PrefBlog

Well, here it is, the market’s been open for two hours and a mere 35-thousand-odd shares have traded. What a slow day! This might be an indication that the blow-out sale has run its course and the underwriters now have some shelf-space free for the next issue.

It is possible that this has something to do with the banks’ year-end: I will not pretend to be an expert on bank finances, but today is the first day that trades will settle after their year-end, which is October 31. Having sales settle on or prior to this date would go a little way, at least, towards deleveraging their reported balance sheets and improving their capital ratios – but I will leave it to others to determine how much of an incentive this was in the determination of blow-out timing.

All this is now ancient history, of course, and the question on everybody’s lips is “when are these shares going to recover? ARE they going to recover?”. My answer to the latter question is ‘I think so.’ Not ‘I know so’, because the market has a special way of humiliating those who profess to know its secrets, but this issue looks quite cheap by a variety of measures – and is actually trading at even-yield to Sunlife bonds, which means that, if we take the market price as fair, the perpetual nature of this issue is considered to offset the tax benefits of dividend income entirely. This does not sound reasonable!

 Timing? Holy smokes … making predictions about what the market will do is risky enough … making predictions about WHEN it’s going to do it is foolhardy! The price could go up tomorrow … it might go up by the end of November … it might, of course, never happen and leave me looking silly. The last blow-out was the WN.PR.E issue: I’ve prepared a HIMIPref™ graph of the price and Yield-to-Worst of this issue since issuance. It flatlined at $24.00 for a long time, but once it got moving, it moved quickly!

 Now, watch! As soon as I click the “Publish” button for this post, half a million shares will trade at $23.50! Such are the perils of forecasting!

This entry was posted on Friday, October 27th, 2006 at 11:54 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.