Market Action

July 5, 2022

Sorry this is so late, but I went to see Harry Potter and the Cursed Child last night. It was a great show and I endorse it completely. Loaded with very well done special effects and a superb set. My friend and I were most impressed by the portrayals of the Dementors and Moaning Myrtle; I particularly liked the magic duel in the first act.

Moaning Myrtle

It was definitely a ‘risk-off’ kind of day!

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 -1.3839 % 2,463.8
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.3839 % 4,725.6
Floater 5.05 % 5.08 % 41,899 15.40 3 -1.3839 % 2,723.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.4168 % 3,468.2
SplitShare 4.90 % 5.60 % 44,319 3.18 8 0.4168 % 4,141.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.4168 % 3,231.5
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.4265 % 2,838.1
Perpetual-Discount 6.01 % 6.11 % 68,775 13.73 34 -0.4265 % 3,094.8
FixedReset Disc 4.81 % 6.33 % 112,114 13.57 56 -2.0251 % 2,449.9
Insurance Straight 6.01 % 6.08 % 93,001 13.81 18 -0.3498 % 2,993.6
FloatingReset 5.88 % 6.21 % 45,268 13.62 2 -1.4783 % 2,596.5
FixedReset Prem 5.01 % 4.76 % 139,848 1.96 10 -0.1660 % 2,603.0
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 -2.0251 % 2,504.3
FixedReset Ins Non 4.72 % 6.42 % 60,776 13.55 14 -1.2867 % 2,582.3
Performance Highlights
Issue Index Change Notes
PWF.PR.T FixedReset Disc -45.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 11.01
Evaluated at bid price : 11.01
Bid-YTW : 12.35 %
TD.PF.D FixedReset Disc -6.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.78 %
BAM.PF.A FixedReset Disc -6.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 20.60
Evaluated at bid price : 20.60
Bid-YTW : 7.24 %
IFC.PR.C FixedReset Disc -4.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 6.97 %
NA.PR.G FixedReset Disc -3.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 22.47
Evaluated at bid price : 22.90
Bid-YTW : 6.29 %
MFC.PR.M FixedReset Ins Non -3.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 6.87 %
BAM.PR.T FixedReset Disc -3.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 16.72
Evaluated at bid price : 16.72
Bid-YTW : 7.37 %
IFC.PR.A FixedReset Ins Non -3.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.51
Evaluated at bid price : 18.51
Bid-YTW : 6.47 %
CU.PR.C FixedReset Disc -3.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 6.44 %
BAM.PR.B Floater -3.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 12.76
Evaluated at bid price : 12.76
Bid-YTW : 5.11 %
BIP.PR.F FixedReset Disc -3.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 22.22
Evaluated at bid price : 22.59
Bid-YTW : 6.57 %
MFC.PR.Q FixedReset Ins Non -2.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 21.91
Evaluated at bid price : 22.45
Bid-YTW : 6.25 %
FTS.PR.M FixedReset Disc -2.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.75
Evaluated at bid price : 19.75
Bid-YTW : 6.80 %
FTS.PR.H FixedReset Disc -2.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 14.60
Evaluated at bid price : 14.60
Bid-YTW : 6.95 %
BIP.PR.A FixedReset Disc -2.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.81
Evaluated at bid price : 19.81
Bid-YTW : 7.75 %
TRP.PR.A FixedReset Disc -2.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 15.66
Evaluated at bid price : 15.66
Bid-YTW : 7.60 %
RY.PR.S FixedReset Disc -2.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 23.10
Evaluated at bid price : 23.50
Bid-YTW : 5.80 %
BIP.PR.E FixedReset Disc -2.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 22.21
Evaluated at bid price : 22.93
Bid-YTW : 6.59 %
TRP.PR.F FloatingReset -2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 16.31
Evaluated at bid price : 16.31
Bid-YTW : 6.21 %
IFC.PR.K Perpetual-Discount -2.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 21.31
Evaluated at bid price : 21.60
Bid-YTW : 6.11 %
TRP.PR.B FixedReset Disc -2.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 12.35
Evaluated at bid price : 12.35
Bid-YTW : 7.77 %
IFC.PR.G FixedReset Ins Non -2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 21.54
Evaluated at bid price : 21.90
Bid-YTW : 6.42 %
BAM.PF.F FixedReset Disc -2.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.77
Evaluated at bid price : 19.77
Bid-YTW : 7.22 %
BNS.PR.I FixedReset Disc -2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 23.10
Evaluated at bid price : 23.52
Bid-YTW : 5.79 %
IFC.PR.E Insurance Straight -2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 21.65
Evaluated at bid price : 21.65
Bid-YTW : 6.05 %
FTS.PR.G FixedReset Disc -1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 6.60 %
TRP.PR.C FixedReset Disc -1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 12.95
Evaluated at bid price : 12.95
Bid-YTW : 7.68 %
BMO.PR.E FixedReset Disc -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 23.12
Evaluated at bid price : 23.57
Bid-YTW : 6.10 %
CU.PR.G Perpetual-Discount -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.80
Evaluated at bid price : 18.80
Bid-YTW : 6.07 %
SLF.PR.D Insurance Straight -1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 5.90 %
PWF.PF.A Perpetual-Discount -1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.52
Evaluated at bid price : 18.52
Bid-YTW : 6.20 %
FTS.PR.K FixedReset Disc -1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.60
Evaluated at bid price : 18.60
Bid-YTW : 6.82 %
TD.PF.K FixedReset Disc -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 23.00
Evaluated at bid price : 23.47
Bid-YTW : 6.05 %
NA.PR.W FixedReset Disc -1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 6.34 %
RY.PR.J FixedReset Disc -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 6.37 %
TRP.PR.G FixedReset Disc -1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.85 %
MFC.PR.N FixedReset Ins Non -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.81
Evaluated at bid price : 18.81
Bid-YTW : 6.82 %
BAM.PR.X FixedReset Disc -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 7.07 %
MFC.PR.J FixedReset Ins Non -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 22.30
Evaluated at bid price : 23.10
Bid-YTW : 6.14 %
SLF.PR.E Insurance Straight -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 5.88 %
PVS.PR.H SplitShare -1.27 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2027-02-28
Maturity Price : 25.00
Evaluated at bid price : 23.40
Bid-YTW : 6.44 %
CU.PR.F Perpetual-Discount -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 6.00 %
SLF.PR.C Insurance Straight -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.02
Evaluated at bid price : 19.02
Bid-YTW : 5.90 %
BAM.PR.C Floater -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 12.89
Evaluated at bid price : 12.89
Bid-YTW : 5.06 %
MIC.PR.A Perpetual-Discount -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 21.22
Evaluated at bid price : 21.22
Bid-YTW : 6.42 %
TRP.PR.D FixedReset Disc -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 17.99
Evaluated at bid price : 17.99
Bid-YTW : 7.36 %
MFC.PR.C Insurance Straight -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.98
Evaluated at bid price : 18.98
Bid-YTW : 5.99 %
BAM.PR.N Perpetual-Discount -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.18
Evaluated at bid price : 19.18
Bid-YTW : 6.24 %
BAM.PR.R FixedReset Disc -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 16.86
Evaluated at bid price : 16.86
Bid-YTW : 7.21 %
TD.PF.M FixedReset Prem -1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2024-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 5.56 %
IFC.PR.I Perpetual-Discount -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 22.16
Evaluated at bid price : 22.50
Bid-YTW : 6.03 %
PWF.PR.E Perpetual-Discount -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 22.28
Evaluated at bid price : 22.55
Bid-YTW : 6.21 %
TRP.PR.E FixedReset Disc 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 7.02 %
POW.PR.C Perpetual-Discount 2.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 23.63
Evaluated at bid price : 23.90
Bid-YTW : 6.09 %
EIT.PR.A SplitShare 3.22 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.04
Bid-YTW : 4.89 %
BAM.PF.G FixedReset Disc 3.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.70
Evaluated at bid price : 18.70
Bid-YTW : 7.27 %
BAM.PF.B FixedReset Disc 3.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.66
Evaluated at bid price : 19.66
Bid-YTW : 7.12 %
Volume Highlights
Issue Index Shares
Traded
Notes
PWF.PR.S Perpetual-Discount 92,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.73
Evaluated at bid price : 19.73
Bid-YTW : 6.21 %
NA.PR.W FixedReset Disc 80,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 6.34 %
GWO.PR.M Insurance Straight 80,137 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 23.53
Evaluated at bid price : 23.80
Bid-YTW : 6.13 %
PWF.PR.H Perpetual-Discount 56,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 23.62
Evaluated at bid price : 23.89
Bid-YTW : 6.13 %
BAM.PR.Z FixedReset Disc 45,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 22.44
Evaluated at bid price : 23.35
Bid-YTW : 6.43 %
GWO.PR.I Insurance Straight 35,450 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 18.87
Evaluated at bid price : 18.87
Bid-YTW : 6.01 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.T FixedReset Disc Quote: 11.01 – 20.50
Spot Rate : 9.4900
Average : 5.2591

