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MAPF

MAPF Portfolio Composition: May, 2023

Turnover declined to under 1% in May. With volatility and nervousness due to worries about financial stability, spreads were wide; in addition, high trading volumes in the early part of the year have left the portfolio in a highly optimized condition.

There was a sharp increase in the proportion of the portfolio due to be reset within one year; this was due to the simple passage of time, not to current-month trading. The fund holds significant positions in TRP.PR.D, NA.PR.S, RY.PR.Z and BMO.PR.S.

Sectoral distribution of the MAPF portfolio on May 31, 2023, were:

MAPF Sectoral Analysis 2023-5-31
HIMI Indices Sector	Weighting	YTW	ModDur
Ratchet	0%	N/A	N/A
FixFloat	0%	N/A	N/A
Floater	0%	N/A	N/A
OpRet	0%	N/A	N/A
SplitShare	0%	N/A	N/A
Interest Rearing	0%	N/A	N/A
PerpetualPremium	0%	N/A	N/A
PerpetualDiscount	6.5%	6.69%	12.86
Fixed-Reset Discount	73.6%	9.29%	10.63
Insurance – Straight	0%	N/A	N/A
FloatingReset	0%	N/A	N/A
FixedReset Premium	0%	N/A	N/A
FixedReset Bank non-NVCC	0%	N/A	N/A
FixedReset Insurance non-NVCC	1.7%	9.12%	11.51
Scraps – Ratchet	1.5%	9.78%	10.38
Scraps – FixedFloater	0%	N/A	N/A
Scraps – Floater	0%	N/A	N/A
Scraps – OpRet	0%	N/A	N/A
Scraps – SplitShare	2.3%	10.45%	1.34
Scraps – PerpPrem	0%	N/A	N/A
Scraps – PerpDisc	0%	N/A	N/A
Scraps – FR Discount	5.4%	11.92%	8.97
Scraps – Insurance Straight	0%	N/A	N/A
Scraps – FloatingReset	0%	N/A	N/A
Scraps – FR Premium	0%	N/A	N/A
Scraps – Bank non-NVCC	0%	N/A	N/A
Scraps – Ins non-NVCC	8.3%	9.27%	11.10
Cash	+0.6%	0.00%	0.00
Total	100%	9.24%	10.46
Totals and changes will not add precisely due to rounding. Cash is included in totals with duration and yield both equal to zero.
The various “Scraps” indices include issues with a DBRS rating of Pfd-3(high) or lower and issues with an Average Trading Value (calculated with HIMIPref™ methodology, which is relatively complex) of less than $25,000. The issues considered “Scraps” are subdivided into indices which reflect those of the main indices.
DeemedRetractibles were comprised of all Straight Perpetuals (both PerpetualDiscount and PerpetualPremium) issued by BMO, BNS, CM, ELF, GWO, HSB, IAG, MFC, NA, RY, SLF and TD, which are not exchangable into common at the option of the company or the regulator. These issues are analyzed as if their prospectuses included a requirement to redeem at par on or prior to 2022-1-31 in the case of banks or normally in the case of insurers and insurance holding companies, in addition to the call schedule explicitly defined. See the Deemed Retractible Review: September 2016 for the rationale behind this analysis and IAIS Says No To DeemedRetractions for the recent change in policy with respect to insurers. Note that the estimate for the time this will become effective for insurers and insurance holding companies was extended by three years in April 2013, due to the delays in OSFI’s providing clarity on the issue and by a further five years in December, 2018; the estimate was eliminated in November. However, the distinctions are being kept because it is useful to distinguish insurance issues from others. The name of this subindex has been changed to “Insurance Straight” as of November, 2020
Calculations of resettable instruments are performed assuming a constant GOC-5 rate of 3.61%, a constant 3-Month Bill rate of 4.73% and a constant Canada Prime Rate of 6.70%

The “total” reflects the un-leveraged total portfolio (i.e., cash is included in the portfolio calculations and is deemed to have a duration and yield of 0.00.). MAPF will often have relatively large cash balances, both credit and debit, to facilitate trading. Figures presented in the table have been rounded to the indicated precision.

Credit distribution is:

MAPF Credit Analysis 2023-5-31
DBRS Rating	MAPF Weighting
Pfd-1	0
Pfd-1(low)	0
Pfd-2(high)	45.8%
Pfd-2	20.8%
Pfd-2(low)	23.6%
Pfd-3(high)	3.2%
Pfd-3	3.8%
Pfd-3(low)	1.5%
Pfd-4(high)	0.6%
Pfd-4	0%
Pfd-4(low)	0%
Pfd-5(high)	0%
Pfd-5	0%
Cash	+0.6%
Totals will not add precisely due to rounding.
A position held in INE.PR.A is not rated by DBRS nor by S&P, but has been included as “Pfd-4(high)” in the above table on the basis of its last S&P rating of P-4(high) and its BB rating from Fitch. A “BB” rating would normally map to Pfd-3, but the company’s disdain for the two major preferred share agencies makes me nervous.

Liquidity Distribution is:

MAPF Liquidity Analysis 2023-5-31
Average Daily Trading	MAPF Weighting
<$50,000	33.1%
$50,000 – $100,000	15.1%
$100,000 – $200,000	45.8%
$200,000 – $300,000	4.3%
>$300,000	1.0%
Cash	+0.6%
Totals will not add precisely due to rounding.

The distribution of Issue Reset Spreads is:

Range	MAPF Weight
<100bp	0%
100-149bp	10.0%
150-199bp	15.7%
200-249bp	58.7%
250-299bp	2.3%
300-349bp	2.2%
350-399bp	0%
400-449bp	0%
450-499bp	0%
500-549bp	0%
550-599bp	0%
>= 600bp	0%
Undefined	10.9%

Distribution of Floating Rate Start Dates is shown in the table below. This is the date of the next adjustment to the dividend rate, if the issue is currently paying a fixed rate for a limited time; which in practice is successive terms of 5 years. Issues that adjust quarterly are considered “Currently Floating”.

Range	MAPF Weight
Currently Floating	1.5%
0-1 Year	23.9%
1-2 Years	34.2%
2-3 Years	19.0%
3-4 Years	12.0%
4-5 Years	0%
5-6 Years	0%
>6 Years	0%
Not Floating Rate	9.4%

MAPF is, of course, Malachite Aggressive Preferred Fund, a “unit trust” managed by Hymas Investment Management Inc. Further information and links to performance, audited financials and subscription information are available the fund’s web page. The fund may be purchased directly from Hymas Investment Management. A “unit trust” is like a regular mutual fund, but are not sold with a prospectus This is cheaper, but means subscription is restricted to “accredited investors” (as defined by the Ontario Securities Commission). Fund past performances are not a guarantee of future performance. You can lose money investing in MAPF or any other fund.

Market Action

June 2, 2023

TXPR closed at 530.35, up 0.90% on the day. Volume today was 852,710, a little below the median of the past 21 trading days.

CPD closed at 10.64, up 1.53% on the day. Volume was 57,180, fourth-highest of the past 21 trading days.

ZPR closed at 8.71, up 1.16% on the day. Volume was 128,000, below the median of the past 21 trading days.

Five-year Canada yields up to 3.52% today.

Jobs, jobs, jobs!:

U.S. employers added 339,000 jobs on a seasonally adjusted basis, the Labor Department said on Friday, an increase from a revised total of 294,000 in April.

The strong figures emerged from a survey of employers. A separate component of the report, based on a survey of households, yielded a somewhat dissonant picture.

That data showed a rise in the unemployment rate to 3.7 percent, from 3.4 percent, and a decrease of 310,000 in the number of people employed, as participation in the labor force was little changed.

In a sign that the pressure to entice workers with pay increases is easing, wage growth slowed slightly in May, with average hourly earnings increasing 0.3 percent from April, and 4.3 percent over the year.
…
How can job growth accelerate while the unemployment rate rises? The two figures come from different surveys, one of businesses (the source of the monthly payroll figure) and one of households (the source of the unemployment rate). Over time, the two typically tell consistent stories. but they can diverge in any given month.

Often, that divergence is nothing more than noise. But sometimes, it reflects something real happening in the economy. That’s because the two surveys measure different things: The survey of households, for example, includes gig workers and other people doing nontraditional jobs that aren’t counted in the business survey.

That appears to be what happened last month. In May, “unincorporated self-employment” — which includes gig workers, independent contractors and some small businesses — fell by 369,000, the third straight monthly decrease. Looking just at people working in more traditional jobs, employment rose in both surveys last month.
…
The share of people in their prime working years — 25- to 54-years-old — participating in the labor market reached 83.4 percent in May, a level not seen since 2007.
…
Investors have added to bets on the Fed raising interest rates in June. Still, bets remain skewed toward the central bank holding rates at their current level, in a range between 5 percent and 5.25 percent.

And the US debt limit will be out of the headlines for the next two years:

After weeks of political impasse, tense negotiations and mounting economic anxiety, the Senate gave final approval on Thursday night to bipartisan legislation suspending the debt limit and imposing new spending caps, sending it to President Biden and ending the possibility of a calamitous government default.

The approval by the Senate on a 63-to-36 vote brought to a close a political showdown that began brewing as soon as Republicans narrowly won the House in November, promising to use their new majority and the threat of a default to try to extract spending and policy concessions from Mr. Biden.

The Canaccord deal (last mentioned May 8) continues to appear dubious:

Canaccord Genuity Group Inc CF-T -7.03%decrease
management-led consortium said on Friday its $1.13-billion take-private offer may not result in a deal as there was “no reasonable chance” its conditions would be met by the expiry date.

This comes just a month after the management warned of delays in securing regulatory approvals for the offer, first announced in January.

The management has made no final decision on extending the June 13 deadline for the offer, which was opposed by a special committee of independent directors at the Canadian firm in February.

And, for what it’s worth, my faith in the company’s governance also continues to be dubious.

Toronto real estate continues to impress:

Toronto’s housing market recovered further in May, with sales and home prices climbing for the fourth consecutive month, as the shortage of properties for sale fuelled competition among buyers.

The home price index, which excludes the highest valued properties, increased by 1.6 per cent to $1,164,400 from April to May, according to the Toronto Regional Real Estate Board, or TRREB. Adjusting for seasonal influences, the home price index was up 3.2 per cent to $1,139,600.

Sales rose by 5 per cent month over month on a seasonally adjusted basis. And although new listings increased by 10 per cent as more homeowners put their properties on the market, the volume was about 50 per cent below the 10-year average for May.

Sales represented more than 70 per cent of the new listings, the second consecutive month of similar conditions. TRREB’s chief market analyst Jason Mercer said a measurement this high “represents a very tight market supporting strong price growth.” The last time the market was this tight was at the peak of the pandemic’s real estate boom in January of last year.

Pablo Hernández de Cos, Governor of the Bank of Spain, gave a speech titled The European Central Bank’s monetary policy in response to the price stability challenge:

From a monetary policy perspective, it must be borne in mind that this inflation forecast – which, I stress, is compatible with our medium-term price stability target – is based, among other assumptions, on market expectations for our interest rates that envisage the deposit facility rate peaking at around 3.75% in the coming months, holding at that level over the following quarters and only gradually falling from 2024 Q2.

Although no new projections were available in May, the latest data published since the March projections were prepared show, firstly, that economic activity has performed in line with the forecast. Thus, euro area GDP grew 0.1% in Q1 and the partial and essentially qualitative information available for Q2 suggests a slight acceleration. By component, private consumption remained weak, but the labour market continued to prove robust: the unemployment rate stood at historically low levels (6.9% in March, almost 1 pp below the February 2020 rate), although hours worked were still 1.6% below the pre-pandemic level.

Inflation of 7% in April was slightly higher than expected, while financial conditions tightened further – as a result, above all, of an even stronger euro exchange rate – and energy prices were at somewhat lower levels than those incorporated into the March projections.

All this information led us to consider that the medium-term inflation outlook in the March projections essentially remained valid. In this respect, the International Monetary Fund projections published on 18 April forecast a similar GDP and inflation outlook to that of the Eurosystem.

Underlying inflation (i.e. excluding energy and food) fell slightly in April, to 5.6%, but was higher than expected, after reaching a record high of 5.7% in March. Other indicators confirm that underlying price pressures remain strong. First, inflation rates for the underlying inflation components most exposed to higher energy prices,3 which increased by 4.5 pp over the course of 2022 (to 7.2% in December), have continued to rise and stood at 7.7% in April. Second, the price growth of those items most affected by the recovery in demand after the pandemic restrictions were lifted, such as those related to transport and household equipment and maintenance, shows signs of stabilising, albeit at levels that remain high (above 7%).4

In addition, inflation rates for the components related to recreation, food service activities and tourism reached an all-time high of 7.5% in March (7.4% in April). Lastly, inflation rates for the rest of the items, which account for more than 30% of the consumption basket, held at 3.6%5 in April, with the prices of more than half of the items
growing at rates of over 4%.

