Research: Analysis of Perpetual Resets

The first one came in March at +205bp. Then Fortis at +213. Today BNS came again at +170. If this keeps up much longer, I’ll be forced to add them to the HIMIPref™ universe … particularly if the index definers pull the old Innovative Tier 1 Capital so-called bond trick and add them to the index!

My conclusion in this article was:

My disdain has not been shared by the market in general. The issue, trading as BNS.PR.P on the Toronto Stock Exchange, had a very successful underwriting and strong secondary demand. But I worry that many investors will have bought this with the assumption, probably valid in most cases but not certain, that the issue will be called in five years. It is the pretense that borrowers can access long term funds from borrowers assuming short-term risks that, after all, caused the credit crisis in the first place.

But … look for the research link!

8 Responses to “Research: Analysis of Perpetual Resets”

  1. Kaitas21 says:

    I can always count on you for quality, critical, analytical research!

  2. jiHymas says:

    And for screwing up the wording of my conclusions!

    In the last sentence it is, of course, the lenders who are purportedly assuming the short-term risk.

  3. […] structure, as he explains in his comment on the new issue TD+160. As for myself, I will stick to my previously published analysis: these issues, at these rates, are trading as pretend-five-year money. If they actually WERE five […]

  4. […] The Big Black Mark against this structure is that it can be called in only five years. I’ve published my thoughts on the matter … but some people like ‘em and they certainly seem to be selling […]

  5. […] is not correct. Have a look at Chart #1 in my recent article Analysis of Perpetual Resets for a ten year graph of the market spread of PerpetualDiscount issues vs. the five year Canada. It […]

  6. […] … these things sure seem popular, eh? And I will admit, so far my disdain has been thrown back in my face. But I still don’t like […]

  7. […] My disdain for Fixed-Reset issues as currently priced is well known, but some people like them! Clearly, some of these issues will be better investment choices than […]

  8. […] … if I didn’t like the other ones, I’m not going to like these ones! But it looks like the structure is popular, so I guess […]

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