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Fixed Income Investment options?

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  • Feb 4th, 2023 6:07 pm
Sr. Member
Mar 17, 2008
807 posts
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Ontario

Fixed Income Investment options?

One RFDer asked me about fixed income investments. Not sure why - I am just another amateur investor trying to manage our retirement savings. Anyway, I wrote this in response, partly as a reminder to myself!

It's always good if your fixed income can guaranty a relatively risk free return of your capital. GICs, Fed/Provincial bonds provide that.

This RBC link provides an idea of GIC yields: https://contact.rbc.com/gicrates/index.php

Even although GIC yields have dropped recently, I would still look at a GIC ladder for part of your funds. Yields are 4.26-4.5% Not a bad time to start a ladder because in more normal times, shorter terms have lower yields.

FEd/Prov bonds are here: https://www.rbcdirectinvesting.com/pric ... bond-rates . Not that enticing, at least for me.

Then there are corporate bonds. With these credit rating needs to be checked. Banks for example could be rated AA, REITS BBB. Inventory depends on who you trade through. Had a quick look, and not many offer much better yields than GICs do. There are a few with yields in the 5+% range that could help boost overall FI yields, albeit with some added risk.

Another type that I have used, are Partners Value split shares. With these spit corporations, Brookfield own all of the capital shares and the preferreds get sold to the public. These have a fixed maturity date on which, like a bond, you get back the par value. You can find these in the split share section here: https://advisor.scotiawealthmanagement. ... 0-2023.pdf
These split pfds are trading at a discount to par so the total return at maturity is quite good (6.3-6.7%). Current yields on price just under 5%. I have some of these, bought when price was higher :(
PVS.PR.F ; PVS.PR.I ; PVS.PR.G ; PVS.PR.H ; PVS.PR.J ; PVS.PR.K

So far as preferreds in general are concerned, I think they look quite good. Liquidity can be an issue, but only if you are in a rush to buy or sell.

I have bought a number of perpetuals yielding ~6% on price at prices well below par. As interest rates drop, these should increase in value. (or the reverse if interest rates go up!). I have no plan to sell. 6% in perpetuity from a low risk source is good for me late in retirement!

I have also bought rate resets or minimum rate resets that are due to reset very soon. They will reset at the quoted spread plus the GOC5 5yr Benchmark rate. Right now it is at 2.88% down from 3.06% Dec 6th. I wouldn't go with any with low spreads that will reset too far down the road except perhaps for those that recently reset for 5 years at high yields.

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This link is a little old, but still provides some good pointers on the current Preferred market: https://www.raymondjames.ca/branches/pr ... report.pdf
16 replies
Sr. Member
Nov 14, 2006
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Tough to find preferred share info so the attached link is quite interesting. How liquid or illiquid are the preferred shares - group of GOC rate+ 2.5%+ spread?
Sr. Member
Mar 17, 2008
807 posts
659 upvotes
Ontario
cchenzz wrote: Tough to find preferred share info so the attached link is quite interesting. How liquid or illiquid are the preferred shares - group of GOC rate+ 2.5%+ spread?
They vary. Having level 2 quotes helps. The market is mainly retail investors or ETFs, so always quite thin. As a result, sometimes doesn't make sense! Some stink bids. However I have usually been able to buy what I want or at least a close equivalent at near the price I wanted. Seldom sell, but when I have, sale went through same day.

A link I left out was this one: https://canadianpreferredshares.ca/ The Scotia link in previous post is the most useful. There may be others, so please post them here if you know of any.
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Mar 25, 2012
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freeagent wrote: They vary. Having level 2 quotes helps. The market is mainly retail investors or ETFs, so always quite thin. As a result, sometimes doesn't make sense! Some stink bids. However I have usually been able to buy what I want or at least a close equivalent at near the price I wanted. Seldom sell, but when I have, sale went through same day.

A link I left out was this one: https://canadianpreferredshares.ca/ The Scotia link in previous post is the most useful. There may be others, so please post them here if you know of any.
That's the one I'd use. You could also try following some of the better actively managed preferred share ETFs' holdings. My 'go-to' reference in that area is the Lysander Active Preferred Share ETF (something like that anyway). There's a time lag in the reporting (semi-annually), as we don't have daily holdings reporting requirements as they do in the U.S.

