{"id":3062,"date":"2008-09-17T21:56:51","date_gmt":"2008-09-18T01:56:51","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=3062"},"modified":"2008-09-17T21:56:51","modified_gmt":"2008-09-18T01:56:51","slug":"september-17-2008","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=3062","title":{"rendered":"September 17, 2008"},"content":{"rendered":"

The market shows infinite capacity to surprise! We are told that today’s horror was due to credit concerns<\/a>, which seems like a reasonable conclusion to draw. Most data seem consistent with this hypothesis.<\/p>\n

So why did Fixed-Resets do so well relative to Perpetuals? Regardless of how wonderful – or not – the structure is, it addresses term risk only. Credit risk is not addressed. You have to make an awfully convoluted argument before you conclude that the relative performance of these two preferred share sub-classes is right and proper.<\/p>\n

On the other hand, Floaters didn’t do very well. It’s a lousy sample – only two issues and both backed by BAM – but they are not money market instruments<\/a>. The market always makes sense eventually. Just not right away and not all at the same time.<\/p>\n

After today’s carnage, PerpetualDiscounts yield an average 6.18%, back to where it was on August 8 (when yields were falling; three days since the yield-trough of September 12 has undone a month of price-gains) and July 4 (when yields were rising). At the standard 1.4x equivalency factor, this is equal to 8.65% interest. Long corporates now yield 6.3%, so the pre-tax interest-equivalent spread is now about 235bp.<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n\n
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.
The Fixed-Reset<\/i> index was added effective 2008-9-5 at that day’s closing value of 1,119.4 for the Fixed-Floater<\/i> index.<\/strong><\/td>\n<\/tr>\n
Index<\/td>\nMean Current Yield (at bid)<\/td>\nMean YTW<\/td>\nMean Average Trading Value<\/td>\nMean Mod Dur (YTW)<\/td>\nIssues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\nN\/A<\/td>\nN\/A<\/td>\nN\/A<\/td>\nN\/A<\/td>\n0<\/td>\nN\/A<\/td>\nN\/A<\/td>\n<\/tr>\n
Fixed-Floater<\/td>\n4.73%<\/td>\n4.79%<\/td>\n73,960<\/td>\n15.74<\/td>\n6<\/td>\n-0.5447%<\/td>\n1,081.3<\/td>\n<\/tr>\n
Floater<\/td>\n5.04%<\/td>\n5.04%<\/td>\n49,315<\/td>\n15.45<\/td>\n2<\/td>\n-5.5873%<\/td>\n795.3<\/td>\n<\/tr>\n
Op. Retract<\/td>\n4.99%<\/td>\n4.61%<\/td>\n123,883<\/td>\n3.30<\/td>\n14<\/td>\n-0.3258%<\/td>\n1,046.7<\/td>\n<\/tr>\n
Split-Share<\/td>\n5.52%<\/td>\n6.68%<\/td>\n49,875<\/td>\n4.33<\/td>\n14<\/td>\n-0.9015%<\/td>\n1,013.3<\/td>\n<\/tr>\n
Interest Bearing<\/td>\n6.63%<\/td>\n7.68%<\/td>\n52,803<\/td>\n5.20<\/td>\n2<\/td>\n+0.2558%<\/td>\n1,073.5<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n6.25%<\/td>\n6.20%<\/td>\n57,935<\/td>\n2.19<\/td>\n1<\/td>\n+0.3613%<\/td>\n993.0<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n6.11%<\/td>\n6.18%<\/td>\n184,303<\/td>\n13.62<\/td>\n70<\/td>\n-0.9394%<\/td>\n872.7<\/td>\n<\/tr>\n
