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.

474 thoughts on “Canadian Chat”

  1. “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.

  2. 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

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. Why you need to check prices on the TSX…..

    ….. even if buying off the U.S. OTC. 600 shares of EBRGF traded today at U.S.$10.80 per. The price on the TSX for ENB.PR.B (as EBRGF is known on the TSX) was CA$13.88, equal to U.S.$10.52. Whoever you are, you overpaid by 28 cents per share. Or if you were the seller you skinned someone to the tune of 28 cents per share.

    When buying off the OTC ignore any bid/ask or past sales. Get your price off the TSX website and use the current exchange rate to determine your bid. Don’t use market orders and don’t worry about an apparent lack of liquidity on the OTC. These issues actually trade off the TSX, even if the order is on the OTC. This issue traded 10k+ shares today.

  9. I got an email this morning asking for my best recommendation on a min rate preferred available to U.S. investors. I told the writer I would reply here.

    To my eyes, PMMBF would be a top pick. Aka PPL.PF.A. 5.58% SY and a min rate of 4.90%. THE BOC 5-yr would need to go above 1.64% to defease the min rate. BB+ issue. No call risk.

    U.S. $ price would be about 16.77.

    Min rates are low risk plays, and pay less. Same issuer will get you about 7% if you give up the min rate feature. 140 bps to SWAN.

      1. Steve you may want to put in a “play order” with a real low bid just to see if this issue trades through your brokerage. Just because ticker shows doesnt mean it will transact online. Im saying this because I see no official OTC trades transacted. I noticed this with ATGAF. TD which is very good with these types had the ticker registered, but wouldnt recognize when order was submitted. It just wasnt worth my effort to call and try to have them do it manually as I was content with TGAPF anyways.
        If it is not tradeable you may get a proficient rep to help transact. Or you may not…..

        1. 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.

  10. Coming to America ……… by way of Canada.

    MTB and BBT both redeemed issues recently. I am still in tears, but life goes on. But did you know these two companies issued new paper just before they redeemed?

    On 7/23 BBT issues 1.7 billion $ of a new preferred, not to be exchange listed.

    On 7/24, MTB issued 400 million $ worth, not to be exchange listed.

    Both are 5-year resets, resetting off the 5-year treasury plus a spread of 3.174% in the case of MTB and 3.003% for BBT.

    I fully understand the need to get off the LIBOR crack pipe, but why not reset off the 3-month treasury instead of the 5-year?

    Canadian-style rests are coming to America! Get out your air-sick bag.

    1. Guys,
      Where are we at with the outlook for BECEF? I see it resets monthly but it’s also tied to the CN prime rate. We expecting to see price erosion and a higher yield on this within the next year or two in your opinion or just the opposite? I’m doing well with BCE on the common side with it up $8/share this year alone.

      1. BECEF, properly known as BCE.PR.H, is floater that resets every 3 months off Canadian prime. Effectively, it’s pinned to 100% of prime, which currently is 3.95%. SY of 6.74% on a BBB- rated company. BCE is just like the old AT&T.

        It all comes down to your view of interest rates and your risk appetite. Canadian floaters offer some monster yields, but the ride is always going to be rough. When rates drop, there is no price support, unlike min rate issues or fixed. They are even more volatile that the naked resets.

        Case in point: NPI.PR.B, a BB-rated issue, was up 5.4% today. A year’s worth of dividends in 1 day. A couple weeks ago, issues were dropping 5% in a day.

        Personally, I won’t buy into floaters unless I am convinced we are at or near a rate bottom. I not convince of that. But if I held BECEF right now, I wouldn’t be selling.

        Among issues I follow, there are 8 Canadian floaters with U.S. ticker. that I know of.

        Lots of opportunity to make good money, or lose a lot.

        1. Appreciate the info, Bob. Steady as she goes for now. Good yield, but it’s the “no support” in the floor that bothers me as rates continue to drop.

  11. 3 questions for you Canadian experts. Why is ENBA trading where it is as compared to the Canadian issues? What do you think of Enbridge as a credit risk? And finally, are there any other Canadian issues you guys think are interesting right now? Thanks in advance for you insights.

    1. Kapil – I think you will get a better response with a more focused question. Enbridge has a zillion issues outstanding, with many different pricing structures and terms. Doing some homework would be to your benefit, and make for a better dialogue.

      ENBA IS a Canadian issue. It’s a Canadian company, even if denominated in U.S. $. Work out the stripped yield to call, consider its place in the capital stack, and consider the 55-year call option the company has.

      As far as credit goes, I’m happy to offer my thoughts after you have been to S&P website and taken the 2 minutes to open a free account and 20 seconds to check the company’s credit ratings on everything from senior debt to preferred.

      If looking for a primer on Canadian prefs, look through some of my old posts here where I link to precisely that.

      My usual emolument for access is a bottle of Montrachet, waived in this case.

  12. The comeback continues …..

    Massive rally in Canadian resets and floaters over last 6 trading sessions. This, after a year long slide.

    TRP.PR.G caught my eye. Up 14% in last 6 trading sessions. This is an IG rated issue resetting in 15 month with a 2.96% spread.

    A veritable sea of green ink. The market is voting that BOC rates have bottomed. Time will tell.

    1. Yep, I am in wait and see mode. Topped off my relative bloated tank of Alta Series I yesterday. Own enough of EBBNF, and TCANF jumped on TSX big after I bought. Wont sell…but not a player here either.

      1. I’ve backed off, too. Some of GTC orders are now 2 bucks under water.

        I will wait until the next market collapse. Maybe I can get Trump to tweet something about a trade war with Canada. Tariffs on pea meal bacon.

        1. 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.

      2. Interesting to see no US trading on EBBNF – Last quote made me think it might be possible to swap out of EBGEF into EBBNF at same current yield given 18.13 = 7.41 current on EBGEF and that would be 16.73 on EBBNF, but alas I see where last trade today for EBBNF on TSX was 17.15….. will keep watching for that opportunity should it ever show up…….

        1. Roses – it traded 19,100 shares on the TSX today. If you want to buy off the U.S. OTC just go ahead. The liquidity will appear, even if no quotes or old quotes are all you see on the OTC.

          Just make sure your U.S. $ bid is made of the current TSX price, at current exchange rate. Else you may be scalped by ruthless Canadians.

          1. Bob, as you know the illiquidity is an illusion, they magically appear from across the border anytime I buy. I just give em a nickel to incentivize them and its never a problem. This recent runup and some trades have got me out of the Canadian reset purgatory hole I had been in for the better part of the year. Sure hasnt been like last winter when it was easy pickings.

  13. Did a quick flip out of my recent ERRAF purchase for a quick 5% return. Dont trust price point of this issue holding long term. Want it lower. Did buy a small smidge of TGAPF to top off the tank there.
    The Bank of Canada kept its key interest rate unchanged at 1.75 per cent Wednesday but said the U.S.-China trade conflict is having a more damaging impact on global growth than previously thought.

    The central bank’s September rate decision did not offer a clear indication of its longer-term plans, but several references to the worsening effects of trade tensions on the world economy suggest the bank is prepared to cut rates if necessary.

  14. So, what kind of Canadian (investor) are you? What’s your risk/reward style?

    Same issuer, same credit risk, 4 different preferred:

    Best min rate, 5.12% SY with 4.75% minimum on the reset.

    Best fixed rate, 5.99% SY.

    Best naked reset, 6.69% SY, with a spread of 2.63% and 4.6 years to next reset. “Best” with naked resets isn’t highest yield, but combination of spread, years to resets and current yield.

    Best floater, 7.43% SY.

    How lucky are you?

    1. Bob, have you uncovered any Canadian financial fixed floor resets. I did not know this but as recently as less than 2 years ago financial institutions were not approved to issue such securities.
      The floor structures are exclusively issued by non-financial corporates as minimum rate resets have not been approved for financial issuers by the regulator, OSFI (Office of the Superintendent of Financial Institutions), at this time.

      1. No min rates in the financial sector that I know of.

        Also, of note, all (most) bank issues coming to market in recent years are “NVCC”, which means the issuer can convert them into equity in a crisis. Most unlikely to happen, but as a response to the 07/08 debacle, it’s a requirement now. The European banks do the same.

        But do know that the min rate issues carry about a 50 bps penalty on yield versus same issuer fixed rate issues. At this stage of the rate cycle the min rate feature is worth next to nil. Even if there were bank min rate issues I’d still probably point you toward the fixed.

  15. Do you believe in resurrection?

    Canadian resets had been on a pretty much uninterrupted slide for the past year, to the point that the group was essentially at it’s 52-week low and very near its 10-year low.

    Then, boom. Two huge up days in a row. The average reset I track was up over 2% yesterday and almost 2% today. 111 of 113 issues were up today. The big mover of the day was up 5.31%.

    The 5-year BOC, on which these reset, has barely moved during this time. So what drove this move? Is the market declaring a halt to lower rates? The 5-year is at 1.19, versus a 2016 low of 0.48.

    You pays your money and you takes your chances.

    1. Bob, quit beating your chest counting your profits, and instead roll up your sleeves and get to work bu helping Giuliber below with those Canadian reset questions below, lol…

        1. Bob, I think we can agree that the bounces dont quit constitute as highs yet. Maybe more as an eye in the Hurricane time to sell, lol…I digress, actually my purpose was to tease you into adding some thoughts for Giuliber to read. As he is interested in some more fixed floor reset primer knowledge.

  16. Hi to everybody, I am relatively new on this blog and on Canadian Preferred in particular, and I’d like to ask a question to more experienced people like you.
    Given the spreading of negative interest rates, what would be the dividend of a canadian preferred reset rate if the 5Y canadian government bond become negative, for example -0.5%? It will be -0.5% + spread or just the spread?
    In other words, the dividend can be lower than the spread or the spread is actually a floor for it?
    Thank you in advance for your help!

    1. Giuliber, one should read prospectus for any mention of “floor rate” or “cannot go below 0%” type wording. If none, one would be best served to assume a negative yield would be subtracted from the spread. FWIW, I did ask Enbridge IR about this recently. And their interpretation was it would be subtracted from spread.
      There are various Canadian reset preferreds issued with Minimum floors. This would protect you from such an event. Of course one usually pays for that protection and their yields are generally lower than their naked reset brethren are.

      1. Thank you so much for your kind reply! Will check the prospectus for wording suggested by you…anyway in europe we have hybrid bonds with similar reset features. 5 years ago we had an average spread of 3.5% over the 5y govy for a typical new issued investmend grade hybrid bond…today it is fallen to 1.5% because of negative yield on govy bonds and investors craving for yield….i mean, not only rate reset canadian preferred recently fallen below 20 can of course recover in an increasing interest rate enviroment, but may be they can start looking interesting even if canadian govy yields go on falling….a spread of 2.5 or 3% looks good when interests are zero and you can buy at 17 cad on 25….makes sense?

        1. Hey Giuliber, of course you are welcome. I dont track the world of fixed floor resets only a few. Maybe Bob will chime in as he has a more expansive list he tracks. I will give you a couple examples of what I own.
          ALTAGAS Series I. Its a 5.25% fixed floor off $25 par and closed TSX at $21.45 CAD with present yield about 6.10%. Its TMX website ticker is ALA.PR.I
          This is its prospectus

          It also has a 4.19% reset plus 5 yr CAD Tbill. This adjustment is of course off par not purchase price.
          Canadian Utilities Series FF…TMX ticker CU.PR.I
          This is a 4.5% fixed floor with a 3.69% spread and 5 yr CAD Tbill. Its last trade was above par at $25.20.
          These examples show the disparity in yields and pricing…Why? Canadian Utilities is a Rock of Gibraltar in terms of safety Ute wise. So it commands a premium. Look at its 5 yr price chart. It stays in a very narrow band compared to most Canadian reset issues. The 4.5% fixed floor is viewed tolerable, while the 3.69% spread is very generous for a high quality ute. Thus the reason it trades so consistently high.

          Ones risk level would determine which yields and resets to pursue.

        2. Giuliber, Thank you for your note. Being that we here in US/CAN also “appear” to be transitioning to an ultra-low IR environment, we’re of course interested in your own experience in EU. You’ve confirmed my theory about much lower margins in a zero/near zero lower bound environment. Did you also experience redemptions of issues that were in some cases well under par? Seems if a reissue shaves 1, 2 or more points off between lower margins and lower (or no) floors, the redemtion woudl pencil out.

          1. Alpha, I am kind of reading between the lines that Guiliber is suggesting there are no 6% IG preferreds to buy in Europe. 🙂

            1. Ahahah, 6% belongs to the past, the distant past in Europe…I hope MMT theories became true fiscal policies, so I can see my income securities producing a decent income again 🤣

            2. Grid, That’s for sure. Yield-wise sounds like an Oliver Twist convention. Guiliber’s yield compression observation was interesting and I’m curious about his/her front line experience with redemptions and reissues over the past few years as their rates slide to and below zero.

              With EU yield compression dropping from 3.5% to 1.5% over 5 yr govvy, seems margins over index would be equally pliable by issuers.

              Counter-intuitively, I’m suggesting some currently under-par resets could become candidates for redemption at reset if issuers are able to float new IPOs for not just lower coupons, but also lower margins or to eliminate fixed-floors.

              1. Alpha8, as far as I am aware, in EU all but seriusly troubled companies have called their hybrid bond at first available date, and that is exactly -I think-because of the constantly decreasing spreads required by the market in a deflationary economic environment. The secular forces behind this global tendency (demography, robotization, wealth&income inequality, etc.) are depressing the aggregate demand, the monetary policy is ineffective (liquidity trap) and the next recession could aggravate the situation…Maybe we will have a that point a strong, globally coordinated, political responce in terms of fiscal policy to avert the course of deflationary forces….
                (by the way I am a man)

                1. Giuliber, the fact you are looking for yield across the pond, kind of states the obvious problem…. But I would like to pick your brain for specifics being I dont know anything in from your geographic location. Are there European companies that issue preferred stock? If so, what yields are they being priced at? I am asking more about preferreds that are issued from companies not financials or Co-Co bonds.
                  Are there any?

                  1. Gridbird, in Europe we have subordinated perpetual bond securities like the one that you name “baby bonds” in USA or Canada, issued by Utilities, Telecom companies, and other non-financial corporations. The design of this securities is very very similar to the recently issued AQNB and ENBA by Algonquin and Enbridge in USD, with step up spread (over govvy) every 5 years if not called.
                    They trade like regular bonds, tel-quel, par 100, minum amount EUR50.000 and over. Being a bond, foreignners do not pay witholding taxes on coupons.
                    We do not have preferred shares in Europe….

                2. Giuliber, you can be sure we’re reading your words carefully and divining between the lines. It increasingly appears the liquidity trap you mention which has been entrenched in JP for decades and now gaining ground in the EU is an inevitability in the US and other regions.

                  Locally, it seems reasonable to expect a transitionary positive to asset values during this move to lower rates. Though how the CBs intend to create inflation from a zero bound rate policy seems to lead us right back to QE.

                  Absorbing the realities of your narrative, holdings that have turned into 3%-4% YTCs over the past few months now appear more attractive than five minutes ago. Though at that level, the risk exposure needs to be considered. And there starts our liquidity trap as we go to cash…

                  1. Alpha, Im gonna keep pushing on our European friend…What are the present issing yeilds for baby bonds across The Pond?

                    1. Giuliber, yes please -as Grid asked…what are the present yields available to you? And any other surprise observations during/after the transition? Should we invest in companies that make safes? haha.

                    2. Alpha, I want a specific yield number dammit…I gots to know!! But Im willing to bet the yield is below ours, ha.

                    3. Ok Gridbird and Alpha8, I’ll give you a couple of examples of recentily issued hybrid bonds to better appreciate the situation here in Europe:
                      1) NGG (National Grid Group, regulated utilities in UK and USA):
                      currency: EUR
                      pricing date: 08/28/2019
                      first call date: 12/05/2024
                      rating: BBB-
                      ISIN: XS2010044977
                      Coupon 1.625% till 2024
                      Coupon Frequency: annual
                      If not called in 2024: EUR Swap 5Y + 2.14%
                      If not called in 2029: EUR Swap 5Y + 2.39%
                      Ask price 99.85

                      8) Merk Kgaa (Big Pharma):
                      currency: EUR
                      pricing date: 06/18/2019
                      first call date: 12/18/2024
                      rating: BBB
                      ISIN: XS2011260531
                      Coupon 1.625% till 2024
                      Coupon Frequency: annual
                      If not called in 2024: EUR Swap 5Y + 1.948%
                      If not called in 2029: EUR Swap 5Y + 2.198%
                      Ask price 102.8
                      Ask yield to next call: 1.1%

                      I think this is enought to undestend the mess we are in…
                      You also have to consider that the greatest part of investment grade senior bond produce near zero or negative yield to maturity, and also some “high yield” short dated bonds don’t produce any income.

                      Could you imagine the potential capital appreciation of CAD preferred with about 3% of spread, now trading in their CAD17, if an enviroment like the one in Europe comes true in Canada too?

                      The only potential headwind could be the eventually negative 5y cad govvy yield to be substracted to the spread, but starting from a spread of 3% should be enought…

                    4. In addition to what Giuliber is writing, Siemens just sold a 2 year corporate bond with a negative 0.3 yield. Orange (telecom) just sold for 750 mil a 7 year bond for 0 yield. And the fun part is that technically companies can’t place bonds with a negative yield. But what happens is that it is placed in the market above par. So for example at 100.1% and the difference goes to the company. The only reason a lot of companies don’t en mass just place 0% (or slightly negative) bonds is that if they place the cash on a bank account they have to pay the bank as the banks have penalty on the business accounts of negative -0.4 to -0.6%.

                      At the moment, of the short term maturity bonds (1-3y) about 85% have a negative yield. the 3-5y about 67% have a negative yield. People buying these are tend to be the pension funds, due to their statutes. But also banks as a 0 or slightly negative yield is better than placing the funds with the ECB where they have to pay the ECB 0.4% penalty for storing overnight cash. So a loss of example 0.1% on a bond is better than a loss of 0.4 with the ECB. Of course you also have active traders in the bonds that buy them now in the hope the interest rates go even lower and treat the bonds like stocks, buy low and hopefully sell higher. As the expectations are that the ECB will lower the overnight rate from a -0.4 to a -0.6 in september.

                      And there you go. A perfect mess for trying to find anything with a decent yield. Anything but junk doesn’t bring any cash home.

                    5. Giuliber, If you’re reading – the thread went so long there was no “Reply” button after your last entry. Want to thank you for your detailed note in response to our query. Sobering would be the one word I’d use to describe your outline. We have been warned and thanks to you – with specifics.

      1. Thank you for your great job here, and for the passion and the great deal of effort you put into it..

    2. Grid has answered you correctly. In the end you need to read the prospectus. That said, most resets follow one of 2 rules.

      Minimum rate resets are just what the name suggests. They reset at BOC plus a spread, subject to the minimum. It’s a comparatively low risk structure.

      Resets with no minimums (“naked” resets) also reset at BOC plus a spread but have no minimum, or lower limit. There are a few exceptions but not many. The spread is not a floor. Zero is not a floor. These are high risk, not just volatile, but with risk of permanent capital impairment. There are naked resets selling at 60% below their issue price.

  17. Today was an astounding day for Canadian resets. They have been on a gentle down slide for months. Last 2 days, out of the blue, big up days. The AVERAGE reset that I follow was up 2.12% in one day.

    CU.PR.C was up 6.85% today. More than a year’s worth of divis in one day.

    The Vomit Comet lives up to its name.

      1. I agree…Thus the saying…”Everybody has a plan until they get punched in the mouth” or something like that. The Mounties have already experienced being punched in the mouth. The US investors havent been punched in the mouth with a bad reset yet.

        1. Well Grid ……….. that is one of my favourite sayings (Canadian spelling) by one of my favourite philosophers. Mike Tyson.

          You watch the vids of Tyson in his prime and it’s frightening. If only I could have gotten in the ring with him.

          If you really want to see pain look at some of the Canadian floaters. World-class issuers with shares trading at 8 bucks that (the underlying share) originally sold at 25.

          1. Bob, I recently bought TCANF at $10.30 CAD recently so I got close. It has a putrid 1.6% ish adjustment. Yes Tyson was…I still remember the past his prime Easton Assassin (Larry Holmes) getting in the ring with Tyson. He danced around for a few rounds but then got leveled and he had fear in his eyes. To show how heavyweight division weakened, some 10 years later Holmes pushing 50 got screwed out of the decision in a heavyweight title bout.

          2. But then many bounced back to low $20, so how about those who almost made 300% on top on a huge dividend when they brought at $8 ? They made a world-class killing

    1. Some of these resets went viral today. I bought a small amount of TCANF the other day at about $7.80. It spiked almost 7% today on TSX with over 30k shares trading.

  18. I can see EBGEF information on Quantum0nline but can’t find any info on other ENB preferred, e.g. EBBNF, EBRGF, etc. Where can I find the details (prospectus)?

        1. Well I thought I did until I made it up, lol. Thanks for correcting my mistake. Actually I guess EBBGF is a preferred too. Never owned it so I dont know why I used that ticker instead of the proper EBGEF one…Maybe its a sign for me to load up! Nah….Advanced senility is the problem….

  19. Some points of comparison ………..

    Simple average stripped yield for fixed rate issues is 5.55%.

    Same for naked resets is 6.56%. The basket of fixed and rests is close enough to consider this an apples-to-apples comparison. 100 bps premium on the resets.

