Archive for July, 2007

July 31, 2007

Tuesday, July 31st, 2007

Month end, and a funny day in the markets! American equities were hit, with a few companies exposed to sub-prime taking the brunt; Canadian equities stayed even, thanks to a CAD 5.8-billion takeover bid for Western Oil Sands by Marathon Oil.  

Treasuries were strong, while Canadas were up a tad, further widening the rate gap … and I do mean widening! For purposes of US/Canada spreads, the vocabulary was established long, long ago, and “widening” means “Canada did worse”. Always.

The differing behaviour is due to - you guessed it! – sub-prime, other junk and hedge funds. Bear Stearns suspended redemptions in another fund, while Macquarie Fortress announced a monthly return of -25% on its high-yield (not sub-prime!) funds.  Three French funds are toast, due to the classic:

“Like many actors, we have tried to revitalize the performance of our funds by investing in CDOs,” Arnaud Ploix, a spokesman for Paris-based Oddo, said in an interview today. “Like others, we noticed recent problems with short-term liquidity and were caught out by the subprime dilemma.”

Still … carnage means carrion, so there are some happy people out there (besides Deutsche Bank!). It’s probably a good time to short hedge funds! But you know things are getting interesting when three super-major dealers’ bonds trade as junk!

But take a break for some perspective:

High-yield, high-risk bonds lost 3.1 percent in July, their worst monthly performance since 2002, as concerns about an onslaught of debt to finance leveraged buyouts drove down prices.

Returning to our more normal and much more interesting apocalyptic screaming, there are musings that the USD 37.2-billion takeover of TXU is at risk, with the suddenly nervous financiers tempted to pay a billion bucks to get out of the deal. Observant readers will not that both amounts are oddly reminiscent of the BCE / Teachers’ agreement, but the musings are rebutted on another news service. Trial balloon? Chatter from clerks? Who knows? There would be a big reputational hit to take.

Meanwhile, back in the real economy (remember that?) US Inflation news was reasonably encouraging. There is no word yet on how third-tranche double-knockout inflation swaptions reacted to this story.

It looks like Murdoch will buy Dow Jones. It is not yet clear how much he will bid for Prefblog. Yo! Murdoch! Call me!

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 4.93% 4.92% 25,041 15.63 2 +0.2060% 1,039.4
Fixed-Floater 4.98% 5.11% 131,615 15.46 8 -0.0252% 1,021.5
Floater 4.85% 1.06% 76,954 11.52 4 +0.0202% 1,049.6
Op. Retract 4.84% 4.07% 85,789 3.12 16 -0.0348% 1,020.3
Split-Share 5.06% 4.60% 102,302 3.93 17 -0.1769% 1,046.5
Interest Bearing 6.25% 6.67% 62,938 4.65 3 +0.1383% 1,031.7
Perpetual-Premium 5.54% 5.23% 114,037 5.93 26 -0.1430% 1,022.0
Perpetual-Discount 5.08% 5.12% 330,656 15.31 38 +0.0585% 973.3
Major Price Changes
Issue Index Change Notes
BNA.PR.B SplitShare (for now! Will be “Scraps” after rebalancing, due to volume concerns) -1.9522% Now with a pre-tax bid-YTW of 5.32% based on a bid of 24.61 and a hardMaturity 2016-3-25 at 25.00
CFS.PR.A SplitShare -1.3834% Giving up yesterday’s gains. Now with a pre-tax bid-YTW of 4.36% based on a bid of 9.98 and a hardMaturity 2012-1-31 at 10.00.
LFE.PR.A SplitShare +1.2597% Now with a pre-tax bid-YTW of 4.31% based on a bid of 10.45 and a hardMaturity 2012-12-1 at 10.00
Volume Highlights
Issue Index Volume Notes
BMO.PR.J PerpetualDiscount 65,700 Now with a pre-tax bid-YTW of 4.97% based on a bid of 23.01 and a limitMaturity.
MFC.PR.A OpRet 59,790 Now with a pre-tax bid-YTW of 4.29% based on a bid of 24.82 and a softMaturity 2015-12-18 at 25.00.
BAM.PR.H OpRet 52,447 Nesbitt crossed 50,000 at 26.60. Now with a pre-tax bid-YTW of 3.28% based on a bid of 26.60 and a call 2008-10-30 at 25.75.
GWO.PR.E OpRet 33,905 RBC crossed 30,000 at 25.80. Now with a pre-tax bid-YTW of 3.96% based on a bid of 25.76 and a call 2011-4-30 at 25.00. A related issue, GWL.PR.L, has recently been called and there is an eagerly awaited (by me, anyway) earnings announcement tomorrow.
CM.PR.J PerpetualDiscount 19,120 Now with a pre-tax bid-YTW of 5.00% based on a bid of 22.62 and a limitMaturity.

