Issue Comments

BMO.PR.G

This issue became the only “Operating Retractible” to have a negative bid-Yield-to-Worst (YTW) on August 17, with a bid price of 25.36.

 It was issued in the spring of 1998 and has an annual coupon of $1.20. The option schedule is:

  • Redemption      2005-08-25      2006-08-24  25.500000
  • Redemption      2006-08-25      2007-08-24  25.250000
  • Redemption      2007-08-25   INFINITE DATE  25.000000
  • Retraction      2008-05-25   INFINITE DATE  26.040000

And the calculation of YTW is:

  • Call  2006-09-16 YTM: 10.41 % [Restricted: 0.86 %] (Prob: 12.31 %)
  • Call  2006-09-24 YTM: -0.43 % [Restricted: -0.05 %] (Prob: 9.32 %)
  • Soft Maturity  2008-05-24 YTM: 3.90 % [Restricted: 3.90 %] (Prob: 78.38 %)

And the cash flow for YTW is:

  • 2006-09-24  FINAL DIVIDEND   0.10   1.000451   0.10
  • 2006-09-24        MATURITY  25.25   1.000451  25.26

Which at least has the advantage of being simple!

HIMIPref™ does not consider the investment merits (or lack thereof!) of this issue when evaluating trades – the eligibleForPurchase function returns code “14” :

pseudoModifiedDuration (Worst) of buy side less than minimum setting

In other words, the issue is simple too short-term to be worth bothering with.

With an annual coupon of only $1.20 and with the bank having the chance to save $0.25 by waiting until the end of August, 2007 to redeem these shares, they will probably be around for another year, no matter what the term until the YTW scenario. From an investor’s perspective, however … Who’s putting a bid on these things???? The most likely scenario has the pre-tax cash flow analysis:

  • 2006-11-25        DIVIDEND   0.30   0.989474   0.30
  • 2007-02-25        DIVIDEND   0.30   0.979888   0.29
  • 2007-05-25        DIVIDEND   0.30   0.970703   0.29
  • 2007-08-25        DIVIDEND   0.30   0.961299   0.29
  • 2007-11-25        DIVIDEND   0.30   0.951985   0.29
  • 2008-02-25        DIVIDEND   0.30   0.942762   0.28
  • 2008-05-24  FINAL DIVIDEND   0.29   0.933925   0.27
  • 2008-05-24        MATURITY  25.00   0.933925  23.35
  • Total Cash Flows    27.0924
  • Total Present Value    25.3601
  • Discounting Rate 3.9026 % (Annual rate compounded semi-annually)

which doesn’t look all that great to me!

Update, 2008-9-9: And, as a matter of fact, the issue was called for redemption at par, effective 2007-8-27.

Market Action

August 17, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Current Yield (at bid) YTW Average Trading Value Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.34% 4.31% 25,634 16.67 2 0.1006% 994.1
Fixed-Floater 4.94% 4.15% 266,483 14.04 6 -0.0065% 1,003.3
Floater 4.60% -17.70% 59,040 6.45 5 -0.0158% 1,007.3
Op. Retract 4.72% 3.03% 76,141 2.68 18 0.1490% 1,001.5
Split-Share 5.02% 3.54% 56,030 2.76 10 -0.0527% 1,001.4
Interest Bearing 6.85% 5.31% 60,272 2.14 7 0.0585% 1,011.1
Perpetual-Premium 5.27% 4.19% 169,346 3.87 42 0.0504% 1,012.01
Perpetual-Discount 4.72% 4.75% 352,073 13.79 13 0.0718% 1,017.4
Major Price Changes
Issue Index Change Notes
GWO.PR.E OpRet +1.1459%  
Volume Highlights
Issue Index Volume Notes
GWO.PR.I PerpetualDiscount 498,885  
TD.PR.O PerpetualPremium 87,000  
RY.PR.A PerpetualDiscount 82,400  
SLF.PR.C PerpetualDiscount 57,600  
GWO.PR.H PerpetualDiscount 56,275  

There were ten other index-included issues with volumes of more than 10,000 shares

HIMIPref News

HIMIPref™ Update : 2006-08-17

I have just (8pm EDT) attempted to download the prices and run into the same bug as has plagued operations all week. You have no idea how much I’m looking forward to next Monday, when the TSX says they hope to have their systems fixed! I will update this post as warranted.

