Again, very brief commentary. Sorry, folks!
Fed will get hit by mark-to-market accounting rules. Haha! This will fuel political debates for CENTURIES!
The Fed will announce its quarterly estimate of the fair value of Maiden Lane LLC’s $30 billion of holdings that JPMorgan Chase & Co. considered too risky when it acquired Bear Stearns in March, Bank of America analysts Jeffrey Rosenberg and Hans Mikkelsen wrote in a client note. The central bank valued the assets at $29 billion as of June 30, according to the report.
“With the worsening in mortgage markets since last quarter, we estimate a range of $2 billion to $6 billion of unrealized losses,” the New York-based analysts wrote.
Discount window working overtime
Market for short term paper on strike; and some anecdotal colour thereof.
Corporate bond market completely illiquid:
The so-called bid-ask spread on Dallas-based AT&T Inc.’s $600 million of 6.8 percent bonds due in 2036 averaged 121 basis points last week, up from 7 basis points in early 2007, according to data compiled by Bloomberg.
Preferred got smacked today in the backwash from a horrible, horrible, horrible day in equities. A bit more commentary, with an emphasis on the sloppiness of the market at Sloppy, Indeed!
| 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. The Fixed-Reset index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater index. |
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| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | N/A | N/A | N/A | N/A | 0 | N/A | N/A |
| Fixed-Floater | 4.81% | 4.91% | 81,540 | 15.64 | 6 | -0.7121% | 1,070.0 |
| Floater | 5.36% | 5.40% | 48,056 | 14.87 | 2 | +0.0646% | 751.2 |
| Op. Retract | 5.09% | 5.15% | 125,759 | 3.71 | 14 | -0.2562% | 1,028.4 |
| Split-Share | 5.86% | 8.21% | 56,288 | 4.08 | 12 | -0.8550% | 960.6 |
| Interest Bearing | 6.50% | 8.15% | 43,247 | 3.79 | 3 | -1.0739% | 1,061.9 |
| Perpetual-Premium | 6.38% | 6.42% | 57,006 | 13.30 | 1 | -2.0000% | 973.1 |
| Perpetual-Discount | 6.30% | 6.37% | 180,427 | 13.37 | 70 | -1.2436% | 850.0 |
| Fixed-Reset | 5.13% | 5.03% | 1,159,714 | 15.26 | 10 | -0.6122% | 1,104.0 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| ELF.PR.G | PerpetualDiscount | -5.0436% | Now with a pre-tax bid-YTW of 7.83% based on a bid of 15.25 and a limitMaturity. |
| WFS.PR.A | SplitShare | -4.4218% | Asset coverage of just under 1.6:1 as of September 25, according to Mulvihill. Now with a pre-tax bid-YTW of 12.27% based on a bid of 8.43 and a hardMaturity 2011-6-30. Below $9, some might find even the regular monthly retraction to be attractive. |
| W.PR.J | PerpetualDiscount | -4.1905% | Now with a pre-tax bid-YTW of 7.00% based on a bid of 20.12 and a limitMaturity. |
| BMO.PR.H | PerpetualDiscount | -4.0094% | Now with a pre-tax bid-YTW of 6.62% based on a bid of 20.35 and a limitMaturity. |
| BAM.PR.M | PerpetualDiscount | -3.6122% | Now with a pre-tax bid-YTW of 7.89% based on a bid of 15.21 and a limitMaturity. |
| POW.PR.D | PerpetualDiscount | -3.5863% | Now with a pre-tax bid-YTW of 6.78% based on a bid of 18.55 and a limitMaturity. |
| BAM.PR.J | OpRet | -3.5002% | Now with a pre-tax bid-YTW of 8.70% based on a bid of 19.85 and a softMaturity 2018-3-30 at 25.00. Compare with BAM.PR.H (6.73% to 2012-3-30), BAM.PR.I (7.13% to 2013-12-30) and BAM.PR.O (9.08% to 2013-6-30); and with the perpetuals at about 7.85%. |
| FFN.PR.A | SplitShare | -2.2581% | Asset coverage of just under 1.8:1 as of September 15 according to the company. Now with a pre-tax bid-YTW of 8.03% based on a bid of 8.70 and a hardMaturity 2014-12-1 at 10.00. Sadly, the capital unit is trading at what I suspect is now a premium to NAV [check before you do anything about this!], making the Regular Monthly Retraction a very chancy thing. |
| PWF.PR.L | PerpetualDiscount | -3.3964% | Now with a pre-tax bid-YTW of 6.54% based on a bid of 19.91 and a limitMaturity. |