There were fourteen other $25-equivalent index-included issues trading over 10,000 shares today.

HIMIPref™ Indices: June 30, 1999

Tuesday, July 31st, 2007

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1999-06-30
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,530.6 0 0 0 0 0 0
FixedFloater 1,625.1 8 2.00 4.42% 16.2 295M 5.08%
Floater 1,441.3 4 1.75 4.96% 14.3 38M 5.45%
OpRet 1,376.4 33 1.18 4.79% 3.4 68M 6.14%
SplitShare 1,395.9 5 1.60 5.69% 6.7 61M 5.54%
Interest-Bearing 1,447.1 2 2.00 7.57% 3.9 1,323M 8.03%
Perpetual-Premium 1,187.0 3 1.33 6.84% 4.6 53M 7.78%
Perpetual-Discount 1,241.9 12 1.50 5.65% 14.4 204M 5.65%

Index Constitution, 1999-06-30, Pre-rebalancing

Index Constitution, 1999-06-30, Post-rebalancing

July 30, 2007

Monday, July 30th, 2007

There was a dead-cat bounce for both American and Canadian equities today, with a concommittant decline in Treasuries and Canadas (although you’ll just have to take my word for it, since I can’t find a source. Doesn’t anybody out there have a blog?)

Another hedge fund went bust and a company that’s in the business of giving mortgages to sub-prime clients discovered they didn’t use enough “sub-”s when describing their clientele. You could almost hear the cheering from Deutsche Bank, which is short sub-primes, but corporate credits improved overall anyway – another dead-cat bounce.

Meanwhile, there’s some fear that over-regulation & lack of innovation will cost the US debt markets some underwriting, so we may see a hum-dinger when Congress regulates sub-primein the spirit of competitiveness, of course. But why would Congress listen to some Fed researchers?

The Eurobond market has traditionally been the domain of top-rated large banks and other financial issuers; together, they accounted for roughly 75 percent of Eurobond volume from 1995 to 2006. It is therefore not surprising that the market would serve as home to other highly rated issues such as structured securities. The market’s self-regulated environment offers another important advantage for structured products, because this debt is often sponsored by hedge funds, whose trading strategies are best suited to this type of environment.

The preferred market had a very quiet day – I don’t think any blocks were traded at all. All eyes are on equities and junk! This is the kind of market where strange things can happen and liquidity has an enormous value … so get your limit orders in now!

