Archive for April, 2019

April 15, 2019

Monday, April 15th, 2019
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.1313 % 2,153.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1313 % 3,950.8
Floater 5.44 % 5.70 % 41,793 14.37 3 0.1313 % 2,276.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.2190 % 3,281.6
SplitShare 4.88 % 4.69 % 78,738 3.82 8 0.2190 % 3,919.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2190 % 3,057.7
Perpetual-Premium 5.57 % -16.68 % 85,051 0.09 10 -0.0196 % 2,961.7
Perpetual-Discount 5.39 % 5.47 % 75,937 14.69 23 -0.0469 % 3,110.7
FixedReset Disc 5.22 % 5.42 % 184,858 14.87 61 -0.0393 % 2,201.7
Deemed-Retractible 5.20 % 5.72 % 92,650 8.14 27 -0.1178 % 3,084.3
FloatingReset 4.22 % 4.29 % 54,767 2.68 5 -0.0646 % 2,419.4
FixedReset Prem 5.06 % 3.63 % 304,767 2.20 22 -0.0053 % 2,587.7
FixedReset Bank Non 1.98 % 3.95 % 136,763 2.70 3 0.1393 % 2,641.2
FixedReset Ins Non 4.97 % 6.68 % 111,951 8.26 22 -0.0883 % 2,268.7
Performance Highlights
Issue Index Change Notes
MFC.PR.L FixedReset Ins Non -2.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.64
Bid-YTW : 8.00 %
EMA.PR.F FixedReset Disc -1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 5.72 %
BAM.PR.Z FixedReset Disc -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.25
Evaluated at bid price : 20.25
Bid-YTW : 5.76 %
NA.PR.W FixedReset Disc -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 17.55
Evaluated at bid price : 17.55
Bid-YTW : 5.55 %
MFC.PR.M FixedReset Ins Non -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.80
Bid-YTW : 7.45 %
TD.PF.J FixedReset Disc -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.35
Evaluated at bid price : 21.65
Bid-YTW : 5.10 %
BAM.PF.C Perpetual-Discount -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.01
Evaluated at bid price : 21.01
Bid-YTW : 5.83 %
BMO.PR.W FixedReset Disc -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 5.40 %
PWF.PR.S Perpetual-Discount -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.91
Evaluated at bid price : 21.91
Bid-YTW : 5.50 %
CU.PR.D Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 22.25
Evaluated at bid price : 22.60
Bid-YTW : 5.48 %
BAM.PF.A FixedReset Disc 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.54 %
GWO.PR.R Deemed-Retractible 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.10
Bid-YTW : 5.81 %
NA.PR.G FixedReset Disc 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.61
Evaluated at bid price : 21.94
Bid-YTW : 5.16 %
HSE.PR.E FixedReset Disc 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.11
Evaluated at bid price : 20.11
Bid-YTW : 6.50 %
HSE.PR.A FixedReset Disc 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 12.81
Evaluated at bid price : 12.81
Bid-YTW : 6.41 %
GWO.PR.N FixedReset Ins Non 1.92 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.89
Bid-YTW : 8.67 %
HSE.PR.C FixedReset Disc 2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 6.42 %
MFC.PR.F FixedReset Ins Non 2.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.10
Bid-YTW : 8.57 %
HSE.PR.G FixedReset Disc 3.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 19.85
Evaluated at bid price : 19.85
Bid-YTW : 6.52 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.Z FixedReset Bank Non 93,550 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 3.95 %
RY.PR.J FixedReset Disc 68,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.56
Evaluated at bid price : 20.56
Bid-YTW : 5.35 %
RY.PR.M FixedReset Disc 49,000 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 5.28 %
BMO.PR.E FixedReset Disc 39,913 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.96
Evaluated at bid price : 22.45
Bid-YTW : 5.01 %
MFC.PR.Q FixedReset Ins Non 36,400 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.75
Bid-YTW : 6.75 %
HSE.PR.C FixedReset Disc 34,740 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 6.42 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.Z FixedReset Disc Quote: 20.25 – 20.90
Spot Rate : 0.6500
Average : 0.4100

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 20.25
Evaluated at bid price : 20.25
Bid-YTW : 5.76 %

MFC.PR.L FixedReset Ins Non Quote: 17.64 – 18.20
Spot Rate : 0.5600
Average : 0.3951

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.64
Bid-YTW : 8.00 %

PWF.PR.L Perpetual-Discount Quote: 23.15 – 23.60
Spot Rate : 0.4500
Average : 0.3178

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 22.88
Evaluated at bid price : 23.15
Bid-YTW : 5.51 %

CU.PR.D Perpetual-Discount Quote: 22.60 – 23.07
Spot Rate : 0.4700
Average : 0.3407

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 22.25
Evaluated at bid price : 22.60
Bid-YTW : 5.48 %

TRP.PR.A FixedReset Disc Quote: 15.15 – 15.63
Spot Rate : 0.4800
Average : 0.3523

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 5.92 %

CU.PR.G Perpetual-Discount Quote: 21.31 – 21.78
Spot Rate : 0.4700
Average : 0.3586

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-15
Maturity Price : 21.31
Evaluated at bid price : 21.31
Bid-YTW : 5.36 %

April PrefLetter Released!