Fixed-Reset<\/td>\n5.07%<\/td>\n4.92%<\/td>\n1,501,971<\/td>\n14.25<\/td>\n9<\/td>\n-0.1501%<\/td>\n1,117.0<\/td>\n<\/tr>\n<\/table>\n<\/div>\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Major Price Changes<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
BAM.PR.K<\/td>\nFloater<\/td>\n-9.4444%<\/td>\nTraded 500 shares in a range of 18.00-19.24 … but the closing quote was 16.30-18.99, 10×3. Way to go on the market making, guys!<\/td>\n<\/tr>\n
BCE.PR.R<\/td>\nFixFloat<\/td>\n-4.1208%<\/td>\nFinancing jitters? See main text.<\/td>\n<\/tr>\n
BAM.PR.K<\/td>\nFloater<\/td>\n-3.7948%<\/td>\nClosing quote 18.00-69, 2×3. 1600 shares traded in the range 18.00-01 between 1:40pm and 2:18pm.<\/td>\n<\/tr>\n
ELF.PR.F<\/td>\nPerpetualDiscount<\/td>\n-6.9251%<\/td>\nNow with a pre-tax bid-YTW of 7.53% based on a bid of 18.01 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
IAG.PR.A<\/td>\nPerpetualDiscount<\/td>\n-6.4499%<\/td>\nNow with a pre-tax bid-YTW of 6.70% based on a bid of 17.26 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.G<\/td>\nPerpetualDiscount<\/td>\n-4.6221%<\/td>\nNow with a pre-tax bid-YTW of 6.95% based on a bid of 19.81 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.P<\/td>\nPerpetualDiscount<\/td>\n-4.5303%<\/td>\nNow with a pre-tax bid-YTW of 7.00% based on a bid of 20.02 and a limitMaturity.<\/td>\n<\/tr>\n
HSB.PR.C<\/td>\nPerpetualDiscount<\/td>\n-4.0553%<\/td>\nNow with a pre-tax bid-YTW of 6.37% based on a bid of 20.11 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.H<\/td>\nPerpetualDiscount<\/td>\n-3.1488%<\/td>\nNow with a pre-tax bid-YTW of 6.86% based on a bid of 17.84 and a limitMaturity.<\/td>\n<\/tr>\n
DFN.PR.A<\/td>\nSplitShare<\/td>\n-3.0663%<\/td>\nAsset coverage of just under 2.3:1 as of September 15, according to the company<\/a>. Now with a pre-tax bid-YTW of 5.72% based on a bid of 9.80 and a hardMaturity 2014-12-1 at 10.00.<\/td>\n<\/tr>\n
GWO.PR.I<\/td>\nPerpetualDiscount<\/td>\n-3.0514%<\/td>\nNow with a pre-tax bid-YTW of 6.24% based on a bid of 18.11 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.D<\/td>\nPerpetualDiscount<\/td>\n-2.9783%<\/td>\nNow with a pre-tax bid-YTW of 6.82% based on a bid of 21.50 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.N<\/td>\nPerpetualDiscount<\/td>\n-2.8781%<\/td>\nNow with a pre-tax bid-YTW of 7.54% based on a bid of 15.86 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.W<\/td>\nPerpetualDiscount<\/td>\n-2.3775%<\/td>\nNow with a pre-tax bid-YTW of 6.17% based on a bid of 20.12 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.O<\/td>\nOpRet<\/td>\n-2.2989%<\/td>\nNow with a pre-tax bid-YTW of 8.94% based on a bid of 21.25 and optionCertainty<\/a> 2013-6-30 at 25.00. Compare with BAM.PR.H (6.52% to 2012-3-30), BAM.PR.I (5.86% to 2013-12-30) and BAM.PR.J (6.34% to 2018-3-30).<\/td>\n<\/tr>\n
POW.PR.B<\/td>\nPerpetualDiscount<\/td>\n-2.1442%<\/td>\nNow with a pre-tax bid-YTW of 6.37% based on a bid of 21.45 and a limitMaturity.<\/td>\n<\/tr>\n
BCE.PR.R<\/td>\nFixFloat<\/td>\n-2.1277%<\/td>\n <\/td>\n<\/tr>\n
