Nothing happened today.
It was a positive day for the Canadian preferred share market, with PerpetualDiscounts up 7bp, FixedResets winning 10bp and DeemedRetractibles gaining 6bp. The Performance Highlights table is a little longer than usual, but has no clear pattern. Volume was low.
| 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 | -0.3703 % | 2,411.0 |
| FixedFloater | 4.75 % | 4.34 % | 30,944 | 17.74 | 1 | -0.1000 % | 3,569.2 |
| Floater | 3.00 % | 3.11 % | 53,366 | 19.42 | 4 | -0.3703 % | 2,603.2 |
| OpRet | 4.61 % | -0.46 % | 68,359 | 0.13 | 3 | 0.0641 % | 2,688.5 |
| SplitShare | 4.87 % | 5.02 % | 62,001 | 4.33 | 5 | 0.1289 % | 3,011.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0641 % | 2,458.4 |
| Perpetual-Premium | 5.67 % | 1.29 % | 93,895 | 0.08 | 12 | 0.0298 % | 2,334.6 |
| Perpetual-Discount | 5.56 % | 5.59 % | 148,156 | 14.49 | 26 | 0.0663 % | 2,387.1 |
| FixedReset | 4.90 % | 3.76 % | 210,538 | 6.43 | 82 | 0.0957 % | 2,489.2 |
| Deemed-Retractible | 5.12 % | 4.04 % | 162,877 | 1.93 | 42 | 0.0614 % | 2,424.1 |
| FloatingReset | 2.66 % | 2.64 % | 162,858 | 7.16 | 6 | -0.2612 % | 2,434.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.B | Floater | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-14 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 3.11 % |
| IFC.PR.A | FixedReset | -1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.89 Bid-YTW : 4.28 % |
| BAM.PR.N | Perpetual-Discount | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-14 Maturity Price : 19.89 Evaluated at bid price : 19.89 Bid-YTW : 6.07 % |
| PWF.PR.A | Floater | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-14 Maturity Price : 19.07 Evaluated at bid price : 19.07 Bid-YTW : 2.75 % |
| BAM.PR.X | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-14 Maturity Price : 20.91 Evaluated at bid price : 20.91 Bid-YTW : 4.43 % |
| SLF.PR.G | FixedReset | 1.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.50 Bid-YTW : 4.47 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.Z | FixedReset | 147,720 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-14 Maturity Price : 23.19 Evaluated at bid price : 25.15 Bid-YTW : 3.76 % |
| NA.PR.S | FixedReset | 131,120 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-02-14 Maturity Price : 23.18 Evaluated at bid price : 25.09 Bid-YTW : 3.94 % |
| MFC.PR.C | Deemed-Retractible | 83,399 | Nesbitt crossed blocks of 60,000 and 20,000 at 21.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.25 Bid-YTW : 6.57 % |
| BNS.PR.Z | FixedReset | 54,770 | RBC crossed 50,000 at 23.74. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.77 Bid-YTW : 3.94 % |
| SLF.PR.D | Deemed-Retractible | 30,664 | Nesbitt crossed 25,000 at 21.05. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.06 Bid-YTW : 6.60 % |
| RY.PR.R | FixedReset | 27,857 | Called for Redemption 2014-2-24 at $25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.48 % |
| There were 21 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.G | FixedFloater | Quote: 19.98 – 20.46 Spot Rate : 0.4800 Average : 0.3406 YTW SCENARIO |
| MFC.PR.F | FixedReset | Quote: 22.42 – 22.83 Spot Rate : 0.4100 Average : 0.3110 YTW SCENARIO |
| BNS.PR.B | FloatingReset | Quote: 24.59 – 24.84 Spot Rate : 0.2500 Average : 0.1637 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 21.55 – 21.82 Spot Rate : 0.2700 Average : 0.1921 YTW SCENARIO |
| BAM.PF.D | Perpetual-Discount | Quote: 20.35 – 20.68 Spot Rate : 0.3300 Average : 0.2575 YTW SCENARIO |
| SLF.PR.F | FixedReset | Quote: 25.54 – 25.72 Spot Rate : 0.1800 Average : 0.1080 YTW SCENARIO |
MFC.PR.C and SLF.PR.D are stated as hard maturity in 2025 bringing their YTW to above 6.5%. However I reviewed the SLF.PR.D prospectus issued in October 2006 and it states the shares are perpetuals with hard maturity date. MFC.PR.C are also listed in other sites as perpetuals. If they are perpertuals, this would reduce their YTW to the present value of their distributions (around 5.1%). Am I in error?
Two words: “deemed retractable”.
http://www.prefletter.com/whatPrefLetter.php
Thanks for the help, adrian2
nitromicro, you are correct that these issues have no maturity date specified in their prospectuses. However, as outlined in the PrefLetter link adrian2 posted, fleshed out in the links given on that page, and as discussed at length in every edition of PrefLetter, the new OSFI regulations regarding Tier 1 capital eligibility for banks are expected to force redemption (or a change in terms approved by shareholders) prior to 2022-1-31, as becoming ineligible for inclusion in Tier 1 capital will change them, in the banks’ view, from ‘cheap equity’ to ‘expensive debt’.
The market seems to accept this, given the way the bank issues are trading, particularly during the sharp downdraft of June 2013.
It is my contention, which is not shared by the market (yet!), that these rules will be extended to insurers and insurance holding companies when OSFI finally gets around to implementing the Life Insurance Regulatory Framework. I currently analyze these issues as if the critical non-inclusion date is 2025-1-31; unless OSFI gets moving quickly, I will be changing this in the near future to 2027-1-31.
That’s my story and I’m sticking to it!