Another new 52-week high for the TXPR price index, with today’s high of 674.37 (which was the closing value) exceeding the mark of 673.58 set yesterday.
PerpetualDiscounts now yield 5.82%, equivalent to 7.57% interest at the standard conversion factor of 1.3x. Long corporates now yield 5.07%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 250bp, a slight (and perhaps spurious) narrowing from the 255bp reported July 16.
| 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 | -0.0786 % | 2,344.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0786 % | 4,563.0 |
| Floater | 6.81 % | 6.90 % | 75,976 | 12.67 | 2 | -0.0786 % | 2,629.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0730 % | 3,681.2 |
| SplitShare | 4.76 % | 4.20 % | 55,726 | 2.44 | 7 | 0.0730 % | 4,396.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0730 % | 3,430.1 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1508 % | 3,002.2 |
| Perpetual-Discount | 5.73 % | 5.82 % | 45,608 | 14.14 | 32 | 0.1508 % | 3,273.7 |
| FixedReset Disc | 5.59 % | 6.26 % | 116,248 | 13.26 | 40 | 0.3141 % | 3,007.9 |
| Insurance Straight | 5.60 % | 5.69 % | 53,501 | 14.36 | 19 | -0.0756 % | 3,233.0 |
| FloatingReset | 5.55 % | 5.37 % | 41,553 | 14.84 | 2 | 0.5488 % | 3,691.9 |
| FixedReset Prem | 5.71 % | 4.98 % | 110,556 | 2.59 | 16 | 0.0628 % | 2,635.9 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3141 % | 3,074.6 |
| FixedReset Ins Non | 5.21 % | 5.57 % | 72,600 | 14.20 | 14 | 0.3187 % | 3,071.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.F | Perpetual-Discount | -5.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 21.38 Evaluated at bid price : 21.65 Bid-YTW : 6.08 % |
| IFC.PR.I | Insurance Straight | -4.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 22.60 Evaluated at bid price : 23.00 Bid-YTW : 5.92 % |
| RY.PR.M | FixedReset Disc | -1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 23.68 Evaluated at bid price : 24.50 Bid-YTW : 5.75 % |
| GWO.PR.Q | Insurance Straight | -1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 22.08 Evaluated at bid price : 22.31 Bid-YTW : 5.82 % |
| ENB.PR.T | FixedReset Disc | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 22.11 Evaluated at bid price : 22.60 Bid-YTW : 6.45 % |
| PWF.PR.Z | Perpetual-Discount | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 21.66 Evaluated at bid price : 21.98 Bid-YTW : 5.87 % |
| MFC.PR.M | FixedReset Ins Non | 1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 23.11 Evaluated at bid price : 24.72 Bid-YTW : 5.48 % |
| MFC.PR.L | FixedReset Ins Non | 2.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 22.95 Evaluated at bid price : 24.20 Bid-YTW : 5.52 % |
| MFC.PR.B | Insurance Straight | 3.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 5.50 % |
| PWF.PR.T | FixedReset Disc | 6.87 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 22.95 Evaluated at bid price : 24.10 Bid-YTW : 5.62 % |
| CU.PR.F | Perpetual-Discount | 7.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 5.72 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.Q | FixedReset Disc | 244,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 23.97 Evaluated at bid price : 24.98 Bid-YTW : 5.82 % |
| ENB.PR.Y | FixedReset Disc | 151,236 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.86 % |
| ENB.PF.K | FixedReset Disc | 136,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 23.13 Evaluated at bid price : 24.21 Bid-YTW : 6.48 % |
| ENB.PF.G | FixedReset Disc | 104,400 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 21.37 Evaluated at bid price : 21.37 Bid-YTW : 6.76 % |
| TD.PF.D | FixedReset Prem | 40,000 | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-08-30 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.43 % |
| ENB.PR.T | FixedReset Disc | 36,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-07-23 Maturity Price : 22.11 Evaluated at bid price : 22.60 Bid-YTW : 6.45 % |
| There were 12 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| See TMX DataLinx: ‘Last’ != ‘Close’ and the posts linked therein for an idea of why these quotes are so horrible. | ||
| Issue | Index | Quote Data and Yield Notes |
| POW.PR.B | Perpetual-Discount | Quote: 23.36 – 24.49 Spot Rate : 1.1300 Average : 0.6775 YTW SCENARIO |
| PVS.PR.L | SplitShare | Quote: 26.06 – 27.99 Spot Rate : 1.9300 Average : 1.5169 YTW SCENARIO |
| IFC.PR.A | FixedReset Ins Non | Quote: 20.30 – 22.57 Spot Rate : 2.2700 Average : 1.8944 YTW SCENARIO |
| BN.PR.T | FixedReset Disc | Quote: 19.84 – 21.35 Spot Rate : 1.5100 Average : 1.2663 YTW SCENARIO |
| RY.PR.M | FixedReset Disc | Quote: 24.50 – 25.25 Spot Rate : 0.7500 Average : 0.5582 YTW SCENARIO |
| BN.PF.I | FixedReset Prem | Quote: 25.01 – 25.56 Spot Rate : 0.5500 Average : 0.3757 YTW SCENARIO |
James,
Glad to see you are back. Serious question here – I suspect I’m not the only one impacted by this.
