Category: Index Construction / Reporting

Index Construction / Reporting

Index Changes : March 30, 2007

The following changes were made to the HIMIPref™ Indices (temporary version) on the March month-end rebalancing:

 

Index Changes 2007-03-30
Ticker From To Because
IAG.PR.A PerpetualDiscount PerpetualPremium Price
BNS.PR.L PerpetualPremium PerpetualDiscount Price
SXT.PR.A SplitShare Scraps Volume
BNA.PR.B SplitShare Scraps Volume
BCE.PR.I Scraps FixFloat Volume
BCE.PR.S Scraps Ratchet Volume
PWF.PR.A Scraps Floater Volume

Two new issues were added to “Scraps” during the month since they did not qualify for the indices due to credit concerns: DW.PR.A on 3/13 and YPG.PR.A on 3/6.

Index Construction / Reporting

RY.PR.F : Another New Issue Staggers to Market

The issuers and their salesmen must be trying to extract every dollar from this market since the new Royal Bank issue announced nine days ago staggered to market, trading 395,889 shares and closing at $24.75-80, 73×29. It opened at $24.90, the high for the day.

It seems buyers of new issues only get rewarded by Split Shares nowadays! And, of course, when you buy a split share new issue, you generally get saddled with a capital unit as well.

This issue has been added to the HIMIPref™ database with a securityCode of A45015, replacing the preIssue code of P37500. A reorgDataEntry has been processed.

The issue has been added to the HIMIPref™ PerpetualDiscount Index.

More later.

Later, more

Royal Bank 4.45% Perp New Issue & Comparatives
Data RY.PR.F RY.PR.A RY.PR.E
Price due to base-rate  22.65 22.65  22.90 
Price due to short-term -0.34  -0.34  -0.34 
Price due to long-term 1.27  1.27  1.28 
Price to to Cumulative Dividends
Price due to Liquidity 1.66  1.66  1.67 
Price due to error -0.04  -0.04  -0.04 
Curve Price (Taxable Curve) 25.20  25.20  25.47 
Dividend Rate $1.1125 $1.1125 $1.125
Quote 3/14  24.75-80 24.89-95  25.11-15 
YTW (after tax) 3.58%  3.57%   3.60%
YTW Date 2037-3-14  2037-3-14   2037-3-14
Credit Rating (DBRS) Pfd-1 Pfd-1 Pfd-1
YTW (Pre-Tax) 4.51%  4.50%  4.53% 
YTW Modified Duration (Pre-Tax) 16.42  16.40  16.29 
YTW Pseudo-Convexity (Pre-Tax) -21.37  -33.51  -54.33 

Observant readers will note that there have been large changes in the YTW Modified Duration and the YTW Pseudo-Convexity. This will be a common occurance when the issue’s price is near its inflection point, as shown on the following graphs:

More later.

Later, More: : I have uploaded some HIMIPref™ reports regarding RY.PR.F on its announcement date, to wit (note that all referenced yields are after-tax):

The enormous effect on duration that a miniscule change in yields produces – the yield difference between the 2016 scenario and the 2037 scenario is less than 1 basis point – shows just why pseudo-convexity is so important! In valuation terms, uncertainties of this nature are discouraged by HIMIPref™ via the optionDoubtPenalty which keys off the optionDoubt attribute, which proxies pseudo-convexity fairly effectively.

I really need to write an article about this stuff.

Index Construction / Reporting

March 2, 2007

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.01% 3.88% 84,498 3.90 1 -0.0398% 1,046.9
Fixed-Floater 4.97% 3.53% 112,983 4.61 5 +0.1750% 1,041.4
Floater 4.72% -16.95% 76,631 0.48 3 0.0000% 1,048.1
Op. Retract 4.71% 2.43% 76,314 2.12 17 +0.1821% 1,031.5
Split-Share 5.07% 1.05% 208,754 3.25 15 +0.0439% 1,043.8
Interest Bearing 6.50% 4.11% 63,264 2.33 5 -0.0853% 1,036.9
Perpetual-Premium 5.01% 3.55% 262,920 5.11 53 +0.0725% 1,055.7
Perpetual-Discount 4.54% 4.53% 835,301 14.21 9 +0.0940% 1,064.9
Major Price Changes
Issue Index Change Notes
ACO.PR.A OpRet +1.2887% TD crossed 33,000 at 27.95 and were on the buy side for all other board-lot trades today, four tranches executed immediately prior to the cross at prices from 27.60 to 27.95. At those prices yesterday’s cross at 27.50 was a bargain! At the closing quotation of 27.51-98, the pre-tax YTW quote is 2.29%-1.32%. Too rich for my blood, but quite normal for this issue. However, the graph of Modified-Duration-to-Worst shows the situation to be unsustainable … we will see within two years just whether Atco, with its stellar operating results really wants to pay $1.4375 p.a. for a retractible … even with the redemption cost declining by $0.50 annually.  

