What is “risk”? Well, it ain’t the standard deviation of monthly returns, I’ll tell you that much right now. For the rest, you’ll have to read the essay!
Look for the research link!
HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
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 | -0.6242 % | 2,446.5 |
FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.6242 % | 4,692.4 |
Floater | 6.46 % | 6.52 % | 39,849 | 13.18 | 3 | -0.6242 % | 2,704.3 |
OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3853 % | 3,467.4 |
SplitShare | 4.91 % | 5.20 % | 44,506 | 3.15 | 8 | -0.3853 % | 4,140.9 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3853 % | 3,230.9 |
Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1754 % | 2,847.7 |
Perpetual-Discount | 5.99 % | 6.07 % | 65,760 | 13.80 | 34 | 0.1754 % | 3,105.2 |
FixedReset Disc | 4.79 % | 6.37 % | 113,654 | 13.55 | 56 | 0.0598 % | 2,458.9 |
Insurance Straight | 5.98 % | 6.06 % | 84,538 | 13.83 | 18 | -0.0483 % | 3,008.8 |
FloatingReset | 6.81 % | 7.10 % | 41,456 | 12.43 | 2 | -1.1392 % | 2,535.6 |
FixedReset Prem | 5.03 % | 4.94 % | 129,183 | 1.94 | 10 | -0.3170 % | 2,592.6 |
FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0598 % | 2,513.5 |
FixedReset Ins Non | 4.78 % | 6.78 % | 56,995 | 13.38 | 14 | -0.0929 % | 2,548.6 |
Performance Highlights | |||
Issue | Index | Change | Notes |
RY.PR.J | FixedReset Disc | -4.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 6.80 % |
IFC.PR.A | FixedReset Ins Non | -2.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 17.66 Evaluated at bid price : 17.66 Bid-YTW : 6.89 % |
IFC.PR.E | Insurance Straight | -2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 21.38 Evaluated at bid price : 21.38 Bid-YTW : 6.14 % |
TRP.PR.E | FixedReset Disc | -2.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 16.69 Evaluated at bid price : 16.69 Bid-YTW : 7.86 % |
BAM.PR.X | FixedReset Disc | -2.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 6.88 % |
IFC.PR.G | FixedReset Ins Non | -1.87 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 6.81 % |
ELF.PR.H | Perpetual-Discount | -1.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 22.39 Evaluated at bid price : 22.65 Bid-YTW : 6.10 % |
PVS.PR.J | SplitShare | -1.50 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2028-02-29 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 6.24 % |
BAM.PF.F | FixedReset Disc | -1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 19.51 Evaluated at bid price : 19.51 Bid-YTW : 7.40 % |
TRP.PR.D | FixedReset Disc | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 17.15 Evaluated at bid price : 17.15 Bid-YTW : 7.81 % |
PVS.PR.G | SplitShare | -1.41 % | YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2026-02-28 Maturity Price : 25.00 Evaluated at bid price : 24.40 Bid-YTW : 5.83 % |
BAM.PF.H | FixedReset Prem | -1.37 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 4.90 % |
IFC.PR.C | FixedReset Disc | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 6.96 % |
SLF.PR.J | FloatingReset | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 15.17 Evaluated at bid price : 15.17 Bid-YTW : 6.66 % |
TRP.PR.F | FloatingReset | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 16.07 Evaluated at bid price : 16.07 Bid-YTW : 7.10 % |
TD.PF.J | FixedReset Disc | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 22.78 Evaluated at bid price : 23.39 Bid-YTW : 6.20 % |
BAM.PR.K | Floater | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 12.71 Evaluated at bid price : 12.71 Bid-YTW : 6.54 % |
MFC.PR.M | FixedReset Ins Non | -1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 7.05 % |
BIP.PR.E | FixedReset Disc | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 23.09 Evaluated at bid price : 23.75 Bid-YTW : 6.44 % |
GWO.PR.M | Insurance Straight | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 23.69 Evaluated at bid price : 24.00 Bid-YTW : 6.09 % |
NA.PR.G | FixedReset Disc | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 23.29 Evaluated at bid price : 23.75 Bid-YTW : 6.14 % |
BAM.PR.Z | FixedReset Disc | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 22.39 Evaluated at bid price : 23.25 Bid-YTW : 6.54 % |
BMO.PR.E | FixedReset Disc | 1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 23.67 Evaluated at bid price : 24.10 Bid-YTW : 6.04 % |
BAM.PR.T | FixedReset Disc | 1.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 16.78 Evaluated at bid price : 16.78 Bid-YTW : 7.43 % |
MFC.PR.K | FixedReset Ins Non | 2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 6.58 % |
IFC.PR.K | Perpetual-Discount | 2.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 21.83 Evaluated at bid price : 22.16 Bid-YTW : 5.96 % |
MIC.PR.A | Perpetual-Discount | 2.90 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 21.31 Evaluated at bid price : 21.31 Bid-YTW : 6.40 % |
FTS.PR.G | FixedReset Disc | 12.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 6.96 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
BMO.PR.S | FixedReset Disc | 99,800 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 21.42 Evaluated at bid price : 21.75 Bid-YTW : 6.16 % |
PWF.PR.G | Perpetual-Discount | 37,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 23.95 Evaluated at bid price : 24.20 Bid-YTW : 6.11 % |
SLF.PR.G | FixedReset Ins Non | 37,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 14.55 Evaluated at bid price : 14.55 Bid-YTW : 6.99 % |
GWO.PR.R | Insurance Straight | 32,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.06 % |
IFC.PR.K | Perpetual-Discount | 30,755 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 21.83 Evaluated at bid price : 22.16 Bid-YTW : 5.96 % |
RY.PR.M | FixedReset Disc | 30,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-14 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 6.24 % |
There were 16 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
BAM.PF.D | Perpetual-Discount | Quote: 20.20 – 22.94 Spot Rate : 2.7400 Average : 1.6804 YTW SCENARIO |
TRP.PR.E | FixedReset Disc | Quote: 16.69 – 19.50 Spot Rate : 2.8100 Average : 1.8743 YTW SCENARIO |
CCS.PR.C | Insurance Straight | Quote: 20.90 – 23.95 Spot Rate : 3.0500 Average : 2.4347 YTW SCENARIO |
IFC.PR.E | Insurance Straight | Quote: 21.38 – 22.50 Spot Rate : 1.1200 Average : 0.7009 YTW SCENARIO |
RY.PR.J | FixedReset Disc | Quote: 20.10 – 21.75 Spot Rate : 1.6500 Average : 1.2337 YTW SCENARIO |
GWO.PR.T | Insurance Straight | Quote: 21.52 – 22.75 Spot Rate : 1.2300 Average : 0.8540 YTW SCENARIO |
How ’bout that US inflation number, eh?
The Consumer Price Index rose 9.1 percent from a year ago, a 40-year high that defied expectations of moderating price pressures. Food, rent and gasoline were among the categories that recorded the biggest increases, further squeezing Americans’ budgets.
…
The report contained unwelcome news beyond the headline number. A core inflation index that strips out food and fuel prices — giving a sense of underlying inflation trends — remains high and came in faster than economists expected. The core index climbed 5.9 percent the year through June, barely a slowdown from 6 percent in the previous report. The core measure actually climbed 0.7 percent from May to June, more than the previous monthly increase and bad news for central bankers.
Underlying inflation, as estimated by the New York Fed, a little less severe:
- The UIG “full data set” measure for June is currently estimated at 4.8%, a 0.1 percentage point decrease from the current estimate of the previous month.
- The “prices-only” measure for June is currently estimated at 6.0%, a 0.1 percentage point increase from the current estimate for the previous month.
- The twelve-month change in the June CPI was +9.1%, a 0.5 percentage point increase from the previous month.
- -For June 2022, trend CPI inflation is estimated to be in the 4.8% to 6.0% range, a slightly wider range than May, with its lower bound 0.1 percentage point lower and its upper bound 0.1 percentage point higher.
The day was enlivened by a ‘shock and awe’ BoC policy rate hike of 100bp, which didn’t affect the market so much as 75bp has been considered a certainty for some time. The preferred share market decided it was shocked by the news, but got used to it as the day wore on:
The net result was a loss of 33bp on the day.
PerpetualDiscounts now yield 6.09%, equivalent to 7.92% interest at the standard equivalency factor of 1.3x. Long corporates now yield 5.23%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) remains at 270bp, the same as reported July 6.
HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
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 | -0.9021 % | 2,461.9 |
FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.9021 % | 4,721.9 |
Floater | 5.05 % | 5.09 % | 40,009 | 15.36 | 3 | -0.9021 % | 2,721.2 |
OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5009 % | 3,480.8 |
SplitShare | 4.89 % | 5.25 % | 44,400 | 3.16 | 8 | -0.5009 % | 4,156.9 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5009 % | 3,243.4 |
Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0425 % | 2,842.7 |
Perpetual-Discount | 6.00 % | 6.09 % | 67,169 | 13.80 | 34 | -0.0425 % | 3,099.8 |
FixedReset Disc | 4.79 % | 6.46 % | 114,914 | 13.52 | 56 | 0.1876 % | 2,457.4 |
Insurance Straight | 5.98 % | 6.05 % | 88,032 | 13.85 | 18 | 0.0000 % | 3,010.3 |
FloatingReset | 6.19 % | 6.48 % | 43,218 | 13.23 | 2 | 0.1902 % | 2,564.8 |
FixedReset Prem | 5.01 % | 4.89 % | 131,200 | 1.94 | 10 | 0.1429 % | 2,600.9 |
FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1876 % | 2,512.0 |
FixedReset Ins Non | 4.78 % | 6.81 % | 56,898 | 13.25 | 14 | 0.3881 % | 2,550.9 |
Performance Highlights | |||
Issue | Index | Change | Notes |
FTS.PR.G | FixedReset Disc | -11.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 7.92 % |
PVS.PR.J | SplitShare | -1.89 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2028-02-29 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 5.92 % |
PVS.PR.K | SplitShare | -1.69 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2029-05-31 Maturity Price : 25.00 Evaluated at bid price : 23.20 Bid-YTW : 5.85 % |
CU.PR.C | FixedReset Disc | -1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 20.44 Evaluated at bid price : 20.44 Bid-YTW : 6.84 % |
BAM.PR.C | Floater | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 12.82 Evaluated at bid price : 12.82 Bid-YTW : 5.09 % |
BAM.PR.K | Floater | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 5.08 % |
GWO.PR.P | Insurance Straight | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 21.86 Evaluated at bid price : 22.10 Bid-YTW : 6.16 % |
IFC.PR.A | FixedReset Ins Non | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 18.06 Evaluated at bid price : 18.06 Bid-YTW : 6.84 % |
CU.PR.G | Perpetual-Discount | -1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 18.85 Evaluated at bid price : 18.85 Bid-YTW : 6.06 % |
IFC.PR.K | Perpetual-Discount | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 21.33 Evaluated at bid price : 21.63 Bid-YTW : 6.11 % |
BIP.PR.E | FixedReset Disc | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 23.35 Evaluated at bid price : 24.00 Bid-YTW : 6.46 % |
BAM.PR.T | FixedReset Disc | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 16.53 Evaluated at bid price : 16.53 Bid-YTW : 7.61 % |
TRP.PR.B | FixedReset Disc | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 12.36 Evaluated at bid price : 12.36 Bid-YTW : 8.00 % |
CU.PR.J | Perpetual-Discount | 1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 20.06 Evaluated at bid price : 20.06 Bid-YTW : 6.01 % |
BAM.PR.R | FixedReset Disc | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 16.36 Evaluated at bid price : 16.36 Bid-YTW : 7.59 % |
MFC.PR.N | FixedReset Ins Non | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 7.13 % |
MFC.PR.L | FixedReset Ins Non | 1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 18.37 Evaluated at bid price : 18.37 Bid-YTW : 7.15 % |
RY.PR.M | FixedReset Disc | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 6.31 % |
TD.PF.J | FixedReset Disc | 1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 23.02 Evaluated at bid price : 23.65 Bid-YTW : 6.21 % |
BAM.PF.F | FixedReset Disc | 1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 7.38 % |
BAM.PF.J | FixedReset Disc | 2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 23.80 Evaluated at bid price : 24.51 Bid-YTW : 6.43 % |
MFC.PR.M | FixedReset Ins Non | 2.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 7.06 % |
BAM.PR.X | FixedReset Disc | 2.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 18.17 Evaluated at bid price : 18.17 Bid-YTW : 6.81 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
BAM.PR.X | FixedReset Disc | 114,516 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 18.17 Evaluated at bid price : 18.17 Bid-YTW : 6.81 % |
PWF.PR.T | FixedReset Disc | 73,556 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 18.79 Evaluated at bid price : 18.79 Bid-YTW : 7.30 % |
CM.PR.T | FixedReset Prem | 63,200 | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 5.05 % |
NA.PR.C | FixedReset Prem | 56,500 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-11-15 Maturity Price : 25.00 Evaluated at bid price : 24.77 Bid-YTW : 6.05 % |
TD.PF.D | FixedReset Disc | 37,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 21.36 Evaluated at bid price : 21.36 Bid-YTW : 6.44 % |
PWF.PR.K | Perpetual-Discount | 36,300 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-13 Maturity Price : 20.31 Evaluated at bid price : 20.31 Bid-YTW : 6.12 % |
There were 12 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
FTS.PR.G | FixedReset Disc | Quote: 17.00 – 19.52 Spot Rate : 2.5200 Average : 1.4231 YTW SCENARIO |
CCS.PR.C | Insurance Straight | Quote: 21.10 – 23.95 Spot Rate : 2.8500 Average : 1.7600 YTW SCENARIO |
MIC.PR.A | Perpetual-Discount | Quote: 20.71 – 22.53 Spot Rate : 1.8200 Average : 1.3985 YTW SCENARIO |
CU.PR.J | Perpetual-Discount | Quote: 20.06 – 21.99 Spot Rate : 1.9300 Average : 1.5929 YTW SCENARIO |
BAM.PR.K | Floater | Quote: 12.85 – 14.00 Spot Rate : 1.1500 Average : 0.9418 YTW SCENARIO |
IFC.PR.A | FixedReset Ins Non | Quote: 18.06 – 18.89 Spot Rate : 0.8300 Average : 0.6254 YTW SCENARIO |
The Bank of Canada has announced it has:
increased its target for the overnight rate to 2½%, with the Bank Rate at 2¾% and the deposit rate at 2½%. The Bank is also continuing its policy of quantitative tightening (QT).
Inflation in Canada is higher and more persistent than the Bank expected in its April Monetary Policy Report (MPR), and will likely remain around 8% in the next few months. While global factors such as the war in Ukraine and ongoing supply disruptions have been the biggest drivers, domestic price pressures from excess demand are becoming more prominent. More than half of the components that make up the CPI are now rising by more than 5%. With this broadening of price pressures, the Bank’s core measures of inflation have moved up to between 3.9% and 5.4%. Also, surveys indicate more consumers and businesses are expecting inflation to be higher for longer, raising the risk that elevated inflation becomes entrenched in price- and wage-setting. If that occurs, the economic cost of restoring price stability will be higher.
Global inflation is higher, reflecting the impact of the Russian invasion of Ukraine, ongoing supply constraints, and strong demand. Many central banks are tightening monetary policy to combat inflation, and the resulting tighter financial conditions are moderating economic growth. In the United States, high inflation and rising interest rates are contributing to a slowdown in domestic demand. China’s economy is being held back by waves of restrictive measures to contain COVID-19 outbreaks. Oil prices remain high and volatile. The Bank now expects global economic growth to slow to about 3½% this year and 2% in 2023 before strengthening to 3% in 2024.
Further excess demand has built up in the Canadian economy. Labour markets are tight with a record low unemployment rate, widespread labour shortages, and increasing wage pressures. With strong demand, businesses are passing on higher input and labour costs by raising prices. Consumption is robust, led by a rebound in spending on hard-to-distance services. Business investment is solid and exports are being boosted by elevated commodity prices. The Bank estimates that GDP grew by about 4% in the second quarter. Growth is expected to slow to about 2% in the third quarter as consumption growth moderates and housing market activity pulls back following unsustainable strength during the pandemic.
The Bank expects Canada’s economy to grow by 3½% in 2022, 1¾% in 2023, and 2½% in 2024. Economic activity will slow as global growth moderates and tighter monetary policy works its way through the economy. This, combined with the resolution of supply disruptions, will bring demand and supply back into balance and alleviate inflationary pressures. Global energy prices are also projected to decline. The July outlook has inflation starting to come back down later this year, easing to about 3% by the end of next year and returning to the 2% target by the end of 2024.
With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates by raising the policy rate by 100 basis points today. The Governing Council continues to judge that interest rates will need to rise further, and the pace of increases will be guided by the Bank’s ongoing assessment of the economy and inflation. Quantitative tightening continues and is complementing increases in the policy interest rate. The Governing Council is resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.
Prime followed:
Well, Rob Carrick and Ryan Siever will be mad:
There’s a case to be made for banks giving borrowers a break when what is expected to be the biggest interest rate hike in 22 years is announced on Wednesday.
A brief flashback to 2015 is required to get the sense of this story. The economy back then was in the opposite shape of what it is now – weak enough to prompt the Bank of Canada to cut its trendsetting overnight rate by 0.25 of a percentage point in January and again in July.
The big banks hijacked part of that rate cut. While the overnight rate fell by a total 0.5 of a point, the banks cut their prime rate by cumulative 0.3 of a point. They held back the rest of the rate cut to build their revenues and profit.
There was a delay in reducing the prime when the Canada Overnight rate dropped 25bp to 0.75% in January 2015 and again when Canada Overnight dropped a further 25bp to 0.50% in July of that year.
I examine instances of interconversion among FixedFloater / RatchetRate shares and conclude:
Interconvertability is an arcane nuance to preferred share investing, but can be used to boost returns on occasion. I expect the field to become more important as FixedResets become a more seasoned element of the preferred share investment universe and Strong Pairs, created at the first exchange date, become interconvertible at the second and successive exchange dates.
At the very least, when one has made a decision to invest in one element of a strong pair, the impact of interconversion should be examined, as it may be possible to buy the type of share that is not desired and convert to the desired element at a lower overall price.
This follows an an earlier look at the subject from the February, 2011, edition of PrefLetter
Look for the research link!
The CMHC is predicting a decline in house prices:
Canada Mortgage and Housing Corp., which was criticized in 2020 for sticking to a pessimistic outlook for housing prices early in the pandemic, is revising its forecast because the Bank of Canada will likely continue to hike its benchmark interest rate aggressively to slow runaway inflation, which makes it harder for residents to afford a mortgage.
The federal agency revised down the percentage gain it expects from 2021 to 2022, with the average price now forecast to climb 11 per cent instead of 13.7 per cent. The forecast is for the full year and it includes the first quarter when home prices peaked.
The agency also expects the average home price in Canada to decline as much as 5 per cent from the first quarter of this year to the second quarter of next, hitting a low of $742,970, according to a blog on CMHC’s website.
Although home prices have plummeted since the central bank started raising interest rates in March, CMHC chief economist Bob Dugan said he was “leery” of forecasting a steeper price decline when the housing shortage is so severe.
“I have trouble believing in a very big price correction,” Mr. Dugan said. “I don’t want to say that it can’t happen. It is possible for a 10-per-cent price correction like some people are saying. But I’m just leery of that because of the supply shortage,” he said.
It was a wild day for the TXPR as all the cowboys placed their bets on what the BoC is going to do tomorrow and how the market will react:
This chart does not do justice to the strength of the rally that began at about 3pm, since values after 4pm are cut off – the Exchange doesn’t seem to have a coherent policy about when their reporting should end! TXPR is shown as ending the day – after the Extended Trading Session – at 607.97, as opposed to its 4pm value of 605.39 (and its close yesterday at 610.21). The low for the day was 603.17, which I understand from other sources is a new 52-week low.
HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
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 | -0.5383 % | 2,484.3 |
FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5383 % | 4,764.9 |
Floater | 5.01 % | 5.02 % | 40,516 | 15.48 | 3 | -0.5383 % | 2,746.0 |
OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2066 % | 3,498.4 |
SplitShare | 4.86 % | 5.18 % | 44,271 | 3.16 | 8 | -0.2066 % | 4,177.8 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2066 % | 3,259.7 |
Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2337 % | 2,843.9 |
Perpetual-Discount | 5.99 % | 6.06 % | 67,206 | 13.82 | 34 | -0.2337 % | 3,101.1 |
FixedReset Disc | 4.80 % | 6.49 % | 119,444 | 13.50 | 56 | -1.1338 % | 2,452.8 |
Insurance Straight | 5.98 % | 6.07 % | 85,427 | 13.82 | 18 | -0.0188 % | 3,010.3 |
FloatingReset | 6.21 % | 6.50 % | 43,935 | 13.20 | 2 | -1.0355 % | 2,560.0 |
FixedReset Prem | 5.02 % | 4.89 % | 130,029 | 1.94 | 10 | -0.5329 % | 2,597.2 |
FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -1.1338 % | 2,507.3 |
FixedReset Ins Non | 4.80 % | 6.83 % | 56,814 | 13.24 | 14 | -1.0705 % | 2,541.1 |
Performance Highlights | |||
Issue | Index | Change | Notes |
FTS.PR.K | FixedReset Disc | -4.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 7.43 % |
FTS.PR.H | FixedReset Disc | -4.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 13.95 Evaluated at bid price : 13.95 Bid-YTW : 7.47 % |
MIC.PR.A | Perpetual-Discount | -3.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 6.57 % |
BAM.PF.J | FixedReset Disc | -3.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 23.21 Evaluated at bid price : 24.00 Bid-YTW : 6.56 % |
CU.PR.C | FixedReset Disc | -3.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 6.73 % |
FTS.PR.M | FixedReset Disc | -3.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 19.26 Evaluated at bid price : 19.26 Bid-YTW : 7.15 % |
BAM.PR.T | FixedReset Disc | -2.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 7.69 % |
TRP.PR.E | FixedReset Disc | -2.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 7.81 % |
MFC.PR.L | FixedReset Ins Non | -2.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 18.11 Evaluated at bid price : 18.11 Bid-YTW : 7.25 % |
TRP.PR.G | FixedReset Disc | -2.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 19.07 Evaluated at bid price : 19.07 Bid-YTW : 7.31 % |
BAM.PR.R | FixedReset Disc | -2.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 16.15 Evaluated at bid price : 16.15 Bid-YTW : 7.68 % |
MFC.PR.M | FixedReset Ins Non | -2.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 18.57 Evaluated at bid price : 18.57 Bid-YTW : 7.22 % |
FTS.PR.G | FixedReset Disc | -2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 6.97 % |
TRP.PR.B | FixedReset Disc | -2.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 12.21 Evaluated at bid price : 12.21 Bid-YTW : 8.09 % |
TRP.PR.C | FixedReset Disc | -2.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 12.80 Evaluated at bid price : 12.80 Bid-YTW : 7.98 % |
BAM.PR.B | Floater | -2.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 12.81 Evaluated at bid price : 12.81 Bid-YTW : 5.09 % |
MFC.PR.N | FixedReset Ins Non | -2.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 18.21 Evaluated at bid price : 18.21 Bid-YTW : 7.22 % |
TD.PF.J | FixedReset Disc | -2.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.65 Evaluated at bid price : 23.25 Bid-YTW : 6.32 % |
SLF.PR.J | FloatingReset | -2.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 15.34 Evaluated at bid price : 15.34 Bid-YTW : 6.02 % |
IFC.PR.G | FixedReset Ins Non | -2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 6.83 % |
RY.PR.O | Perpetual-Discount | -1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.87 Evaluated at bid price : 23.13 Bid-YTW : 5.36 % |
TRP.PR.D | FixedReset Disc | -1.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 17.42 Evaluated at bid price : 17.42 Bid-YTW : 7.79 % |
PWF.PR.T | FixedReset Disc | -1.93 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 18.85 Evaluated at bid price : 18.85 Bid-YTW : 7.28 % |
BAM.PF.F | FixedReset Disc | -1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 7.51 % |
BAM.PF.A | FixedReset Disc | -1.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.51 Evaluated at bid price : 21.51 Bid-YTW : 7.11 % |
BAM.PF.B | FixedReset Disc | -1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 7.43 % |
RY.PR.S | FixedReset Disc | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 23.09 Evaluated at bid price : 23.50 Bid-YTW : 5.96 % |
MFC.PR.I | FixedReset Ins Non | -1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 23.30 Evaluated at bid price : 24.35 Bid-YTW : 6.28 % |
TD.PF.D | FixedReset Disc | -1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 6.49 % |
BAM.PR.M | Perpetual-Discount | -1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 6.18 % |
BAM.PF.E | FixedReset Disc | -1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 17.71 Evaluated at bid price : 17.71 Bid-YTW : 7.60 % |
BAM.PR.N | Perpetual-Discount | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 19.36 Evaluated at bid price : 19.36 Bid-YTW : 6.19 % |
GWO.PR.I | Insurance Straight | -1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 18.87 Evaluated at bid price : 18.87 Bid-YTW : 6.02 % |
NA.PR.S | FixedReset Disc | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 6.50 % |
TD.PF.L | FixedReset Prem | -1.39 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.91 Bid-YTW : 5.27 % |
BMO.PR.F | FixedReset Prem | -1.37 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 5.16 % |
BAM.PR.Z | FixedReset Disc | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.26 Evaluated at bid price : 23.01 Bid-YTW : 6.70 % |
GWO.PR.Y | Insurance Straight | -1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 18.82 Evaluated at bid price : 18.82 Bid-YTW : 6.04 % |
IFC.PR.K | Perpetual-Discount | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.54 Evaluated at bid price : 21.85 Bid-YTW : 6.05 % |
BAM.PF.I | FixedReset Prem | -1.34 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2027-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 4.74 % |
TRP.PR.A | FixedReset Disc | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 15.67 Evaluated at bid price : 15.67 Bid-YTW : 7.79 % |
MFC.PR.J | FixedReset Ins Non | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.08 Evaluated at bid price : 22.72 Bid-YTW : 6.43 % |
MFC.PR.F | FixedReset Ins Non | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 14.40 Evaluated at bid price : 14.40 Bid-YTW : 7.10 % |
NA.PR.G | FixedReset Disc | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.84 Evaluated at bid price : 23.30 Bid-YTW : 6.34 % |
NA.PR.W | FixedReset Disc | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 6.47 % |
PWF.PR.G | Perpetual-Discount | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 23.95 Evaluated at bid price : 24.20 Bid-YTW : 6.10 % |
TD.PF.B | FixedReset Disc | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 6.42 % |
CM.PR.Q | FixedReset Disc | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 6.49 % |
RY.PR.N | Perpetual-Discount | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.90 Evaluated at bid price : 23.25 Bid-YTW : 5.33 % |
MFC.PR.Q | FixedReset Ins Non | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.79 Evaluated at bid price : 22.26 Bid-YTW : 6.48 % |
PWF.PR.P | FixedReset Disc | -1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 14.20 Evaluated at bid price : 14.20 Bid-YTW : 7.35 % |
PWF.PR.E | Perpetual-Discount | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.48 Evaluated at bid price : 22.74 Bid-YTW : 6.05 % |
BIP.PR.F | FixedReset Disc | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 23.48 Evaluated at bid price : 23.90 Bid-YTW : 6.36 % |
ELF.PR.F | Perpetual-Discount | 1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 21.75 Evaluated at bid price : 22.00 Bid-YTW : 6.05 % |
RY.PR.J | FixedReset Disc | 4.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 20.95 Evaluated at bid price : 20.95 Bid-YTW : 6.61 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
BNS.PR.I | FixedReset Disc | 120,170 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 23.45 Evaluated at bid price : 23.86 Bid-YTW : 5.86 % |
PWF.PR.T | FixedReset Disc | 107,540 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 18.85 Evaluated at bid price : 18.85 Bid-YTW : 7.28 % |
BAM.PR.X | FixedReset Disc | 96,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 6.99 % |
TD.PF.A | FixedReset Disc | 63,269 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 6.29 % |
CM.PR.S | FixedReset Disc | 47,264 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 22.33 Evaluated at bid price : 23.15 Bid-YTW : 6.07 % |
BMO.PR.E | FixedReset Disc | 43,100 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-12 Maturity Price : 23.14 Evaluated at bid price : 23.60 Bid-YTW : 6.24 % |
There were 54 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
TRP.PR.B | FixedReset Disc | Quote: 12.21 – 14.16 Spot Rate : 1.9500 Average : 1.3436 YTW SCENARIO |
TRP.PR.D | FixedReset Disc | Quote: 17.42 – 19.00 Spot Rate : 1.5800 Average : 0.9837 YTW SCENARIO |
BAM.PF.J | FixedReset Disc | Quote: 24.00 – 25.11 Spot Rate : 1.1100 Average : 0.6205 YTW SCENARIO |
GWO.PR.R | Insurance Straight | Quote: 19.90 – 21.00 Spot Rate : 1.1000 Average : 0.6559 YTW SCENARIO |
FTS.PR.M | FixedReset Disc | Quote: 19.26 – 20.85 Spot Rate : 1.5900 Average : 1.1497 YTW SCENARIO |
BAM.PR.T | FixedReset Disc | Quote: 16.35 – 18.00 Spot Rate : 1.6500 Average : 1.2164 YTW SCENARIO |
From the introduction (hyperlinks added):
This essay builds on previous discussion in the April, 2010, and April, 2011, editions of this newsletter, as well as that contained in my essay Security of Income vs. Security of Principal. The Hymas Investment Management Inc. retirement calculator (old version available on-line at http://www.prefblog.com/xls/retirementWithdrawals.xls new version at http://www.prefblog.com/xls/retirementWithdrawals_2012.xls) has been refined in various ways and the necessity of these changes is discussed; there is a fairly extensive discussion of “Reversion to the Mean” for equity returns, which is particularly important in the light of OSFI’s denial that such a thing exists.