FFN.PR.A<\/td>\nSplitShare<\/td>\n-2.1030%<\/td>\nAsset coverage of just under 1.8:1 as of September 15, 2008, according to the company<\/a>. Now with a pre-tax bid-YTW of 6.72% based on a bid of 9.31 and a limitMaturity.<\/td>\n<\/tr>\n
FBS.PR.B<\/td>\nSplitShare<\/td>\n-2.0619%<\/td>\nAsset coverage of just under 1.6:1 as of September 11, according to TD Securities<\/a>. Now with a pre-tax bid-YTW of 6.54% based on a bid of 9.50 and a hardMaturity 2011-12-15 at 10.00.<\/td>\n<\/tr>\n
CM.PR.E<\/td>\nPerpetualDiscount<\/td>\n-2.0314%<\/td>\nNow with a pre-tax bid-YTW of 6.72% based on a bid of 21.22 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.J<\/td>\nPerpetualDiscount<\/td>\n-1.9031%<\/td>\nNow with a pre-tax bid-YTW of 6.74% based on a bid of 17.01 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.B<\/td>\nFloater<\/td>\n-1.8225%<\/td>\n <\/td>\n<\/tr>\n
MFC.PR.B<\/td>\nPerpetualDiscount<\/td>\n-1.8040%<\/td>\nNow with a pre-tax bid-YTW of 5.81% based on a bid of 20.14 and a limitMaturity.<\/td>\n<\/tr>\n
HSB.PR.D<\/td>\nPerpetualDiscount<\/td>\n-1.7292%<\/td>\nNow with a pre-tax bid-YTW of 6.32% based on a bid of 19.89 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.M<\/td>\nPerpetualDiscount<\/td>\n-1.6980%<\/td>\nNow with a pre-tax bid-YTW of 7.37% based on a bid of 16.21 and a limitMaturity.<\/td>\n<\/tr>\n
ELF.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.5240%<\/td>\nNow with a pre-tax bid-YTW of 7.23% based on a bid of 16.80 and a limitMaturity.<\/td>\n<\/tr>\n
CM.PR.I<\/td>\nPerpetualDiscount<\/td>\n-1.4223%<\/td>\nNow with a pre-tax bid-YTW of 6.64% based on a bid of 18.02 and a limitMaturity.<\/td>\n<\/tr>\n
MFC.PR.C<\/td>\nPerpetualDiscount<\/td>\n-1.3761%<\/td>\nNow with a pre-tax bid-YTW of 5.85% based on a bid of 19.35 and a limitMaturity.<\/td>\n<\/tr>\n
BNA.PR.B<\/td>\nSplitShare<\/td>\n-1.2658%<\/td>\nNow with a pre-tax bid-YTW of 9.14% based on a bid of 19.50 and a hardMaturity<\/a> 2016-3-25 at 25.00. See BNA.PR.C, below.<\/td>\n<\/tr>\n
ENB.PR.A<\/td>\nPerpetualDiscount<\/td>\n-1.2600%<\/td>\nNow with a pre-tax bid-YTW of 5.89% based on a bid of 23.51 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.A<\/td>\nPerpetualDiscount<\/td>\n-1.2208%<\/td>\nNow with a pre-tax bid-YTW of 6.05% based on a bid of 18.61 and a limitMaturity.<\/td>\n<\/tr>\n
NA.PR.N<\/td>\nFixedReset<\/td>\n-1.2205%<\/td>\n <\/td>\n<\/tr>\n
BCE.PR.I<\/td>\nFixedFloat<\/td>\n-1.2097%<\/td>\n <\/td>\n<\/tr>\n
PWF.PR.E<\/td>\nPerpetualDiscount<\/td>\n-1.1775%<\/td>\nNow with a pre-tax bid-YTW of 6.14% based on a bid of 22.66 and a limitMaturity.<\/td>\n<\/tr>\n
BAM.PR.J<\/td>\nOpRet<\/td>\n-1.1008%<\/td>\nNow with a pre-tax bid-YTW of 6.34% based on a bid of 23.36 and a softMaturity<\/a> 2018-3-30 at 25.00. See BAM.PR.O, above.<\/td>\n<\/tr>\n
PWF.PR.G<\/td>\nPerpetualDiscount<\/td>\n-1.0604%<\/td>\nNow with a pre-tax bid-YTW of 6.17% based on a bid of 24.26 and a limitMaturity.<\/td>\n<\/tr>\n
SLF.PR.C<\/td>\nPerpetualDiscount<\/td>\n-1.0371%<\/td>\nNow with a pre-tax bid-YTW of 6.17% based on a bid of 18.13 and a limitMaturity.<\/td>\n<\/tr>\n
