The Canadian preferred share market celebrated the 36th anniversary of the Crash of 1987 with a trifecta … TXPR, CPD and ZPR all set new 52-week lows.
Pundits are blaming the usual suspect:
U.S. and Canadian stocks ended solidly lower on Thursday, with shares of Tesla falling hard after its quarterly results and longer-term Treasury yields surging as Federal Reserve Chair Jerome Powell spoke about monetary policy and investors worried whether interest rates would stay higher for longer.
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Treasury yields rose further and the benchmark U.S. 10-year note yield was at a 16-year high of almost 5%.
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Powell said at the Economic Club in New York that U.S. central bankers were moving carefully on policy after aggressive rate hikes last year, but he added that the economy’s strength and continued tight labour markets could warrant further rate hikes.The Dow Jones Industrial Average fell 250.91 points, or 0.75%, to 33,414.17, the S&P 500 lost 36.6 points, or 0.85%, to 4,278 and the Nasdaq Composite dropped 128.13 points, or 0.96%, to 13,186.18.
The rate-sensitive real estate sector dropped 2.4% and was the day’s worst-performing S&P 500 sector.
The Cboe Volatility index jumped to its highest close since March.
Data this week has pointed to strong consumer demand and a tight labour market. A U.S. Labor Department report on Thursday showed the number of Americans filing new claims for unemployment benefits fell to a nine-month low last week.
The labour market is showing strength even though the central bank has raised its benchmark overnight interest rate by 525 basis points since March 2022.
| 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 | -0.5827 % | 2,143.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5827 % | 4,110.6 |
| Floater | 11.36 % | 11.57 % | 52,469 | 8.41 | 2 | -0.5827 % | 2,369.0 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3507 % | 3,278.8 |
| SplitShare | 5.10 % | 8.13 % | 42,100 | 1.90 | 7 | 0.3507 % | 3,915.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3507 % | 3,055.1 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.4514 % | 2,420.8 |
| Perpetual-Discount | 7.09 % | 7.24 % | 43,258 | 12.28 | 31 | -0.4514 % | 2,639.7 |
| FixedReset Disc | 6.13 % | 9.37 % | 102,591 | 10.54 | 55 | 0.0170 % | 2,084.5 |
| Insurance Straight | 6.94 % | 7.12 % | 60,557 | 12.39 | 16 | -0.0598 % | 2,591.1 |
| FloatingReset | 11.21 % | 11.44 % | 35,931 | 8.50 | 1 | 0.3378 % | 2,388.5 |
| FixedReset Prem | 4.76 % | 5.19 % | 418,617 | 0.11 | 1 | 0.0401 % | 2,299.2 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0170 % | 2,130.8 |
| FixedReset Ins Non | 6.31 % | 9.30 % | 64,682 | 10.77 | 14 | 0.0171 % | 2,252.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.G | FixedReset Ins Non | -2.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 12.89 Evaluated at bid price : 12.89 Bid-YTW : 10.11 % |
| BMO.PR.S | FixedReset Disc | -1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 17.99 Evaluated at bid price : 17.99 Bid-YTW : 9.22 % |
| RY.PR.H | FixedReset Disc | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 17.66 Evaluated at bid price : 17.66 Bid-YTW : 9.19 % |
| GWO.PR.H | Insurance Straight | -1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 16.84 Evaluated at bid price : 16.84 Bid-YTW : 7.30 % |
| BN.PR.M | Perpetual-Discount | -1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 7.52 % |
| GWO.PR.N | FixedReset Ins Non | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 12.15 Evaluated at bid price : 12.15 Bid-YTW : 10.00 % |
| PWF.PF.A | Perpetual-Discount | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 15.61 Evaluated at bid price : 15.61 Bid-YTW : 7.25 % |
| POW.PR.C | Perpetual-Discount | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 7.05 % |
| PWF.PR.L | Perpetual-Discount | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 17.56 Evaluated at bid price : 17.56 Bid-YTW : 7.31 % |
| POW.PR.B | Perpetual-Discount | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 18.57 Evaluated at bid price : 18.57 Bid-YTW : 7.27 % |
| PWF.PR.H | Perpetual-Discount | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 7.31 % |
| IFC.PR.G | FixedReset Ins Non | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 8.54 % |
| BIK.PR.A | FixedReset Disc | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 10.02 % |
| BN.PR.N | Perpetual-Discount | 1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 16.02 Evaluated at bid price : 16.02 Bid-YTW : 7.51 % |