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 11.01
Evaluated at bid price : 11.01
Bid-YTW : 12.35 %

BAM.PR.X FixedReset Disc Quote: 17.10 – 19.48
Spot Rate : 2.3800
Average : 1.4326

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 7.07 %

SLF.PR.E Insurance Straight Quote: 19.30 – 21.50
Spot Rate : 2.2000
Average : 1.4216

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 5.88 %

TD.PF.D FixedReset Disc Quote: 20.00 – 21.74
Spot Rate : 1.7400
Average : 1.0840

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.78 %

BAM.PF.A FixedReset Disc Quote: 20.60 – 22.04
Spot Rate : 1.4400
Average : 0.8387

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 20.60
Evaluated at bid price : 20.60
Bid-YTW : 7.24 %

TRP.PR.A FixedReset Disc Quote: 15.66 – 17.40
Spot Rate : 1.7400
Average : 1.2500

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-05
Maturity Price : 15.66
Evaluated at bid price : 15.66
Bid-YTW : 7.60 %

Publications

Research : Importance of FixedReset Spreads

The reissue of BCE.PR.K in December, 2011, was one of the most cynical or most ignorant moves by preferred share underwriters and salesmen I have ever seen. So I was prompted to, yet again, implore investors to look at valuation factors more important than Current Yield.

As I state in the conclusion:

Issue Reset Spreads are extremely important in the valuation of FixedReset issues that are not expected to be called – as a rough rule of thumb, I suggest that this includes investment grade issues with an Issue Reset Spread of 200bp or less, and junk issues with an Issue Reset Spread of 300bp or less. I consider the situation for issues with Issue Reset Spreads up to 100bp greater than these thresholds to be unclear, and will depend on relatively minor changes in market conditions.

Investors should pay particular attention to the Issue Reset Spread when selecting issues – even if one does not wish to perform a precise yield analysis for a presumed level of the GOC-5 rate, one should at the very least calculate what the Current Yield will be if the current price is maintained after reset at some reasonable and consistent value of GOC-5.

Look for the research link!

Market Action

July 4, 2022

Peter Misek of Framework Venture Partners takes us down memory lane:

Let’s revisit the past. In 1993, the new Chrétien government was ripe with ideas for pumping stimulus into the country. Its problems were familiar: health and education were clamouring for investment and every government department had needs.

Less than a year into the government’s mandate, a usually uneventful moment became a watershed lesson for Canada. With hours to go before a regular bond auction, there were no bids at any price, Mr. Chrétien confirmed in a 2011 Reuters interview.

At the last minute, the auction received bids, but the damage was done. In a rare moment of clarity, common sense and heroism, Mr. Chrétien called emergency cabinet meetings and set the painful but needed course toward renewed prosperity in Canada.

Yes, it was common knowledge in the industry that the GOC bond auctions had come within a hairsbreadth of failing in 1993. Not enough people know that.

One of the truisms of politics is that the politicians generally know what has to be done; they just don’t know how to get re-elected if they do it. We were very fortunate that at that time there was a Liberal government in Canada: they had the political room to take the harsh steps that were required. If it had been a Progressive Conservative government in power, doing so would have reinforced their political stereotypes and in short order have taken them to the political wilderness – as Mike Harris and the Ontario PCs found out soon enough.

It’s time to break up the banks. This is tied selling:

Some of Canada’s largest banks are blocking online investors from buying high-interest-savings exchange traded funds, which compete with the banks’ own lucrative deposit accounts.

The discount brokerage arms at Royal Bank of Canada, Bank of Montreal and Toronto-Dominion Bank do not allow do-it-yourself investors to purchase high-interest-savings ETFs, also known as cash ETFs, or HISA ETFs. The funds, which are run by independent asset managers, mainly invest in pools of banks’ high-interest savings accounts and deposits.

Rising yields are doing wonders for the solvency ratios of DB pension plans:

Consulting firm Mercer Canada Ltd. said its Mercer Pension Health Pulse, which tracks the median solvency ratio of the defined benefit (DB) pension plans of Mercer clients, increased from 108 per cent on March 31 to 109 per cent by June 30. The measure was 96 per cent at the end of 2020 and 103 per cent at the end of 2021

Aon PLC … said its pension risk tracker, which measures the aggregate solvency of DB pension plans of companies in the S&P/TSX Composite Index, increased from 100.5 per cent to 101.5 per cent during the past three months. It has risen all the way from 89.4 per cent at the end of 2020 and 97.2 per cent at the end of 2021.

