Canadian Chat

There is plenty of discussion going on throughout the site on various Canadian securities so this post is for creation of a “Canadian Discussion” page.

This was requested by a reader and it is easy to do so we can do it quickly.

Hopefully this will be a page for those with Canadian interest will meet up.

310 thoughts on “Canadian Chat”

  1. I was wondering if anyone has had their broker actually create an OTC symbol for a Canadian preferred when one didn’t previously exist. I believe I saw it mentioned previously in this thread that brokers should be able to do it. However, I was curious how painful it was to actually get accomplished. My broker is Schwab so I’m especially interested in any stories about dealing with them.

    I read most of this thread over the weekend and it was an awesome education. Thank you!

    1. Tex – this is 2nd hand but my understanding is that Schwab will create a ticker for you if you are placing an order. Bit of a hassle but it does get done.

    2. Tex,
      I believe that AmyR did this with a Canadian pfd – Grid can fill you in. She had it done at Schwab if I recall correctly. Certainly, it can be done but obviously not in all cases.

      1. Yes, it was Amy…And through Schwab, but maybe their global securities platform? I dont think its them per se, but FINRA or OTC. It may have been a byproduct (the ticker assigned), by them purchasing for her on TSX. But she had to initiate the process though.

        1. Thanks to those who responded!

          I called Schwab today. They will place a trade for you for a Canadian preferred that doesn’t currently have an OTC symbol. It costs $25 commission per trade. However, after you complete the first trade, an OTC symbol will be set up.

          Another alternative would be to set up a Schwab global account. The trades are free. However, there is a 1% fee for the foreign currency exchange.

          At this point, I think I’d be leaning towards just paying the $25. Curious how others are dealing with preferreds without OTC symbols.

          1. Tex – Joel posted below about trading off the TSX through TDA. That’s another option. To my eyes, the best way to trade Canadian preferreds depends on how many issues and how many $ you are thinking to trade.

            If it’s just a few issues or few bucks, you might be able to get the exposure you’re after from among the issues that already have OTC symbols. The opposite end is to go with IBK, if you look to build a sizable portfolio. Without doubt, IBK has the best access to international markets of any U.S. broker. At trading costs and exchange rates others don’t approach.

            If you want to name tickers I’m happy to give you my thought on how to trade them. I don’t hesitate to name names myself as the liquidity in almost all cases is deep enough to adsorb the trading volume.

            It’s only the TSX volumes that matter:


          2. Tex, I agree with Bob. I dont deal with any hassles, I got what I need for what I am invested in them with. You rarely find any miss pricing with the sisters. Just maybe a miss pricing in a future interest rate assumption you feel strongly to gamble on maybe that the market isnt agreeing with you on.
            BTW, you may have missed it, but I responded to your earlier SOCGP question today.

  2. Is anyone actually getting good RESULTS using IBK in trading CN issues, especially on NON-F symbols?

    1. Joel – if by “results”, you mean good execution, IBK is the way to go. You are trading directly on the TSX, looking at actual TSX bid/ask, volumes, etc. You use TSX symbols; the platform won’t even recognize U.S. OTC symbols.

      Best to fund with minimum $25k US, then convert all to CA$. Else, you are effectively creating a little short position every time you buy a CA$ issue.

      IBK is running a promo now, worth $1,000 in IBK stock on a $100k account. See my post from a couple weeks back.

  3. Upcoming Issues on Naked Reset Watch:

    Brookfield Office (REIT) TSE:BPO-A 1/1/2020 P-3 (BBB) – GOC 5Yr + 3.15%
    Canadian Imperial Bank TSE:CM-P 1/31/2020 P-2 (A) – GOC 5Yr + 2.24%
    Toronto-Dominion Bank TSE:TD.PF.C 1/31/2020 P-2H (A) – GOC 5Yr + 2.25%

  4. Update on Naked Reset Watch:
    Manulife (Insurance) TSE:MFC-M 12/19/2019 P-2H – GOC 5Yr + 2.36%

    Announced: Nov 20,2019
    From: 3.9%+2.36%
    To: 3.8%+2.36%

    Coupon Change: -0.1%
    Strip: 5.52
    Yield to Call: 12.18

    Price – 17.46 (52 Week Low/High = 14.99/20.39)
    Action: No Buy
TC Energy (Pipeline) TSE:TRP-A 12/31/2019 P-2L – GOC 5Yr + 1.92% (TNCAF)

    Announced: Dec 2,2019
    From: 1.68%+1.92%
    To: 1.56%+1.92%

    Coupon Change: -0.12%
    Strip: 6.36
    Yield to Call: 16.98

    Price – 13.92 (52 Week Low/High = 11.77/15.10)
    Action: No Buy
Fairfax (Insurance) TSE:FFH-C 12/31/2019 P-3H – GOC 5Yr + 3.15%

    Announced: Dec 2,2019
    From: 1.43%+3.15%
    To: 1.559%+3.15%

    Coupon Change: +0.129%
    Strip: 6.68
    Yield to Call: 12.68

    Price – 17.85 (52 Week Low/High = 15.61/21.44)
    Action: Review for Consideration

  5. Another data dump today, this time dealing with relative yields among same-issuer preferreds. The issuers include ALTA, BAM, EMA, ENB, PPL, SLF and TRP. Some have issues with all 4 rate structures (min rate reset or “min”, naked reset or “reset”, fixed and floating); some just 3. The comparisons to make are the rates among different rate structures of the same issuer, rather than issuer-to-issuer comparisons.

    To make it a easier on the eyes I have bolded the numbers of interest.

    Starting with ALTA, do you want the 5.57% (stripped yield) min, the 6.80% reset, or the 7.43% floater? The min is very safe from a rate pint of view. The reset is offering 123 bps more yield, but with rate risk due to the reset. The floater offers 63 bps more than the reset and 170 bps more than the min but will give you a very bumpy ride.

    BAM offers 4.80% for the min, 5.51% for the fixed, 6.01% for the reset and 6.40% for the floater.

    The others you can read off the spreadsheet, but the pattern is the same. The higher risk rate structures pay more. The question is is it enough? To a good degree the answer is specific to the individual. Also, the answer may change over time as these spreads are not constant. If one could follow the min-reset spread over time, it varies widely. It’s one of those risk-on or risk-off things one sees so often in finance.

    Spreadsheet notes:

    This analysis is as of November 23, but the results would not change if updated.

    For the resets, one has to eyeball a true yield. You have the current yield, based on the present coupon, and a prospective yield, based on where the issue would reset at the date’s BOC 5-year. The “true” yield is somewhere in-between.

    1. Bob in DE – I’ve looked at these issues, but always some risk with securities that I am not familiar with. Can you provide me with any information on total return this year on Canadian resets (interest/dividends received plus or minus capital appreciation)?

      Thank you.

      1. Luo – what I did with my last 2 posts (with spreadsheets) is provide the data on prices and yields. Data on issue prices versus present prices for resets, and a comparison of resets versus other rate structures.

        It’s obvious from a comparison of issue and present prices that someone took a bath. It wasn’t me and I hope it wasn’t you.

        Next post will be my take on how things got where they are and whether we are looking at opportunity or a sucker’s bet. The answer lies in the history of the resets, Canadian psychology, and a bit in bond math.

        That said, all of the companies in my last post (and almost all in every post) are large, big-time companies. Most are household names in Canada and all are well-known in the financial community. Almost all have real NYSE listings for common (not OTC listings) and are SEC reporting. Very easy to research.

        The average preferred issue in Canada is a much stronger credit than the average U.S. issuer. Skanky companies just can’t do preferred issues in Canada. There are a few exceptions among the split corps, which I have covered in a separate post some time ago.

        In any event, the weakest credit I follow is a BB. I prefer to stick to IG rated issues (no shortage of them) but I make exceptions for companies that are exceptional in one way or another, or don’t have a U.S. comparable. Altagas and Faifax Financial, are two such exceptions

        Regarding credit ratings, up to recently I have displayed S&P Global listings for Canadian preferred, and DBRS ratings in the few cases where S&P ratings were not available.

        I’m reversing that. DBRS, the old Dominion Bond Rating Service, is more reliable than S&P. The S&P and DBRS ratings are identical in most cases but where there is a difference the DBRS will be the lower (more conservative) rating.

        1. No bath for me either, Bob! Solidly in the green, but it wasnt a straight line up. Made easy money a year ago, then had to trade and sweat out the cycle and then repurchase lower. Took 50% knowledge and 50% luck!
          We usually agree on most points very tightly, so I dont respond when you post. As far as immediate catalyst goes we are mostly in no mans land I believe. No downward collapse fear as 0% interest mania has subsided. But also a prolific pattern of upward rate failures the past 10 years are keeping a tighter lid on any crazy upward price pressures either….For time being.
          What I own is what I own, and am not looking to trade here like I do with US issues.

    2. Awesome. Thanks one more time for another great spreadsheet. Makes another great reference/guide to use for yield hunting.

      I’ve noticed your sheets don’t have NPI on them. Any reason for that?

      1. LI – the last sheet was about comparing rate structures of same issuers, to isolate rate structure premiums. NPI has issues in but 2 of the 4 rate structures, so didn’t make that list.

        I also wanted to keep things to the more recognized name for this occasion.

  6. Wow, Dr. Bob, that is an amazing spreadsheet. Thanks so much for sharing.

    I’m not smart enough to know what direction rates will take next. So I use Canadian resets as a pure rate hedge to US uncallable securities. Their share prices should in theory have equal but opposite reactions to changes in rates. So positions in WFC-L, BAC-L, SLMNP, RLJ-A, and KTBA get their rate risk hedged with Canadian resets. You can also use Canadians to hedge US prefs with long call protection or ones trading below par where a call is unlikely even in a lower rate environment.

    Also, I think with Canadian resets you really want to focus strictly on high grade prefs BB+ and above. And I limit exposure to the riskier energy and midstream sectors. I especially like the super high credits from the likes of SLF and MFC. If rates go down, those are the preferreds that are least likely to suffer from spread expansion.

    The other day Gridbird pointed out how record low spreads pose a threat to US pref investors. While the 10 year is in the same place as several years ago, at that time prefs had 75 bips or so higher yields because spreads were wider. If we return to a wider spread environment, the prefs that will have their spreads widen the least will be very high grade like SLF and MFC.

    PS – a lot of my strategy depends on continued high correlation between US and Canadian markets.

  7. Naked resets ….. a gift or a graveyard?

    Be warned, regardless of my thoughts on these issue they have the potential to loose value. And, in all but 4 cases, you are dealing with Canadian-denominated issues, so there is currency risk from an American perspective. Or currency diversification, if you prefer to look at it that way.

    Below I have linked a spreadsheet with 80 “naked” resets, those being resets with no minimum reset rate. Banks are excluded, for reasons that are beyond this post. What’s left is 80 issues, which make up perhaps 80-90% of the universe of non-bank naked resets.

    A number of recent post here have either made comments or asked questions about the prices and yields of these issues, and sought to understand why they trade where they do, at the yields they do. This is my attempt to address those posts. Today, it’s mainly data for you to chew on. Next post, when gotten to, I will give my thought on the “why”.

    For background, know that all issues came out at $25.00 per share when issued and currently sell at an average of $16.65, a decline of 33% from the issue price. That’s a big drop. The “worst” of the issues sells for just $11.02 per share, a decline of 56% since issue.

    Some other numbers: The average initial coupon was 4.41%. Today, the average coupon is 4.06% and would reset to 4.15% if all issues magically reset based on the current index. The “real” coupon is thus somewhere between 4.06% and 4.15%, and I shall just arbitrarily take it too be 4.10%

    In other words, since issue, because or resets, the average coupon of these 80 issues has dropped by some 31 bps (4.41-4.10). In comparison, the index off which these issue reset has dropped from an average of 1.71% to today’s 1.52%, a drop of 19 bps. Reasonably consistent to my eye.

    Given that change to the index, some drop in price is expected. But 33%?

    Because of that drop, the average stripped yield has increased substantially, from the 4.41% at issue (the original coupon), to 6.07% today, an increase of 166 bps. But that figure is somewhat understated by the fact that there is some built-in coupon increase due to coming resets. The real difference, compensating for the upcoming resets, approaches 175 bps.

    On the surface, that’s 175 bps of “free money”.

    So why has the average price dropped (and yield increased) among these issues by so much? Lowered credit quality is one possible explanation but I’ll save you the time and tell you it ain’t the case.

    So, what else might it be and what does that imply for futures pries and yields on Canadian resets? And for the growing stable of U.S. issues coming with the same 5-year reset structure? Dominion Energy, just yesterday, was the latest to come with a reset.

    My thoughts later this week.

    PS – all data above was as of 23 November, when I did this analysis.

    1. Dr Bob and Reset-Students,
      I too have spun every element of these resets in ‘inter-related space’ that I understand as an investor. That continues. I will add these comments kind of like working with corollaries and axioms in geometry:
      1) The five years treasury of CN or US is a market perception of base inflation over that five years. That’s all. The only expectations are these: rates and inflation will be up in five years or same or lower. I preserve principal for spending if needed. That’s all, three options. WHY GUESS the direction of rates? Just to feel smart.
      2) We spend our funds in the future inflation adjusted. We hope to at least break even by gaining that inflation return by ‘indexing’ to an instrument like treasury rates. Then, there is a company risk outlook premia added too. That is return ON investment in a company. Add them together = reset rate.
      3) We can not take into account the actions of institutions like the Fed or recessions or other temporary affects on asset prices like treasuries, but historically we can rely on the market to set that rate. This is why you ladder, stagger resets. Indeed you can forget the Fed long term and ONLY follow actual market rates. Byebye CNBC.
      4) If in five years, the rate resets at a higher inflation expectation then the reset has served its purpose. If the rate goes say to zero, that also means it has served its purpose in an outlook of little or no inflation with a very low reset which, nonetheless, should have served its purpose. It is lower, so you don’t “need” more money. (Hard to swallow!)
      6) The above is the rote mechanism. The result we actually look for is a conditioned or behavioral desire to “get ahead” by chasing yield. That is human nature.
      7) Investors have perceived and been conditioned to expect Fed intervention and sideways or lower for longer. This depresses resets.
      The perception looks at dwindling reset at lower rates when that may be an element of fact of the five year outlook. This is also a temptation to companies to reach for packing the balance sheet with cheap money at every tranche perhaps altering the investment grade quality.
      8) By laddering and holding to maturity, one can allow the ‘market facts’ to be incorporated in the future automatically. Tough love! Diversification by number and industry can help with credit risk/quality. This is a fact that most investors or traders think they can do better…making course changes. Notoriously inaccurate.
      9) The mechanism of resetting is structurally very sound. So we get bored in our investment computer ‘hobby’. Like paint drying.
      10) The biggest risk is identified by Dr Bob above: retention of Investment Grade. Because busineses are fluid and run by the same human minds, the management makes all kinds of adjustments along the way (no judgement as to whether their adjustments are right, neutral or wrong). That is why the diligence must be focused on the ability to continue to perform DURING the five, ten or your life cycle and continue to earn investment grade. Diversification may help here. Trading becomes a tool rarely deployed.
      11) Resets reflect an easier investment and portfolio profile to my mind. Obviously, the current deep price values reflect either down or lower for longer rates at reset dates. BUT, That has begun to shift. How can I use that when I am conditioned to get higher fixed rates which my mind can project; I hate the unknown. Can I accept income that is only inflation adjusted or do I need to reach?
      12) The current reset environment reflects little investment landscape change over the next five years compared to the last eleven years of experience. What could possibly happen and what rote tools can I use to control that? Answer: Laddering, diversification, reinvestment and a KNOWN SPEND DOWN PLAN! This is not discussed much, focus is on the accumulation phase and fodder for another treatise.
      13) Preferreds are NOT a field where one bulks up ones principal UNLESS it is left alone and allowed to compound over a term which also allows for future ladder deployment from generated income. This is best deployed in a tax shelter. Preferreds are an income instrument.
      14) Preferreds can be managed for capital gains, a different treatise entirely; now we are trading. It’s hard to make a lot of correct decisions in a row as rates fluctuate.
      15) Conclusion: Resets are boring but have a “automatic ghost” built into them IF the company continues to perform, diversification is employed and management is focused upon reallocation of income and avoiding credit downgrades. Sounds kind of like a personal insurance company annuity or private ETF with no fees!
      PS: caught me at coffee time! JA
      PPS: Thanks Tim and admin over there. Happy Holidays to All!

      1. Joel, some sound thoughts. I would bite back in a few thoughts though. Canadian resets are anything but boring. In fact they have been considerably more volatile than fixed issuances have. Going forward who knows, but look at the previous 5 yr charts for all. And at reset time there is no guarantee it will be anywhere near price at previous reset.
        Also I wouldnt say they are tethered to inflation. They are tethered to the 5 yr “bond” plus the credit spread market deems at time based on credit risk bucket assigned to issue. Inflation has in past been totally ignored. There has been times in past where inflation was over 6% and 10 year was under 3%. Oz behind the curtain can have more determination in market yields than inflation does if they so desire.

