The Fed will continue to pour money into the economy:
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
And so the stock market continues to rise:
The S&P 500 (SPX) advanced 0.7 percent to 1,558.71 at 4 p.m. in New York, trading within seven points of its record reached in 2007. The Dow Jones Industrial Average rose 55.91 points, or 0.4 percent, to 14,511.73. About 5.9 billion shares traded hands on U.S. exchanges today, 6.3 percent below the three-month average.
Cyprus is scrambling to figure out what comes next:
The Cypriot government is scrambling to find bailout “Plan B” as anxieties rise about the timing of the reopening of the banks.
Cypriot banks remained closed again Wednesday and the government’s self-imposed deadline to reopen them by Thursday seems unlikely to be met. While some ATMs still have cash, businesses fear they will soon get crippled unless they can resume normal banking activities, such as making payments to foreign suppliers.
The Cypriot government was locked in meetings Wednesday in Nicosia to try to create a new bailout plan that would be acceptable to the Euro group – the finance ministers of the 17 euro zone countries.
Cyprus’s finance minister, Michael Sarris, was in Moscow Wednesday to seek financial assistance from the Russian government as Russia emerged as a potential saviour. Cypriot president Nicos Anastasiades used a half-hour phone call with his Russian counterpart, Vladimir Putin, to ramp up the save-Cyprus pressure.
Here’s one way to beat deposit taxes:
Gold use in India, the world’s biggest buyer, may climb for the first time in three years as rising incomes and inflation boost investment demand, undermining efforts to narrow a record current-account deficit.
Consumption may total 865 metric tons to 960 tons this year, compared with 864.2 tons in 2012, Somasundaram P.R., managing director of the World Gold Council for India, said in an interview in Mumbai. The gain in imports will match the increase in demand, he said. The country imported 860 tons last year, according to data from the council.
India has tripled the tax on imports since the start of 2012 to moderate demand as gold accounted for almost 80 percent of the current-account deficit, the broadest measure of trade. Gold rallied for 12 straight years, driven in part by demand from investors looking for a store of wealth amid concern about inflation. Goldman Sachs Group Inc. predicts the rally will end as a U.S. economic recovery gathers momentum.
I mentioned Spend-Every-Penny’s outrageous interference in the Canadian mortgage market yesterday. It appears I’m not the only one:
>Not everyone in the Conservative cabinet is backing Jim Flaherty’s latest intervention in the mortgage market.
Small Business Minister Maxime Bernier says he believes the finance minister overstepped his bounds by having his office phone Manulife Financial and ask they withdraw their discount on five-year mortgages to 2.89 per cent from 3.09.
Bernier told reporters Wednesday he would not have done it.
“Me, personally, I would not dictate to businesses what prices to decide,” he said.
“It’s the market. It’s supply and demand that decides the prices. It is the case for interest rates, it is the case for other products too.”
There were plenty of alternatives to this reckless action:
Toronto-Dominion Bank chief economist Craig Alexander said that if Ottawa feels the need to take more action on this front, one tool at its disposal could be setting a minimum interest rate at which people must qualify for an insured mortgage. That would prove buyers could withstand higher rates. But it would not stop them from enjoying lower rates if banks are willing to offer them.
I have no problem with the ethics of the feds setting their own rules for their own mortgage insurance – although I think their policies for the past decade have been stupid. It’s when they start micromanaging unrelated business that I get upset.
It was another mixed day for the Canadian preferred share market, with PerpetualPremiums up 16bp, FixedResets off 5bp and DeemedRetractibles ahead by 5bp. Volatility seems a bit high, but it’s just the Floaters that make it look good. Volume was on the low side.
