BMO.PR.J vs. CIU.PR.A: Credit or Cumulativity?

I have had occasion recently to look carefully at BMO.PR.J and CIU.PR.A and thought I’d pass along some of the data.

They’re very similar issues: both came out during the issuance rush of early 2007 (BMO.PR.J at the beginning, CIU.PR.A at the end … BMO.PR.J pays $1.125 p.a., while CIU.PR.A pays $1.15.

The major differences between them are:

  • Credit: BMO is Pfd-1; CIU is Pfd-2(high)
  • Cumulativity: BMO.PR.J is non-cumulative; CIU.PR.A is cumulative.
  • Volume: BMO.PR.J has an average daily trading volume worth $511M; CIU’s is only $95M

CIU.PR.A should be analyzed as junior to the series second showing on their books.

I have previously compared BMO.PR.J with BMO.PR.H.

Both issues were added to TXPR in July 2007.

Anyway, with no further comment, here are some graphs:

This entry was posted on Tuesday, January 27th, 2009 at 6:36 pm and is filed under Issue Comments. 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.

2 Responses to “BMO.PR.J vs. CIU.PR.A: Credit or Cumulativity?”

  1. prefhound says:
    January 27, 2009 at 9:40 pm

    CIU.PR.A was [Redacted by Admin]. It remains 50 cents to $1.00 cheaper than CU.PR.A or .B, so continues to look relatively attractive on that basis (which is why I have an arbitrage trade long CIU.PR.A and short CU.PR.B in place).

    If I understand your comparison with BMO.PR.J, you seem to draw attention to the BMO pref (higher credit rating vs non-cumulative dividend) being priced slightly lower than CIU.PR.A. My read of the BMO pref is that, compared with other BMO discount prefs, its yield is average.

    For my money, I still like CIU.PR.A over the BMO issue. Notwithstanding the yield, the CIU.PR.A is not a financial — an important attribute in a pref universe 85+% in financial issues. That’s why I continue to believe TCA.PR.X/Y have much lower yields than better credit ratings from banks.

  2. jiHymas says:
    January 27, 2009 at 10:20 pm

    you seem to draw attention to the BMO pref (higher credit rating vs non-cumulative dividend) being priced slightly lower than CIU.PR.A.

    I don’t want to make too big a deal out of it; I just thought it was an interesting cancellation of attributes.

    pref universe 85+% in financial issues. That’s why I continue to believe TCA.PR.X/Y have much lower yields than better credit ratings from banks.

    I’m quite sure you’re right – but continue to believe the best strategy for the average investor is to make up for overexposure to financials in preferreds by adjusting other asset classes.

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