Natixis Canada Blog

Month: August 2014

Responding to Inflation – Bond Commentary from Jeff Herold

Jeff Herold – J Zechner Associates

The Canadian bond market enjoyed good returns in July, as investors focussed on geopolitical risks Jeff-Herold-Photoin Ukraine and the Middle East, plus the potential negative impact of these crises on the already struggling Eurozone economy. Many equity markets around the world fell in the month as investors sought to reduce their exposure to riskier assets. Demand for bonds as safer, less risky investments helped push Canadian bond prices higher and yields lower. More favourable economic news, particularly out of the United States, was by and large ignored in the risk-off environment. The FTSE TMX Canada Universe Bond index returned 0.63% in July.

To read more about Jeff’s outlook and strategy, as well our NexGen Canadian Bond Fund, click here.

$100 Million and Counting – Preferred Share Commentary from Jeff Herold

Jeff Herold – J Zechner Associates

The CaJeff-Herold-Photonadian preferred share market was quite stable in July, with most prices little changed from a month ago. The S&P/TSX Preferred Share Total Return index returned 0.31%, while the S&P/TSX Preferred Share Ladder Total Return index, which measures only rate/reset issues, gained a very similar 0.32%.

To read more about the preferred share market and first anniversary of the NexGen Canadian Preferred Share Funds, click here

U.S. Economy Warms Up With The Weather

Donald J. Nesbitt & Mikhail I. Alkhazov – Ziegler Capital Management

Stocks with higher dividend yields did not generally perform particularly well on a relative basis during July, but we believe that diZiegler Photosvidends will remain an important contributor to total return over the long term; however, the performance of dividend paying stocks will vary depending upon market sentiment. We caution against painting “dividend paying” stocks with a broad brush, as these stocks can span the gamut from defensive, “bond-like proxies”, which perform relatively better during times of economic and market weakness, to “dividend growers” that can more readily participate in a growing economy and rising market. As discussed earlier, we have positioned the Fund to hold more of the “dividend growers”, consistent with an outlook for moderate economic growth

To read more about the state of the U.S. economy and how it impacts the NexGen US Dividend Fund, click here.

September’s Expected Redemptions: Comments from Jeff Herold, CFA

With over $1.1 billion of preferred shares being redeemed on July 31st, investors may be asking what’s next.

In September, another $1.1 billion of preferred shares are likely to be redeemed, with the official announcements expected during August. Investors seeking to reinvest the proceeds may suffer sticker shock when they see currently available yields are much lower than the dividend rates they have been enjoying for the last five years. Interestingly, we do not expect any bank redemptions in September as they have largely completed calling their high rate issues this year. (Only the Royal Bank has a high rate issue left to redeem this year, expected in November.)

The expected redemptions in September include:

Issuer Symbol Size ($) Current Dividend Reset Spread Redemption
Manulife Financial MFC.PR.E 350 mm 5.60% + 323 bp Sept. 19
Brookfield Asset Mgmt. BAM.PR.P 300 mm 7.00% + 445 bp Sept. 30
Brookfield Office Prop. BPO.PR.L 250 mm 6.75% + 417 bp Sept. 30
Dundee Bancorp DC.PR.B 130 mm 6.75% + 410 bp Sept. 30
Equitable Group EQB.PR.A   50 mm 7.25% + 453 bp Sept. 30

As in the past, we recommend that advisors and their clients consider selling issues prior to their redemption to realize potential remaining gains and reinvest ahead of the crowd.

Jeff Herold

Invest better: Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer.