Category: Market Action

The TXPR Price Index set a new 52-week high today of 688.35, erasing the old mark of 688.00 set yesterday.

Five-year Canadas were up 12bp to 2.74%, presumably on the perceived hawkish tone of Tiff Macklem’s post rate-announcement comments.

The FOMC loosened policy:

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 but remained low through August; 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 3-3/4 to 4 percent. In considering 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 decided to conclude the reduction of its aggregate securities holdings on December 1. 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.

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; Austan D. Goolsbee; 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 Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.

Colby Smith of the NYT remarks:

• Lower rates: After another quarter-point cut, interest rates set by the Fed are now below 4 percent for the first time since late 2022. Jerome H. Powell, the Fed’s chair, said today’s reduction moved the Fed’s policy settings closer to a “neutral” level that does not stimulate growth or slow it down. That suggests there may not be that much more scope for the central bank to cut interest rates further.
• Room for debate: This remains a very divided Fed, as evidenced by the fact that two officials cast dissenting votes in opposite directions. One wanted a bigger, half-point cut; another wanted no cut at all. The split stems not only from divergent forecasts about the economy but also risk tolerances around allowing the labor market to weaken or inflation to stay elevated.
• Uncertainty ahead: Mr. Powell made clear that the disagreements extended to the path forward for policy, with a cut at the December meeting not a “foregone conclusion” in light of “strongly differing views about how to proceed.” The Fed chair also said that a lack of official government statistics as a result of the ongoing shutdown could make the central bank more cautious about further cuts.
• Risky choices: Mr. Powell repeatedly emphasized what a challenging situation the Fed was in, reiterating that there was “no risk-free path.” If it keeps cutting to protect the labor market, inflation could get stuck above the Fed’s 2 percent target. If it focuses on getting inflation down, it could cause a more significant increase in unemployment.
• New balance: Mr. Powell also said the Fed was thinking carefully about its balance sheet, which the central bank said it would stop shrinking in December. He said that market strains that have cropped up in the past three weeks have shown that now is the right time to make that change.

PerpetualDiscounts now yield 5.52%, equivalent to 7.18% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.67% on 2025-10-28, and the closing price of ZLC changed from 15.72 on that date to 15.58 on 2025-10-29, a drop of 1.65%. This drop in ZLC price implies an increase in yield of 13bp (BMO does not specify whether their reported “Duration” of 12.44 is Macaulay or Modified; I will assume Modified) to 4.80%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed sharply to 240bp from the 255bp reported October 22.

The TXPR Price Index set a new 52-week high today of 688.00, beating the prior mark of 686.47 set yesterday.

A CNN piece on flagjacking brought to mind a cultural difference between the US and Canada:

[Canadian content creator and author Stewart] Reynolds’ offers a broader overview about the differences between Canadian and American travelers abroad, first with a disclaimer, then with a weather analogy.

“Canada’s got jerks. We’ve got a lot of jerks,” he tells CNN. “But on the whole, I think that Canadians generally try to find the best for the group, whereas Americans are very much for the individual.”

That might mean going to the back of the line instead of trying to find a shortcut, and waiting for their turn. Because Canadians value order, he says.

This characteristic goes a long way to explaining the productivity difference between the US and Canada that is attracting so much media attention lately.

My impression of the difference between US and Canadian business lies largely in how decisions get made. At a Canadian brokerage, for example, if you have a new idea for a product (a derivative, say, or a trading strategy) you’ve got to get the signatures of 10 Executive Vice Presidents before anything can happen – Canada operates by consensus and we wouldn’t want to make a mistake, would we? The US idolizes the Lone Hero. At a US brokerage, if you have a similar idea you go to your boss and if he likes it, then you’ve got X-million in firm capital to get the thing running. The deal is: if it works, you get rich. If it doesn’t work, you get fired. And your boss is hoping you’ll come up with something worth backing, because he has access to 10X-million in firm capital and if there’s one biblical incident that Americans are familiar with, it’s the Parable of the Talents.

On another note, Texas is suing over Tylenol:

Texas Attorney General Ken Paxton has filed a lawsuit against the companies Johnson & Johnson and Kenvue, claiming that they “deceptively” marketed Tylenol to pregnant mothers and that the medication is tied to an increased risk of autism. Kenvue said in a statement that the medication is safe and the company will “vigorously defend” against the claims.