        1. Yes indeed, my diatribe is a place to begin as a perfect 101 classroom tool. It is apparent that ‘Oz’ is really part of our life. As you mention, looks like the ignition of real inflation may not be accurately reflected in a treasury of any sort and this is what they want to achieve as per their statements. There are ALWAYS caveats. I am ratcheting an approach forward like this very slowly.
          Also, Using all the trading tools we have shared for CNs, I followed every detail presented here. plus TD’s direct advise, example here:
          “HSEPRECN a simple and understandable variation on TSX’s symbol. Call us with that and establish your price like you have been doing off of TSX account, we will place the trade after giving you a B/A, IE: HSE.PR.E 19.80 to 13.01. We will place your order for the internet rate via our broker, the order shows up on your Trade Status where you can change price and duration of order by your screen entry.”
          This filled at 19.89. It can be a GTC, but did not get clarification if there is a fresh commission if it rolls into next session.
          You Guys all helped me.

      2. Joel – good of you to take the time to comment.

        I would focus the readers’ attention on your point #8, regarding laddering and diversification. If you want to get into Canadian resets this is the way to go. The diversification is for the usual reasons and the laddering is a means to deal with the inevitable ups and downs of interest rates.

        My personal plan is to (eventually) own the whole time spectrum, meaning the entire 5-year reset ladder. I’m buying in now at the long end but as time goes by it will fill in. And I will have a complete 0-5 ladder.

        At that point it becomes a perpetual motion machine. With no call risk (a few exceptions) you just turn the dividends into new buys as needed.

        A quicker way to do the same thing is via the ETF, ZPR.

        It’s a TSX issue and I don’t know if it can be bought through a U.S. brokerage, other than IBKR. The convenience will cost you 50 bps. It’s a very simple strategy to replicate. If it were a U.S. sponsor the cost would be 10 bps, but this is Canada! There are reasons the Canadian banks make so much money. It’s called FEES.

        1. QUITE ambitious! My laddering will be sparser by number.
          As a side note: After years of talking outloud around my wife she has asked to be tutored as to what and how all of our accounts work. Our rationale is, “what happens if you kick or stroke out on me?”
          Well since we retired a year ago she has gone from, “Rates go down, bond prices go up” to really digging in on getting the details and is quite adept! I know I have tread on possibly dangerous soil, but it beats a broker! The curve goes out to infinity I suppose! JA

        2. ZPR is a very interesting concept. Thanks for sharing. However, the yield of 5.37% seems low. Pretty easy to construct a portfolio with a significantly higher yield while maintaining quality among credit risks.

        3. I continue to limit my total investments in naked Canadian resets to about 10% of my net worth. I own Fortis, Emera, Enbridge, Northland Power, and Bell Canada( float off the Canadian prime – so it’s more a true floater than a fixed rate reset).

          I do own some Canadian fixed in some investment-grade companies; Great West, Sun Life, and Canadian Utilities. Looking to add to these on pullbacks.

          I also own a very small position in Brookfield Renewable but it is a 5-year reset with a high minimum floor – so I consider this to be more of a fixed with the potential to increase in the future.

          All total about 13% of my net worth. I have not done laddering with the resets, unlikely that I will.

          Thanks for your spreadsheets and posts.

    2. Wow, this is an amazing spreadsheet. Thanks so much for sharing.

      I’m not smart enough to know what direction rates will take next. So I use Canadian resets as a pure rate hedge to US uncallable securities. Their share prices should in theory have equal but opposite reactions to changes in rates. So positions in WFC-L, BAC-L, SLMNP, RLJ-A, and KTBA get their rate risk hedged with Canadian resets. You can also use Canadians to hedge US prefs with long call protection or ones trading below par where a call is unlikely even in a lower rate environment.

      Also, I think with Canadian resets you really want to focus strictly on high grade prefs BB+ and above. And I limit exposure to the riskier energy and midstream sectors. I especially like the super high credits from the likes of SLF and MFC. If rates go down, those are the preferreds that are least likely to suffer from spread expansion.

      The other day Gridbird pointed out how record low spreads pose a threat to US pref investors. While the 10 year is in the same place as several years ago, at that time prefs had 75 bips or so higher yields because spreads were wider. If we return to a wider spread environment, the prefs that will have their spreads widen the least will be very high grade like SLF and MFC.

      PS – a lot of my strategy depends on continued high correlation between US and Canadian markets.

      1. Landlord, After going “hot”, “cold”, then “warm but not hot”, on my CAD issues, I have finally settled into a long term hold for basically your reasons. Im not diversified or spread out over a 5 yr continuum though. Just holding a decent sized chunk of Northland Power, a bigger chunk of Fairfax spread out over 4 issues, and some TC Energy. Have just recently trained myself to ignore them and let them be.
        If somebody shouts out some big value drop I will peak my interest again, but am not going to hunt for anything and focus on leaving them alone, ha.

    1. Yes, Tex, a whole lot of big issues repriced on Monday. This includes 5-year resets BPO.PR.A, ENB.PF.A, FFH.PR.C, FTS.PR.M, HSE.PR.C, and TRP.PR.A.

      This is an opportunity to lock down yields for the next five years.

  8. IBKR Promotion …..

    If anyone out there contemplates setting up an IBKR account to trade Canadian issues (or anything else), this is a good time.

    They are offering a 1% bonus, in IBKR stock, up to $1,000 (i.e. a $100k account). Only catch appears to be a 2-year hold period on the stock.

    You need to be referred to get the bonus. If interested send me a PM through SA (same nic) with your email and I will send you a copy of the terms provided by IBKR.

    1. Hi Bob-in-DE,
      I am very interested because I am right now is opening account with them. I sent you message on SA.
      Thank you very much!

      1. Sergey – I got your message at SA. I have to fill out an online form to send to IBKR. Need 1) first name, 2) last name, 3) email, and phone #. It does not need to be a US phone #.

        Send info through SA message system and I will get it done.

  9. Ran a little experiment today:
    – used FXFLF which has been mentioned here as a CN reset on Dec 1, 2019.
    – have a user account on TSX where I got CND to USD rate of .7539 it’s right at the top of the page.
    – It opened at $17.41 x .7539 = $13.13.
    – Experiment: Placed limit order at $13.24 for 100 shares on TD Snap Ticket for electronic order entry via Greys. 1% plus above the open.
    – On TSX, the stock topped mid-afternoon at $17.51 on 500 shares x .7539 = $13.20, so my offer was 4 cents higher than the best offer of the day and within the volume constraints. Never filled.
    – I sent details to TD and really expect an amateur email broker response and will let you know what they say.
    – Any inputs as to a METHODICAL success? Like I said I am still dabbling in the approach to confidence. Thanks in advance to the group mind. JA

    1. Joel – if you had the bid in for the full trading day your order should have executed. More than 22,000 shares traded on the day, so not a liquidity issue.

      Only thing I can suggest (in addition to asking broker, which will get you nada), is check during the day. Both the CA$ price and the exchange rate can move and make your in-the-money bid go out-of-money.

    2. Hello Bob

      FWIW, Just filled an order for FXFLF on TD Ameritrade today for $13.15 US. Placed it off their Think Or Swim platform.

    3. I am quite new to Canadian preferrers and learning by reading the notes here (thanks for sharing). One thing I have noticed that mystifies me is – for many shares — the drop over time from $25 C to the $ 10-15 range. Conceptually I would have thought a drop in interest rates (push price down) would be roughly offset by a corresponding drop in relevant discount rate (push price up).. Certainly there are time lags (5 year resets) and changes in credit quality, but the drop in prices appears over “dramatic”.. While many current issues mentioned on this site do appear to be reasonable investments, I wonder if anyone can shed light on how floating instruments can drop by 40 percent in value. As an aside, what a wonderful site..

      1. LP, I believe the reason these preferreds have fallen so far from par is two-fold. First is very small spreads at IPO. Not unusual to see junk rated preferreds with less than a 300 bps spread to the 5 year treasury. Second, is I think Canadian reset preferreds are undervalued. They shouldn’t trade this far below par. Third is that once a preferred goes substantially below par and experiences high volatility it takes a very long time before the market will trust it again. Preferreds like that trade at a permanent discount simply due to having a volatile history. I’m guessing there are many Canadian investors who have been burned badly by this asset class and have said “never again” to preferreds.

        1. Many thanks for logical and clear explanation.. makes sense to me.. I think the market “distaste” does provide an opportunity to capture value.

    4. In response to my posting above:
      1) No emails accepted regarding “trading discrepancies”, must call.
      2) Call reply was: call and place trade with a broker after you get an ask from the broker, you are paying a commission anyway on Greys.
      3) I really was not too interested in the actual trade, but the methodology. OK

      1. Joel, I own 4 different Fairfax issues. I will use FRFGF (Series E) as my example since I bought them yesterday…I followed same procedure as you… Converted to USD, matched to ask price, etc….But after an hour or so nothing happened. I had had my bid at $10.14. But when something doesnt smell right, I have used this trick that has worked every time for me. I then set my bid above ask to $10.20, and it hit immediately…At $10.12, which was below original standing unfilled bid. This evidently forces someones hand to compete and sell at a lower price or lose the transaction.
        Its not unusual…I did that with INBKL this week. I would have a standing bid unmolested. But then started playing a game. Sending market order bids under 100 share transactions. Several hit immediately well under original bid I had sitting before I pulled it. With free commissions I can play this game on illiquids when something doesnt smell right.

        1. Seems to be a human hand in the chain somewhere. I think I can move it forward from this point.
          There are some very tantalizing planning elements to these reset issues CN and US.
          I like the overall inflation expectation the five year should automatically perform if it can be left to perform that duty without manipulative interferences.
          Also, the real deeper value based on below par price alone; lower denominator factor in just about any security. Hard to miss that.
          It may help me get more toward longer term holdings instead of trading too much. I know I have made mistakes with that in the past. There have been good trader opps in this current year, esp since I began some major allocations beginning in Oct of 2018. I’ve got a scad of non-qual, sh term divs and cap gains, but the house always gets their cut! I will kind of come full circle with tax filing reality for 2019.
          I have learned alot here at III so thanks to All! JA

          1. Well to me, the fact they are under par doesnt mean they are a deal. It still boils down to the adjustment yield in relation to purchase price, plus the assumed TBill yield. Of course the yield and currency conversion is out of our hands. Probably the most salient reason for the older reset CAD issues that are all under par is the fact one doesnt have to worry about redemptions or prices backing up as call date approaches. They certainly will hedge out any future rate hikes if they occur.

          2. Joel – I agree, there is evidence of a human hand in OTC trades. Not just Canadian issues but all OTC.

            I have experienced many incidents where I had a bid in and shares traded below my offer.

            Grid’s methodology of going above the ask price seems the best. Seems to shake the tree.

            1. I agree as well, happened just yesterday. I had a limit order in slightly above the ask but it never filled. Trades took place below my offer. After a couple of hours, as the trading day was coming to a close, I increased my offer price and the order filled at about my original limit. Maybe this means I should be putting in market orders and trust they will be filled at best price, but I’d rather play Battleship with limit orders, I guess. Rational?

              1. I’ve been stymied on trading several OTC pfds. Last week, for the first time, I put in mkt orders for BAC-L, WFC-L, and SLMNP. All immediately gave me reasonable fills. Of course, the spread on these was not too bad. Nothing like, for example, DMRRP and several others I track.


              2. I advise against market orders unless it’s a very liquid issue, and even then I don’t like them.

                If your limit order is well above market you still have an upper limit. There are too many algos out there looking for the split second when there is a market order but no ask.

  10. I’m a beginning student regarding Canadian preferred resets. SLF.PR.G/SUNFF caught my attention a few days ago. I like the very high credit quality, the historically low price, time to next reset, and the low value of the index at the previous reset. I’m not able to get a feeling for what is likely to happen in the event of a significant rise in rates. I’m hoping someone will be able to provide some insight.

    1. I am also a beginner with about 5 months of experience in Canadian issues, I own a very small starter position in SLFYF paying about a 5.3% dividend. I would expect a drop in the market price with a significant increase in rates. I have the same expectation for the US marketplace.

      When I look at the 5-year chart of the stock price this has traded between $13.60 and $22. The current price is $17.10. It seems to have a range most of the time between $16 – $18. Looking to buy more below $16.

      In terms of opinions on the rate increases, my suggestion would be to look at the 5 year US or Canada TBILL (they track decently) and match them up against the stock price for the same period. This will allow you to see for yourself how it behaves in periods of rate hikes and rate cuts.

      1. Though I am far from an expert on Canadian resets having only done work on the US Dollar based ENB preferreds, I suspect that if you SLFYF and Jim’s SUNFF are typical Canadian 5 year resets (I know nothing about either specific issue), your assumptions of what they will do when interest rates surge higher would prove to be wrong… Think about it for a moment – what is it that has brought them to large discounts to par since issuance? It”s the lowering of interest rates since they were issued AND the anticipation of “lower for longer” that pervades right now as far as future expectations for interest rates are concerned…. If Canadian preferret resets are also going to go down when interest rates go up, than boy have we gotten ourselves into bad investments…. When “lower for longer” is no longer the prevailing interest rate assumption these preferreds will begin to anticipate a higher reset rate and rise in price just as now they anticipate lower resets and are cellar dwellers be they have good relative current day current yields right now or not. Apologies for jumping into Bob-in-De and Grid’s areas but had to chime in.

        1. 2WR: You have articulated perfectly why these reset hummers are, for me, a game for whippersnappers, i.e., those who can pay far closer attention to their details than can fogeys like me.

          So I mostly stay in my lane and continue buying EPD, for example, which seems to go down no matter which way the wind is blowing. Something I can, apparently, really count on. lol


          1. Camroc – I hear you but I know from previous posts that we have fogeydom in common…. At least I’ve shied away from LPs, but 12 days ago I strayed out of my lane and bot some common from one of the banks where I’ve loved the preferreds and it’s down 5%, That’s hard to have been able to accomplish in this environment where stocks only go up, but I’ve done it! Yay me!!

        2. I agree with you. These two issues do not float and do no reset. They are fixed rate. So I am more comfortable with the assumption they will fail in value if rates increase.

        3. I’m thinking that a portfolio split between US/Bermudian fixed-rate issues and Cd resets should, theoretically, have pretty stable value over time since the former move inversely to interest rate changes and the latter move in the same direction. Whether they move proportionately, though, I have no idea – has anyone seen research on this? I’m about 55% fixed-rate and 45% 5-year Cd floaters. Thank you for your thoughts on this.

            1. Tim, You got the theoretical concept down. But in reality depending on market conditions its possible it will not…Remember there is another variable (well there are a bunch actually) and that is the corporate credit spread from treasuries. Fixed issues trade more accurately off credit spreads than 10 year. Take Dec. 2018, the credit spreads blew out , all while treasuries yields went lower. Thus fixed preferreds followed the credit spreads not the treasury yields, so preferreds dropped in price.
              Also remember this. Even in a perfect normal trading atmosphere, the fixed perpetuals in theory cannot compensate moving upward that a reset can falling if yields dropped. The “callability” and corresponding date to call will anchor the preferreds in a manner that a reset will not have. Take in general this year…Resets have been down 15-20% or so this past year. Perpetual fixed in general did not climb 15-20% in general. In fact some have dropped because of various reasons (approaching call date, financial problems, etc).
              Personally I like owning a mixture of resets, fixed, and term dated and do…But they will never totally offset each other in total trading harmony though.

              1. Thanks for the response, you’ve given me a lot to think about in your comments. Much appreciated.

      2. Steve – on your SLFYF position, you’re right of course that price would move down if rates went up. It’s a fixed rate issue and will behave just like a US fixed rate.

        Consider pairing it with SUNFF, a 5-year reset from the same issuer. If rates move up, SUNFF should move up as well, very especially in the next 6 months, before it reprices at end of May, 2020. it will act as a hedge, albeit an imperfect hedge, on rate changes.

        In the end the strategy comes down to whether you are wanting to protect yourself from rates going up, or rates going down, or both. Issue selection flows from that decision.

        1. Yes, my error I have a spreadsheet that tracks issues. For some reason (typo?), I had SUNFF as a fixed rate. It should have been SNLFF.

          Agree with what you wrote.

    2. Depends whether you are looking to collect five years of yield regardless of price bot AND THEN getting a reset to 5yr+spread to catch you up with the current interest rate environment OR a call at that time. OF course the reset may be down in a low rate environ.
      For Me: I am at a point where I am a ‘coupon clipper’ for five years and will accept the reset since the 5yr bond will reflect Inflation environment or ‘spendability of the div’ at that future environment also.

