Q: The price of BN.PR.C has dropped significantly since the first week of May. The steepest drop was at the time of the prime interest rate decrease by the B of C. Should one expect similar price drops as interest rates decrease? This preferred share now yields 11.46%. If looking for income, would you have any concerns regarding buying a part position now?
Thank you.
Thank you.
5i Research Answer:
These are floating rate securities and the dividend will be adjusted downward if Canadian rates fall. That being said, there are other influences, such as the company's credit quality and general market sentiment. But all else equal, they will be sensitive to changes in BoC rates.