Again, virtually zero commentary!
The market went down sharply today, on very light volume.
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30 | |||||||
| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | 5.55% | 5.57% | 33,414 | 14.58 | 2 | -0.7367% | 1,079.8 |
| Fixed-Floater | 4.81% | 5.64% | 64,025 | 14.70 | 8 | -0.7229% | 1,031.8 |
| Floater | 4.75% | 4.82% | 87,407 | 15.73 | 2 | -0.0258% | 862.2 |
| Op. Retract | 4.83% | 3.45% | 74,596 | 2.75 | 15 | -0.0523% | 1,046.3 |
| Split-Share | 5.32% | 5.64% | 98,841 | 4.04 | 14 | -0.8286% | 1,032.6 |
| Interest Bearing | 6.19% | 6.53% | 67,042 | 3.95 | 3 | -0.8260% | 1,083.0 |
| Perpetual-Premium | 5.76% | 5.52% | 291,183 | 7.95 | 17 | -0.2239% | 1,022.9 |
| Perpetual-Discount | 5.44% | 5.49% | 267,931 | 14.67 | 51 | -0.4300% | 947.0 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| FTU.PR.A | SplitShare | -3.8784% | Asset coverage of just under 1.5:1 as of February 29, according to the company. Probably a little less now! Ripe for a downgrade, perhaps? Now with a pre-tax bid-YTW of 8.17% based on a bid of 8.90 and a hardMaturity 2012-12-1 at 10.00. |
| LFE.PR.A | SplitShare | -2.7619% | Asset coverage of just under 2.4:1 as of February 29, according to the company. Now with a pre-tax bid-YTW of 4.79% based on a bid of 10.21 and a hardMaturity 2012-12-1 at 10.00. |
| BSD.PR.A | InterestBearing | -2.5907% | Asset coverage of 1.6+:1 as of February 29, according to the company. Now with a pre-tax bid-YTW of 7.13% (mostly as interest) based on a bid of 9.40 and a hardMaturity 2015-3-31 at 10.00. |
| IAG.PR.A | PerpetualDiscount | -2.4256% | Now with a pre-tax bid-YTW of 5.41% based on a bid of 21.32 and limitMaturity. |
| BCE.PR.G | FixFloat | -2.4036% | |
| BMO.PR.J | PerpetualDiscount | -2.1429% | Now with a pre-tax bid-YTW of 5.52% based on a bid of 20.55 and a limitMaturity. |
| LBS.PR.A | SplitShare | -1.8609% | Asset coverage of 2.0+:1 as of March 6, according to Brompton Group. Now with a pre-tax bid-YTW of 5.40% based on a bid of 10.02 and a limitMaturity. |
| GWO.PR.I | PerpetualDiscount | -1.8241% | Now with a pre-tax bid-YTW of 5.37% based on a bid of 20.99 and a limitMaturity. |
| CM.PR.I | PerpetualDiscount | -1.5677% | Now with a pre-tax bid-YTW of 5.75% based on a bid of 20.72 and a limitMaturity. |
| GWO.PR.E | OpRet | -1.3514% | Now with a pre-tax bid-YTW of 3.87% based on a bid of 25.55 and a call 2011-4-30 at 25.00. |
| SLF.PR.B | PerpetualDiscount | -1.2946% | Now with a pre-tax bid-YTW of 5.43% based on a bid of 22.11 and a limitMaturity. |
| BCE.PR.I | FixFloat | -1.2600% | |
| GWO.PR.H | PerpetualDiscount | -1.2400% | Now with a pre-tax bid-YTW of 5.44% based on a bid of 22.30 and a limitMaturity. |
| FBS.PR.B | SplitShare | -1.2158% | Asset coverage of just under 1.5:1 as of March 6, according to TD Securities. Now with a pre-tax bid-YTW of 5.50% based on a bid of 9.75 and a hardMaturity 2011-12-15 at 10.00. |
| POW.PR.C | PerpetualDiscount | -1.1373% | Now with a pre-tax bid-YTW of 5.84% based on a bid of 25.21 and either a call at 25.00 on 2012-1-5 or a limitMaturity. |
| MFC.PR.B | PerpetualDiscount | -1.1062% | Now with a pre-tax bid-YTW of 5.22% based on a bid of 22.35 and a limitMaturity. |
| POW.PR.B | PerpetualDiscount | +1.0305% | Now with a pre-tax bid-YTW of 5.53% based on a bid of 24.51 and a limitMaturity. |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| IAG.PR.A | PerpetualDiscount | 30,300 | TD crossed 30,000 at 21.50. Now with a pre-tax bid-YTW of 5.41% based on a bid of 21.32 and a limitMaturity. |
| TD.PR.Q | PerpetualPremium | 27,241 | Now with a pre-tax bid-YTW of 5.63% based on a bid of 25.14 and a limitMaturity. |
| SLF.PR.C | PerpetualDiscount | 22,475 | Nesbitt crossed 21,000 at 21.32. Now with a pre-tax bid-YTW of 5.23% based on a bid of 21.30 and a limitMaturity. |
| CM.PR.I | PerpetualDiscount | 19,949 | Now with a pre-tax bid-YTW of 5.75% based on a bid of 20.72 and a limitMaturity. |
| BAM.PR.N | PerpetualDiscount | 15,630 | Now with a pre-tax bid-YTW 6.33% based on a bid of 19.15 and a limitMaturity. Closed at 19.15-26, 2×3, compared with the virtually identical BAM.PR.M closing at 19.86-97, 3×5. One might be tempted to speculate that the gap is due to the imminence of the dividend (goes ex 3/12), and tax-driven disincentive to take a long N short M position … but the difference is more than 100% of the dividend! |
There were ten other index-included $25-pv-equivalent issues trading over 10,000 shares today.
