Strip Bonds Information Centre

Interpretation of the CDS strip bond reports

You should use caution when interpreting the reports on strip bonds, packages, and stripped underlying bonds, since these reports have some significant differences from those published in other countries. The following notes may assist your understanding of these reports.

CDS publishes some statistics publicly and more detailed statistics for subscribers. These comments apply to both sets of statistics.

Accuracy

These reports are based on information that CDS believes to be accurate. The information is subject to correction of errors that may occur in daily processing or in preparation of estimates. CDS assumes no liability for any errors or omissions.

Currently the reports are prepared manually, but this may be automated in the future.

The estimated quantity (face value) of physically-stripped bonds and receipt security strip bonds is recalculated periodically, based on the quantity of the corresponding strip bonds on deposit with CDS. These estimates should be used with caution, since they are prepared using the face value of the strip bonds, not an actual review of the strip bonds themselves.

The outstanding amount is based on information obtained from the issuers, their agents, or other sources believed to be reliable. This amount represents the outstanding quantity in the security on the records of the issuers or their agents, as of the end of the reporting period. The information on outstanding amounts should by used with caution, since there is no automated verification.

Stripped underlying securities report

All securities (other than package securities) that have valid CDS strip component lists, as of the report date, are normally shown. The net quantity stripped by book-entry represents the quantity stripped by book-entry through CDS (if the value is greater than zero) or the quantity reconstituted through CDS using the CDS strip bond packaging facility (if the value is less than zero), as of the end of the reporting period.

Two situations may cause the value to be less than zero:

• physical strip bonds were used to reconstitute the security; and/or
• generic book-entry strip components derived from one or more other bonds of the same issuer were used to reconstitute the security.

In either case, the available quantity in the security equals:

[the outstanding quantity on the issuer's records] - [the net quantity stripped by book-entry through CDS] - [the quantity stripped physically or by receipt securities]

On the subscribers reports,

• estimates of the quantity stripped physically and the quantity stripped using receipt securities are updated periodically, not necessarily monthly.
• the stripping and reconstitution activity represents the net activity during the reporting period.

The outstanding amount is based on information obtained from the issuers, their agents, or other sources believed to be reliable. This amount represents the outstanding quantity in the security on the records of the issuers or their agents, as of the end of the reporting period. While CDS attempts to update this information to reflect changes in the outstanding amounts, the outstanding amounts shown may be incorrect. On the December 2004 report, CDS had no information on the outstanding amount for 6% of the issues that had been stripped or reconstituted.

The percentage stripped or reconstituted is the net quantity stripped by book-entry through CDS divided by the outstanding amount.

The sort order on the public reports is alphabetic, based on the description of the security. In some cases, inconsistent naming conventions make the report difficult to use. For example, most Province of British Columbia bonds are listed under "BC PROV ...". However, some others are listed under "PROV BC" and "PROV OF BC". Similarly, Government of Canada bonds may be found under "CDA GOVT" and "GOVT CDA". In most cases, there is no sort based on the maturity date.

Estimates of bonds stripped physically and using receipt securities

The estimated quantity (face value) of physically-stripped bonds and receipt security strip bonds is recalculated periodically, based on the quantity of the corresponding strip bonds on deposit with CDS. Please use your own judgement when basing decisions on these estimates.

Strip bond packages report

This report is available to subscribers only. The report shows all package securities that have valid CDS strip component lists, as of the report date.

Notes:

1. Underlying securities that were reconstituted using the strip bond packages are shown on the stripped underlying securities report, not this report.
2. The packaging and package separation activity represent the net activity during the reporting period.
3. The outstanding quantity column shows the face value of the package that was on deposit at the end of the reporting period.

Strip bond report

This report is available to subscribers only.

Notes:

1. The quantity in the book-entry column represents the total face value created by book-entry stripping through CDS of the related underlying securities, as of the end of the reporting period
2. The quantity in the physical column represents the total face value of the strip bond deposited in physical form through CDS or its custodians, as of the end of the reporting period.
3. The total on deposit column represents the total of the book-entry and physical strips columns.
4. The quantity in packages represents the total face value of the strip bond that has been used to create packages, as of the end of the reporting period. This includes the strip bonds that were used to reconstitute underlying securities beyond the quantity stripped by book-entry through CDS.

Copyright Keith Campbell ©2002-2005. All rights reserved.