| HSB.PR.C | PerpetualDiscount | -3.2901% | Now with a pre-tax bid-YTW of 6.63% based on a bid of 19.40 and a limitMaturity. |
| CM.PR.J | PerpetualDiscount | -2.9922% | Now with a pre-tax bid-YTW of 6.96% based on a bid of 16.21 and a limitMaturity. |
| BAM.PR.N | PerpetualDiscount | -2.9672% | Now with a pre-tax bid-YTW of 7.80% based on a bid of 15.37 and a limitMaturity. |
| STW.PR.A | InterestBearing | -2.9146% | Asset coverage of just under 1.7:1 as of September 25, according to Middlefield. Now with a pre-tax bid-YTW of 8.83% (mostly as interest) based on a bid of 9.66 and a hardMaturity 2009-12-31. Not bad for one-year money! |
| CM.PR.I | PerpetualDiscount | -2.8571% | Now with a pre-tax bid-YTW of 6.93% based on a bid of 17.00 and a limitMaturity. |
| BCE.PR.G | FixFloat | -2.7083% | |
| SLF.PR.D | PerpetualDiscount | -2.6432% | Now with a pre-tax bid-YTW of 6.34% based on a bid of 17.68 and a limitMaturity. |
| HSB.PR.D | PerpetualDiscount | -2.5641% | Now with a pre-tax bid-YTW of 6.64% based on a bid of 19.00 and a limitMaturity. |
| BMO.PR.J | PerpetualDiscount | -2.4725% | Now with a pre-tax bid-YTW of 6.44% based on a bid of 17.75 and a limitMaturity. |
| BNA.PR.C | SplitShare | -2.4373% | Asset coverage of 3.2+:1 as of August 31 according to the company. Coverage now of just under 2.7:1 based on BAM.A at 27.69 and 2.4 BAM.A held per preferred. Now with a pre-tax bid-YTW of 12.04% (!) based on a bid of 14.01 and a hardMaturity 2019-1-10 at 25.00. Compare with BNA.PR.A (9.66% to 2010-9-30) and BNA.PR.B (9.37% to 2016-3-25). |
| IAG.PR.A | PerpetualDiscount | -2.3889% | Now with a pre-tax bid-YTW of 6.60% based on a bid of 17.57 and a limitMaturity. |
| SLF.PR.A | PerpetualDiscount | -2.2040% | Now with a pre-tax bid-YTW of 6.28% based on a bid of 19.08 and a limitMaturity. |
| RY.PR.A | PerpetualDiscount | -2.1196% | Now with a pre-tax bid-YTW of 6.28% based on a bid of 18.01 and a limitMaturity. |
| GWO.PR.G | PerpetualDiscount | -2.1077% | Now with a pre-tax bid-YTW of 6.27% based on a bid of 20.90 and a limitMaturity. |
| BCE.PR.R | FixFloat | -2.0833% | |
| RY.PR.G | PerpetualDiscount | -2.0288% | Now with a pre-tax bid-YTW of 6.23% based on a bid of 18.35 and a limitMaturity. |
| CM.PR.H | PerpetualDiscount | -2.0057% | Now with a pre-tax bid-YTW of 7.04% based on a bid of 17.10 and a limitMaturity. |
| CL.PR.B | PerpetualPremium (for now!) | -2.0000% | Now with a pre-tax bid-YTW of 6.42% based on a bid of 24.50 and a limitMaturity. This is the only member of the PerpetualPremium index! |
| SLF.PR.C | PerpetualDiscount | -1.9759% | Now with a pre-tax bid-YTW of 6.28% based on a bid of 17.86 and a limitMaturity. |
| TD.PR.O | PerpetualDiscount | -1.9493% | Now with a pre-tax bid-YTW of 6.15% based on a bid of 20.12 and a limitMaturity. |
| GWO.PR.H | PerpetualDiscount | -1.9344% | Now with a pre-tax bid-YTW of 6.70% based on a bid of 18.25 and a limitMaturity. |
| SLF.PR.B | PerpetualDiscount | -1.7722% | Now with a pre-tax bid-YTW of 6.24% based on a bid of 19.40 and a limitMaturity. |
| RY.PR.D | PerpetualDiscount | -1.7666% | Now with a pre-tax bid-YTW of 6.23% based on a bid of 18.35 and a limitMaturity. |
| PWF.PR.K | PerpetualDiscount | -1.6890% | Now with a pre-tax bid-YTW of 6.38% based on a bid of 19.79 and a limitMaturity. |
| BCE.PR.I | FixFloat | -1.6667% | |
| RY.PR.E | PerpetualDiscount | -1.6164% | Now with a pre-tax bid-YTW of 6.26% based on a bid of 18.26 and a limitMaturity. |
| LFE.PR.A | SplitShare | -1.6043% | Asset coverage of 2.2+:1 as of September 15 according to the company. Now with a pre-tax bid-YTW of 7.57% based on a bid of 9.20 and a hardMaturity 2012-12-1 at 10.00 |
