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.

544 thoughts on “Canadian Chat”

  1. Having an issue with TD today with a perpetual from Brookfield Environmental (BEP).

    I have a position in BEP.PR.G a/k/a BRENF in the OTC market and they zeroed out my value.

    Hard to believe that the T in TD stands for Toronto….

  2. TC Energy vs Enbridge. I own Rate Resets of both but common stock of neither. Have been very reluctant to touch anything in Energy with two of the Three Stooges in power, Biden and Trudeau. Both companies seem to have their share of political problems in both the US and Canada. I’m not sure which common stock is the best investment in terms of long term support for their share price and safety of their dividend? Any thoughts?

    1. Richard

      I’m happily long ENB and I think it’s the better choice between the two you’ve mentioned. I suggest checking out their web site for the presentations as they have some great expansions in their future.

  3. PPL.PR.O and MFC.PR.I being reset. 6.17% and 6.16%.
    Here’s the crux of the interest rate arbitrage: Both offer convertibility at the same reset amount;
    -one on 5yrGOC fixed, five years
    -other on 3moGOC, adjust every divy pmt for five years.
    My choice answers the question and speaks about my demeanor as an investor. Should I speculate on short term rate spikes which everyone expects to go on forever AND do I know that the prices will follow the spike if I convert to the 3 mo?
    OR do I stick with the increase of 38% in the divy for 5 years and chalk it up to automatic inflation adjustment?
    Looking in the mirror for myself.

    1. Go with the 5yrGOC sure bet vs gambling on future rate hikes.

      In Gambling the only winner is the house.

  4. Any guesses on what the BOC will do on Sept 8th? And whether that will get us across the line to 5% GICs from the major banks?

    1. If you are gold leaf customer (Age 57+) you can already receive 5% GIC rates on 5yr term @ Canadian Western Bank. https://www.cwbank.com/en/investing/gic-rates

      CDIC insurance coverage is more critical. Not all GIC are guaranteed up to ($100,000) per institution. So you will need to spread the stash around if you are a high roller.

      Have already rolled the majority of my GIC stash to 1yr monthly paying @ 4%. Expecting next years rates to be spicy.

    2. Richard – from my recent readings of Globe and Mail articles can comment on a couple items. CIBC Economics latest read on BOC is another 75 bps increase and that’s it for quite a while. Certainly the increases so far this year have brought the real estate market to a standstill. With regards to 5% GICs we may have seen the peak in GIC rates as they are funded from mortgages and the longer term mortgage (bond rates) may have peaked as a recession is a likely scenario which would leak to a gradual drop in interest rates. Of course this is just the current reading of economic data and can change with new data. Not sure who said it but love the quote “economists make sheep look like rugged individualists”

  5. Recent CN Pref actions:
    ALA.PR.U a USD denominated issue that I believe was on the US OTC called.
    BIR.PR.A , oil/gas issue called.
    CPX.PR.I called.
    MFC.PR.I very good IG, reset at 5.978 an increase of div from 1.09 > 1.49 annually or +36%.
    The market get thinner and thinner as the privateers slurp up the public float.
    Conversions to Float Series are meager and not worth it compared to a new fixed rate.
    Comment: A very orderly and slower moving concept for fixed income strategy, BUT…if the REAL RATES for inflation we in the REAL world….

    1. yes pickings are getting slimmer and slimmer Birchcliff also has a series C they are redeeming (along with the A’s). Only good thing is the common which I also hold are really well with all their surplus cashflow. Similar situation for most Cdn small to mid cap oil and gas companies

  6. Much like CDs in the US since the Fed’s July 27th meeting, GIC rates in Canada seem to have plateaued out or taken a pause for the moment. The next Fed meeting is Sept. 21 and Bank of Canada Sept. 7th. As far as the US Fed Funds rate, its predicting a pause or rate cut by mid 2023. If the Market really takes that seriously in spite of the pushback by Fed officials, CD rates in the US have peaked….as counter intuitive as that sounds.
    Any thoughts out there on trying to hit peak rates before things slam into reverse? My focus is 5 year durations and non-callable.