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 -1.4646 % 2,498.4
FixedFloater 0.00 % 0.00 % 0 0.00 0 -1.4646 % 4,791.9
Floater 4.98 % 4.99 % 41,844 15.55 3 -1.4646 % 2,761.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1215 % 3,453.8
SplitShare 4.92 % 5.91 % 50,470 3.18 8 -0.1215 % 4,124.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1215 % 3,218.1
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.0465 % 2,850.2
Perpetual-Discount 5.98 % 6.11 % 66,770 13.77 34 0.0465 % 3,108.0
FixedReset Disc 4.71 % 6.31 % 111,883 13.72 56 -0.2379 % 2,500.6
Insurance Straight 5.99 % 6.10 % 92,231 13.79 18 0.0943 % 3,004.2
FloatingReset 5.80 % 6.07 % 44,062 13.83 2 0.0308 % 2,635.4
FixedReset Prem 5.00 % 4.97 % 138,745 1.97 10 -0.1066 % 2,607.4
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 -0.2379 % 2,556.1
FixedReset Ins Non 4.66 % 6.34 % 61,658 13.69 14 -0.0233 % 2,616.0
Performance Highlights
Issue Index Change Notes
BAM.PF.B FixedReset Disc -4.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 7.36 %
BAM.PF.G FixedReset Disc -3.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 18.10
Evaluated at bid price : 18.10
Bid-YTW : 7.49 %
BAM.PR.K Floater -3.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 12.80
Evaluated at bid price : 12.80
Bid-YTW : 5.09 %
POW.PR.C Perpetual-Discount -2.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 23.14
Evaluated at bid price : 23.40
Bid-YTW : 6.22 %
TRP.PR.C FixedReset Disc -2.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 13.20
Evaluated at bid price : 13.20
Bid-YTW : 7.55 %
EIT.PR.A SplitShare -2.26 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 24.26
Bid-YTW : 6.88 %
BAM.PF.E FixedReset Disc -2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 7.31 %
TD.PF.C FixedReset Disc -1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 6.31 %
BMO.PR.S FixedReset Disc -1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 21.32
Evaluated at bid price : 21.62
Bid-YTW : 6.11 %
CM.PR.P FixedReset Disc -1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 20.40
Evaluated at bid price : 20.40
Bid-YTW : 6.24 %
IFC.PR.C FixedReset Disc -1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 19.29
Evaluated at bid price : 19.29
Bid-YTW : 6.70 %
BAM.PF.D Perpetual-Discount -1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 6.15 %
BMO.PR.Y FixedReset Disc -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 6.27 %
MFC.PR.F FixedReset Ins Non -1.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 6.91 %
BAM.PR.C Floater -1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 13.05
Evaluated at bid price : 13.05
Bid-YTW : 4.99 %
TRP.PR.B FixedReset Disc -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 12.63
Evaluated at bid price : 12.63
Bid-YTW : 7.61 %
MIC.PR.A Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 21.48
Evaluated at bid price : 21.48
Bid-YTW : 6.34 %
FTS.PR.H FixedReset Disc 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 15.00
Evaluated at bid price : 15.00
Bid-YTW : 6.78 %
PWF.PR.E Perpetual-Discount 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 22.55
Evaluated at bid price : 22.80
Bid-YTW : 6.14 %
TRP.PR.E FixedReset Disc 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 7.13 %
RY.PR.N Perpetual-Discount 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 23.18
Evaluated at bid price : 23.66
Bid-YTW : 5.22 %
BAM.PR.X FixedReset Disc 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 17.33
Evaluated at bid price : 17.33
Bid-YTW : 6.98 %
BIP.PR.A FixedReset Disc 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 7.56 %
PWF.PR.P FixedReset Disc 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 7.08 %
FTS.PR.G FixedReset Disc 1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 20.20
Evaluated at bid price : 20.20
Bid-YTW : 6.47 %
GWO.PR.Y Insurance Straight 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 18.90
Evaluated at bid price : 18.90
Bid-YTW : 6.00 %
CU.PR.F Perpetual-Discount 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 19.24
Evaluated at bid price : 19.24
Bid-YTW : 5.93 %
BMO.PR.W FixedReset Disc 2.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 20.70
Evaluated at bid price : 20.70
Bid-YTW : 6.23 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.M Insurance Straight 22,197 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 23.32
Evaluated at bid price : 23.60
Bid-YTW : 6.18 %
CM.PR.R FixedReset Disc 19,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-08-30
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 3.86 %
CM.PR.O FixedReset Disc 18,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 6.11 %
RS.PR.A SplitShare 16,311 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-12-31
Maturity Price : 10.00
Evaluated at bid price : 10.06
Bid-YTW : 5.04 %
POW.PR.C Perpetual-Discount 14,865 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 23.14
Evaluated at bid price : 23.40
Bid-YTW : 6.22 %
NA.PR.C FixedReset Prem 12,500 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 6.16 %
There were 1 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BMO.PR.Y FixedReset Disc Quote: 21.20 – 25.00
Spot Rate : 3.8000
Average : 2.0457

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 6.27 %

CU.PR.G Perpetual-Discount Quote: 19.15 – 23.00
Spot Rate : 3.8500
Average : 2.2892

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 5.96 %

TRP.PR.C FixedReset Disc Quote: 13.20 – 17.88
Spot Rate : 4.6800
Average : 3.6335

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 13.20
Evaluated at bid price : 13.20
Bid-YTW : 7.55 %

GWO.PR.Y Insurance Straight Quote: 18.90 – 21.15
Spot Rate : 2.2500
Average : 1.2919

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 18.90
Evaluated at bid price : 18.90
Bid-YTW : 6.00 %

IFC.PR.E Insurance Straight Quote: 22.10 – 24.00
Spot Rate : 1.9000
Average : 1.3078

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 21.76
Evaluated at bid price : 22.10
Bid-YTW : 5.91 %

CU.PR.J Perpetual-Discount Quote: 19.91 – 21.50
Spot Rate : 1.5900
Average : 1.1098

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-07-04
Maturity Price : 19.91
Evaluated at bid price : 19.91
Bid-YTW : 6.05 %

Publications

Research : Liquidity Black Holes

Anybody considering investing in preferred shares or corporate bonds should be familiar with the concept of liquidity and its effects on market prices. What happens when liquidity ceases to be merely a contributing factor and becomes dominant?

As I state in the conclusion:

As weary readers will have worked out for themselves by now, this essay does not present any magic formulae that guarantee instant success in the Canadian preferred share market – I simply felt that the concept of “Liquidity Black Holes” was interesting enough that I should pass on the information to assist readers to understand the market, and some of the academic research surrounding the market, a little better.

However, there is one salient investment truism that should be remembered: the price of investment instruments can vary, sometimes very sharply, for reasons that have absolutely nothing to do with the fundamental value of that investment – even when both buyers and sellers have identical views on how that fundamental value can be estimated.

Look for the research link!

MAPF

MAPF Performance : June 2022

Malachite Aggressive Preferred Fund’s Net Asset Value per Unit as of the close June 30, 2022, was $9.3115 after a dividend distribution of 0.099935 per Unit.

I was relieved to see that the quotes acquired normally from the Toronto Exchange were actually relatively good this month.

There is still a pronounced ‘risk-off’ sentiment in the market as interest rates rise, but I feel it is only a matter of time before investors start paying attention to the fundamental risk of these instruments compared to their eye-popping interest-equivalent yields.

