Market Action

November 1, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
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% 4.06% 41,662 10.58 2 -0.6366% 1,012.7
Fixed-Floater 4.83% 3.98% 140,659 12.97 7 -0.3718% 1,023.3
Floater 4.52% -15.65% 73,056 6.50 5 -0.1186% 1,021.7
Op. Retract 4.68% 1.75% 86,760 2.30 17 0.1302% 1,022.7
Split-Share 5.03% 3.65% 186,268 3.36 9 0.0467% 1,022.9
Interest Bearing 6.89% 4.30% 57,813 2.43 7 -0.1999% 1,022.2
Perpetual-Premium 5.08% 4.04% 252,736 4.27 49 0.0001% 1,039.5
Perpetual-Discount 4.59% 5.62% 610,937 16.17 7 0.2497% 1,035.2
Major Price Changes
Issue Index Change Notes
FCN.PR.A InterestBearing -1.8719% Income Trusts ultimately back up this one, on a miserable day for income trusts! On June 30, 2006, the fund had $152-million in assets to cover $68-million in prefs. Applying an the prospectus, distributions cannot be made to the Capital Unit holders unless coverage exceeds 1.4:1, so it seems reasonable still. But panic panic panic on the TSX!
ENB.PR.A PerpetualPremium -1.8655%  
BCE.PR.S RatchetRate -1.2490% Closed at $24.51-86. Looks like the market feels the offer at $25.60 won’t be happening!
BC.PR.C FixedFloater -1.1978% Closed at $25.57-77. Looks like the market feels the offer at $26.25 won’t be happening!
MST.PR.A InterestBearing +1.0476% With a name like “Multi-Select Trust” it went up? It gets it come-uppance tomorrow!
Volume Highlights
Issue Index Volume Notes
RY.PR.C PerpetualPremium 239,875 New Issue
SLF.PR.D PerpetualDiscount 86,890 Clearance Sale continues!
BSD.PR.A InterestBearing 85,791 Backed by Income Trusts!
WN.PR.E PerpetualDiscount 70,532  
GWO.PR.X OpRet 52,453  

There were ten other index-included issues trading over 10,000 shares today.

Data Changes

New Issue : CIBC 4.7% Perp

Well, it didn’t take long for CIBC to replace the capital lost via the redemption of CM.PR.B! They announced a new issue (with a headline announcing a redemption!) that will close on November 15.

 Terms of the issue (Class A Series 31) are:

Dividend: Non-cumulative, 4.7% on $25.00 p.v. is $1.1750

Callable:

  • $26.00, 2012-1-31 – 2013-1-30
  • $25.75, 2013-1-31 – 2014-1-30
  • $25.50, 2014-1-31 – 2015-1-30
  • $25.25, 2015-1-31 – 2016-1-30
  • $25.00, 2016-1-31 +

DBRS: Pfd-1 (low)

S&P: P-1 (low)

There will be 16-million shares outstanding; underwriters have a greenshoe option for an additional 2-million shares. It’s a bought deal.

The terms of this issue make it a reasonably close match to CM.PR.H, issued 2005-3-10, paying $1.20, call schedule commencing 2001-3-30, closing 2006-11-3 at $25.80-89

  CM.PR.H New Issue
Base Rate 24.02 23.83
Price due to short-term 0.09 0.10
Price due to long-term 0.52 0.48
Price due to error 0.02 0.01
Price due to Credit Spread (Low) -0.54 -0.49
Intrinsic 24.11 23.93
Price due to Liquidity 1.58 1.58?
Total $25.69 $25.51?

Basically, the thing looks pretty good … priced to move! I’ll also note that it yields 10bp more (at issue) than the recently issued RY.PR.C, in terms of PRE-TAX DIVIDENDS, which is about right considering that the credit spread for “Low” is 11bp AFTER TAX.

This issue has been entered into HIMIPref™ with the temporary security code P50007.