    3. Jim – for some context, Sun Life is a major Canadian insurer. It is one of the largest companies of its kind in the world. Credit quality is extremely high.

      SLF has 5 fixed rate preferreds outstanding, 3 5-year resets, and 2 floaters. The 2 floaters were spun off from two of the resets and have identical terms, except that they reset every 3 months off the BOC 3-month rate rather than the BOC 5-year rate as do the resets.

      For an American buying off the OTC, your investment universe consists of 2 fixed rate and 1 reset, as follows: SLF.PR.A/SLFYF, SLF.PR.F/SNLFF and SLF.PR.G/SUNFF.

      Based on yesterday’s close, the 5 fixed rate issues have yields (stripped in all cases) of 5.32% to 5.36%. Closely bunched, as they should be. No call risk.

      Resets are more complex. One has to look simultaneously at the current coupon, the “spread”, the current BOC 5-year rate, and the time to reset. Plus, of course, the present price.

      From those data points, I derive the current yield, and the yield if the coupon rests to today’s BOC rate. For good measure I also test the yield if the BOC reset at 1% and at 0%. Four yield numbers for each issue.

      Inasmuch as SLF.PR.G is the only one of the 3 available to you, I’ll focus there. My impression is that the coupon is a bit meager relative the the reset risk. Here, I’m comparing the 5.35% that SLF.PR.G would reset to versus the yields available on the fixed rate issues. Most rests will give you 50-100 bps premium over the resets but in this case it’s zero.

      I would also be a bit concerned about the time to reset. You’re in the “danger zone”. If rates tank before the reprice date, and you’re buying at today’s price, you are saddled with a low yield for 5 long years. You are very exposed on interest rate risk for the next half year.

      I would offer 2 ways to play this, with the reset risk in mind: 1) wait to buy SLF.PR.G until closer to the reprice date, when the reset rate becomes more certain, or 2) pair your purchase of SLF.PR.G with one of the fixed rate issues. The two will behave opposite to each other if the BOC rate moves and the loss in one will be offset (roughly) by the gain in the other.

      The explanation to the forging is that, when rates rise, fixed rate issue go south in price but resets (usually) go up. The closer the reset date, the more up one can expect. Just know that the actual price movement doesn’t always comport with the theory. Sometimes, when an issue should be going up in price it goes down. There is a good deal of irrational price movement in Canadian preferred.s

      Always check out the chart, and look at it besides a chart of the BOC 5-year, which you can get at moneywatch.

      Lastly, appreciate that the “reprice” date for Canadian preferred is 30 calendar days before the reset date. Check prospectus for details. The reprice date is the date to be aware of for trading purposes.

      1. Thanks so much Bob. You’re a genius! By the way, I went to H.S. in New Castle. I’m assuming you are in the Diamond State.

      2. First, I second the notion that Dr. Bob is a genius. 🙂

        Second, if you’re not limited to OTC issues and can buy directly TSX, it appears that SLF-I is the best buy. It would have the highest SY if reset today and it would be above what the fixed preferreds pay today. In the meantime, you enjoy a 5.2% SY which is only a tad below the fixed rates. The only downside is the long 2.12 years to reset. So, you’re exposed to the risk/reward of rate movements until that time. If rates go higher, you stand to gain in price per share. If rates fall, price will go down. If you think the direction of rates is a 50/50 bet, then your “average expected” outcome is that rates are the same in 2.12 years as today.

        SLF is a uniquely strong credit among preferreds. I don’t know actually know of any preferreds with a higher credit rating (doesn’t mean it doesn’t exist). I think scarcity value in owning such a highly rated preferred. I have a life insurance policy from them partly because they are such a strong and well respected life insurer. That reputation is a competitive moat (in an otherwise commoditized business) that can’t be crossed by another company overnight.

        While it’s a diversified international company, I like that it’s based in Canada as I view Canada as a more stable country with less political uncertainty than the US.

        1. Thank you LI, but my wife would disagree.

          To extend the point, (almost) all of the major Canadian financials are exceptionally strong credits. This goes for the big banks, big insurance, and even some of the non-bank, non-insurance financials. Several reasons for this but the end result is an almost uniformly strong financial sector.

          Now, the miners and the industrials are a different matter.

  11. Wondering if anyone can shed any light on some of the Fairfax Financial preferreds outstanding. And benefits of one over the other? I picked up Series K ‘FRFFF’ at $14. I’ve done well following Prem Watsa in the past. Seems like a decent holding. I know with a lot of these you have to be careful not to do market orders due to how thinly traded they are. It would appear like a pretty low risk way to earn 6%+ but I’m a novice in this game so want to try and avoid any pitfalls. Appreciate any insight.

    1. RE: FRFFF

      FFH has 6 5-year rests outstanding, 5 with OTC tickers. Differences are the time to reset and the spread. Can’t look at nominal yield alone as that yield may be good for many more years or it may be changing in a month.

      The “best” issue requires context. For me, for my portfolio, FXFLF is the object of my current interest. Reprices in 13 days, to BOC 5-year plus 3.15%, locking down a 6.73% yield for the next 5 years. (Assuming the present price and assuming the BOC stays put for 13 more days.)

      I find no fault with FRFFF, but do point out that as the FFH issue with the longest time to resets it will be the most responsive to changes in the BOC rate, both up and down. It’s a tiger, in other words.

      As you indicate you are new to Canadian resets I urge you to look at the price charts for issues of interest. Look at TMXmoney, not OTC prices. Appreciate the potential price volatility with resets and the benefit of being diversified with respect to reset dates. Not being so diversified has been the graveyard of many an investor.

      For buying Canadian preferred, look at a post on this thread that I did about a week ago.

      1. Thank you Bob. Have spent the last few hours reading through all the comments from the last few months and really appreciate your insight. Thank you also for the google docs and suggesting to create free TMX account – highly useful.

    1. Nice! a good pop-quiz always has a tricky question that challenges pre-conceptions. US resets and CN resets. Seems like a bit of a home market prejudice in our market shown by buyers. Looks like all the prices were shown in USD not CND, but no questions during a test. Translating the yields in same currency has helped me since the percentages are the same (ie: par for USD = $18.75 for CN prefs).

  12. Today we have an opinion poll. Refer to the linked spreadsheet and look at the two groups of preferreds presented, Group A and Group B.

    Which do you want to buy? The two Groups are as equal as one can make them in terms of industry, credit quality, etc. It’s not a perfect match but not too bad, either. Both groups are made up entirely of 5-year resets.

    I draw your attention to the yield columns in particular. “A” has a 84 bp advantage over “B”, and should everything magically reprice today based on the current level of the respective indices, “A” has a 79 bp advantage over “B”.

    But the big difference is in YTC. The “A” issues are all selling well below call price, so the yield is real. The “B” issues are selling above call, so YTC is what you’re going to get. Barring a lower-forever scenario, of course.

    In that case, the real comparison is between A’s 6.40-5.96% yield, and B’s YTC of 4.6%. That’s a 140-183 bp difference.

    There is no right or wrong answer here. It’s your opinion.

    The ID of the issues will be revealed Sunday night.

    1. Group A – I prefer higher current yield selling under Par. I don’t think in 5 years, I would have either group. 5 years is a long way off in a world that I believe will have many, many changes

    2. Gotta be the A team. YTC, YTW, and stripped yield take the day for this investor looking for long term holds and income. Thanks for waking up my Friday night brain.

    3. Group A – BP Chg is 49 points better meaning on reprice B will have a significant dislocation in price vs yield received.

    4. Prof Bob, Nice pop-quiz! Love this sort of mental permutation as this is a similar process I use, but more by spinning it all in multi-dimensional mental space. Until I can achieve this sort of reckoning I will not get in. Thanks!
      I would lean into Group A.
      – Even if we move into the jaws of a ‘rates lower for longer’ or recession the resets may happen at the something like Col O; good inflation adjusted returns.
      – If 5yrbond is higher and issue is renewed or called then goodie!
      – Also, lower denominator always helps (buy low).
      PS: Using the ETF: IPFF as an index HAS shown inverse correlation to the ten year bond at this initial phase of rising Int rates. I am sure the “Bob CN Reset Index” does too. May provide decent entry and exit points?

  13. The opening of an account at TSX was the correct call for quotes and vol, thanks for the guidance.
    Also, Dr Bob: any chance to get a “weekly” update of your proprietary CN 129 reset index? I am interested in mentally tracking a comparison to 5 yr bond over time. Been using ETF: IPFF which is about 85% CN prefs (not all resets so further diluted), but it has been an okay indicator.

    1. P1 is A.
      P2 is BBB.
      P3 is BB.
      P4 is B.
      An “H” or “L” is a “+” or “-“.
      E.G. P-2-H is a BBB+.
      Both S&P and DBRS (Dominion Bond Rating Service) use the same scale, so easy.

    2. Joel – good you have set up the TSX account at

      I urge everyone with an interest in Canadian preferred (or other Canadian issues) to do likewise.

      You can use the sort feature to track day-to-day changes and prices relative to 52-week highs and lows. It can also be downloaded.

      I don’t update my tracking sheets regularly but rather when there have been big price movements and I’m actively investing.

      To track the market you might look at two ETFs, CPD and ZPR. CPD is a broad portfolio of preferred fund run by Black Rock. ZPR is sponsored by BMO.

      ZPR trades on the TSX and is comprised of a laddered portfolio of resets. This is an investment strategy that I favor. Keeps you from getting crushed if the BOC 5-year is low. It’s a useful buy-sell indicator. The best buy opps for resets in the last 5 years have been February, 2016 and September of this year. ZPR clearly shows that.

      Here is the website. It won’t display for you unless you use a VPN with a Canadian IP address.–tabs-1573918328739-=undefined&fundUrl=%2FfundProfile%2FZPR

      I will post something periodically.

  14. Decided to dip my toes into the Canadian reset world with a 500 share purchase of EBGEF at $18.89 a day before today’s x-dividend date. Nice folks at Fidelity, but the equity desk guy had no experience with these. Thanks for the tip @ Gridbird.

    1. Great Peter–you are ahead of me on the Canadian issues–certainly there is plenty of wisdom on the Canadian thread.

      1. Don’t worry Tim. We are now seeing 5 years fixed preferreds on US market with a reset in 5 years. That is what EBGEF is. So, Canada is coming to the US market whether we want it or not.

  15. Upcoming Issues on Naked Reset Watch:

    Manulife (Insurance) TSE:MFC-M 12/19/2019 P-2H – GOC 5Yr + 2.36%
    TC Energy (Pipeline) TSE:TRP-A 12/31/2019 P-2L – GOC 5Yr + 1.92%
    Fairfax (Insurance) TSE:FFH-C 12/31/2019 P-3H – GOC 5Yr + 3.15%

    1. Mia – all correct but important to note that dates provided are the reset dates, i.e the date the rates actually change.

      The important date, however, is 30 days (in most cases) before the reset date. That “reprice date”, as I call it, is the date the reset rate is actually determined. 10:00 AM Toronto time to be precise.

      At today’s last price, at present BOC rate of 1.47%, MFC.PR.M would rest at 5.84%, TRP.PR.A at 6.01%, and FFH.PR.C at 6.65%.

      The FFH issue can be purchased as FXFLF. The other 2 don’t have OTC tickers.

      I was a buyer of the MFC issue at better prices. I am not a buyer of any at these prices.

    1. Learned and sharpened a few , new good points regarding CN Prefs.
      Seems like this group here on III (CN) rode through the learning curve together , shared the info and by comparison to this Ray J publication did a very good job as a group of ‘curmudgeon’ e-learners achieving a broad and thorough understanding of the CN Prefs by ‘group effort’ over the last year!
      Bravo and Thanks. Live Long and Perspire!

  16. Canadian Trading on OTC – Volumes Myth

    This is a redo, but necessarily so.

    Do not (REPEAT, DO NOT) look at OTC prices or volumes for placing bids. Even if you get those figures from your broker. They are wrong.

    Just counting 5-year resets there are 29 Canadian pref issues with OTC tickers. Here they are, along with closing prices and volumes from Friday:

    If you look at OTC you see little or (in most cases zero) volume. Not true. These issues have plenty of liquidity. And even if you place your order off the OTC they will be traded on the TSX.

    Also, and in particular, don’t look at the OTC price. It’s OLD. So, too, is any bid/ask you see. Do not use them.

    As an example, ENB.PR.D traded 15,809 shares on Friday. If you look at the OTC it shows zero for EBRZF. In fact, last trade it shows was on October 24 for 400 shares. Point made, I hope.

    Use the TSX website for prices and volumes. It’s real time and they show the last 25 trades for each issue. You have to know the TSX tickers.

    When you go to place an OTC order, based on the TSX price, be sure to convert from CA$ to US$ (unless it’s a US$ issue).

    I get my bid/ask off of IBKR, which requires an account. Grid, where are you getting yours? Can you post a link for the folks?

    1. Bob, I use TMX Money. Sign up for free account. Once you login and set up a portfolio ticker watchlist the bid ask spreads show. Its live action. I cant set a link up as I am on phone on the road. Its easily found. Good website. Amy turned me on to it.

    2. Thanks Grid ……

      Here’s the procedure for LIVE bid/ask, last and volume:

      Go to TSX website:

      Set up an account (free).

      Create a portfolio. Put in all the tickers of interest. The list I linked to earlier will give you all 29 resets with OTC tickers. Put ’em all in!

      Log in to My Portfolio. Click on whatever you named your portfolio.

      It’s all there.

      Remember, the prices you are looking at are native currency. 4 Enbridge issues and 1 Altgas issues are quoted in US$ (so no currency conversion required); all the rest are CA$, so you need to convert before placing an OTC trade.

      1. I know you said “live” but just want to confirm these are actually live bid/asks and not 20 minute delayed. IBKR gives delayed bid/ask for free but charges 1 cent per quote query for live. Did I mention I’m very very cheap? 🙂

        1. LI – yes, live quotes, but you have to cheat to get them. If you have a live order and go to modify that order you will get real time bid/ask.

          Silly, but it works.

    3. Thanks very much, good information. What’s the best place to look up reset dates on these issues? I haven’t had any luck locating them in Quantum On-Line which is normally my source of reference information.

  17. Ahead of the 4 December policy decision, the BoC said the 29 November GDP report will be the “determinant”. The BoC has already laid the groundwork given its discussion of an “insurance cut”. We think it will happen, especially when you consider Canada has the highest policy rate among major economies, which is adding to upside pressure on the Canadian dollar and eroding international competitiveness.

    1. Given the yield curve inversion in Canada, BOC has to cut. The yield curve steepening will be very good for those of us borrowing margin benchmarked off BOC rates to buy preferreds benchmarked off 5 year rates.

      1. LI – certainly looks like the BOC is set to cut. They didn’t cut the last time the Fed cut but it seems they are being pushed to do so.

        The Canadian yield curve (5yr-3mo) is right now 17 bps inverted. A quarter point cut would get rid of the inversion, assuming the long end doesn’t move.

        With oil & gas prices so low, and with the rail strike, things are getting chilly headed into winter. Could spill over to the financial markets, preferred included. A winter sale may be at hand.

        I’m just shocked that Mr. Dressup isn’t helping out the western provinces as promised before and after the election. Hell, he’s even letting Quebec freeze.

  18. There are two F-symbols already set up for two resets due 31 Dec 2019, so according to Dr. Bob rate set 30 days early:
    APRRF and FXFLF, do your own DD.
    FRFGF resets in 3-2020
    FAXRF resets in 9-2020
    In this regard, I have been a nag on calling TD trade desk about CNs and have a response that at any given time they will set up an F-symbol it just takes time. If you have the gumption to do this, PLEASE share the symbol! I understand that in a thinly traded market you may want to see your fill first, esp after doing the nag-work with the trade desk, BUT please share the symbols as we crack the nut in an electronic age. I am still at odds as to whether sharing all the info creates a crowded buy, but I am sure it does create a more crowded sell environment. On balance, I think liquidity is King and we have all benefited from it.
    Here are caveats I have run into on Greys:
    -No B/A, BUT I can get a live indication off the CN broker with currency factor to USD by calling a desk broker (in addition to requesting a symbol set up).
    -Using the TSX to get the days or last trade price works okay, but the orders on electronic system are in USD, so using x.75 or x 1.32 (depending which are translating) is usually off by about 5-7 cents to the brokers advantage.
    That’s as far as I have dipped into the guts of the cat.

    1. Joel, these CAD are not as thinly traded as it appears. I noticed this week when I bought some FAXRF I paid direct attention to live bid/ask spreads on TSX. My OTC bid went straight to TSX displaying. I would move a penny or two just to confirm it was mine. So they are only illiquid in the sense of what they may or may not be on TSX. There is no constraints being OTC.