Returns to June 30, 2022
Period MAPF TXPR*
Total Return
CPD – according to Blackrock
One Month -5.83% -5.27% N/A
Three Months -10.40% -7.52% N/A
One Year -6.51% -5.88% -6.33%
Two Years (annualized) +26.42% +13.40% N/A
Three Years (annualized) +10.54% +6.06% +5.44%
Four Years (annualized) +2.78% +1.96% N/A
Five Years (annualized) +4.49% +2.60% +2.03%
Six Years (annualized) +8.34% +5.29% N/A
Seven Years (annualized) +4.86% +3.01% N/A
Eight Years (annualized) +3.37% +1.65% N/A
Nine Years (annualized) +3.87% +1.84% N/A
Ten Years (annualized) +4.09% +1.91% +1.41%
Eleven Years (annualized) +3.70% +2.10%  
Twelve Years (annualized) +4.95% +2.85%  
Thirteen Years (annualized) +6.08% +3.36%  
Fourteen Years (annualized) +8.33% +3.12%  
Fifteen Years (annualized) +7.43% +2.47  
Sixteen Years (annualized) +7.29%    
Seventeen Years (annualized) +7.13%    
Eighteen Years (annualized) +7.28%    
Nineteen Years (annualized) +7.93%    
Twenty Years (annualized) +7.89%    
Twenty-One Years (annualized) +8.24%    
MAPF returns assume reinvestment of distributions, and are shown after expenses but before fees.
The BMO Capital Markets “50” Preferred Share Index is no longer being calculated. The final performance report incorporating this venerable index was published as of December, 2020.
“TXPR” is the S&P/TSX Preferred Share Index. It is calculated without accounting for fees, but does assume reinvestment of dividends.
CPD Returns are for the NAV and are after all fees and expenses. Reinvestment of dividends is assumed.
Figures for National Bank Preferred Equity Income Fund (formerly Omega Preferred Equity) (which are after all fees and expenses) for 1-, 3- and 12-months are +%, -% and -%, respectively, according to Globe & Mail / Fundata after all fees & expenses. Three year performance is +%; five year is +%; ten year is +%

Figures from Morningstar are no longer conveniently available.

Manulife Preferred Income Class Adv has been terminated by Manulife. The performance of this fund was last reported here in March, 2018.
Figures for Horizons Active Preferred Share ETF (HPR) (which are after all fees and expenses) for 1-, 3- and 12-months are -5.82%, -8.52% & -6.29%, respectively. Three year performance is +7.30%, five-year is +2.70%, ten year is +2.65%
Figures for National Bank Preferred Equity Fund (formerly Altamira Preferred Equity Fund) are +%, -% and -% for one-, three- and twelve months, respectively. Three year performance is +%; five-year is +%.

Acccording to the fund’s fact sheet as of June 30, 2016, the fund’s inception date was October 30, 2015. I do not know how they justify this nonsensical statement, but will assume that prior performance is being suppressed in some perfectly legal manner that somebody at National considers ethical.

The last time Altamira Preferred Equity Fund’s performance was reported here was April, 2014; performance under the National Bank banner was first reported here May, 2014.

The figures for the NAV of BMO S&P/TSX Laddered Preferred Share Index ETF (ZPR) is -4.44% for the past twelve months. Two year performance is +17.69%, three year is +7.54%, five year is +2.92%.
Figures for Fiera Canadian Preferred Share Class Cg Series F, (formerly Natixis Canadian Preferred Share Class Series F) (formerly NexGen Canadian Preferred Share Tax Managed Fund) are no longer available as the Fund is now the property of Canoe Financial. The last reported performance for the merged fund was May 2020.
Figures for BMO Preferred Share Fund (advisor series) according to BMO are -5.39%, -8.17% and -7.89% for the past one-, three- and twelve-months, respectively. Two year performance is +12.05%; three year is +4.19%; five-year is -0.05%.
Figures for PowerShares Canadian Preferred Share Index Class, Series F (PPS) are -5.90% for the past twelve months. The three-year figure is +6.11%; five years is +2.30%; ten-year is +1.80%
Figures for the First Asset Preferred Share Investment Trust (PSF.UN) are no longer available since the fund has merged with First Asset Preferred Share ETF (FPR).

Performance for the fund was last reported here in September, 2016; the first report of unavailability was in October, 2016.

Figures for Lysander-Slater Preferred Share Dividend Fund (Class F) according to the company are -5.3%, -7.5% and -5.3% for the past one, three and twelve months, respectively. Three year performance is +6.5%, five-year is +2.0%.
Figures for the Desjardins Canadian Preferred Share Fund A Class (A Class), as reported by the company are -4.97%, -8.11% and -7.06% for the past one, three and twelve months, respectively. Two year performance is +12.48%, three-year is +4.98%, five-year is +1.04%
Figures for the RBC Canadian Preferred Share ETF (RPF) as reported by Morningstar are -5.07%, -7.11% and -5.13% for the past one, three and twelve months, respectively. Three-year performance is +7.33%; five-year is +2.55%
Figures for the Dynamic Active Preferred Shares ETF (DXP) are +%, -% and % for the past one, three and twelve months, respectively. Three-year performance is +%; five-year is +%

The pace of yield increases resumed speed in June, with the five-year Canada yield (“GOC-5”) rising from 2.71% at May month-end to 3.24% at June month-end.

The Seniority Spread (between long-term corporate bonds and interest-equivalent PerpetualDiscounts) has recently declined to 256bp and is very volatile:

The situation with FixedResets is interesting, with the spread between GOC-5 and the interest-adjusted FixedReset (Discount) rate widening significantly from its 2021-11-10 low of 344bp to its current level of 493bp …

…while at the same time the spread between FixedReset (Discounts) and PerpetualDiscounts has narrowed to -45bp from its 2021-7-28 level of 170bp.

There is no significant correlation between the Issue Reset Spread and 1-month performance for discounted FixedResets for Pfd-2 Group issues, which is normal because there is a lot of noise in this inefficient market; there is a small (12%) correlation for the Pfd-3 Group.

However, the normally moderate correlations between Issue Reset Spread and three-month performance have disappeared in this month’s check:

There was significant correlation for both groups (20% and 14%) for 1-Month performance against term-to-rest not surpising, since the overall change in the GOC-5 rate was an impressive 53bp (from 2.71% to 3.24%) during the period:

… and for three-month performance, last month’s correlations of 27% and 18% for Pfd-2 and Pfd-3 respectively, have changed to 39% and 28%; the GOC change was 80bp, from 2.44% to 3.24%:

It should be noted that to some extent such a dependence is justified as the nearer-term issues will receive the benefit of presumably higher dividend rates sooner and therefore, perhaps, for longer. However, it seems that this effect merely mitigates the larger influence of ‘risk-off’ behaviour in the market.