August 18, 2006, 12:30 a.m. Prices are in, system is ready to go.

Issue Comments

W.PR.J

This is an interesting issue, a member of the PerpetualPremium index. It’s rated Pfd-2(low) by DBRS, where it was confirmed in their latest review of 2005-09-20. The issue had a closing quotation of 25.22-35 on the TSX on 2006-08-16.

The redemption schedule is:

  • Redemption      2004-07-15      2005-07-14  26.000000
  • Redemption      2005-07-15      2006-07-14  25.750000
  • Redemption      2006-07-15      2007-07-14  25.500000
  • Redemption      2007-07-15      2008-07-14  25.250000
  • Redemption      2008-07-15      2999-12-29  25.000000

so it is currently trading at a discount to its current redemption price, but at a discount to its future redemption price.
Analysis of the schedule and its current price gives this calculation for portfolioYield (from the bid-side of the market):

  • Call  2006-09-15 YTM: 26.33 % [Restricted: 2.16 %] (Prob: 10.32 %)
  • Call  2006-10-15 YTM: 15.67 % [Restricted: 2.57 %] (Prob: 5.69 %)
  • Call  2006-12-14 YTM: 10.54 % [Restricted: 3.46 %] (Prob: 5.64 %)
  • Call  2007-04-13 YTM: 8.02 % [Restricted: 5.27 %] (Prob: 5.05 %)
  • Call  2007-08-14 YTM: 6.23 % [Restricted: 6.19 %] (Prob: 7.39 %)
  • Call  2008-08-14 YTM: 5.42 % [Restricted: 5.42 %] (Prob: 7.06 %) 
  • Limit Maturity  2036-08-16 YTM: 5.60 % [Restricted: 5.60 %] (Prob: 58.87 %)

and the cash flow analysis of the YTW scenario is:

  • 2006-10-15        DIVIDEND   0.35   0.991246   0.35
  • 2007-01-15        DIVIDEND   0.35   0.977971   0.34
  • 2007-04-15        DIVIDEND   0.35   0.965158   0.34
  • 2007-07-15        DIVIDEND   0.35   0.952372   0.33
  • 2007-10-15        DIVIDEND   0.35   0.939618   0.33
  • 2008-01-15        DIVIDEND   0.35   0.927035   0.32
  • 2008-04-15        DIVIDEND   0.35   0.914755   0.32
  • 2008-07-15        DIVIDEND   0.35   0.902637   0.32
  • 2008-08-14  FINAL DIVIDEND   0.11   0.898677   0.10
  • 2008-08-14        MATURITY  25.00   0.898677  22.47

The averageTradingValue of the shares (as defined by HIMIPref™) is only 34,088 … too small to attract institutional players, but quite large enough for the occasional retail purchaser.

The issue now has the highest YTW of any issue in the HIMI Proprietary PerpetualPremium index – even if we measure the YTW from the ask price of 25.35.

 

Market Action

August 16, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Current Yield (at bid) YTW Average Trading Value Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.34% 4.31% 25,731 16.67 2 -0.5379% 993.1
Fixed-Floater 4.94% 4.13% 267,651 14.04 6 -0.0592% 1,003.4
Floater 4.60% -18.01% 58,912 6.44 5 -0.0392% 1,007.4
Op. Retract 4.73% 3.31% 75,942 2.77 18 -0.0043% 1,000.0
Split-Share 5.01% 3.61% 56,434 2.77 10 0.0166% 1,001.9
Interest Bearing 6.85% 5.39% 60,756 2.14 7 0.0090% 1,010.5
Perpetual-Premium 5.28% 4.21% 170,187 3.94 42 0.1012% 1,011.5
Perpetual-Discount 4.72% 4.75% 349,324 13.79 13 0.0822% 1,016.7
Major Price Changes
Issue Index Change Notes
ACO.PR.A OpRet -1.4953%  
MFC.PR.C PerpetualDiscount +1.0309%  
Volume Highlights
Issue Index Volume Notes
RY.PR.A PerpetualDiscount 257,700  
CM.PR.G PerpetualPremium 203,000  
HSB.PR.D PerpetualPremium 202,600  
PWF.PR.L PerpetualDiscount 55,826  
POW.PR.C PerpetualPremium 31,090  

