Market Action

January 18, 2007

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 4.06% 4.08% 25,937 17.30 1 +0.2015% 1,030.4
Fixed-Floater 4.75% 2.98% 75,444 10.72 7 +0.1230% 1,048.2
Floater 4.56% -23.86% 64,020 8.22 4 +0.1556% 1,043.1
Op. Retract 4.67% 2.19% 78,460 2.02 17 +0.0402% 1,031.9
Split-Share 5.06% 1.12% 402,233 2.85 11 -0.0443% 1,044.3
Interest Bearing 6.70% 5.58% 74,501 2.64 6 +0.0033% 1,036.6
Perpetual-Premium 5.02% 3.70% 234,728 5.14 55 +0.0085% 1,052.3
Perpetual-Discount 4.51% 4.53% 1,218,255 16.35 4 +0.0807% 1,055.4
Major Price Changes
Issue Index Change Notes
There were no index-included issues with major price moves today.
Volume Highlights
Issue Index Volume Notes
BNS.PR.K PerpetualPremium 202,800 TD crossed 100,000 at 26.00, then another 100,000 at the same price 90 minutes later. Now with a pre-tax bid-YTW of 4.20% based on a bid of 25.95 and a call 2014-05-28 at $25.00
BMO.PR.J PerpetualDiscount 131,233 Recent new issue. Now with a pre-tax bid-YTW of 4.52% based on a bid of $24.94 and a limitMaturity.
GWO.PR.X OpRet 108,160 Nesbitt crossed 85,000 at $27.51; Desjardins crossed 18,500 at 27.56. Now with a pre-tax bid-YTW of 2.48% based on a bid of $27.56 and a call 2009-10-30 at $26.00.
GWO.PR.H PerpetualPremium 58,860 RBC crossed 50,000 at 26.00. Now with a pre-tax bid-YTW of 4.41% based on a bid of $25.82 and a call 2014-10-31 at $25.00.
RY.PR.D PerpetualPremium 34,440 RBC bought a 19,800 from Scotia in three successive trades at 25.01. Now with a pre-tax bid-YTW of 4.54% based on a limitMaturity.

There were thirteen other “$25 p.v. equivalent” index-included issues with over 10,000 shares traded today.

Updated 2007-1-24 … Correction of some trading information

HIMI Preferred Indices

HIMI Preferred Indices : February, 1997

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1997-02-28
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,492.3 0 0 0 0 0 0
FixedFloater 1,492.1 3 2.00 3.12% 17.9 1,145M 5.01%
Floater 1,405.2 7 1.71 3.45% 18.1 83M 3.77%
OpRet 1,282.9 27 1.25 4.57% 4.6 84M 6.37%
SplitShare 1,273.1 1 2.00 5.39% 5.5 370M 5.60%
Interest-Bearing 1,282.9 0 0 0 0 0 0
Perpetual-Premium 1,201.8 4 1.00 3.26% 2.4 108M 7.84%
Perpetual-Discount 1,147.4 0 0 0 0 0 0

Index Constitution, 1997-02-28, Pre-Rebalancing

Index Constitution, 1997-02-28, Post-Rebalancing

Issue Comments

BCE.PR.Y / BCE.PR.Z

I mentioned one half of this pairing in the January 17, 2007 report and I’ll just make things more explicit here.

This pair is very similar to the BBD.PR.B / BBD.PR.D pair that has been discussed previously. They are convertable into each other on December 1, 2007, just over ten months off, but are trading at prices that are very different.

At the moment, for instance, BCE.PR.Z is quoted at 26.38-75, 1×9, and BCE.PR.Y is quoted at 24.86-90, 4×9. Between now and December 1, 2007, when they can convert into each other, the former issue may be expected to pay dividends at a fixed rate totalling $1.3298, while the Ys, paying a ratchetFloatingRate based on Canadian Prime will pay somewhere around 0.92125. Therefore, the price differential, in the absence of liquidity premia, should be in the neighborhood of $0.40 … but it ain’t. The differential bid/bid is more like $1.50, implying (in this very simple analysis) that there is $1.10 just lying around waiting to be scooped up.

I recognize that the BCE.PR.Y (the cheap ones) are relatively illiquid, due to their float of only 1.1-million-odd shares. The Zs (the expensive ones) have a float of 8.8-million-odd shares. So, there will be problems exploiting this inefficiency for those who care to try it.