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 4.96% 4.95% 25,417 15.58 2 -0.2256% 1,037.3
Fixed-Floater 4.98% 5.12% 133,782 13.98 8 +0.1962% 1,021.7
Floater 4.85% 1.23% 77,537 8.48 4 +0.1106% 1,049.4
Op. Retract 4.84% 4.09% 84,535 3.28 16 -0.0836% 1,020.6
Split-Share 5.05% 4.55% 103,237 3.88 17 +0.2030% 1,048.4
Interest Bearing 6.26% 6.70% 63,131 4.65 3 +0.1375% 1,030.3
Perpetual-Premium 5.53% 5.19% 113,825 5.94 26 +0.0460% 1,023.5
Perpetual-Discount 5.09% 5.12% 333,598 15.31 38 -0.0119% 972.8
Major Price Changes
Issue Index Change Notes
NA.PR.K PerpetualPremium +1.0133% Now with a pre-tax bid-YTW of 4.97% based on a bid of 25.92 and a call 2012-6-14 at 25.00
WFS.PR.A SplitShare +1.3780% Now with a pre-tax bid-YTW of 4.56% based on a bid of 10.30 and a hardMaturity 2011-6-30 at 10.00.
BMO.PR.J PerpetualDiscount +1.4589% Now with a pre-tax bid-YTW of 4.98% based on a bid of 22.95 and a limitMaturity.
CFS.PR.A SplitShare +1.6064% Now with a pre-tax bid-YTW of 4.01% based on a bid of 10.12 and a hardMaturity 2012-1-31 at 10.00
Volume Highlights
Issue Index Volume Notes
BMO.PR.J PerpetualDiscount 19,975 See above.
RY.PR.F PerpetualDiscount 14,300 Now with a pre-tax bid-YTW of 4.98% based on a bid of 22.33 and a limitMaturity.
CM.PR.I PerpetualDiscount 13,790 Now with a pre-tax bid-YTW of 5.12% based on a bid of 23.06 and a limitMaturity.
SLF.PR.A PerpetualDiscount 12,480 Now with a pre-tax bid-YTW of 4.98% based on a bid of 24.06 and a limitMaturity.
BNS.PR.M PerpetualDiscount 11,860 Now with a pre-tax bid-YTW of 5.00% based on a bid of 22.63 and a limitMaturity.

There were TWO other $25-equivalent index-included issues trading over 10,000 shares today.

HIMIPref™ Preferred Indices: May, 1999

Monday, July 30th, 2007

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1999-05-31
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,511.1 0 0 0 0 0 0
FixedFloater 1,615.4 8 2.00 4.62% 16.1 312M 5.09%
Floater 1,422.8 4 1.75 4.94% 15.3 52M 5.51%
OpRet 1,385.6 31 1.16 4.60% 3.4 58M 6.02%
SplitShare 1,430.7 4 1.50 5.21% 7.1 60M 5.33%
Interest-Bearing 1,437.0 2 2.00 7.76% 3.9 1,983M 7.98%
Perpetual-Premium 1,195.3 5 1.40 5.65% 6.9 192M 6.86%
Perpetual-Discount 1,270.0 6 1.50 5.56% 14.3 162M 5.58%

Index Constitution, 1999-05-31, Pre-rebalancing

Index Constitution, 1999-05-31, Post-rebalancing

Is it the End of the World?

Sunday, July 29th, 2007

On the July 27, 2007 post, assiduous reader kaspu asked: 

Your point about not owning junk bonds is well taken. And I fervently hope that your loyal readers have taken your past advice and are watching all this sturm und drang from a viewpoint of relative safety.

But the eternal pessimist within me forces me to ask you this:If there is a complete corporate credit debacle, other than cash and gold, are there any other safe havens that will preserve capital value? Will even those of us who invest in the quality canadian prefs (P2h and higher) escape the hysterical fleeing from corporate debt? after all, the covenant of bank prefs in canada specificies that they are non-cumulative. The market might decide that this is an unacceptable risk and demand a wider spread. Lower yielding Canadas (yes…this time I do remember to call them Canadas) don’t have tjis provision. American bank prefs of even higher quality (AAA) almost always have in there convenants that they can defer dividend payments for as much as 20 quarters.

So will all the money flee to government bonds, with the spreads between them and prefs widening to a ridiculous degree?

Y’know, kaspu, without meaning any offense: I hate this sort of question.

It’s completely open-ended and the only parameters that you’re giving me are “complete corporate credit debacle” – which is a very open ended kind of thing. For any scenario I propose as a base case, for any scenario I propose as a worst case, you can say “Well, yeah, but what if … “. One of my favourite pieces of economic trivia is the fact that the during the Great Depression, there were instances of US Treasury Bills trading above par. Why shouldn’t they? Put your money in a bank, it’ll go bust. Put your money under your mattress, it will get stolen. Buy US T-bills above par and at least you know how much you’ll be losing…

What I’m trying to say is … you might not be satisfied with my answer!

I don’t think the current situation is as bad as all that. It’s certainly bad enough, for those who bought junk mortgage paper and those who had indirect, but highly leveraged, exposure via hedge funds, but I don’t see the world ending any time soon.