The one I like is the MIC.PR.A. It trades well below par, but it almost certainly won't/can't get called in by the issuer because it's a special preferred share that has voting rights, and it's a requirement of the Insurance Companies Act to maintain Canadian investor control (Brookfield and Brookfield Business Partners are effectively foreign controlled). So unless Brookfield Business Partners decides to sell common shares in Sagen MI Canada, this is effectively a permanent preferred share issuance.

Cheers,
Doug
Banking & Savings: Tangerine & EQ Bank
Credit Cards: American Express SimplyCash, Rogers World Elite MasterCard, Scotiabank Scene+ Visa (was Tangerine Money-Back World MasterCard)
Investments: Scotia iTRADE | Pension: Municipal Pension Plan
Sr. Member
Mar 17, 2008
807 posts
659 upvotes
Ontario
dmehus wrote: The one I like is the MIC.PR.A. It trades well below par, but it almost certainly won't/can't get called in by the issuer because it's a special preferred share that has voting rights, and it's a requirement of the Insurance Companies Act to maintain Canadian investor control (Brookfield and Brookfield Business Partners are effectively foreign controlled). So unless Brookfield Business Partners decides to sell common shares in Sagen MI Canada, this is effectively a permanent preferred share issuance.

Cheers,
Doug
I had looked at Sagen last time I bought perpetuals. It had the second highest yield of all listed despite a P2L credit rating?? Only Bombardier with P5L rating was higher. I did not understand why MIC had such a high yield given it's rating and the new ownership. Perhaps mortgage insurance is considered too risky? In any event I decided to go with names that I was more familiar with. Besides I already had two BN perpetuals yielding over 6%!
Sr. Member
Mar 17, 2008
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Ontario
freeagent wrote: I have also bought rate resets or minimum rate resets that are due to reset very soon. They will reset at the quoted spread plus the GOC5 5yr Benchmark rate. Right now it is at 2.88% down from 3.06% Dec 6th.
One I own, Enbridge Minimum reset ENB.PF.K just announced it will reset at GOC5(3.042)+Spread(3.17) 6.212% at Par On March 1st. Still trading below par, so yield is more than that. My yield on cost will be 7% until March 1 2028. :)

Sounds great, but we never know. Just looked at mortgage rates. They seem in the 6.5% range. Over the years we had mortgages (72-86), rates were never that low. More like 8.75%-10.5% over a 14 yr period. Will we go back there?
Sr. Member
Mar 17, 2008
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Ontario
Another Enbridge I own is about to reset. It is ENB.PR.D. This will reset beginning of March at 5.412% of par, but at present is still trading just below $19.00. Better than 7% yield for next 5 years after which it will again reset at GOC5 rate + spread (2.37%) unless called at $25.00 (unlikely).

Better current yield than ENB.PF.K mentioned in previous post, but that would be partly because it has lower spread and that ENB.PF.K is a min reset (won't reset below 4.9%).
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Jan 24, 2007
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North York
Any suggestions for USD preferred shares?

Pl check if my calculations for ENB.PR.D is correct:

Based on current rate of $19 - and dividend rate on par of $5.41 (GOC @3.042+ spread 2.37) = 7.11%

TIA
Sr. Member
Mar 17, 2008
807 posts
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Ontario
sheriffabc wrote: Any suggestions for USD preferred shares?

Pl check if my calculations for ENB.PR.D is correct:

Based on current rate of $19 - and dividend rate on par of $5.41 (GOC @3.042+ spread 2.37) = 7.11%

TIA
I don't own any US issued preferreds, but do own one US$ denominated preferred ENB.PR.V. Other rate resets are ENB.PR.V and ENB.PF.U. Good yields! If I had more US$ I would buy those! (Dividends are eligible dividends in Canada).Brookfield Properties also have a US$ floater BPYP.PR.A that I know nothing about. That's all I could find.

