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The Canadian preferred share market started 2017 with a bang, outperforming investment grade bonds, common stocks, and even junk bonds by a significant margin. Unlike other securities, preferred shares were immune from the volatility arising from the changeover in U.S. administrations. In part, the strong performance of preferred shares reflected investors’ ongoing search for attractive yield combined with limited new issue supply. In addition to investors purchasing outstanding, individual issues, preferred share ETF trading volumes hit an all-time record in January. We believe, though, that much of the ETF activity did not reflect simple buying of the asset class; rather, it was hedging of structured notes linked to the preferred share market. The S&P/TSX Preferred Share index returned 4.05% in January. (more…)