David Berman penned a piece in Saturday’s Globe titled Bonds are in the dumps. Here’s why this investor is buying:
Hanif Mamdani, the lead manager of Royal Bank of Canada’s giant PH&N High Yield Bond Fund, offers a high-profile example of an investor looking to take advantage of eye-popping bond yields.
He’s now prowling for corporate bonds he believes could deliver double-digit annualized returns – breathtaking gains in the normally staid world of bonds – within a couple of years.
…
Now, he believes that one of the most promising areas of the market is Canadian corporate bonds with investment grade ratings that are now trading at unusually high yields.He pointed to a couple of examples.
He bought CIBC’s limited recourse capital notes – or LRCN, a subordinated debt instrument with a five-year term – with yields as high as 7.4 per cent.
The trouble is, of course, that LRCNs are not bonds and are not even genuine subordinated debt, despite OSFI’s best efforts to pull the wool over the eyes of unwary investors. They are preferred shares dressed up as bonds to allow portfolio managers and investment companies to gull the naive. Another problem, of course, is that the term is not, in fact, five years.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | 1.1543 % | 2,468.9 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.1543 % | 4,735.4 |
| Floater | 6.40 % | 6.47 % | 40,944 | 13.23 | 3 | 1.1543 % | 2,729.0 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0464 % | 3,470.7 |
| SplitShare | 4.90 % | 5.22 % | 44,807 | 3.14 | 8 | 0.0464 % | 4,144.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0464 % | 3,233.9 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3640 % | 2,846.5 |
| Perpetual-Discount | 5.99 % | 6.06 % | 68,308 | 13.81 | 34 | 0.3640 % | 3,104.0 |
| FixedReset Disc | 4.85 % | 6.43 % | 114,930 | 13.49 | 56 | -0.1705 % | 2,429.2 |
| Insurance Straight | 5.98 % | 6.05 % | 86,638 | 13.81 | 18 | 0.1481 % | 3,006.9 |
| FloatingReset | 6.80 % | 7.07 % | 43,167 | 12.45 | 2 | -0.3829 % | 2,534.0 |
| FixedReset Prem | 5.04 % | 5.14 % | 125,848 | 1.93 | 10 | -0.0040 % | 2,585.6 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1705 % | 2,483.1 |
| FixedReset Ins Non | 4.86 % | 6.85 % | 56,118 | 13.12 | 14 | -0.6639 % | 2,511.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TD.PF.D | FixedReset Disc | -7.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.85 % |
| RY.PR.J | FixedReset Disc | -5.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 6.80 % |
| MFC.PR.Q | FixedReset Ins Non | -4.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 6.69 % |
| TRP.PR.G | FixedReset Disc | -3.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 7.45 % |
| TRP.PR.A | FixedReset Disc | -2.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 15.03 Evaluated at bid price : 15.03 Bid-YTW : 8.01 % |
| MFC.PR.F | FixedReset Ins Non | -2.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 14.00 Evaluated at bid price : 14.00 Bid-YTW : 7.19 % |
| TD.PF.A | FixedReset Disc | -2.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 6.34 % |
| BAM.PR.Z | FixedReset Disc | -2.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 22.12 Evaluated at bid price : 22.76 Bid-YTW : 6.69 % |
| TD.PF.B | FixedReset Disc | -1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 6.46 % |
| MFC.PR.L | FixedReset Ins Non | -1.65 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 7.23 % |
| BAM.PR.X | FixedReset Disc | -1.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 6.97 % |
| TRP.PR.D | FixedReset Disc | -1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 16.76 Evaluated at bid price : 16.76 Bid-YTW : 7.99 % |
| MFC.PR.N | FixedReset Ins Non | -1.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 18.21 Evaluated at bid price : 18.21 Bid-YTW : 7.13 % |
| TRP.PR.E | FixedReset Disc | -1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 16.55 Evaluated at bid price : 16.55 Bid-YTW : 7.92 % |
| TD.PF.J | FixedReset Disc | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 22.60 Evaluated at bid price : 23.20 Bid-YTW : 6.25 % |
