I have followed your comments and respect your insight, but I wonder why you peg the value of these to the BOE preferreds.
The BOE preferreds are not traded and presumably will not be. The BOE presumable took 12% on these as they were also floating the ordinary offering where they put up $3 for every $1 of preferred. As the ordinary pay no dividend, the BOE's interest yield on investment is currently 3%. I don't think the 12% PFDs were ever intended to be offered to retail or institutional investors.
However, even if the 12% preferreds were traded, I would make a case that the yield on existing preferreds ought to be lower as they are trading at a discount to par. In addition to the interest rates, the existing have a significant upside in the event that they are ultimately redeemed.
Still, where these trade is ultimately based on the percieved risk of RBS not maintaining the dividend, or worse, ultimately going bankrupt or failing in a way that wipes out shareholders equity. WHile I don't see this happening (and own a fair amount of these), perceived risk relative to other high yield institutional preferreds ought to be the benchmark for rate of return, not the BOE PFDs(which to reitterate are not traded, but which presumable would also be trading below par at this time if they were.
If RBS was perceived as rock solid, all PFDs might be trading ABOVE par at this time, given the low interest rate environment at this time. There are very few fixed yield vehicles out there yielding more than 4%.
Valuation seems to be entirely based on perceived risk, and as the risk disappears, these should move closer to par with a yield well below 12%. Conversely if things get worse for RBS, we will continue to see these PFDs with yields in the high teens and higher.
Keep posting. I appreciate your perspective. It is nice to see a thoughtful message board -- not one dominated by hyping and bashing.