Archive for February, 2008

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Best & Worst Performers: January 2008

Tuesday, February 5th, 2008

These are total returns, with dividends presumed to have been reinvested at the bid price on the ex-date. The list has been restricted to issues in the HIMIPref™ indices.

Issue Index DBRS Rating Monthly Performance Notes (“Now” means “January 31”)
BCE.PR.B Ratchet Pfd-2(low) -7.11% This issue is most notable for the horrible market making lately, noted on February 4, January 31, January 22, January 17 and January 7. Naturally, one of the days that Little Boy Blue visits the haystack has to be month-end and it closed at 22.77-24.24. A rational quote would have kept it off this list.
HSB.PR.C PerpetualDiscount Pfd-1 -3.86%  Now with a pre-tax bid-YTW of 5.69% based on a bid of 22.65 and a limitMaturity.
BMO.PR.K PerpetualDiscount Pfd-1 -3.67%  Now with a pre-tax bid-YTW of 5.64% based on a bid of 23.90 and a limitMaturity.
MFC.PR.C PerpetualDiscount Pfd-1(low) -3.20%  Now with a pre-tax bid-YTW of 5.32% based on a bid of 21.45 and a limitMaturity.
HSB.PR.D PerpetualDiscount Pfd-1 -3.06%  Now with a pre-tax bid-YTW of 5.53% based on a bid of 22.84 and a limitMaturity.
… … … … …
W.PR.H PerpetualDiscount Pfd-2(low) +4.73%  Now with a pre-tax bid-YTW of 5.81% based on a bid of 23.68 and a limitMaturity.
W.PR.J PerpetualDiscount Pfd-2(low) +4.78%  Now with a pre-tax bid-YTW of 5.90% based on a bid of 23.90 and a limitMaturity.
BAM.PR.K Floater Pfd-2(low) +5.30%  A dead cat bounce from the horrible performance in December.
FTU.PR.A SplitShare Pfd-2 +5.68%  Asset coverage of just under 1.8:1 as of January 31, according to the company. The US financials on which this is based managed to bounce back in the latter half of January, but another good sharp downdraft could make my speculation regarding a downgrade look prescient. Now with a pre-tax bid-YTW of 5.98% based on a bid of 9.71 and a hardMaturity 2012-12-1 at 10.00.
BAM.PR.B Floater Pfd-2(low) +6.11%  Another dead cat bounce from December.

It’s worth noting that HSB.PR.D was actually only the 27th-worst issue in the HIMIPref™ Universe, but only those issues included in the HIMIPref™ indices are examined for possible inclusion in this table. A lot of lower-volume and worse-credit issues were passed over.

Posted in Issue Comments | 2 Comments »

Index Performance, January 2008

Tuesday, February 5th, 2008

Performance of the HIMIPref™ Indices for January, 2008, was:

Total Return
Index Performance
January 2008		 Three Months
to
January 31, 2008
Ratchet -0.28%  +0.67%
FixFloat -1.57%  -2.97%
Floater +3.17%  -17.64%
OpRet +0.47%  +1.75%
SplitShare +0.31%  -1.01%
Interest +1.37%  +1.04%
PerpetualPremium +0.19%  +1.36%
PerpetualDiscount +0.40%  +2.98%
Funds (see below for calculations)
CPD +0.00%  -0.08%
DPS.UN -0.97%  -0.21%

The FloatingRate index bounced back (just a little bit!) from its disastrous performance in December. The tepid returns for the two perpetual sub-indices mask a great deal of excitement – at its peak on January 16 the PerpetualDiscount index was up 1.85% on the month, while at its trough on January 21 it was down 1.23%. The downdraft was caused by a new issue: BNS.PR.O, announced January 17. There was extreme fear that this could presage another hit to the market as happened in September, but by the time TD.PR.Q was announced January 22 the worst was over.

