January 18, 2007

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
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 4.06% 4.08% 25,937 17.30 1 +0.2015% 1,030.4
Fixed-Floater 4.75% 2.98% 75,444 10.72 7 +0.1230% 1,048.2
Floater 4.56% -23.86% 64,020 8.22 4 +0.1556% 1,043.1
Op. Retract 4.67% 2.19% 78,460 2.02 17 +0.0402% 1,031.9
Split-Share 5.06% 1.12% 402,233 2.85 11 -0.0443% 1,044.3
Interest Bearing 6.70% 5.58% 74,501 2.64 6 +0.0033% 1,036.6
Perpetual-Premium 5.02% 3.70% 234,728 5.14 55 +0.0085% 1,052.3
Perpetual-Discount 4.51% 4.53% 1,218,255 16.35 4 +0.0807% 1,055.4
Major Price Changes
Issue Index Change Notes
There were no index-included issues with major price moves today.
Volume Highlights
Issue Index Volume Notes
BNS.PR.K PerpetualPremium 202,800 TD crossed 100,000 at 26.00, then another 100,000 at the same price 90 minutes later. Now with a pre-tax bid-YTW of 4.20% based on a bid of 25.95 and a call 2014-05-28 at $25.00
BMO.PR.J PerpetualDiscount 131,233 Recent new issue. Now with a pre-tax bid-YTW of 4.52% based on a bid of $24.94 and a limitMaturity.
GWO.PR.X OpRet 108,160 Nesbitt crossed 85,000 at $27.51; Desjardins crossed 18,500 at 27.56. Now with a pre-tax bid-YTW of 2.48% based on a bid of $27.56 and a call 2009-10-30 at $26.00.
GWO.PR.H PerpetualPremium 58,860 RBC crossed 50,000 at 26.00. Now with a pre-tax bid-YTW of 4.41% based on a bid of $25.82 and a call 2014-10-31 at $25.00.
RY.PR.D PerpetualPremium 34,440 RBC bought a 19,800 from Scotia in three successive trades at 25.01. Now with a pre-tax bid-YTW of 4.54% based on a limitMaturity.

There were thirteen other “$25 p.v. equivalent” index-included issues with over 10,000 shares traded today.

Updated 2007-1-24 … Correction of some trading information

8 Responses to “January 18, 2007”

  1. Drew says:

    In light of the fact that HIMIPref is designed to be used principally with investment grade preferred shares, why don’t you eliminate the non-investment grade preferred shares from its database and, if they are available, instead add other investment grade preferred shares? My question obviously assumes there are investment grade preferred shares which are not included in the HIMIPref database, which may of course be wrong, but to the extent it is right, what criteria do you use for selecting preferred shares to be added or deleted from the database?

  2. jiHymas says:

    This is an important issue – and one that I have been asked about by others recently.

    Therefore, I won’t bury a response with a comment here – I’ll prepare a proper explanation for the HIMIPref Website and then post about the new page when it’s done.

    Briefly: All major new issues are added to the universe – these are all Pfd-3(low) or higher [we don’t have a “Junk Pref” market yet!]. Once these are in the universe, they stay in … off the top of my head, I can only recall deleting one issue … it traded about 500 shares per month and was mucking up my monthly reports by always being at either the top or the bottom of the performance charts.

    There are investment grade prefs that are not included in the Universe – these will usually be split share corporations that I don’t consider worth adding.

    I consider the following questions when deciding whether or not to add an issue:

    • Will the issue be tradeable next year?
    • Does this issue have characteristics the Universe needs?
    • Will this issue be considered for inclusion in the BMO NB 50 Index?

    Any affirmative answer gets the issue included.

    For example, right now the Universe needs interest-bearing prefs. I’m much more likely to add a new issue of those than of anything else.

  3. Drew says:

    Thank you. I have one comment. The criteria of “Does this issue have characteristics the Universe needs?” begs the question: what does it need, or, perhaps more usefully, how do you determine what it needs; and why, as an investor and not the Universe, should I care about the needs of the Universe (leaving aside entirely the metaphysical question of whether a Universe can have needs)? I will await your no doubt thoughtful response in the fullness of time.

  4. jiHymas says:

    Well … the Universe needs Interest Bearing issues right now because there’s not a good selection. There are only six issues in the InterestBearing index now and some of them have undesirable characteristics – such as, for instance, the BAM.PR.T issue that is virtually certain to called in June.

    Ideally, there are enough issues in each index that spreads to the curve can be calculated and so that characteristics of individual issues and issuers are not mistaken for characteristics of the class. In other words, I want a statistically valid sample to perform statistics on.

  5. jiHymas says:

    In other words, I want a statistically valid sample to perform statistics on.

    And, of course, once I’ve decided that a particular sub-class of preferreds makes a wonderful investment, I want to be able to invest in it!

  6. Drew says:

    Thanks. I think I understand better now, though I’m still a little confused about the continued inclusion of the P3s, as presumably they are not part of the asset class against which you wish to compare issues.

  7. jiHymas says:

    Oh, Pfd-3s aren’t the shakiest investments going. According to DBRS:

    Preferred shares rated Pfd-3 are of adequate credit quality. While protection of dividends and principal is still considered acceptable, the issuing entity is more susceptible to adverse changes in financial and economic conditions, and there may be other adverse conditions present which detract from debt protection. Pfd-3 ratings generally correspond with companies whose senior bonds are rated in the higher end of the BBB category. 

    Pfd-3’s are suitable from time to time in larger portfolios that can take small positions in them without ruinous transaction costs; HIMIPref™ allows the the maxWeightCreditClass3 and maxWeightIssuerClass3 constraints to be set according to taste. I recommend values of no more than 10% and 2%, respectively, to those users who wish to grab a little of the extra yield.

    There is much more company-specific volatility in these issues than there is for the higher grades, however! The more that a pref can be treated as a generic package of cash flows, the more reliable HIMIPref™ results will be.

  8. […] Drew’s comments and queries have, as always, pointed out some deficiencies and, as is not quite so often the case, have led to an improvement in my documentation. […]

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