PrefBlog

A relatively calm day today, but we did hit another trifecta – 52-week lows on TXPR, CPD and ZPR.

TXPR closed at 495.10, down 0.68% on the day and setting a new 52-week low – and I only had to change one of the numbers in this sentence! Volume today was 1.81-million, fourth-highest of the past 21 trading days.

CPD closed at 9.85, down 1.20% on the day and setting a new 52-week low. Volume was 42,700, near the median of the past 21 trading days.

ZPR closed at 8.31, down 0.72% on the day and setting a new 52-week low. Volume was 141,640, above the median of the past 21 trading days.

Five-year Canada yields were down to 4.22%.

Equities were off a bit and nobody knows what to say about bonds:

Stocks wavered to a mixed close on Monday as benchmark U.S. Treasury yields backed down from 5% and investors shifted their focus to this week’s high profile earnings and closely watched economic data.

The S&P 500 index ended modestly lower, while a host of interest rate sensitive momentum stocks buoyed the tech-laden Nasdaq Composite Index to a higher close. Both the Dow Jones Industrial Average and the S&P/TSX Composite Index notched their fourth straight daily drop.
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The run-up in yields on the 10-year U.S. Treasury note, seen as a safe haven in times of economic uncertainty and a benchmark for borrowing costs around the world, has been driven by investors pricing in stronger U.S. growth.

Yields in longer-term bonds rose quickly after Federal Reserve Chair Jerome Powell said last week that the U.S. economy’s strength and hot labor market might warrant tighter financial conditions.

The 10-year yield was briefly bid at a 16-year high of 5.001% on Thursday, breaking 5% again on Monday morning before slipping to 4.83%. It has risen 160 basis points since mid-May.

Yields have been tempered by the threat of an expanding conflict in the Middle East, which has caused investors to turn to the safe haven of U.S. government bonds after Hamas fighters attacked Israel on Oct. 7.
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So far, 86 of the companies in the S&P 500 have posted earnings. Of those, 78% have beat expectations, LSEG data showed.

Analysts see aggregate S&P 500 earnings for the July-September period growing 1.2% year-on-year, slightly below the 1.6% growth projected at the start of the month, according to LSEG.

TXPR closed at 498.49, down 0.68% on the day and setting a new 52-week low. Volume today was 3.19-million, second-highest of the past 21 trading days and not quite double the volume of the third-place finisher.

CPD closed at 9.97, down 0.50% on the day and setting a new 52-week low. Volume was 44,910, near the median of the past 21 trading days.

ZPR closed at 8.37, down 0.12% on the day. Volume was 65,370, third-lowest of the past 21 trading days.

Five-year Canada yields were down to 4.28%.

Equities got hit:

Major U.S. and Canadian stock indexes ended sharply lower on Friday, with technology and financial shares among the biggest drags, as investors worried about high interest rates and the Israel-Hamas conflict spreading. The selloff came even as bond yields eased after their steady march higher this week.

All of the S&P 500 index’s 11 sectors fell in broad-based selling. Losses were also broad in Toronto, where financials lost nearly 2% and the S&P/TSX composite index fell to its lowest level in two weeks.

The benchmark 10-year Treasury yield fell on Friday, a day after crossing 5% for the first time since July 2007 in the wake of comments by Federal Reserve Chair Jerome Powell. He said the U.S. economy’s strength and tight labour markets could require tougher borrowing conditions to control inflation.
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Echoing some of Powell’s more dovish remarks, Federal Reserve Bank of Atlanta President Raphael Bostic said on CNBC Friday that while inflation remains too high it is coming down amid rising evidence of growth slowing that could open the door to easier monetary policy late next year.

Fed funds futures show bets that the Fed will hike rates once more this year continue to decline. A November hike was almost completely priced out, while a 25 basis points hike in December had a 24% probability, down from 39% on Wednesday, CME Group data showed. The consensus among futures traders remained for a first rate cut to happen in June.

Traders have also started to price in higher odds that the Bank of Canada will start cutting interest rates next year. Implied probabilities in interest rate swaps suggest only a slight 12% chance the Bank of Canada will hike interest rates again when it announces its latest decision next week. And by December 2024, traders are pricing in about a 50% chance the central bank’s overnight rate would be lower than where it is today.
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The TSX ended down 233.17 points, or 1.2%, at 19,115.64, its lowest closing level since Oct. 4. For the week, the index was down 1.8%.