Nonetheless, various short-term underlying inflation indicators – measured in month-onmonth or quarter-on-quarter terms – have started to ease somewhat. In this respect, nonenergy industrial goods inflation fell from 6.6% in March
to 6.2% in April.

At the same time, wage pressures have continued to increase, with compensation per employee and per hour growing by 5% and 4.3%, respectively, in 2022 Q4 (3.9% and 2.9% in Q3). In any event, this is in line with the March projections.

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	-0.2256 %	2,124.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.2256 %	4,075.5
Floater	10.61 %	10.89 %	21,979	8.76	2	-0.2256 %	2,348.7
OpRet	0.00 %	0.00 %	0	0.00	0	0.0860 %	3,341.0
SplitShare	5.03 %	7.34 %	40,300	2.53	7	0.0860 %	3,989.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0860 %	3,113.1
Perpetual-Premium	0.00 %	0.00 %	0	0.00	0	0.5194 %	2,679.8
Perpetual-Discount	6.37 %	6.52 %	39,522	13.12	34	0.5194 %	2,922.2
FixedReset Disc	5.96 %	8.49 %	80,970	11.23	63	1.1006 %	2,092.7
Insurance Straight	6.34 %	6.37 %	59,344	13.42	19	0.5080 %	2,837.6
FloatingReset	11.18 %	11.55 %	47,017	8.53	2	0.5980 %	2,321.3
FixedReset Prem	6.98 %	7.00 %	290,851	3.79	1	0.2789 %	2,315.5
FixedReset Bank Non	0.00 %	0.00 %	0	0.00	0	1.1006 %	2,139.1
FixedReset Ins Non	6.05 %	7.60 %	84,529	11.80	11	1.2365 %	2,305.6

Performance Highlights
Issue	Index	Change	Notes
BIK.PR.A	FixedReset Disc	-1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 22.24 Evaluated at bid price : 23.00 Bid-YTW : 8.10 %
TRP.PR.C	FixedReset Disc	-1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 10.50 Evaluated at bid price : 10.50 Bid-YTW : 10.68 %
TD.PF.L	FixedReset Disc	-1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.98 Evaluated at bid price : 22.56 Bid-YTW : 7.61 %
MFC.PR.C	Insurance Straight	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 18.10 Evaluated at bid price : 18.10 Bid-YTW : 6.24 %
RY.PR.H	FixedReset Disc	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 8.50 %
CM.PR.Y	FixedReset Disc	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 22.85 Evaluated at bid price : 23.35 Bid-YTW : 7.63 %
PWF.PR.E	Perpetual-Discount	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.22 Evaluated at bid price : 21.22 Bid-YTW : 6.58 %
MFC.PR.K	FixedReset Ins Non	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 8.14 %
PVS.PR.K	SplitShare	1.15 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2029-05-31 Maturity Price : 25.00 Evaluated at bid price : 22.00 Bid-YTW : 6.96 %
PWF.PR.Z	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 20.03 Evaluated at bid price : 20.03 Bid-YTW : 6.52 %
RY.PR.N	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.75 Evaluated at bid price : 21.75 Bid-YTW : 5.68 %
BMO.PR.S	FixedReset Disc	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.40 Evaluated at bid price : 17.40 Bid-YTW : 8.44 %
BN.PF.D	Perpetual-Discount	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 6.96 %
PWF.PR.P	FixedReset Disc	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 11.76 Evaluated at bid price : 11.76 Bid-YTW : 9.62 %
BIP.PR.A	FixedReset Disc	1.23 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 10.12 %
FTS.PR.J	Perpetual-Discount	1.25 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 19.47 Evaluated at bid price : 19.47 Bid-YTW : 6.15 %
BN.PR.R	FixedReset Disc	1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 12.86 Evaluated at bid price : 12.86 Bid-YTW : 10.37 %
BN.PF.G	FixedReset Disc	1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 14.44 Evaluated at bid price : 14.44 Bid-YTW : 10.41 %
RY.PR.Z	FixedReset Disc	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.81 Evaluated at bid price : 16.81 Bid-YTW : 8.55 %
RY.PR.S	FixedReset Disc	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 7.62 %
BMO.PR.W	FixedReset Disc	1.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 8.64 %
TRP.PR.E	FixedReset Disc	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 14.70 Evaluated at bid price : 14.70 Bid-YTW : 9.89 %
MFC.PR.I	FixedReset Ins Non	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.30 Evaluated at bid price : 21.58 Bid-YTW : 7.36 %
CM.PR.Q	FixedReset Disc	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.35 Evaluated at bid price : 17.35 Bid-YTW : 8.51 %
IFC.PR.C	FixedReset Disc	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 8.42 %
BN.PF.A	FixedReset Disc	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 18.17 Evaluated at bid price : 18.17 Bid-YTW : 9.16 %
CM.PR.O	FixedReset Disc	1.52 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 8.68 %
CCS.PR.C	Insurance Straight	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 6.29 %
TD.PF.D	FixedReset Disc	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.57 Evaluated at bid price : 17.57 Bid-YTW : 8.42 %
NA.PR.S	FixedReset Disc	1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.49 Evaluated at bid price : 17.49 Bid-YTW : 8.53 %
GWO.PR.M	Insurance Straight	1.58 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 22.22 Evaluated at bid price : 22.50 Bid-YTW : 6.44 %
TRP.PR.B	FixedReset Disc	1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 10.22 Evaluated at bid price : 10.22 Bid-YTW : 10.64 %
BN.PF.C	Perpetual-Discount	1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 6.96 %
BN.PF.B	FixedReset Disc	1.60 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 15.85 Evaluated at bid price : 15.85 Bid-YTW : 9.92 %
MFC.PR.N	FixedReset Ins Non	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 15.70 Evaluated at bid price : 15.70 Bid-YTW : 8.99 %
TD.PF.J	FixedReset Disc	1.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.49 Evaluated at bid price : 21.49 Bid-YTW : 7.24 %
CM.PR.P	FixedReset Disc	1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 8.59 %
BN.PR.T	FixedReset Disc	1.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 13.20 Evaluated at bid price : 13.20 Bid-YTW : 10.23 %
TRP.PR.G	FixedReset Disc	1.88 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 15.75 Evaluated at bid price : 15.75 Bid-YTW : 9.43 %
BN.PF.I	FixedReset Disc	1.89 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 19.36 Evaluated at bid price : 19.36 Bid-YTW : 9.06 %
MFC.PR.M	FixedReset Ins Non	1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.05 Evaluated at bid price : 16.05 Bid-YTW : 8.97 %
BMO.PR.E	FixedReset Disc	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 7.53 %
BN.PR.N	Perpetual-Discount	1.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 6.84 %
RY.PR.J	FixedReset Disc	1.99 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 8.31 %
BN.PR.X	FixedReset Disc	2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 14.00 Evaluated at bid price : 14.00 Bid-YTW : 9.45 %
RY.PR.M	FixedReset Disc	2.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.16 Evaluated at bid price : 17.16 Bid-YTW : 8.31 %
MFC.PR.F	FixedReset Ins Non	2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 12.00 Evaluated at bid price : 12.00 Bid-YTW : 9.20 %
BN.PR.Z	FixedReset Disc	2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 8.56 %
BMO.PR.T	FixedReset Disc	2.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.64 Evaluated at bid price : 16.64 Bid-YTW : 8.60 %
POW.PR.B	Perpetual-Discount	2.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.03 Evaluated at bid price : 21.03 Bid-YTW : 6.47 %
NA.PR.W	FixedReset Disc	2.42 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.51 Evaluated at bid price : 16.51 Bid-YTW : 8.61 %
TD.PF.A	FixedReset Disc	2.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 8.49 %
TD.PF.M	FixedReset Disc	2.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 23.09 Evaluated at bid price : 23.60 Bid-YTW : 7.48 %
TD.PF.K	FixedReset Disc	2.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 7.39 %
TD.PF.C	FixedReset Disc	2.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 8.49 %
FTS.PR.K	FixedReset Disc	2.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 15.75 Evaluated at bid price : 15.75 Bid-YTW : 8.96 %
BMO.PR.Y	FixedReset Disc	3.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 8.36 %
MFC.PR.L	FixedReset Ins Non	5.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 8.70 %

Volume Highlights
Issue	Index	Shares Traded	Notes
BN.PF.H	FixedReset Disc	67,000	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 9.07 %
TD.PF.A	FixedReset Disc	27,300	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 8.49 %
BN.PF.J	FixedReset Disc	25,000	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 7.97 %
RY.PR.J	FixedReset Disc	24,868	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 8.31 %
TRP.PR.C	FixedReset Disc	18,249	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 10.50 Evaluated at bid price : 10.50 Bid-YTW : 10.68 %
NA.PR.W	FixedReset Disc	17,150	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 16.51 Evaluated at bid price : 16.51 Bid-YTW : 8.61 %
There were 5 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
GWO.PR.T	Insurance Straight	Quote: 20.02 – 23.20 Spot Rate : 3.1800 Average : 1.8477 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 6.44 %
CU.PR.C	FixedReset Disc	Quote: 17.93 – 22.72 Spot Rate : 4.7900 Average : 3.7870 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.93 Evaluated at bid price : 17.93 Bid-YTW : 8.14 %
RY.PR.J	FixedReset Disc	Quote: 17.95 – 20.00 Spot Rate : 2.0500 Average : 1.2780 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 8.31 %
RY.PR.M	FixedReset Disc	Quote: 17.16 – 18.75 Spot Rate : 1.5900 Average : 1.0598 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.16 Evaluated at bid price : 17.16 Bid-YTW : 8.31 %
TRP.PR.E	FixedReset Disc	Quote: 14.70 – 17.45 Spot Rate : 2.7500 Average : 2.2550 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 14.70 Evaluated at bid price : 14.70 Bid-YTW : 9.89 %
BN.PF.C	Perpetual-Discount	Quote: 17.80 – 19.19 Spot Rate : 1.3900 Average : 0.9177 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-02 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 6.96 %

Market Action

June 1, 2023

The current issue of IMF’s F&D magazine is devoted to globalization this week:

Mounting disillusionment with globalization has consequences. Yale’s Pinelopi Goldberg concludes that protectionism would make the world less resilient and more conflict-prone. Dartmouth’s Doug Irwin says history shows industrial policies and subsidies could leave countries worse off. Growing global tensions, notes the IMF’s Michele Ruta, may push regional trade alliances toward less integration and more discrimination. And smaller economies may be sidelined as the world fragments into rival trading blocs. Some will find it advantageous to remain nonaligned, says Oxford’s Ngaire Woods.

But the IMF’s Kristalina Georgieva and the World Trade Organization’s Ngozi Okonjo-Iweala appeal to countries to keep faith in trade as a transformative force that has lifted many millions out of poverty and call for a strengthening of multilateral institutions. Other contributors advocate for a new political consensus to resolve competing demands on the global trading system, taking into account structural changes in the global economy.

Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, gave a short speech at a Fed Listens event:

In the near term, higher interest rates intended to lower inflation work most directly in the housing market. While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation.

The pandemic abruptly changed the lives of most Americans and their families, and it fed a surge of demand for those who sought larger homes. It ushered in a wave of homebuilding and renovation that was a significant contributing factor for inflation and supply chain challenges. Much of that initial inflation has moderated, but it will be important to understand the long-term effect of the pandemic environment on household formation and housing demand going forward.

Christine Lagarde, President of the European Central Bank, gave a speech titled The Fight Against Inflation:

Underlying inflation refers to the slow-moving part of inflation which, when temporary shocks have faded, will persist into the medium term. Therefore, by looking at underlying inflation, we can be more confident that inflation is on the right path. And it has an important benefit – measures of underlying inflation can be observed in real time.

However, there is no clear evidence that underlying inflation has peaked. To date, all measures monitored by the ECB are still strong. And whether they remain so will depend mainly on the balance between two forces: energy prices and wages.

On the one hand, as energy is an important input into every economic activity, the sharp rise in energy prices last year has fed through to all prices – including those that make up our various measures of underlying inflation.
But energy prices have dropped considerably since then, which should have the opposite effect. HICP energy inflation in Germany fell from 44.2% in September 2022 to 9.4% in April 2023.