Claymore has published NAV data for its exchange traded fund (CPD) and I have derived the following table:

CPD Return, 1- & 3-month, to January 31
Date NAV Distribution Return for Sub-Period Monthly Return
October 31, 2007 18.19      
November 30 17.97   -1.21% -1.21%
December 24 17.75 0.2219 +0.01% +1.14%
December 31, 2007 17.95   +1.13%
January 31, 2008 17.95   0.00% 0.00%
Quarterly Return -0.08%

The DPS.UN NAV for January 30 has been published so we may calculate the January returns (approximately!) for this closed end fund:

DPS.UN NAV Return, January-ish 2008
Date NAV Distribution Return for period
December 27, 2007 $21.07    
January 30, 2008 $21.02 $0.00 -0.24%
Adjustment for December stub-period -0.67%
Adjustment for January stub-period -0.06%
Estimated January Return -0.97%
CPD had a NAV of $17.83 on December 27 and $17.95 on December 31. The estimated December end-of-month stub period return for CPD was therefore +0.67%, which is subtracted from the DPS.UN total return when estimating the return for January.
CPD had a NAV of $17.96 on January 30 and $17.95 on January 31. The estimated January end-of-month stub period return for CPD was therefore -0.06%, which is added to the DPS.UN total return when estimating the return for January.

Now, to see the DPS.UN quarterly NAV approximate return, we refer to the calculations for December:

DPS.UN NAV Returns, three-month-ish to end-January-ish, 2008
November-ish -1.14%
December-ish +1.93%
January-ish -0.97%
Three-months-ish -0.21%

Posted in Index Construction / Reporting | 2 Comments »

February 4, 2008

Monday, February 4th, 2008

There ain’t too much commentary today, folks! No great loss, since nothing much happened, but there was one item of great pith and moment: Moody’s is considering a separate rating scale for structured products:

Moody’s Investors Service is considering a new ratings system based on numbers for structured- finance securities that would abandon the letter grades created by founder John Moody about a century ago.

Moody’s in a letter today asked investors for comments on five options it is reviewing to improve ratings including a numerical scale and a designation of “.sf” to differentiate a structured finance ranking from a corporate credit grade.

The use of a different scale has been proposed before – it was mentioned by the Bank of Canada and has been advocated elsewhere – like, f’rinstance, by Richard Portes on VoxEU as discussed on November 15. Frankly, I have difficulty understanding why it’s considered worthy of discussion.

And I would like to mention that Malachite Aggressive Preferred Fund has been priced for monthend … and achieved a return of 1.28% for the month, vs. an estimated ZERO for the index. I’ll try to post properly about this tomorrow … but those who speculate that I’m rather pleased about this (especially after the superb performance in December) may very well win a kewpie doll.

Another good strong day in the preferred share market – the perpetualDiscount index is now within a hair of the 945.3 January peak, which it hit on January 16, the day before the announcement of the BNS new issue knocked it for a loop. Volume wasn’t particularly exciting … on the low side of normal, but not by much.

I should hire Assiduous Reader madequota as colour commentator … his daily comments are much better than mine!