Calculation of MAPF Sustainable Income Per Unit
Month NAVPU Portfolio
Average
YTW
Leverage
Divisor
Securities
Average
YTW
Capital
Gains
Multiplier
Sustainable
Income
per
current
Unit
June, 2007 9.3114 5.16% 1.03 5.01% 1.3240 0.3524
September 9.1489 5.35% 0.98 5.46% 1.3240 0.3773
December, 2007 9.0070 5.53% 0.942 5.87% 1.3240 0.3993
March, 2008 8.8512 6.17% 1.047 5.89% 1.3240 0.3938
June 8.3419 6.034% 0.952 6.338% 1.3240 $0.3993
September 8.1886 7.108% 0.969 7.335% 1.3240 $0.4537
December, 2008 8.0464 9.24% 1.008 9.166% 1.3240 $0.5571
March 2009 $8.8317 8.60% 0.995 8.802% 1.3240 $0.5872
June 10.9846 7.05% 0.999 7.057% 1.3240 $0.5855
September 12.3462 6.03% 0.998 6.042% 1.3240 $0.5634
December 2009 10.5662 5.74% 0.981 5.851% 1.1141 $0.5549
March 2010 10.2497 6.03% 0.992 6.079% 1.1141 $0.5593
June 10.5770 5.96% 0.996 5.984% 1.1141 $0.5681
September 11.3901 5.43% 0.980 5.540% 1.1141 $0.5664
December 2010 10.7659 5.37% 0.993 5.408% 1.0298 $0.5654
March, 2011 11.0560 6.00% 0.994 5.964% 1.0298 $0.6403
June 11.1194 5.87% 1.018 5.976% 1.0298 $0.6453
September 10.2709 6.10%
Note
1.001 6.106% 1.0298 $0.6090
December, 2011 10.0793 5.63%
Note
1.031 5.805% 1.0000 $0.5851
March, 2012 10.3944 5.13%
Note
0.996 5.109% 1.0000 $0.5310
June 10.2151 5.32%
Note
1.012 5.384% 1.0000 $0.5500
September 10.6703 4.61%
Note
0.997 4.624% 1.0000 $0.4934
December, 2012 10.8307 4.24% 0.989 4.287% 1.0000 $0.4643
March, 2013 10.9033 3.87% 0.996 3.886% 1.0000 $0.4237
June 10.3261 4.81% 0.998 4.80% 1.0000 $0.4957
September 10.0296 5.62% 0.996 5.643% 1.0000 $0.5660
December, 2013 9.8717 6.02% 1.008 5.972% 1.0000 $0.5895
March, 2014 10.2233 5.55% 0.998 5.561% 1.0000 $0.5685
June 10.5877 5.09% 0.998 5.100% 1.0000 $0.5395
September 10.4601 5.28% 0.997 5.296% 1.0000 $0.5540
December, 2014 10.5701 4.83% 1.009 4.787% 1.0000 $0.5060
March, 2015 9.9573 4.99% 1.001 4.985% 1.0000 $0.4964
June, 2015 9.4181 5.55% 1.002 5.539% 1.0000 $0.5217
September 7.8140 6.98% 0.999 6.987% 1.0000 $0.5460
December, 2015 8.1379 6.85% 0.997 6.871% 1.0000 $0.5592
March, 2016 7.4416 7.79% 0.998 7.805% 1.0000 $0.5808
June 7.6704 7.67% 1.011 7.587% 1.0000 $0.5819
September 8.0590 7.35% 0.993 7.402% 1.0000 $0.5965
December, 2016 8.5844 7.24% 0.990 7.313% 1.0000 $0.6278
March, 2017 9.3984 6.26% 0.994 6.298% 1.0000 $0.5919
June 9.5313 6.41% 0.998 6.423% 1.0000 $0.6122
September 9.7129 6.56% 0.998 6.573% 1.0000 $0.6384
December, 2017 10.0566 6.06% 1.004 6.036% 1.0000 $0.6070
March, 2018 10.2701 6.22% 1.007 6.177% 1.0000 $0.6344
June 10.2518 6.22% 0.995 6.251% 1.0000 $0.6408
September 10.2965 6.62% 1.018 6.503% 1.0000 $0.6696
December, 2018 8.6875 7.16% 0.997 7.182% 1.0000 $0.6240
March, 2019 8.4778 7.09% 1.007 7.041% 1.0000 $0.5969
June 8.0896 7.33% 0.996 7.359% 1.0000 $0.5953
September 7.7948 7.96% 0.998 7.976% 1.0000 $0.6217
December, 2019 8.0900 6.03% 0.995 6.060% 1.0000 $0.4903
March 5.5596 7.04% 1.006 6.998% 1.0000 $0.3891
June 6.3568 6.10% 0.9900 6.162% 1.0000 $0.3917
September 7.2852 5.32% 1.00 5.320% 1.0000 $0.3876
December, 2020 8.3947 4.46% 0.999 4.464% 1.0000 $0.3747
March, 2021 9.6473 4.48% 0.996 4.498% 1.0000 $0.4339
June 10.3712 3.92% 0.985 3.980% 1.0000 $0.4127
September 10.7572 4.08% 1.017 4.012% 1.0000 $0.4316
December, 2021 10.7432 4.31% 0.999 4.314% 1.0000 $0.4635
March, 2022 10.5040 5.53% 1.004 5.508% 1.0000 $0.5786
June, 2022 9.3115 7.04% 0.993 7.090% 1.0000 $0.6672
NAVPU is shown after quarterly distributions of dividend income and annual distribution of capital gains.
Portfolio YTW includes cash (or margin borrowing), with an assumed interest rate of 0.00%
The Leverage Divisor indicates the level of cash in the account: if the portfolio is 1% in cash, the Leverage Divisor will be 0.99
Securities YTW divides “Portfolio YTW” by the “Leverage Divisor” to show the average YTW on the securities held; this assumes that the cash is invested in (or raised from) all securities held, in proportion to their holdings.
The Capital Gains Multiplier adjusts for the effects of Capital Gains Dividends. On 2009-12-31, there was a capital gains distribution of $1.989262 which is assumed for this purpose to have been reinvested at the final price of $10.5662. Thus, a holder of one unit pre-distribution would have held 1.1883 units post-distribution; the CG Multiplier reflects this to make the time-series comparable. Note that Dividend Distributions are not assumed to be reinvested.
Sustainable Income is the resultant estimate of the fund’s dividend income per current unit, before fees and expenses. Note that a “current unit” includes reinvestment of prior capital gains; a unitholder would have had the calculated sustainable income with only, say, 0.9 units in the past which, with reinvestment of capital gains, would become 1.0 current units.
DeemedRetractibles are comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator (definition refined in May, 2011). These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 (banks) or the Deemed Maturity date for insurers and insurance holding companies (see below)), in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis.

The same reasoning is also applied to FixedResets from these issuers, other than explicitly defined NVCC from banks.

In November, 2019, the assumption of DeemedRetraction for insurance issues was cancelled in the wake of the IAIS decision included in ICS 2.0. This resulted in a large drop in the yield calculated for these issues

The Deemed Maturity date for insurers was set at 2022-1-31 at the commencement of the process in February, 2011. It was extended to 2025-1-31 in April, 2013 and to 2030-1-31 in December, 2018. In November, 2019, the assumption of DeemedRetraction was cancelled in the wake of the IAIS decision included in ICS 2.0.
Yields for September, 2011, to January, 2012, were calculated by imposing a cap of 10% on the yields of YLO issues held, in order to avoid their extremely high calculated yields distorting the calculation and to reflect the uncertainty in the marketplace that these yields will be realized. From February to September 2012, yields on these issues have been set to zero. All YLO issues held were sold in October 2012.

These calculations were performed assuming constant contemporary GOC-5 and 3-Month Bill rates, as follows:

Canada Yields Assumed in Calculations
Month-end GOC-5 3-Month Bill
September, 2015 0.78% 0.40%
December, 2015 0.71% 0.46%
March, 2016 0.70% 0.44%
June 0.57% 0.47%
September 0.58% 0.53%
December, 2016 1.16% 0.47%
March, 2017 1.08% 0.55%
June 1.35% 0.69%
September 1.79% 0.97%
December, 2017 1.83% 1.00%
March, 2018 2.06% 1.08%
June 1.95% 1.22%
September 2.33% 1.55%
December, 2018 1.88% 1.65%
March, 2019 1.46% 1.66%
June 1.34% 1.66%
September 1.41% 1.66%
December, 2019 1.68% 1.68%
March, 2020 0.57% 0.21%
June 0.37% 0.21%
September 0.35% 0.14%
December, 2020 0.42% 0.08%
March, 2021 0.94% 0.09%
June 0.93% 0.13%
September 1.07% 0.13%
December, 2021 1.31% 0.16%
March, 2022 2.44% 0.53%
June, 2022 3.24% 2.11%
MAPF

MAPF Portfolio Composition : June 2022

Turnover remained low at 4% in June. Market volumes have been very low for quite some time, having never really recovered from the usual summer decline.

