Post by
CrazyTrader on Jun 01, 2024 4:59pm
Market is saying the A's will reset with 2.896% as the 5yr
rate. I think the market is wrong, as such the price difference between the A's and T's will close.
The T's current 5 yr rate is 3.63% I believe.
Since the A's and T's are basically the same except for timing of reset.... Then if the A's reset with 3.63% for 5 yr rate then their share price should be the same.
Current 5yr rate is 3.76% that's pretty close.
Current Arbitrage is $0.93. Divide that by 5 years = $0.186/year.
How much lower than 3.63% the A's need to reset to produce $0.186/year less than the T's??
That's $0.0465 less per quarter.
Current T's dividend is $0.424375
$0.424375 - $0.0465 = $0.377875..... This is what the market is saying the A's dividend will reset to.
What 5 yr rate will produce such a dividend?
$0.377875 x 4 = $1.5115/year
$25 x (? + 0.0315) = $1.5115
?= 0.02896
The market is saying A's will reset with 5 year rate of 2.896% !!!!!!!