    1. Richard, Just about all of us could answer your question with great conviction about what we think SHOULD happen with rates; maybe even when it will occur. However, sincerity, good intentions, intelligently-worded prognostications, models, trend lines and latest news blurb from some “inside” quant are simply no match for the randomness of the stock market, the wider economic market, the domestic and international news cycle etc. None of these tools of prediction are directly correlated with what WILL happen on a recurring basis. We’ve seen this over and over and over – even from the very many fabulous people on these pages over the years.

      Just a suggestion worth about a penny…don’t try to time the market. Instead, set your buy parameters, establish your bids then execute them spread over a period of time which works with your personal calendar. Counter-intuitively, if the preferred/fixed-income market shows price weakness/higher yields, celebrate and buy more. Further weakness, buy more again. You’ll be averaging down/increasing yield the whole way. My absolute best buys in preferreds, equities, real estate or other assets over the years have ALWAYS (that’s 100%) been when the exit doors are jammed. The April-June market swoon was one such opportunity. Bought small add-on amounts every single day. I mean – they were the best returns we’d seen in years. Heck even bought piles of the much frowned-upon PSA preferreds. They’re up near 15% in 60 days and carry an A3 rating.

      Another penny’s worth (that’s 2 cents total): Ignore the news, stick with investment grade (the risk/reward curve evidences that higher risk means lower return over time), start right-away (today) and remember none of knows with certainty what will happen tomorrow much less next quarter or next year.

      Best wishes.

      1. Thanks…I totally agree with everything you said….Canada has already exceeded my expectations with 4.5% GICs. I would have never guessed that they would be ahead of not just the US Banks but New Zealand, Australia and China. Its trying to see through the fog of mass media monotony in the US that has me tied in knots. But as you suggest even if one could see through that, there might be nothing to actually see.
        What used to be useable/actionable news has been so degraded it borders on tragic, whether its the destroyed WSJ, the nothing but opinionated Bloomberg News and TV and the once wonderful Financial Times.

  7. EBBNF NOT being called – https://finance.yahoo.com/news/enbridge-provides-notice-series-l-220000602.html

    Enbridge Provides Notice of Series L Preferred Shares Conversion Right and Announces Reset Dividend Rates

    CALGARY, AB, Aug. 2, 2022 /PRNewswire/ – Enbridge Inc. (TSX: ENB) (NYSE: ENB) (Enbridge or the Company) announced today that it does not intend to exercise its right to redeem its currently outstanding Cumulative Redeemable Preference Shares, Series L (Series L Shares) (TSX: ENB.PF.U) on September 1, 2022. As a result, subject to certain conditions, the holders of the Series L Shares have the right to convert all or part of their Series L Shares on a one-for-one basis into Cumulative Redeemable Preference Shares, Series M of Enbridge (Series M Shares) on September 1, 2022. Holders who do not exercise their right to convert their Series L Shares into Series M Shares will retain their Series L Shares.

    The foregoing conversion right is subject to the conditions that: (i) if Enbridge determines that there would be less than 1,000,000 Series L Shares outstanding after September 1, 2022, then all remaining Series L Shares will automatically be converted into Series M Shares on a one-for-one basis on September 1, 2022; and (ii) alternatively, if Enbridge determines that there would be less than 1,000,000 Series M Shares outstanding after September 1, 2022, no Series L Shares will be converted into Series M Shares. There are currently 16,000,000 Series L Shares outstanding.

    With respect to any Series L Shares that remain outstanding after September 1, 2022, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The new annual dividend rate applicable to the Series L Shares for the five-year period commencing on September 1, 2022 to, but excluding, September 1, 2027 will be 5.85790 percent, being equal to the five-year United States Government treasury bond yield of 2.70790 percent determined as of today plus 3.15 percent in accordance with the terms of the Series L Shares.

    1. 2WH

      Thanks for keeping us posted on EBBNF.

      Looks like ENB was able to target this to the recent drop in the 5 year interest rate. Looking over the past month, it’s been as low as 2.7 and as high as 3.5

      1. Greg:

        Somewhat torn between the conversion, as I will be getting a 6.5% yield on my EBBNF holding for the next 5 years based on my average cost for the position, even after ENB “cherry-picked” the 2.7079% rate for the reset.

