TD.PR.R Settles: Too Much Hot Money?

TD.PR.R, announced March 3, settled today and was unable to trade above par, with volume of 771,292 in a range of 24.85-97. The closing quotation was 24.88-90, 29×2.

This is particularly surprising since the very similar TD.PR.Q (the only difference is a three month shift in redemption schedule and a long first coupon for TD.PR.R), which had been trading around 25.60 prior to the TD.PR.R announcement, closed at 25.10-15, 20×8 today.

Given the volume for TD.PR.R and the fact that the take-up of the greenshoe was announced on the day following the new issue announcement, I can only assume that the underwriting was a success but that, unfortunately for some, there were a great many players who decided that the new issue would instantly trade at a sixty-cent premium and resolved to subscribe to the issue and sell at the opening.

Too many cooks spoil the broth! We are now in the fairly unusual situation in which one member of a Preferred Pair is in the PerpetualDiscount index, and the other is a PerpetualPremium!

It is also noteworthy that the similar TD.PR.P, which pays a dividend of $1.3125 compared to $1.40 for the other two, closed at 24.40-44, 6×7, with a pre-tax bid-YTW of 5.45%.

Curve Prices (that is to say, fair values as estimated by HIMIPref™) were: TD.PR.P = 24.10; TD.PR.Q = 25.26; TD.PR.R = 25.14.

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