{"id":3768,"date":"2008-11-03T20:53:03","date_gmt":"2008-11-04T00:53:03","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=3768"},"modified":"2008-11-03T20:53:03","modified_gmt":"2008-11-04T00:53:03","slug":"ryprl-fixed-reset-settles-trades-like-five-year","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=3768","title":{"rendered":"RY.PR.L Fixed-Reset Settles: Trades Like Five-Year"},"content":{"rendered":"

The Royal Bank Fixed-Reset 5.60%+267<\/a> closed today, an event fraught with interest due to the question posed on October 28<\/a>: “through or wide?”.<\/p>\n

The problem, you see, is that the extant fixed-resets are all trading with a yield-to-five-year-call well in excess of the 5.60% dividend and simultaneously with a yield-to-limitMaturity well below the 5.60% dividend. Thus, if the market considers these issues to be five-years, the new Royal should trade at a discount to par; if it considers them to be perpetuals, at a premium. This is the first case where the initial fixed coupon and the subsequent resets were significantly enough different from extant issues to make such a comparison meaningful.<\/p>\n

And the results are in! RY.PR.L traded 418,820 shares today and closed at 24.70-75. After accounting for underwriter support, we can draw a preliminary conclusion, based mainly on the fact that the issue trades at a discount to par: the market considers it to be a five year. Probably. The issues trade with less five year variance than perpetual variance but the results are not devoid of ambiguity … they never are! That’s what makes this fun!<\/p>\n

\n\n\n\n\n\n\n\n\n
RY.PR.L and some comparators<\/td>\n<\/tr>\n
Ticker<\/td>\nFixed<\/td>\nReset<\/td>\nQuote<\/td>\nYield
to
5-year call<\/td>\n		Yield
to
limitMaturity<\/td>\n<\/tr>\n
RY.PR.L<\/td>\n5.60%<\/td>\n+267bp<\/td>\n24.70-75<\/td>\n5.90%<\/td>\n5.61%<\/td>\n<\/tr>\n
TD.PR.Y<\/td>\n5.10%<\/td>\n+168bp<\/td>\n23.75-99<\/td>\n6.29%<\/td>\n4.92%<\/td>\n<\/tr>\n
RY.PR.I<\/td>\n5.00%<\/td>\n+193bp<\/td>\n23.70-99<\/td>\n6.33%<\/td>\n5.15%<\/td>\n<\/tr>\n
TD.PR.A<\/td>\n5.00%<\/td>\n+196bp<\/td>\n23.45-00<\/td>\n6.59%<\/td>\n5.23%<\/td>\n<\/tr>\n
TD.PR.S<\/td>\n5.00%<\/td>\n+160bp<\/td>\n23.57-24.69<\/td>\n6.42%<\/td>\n4.86%<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

We’ll get another data point on Wednesday, when the TD 5.60%+274<\/a> settles.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Royal Bank Fixed-Reset 5.60%+267 closed today, an event fraught with interest due to the question posed on October 28: “through or wide?”. The problem, you see, is that the extant fixed-resets are all trading …<\/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-3768","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3768","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=3768"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3768\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3768"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3768"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}