Sectoral distribution of the MAPF portfolio on June 30, 2022, were:

MAPF Sectoral Analysis 2022-6-30
HIMI Indices Sector Weighting YTW ModDur
Ratchet 0% N/A N/A
FixFloat 0% N/A N/A
Floater 0% N/A N/A
OpRet 0% N/A N/A
SplitShare 0% N/A N/A
Interest Rearing 0% N/A N/A
PerpetualPremium 0% N/A N/A
PerpetualDiscount 6.4% 6.25% 13.53
Fixed-Reset Discount 50.3% 7.14% 13.09
Insurance – Straight 0.1% 5.91% 14.05
FloatingReset 0% N/A N/A
FixedReset Premium 0% N/A N/A
FixedReset Bank non-NVCC 0% N/A N/A
FixedReset Insurance non-NVCC 31.0% 6.87% 13.52
Scraps – Ratchet 0% N/A N/A
Scraps – FixedFloater 0% N/A N/A
Scraps – Floater 0% N/A N/A
Scraps – OpRet 0% N/A N/A
Scraps – SplitShare 0% N/A N/A
Scraps – PerpPrem 0% N/A N/A
Scraps – PerpDisc 0% N/A N/A
Scraps – FR Discount 11.6% 7.97% 12.23
Scraps – Insurance Straight 0% N/A N/A
Scraps – FloatingReset 0% N/A N/A
Scraps – FR Premium 0% N/A N/A
Scraps – Bank non-NVCC 0% N/A N/A
Scraps – Ins non-NVCC 0% N/A N/A
Cash +0.7% 0.00% 0.00
Total 100% 7.04% 13.06
Totals and changes will not add precisely due to rounding. Cash is included in totals with duration and yield both equal to zero.
The various “Scraps” indices include issues with a DBRS rating of Pfd-3(high) or lower and issues with an Average Trading Value (calculated with HIMIPref™ methodology, which is relatively complex) of less than $25,000. The issues considered “Scraps” are subdivided into indices which reflect those of the main indices.
DeemedRetractibles were comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 in the case of banks or normally in the case of insurers and insurance holding companies, in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis and IAIS Says No To DeemedRetractions for the recent change in policy with respect to insurers.

Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue and by a further five years in December, 2018; the estimate was eliminated in November. However, the distinctions are being kept because it is useful to distinguish insurance issues from others.

The name of this subindex has been changed to “Insurance Straight” as of November, 2020

Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 3.24%, a constant 3-Month Bill rate of 2.11% and a constant Canada Prime Rate of 3.70%

The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.

Credit distribution is:

MAPF Credit Analysis 2022-6-30
DBRS Rating MAPF Weighting
Pfd-1 0
Pfd-1(low) 0
Pfd-2(high) 41.6%
Pfd-2 12.4%
Pfd-2(low) 33.7%
Pfd-3(high) 3.2%
Pfd-3 5.1%
Pfd-3(low) 1.2%
Pfd-4(high) 2.1%
Pfd-4 0%
Pfd-4(low) 0%
Pfd-5(high) 0%
Pfd-5 0%
Cash +0.7%
Totals will not add precisely due to rounding.
A position held in INE.PR.A is not rated by DBRS nor by S&P, but has been included as “Pfd-4(high)” in the above table on the basis of its last S&P rating of P-4(high) and its BB rating from Fitch. A “BB” rating would normally map to Pfd-3, but the company’s disdain for the two major preferred share agencies makes me nervous.

Liquidity Distribution is:

MAPF Liquidity Analysis 2022-6-30
Average Daily Trading MAPF Weighting
<$50,000 39.9%
$50,000 – $100,000 35.4%
$100,000 – $200,000 23.3%
$200,000 – $300,000 0.7%
>$300,000 0%
Cash +0.7%
Totals will not add precisely due to rounding.

The distribution of Issue Reset Spreads is:

Range MAPF Weight
<100bp 0%
100-149bp 22.5%
150-199bp 30.0%
200-249bp 29.7%
250-299bp 4.5%
300-349bp 2.1%
350-399bp 4.0%
400-449bp 0%
450-499bp 0%
500-549bp 0%
550-599bp 0%
>= 600bp 0%
Undefined 7.2%

Distribution of Floating Rate Start Dates is shown in the table below. This is the date of the next adjustment to the dividend rate, if the issue is currently paying a fixed rate for a limited time; which in practice is successive terms of 5 years. Issues that adjust quarterly are considered “Currently Floating”.

Range MAPF Weight
Currently Floating 0%
0-1 Year 9.2%
1-2 Years 7.1%
2-3 Years 20.4%
3-4 Years 41.8%
4-5 Years 14.3%
5-6 Years 0%
>6 Years 0%
Not Floating Rate 7.2%

MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. The fund may be purchased directly from Hymas Investment Management. A “unit trust” is like a regular mutual fund, but are not sold with a prospectus. This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission). Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.

Publications

Research : Yield Part 2

AS I state in the introduction:

In the July, 2011, edition of this newsletter I reviewed some of the more basic concepts surrounding yield calculations, namely Current Yield (CY), Yield to Maturity (YTM) and Yield to Worst (YTW).

In this issue, I will examine the faults of these measures more closely and introduce some of the measures utilized in HIMIPref™: Portfolio Yield, Cost Yield and Curve Yield and examine how each of these measures compares when used as a predictor of future returns.

Part 1 of this discussion is available via THIS LINK.

Look for the research link!

Market Action

June 30, 2022

Well, that’s the end of the first half!

U.S. and Canadian stocks on Thursday closed out their worst quarter since the onset of the COVID-19 pandemic with another session of broad losses and growing unease among investors that the bloodletting in markets won’t let up any time soon.

The world’s most closely followed benchmark stock index, the S&P 500, saw the steepest percentage decline in the first half of a year since 1970.

The Canadian stock market has fared better, but its outperformance has been eroding in recent weeks amid growing bets that a rush by central bankers to hike interest rates to combat skyrocketing inflation will push economies into recession. Such a scenario paints an unsupportive picture for the S&P/TSX Composite Index, due to its heavy weighting of economically sensitive sectors such as energy, metals and financials.

In total, more than US$13-trillion has been erased from global stocks in a year that has also seen steep losses in bond markets and a breathtaking drop in cryptocurrencies, once thought to be a compelling way to diversify away from larger asset classes.

But we’ll end things on a hopeful note:

An international team of researchers, led by scientists at the University of Manchester, has developed a fast and economical method of converting methane, or natural gas, into liquid methanol at ambient temperature and pressure. The method takes place under continuous flow over a photo-catalytic material using visible light to drive the conversion.