This decline in energy costs for both consumers and producers should, in turn, limit firms’ ability to further raise profit margins, which has been a key factor driving recent price pressures in the euro area.

Consumers are less likely to accept disproportionate price rises when they know that firms are saving on their energy bills.

On the other hand, mounting wage pressures are becoming a more important driver of inflation. So far, workers have faced a significant loss from the erosion in overall labour income caused by the energy crisis. In the euro area, real wages at the end of last year were still around 4 percentage points below prepandemic levels.

But labour markets across the euro area are tight and workers have considerable bargaining power, which they are starting to use to recoup these losses. This is especially visible here in Germany, where labour shortages reached historic highs in the second half of last year, leading to strong wage agreements in many sectors. Wage growth in Germany increased from 3.9% in the fourth quarter of last year to 5.1% in the first quarter of this year.

To be clear: a period of catch-up wage growth need not cause unduly persistent inflation over time – if the costs of the energy shock are ultimately shared in a balanced way between firms and workers. But if we start to see what I have called “tit-for-tat” inflation – with both parties trying to offset any real income losses – we could see a negative spiral taking hold.

The ECB cannot allow this to happen. And since profits are ultimately influenced by the business cycle, it is our responsibility to restrict demand enough to prevent such a spiral. That should, in turn, lead to slower margin growth and lower wage demands while reducing pressure in the labour market.

But to gauge whether rates are sufficiently restrictive, we need to know how much traction our policy tightening is having – and is likely to have – on spending in the economy.

That is why policy transmission is the third element we are looking at.

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	0.2261 %	2,129.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.2261 %	4,084.7
Floater	10.58 %	10.85 %	22,928	8.79	2	0.2261 %	2,354.0
OpRet	0.00 %	0.00 %	0	0.00	0	0.0799 %	3,338.2
SplitShare	5.04 %	7.26 %	40,073	2.54	7	0.0799 %	3,986.5
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0799 %	3,110.4
Perpetual-Premium	0.00 %	0.00 %	0	0.00	0	0.5147 %	2,665.9
Perpetual-Discount	6.40 %	6.54 %	41,155	13.08	34	0.5147 %	2,907.1
FixedReset Disc	6.02 %	8.62 %	81,174	11.08	63	0.4794 %	2,069.9
Insurance Straight	6.37 %	6.41 %	60,018	13.38	19	0.8612 %	2,823.2
FloatingReset	11.25 %	11.63 %	46,474	8.48	2	0.2822 %	2,307.5
FixedReset Prem	7.00 %	7.02 %	302,204	12.35	1	-0.2385 %	2,309.0
FixedReset Bank Non	0.00 %	0.00 %	0	0.00	0	0.4794 %	2,115.9
FixedReset Ins Non	6.12 %	7.62 %	84,942	11.76	11	0.3713 %	2,277.4

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.P	FixedReset Disc	-1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 11.62 Evaluated at bid price : 11.62 Bid-YTW : 9.72 %
BN.PF.I	FixedReset Disc	-1.30 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 9.23 %
BIP.PR.A	FixedReset Disc	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.25 Evaluated at bid price : 16.25 Bid-YTW : 10.24 %
BIP.PR.F	FixedReset Disc	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.79 Evaluated at bid price : 18.79 Bid-YTW : 8.63 %
BN.PR.N	Perpetual-Discount	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.41 Evaluated at bid price : 17.41 Bid-YTW : 6.97 %
CU.PR.G	Perpetual-Discount	1.09 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 6.13 %
PWF.PR.G	Perpetual-Discount	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.71 Evaluated at bid price : 23.00 Bid-YTW : 6.49 %
POW.PR.A	Perpetual-Discount	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 21.49 Evaluated at bid price : 21.75 Bid-YTW : 6.54 %
BMO.PR.W	FixedReset Disc	1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.24 Evaluated at bid price : 16.24 Bid-YTW : 8.75 %
RY.PR.J	FixedReset Disc	1.15 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 8.46 %
BMO.PR.S	FixedReset Disc	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 8.54 %
GWO.PR.H	Insurance Straight	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.85 Evaluated at bid price : 18.85 Bid-YTW : 6.44 %
RY.PR.O	Perpetual-Discount	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 21.41 Evaluated at bid price : 21.41 Bid-YTW : 5.77 %
FTS.PR.G	FixedReset Disc	1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 8.40 %
BMO.PR.E	FixedReset Disc	1.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 7.68 %
TRP.PR.A	FixedReset Disc	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 13.05 Evaluated at bid price : 13.05 Bid-YTW : 10.06 %
IFC.PR.G	FixedReset Ins Non	1.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 7.58 %
BN.PR.Z	FixedReset Disc	1.62 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 8.74 %
BN.PF.D	Perpetual-Discount	1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.79 Evaluated at bid price : 17.79 Bid-YTW : 7.04 %
PWF.PR.O	Perpetual-Discount	1.68 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.09 Evaluated at bid price : 22.37 Bid-YTW : 6.56 %
FTS.PR.H	FixedReset Disc	1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 12.00 Evaluated at bid price : 12.00 Bid-YTW : 9.56 %
BIK.PR.A	FixedReset Disc	1.74 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.80 Evaluated at bid price : 23.40 Bid-YTW : 7.97 %
FTS.PR.M	FixedReset Disc	1.81 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 9.03 %
BMO.PR.F	FixedReset Disc	1.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.88 Evaluated at bid price : 23.44 Bid-YTW : 7.52 %
BN.PR.R	FixedReset Disc	1.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 12.70 Evaluated at bid price : 12.70 Bid-YTW : 10.49 %
BN.PR.M	Perpetual-Discount	2.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 6.93 %
BN.PF.A	FixedReset Disc	2.29 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 9.30 %
TRP.PR.E	FixedReset Disc	2.76 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 10.03 %
RY.PR.N	Perpetual-Discount	3.61 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.75 %
GWO.PR.P	Insurance Straight	3.73 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 6.49 %
SLF.PR.C	Insurance Straight	6.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 6.14 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TRP.PR.D	FixedReset Disc	135,947	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 14.66 Evaluated at bid price : 14.66 Bid-YTW : 10.16 %
BN.PF.J	FixedReset Disc	79,400	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 8.03 %
MFC.PR.L	FixedReset Ins Non	42,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 15.51 Evaluated at bid price : 15.51 Bid-YTW : 9.13 %
TD.PF.A	FixedReset Disc	41,800	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 8.70 %
TD.PF.M	FixedReset Disc	36,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.53 Evaluated at bid price : 23.01 Bid-YTW : 7.67 %
TD.PF.K	FixedReset Disc	28,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 7.59 %
There were 4 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CU.PR.C	FixedReset Disc	Quote: 17.89 – 22.72 Spot Rate : 4.8300 Average : 2.6873 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.89 Evaluated at bid price : 17.89 Bid-YTW : 8.15 %
TRP.PR.E	FixedReset Disc	Quote: 14.50 – 17.45 Spot Rate : 2.9500 Average : 1.7124 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 10.03 %
BMO.PR.Y	FixedReset Disc	Quote: 16.88 – 19.05 Spot Rate : 2.1700 Average : 1.3007 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.88 Evaluated at bid price : 16.88 Bid-YTW : 8.65 %
MFC.PR.M	FixedReset Ins Non	Quote: 15.75 – 17.50 Spot Rate : 1.7500 Average : 1.0374 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 15.75 Evaluated at bid price : 15.75 Bid-YTW : 9.14 %
BN.PF.G	FixedReset Disc	Quote: 14.26 – 16.00 Spot Rate : 1.7400 Average : 1.0275 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 14.26 Evaluated at bid price : 14.26 Bid-YTW : 10.54 %
FTS.PR.J	Perpetual-Discount	Quote: 19.23 – 20.60 Spot Rate : 1.3700 Average : 0.8917 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 19.23 Evaluated at bid price : 19.23 Bid-YTW : 6.22 %

Issue Comments

CPX.PR.E To Reset To 6.631%

Capital Power Corporation has announced:

that it has notified registered shareholders of its Cumulative Rate Reset Preference Shares, Series 5 (Series 5 Shares) (TSX: CPX.PR.E) of the Conversion Privilege and Dividend Rate Notice.

Subject to certain conditions, beginning on May 31, 2023 and ending at 5:00 p.m. (Toronto time) on June 15, 2023, each registered holder of Series 5 Shares will have the right to elect to convert any or all of their Series 5 Shares into an equal number of Cumulative Floating Rate Preference Shares, Series 6 (Series 6 Shares) by delivering an Election Notice to the Corporation.

If Capital Power does not receive an Election Notice from a holder of Series 5 Shares during the time fixed therefor, then the Series 5 Shares shall be deemed not to have been converted (except in the case of an Automatic Conversion, see below). Holders of the Series 5 Shares and the Series 6 Shares will have the opportunity to convert their shares again on June 30, 2028, and every five years thereafter as long as the shares remain outstanding.

Effective June 30, 2023, on May 31, 2023, the Annual Fixed Dividend Rate for the Series 5 Shares was set for the next five-year period at 6.63100%. Effective June 30, 2023, on May 31, 2023, the Floating Quarterly Dividend Rate for the Series 6 Shares was set for the first Quarterly Floating Rate Period (being the period from and including June 30, 2023, to but excluding September 30, 2023) at 1.94410%. The Floating Quarterly Dividend Rate will be reset every quarter.

The Series 5 Shares are issued in “book entry only” form and, as such, the sole registered holder of the Series 5 Shares is CDS Clearing and Depository Services Inc. (CDS). All rights of beneficial holders of Series 5 Shares must be exercised through CDS or the CDS participant through which the Series 5 Shares are held. The deadline for the registered shareholder to provide notice of exercise of the right to convert Series 5 Shares into Series 6 Shares is 3:00 p.m. (MT) / 5:00 p.m. (ET) on June 15, 2023. Any Election Notices received after this deadline will not be valid. As such, beneficial holders of Series 5 Shares who wish to exercise their rights to convert their shares should contact their broker or other intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

After June 15, 2023, (i) if Capital Power determines that there would remain outstanding on June 30, 2023, less than 1,000,000 Series 5 Shares, all remaining Series 5 Shares will be automatically converted into Series 6 Shares on a one-for-one basis effective June 30, 2023 (an Automatic Conversion); or (ii) if Capital Power determines that there would remain outstanding after June 30, 2023, less than 1,000,000 Series 6 Shares, no Series 5 Shares will be permitted to be converted into Series 6 Shares effective June 30, 2023. There are currently 8,000,000 Series 5 Shares outstanding.

The Toronto Stock Exchange (TSX) has conditionally approved the listing of the Series 6 Shares effective upon conversion. Listing of the Series 6 Shares is subject to the Capital Power fulfilling all the listing requirements of the TSX and upon approval, the Series 6 Shares will be listed on the TSX under the trading symbol CPX.PR.F.

For more information on the terms of, rates and risks associated with an investment in, the Series 5 Shares and the Series 6 Shares, please see Capital Power’s prospectus supplement dated March 7, 2013 which is available on sedar.com or on Capital Power’s website at capitalpower.com.

CPX.PR.E was issued as a FixedReset, 4.50%+315, that commenced trading 2013-3-14 after being announced 2013-3-5. The issue reset to 5.238% in 2018 and there was no conversion. It is tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

Issue Comments

IFC.PR.G To Reset To 6.012%

Intact Financial Corporation has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Non-cumulative Rate Reset Class A Shares Series 7 of IFC (the “Series 7 Preferred Shares”) (TSX: IFC.PR.G) on June 30, 2023. As a result, subject to certain conditions set out in the prospectus supplement dated May 22, 2018 to the short form base shelf prospectus dated November 15, 2017 (the “Prospectus”), relating to the issuance of the Series 7 Preferred Shares, the holders of the Series 7 Preferred Shares will have the right, at their option, to elect to convert all or any of their Series 7 Preferred Shares into Non-cumulative Floating Rate Class H Shares Series 8 of IFC (the “Series 8 Preferred Shares”) on a one-for-one basis on June 30, 2023. Holders who do not exercise their right to convert their Series 7 Preferred Shares into Series 8 Preferred Shares on such date will retain their Series 7 Preferred Shares, unless automatically converted in accordance with the conditions below.

With respect to any Series 7 Preferred Shares that may remain outstanding after June 30, 2023, commencing as of such date, holders thereof will be entitled to receive fixed non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of IFC. The annual dividend rate for the Series 7 Preferred Shares for the five-year period from and including June 30,2023 to but excluding June 30, 2028, will be 6.012%, as determined in accordance with the terms of the Series 7 Preferred Shares.

