PrefBlog

There were no surprises in the BoC release:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic outlook has deteriorated in recent weeks as several downside risks to the projection in the Bank’s July Monetary Policy Report (MPR) have been realized. The European sovereign debt crisis has intensified, a broad range of data has signalled slower global growth, and financial market volatility has increased sharply. Recent benchmark revisions show that the U.S. recession was deeper and its recovery has been shallower than previously reported. In combination with recent economic data, this implies that U.S. growth will be weaker than previously anticipated
…
Slower global economic momentum will dampen domestic resource utilization and inflationary pressures. The Bank expects total CPI inflation to continue to moderate as temporary factors, such as significantly higher food and energy prices, unwind. Core inflation is expected to remain well-contained as labour compensation growth stays modest, productivity recovers, and inflation expectations remain well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.

There are rumours that the completely voluntary and not coerced in any way whatsoever Greek bond exchange offer might be in trouble:

Private sector participation in a Greek debt swap has so far reached the 75-percent mark, far below a 90 percent target, newspaper Imerisia reported on Wednesday without naming its sources.

Greece last month turned the screws on investors, saying it may not go ahead with the debt swap—a key part in a second bailout package to stave off the country’s bankruptcy—if holders of less than 90 percent of the bonds take part.
…
A Greek finance ministry official said it was too early to provide a take-up figure. “The process is ongoing, it is premature to give a percentage,” the official told Reuters on condition of anonymity.

Greece has asked bondholders to declare their interest in taking part in the debt swap by Friday. Greece expects to submit a final bond swap offer to investors in October, with a view to complete the exercise by the end of the same month.

As I have often noted, bankruptcy laws evolved over a period of 300 years. To their vast astonishment, the Europeans are finding that the re-write may take a little time:

There were no insider trading reports for YLO today, but I did learn that overlapping NCIBs are allowed which seems a little strange to me. The TMX reported no insider buying of YLO issues today.

It was a good day overall for the Canadian preferred share market, with PerpetualDiscounts losing 4bp, FixedResets gaining 10bp and DeemedRetractibles winning 26bp. Volatility picked up, skewed to the upside. Volume was a little above average.

PerpetualDiscounts now yield 5.29%, equivalent to 6.88% at the standard equivalency factor of 1.3x. Long-term Corporates now yield about 4.9% (maybe a little less?) so the pre-tax interest-equivalent spread is now about 200bp, the same as it was on August 31 as both yields have declined about the same amount.

This entry was posted on Wednesday, September 7th, 2011 at 10:27 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.