There were nine other index-included issues with volumes of more than 10,000 shares

Market Action

August 15, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Current Yield (at bid) YTW Average Trading Value Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.32% 4.32% 25,131 10.53 2 0.0600% 998.5
Fixed-Floater 4.94% 4.10% 271,212 9.48 6 0.0995% 1,004.0
Floater 4.59% -18.43% 59,738 6.44 5 -0.1225% 1,007.8
Op. Retract 4.73% 3.22% 75,920 2.68 18 -0.0433% 1,000.0
Split-Share 5.02% 3.58% 56,449 2.77 10 -0.1930% 1,001.8
Interest Bearing 6.85% 5.25% 61,310 2.14 7 0.1426% 1,010.4
Perpetual-Premium 5.28% 4.26% 170,227 4.05 42 0.1159% 1,010.5
Perpetual-Discount 4.73% 4.75% 352,795 13.79 13 0.2156% 1,015.8
Major Price Changes
Issue Index Change Notes
DFN.PR.A SplitShare -1.3347%  
BAM.PR.K Floater -1.1842%  
Volume Highlights
Issue Index Volume Notes
BC.PR.C FixedFloater 117,143  
GWO.PR.H PerpetualDiscount 31,700  
BNS.PR.K PerpetualPremium 29,600  
PWF.PR.K PerpetualDiscount 28,692  
MFC.PR.B PerpetualDiscount 17,000  

There were five other index-included issues with volumes of more than 10,000 shares

HIMIPref News

HIMIPref™ update : 2006-08-16

I have been advised by the TSX that they are working on the problem and hope to have it resolved by 2006-08-21. I will post updates on this, but it looks like rather a forlorn hope at the moment – don’t rely on an update appearing prior to tomorrow morning.

 Update 2006-08-17 12:30am EDT Well! I can speculate about the nature of TSX’s programming bug a little better now! Prices can be recovered after midnight, and that’s exactly what I’ve done. The system has now been updated to the COB 2006-08-16.

HIMIPref News

HIMIPref™ Update may be Delayed: 2006-08-15

Things are looking a little grim! I’ve just attempted to recover the prices and I’m getting the same thing as yesterday: the TSX Data recovery screen tells me that prices are available until today; so I plug in today’s date for my price list; and a message box appears advising “You have selected an end date for data which is not yet available. This query cannot be processed at this time.”

*sigh*

 I sent them an eMail today inquiring as to whether they intended to fix the problem quickly, but have not yet received a response. This post will be updated as more information becomes available.

 Update, 2006-08-15 9:30pm EDT: Well, I just gave it one last check and it’s the same old story … not too surprising, really, since it really looks like a programming bug introduced in their latest update rather than a data-updating-bug. So, again, the prices will have to be updated in the morning and I’ll post a note when the process is completed.

 Update, 2006-08-16 10am EDT: The prices have been recovered and the system is now updated. I will contact the TSX again today to see what the plans for the future are.

Market Action

August 14, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Current Yield (at bid) YTW Average Trading Value Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.32% 4.29% 26,170 16.72 2 0.3417% 997.9
Fixed-Floater 4.94% 4.15% 266,577 12.09 6 0.0398% 1,003.0
Floater 4.59% -17.50% 60,395 6.49 5 0.3516% 1,009.0
Op. Retract 4.73% 3.25% 76,026 2.77 18 -0.2748% 1,000.4
Split-Share 5.01% 3.58% 56,695 2.77 10 0.0299% 1,003.7
Interest Bearing 6.86% 5.41% 61,661 2.15 7 0.0255% 1,009.0
Perpetual-Premium 5.29% 4.25% 172,954 4.03 42 -0.0081% 1,009.3
Perpetual-Discount 4.74% 4.77% 356,306 14.49 13 0.0578% 1,013.6
Major Price Changes
Issue Index Change Notes
BAM.PR.J OpRet -1.1306%  
GWO.PR.E OpRet -1.6147%  
Volume Highlights
Issue Index Volume Notes
BAM.PR.B Floater 150,530  
BC.PR.C FixedFloater 127,913  
PWF.PR.L PerpetualPremium 83,950  
RY.PR.A PerpetualDiscount 17,320  
GWO.PR.I PerpetualDiscount 15,830  

There were six other index-included issues with volumes of more than 10,000 shares