| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30 |
| Index |
Mean Current Yield (at bid) |
Mean YTW |
Mean Average Trading Value |
Mean Mod Dur (YTW) |
Issues |
Day’s Perf. |
Index Value |
| Ratchet |
4.14% |
4.09% |
48,057 |
17.12 |
2 |
+0.0000% |
1,050.0 |
| Fixed-Floater |
4.97% |
3.99% |
87,413 |
17.14 |
6 |
-0.5028% |
1,028.7 |
| Floater |
4.58% |
-17.77% |
61,718 |
0.09 |
4 |
-0.0392% |
1,054.5 |
| Op. Retract |
4.73% |
3.16% |
84,998 |
2.14 |
17 |
+0.0757% |
1,033.0 |
| Split-Share |
5.00% |
3.74% |
168,106 |
3.20 |
12 |
-0.0298% |
1,050.1 |
| Interest Bearing |
6.54% |
3.45% |
63,137 |
2.29 |
5 |
-0.1420% |
1,041.5 |
| Perpetual-Premium |
5.04% |
3.83% |
195,008 |
5.12 |
53 |
-0.0435% |
1,058.5 |
| Perpetual-Discount |
4.52% |
4.54% |
981,834 |
15.48 |
11 |
-0.0215% |
1,066.8 |
| Major Price Changes |
| Issue |
Index |
Change |
Notes |
| GWO.PR.H |
PerpetualPremium |
-1.1197% |
On volume of 11,555 shares, about average for this issue. Now with a pre-tax bid-YTW of 4.50% based on a bid of 25.61 and a call 2014-10-30 at $25.00 |
| Volume Highlights |
| Issue |
Index |
Volume |
Notes |
| BNS.PR.M |
PerpetualDiscount |
724,590 |
New issue settled today. Now with a pre-tax bid-YTW of 4.54% based on a bid of 24.87 and a limitMaturity. |
| BCE.PR.C |
FixedFloater |
62,000 |
Becomes exchangeable into the Ratchet-Rate series AD March 1, 2008. Until then, it pays a fixed dividend of $1.385 p.a. Afterwards … I bet it’s less! |
| PWF.PR.K |
PerpetualPremium |
54,102 |
Now with a pre-tax bid-YTW of 4.51% based on a bid of $25.66 and a call 2014-11-30 at $25.00. |
| BCE.PR.A |
FixedFloater |
52,330 |
Exchangeable into Ratchet-Rate series AB on September 1, 2007. Until then, it pays $1.3625 p.a. … afterwards … who knows? |
| BCE.PR.H |
RatchetRate |
41,900 |
|
There were thirteen other “$25 p.v. equivalent” index-included issues with over 10,000 shares traded today.
This entry was posted on Friday, April 6th, 2007 at 1:28 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed.
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As you know, I’ve been using HIMIPref for a year and a half and I am extremely pleased with the results. Over that period I have slowly increased the size of my preferred share portfolio as I have become more comfortable with HIMIPref. I’m now at a size where diversification is increasingly difficult. This is because the number of attractively priced investment grade preferred shares that can be purchased in size is limited. It is further exacerbated by the fact that split shares as a class seem always to be the most attractively priced, but, as you point out in your recent post on split shares, the risk of credit downgrade is higher for split shares as compared with single issue preferred shares.
So, I’m now at the point where increasing the size of the portfolio forces me to purchase more of the split share issues I already own, if I want to continue to purchase the most attractive issues as judged by HIMIPref. The other alternative is to diversify into P3 issues. (I already own all of the attractively priced single issuer prefs.)
My questions are as follows:
1. HIMIPref currently gives high valuation scores to several P3 issues. You, however, have noted that HIMIPref is less reliably values P3’s as compared with investment grade. Is the credit risk worth the potential reward? The yield differential alone does not seem to warrant taking on the risk.
2. Widely accepted equity portfolio theory says that adding risk in small amounts to an otherwise conservative portfolio can increase returns and actually decrease risk, where risk is measured in terms of volatility. Does the same hold true for preferred shares where risk is measured in terms of credit and not duration?
3. My intuition is that not all P3’s are in principle alike in terms of risk/return potential. A P3 (high) of a utility-like business such as Yellow Pages seems substantially less risky from a credit perspective than a cyclical issuer with a P3 rating. Further, a P3(high), it seems, has substantially higher reward potential than any P3 due to the bump in price that will no doubt result from a credit upgrade. Should these issues – issuer specific and differences between P3(high) and all other P3’s – play a role as we move down the food chain?
Thanks in advance for your response.
I will respond to these questions soon, as posts.
Honest!
Take your time. A response entirely at your convenience is all that I can reasonably expect.
[…] Drew asked some questions on April 5: 1. HIMIPref currently gives high valuation scores to several P3 issues. You, however, have noted that HIMIPref is less reliably values P3’s as compared with investment grade. Is the credit risk worth the potential reward? The yield differential alone does not seem to warrant taking on the risk. […]