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 5.53% 5.56% 52,857 14.61 2 -0.5942% 1,073.3
Fixed-Floater 5.16% 5.64% 87,818 14.70 7 +0.0565% 1,020.3
Floater 4.95% 5.00% 79,433 15.49 3 -0.2585% 853.3
Op. Retract 4.83% 1.99% 82,057 2.72 15 +0.1190% 1,045.1
Split-Share 5.30% 5.48% 99,705 4.11 15 +0.0723% 1,036.8
Interest Bearing 6.24% 6.33% 61,602 3.39 4 +0.0304% 1,080.2
Perpetual-Premium 5.75% 5.51% 399,131 6.06 16 +0.1734% 1,023.8
Perpetual-Discount 5.44% 5.47% 304,901 14.70 52 +0.4470% 943.7
Major Price Changes
Issue Index Change Notes
BCE.PR.B Ratchet -2.1053% Closed at 23.25-24.25, 2×3. Fine market-making, marvellous! It reminds me of the good old days, when I could (on occasion) put in both a bid and an ask, fifty cents apart, and get filled on both sides thank you very much! Unfortunately, the fund is not long BCE.PR.B to try this play, but those who do have a position to which they’re indifferent can probably improve on this spread.
BSD.PR.A InterestBearing -1.2333% Asset coverage of just under 1.6:1 as of February 1, according to Brookfield Funds. Now with a pre-tax bid-YTW of 6.90% (mostly as interest) based on a bid of 9.61 and a hardMaturity 2015-3-31 at 10.00.
BAM.PR.B Floater -1.1018%  
BCE.PR.S FixFloat +1.0593%  
CU.PR.A PerpetualPremium +1.0620% Now with a pre-tax bid-YTW of 5.11% based on a bid of 25.57 and a call 2012-3-31 at 25.00.
RY.PR.F PerpetualDiscount +1.1933% Now with a pre-tax bid-YTW of 5.27% based on a bid of 21.20 and a limitMaturity.
POW.PR.B PerpetualDiscount +1.2129% Now with a pre-tax bid-YTW of 5.57% based on a bid of 24.20 and a limitMaturity.
POW.PR.D PerpetualDiscount +1.3519% Now with a pre-tax bid-YTW of 5.42% based on a bid of 23.24 and a limitMaturity.
PWF.PR.F PerpetualDiscount +1.4774% Now with a pre-tax bid-YTW of 5.48% based on a bid of 24.04 and a limitMaturity.
PWF.PR.L PerpetualDiscount +1.6796% Now with a pre-tax bid-YTW of 5.43% based on a bid of 23.61 and a limitMaturity.
HSB.PR.C PerpetualDiscount +1.7279% Now with a pre-tax bid-YTW of 5.48% based on a bid of 23.55 and a limitMaturity.
IAG.PR.A PerpetualDiscount +2.2336% Now with a pre-tax bid-YTW of 5.30% based on a bid of 21.97 and a limitMaturity.
Volume Highlights
Issue Index Volume Notes
BNS.PR.O PerpetualPremium 99,060 New issue settled 1/31. Now with a pre-tax bid-YTW of 5.55% based on a bid of 25.18 and a call 2017-5-26 at 25.00.
TD.PR.Q PerpetualPremium 39,775 New issue settled 1/31. Now with a pre-tax bid-YTW of 5.49% based on a bid of 25.28 and a call 2017-3-2 at 25.00.
CM.PR.I PerpetualDiscount 28,399 Now with a pre-tax bid-YTW of 5.67% based on a bid of 20.90 and a limitMaturity.
GWO.PR.I PerpetualDiscount 26,430 Now with a pre-tax bid-YTW of 5.36% based on a bid of 21.25 and a limitMaturity.
GWO.PR.G PerpetualDiscount 26,400 Now with a pre-tax bid-YTW of 5.42% based on a bid of 24.26 and a limitMaturity.

There were seventeen other index-included $25.00-equivalent issues trading over 10,000 shares today.

Posted in Market Action | 3 Comments »

HIMIPref™ Index Rebalancing : January 2008

Monday, February 4th, 2008
HIMI Index Changes, January 31, 2008
Issue From To Because
BCE.PR.T FixFloat Scraps Volume
FAL.PR.B FixFloat Scraps Volume
CM.PR.D PerpetualDiscount PerpetualPremium Price
NA.PR.K PerpetualDiscount PerpetualPremium Price

There were the following intra-month changes:

HIMI Index Changes during January 2008
Issue Action Index Because
MIC.PR.A Deleted Scraps Redemption
BNS.PR.O Added PerpetualPremium New Issue
TD.PR.Q Added PerpetualPremium New Issue

Posted in Index Construction / Reporting | 3 Comments »

February 1, 2008

Friday, February 1st, 2008

There ain’t gonna be much today! Month end duties call, with a shrill, unpleasant voice.

However, remember Springfield, MA’s complaint against Merrill Lynch, discussed here on January 4. They’ve settled … and a certain amount of vital information – previously ignored by the media – has finally been reported:

Merrill and two of its brokers sold “unsuitable” securities to Springfield last year after the firm was hired to help manage the city’s short-term investments, Massachusetts Secretary of State William Galvin said in a complaint filed today.
…
“Merrill was supposed to invest in only safe money-market like investments,” Galvin said in the lawsuit.
…
Merrill, the world’s largest brokerage, bought CDOs for Springfield between April and June last year after it was hired to help manage the city’s cash. It didn’t give the city a detailed description of the investment until November, when it sent officials a private placement memorandum on Centre Square CDO, one of the series of securities it bought.