      1. Interesting: I have done the same process and seen a trade confirmed and see no indication of it on TSX by price or volume even though it does say “Real Time”. Their One Day View is yesterday. I have thought it is a Grey to TSX link timelag, but like a step-child am confused as to whether this is the afternoon I get slapped or not.
        There is some sort of broker turf that may be the issue, but I can be pretty persistent on nagging and will continue. Hey, this is my JOB now!!
        ‘Preciate the feedback!

        1. Joel, who knows, above my pay grade. Sometimes I have bought through OTC ticker and it never showed up as any volume on the OTC ticker. Once I gained access to the actual bid/spreads I feel more comfortable I am getting in at true market pricing instead of flying blind guesstimating.

  19. Glad I have been recently overweighted in CAD resets as they are reacting appropriately now with rates trickling higher.

    1. I was early but my CAD resets are serving the purpose of an income producing interest rate hedge as I intended when I bought them. Just a little disappointed the CAD 5 year is still 5 bps below recent highs at 1.65 while the US 5 year is blasting to a higher high. Well, at least I have my ENB prefs which reset off USTs.

      Not as much movement with my NPI and FTS preferreds as I’d like but MFC, Transalta and Altagas prefs doing well. Unfortuntely, those are my smaller positions.

      Bob’s strategy of positioning in prefs that are resetting in the next year was spot on. Those are the best performers like MFC-N up 37 cents today.

      1. Some kind of move in fits and spurts. A few weeks ago the Fairfax G jumped a buck in a few days. I sold it, but bought them back a dime cheaper as I have limited shorter term notice reset choices. Its bump was earlier so it hasnt done as much since.
        Im not into the CAD resets personally for the currency. Its just one other variable I have to deal with, but personally do not embrace. I wont move the needle anymore. Have a good enough percentage of stash in them between Enbridge, 2 Fairfax issues, and Northland Power…..Burp…

          1. Landlord, I have the Series G and Series K. And truthfully between you, me and the fencepost only, I dont remember why I zeroed in on K. I bought the G several times a month or so ago when it was a lot lower. Playing the expectation yields werent dropping anymore and to exploit the 2020 reset, which has happened so far.
            OTC has a slew of them. I am not going through them all again. Heck I cant remember if I went through all of them to begin with. Will just ride these 2 horses and just focus on them. My brain says being retired means not thinking when its not interested in doing so. . And that is frequent anymore so I stay in my designated issues I follow so I dont have to think much. 🙂

            1. “My brain says being retired means not thinking when its not interested in doing so. .”
              We think a lot alike Grid, we must have gone to different high schools together.

          2. LI – re northland, this is a perfect opp to play your convictions. given prices, reset dates and relevant yields, you should be “all in” on the A if you see BOC going higher (or staying same) before repricing at end of august 2020. would reset at 7.45% based on today’s BOC. not terrible for BB+.

            if your view is the opposite the C is where you want to be. current SY is 6.79%.

            I have been buying NPI.PR.A. No OTC ticker for the A. The C is NPIWF.

            1. Bob, That is the good thing about having to choose from a list of one. Not many options to consider, so I take the only card dealt to me.. I would tag along with you on some A if I had that as an option.

                1. Bob, you know that actually didnt work the last time she got a Fortis fixed issue. The ticker is there but when you hit the buy button it becomes unrecognizable. This also happen with the Altagas issue that recently reset that you own. I called but I got a rep who was useless and was no help despite trying.

                  1. Thant’s too bad. ALA.PG.G is up 14% since purchase and I’m looking at a 7% divi for 5 years.

                    Amy got in even cheaper.

                    1. It really wasn’t so bad, as I bought TGAPF instead and ALTGF and they climbed nicely also. Flipped it out and then got that Fairfax Series G that then popped a buck. So I got same results. I try to stay at a CAD reset dollar limit which I pretty much am at. So I pretty much have to sell to buy to stay under my maximum exposure.

                    2. Hi Bob,

                      I have gotten really far behind in reading this site but I wanted to thank you for the tip regardging ALA.PR.G. That has been a good pick.

                      Grid – its a bummer that those OTC tickers that I got did not work for you. I just called Schwab to get NPI.PR.A set up…should take ~24 hours….then I can place an order. When/if it triggers (you know how ‘cheap’ I can be…often missing out…) I will make sure that an OTC ticker is generated which I will share with the group. Maybe that one would work for you but I think you are already into the C issue and may not be interested in the A.

            2. Bob, I saw your arguments for NPI-A over C previously and realized you were right and have been working on swapping thousands of shares of C for A. Not an easy task with such an illiquid issue but I think it’s a good swap even at these prices. I don’t know why I zeroed in on the C series initially but I started there and just kept on building that position over a few months, never looking back to see if a different series made more sense. I think I was hyper-sensitive to rates going down quickly and wanted to be locked in for as long as I could before a reset. Didn’t actually make sense in retrospect.

              Anyway, I’ve been monitoring and trading furiously and managed to get 2/3 of my shares swapped but looking to swap more. It’s cost me hundreds of dollars in commissions (IB charges $1 per 100 shares) but hopefully a mistake I won’t repeat.

              I’m not actually too focused on the BOC rate which is 1.75%. The reset is off of the 5 year, currently 1.6%. I actually want the BOC rate to go lower since my margin rate is benchmarked off of the BOC rate. In an ideal scenario, BOC goes lower and the 5 year goes higher. Just like banks, what I want is curve steepening so I can borrow short and lend long profitably.

              While Northland is only BB+, I’m very bullish on their prospects and would actually consider the common stock if I didn’t already have so many preferreds. They came out with a very solid earnings report last night and seem to be firing on all cylinders. I’m surprised the common stock isn’t higher given how hot US renewables have been. PEGI just got bought out at a nice premium.

              1. I’ve been buying the A, but do appreciate it’s a bit of a speculative strategy inasmuch as it doesn’t reprice until end of August 2020. I’ve generally been buying issues which reprice sooner but I thought this issue was worth a stretch.

                What are you paying for margin at IBK? I am not yet margined there but may head that way.

                1. Bob,

                  Canada margin rates start at 3.03% and go down the more you borrow. My blended rate is 2.7%. If I can make 5.7% on an IG issue, that’s an acceptable net margin IMO. Anything above a 300 bps spread is gravy.

                  August 2020 is just about when I want to reprice. I’m bullish on US and world markets over the next six months. I don’t want to reprice too soon and lose the interest rate hedge I get from Canadian resets. Have too much money in US fixed rate issues so need to hedge out some of the rate risk. My only concern is if CDN rates decouple from US rates.

          3. RE: FFH. I would chime in by saying it depends, literally day to day. There are a lot of short term inefficiencies in the relative pricing of preferred from the same issuer.

            Right now, at this moment, FFH.PR.E gets my money. Reprices in March 2020. Rate would be 7.12% based on today’s BOC. It’s under priced relative to others. Present yield is low, due to very low BOC at last reset. People aren’t looking past the low current yield.

            This is based on rates headed up, or at least not going down.

            For benefit of others, FFH may be of interest inasmuch as 5 of the 6 FFH resets have a OTC tickers. You can play the field.

  20. Split Corps ………. analysis and comments. Using Quadravest’s Dividend 15 Split Corp. (TSX-DFN) as my example, I will attempt to explain what the investment strategy of a SC is, and why they run off the rails so frequently. I will compare and contrast to U.S.-style Closed End Funds (“CEF”) as I go along. I chose DFN because it’s the largest SC by capitalization, and because Quadravest is the largest sponsor of SCs in Canada. It’s the Gold Standard, and if it can’t cut it likely no one can.

    DFN came out of the shoot in 2004 with 40% leverage. That is a high figure. Very few CEFs have leverage in that range and those that do are in ultra stable assets like muni bonds. DFN’s assets in contrast were 100% in common stocks. Hard to run a highly leveraged fund with volatile assets.

    And the cost of the leverage for DFN is high. That leverage, in the form of DFN.PR.A, came out with a 5.25% coupon. Most CEFs have borrowing costs in the 3-3½% range. DFN is high leverage at a high rate, a dangerous combination.

    Which brings me to the core of the issue. DFN, as the name implies, invested in a basket of 15 common stocks, all dividend paying blue chips. Household names north of the border. The portfolio has changed a bit since inception but many of the original names are still there.

    The average weighted dividend yield of the basket as it sits today is 4.65%. The preferred dividend on DFN, as indicated, is 5.25%, and the dividend on the DFN common was $1.20 annually, or 8%, based on the common’s initial offering price of $15 per share.

    Right away, you have a problem. How do you pay a 5.25% dividend and an 8% distribution on assets yielding 4.65%? And cover the very high fees that attach to SC’s (more on fees later). The answer is you depend on price appreciation of the basket of stocks. If it appreciates fast enough, and steadily enough, you sell off bits each year to make up the gap. Or that’s the hope.

    Even in what has been the biggest bull market for stocks in my lifetime, the appreciation in the basket has not and cannot keep up with the distributions. The DFN preferred shares still pay 5.25%, but their rating has dropped from BBB at issue to BB today. The NAV of the DFN common has been cut almost in half since issue, from $15.00 to $7.76 today. Yes, you got what you thought was a fat distribution, but a large part of what you received was liquidation of the capital gains on the basket stocks, as well as return of your own capital. DFN did not build NAV over the years, it destroyed it.

    Taken together, the DNF common and preferred originally sold, 15 years ago, for $25 per unit. The price of a unit today (adding DNF and DFN.PR.A together) is 18.52. You also received a combined $30.40 in distributions. Thus, your original $25 investment has provided a total return of just $23.92 per unit (30.40+18.52-25). Reinvestment of distributions and taxes not considered. That’s for 15 years.

    Neither the preferred or the common of the SC has been or is a good investment to my mind. The rate on the preferred is nothing to write home about. Sure, it has retraction available to it, but you get a lower coupon because of that retraction feature. Almost every company in the basket issues its own preferred, so why not buy them directly? The coupons are better, the ratings are better, and the NAV of the issuer is not being eroded as time goes by, as it is with DFN.

    The common is even worse. The initial distribution of $1.20 per year, 8% on the initial price, has remain unchanged and now stands at 14.5% based on present price of DFN. But the yield is a fiction. Averaged over time, most of the distribution represents realized capital appreciation on the stocks held in the basket and return of capital. DFN did not turn a 4.65% yielding basket of stocks into 8%, much less 14.5%. They did not turn water into wine.

    One can buy every single issue in the basket on their own, without the fees imposed by Quadravest. The basket components all have TSX tickers, and most have NYSE listings. If you like the basket, buy it yourself. You can probably leverage the basket cheaper than the DFN can, at least in the U.S. I can get 3% from IBK and go out and buy the basket. I will come out much further ahead.

    Look at the NAVs of the various SCs relative to issue price. They are all under water. Some are negative. Some no longer pay dividends. You bought this investment because of a fat yield and now, in some cases, you have zero. FTU pays zero. LFE pays zero. OSP pay zero. XMF.A pays zero. YCM pays zero. FTU owns common stock of the following. Imagine holding these assets and having them go to zero:

    American Express Company
    Bank of America Corp.
    Bank of New York Mellon Corp.
    Citigroup Inc.
    CME Group Inc.
    Fifth Third Bancorp
    Goldman Sachs Group Inc.
    J.P. Morgan Chase & Co.
    Morgan Stanley
    PNC Financial Services Group Inc.
    Regions Financial Corp.
    State Street Corp.
    SunTrust Banks Inc.
    US Bancorp.
    Wells Fargo & Co.

    Which brings me to my last topic before signing off – for good – on Split Corps: Fees! It’s all about the fees. DFN’s annualized running costs are $9.7 million. To “manage” what is essentially a static portfolio made of of blue chips. My poodle (if I had a poodle) could have put together and managed this portfolio. And for nothing more than kibble.

    Appreciate, if you will, 100% of the fund costs effectively fall on the common. The preferred get their $0.525 per year. Nothing (except possibly taxes) comes out of that. That $9.7 million of costs works out to 16.2% of the common distribution. Plus, the common, effectively, bears 100% of the issuance costs of new shares, both common and preferred. Every time DFN issues new shares – which they do frequently – it comes out of the fund, not the fund sponsor, so the common pays.


    PS – there is one exception to the above. It’s Partner’s Value Split Corp. Why is it the exception? Because it has essentially zero fees. But you can’t buy the common. It’s all owned by a private partnership. The 4 series of preferred – what PVSC uses to lever the fund – are all publicly traded. And they are all investment grade. The return on the common, in the absence of high fees, has been huge. The company’s sole asset is common stock of Brookfield Asset management (BAM). Yes, they got “lucky” by holding one of the best stocks to own over the last quarter century, but it’s also about the lack of fees. Paying fees when no value is added – and most SCs add none – does not make sense. One could have replicated the return of PVSC just by buying BAM and borrowing against it.

    1. Thank you Bob-in-De for sharing your analysis. looking at your spreadsheet i notice that some split preferred like BK A are linked to the canadian prime rate + spread + floor, and this look quite interesting to me…what do you think about?
      Moreover, looking at the historic charts, the price of this split preferreds seem more stable than regular canadian preferred, even that those with higher DBRS rating. How do you explain this anomaly?
      Thank you again, best regards, Giuliber

      1. Giuliber – as discussed, I’m not a big fan of the split corps. Certainly not the equity.

        If you to go for some of the preferred, BK is “tolerable” to me. The price stability is entirely a function of the retraction feature. Split corp preferred would not be saleable without it.

        The real risk you take on split corp preferrd is that the NAV will get eroded by the big divi on the common, to the point that they can’t pay the preferred divi any more.

        BK is not near that point but in a good recession it could certainly get there. Right now, you have 5 split corps sponsored by Quadravest paying zero on the common (despite holding very strong socks in the basket) and one preferred that is not paying (holds only CIBC common).

        If you want a really safe split corp preferred, retractable, go for the Partner’s value issues. Yield is a bit less but it’s 100% bullet-proof and retractable. Also the regular preferred with minimum rates.

  21. When rates are headed up, Canadian resets (no min) go up, not down, so says the theory. Especially those that are coming up to reset.

    Today, the theory and the tape agreed. With the BOC 5-yr ticking up the average reset that I track was up 1.98% on the day. That’s 129 issues. Gainers outnumbered decliners 10-1, as Paul Kangas used to say.

    Resets are a good counter to fixed rates, which tend to tank as rate rise.

    1. Paul Kangas….. wishing you the best of good buys!.. Linda O’Bryon and Paul..nightly staples in my early inv days ..

      1. I dont know exactly why, but I liked him and preferred his business news..Ok, I had to google.. Its been 10 years almost since he signed off.

  22. Canadian Split Cops ….. mediocre for preferred, terrible for common, great for fund sponsors.

    A Split Corp. is a mutual fund organized as a corporation. It starts with a sponsor, the Canadian equivalent of a Blackrock or Nuveen, filing a prospectus and raising money. The money so raised is used to buy the common stock of one or more public companies. The companies chosen will have a theme, such as big banks, or big insurance, or big pharma. Pretty simple so far.

    What distinguishes a SC from other funds is its capital structure. That structure always consists of equal numbers of common and preferred shares in the SC. The common and the preferred can be sold at different prices but the numbers are always the same. The net result is that the common stock of the underlying assets is now effectively split into common and preferred issues. Investors who want the smooth ride of a preferred can have their way, and investors who want the return of the underlying common, juiced by leverage from the preferred and covered call writing, can have theirs.

    Or so that’s the theory.

    Features common to (almost) all Split Corps:

    1. Assets consist solely of common stock of public companies
    2. The companies can be Canadian, or foreign, or a mix.
    3. The number of companies in the portfolio is small. Several have just one.
    4. There is always a theme.
    5. The number of common and preferred shared issued by the SC is identical. A common shares together with a preferred shares is a termed a “unit”.
    6. Common and preferred shares are sold separately, and trade separately.
    7. Very often the common of the SC is sold at $15 per share, and the preferred at $10, or $25 for the unit.
    8. The SC has a finite life, usually 5 years from inception, which almost always gets extended. Unless it fails to reach critical mass, in which case it usually ends up being acquired or wound up.
    9. SCs can, and often do, secondary offerings.
    10. The SC preferred has a fixed dividend, which sometimes gets changed when the life of the SC gets extended.
    11. The SC common get an initial fixed divided, which then goes away. After that, the SC common gets what’s left after the preferred have been paid. And after the fees have been paid. More on fees later.
    12. SC preferred dividends are (mostly) qualified. Divis on common are a mix of qualified, capital gains, and return of capital. Sometime, a lot of return of capital.
    13. The SC shares are retractable, that is they can be put back to the company. The common can usually be put at NAV, the preferred at issue price (less a discount).

    Here are spreadsheets for the largest Split Corps, one for the common and one for the preferred:

    If you’re inclined to look I would direct you to DFN & DFN.PR.A, FTU & FTU.PR.A and the 4 Partners Value preferred issues (the common doesn’t trade).