The lawsuit, dated Monday and filed in the District Court of Panola County, Texas, comes about a month after President Donald Trump publicly claimed that the use of Tylenol during pregnancy can be associated with an increased risk of autism in the child, despite decades of evidence that the medication is safe.

“Big Pharma betrayed America by profiting off of pain and pushing pills regardless of the risks. These corporations lied for decades, knowingly endangering millions to line their pockets,” Paxton, the state’s Republican attorney general, who is also running for US Senate, said in a news release Tuesday. “By holding Big Pharma accountable for poisoning our people, we will help Make America Healthy Again.”

The lawsuit claims that Johnson & Johnson and Kenvue violated the Texas Deceptive Trade Practices-Consumer Protection Act because they knew that acetaminophen, the active ingredient in Tylenol, “is dangerous to unborn children and young children” and “they hid this danger and deceptively marketed Tylenol as the only safe painkiller for pregnant women,” according to the lawsuit.

I’m more or less pleased to see this, although it betrays lamentable governance. It will be lots of fun to see this thrashed out in a court of law, where all of the bluster of Trump & Kennedy will be shut down and a judge will be in a position to ask a relatively rare question nowadays: “What evidence do you have for this claim?”. I can just imagine the witnesses for the defence – I’m sure big names in medicine will be lined up for miles to testify on this.

The TXPR Price Index set a new 52-week high today of 686.47, erasing the prior mark of 685.28 set on Friday.

The TXPR Price Index set a new 52-week high today of 685.28, well above the prior mark of 683.66 set yesterday.

US inflation was not as bad as feared:

• • The September CPI inflation report showed that prices rose at a slower-than-expected rate of 0.3% last month, but annual price hikes for a range of consumer goods rose to the fastest pace so far this year.
• • Wall Street responded positively to the data, since it likely does not derail the Federal Reserve’s plans to continue cutting interest rates.
• • This is the first and only piece of official economic data the federal government has released this month, due to the shutdown. Some employees at the Bureau of Labor Statistics returned to work in order to produce the report, since it is needed to assess key cost-of-living adjustments for Social Security recipients.
• • Economists predicted the data would show that annual inflation ticked up in September to 3.1% from 2.9% in August and rose 0.4% on a month-to-month basis.

Meanwhile, it seems that the big US automakers do not believe there should be tariffs on their products:

Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, which represents GM, Stellantis and Ford Motor Co. in Canada, called Canada’s retaliation “an unforced error at the worst possible time.”
…
In an interview, Mr. Kingston said manufacturers facing remissions rules would rather export cars to Canada than build them here and risk being hit with tariffs.

“This is completely eroding our competitiveness right now for manufacturing,” Mr. Kingston said. “The tariff regime plus the EV mandate, now we have legal threats being levied to companies. It is virtually impossible to imagine a scenario where someone is looking at new investments in Canada under this framework.”

Suck it up, boys! We’ll be happy to buy cars made domestically, in Mexico, or imported from countries who practice freer trade – the US is welcome to go back to the 1960s and early 1970s, when import restrictions meant the Big 3 could get away with making crap cars for a long time, only to have their lunch eaten when a relaxation of those restrictions allowed the Japanese to take over the trade.

The dollar got hit on trade worries:

The Canadian dollar weakened against its U.S. counterpart on Friday as trade negotiations between Ottawa and Washington broke down and markets looked ahead to an expected Bank of Canada interest rate cut next week.

The loonie was trading 0.2% lower at 1.4015 per U.S. dollar, or 71.35 U.S. cents, after moving in a range of 1.3975 to 1.4039. For the week, the currency was nearly unchanged.

U.S. President Donald Trump is frustrated with Canada over trade negotiations that have not been going well, White House economic adviser Kevin Hassett said after Trump cut off trade talks between the two countries.

Well … that’s the official line. Walking out in a huff is an integral part of Trump’s dealmaking, so I’d say the latest kerfuffle has been long-planned, only awaiting a plausible trigger.

This time the plausible trigger was an Ontario ad quoting Reagan:

U.S. President Donald Trump has ended trade talks with Canada over an Ontario government anti-tariff advertising campaign running in the United States, prompting Premier Doug Ford to pull the ad at the request of Prime Minister Mark Carney.

