Assiduous Readers will recall that in the MAPF December 2021 Performance Report I suggested that:
While one can only rarely point to a single mechanism explaining a change in relative prices and say, with any credibility whatsoever, that A caused B, I have to admit I’m more dubious than usual about this claim. I believe that the continued rally is due to continued interest rate anticipation, which is now (for some investors) considered to be on the way up rather than continuing the downward staggering of the past ten years; this in turn is derived from Central Bank ‘easy money’ policies and very loose government fiscal policies; which is considered to be on the verge of driving inflation upwards.
Who’s right? Well, we’ll know in ten years, at a time when half of the investing world will graciously explain at length how their uncanny ability to read global market forces allowed them to time the market and make enormous profits, while the other half will tell you the question is irrelevant because investing is about the future, not the past. My advice is, as always, to make asset allocation decisions based on the long-term characteristics of each asset class and how these characteristics interact with your long-term portfolio objectives.
So here’s some interest rate anticipation from George Athanassakos:
It’s undoubtedly a contrarian viewpoint for many investors, but based on underlying trends, it’s my belief that higher interest rates are on the way. COVID-19 has only stalled these long-term forces. When the pandemic ends we will see the trend of higher rates to begin to establish itself.
…
Demographic developments are pushing the real interest rate trend higher. Baby boomers have been retiring and have stopped saving; in fact, they are in their “decumulation” years, which reduces the supply of funds.
This happens in the face of increased demand for capital by corporations that need to embed innovation and new technologies into their production processes, as well as by governments that need to borrow to fund structural deficits.
To clear the demand-supply imbalance, the real interest rate trend is pushed up, not unlike what had happened in the late 1970s.
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 |
0.4269 % |
1,897.7 |
| FixedFloater |
0.00 % |
0.00 % |
0 |
0.00 |
0 |
0.4269 % |
3,482.1 |
| Floater |
4.56 % |
4.58 % |
46,720 |
16.30 |
3 |
0.4269 % |
2,006.8 |
| OpRet |
0.00 % |
0.00 % |
0 |
0.00 |
0 |
-0.1638 % |
3,620.1 |
| SplitShare |
4.72 % |
4.47 % |
39,395 |
4.24 |
8 |
-0.1638 % |
4,323.2 |
| Interest-Bearing |
0.00 % |
0.00 % |
0 |
0.00 |
0 |
-0.1638 % |
3,373.1 |
| Perpetual-Premium |
5.33 % |
-1.97 % |
66,231 |
0.09 |
18 |
0.0043 % |
3,221.4 |
| Perpetual-Discount |
5.00 % |
5.06 % |
68,587 |
15.35 |
13 |
0.0095 % |
3,684.2 |
| FixedReset Disc |
4.98 % |
3.79 % |
135,462 |
17.54 |
57 |
0.2675 % |
2,354.9 |
| Insurance Straight |
5.04 % |
4.75 % |
85,230 |
15.37 |
22 |
0.0992 % |
3,567.2 |
| FloatingReset |
2.53 % |
0.51 % |
33,040 |
0.16 |
3 |
0.8256 % |
1,877.2 |
| FixedReset Prem |
5.13 % |
2.67 % |
211,651 |
1.03 |
20 |
0.1336 % |
2,694.2 |
| FixedReset Bank Non |
1.94 % |
1.56 % |
155,787 |
0.16 |
2 |
-0.0800 % |
2,882.6 |
| FixedReset Ins Non |
4.96 % |
3.71 % |
88,388 |
17.57 |
22 |
0.0482 % |
2,457.7 |
| Performance Highlights |
| Issue |
Index |
Change |
Notes |
| MFC.PR.N |
FixedReset Ins Non |
-21.79 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 4.86 % |
| TRP.PR.D |
FixedReset Disc |
-2.63 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 15.20
Evaluated at bid price : 15.20
Bid-YTW : 4.90 % |
| TRP.PR.C |
FixedReset Disc |
-1.71 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 10.35
Evaluated at bid price : 10.35
Bid-YTW : 4.67 % |
| EIT.PR.A |
SplitShare |
-1.24 % |
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 4.25 % |
| BAM.PR.R |
FixedReset Disc |
-1.21 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 14.75
Evaluated at bid price : 14.75
Bid-YTW : 4.60 % |
| BAM.PR.T |
FixedReset Disc |
-1.12 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 14.95
Evaluated at bid price : 14.95
Bid-YTW : 4.62 % |
| BAM.PR.Z |
FixedReset Disc |
1.04 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.75 % |
| BAM.PF.B |
FixedReset Disc |
1.04 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 17.42
Evaluated at bid price : 17.42
Bid-YTW : 4.72 % |
| NA.PR.S |
FixedReset Disc |
1.08 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 19.67
Evaluated at bid price : 19.67
