The preferred share market enjoyed robust returns in October, powered by growing institutional participation and buying of preferred share Exchange Traded Funds (ETF). Rate reset issues had particularly strong returns, but still trail perpetual issues by a wide margin on a year-to-date basis. The S&P/TSX Preferred Share Index returned 2.32% in the month.
There was only one new preferred share issue in October, but it was particularly noteworthy because it set a couple of records. The issue was from Bank of Montreal (BMO.PR.B), and it had a 4.85% dividend rate and a +406 basis point reset spread. Initially sized at $350,000,000, the deal was upsized to $600,000,000 after the order book surpassed $2 billion. The issue was allocated 70% to institutional buyers and 30% to retail investors. A record number of 84 institutional investors participated in the issue and its first day of trading also set a record as 6.95 million shares changed hands.