We are definitely heading into a period during which junk yields will be higher than they have been in the past few years; this will choke off leveraged buy-outs (at least until the next frenzy) and thereby blow a little froth of the equity markets. This is happening right now … according to Markit’s daily wrap-up:

Panic set in yesterday in the credit markets, with indices worldwide experiencing massive daily movements. Both the CDX NA HY and iTraxx Crossover indices broke through key levels yesterday, the former rising above 500bp and the latter 400bp. Investment grade indices also widened sharply. The turmoil has been sparked by a crisis in the US sub-prime mortgage market, which in turn has led to a broad increase in risk aversion. This has created hostile conditions for borrowers, particularly private equity companies. Their arrangers have had difficulty, to put it mildly, in enticing investors into buying LBO financing. Alliance Boots in Europe and Chrysler were set up as barometers of the leveraged loan market. If so, the market is in a poor state indeed as the arrangers pulled large chunks of the debt packages and took big losses on their fees. HCA led the high-yield sector yesterday in its rapid decline. The hospital operator was acquired last year in what at the time was the largest LBO in history. It is now laden with large amounts of secured financing that have also declined in recent days (see chart below). Like another totemic deal, KKR’s buyout of RJR Nabisco in the 1980s, the HCA LBO may come to embody the hubris of the times.

According to this wrap-up, credit derivative swaps on HCA blew wider by 102bp to 555bp, while GMAC LLC was 94bp wider to 480bp. I do not profess to be an expert on CDS history - or even to have a huge amount of expertise in the field – but it seems to me that this kind of move, in the absence of company specific news, must be some kind of record. We are in the panic phase, and spreads might even go as high as they were in 2001!

2001? Have a look at what the Federal Reserve Bank of San Francisco had to say in 2001, when spreads spiked into the +1000bp area:

Before the terrorist attacks on September 11, the yield spread of the Merrill Lynch junk bond index had risen more than 300 basis points since the beginning of 2000 (Figure 1). This was accompanied by a gradual increase in the comovement of bond yield spreads. These patterns seem to suggest that before the attacks, the run-up in junk bond spreads was driven by concerns about rising credit risk. However, following the attacks, the spread skyrocketed almost 200 basis points to 968 basis points, just 46 basis points shy of the peak recorded during the 1990–1991 recession. While there is no question that a large part of the rise in junk bond yields reflects investors’ reassessment of credit risk, the comovement in bond yield spreads, shown in Figure 2, shot up to a level not seen before. Both the rate of the increase and the level of comovement in yield spreads after September 11 indicate that some of the sizable jump in yield spreads may be attributable to the limited liquidity in the junk bond market.

In other words … it’s all about liquidity. We have just been through a period in which every brain-dead retail stockbroker in the world was telling his clients that an extra 300bp on bonds was free and easy … we are now entering a period in which they are calling their clients and triumphantly telling them that they were able to get out at only +500. The more time I spend in this business, the more influence I attribute to the brain-dead retail stockbroker!

Now, none of this can really be called a direct answer to your question, but I’ll start trying now. There will be an influence on investment grade corporate bond spreads – and there already has been. Spreads moved wider on the week, because credit quality is a continuum. There is no magic line between Investment Grade and Junk … if Junk yields move higher, then Investment Grade will, to some extent, follow them, because investors will connect the dots and say ‘Gee … I can pick up a whole bunch of extra yield by accepting a relatively small amount of extra credit risk! When I divide return by risk, I get a big number! Time to trade!’

Spreads on paper of the quality you were talking about are something of a conundrum. Bank perp prefs are now yielding 5%-odd, interest equivalent of 7%-odd, which is basically Canadas +250bp, which is basically OK by me. I have previously expressed surprise at the very narrow spreads the market gives to Innovative Tier One Capital – which is basically a pref sold in the bond market, and these spreads have a long way to go before they’re even close.

If anything, I think a flight to quality corporates should be good for the high-quality end of the preferred share market, but I’m not going to hold my breath. The bank-perp-pref tax-equivalent spread to Canadas could very well vary by 50bp – up or down – and trying to outguess that is a mug’s game. If one of the banks gets into trouble with Junk exposure, we could very well see a spike in yields of those – but at that point, I’ll probably be in there buying!