Sunday, April 14th, 2019

The April, 2019, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the April, 2019, issue, while the “Next Edition” will be the May, 2019, issue, scheduled to be prepared as of the close May 10, 2019, and eMailed to subscribers prior to market-opening on May 13.

PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.

Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.

Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!

Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.

Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!

Note: Assiduous Reader DG informs me:

In case you have any other Apple users: you need to install a free App from the apple store called “FileApp”. It comes with it’s own tutorial and allows you to download and save a PDF file.

However, Assiduous Reader Adrian informs me in the comments to the January 2015 release:

Some nitpicking for DG:
FileApp costs $1.19 in the Apple Store.

But Adrian2 now advises:

Well, as of now, FileApp is free (again?).

LBS.PR.A Annual Report 2018

Sunday, April 14th, 2019

Brompton Life & Banc Split Corp. has released its Annual Report to December 31, 2018.

LBS / LBS.PR.A Performance
Instrument One
Year
Three
Years
Five
Years
Ten
Years
Whole Unit -13.1% +6.1% +5.2% +11.4
LBS -32.1% +6.6% +5.0% +20.2
LBS.PR.A +4.9% +4.9% +4.9% +5.1%
S&P/TSX Capped Financial Index -9.2% +8.5% +6.9% +12.2%

Note that according to the implementation by iShares, the capped financial index is about 69% banks, 19.7% insurance and 10.4% diversified financials, so the fund is by design overweight insurers relative to this benchmark – and insurers have underperformed.

Figures of interest are:

MER: “The MER per unit, excluding Preferred share distributions (which were covered by the portfolio’s dividend income), was 0.91% for 2018”

Average Net Assets: We need this to calculate portfolio yield. The Total Assets of the fund at year end was $412.0-million, compared to $445.2-million a year prior (there was an increase in shares outstanding due to a warrant offering), so call it an average of $428.6-million. This can be checked by examining distributions on preferred shares of $11.728-million, which at $0.545 / share implies an average of 21.5-million units outstanding, which at an average value of $17.98 implies average net assets of 386.6-million. Since shares were issued in July and December, 2018, the latter figure seems more appropriate.

Underlying Portfolio Yield: Investment income of $17.354-million received divided by average net assets of $386.6-million is 4.5%.

Income Coverage: Net investment income after expenses of $10.845-million received plus $2.468-million issuance costs added back is $13.313-million, to cover preferred dividends of 11.728-million is about 114%.