Why it has not previously been reported that Merrill was acting as Portfolio Manager for the city and therefore had a fiduciary obligation (which would not have been the case if they had simply sold it on a principal to principal basis) is something that I don’t understand.

Given my usual month-end woes, there will be no report on the indices today, which is too bad. It was a really strong day! Volume picked up a little, but not to any spectacular extent.

Major Price Changes
Issue Index Change Notes
PWF.PR.L PerpetualDiscount -1.0230% Now with a pre-tax bid-YTW of 5.52% based on a bid of 23.22 and a limitMaturity.
CM.PR.P PerpetualDiscount +1.0883% Now with a pre-tax bid-YTW of 5.67% based on a bid of 24.15 and a limitMaturity.
SLF.PR.E PerpetualDiscount +1.1450% Now with a pre-tax bid-YTW of 5.37% based on a bid of 21.20 and a limitMaturity.
RY.PR.A PerpetualDiscount +1.1483% Now with a pre-tax bid-YTW of 5.28% based on a bid of 21.14 and a limitMaturity.
GWO.PR.I PerpetualDiscount +1.1973% Now with a pre-tax bid-YTW of 5.39% based on a bid of 21.13 and a limitMaturity.
BNS.PR.N PerpetualDiscount +1.2073% Now with a pre-tax bid-YTW of 5.43% based on a bid of 24.31 and a limitMaturity.
GWO.PR.H PerpetualDiscount +1.2935% Now with a pre-tax bid-YTW of 5.40% based on a bid of 22.71 and a limitMaturity.
CM.PR.G PerpetualDiscount +1.3687% Now with a pre-tax bid-YTW of 5.73% based on a bid of 23.70 and a limitMaturity.
PIC.PR.A SplitShare +1.4237% Now with a pre-tax bid-YTW of 5.91% based on a bid of 14.96 and a hardMaturity 2010-11-1 at 15.00.
FTU.PR.A SplitShare +1.4418% Asset coverage of just under 1.6:1 as of January 15, according to the company. Now with a pre-tax bid-YTW of 5.64% based on a bid of 9.85 and a hardMaturity 2012-12-1 at 10.00.
CM.PR.I PerpetualDiscount +1.4599% Now with a pre-tax bid-YTW of 5.68% based on a bid of 20.85 and a limitMaturity.
RY.PR.G PerpetualDiscount +1.6770% Now with a pre-tax bid-YTW of 5.32% based on a bid of 21.22 and a limitMaturity.
PWF.PR.F PerpetualDiscount +1.7175% Now with a pre-tax bid-YTW of 5.56% based on a bid of 23.69 and a limitMaturity.
MFC.PR.C PerpetualDiscount +1.7716% Now with a pre-tax bid-YTW of 5.22% based on a bid of 21.83 and a limitMaturity.
WFS.PR.A SplitShare +1.8519% Now with a pre-tax bid-YTW of 4.00% based on a bid of 10.45 and a hardMaturity 2011-6-30 at 10.00.
MFC.PR.B PerpetualDiscount +2.1583% Now with a pre-tax bid-YTW of 5.18% based on a bid of 22.72 and a limitMaturity.
HSB.PR.C PerpetualDiscount +2.2075% Now with a pre-tax bid-YTW of 5.57% based on a bid of 23.15 and a limitMaturity.
BCE.PR.A FixFloat +2.2118%  
RY.PR.E PerpetualDiscount +2.2456% Now with a pre-tax bid-YTW of 5.27% based on a bid of 21.40 and a limitMaturity.
BSD.PR.A InterestBearing +2.3134% Asset Coverage of just under 1.6:1 as of January 31, according to Brookfield Funds. Now with a pre-tax bid-YTW of 6.67% based on a bid of 9.73 and a hardMaturity 2015-3-31 at 10.00.
SLF.PR.C PerpetualDiscount +2.4402% Now with a pre-tax bid-YTW of 5.26% based on a bid of 21.41 and a limitMaturity.
ELF.PR.F PerpetualDiscount +2.8302% Now with a pre-tax bid-YTW of 6.12% based on a bid of 21.80 and a limitMaturity.
BMO.PR.K PerpetualDiscount +2.9282% Now with a pre-tax bid-YTW of 5.45% based on a bid of 24.10 and a limitMaturity.
BAM.PR.G FixFloat +4.1237%  
BCE.PR.B Ratchet +4.3039% Reversal of yesterday’s nonsense. It didn’t trade a single share today, so the poor wickle market maker was able to keep up.
Volume Highlights
Issue Index Volume Notes
BNS.PR.O PerpetualPremium 125,385 Recent new issue. Now with a pre-tax bid-YTW of 5.57% based on a bid of 25.13 and a call 2017-5-26 at 25.00.
TD.PR.Q PerpetualPremium 82,028 Recent new issue. Now with a pre-tax bid-YTW of 5.50% based on a bid of 25.25 and a call 2017-3-2 at 25.00.
BMO.PR.J PerpetualDiscount 63,986 Nesbitt crossed 50,000 at 21.10. Now with a pre-tax bid-YTW of 5.36% based on a bid of 21.06 and a limitMaturity.
RY.PR.A PerpetualDiscount 59,615 Nesbitt crossed 50,000 at 21.20. Now with a pre-tax bid-YTW of 5.28% based on a bid of 21.14 and a limitMaturity.
CM.PR.I PerpetualDiscount 59,110 Now with a pre-tax bid-YTW of 5.68% based on a bid of 20.85 and a limitMaturity.