The MDTW graph is quite instructive, by the way (one point was killed for being off the curve, but the YTW scenario has been very stable over the past year). See those little jumps interupting a downward line? That’s the dividends being paid.

Hmm … maybe there’s an article in there somewhere …

Volume Highlights
Issue Index Volume Notes
BCE.PR.G FixFloat 506,800 Nesbitt crossed 500,000 at 25.50.
BCE.PR.R FixedFloater 305,600 Nesbitt crossed 50,000 at 25.50, then another 253,500 at the same price. This was also an active trader yesterday.
BCE.PR.H Ratchet 240,000 Nesbitt crossed 240,000 at $25.12
BCE.PR.Z FixFloat 204,435  
BCE.PR.T Scraps (would be FixFloat, but there are volume concerns) 117,450 No volume concerns today! Nesbitt crossed 115,000 at 25.80.
BCE.PR.C FixFloat 102,400 Nesbitt crossed 100,000 at 25.60

There were sixteen other “$25 p.v. equivalent” index-included issues with over 10,000 shares traded today.

Poor old BCE.PR.A! The only member of the FixFloat Index not to be traded in size today!

Index Construction / Reporting

Index Changes, 2007-02-28

The following changes were made to the HIMIPref™ Indices (temporary version) on the February month-end rebalancing:
 

Index Changes 2007-02-28
Ticker From To Because
 ASC.PR.A Scraps  SplitShare  Volume 
 BNA.PR.B Scraps   SplitShare Volume 
 BCE.PR.S Ratchet  Scraps  Volume 
 BCE.PR.H Scraps  Ratchet  Volume 
 BCE.PR.I FixFloat  Scraps  Volume 
BMO.PR.J  PerpetualDiscount  PerpetualPremium  Price 
 BAM.PR.G FixFloat  Scraps  Volume 
BAM.PR.M  PerpetualDiscount  PerpetualPremium  Price 
PWF.PR.D  OpRet  Scraps  Volume 
PWF.PR.A  Floater  Scraps  Volume 
RY.PR.E  PerpetualDiscount  PerpetualPremium  Price 
PAY.PR.A  SplitShare  Scraps  Volume 
TOC.PR.B  Floater  Scraps  Volume 
WN.PR.E  PerpetualPremium  PerpetualDiscount  Price 

Data Changes

ENB.PR.D Redemption Completed

ENB.PR.D, an interest bearing preferred security, was redeemed today as previously noted. They had, presumably, no difficulty in finding the money for the redemption, what with their recent equity issue and my January gas bill.

This leaves the interestBearing index bereft of all operating companies; it is now populated solely by split-share corporations.

It now remains to be seen whether they will also redeem ENB.PR.A, a perpetual that is currently part of the PerpetualPremium index. This issue has been mentioned as occasionally drifting into negative YTW territory; it’s currently redeemable at $25.25, but will be redeemable at par in December.

Oops! There is actually one remaining operating company issue left in the interestBearing index … BAM.PR.T. However, it is virtually certain that BAM.PR.T will be redeemed in June, so I was only off by five months!

Data Changes

CM.PR.J : Not as Bad as Expected

The new issue from CIBC commenced trading today and on heavy volume of 807,580 shares closed at $24.87-88, 30×100.

CIBC announced that

Following the successful sale of the initially announced
10 million Series 32 Shares, the underwriters exercised an option to purchase
an additional 2 million shares.

The securityCode for this issue is A42019, replacing the preIssue code of P25005. A reorgDataEntry has been input to reflect the change.

curvePrice calculations for it and the comparables previously examined are:

Curve Prices (and other info) on CM.PR.J and comparables
Data CM.PR.J CM.PR.I CM.PR.H RY.PR.D
Price due to base-rate 23.05 23.72 23.95 23.17
Price due to short-term -0.47 -0.48 -0.50 -0.48
Price due to long-term 1.23 1.26 1.30 1.25
Price due to Liquidity 1.43 1.48 1.49 1.48
Price due to error 0.04 0.04 0.04 -0.02
Price due to Credit Spread (Low) -0.54 -0.55 -0.56 NA
Curve Price $24.75 $25.46 $25.72 $25.40
Quote 2/14 $24.87-88 25.50-52 25.86-98 25.01-08
Annual Dividend $1.125 $1.175 $1.20 $1.125
After-Tax YTW 3.61% 3.56% 3.42% 3.62%
Pre-Tax YTW 4.54% 4.48% 4.30% 4.56%

Note that due to recalculation of the yield curve, the values for the components of the curve price are not directly comparable to the components previously reported; but, of course, each reported calculation is internally consistent.