April 12, 2019

Friday, April 12th, 2019
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.1314 % 2,150.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1314 % 3,945.6
Floater 5.44 % 5.70 % 41,446 14.37 3 0.1314 % 2,273.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.0050 % 3,274.5
SplitShare 4.89 % 4.70 % 78,695 3.83 8 0.0050 % 3,910.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0050 % 3,051.0
Perpetual-Premium 5.57 % -11.86 % 87,538 0.09 10 -0.2116 % 2,962.3
Perpetual-Discount 5.39 % 5.42 % 73,979 14.74 23 -0.0563 % 3,112.1
FixedReset Disc 5.22 % 5.42 % 187,507 14.88 61 0.3666 % 2,202.6
Deemed-Retractible 5.20 % 5.68 % 92,351 8.15 27 0.0456 % 3,088.0
FloatingReset 4.22 % 4.32 % 55,083 2.69 5 0.3131 % 2,420.9
FixedReset Prem 5.06 % 3.65 % 308,725 2.21 22 0.0336 % 2,587.9
FixedReset Bank Non 1.98 % 4.04 % 142,168 2.70 3 0.1395 % 2,637.5
FixedReset Ins Non 4.96 % 6.57 % 112,557 8.28 22 0.2043 % 2,270.7
Performance Highlights
Issue Index Change Notes
MFC.PR.F FixedReset Ins Non -1.80 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.75
Bid-YTW : 8.84 %
HSE.PR.G FixedReset Disc -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 19.27
Evaluated at bid price : 19.27
Bid-YTW : 6.71 %
GWO.PR.N FixedReset Ins Non -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.61
Bid-YTW : 8.89 %
HSE.PR.A FixedReset Disc -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 12.65
Evaluated at bid price : 12.65
Bid-YTW : 6.49 %
BAM.PF.J FixedReset Disc 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 23.00
Evaluated at bid price : 24.26
Bid-YTW : 4.86 %
MFC.PR.N FixedReset Ins Non 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.15
Bid-YTW : 7.80 %
TD.PF.C FixedReset Disc 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 5.11 %
PWF.PR.S Perpetual-Discount 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 21.86
Evaluated at bid price : 22.15
Bid-YTW : 5.42 %
TRP.PR.F FloatingReset 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 14.90
Evaluated at bid price : 14.90
Bid-YTW : 6.10 %
IAF.PR.B Deemed-Retractible 1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.15
Bid-YTW : 6.11 %
TD.PF.I FixedReset Disc 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 22.39
Evaluated at bid price : 23.01
Bid-YTW : 4.99 %
EMA.PR.F FixedReset Disc 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 19.32
Evaluated at bid price : 19.32
Bid-YTW : 5.62 %
PWF.PR.T FixedReset Disc 1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 19.70
Evaluated at bid price : 19.70
Bid-YTW : 5.11 %
TRP.PR.C FixedReset Disc 1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 13.50
Evaluated at bid price : 13.50
Bid-YTW : 5.74 %
TD.PF.A FixedReset Disc 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 18.86
Evaluated at bid price : 18.86
Bid-YTW : 5.16 %
BAM.PR.R FixedReset Disc 2.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 16.27
Evaluated at bid price : 16.27
Bid-YTW : 5.92 %
SLF.PR.G FixedReset Ins Non 2.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.30
Bid-YTW : 8.56 %
TRP.PR.B FixedReset Disc 2.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 12.73
Evaluated at bid price : 12.73
Bid-YTW : 5.68 %
PWF.PR.P FixedReset Disc 2.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 14.35
Evaluated at bid price : 14.35
Bid-YTW : 5.48 %
MFC.PR.M FixedReset Ins Non 2.53 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.05
Bid-YTW : 7.28 %
NA.PR.W FixedReset Disc 3.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 17.80
Evaluated at bid price : 17.80
Bid-YTW : 5.47 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.S FixedReset Disc 80,043 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 21.65
Evaluated at bid price : 22.01
Bid-YTW : 4.85 %
HSE.PR.G FixedReset Disc 61,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 19.27
Evaluated at bid price : 19.27
Bid-YTW : 6.71 %
IAF.PR.G FixedReset Ins Non 53,100 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.20
Bid-YTW : 6.24 %
TD.PF.E FixedReset Disc 47,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 21.31
Evaluated at bid price : 21.60
Bid-YTW : 5.13 %
TRP.PR.E FixedReset Disc 38,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 17.05
Evaluated at bid price : 17.05
Bid-YTW : 5.88 %
BIP.PR.F FixedReset Disc 34,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 21.76
Evaluated at bid price : 22.16
Bid-YTW : 5.78 %
There were 28 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
HSE.PR.G FixedReset Disc Quote: 19.27 – 20.07
Spot Rate : 0.8000
Average : 0.4890

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 19.27
Evaluated at bid price : 19.27
Bid-YTW : 6.71 %

BAM.PF.A FixedReset Disc Quote: 21.07 – 21.65
Spot Rate : 0.5800
Average : 0.3997

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 21.07
Evaluated at bid price : 21.07
Bid-YTW : 5.60 %

CM.PR.O FixedReset Disc Quote: 18.35 – 18.82
Spot Rate : 0.4700
Average : 0.2986

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 18.35
Evaluated at bid price : 18.35
Bid-YTW : 5.41 %

EMA.PR.F FixedReset Disc Quote: 19.32 – 19.98
Spot Rate : 0.6600
Average : 0.4893

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-12
Maturity Price : 19.32
Evaluated at bid price : 19.32
Bid-YTW : 5.62 %

SLF.PR.B Deemed-Retractible Quote: 22.50 – 22.96
Spot Rate : 0.4600
Average : 0.2899

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 6.13 %

IFC.PR.C FixedReset Ins Non Quote: 19.29 – 19.84
Spot Rate : 0.5500
Average : 0.3816