    Links to the sponsors’ websites:

    Analysis and thoughts tomorrow.

    1. I looked at these years ago, specifically the CA funds (not pfds) on life split and banc split and decided to pass. Now w 0 commissions it is possible to build a little bank or life ins portfolio yourself, although CA financials not an area I am fond of for entry at this time. Seems like anymore if you look hard enuf you always find a fund or etf in anything anymore. Fine w me, when folks decide to leave a sector and they disgorge, real opportunities can present themselves.

  23. 3 issues of note repriced today. Based on the new coupons, and today’s low price, ENB.PF.A is yielding (stripped in all cases) 6.79%, FTS.PR.M is 5.89%, and PPL.PR.G is 6.85%.

    The new coupons are in place for the next 5 years. All have been trading much closer to 52-week lows than highs.

    ENB is a BBB- rated midstream. FTS is a BBB- electric utility, and PPL is a BB+ midstream. PPL is my favourite of the bunch. Well run, financially conservative (unlike many U.S. midstream companies) and been around forever.

    Good laddering material. No call risk on any of them. No U.S. tickers either. Currency risk for U.S. domiciles. Or currency diversification, depending on your view point.

    I own them all, having bought on dips during the last several months. My entry points for FTS and ENB are well below today’s lows, so my yields are higher than shown above. I bought all my PPL at today’s low.

    1. Why would PPL be your favorite when it’s yielding the same as ENB which is IG rated?

      1. This is not a deep-dive answer, but for what’s it’s worth.

        One of the things that S&P and other ratings don’t capture well is the underlying risk of the business, meaning both the businesses in which the companies compete and how “aggressively” companies are run.

        PPL, to me, is a more “conservative” company, both the business model and the management style. From a preferred perspective, I don’t benefit from ENB’s more aggressive capital program. It goes to the equity. For essentially the same yields on the preferred I’ll go with PPL.

        But I own lots of both.

        1. Bob, I have same feeling to. I lean on ratings but they are not the be all. To me, I personally would have no problem with every penny I have being in my local utilities preferred. I dont care how they rate it. I know they will be taken care of in the end.

          1. Bob/Grid, A beauty of ute-preferreds would seem to be that societal and political interests are typically aligned with their success/survival. Pensions, pension funds, and the employees are core interests that are woven deep into the state and local fabric. Too “important” to fail it would seem. Of course, PCG and SCE are testing that theory, PCG common being down 90% in 24 months, preferreds like PCG-H down 45% over that same time. Formerly high IG ratings didn’t foretell this outcome either, or the current S&P “D”.

            A friend of mine shared his dad’s (whom I’d met before he passed) investment philosophy. He simply put all his funds into utilities in geographical areas around the U.S. with very low risk of natural disaster. He had basically zero investment training or acumen and that was the totality of his criteria. He was never a big earner though parlayed his savings well into 7-figures over the decades sticking to that philosophy. His 4 daughters paid cash/paid off their four houses with the inheritance built on that simple plan.

            1. Makes sense to me….There is no way in hell under any circumstance would there be a 15 billion property liability fire in Ameren jurisdiction. And of course there is no inverse condemnation laws there either.

              1. Grid, Yes exactly. Ties in with Bob’s point about the underlying risk of the business. Was not quickly available when I just checked online, though I believe Alabama and Texas are also IC states. With preferreds, seems boring is better. 2019 cap gains notwithstanding, 20 years of a flat 6% QDI Ameren sounds quite appealing.

                1. Alpha, I suspect CA, is too in deep to reverse inverse condemnation. Its basically imbedded into the societal cost now with utilities serving as the defacto reinsurer to be paid back themselves by consumers. Property and casualty insurers had basically told legislatures they were leaving the state or applying astronomical rate increases if it was ever rescinded.

            2. “societal and political interests are typically aligned with their success/survival. ”

              I don’t doubt the businesses will survive and that service will continue uninterrupted to customers. However, just because the business/service survives doesn’t mean bond/preferred holders survive. They may be sacrificed in the interest of employees and customers. Don’t get me wrong, I love me some regulated utility preferreds like from Fortis. But, utilities have a ton of leverage and in a financial crisis in which access to credit freezes, high leverage companies are the most vulnerable regardless of their profitability. A good example is GGP which was always profitable throughout the financial crisis but had to declare Chap 11 simply because the credit markets were frozen and they couldn’t roll their maturities.

              Another issue is what happens if there’s a fairly sudden shift in political sentiment toward fossil fuel companies. If a critical mass of people get their electricity from some place other than the local utility, then they won’t care if there are policies that bankrupt utility companies. I think nat gas is most vulnerable to this. In Wash DC there’s pending legislation to outlaw any new nat gas hookups for new development so no more fossil fuel infrastructure gets built. It’s going to be a problem for Altagas if that happens. See this:


              To be clear, I know nothing about PPL and it’s now on my list to research. However, before discounting ENB for their growth capex, don’t forget that 10% of EBITDA comes from their regulated utility business which is of course rock solid. They also own trophy-class pipelines and the management team has an excellent common stock dividend growth and total return track record. While those benefits largely accrue to common stockholders, it’s indicative of the quality of management.

              1. Credit lock ups are boogers for any company. Utes didnt have that problem in last crisis though. But nothing is assured. The T&D utes that arent vertically integrated utes are a level safer (no power production). In fact the electric car craze will be a big boom to them.
                I got my Enbridge, but I do share your concerns they face long term. PPL has their Britain problem as they are worried regulators may whack their returns going forward in a couple years when next cycle allowed returns are issued.
                But as you stated technology can upend any sector quickly.

                1. “Credit lock ups are boogers for any company. ”

                  I think it’s really only an issue for companies that have to roll maturities during the freeze. The more debt you have, the more likely you are to have something mature during a credit freeze. Of course from an investor’s standpoint, the solution to that is to diversify.

                1. Bob, I have a big relative slug too. But that gives me more reason to be concerned. A fine company no doubt, but it doesnt mean I wont keep an eye on it, ha. Definitely am comfortable owning it, but it isnt in my Ameren or PacifiCorp ignore mode.

  24. I took a 25% position in APRWF. This is Atlantic Power. This is a speculative issue currently paying a fixed rate of 7.7%. Earnings announced tonight were good (common stock AT trading at only $2.33 a share).

    Normally, I would not invest in a company like this. I was surprised to find the common stock on Schwab’s conviction buy (strong buy rating) list as an A-rated common stock. The 52-week range on the common is $2.07 to $3.02 which does not pay a dividend

  25. From the comments by some of you, I have been looking at EBGEF.
    Can somebody help me understand it? I feel like that I am not clever enough to figure this one out.
    It pays 2.82% above the 5 year treasury until 2024, which is about $0.336/quarter. Correct?
    This is like a 7.3% based on its price today: ~$18.30

    What I can’t figure out is:
    Where is the catch that it pays such a high distribution?
    And, what happens after the 5 year period? You can convert to series 6? Do we know the yield and price of the series 6?

    In short, what are the risks when investing in something that is paying such a high distribution?

    Sorry if these sound like beginners questions.

    Thx in advance!

    1. Pretty unique issue, it trades in US dollars on the Canadian exchange and on the OTC market (no currency adjustment)

      Here is my understanding. Yes it’s 7.3% on todays price until 2024. In 2024, it resets to 5 year treasury (US I believe) + 2.82%. That is 4.35% or 1.09 cents per share. 1.09/18.30 is 5.96%.

      Some folks worry about 0 or negative interest rates in 2024. If 0% on the 5 year, it is 2.82% or 0.70 cents a share. 0.70/18.30 – 3.85%.

      Finally if they call it, it’s a profit of $6.7 or 36.6%

      If I am wrong, please correct me folks.

      Finally if they call it, it’s a profit of $6.7 or 36.6%

      1. I have no idea how conversion to another series would work since it’s an OTC issue. Would we not be eligible if the new issue did not have an OTC also?

        1. If you own a Canadian reset bought off the OTC issue, you cannot exercise the conversion right.

          It’s not much of a loss in this rate environment but if we had a repeat of very low rates, as in 2016, it’s a valuable right.

          If you buy off IBKR you can convert. IBKR even provides you with notice of the opportunity.

      2. Some folks worry about 0 or negative interest rates in 2024. If 0% on the 5 year, it is 2.82% or 0.70 cents a share. 0.70/18.30 or 3.85%.

        1. SteveA, At some point the naked resets start to become more valuable even if rates slope into the Mariana Trench. A 3.85% in a zero-rate market would be terrific. Heck, there are similar rated YTMs lower than that laying all over the battlefield now. Long EBGEF.

          1. I agree. I am LONG EBGEF with a full share meaning the maximum I hold for any one issue. Last year at this time (Nov 2018), Fed watchers were forecasting 3 rate HIKES in 2019. We got 3 rate CUTS. 2024 is a long time off to worry about. We cannot even get the upcoming year correct

            1. Good grief has it been a year already? You’re exactly correct of course – 3 hikes took a “slight” course adjustment to 3 cuts (that’s a “net” shift of 5 expected adjustments in one year). If seen in a movie we’d have called it too unrealistic. I’m sure we’ve all been reading the same/similar literature re the tsunami of Treasury issuances on the way. EBGEF adds a considerable hedge against the potential of the Fed to not fully cooperate.

        2. Canadian preferred, as a group, have nifty features. Whatever your interest rate outlook, whatever your portfolio needs, there is something for you!

          Worried about a lower-for-longer scenario, or lower-forever scenario, no problem. Buy the resets with minimum rates. Your only risk is getting called. And for most issues a call means a big cap gain. Rate go higher, you get the higher rate. Heads you win, tails you win.

          Know of any U.S. issues with a minimum coupon of 5.85%, investment grade, uncallable for almost 5 years, and selling 22 cents above par to yield 5.69%?

          Check out BIK.PR.A.

          Or buy the fixed rates. Most offering 5.5-6.5% yields on IG rated issues and no call risk. Rates go to nothing, you still get your coupon, prices go up, and worst case you get called for a cap gain. Rates go (and stay) high, tough luck. Just like a U.S. fixed rate, except they have good YTCs.

          Like to play with fire, but for a lot more yield? Go with the naked resets, those being resets with no minimum rate. Just be sure you know what you’re doing, and follow closely. Great way to play the yield curve, if you are into that and know how to do it. This is the double black diamond of preferred issues.

          And if you like playing with dynamite, go for the 3-month floaters. Huge yields but you are at the mercy of short term rates.

          À Chacun Son Goût.

          1. Great post. I can maybe understand the discount Canadian preferreds get because they’re Canadian and it’s a small market but there are plenty of Canadian preferreds that are essentially American with NYSE tickers. ENB even has a couple that are USD denominated. Really the only big downside and why I don’t own a ton more is they are not marginable.

    2. Dan, just to address your “high distribution concern”. To the company it isnt high distribution. They already got their $25 (minus fees). So Enbridge is in effect paying about 5.4% on the cost of capital. Its not high cost to them. The preferred is rated BB+/ BBB- range so its presently decent quality. Of course at reset it could be higher or lower. If one million shares dont tender for a series 6 it will never occur. You are getting an above market yield quality wise. But you run the risk of lower resets which would impair the stock price most likely. As they tend to move directly with longer end of yield curve on an almost daily basis.

    3. Dan – Actually, EBGEF pays a 5.3753% coupon UNTIL 3/1/24 and it’s at that point that it will pay for the next 5 years at a rate of 2.82 above the then present 5 year US Treas with that rate actually being determined at a date one month before that…. So it’s paying such a high current yield now because many are concerned about “lower for longer” and want to believe they should discount the price because of how low the reset will be 4 1/2 years from now… Canadians in general tend to have this fear more so than Americans if you compare EBGEF to NI-B for example which also resets about the same time in 2024 also off of the 5 year US Treas,,, NI-B trades at 28 with its present day 6 1/2 coupon for a current yield of 5.80% while this similar credit quality issue trades at 18.38 and pays 7.31% current both up until 2024. If you accept this comparison as opposed to some of the comparisons that might be available in the Canadian universe, it just confirms how differently Canada with its more experience with these type issues treats these kinds of f/f issues based on 5 year resets.

    4. Important to understand the mechanics of Canadian resets.

      This is a US$ denominated issue, one of 4 by Enbridge. Through March, 2024 it pays a quarterly dividend of 0.33596 or 5.38% on its $25 redemption price. That gives it a stripped yield of 7.44% at present price of 18.35. Rated BBB- by S&P Global.

      In 2024, the issue will reset to the THEN 5-yr BOC + 2.82%. If it reset at this moment, the rate would drop by 97 bps.

      Look not only at today’s yield, but also what the issue would yield at various reset rates. I use today’s BOC rate, a 1% rate and a 0% rate.

      Read the prospectus, and look at the 10 year chart on the TSX website. The ticker is ENB.PF.V.

      Be sure you understand the terms and the risks. Canadian preferred offer lots of opportunity, for profit and for carnage.

    5. Dan you may want to split your bet and look at EBBNF which is Series L and is USD based. Right or wrong its my personal favorite and what I own. It resets late 2022, and has a better 3.15% adjustment.

      1. Thanks to all the knowledgeable replies, gridbird,steve, bob, 2wr and the others! These Enbridge securities are really fun and unique; this makes investing interesting.

        Gridbird: would you care to expand on why EBBNF is your favorite? I see the slight diferences in %, as well as dates, but besides?
        BTW: quantumonline does not know ebbnf, and the info on ebgef is not very useful.

        Before I buy something I like to understand what I am doing, and there is still something that I have no idea:

        What exactly happens in 2024 (or 2022 for EBBNF) if I can not exercise the conversion right? Do I just get some (unknown) amount of money? How much can one reasonably expect? I assume it is NOT like the term preferreds that you get the $25 (that would be a $7 gain from today’s price, giving a crazy high total investment % ) ?


        1. Dan – Personally I have not focused much on the “conversion” factor if you mean an ability to convert into the shadow series that converts EBGEF from a 5 year reset into a floater because your ability to even consider that is not in your hands unless there’s a minimum number of holders looking to do so. However, I think you’re on the wrong track as to what happens in 2024 if conversion does not become an option open to you. What then happens is only that the dividend payments change from the present day 5.3753% to a new rate. Were that new rate set today, it would be the present 1.52% 5 yr Treas rate PLUS 2.82 OR 4.34% based on a par amount of $25 (Tim, please don’t chastise my loose usage of the word, “par” – lol). So you don’t get anything in the way of a payoff payment, You get the new coupon payment quarterly and the market continues to measure how much that payment for the next 5 years is worth by setting a unknown price that will most likely continue to be below $25. OK, Grid, step in… lol

          1. 2WR, We already beat each other up on the playground once so hard with pillows we had to help get each other back up off the ground. So we dont want to repeat that, ha. They rarely trade apart enough to really exploit, but it worked a few times for me. Its funny how EBGEF was the “discovered one” with frequent mentions and a few articles on SA even. But EBBNF really never had any radio airplay at all and traded OTC long before. It just goes to show they really longer term are not exploitable or any real imbalance occurs for very long without it being corrected.
            I dont make a passion of it and only do it occasionally for small ball, but the trades to exploit arent the issues from the same company. But similar quality issues from multiple companies with same reset year and largely same adjustment factor.

        2. Dan, they are identical in terms of priority, so the difference is what you stated. The spread of 3.15%. Now this would have to be amortized over a long time, but that 33 basis points over EBGEF represents a little under a dollar in inherent value from a $25 preferred. Yet it trades around a buck lower (and there are reasons for that which need to be understood). Its also just admittedly easier for me to track as it reset in 2017 with a sub 2% stub then. So at present crap yields its reset will not be appreciably different today. That being said I almost made a trade switch on some yesterday but it corrected before I could.
          I would suggest for most people who are interested in these types, the far more important thought is what Bob has frequently mentioned…Finding issues of comfort and laddering with different reset years. Just through quirks not intent as I move around some anyways. I own presently three later 2022 resets and one late 2020 reset.

        3. If you cannot exercise the conversion right, then you keep the issue you bought. You don’t get any money. Certainly not $25. There is no work around for this other than buying the Canadian tickers off IBKR.

          Issues don’t convert all that often. Usually, only when the 5-yr BOC is very low, as in under 1%, as in 2015/16. The convert is exactly the same issue; just becomes a 3-mo reset off the 3-mo BOC rate. And a new ticker.

          Read the prospectus; it’s actually quite straight forward. Just different than U.S.

        4. Cannot emphasize enough. Do NOT use U.S. info sources for Canadian preferred, even those with OTC tickers. Not for terms, not for prices, not for anything. Especially not for prices.

          You just need to know the TSX tickers, which you can work out on the company’s website.

          Use the TSX website for pricing. Use the company’s website for terms. It’s all there.

  26. So what do you get if you raise (say) $100 million for a new fund by selling exactly equal numbers of common and preferred shares and then using the entire $100 million (less fees) to buy exactly one ticker?