Market Action

November 3, 2006

When it rains, it pours! I have again been unable to get to the index rebalancing, but will do the daily return and volume charts. Monday! I’ll update the indices Monday! (unless the roof falls in)

Update 2006-11-7

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
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% 4.07% 38,445 10.58 2 +0.3444% 1,013.6
Fixed-Floater 4.83% 3.98% 139,618 9.01 7 +0.0295% 1024.7
Floater 4.51% -19.22% 70,655 6.53 5 +0.2632% 1,027.2
Op. Retract 4.67% 1.19% 83,496 2.29 18 -0.0444% 1,023.2
Split-Share 5.03% 3.71% 182,023 3.36 9 0.1228% 1,022.4
Interest Bearing 6.93% 5.41% 58,898 2.42 7 0.0786% 1,017.2
Perpetual-Premium 5.07% 3.92% 247,576 3.92 49 +0.0681% 1,041.5
Perpetual-Discount 4.58% 4.62% 603,240 16.17 7 -0.0342% 1,036.1

End of 2006-11-7 Update

Major Price Changes
Issue Index Change Notes
BSD.PR.A InterestBearing -1.0989% Yet another apparent victim of “I-don’t-want-anything-to-do-with-income-trusts!” syndrome, as this one is also ultimately dependent upon a portfolio of Canada’s favourite investment. According to their June 30, 2006 financial statement, they had assets of $154-million to cover preferred securities of $68-million (rounded figures). Applying yesterday’s approximation of a 15.4% loss since then, we are left with $130-million in assets, for a coverage ratio of 1.9:1. This is not as good as the two other Income Trust based prefs examined earlier, but is still a long way away from panic time. This issue will not pay distributions to the capital unit holders if the coverage is less than 1.4:1. YTW at the bid of 9.90 is 6.33% based on a maturity 2015-3-31.
STW.PR.A InterestBearing +1.6000% Bouncing back from yesterday! Pre-tax YTW is 5.60% based on a bid price of $10.16 and a maturity 2009-12-31.
Volume Highlights
Issue Index Volume Notes
WN.PR.E PerpetualDiscount 63,053 Closed at $24.95-00, making a determined effort to get into “PerpetualPremium” territory! The bid-side YTW is 4.87%, based on a call at $25.00, 2015-7-31.
PIC.PR.A SplitShare 58,842 RBC sold 10,000 to Scotia @ 16.02, then crossed 38,989 @ $16.03 for delayed delivery. Pre-tax YTW is 3.92% based on a maturity 2010-11-1.
BC.PR.C FixedFloater 53,188 Scotia crossed 50,000 @ $25.60 in the final minutes of trading.
SLF.PR.D PerpetualDiscount 43,250 The clearance sale mentality returned a little today, as the issue slipped a bit, to close at $24.06-09. The extremely comparable SLF.PR.C were quoted at $24.45-50.
CM.PR.H PerpetualPremium 41,475 A good day for this issue, which gained 35bp on the day (bid/bid). YTW at the closing bid of $25.80 was 4.34%, based on a call 2014-4-29 @ $25.00. I’d be tempted to call this a result of money switching out of the CM.PR.B, which were called for redemption today … but the volume on the Bs was only 16,463 and the redemption has been anticipated for quite a while.

There were ten other index-included issues trading over 10,000 shares today.

Issue Comments

CM.PR.B to be Redeemed!

CIBC has announced that CM.PR.B (Non-cumulative Class A
Preferred Shares Series 24) will be redeemed at $26.00 on January 31, 2007. [Note: the link is to a cgi script. If not accessible, try here.]

 Not a surprise, really … perpetuals paying $1.50 are an endangered species, but the idea that they might have saved $0.25 p.a. on the redemption price (due to a declining call price) added a little piquancy to the speculation.

 What will be interesting is the resolution of the question: will they replace them with a new issue?

Update, 2007-5-10: For some odd reason this post has become the target of spambots. I am therefore disabling comments on this post.

Programme Changes

HIMIPref™ Release : 2006-11-02

There’s a new release of HIMIPref™ available for download at usual place.

If you choose to install this upgrade, please, PLEASE remember to back-up your user data prior to re-installation!
This release continues the recent tradition of being more for my convenience than for users’! Several changes have been made to the Administrative Users’ Computation of Indices, but very little has changed for Institutional users.

There is no absolute necessity for Institutional users to install the new version – any old version that worked yesterday will continue to work today. There is the consideration that, in the unlikely event that (i) You find a bug, and (ii) the effect of this bug is different in the two versions, it will be much easier track down the error if we’re all singing from the same hymnbook.

I can remember two minor fixes! Clicking on a data point in a graph of the “Core Yield Curve” now has a much more explicable error message; and calculation of after-tax performance for individual issues has been fixed up.

I found two more minor bugs (features!) when testing the system:

  • When you do a price-variance analysis graph for a very wide (say, 40%) band of prices, the system insists that the point with “x = -0.0000” is outside the graphed area. Don’t click on the error box! Just hit return, or the cursor will cause the system to attempt to redraw the graph and HIMIPref™ will appear frozen, although it isn’t.
  • Error #3706 is produced when right-clicking on Average Trading Volume on the report summary and selecting “Liquidity Calculation”. The report box gets produced, but with one line of missing information and it’s annoying.

I’ll look at these bugs tomorrow. It’s not worth putting out a new release just for them, but fixes will be part of the next release.

Market Action

November 2, 2006

Not only do I have to do the rebalancing for November month-end, but a lot of things have been piling up this week to soak away my time! I will do the volume and price change reports tonight, but the index levels will have to wait until tomorrow. Sorry!

Update 2006-11-7

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.15% 4.08% 39,965 10.54 2 -0.2611% 1,010.1
Fixed-Floater 4.83% 3.97% 137,276 12.98 7 +0.1140% 1,024.4
Floater 4.52% -18.83% 70,995 6.49 5 +0.2796% 1,024.5
Op. Retract 4.67% 1.30% 84,595 2.29 18 0.0976% 1,023.7
Split-Share 5.04% 3.74% 184,790 3.36 9 -0.1743% 1021.1
Interest Bearing 6.93% 5.52% 58,231 2.43 7 -0.1667% 1,016.4
Perpetual-Premium 5.08% 3.85% 250,223 3.85 49 +0.1257% 1,040.8
Perpetual-Discount 4.58% 4.61% 604,477 16.18 7 +0.1167% 1036.4

End of 2006-11-7 update

Major Price Changes
Issue Index Change Notes
MST.PR.A InterestBearing -2.7333% The underlying interest for this issue is … income trusts! June 30, 2006, the fund had assets of about $127.8-million to cover preferred securities of $53.2-million: asset coverage of 2.40:1. If we have a look at the Capped Income Trust Index ETF (Symbol : XTR), we see it closed at $15.58 on June 30, compared to $13.19 today, a loss of about 15.4%. This would imply net assets of MST.UN of $108-million to cover the $53.2-million prefs … more than 2:1, still quite adequate. No need to panic just quite yet! The YTW is now 5.48% to a maturity on 2009-9-30.
STW.PR.A InterestBearing -1.8646 The underlying interest for this issue is a vehicle called COMPASS … and COMPASS is … an Income Trust Fund! On Jun 30, 2006, this fund had assets of $184-million to cover preferred securities worth $72.4-million : asset coverage of 2.54:1. Reduce assets by 15.4%, as above, estimate assets to be now $155-million. Still in excess of 2.0:1, no need for any throat-cutting. YTW is now 6.16%, based on a 2009-12-31 maturity.
AL.PR.E Floater +1.5578% On zero volume!
ENB.PR.A PerpetualPremium +1.6634% A big bounce back from a steep drop yesterday. At a bid price of $25.67, it is now trading with a YTW of 0.97%, based on a call 2007-1-1 at $25.25. If it survives until its 2008-1-1 call at $25, it will have yielded 3.98%. Given that the issue pays $1.375 and Enbridge can save $0.25 by waiting a year, it may well make it to the later date.
Volume Highlights
Issue Index Volume Notes
CM.PR.G PerpetualPremium 102,735 MacDougall bought 100,000 from RBC (in two tranches: one lot was of 100 shares!) @ 27.05.
GWO.PR.G PerpetualPremium 94,434 RBC sold 20,000 to Desjardins and 63,700 to Scotia, both lots trading at $26.85.
RY.PR.C PerpetualPremium 61,670 A steady day for the new issue: it closed a little better than yesterday at 25.18-22, 3×50
CU.PR.A PerpetualPremium 50,000 The only trade was a purchase by MacDougall of 50,000 @ 27.21 from RBC. It pays $1.45, so the issuer may just wish to call it without taking advantage of the $0.25 p.a. declining premium – if this happens, the 2008-3-31 call will result in a yield of 2.93%.
SLF.PR.D PerpetualDiscount 49,103 Only just on the high-volume charts! The clearance sale is definitely winding down … but how long until the price recovers? If anything, the issue should be priced higher (not much higher!) than SLF.PR.C, which closed 40-ish cents better than SLF.PR.D.