GWO.PR.H<\/td>\nPerpetualDiscount<\/td>\n+1.0350%<\/td>\nNow with a pre-tax bid-YTW of 5.94% based on a bid of 20.50 and a limitMaturity.<\/td>\n<\/tr>\n
TCA.PR.Y<\/td>\nPerpetualDiscount<\/td>\n+1.6344%<\/td>\nNow with a pre-tax bid-YTW of 5.97% based on a bid of 47.26 and a limitMaturity.<\/td>\n<\/tr>\n
BNA.PR.C<\/td>\nSplitShare<\/td>\n+5.8906%<\/td>\nAsset coverage of 3.2+:1 as of August 29 according to the company<\/a>. Now with a pre-tax bid-YTW of 10.92% based on a bid of 15.10 and a hardMaturity<\/a> 2019-1-10 at 25.00. Compare with BNA.PR.A (7.26% to 2010-9-30) and BNA.PR.B (9.14% to 2016-3-25). Note that, given 2.4 shares of BAM.A per BNA preferred<\/a> and a price of 27.51 on BAM.A (down 4.35% from yesterday), asset coverage is now 2.6+:1. Today’s volume was 1,500 shares in a range 15.50-75.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n
\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nVolume<\/td>\nNotes<\/td>\n<\/tr>\n
RY.PR.I<\/td>\nFixedReset<\/td>\n187,370<\/td>\nRBC bought a total of 64,400 shares in six blocks from various dealers in a range of 24.95-97. New issue settled yesterday<\/a>.<\/td>\n<\/tr>\n
TD.PR.P<\/td>\nPerpetualDiscount<\/td>\n169,675<\/td>\nNational Bank crossed 100,000 at 23.40, then Nesbitt crossed 65,000 at the same price. Now with a pre-tax bid-YTW of 5.71% based on a bid of 23.31 and a limitMaturity.<\/td>\n<\/tr>\n
BNS.PR.M<\/td>\nPerpetualDiscount<\/td>\n127,100<\/td>\nAnonymous bought 10,000 from Nesbitt at 19.75, then National crossed 80,000 at the same price. Now with a pre-tax bid-YTW of 5.83% based on a bid of 19.63 and a limitMaturity.<\/td>\n<\/tr>\n
RY.PR.G<\/td>\nPerpetualDiscount<\/td>\n75,050<\/td>\n(Not necessarily the same) anonymous bought five blocks of 10,000 shares each from Scotia (virtually simultaneously), then another 10,000 from Nesbitt at 19.12. Now with a pre-tax bid-YTW of 5.99% based on a bid of 19.01 and a limitMaturity.<\/td>\n<\/tr>\n
CU.PR.B<\/td>\nPerpetualDiscount<\/td>\n50,500<\/td>\nNesbitt crossed 50,000 at 24.90. Now with a pre-tax bid-YTW of 6.05% based on a bid of 25.00 and a limitMaturity.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

There were twenty-nine other index-included $25-pv-equivalent issues trading over 10,000 shares today.<\/p>\n","protected":false},"excerpt":{"rendered":"

The market shows infinite capacity to surprise! We are told that today’s horror was due to credit concerns, which seems like a reasonable conclusion to draw. Most data seem consistent with this hypothesis. So why …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-3062","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3062","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=3062"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3062\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3062"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3062"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3062"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}