| TD.PF.A | FixedReset Disc | 1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 8.98 % |
| PVS.PR.I | SplitShare | 2.16 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-10-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 8.13 % |
| PWF.PR.P | FixedReset Disc | 2.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 11.86 Evaluated at bid price : 11.86 Bid-YTW : 10.84 % |
| IFC.PR.C | FixedReset Ins Non | 3.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 9.43 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.P | FixedReset Disc | 107,501 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 16.29 Evaluated at bid price : 16.29 Bid-YTW : 9.60 % |
| CU.PR.D | Perpetual-Discount | 88,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 7.03 % |
| MFC.PR.C | Insurance Straight | 37,650 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 6.88 % |
| MFC.PR.J | FixedReset Ins Non | 28,347 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 19.35 Evaluated at bid price : 19.35 Bid-YTW : 8.74 % |
| CU.PR.E | Perpetual-Discount | 27,358 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 7.12 % |
| BN.PF.I | FixedReset Disc | 20,558 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-10-19 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 10.70 % |
| There were 17 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BN.PF.A | FixedReset Disc | Quote: 18.45 – 20.04 Spot Rate : 1.5900 Average : 0.9622 YTW SCENARIO |
| PWF.PR.P | FixedReset Disc | Quote: 11.86 – 12.97 Spot Rate : 1.1100 Average : 0.7542 YTW SCENARIO |
| MFC.PR.Q | FixedReset Ins Non | Quote: 19.15 – 19.85 Spot Rate : 0.7000 Average : 0.4588 YTW SCENARIO |
| BN.PR.X | FixedReset Disc | Quote: 12.68 – 13.31 Spot Rate : 0.6300 Average : 0.4577 YTW SCENARIO |
| BN.PR.K | Floater | Quote: 11.07 – 11.79 Spot Rate : 0.7200 Average : 0.5754 YTW SCENARIO |
| GWO.PR.H | Insurance Straight | Quote: 16.84 – 17.25 Spot Rate : 0.4100 Average : 0.2849 YTW SCENARIO |
I remember that day well. I had sent in an order for myself for a fund named AGF HiTech on the Friday before but in those days you didn’t book orders you sent them in via snail mail. So it got processed after the crash not before. But I don’t mention this much as most advisors just look at you and exclaim “I wasn’t born yet”.
I was going to move the majority of my corporate account that has been sitting in cash for years into a money market fund today but changed my mind as the preferred share market yields are just too compelling. The phrase “all set new 52-week lows” from above is just the push I needed. The regulators view preferred shares the same as common shares so my capital is cut in half for every dollar I place in preferreds. But regulators be damned I’m going in anyway.
Hi Dan, what did you buy? CPD?
“I was going to move the majority of my corporate account that has been sitting in cash for years into a money market fund today…”
You mean it really has just been sitting there? Glad you don’t manage my money 🙂
“the preferred share market yields are just too compelling”
I’m looking forward to the next MAPF review post to see James’ FR/GOC5 spread chart. One more move up before the retracing starts?
As an example, based on Friday’s close, the hypothetical new issue spread for TRP is now 8.3%, 2.3% (!) higher than 8 months ago when I thought it was ridiculous.
I remember that day well. I had sent in an order for myself for a fund named AGF HiTech on the Friday before but in those days you didn’t book orders you sent them in via snail mail. So it got processed after the crash not before.
I was working as a very low-level wage slave in Merrill Lynch Canada Operations … my desk was within sight of the VP-Operations’ office. It was most entertaining to see a steady stream of well-dressed, worried looking men going into his office.
The regulators view preferred shares the same as common shares so my capital is cut in half for every dollar I place in preferreds.
Yeah, the Excess Working Capital rules are … onerous. HIMI has money in MAPF … and the “market risk” for a non-prospectus fund is 100% … so any capital the company puts into the fund just disappears, as far as this calculation is concerned.
I’ve never seen any evidence that the whole rigamarole accomplishes anything. When the rules came in (as part of a major overhaul), the OSC published a hilarious FAQ: “Why is the minimum capital requirement for an investment fund manager $100,000?” “Staff has determined that this is the proper amount.” … thanks, OSC, most informative!