedReset Disc Quote: 15.15 – 15.63
Spot Rate : 0.4800
Average : 0.3523

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 5.92 %

CU.PR.G Perpetual-Discount Quote: 21.31 – 21.78
Spot Rate : 0.4700
Average : 0.3586

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.31
Evaluated at bid price : 21.31
Bid-YTW : 5.36 %

April PrefLetter Released!

Sunday, April 14th, 2019

The April, 2019, 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.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the April, 2019, issue, while the “Next Edition” will be the May, 2019, issue, scheduled to be prepared as of the close May 10, 2019, and eMailed to subscribers prior to market-opening on May 13.

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?).

LBS.PR.A Annual Report 2018

Sunday, April 14th, 2019

Brompton Life & Banc Split Corp. has released its Annual Report to December 31, 2018.

LBS / LBS.PR.A Performance
Instrument One
Year
Three
Years
Five
Years
Ten
Years
Whole Unit -13.1% +6.1% +5.2% +11.4
LBS -32.1% +6.6% +5.0% +20.2
LBS.PR.A +4.9% +4.9% +4.9% +5.1%
S&P/TSX Capped Financial Index -9.2% +8.5% +6.9% +12.2%

Note that according to the implementation by iShares, the capped financial index is about 69% banks, 19.7% insurance and 10.4% diversified financials, so the fund is by design overweight insurers relative to this benchmark – and insurers have underperformed.

Figures of interest are:

MER: “The MER per unit, excluding Preferred share distributions (which were covered by the portfolio’s dividend income), was 0.91% for 2018”

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $412.0-million, compared to $445.2-million a year prior (there was an increase in shares outstanding due to a warrant offering), so call it an average of $428.6-million. This can be checked by examining distributions on preferred shares of $11.728-million, which at $0.545 / share implies an average of 21.5-million units outstanding, which at an average value of $17.98 implies average net assets of 386.6-million. Since shares were issued in July and December, 2018, the latter figure seems more appropriate.

Underlying Portfolio Yield: Investment income of $17.354-million received divided by average net assets of $386.6-million is 4.5%.

Income Coverage: Net investment income after expenses of $10.845-million received plus $2.468-million issuance costs added back is $13.313-million, to cover preferred dividends of 11.728-million is about 114%.