BMO.PR.N Bid Through 3.00%

About four months ago, on March 26, I noted that RY.PR.R was bid at under 3.00%. It turns out that that was a significant date: March 26 marked a peak in the FixedReset market, which then entered a slump period that I analyzed extensively in the May edition of PrefLetter.

So now BMO.PR.N is bid through 3.00%. This is an interesting issue: it was announced 2008-11-25, very close to the all time low in the PerpetualDiscount market (BMO PerpetualDiscounts were at 8.50%!), and settled in December 2008; it’s a FixedReset, 6.50%+383bp. It closed today bid at 28.30 and is callable at 25.00 on February 25, 2014.

We plug the following data into the Yield-to-Call calculator (broken link redirected 2024-2-1):
Current Price 28.30
Call Price 25.00
Settlement Date 2010-7-23 (easily disputable – so sue me)
Quarterly Dividend 0.40625
Cycle 2 (FMAN)
Pay Date 25
Include First Dividend 1 = yes (goes ex 7/28; the proximity of the ex-Date might be influencing the price)

And we get IRR = 2.95%, Quarterly compounded yield 2.91%. HIMIPref™ reports 2.98% yield – the difference is due to the month’s grace period that is a bug feature idiosyncracy in the system; of very little import since it’s small AND consistent across issues, but it’s embarrassing because it has to be disclosed every time I discuss yields. One day I’ll change it, never fear.

Another notable fact regarding BMO.PR.N is that it has just been added to TXPR which may be exerting a little upwards pressure on the price.

Two charts have been uploaded for your edification and amusement:

which plot both BMO.PR.N and RY.PR.R from the latter’s issuance in January 2009. Enjoy!

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