Additionally, I have updated my study of the pricing of annuities to incorporate another year of data collected by Dr. Milevesky’s Individual Finance and Insurance Decisions Centre.
Look for the research link!
Unfortunately, a production error led to some data missing from the “Investment Grade FixedReset Issues” on page 33 of the recently released July, 2022, PrefLetter.
These data may be recovered by clicking HERE.
The New York Fed has released its June 2022 Survey of Consumer Expectations:
Inflation
- Median one-year-ahead inflation expectations increased to 6.8%, from 6.6% in May, marking a new series high. In contrast, median three-year ahead inflation expectations decreased to 3.6% from 3.9%. The increase in short-term expectations was driven by respondents over age 60 and respondents with at least some college education. The decline in medium-term expectations was broad-based across education and income groups. Our measures of disagreement across respondents (the difference between the 75th and 25th percentiles of inflation expectations) increased at the one-year-ahead horizon and remained unchanged at the three-year-ahead horizon.
- Median five-year ahead inflation expectations, which have been elicited in the monthly SCE core survey on an ad-hoc basis since the beginning of this year, declined to 2.8% from 2.9%. After being stable at 3.0% during the first three months of the year, the series has trended down slightly. Disagreement across respondents in their five-year ahead inflation expectations has been trending up during this period and increased again in June.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—increased at the one-year ahead horizon to a new series high, but remained unchanged at the three-year ahead horizon. Uncertainty at the five-year ahead horizon increased.
- The median expected change in home prices one year from now dropped sharply to 4.4% from 5.8%. This is the lowest reading of the series since February 2021. The decline, the second largest recorded in the survey’s series only to the sharp drop at the onset of the pandemic, was broad based across age, education, and income groups. The decline was largest in the West census region.
- Expectations about year-ahead price changes increased by 0.1 percentage point for gas (to 5.6%), rent (to 10.3%), medical care (to 9.5%), and college education (to 8.7%). The median one-year-ahead expected change in the price of food decreased by 0.1 percentage point to 9.2%.
There are also reports on expectations regarding the labour market and household finance.
HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
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 | 0.4377 % | 2,497.7 |
FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4377 % | 4,790.7 |
Floater | 4.98 % | 5.01 % | 37,546 | 15.50 | 3 | 0.4377 % | 2,760.9 |
OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3532 % | 3,505.6 |
SplitShare | 4.85 % | 5.07 % | 46,100 | 3.16 | 8 | 0.3532 % | 4,186.4 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3532 % | 3,266.4 |
Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1560 % | 2,850.6 |
Perpetual-Discount | 5.98 % | 6.07 % | 64,973 | 13.82 | 34 | 0.1560 % | 3,108.4 |
FixedReset Disc | 4.75 % | 6.41 % | 111,336 | 13.45 | 56 | -0.0800 % | 2,480.9 |
Insurance Straight | 5.97 % | 6.07 % | 86,677 | 13.82 | 18 | 0.2746 % | 3,010.9 |
FloatingReset | 6.14 % | 6.49 % | 41,979 | 13.21 | 2 | 0.3148 % | 2,586.7 |
FixedReset Prem | 4.99 % | 4.41 % | 125,906 | 1.95 | 10 | 0.1107 % | 2,611.1 |
FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0800 % | 2,536.0 |
FixedReset Ins Non | 4.75 % | 6.80 % | 56,588 | 13.34 | 14 | 0.1146 % | 2,568.6 |
Performance Highlights | |||
Issue | Index | Change | Notes |
RY.PR.J | FixedReset Disc | -6.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 6.88 % |
BIP.PR.A | FixedReset Disc | -4.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 8.22 % |
FTS.PR.K | FixedReset Disc | -2.65 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 7.09 % |
MFC.PR.K | FixedReset Ins Non | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.80 % |
IAF.PR.I | FixedReset Ins Non | -1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 23.00 Evaluated at bid price : 23.66 Bid-YTW : 6.28 % |
ELF.PR.F | Perpetual-Discount | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 21.40 Evaluated at bid price : 21.67 Bid-YTW : 6.14 % |
GWO.PR.G | Insurance Straight | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 21.21 Evaluated at bid price : 21.21 Bid-YTW : 6.19 % |
BAM.PR.T | FixedReset Disc | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 16.84 Evaluated at bid price : 16.84 Bid-YTW : 7.48 % |
IFC.PR.I | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 22.37 Evaluated at bid price : 22.75 Bid-YTW : 5.97 % |
GWO.PR.N | FixedReset Ins Non | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 14.21 Evaluated at bid price : 14.21 Bid-YTW : 6.86 % |
IFC.PR.K | Perpetual-Discount | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 21.82 Evaluated at bid price : 22.15 Bid-YTW : 5.96 % |
BAM.PR.B | Floater | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 13.10 Evaluated at bid price : 13.10 Bid-YTW : 4.98 % |
PVS.PR.K | SplitShare | 1.29 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2029-05-31 Maturity Price : 25.00 Evaluated at bid price : 23.55 Bid-YTW : 5.58 % |
GWO.PR.S | Insurance Straight | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 21.47 Evaluated at bid price : 21.78 Bid-YTW : 6.07 % |
BAM.PR.M | Perpetual-Discount | 1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 19.73 Evaluated at bid price : 19.73 Bid-YTW : 6.08 % |
GWO.PR.I | Insurance Straight | 1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 19.15 Evaluated at bid price : 19.15 Bid-YTW : 5.93 % |
BAM.PF.F | FixedReset Disc | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 7.38 % |
PWF.PF.A | Perpetual-Discount | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 6.09 % |
RY.PR.O | Perpetual-Discount | 1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 23.13 Evaluated at bid price : 23.60 Bid-YTW : 5.24 % |
PVS.PR.J | SplitShare | 1.93 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2028-02-29 Maturity Price : 25.00 Evaluated at bid price : 23.80 Bid-YTW : 5.52 % |
BIP.PR.F | FixedReset Disc | 2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 23.16 Evaluated at bid price : 23.60 Bid-YTW : 6.44 % |
IFC.PR.E | Insurance Straight | 2.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 21.58 Evaluated at bid price : 21.85 Bid-YTW : 5.99 % |
BIP.PR.E | FixedReset Disc | 2.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 23.33 Evaluated at bid price : 23.98 Bid-YTW : 6.46 % |
SLF.PR.H | FixedReset Ins Non | 3.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 17.45 Evaluated at bid price : 17.45 Bid-YTW : 6.86 % |
BAM.PR.X | FixedReset Disc | 3.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 17.53 Evaluated at bid price : 17.53 Bid-YTW : 7.06 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
CM.PR.R | FixedReset Disc | 520,400 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-08-30 Maturity Price : 25.00 Evaluated at bid price : 24.96 Bid-YTW : 4.11 % |
TRP.PR.A | FixedReset Disc | 80,125 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 15.88 Evaluated at bid price : 15.88 Bid-YTW : 7.69 % |
GWO.PR.Y | Insurance Straight | 63,919 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 19.08 Evaluated at bid price : 19.08 Bid-YTW : 5.95 % |
TD.PF.B | FixedReset Disc | 27,151 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 6.35 % |
BMO.PR.T | FixedReset Disc | 21,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 6.28 % |
BIP.PR.A | FixedReset Disc | 21,833 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-11 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 8.22 % |
There were 8 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
BAM.PR.R | FixedReset Disc | Quote: 16.58 – 17.84 Spot Rate : 1.2600 Average : 0.8035 YTW SCENARIO |
CU.PR.J | Perpetual-Discount | Quote: 19.81 – 21.99 Spot Rate : 2.1800 Average : 1.7530 YTW SCENARIO |
BAM.PR.T | FixedReset Disc | Quote: 16.84 – 18.00 Spot Rate : 1.1600 Average : 0.7409 YTW SCENARIO |
RY.PR.J | FixedReset Disc | Quote: 20.10 – 21.66 Spot Rate : 1.5600 Average : 1.1872 YTW SCENARIO |
BIP.PR.B | FixedReset Prem | Quote: 25.12 – 26.00 Spot Rate : 0.8800 Average : 0.5824 YTW SCENARIO |
POW.PR.A | Perpetual-Discount | Quote: 23.20 – 23.75 Spot Rate : 0.5500 Average : 0.3760 YTW SCENARIO |