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 0.0000 % 2,535.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0000 % 4,863.1
Floater 4.91 % 4.92 % 42,274 15.65 3 0.0000 % 2,802.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1549 % 3,458.0
SplitShare 4.92 % 5.77 % 44,206 3.19 8 -0.1549 % 4,129.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1549 % 3,222.0
Perpetual-Premium 6.07 % 6.20 % 77,781 13.50 2 1.2605 % 2,848.9
Perpetual-Discount 5.97 % 6.06 % 65,054 13.83 34 0.2745 % 3,106.6
FixedReset Disc 4.70 % 6.41 % 113,121 13.52 57 0.0194 % 2,506.5
Insurance Straight 5.99 % 6.11 % 93,272 13.78 19 0.5677 % 3,001.3
FloatingReset 5.81 % 6.06 % 44,736 13.81 2 -0.3989 % 2,634.6
FixedReset Prem 5.05 % 4.68 % 138,149 1.98 9 0.1756 % 2,610.2
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.0194 % 2,562.2
FixedReset Ins Non 4.78 % 6.46 % 71,255 13.47 15 0.1898 % 2,616.6
Performance Highlights
Issue Index Change Notes
MFC.PR.K FixedReset Ins Non -2.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 20.80
Evaluated at bid price : 20.80
Bid-YTW : 6.54 %
BIP.PR.A FixedReset Disc -1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 7.82 %
RY.PR.H FixedReset Disc -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 6.34 %
GWO.PR.T Insurance Straight -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 6.12 %
CCS.PR.C Insurance Straight -1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.92 %
PWF.PR.T FixedReset Disc -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 6.84 %
IFC.PR.F Insurance Straight -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.71
Evaluated at bid price : 22.05
Bid-YTW : 6.03 %
BAM.PF.B FixedReset Disc -1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.81
Evaluated at bid price : 19.81
Bid-YTW : 7.23 %
FTS.PR.H FixedReset Disc 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 14.85
Evaluated at bid price : 14.85
Bid-YTW : 7.04 %
SLF.PR.D Insurance Straight 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 5.85 %
CU.PR.H Perpetual-Discount 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 22.02
Evaluated at bid price : 22.25
Bid-YTW : 5.96 %
GWO.PR.L Insurance Straight 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 22.88
Evaluated at bid price : 23.15
Bid-YTW : 6.13 %
GWO.PR.M Insurance Straight 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 23.26
Evaluated at bid price : 23.56
Bid-YTW : 6.19 %
RY.PR.Z FixedReset Disc 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 20.94
Evaluated at bid price : 20.94
Bid-YTW : 6.34 %
BAM.PR.C Floater 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 13.20
Evaluated at bid price : 13.20
Bid-YTW : 4.92 %
MFC.PR.F FixedReset Ins Non 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 14.60
Evaluated at bid price : 14.60
Bid-YTW : 7.01 %
GWO.PR.Q Insurance Straight 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 6.15 %
BAM.PF.D Perpetual-Discount 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 20.40
Evaluated at bid price : 20.40
Bid-YTW : 6.05 %
RY.PR.S FixedReset Disc 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 23.71
Evaluated at bid price : 24.08
Bid-YTW : 5.81 %
SLF.PR.E Insurance Straight 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 5.81 %
GWO.PR.G Insurance Straight 1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.38
Evaluated at bid price : 21.38
Bid-YTW : 6.13 %
BMO.PR.S FixedReset Disc 1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.60
Evaluated at bid price : 22.00
Bid-YTW : 6.16 %
TRP.PR.E FixedReset Disc 1.93 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 7.39 %
GWO.PR.P Insurance Straight 2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.85
Evaluated at bid price : 22.09
Bid-YTW : 6.14 %
SLF.PR.C Insurance Straight 2.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.40
Evaluated at bid price : 19.40
Bid-YTW : 5.78 %
BNS.PR.I FixedReset Disc 2.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 24.24
Evaluated at bid price : 24.56
Bid-YTW : 5.78 %
CU.PR.D Perpetual-Discount 2.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 20.90
Evaluated at bid price : 20.90
Bid-YTW : 5.94 %
POW.PR.C Perpetual-Premium 2.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 23.69
Evaluated at bid price : 24.00
Bid-YTW : 6.05 %
MFC.PR.M FixedReset Ins Non 4.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 6.78 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.I FixedReset Disc 51,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 24.27
Evaluated at bid price : 24.93
Bid-YTW : 6.30 %
MFC.PR.C Insurance Straight 44,924 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 5.91 %
CM.PR.R FixedReset Disc 28,300 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 2.80 %
IFC.PR.I Perpetual-Discount 25,830 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 22.18
Evaluated at bid price : 22.53
Bid-YTW : 6.02 %
BAM.PF.F FixedReset Disc 25,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 7.26 %
BMO.PR.S FixedReset Disc 19,745 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.60
Evaluated at bid price : 22.00
Bid-YTW : 6.16 %
There were 12 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CU.PR.H Perpetual-Discount Quote: 22.25 – 25.10
Spot Rate : 2.8500
Average : 1.6007

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 22.02
Evaluated at bid price : 22.25
Bid-YTW : 5.96 %

TRP.PR.C FixedReset Disc Quote: 13.51 – 17.00
Spot Rate : 3.4900
Average : 2.4861

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 13.51
Evaluated at bid price : 13.51
Bid-YTW : 7.59 %

GWO.PR.T Insurance Straight Quote: 21.20 – 23.00
Spot Rate : 1.8000
Average : 1.0618

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 6.12 %

MFC.PR.M FixedReset Ins Non Quote: 19.80 – 22.00
Spot Rate : 2.2000
Average : 1.4677

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.80
Evaluated at bid price : 19.80
Bid-YTW : 6.78 %

MFC.PR.N FixedReset Ins Non Quote: 19.07 – 20.50
Spot Rate : 1.4300
Average : 0.9241

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 19.07
Evaluated at bid price : 19.07
Bid-YTW : 6.90 %

PWF.PR.Z Perpetual-Discount Quote: 21.35 – 22.60
Spot Rate : 1.2500
Average : 0.8345

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-30
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 6.15 %

Publications

Research : Fund Comparison 2011

AS I state in the introduction:

In last year’s review of Canadian preferred share funds, I discussed the explosion in the number of decision-makers in the investment market-place; the decline in Defined Benefit pension plans and corresponding increase in Defined Contribution plans and other forms of saving have changed the investment world from one in which the decisions were made by a relatively small group of specialists to a world in which investment management is just another consumer good. This change has resulted in an explosion of consumer choice and a consequent rise in the importance of marketing to the success of any investment product, as opposed to old-fashioned concepts such as risk and return.

In this essay I will discuss

  • • the manner in which investment decisions – particularly with respect to index funds – are made
  • • the use of derivatives by index funds
  • • the explosion in the number of indices in recent years, as the notion of passive investing has become more fashionable

The 2010 comparison is available via THIS LINK.

Look for the research link!

Market Action

June 29, 2022

An eMail from the New York Fed brought news of a new index:

The Federal Reserve Bank of New York today announced the monthly publication of a first-of-its-kind research product focused on identifying periods of widespread distress in the U.S. corporate bond market. Starting with today’s publication, the Corporate Bond Market Distress Index (CMDI)—a summary metric of U.S. corporate bond market functioning—will be updated regularly at 10:00 AM ET on the last Wednesday of each month. The CMDI was first introduced through a New York Fed Staff Report in January 2021, and a subsequent Liberty Street Economics blog post in February 2021.

The CMDI is a unified measure that identifies periods of dislocations and is associated with future realizations of other financial market conditions. By applying the CMDI to historical data, the index identifies past periods of market distress, such as those around the global financial crisis peaking in late 2008 and early 2009 as well as during COVID-19-related market stress in 2020. Additional periods since the beginning of 2022 were identified in a recent Liberty Street Economics blog post in June 2022.