The abrupt break in negotiations follows mounting White House frustration with Ottawa, which so far hasn’t agreed to the sort of punitive trade deal that other U.S. trading partners have accepted.

Mr. Trump became annoyed Thursday night at the ad, which features archival footage of late former U.S. president Ronald Reagan, a revered figure among Mr. Trump’s Republicans, warning that tariffs are economically disastrous.

In Truth Social posts Thursday and Friday, the U.S. President declared that “ALL TRADE NEGOTIATIONS ARE HEREBY TERMINATED,” incorrectly claimed that Mr. Reagan “LOVED TARIFFS,” and accused Canada of “trying to illegally influence the United States Supreme Court” on a coming case over Mr. Trump’s levies.

In a statement Friday afternoon, Mr. Ford said the ad would run as planned over the weekend – including during the first two games of baseball’s World Series between the Toronto Blue Jays and the Los Angeles Dodgers – but would no longer air as of Monday.

We can thank Trump, though, for making sure everybody knows about the ad and its contents. A variation of the Streisand Effect?

The TXPR Price Index hit a new 52-week high today of 683.66, edging the prior mark of 683.50 set yesterday.

It’s nice to see some meaningful retaliation:

The federal government is firing back at Stellantis and General Motors by limiting the number of tariff-free vehicles the automakers can import from the U.S. to sell in Canada, CBC News has learned.

The two multinational manufacturers will no longer be exempt from paying Canada’s retaliatory tariffs on as many U.S.-assembled vehicles as before, sources said.

The move is expected to put pressure on the companies to reinvest in Canadian production and workers to get this benefit back and avoid a big tariff bill.
…
Effective immediately, the government is reducing the amount of American-assembled vehicles GM can import tariff-free by 24 per cent and cutting Stellantis’s amount by 50 per cent, sources said.

Yup. Let automakers import from the States at preferential tariff rates only as much as they export to the States. There are lots of other automakers from free-trade countries who will be happy to pick up any slack there might be.

The TXPR Price Index set a new 52-week high of 683.50 today, beating the old mark of 682.97 set yesterday.

PerpetualDiscounts now yield 5.61%, equivalent to 7.29% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.73% on 2025-10-22, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained at the 255bp reported [belatedly] October 15.

The TXPR Price Index set a new 52-week high today, of 682.97 vs. the old mark of 682.28 set 2025-10-9.

Canadian inflation ticked up:

The Consumer Price Index rose 2.4 per cent in September on an annual basis, up from August’s 1.9-per-cent pace, Statistics Canada said Tuesday. Financial analysts had expected inflation to land at 2.2 per cent. On a monthly basis and adjusted for seasonality, prices rose 0.4 per cent.

The CPI results were heavily influenced by fluctuations in fuel costs. Year over year, gasoline prices fell by 4.1 per cent in September, but that was less than a 12.7-per-cent decline in August, putting upward pressure on headline inflation.

Excluding gas, consumer prices have risen by 2.6 per cent over the past year, up from 2.4 per cent in August.

After the CPI report, investors were pricing in a 66-per-cent chance that the Bank of Canada cuts interest rates by a quarter-point on Oct. 29, according to Bloomberg data. That’s down from 75-per-cent odds before the report.
…
Inflation has picked up in various categories. For example, grocery prices have risen by 4 per cent over the past year, and growth has been trending higher since April, 2024. Statscan noted that several items – including beef and coffee – have contributed to the upturn.

Still, there are signs that Canada isn’t facing a reignited inflation crisis. The Bank of Canada’s core measures of inflation – which strip out volatile movements in the CPI – rose by an annual average of 3.15 per cent in September, a tad higher than 3.1 per cent in August.

The market responded:

Here, in detail, is how implied probabilities of future interest rate moves stood in swaps markets after the 830 am ET inflation report. The current overnight rate is 2.50%, where it has stood since Sept. 17. While the bank moves in quarter-point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.

Pre-announcement

Post-announcement

The terminal rate edged up to 2.11% from 2.06%.