But … what I can’t understand is: why would anybody hold the Zs? Even if they’re unable to buy sufficient Ys to replace them? BCE can put an extremely low rate on the “Z” dividend payout commencing December 1, 2007, all but forcing conversion. Surely nobody seriously believes that BCE will leave the rate as it was set five years ago, at 5.319%. In BCE’s last ratchet/reset, the BCE.PR.S / BCE.PR.T the rate was reset to 4.502% … and I certainly wouldn’t bet on this very generous payout being offered again on the Y/Z reset date.

Update: The Zs actually went up in price today (2007-1-18) (bid/bid), closing at 26.39-75, 3×8. Why? Surely there will be few who disagree that the projected price as of the Dec. 1 conversion date is $25.00 … and if you do disagree, please leave a comment, because I’m interest. So the projected capital loss (from the bid price) exceeds the intervening dividends – expected total return over the next 10 months is negative. I don’t understand ….

Market Action

January 17, 2007

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 4.07% 4.09% 24,015 17.27 1 -0.1609% 1,028.4
Fixed-Floater 4.75% 3.11% 76,886 10.73 7 +0.3083% 1,046.9
Floater 4.57% -25.47% 63,673 8.20 4 +0.1674% 1,044.8
Op. Retract 4.68% 2.10% 78,584 2.02 17 +0.0116% 1,031.5
Split-Share 5.05% 0.81% 410,266 2.85 11 -0.1176% 1,044.8
Interest Bearing 6.70% 5.64% 75,192 2.81 6 +0.1281% 1,036.6
Perpetual-Premium 5.02% 3.68% 237,619 5.43 55 -0.0062% 1,052.2
Perpetual-Discount 4.51% 4.53% 1,221,325 16.34 4 -0.0805% 1,054.5
Major Price Changes
Issue Index Change Notes
BCE.PR.Z FixedFloater +1.0417% What’s up with FixedFloaters and specifically this issue? The index has gained a total of 0.75% in the last three days. This particular issue is callable at $25.00 on 2007-12-1 and becomes exchangeable into a ratchet-rate preferred at that point … and if BCE feels like it, BCE can put such a crummy rate on the reset option that conversion is almost forced. So, who would put a closing bid of $26.19 on this stuff? Even more mysteriously, who would pay $28.00 for it? TD Securities bought 122 shares at $28.00 and CIBC bought 388 shares at the same price today. ???? That makes two poor retail suckers who have just overpaid big time.
Volume Highlights
Issue Index Volume Notes
BMO.PR.J PerpetualDiscount 371,320 Today’s new issue settlement brings lots of lovely commissions to the Street! Now with a pre-tax bid-YTW of 4.52% based on a limitMaturity.
FBS.PR.B SplitShare 265,850 Recent new issue continues to trade frantically. But why? Why why why? Now with a pre-tax bid-YTW of 1.93% based on a bid of $10.32 and a call 2008-1-14 at $10.00. Many are obviously betting that it will last until the hardMaturity 2011-12-15 … that will be a first, if it happens to a large extent.
BNS.PR.K PerpetualPremium 72,431 Scotia crossed 70,100 at $26.00. Now with a pre-tax bid-YTW of 4.18%, based on a bid of 25.97 and a call 2014-5-28 at $25.00.
CM.PR.I PerpetualPremium 54,742 Now with a pre-tax bid-YTW of 4.48% based on a bid of $25.42 and a call 2016-3-1 at $25.00. Getting to be a tad expensive, I’d say.
BNA.PR.C SplitShare 53,075 Recent New Issue. Now with a pre-tax bid-YTW of 4.46% based on a bid of $24.81 and a hardMaturity 2019-1-10 at $25.00

There were ten other “$25 p.v. equivalent” index-included issues with over 10,000 shares traded today.

