Archive for November, 2006

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November 20, 2006

Monday, November 20th, 2006
Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.21% 4.16% 32,268 10.46 2 +0.1807% 1,017.9
Fixed-Floater 4.82% 3.87% 116,924 8.43 7 0.1646% 1,027.5
Floater 4.48% -23.30% 65,196 6.54 5 +0.1500% 1,034.6
Op. Retract 4.66% 0.97% 80,119 2.26 18 -0.0466% 1,028.0
Split-Share 5.01% 3.41% 153,586 3.31 9 -0.0820% 1,027.4
Interest Bearing 6.94% 5.96% 65,965 2.36 7 -0.3524% 1,015.7
Perpetual-Premium 5.07% 4.03% 218,236 4.19 49 +0.0068% 1,043.3
Perpetual-Discount 4.63% 4.65% 1,028,052 16.13 9 -0.2680% 1,036.1
Major Price Changes
Issue Index Change Notes
BSD.PR.A InterestBearing +1.2097% Continue to bounce around. No solid news yet about the upcoming retraction event.
Volume Highlights
Issue Index Volume Notes
BAM.PR.M PerpetualDiscount 395,480 New issue
SLF.PR.A PerpetualPremium 334,880 Closed at $25.41-59, with a YTW of 4.44% based on the bid price and a call at $25.00 2014-04-30. It pays $1.1875 – so “call protection” of 30 bp 7.5 years hence is being valued at 18bp p.a., compared to the SLF.PR.D. Whether there are ANY scenarios in which the SLF.PR.A have a better total return is left as an exercise for the reader.
CM.PR.I PerpetualDiscount 69,560 Another recent new issue, closing with a bid-YTW of 4.74%. An attractive issue at $24.88-90.
WN.PR.E PerpetualDiscount 29,978 It’s trying hard to be PerpetualPremium, at 24.96-99, but it’s full of dividend – the next ex-date is on or about 2006-12-13. Bid YTW is 4.81, based on perpetuity.
SLF.PR.D PerpetualDiscount 18,675 Still trading heavily.

There were fifteen other index-included issues trading over 10,000 shares today.

Posted in Market Action | 1 Comment »

HIMI Preferred Indices : July, 1995

Monday, November 20th, 2006

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1995-7-31
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,243.0 0 0 0 0 0 0
FixedFloater 1,243.0 0 0 0 0 0 0
Floater 1,172.9 7 1.55 6.89% 12.7 75M 7.06%
OpRet 1,059.7 25 1.27 6.62% 5.9 89M 7.02%
SplitShare 1,059.7 0 0 0 0 0 0
Interest-Bearing 1,059.7 0 0 0 0 0 0
Perpetual-Premium 1,082.5 5 1.00 6.04% 3.5 51M 7.92%
Perpetual-Discount 1,033.5 0 0 0 0 0 0

Index Constitution, 1995-7-31, Pre-Rebalancing

Index Constitution, 1995-7-31, Post-Rebalancing

Posted in HIMI Preferred Indices | No Comments »

BAM.PR.M Disappoints on Opening

Monday, November 20th, 2006

The Brookfield new issue closed today and dropped to a closing quotation of $24.59-60 on heavy volume of 395,480 shares.

At this price I like it more than BAM.PR.J – but not by enough (quite!) to perform the swap.

The issue has been added to the HIMIPref™ database with the securityCode A41222, as a reorg out of the pre-issue code, P25003.

It has been added to the PerpetualDiscount Index as of 2006-11-20

Posted in Data Changes, Index Construction / Reporting, Issue Comments | 12 Comments »

MAPF Returns : October 31, 2006

Sunday, November 19th, 2006

The monthly return for Malachite Aggressive Preferred Fund has been calculated – it was calculated some time ago, actually, and I’m just getting around to updating the websites!

 The unit price as of October 31, 2006, was $9.6628
Returns may therefore be calculated as:

Period Ending October 31, 2006 Return (see Note)
Month +0.48%
Year +6.32%
Two Years (Annualized) +6.38%
Three Years (Annualized) +9.31%
Four Years (Annualized) +13.36%
Five Years (Annualized) +10.30%
MAPF returns are shown after expenses, but before fees.

Note that past performance should not be taken as a guarantee of future performance. You can lose money investing in MAPF or any other investment.
The nice thing about these returns is that they have been virtually entirely dividends and capital gains, resulting in a generally lower tax rate than for interest for most taxable investors.