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.29
Bid-YTW : 7.15 %

April 11, 2019

Thursday, April 11th, 2019
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.3406 % 2,147.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.3406 % 3,940.5
Floater 5.45 % 5.70 % 42,157 14.38 3 -0.3406 % 2,270.9
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1937 % 3,274.3
SplitShare 4.89 % 4.70 % 79,390 3.83 8 -0.1937 % 3,910.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1937 % 3,050.9
Perpetual-Premium 5.55 % -18.68 % 88,153 0.09 10 0.4052 % 2,968.6
Perpetual-Discount 5.39 % 5.46 % 75,649 14.74 23 -0.4240 % 3,113.9
FixedReset Disc 5.24 % 5.35 % 193,307 14.95 61 0.0487 % 2,194.6
Deemed-Retractible 5.20 % 5.75 % 92,754 8.15 27 -0.0267 % 3,086.6
FloatingReset 4.22 % 4.34 % 55,752 2.69 5 0.2815 % 2,413.4
FixedReset Prem 5.06 % 3.69 % 301,648 2.21 22 0.0779 % 2,587.0
FixedReset Bank Non 1.98 % 4.04 % 137,890 2.71 3 0.0279 % 2,633.8
FixedReset Ins Non 4.98 % 6.56 % 104,759 8.30 22 0.1637 % 2,266.1
Performance Highlights
Issue Index Change Notes
BAM.PR.R FixedReset Disc -2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 15.91
Evaluated at bid price : 15.91
Bid-YTW : 5.98 %
GWO.PR.R Deemed-Retractible -1.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.66
Bid-YTW : 6.04 %
BAM.PR.N Perpetual-Discount -1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 20.75
Evaluated at bid price : 20.75
Bid-YTW : 5.78 %
BAM.PR.M Perpetual-Discount -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 5.79 %
PWF.PR.P FixedReset Disc -1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 14.01
Evaluated at bid price : 14.01
Bid-YTW : 5.53 %
TD.PF.A FixedReset Disc -1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 5.19 %
PWF.PR.S Perpetual-Discount -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 21.89
Evaluated at bid price : 21.89
Bid-YTW : 5.50 %
NA.PR.W FixedReset Disc -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 17.27
Evaluated at bid price : 17.27
Bid-YTW : 5.56 %
BMO.PR.D FixedReset Disc -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 21.93
Evaluated at bid price : 22.29
Bid-YTW : 5.32 %
TRP.PR.C FixedReset Disc -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 13.25
Evaluated at bid price : 13.25
Bid-YTW : 5.76 %
MFC.PR.K FixedReset Ins Non -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.53
Bid-YTW : 7.11 %
BIP.PR.C FixedReset Disc -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 23.30
Evaluated at bid price : 24.55
Bid-YTW : 6.21 %
BIP.PR.E FixedReset Disc 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 21.90
Evaluated at bid price : 22.30
Bid-YTW : 5.63 %
CU.PR.C FixedReset Disc 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 18.39
Evaluated at bid price : 18.39
Bid-YTW : 5.35 %
GWO.PR.S Deemed-Retractible 1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.61
Bid-YTW : 5.50 %
SLF.PR.J FloatingReset 1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.00
Bid-YTW : 8.97 %
NA.PR.G FixedReset Disc 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 21.43
Evaluated at bid price : 21.69
Bid-YTW : 5.18 %
GWO.PR.N FixedReset Ins Non 1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.80
Bid-YTW : 8.68 %
MFC.PR.F FixedReset Ins Non 1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.02
Bid-YTW : 8.57 %
TRP.PR.G FixedReset Disc 2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 5.92 %
BIP.PR.D FixedReset Disc 3.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 22.60
Evaluated at bid price : 23.26
Bid-YTW : 5.72 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.L FixedReset Ins Non 53,550 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.93
Bid-YTW : 7.72 %
MFC.PR.K FixedReset Ins Non 50,355 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.53
Bid-YTW : 7.11 %
POW.PR.G Perpetual-Premium 45,480 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-05-15
Maturity Price : 25.50
Evaluated at bid price : 25.70
Bid-YTW : -3.53 %
GWO.PR.M Deemed-Retractible 44,300 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-05-11
Maturity Price : 25.00
Evaluated at bid price : 25.47
Bid-YTW : -14.43 %
GWO.PR.R Deemed-Retractible 35,466 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.66
Bid-YTW : 6.04 %
IAF.PR.G FixedReset Ins Non 29,020 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.07
Bid-YTW : 6.28 %
There were 40 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.G FixedReset Ins Non Quote: 20.77 – 21.23
Spot Rate : 0.4600
Average : 0.2863

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.77
Bid-YTW : 6.59 %

BAM.PR.R FixedReset Disc Quote: 15.91 – 16.50
Spot Rate : 0.5900
Average : 0.4217

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 15.91
Evaluated at bid price : 15.91
Bid-YTW : 5.98 %

PWF.PR.T FixedReset Disc Quote: 19.35 – 19.75
Spot Rate : 0.4000
Average : 0.2611

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 19.35
Evaluated at bid price : 19.35
Bid-YTW : 5.13 %