Bid-YTW : 3.79 % |
| RY.PR.M |
FixedReset Disc |
1.09 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 21.38
Evaluated at bid price : 21.38
Bid-YTW : 3.55 % |
| BIP.PR.F |
FixedReset Disc |
1.13 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 23.02
Evaluated at bid price : 24.09
Bid-YTW : 5.27 % |
| TD.PF.K |
FixedReset Disc |
1.20 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 22.26
Evaluated at bid price : 22.68
Bid-YTW : 3.58 % |
| BNS.PR.I |
FixedReset Disc |
1.36 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 21.99
Evaluated at bid price : 22.33
Bid-YTW : 3.46 % |
| MFC.PR.F |
FixedReset Ins Non |
1.41 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 12.21
Evaluated at bid price : 12.21
Bid-YTW : 3.72 % |
| TD.PF.J |
FixedReset Disc |
1.57 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 22.75
Evaluated at bid price : 23.36
Bid-YTW : 3.51 % |
| MFC.PR.H |
FixedReset Ins Non |
1.71 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 23.25
Evaluated at bid price : 23.75
Bid-YTW : 3.74 % |
| SLF.PR.G |
FixedReset Ins Non |
1.85 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 12.09
Evaluated at bid price : 12.09
Bid-YTW : 3.75 % |
| CU.PR.F |
Perpetual-Discount |
1.90 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 23.38
Evaluated at bid price : 23.65
Bid-YTW : 4.80 % |
| MFC.PR.Q |
FixedReset Ins Non |
2.00 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 21.37
Evaluated at bid price : 21.37
Bid-YTW : 3.71 % |
| BAM.PF.F |
FixedReset Disc |
2.14 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 18.14
Evaluated at bid price : 18.14
Bid-YTW : 4.73 % |
| IAF.PR.G |
FixedReset Ins Non |
2.23 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 21.06
Evaluated at bid price : 21.06
Bid-YTW : 3.91 % |
| IAF.PR.I |
FixedReset Ins Non |
2.44 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 21.50
Evaluated at bid price : 21.87
Bid-YTW : 3.78 % |
| SLF.PR.J |
FloatingReset |
3.13 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 11.20
Evaluated at bid price : 11.20
Bid-YTW : 3.27 % |
| IFC.PR.G |
FixedReset Ins Non |
3.25 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 20.94
Evaluated at bid price : 20.94
Bid-YTW : 3.81 % |
| GWO.PR.N |
FixedReset Ins Non |
4.45 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 11.74
Evaluated at bid price : 11.74
Bid-YTW : 3.65 % |
| Volume Highlights |
| Issue |
Index |
Shares
Traded |
Notes |
| TRP.PR.A |
FixedReset Disc |
157,100 |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 13.39
Evaluated at bid price : 13.39
Bid-YTW : 4.82 % |
| TD.PF.G |
FixedReset Prem |
129,589 |
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 25.58
Bid-YTW : 1.20 % |
| RY.PR.Q |
FixedReset Prem |
114,632 |
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.47
Bid-YTW : 2.19 % |
| BNS.PR.E |
FixedReset Prem |
83,355 |
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 25.21
Bid-YTW : 1.61 % |
| TRP.PR.C |
FixedReset Disc |
61,675 |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 10.35
Evaluated at bid price : 10.35
Bid-YTW : 4.67 % |
| TRP.PR.B |
FixedReset Disc |
45,000 |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 9.58
Evaluated at bid price : 9.58
Bid-YTW : 4.40 % |
| There were 23 other index-included issues trading in excess of 10,000 shares. |
| Wide Spread Highlights |
| Issue |
Index |
Quote Data and Yield Notes |
| MFC.PR.N |
FixedReset Ins Non |
Quote: 15.15 – 19.84
Spot Rate : 4.6900
Average : 2.6682
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 4.86 % |
| BAM.PF.F |
FixedReset Disc |
Quote: 18.14 – 19.59
Spot Rate : 1.4500
Average : 0.8812
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 18.14
Evaluated at bid price : 18.14
Bid-YTW : 4.73 % |
| MFC.PR.M |
FixedReset Ins Non |
Quote: 19.69 – 20.69
Spot Rate : 1.0000
Average : 0.6647
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 19.69
Evaluated at bid price : 19.69
Bid-YTW : 3.78 % |
| BMO.PR.Y |
FixedReset Disc |
Quote: 21.45 – 22.00
Spot Rate : 0.5500
Average : 0.3701
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 3.64 % |
| PWF.PR.P |
FixedReset Disc |
Quote: 11.76 – 12.20
Spot Rate : 0.4400
Average : 0.3114
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2051-01-06
Maturity Price : 11.76
Evaluated at bid price : 11.76
Bid-YTW : 4.30 % |
| EIT.PR.A |
SplitShare |
Quote: 25.50 – 26.10
Spot Rate : 0.6000
Average : 0.4736
YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.50
Bid-YTW : 4.25 % |