The fund is available only to accredited investors in Ontario. If you are a Canadian accredited investor not in Ontario with a substantial amount of money to invest, contact me and we can discuss the possibility of Hymas Investment Management Inc. (HIMI) applying for registration in your province or territory.

For more information and documents regarding the fund, see the HIMI website

I have resumed transmission of information regarding the fund to Globefund. I confess to some amusement at the fact that MAPF – 100% invested in TSX listed preferred shares and the occasional preferred security – is categorized as “Canadian Equity” and gets THREE STARS anyway, despite the very favourable conditions for actual equity funds over the past few years.

Posted in MAPF | No Comments »

Saskatchewan Increases Dividend Tax Credit

Saturday, November 18th, 2006

According to an official news release, Saskatchewan intends to increase the dividend gross up and tax credit quite substantially.

The Government also introduced changes to the dividend tax credit (DTC). Effective for the 2006 taxation year, Saskatchewan will establish a new DTC on dividends received from larger corporations at a rate of 11 per cent. By increasing its DTC rate for larger businesses, Saskatchewan has now integrated with the changes announced in the May federal budget. Effective for the 2007 taxation year, the DTC rate on dividends received from small businesses will drop from 8 per cent to 6 per cent to reflect Saskatchewan’s lower small business corporate income tax rate.

I’ll keep an eye on the E&Y Tax Calculator and post again when they have accounted for this change. 

Hat-tip to Financial Webring Forum for bringing this to my attention. 

Update, 2006-11-18: Boy, that was fast!

Investors Taxable Income Marginal Rate on Interest Marginal Rate on Dividends Equivalency Factor
Widows & Orphans $30,000 26.25% 0.00% 1.36
Professionals $75,000 39.00% 13.10% 1.42
Plutocrats $150,000 44.00% 20.35% 1.42

Posted in Taxation | No Comments »

BAM.PR.S Called for Redemption

Saturday, November 18th, 2006

All good things must come to an end.

BAM.PR.S has been a wonderful issue, paying $2.0875 interest every year but it’s time to wave farewell to the old friend.

Brookfield called it for redemption:

Brookfield Asset Management Inc. (NYSE/TSX: BAM) announced today that it intends to redeem its 8.35% Preferred Securities (“Securities”) on January 2, 2007 for C$25.00 per Security plus accrued interest of C$0.01144, representing a total Redemption Price of C$25.01144 per Security.

Enjoy the company of BAM.PR.T while you can, because it’s going to get called shortly as well (or, at least, so I predict). These were all issued during a small craze for interest-bearing prefs … they were a bit expensive compared to regular bonds, but these things had a stated term of 50-years. Not only could Brookfield not issue 50-year regular bonds (at least, I don’t think they could) but still get away with offering the preferred securities, but I believe there is some accounting convention whereby a 50-year bond is considered equity for at least some capital adequacy purposes.

Update 2007-01-05 : This post has been singled out for spamming for some odd reason; I have therefore disabled the comment function.

Posted in Issue Comments | 2 Comments »