BAM.PF.J FixedReset Disc Quote: 24.00 – 24.40
Spot Rate : 0.4000
Average : 0.2668

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 22.88
Evaluated at bid price : 24.00
Bid-YTW : 4.92 %

BAM.PF.B FixedReset Disc Quote: 18.72 – 19.12
Spot Rate : 0.4000
Average : 0.2797

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 18.72
Evaluated at bid price : 18.72
Bid-YTW : 5.78 %

BAM.PF.C Perpetual-Discount Quote: 21.27 – 21.60
Spot Rate : 0.3300
Average : 0.2138

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-11
Maturity Price : 21.27
Evaluated at bid price : 21.27
Bid-YTW : 5.75 %

FFN.PR.A Downgraded to Pfd-4(high) by DBRS

Thursday, April 11th, 2019

DBRS Limited has announced that it:

downgraded the rating on the Preferred Shares issued by North American Financial 15 Split Corp. (the Company) to Pfd-4 (high) from Pfd-3 (low).

On February 21, 2019, the Company extended the term of the Preferred Shares for additional five years. The new termination date is December 1, 2024. After December 1, 2019, the Company will have the right to amend the dividend rate on the Preferred Shares for the new five-year term. Any such changes are expected to be announced no later than September 30, 2019.

The Portfolio provides approximately 37% of downside protection to holders of the Preferred Shares as at March 15, 2019. The downside protection experienced a decline in 2018, showing only a slow recovery over the past few months. The Preferred Shares currently pay a fixed cumulative monthly dividend of $0.04583 per Preferred Share, yielding 5.5% annually on their issue price of $10 per share. Holders of the Class A Shares receive regular monthly targeted cash distributions of $0.10 per Class A Share, yielding 8.0% annually on the issue price of $15 per share. No distributions will be paid to Class A Shares if the NAV per unit falls below $15 and no special year-end dividends will be paid if, after such payment, the Portfolio’s NAV is less than $25. The Preferred Share dividend coverage ratio was approximately 0.64 times. The average grind on the Portfolio is expected to be 3.1% annually for the next five years.

The affected issue is FFN.PR.A .

April 10, 2019

Wednesday, April 10th, 2019

I am pleased to pass on another data point illustrating just how absurdly cheap the preferred share market is at the moment:

DBRS Limited (DBRS) assigned a rating of A (low) with a Stable trend to TransCanada PipeLines Limited’s (TCPL or the Company) $1.0 billion 4.34% Unsecured Medium Term Note Debentures (the Notes) due 2049. The rating being assigned is based upon the rating on already-outstanding series of the above-mentioned debt instruments.

DBRS notes that the proceeds from the Notes issue will be used to repay existing indebtedness and for general corporate purposes.

The Notes will rank pari passu, except as to sinking funds and other claims preferred by operation of law, with all other unsecured and unsubordinated indebtedness of the Company.

Sadly, TRP does not have any Straight Preferreds outstanding, but they do have a slew of FixedResets, ranging from TRP.PR.C yielding 5.70% to TRP.PR.G yielding 6.04%. So, for the sake of an argument and assuming a reasonably normal relationship, let’s say a TRP discounted Straight Perpetual would yield about 6.00% dividend, equivalent to about 7.80% interest. Its interest-equivalent Modified Duration as a perpetual annuity will be the inverse of this, or about 12.8. I can’t be bothered to work out the Modified Duration of a 30-year par bond yielding 4.34, but it will be more than this. Options on either instrument will lower the Modified Duration, but basically we can say that the Straight Perpetual preferred will have a little bit lower interest rate risk than the new bond.

Credit Risk will be a little higher for the preferred, but I worked out a long time ago that reasonable assumptions regarding default rates lead to a required credit risk premium of about 20bp. OK, so the preferreds are issued by the holding company and the bonds are issued by the operating company. So tack on another 20bp for credit risk, if you’re so inclined. It doesn’t make much difference to the conclusion!

There’s markedly lower liquidity for the preferred, but not so much of a difference that most of us need to care. If you do have an investment portfolio in which such a liquidity difference is significant, please contact me because I would like to make a proposal to manage your account!

So we’re left with 4.34% on the bond and 7.80% on the notional Straight, with about 20bp of the difference accounted for by Credit Risk. And, what’s more, this difference is in-line with the overall Seniority Spread that I estimate weekly (with a bond indicator that has an average term of about 21.25 years), so it’s not just these particular issues, it’s the whole damn market.

Yep, preferreds are cheap, all right!

