I got a call today from an investor concerned about the recent performance of the SLF preferreds. This poor performance is well illustrated by the following three graphs, which plot Current Yield against Annual Dividend.
As may be seen, the prices of the SLF preferreds have changed so that their Current Yields are now significantly higher than what they would be if they had maintained their relationship (shown on the 9/9 chart) with the GWO and PWF preferreds (note that GWO and SLF issues plotted are DeemedRetractibles; the PWFs are Straight Perpetuals and should have current yields greater than the other two issuers’ preferreds, but don’t. The market hasn’t been pricing in any possibility of regulatory redemption in 2022-1-31!
So what’s the problem? The only news of note lately has been the SLF purchase of McLean Budden, which doesn’t sound like a big deal. SLF common hit a new 52-week low on the NYSE recently, but a comparison of common prices for the three dates doesn’t really provide any clues:
|Comparitive Common Prices|
In the absence of news or a confirming signal from the common I have to conclude that the variance from the relationship with the other two series of preferreds examined is due to liquidity pressures – in other words, I think somebody’s selling a whack of these things and is taking a big market impact cost in order to do so.