PerpetualDiscounts now yield 5.10%, equivalent to 6.63% interest at the standard equivalency factor of 1.3x. Long corporates now yield 2.96%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened slightly (and perhaps spuriously) to 365bp from the 360bp reported October 7.
| 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 | -0.1614 % | 1,637.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1614 % | 3,004.4 |
| Floater | 5.20 % | 5.24 % | 44,446 | 15.10 | 3 | -0.1614 % | 1,731.4 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0248 % | 3,531.8 |
| SplitShare | 4.80 % | 4.64 % | 52,924 | 3.57 | 8 | -0.0248 % | 4,217.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0248 % | 3,290.8 |
| Perpetual-Premium | 5.29 % | -3.05 % | 92,463 | 0.09 | 17 | -0.0183 % | 3,196.6 |
| Perpetual-Discount | 5.09 % | 5.10 % | 88,730 | 15.31 | 17 | 0.1095 % | 3,612.6 |
| FixedReset Disc | 5.48 % | 4.19 % | 124,073 | 16.55 | 65 | -0.1375 % | 2,108.7 |
| Deemed-Retractible | 5.07 % | 4.83 % | 106,251 | 15.17 | 22 | 0.1499 % | 3,498.6 |
| FloatingReset | 1.97 % | 2.75 % | 42,668 | 1.28 | 3 | -0.2353 % | 1,793.9 |
| FixedReset Prem | 5.22 % | 3.52 % | 259,759 | 0.83 | 14 | -0.2619 % | 2,638.4 |
| FixedReset Bank Non | 1.94 % | 2.24 % | 112,555 | 1.28 | 2 | 0.0000 % | 2,856.6 |
| FixedReset Ins Non | 5.51 % | 4.24 % | 77,977 | 16.41 | 22 | -0.6879 % | 2,192.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.G | FixedReset Disc | -6.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 14.26 Evaluated at bid price : 14.26 Bid-YTW : 5.95 % |
| SLF.PR.G | FixedReset Ins Non | -5.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 10.35 Evaluated at bid price : 10.35 Bid-YTW : 4.38 % |
| MFC.PR.N | FixedReset Ins Non | -4.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 17.04 Evaluated at bid price : 17.04 Bid-YTW : 4.31 % |
| MFC.PR.G | FixedReset Ins Non | -3.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 4.36 % |
| PWF.PR.S | Perpetual-Discount | -2.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 22.76 Evaluated at bid price : 23.03 Bid-YTW : 5.21 % |
| TRP.PR.A | FixedReset Disc | -2.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 11.72 Evaluated at bid price : 11.72 Bid-YTW : 5.61 % |
| MFC.PR.R | FixedReset Ins Non | -1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 23.91 Evaluated at bid price : 24.30 Bid-YTW : 4.40 % |
| CM.PR.P | FixedReset Disc | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 17.96 Evaluated at bid price : 17.96 Bid-YTW : 4.07 % |
| BAM.PR.T | FixedReset Disc | -1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 13.37 Evaluated at bid price : 13.37 Bid-YTW : 5.22 % |
| TRP.PR.F | FloatingReset | -1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 10.13 Evaluated at bid price : 10.13 Bid-YTW : 5.00 % |
| MFC.PR.I | FixedReset Ins Non | -1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 4.23 % |
| BAM.PF.E | FixedReset Disc | -1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 5.30 % |
| BIK.PR.A | FixedReset Prem | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 23.32 Evaluated at bid price : 25.01 Bid-YTW : 5.82 % |
| SLF.PR.E | Deemed-Retractible | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 23.14 Evaluated at bid price : 23.40 Bid-YTW : 4.83 % |
| TRP.PR.J | FixedReset Prem | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 24.79 Evaluated at bid price : 25.16 Bid-YTW : 5.53 % |
| PWF.PR.T | FixedReset Disc | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 16.61 Evaluated at bid price : 16.61 Bid-YTW : 4.53 % |
| SLF.PR.D | Deemed-Retractible | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 4.81 % |
| TRP.PR.E | FixedReset Disc | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 13.41 Evaluated at bid price : 13.41 Bid-YTW : 5.56 % |
| TRP.PR.K | FixedReset Disc | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 23.55 Evaluated at bid price : 24.65 Bid-YTW : 4.97 % |
| TD.PF.C | FixedReset Disc | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 3.93 % |
