With all the tumult of the past year, I thought it was high time to show a new portfolio analysis of CPD. Holdings were recovered from the CPD information page as of February 25 and converted into HIMIPref™ format. Cash was not included in the HIMIPref™ transcription – these analyses are for the securities only.
Sectoral distribution of the CPD portfolio on February 26 was as follows:
| CPD Sectoral Analysis 2021-2-26 | ||||
| HIMI Indices Sector | Weighting | YTW | ModDur | |
| Ratchet | 0% | N/A | N/A | |
| FixFloat | 0% | N/A | N/A | |
| Floater | 0% | N/A | N/A | |
| OpRet | 0% | N/A | N/A | |
| SplitShare | 0% | N/A | N/A | |
| Interest Rearing | 0% | N/A | N/A | |
| PerpetualPremium | 4.9% | 1.44% | 3.39 | |
| PerpetualDiscount | 3.4% | 4.96% | 15.52 | |
| Fixed-Reset Discount | 25.9% | 4.01% | 17.19 | |
| Insurance – Straight | 7.8% | 3.91 | 12.11 | |
| FloatingReset | 0% | N/A | N/A | |
| FixedReset Premium | 20.0% | 3.16% | 3.42 | |
| FixedReset Bank non-NVCC | 0.4% | 1.92% | 0.49 | |
| FixedReset Insurance non-NVCC | 7.4% | 3.57% | 13.52 | |
| Scraps – Ratchet | 1.2% | 4.95% | 18.36 | |
| Scraps – FixedFloater | 0.9% | 4.84% | 17.61 | |
| Scraps – Floater | 0% | N/A | N/A | |
| Scraps – OpRet | 0% | N/A | N/A | |
| Scraps – SplitShare | 0% | N/A | N/A | |
| Scraps – PerpPrem | 1.5% | -1.06% | 7.50 | |
| Scraps – PerpDisc | 1.4% | 5.00% | 15.48 | |
| Scraps – FR Discount | 18.9% | 5.29% | 14.88 | |
| Scraps – Insurance Straight | 0% | N/A | N/A | |
| Scraps – FloatingReset | 0% | N/A | N/A | |
| Scraps – FR Premium | 6.3% | 4.68% | 3.65 | |
| Scraps – Bank non-NVCC | 0% | N/A | N/A | |
| Scraps – Ins non-NVCC | 0% | N/A | N/A | |
| Cash | 0% | N/A | N/A | |
| Total | 100% | 3.94% | 11.53 | |
| Totals and changes will not add precisely due to rounding. | ||||
| The various “Scraps” indices include issues with a DBRS rating of Pfd-3(high) or lower and issues with an Average Trading Value (calculated with HIMIPref™ methodology, which is relatively complex) of less than $25,000. The issues considered “Scraps” are subdivided into indices which reflect those of the main indices. | ||||
| DeemedRetractibles were comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 in the case of banks or normally in the case of insurers and insurance holding companies, in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis and IAIS Says No To DeemedRetractions for the recent change in policy with respect to insurers.
Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue and by a further five years in December, 2018; the estimate was eliminated in November. However, the distinctions are being kept because it is useful to distinguish insurance issues from others. The name of this subindex has been changed to "Insurance Straight" as of November, 2020 |
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| Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 0.86%, a constant 3-Month Bill rate of 0.11% and a constant Canada Prime Rate of 2.45% | ||||
The calculation of overall yield may be criticized, since it is merely a weighted average of the yield for each issue. Thus, when considering WN.PR.A, the average will reflect the calculated YTW of -17.44% as if it was in effect for as long as every other calculated yield, which is simply wrong. A proper overall yield calculation would take the cashflows of each instrument in the portfolio and calculate the yield based on all these cashflows together, but I don’t know anybody who does that. HIMIPref™ can prepare a table of these cashflows, but I see no point in doing so.
The weighted average is 3.94%, as indicated on the table. The weighted average if all the negative YTWs (there are eight of them) are set to zero is 4.11%. The weighted average if all the issues with a negative YTW are ignored completely is 4.23%. So take your pick.
A wrinkle to the division into sub-indices is the fact that some issues are classed here as FixedResets, even though for analytical purposes they are classified as Straights – this is due to the fact that these particular issues reset with a floor rate which is (given the current level of the GOC 5-Year bond) currently expected to be effective.
For CPD the total portfolio is 68.5% “Floating”, which means the rates will reset periodically based upon the GOC-5, T-Bill or Canada Prime levels.
Credit distribution is:
| CPD Credit Analysis 2021-2-26 | ||
| DBRS Rating | CPD Weighting | |
| Pfd-1 | 0 | |
| Pfd-1(low) | 0 | |
| Pfd-2(high) | 36.2% | |
| Pfd-2 | 16.7% | |
| Pfd-2(low) | 15.0% | |
| Pfd-3(high) | 14.8% | |
| Pfd-3 | 12.6% | |
| Pfd-3(low) | 1.6% | |
| Pfd-4(high) | 0% | |
| Pfd-4 | 0% | |
| Pfd-4(low) | 0% | |
| Pfd-5(high) | 0% | |
| Pfd-5 | 0% | |
| Cash | 0% | |
| Totals will not add precisely due to rounding. | ||
| 3% of the portfolio is not rated by DBRS and I have not used S&P ratings as a substitute. | ||
Liquidity Distribution is:
| CPD Liquidity Analysis 2021-2-26 | ||
| Average Daily Trading | CPD Weighting | |
| <$50,000 | 2.6% | |
| $50,000 – $100,000 | 16.4% | |
| $100,000 – $200,000 | 39.2% | |
| $200,000 – $300,000 | 24.5% | |
| >$300,000 | 17.3% | |
| Cash | 0% | |
| Totals will not add precisely due to rounding. | ||
The distribution of Issue Reset Spreads is:
| Range | CPD Weight |
| <100bp | 0% |
| 100-149bp | 0.4% |
| 150-199bp | 1.8% |
| 200-249bp | 17.9% |
| 250-299bp | 18.1% |
| 300-349bp | 11.7% |
| 350-399bp | 9.9% |
| 400-449bp | 6.5% |
| 450-499bp | 10.8% |
| 500-549bp | 1.8% |
| 550-599bp | 0% |
| >= 600bp | 0% |
| Undefined | 21.0% |
Distribution of Floating Rate Start Dates is shown in the table below. This is the date of the next adjustment to the dividend rate, if the issue is currently paying a fixed rate for a limited time; which in practice is successive terms of 5 years. Issues that adjust quarterly are considered “Currently Floating”.
| Range | CPD Weight |
| Currently Floating | 1.2% |
| 0-1 Year | 19.0% |
| 1-2 Years | 18.6% |
| 2-3 Years | 13.4% |
| 3-4 Years | 20.8% |
| 4-5 Years | 8.1% |
| 5-6 Years | 0% |
| >6 Years | 0% |
| Not Floating Rate | 19.0% |