PerpetualDiscounts now yield 6.07%, equivalent to 7.89% interest at the standard equivalency factor of 1.3x. Long corporates now yield 5.33%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed slightly (and perhaps spuriously) to 255bp from the 260bp reported June 22.

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<
br>Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.0
0
0 2.0619 % 2,535.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 2.0619 % 4,863.1
Floater 4.91 % 4.88 % 43,873 15.71 3 2.0619 % 2,802.6
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0129 % 3,463.3
SplitShare 4.91 % 5.62 % 44,842 3.19 8 -0.
0129 %
4,135.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0129 % 3,227.0
Perpetual-Premium 6.14 % 6.20 % 78,333 13.51 2 -1.1012 % 2,813.5
Perpetual-Discount 5.99 % 6.07 % 61,918 13.79 34 0.2711 % 3,098.1
FixedReset Disc 4.66 % 6.41 % 116,655 13.51 57 0.3124 % 2,506.0
Insurance Straight 6.03 % 6.08 % 88,190 13.83 19 0.5528 % 2
,984.4
FloatingReset 5.79 % 6.01 % 45,356 13.88 2 1.1798 % 2,645.2
FixedReset Prem 5.06 % 4.90 % 138,256 1.98 9 0.1055 % 2,605.6
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.3124 % 2,561.7
FixedReset Ins Non 4.60 % 6.40 % 69,411 13.48 15 -0.
0865 %
2,611.6

<
td>Notes

Performance Highlights
Issue Index Change
GWO.PR.P Insurance Straight -2.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.38
Evaluated at bid price : 21.65
Bid-YTW : 6.27 %
TRP.PR.E FixedReset Disc -2.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 17.66
Evaluated at bid price : 17.66
Bid-YTW : 7.52 %
TRP.PR.D FixedReset Disc -2.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 18.06
Evaluated at bid price : 18.06
Bid-YTW : 7.51 %
MFC.PR.F FixedReset Ins Non -2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 14.40
Evaluated at bid price : 14.40
Bid-YTW : 7.10 %
POW.PR.C Perpetual-Premium -2.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 23.14
Evaluated at bid price : 23.40
Bid-YTW : 6.21 %
SLF.PR.G FixedReset Ins Non -1.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 14.50
Evaluated at bid price : 14.50
Bid-YTW : 7.10 %
IFC.PR.A FixedReset Ins Non -1.70 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 19.11
Evaluated at bid price : 19.11
Bid-YTW : 6.46 %
PWF.PR.T FixedReset Disc -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 6.76 %
FTS.PR.G FixedReset Disc 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.71 %
PWF.PR.Z Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.42
Evaluated at bid price : 21.42
Bid-YTW : 6.13 %
ELF.PR.F Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.75
Evaluated at bid price : 22.00
Bid-YTW : 6.03 %
MFC.PR.J FixedReset Ins Non 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 22.90
Evaluated at bid price : 23.55
Bid-YTW : 6.19 %
CCS.PR.C Insurance Straight 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 5.85 %
TD.PF.K FixedReset Disc 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 23.24
Evaluated at bid price : 23.70
Bid-YTW : 6.12 %
NA.PR.S FixedReset Disc 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.27
Evaluated at bid price : 21.55
Bid-YTW : 6.40 %
CU.PR.J Perpetual-Discount 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 6.01 %
ELF.PR.H Perpetual-Discount 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 23.00
Evaluated at bid price : 23.27
Bid-YTW : 5.92 %
POW.PR.D Perpetual-Discount 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 20.85
Evaluated at bid price : 20.85
Bid-YTW : 6.02 %
FTS.PR.M FixedReset Disc 1.75 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 6.76 %
IFC.PR.F Insurance Straight 1.78 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 22.01
Evaluated at bid price : 22.30
Bid-YTW : 5.97 %
GWO.PR.T Insurance Straight 1.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 6.05 %
BMO.PR.T FixedReset Disc 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 20.90
Evaluated at bid price : 20.90
Bid-YTW : 6.34 %
RY.PR.O Perpetual-Discount 1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 23.04
Evaluated at bid price : 23.45
Bid-YTW : 5.27 %
GWO.PR.Y Insurance Straight 2.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 6.13 %
IFC.PR.K Perpetual-Discount 2.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.51
Evaluated at bid price : 21.81
Bid-YTW : 6.04 %
GWO.PR.R Insurance Straight 2.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 19.52
Evaluated at bid price : 19.52
Bid-YTW : 6.19 %
BAM.PR.B Floater 2.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 13.29
Evaluated at bid price : 13.29
Bid-YTW : 4.88 %
TRP.PR.F FloatingReset 2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 16.83
Evaluated at bid price : 16.83
Bid-YTW : 6.01 %
BAM.PR.K Floater 3.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 13.29
Evaluated at bid price : 13.29
Bid-YTW : 4.88 %
RY.PR.J FixedReset Disc 4.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.27
Evaluated at bid price : 21.55
Bid-YTW : 6.41 %
IFC.PR.C FixedReset Disc 8.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 19.60
Evaluated at bid price : 19.60
Bid-YTW : 6.73 %
Volume Highlights
Issue Index Shares
Traded
Notes
RS.PR.A SplitShare 49,385 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-12-31
Maturity Price : 10.00
Evaluated at bid price : 10.03
Bid-YTW : 5.11 %
TD.PF.J FixedReset Disc 47,720 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 23.24
Evaluated at bid price : 23.85
Bid-YTW : 6.25 %
GWO.PR.M Insurance Straight 45,745 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 22.98
Evaluated at bid price : 23.25
Bid-YTW : 6.27 %
IFC.PR.G FixedReset Ins Non 37,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.98
Evaluated at bid price : 22.56
Bid-YTW : 6.38 %
BMO.PR.E FixedReset Disc 31,550 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 23.57
Evaluated at bid price : 24.00
Bid-YTW : 6.13 %
PWF.PF.A Perpetual-Discount 27,169 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 18.65
Evaluated at bid price : 18.65
Bid-YTW : 6.15 %
There were 8 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.K Floater Quote: 13.29 – 15.31
Spot Rate : 2.0200
Average : 1.3907


YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 13.29
Evaluated at bid price : 13.29
Bid-YTW : 4.88 %
PWF.PR.T FixedReset Disc Quote: 20.50 – 22.25
Spot Rate : 1.7500
Average : 1.1378


YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 6.76 %
MFC.PR.L FixedReset Ins Non Quote: 18.75 – 24.35
Spot Rate : 5.6000
Average : 5.0790


YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 6.99 %
GWO.PR.P Insurance Straight Quote: 21.65 – 22.65
Spot Rate : 1.0000
Average : 0.6891


YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.38
Evaluated at bid price : 21.65
Bid-YTW : 6.27 %
RY.PR.O Perpetual-Discount Quote: 23.45 – 24.40
Spot Rate : 0.9500
Average : 0.6495


YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 23.04
Evaluated at bid price : 23.45
Bid-YTW : 5.27 %
CCS.PR.C Insurance Straight Quote: 21.50 – 24.25
Spot Rate : 2.7500
Average : 2.4497


YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-06-29
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 5.85 %