Accrued Interest has posted a good piece about CDS clearing and exposures; I have added the link to my discussion of his prior post on the issue.
OSFI has, essentially, banned “Global Market Disruption” lines of credit, which have been much discussed since non-bank ABCP sponsors found out just how little liquidity they actually provided. Banned? Well, not in so many words. But the credit conversion factor is now the same as a guaranteed line; therefore, the cost to the bank (in terms of capital when the line’s undrawn) will be the same; therefore it seems highly unlikely that anybody will ever want one. It’s an interesting issue and OSFI has included a fair bit of discussion with the advisory. I’ll try to review the rule change … soon!
Practically a return to good times today … PerpetualDiscounts were down only 40bp! Their pre-tax bid-YTW now averages 6.09%; at the standard factor of 1.4x, this is equivalent to 8.53% interest. Those feverishly updating their historical yield spread graphs will note that 30-year Canadas are now at 4.18% and long Corporates at a little over 6.10% … so call Canadas/Corporates at 195bp and preferreds/corporates at 240. This is a thoroughly bizarre market.
| 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 | 4.19% | 4.20% | 53,460 | 17.02 | 1 | 0.0000% | 1,115.0 |
| Fixed-Floater | 5.01% | 4.80% | 61,685 | 15.90 | 7 | -1.1266% | 998.8 |
| Floater | 4.02% | 4.02% | 70,782 | 17.39 | 2 | +0.7315% | 951.9 |
| Op. Retract | 4.85% | 2.52% | 87,648 | 2.55 | 15 | -0.0097% | 1,055.4 |
| Split-Share | 5.31% | 5.67% | 69,455 | 4.15 | 15 | -0.2410% | 1,048.1 |
| Interest Bearing | 6.09% | 3.56% | 48,552 | 2.02 | 3 | -0.0327% | 1,124.1 |
| Perpetual-Premium | 5.96% | 4.81% | 366,149 | 11.08 | 13 | -0.1660% | 1,007.2 |
| Perpetual-Discount | 6.02% | 6.09% | 222,572 | 13.74 | 59 | -0.3954% | 871.9 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| BCE.PR.C | FixFloat | -3.9721% | |
| BNA.PR.C | SplitShare | -3.3168% | Asset coverage of just under 3.6:1 as of May 30, according to the company. Now with a pre-tax bid-YTW of 7.44% based on a bid of 19.53 and a hardMaturity 2019-1-10 at 25.00. Compare with BNA.PR.A (6.16% to 2010-9-30) and BNA.PR.B (8.49% to 2016-3-25). |
| IAG.PR.A | PerpetualDiscount | -2.8243% | Now with a pre-tax bid-YTW of 6.22% based on a bid of 18.58 and a limitMaturity. |
| PWF.PR.F | PerpetualDiscount | -2.6697% | Now with a pre-tax bid-YTW of 6.21% based on a bid of 21.51 and a limitMaturity. |
| BCE.PR.A | FixFloat | -2.5597% | |
| POW.PR.C | PerpetualDiscount | -2.2047% | Now with a pre-tax bid-YTW of 6.17% based on a bid of 23.51 and a limitMaturity. |
| BNS.PR.N | PerpetualDiscount | -2.1778% | Now with a pre-tax bid-YTW of 6.07% based on a bid of 22.01 and a limitMaturity. |
| WFS.PR.A | SplitShare | -2.0619% | Asset coverage of just under 1.7:1 as of June 12, according to the company. Now with a pre-tax bid-YTW of 7.11% based on a bid of 9.50 and a hardMaturity 2011-6-30 at 10.00 … 9.95% interest-equivalent for three year money isn’t all that bad! |
| BCE.PR.G | FixFloat | -1.3901% | |
| BNS.PR.M | PerpetualDiscount | -1.2953% | Now with a pre-tax bid-YTW of 6.01% based on a bid of 19.05 and a limitMaturity. |