    In Canada it’s called a Split Corp.

    Coming soon to these pages.

    (Hint: it’s all about the fees.)

  27. Landlord and Bob, Im a little late to the party here, but decided anyways to get an initial position in the Northland Power Series C through OTC at $13.99 for 750 shares.

      1. Kapil, this one is NPIWF. It is a Canadian CAD priced that needs to be converted to USD. Its adjustment is 3.46% plus 5 yr CAD. Traded to 18.48 CAD today. I bought OTC at $13.99 USD.
        More of a “green energy” producer …BBB bond rated. S&P slots preferred at BB+.
        They have 3 preferreds if memory serves, but this is the only one OTC that I am aware of.

          1. Most Canadian preferred issuers have the prospectus available for download on their website.

            In all cases you can get them off SEDAR, which is Canada’s EDGAR.

          2. Val, the easiest way to get the Canadian preferreds prospectus for the big boys is through their company website under their stock investor section. Unlike US counterparts they treatment them with more respect and info….I teed EBGEF (Series L) for you directly from their website.
            Also through a link via preferredstockchannel works also. But you have to know CAD trading ticker to do this.

    1. Grid, I’m a huge fan of NPI-C. Renewable energy is hot and we’re seeing a lot of capital flow into this space. NPI strikes me as a well managed company with solid vision and execution. Leverage is a tad high but as their new projects come online (Germany within the next year), leverage will drop. Also, they have a huge common equity buffer in relation to the size of their preferreds. They do have some subordinated debt but that should be converted to common in June. I view their acquisition of a regulated utility business as credit positive.

      1. Landlord, I largely tailed you on this issue as I could read between the lines you were versed in the company. But price spiked when I got serious, so I needed a little retreat before I would buy. But don’t worry, I wont blame you if it goes to zero, ha! 🙂

    2. Grid – been buying the Series A myself. Alas, no OTC ticker.

      The SY is lower than the Secies C but looking at the reset rate the A is far ahead.

      1. Bob, you’re right. I think Series A actually makes more sense here. I’ve got to get smart like you and put everything into a spreadsheet so I can better compare different series. Now I’ve got to figure out how to swap thousands of C shares for A shares when there’s very little liquidity.

  28. DateD Oct 24-2019 the Ray James CN Pref Report for those who like:
    PS: I noticed the disclaimer at the end of a blog contribution recently saying, “notice that only one of the potential positions has a Pink/Grey trading symbol at this time.” So what brokerage is facilitating? or is someone using a foreign CN account with a CN brokerage?
    PPS: There is an iShares Intl Pref ETF: IPFF that seems to perform as a decent index-proxy for CN Prefs since 85% is CN and lots resets in fund. A researcher can take it from there. Sometimes an index trend is useful. It seems to be an inverse rate correlation as one may expect from a pool of CN resets…can not find info on how the positions are managed in fact.

  29. A friend of mine who worked until recently at the StL Fed just sent me a link:
    an interview in Canada of Steve “The Big Short” Eisman from April 2019. Some good subtle current points worth listening to AND some insights into CN Banks. Might be worth the eyeglasses of some one who has seen it all and is very knowledgeable regarding regulation, real risk now, financial evolution and where we may be now.

    1. One additional comment ….

      This may resonate with Canadians more than Americans but it’s hard to appreciate just how strong a monopoly the Canadian banks enjoy, and how much they exploit it.

      Canadian banks kill you with fees. They are truly fee-mad. A fee for too many cheques, too few cheques, too low a balance, too high a balance, too many transactions, too few transactions, deposit by teller, deposits by ATM, no deposits, too many deposits, breathing too much air, not breathing enough air!

      The only way to get even with them is to buy the stock.

      1. When I started investing I looked at my utility bills and thought to myself if I can just receive parity From these same companies. Wouldn’t that be something.

      1. Mass Transit, U Healthcare, Coalition Parties Govt, kickass fishing and a Natl Energy Policy too! Just sayin’ ‘different’.

    1. I need a drop for a bargain. As yesterday I dumped my Fairfax and Altagas on nice quick gains. Im just down to Fairfax Series K and Enbridge L series now.

  30. To Bob-in-DE,
    About two weeks ago you posted links to spreadsheets that included a column for Grey/Pink symbols. I mentioned I still had work to do on these and completed that tonite while ‘watching’ a movie. I do not know how to send a communication via email and have done badly at GoogleSheets postings. If you want a list of 77 CN prefs only (there are a few more that are foreign and CN Commons) that may aid in filling in your database let me know how to get it to you. I heard mention of a way/link thru Shrieking Alpha?
    I have not gone back to the comprehensive Raymond James sheets and worked thru them yet so there may be more to come. That’s it for tonite. Your work and insight into the mental gymnastics of the resets particularly has been valuable. You are a hound on a good trail.
    Thanks, JA

    1. If you go to the website, you can then click on the ‘screener’ function. Filter for Pfd issues and Canadian issues. All Canadian
      preferred issues that trade OTC in the U.S. will display. Once you choose a pfd issue you will have to find the correlation to the Canadian preferred symbol to see what the data is. TDA will bring it up automatically once you key the OTC symbol into the quote box. That is how I do it but others may have a better system.

  31. Building a “ladder” of naked resets (resets without minimum rates)…

    Naked resets are an advanced topic. If bond math isn’t your thing, or you aren’t in to reading prospectuses, or you can’t stand the thought of temporary (or permanent) capital loss, you should stop here.

    Everyone here is familiar with the concept of a bond ladder. One can apply the same laddering principle to building a portfolio of naked resets, except that the ladder is based on reset dates rather than maturity dates. Naked resets reset every five years, so your ladder is going to consist of issues resetting over a rolling 5-year period.

    One can build a ladder by going out and buying the ladder all at one time, spreading your purchases over the 5-year reset period. Or one can buy them as they come up to reset, or after they have recently reset. I am doing the latter, more so pre-reset than post-reset. Buying this way gives me a 5-year runway once the rate resets, and there appears to be a bit of a premium (~50 bps) for buying before the reset as opposed to after the reset. A nice yield bump for taking a small rate risk.

    If you want to do the same, please realize that the reset rate is actually determined (usually) 30 days before the reset date. It’s that “reprice” date as I call it that counts, not the actual date the rate changes.

    The universe of naked preferred for laddering is about 150 issues, meaning that you have on average 30 or so issues per year or 3 issues resetting per month. There is always something coming up to reset.

    Thus far, I have made 6 buys of soon-to-reprice naked preferreds. That includes ALA.PR.G, which repriced on 8-30, and TRP.PR.E, which repriced on 10-1. On ALA, I locked in 6.97% for 5 years, and about 6.15% on TRP.

    Buys that have yet to reprice include ENB.PF.A (repricing 11-1), FTS.PR.M (also 11-1), MFC.PR.M (11-19), and PPL.PR.G (11-1). Yields on these issues, at Friday’s closing price, assuming a BOC rate of 1.555% on reset, would be, respectively, 6.89%, 5.97%, 6.08%, and 6.98%. All are trading well below redemption price so the yield you see is the yield you get. For 5 years, anyway.

    So the point is made, I am not buying these issues blindly because they are coming up to reset. I look (very carefully) at valuation metrics, too. I look at these: current price relative to 10-year lows, current price relative to 52-week high and low, and yield if the next reset were at a BOC rate of zero.

    All of the issues listed above trade on good valuation metrics right now. That is not to say they can’t go lower in price (they can) but I’m not buying in at a market top.

    I do point out, even if you’re a market pro, that these naked rests offer nothing in the way of “protection” if we go to a lower-for-longer or lower-forever rate scenario. If you’re looking to cover that risk, the minimum rate rests do precisely that, albeit at a big yield penalty.

    The following will be posted through the market close on Monday. Note that all issues displayed trade in CA$ and only one has an OTC ticker.

    1. Its always interesting to notice individual daily trading volumes, also. Take Altagas. The Series C which I own has exploding volume Friday of 73,000 shares. It was up 40 cents on day. The Series G and I had volume of 13,000 and 3,000 and were up a nickel and down a couple pennies.

      1. Grid, there was a big buyer of naked resets on Friday across the board. Check out volume on NPI-C.

        1. Landlord, you probably look from a better viewpoint than I do as I only watch a select few. But I didnt see it in the few naked resets I track outside of C from Friday.

      1. miahc – appreciate the distinction. The reset date is the actual date the coupon changes. The “reprice date”, as I call it, is the date on which the new coupon is determined. The reprice date typically precedes the reset date by 30 calendar days. So, an issue resetting on 1 December, such as FTS.PR.M, reprices on November 1.

        Companies typically put out a press releases the same day an issue reprices. Usually just after market close.

    2. “these naked rests offer nothing in the way of “protection” if we go to a lower-for-longer or lower-forever rate scenario. If you’re looking to cover that risk, the minimum rate rests do precisely that, albeit at a big yield penalty.”

      Bob, another way to cover that risk is to buy uncallable preferreds like WFC-L, KTBA or RLJ-A. Those have unlimited upside from lower rates as long as spreads don’t blow out.

        1. I saw perpetual noncallable SLMNP had a nice dump delayed from going exD a few days ago. I picked up 20 to beef back the supply. Flipped some a while back so a decent entry point here to get some back without much effort.

          1. You make it look so effortless.

            I looked at SLMNP this morn but decided to hold cash for now. Very depressing, I didn’t enter a single buy order today. Or last week.

            1. You should be depressed, as it is pitiful….Where can you find a QDI 5.85% fixed with no YTC problems with a slotted BBB- rating? I dont know of any besides this one. The 4123 shares or sold is a bit deceiving. Two 1000 share blocks were sold, and one 2000 share block sold most likely institutionally. The other 120 shares or so were scraps sold on the market.
              Just seen BB credit spread still bouncing around near all time lows. But triple C spreads are starting to widen.

              1. SLMNP was the only issue that truly tempted me this morning. But I am hoping for a repeat of last year’s December debacle, so cash it is.

          2. Grid, I saw that SLMNP dump, it was mostly 3 trades of 1K, 1K, and 2K making up much of the day’s trading volume.

            Figure the rest were weak holders getting rattled by the dump and selling their 5, 10, 20 share holdings.

            I bought another 5 shares at $1,025.

            1. Good for you. When I see a price dive on a FI issue that I like (emphasis) my instincts are that it’s a buying opportunity.

              I then look carefully to see if there is news that I missed. Sometimes there is. But more often it’s nothing but some big holder dumping shares or an overreaction to what isn’t such bad news after all.

            2. Spent the day doing important stuff like steam cleaning the garage floor tiles so just catching up on SLMNP now… Of course you were all over this, Grid. I’d expect no less…. For the record, once again this time around, it was not me dumping just as it wasn’t the last… lol ….. but I might add 5 or 10 tomorrow if the opp’s still there….

              1. You would buy this 2WR? I thought you only bought shares that were getting redeemed and there was a dime meat on the bone to pluck. Or a 9% Microsoft 3 year term dated preferred. 🙂
                Bob, I had money burning a hole in my pocket as I dumped a slug of Fairfax G and Altagas C as they both spiked over a buck a share and I barely held them a couple weeks. So I dumped the proceeds in Enbridge Series L which hasnt moved much recently and goes ExD next month (I have too much of this), and oooops I bought 32 shares of SLMNP as I forgot about the other brokerage account. I am like Camroc now and have too damn much of this for my comfort counting what I already had. I will need to peel off some shares at some point.
                So Inspy is these 5 shares been banished to the sock drawer? I guess I cleaned up more of those loose shares than I thought. I bought them all later in day so there could be more available at $1025.

                1. Grid,

                  Yeah – I relegated the 5 shares to the sock drawer. I don’t have many, only 20 shares, so not a huge amount of money tied up in any case.

                  If tomorrow has continued selling pressure, I might consider adding more. GCV-B is getting redeemed, so I have cash coming in, and would like a new home for it.

                2. Grid – You sucked me into this one in May when we thought it had a par put. Still, with the 83 put there is that as little as it might be, that would give some downside protection which is always important to me. And as you mentioned in this thread, where else can you get this kind of current on a near par IG issue? Best I can figure, the only reason it trades this low is because there was a BK in Lyondell’s long ago history, right? At least its US operations….. Plus I bet they make the dreaded plastic straw…..

                  1. I think the stigma of that financial crisis era bankruptcy is a good thing. Because now every other sentence they state maintaining investment grade status is a “high priority”. They got over extended with a slew of acquisitions and it bit them.
                    I tried a wax type paper straw the other day. I had no problem with it. But dont take away my coal fired sub 9 cent a kilowatt hour electric bill though!

                  2. 2WR, I gave your question some thought, and it wont surprise you know, I cant come up with a knowledgeable explanation. You know issues like this such as WFC-L and BAC-L which are also $1000 preferreds for many years badly lagged their sister $25 preferreds until very recent time.
                    I just dont think they get much “Radio airplay”. Once you started seeing BAC-L and WFC-L mentioned a lot their prices over time finally fell in line.
                    SLMNP is hobbled by a couple more factors. One is understanding it. I had to dig and dig AFTER LYB acquired to figure out it was safe to buy above par. I played with it a bit as a trader when it was Schulman and a true tethered convertible. But when LYB acquired it, it was hard to figure out for a long time what was going on with it as the acquisition took 6 months. Throw in the fact it only has about 116,000 shares outstanding and was meant for institutional holding. It went over 4 months without even really trading earlier this year. Only a very few amount of people own it I would bet. Whenever there is any real volume, you dig and find it was actually mostly big block sells. It really should be over $1100, but due to its “uniqueness” I am under no illusion of it ever ascending to market yield level pricing.

                    1. You noticed we had another dump on SLMNP today? This time I did jump in but it looks like a little early. Bot the amount I was too late to buy the other day at 1025, then 1024, 1023.25 and 1021.5 for average of 1023.75. Total = 25. Hopefully, the dumping is now over……….

                    2. 2WR, about 10% of the float has rolled over, with another two 1000 and one 2000 block purchase at end of day. Exactly like Tuesday. I suspect it wont last much longer. Law of big numbers here…A $5 loss is equal to less than 13 cents on a $25 issue. All in all it really hasnt moved much for a float roll over. It was sitting about 1045 before Oct. 11 exD of $16. So it hasnt really moved the dial much, but the liquidity offered a chance to buy though. And since I sold off my lower purchases on the last dump from summer, I restocked the kitty to an over bloated position again.

                    3. I think you guys have been talking about this issue since May/June. I threw my hat in the ring today and bought some. It is nice to see ones like this pinned near a bottom for the time being. Keep selling high flyers and rotating funds. It also pays to have high limit sell orders sitting out there. It is cool that they hit at times.

  32. Alberta new government to lift previously imposed consumer electric rate cap. Deregulate energy market further.

    Expecting my utility bill to experience more volatility.

    Long Capital Power, Transalta, Canadian Utilities, Fortis

  33. Preferreds are known for having some pretty vicious tax loss selling. Obviously, very little tax loss selling in US preferreds this year due to how well they’ve performed. But CDN issues should be a different story. Do people tax loss sell in Canada and are folks thinking we could get some tax loss selling bargains come Nov/Dec?

    Must admit I’ve been late to join this chat board. Some really great insight and ideas from Bob, Gridbird and others here!

    PS – some unusual volume in my favorite CDN preferred NPI-C today. Looks like a big buyer stepped in.

    1. Yes, Canadians tax loss sell, too. The big losses have been in the naked resets and floaters. Look especially at BAM, FTS, HSE, MFC, SLF, and TRP issues.

      If they do take a dive at year end I am there to scoop them up. Same with U.S. issues, but as you point out not a lot of losses here.

      But, you may have GAIN driven selling in the U.S., especially among past call or near call issues. If selling of STT and WFC and BTT past call issues drives them below par, I will buy.

      1. Thanks for the ideas to look at. I also downloaded your tracking spreadsheet of a number of preferreds you posted I think a month ago. Thanks for that as well. Saves me a lot of time going back and forth with prospectuses and

        I’ve admittedly been early on my CDN naked reset purchases but I’ve been doubling down here. In the past I’ve shorted US treasuries in order to hedge out rate risk in my highly leveraged preferred portfolio. But buying CDN naked resets is a far more efficient way of hedging as long as CDN rates remain correlated with US rates.

        1. Resets are certainly a way to “protect” (profit!) from a high-for-longer rate scenario. I wish that were the next problem. A nice balance to the U.S. perps that would tank in that case. Which we all own a lot of.

          When you say “leveraged” are you talking about actual leverage or leverage via CEFs or other?

  34. Geez a few of my resets I recently bought have jumped. Altagas Series C on TSX is up about a $1 since Tuesday and Fairfax Series G is up 10% in past 10 days.

