Have we seen this movie before? Esoteric assets are being securitized in volume:
Sales of bonds backed by everything from timeshare rentals to shipping containers to entertainment royalties are poised to rise this year as investors seek to boost returns with interest rates at about record lows.
So-called esoteric asset-backed securities issuance may soar 12.9 percent to $35 billion, compared with debt linked to more traditional collateral such as auto and credit-card loans, which will grow 8.75 percent to $87 billion, according to a forecast from Credit Suisse Group AG.
…
Investors willing to hold BBB rated bonds backed by franchise royalty fees of the Sonic Corp. (SONC) fast- food chain may receive as much as 2 percentage points more annually than similarly rated securities tied to auto loans, according to Barclays Capital’s Cory Wishengrad in New York.
…
Cronos Containers Ltd. boosted the size of its November offering of bonds tied to shipping container lease payments by $50 million to $200 million, according to data compiled by Bloomberg. An A rated $170 million portion maturing in five years priced to yield 5 percent.
It was quite a good day for the Canadian preferred share market, with PerpetualDiscounts – what are left of them! – winning 53bp, FixedResets up 9bp and DeemedRetractibles gaining 19bp. Floating Rate issues also appear to be celebrating the new year. Good volatility – all winners! Volume was quite low, but better than the comatose levels of the last week.
PerpetualDiscounts now yield 5.08%, equivalent to 6.60% interest at the standard conversion factor of 1.4x. 1.3x. Long corporates now yield about 4.65%, so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 195bp, significantly narrower than the 205bp reported December 30.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.1234 % | 2,169.8 |
| FixedFloater | 4.80 % | 4.54 % | 36,535 | 17.14 | 1 | 1.0204 % | 3,211.9 |
| Floater | 3.07 % | 3.34 % | 67,638 | 18.94 | 3 | 1.1234 % | 2,342.9 |
| OpRet | 5.00 % | 1.34 % | 65,635 | 1.36 | 7 | 0.4228 % | 2,471.8 |
| SplitShare | 5.44 % | 1.71 % | 70,190 | 0.93 | 4 | 0.0924 % | 2,573.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4228 % | 2,260.2 |
| Perpetual-Premium | 5.41 % | -6.07 % | 85,510 | 0.09 | 23 | 0.2211 % | 2,199.4 |
| Perpetual-Discount | 5.15 % | 5.08 % | 142,236 | 15.29 | 7 | 0.5343 % | 2,348.5 |
| FixedReset | 5.08 % | 2.87 % | 201,174 | 2.39 | 64 | 0.0872 % | 2,360.9 |
| Deemed-Retractible | 4.98 % | 3.69 % | 183,734 | 1.89 | 46 | 0.1922 % | 2,260.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.G | FixedFloater | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-04 Maturity Price : 25.00 Evaluated at bid price : 19.80 Bid-YTW : 4.54 % |
| MFC.PR.B | Deemed-Retractible | 1.05 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.09 Bid-YTW : 6.29 % |
| BAM.PR.B | Floater | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-04 Maturity Price : 15.81 Evaluated at bid price : 15.81 Bid-YTW : 3.34 % |
| SLF.PR.E | Deemed-Retractible | 1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.34 Bid-YTW : 6.55 % |
| MFC.PR.C | Deemed-Retractible | 1.40 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.71 Bid-YTW : 6.35 % |
| POW.PR.D | Perpetual-Discount | 1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-04 Maturity Price : 24.49 Evaluated at bid price : 24.97 Bid-YTW : 5.00 % |
| BAM.PR.I | OpRet | 1.92 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-02-03 Maturity Price : 25.25 Evaluated at bid price : 25.50 Bid-YTW : -5.75 % |
| BAM.PR.K | Floater | 2.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-01-04 Maturity Price : 15.75 Evaluated at bid price : 15.75 Bid-YTW : 3.35 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| GWO.PR.M | Deemed-Retractible | 233,800 | Nesbitt crossed blocks of 185,000 and 25,000, both at 25.60. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 5.53 % |
| CM.PR.I | Deemed-Retractible | 90,330 | RBC crossed 29,300 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-31 Maturity Price : 25.75 Evaluated at bid price : 25.95 Bid-YTW : 3.51 % |
| CM.PR.L | FixedReset | 54,069 | Nesbitt crossed 50,000 at 27.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.35 Bid-YTW : 2.13 % |
| BNS.PR.T | FixedReset | 52,980 | Nesbitt crossed 50,000 at 27.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 27.11 Bid-YTW : 2.27 % |
| BAM.PR.O | OpRet | 35,400 | RBC crossed blocks of 20,000 and 15,000 at 25.50. YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 3.66 % |
| SLF.PR.G | FixedReset | 33,837 | RBC crossed 30,000 at 22.55. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.47 Bid-YTW : 4.61 % |
| There were 18 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.H | Perpetual-Premium | Quote: 25.55 – 26.88 Spot Rate : 1.3300 Average : 0.7773 YTW SCENARIO |
| TCA.PR.Y | Perpetual-Premium | Quote: 52.65 – 53.94 Spot Rate : 1.2900 Average : 0.8248 YTW SCENARIO |
| FTS.PR.C | OpRet | Quote: 25.90 – 26.47 Spot Rate : 0.5700 Average : 0.3518 YTW SCENARIO |
| GWO.PR.L | Deemed-Retractible | Quote: 25.91 – 26.50 Spot Rate : 0.5900 Average : 0.3948 YTW SCENARIO |
| BMO.PR.K | Deemed-Retractible | Quote: 26.47 – 26.98 Spot Rate : 0.5100 Average : 0.3468 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 24.50 – 25.18 Spot Rate : 0.6800 Average : 0.5168 YTW SCENARIO |
Isn’t “the standard conversion factor” still 1.3x ?
I was just about to post the same question adrian2.
I look back in PreLetter and see the change to 1.3x was made back in March 2011.
Perhaps James had a brain freeze…….
Whoopsy!
I actually multiplied by 1.3, but wrote down 1.4. Geez, I was so proud of myself for putting the right year on the title, I forgot that other elements of accuracy are also desirable.
I’ve fixed the post.
Hi James,
Any comments on the BAM split annual report, especially the newly created Junior Preferred shares? Thanks.
[…] PerpetualDiscounts now yield 4.86%, equivalent to 6.32% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.6%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) now stands at about 170bp, a sharp decline from the 195bp reported January 4. […]