| HSB.PR.C | PerpetualDiscount | -1.1759% | Now with a pre-tax bid-YTW of 6.10% based on a bid of 21.01 and a limitMaturity. |
| CM.PR.J | PerpetualDiscount | -1.1596% | Now with a pre-tax bid-YTW of 6.40% based on a bid of 17.90 and a limitMaturity. |
| CM.PR.H | PerpetualDiscount | -1.1329% | Now with a pre-tax bid-YTW of 6.37% based on a bid of 19.20 and a limitMaturity. |
| PWF.PR.L | PerpetualDiscount | -1.1294% | Now with a pre-tax bid-YTW of 6.18% based on a bid of 21.01 and a limitMaturity. |
| BNS.PR.J | PerpetualDiscount | -1.0748% | Now with a pre-tax bid-YTW of 5.76% based on a bid of 23.01 and a limitMaturity. |
| RY.PR.F | PerpetualDiscount | -1.0521% | Now with a pre-tax bid-YTW of 5.99% based on a bid of 18.81 and a limitMaturity. |
| NA.PR.K | PerpetualDiscount | -1.0309% | Now with a pre-tax bid-YTW of 6.17% based on a bid of 24.00 and a limitMaturity. |
| BCE.PR.R | FixFloat | -1.0114% | |
| POW.PR.D | PerpetualDiscount | -1.0048% | Now with a pre-tax bid-YTW of 6.06% based on a bid of 20.69 and a limitMaturity. |
| ELF.PR.F | PerpetualDiscount | -1.1634% | Now with a pre-tax bid-YTW of 6.77% based on a bid of 20.00 and a limitMaturity. |
| SLF.PR.B | PerpetualDiscount | +1.2301% | Now with a pre-tax bid-YTW of 6.10% based on a bid of 19.75 and a limitMaturity. |
| GWO.PR.I | PerpetualDiscount | +1.5541% | Now with a pre-tax bid-YTW of 5.97% based on a bid of 18.95 and a limitMaturity. |
| W.PR.H | PerpetualDiscount | +2.3661% | Now with a pre-tax bid-YTW of 6.08% based on a bid of 22.93 and a limitMaturity. A fine company. But why is it trading THROUGH the Sunlifes? |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| BNS.PR.K | PerpetualDiscount | 405,200 | Nesbitt crossed 400,000 shares in four tranches, all at 21.00. Now with a pre-tax bid-YTW of 5.82% based on a bid of 20.99 and a limitMaturity. |
| NTL.PR.F | Scraps (would be Ratchet, but there are credit concerns) | 132,350 | Nesbitt crossed 20,000, Scotia crossed 50,000, Nesbitt repeated for 15,400 shares (and sold 4,600 to Scotia) and CIBC crossed 40,000 – all at 12.10. |
| BNS.PR.M | PerpetualDiscount | 118,940 | Now with a pre-tax bid-YTW of 6.01% based on a bid of 19.05 and a limitMaturity. |
| SLF.PR.A | PerpetualDiscount | 68,895 | Now with a pre-tax bid-YTW of 6.14% based on a bid of 19.44 and a limitMaturity. |
| RY.PR.W | PerpetualDiscount | 55,955 | CIBC crossed 50,000 at 22.20. Now with a pre-tax bid-YTW of 5.58% based on a bid of 22.19 and a limitMaturity. |
| FBS.PR.B | SplitShare | 126,390 | CIBC crossed 70,000 at 9.90, then Nesbitt crossed 50,000 at the same price. Asset coverage of just under 1.6:1 as of June 12, according to TD Securities. Now with a pre-tax bid-YTW of 5.25% based on a bid of 9.86 and a hardMaturity 2011-12-15 at 10.00. |
There were twenty-seven other index-included $25-pv-equivalent issues trading over 10,000 shares today.
Probably a good time to be buying but what about us poor sods who keep seeing already held holdings plunging day after day? ie. POW.PR.C is just taking a pounding!
Sometimes all you can do is shrug and sigh.
You bought it for the income … keep it for the income (unless you see a swap into an issue that, overall, looks better).
Call me Pollyanna, but I don’t see Power Corp. defaulting any time soon.