    Stripped yield if resets magically all reset today based on current BOC rate, 6.21%, a mere 35 bps drop. Yet the average naked reset trades at close to its 10-year low.

    Same if reset took place at a zero BOC rate, 4.26%. It’s when the BOC gets real low that that old “spread” gets mighty important.

  20. So, it looks like the market wants to test my thesis on ENB.PF.V (EBGEF – US OTC). The 10-year chart shows the low at 14.05 on 3/12/2016 (but it is really the 6 year low since is started trading in 9/2013). At the time, the yield was 7.85%.

    Right now. I have the close on TSX at $17.10. Right now, so the yield is 7.86%. My thesis is the low should be measured on equivalent yield. At $14.05, the yield would be 9.6% until the next reset period.

    This has been painful, let’s see what happens.

      1. Hi Steve,

        If you really mean EBGEF then you stated the Canadian symbol correctly the first time ENB.PF.V.

        When you changed it to ENB. PR. V, that would be EBBGF.

        Which one are you referring to? I assume you were correct the first post and that you are talking about EBGEF which is the PF ticker not the PR ticker. EBGEF shows a CAD price of 17.10 so I’m still going with assumin that you’re talking about EBGEF, not EBBGF.

    1. Steve, I wonder if Enbridge down the road will move to seize my bank assets if I owe them a divi payment from negative yields and dont pay them, lol.
      Im watching but in wait mode. Wont get heavy here, but want one more Series L purchase but it needs to drop under $16 for me.
      Want to buy three tranches of the Emera Series C. But need around $16 CAD for round one.

      1. I have my limit amounts ENB.PR.V and EMA.PR.C. I am still interested in FTS.PR.G but only when I see some strength at the point. These are in my long term holds. 4 years before the next reset is a long way away.

      2. Right now, the total of all my Canadian preferred at the current market value is 10% of my total investable assets spread across 5 companies. Although I am happy with the companies and yields, I will hold with maybe some small purchases with Bell Canada that floats off prime and/or Fortis.

        I am a rather conservative investor more so every day

        1. Steve, I sometimes build interactive models to understand variables and implications. I previously had some ser 5 and modeled these ENB was very simple. Here is couple simplified snapshots at zero reset. Of course the reset could be other than zero. I could enter whatever assumed reset and whatever assumed corresponding fixed and postulate to my hearts content. You could try this. Good luck hope it helps.
          cusip zero reset $ price yield
          pr ser 1 3.140 0.785 15.70 5.00%
          pf ser 5 2.820 0.705 14.10 5.00%

          pr ser 1 3.140 0.785 18.52 4.24% (todays close)
          pf ser 5 2.820 0.705 17.10 4.12% (todays close)

          pr ser 1 3.140 0.785 26.20 3.00%
          pf ser 5 2.820 0.705 23.50 3.00%

          1. Thanks your models are right on.

            My models are different because I own shares already and have a cost basis. Why are we 0 rate modeling and worried about that 4 years from now on the Canadian exchanges but not on the US exchanges?

            You have AQNA which is in the business as Fortis and Emera and a direct competitor. We are not 0 rate modeling for AQNA. Why? It trades on US exchanges. We are for Emera and Fortis not based upon financials but based upon the exchange they trade on. Soon or later, money managers will step in and buy.

            Enbridge for 7.9% yield for the next 4.5 years is a very nice investment in a low-interest rate world. When did the street start looking at things 4 and 5 years out? I guess I missed that change.

            The buffet approach is to buy good companies when the price is low or when they are on sale. Unfortunately, I am not Buffet or I’d move my allocation on these issues up above 10% of the portfolio.

            I don’t know what interest rates will be like in 2023 or 2024. I cannot predict where they will be at year-end of 2019.

            1. Steve, there definitely in my opinion is a dichotomy between US and CAD. Historically Canada has went through lower resets before. Most US issuances havent except for the low libor tied bank preferreds. The CAD charts definitely show from last cycle severe price droppings from reset issues protected for many years and it didnt stop the drop. Oddly enough their fixed brethren did also but with less severity. And that made zero sense to me. The opposite should have happened.
              The risk with these isnt so much the quality of the company but interest rate risk. Emera common stock is up almost 40% past year, while the Series C is down about 35% same time. So the quality issue per se isnt the problem.
              I certainly appreciate your thoughts on predicting interest rates. Those predictions humble us all, including the experts.
              The fact you have made it a 10% allocation is a very safe play. For naked resets, that will be my ultimate range give or take. The fact you are thinking long term keeps you grounded as they are a ying and ying buy versus the fixed perpetual sister. Watching them drop and drop and knowing we still arent near the 0.50% Waterloo point of 2016 still makes this a “pain trade” I just cant fully commit to for my maximum limits. But there will be no whistles blowing for correct entry point. So I personally will toe in a bit more at levels above that point.
              For me why I kind of think 0% as the base reference point is three fold and emotional… 1) I dont particularly trust these issues from lack of experience and the fact CAD yields have tended to go lower than US 2) They have shown themselves to be historically more volatile than US fixed (or F/F) issuances. 3) I want a comfort yield I can accept if I have to swallow a mark to market haircut for any considerable time.
              If govt yields go lower if will present a mixed bag for me in theory outside of my term dated issues…Increased cap gains on the uncallables, increased call risk on past call issues, and increased opportunity chances on buying resets at more discounted prices. Time will tell……

              1. Steve, P and Grid, Truly fascinating discussion. One observation: When passing through March 2016 rate nadir, there were a plethora of fixed-income investment alternatives to the beat-up CN resets.

                Though this time around, well-trained (previously burned) CN reset holders are reacting as much as 4 1/2 years in advance of reset, to the world-wide rate/yield plunge. Also this time around, there are fewer and weaker fixed-income alternatives to the CN resets almost daily.

                If rates continue to decline as expected, it may play out that the margins on these resets become a distinguishing factor in their attractiveness. As around the planet many fixed-income investments are yielding zero or less, it is possible the CNs, along with many other IG corps, will eventually be issuing fixed rate issues in the 2s or 3s (we are already seeing 2s in some higher IG issues), or at least fixed floors in the 2s or 3s.

                By extension, if zero/near zero becomes a norm for an extended period of time – many of the fixed floor or high margin resets could be fair game for redemption (another near unbelievable scenario) as issuers could permanently shave 1% – 2% off their LT borrowing costs. In any case, anything with a 2.5%+ kicker would appear to be extremely valuable at that point – much more so than in March 2016. For this reason, in a continuing rate decline, P’s interactive model at 3% seems a distinct possibility if not significant probability.

                1. The 0 rate long term scenario for US, how realistic is that scenario? Nobody knows.

                  This we do know. Corporate debt is at all-time record highs. Student debt is at all-time record highs. Federal deficits approaching all-time record highs and modeled to get even larger. Why is anybody going to keep lending money at 0% with all this demand?

                  So we record borrowing going on, what’s the economic scenario that we are modeling 0% interest rates for? it seems to me to be the mother of all recessions or another 1920’s depression.

                  We have a massive disconnect somewhere. Frankly, it scares the daylights out of me

                  1. It IS scary, Steve. Sometimes I wish I were a young whippersnapper like Grid so I could try to catch the waves. But mostly, I’m glad I’m old so that maybe things don’t completely crash until after I’m gone.

                    I’m trying to stay with what will likely stay with me for the rest of my days. Primarily: noncallable IG ute & bank preferreds, though they all seem about to breach the 5% yield level on the way down. I’m looking in the mid 4s now, but pickins is slim, I tell ya.

                    I’m also counting on a world that continues to run on hydrocarbons for the rest of my life. And there are now real bargains in the hated energy arena. If you can stomach the uncertainty, many IG, best of breed MLPs provide great well-covered yields now–relative to most other investments. Straw hats in winter, so to speak. I used to own a lot of them, but they’ve now dwindled down to the precious few in my portfolio. And those will be with me for the duration.


                    1. Between money market cash and muni bond mutual fund, I am at about 66% which hurts. Not enough income to cover my expenses. The rest is individual preferred stocks. My Canadian reset (10%) on my portfolio is my only real risk asset. Although, you could argue that the US preferreds(24%) are also risk assets.

                      I would like to invest more. Only seeing opportunities in Canada but that 10% of my portfolio is enough. Right now, it’s a failing knife. I like it long term but short term my 2% money market is a better opportunity for me. The good news for this year is my 10% in Canadian resets came from large profits in the US preferred markets.

                      Pretty much just watching, looking for opportunities which are very, very hard to find at a good price

                2. Jerry – I echo your “fascinating” assessment.

                  For what it’s worth I’ve come to several conclusions re: Canadian preferred:

                  The min rate resets are overpriced. Versus identical fixed rate issues one sacrifices 50 bps or more for the upside of the min rate versus the fixed. The chances of any of these issues resetting higher than the minimum is close to NIL, so why pay a premium?

                  The fixed rates are very solid in this environment. Theory says that if rates drop these should INCREASE in price, but as grid noted they actually FELL in 2016. Not nearly as much as the naked resets but nonetheless they fell. But only very briefly. The recovery of the fixed from the 2016 crash was measured in days or weeks.

                  The naked resets offer plenty of risk and plenty of opportunity. Yes, I agree that what you see now is issues with 4-5 years to reset acting as if they were going to reset (lower) tomorrow. Irrational, but true. Very risk averse behavior by the Canadian investors.

                  So, ask yourself, what’s going to happen to these long runway issues if the BOC goes to zero? Are they going to fall further? Like a rock. The overreaction will become more extreme I would think. My rough calculation is that the average reset would fall an additional 10-20% if the BOC went to zero.

                  I also do what Grid seems to be doing in that I assess the naked resets as if the BOC had gone to zero. I hope zero is the lower limit, but who knows. If I can “stomach” the return at a zero BOC (stomach being 4-5%), I take a good look at the issue.

                  I have made fixed rate issues the bedrock of my Canadian portfolio. I am looking at the resets with great care with the intention to enter when the entry points are good. Not risk free, but good. I am not a “mark-to-market” guy on these issues so I don’t mind a 10-20% price drop if I’m looking at strong yields over the price cycle and big potential cap gains. Volatility and permanent capital impairment are not the same thing.

                  One strategy I am trying on the naked resets is buying just before they reprice, on the theory that you are being over compensated for the reset risk at that time. There are several issues repricing this Friday and I have bought one and will look closely at the other 2 tomorrow.

              2. Yes, and I think it speaks to extreme fear in this market. Let’s look at the scenario of those who brought at $14.05 with a 7.86% rate before. How did they do? They got a great interest rate of 7.86% and they made a 70% capital gain in 3 years as it recovered to $24. Right now, on a recovery to the rates we had just 1 year ago, the potential is a $7 gain on investment of $17 per share for the same 7.86% interest rates. That’s a 40% potential capital gains. Perhaps the lesson of this market is not how much money you risk to lose. Perhaps the lesson is how much gain you stand when you don’t overly focus on risk but you also look at reward while getting a 7.86% dividend

                1. Steve, I hear ya and am totally with you on the potential gains…Otherwise I wouldn’t be kicking the tires. But, there is a big factor not being mentioned in your price appreciation cycle. When the resets started re-appreciating was with the Fed tightening cycle and increased long end rates.
                  We have falling rates (long end) and the Fed just instituted its first Funds cut. So we are still at opposite end of the cycle that we were at when they appreciated. I claim no expertise here. It just appears the next 15% movement is down, not up. But we are getting close to nibbling time for me. The key for me probably will to maybe nibble in smaller bites over a longer period of time with insignificant purchases than trying to time bottom or go big with any specific lot purchase.

                  1. In the short term, “the trend is your friend” so I would not be surprised if we drop further. I do know this, if I were doing a mortgage or knew somebody getting one, I would tell them it’s a great time to get one with 30-year bond at historic lows.

                    Remember Tim’s post on 50 or 100 year bonds? I think we are on an express train headed towards that situation

                  2. You folks in the CA resets are way braver than I am. I’m sitting with about 15% cash and will have about another 5% when the MTBs, alas, are called in a couple days. I would really hate to be 2/3 in cash like Steve and looking for a home for it today.

                    And none of my spare change will go into those resets. I feel fortunate to have escaped those hummers some months ago with a div or two & slight gains. Lucky lucky lucky. Rather be lucky, etc.

                    Looking over my pfds (~45% of my stash) I see only 3 I’d sell at the right price. I love them but they’re callable: AILLL, CBKLP, & IPWLK. And if rates continue down, I will worry more about them. But no, Grid, I’m not selling my huge stake in AILLL at current prices. lol


                    1. Camroc, its too bad they couldnt dial you up some Canadian Utilities Series DD in US currency and no international tax laws. You would be serving yourself up a helping there. BBB IG rated 5.4% fixed and 20% below par.

    2. Steve – I think you were right the first time on the symbol. EBGEF is ENB.PF.V, not ENB.PR.V.

      In any event, you are, of course, right to look at yield based on the coupon of the time. The 7.85 and 7.86 are apples-to-apples comparisons. For the 9.6, I’m not so sure I would match a price and a coupon that never took place at the same time.

      One metric you may want to consider is yield if reset at today’s BOC rate. In the case of ENB.PF.V, the reset rate today would be 5.84%, which is obviously well below 7.85 or 7.86.

      Right now, 5.84 means nothing as the issue is 4.51 years to reset but on an option adjusted basis the price on the issue clearly has a long way to fall if the BOC doesn’t go higher or the time to the next reset approaches.

      For those who like Enbridge but prefer less drama, ENB.PR.A offer a fixed rate (no reset) and a 5.82% stripped yield. No U.S. ticker.

    3. I bought 500 shares each of EBGEF and EBBNF today. Less than 1% holding in each, but I may increase positions if they continue to sink in price.

      I am sticking to these two issues because dividends are paid in $US, although I am open to other suggestions.

  21. Bob, GF went home for the night to get ready for bed and work tomm (not my problem, lol) so I did a little math just now. And quite frankly dont feel any smarter for it…Doing numbers on the Emera Series C…
    Its low point was late Feb 2016 at $15 flat. Issued in 2013 at 4.1%. At previous interest rate low cycle its then current yield peaked at 6.83%. Projected reset yield at low point was 5.25%. At the actual reset time 2018 in rising rate era it went to $24 and reset at 4.72% par at 4.91% purchase yield.
    Today its present yield is 6.97%, current projected 2023 reset yield would be 5.7%. But the specter of going lower is not factored in. So present yield matches highest yield of last cycle but I dont see a ballast from that with expectations of yields going lower still.

    1. EMA-C/F are trading close in yield while EMA-A (-1.61%) out of step.

      Adjusted for resets EMA-F (6.55%), EMA-A (5.86%), EMA-C (6.11%)

      TSE:EMA-C 16.95
      TSE:EMA-F 15.26
      TSE:EMA-A 9.18

      Looks like EMA-A has to play a lot of catchup.

      1. Micah, unless I am misunderstanding what you are saying, my Series C reset projection numbers are not aligned with yours. I have it as ~5.7%, not your 6.1%

      2. When comparing resets from the same issuer you have to look beyond nominal yield. Each issue has a different reset date and a different spread, hence the apparent difference in yield.

        It’s a bit simplistic but one way I compare issues is to look at yield as if each issue reset today, at today’s BOC rate. The “error” in this method is the different times to reset, but it’s still a decent basis for comparison.

        What’s dragging on the A issue (compared to C and F) is the combination of short time to reset and low spread. C has a short time to reset, too, but a much better spread.

        1. Bob, I agree and for my needs find the error minimal in resets out 3-5 years on comparative worry basis. As the ones protected almost 5 years out getting spanked pretty good also.
          C is the only one I can buy and one of only a few I am even interested in. I have access to bid ask spreads now, but have no interest in trading resets like I do US fixed perpetuals. Just waiting for a toe in reentry point and slowly average down if possible.

    2. EMA.PR.C certainly has further to fall. I would not be a buyer today.

      If I had to buy an Emera issue today it would be EMA.PR.E at 5.59% SY. For a BBB rated issue with no call risk, not bad.

      Alas, no U.S. ticker.

  22. Another random musing on EBGEF – Since I continue to be amazed how today’s current yield on EBGEF and the other Canadian USD and UST resets has not cushioned a downward slide on them at a time when Ni-B goes untouched to the downside, I did a quickie calculation with some assumptions just to see what a holder would get if he held EBGEF for the next 9 1/2 years and the 5 year Treas upon reset was ZERO. I used 16.80 on EBGEF as a purchase price just because it’s not that far away and 16,80 represents an 8% current yield… Interestingly, if a buyer bought EBGEF at 16.80 at any time before 12/1/19’s x-div date and EBGEF reset on 3/1/24 at 2.82 (because 5 yr UST was at zero AND buyer held until 3/1/29, the long term holder would have achieved an average (and front loaded no less!) current yield of 6% throughout the holding period. Current yield on 2.82% $25 preferred priced at 16.80 = 4.20% (4.196 to be exact) so 4.5 x 8.00 + 5 x 4.20 = 57. 57 divided by 9.50 = 6.00%…. What would you say is the going rate right now for an investment grade perpetual preferred similar to ENB right now, less than 5 1/2% conservatively? I’d think so…. So with that in mind, how much lower can EBGEF go in a declining interest rate environment??? Incidentally, I chose EBGEF as my example not only because I own it but to rankle Grid who favors EBBNF vs EBGEF because of its higher reset rate. lol.

    1. 2WR, Ya gotta use EBGEF…We need a little drama and controversy on this extra polite forum that doesnt involve politics! 🙂
      Im a simpleton, so I seek simple answers. I still think US investors have never had their arse handed to them on a true reset before. They are naive. Canadians have been stung and have a long memory. Outside of us nitwits here on SI, very very few Americanos have bought Canadian resets. And I assure you very few Mounties have been loading up on NI-B at this price. Dont you think that is a reasonable bet? 🙂
      For ones I track, I dont think I can expect return to 2016 prices to buy. The current paying yield is higher than it was during that cycle.

      1. Most US investors have no memory of the “Halloween Massacre” a few years ago that destroyed Canadian O&G royalty trusts. The Canadian Government broke a recorded promise to the nation, and changed the rules when they said they would not only a few months before.

        I was hurt bad in that rout. That is one reason I will never buy Canadian equities again – there is no guarantee the government will not screw the nation, and foreign investors, any time they feel like it.

        I hope such an experience never happens to those of you invested there – but I have to say I will not be surprised if it happens again.

        1. Inspy, I never heard of that. I checked and it was a tax change issue on royalty trusts. Governments love to play with tax schemes. As far as pure equities goes I doubt there is much worry anymore than the usual disasters lurking. Of course foreign currency changes and tax rates of companies themselves can effect one too. Always landmines everywhere….Until I can get my 5% CDs again! 🙂

        2. Oooh you bring up bad memories. But yes, that is one of the big reasons I stay away from most Canadian issues. You can’t trust a government that broke its promise and screwed investors big time.

          Plus I have no inclination to play the Canadian preferred reset game

          1. Right. I much prefer to put my full faith in the U.S. government. They have never screwed the people by changing the rules. Not like they devalued the dollar overnight by 40% or anything like that.

            There is not enough ink to cover the topic.

        3. Canadian government allowed special investment trusts with reduced tax rates. Many corporations converted over and even more invested as they where safe and high yielding vehicles.

          PC Government changed rules after realizing the taxation shortfall created by the trusts. Sept 31/2006

        4. inspbudget–I used to cover those issues on the old website and remember this very well.

      2. You are right about U.S. investors not understanding the 5-year reset structure. The first Canadian resets (I think) were issued in 2008. They took a big dive in 2009 (as rates were cut) and a much bigger dive in early 2016. They have never recovered, as interest rates have stayed down.

        One of the metrics I watch is average 10-year low close for resets, which is 15.26 for the group I follow. This compares, of course, with a 25.00 issue price. So, on average down 39%. The “early adopters” in resets got crushed.

        I expect the U.S. to follow the same pattern. Be careful with NI-B when rates head south, and reset approaches.

    2. Grid – We’re on “SI?” If this is the SI I normally associate with those initials, I sure hope I don’t see you appearing in the swimsuit edition…. Yes, I agree with you about Mounties not piling into NI-B. So are you associating most of the selling in these Canadian holders based on their past experience? I suppose that makes sense… And just to add another weird thought or comparison regarding this, in a way, from these levels on EBGEF and probably others this kind of reminds me of the Gabelli preferreds that are issued with a high up front coupon that resets later on to a lower rate…. Yeah, I know, that’s a stretch but it did cross my mind when thinking about where these are now given the high current today and expectations of a lower one when they reset….. The big difference with them is that they are issued with puts that allow you to control the expectation of a maturity date…. weird thought, I know…….

      1. 2WR, Ooops…SI is a different investing forum…Getting senile I suppose. Yes, I think its all about interest rate expectations. The long multi charts kind of ebb and flow with the current cycle interest rate expectations. Current amount of years protection from reset date is meaningless based on the chart flows. At some point current yield will have to serve as a ballast. Maybe at 33% yield and 3 year reset protection, lol.

    3. 2 wr, …and EBGEF is QDI.

      I ran the same numbers on NI-B v EBGEF a few weeks back. I had to re-read the NI-B prospectus and check the numbers making sure there wasn’t a mistake. Oh boy there’s going to be a reckoning. And my add-on buy order numbers are ready for EBGEF. In the meantime, paired with a fixed-uncallable.

      1. Jerry – you are right, of course, to consider the resets relative to their fixed cousins. In many cases, an issuer has 4 types of issues outstanding: 1) min rate reset (really a fixed with upside), 2) fixed, 3) naked resets and 4) floaters.