ENB.PR.D closed at $18.89 . Dividend if bought at that would be 5.412% of $25 or $1.353 after March 1st. Yield at current price 100*1.353/18.78= 7.2% or 7.12% at $19.00.
Sr. Member
Mar 17, 2008
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Ontario
Thought I should mention that the yields quoted are the dividend yields. Your total return could be higher or lower depending on market price if you sell at the end of 5 years. Or if the pfds get called at $25 , which would be great!

In other words, these are not GICs or Bonds! Neutral Face
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Mar 1, 2018
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are these yields taxed as eligible dividends?
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Jan 24, 2007
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freeagent wrote: Thought I should mention that the yields quoted are the dividend yields. Your total return could be higher or lower depending on market price if you sell at the end of 5 years. Or if the pfds get called at $25 , which would be great!

In other words, these are not GICs or Bonds! Neutral Face
Thanks for your help and information. I had US$ denominated ENB preferred b4 but they were redeemed. Will invest on Monday for more. Do you know of any other Canadian, but US$ denominated, preferred or could suggest a site where I could look them up.

In the Scotia Link you provided above, what do the column heads YTR%; IRE% and Spread mean - sorry for my ignorance. TIA

A MIC (mortgage investment corporation) that I like is TF Toronto Stock Exchange - currently at $7.90 yields a very good return. You might like to investigate it.
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Dec 8, 2010
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How do you pick between issues when there are so many?!

Eg looking at TRP, they're all $25 par https://canadianpreferredshares.ca/rank ... referreds/

So then you're weighing up time to reset (I'm interested in the resetting ones), the rate over BoC 5 year, the current div, and the current price.. that's a lot of variables.

TRP.PR.A and TRP.PR.E both yield 5.9%, for example. Makes my head spin a bit..
Sr. Member
Mar 17, 2008
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rustyone wrote: are these yields taxed as eligible dividends?
Yes, Canadian preferreds pay eligible dividends just like ordinary shares.. Even the US$ denominated ones do.
Sr. Member
Mar 17, 2008
807 posts
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Ontario
sheriffabc wrote: Thanks for your help and information. I had US$ denominated ENB preferred b4 but they were redeemed. Will invest on Monday for more. Do you know of any other Canadian, but US$ denominated, preferred or could suggest a site where I could look them up.

In the Scotia Link you provided above, what do the column heads YTR%; IRE% and Spread mean - sorry for my ignorance. TIA

A MIC (mortgage investment corporation) that I like is TF Toronto Stock Exchange - currently at $7.90 yields a very good return. You might like to investigate it.
I looked through the full list and only found those four Canadian pfds that are USD. based. The Scotia list has all the pfds that are traded, I believe.

The Scotia link has the abbreviation descriptions at the very bottom.
Sr. Member
Mar 17, 2008
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daverobev wrote: How do you pick between issues when there are so many?!

Eg looking at TRP, they're all $25 par https://canadianpreferredshares.ca/rank ... referreds/

So then you're weighing up time to reset (I'm interested in the resetting ones), the rate over BoC 5 year, the current div, and the current price.. that's a lot of variables.

TRP.PR.A and TRP.PR.E both yield 5.9%, for example. Makes my head spin a bit..
You need to first go to https://advisor.scotiawealthmanagement. ... 3-2023.pdf (TRP are on p3). A lot more info there than on CanadianPreferredShares.
Then look at current yield, reset date, spread.
Look up GOC5 rate (available from Bank of Canada site or even the CP-S site you used.
Reset yield on $25 par will be spread+GOC5 rate(at the time it resets). Actual yield ($25/price) x the par yield. Of course you can't know what the GOC5 or market price will be too far into the future. Best to go with higher spreads and good discount to par. Or something resetting soon.
Also look at credit ratings. Lower the number the better.
Snip from my spreadsheet. Most of those TRP pfds seem to have low spreads. As a result, heavily discounted. G at 296 better, but lower current yield. You have to think about where the GOC5 might be at the time they are reset. There are probably better choices.
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Last edited by freeagent on Feb 4th, 2023 7:58 pm, edited 1 time in total.

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