DBRS also has a warning for Premier Ford:

DBRS Limited (DBRS) confirmed the Issuer Rating and the Senior Unsecured Debentures rating of Hydro One Inc. (HOI or the Company) at A (high) and the Commercial Paper rating at R-1 (low). All trends are Stable.

However, should political interference adversely affect the Ontario Energy Board’s (OEB) independent regulatory rate making framework or HOI’s operating and financial decisions, DBRS could take a negative rating action.

PerpetualDiscounts now yield 5.40%, equivalent to 7.02% interest at the standard equivalency factor of 1.3x. Lonc corporates now yield 3.75%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 325bp, a significant narrowing from the 335bp reported April 3.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 1.0056 % 2,154.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.0056 % 3,953.9
Floater 5.43 % 5.70 % 42,363 14.38 3 1.0056 % 2,278.7
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1191 % 3,280.7
SplitShare 4.88 % 4.64 % 78,537 3.84 8 -0.1191 % 3,917.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1191 % 3,056.8
Perpetual-Premium 5.58 % -8.56 % 82,751 0.09 10 -0.0315 % 2,956.6
Perpetual-Discount 5.37 % 5.40 % 76,043 14.79 23 0.3223 % 3,127.1
FixedReset Disc 5.24 % 5.34 % 191,864 14.96 61 -0.2937 % 2,193.5
Deemed-Retractible 5.20 % 5.72 % 93,567 8.15 27 0.0487 % 3,087.4
FloatingReset 4.23 % 4.30 % 52,626 2.70 5 0.0975 % 2,406.6
FixedReset Prem 5.07 % 3.67 % 298,016 2.21 22 0.0088 % 2,585.0
FixedReset Bank Non 1.98 % 4.02 % 135,592 2.71 3 0.1118 % 2,633.1
FixedReset Ins Non 4.98 % 6.55 % 106,900 8.30 22 -0.0477 % 2,262.4
Performance Highlights
Issue Index Change Notes
TRP.PR.G FixedReset Disc -2.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 6.04 %
BAM.PR.R FixedReset Disc -2.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 16.24
Evaluated at bid price : 16.24
Bid-YTW : 5.86 %
BAM.PR.T FixedReset Disc -2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 16.35
Evaluated at bid price : 16.35
Bid-YTW : 5.90 %
TD.PF.J FixedReset Disc -1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.54
Evaluated at bid price : 21.81
Bid-YTW : 5.02 %
IFC.PR.G FixedReset Ins Non -1.66 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.75
Bid-YTW : 6.79 %
BIP.PR.F FixedReset Disc -1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.76
Evaluated at bid price : 22.15
Bid-YTW : 5.78 %
MFC.PR.H FixedReset Ins Non -1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 6.06 %
EMA.PR.H FixedReset Disc -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 22.58
Evaluated at bid price : 23.49
Bid-YTW : 5.25 %
BAM.PR.K Floater 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 12.24
Evaluated at bid price : 12.24
Bid-YTW : 5.70 %
MFC.PR.K FixedReset Ins Non 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.73
Bid-YTW : 6.98 %
TRP.PR.A FixedReset Disc 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 14.85
Evaluated at bid price : 14.85
Bid-YTW : 5.95 %
PWF.PR.A Floater 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 13.75
Evaluated at bid price : 13.75
Bid-YTW : 5.10 %
CU.PR.G Perpetual-Discount 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.37 %
BAM.PR.N Perpetual-Discount 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.12
Evaluated at bid price : 21.12
Bid-YTW : 5.67 %
SLF.PR.G FixedReset Ins Non 1.90 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.05
Bid-YTW : 8.69 %
MFC.PR.L FixedReset Ins Non 1.94 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.91
Bid-YTW : 7.74 %
Volume Highlights
Issue Index Shares
Traded
Notes
VNR.PR.A FixedReset Prem 241,633 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 23.25
Evaluated at bid price : 24.85
Bid-YTW : 4.38 %
BMO.PR.W FixedReset Disc 67,970 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 18.15
Evaluated at bid price : 18.15
Bid-YTW : 5.33 %
BIP.PR.F FixedReset Disc 52,155 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.76
Evaluated at bid price : 22.15
Bid-YTW : 5.78 %
BAM.PF.B FixedReset Disc 46,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 5.74 %
CU.PR.G Perpetual-Discount 41,295 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.37 %
BAM.PR.N Perpetual-Discount 40,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.12
Evaluated at bid price : 21.12
Bid-YTW : 5.67 %
There were 21 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
NA.PR.E FixedReset Disc Quote: 20.19 – 20.69
Spot Rate : 0.5000
Average : 0.3465

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 20.19
Evaluated at bid price : 20.19
Bid-YTW : 5.28 %