      1. They way they bounce you may be right…Look at the craziness in pricing with US. VOY-B is an newer US reset. It has a 3.21% reset and is now $27.30 with a 4.75% yield. Compare to Fairfax Series K…They both are BB type credit. Fairfax (FRFFF) has a 3.51% reset and yields about 6.35% now. And trades at $18, almost 30% under redemption while Voya is 8% over par and lower yield. These US resets could be a ticking time bomb down the road.

        1. They are a ticking time bomb. Canada started issuing resets in 2008 out of concerns that Canada was headed to permanently higher rates. The reset was a protective device for investors.

          Then, when issues started resetting 5 years later, rates had plunged. And investors got locked into the lower reset rates for 5 years. Except for a few who were converted to 3-month floaters.

          The capital losses resulting from the lower resets were huge. You had investment grade issues from world-class companies selling for 60% below issue price.

          That’s what lead to the minimum rate issues starting in 2015.

          Americans will, in time, learn the lesson the Canadians learned years ago, if we ever get to a lower-for-longer rate scenario.

          In the meantime, Canadian resets are very tempting. Some other poor bloke has already taken a big capital hit for you. Yield on companies you would actually like to own generally run 6-7.5% on naked resets. On resets with mins the rates run 4.5-6%.

          Will be posing again this weekend on laddering Canadian resets.

    1. Grid – If Fairfax “G” keeps up the 1% daily return you will have a 38-bagger by this time next year.

      Fairfax G trades as FAXRF for those wanting in on this gravy train.

      Seriously, folks, look at the chart before you buy. Even by Colorado standards it’s a double black diamond. Which is what creates the opportunity. Good trader for the agile.

      1. Yes it is amazing how volatile they can trade. The Fairfax Series K move in a trading range of 55 cents Friday and closed down after jumping 40 cents. Landlord Investors Northland Power appears to be a decent quality and good term issue. But Im just up to my gills in Energy and Ute related issues.

      2. For the resets that are way below par, are these preferreds that will never be called, or do some of them have a maturity date or termination date, where the principal would be paid back?

        1. Justin they are perpetual and typically can only be redeemed at reset date. As far as company redeeming, it typically is done in manner Fairfax just declared last month. They stated they over a course of the coming year may buy back up to 10% of all floats in the market. But they are under no requirement to fulfill this. And certainly are doing it at market price, not issuance price.
          Any ones remotely a candidate are priced in. For example Canadian Utilities has a reset preferred trading over par despite vast majority of these types being under par.

  35. So what am I buying, or what might you want to consider?

    Min rates are expensive right now. Not super so but considerably closer to 52-week highs than lows. Averaged stripped yield of the group is 5.43%. Almost all are below par so SY is YTW on most issues. These are not like the U.S. issues that offer good nominal yield but 2-3% YTC. I was a buyer of min rates a few months ago, when prices were better, but am not buying now.

    Same with fixed rate issues. Average SY on the cohort I follow is 5.35%. The reason that it’s lower than the min rate average is composition. On average, the fixed rate issues are better credits.

    Naked resets is where the actions is for me. Here, the average issue is much closer to its 52-week low than its high. Further room to fall, to be sure, but some very good yields available. The average SY of the group is 6.00% and the average SY if they all magically rest to today’s BOC rate is 6.26%. The “real” rate is somewhere between the 2 numbers.

    To test the extreme, I also calculate the SY as if the BOC was ZERO. So all you’d be getting after reset was the spread. In that case, again assuming all issues magically based on the zero BOC, the SY goes to 3.91%. That ain’t bad. And, except for the very few issues that are trading above call, you have no call risk. If the BOC goes to zero, and you get called, you have a fat gain in nearly all cases.

    To me, the resets are worth of considering, as long as you buy carefully. What I have been buying are issues that are less than a month from reset. That includes ALA.PR.G, which repriced back in August, and TRP.PR.E, which repriced on September 30.

    By buying soon-to-be-reset issues you are giving yourself a 5-year runway before the next reset. On a present value basis, that’s the lion’s share of the issue’s value. By buying slightly ahead of the reprice date I believe I am picking up, on average, about 50 bps in yield over what I would get if I waited until after the reprice date. All for taking some rate risk for 30 days or less.

    Just remember, “reprice” occurs 30 days before (in most cases) the reset date.

    I locked in a rate on TRP of 6.16% for the next 5 years and 6.97% on ALA. TRP is a BBB- issue and ALA is BB. Qualified.

    There are several naked resets that will be repricing soon. I am following them closely.

    Just know that naked resets have a great deal of price volatility and may go permanently lower in price in a “lower for longer” interest rate scenario. If you re a “trader” the volatility in naked resets makes them a playground.

    Floaters have outstanding yields but are not and have not yet been a buy for me. When and if the BOC 3-month goes below 1%, I will almost surely be a buyer.

    Overall, since I started buying on IBK in July I’ve bought 28 issues from 18 different issuers. A mix of mins, fixed and naked resets. Average YTC is 6.10%, as is YTW. The average credit is about a BBB- with nothing lower than BB. All qualified, even for U.S. residents. Needless to say, I’m not getting these kinds of rates on U.S. issues I’ve bought in the last 6 months. I recently bought a slug of STT-E with 16 cents of call risk in order to get a 5.96% stripped yield. Better than idle cash but not much.

    1. Bob, kinda in same game plan myself. I sold off my min. floor resets several weeks ago. I also sold off my fixed perpetuals on bounces also. This has left me deeper back into the naked resets.
      I like your thought process to lock in longer window yields. But pricing wise they still kinda hop together no matter the duration. I was a bit more aggressive buying a few rounds of that Fairfax Series G that resets in about a year. The yield reset could break either way to down or modestly up. But it covers a shorter duration that I did not have. I have more in 2022 reset range.
      Havent decided if I want any more exposure now than what I want or not. But largely by accident more than concern, I have little CAD exposed resets. I wouldnt mind one more CAD issue though.

      1. The closest I ever came to hedging was my 50-1 Blues bet to win the cup. Decided not to hedge there and it worked out fine. Its just part of the risk or fun one takes to diversify.

      2. Speaking for myself, no, I am not hedging.

        My reasoning, which may or may not work for you, is that I’m not watching the cap gains or losses. It’s a pure income play. If CA$ goes up or down 10% (or more) I can and will live with it.

        I’ve been watching the US$/CA$ exchange rate for 40 years and it goes back and forth, sometimes with great vigo(u)r. Since I have a long time horizon, and financial flexibility, I don’t sweat it. If I was a trader I would.

        Currency diversification is, to me, a good thing. Like most here I have too much tied to the US$ and to US markets.

        If you don’t want CA$ exposure you can hedge ($100,000 min for good rates and you need to frequently roll your positions).

    2. Bob and Grid, I’ve done no buying or selling in this group for quite a while – still sitting on an equal-weighted naked v perpetual position (both IG) and not paying much attention to either. If the index goes to zero, the margin will continue to do it’s job on the left side of the equation. Assuming there are no rating changes, these will stay buried in the portfolio ad infinitum.

      1. Alpha, for what you are doing that is certainly sound. And trust me there really is little alpha trying to trade from company to company with similar credit terms and reset periods looking for better value…Take Fairfax Financial Series K versus Altgas Series C. Reset dates are 3/22 and 9/22. Both have BB credit rating. FF has a 3.51% adjustment and Alt 3.58%. Though latter is pegged to US 5 yr and former CAD, they both closed today at exactly $18 on TSX.

  36. “Spreads” on Canadian preferreds (CPs) ……

    Recall there are 4 basic flavours of CPs. In order of increasing risk they are:

    1) Resets with mins, resetting every 5 years off the BOC 5-year plus a spread. The mins are “robust” in that the minimums in all cases are equal to the initial coupons,

    2) Fixed rates,

    3) 5-year resets without mins (naked resets) resetting as above but with no minimum reset rate, and

    4) Floaters resetting every 3 months off the BOC 3-month rate.

    The Google sheet linked below shows the yields available for the 4 species of issues from BAM, EMA and ENB. These are the only 3 issuers that I follow that have issues on each rate category. I also include figures for MFC, which has 3 of the 4 species among its issues, just so that there would be one financial represented in the group. All are solid, IG-rated issues.

    In addition to showing current yields, I show what the yields would be (assuming no price change) if the BOC reset at lower rates, all the way down to a zero BOC rate. This is intended to show the “stoutness”, or lack of it, should rates head south.

    (In looking at the stripped yields, the figures for mins, fixed and floaters are straight forward. The yields for naked resets appear to be all over the place but are not. The differences in yields has to do with when the issue resets, and whether it’s going to reset up or down and by how much. The “purest” values can be taken from issues that about to reset, or those that have recently reset.)

    I leave it to the readers to look for themselves at the spreads between the various species. The spreads work as expected, with the lowest yields attached to the min rate issues, followed by fixed, followed by naked resets, and the highest yields attaching to the floating rate issues.

    The yield premiums can be substantial, more than 200 bps in some cases, going from min to floater. If you’re going to play in the CP sandbox, and have to chose among issues, the operative questions are 1) are you being adequately compensated for buying the “riskier” issues, and 2) what about timing?

    In considering the questions be sure to look at the columns labeled “52-week vol” and “price percentile”, as those both figure into the decision.

    I will give my thoughts on those topics in the next post, in a couple days.

  37. Buying Canadian Preferreds (CPs) off the U.S. OTC – Redux

    There are advantages to buying CPs directly off the TSX but I recognize that most here will buy off the U.S. OTC, if they buy at all. This is for those folks.

    Below I link a list of 62 CPs with U.S. tickers. Some may be obsolete or incorrect. If you find an error please report it. This list has not been error checked by me.

    DO NOT USE THE OTC FOR VOLUME OR PRICING INFORMATION ON CPs. The information from any U.S. quotation system will not be current or accurate. The only thing you will use the OTC for is order placement, after you have read the following about how to figure your bid.

    To see live pricing, actual volumes, as well as a host of other (mostly) current market information on CPs go here:

    Be aware that prices on the TSX are quoted in an issue’s native currency, i.e. Canadian-denominated issues (most) are quoted in CA$, and the handful of U.S. dollar issues are quoted in US$.

    However (this is where it gets a bit confusing) all prices on the OTC are US$, regardless of native currency, so in most cases you have to do a currency translation. In other word, you have to translate the CA$ TSX price into a US$ OTC price.

    I get US/CA exchange rates here, by inputting “USDCAD” as the ticker:

    Take the CA$ quote and DIVIDE by the exchange rate. For example, the current quote for ALA.PR.G of CA$15.76 becomes US$11.86 after dividing by 1.3292, the current exchange rate.

    The OTC ticker for ALA.PR.G is ATGAF. The US$11.86 figure is what you should be basing your OTC bid for ATGAF on, not the CA$15.76.

    Once you have figured the US$ amount for your OTC bid, don’t be afraid to put in an offer well below the last trade, especially on naked resets and floaters. Theses can be very volatile in price, even on an intra-day basis, and you can often get a hit on a low-ball bid. Look at an issue’s chart on the TMX website to get a sense of volatility.

    Also, be aware that the dividend information on the TMX website may be wrong for floaters or resets that have recently reset. TMX doesn’t update the divi info until the next divi is declared, so what you are looking at may be the last divi paid, not the next to be paid.

    For resets and floaters, you need to be aware of both the BOC 5-year and 3-month rates, which you can also get at marketwatch. So, too, the 5-year Treasury. Search “canada 5”, canada 3” and “treasury 5”.

    Ratings I get at either S&P (most issues) or DBRS, the latter being as reliable as S&P ratings.

    For detailed information about specific issues you need to consult the prospectus, just as you do for U.S. issues. Most companies link to prospectuses on their websites. For those that don’t you need to figure out SEDAR.

    Taxes: Please, please, don’t let me hear anyone complaining about Canadian tax withholding. Owing to the U.S.-Canada tax treaty the taxation of CPs is EXACTLY the same as U.S. preferreds.

    Canadian QID issues (which is nearly all of them) are treated as such by the IRS. In a taxable account, you will get withheld 15% but you get this back at tax time, assuming you would be entitled to get it back if it were a U.S. preferred issue. You get taxed once (if at all), not twice.

    If it’s in a IRA or similar, you should have no tax withheld. You may have to file a form with your broker but that is how it should work. I say “should” because sometime you get withheld notwithstanding the tax treaty. If that’s the case, I would bail out of the issue. This is an issuer issue, not a broker issue. Write Investor Relations of the issuer an email, and perhaps they can solve the problem for you. Tell them you own 100,000 shares.

    Topics to follow, as I have time: 1) yield differentials among different species of preferred (and debt), 2) strategies for playing resets, 3) building a laddered reset portfolio, 4) actual and deemed retractables, 5) getting an OTC ticker for an issue that doesn’t have one, and 6) Canadian culinary treasures.

    The last topic shall be very brief.

    1. Bob, lol, if must be my left brained thinking (or is it right brained since I am totally left handed). But concerning currency conversion I do the opposite to reach same conversion. I multiply by CAD to get exchange equivalency instead of dividing by US. In other words $15.75 x .7565….Both reach Rome on a different path. It just resonates in my brain to convert that way. Funny, I never considered the division route.

        1. Maverick, Sometimes google doesnt understand my syntax. I would hate to not pay attention and it convert to some other country and I get screwed, ha.

    2. And it may not be a reset bargain hunting either today as yields are rising and CAD popped today on upbeat employment report today up north.

    3. Thanks, Bob. Your information is always very helpful.

      Regarding searching for information on CPs, I like to add “prefblog” to my search term – especially if I am looking for a CP’s last reset information.

      Example search term: “ prefblog” which brings up this:

      Also, I do the same math as Grid does: CN price x 0.75….ish.

    4. The BOC 5-year was up biggly in the last 2 days, on the order of 20 bps.

      As one would expect the naked (no-minimum) resets and the floaters have gone way up. Some of the Sun Life issues were up more than 5%. In one day. This is not some low-brow issuer on a credit bounce; this is a high IG rated insurer. Overall, it was a sea of green today and yesterday.

      For me, these have been a days to be tallying profits, not days to be buying. In any event this is how I’m justifying the ’82 Bordeaux I bought at auction last week.

      1. Yes the CAD issues partied while the US denominated ones largely sat on the sidelines (though US 5 yr has jumped too, mitigated I assume by CAD rising in relation to the Greenback). . I had done some flipping on the “Brad Bounce” which lifted the Enbridge preferreds when he recommended a few weeks ago EBGEF that he clearly had no understanding of. I have used the recent sagging to reenter EBBNF back to a full position this week. And also ALTGF which replaced my TGAPF that had risen. I sold a couple days early on TGAPF, but the Fairfax purchase made up for it though.

    5. Bob, it appears I stumbled onto a purchased preferred (Fairfax Series G) that Fairfax is buying at the market. You referenced this if I am not mistaken a while back about companies doing this. But I had never ran across a direct announcement before. If appears that Fairfax is going to buy a select amount across the board and will give themselves a year to do it. They also state they could buy up to 10% of each float the link even shows daily purchase limits.
      TORONTO, Sept. 26, 2019 (GLOBE NEWSWIRE) — Fairfax Financial Holdings Limited (“Fairfax”) (TSX: FFH and FFH.U) announces that the Toronto Stock Exchange (the “TSX”) has accepted a notice filed by Fairfax of its intention to commence a Normal Course Issuer Bid (“NCIB”) through the facilities of the TSX (or other alternative Canadian trading systems) for its Subordinate Voting Shares and the following series of its Preferred Shares: Cumulative 5-Year Rate Reset Preferred Shares, Series C (“Series C Shares”), Cumulative Floating Rate Preferred Shares, Series D (“Series D Shares”), Cumulative 5-Year Rate Reset Preferred Shares, Series E (“Series E Shares”), Cumulative Floating Rate Preferred Shares, Series F (“Series F Shares”), Cumulative 5-Year Rate Reset Preferred Shares, Series G (“Series G Shares”), Cumulative Floating Rate Preferred Shares, Series H (“Series H Shares”), Cumulative 5-Year Rate Reset Preferred Shares, Series I (“Series I Shares”), Cumulative Floating Rate Preferred Shares, Series J (“Series J Shares”), Cumulative 5-Year Rate Reset Preferred Shares, Series K (“Series K Shares”) and Cumulative 5-Year Rate Reset Preferred Shares, Series M (“Series M Shares” and, together with the Series C Shares, Series D Shares, Series E Shares, Series F Shares, Series G Shares, Series H Shares, Series I Shares, Series J Shares and Series K Shares, the “Preferred Shares”). Purchases will be made in accordance with the rules and policies of the TSX and Subordinate Voting Shares and Preferred Shares purchased will be cancelled.

      1. So for all practical purposes, they are doing a partial call of up to 10% but instead of at the call price, they are buying at current market price and reducing the number of preferred shares on the market, their dividend obligations, and their future call costs.