Update 2007-07-30: More comment … Tom Graff’s headline is “We’re doomed” … but the post itself is at least a little bit more cheerful.

July 27, 2007

Friday, July 27th, 2007

The week ended with another thumping for US Equities and Canadian stocks went along for the ride, notably

BCE Inc., target of the largest buyout, retreated after Citi Investment Research cut its recommendation, citing growing risks to its financing.

One analyst puts the odds of a Telus bid at 25% or less, but the long term track record of this analyst was not disclosed.

Some say that a turning point in capital markets has definitely been reached but there is some doubt that Wall Street’s problems will reach Main Street. The US economy has, apparently, been growing at a fair clip but the nattering nabobs of negativism have their own interpretation of the underlying trends. All the uncertainty meant that Treasuries did superbly, while Canadas followed … mostly. Even New York City, almost bankrupt in 1975, was able to get in on the action and scoop up some financing that ain’t going into corporates no more.  

And … I must apologize … the tables and commentary that have something of direct relevance to actual preferred shares will have to wait. HIMIPref™ has been updated, but I have dinner scheduled with a dear friend, whom I intend to regale with stories about how I don’t own any junk bonds.

I will update everything tomorrow!

Update, 2007-07-29: OK, maybe it wasn’t the very next day. But it was a most enjoyable dinner! In the meantime, the National Post has reported that:

“We have our financing,” Claude Lamoureax, president and CEO of Teachers’ said yesterday. “Clearly right now, the spreads have widened but that’s why you pay the bank huge fees to take the risks.”

As Mr. Lamoureax said, in leveraged buyouts the banks “take the risks” and right now the investment banks are temporarily swallowing the billions of dollars worth of debt deals for Chrysler and Alliance.

As for whether Teachers’ bankers should be worried, Mr. Lamoureux said there are no worries with its bankers or anyone else.

“Right now, we have our financing in place. No trouble,” he said.

Either he refused to say just exactly how the financing was in place, or the reporter didn’t ask. The story doesn’t go any further than the above bland assurance.

I’ve thought the issue in the context of what a massive break-fee-loss would mean to Teachers, and come to the conclusion that I don’t know enough about the issue. It would seem to me reasonable that there might be provisions regarding financing in the consortium agreement, to the effect that, if the deal fails on financing, the loss would be borne by Teachers financial partners, Providence Equity Partners Inc. and Madison Dearborn Partners, LLC. After all, they’re the financial muscle for the deal! It may be that such a provision is why Mr. Lamoureux is so sanguine … but we will just have to sit back and wait and see! In the meantime, I highly doubt that I’ll be throwing chips down on that table!

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 4.97% 4.96% 25,112 15.57 2 +0.0998% 1,039.6
Fixed-Floater 4.96% 5.15% 136,351 15.31 8 +0.1813% 1,019.7
Floater 4.86% 1.37% 78,819 8.47 4 +0.0808% 1,048.3
Op. Retract 4.83% 3.96% 85,443 3.25 16 -0.0019% 1,021.5
Split-Share 5.06% 4.57% 105,261 3.89 17 -0.0706% 1,046.3
Interest Bearing 6.26% 6.74% 64,084 4.66 3 -0.8786% 1,028.9
Perpetual-Premium 5.53% 5.19% 115,290 5.41 26 -0.0536% 1,023.0
Perpetual-Discount 5.09% 5.12% 338,800 15.32 38 -0.0002% 972.9
Major Price Changes
Issue Index Change Notes
BSD.PR.A InterestBearing -1.9792% Now with a pre-tax bid-YTW of 7.19% (as interest) based on a bid of 9.41 and a hardMaturity 2015-3-31 at 10.00. Y’know, when I think about all the stuff most people put in their RRSPs, this doesn’t look too bad!
BCE.PR.Z FixedFloater +1.0179%  
MFC.PR.C PerpetualDiscount +1.5277% Now with a pre-tax bid-YTW of 4.89% based on a bid of 23.26 and a limitMaturity.
Volume Highlights
Issue Index Volume Notes
IGM.PR.A OpRet 53,344 Now with a pre-tax bid-YTW of 4.06% based on a bid of 26.85 and a call 2009-7-30 at 26.00.
BNS.PR.L PerpetualDiscount 42,790 Now with a pre-tax bid-YTW of 4.99% based on a bid of 22.66 and a limitMaturity.
W.PR.J PerpetualPremium 41,100 Now with a pre-tax bid-YTW of 5.63% based on a bid of 25.01 and a limitMaturity. Not bad! Rated Pfd-2(low) by DBRS and P-2(low) by S&P. Currently redeemable at 25.25 … redeemable at 25.00 commencing 2008-07-15.
RY.PR.F PerpetualDiscount 39,500 Now with a pre-tax bid-YTW of 5.00% based on a bid of 22.25 and a limitMaturity.
BCE.PR.A FixedFloater 23,500  

