July 3, 2019

PerpetualDiscounts now yield 5.57%, equivalent to 7.24% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.37%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 385bp, equal to that reported on June 26.

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 0.0223 % 1,934.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0223 % 3,549.3
Floater 6.16 % 6.33 % 36,904 13.46 4 0.0223 % 2,045.5
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0284 % 3,322.2
SplitShare 4.69 % 4.71 % 84,835 4.18 7 -0.0284 % 3,967.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0284 % 3,095.5
Perpetual-Premium 5.59 % -12.03 % 65,542 0.09 7 0.2017 % 2,962.5
Perpetual-Discount 5.47 % 5.57 % 60,845 14.51 25 0.2477 % 3,098.1
FixedReset Disc 5.43 % 5.32 % 174,425 14.90 69 0.3225 % 2,112.1
Deemed-Retractible 5.25 % 5.97 % 75,838 8.01 27 0.2386 % 3,096.1
FloatingReset 4.06 % 4.31 % 48,603 2.49 4 0.2780 % 2,351.8
FixedReset Prem 5.12 % 3.70 % 177,201 1.96 17 0.0663 % 2,593.3
FixedReset Bank Non 1.98 % 4.00 % 126,369 2.50 3 0.1114 % 2,654.6
FixedReset Ins Non 5.30 % 7.45 % 89,893 8.08 22 0.2581 % 2,145.1
Performance Highlights
Issue Index Change Notes
CCS.PR.C Deemed-Retractible -3.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.98
Bid-YTW : 6.09 %
GWO.PR.N FixedReset Ins Non -2.44 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.00
Bid-YTW : 9.23 %
HSE.PR.A FixedReset Disc -1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 12.50
Evaluated at bid price : 12.50
Bid-YTW : 6.15 %
BAM.PR.C Floater -1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 10.95
Evaluated at bid price : 10.95
Bid-YTW : 6.37 %
IAF.PR.B Deemed-Retractible -1.33 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.58
Bid-YTW : 6.44 %
MFC.PR.L FixedReset Ins Non 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.77
Bid-YTW : 8.38 %
BMO.PR.C FixedReset Disc 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 22.26
Evaluated at bid price : 22.70
Bid-YTW : 5.22 %
TRP.PR.G FixedReset Disc 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 18.16
Evaluated at bid price : 18.16
Bid-YTW : 6.03 %
MFC.PR.F FixedReset Ins Non 1.35 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 13.50
Bid-YTW : 9.78 %
BIP.PR.A FixedReset Disc 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 19.11
Evaluated at bid price : 19.11
Bid-YTW : 6.52 %
GWO.PR.S Deemed-Retractible 1.38 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.25
Bid-YTW : 5.67 %
RY.PR.W Perpetual-Discount 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 24.60
Evaluated at bid price : 24.85
Bid-YTW : 4.98 %
BAM.PF.B FixedReset Disc 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 17.45
Evaluated at bid price : 17.45
Bid-YTW : 6.00 %
NA.PR.S FixedReset Disc 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 5.50 %
TRP.PR.A FixedReset Disc 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 13.95
Evaluated at bid price : 13.95
Bid-YTW : 6.01 %
IFC.PR.E Deemed-Retractible 1.50 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 5.88 %
BMO.PR.Y FixedReset Disc 1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 19.54
Evaluated at bid price : 19.54
Bid-YTW : 5.32 %
TRP.PR.C FixedReset Disc 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 12.28
Evaluated at bid price : 12.28
Bid-YTW : 5.90 %
BAM.PR.B Floater 1.94 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 11.01
Evaluated at bid price : 11.01
Bid-YTW : 6.33 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.G FixedReset Prem 157,625 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.65 %
TD.PF.K FixedReset Disc 81,450 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 20.58
Evaluated at bid price : 20.58
Bid-YTW : 5.18 %
HSE.PR.A FixedReset Disc 67,743 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 12.50
Evaluated at bid price : 12.50
Bid-YTW : 6.15 %
BIP.PR.F FixedReset Disc 54,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 21.32
Evaluated at bid price : 21.60
Bid-YTW : 5.93 %
NA.PR.S FixedReset Disc 50,142 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 17.87
Evaluated at bid price : 17.87
Bid-YTW : 5.50 %
BMO.PR.Y FixedReset Disc 43,720 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 19.54
Evaluated at bid price : 19.54
Bid-YTW : 5.32 %
There were 23 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.E FixedReset Disc Quote: 16.12 – 16.88
Spot Rate : 0.7600
Average : 0.4687

