16 Responses to “July 5, 2023”

1. Dan Good says:

   July 6, 2023 at 12:34 pm

   Doesn’t anyone else find a yield of 6.81% on preferred income “a little high?”. I noticed it was mentioned (previously) that Government of Canada 5 year bonds yield about 3.75%? What made preferred shares such an ugly second cousin? I learned early on in my career to supplement my working income by investing to get passive income so that my during my dry months at least I had bread. Fast forward 40 years and the attraction to passive income has not wained. I’m having a difficult time not going “all in” when I see figures like 6.81%. Who really needs a lake cottage with a boat and RV anyway?

2. Nestor says:

   July 6, 2023 at 8:32 pm

   I’m having a difficult time not going “all in”

   i think people are insane not looking at prefs. i have no perpetuals. my personal view is we had a secular change in trend for bonds, so i’m weighted to floaters and fixed resets. (they’re a better deal anyway, regardless of what i believe). i’ve been buying floaters yielding in the 10-12% range. my fixed resets with the current 5 year bond rate will reset upwards of 10%. factor in the dividend tax credit and i’m shocked anyone would bother with a GIC…

3. stusclues says:

   July 6, 2023 at 10:20 pm

   “What made preferred shares such an ugly second cousin?”

   Mr. Market’s incurable emotional problems – see Ben Graham.

4. baffled says:

   July 7, 2023 at 7:43 am

   dan good , you are smart to buy , but not go ” all in” that is what i am doing , i think rates are going higher , so these yields will go higher and i will buy some more.

5. Dan Good says:

   July 7, 2023 at 9:33 am

   I went to a mutual fund guy in September of 1981 with $5,000 and he sold me a stock fund and a 1 year GIC at 20%. Obviously a bond fund would have done better or a preferred share fund if they had them in those days. Today seems eerily familiar unless we are at the bottom of the mountain still going up?

6. paradon says:

   July 8, 2023 at 3:50 pm

   I have also started following CD again as the return on many of those issues have shot way up as well.

7. RAV4guy says:

   July 9, 2023 at 2:24 pm

   Please tell me what “CD” is.

8. peet says:

   July 9, 2023 at 3:11 pm

   RAV4guy, I read that as referring to Certificates of Deposit, but it’s a US product.

   https://www.investopedia.com/terms/c/certificateofdeposit.asp

9. jiHymas says:

   July 9, 2023 at 3:57 pm

   Please tell me what “CD” is.

   The Canadian term is Bearer’s Deposit Note.

10. paradon says:

    July 9, 2023 at 4:32 pm

    Sorry I was referring to convertible debentures.

11. fsabbagh says:

    July 10, 2023 at 3:03 pm

    Is it possible that some of the preferreds may be in financial trouble and the big boys are dumping them before anything hits the wire? Pure speculation on my part 🙂

12. stusclues says:

    July 10, 2023 at 5:21 pm

    “Is it possible that some of the preferreds may be in financial trouble and the big boys are dumping them”

    What? No.

    Preferreds (preferred shares) don’t get in financial trouble, companies do.

    That preferred shares, especially FRs, are cheap is the same thing as saying that required spreads to BOC5 are at nosebleed levels. This time is not different. Spreads will shrink and prices will rise

13. Avoid the Herd says:

    July 10, 2023 at 6:40 pm

    stusclues “Spreads will shrink and prices will rise”

    Or interest rates could continue to rise, spreads shrink and Pref prices go sideways.

    Nothing is certain, especially if the generational bull market in bonds is over.
    Canadian preferreds tend to track the high yield bond funds.
    However, so far, the Oct 2022 lows in the bond funds have held.
    Sharp contrast to the prefs which made lower lows in Dec and May.
    The U.S. pref market has a slightly better performance than Canada’s.

14. fsabbagh says:

    July 10, 2023 at 10:33 pm

    baffled –> “so these yields will go higher and i will buy some more.”

    Meaning the preferred stocks will continue dropping in price. Why do you believe so?

15. baffled says:

    July 11, 2023 at 5:32 am

    fsabbagh says:……why you ask ,………… if int rates continue to rise , then the price of the pref, common and bonds will decline , the yields will go up . the “risk free ” gic from the bank will yield more and attract money from the stocks .

16. July 12, 2023 « PrefBlog says:

    July 12, 2023 at 8:40 pm

    […] PerpetualDiscounts now yield 6.89%, equivalent to 8.96% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.27% on 2023-7-7 and since then the closing price has changed from 14.72 to 14.89, an increase of 115bp in price, with a Duration of 12.20 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies a decrease in yield of about 9bp since 7/7 to 5.20%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained constant at about the 375bp reported July 5. […]