market observations . . . Monday AM
It would be easy to blame the TD 5.6’s for the slide that seems to be upon the pref market at this point. It might be prudent to blame it on the credit market/bank stock situation. If either of these items seemed to me to be the core cause of the situation, I would toss it out there (even at the risk of drawing the wrath of James, Kaspu, et al!).
There are 2 differences I’m seeing between this correction and the fall ’07 event, however . . . and here it is: like last fall, the bid has evaporated . . . no question (look at SLF.PR.D this morning . . . last @ 20.79, down .62 . . . it would take 2 quarters of all that wonderful “pre-tax bid-YTW %” mantra to recover what holders have lost in 5 minutes this morning . . .
yet, a number of the popular pref issues have substantial (below market, but substantial) bids from the market maker. Last fall, it was BMO and RBC who represented most of the meaningful size in the pref market, with the market makers essentially absent. This is a big positive.
Second item, and to me this is big: RBC seems to have removed itself from the sell side altogether. I’ve been accused of a number of biased observations regarding the “dumping” behaviour of this group . . . but they appear to be a non-player this time.
Bottom line, perhaps optimistic, is that this “correction” may be short lived, with the market waking up to the fact that 5.3%+ yields are not a bad investment in a declining rate environment (yes, I know, Tier 1, blah, blah) . . . it’s still cash, and it’s not bad.
If RBC believes, then it must be true!
madequota
with the market waking up to the fact that 5.3%+ yields are not a bad investment
Oh, madequota, you’re always chanting that “pre-tax bid-YTW %” mantra!
The S&P/TSX Preferred Share Index is down 30-35bp as of noon. This could be ugly indeed.
I don’t know about ugly right now; there’s plenty of prefs turning +ve, and some really interesting bids. The bank’s common is getting hurt, and this is probably supplying some lacklustre to the prefs, but I’m sticking with the points I made above. This tank job is different from the last one.
The other item that is very important, is that the majority of pref share upticking happens in the last 20 minutes of trading. (I can elaborate on where that comes from if anyone’s interested); the time of day when we see the widest bid/ask spreads, and the most erratic trading to the downside seems to be between 11:30AM and 2:30PM. Any upticking in that window is a firm pre-cursor to a solid “last half hour of trade”.
stay tuned,
madequota
for what it’s worth, it’s very, very ugly on the U.S. side, and this is with the 10 year at 3.22. There are rumours that Bear Stern is having a liquidity crisis. When this happens, a lot of people get very worried about raising cash, anywhere they can. Very often, unfortunately, especially when the banks get hit, the prefs are an easy and ready source of cash.
There are rumours that Bear Stern is having a liquidity crisis.
Moody’s has downgraded a big whack of Bear Stearns’ Alt-A ABS:
I have been advised that (i) Moody’s has issued a statement stressing that they are not downgrading Bear Stearns itself, and (ii) BSC bonds and CDSs are being blown out of the water anyway; but I cannot confirm either report.
Bloomberg story on BSC.
BCE’s common is up nicely on the bond suit verdict (good call, Mr. Hymas) . . . anyone know what’s happening to BCE’s bonds today? Where can one get meaningful quotes on this kind of bond during the day? I’m perpetually challenged in this area for sure.
a quick question for Kaspu . . . are you bidding on BNS.PR.M at this moment? I don’t know how Kosher it is to discuss this kind of thing here, but if everyone’s OK with it, I’d be interested in knowing.
madequota
I don’t know how Kosher it is to discuss this kind of thing here
You can ask, if you like. He can answer, if he likes. You can believe his answer, if you like.
I haven’t heard anything dramatic on BCE bonds.
thank you for that, Mr. H . . . under the circumstances of the TSX down at this moment 250 pts., the credit item K mentions, and the general shape of the financials (bank commons), the prefs continue to look positive in a spotty kind of way, if that makes any sense. Many are down on low volume, but a number of others continue to surprise to the upside (RY’s are the best example at this moment).
madequota