Econbrowser‘s James Hamilton took a look at How the Federal Reserve Earned its Profit.
There was a surprising amount of activity in the Canadian preferred share market today – considering the American holiday – with an equally surprising amount of price action. PerpetualDiscounts lost 2bp while FixedResets gained 14bp and scored a shut-out on the volume highlights table.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5052 % | 1,700.4 |
| FixedFloater | 5.78 % | 3.86 % | 35,307 | 19.20 | 1 | 1.8970 % | 2,733.2 |
| Floater | 2.31 % | 2.63 % | 108,857 | 20.69 | 3 | -0.5052 % | 2,124.3 |
| OpRet | 4.85 % | -0.18 % | 115,727 | 0.09 | 13 | -0.0767 % | 2,318.0 |
| SplitShare | 6.36 % | 1.26 % | 184,028 | 0.08 | 2 | -0.1534 % | 2,111.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0767 % | 2,119.6 |
| Perpetual-Premium | 5.79 % | 5.67 % | 147,134 | 5.98 | 12 | -0.1717 % | 1,893.0 |
| Perpetual-Discount | 5.73 % | 5.77 % | 179,077 | 14.24 | 63 | -0.0162 % | 1,833.0 |
| FixedReset | 5.39 % | 3.52 % | 330,634 | 3.85 | 42 | 0.1367 % | 2,183.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| HSB.PR.C | Perpetual-Discount | -2.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 22.58 Evaluated at bid price : 22.76 Bid-YTW : 5.65 % |
| IAG.PR.C | FixedReset | -1.78 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 27.00 Bid-YTW : 4.12 % |
| W.PR.J | Perpetual-Discount | -1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 22.90 Evaluated at bid price : 23.17 Bid-YTW : 6.08 % |
| HSB.PR.D | Perpetual-Discount | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 22.08 Evaluated at bid price : 22.21 Bid-YTW : 5.68 % |
| POW.PR.D | Perpetual-Discount | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 21.43 Evaluated at bid price : 21.71 Bid-YTW : 5.79 % |
| PWF.PR.J | OpRet | 1.01 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2010-02-17 Maturity Price : 25.75 Evaluated at bid price : 25.97 Bid-YTW : -7.78 % |
| MFC.PR.C | Perpetual-Discount | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 5.70 % |
| POW.PR.C | Perpetual-Discount | 1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 24.65 Evaluated at bid price : 25.01 Bid-YTW : 5.83 % |
| BAM.PR.G | FixedFloater | 1.90 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 25.00 Evaluated at bid price : 18.80 Bid-YTW : 3.86 % |
| TD.PR.Y | FixedReset | 1.99 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-11-30 Maturity Price : 25.00 Evaluated at bid price : 26.17 Bid-YTW : 3.70 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BAM.PR.R | FixedReset | 143,120 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-01-18 Maturity Price : 23.19 Evaluated at bid price : 25.30 Bid-YTW : 4.82 % |
| TRP.PR.A | FixedReset | 132,770 | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.84 Bid-YTW : 3.07 % |
| TD.PR.K | FixedReset | 119,820 | Nesbitt crossed 100,000 at 27.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.85 Bid-YTW : 3.55 % |
| PWF.PR.M | FixedReset | 114,390 | Nesbitt crossed 100,000 at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-02 Maturity Price : 25.00 Evaluated at bid price : 27.25 Bid-YTW : 3.58 % |
| RY.PR.L | FixedReset | 106,620 | Nesbitt crossed 100,000 at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 27.25 Bid-YTW : 3.48 % |
| MFC.PR.D | FixedReset | 88,965 | Desjardins crossed 59,600 at 28.10; RBC crossed 22,800 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 28.08 Bid-YTW : 3.78 % |
| There were 50 other index-included issues trading in excess of 10,000 shares. | |||
BAM.PR.R is shown with a Limit Maturity in volume highlights. Is it not a reset with a call?
You are quite correct – it is. But when I estimate the price if it survives for thirty years (23.19) and plug in the reset spread (+230) and the contemporary yield on five year Canadas (2.46%), I calculate a yield that is lower than the yield-to-call.
The limitPrice of 23.19 will be controversial and introduces complexities that do no exist in standard YTW calculations. It incorporates an element of scenario analysis: in the cases in which market spreads go down, the issue is called; hence, the cases in which it is not called has market spreads that are higher than they are currently; hence, the limitPrice will be lower than the contemporary price.
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