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 16.12
Evaluated at bid price : 16.12
Bid-YTW : 6.23 %

CM.PR.P FixedReset Disc Quote: 16.81 – 17.59
Spot Rate : 0.7800
Average : 0.5454

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 16.81
Evaluated at bid price : 16.81
Bid-YTW : 5.44 %

MFC.PR.K FixedReset Ins Non Quote: 18.28 – 18.70
Spot Rate : 0.4200
Average : 0.2685

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.28
Bid-YTW : 7.85 %

MFC.PR.H FixedReset Ins Non Quote: 20.45 – 20.87
Spot Rate : 0.4200
Average : 0.2796

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.45
Bid-YTW : 6.99 %

IFC.PR.F Deemed-Retractible Quote: 24.01 – 24.33
Spot Rate : 0.3200
Average : 0.2271

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.01
Bid-YTW : 5.85 %

CU.PR.C FixedReset Disc Quote: 17.74 – 18.00
Spot Rate : 0.2600
Average : 0.1674

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-07-03
Maturity Price : 17.74
Evaluated at bid price : 17.74
Bid-YTW : 5.34 %

5 Responses to “July 3, 2019”

  1. Kirok says:

    What are your thoughts on this article in the Globe and Mail about preferred shares, entitled “ This is the worst bond alternative ever: With interest rates shrinking, you need to steer clear of this investment option.”

    https://www.theglobeandmail.com/investing/markets/inside-the-market/article-this-is-the-worst-bond-alternative-ever/#comments

  2. Jingaly says:

    @kirok, to label Carrick a putz would be doing a disservice to putzes

  3. paradon says:

    Hope that the weak hands listen to him and sell their cheap prefs to me!

  4. Nestor says:

    he has to write about something. just an opinion. what can you do?

  5. jiHymas says:

    What are your thoughts on this article in the Globe and Mail about preferred shares, entitled “ This is the worst bond alternative ever: With interest rates shrinking, you need to steer clear of this investment option.”

    My major argument is that it’s one-sided and therefore simplistic.

    As far as not being bond substitutes – sure. They’re fixed-income, by my definition, but they’re not bonds. Long, long ago, in a piece titled Preferreds or Common, I remarked:

    So by all means, prefs will often trade more like common than they trade like stock. An investor must look through that and realize that prefs are not common. Prefs are also not bonds. They’re preferreds. I feel it is appropriate to benchmark them (at least, the high quality ones) against long corporates because that is what their risk most resembles; but I recognize that sometimes markets will go blahooey, if for no other reason than their investor universe is different. Times when things are going blahooey is when I earn my pay – largely by doing nothing. Nice work, if you can get it.

    I will note that the fact that things can go blahooey is a major reason behind my exhortations to limit preferred exposure to 50% maximum of a fixed income portfolio. The spreads are juicy, and sometimes they’re very juicy indeed … but when you need to raise cash for non-investment reasons, you really don’t want to be a forced seller.

    The article points out the high volatility of preferred shares, but neglects to investigate two questions:

    • Who cares?
    • What is risk?

    Volatility is not the same thing as risk at all times for all people. As I have pointed out before (risk should be considered as ‘the probability that the portfolio will not achieve its aims’ and therefore:

    Naturally, different portfolio objectives will lead to different perspectives on the riskiness of various methods used to accomplish those goals. If I have $100,000 and my portfolio objective is to use the money to buy a house in one month’s time, then investing the whole thing in a government perpetual would be insanely risky. Far better would be a one-month treasury bill.

    And if my portfolio objective is to make $3,000 p.a. AFTER INFLATION, then holy-smokes, the thirty-year treasury bond just got risky again. How about that?

    And, in my favourite example ever, if you have $1 and your portfolio objective is to make $1-million before next Tuesday, then your least risky investment is a lottery ticket. The chances of success, while miniscule, are higher than with anything else – although a prudent person will be well-advised to redefine his portfolio objectives until a significant chance of success can be reasonably estimated.

    To talk of “risk” in the absence of clearly defined desirable rewards is just craziness. I should work this up into a proper article some day.

    Until I can convince the world to adopt my definition of investment risk, however, it is clear that volatility (which is closely aligned with retail’s pathological fear of capital losses) will continue to scare people away from the market. Good. That makes the liquidity premium (the amount you get paid for nothing more than being calm) nice and big.

    Happiness is a huge liquidity premium.

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