Yield on Retractibles Index Goes Negative!

Well, it had to happen sometime … the headline event has occurred.

It is, I admit, a bit of a crock – only three of the 18 members of the index have negative yields-to-worst. Due to the very short term-to-worst for these three issues (BMO.PR.G, RY.PR.K and BMO.PR.I) it doesn’t take very much of a price change to change the yield drastically. Since the averages I’m currently reporting are the means, this means that a few large negatives can drag down the whole index. The HIMI Preferred Indices, currently only compiled until January 1996 (but gaining fast!) will report the median averages.

Still, it’s a landmark! Those who like preferreds, but are not so fond of sub-zero yields, may wish to consider buying high-premium perpetuals … the high coupon on these makes it more likely they will be called, mitigating (but not eliminating!) the risk of having to hold a perpetual when you don’t want to. See How Long is Forever?, where I introduce some arithmetic to the question.

To get you started, I’m attaching “Portfolio Evaluations” of three of the indices:




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