During August, Bell Canada announced that following the recent conversion date only 39.7% of investors in BCE.PR.I had stayed with the fixed rate option, as over 60% of holders had opted for the floating rate alternative (BCE.PR.J). With the fixed rate reset at a comparatively low rate, the floating rate shares offered the possibility of higher returns should Canadian bank prime increase in the next 5 years. In contrast with the Bell Canada announcement, Bank of Montreal stated that only 18.7% of holders of its BMO.PR.Q issue had chosen the floating rate option as the dividend reset. Interestingly, the BMO.PR.Q issue has one of the lowest reset spreads at 115 basis points.

As expected, Sun Life stated that it would not be redeeming its SLF.PR.H issue. The issue will reset at 217 basis points over 5-year Canada Bonds. Intact Financial also chose to leave its IFC.PR.C issue outstanding. Its reset spread is 266 basis points. In addition, Canaccord Genuity announced that it would not be redeeming its CF.PR.A issue. Instead, it will be resetting at 312 basis points over 5-year Canada Bonds. The issue is rated P-3(low) by DBRS with a negative outlook, hence the relatively low price ($11.50) on this issue. Fortis announced that it would be redeeming its FTS.PR.E retractable issue effective September 1st.

With the passage of Labour Day, we are hopeful that the supply of new issues will increase from the summer doldrums. We believe new issues, when they come, will be priced with new issue concessions versus most secondary opportunities. A month end deposit temporarily increased the fund’s cash level above 6%, but we will use new issues as well as purchases of secondary offerings to invest the majority of the available cash. Perpetual preferred shares continue to form the largest portion of our portfolios, but after years of outperformance, the relative value that the sector offers is less compelling. Accordingly, we are looking for opportunities to switch into other sectors.

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