{"id":1256,"date":"2007-09-29T16:36:44","date_gmt":"2007-09-29T20:36:44","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1256"},"modified":"2007-09-29T16:36:44","modified_gmt":"2007-09-29T20:36:44","slug":"whoosh-market-adjustment-affects-fair-value-of-new-issues","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1256","title":{"rendered":"Whoosh! Market Adjustment Affects Fair Value of New Issues"},"content":{"rendered":"<p>Readers will remember that when the recent new issues were announced, I liked both of them: the <a href=\"http:\/\/www.prefblog.com\/?p=1235\">BNS 5.25% was worth $25.93<\/a> according to the prior day&#8217;s closing prices, although by the time the <a href=\"http:\/\/www.prefblog.com\/?p=1246\">BMO 5.25% was announced<\/a> both issues were worth more like $25.33.<\/p>\n<p>Which was still good enough to buy!<\/p>\n<p>Following the debacle of Friday September 28, in which the market just kept on falling, both issues are now fairly valued below their issue price: fair value is about 24.88 to 24.90.<\/p>\n<p>Something like this leads me to suspect that there just isn&#8217;t too much opportunistic money on the sidelines; that while the new issues were recognized as attractive, all the money required to buy them has come out of other preferred issues, rather than from other asset classes.<\/p>\n<p>This is a funny market. 5.25% dividends, multiplied by an <a href=\"http:\/\/www.prefblog.com\/?p=1255\">equivalency factor<\/a> of 1.4 implies that interest of 7.35% must be received to provide the same after-tax income. There are unique risks in the preferred share market, of course. Investors must be aware of these risks and ensure they&#8217;re not overly exposed to any of them (or to any other single risk!) &#8230; but 7.35%? From a major bank? We haven&#8217;t seen that kind of interest rate lately.<\/p>\n<p><strong>Update, 2007-10-2<\/strong>: As of the close\u00a0today, fair value\u00a0for both issues is within\u00a0a few pennies of\u00a0$24.85.<\/p>\n<p><b>Update, 2007-10-4<\/b>: As of the close today, fair value is $24.72 for the BMO issue, $24.74 for BNS.\n<\/p>\n<p><!--cc0f36394229f5d50ddb724937007d70--><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Readers will remember that when the recent new issues were announced, I liked both of them: the BNS 5.25% was worth $25.93 according to the prior day&#8217;s closing prices, although by the time the BMO &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[],"class_list":["post-1256","post","type-post","status-publish","format-standard","hentry","category-new-issues"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1256","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1256"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1256\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}