The Bank of Canada stood pat today:
The Bank of Canada today maintained 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 economy is evolving largely as expected in the Bank’s October Monetary Policy Report (MPR). In the United States, growth in the third quarter was stronger than forecast but is still expected to moderate in the months ahead. Growth has firmed in other advanced economies. Meanwhile, oil prices have moved higher and financial conditions have eased. The global outlook remains subject to considerable uncertainty, notably about geopolitical developments and trade policies.
Recent Canadian data are in line with October’s outlook, which was for growth to moderate while remaining above potential in the second half of 2017. Employment growth has been very strong and wages have shown some improvement, supporting robust consumer spending in the third quarter. Business investment continued to contribute to growth after a strong first half, and public infrastructure spending is becoming more evident in the data. Following exceptionally strong growth earlier in 2017, exports declined by more than was expected in the third quarter. However, the latest trade data support the MPR projection that export growth will resume as foreign demand strengthens. Housing has continued to moderate, as expected.
Inflation has been slightly higher than anticipated and will continue to be boosted in the short term by temporary factors, particularly gasoline prices. Measures of core inflation have edged up in recent months, reflecting the continued absorption of economic slack. Revisions to past quarterly national accounts have resulted in a higher level of GDP. However, this is unlikely to have significant implications for the output gap because the revisions also imply a higher level of potential output. Meanwhile, despite rising employment and participation rates, other indicators point to ongoing – albeit diminishing – slack in the labour market.
Based on the outlook for inflation and the evolution of the risks and uncertainties identified in October’s MPR, Governing Council judges that the current stance of monetary policy remains appropriate. While higher interest rates will likely be required over time, Governing Council will continue to be cautious, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.
It seems that some players were expecting a hike:
The Canadian dollar reversed gains after the statement, weakening 0.7 percent to C$1.2777 per U.S. dollar at 11:10 a.m. in Toronto. Yields on Canadian government bonds fell across all maturities, with the rate on the country’s two-year bonds dropping four basis points to 1.5 percent.
Swaps trading suggests investors pushed back their expectations for the next rate increase, with the likelihood of a hike in the first quarter now at 60 percent from as high as 75 percent earlier this week.
Meanwhile, in the Canadian preferred share market:
Click for BigPerpetualDiscounts now yield 5.30%, equivalent to 6.89% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.75%, so the pre-tax interest-equivalent spread is now 315bp, a significant widening from the 305bp reported November 6.
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 |
-0.3733 % |
2,503.7 |
| FixedFloater |
0.00 % |
0.00 % |
0 |
0.00 |
0 |
-0.3733 % |
4,594.1 |
| Floater |
3.65 % |
3.84 % |
33,207 |
17.68 |
4 |
-0.3733 % |
2,647.6 |
| OpRet |
0.00 % |
0.00 % |
0 |
0.00 |
0 |
-0.1247 % |
3,117.6 |
| SplitShare |
4.73 % |
3.72 % |
54,730 |
1.07 |
6 |
-0.1247 % |
3,723.1 |
| Interest-Bearing |
0.00 % |
0.00 % |
0 |
0.00 |
0 |
-0.1247 % |
2,904.9 |
| Perpetual-Premium |
5.37 % |
4.73 % |
55,435 |
0.24 |
20 |
-0.2160 % |
2,832.6 |
| Perpetual-Discount |
5.24 % |
5.30 % |
73,312 |
14.91 |
14 |
-0.3885 % |
2,989.9 |
| FixedReset |
4.30 % |
4.44 % |
143,914 |
6.13 |
98 |
-0.3555 % |
2,461.5 |
| Deemed-Retractible |
5.07 % |
5.32 % |
89,841 |
5.95 |
30 |
-0.3673 % |
2,932.8 |
| FloatingReset |
2.74 % |
2.81 % |
40,241 |
3.92 |
8 |
0.0925 % |
2,681.7 |
| Performance Highlights |
| Issue |
Index |
Change |
Notes |
| IFC.PR.C |
FixedReset |
-2.46 % |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.60
