TA.PR.J : Convert or Hold?

Sep 11 03:09 2019 Print This Article

It will be recalled that TA.PR.J will reset at 4.988% effective September 30, 2019

TA.PR.J is a FixedReset, 5.30%+380, that commenced trading 2014-8-14 after being announced 2014-8-6. It is tracked by HIMIPref™ and has been assigned to the Scraps index on credit concerns. It was recently downgraded to P-4(high by S&P but remains at Pfd-3(low) with DBRS.

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. TA.PR.J and the FloatingReset 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.

Read More

About Article Author

PrefBlog

PrefBlog is presented as a public service by Hymas Investment Management Inc., Manager / Trustee of Malachite Aggressive Preferred Fundand publisher of PrefLetter, a monthly newsletter directed towards long term buy-and-hold retail investors. James Hymas, president of Hymas Investment Management Inc, with years of experience designing quantitative investment technology and applying this technology to conservative portfolios, seeks to provide institutions and retail investors with the information and advice necessary to produce top quartile returns in the preferred share market without the assumption of excess risk.

Related Items

Did HOOPP Exploit the Danish Tax System?

Zach Dubinsky of CBC News reports that Ontario health-care workers' pension has up to $430M at stake in Danish tax dispute:One of Canada's largest pension funds has been hauled into court in Denmark in a dispute about whether it improperly claimed hundreds of millions of dollars in tax rebates on D ...

FixedReset Prospectuses Are Imprecise!

As we all know, FixedResets will reset their dividend every five years based on the Government of Canada Five Year yield (“GOC-5 rate” or “GOC-5 yield”) and therefore the prospectus for each issue needs to include information regarding exactly how that yield is determined. The prospectus fo ...

Will The Recent Rally In Value Stocks Last?

September has been kind to undervalued shares, offering investors a reason to wonder if this long-suffering slice of the US equity market is finally due to lead over its growth counterparts. A few weeks is hardly a reliable gauge, but hope springs eternal… again. The current issue of Barron’s ...

US Open – Aramco Update, Focus shifting to Fed, US-Japan trade progress, Gold trims gains

If we don’t see any major geopolitical developments today, we could see a lackluster moves in US equities and the currency markets. The focus is tentatively shifting back to the Fed and markets are nervous that the sudden rise with oil prices could derail some dovish bets. The aftermath of the w ...

USD/CAD Canadian Dollar Lower on ECB Topsy Turvy Thursday

The Canadian dollar is lower on Thursday. The loonie is trading at 1.3217 after the European Central Bank (ECB) cut its benchmark rate and announced a relaunch of its QE program. The central bank will buy 20 billion euros a month of bonds in an effort to boost the eurozone economy. The Canadian dol ...

3 Reasons Why I See Further Upside Potential for Gold Prices

Gold may be off its 52-week highs, but the precious metal is still up more than 15 percent for the year through September 17. This appears to put gold on a path for its best year since 2010, when it gained just under 30 percent. (Click here to see our interactive Periodic Table of Commodity Re ...

September 16, 2019

Over the weekend, global markets received another lesson in why market timing doesn’t work: Oil ended nearly 15 per cent higher on Monday, with Brent logging its biggest jump in over 30 years and a record trading volumes, after an attack on Saudi Arabian crude facilities cut the kingdom’s produ ...

Could ‘helicopter money’ help Europe’s economy take flight?

Last week, the European Central Bank (ECB) decided to take a significant step away from normalization and toward more accommodation. It cut the deposit facility rate by 0.1% to a level of -0.5% (the first time the deposit rate has changed since 2016) and announced a re-ignition of quantitative easi ...

Fed Announcement Days Turn Bearish: S&P 500 Down 11 of Last 14

In the chart below the 30 trading days before and after the last 92 Fed meetings (back to March 2008) are graphed. There are three lines, “All,” “Up,” and “Down.” Up means the S&P 500 finished announcement day with a gain, down it finished with a loss or unchanged. Note how past down an ...