PerpetualDiscounts now yield 4.85%, equivalent to 6.30% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.25%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 205bp, a slight (and perhaps spurious) decline from the 210bp reported March 13.
| 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 | -0.7211 % | 2,627.9 |
| FixedFloater | 4.09 % | 3.44 % | 29,686 | 18.39 | 1 | 0.0000 % | 3,971.7 |
| Floater | 2.54 % | 2.83 % | 87,935 | 20.16 | 5 | -0.7211 % | 2,837.5 |
| OpRet | 4.81 % | 2.32 % | 59,578 | 0.28 | 5 | 0.0852 % | 2,605.2 |
| SplitShare | 4.28 % | 4.08 % | 677,460 | 4.20 | 4 | 0.1039 % | 2,939.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0852 % | 2,382.2 |
| Perpetual-Premium | 5.19 % | 1.73 % | 89,631 | 0.56 | 31 | 0.1601 % | 2,365.3 |
| Perpetual-Discount | 4.77 % | 4.85 % | 164,570 | 15.77 | 5 | 0.0243 % | 2,663.7 |
| FixedReset | 4.89 % | 2.62 % | 290,905 | 3.30 | 80 | -0.0533 % | 2,512.6 |
| Deemed-Retractible | 4.86 % | 3.11 % | 138,135 | 0.60 | 44 | 0.0537 % | 2,448.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRI.PR.B | Floater | -3.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-20 Maturity Price : 23.27 Evaluated at bid price : 23.57 Bid-YTW : 2.19 % |
| BAM.PR.K | Floater | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-20 Maturity Price : 18.18 Evaluated at bid price : 18.18 Bid-YTW : 2.88 % |
| FTS.PR.H | FixedReset | -1.07 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 2.58 % |
| PWF.PR.A | Floater | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-20 Maturity Price : 24.22 Evaluated at bid price : 24.51 Bid-YTW : 2.12 % |
| POW.PR.G | Perpetual-Premium | 1.22 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-04-15 Maturity Price : 26.00 Evaluated at bid price : 27.36 Bid-YTW : 4.26 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CU.PR.F | Perpetual-Discount | 459,650 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-20 Maturity Price : 24.61 Evaluated at bid price : 25.00 Bid-YTW : 4.50 % |
| MFC.PR.D | FixedReset | 254,942 | RBC crossed blocks of 187,400 and 35,000 at 26.35. TD crossed 25,000 at 26.40. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.41 Bid-YTW : 2.04 % |
| FTS.PR.H | FixedReset | 55,068 | Nesbitt crossed 50,000 at 26.22. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.95 Bid-YTW : 2.58 % |
| BNS.PR.P | FixedReset | 41,700 | Desjardins crossed 34,000 at 25.17. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.18 Bid-YTW : 3.33 % |
| PWF.PR.S | Perpetual-Discount | 33,484 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-20 Maturity Price : 24.69 Evaluated at bid price : 25.09 Bid-YTW : 4.80 % |
| TRP.PR.D | FixedReset | 31,332 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-03-20 Maturity Price : 23.32 Evaluated at bid price : 25.73 Bid-YTW : 3.48 % |
| There were 28 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRI.PR.B | Floater | Quote: 23.57 – 24.48 Spot Rate : 0.9100 Average : 0.6638 YTW SCENARIO |
| BAM.PR.C | Floater | Quote: 18.50 – 19.00 Spot Rate : 0.5000 Average : 0.3457 YTW SCENARIO |
| CIU.PR.C | FixedReset | Quote: 24.62 – 24.99 Spot Rate : 0.3700 Average : 0.2376 YTW SCENARIO |
| BAM.PR.K | Floater | Quote: 18.18 – 18.42 Spot Rate : 0.2400 Average : 0.1499 YTW SCENARIO |
| FTS.PR.H | FixedReset | Quote: 25.95 – 26.29 Spot Rate : 0.3400 Average : 0.2506 YTW SCENARIO |
| PWF.PR.E | Perpetual-Premium | Quote: 25.68 – 25.90 Spot Rate : 0.2200 Average : 0.1366 YTW SCENARIO |
[…] PerpetualDiscounts now yield 4.82%, equivalent to 6.27% interest at the standard conversion factor of 1.3x. Long Corporates now yield about 4.2%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 205bp, unchanged from the figure reported March 20. […]