Category: Market Action

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Tiff Macklem is the new governor of the BoC:

Finance Minister Bill Morneau has appointed Tiff Macklem, the former senior deputy governor of the Bank of Canada, to take over the top job at the central bank as it navigates the uncertainty of a pandemic-driven recession.

Macklem is currently the dean of the Rotman School of Management in Toronto, but had spent decades with the Bank of Canada before starting that appointment.

Macklem began his career at the bank in 1984. He was widely expected to win the contest for bank governor in 2013, but was beaten out by Stephen Poloz, who was then CEO of Export Development Canada.

Poloz’s term ends June 2.

TXPR closed at 520.86, down 0.63% on the day. Volume today was 1.70-million, lowest of the past thirty days, behind second-place April 24.

CPD closed at 10.38, down 0.10% on the day. Volume was 151,520, high but not extraordinary in the context of the past 30 trading days.

ZPR closed at 8.10, down 0.37% on the day. Volume of 197,498 was low in the context of the past 30 trading days.

Five-year Canada yields were unchanged at 0.38% today.

Well, that’s another month done! This one was considerably more pleasant than the last one!

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The markets got excited over initial testing of remdesivir today:

A top U.S. health official said Gilead Sciences Inc’s experimental antiviral drug remdesivir is likely to become the standard of care for COVID-19 after early results from a key clinical trial on Wednesday showed it helped certain patients recover more quickly from the illness caused by the coronavirus.

Preliminary results from a U.S. government trial show that patients given remdesivir had a 31 per cent faster recovery time than those who received a placebo, results hailed by Dr. Anthony Fauci, the nation’s top infectious disease expert, as “highly significant.”

Gilead earlier on Wednesday said remdesivir helped improve outcomes for patients with COVID-19 in the government-run trial, and provided additional data suggesting it worked better when given earlier in the course of illness, sending its shares up more than 7 per cent.

The FOMC also met, but nothing really new was said, although they hint at forward guidance suggesting rates are stuck for a while:

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.

The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor market conditions and is prepared to adjust its plans as appropriate.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.

Implementation Note issued April 29, 2020

TXPR closed at 524.34, up 2.76% on the day. Volume today was 3.59-million, very high in the context of the past thirty days.

CPD closed at 10.49, up 2.44% on the day. Volume was 227,152, second only to April 9 in the past 30 trading days.

ZPR closed at 8.195, up 2.69% on the day. Volume of 358,272 was high in the context of the past 30 trading days.

Five-year Canada yields were down 1bp to 0.41% today.

PerpetualDiscounts now yield 5.96%, equivalent to 7.75% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.38%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened somewhat, to 435bp from the 425bp reported April 22.

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TXPR closed at 510.24, up 0.76% on the day. Volume today was 2.72-million, below average in the context of the past thirty days.

CPD closed at 10.24, up 1.69% on the day. Volume was 77,422, quite low in the context of the past 30 trading days.

ZPR closed at 7.98, up 0.88% on the day. Volume of 258,059 was average in the context of the past 30 trading days.

Five-year Canada yields were down 5bp to 0.42% today.

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TXPR closed at 506.38, up 0.59% on the day. Volume today was 3.22-million, maybe a hair above average in the context of the past thirty days.

CPD closed at 10.07, up 0.10% on the day. Volume was 65,422, second-lowest of the past 30 trading days, ahead of only April 22

ZPR closed at 7.91, up 0.89% on the day. Volume of 180,599 was well below average in the context of the past 30 trading days.

Five-year Canada yields were up 3bp to 0.47% today.

Aristocrats have fallen on hard times:

Companies across a range of industries are slashing or suspending dividends to cope with the economic fallout from the coronavirus outbreak, complicating the stock selection process for money managers eager to buttress their portfolios with a steady stream of income.
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The S&P 500 dividend aristocrats index, which tracks companies that have increased dividends annually for the past 25 years and includes Exxon and Chevron, has fallen about 19% so far in 2020 as of Thursday, greater than the 12.9% drop over that time for the S&P 500 total return index.
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The S&P 500’s dividend yield recently exceeded the yield on the benchmark 10-year U.S. Treasury by its highest margin in nearly five decades.
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Goldman Sachs expects S&P 500 aggregate dividends to fall 23% to $398 billion in 2020 after rising each year over the past decade.

Amidst frequent reports of commercial evictions, there is talk of a new federal program to pay the rent:

Ottawa is proposing to offer commercial rent relief in the form of loans for landlords of small and medium-sized businesses that would cover up to three-quarters of tenants’ payments for three months, according to sources familiar with the negotiations.

A portion of the loans – as much as two-thirds, according to three sources – is expected to be forgivable. Discussions with provinces and territories were continuing as next month’s rent payments loom, said the sources.
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Three of the sources said the current proposal would require tenants to cover the remaining 25 per cent of their rent, and that the program would initially cover April, May and June rent, with further months subject to a later decision.

Significant questions remained over measures that would guarantee landlords use the money to relieve their tenants, two sources said.

I must say, I’m getting more than a little tired of the continuing execrable quality of the quotes provided by the Exchange.

PerpetualDiscounts now yield 6.15%, equivalent to 8.00% interest at the standard equivalency factor of 1.3x. Long corporates continue to yield 3.75%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed significantly, to 425bp from the 445bp reported April 15.