Research : Correlation Analysis and the Canadian Preferred Share Market

My footnote to the title probably says it best (hyperlinks added):

This essay is largely copy-pasted from the appendix to the October, 2009, edition of this newsletter (charts have been updated and the text lightly edited), which in turn borrowed heavily from my blog post of 2008-6-21, Market Timing, available on-line at http://www.prefblog.com/?p=2294 (accessed 2009-10-8). Reduce Reuse and Recycle, that’s me!

Look for the research link!

This entry was posted on Wednesday, July 20th, 2022 at 10:50 am and is filed under Publications. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “Research : Correlation Analysis and the Canadian Preferred Share Market”

  1. CanSiamCyp says:
    July 20, 2022 at 6:49 pm

    James:

    On Monday, TD issued $800M institutional prefs at 7.236%:

    https://money.tmx.com/en/quote/TD/news/4856616869523897/TD_Bank_Group_Announces_Institutional_NVCC_Preferred_Share_Issue

    Today, BMO issued $500M institutional prefs at 7.376%:

    https://money.tmx.com/en/quote/BMO/news/7000032120210523/Bank_of_Montreal_Announces_Institutional_NVCC_Preferred_Share_Issue

    Since the banks continue to recall retail reset prefs frequently, does this indicate that bank prefs will primarily be institutional prefs in the future? What is the advantage to the banks from this approach?

    Cheers!

  2. jiHymas says:
    July 20, 2022 at 7:06 pm

    Those are pretty high yields, not to mention spreads!

    According to this article (previously mentioned in this comment):

    There is a ceiling, as OSFI pointed out in its July 2020 ruling: LRCNs issued by a federally regulated bank can only fill up 50% of its AT1 bucket. By issuing OTC preferred shares, banks gain the ability to issue more LRCNs. Our understanding of the market’s thinking is that once OSFI is comfortable that there is an established OTC preferred share market, it will raise the LRCN limits.

    In essence, the banks are moving regulatory capital from retail investors (i.e. exchange-traded preferred shares) to institutional investors. In our view, OSFI is interested in seeing an established OTC preferred share market in the event that those LRCNs would be converted to preferred shares.

    … but I have no independent insight into OSFI’s thinking or influence on the matter.

  3. baffled says:
    July 21, 2022 at 7:11 am

    well i would not be upset if the price of the preferreds that we lowly retail can buy moved down so i can buy with a 7.236% or 7.376 % yield .

  4. jiHymas says:
    July 21, 2022 at 9:32 pm

    well i would not be upset if the price of the preferreds that we lowly retail can buy moved down so i can buy with a 7.236% or 7.376 % yield .

    A few more days like this and you might get your wish!

  5. BMO.PR.D To Be Redeemed « PrefBlog says:
    July 21, 2022 at 9:37 pm

    […] Thanks to Assiduous Reader CanSiamCyp for bringing the redemption to my attention, and for previously bringing the OTC issue to my attention. […]

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