Category: Market Action

The TXPR price index set a new 52-week high today of 694.34, edging the old mark of 694.10 set yesterday.

The TXPR price index set a new 52-week high of 694.10 today, beating the old mark of 693.91 set on November 11.

TXPR was helped along by amazing performance of PWF.PR.P, up 11.06% on a close-close basis, due to four trades executed at 3:46-3:47pm, all buys by RBC from CIBC. This took the market from a close of 19.26 yesterday, through 20.00 at 3:18, through the first two of the four trades at 20.69, through the third at 20.70 to 100 shares at the close of 21.39. It is of interest to note that RBC was on the buy side all day long; not quite monopolizing the market but making a damn good effort!

By my count, RBC was the buyer in 22 of the 27 TSX trades today, accounting for 6,600 of the 7,100 shares traded at the venue. Consolidated volume (including all the ATSs) was 19,750, so I’ll guess they bought somewhere a little north of $300,000 worth altogether (actual numbers are probably available somewhere). This is too much – and spread over too much time – to be some idiot placing a market or fat-finger order; and it seems unlikely that somebody with that much money to spend suddenly realized that PWF.PR.P will reset soon and, um, might therefore go up. So I’m gonna guess that it’s a buy-in, with RBC getting aggressive (while still reasonably patient – most TSX trades are for 100 shares) at about 3pm. The buy-in could be because of an unmargined short or a failed delivery.

Thanks to the newly arrived Assiduous Reader Le_bib for bringing this to my attention!

The Boston Fed has published a Current Policy Perspective by Anat Bracha and Jenny Tang titled Shaping the Future of Work: Workers’ Optimism and Pessimism about AI:

Key Takeaways:

• Only about 10% of survey respondents expected their financial well-being to worsen within the next year (2025) due to AI; 21% expected it to worsen in one to five years (through 2029).
• Roughly 11% of the workers in the survey anticipated some negative impact of AI on their job prospects; 5% were worried about job loss specifically.
• According to the survey, 49% of workers were confident they could adapt to AI with proper training; only 29% expected they could do so on their own.
• The expected effects of AI varied considerably across industries and educational levels, with workers in industries planning to expand AI use more worried about job loss.

I liked this chart:

Collectively, the results from the two surveys indicate that while overall worry about job loss due to AI did not seem to be acute at the end of last year, the intensity varied across industries and related mildly to the extent to which an industry planned to use AI.

While many workers in our survey were worried about how AI could affect their job, others indicated that they expect it will bring increased productivity and new opportunities; 22 percent of workers anticipated boosts to productivity, and 10 percent expected to have new AI-driven job or business opportunities.

As with pessimism about AI, optimism varied substantially across industries. The shares of workers expecting AI-related productivity boosts were the largest in information (53 percent), private educational services (42 percent), and finance and insurance (32 percent). Expectations of greater productivity are related positively to the share of an industry’s firms that expected to use more AI in the next six months, as recorded in the BTOS at the end of 2024. This relationship is seen in the right panel of Figure 3. The correlation is strong at 77 percent, and it is highly statistically significant.

PerpetualDiscounts now yield 5.64%, equivalent to 7.33% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.94% on 2025-12-18, while the price ZLC changed from 15.15 on 2025-12-17 to 15.21 on 2025-12-18, a gain of 40bp in price. Given a “Duration” of 12.29 for the ZLC portfolio (BMO does not specify which duration they report; I am assuming Modified), this implies that portfolio yield fell 3bp from 12/17 to 12/18, implying a yield of 4.97% on 2025-12-17. Therefore the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed slightly (and perhaps spuriously) to 235bp from the 240bp reported December 10.

Canadian inflation was steady in November:

Economists and academics expect the trend of rising prices at the grocery store will follow consumers into 2026 even as Statistics Canada reported the overall inflation rate held steady in November.

The agency said Monday that annual inflation rose 2.2 per cent in November, unchanged from the previous month and a tick below economists’ expectations.

Grocery prices were up 4.7 per cent year-over-year in November – a jump from 3.4 per cent in October and the highest level recorded since December 2023.

Rising prices for fresh berries were driving the acceleration in November, Statscan said, and costs were also rising in a broad category that includes prepared foods like soup and potato chips.

Prices for fresh or frozen beef were up 17.7 per cent in November amid lower cattle inventories across North America. Meanwhile, tariffs from the United States, combined with tough weather conditions, are putting strain on coffee-producing regions, driving the cost of refined coffee up 27.8 per cent annually.

The Bank of Canada left the policy rate unchanged today:

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

Major economies around the world continue to show resilience to US trade protectionism, but uncertainty is still high. In the United States, economic growth is being supported by strong consumption and a surge in AI investment. The US government shutdown caused volatility in quarterly growth and delayed the release of some key economic data. Tariffs are causing some upward pressure on US inflation. In the euro area, economic growth has been stronger than expected, with the services sector showing particular resilience. In China, soft domestic demand, including more weakness in the housing market, is weighing on growth. Global financial conditions, oil prices, and the Canadian dollar are all roughly unchanged since the Bank’s October Monetary Policy Report (MPR).

Canada’s economy grew by a surprisingly strong 2.6% in the third quarter, even as final domestic demand was flat. The increase in GDP largely reflected volatility in trade. The Bank expects final domestic demand will grow in the fourth quarter, but with an anticipated decline in net exports, GDP will likely be weak. Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility.

Canada’s labour market is showing some signs of improvement. Employment has shown solid gains in the past three months and the unemployment rate declined to 6.5% in November. Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued.

CPI inflation slowed to 2.2% in October, as gasoline prices fell and food prices rose more slowly. CPI inflation has been close to the 2% target for more than a year, while measures of core inflation remain in the range of 2½% to 3%. The Bank assesses that underlying inflation is still around 2½%. In the near term, CPI inflation is likely to be higher due to the effects of last year’s GST/HST holiday on the prices of some goods and services. Looking through this choppiness, the Bank expects ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target.

If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. Uncertainty remains elevated. If the outlook changes, we are prepared to respond. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.

… while the FOMC decreased its policy rate by 25bp, also as expected … and with dissents, also as expected:

Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.

In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting; and Austan D. Goolsbee and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.

The dotplot was interesting, as always:

PerpetualDiscounts now yield 5.65%, equivalent to 7.34% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.96% on 2025-12-10, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed slightly (and perhaps spuriously) to 240bp from the to 245bp reported December 3.