Financials hit a one-year low, while energy was down 1.5% as oil settled 0.7% lower at US$88.75 a barrel, giving back some of this week’s gains. Together, financials and energy account for nearly 50% of the TSX’s weighting.

The interest-rate sensitive utilities and real estate sectors also lost ground, falling 1.7% and 1.6% respectively.

In the U.S., the S&P 500 financial index was down 1.6% while the KBW regional banking index fell 3.5%. Shares of Regions Financial slid 12.4% after its profit missed analysts’ average estimate.

The Canadian preferred share market celebrated the 36th anniversary of the Crash of 1987 with a trifecta … TXPR, CPD and ZPR all set new 52-week lows.

Pundits are blaming the usual suspect:

U.S. and Canadian stocks ended solidly lower on Thursday, with shares of Tesla falling hard after its quarterly results and longer-term Treasury yields surging as Federal Reserve Chair Jerome Powell spoke about monetary policy and investors worried whether interest rates would stay higher for longer.
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Treasury yields rose further and the benchmark U.S. 10-year note yield was at a 16-year high of almost 5%.
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Powell said at the Economic Club in New York that U.S. central bankers were moving carefully on policy after aggressive rate hikes last year, but he added that the economy’s strength and continued tight labour markets could warrant further rate hikes.

The Dow Jones Industrial Average fell 250.91 points, or 0.75%, to 33,414.17, the S&P 500 lost 36.6 points, or 0.85%, to 4,278 and the Nasdaq Composite dropped 128.13 points, or 0.96%, to 13,186.18.

The rate-sensitive real estate sector dropped 2.4% and was the day’s worst-performing S&P 500 sector.

The Cboe Volatility index jumped to its highest close since March.

Data this week has pointed to strong consumer demand and a tight labour market. A U.S. Labor Department report on Thursday showed the number of Americans filing new claims for unemployment benefits fell to a nine-month low last week.

The labour market is showing strength even though the central bank has raised its benchmark overnight interest rate by 525 basis points since March 2022.

TXPR closed at 503.42, down 0.56% on the day and setting a new 52-week low. Volume today was 1.61-million, above the median of the past 21 trading days.

CPD closed at 10.03, down 0.60% on the day and setting a new 52-week low. Volume was 116,440, second-highest of the past 21 trading days.

ZPR closed at 8.42, down 0.71% on the day. Volume was 141,000, near the median of the past 21 trading days.

Five-year Canada yields were up to 4.37%.

I don’t know what a pundit might call this. Risk-off? Flight to safety? Response to rising yields? The last makes the least sense, so I suppose that gets the vote.

U.S. and Canadian stocks ended sharply lower on Wednesday with Treasury yields rising again and investors assessing the latest batch of quarterly corporate results and forecasts.

Mounting tensions in the Middle East stoked risk aversion. Safe-haven gold hit its highest in more than two months while the Cboe Volatility index, Wall Street’s fear gauge, rose. Dividend-rich sectors of the TSX were particularly hard hit, with industrials, real estate, financials and telecom sectors all down by about 2%.

The yield on U.S. 10-year notes rose 4.9 basis points to 4.896% after earlier in the day hitting 4.928%, the highest for the benchmark Treasury since July 2007. The Canada 10-year was up 3.4 basis points at 4.108%, moving closer to a 16-year high it touched earlier this month at 4.292%.

Yields edged higher after data showing U.S. single-family homebuilding rebounded in September, stoking the view that the Federal Reserve will keep interest rates higher for longer.

PerpetualDiscounts now yield 7.20%, equivalent to 9.36% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.68% on 2023-10-13 and since then the closing price has changed from 13.98 to 13.76, a decrease of 157bp in price, with a Duration of 11.98 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies an increase in yield of about 13bp since 10/13 to 5.81%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed slightly (and perhaps spuriously) to 355bp from the 360bp reported October 11.

So on the one hand, this is very late and that makes me sad. On the other hand, I had an excellent dinner last night with a dear friend and that makes me happy. So call it a wash.