| FTS.PR.M | FixedReset Disc | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 7.25 % |
| TD.PF.L | FixedReset Prem | -1.17 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 6.27 % |
| TD.PF.E | FixedReset Disc | -1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.81 Evaluated at bid price : 20.81 Bid-YTW : 6.56 % |
| IFC.PR.A | FixedReset Ins Non | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 17.61 Evaluated at bid price : 17.61 Bid-YTW : 6.90 % |
| ELF.PR.H | Perpetual-Discount | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 22.71 Evaluated at bid price : 22.95 Bid-YTW : 6.02 % |
| ELF.PR.F | Perpetual-Discount | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 21.75 Evaluated at bid price : 22.00 Bid-YTW : 6.05 % |
| BAM.PR.K | Floater | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 6.47 % |
| CU.PR.J | Perpetual-Discount | 1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 6.02 % |
| BAM.PR.B | Floater | 1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 12.81 Evaluated at bid price : 12.81 Bid-YTW : 6.49 % |
| PWF.PF.A | Perpetual-Discount | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 6.03 % |
| MFC.PR.M | FixedReset Ins Non | 1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 7.17 % |
| BAM.PF.B | FixedReset Disc | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 19.58 Evaluated at bid price : 19.58 Bid-YTW : 7.23 % |
| BAM.PF.E | FixedReset Disc | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 7.44 % |
| CCS.PR.C | Insurance Straight | 1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 5.93 % |
| TRP.PR.C | FixedReset Disc | 2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 12.75 Evaluated at bid price : 12.75 Bid-YTW : 7.90 % |
| CU.PR.C | FixedReset Disc | 2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.86 Evaluated at bid price : 20.86 Bid-YTW : 6.63 % |
| MIC.PR.A | Perpetual-Discount | 2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.95 Evaluated at bid price : 20.95 Bid-YTW : 6.52 % |
| CU.PR.E | Perpetual-Discount | 2.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 5.87 % |
| NA.PR.W | FixedReset Disc | 4.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 19.81 Evaluated at bid price : 19.81 Bid-YTW : 6.50 % |
| BAM.PF.F | FixedReset Disc | 8.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 7.40 % |
| NA.PR.E | FixedReset Disc | 8.69 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 21.88 Evaluated at bid price : 22.40 Bid-YTW : 6.32 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.K | FixedReset Disc | 301,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 22.41 Evaluated at bid price : 22.85 Bid-YTW : 6.20 % |
| TD.PF.I | FixedReset Disc | 58,971 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 23.68 Evaluated at bid price : 24.55 Bid-YTW : 6.25 % |
| NA.PR.E | FixedReset Disc | 51,100 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 21.88 Evaluated at bid price : 22.40 Bid-YTW : 6.32 % |
| TD.PF.A | FixedReset Disc | 44,952 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 6.34 % |
| TD.PF.M | FixedReset Prem | 41,650 | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-07-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 5.24 % |
| CM.PR.S | FixedReset Disc | 40,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-18 Maturity Price : 22.25 Evaluated at bid price : 23.00 Bid-YTW : 6.02 % |
| There were 11 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.M | FixedReset Ins Non | Quote: 18.46 – 21.50 Spot Rate : 3.0400 Average : 1.8712 YTW SCENARIO |
| TD.PF.D | FixedReset Disc | Quote: 19.80 – 21.99 Spot Rate : 2.1900 Average : 1.2730 YTW SCENARIO |
| BAM.PR.Z | FixedReset Disc | Quote: 22.76 – 24.00 Spot Rate : 1.2400 Average : 0.7825 YTW SCENARIO |
| RY.PR.J | FixedReset Disc | Quote: 20.10 – 21.75 Spot Rate : 1.6500 Average : 1.2384 YTW SCENARIO |
| MFC.PR.Q | FixedReset Ins Non | Quote: 21.35 – 22.35 Spot Rate : 1.0000 Average : 0.6293 YTW SCENARIO |
| BAM.PF.G | FixedReset Disc | Quote: 18.20 – 19.35 Spot Rate : 1.1500 Average : 0.8692 YTW SCENARIO |