PrefBlog

This is the inaugural essay in a new column for Canadian Moneysaver under the general heading of Gentlemen Prefer Bonds.

Look for the Research Link!

Remember … Bonds. James: Bonds.

OSFI is often criticized on PrefBlog! In a recently published article I developed the theme and set six milestones for improvement.

Look for the opinion link!

The January edition of Canadian Moneysaver included my latest effort – “Where Are We Now?”, a review of 2008 … the most horrific year for preferreds in recent memory, at any rate.

Look for the research link!

The monthly retraction privilege that exists on most split share preferreds is normally a joke – but in late 2008 the feature suddenly became much more interesting!

Look for the research link!

Bankers’ Acceptances or Bearer Deposit Notes? What’s safer? What’s the difference?

This article was a long time in the making; I made interim notes in the post Seniority of Bankers’ Acceptances and republished a paper from the BoC Review, The Evolution of Bankers’ Acceptances in Canada.

Look for the research link!

The preferred share market did very poorly in June 2008 – not just in terms of return, but, what’s worse, in terms of theory! Look for the Research Link!

Bonus! Several paragraphs needed to be hastily revised (and the charts renumbered!) to meet space restrictions:

• Original paragraphs
• Original Charts and data (4MB Excel Spreadsheet)

Update: The article states:

A certain amount of algebra starting from Equation (3) of the article “Modified Duration” in CMS, May 2007 leads to the conclusion that the Macaulay Duration of a perpetual annuity with a yield per period of “r” is (1+r)/r. Therefore, from Equation (2) of that article, the Modified Duration (which measures the sensitivity of price to yield changes) is simply 1/r.

The algebra is linked in the post PerpetualDiscount Duration Calculation.

OK, we all know that The Great Credit Crunch of 2007-?? had a grim effect on financial companies and an even more grim effect on their share prices. But, for preferred share investors, the important thing is: what was the effect on preferred shares of split-share corporations backed by financial issues?

The July, 2008, edition of Canadian Moneysaver includes my efforts to review the situation. Look for the research link!

And I can offer a bonus spreadsheet that includes a little information that couldn’t be squashed in to the article.

Sometimes, one big bank is as good as another – at least, according to the market prices of their preferred shares. Right now, they’re not. I review the issue in an article published in Canadian Moneysaver. Look for the research link!

The first one came in March at +205bp. Then Fortis at +213. Today BNS came again at +170. If this keeps up much longer, I’ll be forced to add them to the HIMIPref™ universe … particularly if the index definers pull the old Innovative Tier 1 Capital so-called bond trick and add them to the index!

My conclusion in this article was:

My disdain has not been shared by the market in general. The issue, trading as BNS.PR.P on the Toronto Stock Exchange, had a very successful underwriting and strong secondary demand. But I worry that many investors will have bought this with the assumption, probably valid in most cases but not certain, that the issue will be called in five years. It is the pretense that borrowers can access long term funds from borrowers assuming short-term risks that, after all, caused the credit crisis in the first place.

But … look for the research link!