HIMI Preferred Indices

HIMI Preferred Indices : January, 1997

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1997-01-31
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,483.7 0 0 0 0 0 0
FixedFloater 1,478.7 3 2.00 3.44% 17.3 2,140M 5.03%
Floater 1,397.0 7 1.71 3.43% 18.1 76M 3.78%
OpRet 1,267.3 27 1.29 4.88% 4.7 73M 6.44%
SplitShare 1,260.7 1 2.00 5.50% 5.6 534M 5.66%
Interest-Bearing 1,267.3 0 0 0 0 0 0
Perpetual-Premium 1,195.3 4 1.00 3.25% 2.4 88M 7.84%
Perpetual-Discount 1,141.2 0 0 0 0 0 0

Index Constitution, 1997-01-31, Pre-Rebalancing

Index Constitution, 1997-01-31, Post-Rebalancing

Data Changes

BMO.PR.J : First Day Uneventful

The BMO New Issue settled today and there wasn’t much of a surprise. The trading range was 24.90-98 on volume of 371,320 shares; the closing quote was 25.96-98, 25×35.

This issue has been fully entered into the HIMIPref™ database – the securityCode is A40006, and a reorgDataEntry has been posted to reflect the change from the preIssue code of P25004.

Update : The issue has been added to the PerpetualDiscount Index.

Market Action

January 16, 2007

Sorry! No time to do the indices just now! I will update them tom… er, later today.

Major Price Changes
Issue Index Change Notes
There were no index-included issues with major price moves today.
Volume Highlights
Issue Index Volume Notes
FBS.PR.A SplitShare 678,160 Recent new issue. Now with a pre-tax bid-YTW of 1.82% based on a bid of $10.33 and a call 2008-1-14 at $10.00, so why bother? There would seem to be a lot of money being bet that it will make it to its hardMaturity 2011-12-15 at $10.00, which yields 4.12%. I’ll take the other side of that bet!
BNA.PR.C SplitShare 69,331 Now with a pre-tax bid-YTW of 4.47% based on a bid of $24.77 and a hardMaturity 2019-01-10 at $25.00. Now, that’s more like it!
PWF.PR.L PerpetualPremium 52,500 Now with a pre-tax bid-YTW of 4.20% based on a bid of $26.65 and a call 2015-11-30 at $25.00.
GWO.PR.G PerpetualPremium 51,495 Now with a pre-tax bid-YTW of 4.09% based on a call 2010-01-30 at $26.00 … or 2011-1-30 at $25.75 … or 2012-1-30 at $25.50! Even if it lasts until the call 2014-1-30 at $25.00, the yield only increases to 4.11%! Pays $1.30, for those who are interested.
SLF.PR.B PerpetualPremium 47,555 Now with a pre-tax bid-YTW of 4.34% based on a call 2014-10-30 at $25.00.

There were twelve other “$25 p.v. equivalent” index-included issues with over 10,000 shares traded today.

Update:

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 4.07% 4.09% 23,999 17.28 1 +0.1208% 1,030.0
Fixed-Floater 4.77% 3.35% 77,555 12.53 7 +0.2349% 1,043.7
Floater 4.56% -24.21% 62,783 8.21 4 +0.2170% 1,043.0
Op. Retract 4.68% 2.05% 79,258 2.02 17 +0.0597% 1,031.4
Split-Share 5.05% 0.51% 408,981 2.85 11 +0.0490% 1,046.0
Interest Bearing 6.70% 5.68% 75,169 2.64 6 +0.0930% 1,035.2
Perpetual-Premium 5.02% 3.65% 241,089 5.44 55 -0.0087% 1,052.3
Perpetual-Discount 4.51% 4.53% 767,953 16.33 3 +0.0539% 1,055.4

HIMI Preferred Indices

HIMI Preferred Indices : December, 1996

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1996-12-31
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,483.1 0 0 0 0 0 0
FixedFloater 1,472.0 3 2.00 3.82% 16.7 4,418M 5.06%
Floater 1,396.5 8 1.74 3.45% 18.5 61M 3.74%
OpRet 1,257.1 27 1.29 4.80% 4.7 69M 6.44%
SplitShare 1,230.3 1 2.00 5.85% 5.6 838M 5.71%
Interest-Bearing 1,257.1 0 0 0 0 0 0
Perpetual-Premium 1,194.1 4 1.00 3.28% 2.5 98M 7.81%
Perpetual-Discount 1,140.1 0 0 0 0 0 0

Index Constitution, 1996-12-31, Pre-Rebalancing

Index Constitution, 1996-12-31, Post-Rebalancing