There were nine other $25-equivalent index-included issues trading over 10,000 shares today.

HIMIPref™ Preferred Indices : April, 1999

Friday, July 27th, 2007

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1999-04-30
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,501.2 0 0 0 0 0 0
FixedFloater 1,620.0 8 2.00 4.73% 15.7 456M 5.05%
Floater 1,413.6 4 1.74 5.04% 15.3 68M 5.73%
OpRet 1,388.8 31 1.16 4.32% 3.5 55M 5.99%
SplitShare 1,426.9 4 1.50 5.12% 7.2 62M 5.34%
Interest-Bearing 1,437.0 2 2.00 7.69% 4.0 3,522M 7.98%
Perpetual-Premium 1,206.0 6 1.33 5.52% 6.8 103M 6.55%
Perpetual-Discount 1,272.3 5 1.60 5.50% 14.5 330M 5.58%

Index Constitution, 1999-04-30, Pre-rebalancing

Index Constitution, 1999-04-30, Post-rebalancing

July 26, 2007

Friday, July 27th, 2007

The day ended, at long last, with not just a sound thumping for US Equities, but just about everybody else as well, including Canada.

Liquidity in the US Corporate markets was terrible (worse than yesterday), with marked spread-widening after yet another blown-up hedge fund, but there is some steepening developing with expectations the Fed will cut rates this year. The housing numbers are getting blamed for this in some quarters. Me, I’m not sure. There’s never just one reason. Weak (non-housing) economic news and Junk Bond Fatigue have also been blamed.

Still, at least Treasuries and Canadas had a good day, although the CAD got whacked.

More mundanely, the quarterly results from Loblaws seem to argue against any imminent reversal of the Weston downgrade. And I couldn’t resist checking the definitive BCE / Teachers’ Agreement:

6.4(9): The Purchaser acknowledges and agrees that its obtaining financing is not a condition to any of its obligations hereunder, regardless of the reasons why financing is not obtained or whether such reasons are within or beyond the control of the Purchaser. For the avoidance of doubt, if any financing referred to in this Section 6.4 is not obtained, the Purchaser will continue to be obligated to consummate the Arrangement, subject to and on the terms contemplated by this Agreement.

The PerpetualDiscount index had a nine-day winning streak snapped – but not by much, as the preferred market displayed its customary insouciance towards silly old market news. BCE issues, particularly, did quite well. The Ratchet Rate Index, comprised entirely of Bell Ratchets, kept its streak alive with ten-straight. The volume certainly wasn’t heavy today, but it wasn’t too much on the light side.