GWO.PR.S Deemed-Retractible Quote: 24.30 – 24.67
Spot Rate : 0.3700
Average : 0.2452

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 5.65 %

TRP.PR.E FixedReset Disc Quote: 16.90 – 17.20
Spot Rate : 0.3000
Average : 0.1980

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 16.90
Evaluated at bid price : 16.90
Bid-YTW : 5.86 %

MFC.PR.H FixedReset Ins Non Quote: 22.25 – 22.67
Spot Rate : 0.4200
Average : 0.3199

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.25
Bid-YTW : 6.06 %

TD.PF.E FixedReset Disc Quote: 21.75 – 22.21
Spot Rate : 0.4600
Average : 0.3708

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-10
Maturity Price : 21.42
Evaluated at bid price : 21.75
Bid-YTW : 5.03 %

GWO.PR.P Deemed-Retractible Quote: 24.80 – 25.09
Spot Rate : 0.2900
Average : 0.2089

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 5.55 %

TRP.PR.D : Convert or Hold?

Tuesday, April 9th, 2019

It will be recalled that TRP.PR.D will reset at 3.903% effective April 30, 2019.

TRP.PR.D is a FixedReset, 4.00%+238, that commenced trading 2013-3-4 after being announced 2013-2-25. The extension was announced 2019-3-15. The issue is tracked by HIMIPref™ and assigned to the FixedReset (Discount) subindex.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., TRP.PR.D and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pair_fr_190409
Click for Big

The market appears to have lost its fleeting interest in floating rate product; the implied rates until the next interconversion are above the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.78% and +1.24%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the TRP.PR.D FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for TRP.PR.D) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
TRP.PR.D 17.00 238bp 16.98 16.49 16.00

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to be cheap and trading below the price of their FixedReset counterparts, TRP.PR.D. Therefore I recommend that holders of TRP.PR.D continue to hold the issue and not to convert. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

Those who wish to convert anyway are advised that the deadline for notifying the company of such a desire is 5 p.m. (EDT) on April 15, 2019. Brokers and other intermediaries generally set their internal deadlines a day or two in advance of this date, so if you wish to convert there’s no time to waste! Note that brokers will, in general, try to execute the instruction on a ‘best efforts’ basis if received between the two deadlines, provided that the procrastinating shareholder grovels entertainingly enough.

CWB.PR.B : Convert or Hold?

Tuesday, April 9th, 2019

It will be recalled that CWB.PR.B will reset at 4.301% effective May 1, 2019.

CWB.PR.B is a FixedReset, 4.40%+276, that commenced trading 2014-2-10 after being announced 2014-1-31. The extension was announced 2019-3-11. The issue is tracked by HIMIPref™ but relegated to the Scraps – FixedReset (Discount) index on credit concerns.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., CWB.PR.B and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pair_fr_190409
Click for Big

The market appears to have lost its fleeting interest in floating rate product; the implied rates until the next interconversion are above the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.78% and +1.24%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the CWB.PR.B FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for CWB.PR.B) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
CWB.PR.B 19.00 276bp 18.47 17.98 17.48

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to be cheap and trading below the price of their FixedReset counterparts, CWB.PR.B. Therefore I recommend that holders of CWB.PR.B continue to hold the issue and not to convert. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

Those who wish to convert anyway are advised that the deadline for notifying the company of such a desire is 5:00 p.m. (EDT) on April 15, 2019. Brokers and other intermediaries generally set their internal deadlines a day or two in advance of this date, so if you wish to convert there’s no time to waste! Note that brokers will, in general, try to execute the instruction on a ‘best efforts’ basis if received between the two deadlines, provided that the procrastinating shareholder grovels entertainingly enough.