There were twenty other index-included $25.00-equivalent issues trading over 10,000 shares today.

Posted in Market Action | 17 Comments »

FIG.PR.A : Partial Redemption

Friday, February 1st, 2008

Woo-hoo! You know what I like? I like redemptions at prices that exceed the market, that’s what I like! Redemptions are not always unfavourable!

FIG.PR.A closed today at 9.81-85, 4×9, after trading 20,437 shares in a range of 9.80-90. The sponsor, Faircourt Asset Management, has just announced:

that $30,000,000 of aggregate principal amount of preferred securities will be redeemed.
    Given the challenges facing global equity markets and resulting volatility, the Manager believes that to maintain appropriate balance in the fund between the Trust Units and Preferred Securities, redemptions are necessary. Therefore, the Manager announces that $30,000,000 in aggregate principal amount of the Trust’s 6.25% outstanding Preferred Securities (the “Preferred Securities”) will be redeemed on March 2, 2008 (the “Redemption
Date”). The scheduled Redemption Date of March 2, 2008 falls on a Sunday and payment will therefore be made in full on the next business day, March 3, 2008.
    Proceeds from the Preferred Securities redemption will amount to $10.1062 for each $10.00 principal amount of Securities, being equal to the aggregate of (i) $10.00 (the “Redemption Price”), and (ii) all accrued and unpaid interest hereon to but excluding the Redemption Date (collectively, the “Total Redemption Price”). The notice date of the Preferred Securities redemption is February 1, 2008. The Total Redemption Price for all Preferred Securities being redeemed is $30,318,600
    The Preferred Securities are being redeemed pursuant to the terms of the Trust Indenture governing the Preferred Securities, which permit a partial redemption at such time as the principal amount of the Preferred Securities exceeds 40% of the Total Assets of the Trust.

Assiduous Readers with extremely good memories will recall that there was also a redemption last August. The TSX states that 17,464,308 shares are outstanding, therefore the redemption proportion is a bit more than one-sixth.

Asset coverage on January 31 was 2.0+:1 according to the company. This redemption should bring coverage up to 2.4+:1.

FIG.PR.A is tracked by HIMIPref™ and is part of the Interest Bearing subindex. The issue has recently been removed from the S&P/TSX Preferred Share Index.

Posted in Issue Comments | 3 Comments »

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