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 4.98% 4.99% 24,636 15.46 2 +0.5965% 1,038.6
Fixed-Floater 4.97% 5.18% 136,047 15.28 8 +0.1292% 1,017.9
Floater 4.86% 2.59% 79,599 11.53 4 -0.0900% 1,047.4
Op. Retract 4.83% 4.03% 85,083 3.19 16 +0.0973% 1,021.5
Split-Share 5.05% 4.57% 107,030 3.89 17 -0.1013% 1,047.0
Interest Bearing 6.21% 6.53% 64,224 4.40 3 -0.1673% 1,038.0
Perpetual-Premium 5.53% 5.18% 116,729 5.79 26 +0.0061% 1,023.6
Perpetual-Discount 5.09% 5.11% 343,200 15.32 38 -0.0001% 972.9
Major Price Changes
Issue Index Change Notes
BAM.PR.N PerpetualDiscount -3.0345% Now with a pre-tax bid-YTW of 5.70% based on a bid of 21.09 and a limitMaturity.
WFS.PR.A SplitShare -1.1639% Now with a pre-tax bid-YTW of 4.85% based on a bid of 10.19 and a hardMaturity 2011-6-30 at 10.00.
Volume Highlights
Issue Index Volume Notes
SLF.PR.B PerpetualDiscount 47,250 Now with a pre-tax bid-YTW of 4.97% based on a bid of 24.33 and a limitMaturity.
BMO.PR.G OpRet 31,681 Has been called for redemption.
CM.PR.I PerpetualDiscount 23,163 Now with a pre-tax bid-YTW of 5.11% based on a bid of 23.10 and a limitMaturity.
POW.PR.D PerpetualDiscount 22,414 Now with a pre-tax bid-YTW of 5.24% based on a bid of 24.00 and a limitMaturity. There’s not much room for a capital gain on this one, but the yield looks juicy, eh?
BNS.PR.L PerpetualDiscount 21,635 Now with a pre-tax bid-YTW of 5.00% based on a bid of 22.62 and a limitMaturity.

There were fifteen other $25-equivalent index-included issues trading over 10,000 shares today.

EN.PR.A Proposes Term Extension

Thursday, July 26th, 2007

Energy Split Corp. II has announced:

that its Board of Directors has approved a proposal to reorganize the Company. The reorganization will permit current holders of both Capital Yield Shares and ROC Preferred Shares to extend their investment in the Company beyond the scheduled redemption date of December 16, 2007 for up to an additional 3 years. Under the proposed reorganization, holders of ROC Preferred Shares will be entitled to receive a new coupon rate which will be fixed prior to the time of the shareholder meeting described below in the context of market conditions at that time. In approving the proposal to reorganize the Company, the Board received and relied on the financial advice and recommendations of Scotia Capital Inc.
    A special meeting of holders of Capital Yield Shares and ROC Preferred Shares will be held on October 23, 2007 to consider and vote upon the proposed reorganization. Details of the proposed reorganization will be outlined in an information circular to be prepared and delivered to holders of Capital Yield Shares and ROC Preferred Shares in connection with the special meeting and will be available on www.sedar.com.

It is, of course, impossible to comment meaningfully on this proposal until the “new coupon rate” has been disclosed.

EN.PR.A is tracked by HIMIPref™, but is not included in any of the indices due to low average volume. There are a mere 1,209,398 shares outstanding, according to the Toronto Stock Exchange.

Term extensions this year have been approved for DFN.PR.A and FFN.PR.A; the proposal for FTN.PR.A was denied by the capital stockholders.

HIMIPref™ Preferred Indices : March, 1999

Thursday, July 26th, 2007

All indices were assigned a value of 1000.0 as of December 31, 1993.

HIMI Index Values 1999-03-31
Index Closing Value (Total Return) Issues Mean Credit Quality Median YTW Median DTW Median Daily Trading Mean Current Yield
Ratchet 1,504.7 0 0 0 0 0 0
FixedFloater 1,594.4 7 2.00 4.51% 16.0 354M 5.09%
Floater 1,416.9 4 1.75 5.21% 14.9 84M 5.92%
OpRet 1,367.0 33 1.18 4.76% 3.6 65M 6.12%
SplitShare 1,413.8 5 1.60 5.44% 6.9 75M 5.44%
Interest-Bearing 1,388.7 1 2.00 8.90% 4.0 6,040M 8.93%
Perpetual-Premium 1,208.4 2 1.00 6.13% 0.6 56M 8.75%
Perpetual-Discount 1,236.5 9 1.56 5.61% 14.4 260M 5.65%

Index Constitution, 1999-03-31, Pre-rebalancing

Index Constitution, 1999-03-31, Post-rebalancing