November 17, 2006

Saturday, November 18th, 2006
Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.21% 4.17% 33,598 16.94 2 -0.1603% 1,016.0
Fixed-Floater 4.82% 3.94% 120,062 12.93 7 -0.0500% 1,025.8
Floater 4.49% -23.33% 65,900 6.52 5 +0.3540% 1,033.0
Op. Retract 4.66% 0.72% 80,926 2.26 18 +0.1157% 1,028.5
Split-Share 5.00% 3.37% 155,337 3.32 9 -0.0510% 1,028.3
Interest Bearing 6.92% 5.72% 66,261 2.04 7 +0.2431% 1,019.3
Perpetual-Premium 5.07% 3.96% 221,242 4.18 49 -0.0143% 1,043.3
Perpetual-Discount 4.59% 4.63% 833,444 16.15 8 +0.0763% 1,038.9
Major Price Changes
Issue Index Change Notes
DFN.PR.A SplitShares -1.0476 These split-shares are non-callable, which is nice … they mature on Dec. 1, 2009, according to their prospectus. And at today’s closing bid of $10.39, they have a yield-to-maturity of 3.95% – equivalent to 5.53% interest for many investors. For a three-year fixed income instrument, that’s not bad!
BSD.PR.A InterestBearing +1.6393% These things have been bouncing around a lot lately, due to a combination of fear of the income-trusts that ultimately back the paper, and the upcoming retraction event.
TOC.PR.B FloatingRate +1.9208% A client of TD Securities appears to have completely lost his mind, as TDS was on the buy side of the last ten trades of this issue, starting with 100 at $26.00 at 10:32am and continuing until 2:26pm with a final buy of 1,000 shares at $26.49. These ten trades accounted for 4,350 of the 7,750 shares traded today; the issue closed at $26.00-40, 1×1, a substantial change from the $25.50 closing bid yesterday. These puppies pay 70% of prime on $25.00 face value, so $1.05 annually. I don’t get it. A floater isn’t even a money market instrument!
Volume Highlights
Issue Index Volume Notes
CM.PR.I PerpetualDiscount 98,143 The new issue continues to lead the volume list.
SLF.PR.D PerpetualDiscount 26,544 Still seem to be huge chunks of hot shares looking for a home!
BAM.PR.S InterestBearing 24,370 Called for redemption today, effective January 2, 2007.
TD.PR.M OpRet 18,200 Scotia crossed 12,500 at $27.49. At the closing bid of $27.45, these have a pre-tax YTW of 2.34%, based on a call 2009-5-30 … since this is only the equivalent of 3.26% on a bond, we will be charitable and assume the purchasers have good reason to think that it will last until its soft maturity 2013-10-30, when it will have yielded 3.17% pre-tax, interest equivalent of 4.44%, which is roughly maybe sorta equivalent to where TD bonds are trading institutionally. And who knows – maybe the purchasers will be right! Seems like a risky play to me, however, with no upside to compensate for the chance of an early call.
SLF.PR.A PerpetualPremium 14,775 Not the worst issue in town, with a pre-tax YTW of 4.42% based on a bid of $25.72 and a call at $25.00 2014-4-30. This is now ex-dividend, as today was the last day of trading cum-dividend. But I still say it’s expensive. And not just because they not only don’t post dividend information on their website, but use a service that doesn’t allow direct linking! Go to PRNewswire and search for “Sun Life” to verify dividend info, if you don’t trust me.

There were eight other index-included issues trading over 10,000 shares today.

Update, 2006-11-18: I stand corrected on my snarky comment about Sunlife and the alleged lack of preferred share information on their website – see the comments section. I will, however, say that this information is not as easy to find as it should be! “Shareholder FAQs”? What on earth is the information doing in “Shareholder FAQs”? I mean, especially since all the questions refer to preferred shares, why isn’t the information linked on the menu as “Preferred Shares”? And why aren’t there links to the prospectuses?

Yes, I made a mistake and maybe I’m being a little defensive. But they sure made it easy for the mistake to be made!

Posted in Market Action | 3 Comments »

HIMIPref™ Release : 2006-11-17

Friday, November 17th, 2006

There’s a new release of HIMIPref™ available for download at the usual place.

If you choose to install this upgrade, please, PLEASE remember to back-up your user data prior to re-installation! It is NOT stored on the server, it exists on the client machine only!

There is no absolute necessity for Institutional users to install the new version – any old version that worked yesterday will continue to work today. There is the consideration that, in the unlikely event that (i) You find a bug, and (ii) the effect of this bug is different in the two versions, it will be much easier track down the error if we’re all singing from the same hymnbook.
Improvements in this release are:

  • The two problems noted in the announcement of the previous release have been fixed.
  • There was a problem with the printing of the reportSummary that would occasionally cause truncation. The reportSummary would occasionally not print, or even announce the existence of, the final partial page of the report. Not only has this truncation error been fixed, but I now have a deeper and more vivid understanding of my horror when programming printing under Microsoft Foundation Classes for Windows and C++.
  • Still with the report summary: if curvePrice is being reported and right-clicked to bring up the curveCalculationContextMenu you may choose to get the cashFlowDiscountingAnalysisBox. If you then click the “OptionDetails” button, you will get the optionCashFlowAnalysisBox. If you then click the “Replacement Cash Flows” button, you will then get another cashFlowDiscountingAnalysisBox with (this is the clever bit) all of the replacement cash flows, not just the replacement cash flows for the chronologically first option.

