Research: Analysis of Perpetual Resets

The first one came in March at +205bp. Then Fortis at +213. Today BNS came again at +170. If this keeps up much longer, I’ll be forced to add them to the HIMIPref™ universe … particularly if the index definers pull the old Innovative Tier 1 Capital so-called bond trick and add them to the index!

My conclusion in this article was:

My disdain has not been shared by the market in general. The issue, trading as BNS.PR.P on the Toronto Stock Exchange, had a very successful underwriting and strong secondary demand. But I worry that many investors will have bought this with the assumption, probably valid in most cases but not certain, that the issue will be called in five years. It is the pretense that borrowers can access long term funds from borrowers assuming short-term risks that, after all, caused the credit crisis in the first place.

But … look for the research link!

This entry was posted on Tuesday, May 27th, 2008 at 11:38 pm and is filed under Publications. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

8 Responses to “Research: Analysis of Perpetual Resets”

  1. Kaitas21 says:
    May 28, 2008 at 8:50 am

    I can always count on you for quality, critical, analytical research!

  2. jiHymas says:
    May 28, 2008 at 2:19 pm

    And for screwing up the wording of my conclusions!

    In the last sentence it is, of course, the lenders who are purportedly assuming the short-term risk.

  3. PrefBlog » Blog Archive » Fixed-Resets : Critchley Likes, Ruggins Doesn’t says:
    May 29, 2008 at 12:37 pm

    […] structure, as he explains in his comment on the new issue TD+160. As for myself, I will stick to my previously published analysis: these issues, at these rates, are trading as pretend-five-year money. If they actually WERE five […]

  4. PrefBlog » Blog Archive » New Issue: National Bank Fixed-Reset, 5.375%+205 says:
    June 2, 2008 at 10:22 am

    […] The Big Black Mark against this structure is that it can be called in only five years. I’ve published my thoughts on the matter … but some people like ‘em and they certainly seem to be selling […]

  5. PrefBlog » Blog Archive » Critchley Credits Desjardins for Fixed-Reset Issues says:
    June 2, 2008 at 5:09 pm

    […] is not correct. Have a look at Chart #1 in my recent article Analysis of Perpetual Resets for a ten year graph of the market spread of PerpetualDiscount issues vs. the five year Canada. It […]

  6. PrefBlog » Blog Archive » New Issue: TD Fixed-Reset, 5.10%+168 says:
    July 7, 2008 at 11:56 am

    […] … these things sure seem popular, eh? And I will admit, so far my disdain has been thrown back in my face. But I still don’t like […]

  7. PrefBlog » Blog Archive » PrefLetter: Two New Recommendation Classes says:
    September 8, 2008 at 5:47 pm

    […] My disdain for Fixed-Reset issues as currently priced is well known, but some people like them! Clearly, some of these issues will be better investment choices than […]

  8. New Issue: TD Perpetual Fixed-Floating-Reset 5% + 160bp « PrefBlog says:
    June 22, 2013 at 2:25 am

    […] … if I didn’t like the other ones, I’m not going to like these ones! But it looks like the structure is popular, so I guess […]

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