        To use Enbridge as an example, choices are: 1) fixed at SY of 5.28%, 2) min rate at 5.53%, and 3) resets at 7.33% (average current yield across 17 issues) or 6.24% if reset at present BOC rate, or 4.26% if BOC reset at zero. I use the 6.24% figure for comparison purposes.

        So, what’s your risk appetite? In this particular case, versus the fixed, you give up 25 bps for the min rate (the price of the option), and you get paid an additional 71 bps to take the risk on the reset.

        At this exact moment, I would go with the fixed, in part that’s what my portfolio needs. The extra 71 bps comes with lots of downside risk.

        But the spread between the different rate structures is not static and will change with time. And it is different among different issuers.

        Right now, I’m buying fixed rates. And waiting for a big drop in resets. Just let me get my fill of fixed rates before that happens.

  23. An actual opportunity …. but only for the brave, who can understand the risks, and don’t cry when things blow up. Things can always blow up.

    So, BB-rated issuer, 8.15% stripped yield (means nothing), BOC + 306 bps, no minimum rate, rate resets based on the BOC rate 9 days hence. The short time to reset is key.

    If the issue resets at today’s BOC of 1.281% your SY after the reset would be 7.45%. If the BOC went to zero (not gonna happen on this reset but who knows about the future) your SY would be 5.25%.

    The premium over the same issuer’s min rate issues is about 150 bps. This is your “reward” for taking on some interest rate risk.

    ALA.PR.G, and, as of tomorrow, trading as ATGAF, per FINRA.

    If you have any interest in trading the issue look up the CA$ price on the TSE (14.80 today’s last) and multiply by the exchange rate (about 0.75) to get a US$ price. DON’T put in a US$ bid at the CA$ price, unless you like losing 25% instantly.

    If this works out to be a screaming success for you, you have another poster here to thank for procuring the US ticker.

    If it blows up on you, blame the guy in the mirror. Figuring out the risks and determining if the reward is sufficient is the most essential skill in investment management. “Risk” is not a dirty word. “Uncompensated risk” or “under compensated risk”, those are dirty words … I mean phrases.

    la chance soit avec les braves.

    1. Bob, I always reserve the right to cry…That can totally be separated from “blame”. Two different concepts, lol… If you were getting a penny a look per person, then I could blame you, ha. I looked earlier talking with Amy. I never did see the end Aug reset calculation. Since it officially resets end of next month it makes perfect sense. Enbridge did it that way. But I never found it. Admittedly I didnt fine tooth comb it though.
      I like your logic and essentially outside of negative reset yield in 5 years a credible floor is baked into price. For me personally it still boils down to proper allocation size. So I will most likely pass outside of a further price drop simply because I feel I have enough of the Series I fixed floor. Not really interested in selling, and I have to be mindful of allocation risk. This company isnt on my highest trust list so I have to keep the size in its proper proportion.
      A good food for thought post though!

      1. Just so the point is made, the key date with resets is not the reset date but the reset CALCULATION date, which is usually 30 days earlier.

        1. Bob, I am assuming you aren’t certain of calc date since you said “usually”? I never found it per se on Alta info.

          1. “Tis always in the prospectus. In the case of AlA.PR.G the calc date is 30 days prior to the reset date. 10:00 AM, Toronto time, to be precise.

            A reset that is so close in time behaves (or should) like an option, in that the option premium will decay to zero on the reset date. Put another way, the price of the issue should be going up even if the BOC doesn’t.

            BOC 5-year up nicely last 2 days.

            1. Thanks, Bob, I figured you knew, but the usually word through me off in that I didnt know if you were specifically citing this one or in general. I knew the Enbridge one was set up that way. I didnt find it in Alta, but wasnt reading with precision like I usually do. I assume my focus was commiserate with my interest in adding more money to this company.
              Probably would make a good switch out of my I to this one since this issue has tanked hard the past 5 days. While I series is basically unchanged in same time frame.

    2. Yep, Bob, if it does well I’ll take the credit for procuring the ticker. If it doesn’t do well, we’ll blame you. :>)

      Grid – I love your first sentence below. I will always reserve the right to cry in my beer, even though I don’t drink beer, but I will never blame. Nobody holds a gun to my head to make me buy anything. I’m very good at making stupid mistakes all on my own.

      In all seriousness, I like to encourage everyone to make personal recommendations to buy/sell without ever worrying that somebody’s going to blame them for their suggestions. I don’t want people to feel handcuffed and not feel free to express their buy/sell opinions.

      1. Amy, well you asked…And you wont be surprised, ha… PPX..couldnt resist and sold off part of my money market account at 25.76. These were bought in 25.30s just last week. Scalped the next interest payment 2.5 months early, lol, on some. Tried to buy me a decent allotment of AATRL. Only got 149 shares at $46.90. Ask backed up over a buck to $48.75 so I cancelled rest of order so figured seller was gone. It is a quirky trading little Baa1 trust debt convertible issue (Inspbudget told me about it). I saw my PPX “money market” stock had already dropped back to 25.59, so I bought them right back.

        1. I need to stop being so greedy. I had PPX set to but at $25.25 and it never triggered. Still learning…..

          1. Amy, I certainly get it. I have been fortunate to flip this so often (real often) with gains this year it gives me the mental math freedom to not fight for the best offer. For example today flipping out at 25.76. If I hadnt locked down easy gains, already, I wouldnt have been so excited to reenter right back at 25.59. But if I hadnt sold them I obviously would have still had them at the lower price anyways, so buying that allotment back wasn’t much mental anguish.

    3. Bob and Amy – thanks for the work on this one. I bought a starter position on Friday at $11.25. I trade these Canadian issues in my TDA account. When I went to buy it online, the system recognized the US gray market ticker of ATGAF but would not accept a trade. I had to call their desk to get the trade entered. It now shows up in my account with a ticker of ALApGCN. Go figure.

      I am now a little over 50% invested in the allocation I set aside for these Canadian issues. I’m sticking with my initial plan but its sometimes difficult to watch the earlier purchases get hammered.

      1. Grichter, be patient its coming. These resets have performed exactly as advertised. The stage is set for further deterioration. Like US, Canada’s overnight rate is higher than anything on the yield curve. Yields have a pretty good chance of deteriorating from here which means further price drops with the resets.
        The plan I would like is get them near 2016 lows. And still have 3-4 years of 7% plus yield protection. And by then even a “recovery” of 5 yr to 1% would then get one over 6% QDI. That is a 500 bp level over Tbill which is historically high. Of course the key is getting that price point down to where yield is credible on its own without any Tbill help.
        But, I suspect I will have to start buying a bit higher as eventually the current paying yield will inhibit as much price deterioration as 2016.

  24. Some stunning figures ….

    I am following a universe of 113 naked Canadian resets, “naked” meaning no minimum rates.

    The average issue price of the cohort was (surprise) $25.00.

    Average current stripped price (an apples-to-apples comparison) is 16.52.

    The average 52-week low is 16.48. Compare that to 16.52.

    The average 10-year low close is 15.43.

    The average stripped yield is 6.47% and the average issue has zero call risk. The cohort ranges from BB to A-, with the average being investment grade. This is not junk.

    If I thought no further I would say this is the greatest buying opportunity of the decade.

    But consider that the BOC 5-year is, today, at 1.195% and the 2016 low came in at 0.048%. Rates have further to fall, and so do prices. I believe that patience here will be rewarded.

    But if you are tempted to buy now, do so carefully. Calculate what the yield on any issue would be if it reset to .48% + spread, and also 0% plus spread. Many of them hold up very well. Many do not.

    Within the issues of any one issuer, there is a wide range of reset yields, and the one that often appears “best” based on current yields isn’t the best at all. Within TRP, TRP.PR.E appears to be best based on its 7.87% yield. But viewed through reset eyes, TRP.PR.G, with a 6.01% yield, is actually the best of the TRP brood.

    Today was a big down day for the naked resets, with only a very small decrease in the 5-year rate. Imagine what will happen when the rate drops to 2016 levels. At the risk of sounding like a Chinese fortune cookie, good things are on their way. The opportunity to pick up world class companies at 8-9-10% yields is a distinct possibility.

    1. That is true, Bob. One issue is investment grade and at todays prices if 5 yr ever climbed back to 3% from 2010 you would have an 11% QDI IG preferred…Instead one could be looking at easily sub 4% at reset, lol….The power of low number discount to par…If……..

      1. And for that 11% reason Grid, it seems a possibility redemptions occur at reset as issuers will be able to negotiate generationally favorable terms. Issuers might offer a bonus such as – the index will not be counted as less than zero, then drop the margin by 1%.

        If we’re personally running any of these corps and have the opportunity to float a new issue with much lower margins then currently outstanding – we’re doing it.

        For that reason, there is the possiblity of windfalls on some of these “way” below par issues. Of course, I never fully understood the reason a corp would not just buy back their own issues from the open market.

        1. Alpha, this one TCANF, the company would not be paying out 11%. This has a lowly 1.54% kicker. A 3%, 5 yr would in general equate to a 6-7% QDI IG perpetual. This at reset would only cost them 4.54% off par. So it is still dirt cheap to them. They wouldnt redeem I suspect. Buying way below par is what makes the theoretical yield high in this scenario. Unfortunately with low kickers it works nasty the opposite way price wise when yields go down.

          1. Grid, yes of course – in terms of company expense I’m referring to the kicker. There are a few that are over 3%.

            The YTC on many issues today is already passing south through 4.54%. If indexes continue south, it’s reasonable to expect yields to continue to fall. If this occurs and we approach the zero-bound, corp boards can be expected I think to attempt to secure better terms on debt or equity obligations.

            EBGEF’s margin for example is 2.82%. Even if a full 1% was shaved off the margin via a redeem/reissue, it’d still be higher than the TCANF margin of 1.54%.

            None of this is to suggest it will happen. Though it does appear the min rate resets and higher margin issues could be exposed to redemption in an ultra-low rate environment. This would provide lower costs to the issuers and windfalls to holders.

            Related but separate, if we do approach the zero-bound, it’s difficult to envision a near-term scenario where rates climb meaningfully. Even if a liquidity event, the CBs have evidenced their willingness to push the QE button at will. e.g. Italy and Greece ten year bonds recently less than US – good grief.

            1. Could there also come a time when these companies might consider taking a longer term view and want to lock historically low rates with refinancings with fixed rates to replace these resets or do you think the reset every 5 years aspect will always be long enough term thinking for them to forever ignore locking in a rate such as 2.82% for EBGEF if Treas were at zero 3/1/24?

              1. 2WR, good question…I dunno…But remember the origination of resets to begin with was low long term rates. The market up north has almost completely went away from the fixed yield model.

                1. What ‘chu talkin’ ’bout, Grid, not knowing? I thought for sure by my merely posing the question you would Carnac the divine answer we’re all looking for on these Canadian resets……. 🙂

                  1. I give free opinions, 2WR. Worth roughly what cha pay ‘fer. Now if ya want that high quality fancy expert opinions….Ya gotta pay up and subscribe to Rida Moron’s and Pendynuts paid site. Them there give ya the good stuff…Ya know…Like CBL at $8 and WPG at $9, etc.

                    1. You don’t pay for just “the good stuff” Grid, you pay for early and special access to “the good stuff”. Ha! What a steal! Oops, I meant ‘deal’…

                    2. A4I, you cant make this stuff up. Pendynut said his mall reits were doing exactly what he wanted and was very satisfied. So I buy their WPG reco at $9 and I am supposed to be satisfied its at $3.31? And people pay for that expertise…ugh….

              2. 2wr, Yes that’s what I’m driving at. In a historically ultra-low rate environment, one would expect corporations to lock in those lower rates. Lower margins or lower fixed rates as you indicate appear an inevitability if the rate trend continues.

                The potential for this outcome appears high as the breadth of the current rate nadirs being reached is not in an index or two, but literally across the planet.

    2. Bob, thanks for these interesting stats.

      There is no doubt that these issues will fall further. As you noted, today was an ugly day for the Canadian resets. But, as I was saying to Grid, I find the magnitude of this reaction a bit surprising for 2 reasons:

      1) investors are said to very “yield starved”…and

      2) human nature is to worry more about what they can get NOW…vs what might happen 3-5 years down the road.

      CY is being ignored….and the years of call protection are being ignored.

    3. I sold off 2,000 shares of Ebbnf and Ebgef today. I could use the tax losses to offset some things. However, things I’ve heard from a couple of extremely smart HF gurus this week is giving me serious pause.

      1. MrInprophet….Who knows… In one week it may look like a mistake and in 2 months you may be thankful you sold. Interesting despite the great consumer economic news, the 2/10 yield curve briefly inverted again today.
        You may get a crack at lower prices if you reconsider in 31 days.
        Basically that is what I did with EBBNF. I got a small cap loss as an offset, but have bigger cap gains still from earlier flips on this particular issue. EBGEF, I took my $1 or so cap loss like a man, and never looked back. I bought EBBNF back this week about a buck cheaper, so psychologically anyways I feel better. I really want to have some skin in this game, though largely it went to fixed floor resets a while back.
        I still want a crack at the Emera Series C again and buy it back. But Im guessing it still can be bought quite a bit cheaper down the road, so I will wait.

  25. Ok, throw me in jail. I just bought 500 of EBBNF at 16.70. Even at 0% 5 yr the yield is still 4.71%. Basically replacing some of the shares I sold off higher a few weeks ago.

    1. Well, you’d have gotten there quicker if you’d just bought Inspy’s uncallable FIISO @ 180. 🙂

      1. Im an eternal optimist Camroc. Im thinking sometime before I die the 5 yr will hit 2% and I may even squeeze out a cap gain before I die…Or before pipelines having cigarette cancer warning labels on them and the stock goes to zero, lol.

    2. Hmmmmmmmmmm, I had heard on the Street where the Royal Mounted Police were looking for you, Grid, but I didn’t know why…. Now I know…. Mentally, I have had a “I’ll think about adding” tag on 16.80 (8% current) for EBGEF should it get there, but it ain’t happened yet…. no matter what, trading in and out has saved you some coins that my inflexible sticking to my guns strategy has not done for me……

      1. 2WR, I would credit it more to satisfying my “trading fix” than any sound tactical strategy, lol. A while back when I wanted to get a serious load of LXP-C and NYCB-U something had to go. So most of them got the boot to make way. Fortunately those two have appreciated nicely. 6 months ago they would have got the boot already. But nothing to buy so they are staying in the 5 man starting rotation.
        More EBBNF? Hmm, no, I will pass. PPX? Belch….Im belly stuffed with it, and would love to find a deal to lighten that load. But it isnt out there…Well, Brad Thomas has recommended SKT today for the 500th time since he first recommended it at a price almost 50% higher than today. I guess I could buy that, ha.

        1. I think some prozac is in order.

          If the SKT chart were a ski hill it would be a double black. Ugh.

          1. Bob, his ego is just to big to let go of this SKT love affair. Sometimes people lose objectivity. He seriously recommends it once a week and will not give any respect to the capital lost on this downhill trade. His article today was “Get Schooled” with…and SKT was one. He isnt quite as witty as he thinks he is. As the title actually refers to real truth, ala the 50% beat down on price since reco. Get schooled is slang for getting your butt kicked. This one has certainly done that.

      2. 2wr, I’m usually stubborn about figuring things out for myself but I need your help with this bond. You know bonds better than me. It’s not Canadian, it’s US TIPs. Could you post in sandbox about why you think price action over last year is what it is? TIA

        1. P – Though I’m flattered to be asked, I’m also not going to be much help on TIPS… I’ve not spent much time on them but I do remember studying what they are supposed to do and how they’re supposed to do it and ending up not being able to figure out how a holder was supposed to get from Pt A to Pt. B without holding the bond all the way to maturity… I also know that as a workaround to attempt to accomplish the same thing as TIPS are suppose to accomplish, I at one time invested in WIA and WIW, two Western Asset Mgnt Inflation Linked funds… What I discovered was that those 2 funds did nothing more than track what normal, non TIPS interest rates were doing, so they were not good TIPS alternatives… So sorry I’m not much help, but maybe Tim will send this over to the Sandbox and maybe we can both get an education from others..

          1. 2wr, thanks for reply. The price relationship between yield expectations and inflation expectations is what puzzles me. I did figure out it’s best to hold to maturity that part. I’ll keep digging around more if nobody else adds insight.

      1. Bob, its paying 7.4%? I didnt notice. :). Actually when it sold off Friday, its floor yield on a reset of zero would be “tolerable” in that environment. I am more of a negative person, so it wasnt much of what I will get now, but how much lower is it likely to go and I could tolerate.
        Im certainly not pulling a Rida “table pounder” here. In fact I am still skeptical in general. Maybe near $15, I would make another small purchase. Im done with naked resets most likely until ERRAF can get to around its 2016 lows.

        1. Grid, Wrap an equal-weighted fixed non-callable around it and you’ll have a low volatility, less interest rate sensitive pairing with a high yield. That’s what I’ve done with EBGEF. The pairing is up in cap value (including EBGEFs slide since February), is IG, partially QDI and weighted average yields near 7%.

          1. Hey Alpha. I actually have way more of those than I do resets. I got LXP-C, SLMNP, RPT-D, and CTGSP that I know of. CNIGO is term dated non callable. Then I have IPWLO and PFX that might as well be labeled as such. Cant really make heads or tails out of NYCB-U, but if they would redeem its below par. The rest are call protected. My only past call exposure is CNTHO and PPX.
            Your advise is sound, but I still will curl up and cry like a baby if it drops another buck. But at a $2 loss, the sniffles will dry up and I would then buy some more. 🙂

            1. hahahaha…Grid, if it drops another two bucks I’ll bring the Kleenex and we’ll both buy more.

              Our strategically viable options appear to be dwindling. HCXY, LXP-C, AGM-D, CHSCN, CNUTF, HFRO-A and NCZ-A are my only remaining 5%-handle YTC pfds as the other 20-something have dropped below 5% YTC.

              You might be able to flip ERRAF on a post-sell off bounce. I’m holding two remaining flips though am increasingly distracted by the risk of flipped funds being stranded in the 2% penalty bin for a long time. Averaged-up on a few on last week’s dip though that’s now in the rear view mirror.

              1. Alpha, IG and fixed plus 6% YTC is scarce as hens teeth. I havent been thorough but the list cant be long. NYCB-U is the only one that I have now since LXP-C went below 6% now.

                1. Grid, admittedly this may be an apples-to-oranges comparison but if NYCB-A has Moddy’s/S&P ratings of Ba1/B+ why would NYCB-U be considered IG? Help me understand what I’m not getting here.

                  1. Mikeo, that issue you are referencing is a preferred stock.NYCB-U is actually subordinated debt so it sits higher in the cap stack and thus higher rated.

                  2. Mike,
                    I was discussing this with Grid yesterday. NYCB’s website shows the following rating on the preferred trust shares (NYCB-U) : Moody’s: Baa3 S&P: BB-

                    The regular preferred shares (NYCB-A) have the following ratings: BB- (from Fitch)… they show no rating at all from Moody’s and S&P

                    I didn’t look these up on Moody’s or S&P… Just relaying what NYCB has on their website

                  3. Mikeo, As you noticed the lower cap stack preferred from NYCB trades considerably higher than “safer” NYCB-U. I strongly suspect the reason is the way the issue set up. They declared the trust debt heavily discounted to part of the par and included the stock conversion as part of the issuance. So you get 6% off $50. But in reality based on what I read you owe a phantom tax. Because its original yield was like 11% off the “actual” debt part. This is amortized over life of the preferred until maturity. So I THINK you owe more taxes on this if its held outside of a tax free account.

  26. What Canadians should you be buying now? Depends on your view of interest rates and risk appetite. (I assume here you are willing to get into CA$ denominated issues.)

    If you see rates continuing to fall, resets with minimums and fixed rate issues are what you should be looking at. These will have “backbone” in that environment. They may fall further in price but the rate structure will provide considerable buoyancy (and a good capital gain at some point). These are the low risk play presently, especially the min rate issues.

    If you think rates have bottomed out and we are now looking at flat to rising rates, then “naked” resets (i.e. no minimum rate) are for you. But make sure you can stand big losses without getting ill.

    Go to and type in a ticker (must be a TSX ticker) and look at the 10 year chart. Try “TRP.PR.G” You will see what I’m saying. And that, folks, is an investment grade issue, one of the backbones of the Canadian economy.

    I personally would not touch naked resets (or floaters) right now. When the 5-year gets below 1%, and preferably closer to 0.5%, depending on the rate outlook at the time, I would be looking to make a big move into naked resets.

    If you like mins and fixed rates, but are confined to using US tickers, look at TGAPF, CDUTF, PMMBF, BXDIF, CNUTF, RYYLF, SLFYF, WGRGF.

    If you have access to the TSX you have many more to consider.

    1. Yes, the 10-year chart is scary. I am not sure, it is quite the same comparison to just look at the share price. Perhaps, we need to look at equivalent yields. Let me know your thoughts. Just an idea I have that may or may not hold water.

      When it hit $14.05 in 2014 what was the actual yield being paid? If I understand this correctly, it was a dividend of $1.10 per share ( i will look in more detail later). That is 7.8%.

