November 16, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.19% 4.14% 33,011 10.50 2 -0.0800% 1,017.7
Fixed-Floater 4.82% 3.92% 123,010 14.66 7 -0.0154% 1,026.3
Floater 4.59% -20.21% 65,810 6.53 5 -0.1493% 1,029.4
Op. Retract 4.66% 0.85% 81,264 2.26 18 -0.0057% 1,027.3
Split-Share 5.00% 3.33% 159,050 3.32 9 +0.0760% 1,028.8
Interest Bearing 6.93% 5.74% 64,834 1.90 7 +0.1369% 1,016.8
Perpetual-Premium 5.07% 3.96% 225,362 4.19 49 0.0195% 1,043.4
Perpetual-Discount 4.60% 4.63% 839,160 16.15 8 -0.0501% 1,038.1
Major Price Changes
Issue Index Change Notes
There were no index-included issues with absolute returns greater than 1% on the day.
Volume Highlights
Issue Index Volume Notes
CM.PR.I PerpetualDiscount 386,640 A new issue, that traded more on its second day of trading than on its first! “What’s up with CM.PR.I?” my correspondent today asked. To which I answer: “Yield!”. That’s the nice thing about fixed-income. Something’s always up. The issue closed today at $24.83-89, 20×252, so there are a lot of people willing to sell the issue at a discount from issue price (or, I should say, at least one person with a lot of shares!) The question regarding why it’s not trading at a premium puzzles me, quite frankly. Look at the Portfolio Evaluation for the Perpetual Premium Index. You’ve got a Sunlife issue there, rated Pfd-1(low) by DBRS, trading just a hair lower (in pre-tax YTW terms) than the IAG.PR.A – which are only Pfd-2(high) and have a much lower volume. The CM.PR.I are not only trading with a higher YTW than the Industrial Alliance issue, but are only six basis points lower-yielding (six PRE-TAX basis points!) than the WN.PR.E, which is only Pfd-2(low). It’s all rather odd, really, but I’ll take a stab at providing not just one, but two explanations: 

  • The issue is being sold by accounts who bought in hopes of a strong rush out of the gates and a quick flip. But too many people are playing that game and the exit door is getting crowded.
  • Everybody who wants a Bank of Commerce preferred is already filled up to the gills with them; the bank has crowded itself out of the marketplace.

Either explanation could be correct – and both could be wrong. Trying to explain day-to-day moves in the markets is a game for fools and journalists, so I don’t do it much … I just try to keep an eye on basic analysis and trust that eventually the zigs will zag my way.

SLF.PR.D PerpetualDiscount 107,805 Closed at 24.25-33, 1×80. Will these things never settle down?
SLF.PR.B PerpetualPremium 98,780 YTW is 4.37% at the closing bid of $25.91, based on a call 2014-10-30 at $25.00. These pay $1.20 p.a., compared to the $1.1125 on the SLF.PR.C and SLF.PR.D, so admittedly there’s a little more interest-rate protection on the Bs than on the latter two issues. But 20-26bp worth? That seems a little extreme.
GWO.PR.X OpRet 64,882 RBC crossed 30,000 at $27.55, then another 30,000 at the same price about 45 minutes later. Maybe the same 30,000? At the closing bid of $27.55, these had a bid-pre-tax-YTW of 2.73%, and a modified-duration-of-worst of 2.75. Huh. That’s the interest equivalent of 3.82% on a three-year bond: I can do better than that with Canadas. Somebody’s betting – actually, everybody’s betting – that they will last until their “soft Maturity” on 2013-9-29, to have yielded a munificent 3.25% (interest equivalent of 4.55% on a seven year bond … about the same as for bonds of comparable tenor and credit.
NA.PR.L PerpetualPremium 55,575 Nesbitt processed an internal cross of 49,000 shares at $25.86. At this prices (which was the closing bid), they have a pre-tax YTW of 4.34%, based on a call 2014-6-14 at $25.00.

There were twenty-one other index-included issues trading over 10,000 shares today.

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