The Bank of Canada sounded a warning note:
The Bank projects that the economy will grow by 2.4 per cent in both 2012 and 2013 before moderating to 2.2 per cent in 2014. The degree of economic slack has been somewhat smaller than the Bank had anticipated in January, and the economy is now expected to return to full capacity in the first half of 2013.
As a result of this reduced slack and higher gasoline prices, the profile for inflation is expected to be somewhat firmer than anticipated in January. After moderating this quarter, total CPI inflation is expected, along with core inflation, to be around 2 per cent over the balance of the projection horizon as the economy reaches its production potential, the growth of labour compensation remains moderate, and inflation expectations stay 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 the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.
Is this a first? If not globally, then for a super-major bank? Citibank had a negative say-on-pay vote:
Citigroup Inc. (C) shareholders rejected the bank’s executive compensation plan in an advisory vote amid criticism it would let Chief Executive Officer Vikram Pandit collect rewards too easily.
About 45 percent of the votes were in favor of the plan, which Citigroup had argued would help attract and retain top talent, according to a preliminary tally at the New York-based firm’s annual meeting in Dallas today.
“That’s a serious matter,” Chairman Richard Parsons said in response to the outcome. “The board of directors takes this matter seriously” and will seek a more quantitative, formula- based method for setting top executives’ pay, he said.
Comrade Peace-Prize is demonizing speculation:
President Barack Obama urged Congress to bolster federal supervision of oil markets, including bigger penalties for market manipulation and greater power for regulators to increase the amount of money that traders must put up to back their energy bets.
Obama asked Congress to fund a six-fold increase for surveillance and enforcement staff at the Commodity Futures Trading Commission to put “more cops on the beat” overseeing oil markets.
He is seeking to empower the CFTC to raise margin requirements for traders’ oil positions and also asked lawmakers to raise civil and criminal penalties for businesses that are guilty of market manipulation to $10 million from $1 million. The plan would cost $52 million.
“Rising gas prices means a rough ride for a lot of families” Obama said in remarks in the White House Rose Garden today. “When gas prices go up it’s like an additional tax that comes right out of your pocket.”
The European market is a shell game:
Spanish, Italian and Portuguese banks are loading up on bonds issued by their own governments, a move that shifts more of the risk of sovereign default to European taxpayers from private creditors.
Holdings of Spanish government debt by lenders based in the country jumped 26 percent in two months, to 220 billion euros ($289 billion) at the end of January, data from Spain’s treasury show. Italian banks increased ownership of their nation’s sovereign bonds by 31 percent to 267 billion euros in the three months ended in February, according to Bank of Italy data.
German and French banks, meanwhile, have cut holdings of those countries’ bonds, as well as Irish and Greek debt, by as much as 50 percent since 2010 in some cases. That leaves domestic firms on the hook for a restructuring such as Greece’s last month and their main financier, the European Central Bank, facing losses. Like Greece, governments would have to rescue their lenders with funds borrowed from the European Union.
“The more banks stop cross-border lending, the more the ECB steps in to do the financing,” said Guntram Wolff, deputy director of Bruegel, a Brussels-based research institute. “So the exposure of the core countries to the periphery is shifting from the private to the public sector.”
This is very much to the politicians’ advantage. Should there be another default, one in which the ECB loses money, they will be able to point at banks and evil bonus-seeking traders as the cause of the losses, rather than the sovereign default.
How does one get ahead in life? Bootlicking is a perennial favourite:
The Bank of England has its eye on Canada’s central bank chief, the Financial Times reports today.
The newspaper said that a member of the Bank of England’s court, the group that oversees the central bank but does not set policy, recently approached Mr. Carney about the idea of replacing Mervyn King in June, 2013.
The Bank of Canada told The Globe and Mail that the newspaper report indicating Mr. Carney had been approached as a potential candidate was not accurate. Mr. Carney, who is respected around the world, and most recently was also tapped to head the global Financial Stability Board, would not comment to the newspaper.
It’s rocket science! It’s an entirely unheard of approach to investing! Imagine, a pension plan sitting down to determine what they want to accomplish before investing!
Healthcare of Ontario Pension Plan’s big bet on bonds paid off in 2011, as the plan ended the year up 12.2 per cent on its investments and more than fully funded.
What happens, however, when rates rise and that bond bet turns around? Not what you might think, according to HOOPP. Yes, the bonds may decline in value, but that shouldn’t leave the plan with a funding gap.