      Given the increase in dividend in 2019, it is currently paying 7.4%

      So, on a yield basis, would you consider $17 a share which would yield a return of 7.8% to be the equivalent bottom to the $14 per share in 2014?
      Or am I trying to rationalize in your opinion? A drop to $14 would be a 9.5% yield. Just trying to understand how others view this also

      1. Steve, Bob and I have been pretty much on the same page here. The length of protection has little bearing on the weight of lower yields. Logical or not it is what it. Of course predicting the bottom can be problematic, I know. I got a few numbers in my head and if they hit, I will grit my teeth and buy. Some are not that far away. One can be totally negative and assume a zero reset to get you a yield you could live with. But of course that price may not come.
        It does appear that pipelines are starting to get a “tobacco” company rep. It just seemed like this has creeped in over past few years. I dont know if this will effect longer term this area of the preferred world or not. The whole concept strikes me as odd, but it sure feels that way to me.

        1. Given these reset again in 2024, I consider this very far away. I am going to hold EBGEF for now. We shall see what happens when the current interest rate environment stabilizes. My assumption is the $17 per share matches their historic low on a yield basis. If it breaks that, maybe I will reconsider

          1. Steve A

            Added to my position in EBBNF today (@ $17.06). Like you, I think 2024 is a lifetime away and the coupon is safe.

        2. Grid, Steve and Bob, Viewed as a stand-alone purchase the naked resets are not performing as hoped over the last few quarters. However, the current yield remains compelling. We’re all concerned with the risk of course.

          I purchased EBGEF simultaneously with a $$ equivalent of similar-rated fixed non-callables, for a combined holding of +/- $50K. All securities yield over 6.5%. The weighted average date of the acquisitions was the first week in March. At the time, there was still plenty of sentiment rates were going to rise (that’s just 5 months ago).

          EBGEF has been in an unacceptably heavy yield-related downdraft resulting in unrealized cap losses. However, the fixed non-callables have benefited significantly, and experienced a heavy updraft resulting in unrealized cap gains. Checking this morning, the combined holding, despite EBGEF’s slide is UP exactly $168.71, not including dividends. The current combined weighted yield is 6.825%, is IG and some of it is QDI.

          Adding EBGEF provided access to above market yield in an under par security. Pairing the fixed non-callables provided ballast to the position and turned them into a combined low-volatility and rate “in”-sensitive holding.

          Going forward, if EBGEF obtains a 15-handle, I’ll be increasing the position on both sides. If EBGEF experiences manic selling, I’ll be comfortable adding as a new stand-alone position.

          1. Alpha8 – Great post – very helpful….. as I sit here and mull over my options with my Enbridge preferreds…..and my FTRSF (ouch) and ERRAF (double ouch).

      2. If we are discussing TRP.PG.G, this was issued at $25 in Feb 2015 at an initial coupon of 3.80%, where it still is. If you had bought the issue when issued, counting all dividends received since then, you are still about $5 under water given the present share price of $16.25.

        Point being that these resets are very sensitive to rates (much more so than F2F issues that go to LIBOR) and that entry point is (almost) everything.

        The BOC 5-year is at 1.20% now and bottomed out in 2016 at 0.48%. And we aren’t even in a recession. The BOC not only has to watch what the Fed does but the ECB, too. If the Canadian 5-year drops back to 2016 levels, or goes to zero, these naked preferred still have a lot of room to fall.

        Many of them have very nice yields at present prices but the downside risk on price is there. Overall, naked resets yield about 75 bps above same issuer min rates and 100 bps above same issuer fixed. You are getting a better nominal yield but you are taking on substantially more risk.

  27. Is there a treaty with Canada that exempts Canadian taxes from being withheld in an American owned IRA? Etrade is withholding 15% and I have not been able to get it exempted yet. Any help would be appreciated. I’m sorry if this has been previously discussed but I was unable to find it. Thanks

    1. Yes, it was discussed early, but not much of the wonderful content here is easily found. It just rolls off into oblivion on this platform.


      1. camroc–I am working (slowly) on getting some sort of resolution to the issue you mention–I will find a way to alleviate that situation.

        1. It would really help if we could search on a contributor’s name and find all those posts, no matter when or what about. Or all posts on a ticker or keyword. Silicon Investor and Investor Village do these kinds of searches very well.

          It would help me tremendously because I follow folks like Gridbird around the net like some kind of lapdog. In fact, it’s all his fault I own so much AILLL. lol


          1. Hi camroc–I just sent a note to Chad to find us some options. I can find some out there, but of course when it comes to the tech side of things I have no idea how well they would dovetail with wordpress.

    2. Yes, there is a treaty but that doesn’t mean it gets honored. In at least 50% cases, I have seen on the board, it is not honored. I have stopped holding Canadian issues in IRA’s because of the uncertainty. You will not get a TAX CREDIT for the taxes paid out of your IRA. You will get the tax credit from your taxable account.

    3. Pete, as I recall the discussion it seemed to depend on the retail broker and more importantly, the clearing house the your broker uses. Of the two clearing houses mentioned one did not withhold Canadian taxea if your account was US tax-exempt, and the other one did withhold the taxes no matter what type account it was. This last clearing house is apparently the one used by Schwab for many Canadian securities because the tax is being withheld in my wife’s IRA at Schwab.

      1. Yes, Schwab says DTC (Depository Trust)) has the infrastructure to honor the treaty and Citibank doesn’t. I am not sure who Etrade uses.

        For that matter, I am not sure how accurate Schwab is with this information.

        To me, if you cannot honor a treaty you should be disqualified as a clearinghouse for those securities. But, then I am a nutjob who thinks you should be held accountable for your actions or lack of actions.

        1. I’m diving deeper. Etrade did not hold taxes on ENB but they are on EBGEF. Thanks for your replies. I’ll report back when I get some answers.

  28. North of the border, the Canadian resets are responding to a worldwide drop in rates (as expected). Quality companies.
    Fortis 6.3% (FTRSF)
    Enbridge 7.2%(EBGEF)
    Bell Canada 6.6%(BECEF)
    Emera 6.6% (ERRAF).

    All are at or near 52-week lows with 10%+ capital gains potential if they recover. Worth checking out for those with a risk appetite or long term horizon

    1. Steve & others – I would think carefully about buying these issues, at this time. 3 of 4 are 5-year resets with no minimum, the fourth a floater. If interest rates move down from where we are today these issues have a substantial downside risk.

      Rather than look at these on a 52-week basis extend your time horizon back to 2016, when the 5-year BOC rate (on which the resets reset) bottomed out at under half a percent. If you make that comparison, the 3 resets have another 20-25% to the downside.

      Look at this chart of ENB.PF.V (EBGEF) to illustrate:

      So, I respectfully suggest you consider your view of interest rates in deciding on these issues. If you think we have bottomed out, you should be a buyer or resets and floater.

      But, if you believe, as I do, that we have further to fall you would be better to look at the resets with minimums or straight fixed rate issues. These issues will stand up much better in a falling rate environment and may actually go up in price.

      1. Bob-in-DE or others.
        Help me understand EBGEF. For example if the 5 year is zero on the next reset date which I believe is March 1, 2024 than the yield will reset to 2.82% for the next 5 years. Am I understanding that correctly? On my fidelity spreadsheet its showing a dividend of .336. Will that remain intact until the next reset date?

        1. Jakester – Being as stubborn as I tend to be, I’ve stuck with EBGEF even though it’s been a big loser so far, but yes, you’re correct on both points – the dividend is .336 per quarter and if 5 YR Treas is zero in 4 1/2 years, this will reset at 2.82% based on $25 par… but in the meantime, you collect a 7.36% current yield between now and 3/1/24 based on current price of 18.25 and if prices decline as they most likely would if Treas goes to zero. you get a multiplier effect on the price of the shares at the time of conversion. So, for example, if EBGEF were to fall to 12.50 on date of reset, your current yield would be 5.64% on that price…. this on a preferred from a Baa2 rated company. In a zero interest rate environment, I would suspect 5.64% current might be pretty tasty… Heck today a 5.64% current on a new issue IG preferred is pretty tasty! Unquestionably I’ve been wrong to hold on to this, but all in all it seems kind of crazy to give up today’s current in anticipation of what interest rates will be 4 1/2 years from now… Heck it was only 8 months ago when everyone was trying to figure just how high interest rates were going to go….

          1. 2wr, I am also a stubborn holder of EBGEF for exactly the reasons you outline – most notably, 4 1/2 years is a long way out and a lot can happen between now and then. If EBGEF is 12.50 at reset, we’ll still have lost capital, though it would be a terrific time (if not before) to average down.

            Could easily be wrong, though my thought is that baring any manic selling, the nadir for EBGEF will be in the 15s because if the “planet” (and not just the resets subject to a 5yr index) is at 0% or less, then the 4.5%-5.0% effective yield in the 15s will be highly supportive of the price.

            If I’m wrong I’ll have to come out and help you mow the ten acres. But you have to get a larger mower.

            1. Alpha, I caved a while back moving resets into CAD fixed and floor resets a while back. Presently I just have my EBBNF. I made a couple bucks a share flip a few times with it last winterish, so my feelings are fine with it as it has been a good play longer term. I had the Fortis one and flipped for a buck and divi long ago when it spiked and I never got back in. EBGEF I got around 19.70 I remember and tossed in the towel with about a buck loss recently, not counting the divi I received. ERRAF has been the pain trade of the bunch. I bet I lost $1.50 not counting the 2 divis I got. It has dropped quite a bit more since I sold.
              Ironically it is the one I prefer the most of the naked resets financially wise. A couple more bucks south and I will get back in and hold my nose.
              I am not betting on negative rates, but I was still put off by the fact it appears if they did it would be subtracted from the kicker…I dont like that concept at all no matter how small the odds are. Plus the entire thesis changed since my foray…Rates were going up at that time. So the plan was to ride the wave from an already low price. Instead bond yield collapsed and low reset prices, became lower.

              1. Grid, Agree, yes the ENB 5yr resets purchase criteria pulled a 180 and your change of direction is understandable. Thanks to you, Amy and Bob’s spreadsheet was able navigate into CNUTF to hold through the storm.

                For me EBGEF was purchased with the intent to hold through potential multi-resets and balanced with long-duration fixed perpetuals, creating a low-volatility pairing. Both are IG securities yielding over 6 1/2% and the capital losses in one are being offset by the capital gains in the other.

                Viewed as a stand-alone holding, EBGEF’s the 6 1/2% for the next 4 1/2 years is appealing, albeit there is a potential loss of capital. But – though currently improbable, the possibility exists that rates turn north again before next reset, in which case EBGEF would experience significant cap gains. Alternatively, if rates stay truly zero-bound, ENB may have the opportunity to refinance outstanding pfds at unimaginably low rates or lower margins resulting in cap gain windfalls to pfd holders. With $17T around the globe sitting in negative yields, and UST30 touching all-time lows, less probable (crazy and unbelievable) outcomes are occurring. Going to be an interesting few years ahead for us.

            2. Alpha – If we’re really wrong, I’ll be selling my mower on the street corner and getting some goats. As someone on here pointed out, it is odd that investors in NI-B which will convert within 15 days of EBGEF and converts off the same 5 yr Treas but with an 81 additional premium to EBGEF’s 2.82, have shown no fear of what will happen in 2024 while EBGEF’s holders are panicking. It does make me wonder whether or not there’s any additional company related issues involved with the drop what with the political attacks on ENB in Michigan and MN and the carbon based energy generation base for ENB… For those involved in other CDN resets is there any evidence of this being ENB specific?

              1. 2WR, take comfort in knowing they all are trading in relative tandem. ERRAF just set yearly low this week too. Just go to TSX and you will find comfort in many reset casualties. There really is no ,in relative speaking, any investing secret sauce here. They all follow in lock step pretty closely over a small period of time.
                Just track them on TSX under the real tickers.

              2. 2wr, Not just MI and MN, a number of CA municipalities have legislation in place or pending that outright bans natural gas from new construction. Plastics is another hot button with a number of Northern European nations legislating significant reductions. Here in CA straws are now paper and much of the local packaging is no longer plastic. Certainly worth considering these changes.

              3. 2WR – the energy issues are somewhat more rate sensitive than non-energy but ALL the naked resets show the same price volatility. Even the utility-like bank issues,

        2. EBGEF is aka ENB.PF.V on the TSX. It’s a 5-year reset next resetting on March 1, 2024, that being in 4.5 years.

          The spread is 2.82% (5-year U.S. treasury +2.82%). If, on the reset date, the 5-year is zero, you have a 2.82% coupon for the next 5 years, yes. If the 5-year is negative, you have something less. If the 5-year goes below -2.82% you mail Enbridge a cheque.

          This issue last reset in early 2019, and has a current dividend of .33596 for a annual coupon of 5.38%. At present price it’s yielding considerably more.

          Anyone wanting to look at this issue (to buy, sell, or hold) would be well advised to look at the 10-year chart:

          Understand how sensitive these “naked” resets are to interest rates. 2016 is the key year to look at to see how far they can fall. And look at 2017 to see how quickly they can go up.

      2. Bob – I absolutely agree with you. There is a risk here. But a couple of points to also consider.

        Will the strong dollar hold up, if we don’t fix out fiscal deficits? I don’t know but my opinion is no. We cannot afford 1T dollar annual deficits. Right now, we are only getting 75% of the dividend due to the exchange rate. That has the potential to change. Could we see the exchange rate widen and go the other way? Of course, it is just something to think about and potentially factor into your thinking.

        If interest rates, fall further, it likely means that many of the current preferreds in the US will be called. Are you willing to pay a 10% premium and take that risk? When you factor in the yield to call is maybe 5%. You lose 2% dividend each year to an issue like EBGEF, which is 8% over the next 4 years. So, you may be looking at an 18% delta factoring in the lost opportunity of accepting lower dividends.

        Finally, if we get a recession where are the areas of the market which are the historical safe havens? Typically Utilities and Telecomm.

        I am still accumulating BECEF and FTRSF, so my losses are trivial. ERRAF and EBGEF, I have taken on the chin.

        Yes, I would not touch these if my investing horizon was short term. Way too much risk. I intend on holding and potentially averaging down. But, not yet, we may have more room to fall.

        1. “Will the strong dollar hold up, if we don’t fix out fiscal deficits?”

          How can it not stay strong if there’s, as someone just posted, $17T getting negative interest around the world? I thought it was only ~$15T but, hey, what’s a couple trillion here or there? lol

          So…as long as US rates stay positive, our securities are a strong lure. Whether we’re a Venus Fly Trap is subject to debate, of course.

          The Fed (& other CBs), after learning back in ’09 that there are apparently no real (current) problems with printing money, has now got a tiger by the tail and can’t let go or the whole economic house of cards implodes.

          People hate hydrocarbons, yet the world runs on it. Green new dealers are kidding themselves. Bill Gates knows it. And now Michael Moore does, too, according to his latest, ‘Planet of the Humans.’

          So…I keep adding opportunistically to EPD & MMP, the best of the MLPs, with growing, well-covered, tax-deferred 6+% distributions. Those and more noncallable IG preferreds–if they don’t just go ahead and leave for the moon. Ha!

          All the 5-6% callables are prolly gonna disappear just like the MTBs will at the end of this month.

          Bitter medicine for a lot of savers.


        2. I agree with comments about the US markets. Personally, I am way over exposed to call risk. That is by choice and I have made out like a bandit with callable and soon-to-be-callabale issues in the last year. But, as you say, it’s coming to an end.

          Look at the Canadian min rate and fixed rate issues is all I suggest. Good yields, no call risk (in most cases), on good credits, with much less downside risk that the naked resets right now. If you go ahead with new money in resets, at least buy nothing that doesn’t have 3+ years on the clock.

          I love naked resets, just not right now.

        3. Many good points, Steve.

          I am firm believe that there are just 2 sets of laws that can’t be repealed: the laws of physics and the laws of economics. No matter what the MMT bunch would have us believe the world can’t stand unending deficit spending. Things will blow up. And to think we came 1 (Democrat) vote from sending a balanced budget amendment to the States for consideration. I have no doubt it would have passed and would have saved us from the awful mess.

          If interest rates in the U.S. fall further we will see a flood of redemptions. My sense is that issuers have paused to see where rates are headed next but in any event the calls are coming! I have a huge call exposure, which is one of the reasons for my interest in Canadian min resets and fixed – most have no call risk. At this point I won’t paying anything above stripped par for any U.S. with call risk.

          Currency risk, yes. But I will take it. Some currency diversification is a good thing, and I have a long time horizon.

    2. Only way to play these issues is near the reset date or try to time the bottom of interest rates (high risk). To protect your capital from severe drop by purchasing high spread resets is desirable.

      RYMTF 4.80% + GOC 5Yr
      TNTOF 4.66% + GOC 5Yr
      TORDF 4.12% + GOC 5Yr
      ALTGF 3.58% + GOC 5Yr
      FRFFF 3.51% + GOC 5Yr

      If you want to see a few ugly charts.


      1. micahc, TA-D initially appears to have appeal at this level as it’s sporting a current yield north of 6%, and even assuming GCAN5YR at 0% in 2021, it would yield a 5%+ at $10. In a zero GCAN5YR world, appears the 5%+ would be attractive and therefore price-supportive.

        What halts the read for me though is the slowly declining credit rating of the company, currently at BB+ per June 2019 review.

        Then there’s that pesky question of how the rate calculation will be affected if GCAN5YR is <0% at reset. Same thing for the UST floats/resets.

      2. Micah, You may want to look at TGAPF (Altagas) for your spreadsheet. It has a 4.17% spread and a 5.25% par minimum reset. It is up some since I bought, and is now trading $22.40 CAD.

        1. Will need to wait for a pull back it’s had too much of a run. Only one meeting my rules to investigate further.

          ALTGF TSE:ALA-U

          Strip Yield: Minimum 6.5%
          Yield to Call: Minimum 6.0%
          Call Date: 2 Year Call Protection
          Cumulative: Not Required

          1. Sorry, I wasnt clear, I meant to watch not to buy. I didnt know if your list represented a buy list or a watch list. So I wasnt for sure if you were aware of that one. There would appear to be plenty of them now that would fit your specific criteria. TGAPF is not though.
            I just need more price drop to get interested again to compensate for reset risk. I got some since I sold, but I need more.

        2. Like TGAPG a lot and own it. I will like it a lot more, and buy a lot more, when it has its next hiccup into the C$20 range.

          1. Bob, I think its going to need a loud belch, not hiccup to hit the 20 spot. I probably own enough since it is a highly indebted not pure play utility. But I may buy a couple hundred more if I can get the 6% fixed handle floor and the divi.
            I tried to get another CU issue and was unsuccessful. I sold off a slice of my PPX “money market” account at 25.40 this morning…So at end of day, when it was apparent the trade was hopeless, I bought the money market shares back at 25.32, lol…

    3. I bought EBGEF in an IRA at TD on 5/24/19 at $19.90. The stock has done nothing but sink. I will get a dividend, however. Should I sell now and reinvest or hold in hopes of a reversal. I don’t want to end up losing too much. Thanks.

  29. Just curious….does anyone know of an ETF that holds high yielding Canadian dividend stocks but is traded in US dollars? I see some that are traded on the TSX but to purchase them on IB requires some currency exchanges as they are denominated in CAD. Thanks!

    1. IBK makes currency exchange simple and you pay institutional rates. You can buy an issue without exchanging currency but I don’t recommend doing so. Your currency exposure, no matter how you do it, will be CA$.

    1. Bob, Thank you this excellent summary. I agree many of the US issues don’t hold a stick to the CNs, variously either in terms or pricing. Seems many of the new US issues resemble the old CN issues. NI-B comes to mind.

      1. I bought about 2000 shares of the Altagas Series I TGAPF when its true purchased yield was over 6%……I should have bought more…But they dont have the prettiest of balance sheets and need to deleverage more. But they are on point still. So its easy to talk in retrospect, which means I really bought as much as I should have.

        1. Yeah, I shoulda bought a LOT more WFC-L @ 1206, too. I like this hindsight stuff. Makes things real easy. 🙂

          1. Ok, you like hindsight so much, which ones do you wish you had bought LESS of when you bought, lol.

            1. Somebody gave me a guaranteed market tip a long time ago:

              Only buy stocks that go up. And if they don’t go up, don’t buy ’em.


          2. and I shoulda brought a Penske moving truck instead of the SUV on NCZ-A at 22.79. Oh self-loathing…

      2. Welcome, Jerry. Aside from having nice numbers the Canadian issues provide investment opportunity you don’t have in the U.S. There is no U.S. equivalent of George Weston Ltd, or Brookfield, or Enbridge, or Transcanada pipe, or Power Financial. Certainly not in preferred. Or the big 5 banks. They may be banks but they are legislatively protected and are more like financial utilities than what we think of as banks here in the States.

  30. I kinda waved the white flag on naked resets about a month ago. Just have a very small skin in game on some to keep me awake. I rolled most of that money into the fixed floors and fixed rate perpetual CAD utes. They have done nicely…. I am hoping for a trading zig zag in coming months. My long perpetuals to increase some more while the resets totally wash out and hit those Jan 2016 lows. Then sell of the appreciated fixed and roll into the blown out resets. That is the working plan anyways.

    1. Same plan. Buying min rate and fixed rate, based on assumptions rates are more likely to go down than up. Also, will act as good counterweight to all the calls that are coming from lower rates.

      To put new money into naked resets or floaters I would want the BOC under 1% and 0.5% would be better. A repeat of 2016.

    2. REDRUM!…I took three smalls and went out to 2022 and 23, trying to give the Japanese Model of Global Monetary Leaders an opp. to prove that secure, IG and competently placed capital will be rewarded. So much for homegrown leadership. Just WHO is getting SAVED?! If it is in the name of the largest sweep of society (my defintion of socialism: stirring together the good, the bad and the ugly) then indeed we are socialist…with torture to the Good. Actually, it is Ambition that is getting strangled. The Drama isn’t even that damn good.