Bid-YTW : 5.57 % |
| IFC.PR.A |
FixedReset |
-1.48 % |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.35
Bid-YTW : 7.82 % |
| MFC.PR.C |
Deemed-Retractible |
-1.45 % |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.78
Bid-YTW : 6.82 % |
| MFC.PR.M |
FixedReset |
-1.42 % |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.86
Bid-YTW : 5.49 % |
| BAM.PF.E |
FixedReset |
-1.37 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.55
Evaluated at bid price : 23.03
Bid-YTW : 4.70 % |
| CM.PR.O |
FixedReset |
-1.37 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.68
Evaluated at bid price : 23.07
Bid-YTW : 4.38 % |
| MFC.PR.N |
FixedReset |
-1.36 % |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.52
Bid-YTW : 5.66 % |
| IAG.PR.A |
Deemed-Retractible |
-1.27 % |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.61
Bid-YTW : 6.26 % |
| MFC.PR.L |
FixedReset |
-1.25 % |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.05
Bid-YTW : 5.94 % |
| PWF.PR.L |
Perpetual-Discount |
-1.19 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 23.92
Evaluated at bid price : 24.16
Bid-YTW : 5.33 % |
| CM.PR.P |
FixedReset |
-1.17 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.44
Evaluated at bid price : 22.73
Bid-YTW : 4.35 % |
| CM.PR.Q |
FixedReset |
-1.16 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.99
Evaluated at bid price : 23.92
Bid-YTW : 4.55 % |
| BMO.PR.S |
FixedReset |
-1.06 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.82
Evaluated at bid price : 23.25
Bid-YTW : 4.35 % |
| BAM.PF.B |
FixedReset |
-1.06 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.93
Evaluated at bid price : 23.40
Bid-YTW : 4.68 % |
| BAM.PR.C |
Floater |
-1.02 % |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 14.61
Evaluated at bid price : 14.61
Bid-YTW : 3.88 % |
| MFC.PR.R |
FixedReset |
3.83 % |
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.03 % |
| Volume Highlights |
| Issue |
Index |
Shares
Traded |
Notes |
| HSB.PR.C |
Deemed-Retractible |
403,440 |
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-01-05
Maturity Price : 25.00
Evaluated at bid price : 25.28
Bid-YTW : 2.90 % |
| SLF.PR.J |
FloatingReset |
238,765 |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.60
Bid-YTW : 7.74 % |
| BNS.PR.R |
FixedReset |
100,083 |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.13
Bid-YTW : 3.64 % |
| TD.PR.Y |
FixedReset |
80,100 |
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.93
Bid-YTW : 3.61 % |
| BNS.PR.G |
FixedReset |
60,030 |
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-07-25
Maturity Price : 25.00
Evaluated at bid price : 26.83
Bid-YTW : 3.54 % |
| RY.PR.Z |
FixedReset |
48,500 |
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.49
Evaluated at bid price : 22.90
Bid-YTW : 4.30 % |
| There were 34 other index-included issues trading in excess of 10,000 shares. |
| Wide Spread Highlights |
| Issue |
Index |
Quote Data and Yield Notes |
| PWF.PR.A |
Floater |
Quote: 17.42 – 18.25
Spot Rate : 0.8300
Average : 0.5575
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 17.42
Evaluated at bid price : 17.42
Bid-YTW : 3.23 % |
| GWO.PR.Q |
Deemed-Retractible |
Quote: 24.40 – 24.74
Spot Rate : 0.3400
Average : 0.2128
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.40
Bid-YTW : 5.54 % |
| BMO.PR.Y |
FixedReset |
Quote: 24.22 – 24.64
Spot Rate : 0.4200
Average : 0.3165
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 23.12
Evaluated at bid price : 24.22
Bid-YTW : 4.44 % |
| PWF.PR.F |
Perpetual-Discount |
Quote: 24.65 – 25.00
Spot Rate : 0.3500
Average : 0.2534
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 24.34
Evaluated at bid price : 24.65
Bid-YTW : 5.38 % |
| VNR.PR.A |
FixedReset |
Quote: 24.27 – 24.64
Spot Rate : 0.3700
Average : 0.2780
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 22.90
Evaluated at bid price : 24.27
Bid-YTW : 4.67 % |
| PWF.PR.T |
FixedReset |
Quote: 24.00 – 24.34
Spot Rate : 0.3400
Average : 0.2496
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-12-06
Maturity Price : 23.50
Evaluated at bid price : 24.00
Bid-YTW : 4.28 % |
