PrefBlog

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

As noted on the January 9, 2007 Market Action report, the mean-yield-to-worst on the Split Share index has now gone negative.

This is due to the exceptional performance of DIV.PR.A, which had a stellar bid/bid return today of +1.2128%, despite the fact that it is currently callable at prices well below its current quotation. Will the market never learn?

Even after the recent call for redemption of the CVF.PR.A shares (under the same management as DIV.PR.A), people still do these things. If I thought that they were knowingly taking the risk, having explicitly taken a view on the likelihood of redemtption, it wouldn’t bother me so much … but that’s not what I think and I am bothered.

A portfolio evaluation of the split-share index as of today is available here.

The indices have now been rebalanced. Changes are

More details will be added to this post shortly.

Update : Notable performances in December were:

Not a very pleasant month for the Weston issues, presumably due to the 9-figure charge against inventory.

Update & Bump: The rebalanced indices have been uploaded here.

The worst index-included issue for the month was MST.PR.A, an income-trust-backed interest-bearing issue that lost 1.52% on the month and now has a pre-tax YTW of 5.56% based on a bid of $10.34 and a maturity 2009-9-30.

There were a number of index-included issues with superb monthly performance, led by ACO.PR.A +3.75% (I don’t understand it – see November 29 – it’s trading a lot, but the yield is very low), closely followed by FFN.PR.A +3.49% (which is simply ridiculous.

The pre-rebalancing preliminary indices can be downloaded here. Note that everything in this is subject to change as my final indices get caught up.

Update & bump, 2006-12-01 : The indices have now been rebalanced. Changes are

The revised indices can be downloaded here.

Well, it had to happen sometime … the headline event has occurred.

It is, I admit, a bit of a crock – only three of the 18 members of the index have negative yields-to-worst. Due to the very short term-to-worst for these three issues (BMO.PR.G, RY.PR.K and BMO.PR.I) it doesn’t take very much of a price change to change the yield drastically. Since the averages I’m currently reporting are the means, this means that a few large negatives can drag down the whole index. The HIMI Preferred Indices, currently only compiled until January 1996 (but gaining fast!) will report the median averages.

Still, it’s a landmark! Those who like preferreds, but are not so fond of sub-zero yields, may wish to consider buying high-premium perpetuals … the high coupon on these makes it more likely they will be called, mitigating (but not eliminating!) the risk of having to hold a perpetual when you don’t want to. See How Long is Forever?, where I introduce some arithmetic to the question.

To get you started, I’m attaching “Portfolio Evaluations” of three of the indices:

OpRet

SplitShare

PerpetualPremium