        I would guess that it should provide some short term price support over the next 12 months.

        1. Yes Steve that is very correct. I wasnt clear but I was inferring to a previous conversation where Bob I believe stated they had to announce these. In US I have never seen that occur. They quietly buy on open market or offer tenders at a specific price. I actually doubt there will be a bump. If you look at chart the maximum daily purchase limit of is very miniscule.
          I was posting more as a confirmation of what he mentioned before than any actionable investable situation here. Though I will take some comfort I suppose in the fact they deem it good value to be purchasing them and have the financial means to do so.

          1. Yes. very interesting. Although it is only 10% when I added up the shares it a max of 5.7M shares. If you look at their 10 preferred issues, it is the share equivalent of retiring the entire Series D and the entire Series J. An interesting approach.

            I agree the daily limits should not move the needle much on the share price.

            It really works well in Canada since the preferred market is at such a discount. Right now, it wouldn’t work so well in US since almost everything is at a premium. But in the future who knows.

            1. Yes that is also very true. I know this is capital so they are not liabilities on the balance sheet. But still bottom line for them its largely paying back in full with 60 cents or so for every dollar received when they were issued. But still since they are paying off $25, the cost of capital was pretty low here. I know damn well I wouldnt have bought the series G this week if I had to have paid issuance price of $25, ha.

    6. Some of us are sifting and continuing the research at our own speed and level. Glad for the inputs! Personal investing and real decision making will probably continue like a dance for us all…seems the one trick ponies die off too!
      I’ve got a good list too and will compare. It is harder now since weather has been so fine and all the fishing gear stays in the car. Too bad I can’t stop for a plate of Poutine.

    7. Bob, Don’t know if you have discovered this, but I find it interesting regarding CN Prefs.
      IShares has an Intl Pref ETF: IPFF. It is 85 % CN. Their prospectus , pg 8 shows holdings and as footnote (a) almost all are float/adj. Without looking up all series noted there, it is…interesting.
      It uses S&P Pref Index which ‘reflects Intl Pref Market’. May stabilize from a low price right now in the CN5year bottoms?
      Now I do not know if Blackrock manages for potential reset advantage/price or just rate or what any manager may actually have shown historically, but it is an interesting…and easy venue…if managed as Blackrock may by capable of? Just an Idea. JA

  38. Bought an entry position of the Fairfax Series G on OTC (FAXRF) at $10.05 today. I guess it will remain an entry position because for some reason it jumped 24 cents today to $13.55 on TSX on a large 50,000 plus shares trading.

    1. So let’s look at what grid bought.

      FAXRF is aka FFH.PR.G on the TSX. At US10.05 per share, grid paid CA$13.40 per share. SY at purchase price was 6.22%, and if reset today (see below) would yield 7.28%. Obviously, no call risk.

      The issuer is Fairfax Financial, a diversified (non-bank) financial services firm, preferred rated BB by S&P.

      The issue is a 5-year reset resetting in about a year at the 5-year BOC + 2.56% (3.88% at yesterdays BOC rate). Denominated in Canadian dollars. QID. Neither retractable nor on the deemed retractable list (more on that in a later post).

      Notable risks are: 1) CA$ exchange rate, and 2) the BOC rate between now and reset in a year.

      Anyone else for a ~7% yielding QID BB issue?

      1. Bob, my angle was a little play on the 5 yr not plummeting as feared and spread out my resets a bit. I was playing a 0.75% 5 yr in a year and still showing 6.17% as not being the end of the world.

  39. Is anyone out there trading Canadian preferred directly off the TSX, with their Canadian tickers? I have some thoughts to post but I don’t want to be speaking to a non-existent audience.

    1. Bob, I dont, but wanted to tell you, since I have been following bid ask spreads on TSX, my trades are very tight to the TSX action. I actually got low trade price of the day on FTRSF the other day and there were buys and sells before and after. Also today I did well on ALTGF today. The spread was 17.85/17.90 and I got 17.88. Closed at 17.90 with B/A spread of 17.84/17.92.

    2. For tax purposes in Canada a lot of us are forced to invest in Canada only securities using different tax advantage accounts resp and tfsa or face additional taxation.

      For a lot of us we are already taxed at 45%+ rates. So being tax efferent is very prudent.

    3. Hi Bob,

      I am via Schwab Global Investing.

      I have an order in for 2,000 FTRSF and it closed $0.03 below my limit price. 3.1K shares traded today but I still did not get any. I need to check with Schwab and make sure the order isn’t set for AON.

      1. TNT – if you want to buy Canadian issues through IBK I suggest:

        Do it all on the TSX, not the OTC.

        Transfer a minimum of US$25,000 to IBK. Then buy CA$ using the 25k. You need at least a 25k trade to get their best rate.

        Then buy away. After careful study, of course.

  40. Have been trading in and out (mostly out until today) of Canadian preferreds. Decided to sell off last week all my EBGEF near $19 when doofus Brad Thomas co-signed an article recommending EBGEF that he knew nothing about. Of course his loyal troops bid it up so I let them have mine. I lightened my load on EBBNF a bit the other day also from an extra purchase a month ago or so.
    Decided to reenter an issue that was good to me on fortunate trading earlier in year, FTRSF. Bought a 1000 at $12.15 today for a current 6.8% yield until 2023. Will double down if it drops another buck. This one has been hit hard dropping over a $1.50 in past couple weeks and is starting to drift near its 52 week low unlike others yet, I track. Still about $1.50 below all time low back when CAD 5 yr hit 0.50%.
    Took almost a year, but I got a whopping 271 shares of HAWLM today at $21. Damn thing hadnt traded but one time since January. At 5% present yield and $21 redemption price its no barn burner, but basically within upper 5 yr trading history and got at highest yield trade compared to sister issues.
    Bought a modest 150 more shares of fixed perpetual CNUTF at $15.86. This issue has been good to me trading in and out.

    1. Locked down some nice gains on TGAPF selling over a 1000 shares. The price was getting too high in relation to par and the floor yield. Bought a half lot of ALTGF at $17.89 which went over to TSX to transact as it never showed up on OTC which isnt unusual.

  41. Two Canadian issues with newly-acquired U.S. tickers ….

    BKAMF, aka BAM.PR.Z is a 5-yr reset at BOC+2.96%, resetting in 3.28 year. Yields 6.29%. World-class company with BBB rating on the preferred. I have no interest based on the time to reset, but otherwise a strong issue.

    CPRHF, aka CPX.PR.C is also a 5-year reset. No interest based on BB rating.

    1. Hi Bob in DE, This is very odd, cos my brother called a week ago his Shwab emploee in order to put in their platform and be able to trade exactly this two canadian preferred i chosed for him…
      I belive you will find another couple of new ticker of Brookfield Renewable and Brookfiled Infrastrustructure preferred shares in a couple of days…

      1. Well, Giuliber, then you are responsible for getting these 2 tickers! That’s how these Canadian issues get U.S. tickers.

        I buy through IBK, so I don’t need a U.S. ticker, but most here need it.

        If you want a couple more to go for I can give you some ideas. Give me a sense of what you’re looking for.

        1. Thank you Bob in DE, very kind of you. In the interest environment now prevailing, I really like Canadian preferred with reset rates and a floor, but, unfortunately most of them trade above par…few exemptions, like the pembina pipeline series 21, and some issued by brookfield renewables and brookfield infrastructure, both investment grade issues…moreover i like regular reset rates, but with an high spread over the 5govvy, possibly above 3%….

          1. I track a list of 27 5-year resets with minimum rates. Only 3 of them have U.S. tickers: TGAPF, CDUTF, and PMMBF. These are the safest rate structure among Canadian preferred, because of the minimum rate. Consequently, the yields are lower that same issuers issues with riskier rate structures.

            The list of naked resets is much longer. I track a list of about 125 issues, abut 20 of which have U.S. tickers. I trust you appreciate that naked resets (with no min rate) have a great deal of price volatility and also come with the risk of permanent capital loss if you time your purchase badly. Or are just unlucky.

            As you would expect, with resets, the higher the spread the higher the risk inherent in the issuer. The big 5 Canadian banks have much lower spreads than Altagas.

            Straight fixed (no reset, no min) are somewhere in between in risk.

            If you’re willing to do the dance with Schwab you can get a U.S. ticker for any of the Canadian preferred.

            With that in mind where is your interest?

            1. Thanks Bob-in-DE,
              I can see you put a lot of effort to make this list. Here are a few more securities you can add to it if you wish.
              BPS.PR.U Brookfield Property Split Corp. 5.25%, Series 1 US$25.00 Current yield 5.05%
              BPS.PR.A Brookfield Property Split Corp. 5.75%, Series 2 C$25.00 Current yield 5.58%
              BPS.PR.B Brookfield Property Split Corp. 5.00%, Series 3 C$25.00 Current yield 4.94%
              BPS.PR.C Brookfield Property Split Corp. 5.25%, Series 4 C$25.00 Current yield 5.14%
              All of them are tiny 25 Millions issues. All of the under call risk for some time now.
              The main point that make them special and different from others in the Brookfield Property Preferred Shares universe is ” … Shareholder shall be entitled to require the Company to redeem at any time or times after the date of issue thereof all or any of the Series 1-4 Senior Preferred Shares registered in the name of such Series 1-4 Shareholder…” which effectively makes 25.00 as a bottom

              1. LTR – thanks for the list.

                For the benefit of other readers, LTR introduces 2 separate topics here. “Retractables” are issues where the investor has the right to put the issue back to the company at a predetermined price (which may vary with time), usually after a minimum holding period and possibly with other restrictions.

                The effect of the retraction option, when combined with the issuer’s right of redemption, is to keep the issue pinned pretty close to par for it’s life. By definition, all retractable issues are fixed rate (or at least I’m pretty sure they are).

                There aren’t very many retractables and the yields are lower than comparable issues without the retraction feature.

                Gabelli has a couple issues with a similar structure.

                Split Corps require a somewhat lengthy explanation but closest analogy would be a CEF that issues preferred shares. In most cases (the Brookfield issues are an exception) it’s a financial company that puts the split corp together and then buys a thematic group of assets, i.e. banks, gold companies, high dividend companies, and the like. And then levers them to the hilt by issuing preferred. You can take the high risk road by buying the split corp equity or the low risk by buying the preferred.

                I’ve not delved into split corps or retractables in the past as I thought I’d done enough to confuse folks with what I did post. If you like the idea of retractables look at the issues LTR mentions, as well as BRN.PR.A, CGI.PR.D, EIT.PR.A & B.

                I don’t recommend split corps unless you are going to do very deep due diligence to understand the peculiarities of the structure and the underlying investments.

                Again, thanks for the list.

    2. Bob-in-DE
      Acording to The Brookfield website, the yield on the series 30 BKAMF preferred issue is 4.685%. ( on the Canadian board ). Would you be so kind as to verify your stated yield of 6.29% ? The difference is confusing.
      Thanks, Howard

      1. Howard, this is a good question that confuses many. They both are correct and need to be correctly understood…Lets break it down…
        The 4.685% is the reset yield off par. This is what Brookfield pays in actual dividend money dispersed. Look at this link…
        The new fixed dividend rate that will apply for the five years commencing January 1, 2018 represents a yield of 4.685% based on the redemption price of $25 per share.
        The above link is important as one needs to understand an issues reset terms and dates it occurs.
        Now the current 6.4% yield is what you get when you purchase because it is selling considerably below par. The lower the price you purchase at the higher current yield you personally will receive. Brookfield pays out an equivalent 4.685% off par, but you receive 6.4% being its last trade was $18.30.
        The quarterly dividend is .2928 CAD. So…. .2928 X 4= 1.171
        $1.171 divided by $18.30 = 6.4% present yield.

        1. Grid – OK, what do you then use to officially convert your dividend paid in Canadian dollars to what you get in US Dollars? Is there an official exchange rate? Each online Cdn to US dollar converter seems to differ slightly. Is it always an approximate number only?

          1. 2WR, the conversion slightly differs because literally each second it changes. Any conversion formula uses “an average” of trades. So in essence no conversion formula would be totally accurate. But to me, I give it zero thought to the minute discrepancies. Whether it is .751 or really .753 on any dividend date isnt going to effect my payout with the money I buy with. I am certainly not pushing 6 figure trades through, lol.
            And as you well know its out of our hands. We may buy at a specific conversion, but of course come dividend paying time that conversion number will be completely different and unknowable. Sticking to those USD issues in CAD eliminates the problem, and eliminates about all the preferred options, too, ha.

          2. 2WR, May differ among issuers, and of course we know there’ll always be a speculative aspect to the currency conversion, though from the ENB Series 5 and 6 Prospectus in part:

            Foreign Currency Conversion
            …all amounts relating to the acquisition, holding, conversion or disposition… including amounts relevant to the computation of actual and deemed dividends…must be
            converted into Canadian dollars using the Bank of Canada noon rate on the day on which the amount first arose…

            1. Thanks, A8 and Grid. I guess that’s the closest thing we have to “official,” at least for ENB – the Bank of Canada noon rate on the day… Maybe some day I’ll go beyond ENB USD denominated Canadian issues, but, being tortoise like, I’ll need another quarter or two before that happens.

  42. I have never been to Toronto, so I had to look up what pea meal bacon is.
    On the Wikipedia page, it says the low fat content makes it juicy.
    Is that right? I thought HIGH fat content made meat juicy.

  43. Going to try my hand at a switch off and 2 White Roses will love it. Sold off 500 shares (just a portion) of EBBNF at 17.67 today and flipped it over into EBGEF at $18.04 today.

    1. I did a Canadian switcheroo, too. Sold most of my CPG on its recent pop & rolled equal amounts into FRHLF & SPGYF for way more yield with about the same continued upside potential. In my IRAs, natch.

      Cause countin on all that Saudi oil seems a bit more dicey these days, don’t it?

      Or is it JMO…

      1. Would not touch the two royalty corps in canada. Basically a dumping ground for tax purposes from the major E&P businesses converting totality land from a liability on the books to a paying dividend as most deals are land titles paid for in shares.

        Small E&P businesses have been crushed over the past 2 years due to not being able to purchase firm pipeline contracts for market access. Which is even going to get worse with enbridges new open season mandating firm only contracts.

        If you are going to invest in Canadian E&P CNQ should be at the top of your list. They have been buying tier 1 properties for .50c on the dollar consolidating the assets into existing owned neighbouring infrastructure. What I am saying is these guys are the consolidating gorilla of Canada and have already taken out shell, ConocoPhillips, Apache, and Devon.

        Buy the big dog and swan

    2. Grid – And your reason is????? Based on where they’ve been trading it looks like a sister kissing trade unless [fill in the blank]..

      1. 2WR. Say what? You are the guy that thinks EBGEF is a rock star opening act and EBBNF is a warm up band lol..I actually thought you would think I came to my senses finally loving your baby…. I already have saved over a half a divi on the trade! 🙂
        Ok, seriously now, EBGEF is 95 cents off its 52 week low. EBBNF at time of my sell was $1.61 off its 52 week low. Just playing tweak the charts some. I may do this more some now that I follow the TSX B/A spreads on the issues.

        1. Grid – Was just wondering whether you were coming to your senses as to why EBGEF is better because of its higher current and longer time to reset date, but alas, that doesn’t seem to be the rationale… lol…. to be honest, I got very close to Gridding in the opposite direction when they got so close on a current yield basis, with the incentive being to get into the lower dollar priced issue if it could be done for no penalty in current when the world thought everything’s going to zero rates… might as well get into the lower dollar price issue.. I didn’t and the trade off was to be giving up the longer out reset date for EBGEF in exchange for equivalent current yield… I didn’t do it, didn’t even have a trade set up to go, but I thought about it…. I just continue to believe rates will be lower when EBBNF resets than when EBGEF resets and that will negate the better premium reset rate EBBNF enjoys…. BTW, these are the only Canadians I follow…. I bow to you and Bob for your willingness to study and work them all, but this be it for me…

          1. 2WR, no I am closer to your camp than Bobs. I play these two Enbridge issues, have a perpetual fixed Canadian Utility preferred (Series DD), a TC Energy reset and a the fixed floor Altagas reset. Not looking at anything else. That is enough for me.
            At one time I was all out of EBGEF and just all in EBBNF. But its pretty close to even again after this switch. The total dollar amount of the two combined usually doesnt change much.

  44. You are correct. Tried issue a buy of 20 shares. I can do a stock quote of PMMBF – it shows average daily volume in the 30,000 range but the symbol is not valid for trade on Schwab. I will take it off my watch list. I was only really interested if we got a bigger pullback to yield 6% (around 15.50). Don’t want to deal with something this difficult to trade nor do I want to open a global account with Schwab

    1. If buying based on U.S. tickers TDA is the most consistent. Schwab is hit-or-miss. Vanguard is a total off limits.

      IBK works 100% of the time, on TSX symbols.

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