PrefBlog

TXPR closed at 563.92, down 0.79% on the day. Volume today was 925,210, fourth-lowest of the past 21 trading days. The decline is a little over half of Friday’s gain … it would be interesting to work out the transaction costs of the accounts that were buying late on Friday. Say, 3-million shares extra, 0.75% peak market impact, $20/share … say, up to $450,000? And commission on top of that?

CPD closed at 11.20, down 0.53% on the day. Volume was 67,110, fourth-lowest of the past 21 trading days.

ZPR closed at 9.39, down 0.53% on the day. Volume was 252,790, third-highest of the past 21 trading days.

Five-year Canada yields were down slightly to 3.75% today.

Rishi Sunak will be the next UK PM:

He’s got a glittering résumé, billionaire in-laws and enjoyed a meteoric rise in politics. But Rishi Sunak, the man about to become Britain’s next prime minister, remains something of a mystery to many in the country.

Mr. Sunak, 42, was acclaimed Conservative Party Leader on Monday and he’ll formally take over as prime minister on Tuesday, replacing Liz Truss who resigned after just 45 days in office. He’ll make history as Britain’s first person of Indian origin to hold the post and the youngest in more than 200 years. He’ll also be the country’s third prime minister in seven weeks.
…
Mr. Sunak’s victory comes with a certain amount of vindication. He finished second to Ms. Truss in a bruising leadership campaign this summer that pitted his experience as Chancellor of the Exchequer against her free-market ideology. Mr. Sunak tried to be the voice of reason during the race and he criticized Ms. Truss’s pledge to slash taxes as a “fairy tale.”

In the end, Ms. Truss proved Mr. Sunak’s point by introducing a tax-cutting mini-budget that caused so much financial turmoil that Conservative members of Parliament moved quickly to force her out.

So we’ll see how that turns out. In the meantime, have a look at an American reaction to the Truss budget, courtesy of Fox News.

Speaking of quick flameouts, the OSC has a job opening:

Heather Zordel, the new chair of the recently restructured Ontario Securities Commission has resigned, just seven months after she was appointed to lead the board of Canada’s largest securities regulator.

Ms. Zordel, a Bay Street lawyer, was appointed in March by the Progressive Conservative government of Ontario Premier Doug Ford, immediately prompting two high-profile board resignations in protest.
…
But when Ms. Zordel’s appointment was announced in March, it immediately caused a stir. Ms. Zordel had a previous, contentious term as a commissioner between 2019 and 2021, which ended not long after a majority of commissioner peers recommended against her reappointment. Her elevation to chair a little more than a year later prompted two sitting commissioners – lead director Lorie Haber and Craig Hayman, the chair of the OSC’s governance and nominating committee – to resign in protest.

She has also been criticized by investor protection advocates for some of the views she espoused in two decisions she worked on during her first stint with the OSC.

In both cases, she was part of a three-person adjudicative panel, but dissented, in part, from the majority. Her dissents were two of just three dissents in OSC enforcement proceedings over the past decade, according to the regulator’s records.

In her dissents, Ms. Zordel differed from the other two members of each adjudicative panel on several core issues in securities law. Those issues include what constitutes material, non-public information (MNPI), which can lead to illegal insider trading. She also disagreed with other panelists about how much leeway an investment fund has to deviate from its offering memoranda before its actions become fraudulent.

TXPR closed at 568.42, up 1.44% on the day. Volume today was 5.91-million, highest of the past 21 trading days by far – nearly four times as high as the second-place day.

CPD closed at 11.26, up 0.99% on the day. Volume was 73,460, below the median of the past 21 trading days.

ZPR closed at 9.44, up 0.86% on the day. Volume was 126,840, fourth-lowest of the past 21 trading days.

Five-year Canada yields were down to 3.76% today.

The market popped up big time at the end of the session and during the extended session; it looks like Raymond James was acting for somebody who got a really, really itchy trigger finger. Of the top six issues by volume today, they:
– sold TRP.PR.B (deep discount FixedReset)
– sold PWF.PR.P (deep discount FixedReset)
– Bought POW.PR.C (high-coupon straight)
– Sold IAF.PR.I (FixedReset discount)
– Sold RY.PR.N (PerpetualDiscount)
– Sold RY.PR.O (PerpetualDiscount)

Of course, there may be issues with higher volume that I don’t report because they’re junk. But there’s some guy on a preferred desk who’s going home with a big commission-derived smile tonight!

The five-year Canada yield popped up today to 3.88%%. This has been attributed, as ususal, to fear of the Fed:

North American stocks ended the session lower and benchmark Treasury yields continued their ascent on Thursday after investors weighed generally upbeat earnings against the prospect that the Federal Reserve could hold firm on its aggressive policy for longer than they had hoped.

