9 Responses to “June 13, 2019”

1. skeptical says:

   June 13, 2019 at 6:30 pm

   The question is why?
   With S&P in both US and Canada near all time highs, bond yields at multi-decade lows, people hate about 5.75 to 6% yields from Brookfield, Canadian Utilities and GWO.
   Going against the crowd? This is the time.

2. jiHymas says:

   June 13, 2019 at 6:37 pm

   The question is why?

   I agree! People are selling just because the market’s gone down … it makes no sense at all.

3. dodoi says:

   June 14, 2019 at 8:30 am

   I think the people are selling because they are afraid that FED and BOC will cut interest rates and the preferred shares will go even lower than they are today. If this will happen I will sell my BMO.PR.Q and buy something more juicy.

4. yieldpig says:

   June 14, 2019 at 9:51 am

   It seems that in a number of cases, fixed-resets with rate floors are trading at unsubstantiated premiums to fixed-resets with no floors, issued by the same issuer, with reset dates relatively close to one another, when you look at the forward 5-year rates implied by the zero coupon canada curve ? Any thoughts on this ?

5. baffled says:

   June 14, 2019 at 10:15 am

   dodoi , i get why the rate resets would go down if the fed or the boc cut rates . i dont get why the perpetual prefs would go down , the rate is set , the only risk is that they are called ( so never pay more than the call price ) . i see them as bonds as rates drop the price should go up . i dont know what i am missing

6. skeptical says:

   June 14, 2019 at 10:21 am

   baffled
   You are missing nothing. I think part of it is the way ETFs are strucutred. There are hard caps on the issues that an ETF is allowed to carry. And most ETF holds at least 10 to 15% perpetuals, if not more.
   So when they have to sell, they have to sell, including perpetuals.

   James would know it better, but if they have to sell, they will sell at market price with hard floor numbers. The kinds of prices that were available at the close of 13th June, they simply didn’t exist on 14th.

   So, IMHO, plain market inefficiency, which is so wonderful for the little guys.
   Or in a slightly metaphorical tone, in our jungle the lions leave too much meat attached to the bones for the scavengers! Can’t complain at all.

7. baffled says:

   June 14, 2019 at 10:30 am

   skeptical , thanks for that , i keep buying

8. jiHymas says:

   June 14, 2019 at 9:16 pm

   I think the people are selling because they are afraid that FED and BOC will cut interest rates and the preferred shares will go even lower than they are today.

   Perhaps, but I still don’t understand that.

   fixed-resets with rate floors are trading at unsubstantiated premiums to fixed-resets with no floors,

   Yes.

   when you look at the forward 5-year rates implied by the zero coupon canada curve ?

   Don’t look at implied forward rates. There’s no evidence to show that the predictive ability is any better than the square root of squat.

   i dont get why the perpetual prefs would go down

   I agree with much of skeptical‘s response to this, but suggest that there should be marginal traders who should – if they look solely to the economic environment and predictions thereof – adjust the prices of Straights so that they trade to yield less than FixedResets.

   One part of the answer, I think, is that Straights are simply not being priced off of economic predictions, they’re being priced off of FixedResets; with a yield premium being demanded because ‘everybody knows Straights are risky’.

   I know that doesn’t make sense. But in the preferred share world, we learn to believe six impossible things before breakfast.

9. jiHymas says:

   June 18, 2019 at 3:04 pm

   there should be marginal traders who should – if they look solely to the economic environment and predictions thereof – adjust the prices of Straights so that they trade to yield less than FixedResets.

   I should point out that this does not necessarily involve ‘real money’ accounts actually transacting in individual issues. Such an adjustment could also be achieved via differential flows in CPD vs. ZPR.