        Might be able to boost my yield even further if sellers show up that were in EBBNF only for the potential redemption at month-end (which has now crashed and burned).

        I assume you plan on not converting due to your low cost basis on EBBNF? If enough holders convert (93.75%), looks like we won’t have a choice.

        Thanks!

        1. Rob
          I’m going to hang on to EBBNF for a while. It’s in an after tax account and I have a large LT capital gain ($10 per share) and 6+% is pretty good for a high quality issue.

    2. The reset did its job, an increase of about 17% in income. Goes to show: getting the trend right and buy price matters! For me, it becomes a slow game. I think the Reset rate securities are truly hybrid securities.
      Greg below, Enbridge got LUCKY with the drop in USGov5 over the last six weeks, maybe there is a trend that can be seen five years in advance? I’ve never been able to see the trend, but it may have gotten called IF it had been higher? Some internal cashflow guru at ENB is earning his pay nonetheless.
      PS: for anyone using Yuriy’s CN Pref Sheets, the US denominated Enbridge Reset rate securities have the Month/Day info inverted. Minutia. IT’s ALWAYS the last few entries! Use the Issue column to link to the prospectus. How handy!

  8. EBBNF – Enbridge has up until Aug 2nd or 3rd to announce whether or not they will call EBBNF on 9/1 rather than reset… Last quarter, On 5/4/22, ENB announced a call instead of choosing to reset SERIES J on 6/1/22 that had identical reset terms of + 3.15 over the 5 year US Treas as EBBNF. I’m not sure what exact day the next reset coupon would be determined but the 5 year was at 2.90% on day of announcement on Ser J, so right now with 5 year at 2.85% it’s touch and go whether the conditions for reset will be better or worse than when they chose to call in May… Mr. Market seems to be unsure what to expect with EBBNF closing at 23.71 on tsx.com as ENB.PF.U (last trade as EBBNF on Wed at 24.10). but if they call, it should be a nice quick 1 point plus jump up in price.. If it reset today, EBBNF would be @ 6% and I would suspect EBBNF would drop in price slightly, so EBBNF seems to be set up for a “Do you feel lucky, Punk?” kind of a week. Next in line for reset with almost identical terms would be EBBGF which will reset June 2023.

    1. 2WH

      Thanks for the post.
      I’m long both EBBNF and EBGEF and was thinking that the decision was a month later. I’ve been long both names for years (thanks Bob in DE) and have a large gain at these prices.

      While I’m expecting them to be called, I’m OK if they are not as the payments are quite secure.

      1. I’ve still got EBGEF thanks to Bob as well and recently took a small flyer on EBBGF which seems to be out of line low imho…. As opposed to EBBNF’s 4.96% coupon which will reset to 5 year Treas + 3.15 on 9/1/22 if not called, EBBGF already has a 5.949% coupon and will adjust to 5 year Treas + 3.14% beginning 6/1/23, yet its last trade on tsx.com was $23 vs EBBNF’s $23.71 So EBBGF has a considerably higher current yield now than EBBNF with almost identical terms for resetting only 9 months later….EBGEF resets another 6 months later than EBBGF. So what’s to happen regarding future calls will boil down to ENB’s view of future interest rate levels longer term and whether or not that view has changed from May when they announced the call on Ser J. .

      2. I do miss Bob in DE (sigh) — Just my luck I’m holding on US side ENBA which is basically flat but at least my CDN ENB pref is up as well as the common

      3. ENB just declared their quarterly dividends on all their 9/1 due preferreds – https://finance.yahoo.com/news/enbridge-declares-quarterly-dividends-213000432.html including EBBNF Ser L….. Last quarter, they made the declaration on May 4 and simultaneously made an announcement calling Ser. J….. I see no second announcemnt for L right now… Don’t know if that means for sure they’ve decided not to call.. They still have a few days left to decide before the window closes for 5 years…

        1. 2WR:

          Question – why does ENB only have a few days to decide on whether to call EBBNF? Can they not wait right up until the reset day of 9/1/22 and then give 30 days notice with the final preferred dividend at the higher rate?