Canada’s TSX and all three major U.S. stock indexes reversed an earlier rally, turning red after remarks from Philadelphia Federal Reserve President Patrick Harker suggested the central bank will “keep raising rates for a while.” Harker’s comments also helped support the 10-year Treasury yield’s climb past 14-year highs.
…
Financial markets have now fully priced in yet another 75 basis point interest rate hike from the Federal Reserve when it meets next month, according to CME’s FedWatch tool.

A spate of mixed quarterly corporate results and economic indicators provided some evidence of economic slowdown, but a dip in jobless claims showed the Fed’s aggressive campaign of interest rate hikes has so far had minimal effect on the tight U.S. labor market.
…
Benchmark Treasury yields resumed their rise after economic data appeared to confirm the Fed is unlikely to relent in its aggressive campaign to rein in inflation.

Benchmark 10-year notes last fell 25/32 in price to yield 4.2346%, from 4.129% late on Wednesday.

The 30-year bond fell 49/32 in price to yield 4.231%, from 4.127% late on Wednesday.

Oh, and what’s ‘er name resigned as UK PM:

Then-chancellor of the exchequer Kwasi Kwarteng, who shared Ms. Truss’s economic outlook, unveiled a mini-budget on Sept. 23 that included sweeping tax cuts but no detailed plan spelling out how the measures would be financed. That spooked investors and drove the British pound to a record low against the U.S. dollar. It also pummelled prices for government bonds, which in turn drove up the cost of mortgages.

Ms. Truss faced a chorus of criticism and began backtracking. First she scrapped plans to cut the top income tax rate to 40 per cent from 45 per cent. Then, she fired Mr. Kwarteng and replaced him with Jeremy Hunt, who started dismantling almost all the tax cuts in the mini-budget.

With her economic plan in disarray and almost all of her campaign promises broken, Ms. Truss vowed to fight on, but her efforts to address her many U-turns fell flat. Public opinion polls put the Conservatives 30 points behind the Labour Party, and one survey found that just 10 per cent of voters approved of Ms. Truss’s performance in office.

You can only get away with wingnut-scale tax cuts if you’re the richest country on Earth. And there’s only one of those … and cracks in the edifice are slowly spreading …

PerpetualDiscounts now yield 6.58%, equivalent to 8.55% interest at the standard equivalency factor of 1.3x. Long corporates have been hammered in the past week to yield 5.56%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has declined to 300bp from the 320bp reported October 12.

TXPR closed at 559.12, up 0.99% on the day. Volume today was 1.52-million, fourth-highest of the past 21 trading days.

CPD closed at 11.21, up 0.81% on the day. Volume was 130,720, near the median of the past 21 trading days.

ZPR closed at 9.36, up 0.21% on the day. Volume was 232,310, near the median of the past 21 trading days.

Five-year Canada yields were down to 3.53% today.

TXPR closed at 553.64, up 0.92% on the day. Volume today was 1.27-million, near the median of the past 21 trading days.

CPD closed at 11.12, up 2.11% on the day. Volume was 181,620, fourth-highest of the past 21 trading days.

ZPR closed at 9.34, up 2.52% on the day. Volume was 214,210, near the median of the past 21 trading days.

Five-year Canada yields were down slightly to 3.64% today.

DBRS published a commentary on gilts:

Pressures have continued to mount in the UK government bond market. To a large extent this reflects concerns over the current incongruence between fiscal and monetary policies in the UK, with the market volatility exacerbated by liability-driven investment (LDI) funds. UK gilts have again come under pressure in less than a month, with another sell-off and yield spike, following the governor of the Bank of England’s (BoE) confirmation that the temporary emergency support adopted in September would end on 14th October as planned. The sell-off of gilts took place despite additional interventions by the BoE on 10th and 11th October. We see with some concern how the BoE interventions this week initially failed to contain market pressures.

We highlight the risk that volatility in the gilt market could turn more long lasting. Persistent pressures and dysfunction could pose risks to the UK’s financial stability. Financial instability would ultimately have adverse consequences for the financial flexibility of the UK government. We see both the health of the pension fund sector – as one of the main holders of government bonds – and the efficient functioning of the gilt market, as key for the financial flexibility of the UK government.

While we see with concern the ongoing pressures in the gilt market and the liquidity issues in the pension fund sector, we expect the BoE to continue to address potential risks to financial stability, preventing liquidity issues turning into solvency problems at a systemic level. That said, we continue to monitor market and policy developments. We would see with great concern a situation in which the BoE measures fail to prevent contagion from the stresses in pension funds to other financial market participants.

Key Highlights
• The inconsistency between fiscal and monetary policies remains a concern, posing risks for policy credibility.
• If pressures in the gilt market prove persistent, financial stability risks could emerge.
• Financial stability risks could have adverse consequences for the financial flexibility of the UK government. The efficient functioning of the gilt market remains crucial.

My understanding is that Truss’ leadership is now a laughingstock on deathwatch.