Turnover declined to 5% in January, the absence of tax-loss selling and the market’s violent move upwards combined to make trading difficult.
Sectoral distribution of the MAPF portfolio on January 31, 2024, were:
| MAPF Sectoral Analysis 2024-1-31 | ||||
| HIMI Indices Sector | Weighting | YTW | ModDur | |
| Ratchet | 0% | N/A | N/A | |
| FixFloat | 0% | N/A | N/A | |
| Floater | 0% | N/A | N/A | |
| OpRet | 0% | N/A | N/A | |
| SplitShare | 0% | N/A | N/A | |
| Interest Rearing | 0% | N/A | N/A | |
| PerpetualPremium | 0% | N/A | N/A | |
| PerpetualDiscount | 9.0% | 6.92% | 12.65 | |
| Fixed-Reset Discount | 65.8% | 7.83% | 11.95 | |
| Insurance – Straight | 6.9% | 6.12% | 13.69 | |
| FloatingReset | 0% | N/A | N/A | |
| FixedReset Premium | 0% | N/A | N/A | |
| FixedReset Bank non-NVCC | 0% | N/A | N/A | |
| FixedReset Insurance non-NVCC | 0% | N/A | N/A | |
| Scraps – Ratchet | 0% | N/A | N/A | |
| Scraps – FixedFloater | 1.4% | 9.79% | 10.95 | |
| Scraps – Floater | 0% | N/A | N/A | |
| Scraps – OpRet | 0% | N/A | N/A | |
| Scraps – SplitShare | 3.3% | 7.69% | 2.17 | |
| Scraps – PerpPrem | 0% | N/A | N/A | |
| Scraps – PerpDisc | 0% | N/A | N/A | |
| Scraps – FR Discount | 13.2% | 9.83% | 10.15 | |
| Scraps – Insurance Straight | 0% | N/A | N/A | |
| Scraps – FloatingReset | 0% | N/A | N/A | |
| Scraps – FR Premium | 0% | N/A | N/A | |
| Scraps – Bank non-NVCC | 0% | N/A | N/A | |
| Scraps – Ins non-NVCC | 0% | N/A | N/A | |
| Cash | +0.4% | 0.00% | 0.00 | |
| Total | 100% | 7.89% | 11.52 | |
| Totals and changes will not add precisely due to rounding. Cash is included in totals with duration and yield both equal to zero. | ||||
| The various “Scraps” indices include issues with a DBRS rating of Pfd-3(high) or lower and issues with an Average Trading Value (calculated with HIMIPref™ methodology, which is relatively complex) of less than $25,000. The issues considered “Scraps” are subdivided into indices which reflect those of the main indices. | ||||
| DeemedRetractibles were comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 in the case of banks or normally in the case of insurers and insurance holding companies, in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis and IAIS Says No To DeemedRetractions for the recent change in policy with respect to insurers.
Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue and by a further five years in December, 2018; the estimate was eliminated in November. However, the distinctions are being kept because it is useful to distinguish insurance issues from others. The name of this subindex has been changed to “Insurance Straight” as of November, 2020 |
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| Calculations of yield and related attributes of resettable instruments are performed assuming a constant GOC-5 rate of 3.57%, a constant 3-Month Bill rate of 5.11% and a constant Canada Prime Rate of 7.20% | ||||
The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.
Credit distribution is:
| MAPF Credit Analysis 2024-01-31 | ||
| DBRS Rating | MAPF Weighting | |
| Pfd-1 | 0 | |
| Pfd-1(low) | 0 | |
| Pfd-2(high) | 40.7% | |
| Pfd-2 | 32.1% | |
| Pfd-2(low) | 9.0% | |
| Pfd-3(high) | 9.6% | |
| Pfd-3 | 2.5% | |
| Pfd-3(low) | 5.5% | |
| Pfd-4(high) | 0.3% | |
| Pfd-4 | 0% | |
| Pfd-4(low) | 0% | |
| Pfd-5(high) | 0% | |
| Pfd-5 | 0% | |
| Cash | +0.3% | |
| Totals will not add precisely due to rounding. | ||
| A position held in INE.PR.A is not rated by DBRS nor by S&P, but has been included as “Pfd-4(high)” in the above table on the basis of its last S&P rating of P-4(high) and its BB rating from Fitch. A “BB” rating would normally map to Pfd-3, but the company’s disdain for the two major preferred share agencies makes me nervous. | ||
Liquidity Distribution is:
| MAPF Liquidity Analysis 2024-01-31 | ||
| Average Daily Trading | MAPF Weighting | |
| <$50,000 | 5.3% | |
| $50,000 – $100,000 | 16.5% | |
| $100,000 – $200,000 | 43.2% | |
| $200,000 – $300,000 | 26.8% | |
| >$300,000 | 7.9% | |
| Cash | +0.4% | |
| Totals will not add precisely due to rounding. | ||
The distribution of Issue Reset Spreads is:
| Range | MAPF Weight |
| <100bp | 0% |
| 100-149bp | 0% |
| 150-199bp | 7.4% |
| 200-249bp | 57.5% |
| 250-299bp | 12.7% |
| 300-349bp | 1.6% |
| 350-399bp | 0.9% |
| 400-449bp | 0% |
| 450-499bp | 0% |
| 500-549bp | 0% |
| 550-599bp | 0% |
| >= 600bp | 0% |
| Undefined | 19.8% |
Distribution of Floating Rate Start Dates is shown in the table below. This is the date of the next adjustment to the dividend rate, if the issue is currently paying a fixed rate for a limited time; which in practice is successive terms of 5 years. Issues that adjust quarterly are considered “Currently Floating”.
| Range | MAPF Weight |
| Currently Floating | 1.1% |
| 0-1 Year | 25.0% |
| 1-2 Years | 28.0% |
| 2-3 Years | 14.3% |
| 3-4 Years | 12.2% |
| 4-5 Years | 0.9% |
| 5-6 Years | 0% |
| >6 Years | 0% |
| Not Floating Rate | 18.4% |
MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. The fund may be purchased directly from Hymas Investment Management. A “unit trust” is like a regular mutual fund, but are not sold with a prospectus This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission). Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.
“The situation with FixedResets is interesting, with the spread between GOC-5 and the interest-adjusted FixedReset (Discount) rate widening significantly from its 2021-11-10 low of 344bp to a level of 636bp (as of 2024-1-31) … (chart end-date 2024-01-12):”
My proxies suggested closer to 6% for month end. James’ index is dated Jan 12th so perhaps I am pretty close for month end? The key question now is where does it bottom out? Around 3.5%? Does it overshoot? Nothing has more impact on discount FR pricing than the answer to these questions.