          Based on today’s 5-year Treasury yield of 2.85%, interest costs on EBBNF for ENB would jump to $2.4M per year from $1.983M – or $417K per year. $2.1M more in payments over the next 5 years. They would be foolish not to redeem it if they have the available funds ($400 million USD)?

          If the Fed does a surprise interest rate hike in August, ENB’s interest costs might really shoot higher on this thing.

          1. The call feature on their resets is a little bit different than a normal preferred…It is not continuously callable after the specified date – it is callable on a single day every 5 years…. That day is 9/1 of this year. They have to give a minimum of 30 days advanced notice if they’re to call, so that means they would have to give notice by no later than PROBABLY 8/2, though it could be 8/3 depending on how they figure..

            1. 2WR:

              Understood…ENB published the following in their 3/31/22 10Q:

              “On May 2, 2022, we notified holders of our outstanding Cumulative Redeemable Preference Shares, Series J (Series J Shares) (TSX: ENB.PR.U) of our intention to redeem all US$200 million outstanding Series J Shares on June 1, 2022.”

              EBBNF is twice the size of that $200M issue. Maybe that is the issue here for them. ENB had $413 million of cash on their balance sheet as of 3/31/22, but they have close to $5 Billion available on their various credit facilities, including $1.5 Billion on their US-based line.

              There has been a 30 basis point drop in the 5-year Treasury yield in the last month, so I can see why they are wavering a bit. But they are still rolling the dice here if rates shoot up between now and 9/1/22. The original dividend on EBBNF was only $.25/quarter for the first 5 years.

              I’m actually hoping they don’t call it, as I have too much cash to put to work already. UMH+C was my second largest position. Shed a tear when that one was redeemed today as that was a tough good-bye.

      4. Greg, Usually the announcement is 30 days before the reset (final x-div date for the last period of the term), keep an eye on the parent’s site for announcement from Board.

  9. Once Again Canada shows the way. And of course is totally ignored by US Media.

    “The Bank of Canada hiked interest rates by a full percentage point, a surprise move that supercharges efforts to withdraw stimulus amid fears four-decade-high inflation is becoming entrenched.
    Governor Tiff Macklem raised the central bank’s policy rate to 2.5 per cent in a decision announced Wednesday in Ottawa that warned of more hikes to come. The 100-basis-point move is the largest increase since 1998. Markets and economists were anticipating 75 basis points.”

      1. Re GICs: Please be aware that the issuers of GICs are managing an investment pool. GICs are not segregated into a ‘hold to maturity’ which pays off that pool. The good thing is that the NVCC rules in Canada prob protect the GIC, but try to get an answer from a regulator!
        The investment pool will be managed to throw off capital gains and income spread…in other words you have to trust the manager to skim gains and incremental income from some OTHER investment instrument SOMEWHERE. That’s the same thing a self managed account tries to do, but keep it all. That’s why I always refer to my accounts as My Personal Annuity. Think like those external managers. Here’s an example since we are on a sharing investment site: GWO.PR.Y, nine years of call coverage, step down in 2025 beginning at CN$26, 4.5 coupon, currently being thrown away at under CN$19, yield = 6%, very high IG.
        Just another idea! Happy Investing.

        1. Joel – completely agree the investment manager will not be offering higher GIC rates without maintaining a spread.

          Spicier GIC offerings from Alterna Bank / EQ Bank / Oaken Financial (Home Trust Company) that are tier 2/3 mortgage lenders are available.

          1. and with CDIC (ie. Govt) insurance covering $100K from any member bank even more reason to go for the highest rate possible. My bank discount brokerage service just raised their 1 yr (cashable after 30 day) GIC rate to 3% from 2% this week so rolling over all my cashable GIC’s . Will just keep rolling them up as rates continue to rise this year

    1. I had to read in Canadian news about the Forward Party which has consolidated other parties into the third largest. WHY would THAT be broadcast in the US?

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