{"id":32241,"date":"2006-08-18T15:06:50","date_gmt":"2006-08-18T19:06:50","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=80"},"modified":"2006-08-18T15:06:50","modified_gmt":"2006-08-18T19:06:50","slug":"bmoprg","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=32241","title":{"rendered":"BMO.PR.G"},"content":{"rendered":"<p>This issue became the only &#8220;Operating Retractible&#8221; to have a negative bid-Yield-to-Worst (YTW) on August 17, with a bid price of 25.36.<\/p>\n<p>\u00a0It was issued in the spring of 1998 and has an annual coupon of $1.20. The option schedule is:<\/p>\n<ul>\n<li>Redemption\u00a0\u00a0\u00a0\u00a0\u00a0 2005-08-25\u00a0\u00a0\u00a0\u00a0\u00a0 2006-08-24\u00a0 25.500000<\/li>\n<li>Redemption\u00a0\u00a0\u00a0\u00a0\u00a0 2006-08-25\u00a0\u00a0\u00a0\u00a0\u00a0 2007-08-24\u00a0 25.250000<\/li>\n<li>Redemption\u00a0\u00a0\u00a0\u00a0\u00a0 2007-08-25\u00a0\u00a0 INFINITE DATE\u00a0 25.000000<\/li>\n<li>Retraction\u00a0\u00a0\u00a0\u00a0\u00a0 2008-05-25\u00a0\u00a0 INFINITE DATE\u00a0 26.040000<\/li>\n<\/ul>\n<p>And the calculation of YTW is:<\/p>\n<ul>\n<li>Call\u00a0 2006-09-16 YTM: 10.41 % [Restricted: 0.86 %] (Prob: 12.31 %)<\/li>\n<li>Call\u00a0 2006-09-24 YTM: -0.43 % [Restricted: -0.05 %] (Prob: 9.32 %)<\/li>\n<li>Soft Maturity\u00a0 2008-05-24 YTM: 3.90 % [Restricted: 3.90 %] (Prob: 78.38 %)<\/li>\n<\/ul>\n<p>And the cash flow for YTW is:<\/p>\n<ul>\n<li>2006-09-24\u00a0 FINAL DIVIDEND\u00a0\u00a0 0.10\u00a0\u00a0 1.000451\u00a0\u00a0 0.10<\/li>\n<li>2006-09-24\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 MATURITY\u00a0 25.25\u00a0\u00a0 1.000451\u00a0 25.26<\/li>\n<\/ul>\n<p>Which at least has the advantage of being simple!<\/p>\n<p>HIMIPref\u2122 does not consider the investment merits (or lack thereof!) of this issue when evaluating trades &#8211; the <a href=\"http:\/\/www.prefshares.com\/glossary.html#eligibleForPurchase\">eligibleForPurchase<\/a> function returns code &#8220;14&#8221; :<\/p>\n<blockquote>\n<p>pseudoModifiedDuration (Worst) of buy side less than minimum setting<\/p>\n<\/blockquote>\n<p>In other words, the issue is simple too short-term to be worth bothering with.<\/p>\n<p>With an annual coupon of only\u00a0$1.20 and with the bank having the chance to save $0.25 by waiting until the end of August, 2007 to redeem these shares, they will probably be around for another year, no matter what the term until the YTW scenario. From an investor&#8217;s perspective, however &#8230; <strong>Who&#8217;s putting a bid on these things????<\/strong> The most likely scenario has the pre-tax cash flow analysis:<\/p>\n<ul>\n<li>2006-11-25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.30\u00a0\u00a0 0.989474\u00a0\u00a0 0.30<\/li>\n<li>2007-02-25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.30\u00a0\u00a0 0.979888\u00a0\u00a0 0.29<\/li>\n<li>2007-05-25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.30\u00a0\u00a0 0.970703\u00a0\u00a0 0.29<\/li>\n<li>2007-08-25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.30\u00a0\u00a0 0.961299\u00a0\u00a0 0.29<\/li>\n<li>2007-11-25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.30\u00a0\u00a0 0.951985\u00a0\u00a0 0.29<\/li>\n<li>2008-02-25\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 DIVIDEND\u00a0\u00a0 0.30\u00a0\u00a0 0.942762\u00a0\u00a0 0.28<\/li>\n<li>2008-05-24\u00a0 FINAL DIVIDEND\u00a0\u00a0 0.29\u00a0\u00a0 0.933925\u00a0\u00a0 0.27<\/li>\n<li>2008-05-24\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 MATURITY\u00a0 25.00\u00a0\u00a0 0.933925\u00a0 23.35<\/li>\n<li>Total Cash Flows\u00a0\u00a0\u00a0 27.0924<\/li>\n<li>Total Present Value\u00a0\u00a0\u00a0 25.3601<\/li>\n<li>Discounting Rate 3.9026 % (Annual rate compounded semi-annually)<\/li>\n<\/ul>\n<p>which doesn&#8217;t look all that great to me!\n<\/p>\n<p><b>Update, 2008-9-9<\/b>: And, as a matter of fact, the issue was <a href=\"http:\/\/www.prefblog.com\/?p=997\">called for redemption at par, effective 2007-8-27<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This issue became the only &#8220;Operating Retractible&#8221; to have a negative bid-Yield-to-Worst (YTW) on August 17, with a bid price of 25.36. \u00a0It was issued in the spring of 1998 and has an annual coupon &hellip;<\/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-32241","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/32241","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=32241"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/32241\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32241"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32241"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32241"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}