There is, of course, a lot of commentary on social media about housing prices, most of it generated by partisans who assume that the Prime Minister is responsible for every inconvenience in life. Here’s what’s being said in the States:

In the past few weeks, President Trump has blamed America’s largest homebuilders for the country’s housing affordability woes. In a social media post this month, Trump compared homebuilders to oil cartel OPEC, accusing them of sitting on empty lots to keep home prices artificially high.
…
Yet builders and economists say this supply shortage isn’t caused simply by builders sitting on empty lots. They say that building new homes has only gotten harder, slowed by regulation, labor shortages and high financing costs.
…
A study from the National Association of Homebuilders (NAHB) found that nearly 25% of the price of a typical newly built single-family home is due to regulations imposed by state, local and federal governments. The NAHB has lobbied against what it calls “regulatory burdens” around building homes.

If land-use regulations were relaxed, an extra 2.5 million more housing units would likely be added over the next decade — eliminating about two-thirds of the estimated housing shortage, according to an analysis by Goldman Sachs.

The analysis also noted that large-scale reform would be “challenging” to implement because most regulations are set at the local level.
…
Oren Amir, founder of Go Home Builders in Los Angeles, said some of his rebuilding projects in Altadena, where residential areas were destroyed by January’s wildfires, have been delayed by conflicting guidance from the city on rooftop solar panel requirements.
…
For example, California Gov. Gavin Newsom, a Democrat, recently signed a bill that overrides local zoning by allowing for more density near transit stops in some California counties. Montana Gov. Greg Gianforte, a Republican, has also enacted laws aimed at increasing housing supply and cutting red tape.

But it’s not only governments that slow projects down. There is often community resistance that stalls the building of homes.

That NIMBY, or “not in my back yard,” opposition is driven by a range of concerns, from overcrowding to worries about radically changing the character of communities.

NIMBY concerns are a leading obstacle to adding more housing supply, Donovan said. “We’ve got to get communities to understand we’re not talking building skyscrapers,” he said.

My views on “land use regulations” depend on what precisely is meant. If the regulations (or zoning bylaws, if you consider that different) say ‘you can’t build towers near subways stops or on arterial roads and you can’t build modest apartment buildings in residential neighborhoods’ – then I oppose such regulations. If they say ‘you can’t build sprawling suburbs on greenbelt‘ then I’m all in favour.

Trump’s lost another nominee, but what amused me was his lawyer’s defence of some very dubious social media posts:

“Looks like these texts could be manipulated or are being provided with material context omitted. However, arguendo, even if the texts are authentic, they clearly read as self-deprecating and satirical humor making fun of the fact that liberals outlandishly and routinely call MAGA supporters ‘Nazis,’” Paltzik first told Politico.

I love it! “Could be” and “arguendo” (Fancy Talk meaning ‘for the sake of an argument’)! He said absolutely nothing at all, made no claims whatsoever, but it sounded good!

Investment Executive had a piece on the preferred share market:

Since the preferred market is less liquid than some other types of fixed-income, “the capacity or the potential to outperform the benchmark is higher,” said the Montreal-based [Dynamic Funds’ Marc-André] Gaudreau [vice-president and senior portfolio manager of Dynamic Active Preferred Shares ETF.], whose ETF is one of the category’s best performers and has a five-star Morningstar rating.

Other actively managed funds that have outperformed their peer group include Global X Active Preferred, NBI Active Canadian Preferred Shares ETF and TD Active Preferred Share ETF.

“The other thing that’s very important is the flexibility in our mandate. We don’t have to be fully invested in the $25-par pref market in Canada,” Gaudreau said. “We can go to the U.S. We can go to the institutional preferred share market.” LRCNs and hybrids are also held in the Dynamic portfolio.

For his part, Fiera’s Normandeau is above market weight in rate-reset preferreds versus the fixed-rate perpetuals. Among the rate reset issues, he favours those with low- to mid-reset yields that are trading at discounts. These securities, along with having capital gains potential, are less likely to be called away by issuers.

The Global X portfolio also emphasizes high credit quality, Normandeau said. “In this environment right now, you’re not really paid to go to a weaker credit name.”

As it happens, I track all four of the active ETFs managed as part of my MAPF performance reporting – so you can check out how I did against them as of the end of September.

Thanks to Assiduous Reader A for bringing this to my attention!