This issue has been added to the PerpetualDiscount index – the current composition of this index has been uploaded.

Data Changes

CFS.PR.A Eases into Market

It was a very quiet opening for this issue, with only 11,200 shares changing hands. The leveraging / deleveraging feature appears to have found favour only with DBRS!

However, to my chagrin (and, undoubtedly, CC&L Capital Markets’), this is a teeny-tiny issue: the TSX reports that only 1.5-million shares are outstanding, for a value of $15-million in prefs and total company capitalization of $30-million.

Still, even if you take the view that this thing will trade by appointment only, you can’t deny that a lot of investors will consider it worth holding. It’s Pfd-1 and I calculate the curvePrice to be $10.42, compared to the closing quote of $10.06-25:

  CFS.PR.A CGI.PR.C
Price due to base-rate 9.87  23.66
Price due to short-term -0.20  -0.62
Price due to long-term 0.52  1.55
Price due to SplitShareCorp -0.21  -0.90
Price due to Retractibility 0.30  1.24
Price due to Liquidity 0.15  -0.27
Price due to error 0.01  0.09
Curve Price (some rounding error) 10.42  24.75
Quote 10.06-25  25.86-09
After-Tax bid-YTW 3.29%  2.82%
Pre-Tax bid-YTW 4.14%  3.55%
Presumed Maturity 2012-1-31  2016-06-14

Even if one takes the view that the +$0.15 allowance for liquidity turns into -$0.10 for illiquidity (probably a safe bet!) there’s room for some capital gains for those who buy and sell liquidity in small amounts!

This issue has been entered into the HIMIPref™ database with the securityCode A41410, which replaces the preIssue code of P25006. A reorgDataEntry has been processed.

The issue has been added to the SplitShares index.

Index Construction / Reporting

Index Adjustments, February 2, 2007

As a result of the corporate actions by Faircourt and a new issue by Sunlife, the following index adjustments have been made:

Index Adjustments, 2007-02-02
Index Old Ticker Old Security Code New Ticker New Security Code
InterestBearing FCN.PR.A B35002 Cash @ 10.05 N/A
Scraps FCF.PR.A B35001 Cash @ 10.05 N/A
Scraps FCI.PR.A B35000 Cash @ 10.05 N/A
PerpetualDiscount Cash @ 25.00 N/A SLF.PR.E A48984

Note that the cash recorded as a result of the Faircourt actions is fictitious: $10.05 is the bid price today of FIG.PR.A, the continuing security. Processing a formal re-org inside the indices would result in having this issue included four times, which is three too many.

Index Construction / Reporting

Index Adjustments, February 1, 2007

As a result of the corporate actions by Bell / BCE and by CIBC, the following index adjustments have been made:

Index Adjustments, 2007-02-01
Index Old Ticker Old Security Code New Ticker New Security Code
FixedFloater BC.PR.B A38006 BCE.PR.G A39014
FixedFloater BC.PR.C A38005 BCE.PR.I A39016
Scraps BC.PR.E A38007 BCE.PR.H A39015
PerpetualPremium CM.PR.B A42013 $26 Cash N/A
Index Construction / Reporting

Index Rebalancing, January 31, 2007

This is another placeholding post, I’m afraid, but I’ll update it later.

Index Rebalancing 2007-01-31
Ticker From To Reason
FIG.PR.A Backdate InterestBearing Backdate
BNA.PR.A Scraps SplitShare Volume
MUH.PR.A Scraps SplitShare Volume
PAY.PR.A Scraps SplitShare Volume
PWF.PR.A Scraps Floater Volume
PWF.PR.D Scraps OpRet Volume
CAC.PR.A SplitShare Scraps Volume
RY.PR.A PerpetualPremium PerpetualDiscount Price
MFC.PR.C PerpetualPremium PerpetualDiscount Price
IAG.PR.A PerpetualPremium PerpetualDiscount Price
BAM.PR.M PerpetualPremium PerpetualDiscount Price