  31. Initiated a very small (almost tiny position) in BECEF. Paying 6.6% monthly, floating off Canadian Prime rate which is currently 3.95%. I like monthly dividend payers and floating off the prime rate is attractive since that rate tends to be higher than government bonds and less volatile.

    Will Canada cut their prime rate shortly? Perhaps but still attractive and I will willing to buy quite a bit more on weakness.

    On the whole, I cannot believe the bond markets in the US and Canada. I was a HUGE critic of Powell for taking rates above inflation. But now, we are very close to inflation. GDP and employment strong. Perhaps our dollar is too high. Another reason to buy the Canadian preferreds.

    1. Hello all BECEF holders. I want to make sure that I understand this issue correctly. From the prospectus:

      …on 12/1/22 we have the choice of sticking with our Y series or switching to the Z series. It looks like from paragraph 6 that every 5 years the Zs reset to the CAD 5 year x 231%. So, if the 5 year is 1%, we end up with a coupon of 2.31% for the next 5 years.

      I think I have that correct…..

      1. My understanding is that the BECEF shares are the AH series or BCE.PR.H on the TSX. These are the shares that are currently floating monthly at Canadian Prime. On 5/1/21, they can be converted to the AG series at the holder’s option and subject to the automatic conversion provision. At that point in time the AG series will pay not less than 80% of the Canadian 5 year rate on a quarterly basis for the next 5 years. I’m fairly sure I have this right…

  32. Picked up starter position of 700 shares of CNUTF in taxable. Fixed rate, well under par and higher IG sporting a P-2 rating (BBB+ equivalent) with a stripped yield of 5.50%. Needed to call the TDAM trade desk but they have a direct link with TSX so it was quite easy to search between the bid and ask until it hit. Thank you Grid.

        1. Happy to now be there with you Grid. Should have jumped on it when you mentioned it earlier and saved myself a few margaritas, though the US issues going stratospheric has been a consolation prize. Rolled NRUC out of one of the tax-advantaged accounts today as I can’t talk myself into sitting on a 3.27% YTC with 5 years remaining on the calendar. Having bought near par, got my beauty out of that one.

          1. Alpha, the only thing annoying about the issue is it somewhat mirrors the reset issues in charting albeit without as much volitility. It seems maybe this time to be decoupling a bit finally. Maybe they figured out its not a reset issue. As it should trade in line with the fixed perpetuals that it is.

            1. Grid, Yes it does certainly seemed underpriced given the details in the prospectus. I’m in line to pick up more if there is any weakness, but prospectus to prospectus, credit rating to credit rating and yield to yield it’s stellar compared to the utes south of the 48th. And we’re under par.

      1. Bob, probably paid a few pennies too high inside the spread though I wasn’t willing to quibble around the margins given our current environment. I did reference your spreadsheet from a few weeks ago for a quick read on the stripped price so thank you again.

    1. alpha, Amy, Grid — sorry if I missed this in an earlier thread, but is it treated as QDI? couldn’t find it anywhere. thank you

  33. I have bought a number of the min rate resets. The link below will show you the issues I have been following. Prices were current as of market close on Aug 1. I am done buying for the moment, so feel free to drive the prices higher.

    The average stripped yield of what I bought is about 5.7-5.8%. Not exciting but the min rate feature is what does it for me. If rates drop these will actually go UP in price. The stripped yield is actually YTW since everything purchased was under par. The only risk, other than default risk, is call risk. But in all cases there would be a substantial cap gain if called.

    For me, these are a nice compliment to all the callable (and likely to be called) issues I hold and issues that will drop if rates drop.

  34. Altagas released earnings today. Everything is fine. I am more mindful of them executing their debt reduction strategy as credit agencies are watching closely and holding their hand here. They knocked off $2 billion in asset sales and are looking for another billion. This needs to be done to maintain their investment grade bond rating. On plan to reach 5.5 debt/ebita at year end. Have a decent slug in TGAPF which has performed nicely since I bought last month. This isnt my “Linus blanket” issue, so I am keeping an eye on this company.

  35. I finally stuck my big toe in the water. 250 shares of KML.PR.A @C$23.25 per share bought directly off the TSX through IBK. This is a Kinder-Morgan Canada 5-year reset with a 5.25% minimum coupon. Stripped yield of 5.72%.

    This was above my natural entry point but I wanted to see how things worked with IBK. I’ve been sitting with unfilled orders for almost a month now.

    Rated equivalent of BB+ by S&P. So, unless the company goes bankrupt, I have a perpetual at no less than 5.72% yield with some cap gains upside. If the price goes to zero I’m still clipping coupons at 5.72% on cost. Unless they get suspended.

    I view this as a forever hold, unless a big cap gain becomes available.

    Commission was all of C$2.50 for the trade and they did the currency conversion for less than a basis point. Can’t complain.

    To emphasize, this is a C$ issue, so one has to consider exchange risk. My personal view is that the C$ is cycling between ~ 72-78 cents U.S., or about 8-9%. Presently, it’s at the top of the range, meaning there is a lot of downside exposure for people who live their lives in US$. I have chosen to hedge for now, having bought 1 future contract (nominal C$100,000). My intention is to abandon the hedge once the C$ gets to a cyclical low.

    This is an issue with no U.S. ticker. That may change but can’t say more for now.

    Off to Muskoka tomorrow!

    1. I like what I hear from you about IBK. I DO REALLY like have consolidated accounts at TD now esp the way I can manage views as a group and do everything with one logon. In the next few months after I complete frying the four fish (life completions) I have laid out right now, I think I will begin a pressure campaign on TD to at least compete with IBK because we all know they have the CN capacity! I’ll pay the $7. We should begin a concerted lobby to them this Fall.
      I remember going to Georgian Bay as a kid in mid summers and floating up and down on the six foot waves of Lake Huron on an innertube, slate cliffs , dunes and crystal waters. A very unknown and simple destination for Americans…like 1960s still. Good fish too! Back on the list again. Have fun!

      1. Georgian Bay is still wild, in most parts. If one wants the full experience drive to end of Bruce Peninsula and take the ferry from Tobermory to Manitoulin Island, drive the length of the island and cross over to the north shore.

        Few Americans get up that far.

  36. Grichter or Bob, just want to pick your brain as I am too lazy to read those BCE prospectus again as it has been a while. Should have bought when you first mentioned but needed to check out BCE and read prospectus which wasnt light reading…Anyhow, got my 350 small initial entry position to pay attention (since I forgot) in BCEFF…My question is what exactly is difference in it and the other apparently twin sister BECEF? I figured one of you could rattle this off without any effort, thanks.

    1. BECEF and BCEFF are for practical purposes identical. Although the float rate on both is nominally 80% or more of prime, the adjustment collar effectively forces both to 100% of prime, which is 3.95% now. That’s why they both have the same divi and the same stripped yield.

      Risk is they are pure floaters and prime can go lower. For that you get about 100 bps extra yield.

      I own BECEF but bought it the 2016 time frame. I would be a buyer at about C$12, but not at present levels.

      1. Thanks Gentlemen for reinforcing my memory. Yes, the $12 point was the Waterloo point. Things will have to head south further for that to hit. Prime has been a bit sticker going south potentially than Tbills. I already tracked the monthly dividend payments from 2016, so I what the yield is capable of heading towards. Just got a toe dip into it to establish a position. This will help me long term in tracking. Because for me if its not in my rotation list, I generally dont follow, track, or pay attention to it. 95% of the preferred world flies around me with no desire to research, buy or track.

    2. As far as I can tell they are identical other than call/conversion date.

      Canadian Prime Rate : 3.950%

      BECEF – BCE AH
      monthly floating adjustable cash dividends of 100% x Canadian Prime.
      Adjustment factor starts @ $24.50.
      Next Call/Conversion 4/30/2021 – $25.50 call price

      BCEFF – BCE Y
      monthly floating adjustable cash dividends of 100% x Canadian Prime.
      Adjustment factor starts @ $24.50.
      Next Call/Conversion 12/1/2022 – $25.50 call price

  37. People on TSX have been loving up on the Series I I see (TGAPF). It is up over 50 cents on TSX since I first bought late last week, I see. Probably should sell, lol. I think I am in this one for the long haul. At purchase price the barbell is just too good.

  38. No reason to panic, or to even do anything as this is far from the definitive source an email reply from Investor Relations….But it does at least reinforce a theory of mine IF 5 yr Tbill would ever go negative that amount would clipped from the spread and not inserted as 0%…

    The wording in the prospectus is usually “… plus a spread of x.xx%”. I’m looking at the Series J for example and there are no clarifications for negative yields on the reference benchmark. So I’m inclined to agree that the negative yield would be subtracted from the spread.
    You can find the prospectus for all of our prefs here:
    Enbridge Investor Relations
    TEL: 1-800-481-2804 |
    Integrity. Safety. Respect.

      1. Especially if we owed them quarterly, lol… BTW, Amy, Altagas just disposed of an asset today (remember the need to deleverage conversion we had the other day) for $720 million. Market liked it as Alta common jumped 5.75% today. It eased my still skittish concerns of issue so I bought a few hundred more of TGAPF. You know the one we own that wont go below zero and us having to write a check at divi time, lol.

  39. Just posted a Reader Alert re: a new BB&T issue. Very relevant to the topic of Canadian preferred. Have a look.

  40. For diversity have always been interested in BCE issues. Have not pulled the trigger based upon not knowing reset rate.

    The problem is the board of directors sets the first variable:
    >80% x GoC5 x par?

    It doesn’t make sense to just set it at the minimum possible or you would have mass swapping to the floating pair.

    Has anyone cracked the code?

    1. I emailed the company’s IR department a couple of weeks ago because I was having trouble understanding the terms myself. With respect to the 5 year reset issues (there are several), here is the response:

      “Reset rates
      Most series paying a fixed dividend rate will be reset based on the 5 Year Canada Bond (GOC) which cannot be lower than 80% of the GOC. At the time of a conversion, BCE will review the market conditions but will not reveal any of the factors considered when resetting the rates. In some cases, a selected percentage is announced (R, T, Z, AF) and will be found in the conversion notice sent to shareholders. No selected percentage is provided ahead of time for series AA, AC, AG, AI, the reset rates will be confirmed in the newspapers 2 to 3 weeks prior to the conversion date (no additional details provided – i.e., what are the factors BCE is considering when resetting a rate). ”

      I didn’t really like the part about them not revealing the factors (the code) used when resetting the rates so I decided to avoid the 5 year resets for now.

      I own the series AH (ticker BECEF or BCE.PR.H on the TSX), which currently is paying 100% of Canadian Prime or 3.95%. It resets on a monthly basis. I like that it is linked to the Prime rate and not a government rate. These monthly floaters pay a dividend rate between 50-100% of Prime depending on the trading price of the issue. If the price is below C$24.875, the dividend rate will adjust by 1-4% (there is a sliding scale) on a monthly basis until it reaches 100% of Prime. If the price is above C$25.125, the dividend rate will adjust down until it hits 50% of Prime. These floating issues have been paying 100% of Prime for several years.

      Hope this helps – good luck!

    2. The BCE issues have several different reset mechanisms. If we’re just talking about the ones with U.S. tickers:

      BCEFX is 5-year plus a spread.

      BECEF adjusts based on prime. At the present price it is effectively pinned at 100% of prime, that being 3.95%. Monthly floater.

      BCCF is e 3-month plus a spread.

      BCEFF is same as BECEF.

      1. The reset mechanism and rate is based upon a formula not published within the prospectus and at the discretion of the board. To avoid offence not simply reset at the minimum.

        Resets have a floater pair for conversion. My best guess as these are pairs an interest rate swap formula is applied. Nothing obvious has made a fit to predict the mechanism. Just wanted to see if anyone has cracked the code in predicting the reset. (search:Details of the Offering)

        Section: Principal Characteristics of Series AA Preferred Shares (Dividends)
        For each succeeding Subsequent Fixed Rate Period, commencing on the day immediately following the end of the immediately preceding Subsequent Fixed Rate Period and ending on and including August 31 in the fifth year thereafter, the Series AA Preferred Shares will be entitled to fixed cumulative preferred cash dividends, as and when declared by the board of directors of BCE Inc. BCE Inc. shall determine on the 25th day prior to the first day of each Subsequent Fixed Rate Period the annual dividend rate for each Subsequent Fixed Rate Period and give notice thereof. Such annual dividend rate shall not be less than 80% of the five-year Government of Canada Yield determined on the 25th day prior to the first day of each Subsequent Fixed Rate Period.

        1. If you’re asking about BCE issues you need to be specific. Out of the 21 outstanding issues there are perhaps 10 different reset mechanisms.

          The Series AA, AKA BCE.PR.A, is reset at no less than 80% of prime. No other qualifier, so it is at the discretion of the board.

          That said, what the board is actually doing is resetting both the AA and its convert pair, the BB, at 100% of prime. The BB has a mechanism that effectively forces it to 100% of prime and the Board is just using the same rule for the AA.

          I trust you appreciate these issues have no U.S. ticker.

  41. An update ….

    I was a buyer of TGAPF today. I put one toe in. The price will need to drop a good bit before I go for more. That, generally, is my attitude to the min rate resets. I have 4 orders in at IBK on their Canadian tickers but they are well out of the money.

    The min rate resets make a good deal of sense if your view is that rates are headed lower. Of course, if rates go lower – and stay there forever – you may have capital losses, just as you would for a U.S. perp. But then the min rate feature, unlike most perps, is likely to get them redeemed at par.

    Altagas isn’t going to let a 5.25% min issue sit when they can reissue at less. You will be “pinned to par” or redeemed.

    FYI, we (hopefully) have some new U.S. tickers coming for some min rate resets. No further word until it’s a reality.

    Trying hard to avoid boredom trades. They feel good at the time but rarely end well.

    KEY-I at 28.94? Mon dieu.

    From Hot-as-Hell Delaware ….

    1. Bob, If TGAPF ever got pinned to par, that wouldnt upset me, since we are sitting a bit under 20% south of that presently. Its kind of a unique situation with that relatively high kicker of 4.15% ish. If Alta over time doesnt make more asset purchases and focuses on deleveraging this could ramp their credit quality up and increase the pressure towards par over time or a revisit to having a 4.15% ish kicker outstanding depending on where rates are. Being its first reset is 2020, I dont see the above thesis playing out by then. For me the 6% minimum floor at purchase price coupled with the 4.15% ish par kicker is a good barbell type issue. A shame it is not a high quality issue considering it is subordinated to all the WGL stuff. But your boy Pendragon would disagree. Since its rating is better than NSS he would label this issue as “very high quality”, lol…

  42. Somebody on the forum join the TGAPF club today? I seen 500 have traded today. Amy and I bought them all yesterday and I assume she has a full belly of them already and didnt buy.

    1. I saw that 500 but it wasn’t me…although I was tempted as I had a chunk of change end up in my account yesterday from the CPE-A redemption. I want to wait for a pullback before buying more.

      1. I hadnt talked to you today, Amy, but I thought you would be “behaving” today with the market since you just bought yesterday. 🙂

        1. I did have to put handcuffs on…you know how much I hate my cash sitting idle. But, I am trying to channel my inner Tim and be patient.

    2. I started with a small position today of 300 shares. I have been watching this and several other issues for several weeks and hoping they would move lower, but nothing is cheap these days. C$ strength hasn’t been helping either.

      1. Welcome to the club, Grichter. Toeing in is the way to go. Amateur credit ranking order from these five to me would me…Canadian Utilities, Fortis, Emera, Enbridge (its rated a bit higher split decision than Emera last I checked, but Emera has more regulated utility earnings of good quality which is my personal bias), and then Altagas…Credit agencies are “working with” Alta in presently keeping their BBB- unsecured debt. So far so good, but more is needed in debt reduction at appropriate pricing.

        We could lower the ratings if AltaGas is not able to sell the planned assets
        or receives lower-than-expected proceeds, or acquires debt that results in
        forecast AFFO-to-debt below 10%. We also expect the company to maintain its business mix, which is highly weighted toward the more stable utility cash
        flows. A material increase in the proportion of more volatile cash flows, such
        as from riskier midstream or unregulated power, without a corresponding
        improvement in financial metrics, could also lead to a downgrade.

        1. Thank you Gridbird – I really appreciate all the people who post on this site! I currently own two of the Enbridge issues and Emera. I have been working orders for Canadian Utilities and Fortis for the last couple of weeks but the price keeps moving away. Trying to stay patient…

          1. Glad I can assist in any manner. Just remember like most, I am no brainiac. I simply parrot the best info I know I feel like I can trust. The pricing has kind of went into no mans land on resets.. Even the fixed Series DD which has jumped about 75 cents since I bought most of mine at last month and is now probably at $16.20 USD and not appealing to add (which I dont need to anyways as I have a full position).
            ERRAF has started to sag again on TSX. But I need closer to $1.50-2 sag from here to take that next bite of the apple. So I would have to sell something now. Got about 18 issues, and really would only be interested in peeling off maybe 2, or take some SR-A off table. But it would have to take a nice drop to entice me for Emera anyways. I have a decent position already. And it hasnt been my path to riches this year, so I think the best way for me to come out a head long term (since it is an indefinite hold) is wait for another meaningful pullback hopefully from the bond market.

    1. Bob, you kind of mailed it in on this effort, the other two were much better…….Just kidding, another EXCELLENT post, Bob! But, I dont get much diversity from you, because your thoughts make me think we are brothers from another mother though, lol… I cant really think of an investment comment from you, that I didnt agree with.

      1. Mr. Lucky, you are correct and it was quite funny you posted that being Amy and I just bought that one today. We had been cussin and discussin for a few days on it before we could get the deal done. She made a small purchase to where I could call TD to show its active and then get it unlocked for me. All the shares traded today were ours. She got a nickel better deal being a bit more patient, so I have to tip my hat to her…
        This qualifies more in the risk bucket as Alta still has to get more deleveraging done from engorging on debt acquiring US ute WGL. They are about 50% reg. Ute and rest midstream and energy with energy the smallest part by far and getting smaller. So some risk as they work to maintain their investment grade bond rating.
        The terms of this issue are way more appealing than the finances (unfortunately). A very nice 5.25% par floor with a nice 4.19% kicker. The issue resets first time in 2020. CAD price ended $21.75 today. So worst it will yield at reset is smidge over 6% even with a 0% or lower 5 yr CAD. A modest purchase for me….

        1. I have done some more rounds of selling as some have hit the mid $26’s. Then taking the big gains and putting into new issues, and or value based or pinned to par ones where they are close to 1 divy from par. I can tell you it is getting harder and harder to find things. Seems it was easy pickens for several years. Good thing Christmas came last year as that already produced 1 year of dividends in a couple of months.

          I am hoping for an event where investors run for the doors, but that might not happen for awhile. Investors have been getting out of common and moving towards fixed investments. In the mean time, the Canadian one’s have been catching my attention and have been investing in them.

  43. I have to confirm what my Dad said to me at least 45 years years ago, ” Maybe it makes sense to hang out with people who at least ACT smarter.”
    Appreciate all these very beneficial coop efforts here! It is a small modeling of future opp. for community decision/actions that we need so badly.
    Nice job All!!

    1. Joel, your father reminded me of another saying I loosely use in investing…If you sit in on a poker game and don’t see a sucker, get up. You’re the sucker.”
      This is why I probably don’t play poker.

    1. EBBGF is one to be careful with. It reset in June, 2018, off a very high BOC rate. Even though reset is more than 3 years away, there is a big rate drop built in at present BOC rates. So the 7.36% stripped yield is deceptive.

    2. Mikeo – Since TDA’s Think Or Swim was not recognizing EBBGF, I tried a test order on the website… When that didn’t enter, I picked up the phone to see what’s what. As it turns out, it took a call like mine for them to start the process, so EBBGF will not be activated at TDA until tomorrow at the earliest. That’ll give me the weekend to read up before attempting to corner the market with a 20k order as Grid called me out for doing on SLMNP… Hmmmmmm, now that I think of it, with EBBGF being a $25 par issue and SLMNP an 1k one, I better start thinking of a 1 mil share order! lol

      1. 2WR, I’ll watch for that 1M order to cross the wire tomorrow (Hehehe)
        Bob’s excellent work has brought me to the conclusion there are too many moving parts in most Canadian preferreds for me. So I’ll steal one of Grids phrases and say “I’ll just stay in my lane”, which is on the U.S. side of the border.

        1. Mikeo – though I certainly understand where you’re coming from, I’m wondering if you’re willing to go into a bit more detail as to the whys (I skipped the apostrophe out of fear) of your decision… Personally, I’ve done the same thing as you by eliminating all but the very few USD denominated issues and to my way of thinking, having done that, then the only wrinkle more frequently used in Canadians than US F/F is the use of a 5 year reset more than a shorter one and perhaps the use of UST instead of LIBOR… Those seem manageable variables to me to think about, but then again, I guess I’m on record as thinking these things through differently than some others. So far, over a short period of time, these have not worked out, but I agree that these are for long term views and opportunistic grooming..