The last couple of years, my pref portfolio is getting “consumed” by a number of issuer redemptions – i.e. BNS.PR.I, BMO.PR.S, CM.PR.O, TD.PF.D, BMO.PR.Y.
It’s my understanding these redemptions are motivated, to a great extent, by regulatory changes and being funded by the issuance of LRCNs. It’s getting harder and harder to find suitable alternatives of a similar credit quality, with ~ the same reset dates (so I can maintain a nice evenly staggered barbell of 12-15 issuers).
What’s a long time pref investor to do?
I should have said 12-15 issues…..
CU.pr.i closed July 24th at $25.46 and has been trading close to that for a few days. The assumption is that, due to it’s 3.69% spread, it will be redeemed this December.
By my calculation… { [ (25.00 redemption + 0.5625 remaining divs) /25.46 price ] – 1 } / {0.35 years to redemption} = 1.1% annual yield.
Is my calculation wrong? (James, I dug up one of your old yield calculators and it seemed to give a similar result to my simplified calculation).
If my calc is correct, why are people buying a 1.1% yield?!! Thanks for any insights.
Brian, my calc of the annualized yield is about the same as yours. And I agree that Cu will likely redeem this given current market conditions. My guess is that the buyers of this at these prices might be ETFs or other funds that need to buy this issue and don’t look at the likelihood of redemption.
Is my calculation wrong? (James, I dug up one of your old yield calculators and it seemed to give a similar result to my simplified calculation).
Your calculation looks fine to me – although I prefer precise answers for serious work over approximations.
My guess is that the buyers of this at these prices might be ETFs or other funds that need to buy this issue and don’t look at the likelihood of redemption.
Perhaps. Another influence might be retail investors buying on the basis of Current Yield – although the value of this attribute is only 4.44% as of today. Retail could also be buying in hopes that the issue will reset at +369 and ignoring the downside if this does not in fact occur. A lot of strange things happen in this market!
t’s getting harder and harder to find suitable alternatives of a similar credit quality, with ~ the same reset dates (so I can maintain a nice evenly staggered barbell of 12-15 issuers).
What’s a long time pref investor to do?
I’m afraid I don’t have any easy answers for you. It is definitely getting harder to maintain a value-seeking portfolio while keeping issuer concentration at reasonable levels.
All I can suggest is that you relax your constraint of holding an ‘evenly staggered barbell’ (I’m not sure what that is, frankly – it sounds like a contradiction in terms). I wrote a piece titled “Interest Rate Shocks and Term to Reset” in the PrefLetter of August, 2022 – you may wish to review that to get a sense of how interest rate changes should – and very often do – affect pricing of similar issues with different terms-to-reset.
[…] PerpetualDiscounts now yield 5.79%, equivalent to 7.53% interest at the standard conversion factor of 1.3x. Long corporates now yield 4.96%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 255bp, a slight (and perhaps spurious) widening from the 250bp reported July 23. […]