April 9, 2019

Tuesday, April 9th, 2019
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -1.0733 % 2,133.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.0733 % 3,914.6
Floater 5.49 % 5.76 % 42,463 14.29 3 -1.0733 % 2,256.0
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1041 % 3,284.6
SplitShare 4.87 % 4.63 % 79,642 3.84 8 -0.1041 % 3,922.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1041 % 3,060.5
Perpetual-Premium 5.57 % -10.58 % 86,153 0.09 10 -0.1021 % 2,957.5
Perpetual-Discount 5.38 % 5.43 % 75,562 14.76 23 -0.3144 % 3,117.1
FixedReset Disc 5.23 % 5.33 % 194,091 14.98 61 -0.2472 % 2,200.0
Deemed-Retractible 5.20 % 5.74 % 96,698 8.16 27 -0.0612 % 3,085.9
FloatingReset 4.23 % 4.23 % 54,490 2.70 5 -0.2595 % 2,404.3
FixedReset Prem 5.07 % 3.59 % 297,789 2.21 22 -0.0769 % 2,584.8
FixedReset Bank Non 1.99 % 4.08 % 136,791 2.71 3 -0.1395 % 2,630.2
FixedReset Ins Non 4.98 % 6.57 % 108,203 8.29 22 -0.1543 % 2,263.4
Performance Highlights
Issue Index Change Notes
BIP.PR.D FixedReset Disc -1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.98
Evaluated at bid price : 22.31
Bid-YTW : 5.98 %
NA.PR.W FixedReset Disc -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 5.52 %
TRP.PR.F FloatingReset -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 14.53
Evaluated at bid price : 14.53
Bid-YTW : 6.23 %
MFC.PR.L FixedReset Ins Non -1.62 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.57
Bid-YTW : 7.97 %
NA.PR.S FixedReset Disc -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 5.42 %
NA.PR.G FixedReset Disc -1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.29 %
TRP.PR.D FixedReset Disc -1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.86 %
BAM.PR.N Perpetual-Discount -1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 5.76 %
MFC.PR.G FixedReset Ins Non -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.96
Bid-YTW : 6.48 %
MFC.PR.H FixedReset Ins Non -1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 5.92 %
BAM.PR.B Floater -1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 12.08
Evaluated at bid price : 12.08
Bid-YTW : 5.77 %
BAM.PR.K Floater -1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 12.11
Evaluated at bid price : 12.11
Bid-YTW : 5.76 %
CU.PR.F Perpetual-Discount -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.43 %
HSE.PR.A FixedReset Disc -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 12.70
Evaluated at bid price : 12.70
Bid-YTW : 6.37 %
PWF.PR.S Perpetual-Discount -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.82
Evaluated at bid price : 22.10
Bid-YTW : 5.43 %
NA.PR.C FixedReset Disc -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.92
Evaluated at bid price : 22.30
Bid-YTW : 5.48 %
MFC.PR.K FixedReset Ins Non -1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.52
Bid-YTW : 7.11 %
BMO.PR.E FixedReset Disc -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 22.16
Evaluated at bid price : 22.76
Bid-YTW : 4.88 %
PWF.PR.P FixedReset Disc -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 14.25
Evaluated at bid price : 14.25
Bid-YTW : 5.43 %
HSE.PR.E FixedReset Disc -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 6.60 %
NA.PR.E FixedReset Disc 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 20.26
Evaluated at bid price : 20.26
Bid-YTW : 5.26 %
IAF.PR.G FixedReset Ins Non 1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 6.31 %
MFC.PR.F FixedReset Ins Non 1.37 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.75
Bid-YTW : 8.78 %
BAM.PR.X FixedReset Disc 1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 14.36
Evaluated at bid price : 14.36
Bid-YTW : 5.73 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.K FixedReset Prem 209,511 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.78 %
BAM.PF.F FixedReset Disc 139,350 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 19.85
Evaluated at bid price : 19.85
Bid-YTW : 5.65 %
BAM.PR.X FixedReset Disc 78,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 14.36
Evaluated at bid price : 14.36
Bid-YTW : 5.73 %
BAM.PR.K Floater 63,172 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 12.11
Evaluated at bid price : 12.11
Bid-YTW : 5.76 %
BMO.PR.Y FixedReset Disc 57,235 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.49
Evaluated at bid price : 21.49
Bid-YTW : 5.03 %
RY.PR.S FixedReset Disc 55,550 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.61
Evaluated at bid price : 21.95
Bid-YTW : 4.82 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAF.PR.G FixedReset Ins Non Quote: 21.01 – 22.36
Spot Rate : 1.3500
Average : 0.9398

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.01
Bid-YTW : 6.31 %

IFC.PR.G FixedReset Ins Non Quote: 21.10 – 21.63
Spot Rate : 0.5300
Average : 0.3174

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.10
Bid-YTW : 6.57 %

TRP.PR.F FloatingReset Quote: 14.53 – 14.97
Spot Rate : 0.4400
Average : 0.2900

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 14.53
Evaluated at bid price : 14.53
Bid-YTW : 6.23 %

PWF.PR.L Perpetual-Discount Quote: 23.23 – 23.64
Spot Rate : 0.4100
Average : 0.2674

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 22.96
Evaluated at bid price : 23.23
Bid-YTW : 5.49 %

RY.PR.S FixedReset Disc Quote: 21.95 – 22.24
Spot Rate : 0.2900
Average : 0.1846

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 21.61
Evaluated at bid price : 21.95
Bid-YTW : 4.82 %

TRP.PR.D FixedReset Disc Quote: 17.00 – 17.34
Spot Rate : 0.3400
Average : 0.2374

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-04-09
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 5.86 %