| DFN.PR.A | SplitShare | -1.5402% | Asset coverage of just under 2.3:1 as of September 15 according to the company. Now with a pre-tax bid-YTW of 7.46% based on a bid of 8.95 and a hardMaturity 2014-12-1 at 10.00. Sadly, the capital units are trading too close – if not over – NAV to make the monthly retraction feature a compelling possibility. But some might wish to keep an eye on it… |
| CM.PR.G | PerpetualDiscount | -1.5385% | Now with a pre-tax bid-YTW of 7.05% based on a bid of 19.20 and a limitMaturity. |
| POW.PR.B | PerpetualDiscount | -1.5377% | Now with a pre-tax bid-YTW of 6.78% based on a bid of 19.85 and a limitMaturity. |
| NA.PR.M | PerpetualDiscount | -1.4718% | Now with a pre-tax bid-YTW of 6.32% based on a bid of 24.10 and a limitMaturity. |
| RY.PR.H | PerpetualDiscount | -1.4706% | Now with a pre-tax bid-YTW of 6.11% based on a bid of 23.45 and a limitMaturity. |
| BCE.PR.Z | FixFloat | -1.4407% | |
| TD.PR.S | FixedReset | -1.4022% | |
| BAM.PR.I | OpRet | -1.2712% | See BAM.PR.J, above. |
| PWF.PR.H | PerpetualDiscount | -1.2653% | Now with a pre-tax bid-YTW of 6.25% based on a bid of 23.41 and a limitMaturity. |
| SLF.PR.E | PerpetualDiscount | -1.2610% | Now with a pre-tax bid-YTW of 6.30% based on a bid of 18.01 and a limitMaturity. |
| BNS.PR.Q | FixedReset | -1.1670% | |
| PWF.PR.G | PerpetualDiscount | -1.0700% | Now with a pre-tax bid-YTW of 6.25% based on a bid of 24.04 and a limitMaturity. |
| MFC.PR.C | PerpetualDiscount | +1.0182% | Now with a pre-tax bid-YTW of 6.03% based on a bid of 18.85 and a limitMaturity. |
| BAM.PR.H | OpRet | +1.2078% | See BAM.PR.J, above. |
| ALB.PR.A | SplitShare | +2.5918% | Asset coverage of 1.7+:1 as of September 25 according to Scotia. Now with a pre-tax bid-YTW of 6.74% based on a bid of 23.75 and a hardMaturity 2011-2-28 at 25.00 |
| BCE.PR.C | FixFloat | +2.8718% | |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| MFC.PR.B | PerpetualDiscount | 155,250 | Desjardins crossed 100,000 at 19.20; CIBC crossed 50,000 at the same price. Now with a pre-tax bid-YTW of 6.13% based on a bid of 19.16 and a limitMaturity. |
| BNS.PR.L | PerpetualDiscount | 132,205 | Desjardins crossed 100,000 at 19.72; National crossed 25,000 at the same price. Now with a pre-tax bid-YTW of 5.81% based on a bid of 19.72 and a limitMaturity. |
| BNS.PR.M | PerpetualDiscount | 124,575 | Desjardins crossed 70,000 at 19.72; National crossed 35,000 at the same price. Now with a pre-tax bid-YTW of 5.82% based on a bid of 19.70 and a limitMaturity. |
| BNS.PR.P | FixedReset | 73,200 | Anonymous bought 36,300 from Scotia at 25.00. |
| SLF.PR.E | PerpetualDiscount | 62,450 | Desjardins crossed 50,000 at 18.35. Now with a pre-tax bid-YTW of 6.30% based on a bid of 18.01 and a limitMaturity. |
There were twenty-one other index-included $25-pv-equivalent issues trading over 10,000 shares today.
Do you think the US gov’t, in their infinite wisdom, might get hit again when they suspend or do away with altogether ‘mark to market” by going back to cost just before they start buying up the junk? There is talk. Wouldn’t surprise me in the least. Paulson would get his way in the end were that to happen as I don’t think he had any kind of discount in mind when he submitted his three pager bailout plan
Who knows? Sometimes mark-to-market is the best way to deal with pricing, sometimes an evaluation based on expected cash flows is more appropriate. There’s no hard and fast rules … to a great extent, you have to trust whoever is doing the valuation and verify that their choices make sense and are consistently applied.
Trust is in awfully short supply just about now.
I am rookie and have tried to understand your comments about BAM.pr.M and BAM.pr.N However, my question is reasonably simple…. are they relatively high paying dividend preferred shares that will be relatively safe in these volatile times? As a retired stock owner, I am looking for dividend income, pure and simple
Bob
Welcome to the blog, bobmcmu! I’ve attempted to answer your question in the comments to the last BAM post.