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:
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.
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.