TD.PF.M Outperforms Market on Modest Volume

The Toronto Dominion Bank’s new issue closed today without an announcement on their website.

TD.PF.M is a FixedReset 5.10%+356, NVCC, announced 2019-5-24. It will be tracked by HIMIPref™ and has been assigned to the FixedReset (Discount) subindex.

The issue traded 680,093 shares today in a range of 24.60-78 before closing at 24.70-71. Vital statistics are:

Maturity Type : Limit Maturity
Maturity Date : 2049-06-04
Maturity Price : 23.05
Evaluated at bid price : 24.70
Bid-YTW : 4.96 %

Given that the PerpetualDiscount index is down 5.64% from its pre-announcement close on May 23, this was actually a pretty good day for the issue!

The new issue remains expensive according to Implied Volatility Analysis:

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According to this analysis, the fair price of the new issue is 23.58, down 0.69 from the announcement day fair value of 24.27.

It is most interesting to compare this issue with TD.PF.L, a FixedReset, 5.20%+327, that commenced trading 2019-1-28 after being announced 2019-01-17. Alert Assiduous Readers will have noticed that although the initial dividends of the two issues are similar, the spreads are 29bp different, which is significant. The fair price of TD.PF.L according to the analysis above is only 22.39 (down 0.84 from the TD.PF.M announcement day value of 23.23), yet the issue closed today at 24.63-68, not much below TD.PF.M’s 24.70-71. I am reminded of the BCE.PR.K Ridiculous Rip-off Wrinkle, in which BCE was able to reopen the issue since – presumably – the initial coupon rate was in-line with the market even though the spread to the Canada 5-year for the re-opened portion was 87bp lower than it should have been.

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