HOOPP, which runs about $40-billion, is a booster of an approach to pension management known as liability driven investment (LDI). For adherents of LDI, beating market benchmarks is considered largely irrelevant and the goal is simply to remain in a fully funded state with enough assets to cover projected liabilities.
Geez, I don’t know about my Assiduous Readers, but I think these guys should all get Nobel Prizes. Two each! Taking account of client objectives prior to formulating an investment strategy is revolutionary!
There was a good upward move in the Canadian preferred share market today, with PerpetualPremiums gaining 3bp, FixedResets up 9bp and DeemedRetractibles winning 14bp. The Performance Highlights table is comprised entirely of winning Floaters, presumably driven up by thoughts of imminent BoC rate hikes. Volume was well below average.
| 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 | 1.7451 % | 2,378.7 |
| FixedFloater | 4.44 % | 3.79 % | 34,472 | 17.79 | 1 | 0.0000 % | 3,551.2 |
| Floater | 3.04 % | 3.05 % | 45,224 | 19.61 | 3 | 1.7451 % | 2,568.3 |
| OpRet | 4.75 % | 2.84 % | 45,969 | 1.17 | 5 | 0.1608 % | 2,511.3 |
| SplitShare | 5.26 % | 2.43 % | 82,011 | 0.66 | 4 | 0.0199 % | 2,685.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1608 % | 2,296.4 |
| Perpetual-Premium | 5.47 % | 1.10 % | 83,412 | 0.12 | 23 | 0.0263 % | 2,222.8 |
| Perpetual-Discount | 5.17 % | 5.16 % | 130,251 | 15.18 | 10 | -0.0041 % | 2,414.3 |
| FixedReset | 5.01 % | 2.97 % | 187,266 | 2.18 | 67 | 0.0938 % | 2,399.1 |
| Deemed-Retractible | 4.96 % | 3.82 % | 193,293 | 2.83 | 46 | 0.1403 % | 2,311.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.B | Floater | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-17 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 3.05 % |
| BAM.PR.C | Floater | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-17 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 3.06 % |
| BAM.PR.K | Floater | 2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-17 Maturity Price : 17.34 Evaluated at bid price : 17.34 Bid-YTW : 3.04 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.O | FixedReset | 128,821 | Desjardins crossed 120,000 at 27.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.16 Bid-YTW : 2.72 % |
| BAM.PF.A | FixedReset | 92,470 | Nesbitt crossed blocks of 40,000 and 20,000, both at 25.35; Scotia sold 18,400 to anonymous at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-17 Maturity Price : 23.22 Evaluated at bid price : 25.40 Bid-YTW : 4.26 % |
| ENB.PR.H | FixedReset | 67,097 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-17 Maturity Price : 23.21 Evaluated at bid price : 25.35 Bid-YTW : 3.54 % |
| PWF.PR.K | Perpetual-Discount | 54,944 | Nesbitt crossed 50,000 at 24.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-17 Maturity Price : 24.07 Evaluated at bid price : 24.40 Bid-YTW : 5.07 % |
| GWO.PR.P | Deemed-Retractible | 52,800 | RBC crossed 40,000 at 25.96. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.86 Bid-YTW : 5.09 % |
| BNS.PR.Y | FixedReset | 43,322 | Nesbitt crossed 40,000 at 25.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.31 Bid-YTW : 2.77 % |
| There were 19 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IAG.PR.A | Deemed-Retractible | Quote: 23.90 – 24.20 Spot Rate : 0.3000 Average : 0.2286 YTW SCENARIO |
| BNA.PR.D | SplitShare | Quote: 26.30 – 26.57 Spot Rate : 0.2700 Average : 0.2069 YTW SCENARIO |
| BAM.PR.G | FixedFloater | Quote: 21.40 – 22.00 Spot Rate : 0.6000 Average : 0.5396 YTW SCENARIO |
| CM.PR.P | Deemed-Retractible | Quote: 25.36 – 25.57 Spot Rate : 0.2100 Average : 0.1507 YTW SCENARIO |
| CM.PR.D | Perpetual-Premium | Quote: 25.87 – 26.09 Spot Rate : 0.2200 Average : 0.1618 YTW SCENARIO |
| BAM.PR.C | Floater | Quote: 17.25 – 17.66 Spot Rate : 0.4100 Average : 0.3584 YTW SCENARIO |