| CU.PR.E | Perpetual-Discount | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 24.52 Evaluated at bid price : 24.79 Bid-YTW : 4.99 % |
| TRP.PR.B | FixedReset Disc | 1.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 8.53 Evaluated at bid price : 8.53 Bid-YTW : 4.93 % |
| CU.PR.D | Perpetual-Discount | 3.83 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 24.67 Evaluated at bid price : 24.95 Bid-YTW : 4.96 % |
| SLF.PR.C | Deemed-Retractible | 5.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 23.14 Evaluated at bid price : 23.40 Bid-YTW : 4.78 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.C | FixedReset Disc | 155,625 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 3.93 % |
| TD.PF.M | FixedReset Disc | 102,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 23.32 Evaluated at bid price : 25.15 Bid-YTW : 4.02 % |
| CM.PR.P | FixedReset Disc | 82,100 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 17.96 Evaluated at bid price : 17.96 Bid-YTW : 4.07 % |
| BAM.PF.B | FixedReset Disc | 58,107 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 16.25 Evaluated at bid price : 16.25 Bid-YTW : 5.13 % |
| GWO.PR.M | Deemed-Retractible | 51,854 | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-11-13 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : -9.19 % |
| TD.PF.B | FixedReset Disc | 42,400 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-10-14 Maturity Price : 17.63 Evaluated at bid price : 17.63 Bid-YTW : 4.05 % |
| There were 24 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| RY.PR.M | FixedReset Disc | Quote: 11.98 – 19.00 Spot Rate : 7.0200 Average : 5.4865 YTW SCENARIO |
| SLF.PR.G | FixedReset Ins Non | Quote: 10.35 – 11.50 Spot Rate : 1.1500 Average : 0.7268 YTW SCENARIO |
| CU.PR.C | FixedReset Disc | Quote: 16.65 – 18.00 Spot Rate : 1.3500 Average : 0.9449 YTW SCENARIO |
| CM.PR.Q | FixedReset Disc | Quote: 19.03 – 20.00 Spot Rate : 0.9700 Average : 0.5824 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 23.50 – 25.25 Spot Rate : 1.7500 Average : 1.3927 YTW SCENARIO |
| PWF.PR.S | Perpetual-Discount | Quote: 23.03 – 23.90 Spot Rate : 0.8700 Average : 0.5144 YTW SCENARIO |
Hi,
Why in the world would we purchase BNS preferred shares when the common pays a dividend of 6.45%. I understand the difference between common and preferred but for a bank that is not going under in our lifetime, it is hard to justify the preferred.
Regards,
Ferris
The bank doesn’t have to go bankrupt for the common shares to drop over a long period of time. The business could simply deteriorate. There are many possible futures between the extremes of bank goes bankrupt and bank does well where the preferreds outperform the common.
They could pull a LB and cut the dividend on the common stock.
The issue is first-loss protection. Preferred Shares, bonds, etc., got it – common stock ain’t.
If BNS should take a major unexpected loss, that loss will be borne entirely by the common stock holders; other investors will not suffer directly until the common has been wiped out (although they will, of course, endure a loss of credit quality and related price declines). Gargantuan tax increases are counted in the major unexpected loss category; banks are popular targets for taxation and coronavirus has to be paid for somehow.
On the other hand, Canada’s financial system is run under what might be called the ‘State Capitalism’ model; coddled, protected and tightly regulated, providing a good investment for mom and pop at the expense of innovation and high fees.
Equities are not fixed income, but if you choose to disregard the distinction you have lots of company – it’s been an increasing trend over the last decade. Still and all, however, the fundamentals are against you – and while fundamentals are often flouted for decades at a time, the world has a habit of snapping back to reality unexpectedly and at the most inconvenient time.
“.. the world has a habit of snapping back to reality unexpectedly and at the most inconvenient time.”
Amen to that.
Thanks for your thoughts everyone. Making me think twice about my upcoming purchase.