There were six other index-included issues trading over 10,000 shares today.

Data Changes

RY.PR.C Off to a Fine Start!

The new Royal Bank 4.6% perpetuals were off to a good start today, trading 239,875 shares in a range of 25.15-25 to close at $25.16-18, 3×13.

The reorg entry has been processed on HIMIPref™: the pre-issue code was P50006, the new security code is A45012.

I’ll update this post with some comments about valuation when I update HIMIPref™ with today’s closing quotations later tonight.

Update : The issue still looks attractive at the closing quotation. Consider the YTWs of the other Royal Perpetual issues that are outstanding (except for the soon to be redeemed RY.PR.O:

Issue Pre-tax YTW Quote “Taxable Curve” Price
RY.PR.A 4.47% 24.84-91 24.97
RY.PR.B 4.30% 25.70-75 25.83
RY.PR.C 4.54% 25.16-18 25.59
RY.PR.W 4.07% 26.27-55 25.89

So, it’s my guess there’s still a little value left in this issue!

Market Action

October 31, 2006

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.11% 4.03% 42,749 10.68 2 -0.1794% 1,019.2
Fixed-Floater 5.00% 2.75% 151,045 10.65 7 +0.0864% 1,027.1
Floater 4.52% -16.01% 74,789 6.52 5 0.0635% 1,022.9
Op. Retract 4.67% 1.94% 89,693 2.37 17 0.0859% 1,021.3
Split-Share 4.95% 3.47% 157,739 3.26 11 0.0075% 1,022.4
Interest Bearing 6.88% 5.16% 57,457 1.97 7 0.0257% 1,024.2
Perpetual-Premium 5.07% 3.88% 213,084 4.32 47 0.1516% 1,039.5
Perpetual-Discount 4.60% 4.63% 604,494 16.15 7 0.1804% 1,032.6
Major Price Changes
Issue Index Change Notes
BCE.PR.R FixedFloater +1.1111% Just a reversal of yesterday’s loss, really : a handful of shares traded just above $25.50. Closed at 25.48-56, 5×5.
Volume Highlights
Issue Index Volume Notes
GWO.PR.X OpRet 307,528 National sold 150,000 @27.55 to Nesbitt, Scotia & Desjardins in the late afternoon. Pre-tax YTW 2.69% based on a bid of $27.55 and a call 2009-10-30 @ $26.00. It only pays $1.20, so it might possibly make it to 2013-9-29, having yielded 3.23%.
ACO.PR.A OpRet 276,511 Nesbitt processed an internal cross of 275,000 @ 27.89. Pre-tax YTW of 2.94%, based on a bid of $27.65 and a call 2008-12-31 @ $26.00. It pays $1.4375, so its chances of making it further along the redemption trail are … not good.
SLF.PR.D PerpetualDiscount 91,007 The clean-out sale continues, but at a slower pace!
SLF.PR.B PerpetualPremium 81,885 A bit, but not much, expensive I’d say, closing at $25.56-63 for a pre-tax YTW of 4.55% based on a call @ $25.00 on 2014-10-30.
PWF.PR.D OpRet 70,700 Nesbitt processed an internal cross at $27.18 in the only trade of the day. This issue has trade enough this month that it will be back in the index after rebalancing.

There were fifteen other index-included issues trading over 10,000 shares today.

HIMI Preferred Indices

HIMI Preferred Indices : October, 1994

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

HIMI Index Values 1994-10-31
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,086.0 0 0 0 0 0 0
FixedFloater 1,086.0 0 0 0 0 0 0
Floater 1,024.8 3 1.33 5.63% 14.4 94M 6.36%
OpRet 969.1 17 1.34 7.21% 5.3 73M 7.30%
SplitShare 969.1 0 0 0 0 0 0
Interest-Bearing 969.1 0 0 0 0 0 0
Perpetual-Premium 1,015.2 5 1.19 6.94% 4.0 56M 8.32%
Perpetual-Discount 1,004.8 1 1.00 7.40% 12.1 44M 7.39%

Index Constitution, 1994-10-31, Pre-Rebalancing

Index Constitution, 1994-10-31, Post-Rebalancing