{"id":2018,"date":"2008-04-02T22:06:24","date_gmt":"2008-04-03T02:06:24","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=2018"},"modified":"2008-04-02T22:06:24","modified_gmt":"2008-04-03T02:06:24","slug":"bmoprl-drops-onto-market","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=2018","title":{"rendered":"BMO.PR.L Drops Onto Market"},"content":{"rendered":"

BMO.PR.L, the 5.80% perp announced March 25<\/a> commenced trading today to less than rapturous applause, but enough volume to indicate that the underwriting was a modest success. Modest? Their press release<\/a> indicated:<\/p>\n

The Bank has granted to the underwriters an option to purchase up to an additional $50 million of the Preferred Shares exercisable at any time up to two days before closing.<\/p><\/blockquote>\n

… and I don’t see a press release on their site indicating that the option was picked up, nor is there anything on SEDAR<\/a>.<\/p>\n

On the ‘new issue’ post<\/a> there was a question<\/a> about the relative levels of the TD and BMO prefs … so here’s a table, as of the close 4\/2:<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
BMO \/ TD Perpetual Comparison<\/td>\n<\/tr>\n
Issue<\/td>\nDividend<\/td>\nQuote, 4\/2<\/td>\nPre-Tax
Bid-YTW<\/td>\n		Curve Price<\/td>\n<\/tr>\n
BMO.PR.J<\/td>\n1.125<\/td>\n19.95-05<\/td>\n5.72%<\/td>\n20.65<\/td>\n<\/tr>\n
BMO.PR.K<\/td>\n1.3125<\/td>\n22.35-40<\/td>\n5.95%<\/td>\n23.57<\/td>\n<\/tr>\n
BMO.PR.H<\/td>\n1.325<\/td>\n23.23-39<\/td>\n5.74%<\/td>\n23.72<\/td>\n<\/tr>\n
BMO.PR.L<\/td>\n1.45<\/td>\n24.75-79<\/td>\n5.89%<\/td>\n25.12<\/td>\n<\/tr>\n
TD.PR.O<\/td>\n1.2125<\/td>\n22.80-00<\/td>\n5.41%<\/td>\n22.29<\/td>\n<\/tr>\n
TD.PR.P<\/td>\n1.3125<\/td>\n23.95-00<\/td>\n5.57%<\/td>\n23.56<\/td>\n<\/tr>\n
TD.PR.Q<\/td>\n1.40<\/td>\n25.11-15<\/td>\n5.67%<\/td>\n24.58<\/td>\n<\/tr>\n
TD.PR.R<\/td>\n1.40<\/td>\n24.86-88<\/td>\n5.68%<\/td>\n24.50<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Internally, the TD issues look well behaved … the yield spread between the discount issues and the near-par ones is not quite the 15bp I have previously suggested<\/a> as a rule of thumb, but it’s close enough for horse-shoes. Note that TD.PR.Q, despite its 25.11-15 quote, may legitimately be considered a discounted issue because it’s full of dividend … a dividend of $0.35 goes ex on April 4<\/a>. The BMO issues, internally, are less in accord with the rule, with BMO.PR.K looking about 20bp cheap to its peers.<\/p>\n

If we mentally adjust the BMO.PR.K issue, we can see that BMO is trading to yield about 30bp more, pre-tax, than TD across the curve. This may be contrasted with the best available bond comparison, sub-debt, the recent BMO issue<\/a>, trading with a presumed call in 2018, is quoted at 261bp over Canadas, while a TD issue<\/a> trading to a presumed call in 2017 (5 years prior to maturity), is at 245bp over Canadas. So that’s 16bp over, pre-tax, for 10-year sub-debt, which makes a 30bp pre-tax spread on preferreds seem plausible.<\/p>\n

Looking at a Pfd-1(low) issuer: NA.PR.K yields 5.98%, NA.PR.L yield 5.96 (no allowance for convexity here!) with a new issue currently being flogged at a 6.00% yield. The BMO issues are at least trading through the NAs.<\/p>\n

All in all, given the preferred share quotes, and supported by evidence from the sub-debt market, I’d say the differences between BMO and TD preferred yields are well explained by a presumption of credit quality. <\/p>\n","protected":false},"excerpt":{"rendered":"

BMO.PR.L, the 5.80% perp announced March 25 commenced trading today to less than rapturous applause, but enough volume to indicate that the underwriting was a modest success. Modest? Their press release indicated: The Bank has …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-2018","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2018","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=2018"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/2018\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2018"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2018"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2018"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}