June 20, 2017 1:00 pm eastern

Regarding TFI Inc. (TransForce) I see that the company bought back almost 900,000 shares in May at prices as high as $29.30 but mostly at closer to $28. This company has been very smart in the past about buying back shares at good prices. This buyback adds to my confidence that the shares are good value at the current 27.25.

Bank of Montreal is out with a rate reset preferred share paying 4.4%. This does NOT feature any minimum on the reset yield as some relatively recent issues did. I am not planning to buy this and I don’t think it is a great investment. What it illustrates is that the market yield on rate reset shares has drifted down. On August 31, 2016, TD had to pay 4.85% to issue similar shares and my comment of February 25, 2016 notes that Royal Bank did an issue at 5.5% at that time. As the market yield on rate reset preferred shares has drifted down (despite forecasts of Bank of Canada interest rate hikes) this has pushed up the price of the many existing rate reset shares on the market. With the market yield down and the potential reset yield rising if the 5 year Canada bond yield rises, this provides two reasons for the existing rate reset preferred shares that are trading under $25 to rise.

Home Capital has announced it will sell $1.2 billion of commercial mortgages at 99.61% of face value. But this could drop to as low as 97% if credit losses are higher than expected. Ordinarily this would not be a great price at all. In an originate-to-sell model Home Capital needs to get about 101% of face value. But this is a pretty good price in this case given all of Home Capital’s troubles. This would appear to indicate that Home Capital is worth at least something relatively close to book value which could mean the shares will continue to rise. Meanwhile, as of Friday Home was still seeing deposits declining although slowly. If this move restores confidence then perhaps the deposits will now being to increase.

This development for Home Capital is also a positive for Canadian Western Bank which shares had fallen out of fears about its alternative mortgage business. However CWB is down 1.8% this morning likely due to the lower oil price.