          1. 2WR, to be honest you are 100% correct. But philosophically I am 100% with Mikeo also. When you first read it, its undigestable. But then you study it and it all soaks in. Im interested for Mikeo’s response. But Im willing to bet Mikeo made the “eyes glazed over” decision. Happens to me on about 95% of things. A lot of good investments…even the apostrophe ones like Howard mentioned. Usually I am intellectually lacking curiosity, but a few things do interest me greatly and that is where I stay at in my investing lane. For example my TGAPF purchase today may appear random but I have followed the company for years and know the company as about as good as a layman investor can. So I am comfortable owning the issue and can accept whatever price movement occurs north or south going forward. But my guess is we are still in “circle the wagons” mode on resets. Best chance to make money is for them to go down more then buy a second tranche. But already owning a few of those I admittedly cheated with TGAPF with the 6% minimum floor (off purchase price) in place, but possible upside potential with the high 4.17% kicker. Of course I am sacrificing my usual lean to quality (along with currency risk) for this feature.

            1. 2WR and Grid, I really like complicated and fast moving machinery, cars and motorcycles come to mind, but my willingness to study financial reports or IPOs (no apostrophe abuse here) is right down there near the bottom—shear lack of interest and laziness I guess because my IQ is not wanting. This tendency has cost me in the past, I will admit to jumping without doing my DDD. Hey, I’m trying to get better, slowly, and I’m not ruling out CAD preferreds forever, just not comfortable with it now.

              1. And a needed addition would be; without the generous assistance and unselfish information sharing by all of you here I would not have had the happy outcome enjoyed after starting this effort in early December. Much appreciation to all, especially Tim for making this possible.

              2. Mikeo, you may be called into StL to eventually fix my electro mechanical 1970s Lawman pinball machine. If you know motors this will be a piece of cake for you. When I bought it, I didnt take time to reflect there are no pinball doctors around. One of these days I wont be able to fix it, as my skill and luck level is fast running out.
                Anyhow, you are wise to stick with your comfort zone…Know your risk level and comfort zone and match the investments to it. And being able to accept the outcome either way. See that is why I wont buy those AHT preferreds. I would love to jump in and buy a modest serving. But I dont trust them, dont trust the external management self dealing, and the extreme leverage they blatantly use. If it cratered a couple more bucks after I bought, I could easily fall into the buy high sell low trap of panic investing thinking bankruptcy or going private and delisting preferreds and screwing me over…If SR-A would drop a buck, its oh well I guess more people didnt want them today than people that wanted them. Life goes on as company is fine.

                1. mikeo, 2wr and grid, Agree on all. Like Mikeo, I’m really not interested in a lot of nonsense that requires handholding, though do appreciate the unique qualities of the CNs. I stay in my lane by owing only one CN: EBGEF. Picked up 1K shares and happy to average down at already set downside mileposts. Counter-intuitively, I actually hope it drops enough to be able to average down a bit as this has the hallmarks of a very LT hold. Looking most of my other holdings, I could easily convince myself it makes sense to unload almost all it at current prices, notably the sub 4% YTCs and wait for an “event.” But not the EBGEF as though it may be an e-ticket ride, appears it will stay on the rails for many years.

                  1. Alpha, my criteria probably doesn’t vary from yours much (except my mad money). I spent this year strategically repositioning for better quality and YTW but done recently and now cash started growing organically from income and bonds rolling off. Remember that the 52 week highs we are seeing challenged were those set in the rising rate environment with multiple more forecast. Now that we have entered what appears to be a falling rate environment the challenge is not that surprising….. if all other things remain equal. However last year we saw what happens when the market decides all things do not remain equal. Ugly. “It is hard to make predictions, especially when it involves the future” comes to mind. I see no reason compelling enough to start selling off stuff today, it was hard to come by. Of course that might change tomorrow. What to do with the cash? I try to put some numbers on it, maybe not exact but something in the same ballpark. With a few exceptions anything I would buy is IG, pays 5.5% plus and with similar YTW. So pretty much down to a new issue I like. Don’t see one of those right now. I can buy something outside of that or I can put it in 2% bin. The spread is 3.5%-4.5%. What’s the odds of a 3.5%-4.5% selloff in the next year, or a 7%-9% selloff in the next two? There’s my answer. But for each his own of course.

                    1. P, You outline a compelling viewpoint. I have sold off a few minor positions such as UBP-G which was one of my few remaining NRs that rose to a pre-dividend “projected” YTC of -7%. I mean, that’s just crazy.

                      Staying up on the IG ladder with you P. I do believe a 4% selloff ($1 on a typical $25 issue) is 50/50 possibility in the next year. And if a greater selloff occurs, would be happy to pick up more NCZ-A at $22.79. Should have backed up the truck that day.

                      But I might be distracted anyway as son #1 just got engaged a few days ago to a fabulous woman. For anyone that knows it, they hiked for a few days to the top of Mt Shasta where “she said yes.” She’s AAA IG, high-yield, qualified, noncallable and non-convertible. lol

                  2. Alpha, a good woman is harder to find than a good deal on a preferred any day. Mine is the best deal I ever made hands down. I don’t know how I got so lucky. Congrats to you and your son. I know Mt Shasta and many others north to BC and some in Alaska. Climbed a couple but those days are behind me now. I still paddle my canoe around some of the high mountain lakes because I like to fly fish, they only cost me about $20 per pound. Way cheaper than the ones I catch from my boat at $40 per pound. Golfing would be much cheaper but I like fishing better.

                    1. P, They were going to climb Rainier but my son is in the process of readying a company for sale and couldn’t afford the extra days needed for that ascent. They’ve been up Whitney a few times and are climbing Aconcagua (22,841) in the Andes later this year.

                      You’re location sounds idyllic. Think I need to find you and head down to the canoe salesman. I’m sure investing decisions are much better after a morning on the lake.

                2. Hahaha, Lawman pinball machine? Regrettably, at 76 I no longer do my own wrenching. I find computers most enthralling now and like to build my own desktops and repair laptops (screwdrivers only) as a hobby. Here, again, speed is paramount in moving bits and bytes around.

                  1. Trust me, Mikeo, if you can build your laptop you could fix one of these Im sure. 2WR, is a little younger than he is letting on..I sent him a picture of my Lawman with the playing field deck up blocking the view of the back screen while showing all the “guts” underneath. He didnt even know what it was…These young kids nowadays…. 🙂

                    1. Grid – “Ah but I was so much older then, I’m younger than that now.”….. Yup, me and Bobby D (not in Delaware)

                      And thanks, Mikeo for adding color to your reasoning… I too, have limits where I draw the line on how much esoterica I’m willing to absorb in trying to understand the inner workings of preferreds, bonds, and other financial crap, but I do like to theorize on a lot of it anyway every now and then…. What I’ve found is that doing so normally helps me pay for someone to come in and put the parts back in I always have left over whenever I take apart anything mechanical.

  44. I have posted part 2 of my 3 part series on Canadian preferred. It’s in google docs:

    Part 3, which will be out in a couple days, will deal with portfolio construction. I will be working from the following spreadsheet. Note that the spreadsheet is not dynamic, meaning it does not update prices, ex dates, or anything else. It’s frozen in time. Also certain to contain errors:

    1. Excellent post Bob…Congrats you are two for two batting 1,000! Better watch out, Rida Moron will be trying to get you to “join the team”. He pays more per click that is why they all to jump on board to be on “the team”. Of wait, never mind…It wont work, since you publicly stated you may have made an error.
      That is a prime directive “No No” of the team. Never admit errors or blatant lies. Stick with it and double down. So, since you are a man of honor, looks like you are “stuck” posting here for gratis 🙂

    2. Hi Bob,

      Thanks for posting this. Great information.

      I was trying to find Part 1….I think you put Part 1 in a post here but can’t find it. Hopefully, you will put all parts in a google docs format when you are done with your masterpiece.

  45. FYI: Here’s a curious research target regarding Canadian Preferreds: IPFF, iShares International Preferred Stock ETF. Yes it is an ETF but 85% CN prefs in a tidy package, most all look IG. Did a basic look at any specific internal issues and no work on whether the geniuses of the index are savvy on the details regarding resets, managing risks, etc or just another ‘income etf for a fee’.
    Just a point of interest and research at a time when we seem to all be watching the action from a perch. I’m distracting myself with stuff like this. CN Prefs without some of the barriers we all have encountered, but of course you take their mix. Look historically low priced and yield +-4.8%, 55 point fee. Disclosure: I own no ETFs.

    1. Hi Bob,

      I am able to open it. It does not play very nice with my old iPad so I will study it further when I get to my desktop. Thanks for sharing!

    2. Bob, Excellent compilation. Please add columns indicating what the rate/price will be after next reset out to 2024. lol.

      Seriously good and useful summary. Thank you for sharing.

      1. Alpha, as long as that’s not a big deal, let’s also ask for currency exchange rate graphed out for next couple years. Today one of my cusips morphed into EBBGF. Amy hard at work. Thanks Amy!

      2. Jerry – no crystal ball, sorry. But as you can see I do keep track of lots of metrics going to reset rates. Spread, reset date, how much they are “in” or “out” of the money (i.e. whether rates would reset higher or lower based on current BOC).

        It’s then a matter of how you want to play rates. I can give you low risk strategies, risk neutral strategies, and rate bull and bear strategies.

        If you like big risk/reward plays you have plenty of them available.


        1. Bob, I only focus on a more concentrated segment, but basically as far as what I see, the current pricing bakes some of the future expectations in. Hence the higher current yield of Series 1 over the Series L. That is where one has to decide the importance of present yield over future expectations and subsequent repricing. The fixed floor minimums tend to track in tandem, and the no floor resets do also in their segment.
          Where one really earns their meddle in guessing to me is the battle between the lower kicker no floor resets and the relative higher kicker ones. For example if one is predisposed to thinking 5 year is gonna jump significantly down the road, you look at the lower kickers trading closer to 50% off par. That is where you get the double bang from the increased Tbill. Of course one has to guess the trend correctly to align with reset date. Get that wrong and the correct thesis still goes out the door.
          My personal feeling is if one is into these things, they need to spread the money across multiple reset years with similar ilk quality and terms as predicting directional rates daily let alone annually is very problematic. And always have an eye on the January 2016 reset charting lows as a baseline in thought process if assuming the worst is part of ones thought process.

          1. Agree for the most part. As I’ve dug into them I’ve come to the opinion that one has to decide if one is going to play the rates (based on a superior crystal ball) or do something more rate neutral.

            Episode 3 will go into some of that.

            1. “superior crystal ball” lol. I wanna meet the guy with that thing, but he’s been hidden deep in the forest all my life. I think he may be an effing werewolf.

              So, yeah, can’t wait for episode tres.

              Thanks so much for all this, Bob…

  46. I see a new Enbridge preferred ticker on Finra–EBBGF. But I can’t find anything about it online. Anyone familiar with this?

    1. Roger, its another “Amy special”…

      2WR, you being the brainiac and always wanting to know why 2+2=4 instead of just accepting it as so, I got a little treat for you. Hurts my brain so I pass it on to you…Remember when you were wanting to know of some type of conversion formula to decide on whether to convert to float or accept the 5 year reset? Well this guy dabbles in that process a bit. Maybe it will lead you somewhere. Here is a teaser and then the link…His example sited is in a blog about the Canadian Utilities Series Y reset notice from a few years back. You will need to pop the link to get other details.
      The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., BAM.PR.T and the FloatingReset BAM.PR.W that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

      We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

      1. Grid – Just catching up on this site now having successfully been capable to ride the range on my riding mower for 3 hours today for the first time in 2 months…. yay… When first reading this, my initial reaction was to wish I could remember the name of the security we laughed about a while back that mentioned the name of a crazy off the wall theorem that was used to determine a particular characteristic of the issue.

        With that in mind, I think I’ll begin my assigned task by first congratulating Amy, checking out the ins and outs of EBBGF, then mowing another 5 acres…..

        1. 2WR, thanks for the congrats. This had to be a record. I only asked for it to be assigned this morning!

          I was going to place a trade and go through TSX via Schwab but they were going to charge me $29. Grid can attest to just how incredibly tight with a buck I am….. and I also wanted you guys to be able to trade it, if interested, …… I asked the Schwab rep to get FINRA to assign a ticker so I (we) could trade it online for no commission.

        2. 2wr, Having worked on a farm as a teenager I came to appreciate the beauty of that ol bush hog. I could clear more acreage in an hour then four riding mowers, albeit with a bit less polish. Loved that job, except stacking the hay in the barn. Oh gosh that was miserable on those 90% humidity days. Jealous of your acreage. Having east-coast blood in my veins, sure miss those wide open spaces. Heck in CA, 1/2 the people’s driveways barely fit the cars. haha. Been reading the relocation comments here carefully…

      1. Hi Joel,

        When I tried to access the sheet it told me that I needed permission. Maybe the problem is on my end and others have been able to open it successfully.

        1. My first attempt with Google Sheets. over time, I have diligently added to my TDAM Watch List and exported it to a Google Sheets. I have liked TD’s system because I can create a Custom View and this is reflected on this exported version, including yield, ex-div, and a fuller description of the security all based on the symbol. Also, a click over to a full charting.
          I have gotten requests to access and have ‘given access’ when received by an email from someone else. I hope it is working. I am not a huge tech, but usually can learn a system by trial. I do not know how to create an open link. Now I see it is a matter of administrating also. JA

      2. I found Link Sharing and turned it ON. It should be available to anyone…I hope!! Good Research! JA

      3. Joel – nice spreadsheet. Does Google load the prices automatically (like they do for US issues) or are you doing it manually?

        1. No. I am not good enuf yet to do that. It is an export of my TDAM Watch List which doed update. I do not see an Import on their Watch Lists, but it is v easy to just enter ‘five symbol F’ and then Customize a view (gear icon). When hovering the full description pops up and allows for a click to interactive charting.
          I have had an issue following details on the Reset Column AN on your magnificent sheets showing Convert to a Specific Series. ie: AltaGas, Converts to H,B,J,L etc.

          1. I have found evidence that says, “…holder has the RIGHT to convert to Series I, etc…” not automatic conversion.

    2. It’s ENB.PR.V. Chart and prospectus available on line. It’s the last of the U.S. $ issues to get a U.S. ticker, including all four Enbridge issues.

      High strip yield but way out of the money on reset rate. Which, of course, explains the high yield. Coupon is 5.95 now but would rest to 4.69 based on current rates.

      1. Hi Bob,

        I am confused by your post above that it said it would reset to 4.69 based on current rates.

        If the current five-year is 2.34% and the kicker is 3.14%, why won’t the coupon (based on par) be 5.48%?

        When using the word “coupon,” share price, other than considering the par value of $25, would not enter into the equation. I would use that coupon % and multiply it by $25 to come up with my dividend amount which I would then divide by the current share price to get CY.

        What am I missing? How are you coming up with the 4.69%?

        1. I’m confused as well. Assuming I’m reading it correctly, the prospectus says US Gov’t Bond Yield, which later is defined as US Treasury Bond with a maturity of five years…Bloomberg Screen USGG5YR. If the US 5yr is currently 1.83, then coupon on $25 would be 4.97% (1.83 + 3.14 = 4.97, or $1.2425). Given the current price of $20.65…that would be a yield of 6.0%. Reset ~4 years out.

          1. Mrinprophet, you are correct. But Bob was referencing off par yield. That is the basis for which the yield and payment is derived and from where the company is concerned about. Various people have various purchase price points that determine their effective yield.
            Bob is guilty of becoming a serious student. He is correct as they are reset off par. Now us layman use our purchase price with pencil in hand to see what the yield would be in relation to a new reset. So long story short with politically correct answer….You both are correct! 🙂

              1. Mrinprophet, sure be glad to… We will start from beginning. This Series 1 issue was sent to market in 2013 at issue price of $25. $25 is the “par” price. In other words the beginning point and end point if ever redeemed. The issue “resets” every 5 years, with next reset June 2023. It will reset at then current 5 yr US Tbill (bond) plus 3.14% (which I always refer to slang wise as the “kicker”) .
                So reset time Enbridge must determine new payment…They dont determine yield they determine payment off par price of $25…Yield is what you get from your purchase price…So using todays bond price here is an example..
                1.82% +3.14%= 4.96%…To determine dividend then its… 0.0496 x $25 = $1.24 annual dividend at reset… Now if you bought at $20. Your yield would not be 4.96%, but 6.2% ($1.24/$20)

                1. Thanks Grid. That confirms my thoughts. What I struggled with was Bob’s statement “Coupon is 5.95 now but would rest to 4.69 based on current rates.” I suspect that it was transposition and 4.96 became 4.69.

        2. Amy, the 5 yr is currently is ~1.83%. So it would reset at 1.83 + 3.14 =4.97% at reset time if present 5 yr TBill held until then. Of course that is par yield. So at current trends at current price it would reset to 6.016%….Assuming my math is current which is a big assumption to make. 🙂
          I am decent with math, but when fingers, keyboard, distractions, and memory get involved, it degrades my math ability.

        3. Dang….I am not sure where I came up with a figure of 2.34 rather than 1.83 for the 5-year. My Google figures must have mashed a wrong button.

          Now Bob’s math makes sense!

  47. On to preferred structures …………..

    90+% of Canadian preferred issues fall withing one of the following structures. As you read through the descriptions give thought to how each interest rate structure behaves when rates change:

    Traditional fixed rate.

    Traditional fixed rate preferred are similar to U.S. fixed rate issues. CU.PR.H is a typical. The issue is non-redeemable for approximately 5 years from date of issue. After that, on 30-60 day’s notice, the company can redeem. When the issue is redeemed, there is a redemption premium that starts at $1.00 per share on the first redemption date and drops 25 cents per year until it is zero after fours years from the first redemption date. Not all fixed rate issues have this premium feature but most do.

    Dividends are cumulative, unless it’s a bank (in which case it’s non-cumulative), and “qualified”. Whether or not your brokerage gets the tax forms right, I can’t say, but they are qualified and under the U.S.-Canada tax treaty treated the same as a U.S. qualified issue. Same goes for all the other issues discussed below. There are very few non-qualified issues among Canadian preferred.

    Similar to U.S. fixed rate issues, prices will move with interest rates but won’t (usually) make you sea-sick. My suggestion is play them exactly as you would the U.S. fixed rate issues.

    Floating rate.

    Floating rates may be either floaters from day one or, more typically, 5-year resets that converted to floating rate. Nearly all the floaters were converted from 5-year resets in the 2015-16 time period, when the BOC 5-year was under 1% (bottomed out at under half a percent) and the resets would have stayed at those levels for the next 5-year period. Better to float than get locked in at the bottom.

    FTS.PR.I is a good example. It began as a 5-year reset (FTS.PR.H) in January, 2010 and converted to a 90-day floater in June, 2015. The conversion was at the option of the holder (not the company) and issuance required at least 1 million shares vote for conversion. If you didn’t opt for conversion you hung on to your FTS.PR.H. Conversion is not automatic; you have to opt in.

    FTS.PR.I now floats at the 3-month Canadian treasury bill rate plus (in this case) 145 basis points or “bps”.

    FTR.PR.I is redeemable any time for 25.50 per share (a 50 cent premium) or on each 5-year anniversary of issuance (i.e. June, 2020; June, 2025; etc.) without premium.

    Finally, every five years after issue, FTS.PR.I can be converted BACK to its predecessor 5-year reset, FTS.PR.H, provided at least 1,000,000 share opt for re-conversion. In practice, I have never seen this re-conversion right exercised. The circumstance in which it might would be a very high 5-year BOC rate on one of the re-conversion dates. Ditch the floater and lock in the higher rate for 5 years.

    Floaters can exhibit a lot of price movement, and yield movement. When rates drop, prices drop and the dividends drops. A double whammy. Getting a good entry point is critical. Big cap gains to be made by good or fortuitous timing.

    5-year resets without minimums.

    There is the “fat” part of the market. Most preferred issued from 2000 to about 2015 were 5-year resets with no minimum. They continue to be issued.

    MFC.PR.Q is a typical example. Issued in February, 2018, it comes with a fixed rate of 4.7% through June, 2023, after which it resets every 5 years at the BOC 5-year plus 255 bps (i.e. June, 2028; June 2033; etc.). If the issue resets when rates are high, you are golden for the next 5 years. The converse is true, too. 5 years is a long time to be stuck in the basement.

    MFC.PR.Q is non-redeemable until the first reset date and is thereafter redeemable only every 5 years, on the reset date. In between resets, it is non-redeemable.

    On each reset date, there is also the option to convert from a 5-year reset to 3-month floater (same spread), so long as at least 1,000,000 shares elect to so convert.

    Resets can be exceedingly volatile in price as the reset date approaches, more so if rates are in flux. Now, with the market rather uncertain on the direction of rates, the issues that are coming up for reset are up and down like a yo-yo. If you are a day trader, this is a good place to be.

    Resets also can experience large, permanent capital losses. Appreciate, there are resets (with no minimums) from investment grade companies selling presently for half their issue price. They were issued when rates were high and subsequently reset to much lower rates. TPR.PR.B is a good example. Issues at $25 per share, it presently trades at $12 and has traded as low as $9 and change. Unless rates head much higher, and the reset coincides with the higher rate, these are down forever.

    5-year resets with minimums.

    Resets with minimums are the most recent specie of Canadian preferred. They came about because of the extreme volatility – and permanent capital losses – associated with many of the resets lacking minimums.

    There are perhaps 3 dozen or so resets with minimums, all issued within the last 5 years. Most were issues by energy-related companies (plus several from Brookfield). They are the same as the 5-year resets except there is a minimum rate below which they cannot fall when they reset, no matter how low rates at the time.

    TRP.PR.J, issued in April, 2016, is typical The initial coupon was 5.5%, with first reset in May, 2021. The reset rate is the 5-year plus 469 bps with a minimum rate of 5.5% This minimum provides a lot of backbone to the issue. Right now the issue is trading above par, as it has for most of its life. It’s a good candidate to be called on the reset date.

    Other terms are similar to the resets with no minimum, including the option to convert to a 3-month floater every 5 years. The minimum rate does not carry over to the floater, however. It is unlikely, in my judgment, that you will see many (any?) of the issues with minimums ever convert.

    If you want to play the Canadian energy market via preferreds, the resets with minimums are a relatively safe option.

    Final thoughts.

    Except perhaps for the resets with minimums, Canadian preferred are not for the faint of heart. Most of the concern (and price action), is due to interest rate sensitivity, not credit concerns. This is somewhat unlike the U.S. preferred market, where you need to be ever vigilant on credit quality. Not so much for the JP Morgans of the world but for the many issuers who are below investment grade or unrated.

    Next time, we talk about specific issuers and issues, with practical thoughts on how to play this market.

  48. I received about 50 requests for my list of Canadian preferred with U.S. tickers. Since then, I have identified about a dozen more. At some point I will update the list.

    There was a good deal of back and forth on the subject of Canadian prefs and I undertook with several of you to add some commentary to the numbers. This will be the first of (probably) 3 missives on the topic. Today, I will offer some perspective on the Canadian economy and the companies that sell preferreds. Next I will offer a short tutorial about typical terms of Canadian preferreds and how they move in response changing interest rates. Lastly, I will talk in more depth about specific companies and issues, complete with thoughts on portfolio construction.

    Canada has a population of about the same as the state of California and a GDP of about two-thirds that of the Golden State. Despite the relatively small size, Canada has a disproportionate number of heavy-hitters in the corporate world. It’s a concentrated corporate structure, with smaller numbers of larger firms compared to many other countries. Many of the larger Canadian corporations are world-scale, and most are well-managed and well capitalized. Many of those firms issue preferred shares!

    The banking industry illustrates the point. The big 5 of Canadian banks control (I’m guessing) 80-90% of retail banking in the country. They are well known to most here: Scotia, Royal, CIBC, TD, and BOM. If you stand at the corner of King and Bay Streets in Toronto, you are surrounded by 50-60-story building bearing the names of these institutions.

    Similarly, you have concentrations in non-banking finance (Sunlife, Manulife, Power Corporation), midstream energy (TC Energy, Enbridge, Pembina, Kinder Morgan Canada), utilities (Canadian Utilities, Emera, Fortis, BCE), as well as a few one-offs. Brookfield Asset and its related entities is one of the largest companies of its kind in the world. George Weston Ltd is both the largest grocery chain and the largest drugstore franchise in the country. By a wide margin.

    All of the companies named above issue preferred shares, some of them many, many preferred shares. BCE has 22 issues outstanding and Enbridge 21. Most of the prefs are investment grade. Those that aren’t are close to it. Compare that to the U.S., where most issuers are not investment grade. Many of them are far from it.

    To get to a close on today, two questions that came up in discussion were 1) why should I be interested in Canadian preferreds, and 2) why shouldn’t I be interested?

    To answer the “shouldn’t” first, if you can’t stand currency risk (or don’t know how to hedge it), stay out. Out of the hundreds of issues available only about 5-6 are U.S. dollar denominated. Also, if you don’t like volatility, or can’t or don’t want to manage it, stay away.

    For the “should”, I offer a couple possibles. First, I think there is alpha to be had here. Rates in Canada tend to run a bit hotter than U.S. Rates, all else equal. Second, the volatility, especially among the 5-year resets, offers good opportunities to time entry and to play the yield curve. You have to be nimble, and you can be burned if you get it wrong, but the opportunities abound. Have a gander:

    I would also add that investments in Canadian preferred are a good diversifying opportunity. Most of us are probably over-concentrated in U.S. Issues. You also have some investment opportunities that you don’t have in the U.S. There is no real U.S. Equivalent of Brookfield, Weston and (arguably) several others. An investment in Canadian banks is not the same investment as a U.S. bank

    That’s it for today; chapter 2 sometime in the next few days.

    1. Bob, thank you for taking the time and effort to post such helpful information! Looking forward to the coming installments.

    2. Great post Bob….You have really taken the ball and ran with it! The reset preferred market constitutes about 80% of the Canadian preferred market which is about an $80 billion market. The traditional fixed would comprise most of the rest. To put it in perspective the Canadian bond market is about 1.6 trillion or so.
      Definitely a lot more volatility as you mentioned. My personal purchases for my objectives were not for Alpha or currency. I am more of a utility preferred investor and it is just another way to diversify in this concentrated segment.
      I do have the non currency risk issues from Enbridge, but have currency risk in my Emera and Canadian Utilities issues. Personally I would be more pleased if they were USD but it is what it is. I own a lot of the fixed perpetual CU that is not a reset. The fixed OTC Weston issue intrigues me, but I would like it to sag more. But it trades close enough in lock step to higher rated CU Series DD that there is no real hurry to diversify.
      This pretty much is where I hold the line for myself in investing in our great neighbor to the north.

      1. Grid – you may want to think about the banks. Canadian banks are more like utilities than U.S. banks. They operate under a government granted monopoly and the banking regs don’t allow for U.S. type craziness. TD and Royal are both BBB and have issues with U.S. tickers. Not RY-T.

        So, too, Manulife, Sunlife and Power Financial. BBB+ and A- PREFERRED.

        1. I agree with you, Bob, and would have no problem owning. I just personally dont need too much overexposure in CAD issues. Plus I am biased towards utilities for my comfort. But I will not discount ever owning. Some times I own a decent amount of bank preferreds and sometimes I dont. I have held FIISO for years and recently bought a decent slug of NYCB-U in $47.80 range. More as an upcoming interest capture than a long term hold. It is creeping up as it heads towards exD. If I am in a babysitting mood I may keep it awhile, but certainly don’t have the pom pons out owning it though.

        1. Hi Grid,

          This is a great chart! Thanks for posting.

          I noticed that FTRSF (Fortis series G) is missing. Any idea why?

          Maybe I’m blind and just missed it but I don’t see it.

          1. Hi Amy. Yep I didnt see it either. Probably human error. Something I excel at also, ha. I would guess they are missing a few others too, but it still is a decent primer list.

          2. Amy – Fortis G is one of the few resets that has no conversion option. Perhaps that lead to it’s exclusion but more likely just oversight.

            1. Hi Bob, I don’t think the ommission is due to the conversion issue. There are several other resets that are not on the list that do require currency conversion.

              That said, the list is very helpful for the issues that are listed.

              1. Amy, what I like about it is the updated credit ratings it has for the issues…You know, those things Moron doesnt like to mention in reco articles, lol. Whenever I have perused the many various credit ratings of companies, I have never seen the words “high quality” near B1 ratings, ha.

          1. Alpha, at this point in my life, I prefer the lazy route, also. This allows me more time to focus on what I enjoy most….Being lazy! As far as the steak goes. I just chewed down a $12 sirloin steak dinner at local diner, so you wont need to spend much to satisfy my palate. 🙂

            1. $12?!?! I just had a $1.88 Lean Cuisine meatloaf and mashed potatoes….I am a much cheaper date than you are. I won’t buy them full price…..this girl waits for a sale.

      1. @MAICAHC

        I trust this isn’t the mortgage money you’re talking about. I don’t pay any regard to Fairfax but the others I know. PPL is BB+ and TA is B+. Volatile issues in volatile industries. Timing matters a great deal. If you’re buying 2-3 year resets you’re effectively making a bet on where the 5-year will be in 2-3 years. I think this is the highest risk space you could be in.

        Safer would be a laddered approach (ladder reset dates just like you would ladder maturities in a bond portfolio). Otherwise, resets that are resetting very soon (or have reset very recently), where you are pretty much locking down yields for the next 5 years.

        Or look at the resets with minimums. Fairly good yield with downside protection. Some of these will actually go UP in price if rates drop lower (and the mins kick in).

        I have a piece pending review that goes into more detail.

        1. Just Lobster dinner money.

          Understand your concern GoC 5-year yield saw a drop of ~100 bps from nearly 2.5% since the last rate hike by the BoC in Oct 2018. This reminded me of 2015 when the BoC cut rates twice and caused prefs to fall by nearly 20% in the year.

          For resets I model a 0% GCAN5YR reset. To see if I can withstand not only the capital loss but income stream while waiting for rates to revert. Understandable dumpster diving can make you into trash.

          1. If you look at the link I posted to my google sheet of Cdn prefs you’ll find all the reset dates.

            For the broader audience I point out the extreme loss (and profit) potential of the no-min resets, especially those 2-3 years out from reset dates. If they reset at a low rate you are doubly screwed in that the dividend decreases in absolute amount and the price drops like a stone. The BOC 5-year is now 1.5%+ and went below 0.5% in 2016, so there is a lot of room for downside movement.

            Personally, I’m going for resets with minimums and a laddered approach to resets without minimums. If rates do drop through the floor I may get in to non-min resets in a big way, but not at present rates.

  49. Has anyone checked out the the Manulife preferred?


    1. Furcal – I make several suggestions to those contemplating Canadian prefs:

      1) look at the chart. In your case

      See if that looks appealing to you.

      2) Look at the prospectus supplement for the issue. You can get it at the company’s website, as you can for nearly all Canadian pref issuers. Make sure you understand what your are buying, most especially the interest rate terms, adjustments, calls, etc. They are unlike American issues in several respects. This particular issue was converted from a 5-year reset to a 90-day floater in 2016, and can be converted back in 2021.

      3) Check your broker to see if you can buy it. Most will not trade it. TDA, I believe, will.

      4) Check S&P global ratings.

      That said, I’ll give you my 2 cents. It’s Grade A company. About as strong as any insurer on the continent. This is one of 15 issues MFC has outstanding, and the only one with a US ticker to my knowledge. The 5.5% yield (stripped) reflects that. The price is volatile and will be vary with interest rates. It’s a C$ issue, so you have to be content with that. Personally, I would not buy now based solely on my interest rate outlook. The 90-day is 1.66 now. I’d be looking for sub 1% to get in, maybe a part position at 1.25%.

      PS – don’t bother looking at US OTC quotes. They are non-existent or old. Get a price off the TSX and then convert to US$. Base your bid off the US$ converted price.

      1. I tried to buy a small position online yesterday on TDA and it wouldn’t let me, got a “symbol not recognized” or something of that order.

        1. Grichter, with TD, this has happened before. Either you will have to wait for a transaction to occur to wake it up, or call them to activate their ability to trade it. Unfortunately you probably will get someone on phone who is clueless to assist though. This has happened to me before. Once a trade occurred it was opened up for action on TD.

        2. I just found the same thing. TDA is hit or miss on the US tickers for Cdn pref. This one did not go.

          That said, IBK will take an order for MFC.PR.P, which is the same issue trading on the TSX.

          And, surprise, Schwab would take an order for MNLFF!

          This is why I have accounts with 4 brokerages presently.

      2. Might I ask for assistance with the supplement prospectus? On the corporate website I find the underlying prospectus but not any supplements. It is probably obvious but I would appreciate any assistance.

        1. TN – this is the quirk: Canadian companies file a so-called “base prospectus” or a shelf registration as we call it here, covering all future security issues. You don’t need that.

          When a company issues a new security they file a “prospectus supplement” to the base prospectus. This is what you need.

          In the case of the series 4, it was converted from the series 3. The terms of the series 4 are set forth in the series 3 supplement. The series 4 did not issue its own prospectus.

          Whether you click on the series 3 or series 4, it brings up the same series 3 prospectus. Scroll down until you come to the conversion section of the prospectus supplement.

          1. Bob, Many thanks! I appreciate your sharing and patience as this is all new to me. So, this issue floats quarterly tied to the CAN T. In 2021 it may be converted back to 5 year reset if substantial majority of holders elect?
            I think someone should prepare cliff notes for these prospectus! I would purchase. But, in the meantime I put in the effort and am grateful for everyone on this site’s assistance.

  50. Lot’s of luck with that. I’ve had the FINRA arguments with Vanguard and even when I was plainly right (Yeah, I read the regs) I lost the argument. You can’t talk sense to compliance.

    1. I had a standoff with FIDO that travelled all the way through their so-called senior desk management a few months back on on issue that was as plain as 1+1=2, but they kept coming up with three. One of those situations where during the conversation you pull the phone away from your head and look at it. Wrote FINRA and the SEC, attached documentation, problem solved.

      “On further review…”

  51. Alpha – I understand your TDA broker is correct. THe likley best place to attack withholding issuers is with the investor relations dept of the issuer. They have more inventive than anyone else to get the tax withholding correct.

  52. Somewhat related to Canadian issues, I recently opened an account with IBK, my fourth U.S. brokerage. It’s now Vanguard, Schwab, TDA, and IBK. The plan is to eventually slim down to two, but I’m still working out which 2 that should be.

    I’ve found that no one brokerage, or maybe even 4, can provide my 3 must-haves: Low costs, access to gray market issues, and fast access to new issues.

    Low costs is for obvious reasons. Although I’m basically a buy-and-hold investor, I do a lot of trades in the course of a year and costs make a dent.

    I want access to “gray” market issues, meaning issues that just might not have ever registered with the SEC. I won’t name names but the veteran preferred investors know exactly the issues I reference. This includes many U.S. Issues but also nearly all of the Canadian issues with “F” tickers.

    I want prompt access to new issues. As in same day, as soon as FINRA has provided a ticker. I have bought 4 new issues this year, all on day of issue, but the 3-4-hour delays in being able to buy cost me several thousand. I mean, that’s almost a month’s wine budget. Can’t have that.

    None of Vanguard, Schwab of TDA does all 3 for me, hence the IBK account

    My hope is that IBK will plug the whole. After I’ve done the full evaluation I intend to prune. Observations thus far are that IBK provides poor access to gray market issues, but rather good access to direct TSX buys. For example, IKK won’t trade the ticker ALTGF, but will trade ALA.PR.U, which is the same security but trading on the TSX.

    Have yet to see how they do on new issues. Commissions are low but until I actually do some trades and see some statements I won’t really know. In the end I find one has to actually test drive a brokerage to see how it performs. You can’t get all the info on the sponsor’s website, or even with a phone call.

    So back to Canadian issues: I am now up to about 50 Canadian preferred with U.S. Tickers, some of which are of interest. There are many (many) more without U.S. Tickers, that should be accessible through IBK. This includes many of the biggest players in the Canadian economy, most of which are investment grade. I’m talking the likes of BNS, Power Financial, Sunlife, Manulife and George Weston. Will be looking through them in coming weeks (probably drag on beyond that) before heading north (yes, Canada!) for our annual sojourn in the Muskokas. Anyone near Port Carling?

    1. Bob, George Weston had a perpetual that OTC recently assigned a ticker too but it isnt awake yet. I almost had Amy do me another favor, but decided not too. Mostly because being a fixed brethern it basically exactly tracked the movement of CU Series DD I own, so really it wasnt important for me to diversify as I could just add more DD.
      I am not an expert on IPOs, but having a brokerage that partners underwriting is where you get the value. An online friend has Morgan Stanley as his brokerage and he can buy any new issue at $25 IPO on any of their offerings which has been very valuable for him on some new preferreds this year.
      Oh and your plan of eventually getting down to two brokerages? Ha! Now that you have gone down the dark road of unassigned SEC tickers you are doomed…Two months ago my plan was going all the way down to one brokerage…After opening up my taxable TD to consolidate (already had a TD HSA brokerage acct) everything, the only thing I accomplished was adding an additional sub account and I am still stranded with 3 brokerage accounts and no way to consolidate as they wont take the illiquids, grey markets, or “F” issues. Despite the fact I had the same dang tickers already in TD.
      Refusing to accept transfer preferreds from issues they allowed me to buy themselves seems a bit counter intuitive.

      1. I have followed your brokerage travels with amusement 🙂 I may regret what I’m doing but we shall see.

        I am waiting to see how IBK does on new issues. TDA has by far the least restrictive rules on what you can trade but they are not exactly low cost (even with negotiated discount). Vanguard is cheap but very restrictive on what can trade and always slow to get new issues up. I can be on the phone with Vanguard at 830 AM and might be able to enter an order by Noon at best. By which time the price has gone up 30-40 cents.

        The Weston issue shows one trade in June and TDA will take an order. At 5.4% for BB+ it’s thin. But a good diversifier as you won’t find anything like it among U.S. preferred. Groceries and drugs.

        The real fun, I think I will find, is going to be in the resets. What a roller coaster! If you can time well big bucks to be made. If you get it wrong you can take a real beating. For example:

        1. Bob, TD wont take the trade. It recognizes the ticker and allows you to enter shares and price. But when you hit trade icon, it doesnt transact and says “Security not found”. This happened with Series DD from CU also, until Amy got it in “live action mode”. If it ever gets closer to 6%, I may try to twist Amy’s arm one more time to help.
          When you finally try to consolidate if you raise holy hell and get the right advocate you may get them moved. Camroc was able to finally push his through. I appealed and they took half of what they initially rejected. I didnt push again. I imagine over next 5 years I will have sold most at some time and then just slowly liquidate.

          1. No arm twisting required. Just let me know when you want me to start badgering the Schwab reps. I owe you.

            1. You’re the best, Amy. I will try not to abuse the privilege! Like Bob mentioned the allure is the grocery/drug sector for preferred yield (and higher quality) which is essentially non existent in US. If it heads north of 5.5% I will message you to beg one last trip to the battlefield. 🙂

    2. Bob, Please do let us know the results of your experiment. Someone suggested a Royal Bank of Canada account. I have been too busy (or lazy) to explore.

      1. TN – if you actually open a Canadian brokerage account (as opposed to buying TSX issues through a U.S. broker) you need to deal with FATCA, file a FBAR, and (possibly) a Canadian tax return.

        I already file a FBAR but I keep earnings on my Canadian accounts in non earning assets so as not to trigger a tax return. It’s an opportunity cost but I don’t want to end up filing foreign tax returns.

    3. I have the same situation Bob – just substitute Fido for Schwab, otherwise identical. In my experience, IB is good for buying native on Canadian exchanges (with an associated FX transaction), but quotes often show up later than Fido or TDA.

      BTW, thanks again for the spreadsheet.

  53. Comparing EBGEF vs EBBNF @ today’s prices of 18.66 and 18.16 – EBGEF WINS!

    Sitting around here nursing my broken leg, I’m doing nothing more exciting than playing around with some numbers. Doing so, I just came to the conclusion that for EBBNF to be a better buy at its last trade price of 18.16 vs buying EBGEF @ its last of 18.66, the 5 year Treasury would have to go UP 92 basis points from present day 1.74% to 2.66% in the next 3 years when EBBNF resets for EBBNF to be a better buy. If that happened, then on 3/1/24 when EBGEF would reset, an investor in EBBNF would have earned the equivalent income an investor in EBGEF would up to that date of 3/1/24. Wanna check my numbers? Let’s assume you buy approx 10k of each, or 550 shares of EBBNF and 535 shares of EBGEF and you compare the income you receive up to and including 3/1/24. 535 shares of EBGEF will generate 19 quarterly payments of 179.736 for a total of 3414.99. EBBNF will earn 13 payments of 170.50 or 2216.50 thru 9/1/22 plus 6 payments totaling 1198.31 to and including 3/1/24 for a total of 3414.81 thru the same date. Given all resets are seemingly being decimated today because of expectation of lower rates, this scenario of Treas being higher by 92 basis seems to be considered unlikely, however, if it did happen, I suppose the price appreciation for EBBNF around its 9/1/22 reset date might exceed EBGEF’s but that’s all speculative. On the other hand, if you assume the market’s right that interest rates are going to zero and staying there forever and you then assume EBBNF were to reset with the 5 year Treasury at .50% on 9/1/22, EBGEF would generate 13.4% more income than EBBNF by 3/1/24. As this year has proven, accurately predicting the direction of interest rates for any length of time beyond a number of months is as difficult to do as it is to time the stock market and yet, all these resets are projecting well into the future that what’s happening now with interest rates will continue happening and will last forever…. To come to that conclusion, one would have to begin by accepting those famous last words, “It’s different this time,” and not recognize how historically low interest rates are right now… With that in mind, I own both EBGEF and EBBNF, but as long as they stay this close together in price I’ll add to EBGEF before I’d buy more EBBNF….. Would welcome to hear different opinions, but now that I’ve said my piece, I’m going to go back to sitting around doing nothing while enjoying wearing my brand new Betsy Ross Nikes… Happy 4th.

    1. Sorry – I forgot to add that in the assumption, EBBNF will reset to 5.81% on 9/1/22 if the 5 Year Treas were at 2.66% on that date.

      1. 2WR, Sorry you had to break a leg to churn out the great summary. Heal up soon! Another perk with EBGEF is its $US-denominted jacket so no currency risk. Viewing EBGEF as a potential 9.5 year hold – or longer. Current declining rates and negative sentiment in my view are collectively creating an exceptional average-down opportunity; deep under par, 6%+, IG, QDI, with 5yr index declining toward zero. Assuming the 5yr does not go negative, EBGEF has a defacto “floor” rate of 4% for buyers at $17.63 or lower even if the index is at zero. Liked it in the 19s and would be thrilled to buy more in the 15s but will absolutely pick more up on the way. No grocery money here as these are LT holds. Thank yous and kudos to Grid and Bob-In-DE for shining the light on these. Was happy to read about your Betsys.

