The predicted hike in the European policy rate is causing some angst:
Primed to raise its benchmark interest rate this week for the first time in almost three years, President Trichet’s European Central Bank again faces the conundrum that its monetary policy rarely suits all 17 members of the euro area, where the kaleidoscope of growth ranges from record expansion to recession paired with a sovereign-debt crisis.
The upshot may be that the normalization of rates from a record low of 1 percent will disproportionately hurt Spain, Greece, Portugal and Ireland, while failing to nip inflation threats in Germany. Such uneven fallout risks exacerbating the two-speed European recovery and dealing further damage to the bonds of so-called peripheral nations.
But the outlook for Treasuries continues to be bright (according to some):
Treasuries are signaling that the $9 trillion market will weather the end of the Federal Reserve’s quantitative easing program in June without suffering a selloff that drives long-term borrowing cost higher.
The class of investors that includes foreign central banks purchased 60 percent of the $66 billion in benchmark 10-year U.S. notes sold this year, up from 42 percent in 2010.
…
Rising demand from international investors and financial institutions bodes well for bonds with the Fed’s plan to buy more than $600 billion of Treasuries more than 80 percent complete. U.S. fixed-income assets are retaining their appeal as the credit quality of European sovereign debt deteriorates and banks meet tighter risk standards governing the capital they need cushion against losses.
Algos gone wild? RBC bought 2100 shares of CIU.PR.C in 12 transactions starting at 25.05 at 12:04pm and finishing at 27.00 at 12:18. Too much time-span to be a retail market order … I wonder what happened there? The lucky seller was Byron Securities (who?), which sold 900 shares at an average price of 25.85.
Other than that, it was a relatively quiet day for the Canadian preferred share market, with PerpetualDiscounts down 1bp, FixedResets gaining 4bp and DeemedRetractibles up 5bp. Only three entries on the performance highlights table, and volume was nothing special.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0951 % | 2,412.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0951 % | 3,628.1 |
| Floater | 2.49 % | 2.27 % | 40,298 | 21.57 | 4 | 0.0951 % | 2,604.7 |
| OpRet | 4.91 % | 3.46 % | 91,412 | 2.11 | 8 | 0.0144 % | 2,412.4 |
| SplitShare | 5.20 % | -1.59 % | 120,314 | 0.69 | 6 | 0.0729 % | 2,493.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0144 % | 2,205.9 |
| Perpetual-Premium | 5.76 % | 5.60 % | 127,436 | 1.18 | 8 | 0.0445 % | 2,046.5 |
| Perpetual-Discount | 5.52 % | 5.53 % | 135,230 | 14.45 | 16 | -0.0118 % | 2,138.4 |
| FixedReset | 5.15 % | 3.38 % | 222,776 | 2.97 | 57 | 0.0410 % | 2,293.3 |
| Deemed-Retractible | 5.21 % | 5.08 % | 301,803 | 8.23 | 53 | 0.0521 % | 2,098.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.K | Perpetual-Discount | -1.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-04-04 Maturity Price : 23.28 Evaluated at bid price : 23.53 Bid-YTW : 5.34 % |
| BAM.PR.R | FixedReset | -1.50 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-30 Maturity Price : 25.00 Evaluated at bid price : 25.61 Bid-YTW : 4.90 % |
| BAM.PR.M | Perpetual-Discount | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-04-04 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 5.59 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.Q | FixedReset | 53,990 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 3.92 % |
| TRP.PR.B | FixedReset | 42,805 | Desjardins crossed 20,500 at 24.99. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-04-04 Maturity Price : 24.96 Evaluated at bid price : 25.01 Bid-YTW : 3.98 % |
| RY.PR.A | Deemed-Retractible | 39,411 | TD crossed 17,500 at 23.95. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.95 Bid-YTW : 5.05 % |
| RY.PR.I | FixedReset | 36,065 | TD bought 23,200 from RBC at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 26.30 Bid-YTW : 3.33 % |
| BNS.PR.K | Deemed-Retractible | 33,935 | Desjardins crossed 25,000 at 24.89. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.86 Bid-YTW : 4.86 % |
| BNS.PR.Z | FixedReset | 33,919 | Desjardins bought 10,000 from anonymous at 24.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.31 Bid-YTW : 4.17 % |
| There were 29 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.C | FixedReset | Quote: 25.06 – 27.00 Spot Rate : 1.9400 Average : 1.0467 YTW SCENARIO |
| BAM.PR.R | FixedReset | Quote: 25.61 – 26.14 Spot Rate : 0.5300 Average : 0.3819 YTW SCENARIO |
| BAM.PR.H | OpRet | Quote: 25.47 – 25.82 Spot Rate : 0.3500 Average : 0.2292 YTW SCENARIO |
| PWF.PR.K | Perpetual-Discount | Quote: 23.53 – 23.86 Spot Rate : 0.3300 Average : 0.2177 YTW SCENARIO |
| HSB.PR.E | FixedReset | Quote: 27.46 – 27.70 Spot Rate : 0.2400 Average : 0.1643 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 22.50 – 22.88 Spot Rate : 0.3800 Average : 0.3048 YTW SCENARIO |