The Fed has a new slogan – Twist & Shout!:
The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
…
Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.
With any luck, there will be increased pressure to end milkfare:
Canada has set an ambitious trade agenda that includes separate proposed deals with the EU, Japan and South Korea, along with entry into the Trans-Pacific Partnership negotiations. The issues on the table differ from negotiation to negotiation: Japan and South Korea want Canada to reduce or eliminate a 6.1 per cent tariff on imported automobiles and parts; The EU and United States are requesting a change in Canadian intellectual property laws.
One issue, however, is common to all negotiations: Our trading partners want to see an end to supply management of our dairy and poultry industries.
The tariffs that buttress the system range between 200 and 300 per cent on imported dairy products, with milk facing a 241 per cent tax and butter one of 298.5 per cent. These tariffs make foreign products prohibitively expensive and keep domestic prices among the highest in the world.
Spend-Every-Penny continues to micromanage the economy:
The federal government is moving again to tighten the rules on mortgage lending in Canada amid growing concerns that the housing market is overheated and household debt levels are climbing to perilous levels.
The country’s biggest banks were caught off guard on Wednesday night as the Department of Finance confirmed that it is clamping down on mortgages by reducing the maximum amortization for a government-insured mortgage to 25 years from 30.
Ottawa will also limit the amount of equity that can be borrowed against a home to 80 per cent of the property’s value, down from 85 per cent.
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 21bp, FixedResets off 1bp and DeemedRetractibles gaining 3bp. There was a good dollop of volatility, with no clear pattern showing up in the Performance Highlights table. Volume was low.
PerpetualDiscounts now yield 5.06%, equivalent to 6.58% interest at the standard conversion factor of 1.3x. Long corporates continue to yield about 4.4%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 220bp, a slight (and perhaps spurious) increase from the 215bp reported June 13.
HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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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 | 0.8650 % | 2,316.5 |
FixedFloater | 4.46 % | 3.85 % | 21,307 | 17.59 | 1 | -0.5138 % | 3,534.7 |
Floater | 3.14 % | 3.14 % | 71,393 | 19.39 | 3 | 0.8650 % | 2,501.2 |
OpRet | 4.81 % | 2.43 % | 36,761 | 1.00 | 5 | 0.0852 % | 2,510.1 |
SplitShare | 5.26 % | -8.45 % | 44,292 | 0.50 | 4 | 0.4535 % | 2,722.8 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0852 % | 2,295.2 |
Perpetual-Premium | 5.42 % | 3.27 % | 88,794 | 0.09 | 27 | 0.2126 % | 2,236.6 |
Perpetual-Discount | 5.06 % | 5.06 % | 117,367 | 15.38 | 7 | 0.1082 % | 2,448.2 |
FixedReset | 5.04 % | 3.18 % | 201,611 | 7.83 | 71 | -0.0131 % | 2,394.3 |
Deemed-Retractible | 5.01 % | 3.95 % | 153,537 | 2.66 | 45 | 0.0317 % | 2,307.7 |
Performance Highlights | |||
Issue | Index | Change | Notes |
IAG.PR.F | Deemed-Retractible | -1.49 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.71 Bid-YTW : 5.41 % |
SLF.PR.H | FixedReset | -1.27 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.15 Bid-YTW : 4.03 % |
SLF.PR.I | FixedReset | -1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.07 % |
CIU.PR.A | Perpetual-Discount | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-20 Maturity Price : 23.82 Evaluated at bid price : 24.25 Bid-YTW : 4.76 % |
BAM.PR.K | Floater | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-20 Maturity Price : 16.71 Evaluated at bid price : 16.71 Bid-YTW : 3.14 % |
BAM.PR.B | Floater | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-06-20 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 3.14 % |
FBS.PR.C | SplitShare | 1.79 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-12-15 Maturity Price : 10.00 Evaluated at bid price : 10.81 Bid-YTW : -10.93 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
IAG.PR.G | FixedReset | 233,615 | Recent new issue and reopening. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.12 Bid-YTW : 4.16 % |
W.PR.H | Perpetual-Premium | 100,700 | Desjardins crossed blocks of 50,000 shares, 20,000 and 30,000, all at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-01-15 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 0.92 % |
CU.PR.D | Perpetual-Premium | 73,050 | Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.09 Bid-YTW : 4.89 % |
RY.PR.I | FixedReset | 50,252 | RBC crossed 50,000 at 25.57. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 3.23 % |
BMO.PR.H | Deemed-Retractible | 46,508 | Nesbitt crossed 40,000 at 25.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.59 Bid-YTW : 2.35 % |
TD.PR.O | Deemed-Retractible | 36,952 | Desjardins crossed 26,800 at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-31 Maturity Price : 25.50 Evaluated at bid price : 25.86 Bid-YTW : 2.68 % |
There were 23 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
IAG.PR.C | FixedReset | Quote: 25.91 – 26.39 Spot Rate : 0.4800 Average : 0.3508 YTW SCENARIO |
BNA.PR.E | SplitShare | Quote: 24.75 – 25.00 Spot Rate : 0.2500 Average : 0.1530 YTW SCENARIO |
HSB.PR.D | Deemed-Retractible | Quote: 25.35 – 25.59 Spot Rate : 0.2400 Average : 0.1582 YTW SCENARIO |
BNS.PR.Q | FixedReset | Quote: 25.52 – 25.79 Spot Rate : 0.2700 Average : 0.1883 YTW SCENARIO |
RY.PR.N | FixedReset | Quote: 26.33 – 26.55 Spot Rate : 0.2200 Average : 0.1530 YTW SCENARIO |
TCA.PR.Y | Perpetual-Premium | Quote: 51.90 – 52.20 Spot Rate : 0.3000 Average : 0.2365 YTW SCENARIO |
Almost New Issue: IAG.PR.G Reopening
June 19th, 2012Industrial Alliance Insurance and Financial Services Inc. has announced:
The mention of the solvency ratio is unusual and interesting. Assiduous Readers will remember that the company’s preferreds and sub-debt were placed on Watch-Negative by DBRS very recently. The agency noted:
We will have to wait and see whether this additional debt-like fixed-charge (if I say “debt issue”, I’ll get lots of scornful hate mail) tips the company down a rating notch.
IAG.PR.G is a FixedReset, 4.30%+285, for which the first tranche closed 2012-6-1. It is interesting that the five year GOC yield is now about 1.19%, which implies that the reset dividend in five years is forecast to decline. If it had been forecast to rise, using current GOC5 levels, the company might have had some difficulties persuading OSFI to grant the re-opening Tier 1 status and might have been forced to bring a new issue to market.
But why not bring new issues to market while forecasting declining resets? It hasn’t done BCE.PR.K, an egregious offender any harm!
IAG.PR.G is tracked by HIMIPref™ and is incorporated in the FixedReset index.
IIROC halted IAG.PR.G at 15:36 “pending news”, which was the reopening.
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