With respect to any Series 8 Preferred Shares that may be issued on June 30, 2023, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of IFC. The dividend rate for the Series 8 Preferred Shares for the 3-month floating rate period from and including June 30, 2023, to but excluding September 30, 2023, will be 1.79287% (7.113% on an annualized basis), as determined in accordance with the terms of the Series 8 Preferred Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

The foregoing conversion right for the Series 7 Preferred Shares is subject to the conditions that: (i) if IFC determines that there would be less than 1,000,000 Series 7 Preferred Shares outstanding on June 30, 2023, then all remaining Series 7 Preferred Shares will automatically be converted into an equal number of Series 8 Preferred Shares on June 30, 2023, and (ii) alternatively, if IFC determines that there would be less than 1,000,000 Series 8 Preferred Shares outstanding on June 30, 2023, then no Series 7 Preferred Shares will be converted into Series 8 Preferred Shares. In either case, IFC will give written notice to that effect to any registered holders of Series 7 Preferred Shares on or before June 22, 2023.

The Series 7 Preferred Shares are issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (“CDS Participant”). All rights of holders of Series 7 Preferred Shares must be exercised through CDS or the CDS Participant through which the Series 7 Preferred Shares are held. The deadline for the registered shareholder of any Series 7 Preferred Shares to provide notice of exercise of the right to convert is 5:00 p.m. (ET) on June 15, 2023. Any notices received after this deadline will not be valid. As such, beneficial holders of Series 7 Preferred Shares who wish to exercise their right to convert their shares during the conversion period, which will run from Wednesday, May 31, 2023 until 5:00 p.m. (ET) on Thursday, June 15, 2023, should contact their broker or other intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

Holders of the Series 7 Preferred Shares and the Series 8 Preferred Shares (if issued on June 30, 2023) will have the opportunity to convert their shares again on June 30, 2028, and every five years thereafter as long as the shares remain outstanding. Subject to certain conditions described in the Prospectus, IFC may redeem the Series 7 Preferred Shares, in whole or in part, on June 30, 2028, and on June 30 every five years thereafter and may redeem the Series 8 Preferred Shares (if issued), in whole or in part, on any date after June 30, 2023.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 8 Preferred Shares effective on conversion. Listing of the Series 8 Preferred Shares is subject to IFC fulfilling all the listing requirements of the TSX.

For more information on the terms of, and risks associated with an investment in, the Series 7 Preferred Shares and the Series 8 Preferred Shares, please see IFC’s prospectus supplement dated May 22, 2018, which is available on www.sedar.com.

IFC.PR.G was issued as a FixedReset, 4.90%+255, that commenced trading 2018-5-29 after being announced 2018-5-17. It is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

Thanks to Assiduous Reader CanSiamCyp for bringing this to my attention.

Market Action

May 31, 2023

TXPR closed at 524.69, up 0.53% on the day. Volume today was 1.02-million, fifth-highest of the past 21 trading days. This didn’t help the month much: the TXPR price index (reported here) is down 4.09% from April 28. The total return index (used for benchmarking) will be somewhat better, but not enough to make May anything other than a bad month.

CPD closed at 10.42, up 0.29% on the day. Volume was 50,340, fifth-highest of the past 21 trading days.

ZPR closed at 8.57, up 0.47% on the day. Volume was 594,180, second-highest of the past 21 trading days and miles ahead of #3.

Five-year Canada yields down to 3.47% today.

So the big news today was economic growth:

The Canadian economy grew at an annualized rate of 3.1 per cent in the first quarter of 2023, Statistics Canada reported Wednesday.

The latest data shows growth beat out the federal agency’s own forecast of 2.5 per cent for the quarter. A preliminary estimate suggests the economy grew by 0.2 per cent in April, after remaining flat in March.
…
The federal agency says growth in exports and household spending helped spur growth in the first quarter.

Meanwhile, slower inventory accumulations as well as declines in household investment and business investment in machinery and equipment weighed on growth.

The Canadian economy has managed to continue outperforming expectations, despite the Bank of Canada hoping high interest rates would cause a more profound pullback by consumers and businesses.

The household spending figures show spending up on both goods and services in the first three months of the year, after minimal growth in the previous two quarters.

However, the report notes disposable income fell for the first time since the fourth quarter of 2021. The federal agency says disposable income declined by one per cent, largely due to the expiration of government measures aimed at helping people cope with inflation.

This had an immediate effect on rate forecasts:
Pre-announcement

Post-announcement

Oddly, the GOC-5 was down today to 3.47%, despite yield increases in T-bills out to six months.

And the US job market seems to be holding up:

After three consecutive months of declines, job openings jumped in April, reaching 10.1 million, the Labor Department reported on Wednesday.

The surge signals that job opportunities are withstanding the economic pressures that have led many to believe that the American economy may soon enter a recession.

At the same time, the report — known as JOLTS, or the Job Openings and Labor Turnover Survey — showed that the labor market was far less feverish than it was a year earlier.

The quits rate — viewed as an indicator of how confident workers are in leaving a job and finding employment elsewhere — was 3 percent, seasonally adjusted, in April 2022. Since then, it has retreated to 2.4 percent, just above its prepandemic peak. And the hiring rate was unchanged from March, which was the lowest since December 2020.

Layoffs, however, decreased again, showing that employers are hesitant to let go of employees brought on board during this recovery.

While at the same time:

The House of Representatives is expected to vote in the evening on a bill to lift the $31.4 trillion debt limit, a critical step to avoid a destabilizing default that could come early next week without congressional approval.

House passage would send the bill to the Senate, where debate could stretch to the weekend, just before the June 5 date when the government could start to run out of money.
…
Fed Governor and vice chair nominee Philip Jefferson said skipping a rate hike in two weeks would provide policymakers time to see more data before making a decision. Philadelphia Fed President Patrick Harker also said on Wednesday that for now he is inclined to support a “skip” in rate hikes.

Market timing? You can have it!

Great-West has swallowed the medicine on Putnam:

Canadian insurer Great-West Lifeco Inc. GWO-T -0.62%decrease
is offloading U.S. wealth manager Putnam Investments to investment giant Franklin Templeton in a deal valued at US$1.8-billion, a fraction of what the insurer initially paid for the operation.

The two asset managers announced Wednesday that Franklin Templeton will initially pay Great-West Life US$950-million to US$1-billion in a combination of cash and stock. Franklin Templeton will issue 33.33 million shares to Great-West at closing and $100-million in cash six months after closing.

Great-West’s shares will represent a 6.2-per-cent ownership stake in parent Franklin Resources Inc., and it has agreed to hold at least 4.9 per cent of Franklin Resources for at least five years.
…
Great-West Lifeco purchased Putnam for US$3.9-billion in 2007 to expand its U.S presence. The deal also included a US$900-million deferred tax benefit. In 2007, Putnam managed about US$192-billion in assets but struggled with performance and investor redemption in the years following the financial crisis. Now, the company manages about US$170-billion in assets. That includes about $33-billion of assets in Putnam subsidiary PanAgora, a quantitative asset manager that Great-West Lifeco will keep its controlling interest in.

It’s springtime, and in spring a young man’s fancy lightly turns to thoughts of fraud:

A panel of the Ontario Securities Commission has ordered the principals of Paramount Equity Financial Corp., which sold pooled mortgage products until it was shut down in 2017, to pay $47.2-million, after they were found to have defrauded investors.

But one of the defendants, the company’s chief executive, has gone missing, and another defendant is collecting employment insurance, raising questions as to how much of the judgment will be paid.

Paramount and several affiliate companies, which were placed under the control of a receiver at the request of the OSC in 2017, promoted themselves as a vehicle for investing in second mortgages on residential homes. They raised about $78-million from 500 investors for their two funds.

About $50-million was instead directed to higher-risk mortgages for undeveloped land, or the redevelopment of existing buildings. The OSC panel, called the Capital Markets Tribunal, also found in April, 2022, that the principals of Paramount – CEO Marc Ruttenberg, senior vice-president Brad Burdon and director of sales Matthew Laverty – had undisclosed, indirect ownership interests in these riskier development projects.
…
The OSC said it was unable to locate Mr. Ruttenberg when it started its enforcement proceeding, and that the most up-to-date address it had for him is a post-office box in a Toronto UPS store. In its order, the panel said Mr. Ruttenberg did not appear, provide evidence, make submissions or participate in any other way in the proceeding.

… and …

An Ontario builder of so-called “tiny homes” has been charged with fraud and police say 11 victims have now come forward, with more than $800,000 of deposit money unaccounted for.
…
Halton Police Regional Services said on May 3 that Philip Bradley, 58, was arrested and charged with nine counts of fraud over $5,000. He has since been released on bail and is expected back in court on June 19. Since his arrest, more victims have come forward according to Det. Constable Kevin Harvey of the Halton Regional fraud unit.

I mentioned CI Financial on May 11 with an update on May 15. Now, DBRS has weighed in:

DBRS Limited (DBRS Morningstar) changed the trend to Negative from Stable and confirmed the ratings of CI Financial Corp. (CI or the Company) and its principal subsidiary, CI Investments Inc. (CII), including CI’s Senior Unsecured Debentures rating and CII’s Issuer Rating, at BBB.

KEY RATING CONSIDERATIONS
The change in the trend to Negative reflects the deterioration in CI’s credit fundamentals, including weaker earnings, still very high leverage, even with paying down some debt recently, and a lower fixed charge coverage ratio. DBRS Morningstar had previously anticipated that CI would have completed the initial public offering (IPO) of its U.S. wealth management business (CI US) to deleverage, but this was postponed due to market conditions with CI instead agreeing to a pre-IPO investment with a group of global institutional investors (Investors).

While the proceeds of the recently closed $1.34 billion pre- IPO investment will help lower debt levels by approximately $1 billion in Q2 2023, and decrease the extraordinarily high debt-to-EBITDA ratio of 7.3 times (x) (as of Q1 2023, per DBRS Morningstar calculations), CI’s leverage will continue to be elevated and its fixed charge ratio low because the Company redeemed mostly its lower-cost debt. In order to retain a majority interest in CI US, the Company will have to grow at a pace that is comparable to the past two years, which would be much more challenging under the current market conditions, and may lead to additional borrowing. Furthermore, the terms of the investment deal stipulate a 14.5% compounding annual return for the Investors that will be materialized at the time of the IPO, within the next six years. The uncertainty with respect to CI’s ultimate ownership in CI US may therefore remain high for some time. As such, DBRS Morningstar does not expect a significant and sustained reduction in debt over the medium term as would have been expected with an IPO.

DBRS is also hosting a webinar that some may find of interest:

Join DBRS Morningstar on Wednesday, June 7, at 10:30 a.m. EDT for a Frontline Perspectives webinar, “The Future of LRCN Issuances in Canada.” Since mid-2020, Canadian insurers and banks have been issuing deeply subordinated capital instruments targeted to institutional investors, which are known as Limited Recourse Capital Notes and Non-Viability Contingent Capital Additional Tier 1 (AT1) Limited Recourse Capital Notes (together, LRCNs). Recent global market developments, including the banking failures in the U.S. and the wipe out of Credit Suisse’s AT1 notes, have adversely affected the market for new issuances.

In this Frontline Perspectives webinar, Nadja Dreff, Senior Vice President, Head of Canadian Insurance, will be joined by Kris Somers, Managing Director, BMO Capital Markets. They will review and discuss the recent LRCN market developments and provide an outlook for LRCN issuances in Canada.

WEBINAR DETAILS:
Date: June 7, 2023
Time: 10:30 a.m. EDT

The New York Fed has updated its Corporate Bond Market Distress Index:

Corporate bond market functioning remained close to historical norms over the month of May, with the end-of-month market-level CMDI above its historical median.

Market functioning in both the high-yield and investment-grade sectors remained roughly flat over the course of the month.

Snippets from the Credit Crunch are still coming out – most recently price-fixing in the UK bond market:

Traders at five major banks colluded in chatrooms to swap sensitive information on UK bonds in the wake of the 2008 financial crisis, Britain’s antitrust agency said in a move that could pave the way for fines for some of the lenders involved.

Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, Morgan Stanley and Royal Bank of Canada each unlawfully shared details on pricing and trading strategies in chatrooms between 2009 and 2013, the Competition and Markets Authority said on Wednesday in its provisional findings.
…
Antitrust watchdogs across Europe have taken a closer look at bond market collusion in a series of probes targeting some of the biggest banks in the region. The European Commission issued a formal complaint to Deutsche Bank last year for its alleged role in a cartel linked to euro-denominated bonds.

That was the third EU investigation involving cartels affecting the market for bonds trading and comes after the EU spent more than a decade probing how bank traders swapped information in chatrooms.

The UK watchdog has been investigating the allegations since it first opened the probe in November 2018, but has publicly revealed little details about what area of financial services or banks were involved. A separate CMA cartel probe saw 10 construction firms fined £60 million ($74.5 million).

PerpetualDiscounts now yield 6.59%, equivalent to 8.57% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.23% on 2023-5-26 and since then the closing price has changed from 14.82 to 15.05, an increase of 155bp in price, with a Duration of 12.21 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies a decrease in yield of about 13bp since 5/26 to 5.10%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened dramatically to about 345bp from the 320bp reported May 24.

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	0.0000 %	2,124.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0000 %	4,075.5
Floater	10.61 %	10.88 %	23,344	8.77	2	0.0000 %	2,348.7
OpRet	0.00 %	0.00 %	0	0.00	0	-0.1289 %	3,335.5
SplitShare	5.04 %	7.25 %	40,353	2.54	7	-0.1289 %	3,983.3
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1289 %	3,107.9
Perpetual-Premium	0.00 %	0.00 %	0	0.00	0	0.1793 %	2,652.3
Perpetual-Discount	6.43 %	6.59 %	41,723	13.04	34	0.1793 %	2,892.2
FixedReset Disc	6.05 %	8.64 %	84,564	11.07	63	0.4097 %	2,060.0
Insurance Straight	6.43 %	6.45 %	60,143	13.36	19	-0.2203 %	2,799.1
FloatingReset	11.28 %	11.71 %	47,255	8.43	2	-0.3515 %	2,301.0
FixedReset Prem	6.98 %	7.00 %	313,321	3.79	1	0.0398 %	2,314.6
FixedReset Bank Non	0.00 %	0.00 %	0	0.00	0	0.4097 %	2,105.8
FixedReset Ins Non	6.15 %	7.70 %	85,754	11.63	11	0.2179 %	2,269.0

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.C	Insurance Straight	-7.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 6.54 %
PVS.PR.K	SplitShare	-2.09 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2029-05-31 Maturity Price : 25.00 Evaluated at bid price : 21.55 Bid-YTW : 7.36 %
RY.PR.N	Perpetual-Discount	-1.66 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 5.95 %
BN.PF.D	Perpetual-Discount	-1.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 7.16 %
PWF.PR.O	Perpetual-Discount	-1.12 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 21.75 Evaluated at bid price : 22.00 Bid-YTW : 6.68 %
BN.PR.T	FixedReset Disc	-1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 10.48 %
FTS.PR.F	Perpetual-Discount	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 6.11 %
GWO.PR.P	Insurance Straight	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 6.73 %
MFC.PR.M	FixedReset Ins Non	1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 15.77 Evaluated at bid price : 15.77 Bid-YTW : 9.12 %
TRP.PR.D	FixedReset Disc	1.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 14.60 Evaluated at bid price : 14.60 Bid-YTW : 10.20 %
CU.PR.J	Perpetual-Discount	1.07 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 6.33 %
BN.PF.A	FixedReset Disc	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 9.51 %
TD.PF.C	FixedReset Disc	1.11 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.33 Evaluated at bid price : 16.33 Bid-YTW : 8.67 %
PVS.PR.J	SplitShare	1.14 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2028-02-29 Maturity Price : 25.00 Evaluated at bid price : 22.15 Bid-YTW : 7.30 %
NA.PR.G	FixedReset Disc	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 7.48 %
POW.PR.C	Perpetual-Discount	1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 22.63 Evaluated at bid price : 22.88 Bid-YTW : 6.44 %
BIP.PR.E	FixedReset Disc	1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 7.98 %
MFC.PR.N	FixedReset Ins Non	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 15.40 Evaluated at bid price : 15.40 Bid-YTW : 9.16 %
CM.PR.O	FixedReset Disc	1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.48 Evaluated at bid price : 16.48 Bid-YTW : 8.79 %
GWO.PR.S	Insurance Straight	1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 6.51 %
PWF.PR.P	FixedReset Disc	1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 11.80 Evaluated at bid price : 11.80 Bid-YTW : 9.58 %
BN.PF.G	FixedReset Disc	1.79 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 14.25 Evaluated at bid price : 14.25 Bid-YTW : 10.54 %
GWO.PR.M	Insurance Straight	1.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 22.07 Evaluated at bid price : 22.30 Bid-YTW : 6.50 %
BN.PF.F	FixedReset Disc	2.31 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 10.25 %
IFC.PR.C	FixedReset Disc	2.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 8.60 %
BIP.PR.F	FixedReset Disc	3.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 8.71 %
PWF.PR.G	Perpetual-Discount	5.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 22.49 Evaluated at bid price : 22.75 Bid-YTW : 6.57 %

Volume Highlights
Issue	Index	Shares Traded	Notes
RY.PR.Z	FixedReset Disc	53,734	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 8.66 %
MFC.PR.N	FixedReset Ins Non	52,685	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 15.40 Evaluated at bid price : 15.40 Bid-YTW : 9.16 %
BMO.PR.E	FixedReset Disc	45,925	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 7.79 %
TD.PF.B	FixedReset Disc	36,944	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 8.65 %
FTS.PR.M	FixedReset Disc	28,462	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.06 Evaluated at bid price : 16.06 Bid-YTW : 9.19 %
GWO.PR.T	Insurance Straight	22,324	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.45 %
There were 11 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
TD.PF.C	FixedReset Disc	Quote: 16.33 – 17.77 Spot Rate : 1.4400 Average : 0.8325 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.33 Evaluated at bid price : 16.33 Bid-YTW : 8.67 %
SLF.PR.C	Insurance Straight	Quote: 17.05 – 18.40 Spot Rate : 1.3500 Average : 0.9277 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 6.54 %
BIK.PR.A	FixedReset Disc	Quote: 23.00 – 23.75 Spot Rate : 0.7500 Average : 0.4764 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 22.24 Evaluated at bid price : 23.00 Bid-YTW : 8.10 %
MFC.PR.L	FixedReset Ins Non	Quote: 15.51 – 16.35 Spot Rate : 0.8400 Average : 0.5932 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 15.51 Evaluated at bid price : 15.51 Bid-YTW : 9.13 %
NA.PR.W	FixedReset Disc	Quote: 16.05 – 16.79 Spot Rate : 0.7400 Average : 0.5102 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-31 Maturity Price : 16.05 Evaluated at bid price : 16.05 Bid-YTW : 8.84 %
PVS.PR.H	SplitShare	Quote: 22.95 – 23.60 Spot Rate : 0.6500 Average : 0.4561 YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2027-02-28 Maturity Price : 25.00 Evaluated at bid price : 22.95 Bid-YTW : 7.25 %

Market Action

May 30, 2023

The New York Fed has released a Staff Report by Natalia Emanuel and Emma Harrington titled Working Remotely? Selection, Treatment, and the Market for Remote Work:

How does remote work affect productivity and how productive are workers who choose remote jobs? We estimate both effects in a U.S. Fortune 500 firm’s call centers that employed both remote and on-site workers in the same jobs. Prior to COVID-19, remote workers answered 12 percent fewer calls per hour than on-site workers. When the call centers closed due to COVID-19, the productivity of formerly on-site workers declined by 4 percent relative to already-remote workers, indicating that a third of the initial gap was due to a negative treatment effect of remote work. Yet an 8 percent productivity gap persisted, indicating that the majority of the productivity gap was due to negative worker selection into remote work. Difference-in-differences designs also indicate that remote work degraded call quality— particularly for inexperienced workers—and reduced workers’ promotion rates. In a model of the market provision of remote work, we find that firms were in a prisoner’s dilemma: all firms would have gained from offering comparable remote and on-site jobs, but any individual firm was loathe to attract less productive workers.
…
Adverse selection consequently offers an important missing piece to the puzzle of remote work’s rarity prior to Covid-19. Our estimates suggest that adverse selection distorts the decisions of 22 percent of call-center workers who do not choose to be remote because they do not want to pool with less productive types. There is promise that the pandemic could nudge the market into a more efficient equilbrium. Yet distortions will likely persist unless career opportunities can be equalized. Indeed, pre-pandemic remote workers were half as likely to be promoted as on-site workers, consistent with Bloom et al. (2015)’s RCT evidence

John C. Williams, President and Chief Executive Officer of the New York Fed, gave a speech titled This Is the Way:

Nationally, we are also seeing improvements on the supply side of the labor market. As you’ll recall, when businesses reopened after the 2020 pandemic shutdowns, many faced a dire shortage of workers.

Since then, we have seen a rebound in labor force participation, with the 25-to 54-year-old age group slightly above pre-pandemic levels. Although overall participation is below where it was before Covid, economists at the New York Fed have found that this shortfall is more than fully accounted for by the aging—or what I prefer to call “maturing”—of the workforce.2

This increase in labor force participation has helped alleviate some of the imbalance in the labor market. But with baby boomers increasingly reaching retirement age, population aging will continue to put downward pressure on participation in the medium term. Increases in the labor force from immigration, which has picked up from its pandemic lows, can partially offset this, but it is unlikely to fully undo the impact.
…
At the same time, the March price data indicate some moderation in overall rent inflation. And rents for new leases have been showing slower rates of increases, which should bring down shelter inflation in coming months. This is important because shelter inflation had been a significant driver of higher inflation over the past year.

But the most persistent area of inflation is in core services excluding housing, which has been running around 4-1/2 percent since last August . This is driven by a continued imbalance in overall supply and demand, and it will take the longest to bring down.
…
Because of the lag between policy actions and their effects, it will take time for the FOMC’s actions to restore balance to the economy and return inflation to our 2 percent target. I expect inflation to decline to around 3-1/4 percent this year, before returning to our longer-run goal of 2 percent over the next two years.

As tighter monetary policy continues to take effect, I expect real GDP to grow modestly this year, with growth then picking up somewhat next year.

And I anticipate slow growth will continue to cool the labor market, with unemployment gradually rising to about 4 to 4-1/2 percent over the next year.

François Villeroy de Galhau, Governor of the Bank of France, gave a speech titled Monetary policy transmission:

Overall, evidence shows a quick and smooth pass-through of ECB decisions to broad financing conditions, which is the first step of monetary policy transmission. The growth rate of bank loans to households and firms has slowed due to a combination of higher borrowing rates, lower demand, and – for firms – tighter credit standards. Volumes of loans are decelerating, even though growth in outstanding amounts remains positive [+3.3% in the euro area for mortgages to households and +5.2% for loans to businesses]. By the way, the growth of loans in France remains significantly higher than in the euro area average.

The second step of monetary policy transmission goes from the overall financing conditions to the economy and to inflation. In the textbook theory, tighter financial conditions moderate aggregate demand, and then decrease inflation with some lags. The estimated transmission lags of monetary policy in the literature vary from one year1 to more than two years2. At the current juncture several factors may bring us closer to the upper range:

The current tightening cycle started from exceptionally low levels of real interest rates. It is only from the end of 2022 that we achieved positive real rates at all maturities – but we are now clearly in restrictive territory.
the proportion of fixed-rate long-term loans is particularly high by historical standards. This is welcome for financial stability, especially for mortgages. But as a result, the pass-through of higher policy rates is more gradual.
The origin and sectorial composition of inflation matters. The current surge in inflation does not primarily originate in overheated demand but in supply shocks. This has implication for the transmission lags.
(i) The rise in the price of commodities and input costs was at the root of inflation. Their pass-through to producer prices and subsequently to CPI inflation might be asymmetric, faster and more complete on the way up than on the way down. It implies that the current decline in energy and input costs may not fully translate yet into lower inflation.

(ii) Services inflation, in part fuelled by wage developments, has gradually but steadily surged over recent quarters, and is likely to become the dominant source of inflation in the euro area. Historically, services are the most persistent and important component of both headline and core inflation, and their share in consumption increased significantly in the last decades. They are less directly sensitive to interest rates; the dampening effect of monetary policy on aggregate demand will be felt, but it will take more time.
…
Monetary policy is at work and rest assured, we’ll do the job: we’ll bring inflation back towards 2%. We’ll do it with the necessary patience – looking at the 2025 horizon for full transmission, with persistence – maintaining restrictive interest rates for long enough, and pragmatism – monitoring actual economic data. But once more, monetary policy cannot be the only game in town. Fiscal policies should adjust and consolidate, first and foremost scrapping energy subsidies as the European Commission rightly advocated yesterday ; wage negotiations and mark-up decisions by firms should incorporate the expected decrease in inflation; and still more, structural reforms are needed more than ever to increase the supply-side capacity and flexibility in Europe and in France.3 And this is where Capital Markets Union would greatly help to finance investment and innovation, and hence reduce inflation. Let us acknowledge it: if we are lagging behind today in Europe, it’s in this domain of supply transformations, and not in monetary policy.

And Christopher J Waller, Member of the Board of Governors of the Federal Reserve System, gave a speech titled Hike, skip, or pause?:

Let me turn to the implications for monetary policy. There is a lot of discussion about the next step for policy. There are three options: hike, skip, or pause. Let me outline reasons why each of these options may be appropriate.

One might lean toward hiking by focusing on the economic data and interpreting it to suggest that inflation and economic activity are not consistent with significant and ongoing progress toward the FOMC’s 2 percent inflation goal. Based solely on the data we have in hand as of today, we are not making much progress on inflation. If one doesn’t believe the incoming data will be much better, one could advocate for another 25-basis-point hike as the appropriate action in June.

Alternatively, one might view the current and incoming data as supporting a hike in June but believe that caution is warranted because there is a high level of uncertainty about how credit conditions are evolving. Another hike combined with an abrupt and unexpected tightening of credit conditions may push the economy down in a rapid and undesirable manner. This possibility is the downside risk of an additional rate hike in the current environment. If one is sufficiently worried about this downside risk, then prudent risk management would suggest skipping a hike at the June meeting but leaning toward hiking in July based on the incoming inflation data. There is a little over a month between the June and July FOMC meetings, and during that time we will learn more about how credit conditions are evolving. Over four months will have passed between the Silicon Valley Bank failure and the July meeting. By then we will have a much clearer idea about credit conditions. If banking conditions do not appear to have tightened excessively, then hiking in July could well be the appropriate policy.

Lastly, one might want to pause hikes at the June meeting, meaning that the target range is at its terminal rate, if the current stance of policy is thought to be enough to bring inflation down over time. Between policy lags and possible tightening credit conditions, the current stance of monetary policy may be seen, at that point, as sufficiently restrictive to move us toward the dual mandate. From this viewpoint, the policy rate is high enough and we simply need to hold it there to bring inflation down toward our 2 percent target.

I do not expect the data coming in over the next couple of months will make it clear that we have reached the terminal rate. And I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2 percent objective. But whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks. We will get additional labor market data, with some information about wages, and additional inflation numbers in the next few weeks that will continue to shape my view on where we stand relative to the FOMC’s dual mandate. During this time, I’ll also be reviewing data on credit conditions to evaluate how much potential tightening is coming from the banking sector.

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	0.0452 %	2,124.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.0452 %	4,075.5
Floater	10.61 %	10.88 %	23,586	8.77	2	0.0452 %	2,348.7
OpRet	0.00 %	0.00 %	0	0.00	0	0.2215 %	3,339.8
SplitShare	5.03 %	7.30 %	39,878	2.54	7	0.2215 %	3,988.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2215 %	3,111.9
Perpetual-Premium	0.00 %	0.00 %	0	0.00	0	0.1261 %	2,647.6
Perpetual-Discount	6.45 %	6.60 %	42,305	13.01	34	0.1261 %	2,887.0
FixedReset Disc	6.08 %	8.69 %	84,349	11.04	63	0.3228 %	2,051.6
Insurance Straight	6.41 %	6.44 %	59,685	13.36	19	-0.9508 %	2,805.3
FloatingReset	11.24 %	11.66 %	49,263	8.47	2	-1.6932 %	2,309.2
FixedReset Prem	6.99 %	7.00 %	318,363	12.37	1	0.1992 %	2,313.6
FixedReset Bank Non	0.00 %	0.00 %	0	0.00	0	0.3228 %	2,097.2
FixedReset Ins Non	6.16 %	7.69 %	83,724	11.64	11	0.0053 %	2,264.0

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.G	Perpetual-Discount	-5.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 21.30 Evaluated at bid price : 21.57 Bid-YTW : 6.93 %
GWO.PR.P	Insurance Straight	-2.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 6.80 %
CU.PR.F	Perpetual-Discount	-1.90 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 18.05 Evaluated at bid price : 18.05 Bid-YTW : 6.28 %
PWF.PR.P	FixedReset Disc	-1.69 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 11.60 Evaluated at bid price : 11.60 Bid-YTW : 9.73 %
BIP.PR.F	FixedReset Disc	-1.46 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 9.00 %
CCS.PR.C	Insurance Straight	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.83 Evaluated at bid price : 19.83 Bid-YTW : 6.43 %
BN.PF.I	FixedReset Disc	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.37 Evaluated at bid price : 19.37 Bid-YTW : 9.05 %
TRP.PR.E	FixedReset Disc	1.08 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 14.05 Evaluated at bid price : 14.05 Bid-YTW : 10.34 %
CM.PR.Y	FixedReset Disc	1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 22.57 Evaluated at bid price : 23.05 Bid-YTW : 7.72 %
PWF.PR.O	Perpetual-Discount	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 22.01 Evaluated at bid price : 22.25 Bid-YTW : 6.60 %
MFC.PR.J	FixedReset Ins Non	1.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 7.31 %
BN.PF.C	Perpetual-Discount	1.16 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 17.51 Evaluated at bid price : 17.51 Bid-YTW : 7.08 %
BN.PR.N	Perpetual-Discount	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 7.05 %
FTS.PR.F	Perpetual-Discount	1.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.17 %
RY.PR.M	FixedReset Disc	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 16.68 Evaluated at bid price : 16.68 Bid-YTW : 8.53 %
FTS.PR.J	Perpetual-Discount	1.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 6.21 %
SLF.PR.J	FloatingReset	1.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 14.14 Evaluated at bid price : 14.14 Bid-YTW : 10.89 %
CU.PR.I	FixedReset Disc	1.38 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 22.38 Evaluated at bid price : 22.81 Bid-YTW : 7.51 %
TRP.PR.D	FixedReset Disc	1.40 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 14.45 Evaluated at bid price : 14.45 Bid-YTW : 10.30 %
PWF.PR.K	Perpetual-Discount	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.07 Evaluated at bid price : 19.07 Bid-YTW : 6.58 %
GWO.PR.Y	Insurance Straight	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 17.99 Evaluated at bid price : 17.99 Bid-YTW : 6.26 %
RY.PR.S	FixedReset Disc	1.51 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 7.69 %
TRP.PR.B	FixedReset Disc	1.65 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 10.10 Evaluated at bid price : 10.10 Bid-YTW : 10.75 %
BN.PR.M	Perpetual-Discount	1.71 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 7.03 %
BN.PF.D	Perpetual-Discount	1.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 17.70 Evaluated at bid price : 17.70 Bid-YTW : 7.07 %
BIP.PR.A	FixedReset Disc	1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 10.20 %
TRP.PR.A	FixedReset Disc	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 12.81 Evaluated at bid price : 12.81 Bid-YTW : 10.24 %
BIP.PR.E	FixedReset Disc	2.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 8.07 %
BN.PR.T	FixedReset Disc	2.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 12.98 Evaluated at bid price : 12.98 Bid-YTW : 10.38 %
BIK.PR.A	FixedReset Disc	2.27 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 22.16 Evaluated at bid price : 22.85 Bid-YTW : 8.15 %
TRP.PR.C	FixedReset Disc	2.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 10.61 Evaluated at bid price : 10.61 Bid-YTW : 10.57 %
PWF.PR.H	Perpetual-Discount	2.56 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 21.81 Evaluated at bid price : 22.05 Bid-YTW : 6.60 %
BMO.PR.Y	FixedReset Disc	5.67 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 16.78 Evaluated at bid price : 16.78 Bid-YTW : 8.69 %
SLF.PR.C	Insurance Straight	7.78 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 6.05 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CM.PR.O	FixedReset Disc	144,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 16.26 Evaluated at bid price : 16.26 Bid-YTW : 8.91 %
TRP.PR.E	FixedReset Disc	67,075	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 14.05 Evaluated at bid price : 14.05 Bid-YTW : 10.34 %
IFC.PR.A	FixedReset Ins Non	22,613	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 7.67 %
BN.PF.G	FixedReset Disc	19,100	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 14.00 Evaluated at bid price : 14.00 Bid-YTW : 10.72 %
GWO.PR.I	Insurance Straight	16,606	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 17.68 Evaluated at bid price : 17.68 Bid-YTW : 6.37 %
BMO.PR.Y	FixedReset Disc	15,100	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 16.78 Evaluated at bid price : 16.78 Bid-YTW : 8.69 %
There were 1 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CU.PR.E	Perpetual-Discount	Quote: 19.56 – 23.72 Spot Rate : 4.1600 Average : 3.6259 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.56 Evaluated at bid price : 19.56 Bid-YTW : 6.31 %
PWF.PR.G	Perpetual-Discount	Quote: 21.57 – 22.95 Spot Rate : 1.3800 Average : 0.8621 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 21.30 Evaluated at bid price : 21.57 Bid-YTW : 6.93 %
POW.PR.G	Perpetual-Discount	Quote: 21.50 – 22.50 Spot Rate : 1.0000 Average : 0.6864 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 6.63 %
GWO.PR.P	Insurance Straight	Quote: 19.90 – 20.75 Spot Rate : 0.8500 Average : 0.6460 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 6.80 %
BIP.PR.F	FixedReset Disc	Quote: 18.01 – 18.59 Spot Rate : 0.5800 Average : 0.3980 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 9.00 %
POW.PR.C	Perpetual-Discount	Quote: 22.61 – 23.75 Spot Rate : 1.1400 Average : 0.9738 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-30 Maturity Price : 22.34 Evaluated at bid price : 22.61 Bid-YTW : 6.51 %

Market Action

May 29, 2023

TXPR closed at 521.45, up 0.51% on the day. Volume today was 816,230, below the median of the past 21 trading days.

CPD closed at 10.43, up 0.68% on the day. Volume was 18,110, second-lowest of the past 21 trading days.

ZPR closed at 8.56, up 0.12% on the day. Volume was 133,860, near the median of the past 21 trading days.

Five-year Canada yields up to 3.62% today.

I went to a book signing by Jo Nesbo tonight. There were over 200 people there! Impressive!

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	-0.1807 %	2,123.9
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.1807 %	4,073.6
Floater	10.61 %	10.88 %	23,972	8.78	2	-0.1807 %	2,347.7
OpRet	0.00 %	0.00 %	0	0.00	0	-0.5811 %	3,332.4
SplitShare	5.05 %	7.29 %	38,066	2.54	7	-0.5811 %	3,979.6
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.5811 %	3,105.1
Perpetual-Premium	0.00 %	0.00 %	0	0.00	0	0.2364 %	2,644.2
Perpetual-Discount	6.45 %	6.60 %	42,092	13.02	34	0.2364 %	2,883.4
FixedReset Disc	6.10 %	8.69 %	85,026	11.01	63	0.2142 %	2,045.0
Insurance Straight	6.35 %	6.50 %	60,511	13.12	19	-0.0834 %	2,832.2
FloatingReset	11.05 %	11.75 %	49,827	8.20	2	0.1384 %	2,348.9
FixedReset Prem	7.00 %	7.01 %	321,078	12.36	1	-0.1988 %	2,309.0
FixedReset Bank Non	0.00 %	0.00 %	0	0.00	0	0.2142 %	2,090.4
FixedReset Ins Non	6.16 %	7.68 %	83,239	11.65	11	0.4110 %	2,263.9

Performance Highlights
Issue	Index	Change	Notes
SLF.PR.C	Insurance Straight	-6.48 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 17.33 Evaluated at bid price : 17.33 Bid-YTW : 6.55 %
BMO.PR.Y	FixedReset Disc	-4.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 15.88 Evaluated at bid price : 15.88 Bid-YTW : 9.16 %
PWF.PR.H	Perpetual-Discount	-2.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 6.78 %
POW.PR.B	Perpetual-Discount	-2.14 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 6.62 %
TRP.PR.D	FixedReset Disc	-1.93 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 14.25 Evaluated at bid price : 14.25 Bid-YTW : 10.45 %
BN.PR.R	FixedReset Disc	-1.59 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 12.40 Evaluated at bid price : 12.40 Bid-YTW : 10.72 %
PWF.PR.K	Perpetual-Discount	-1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 6.68 %
BN.PR.B	Floater	-1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 10.99 Evaluated at bid price : 10.99 Bid-YTW : 11.00 %
PVS.PR.I	SplitShare	-1.34 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-10-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 7.29 %
PVS.PR.H	SplitShare	-1.29 %	YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2027-02-28 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 7.17 %
BN.PR.N	Perpetual-Discount	-1.22 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 7.14 %
BN.PR.T	FixedReset Disc	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 12.70 Evaluated at bid price : 12.70 Bid-YTW : 10.59 %
CU.PR.I	FixedReset Disc	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 22.17 Evaluated at bid price : 22.50 Bid-YTW : 7.62 %
POW.PR.C	Perpetual-Discount	-1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 22.34 Evaluated at bid price : 22.61 Bid-YTW : 6.51 %
BN.PR.K	Floater	1.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 11.11 Evaluated at bid price : 11.11 Bid-YTW : 10.88 %
CM.PR.Q	FixedReset Disc	1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 16.95 Evaluated at bid price : 16.95 Bid-YTW : 8.69 %
IFC.PR.C	FixedReset Disc	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 8.85 %
BN.PF.H	FixedReset Disc	1.24 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 9.04 %
GWO.PR.T	Insurance Straight	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 6.46 %
IFC.PR.A	FixedReset Ins Non	1.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 7.67 %
BIP.PR.B	FixedReset Disc	1.53 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 21.49 Evaluated at bid price : 21.85 Bid-YTW : 8.84 %
TRP.PR.C	FixedReset Disc	1.57 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 10.36 Evaluated at bid price : 10.36 Bid-YTW : 10.80 %
CM.PR.Y	FixedReset Disc	1.92 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 22.35 Evaluated at bid price : 22.80 Bid-YTW : 7.81 %
CU.PR.F	Perpetual-Discount	1.94 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 6.16 %
TRP.PR.B	FixedReset Disc	2.34 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 10.04 Evaluated at bid price : 10.04 Bid-YTW : 10.92 %
IFC.PR.G	FixedReset Ins Non	2.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 7.68 %
BN.PF.B	FixedReset Disc	2.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 10.10 %
BN.PF.F	FixedReset Disc	5.83 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 15.25 Evaluated at bid price : 15.25 Bid-YTW : 10.41 %
ELF.PR.F	Perpetual-Discount	19.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 6.62 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.J	FixedReset Ins Non	113,670	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 21.06 Evaluated at bid price : 21.06 Bid-YTW : 7.39 %
BMO.PR.W	FixedReset Disc	45,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 8.87 %
BN.PF.B	FixedReset Disc	27,546	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 10.10 %
BN.PF.G	FixedReset Disc	26,104	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 13.98 Evaluated at bid price : 13.98 Bid-YTW : 10.73 %
TD.PF.B	FixedReset Disc	25,200	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 16.45 Evaluated at bid price : 16.45 Bid-YTW : 8.72 %
BN.PF.H	FixedReset Disc	16,500	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 9.04 %
There were 5 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
CU.PR.E	Perpetual-Discount	Quote: 19.41 – 23.72 Spot Rate : 4.3100 Average : 3.0403 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 6.36 %
SLF.PR.C	Insurance Straight	Quote: 17.33 – 18.72 Spot Rate : 1.3900 Average : 0.8318 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 17.33 Evaluated at bid price : 17.33 Bid-YTW : 6.55 %
CM.PR.Q	FixedReset Disc	Quote: 16.95 – 18.95 Spot Rate : 2.0000 Average : 1.4678 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 16.95 Evaluated at bid price : 16.95 Bid-YTW : 8.69 %
BN.PR.M	Perpetual-Discount	Quote: 16.96 – 18.35 Spot Rate : 1.3900 Average : 1.0144 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 16.96 Evaluated at bid price : 16.96 Bid-YTW : 7.15 %
MFC.PR.B	Insurance Straight	Quote: 18.35 – 19.65 Spot Rate : 1.3000 Average : 0.9422 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 6.36 %
POW.PR.C	Perpetual-Discount	Quote: 22.61 – 23.75 Spot Rate : 1.1400 Average : 0.7917 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-29 Maturity Price : 22.34 Evaluated at bid price : 22.61 Bid-YTW : 6.51 %

Miscellaneous News

Property Insurers to Stop Buying?

On May 16, the Globe published a piece titled Property insurers warn proposed federal tax change to preferred shares could hurt the sector that has caused a fair amount of comment on the web and interest from Assiduous Readers. According to the Globe:

Louis Marcotte, Intact’s executive vice-president and chief financial officer, told The Globe and Mail that the company has been a significant investor in Canadian dividend-generating securities for decades, and is encouraging the government to “consult widely” on the proposed change to ensure it is supporting its “local market champions.”

“Most Canadian equity investments held by Canadian insurers like Intact Financial Corporation, are held for the long term with a view of providing a safe return for policy holders and investors,” Mr. Marcotte said in an e-mail. “The loss of the dividend deduction could have a knock-on effect on premiums but also on the availability and diversity of funding sources for Canadian corporations.”

The loss of income from the dividends deduction would effectively raise Intact’s tax rate by almost two percentage points, the company said.

“It also would increase the tax imbalance for us but also all Canadian insurers when facing their foreign counterparts,” Mr. Marcotte added.

Canadian property and casualty (P&C) insurers hold at least 12 per cent of all outstanding preferred shares in Canada – about $6-billion, according to a recent report by SLC Asset Management, Sun Life Financial’s asset-management division.

I discussed the proposed taxation change in the post Dividend Capture by Banks Now Less Profitable, but only in the context of dividend capture trading strategies. The Globe article highlights further-reaching possibilities.

So what are the implications of a potential exodus? I don’t think prices will be immediately affected: right now the market is extremely depressed – there hasn’t been much new issuance in the last three years, and that tells you something right there – and the institutions aren’t going to have a fire-sale of perfectly good assets just because the tax situation has changed unfavourably. What might happen is that any future ascent in prices gets slowed down because the holders sell into market strength, but I don’t think they’ll sell otherwise.

Liquidity will be adversely affected; but much more in the world of block-trades (more than 10,000 shares on a single ticket) and the dealer market (the proprietary traders at the big firms who make a significant portion of their paycheques by arranging these trades for their clients). At the retail level, which dominates the market so much that the average daily trading value for the universe is a mere $100,000, not so much.

A more insidious effect, I think, is that there will be some capital exiting the business. A decline in block trading will be a direct hit to dealer profits and the firms will react by reducing the amount of capital available to their proprietary desks. We saw this writ large during the Credit Crunch, when the prop-traders basically stopped doing business due to lack of capital and as a result there were enormous intra-day price swings, $1.00 gaps between successive trades, up to $2 range on a single day. Those days were glorious for those among us who supply liquidity to the market in our modest way: to some extent I see this happening again.

Another source of liquidity in the market that may be affected is ETF arbitrage. There are a few players who spend a great deal of time exploiting the equation “ETF-1 + ShareBasketA – ShareBasketB = ETF-2” and trading accordingly. A decline in liquidity will disproportionately hurt them and if they can’t make any money with a fully hedged position they’ll have to find some other market to play in.

A decline in liquidity and a shortage of big buyers will also mean that issue sizes will tend to shrink. We’ve seen some massive issues over the past decade – e.g., TRP.PR.K, $500MM, 2016, redeemed in 2022; TD.PF.H, 1,000MM, 2016, redeemed in 2021; TD.PF.G, $700MM, 2016, redeemed in 2021. I don’t think we’ll be seeing that kind of size very often if 12% of the market takes its ball and goes home.

And really, that’s all I got. Our illiquid market will become a little more illiquid, helped along by OSFI’s determination to create an OTC preferred share market (dealt a blow by the proposed tax change?) for institutional investors (see this comment). But there should be no adverse price effects relative to the current subterranean levels; perhaps a slower ascent on the way back up; and probably a greater degree of intra-day volatility.

Market Action

May 26, 2023

Nervousness regarding a possible US default continues to run high:

Treasury securities are used widely as collateral across markets. A key question for market participants is how would bonds that are maturing next month be treated if a deal is not reached in time and the Treasury is unable to pay principal and interest on debt.

One such area is the $4 trillion repurchase, or repo, market, for short-term funding used by banks, money market funds and others to borrow and lend. Some counterparties, including banks, were shying away from Treasury bills maturing in June in bilateral repos, where the trade is between two parties, said an executive at a U.S. fund manager who decline to be named. There are 14 T-bills maturing in June.

Scott Skyrm, executive vice president for fixed income and repo at broker-dealer Curvature Securities, said some repo buyers or cash lenders did not want to accept any bills maturing within a year. Skyrm said stress began to appear in the market at the start of May, with some lenders refusing to accept Treasury bills that they perceived as at risk of delayed payments in some types of trades. He declined to name buyers who were not accepting T-bills.
…
In the case that it needs to delay payments on some securities that are maturing, expert groups have suggested in the past that Treasury could help markets to keep functioning by extending the so-called “operational maturity date.” The proposal, detailed in a December 2021 contingency planning document prepared by an expert group, calls for extending the maturities of securities at risk of default by one day at a time.

That could allow the security to be technically traded and available for settlement on the Fedwire Securities Service system used for government debt. However, the group warned that it would need many broker-dealers to adjust their trading systems to also be able to do so and the consequences of a delay in payments on securities would still be severe.

The broker-dealer executive said the process was cumbersome because maturity dates subsumed several other calculations about the value of the security. Extending the maturities required the firm to “basically break their own system,” the executive said.

The X-Date is now June 5:

Treasury Secretary Janet L. Yellen said on Friday that the United States will run out of money to pay its bills on time by June 5, moving the goal posts back slightly while maintaining the urgency for congressional leaders to reach a deal to raise or suspend the debt limit.

The letter provided the most precise date yet for when the United States is expected to run out of cash. Ms. Yellen had previously said the United States could hit the so-called X-date — the moment when it does not have enough money to pay all of its bills on time — as soon as June 1.

While the letter to lawmakers provides a tiny bit of wiggle room, it also makes clear the dire financial situation that Treasury is facing. The federal government is required to make more than $130 billion in scheduled payments during the first two days of June — including money to veterans and Social Security and Medicare recipients.

And PCE inflation ticked higher:

The Personal Consumption Expenditures index climbed 4.4 percent in April from a year earlier. That was a slight increase from March, when prices climbed 4.2 percent on an annual basis. Still, prices are not climbing as fast they were in February, when the index rose 5.1 percent on an annual basis.

A “core” measure that tries to gauge underlying inflation trends by stripping out volatile food and energy prices rose 4.7 percent in the year through April, up slightly from 4.6 percent in March.
…
Although Fed officials have noted that inflation has eased in recent months, they have called it “unacceptably high” and far from the central bank’s 2 percent goal.

They have also acknowledged some cooling in the labor market, as the number of job openings has fallen recently. But Fed officials have said labor market conditions are still too hot, pointing to solid monthly job gains, steady wage growth and an unemployment rate near historically low levels.

And the IMF has weighed in with a hawkish ‘concluding statement’:

The strength in demand and in labor market outcomes is a double-edged sword, contributing to more persistent inflation. Goods inflation has leveled out and shelter price growth is expected to start moderating in the coming months. However, past nominal wage increases are now feeding into non-shelter services. While core and headline PCE inflation are expected to continue falling during 2023, they will remain materially above the Fed’s 2 percent target throughout 2023 and 2024.

Achieving a sustained disinflation will necessitate a loosening of labor market conditions that, so far, has not been evident in the data. To bring inflation firmly back to target will require an extended period of tight monetary policy, with the federal funds rate remaining at 5¼–5½ percent until late in 2024. Model estimates suggest such a path would be sufficient to slow demand, restore balance to the labor market, and lower wage and price inflation. However, insofar as models are calibrated on past experiences, they offer only an imperfect guide to the current conjuncture.
…
The resilience of the economy and the robustness of labor markets are good news. However, it is possible that the large and rapid increase in interest rates that has already been put in place may not be sufficient to expeditiously bring inflation back to target. With a large share of household and corporate debt contracted at relatively long duration and fixed rates, household consumption and corporate investment have proven less interest-sensitive than in past tightening cycles. This creates a material risk that the Federal Reserve will have to raise the policy rate by significantly more than is currently expected to return inflation to 2 percent. On the positive side, near-term growth outcomes could be better than currently anticipated. However, this would only mean that the economy would slow more abruptly at a later stage (possibly in 2024), creating a recession as tighter monetary policy takes hold. The combination of higher U.S. interest rates, a stronger dollar, and a sharper slowdown in U.S. activity would have significant negative macro-financial spillovers to the rest of the world.

The downside risks associated with a less effective monetary transmission, and a more protracted disinflation, could be further complicated by two additional considerations:

First, a higher path for interest rates could reveal larger, more systemic balance sheet problems in banks, nonbanks, or corporates than we have seen to-date. Unrealized losses from holdings of long duration securities would increase in both banks and nonbanks and the cost of new financing for both households and corporates could become unmanageable. Such a tightening of financial conditions could trigger an increase in bankruptcies, worsen credit quality, and heighten stress for those entities carrying high levels of leverage and with large near-term gross financing needs. These financial stability problems could be further exacerbated if the functioning of the Treasury market also becomes compromised. The longer that higher interest rates persist, the greater the likelihood that such fractures will be revealed. Recent failures of large, non-internationally active banks—which have, so far, only had a modest effect on credit conditions—could potentially be a prelude to more serious and ingrained systemic financial stability problems.

Second, brinkmanship over the federal debt ceiling could create a further, entirely avoidable systemic risk to both the U.S. and the global economy at a time when there are already visible strains. To avoid exacerbating downside risks, the debt ceiling should be immediately raised or suspended by Congress, allowing negotiations over the FY2024 budget to begin in earnest. Furthermore, a more permanent solution to this recurring stand-off should be found through institutional changes that ensure that, once appropriations are approved, the corresponding space on the debt ceiling is automatically provided to finance that spending.

Credit losses, whether real or projected, have been in the news lately – and BIS has released a Working Paper by Li Lian Ong, Christian Schmieder and Min Wei titled Insights into Credit Loss Rates: A Global Database:

Focus
Credit risk was a key factor in the Great Financial Crisis and numerous other crises. Banks’ overall credit losses tend to increase suddenly during a crisis from the typically low levels seen during “normal” times. The Covid-19 pandemic underscored the need for accurate credit risk assessments of bank balance sheets. In this paper, we present alternative micro- and macroprudential concepts and metrics to establish actual credit loss rates as well as forward-looking market- and macro-implied credit loss rate estimates for most jurisdictions worldwide. We also provide a public dashboard featuring 10 downloadable economy-level credit loss rate metrics, which will be updated regularly.

Contribution
This project aims to help close the long-standing data gap issue on economy-level credit loss information by providing a valuable public resource for researchers, policymakers and practitioners. Building upon previous work by Daniel Hardy and Christian Schmieder, we combine time series of actual credit losses with forward-looking market- and macro-implied credit loss estimates. We provide various credit loss rate series for as many jurisdictions worldwide as possible, which will be updated as new information becomes available. The estimates are available in a dashboard, and users can easily download the data sets of credit loss metrics for the desired jurisdictions and time periods. Additionally, we provide a tool for users to run simplified scenario analyses based on projected GDP growth paths.

Findings
The paper presents various metrics of credit loss rates derived from multiple sources, each with its own unique purpose and usefulness. While granular information, such as sector-level statistics, would be ideal for precise loss estimation, such data remain scarce. The economy-specific time series estimated in the paper can be valuable for credit loss analyses and projections, but future work on calibrations may be necessary. Given the challenges associated with anticipating peaks in credit loss rates, one option presented in this paper is to use GDP-implied loss rate simulations, akin to those typically applied in stress tests.

Abstract
Credit risk has played a significant role in many financial crises, including the great financial crisis. The COVID-19 pandemic also highlighted bank credit losses to the private sector. However, there remains a significant gap in terms of reliable economy-level credit risk data for financial stability analysis, given that such information is not readily available to the public in any systematic manner. Building upon the work of Hardy and Schmieder (2020), we derive time series of actual as well as forward-looking market- and macro-implied credit loss rates for the majority of jurisdictions around the world. Our database, intended as a public good, is available through a user-friendly interactive dashboard, which allows downloads of credit loss rate time series for the desired jurisdiction(s). Users are also able to run simple scenario analyses based on their projected GDP paths. The data series will be updated on an ongoing basis as new information is published by the original sources.
…
The possible uses of the estimated data series are illustrated with a variety of examples, covering the majority of jurisdictions worldwide (https://www.amro-asia.org/credit-lossrates/).

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	-0.3600 %	2,127.7
FixedFloater	0.00 %	0.00 %	0	0.00	0	-0.3600 %	4,081.0
Floater	10.59 %	10.84 %	48,878	8.81	2	-0.3600 %	2,351.9
OpRet	0.00 %	0.00 %	0	0.00	0	-0.1649 %	3,351.9
SplitShare	5.02 %	7.08 %	38,580	2.55	7	-0.1649 %	4,002.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	-0.1649 %	3,123.2
Perpetual-Premium	0.00 %	0.00 %	0	0.00	0	-0.4692 %	2,638.0
Perpetual-Discount	6.47 %	6.56 %	43,136	13.10	34	-0.4692 %	2,876.6
FixedReset Disc	6.10 %	8.49 %	85,870	11.17	63	-0.0656 %	2,040.6
Insurance Straight	6.34 %	6.52 %	59,429	13.10	19	0.0997 %	2,834.6
FloatingReset	10.86 %	11.58 %	51,700	8.31	2	-0.1727 %	2,345.7
FixedReset Prem	6.99 %	6.88 %	324,030	12.48	1	-0.2776 %	2,313.6
FixedReset Bank Non	0.00 %	0.00 %	0	0.00	0	-0.0656 %	2,085.9
FixedReset Ins Non	6.18 %	7.67 %	81,984	11.67	11	-0.2874 %	2,254.7

Performance Highlights
Issue	Index	Change	Notes
ELF.PR.F	Perpetual-Discount	-16.63 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 7.90 %
SLF.PR.E	Insurance Straight	-8.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.37 Evaluated at bid price : 17.37 Bid-YTW : 6.61 %
BN.PF.F	FixedReset Disc	-5.82 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 14.41 Evaluated at bid price : 14.41 Bid-YTW : 10.75 %
BN.PR.R	FixedReset Disc	-2.85 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 12.60 Evaluated at bid price : 12.60 Bid-YTW : 10.33 %
BN.PR.M	Perpetual-Discount	-2.80 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.01 Evaluated at bid price : 17.01 Bid-YTW : 7.13 %
BN.PF.D	Perpetual-Discount	-2.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 7.13 %
BN.PR.T	FixedReset Disc	-2.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 10.27 %
BN.PF.B	FixedReset Disc	-2.13 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 15.17 Evaluated at bid price : 15.17 Bid-YTW : 10.09 %
PWF.PR.S	Perpetual-Discount	-2.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 18.61 Evaluated at bid price : 18.61 Bid-YTW : 6.54 %
GWO.PR.T	Insurance Straight	-1.91 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 20.06 Evaluated at bid price : 20.06 Bid-YTW : 6.54 %
BN.PR.K	Floater	-1.87 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 11.00 Evaluated at bid price : 11.00 Bid-YTW : 10.98 %
MFC.PR.L	FixedReset Ins Non	-1.84 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 15.51 Evaluated at bid price : 15.51 Bid-YTW : 8.88 %
BN.PR.N	Perpetual-Discount	-1.77 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.21 Evaluated at bid price : 17.21 Bid-YTW : 7.04 %
GWO.PR.Q	Insurance Straight	-1.49 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 6.61 %
CU.PR.C	FixedReset Disc	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.85 Evaluated at bid price : 17.85 Bid-YTW : 8.00 %
CM.PR.S	FixedReset Disc	-1.39 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 20.56 Evaluated at bid price : 20.56 Bid-YTW : 7.28 %
BN.PR.Z	FixedReset Disc	-1.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 18.65 Evaluated at bid price : 18.65 Bid-YTW : 8.65 %
ELF.PR.G	Perpetual-Discount	-1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 18.25 Evaluated at bid price : 18.25 Bid-YTW : 6.61 %
PWF.PR.O	Perpetual-Discount	-1.35 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.75 Evaluated at bid price : 22.00 Bid-YTW : 6.67 %
MFC.PR.J	FixedReset Ins Non	-1.26 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 7.24 %
BN.PF.J	FixedReset Disc	-1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 8.02 %
GWO.PR.L	Insurance Straight	-1.19 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.29 Evaluated at bid price : 21.56 Bid-YTW : 6.67 %
CM.PR.O	FixedReset Disc	-1.17 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 16.11 Evaluated at bid price : 16.11 Bid-YTW : 8.76 %
BN.PR.X	FixedReset Disc	-1.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 13.51 Evaluated at bid price : 13.51 Bid-YTW : 9.57 %
MFC.PR.I	FixedReset Ins Non	-1.06 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.29 Evaluated at bid price : 21.57 Bid-YTW : 7.22 %
CM.PR.Y	FixedReset Disc	-1.02 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.85 Evaluated at bid price : 22.37 Bid-YTW : 7.79 %
TRP.PR.A	FixedReset Disc	-1.01 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 12.70 Evaluated at bid price : 12.70 Bid-YTW : 10.23 %
BN.PR.B	Floater	1.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 11.14 Evaluated at bid price : 11.14 Bid-YTW : 10.84 %
BMO.PR.E	FixedReset Disc	1.45 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 7.59 %
FTS.PR.G	FixedReset Disc	1.50 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 8.32 %
RY.PR.Z	FixedReset Disc	2.04 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 16.48 Evaluated at bid price : 16.48 Bid-YTW : 8.48 %
CM.PR.T	FixedReset Disc	2.18 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.61 Evaluated at bid price : 22.00 Bid-YTW : 7.64 %
RY.PR.N	Perpetual-Discount	2.37 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.18 Evaluated at bid price : 21.18 Bid-YTW : 5.83 %
BN.PF.I	FixedReset Disc	2.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 8.84 %
MFC.PR.F	FixedReset Ins Non	2.72 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 11.71 Evaluated at bid price : 11.71 Bid-YTW : 9.16 %
CU.PR.I	FixedReset Disc	3.32 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 22.34 Evaluated at bid price : 22.75 Bid-YTW : 7.39 %
IFC.PR.F	Insurance Straight	4.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 21.32 Evaluated at bid price : 21.32 Bid-YTW : 6.33 %
BMO.PR.Y	FixedReset Disc	5.10 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 16.69 Evaluated at bid price : 16.69 Bid-YTW : 8.54 %
GWO.PR.P	Insurance Straight	9.47 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 6.62 %
PWF.PR.F	Perpetual-Discount	20.00 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 20.28 Evaluated at bid price : 20.28 Bid-YTW : 6.56 %

Volume Highlights
Issue	Index	Shares Traded	Notes
CU.PR.G	Perpetual-Discount	170,910	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 6.17 %
BMO.PR.E	FixedReset Disc	55,211	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 7.59 %
GWO.PR.H	Insurance Straight	27,400	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 6.54 %
RY.PR.H	FixedReset Disc	22,000	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 16.55 Evaluated at bid price : 16.55 Bid-YTW : 8.45 %
BN.PF.B	FixedReset Disc	21,445	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 15.17 Evaluated at bid price : 15.17 Bid-YTW : 10.09 %
TRP.PR.A	FixedReset Disc	20,690	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 12.70 Evaluated at bid price : 12.70 Bid-YTW : 10.23 %
There were 17 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
ELF.PR.F	Perpetual-Discount	Quote: 17.10 – 20.60 Spot Rate : 3.5000 Average : 1.9546 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 7.90 %
SLF.PR.E	Insurance Straight	Quote: 17.37 – 18.96 Spot Rate : 1.5900 Average : 0.9275 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.37 Evaluated at bid price : 17.37 Bid-YTW : 6.61 %
CU.PR.J	Perpetual-Discount	Quote: 18.63 – 22.00 Spot Rate : 3.3700 Average : 2.9208 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 18.63 Evaluated at bid price : 18.63 Bid-YTW : 6.42 %
MFC.PR.N	FixedReset Ins Non	Quote: 15.21 – 16.52 Spot Rate : 1.3100 Average : 0.9278 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 15.21 Evaluated at bid price : 15.21 Bid-YTW : 9.03 %
TD.PF.D	FixedReset Disc	Quote: 17.01 – 18.34 Spot Rate : 1.3300 Average : 0.9939 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 17.01 Evaluated at bid price : 17.01 Bid-YTW : 8.48 %
PWF.PR.Z	Perpetual-Discount	Quote: 19.87 – 20.99 Spot Rate : 1.1200 Average : 0.8058 YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-05-26 Maturity Price : 19.87 Evaluated at bid price : 19.87 Bid-YTW : 6.57 %

PrefBlog

MAPF Portfolio Composition: May, 2023

June 2, 2023

June 1, 2023

CPX.PR.E To Reset To 6.631%

IFC.PR.G To Reset To 6.012%

May 31, 2023

May 30, 2023

May 29, 2023

Property Insurers to Stop Buying?

May 26, 2023

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