    2. 2WR, I cant dispute math from a man with plenty of time on his hands. Especially to my Vegas math from a pool side, so I certainly wont dispute it.
      It just depends on what factors and math one wants to use. All in all I think the market largely discounts it all based on what projections they are using and of course current sentiment too.
      But all things stripped away (which is also in itself an unreasonable theoretical analysis like any thing else mentioned) the 35 basis point differential cannot be totally discounted. In a totally theoretical world of 0% world. That 35 extra basis points is worth $2.50 in par value that EBBNF holds in favor. Simply put EBGEF at $22.50 would equal EBBNF at $25. Right now there is about 50 cent differential. And of course we know why that theoretical $2.50 spread is only 50 cents now.
      All resets in general move in tandem to a certain degree, so probably on another meaningful downward pricing event I will probably not add to either and go the utility reset route. I think I have about as much in Enbridge as I want.
      Its a fine company but it faces significantly more economic, sentiment, and governmental head winds than a regulated ute has. So I probably have reached my investing limits in EBGEF and EBBNF.

      1. Grid – Sure, I agree there are a lot of moving parts in any of these exercises with nobody able to accurately know or predict how these parts will move at any particular time, but my head is just trying to pin down what I’ll get in dividends in the next 4 years, no longer, if I add to either one of these today at their present levels. And though I’ve not tested your math that says in a .50 Treas environment EBBNF’s extra 35 basis (which is actually 33) is worth an extra 2.50 in market value, I’m guessing the likelihood of a .50 basis point environment staying in place for a year and a half between 9/1/22 and 3/1/24 is pretty slim… Yeah, I get it, what I’m stating is purely an arbitrary opinion but that’s on top of the present market’s purely arbitrary opinion that today’s interest rate trends will continue nonstop until 9/22 and beyond. AND, if you see EBBNF adjust to a .50 Treas environment on 9/1/22 while EBGEF remains unchanged until 3/1/24, how bad will the market price differential be between those two on 9/1/22 in EBGEF’s favor when EBBNF’s coupon will be 3.85 and EBGEF’s will still be 5.3753? All mental gymnastics.

        1. BTW, Grid – I see where Wynn stock was up almost 10% this past week… Coincidence? I think not…

        2. 2WR, I used the 2.82% kicker compared to 3.15% for EBBNF. The 33 basis point differential is this…If EBBNF and EBGEF had same reset dates. EBGEF would be worth over $2.50 less a share than EBBNF is 3.15% was markets base current calling kicker rate that commanded a par pricing. It would take EBGEF to drop to under $22.50 ( I actually round up for EBGEF considering $23.50 is only a 3.13% yield, not 3.15% so its a bit worse). This has value and a lot of it. It just depends on when its unlocked…Which could be never as it depends on the reset yeild and sentiment.
          Yep, heading home today. 4 days is plenty here. My NFL investments were made this week with a concentration of Cowboys 8.5 ovr, and Titans 7.5 ovr, and Titans 8 ovr (better payout odds at 8).

          1. Grid – I feel like by responding I’m trying to right fight and that was not the point of the exercise, however, that won’t prevent me from doing so anyway… lol. When you say, “If EBBNF and EBGEF had the same reset dates…,” it reminds me of the old saying, “If pigs had wings…..” They don’t and that fact has to be a part of the equation too. How much that should factor into the equation is another question. Certainly today, imho, because of how close the two are in price, the market is already giving value, perhaps too much one direction for interest rates only value, to EBBNF’s added kicker amount. To me, it’s valuing it too high because you have to pay approx 30 basis less in current yield for EBBNF vs EBGEF. Also, as you and I both agree, the value of the 33 basis point difference in reset premiums between the two increases the closer you get to zero interest rates and, conversely, decreases as rates go up. How did you arrive at your number of 2.50 less value for EBGEF if both reset when Treasury is at .50? Are you equating current yields at the “if” date? Currently the market for these two believes interest rates will never go up again, today’s action in rates to the contrary, and if that’s true, if you’re a buy and hold for the income investor, it’ll take more than 5 years to do better with EBBNF. I’ll favor the bird in hand… And as far as the Titans bet, I have no clue, but given the sad state of NY sports, with Knicks situation even worse than the Giants, all I can say now is Go, Titans! Go Grizzlies! And inviting personal attack, Go, Predators! This carpetbagger’s going local!

            1. 2WR, know I dont consider this a right or wrong situation. In fact I am not disagreeing just pointing other pricing variables. My previous post has to be read in conjunction with yesterdays. Its all theoritcal. Any added present divi gains could be negated by cap gains of EBBNF.
              My $22.50 reference point is that is price EBGEF would have to be at to counter a par 3.15% of EBBNF. It may take decades do to randomness of 5 yr at reset…But math wise 33 basis points is equivalent to a bit more than $2.50 in par preferred stock pricing off a 3.15% base. As mentioned Im just talking in theory and own both.

            2. 2WR, Titans were very good to me last year covering 8 even with worthless Gabbert QBing in 8 games last yr. They deserve the chance to make me money again, lol.. The ‘Boys is a partial fan bet but going 9-7 or better seems very doable.

            3. 2WR, Tagging on…If the 5 yr index = 0% “today”, then EBBNF’s .33 would equate to a price differential $2.62 to EBGEF. However, at today’s “actual” index+margin, that differential equates to $1.65 – and as you have pointed out, that $1.65 is is heavily compromised by EBBNF’s shorter calendar to reset, ergo the only .50 differential. Also, assuming rates will at some point pass the current cycle rate nadir, EBGEF will enjoy that differential in reverse. This means it’s price relative to EBBNF should rise faster in a rising interest rate environment. Buying EBGEF near the nadir in my view will be one of the best openly visible total return opportunities I think we’ve seen in quite a while. As I only opened a partial position in EBGEF, will be adding as the price drops. This assumes of course the other factors that make ENB attractive remain intact.

              1. Alpha, you are making my point….And actually 2WR’s… The damn thing is unknowable and value is based on ones prejudicial variables and future guesstimates. And largely at any given moment in time the market has it baked into current pricing. The only thing that is entirely certain is EBGEF will generate more dividend payments from now until reset time of EBBNF.

                1. Guy, I love your conviction. One dreary winter I built a Excel spreadsheet for this type of thing. Had price @ par, price @ market, reset rate%, current base %, assumed reset base rate%, time to reset, accrued $ to reset date, assumed capital gain/loss at reset date derived from reset up or down, assumed market yield on a fixed rate at reset date, assumed fixed accrued, assumed market spread between Gov and Corp rates at reset, other variables and hypothesis I can’t remember but deemed relevant at the time. Took me days to formulate and it became a monster. I deleted it because I got headaches. 2WR hope your leg heals before you get to that point.

              2. Fun, huh? Thanks for chiming in, Alpha… always fun to add another bellybutton, uh, I mean opinion…. I think I understand your math: in a 0 Treas world and with both resetting on the same day, EBBNF would have a 3.15% coupon and, EBGEF would be 2.82% and, assuming EBBNF would be at par, EBGEF would have to be at @ 22.38 to have a 3.15% current yield identical to EBBNF. But of course, taking different reset dates out of the equation today, with EBGEF now at a 7.20% current yield, EBBNF ought to be at 17.22 to equate to EBGEF’s present day current but it isn’t. It’s at 18.16, thus making EBBNF the lesser well priced animal. My personal belief is that even if interest rates continue to head toward zero, the likelihood of them staying there 3 1/4 years from now (9/1/22) THRU and beyond 4 1/2 years from now (3/1/24) are slim and the odds favor interest rates being LOWER in 2022 than in 2024. That makes me feel as though when both of these reset next time, odds are in favor of the interest rate environment at each date will negate much if not all of EBBNF’s extra 33 basis point reset rate advantage…. I now rest my pontification..

                1. yes,this was just theoretical. My personal opinion is if I am in them I think diversity in reset years through various issues of similiar quality is more of an important decision for me than an either or on one issue.

            4. 2WhiteRoses, Thank you for the analysis and follow on by all. I am slowly adding positions. Sentiment in Canada (from recent visit and CAN citizens) is one of frustration. I suspect CAN will have change in P.M. and Govt. policy in next few years. If so, will be good for ENB . As a 5th generation Tennessean, welcome! Nashville has become IL, CA, NY central. Just add the TN Volunteers to your list and you are bona fide.

              1. TNT, CA is in the midst of an exodus. Barely a day goes by we don’t hear about it or of someone else leaving.

              2. Thanks, TNT – The Vols were an easy add right from the get go… We’ve been here in TN 12 years now, half way between Knoxville and Chattanooga so have lived thru the dismal post Fulmer revolving door years offset by having been able to experience Pat Summit’s achievements. Liked Pearl and do like what Barnes has accomplished. Undecided on Pruitt. Am really rooting for Bone to do well in Detroit as a hidden gem in the NBA as Kamara was in the NFL. Ho hum on Williams and the Admiral.

    3. 2WR, I was looking at the week close on TSX pricing this morning. I would suggest if EBGEF won in your comparison on Thursday, they would even more so now. As EBBNF is now $18.60 up 44 cents while EBGEF is $18.83 up only 17 cents. EBBNF is actually higher than it was a month ago, while EBGEF is actually still about 50 cents lower than last month. There can be tradeable opportunities between these as they always dont move daily in tandem. Its just too difficult for me to exploit though in any meaningful way.

      1. Grid – Oh sure, rub it in…… Actually I don’t often visit the TSX site unless I’m ready to enter a trade, so I didn’t see that… On TOS last trades were 18.16 and 18.75, thus showing a slight widening but I have no doubt the activity on TSX is higher and probably more accurate. Your bringing this up reminds me though, that perhaps trying to actively play this spread thing by buying one and selling the other while maintaining the long position overall might be an alternative to participating in the IPO flip game you guys have been playing and I’ve been reluctant to do… I actually successfully play this game for a year or two earlier this decade trading in and out of the various 5 series of outstanding IStar preferreds when the spreads got too thin or too wide…maybe that’s repeatable with these…. Trouble is, the STAR preferreds were in an IRA and these are not, so right now trades on ENB preferreds would be taxable…. Maybe I should start new positions in my IRA just for the fun of it. As long as I’m willing to own ENB in any case, it might just goose the return a bit without much risk… Thanks for the thought…

        1. 2WR, I could never exploit this because as you know one needs to see bid/ask prices to see what is going on. Im flying blind on OTC. Amy, however, has the platform to see bid/ask TSX spread on her brokerage. Based on last couple weeks price movement on a quick trade, I would go with EBGEF for that.

          1. The TSX website has real time prices and last 25 executions to the second but I don’t think they show bid-ask. I’ll look on Monday.

            When my own trade executed on Schwab I saw it immediately on the TSX website. Interestingly, although the order was entered on the U.S. ticker the confirmation I received from Schwab was for the Canadian.

            1. Bob, I have never seen bid/ask either. Amy has access though through her brokerage account which has foreign operations. Yes, many of my OTC trades went straight to TSX and bypassed totally OTC ticker volume and trade. Have not determined any pattern from it though.

    4. Roses – a suggestion: when you look at prices of Canadian “F” preferred, don’t use the prices reported through FINRA, which would include any quote you would get from a brokerage website (or Marketwatch, etc.). They are often days old and you will find that you can’t trade at those price.

      Using EBBNF as an example, the last FINRA quote is 18.16 on June 28. The last TSX price on ENB.PF.U (same security) is 18.60 (all in U.S. dollars).

      That difference – 18.16 vs. 18.60, may change the analysis.

      To make it more challenging consider that ENB has a total of 21 preferred issues outstanding, with variable pricing structures, spreads, reset dates, and currencies. Try picking the best from that lot!

      Cheers from DE.

      1. Thanks for the suggestion, Bob… I got your spreadsheet so also thanks for that very helpful tool….. In practice, for now I’ve chosen not to expand in Canadians beyond ENB until I feel more comfortable, and being of simple mind, I’ve also limited myself to those in USD only. Were I to choose to get into CDN issues, I’d have to figure out the proper conversion rate and whether I wanted to root for the USD to go up or down, and that always hurts my head, so I pass for now… I do, however, know enough to check on TSX prices before entering a trade on EBGEF or EBBNF. I had also reviewed all the various ENB preferreds, but my other parameters do eliminate many of the 21 even though I know some on TSX onlyissues seem to trade cheaper….To the best of my knowledge, I do not have access to TSX at Fidelity or TDA but will be interested in your new experiment with IBK What I haven’t spent much time on trying to figure out yet is what the circumstances might be when an investor in the resets would want to convert to the floating mirrored issue or whether or not that’s only a company option not an owner’s…

        1. Good morning 2WR! The conversions on these Canadian resets seem to be fairly standard practice across all lines of preferreds I have owned and researched…For your example, I am posting the terms of your BFF, The Series 5 (EBGEF).

          Holders of Series 5 Shares shall not be entitled to convert their shares into Series 6 Shares if the Corporation determines that there would remain outstanding on a Series 5 Conversion Date less than 1,000,000 Series 6 Shares, after having taken into account all Series 5 Shares tendered for conversion into Series 6 Shares and all Series 6 Shares tendered for conversion into Series 5 Shares. Furthermore, if the Corporation determines that there would remain outstanding on a Series 5 Conversion Date less than 1,000,000 Series 5 Shares, after having taken into account all Series 5 Shares tendered for conversion into Series 6 Shares and all Series 6 Shares tendered for conversion into Series 5 Shares, then all of the remaining outstanding Series 5 Shares shall be converted automatically into Series 6 Shares on the basis of one Series 6 Share for each Series 5 Share on the applicable Series 5 Conversion Date.

          So, its never cut and dry…If too few tender, you dont get to convert…If too many want to convert, and you dont…Sucks to be you, as you get converted anyways.

          1. Yeah, I’ve read all that, Grid…. and I get the not cut and dried sitch…. What I haven’t spent enough time trying to figure out is under what circumstances, or in what interest rate environment, would someone want to convert? BTW, unrelated, along the lines of my having mentioned CUBI preferreds to you, I’ve noticed that INBKL says, “if three-month LIBOR is less than zero, three-month LIBOR will be deemed to be zero.” Of course from my point of view all that means is an increased expectation that INBKL will be called on its float date and in my world, that’s not a negative.

            1. 2WR, Some conversions came a few years ago, with various preferreds on expectation of rising short end yield curve. Plus it of course adjusts on a floating basis then so you get any immediate yield improvement on a quarterly basis plus any price increase baking that expectation in. An inverted yield curve of the two would be a possible reason also. It like anything else we do. Ya place your bets and take your chances on where you think either instrument is going…..As a general rule though, history shows the majority have never exercised that floating option.

          2. As an empirical matter almost all the resets have conversion options (from 5-year reset to 90-day float, same spread) but very few get converted. They all have conversion minimums (1 million shares is typical).

            That said, there are some 90-day floaters out there, most having been converted in the 2015/6 time frame when the BOC 5-year was under 1% (almost down to 50 bips). Yeah, if I had a 5-year reset with a 120 bp spread and a 50 bp 5-year, I’d not want to be holding that thing for 5 more years at the same rate. I’d take chances on the 90-day.

  54. I’m noticing some buy on vol interest in some of these resets. Could be one of two things: Grid buying while he has some winnings left while he’s wearing his lucky Blues jersey in Vegas!…OR a perceived bottom in rates as the Fed may be stonewalling rates?
    Stay tuned…It’s hard to wait for a solid turn in thinly traded issues as they can just walk away and fast. (PS: Never a recommendation for action) J
    I prob won’t get over there to really look around until next week.

    1. Joel, waiting in line for my free Wynn buffet so Im surfing, lol.. Remember these really arent that illiquid since they flow through to TSX. Somebody(I was either here or SA) gave a link from major brokerage saying they were buys. And they have been climbing a bit since. I just have dabbled buying a couple hundred more of ERRAF last week and a bit more of Canadian Utilities fixed DD the other day. Wont be blowing that Blues cash because I basically spent it on NYCB-U and have to pay myself back. Noticed Emera last week had its ratings affirmed and stable from Moodys. That means the preferred is still BB+.
      Glad I didnt own any ATH. Never have trusted that leveraged outfit.

      1. If you want some amusement (don’t we all) check out Rida’s articles on AHT, one in 2017 singing its praises and one just recently explaining what went wrong and how its really has been a dog all the time.

        I put Rida in the same category as Cramer – negative indicator. When Cramer yell BUY! it’s time to sell, and vice versa.

    2. I picked up 500 shares of EBGEF (first purchase of this series) on hopes we are seeing expectations of a bottom. JMO, but I think there is a contingent (Powell, Meester) that really does not want to lower rates to make sure they have the tools if things end up being more severe than expected.

    3. Grid may be able to move markets but probably not in this case. The resets, those without minimums (which is most of them), are very sensitive to interest rate changes. In just the last week, as odds of a Fed rate cut (followed by a BOC rate cut) diminished, prices shot up quite a bit. Some were up a buck in just days.

      1. Bob, Im not Rida Moron, I cant move my GF to do what I want, let alone markets, lol… Here is you question, Bob, as I know you read prospectus material and I havent seen the answer. And Canadian reset prospectus are very short reads comparatively to US preferreds….So, a scenario…… Take the Enbridge Series 5….For simplicity say its resets with a negative 2.82% 5 yr, plus 2.82% kicker…Will the yield be 2.82% off par, or 0%…As prospectus says the sum of 5 yr. and 2.82%…. This prospectus was issued prior to negative interest rates.

        1. Grid – except for the issues that have explicit minimums there is no downside limit on the resets. In theory the rate could go to zero. If it went negative you send them a cheque each quarter. Not sure how that works.

          1. And if I dont get the check sent to them by payment date, do I owe a late payment fee? Possibly an extradition warrant for my arrest for non payment? …..Why are you are you jail, extradited from US, Gridbird? Murder? Larceny? …No, I forgot to pay Enbridge my negative yielding preferred dividend I owe them. 🙂

            1. I had some insight but didn’t extend that deep into the details. But maybe US check wouldn’t work but they might set up a US account for US shareholders. Otherwise you might need to wire it. I’m unsure what the fee would be for that. If it’s not a large amount maybe just pay entire year and avoid recurring monthly wire fee. Would need to do the math on that first though. Besides Grid, if you do wind up in Canadian jail I’ll start a go-fund-me page for your bail. I’ve made money off some of your ideas and probably chip in hundred or two. Who says I’m a curmudgeon now?

              1. Ok, P, reluctantly I agree to accept your delisting from the Curmudgeon list. That leaves Camroc as the last man standing. 🙂

            2. Well …. Canada (unlike the U.S.) does not extradite for fiscal crimes. They will wait until you cross the border then send you off to Kingston.

  55. Grid, These are setting up to be one of those issues years from now someone will ask how we got in them. I’ll be happy to pick up a few thousand more shares if EBGEF hits 15. Own a chunk now, and it’s the first issue I’ve ever owned where when it drops, my anticipation grows. lol. The current 7% yield may melt to a 3.2% YTR (4% taxable equiv). However, at 15, EBGEF would yield at least 4.7% on new money; a terrific yield in a 0% 5yr landscape. This would provide substantial support at 15 while the issue will simultaneously be sitting on a potential cap appreciation launchpad – a very long way from par. Will pick up more about 1/2 way to 15 and then again if we get there. Staying in my lane as this is my only CN, which may act as a valuable wide moat hedge against near 7% IG perpetuals acquired 12-18 months ago. We just need patience and don’t use the laundry money. This one could pay out/play out over many years.

  56. On TDAM, enter the F symbols onto a handy Watch List, then hover over the symbol and a pop up will appear showing the CN ‘titling’. You get both.

  57. Grid is correct, that is the analysis! Like someone said here recently, “you have to know the math of bonds…” Keep trudging forward!
    Also, look at the CNDollar vs. USDollar relationship:
    Go to long term view and you will see a reversion to the mean on currency valuations. You will see CND at par with USD ‘recently’. You will see a big gain from currency valuations at various times and this can be a good diversifier. That is some of the reason why CN issues are beat down right now, but it will shift over time. Right now the dollar is “bully”. If inflation begins to rise commodity currencies can get very strong. Eventually, paper will weaken.
    There are plenty of long term studies that show hedging currency over long time frames, into international markets , is really inconsequential…unless you are buying into a temporary deep divergence in two fundamentally ‘sound’ currencies.
    Take it all in and keep plowing! JA

    1. Joel, I know as much about currency as I do curing cancer, so take this with a grain of salt. But I agree with your thought process. If one has time it basically averages out over longer haul. If one looks at a 40 year CAD-US currency chart it basically is unchanged from that duration. With CAD spending roughly as much time under 75 cents as above 75 cents. Ironically with the dollar being recently strong it has really had little over impact on CAD. In fact CAD is slightly higher now than 1 year ago, and also 2 years ago. Of course like anything, pick your reference point in time and one can make a case for the opposite, too.

  58. For those of you that follow Canadian preferreds I have just recently updated my tracking sheets and will make same available by email upon request. These are the sheets I use to both track and make investment decisions from. Covers only those with US tickers, about 35 in total.

    To obtain, you can either post your email here (strongly discouraged) or send me a PM through Seeking Alpha with your email address. I use same nic on SA as here.

    Price is only …….. wait, this is III, not SA! Gratis, of course.

    1. Hi Bob,

      I tried searching for “Bob-in-DE”, but it just provided any reference to just “Bob”, and didn’t see your comment or user profile anywhere. Any chance yo could post a link to your SA profile to contact you? Thanks.

    2. Hi Bob-in-DE, Always happy to compare/share notes and will be interested to see how you have everything laid-out. Message sent…

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