Posted in Programme Changes | No Comments »

HIMI Preferred Indices : June, 1995

Friday, November 17th, 2006

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1995-6-30
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,231.4 0 0 0 0 0 0
FixedFloater 1,231.4 0 0 0 0 0 0
Floater 1,162.0 5 1.58 7.90% 11.4 142M 7.58%
OpRet 1,054.9 25 1.27 6.59% 6.0 99M 7.02%
SplitShare 1,054.9 0 0 0 0 0 0
Interest-Bearing 1,054.9 0 0 0 0 0 0
Perpetual-Premium 1,073.8 6 1.00 6.09% 3.6 48M 7.97%
Perpetual-Discount 1,025.2 0 0 0 0 0 0

Index Constitution, 1995-6-30, Pre-Rebalancing

Index Constitution, 1995-6-30, Post-Rebalancing

Posted in HIMI Preferred Indices | No Comments »

DBRS Reviewing Income-Trust Based Split Shares

Friday, November 17th, 2006

DBRS announced on November 8 that they will be reviewing the ratings of Income-trust based split shares:

This recent announcement has placed downward pressure on the net-asset value of portfolios containing income trusts and consequently the downside protection available to the Split Shares. Income trusts that plan to reduce the level of distributions to unitholders to reflect the additional tax burden may influence the ability for static and managed portfolios to generate sufficient yields to meet distributions to the Split Shares. In addition to the risk that this announcement may represent for distributions from any single trusts, the risk of a number of income trusts reverting back to corporate status may limit the number of eligible names for certain portfolios with a defined investment criteria and thereby increasing concentration risk.

Issues affected by this announcement are:

Income-Trust-Based Split-Shares Under Review
Ticker HIMI Index Current Rating
FCI.PR.A Scraps Pfd-2
FCF.PR.A Scraps Pfd-2
FCN.PR.A InterestBearing Pfd-2
FIG.PR.A – Pfd-2
ASI.PR.A  – Pfd-2 (low)
STW.PR.A InterestBearing Pfd-2 (low)
ES.PR.B – Pfd-2 (low)
EN.PR.A Scraps Pfd-2 (low)

Two Income-trust-based split share corporations tracked by HIMIPref™ and included in the “InterestBearing” index are BSD.PR.A and MST.PR.A. Presumably their omission from the review list is a simple oversight.

BSD.PR.A is interesting: according to the manager the NAV of BSD.UN was $8.061 on November 10 (compared with $11.479 on October 31! Ouch!). It is currently quoted at $7.66-99 on the TSX – some have traded as low as $7.62 today (the 52-week low is $6.71! We can assume that’s recent!). According to their prospectus (available on the manager’s site! Good for them!):

Concurrent Annual Redemption. A Unitholder who surrenders Capital Units together with Preferred Securities for redemption in the month of November of each year at least 15 Business Days prior to a Redemption Date will receive payment for each Combined Security equal to the Combined Value determined as of the Redemption Date, less redemption costs.

Annual Redemption of Capital Units. A Unitholder who surrenders Capital Units alone for redemption at least 15 Business Days prior to a Redemption Date will receive an amount equal to Combined Value determined as of the Redemption Date, less redemption costs and the costs incurred by the Trust in purchasing a Preferred Security either in the market or pursuant to the Call Right.

 The interesting part comes when we look at the BSD.PR.A redemption schedule:

Redemption 2005-03-15 2006-03-31 11.000000
Redemption 2006-04-01 2007-03-31 10.900000
Redemption 2007-04-01 2008-03-31 10.800000
Redemption 2008-04-01 2009-03-31 10.700000
Redemption 2009-04-01 2010-03-31 10.600000
Redemption 2010-04-01 2011-03-31 10.500000
Redemption 2011-04-01 2012-03-31 10.400000
Redemption 2012-04-01 2013-03-31 10.300000
Redemption 2013-04-01 2014-03-31 10.200000
Redemption 2014-04-01 2015-03-30 10.100000
Maturity 2015-03-31 2015-03-31 10.000000

There were spikes in BSD.PR.A volume on November 1 (wonder why!) and yesterday, November 16. BSD.PR.A is currently quoted at $9.60-80 3×5 with no shares traded today. It will be most (most, most!) interesting to see if there’s a price spike towards month-end, as the manager seeks to match capital units submitted bare for redemption, scrambling to purchase the prefs in order to avoid the punitive redemption price.

Yes, yes, I know that we are now 15 days prior to the Redemption Date and all capital unit redemption requests have been made. But the November 16 volume spike was only 50,000 shares, out of 6,842,341 outstanding. Somehow, I suspect that there were more redemption requests than that … but we will see!

Posted in Issue Comments | 4 Comments »

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