It was a day of mixed indicators, with frenzied traders choosing random bits of data and making bets on them! US equities rose again, continuing a huge rise from yesterday while all sensible people were on holiday, on the very good rationale that the Fed says the economy is growing enough that the main risk is inflation. It therefore makes all kinds of sense that Canadian equities fell on fears that the US Economy is slowing, doesn’t it? Is the glass half-empty or half-full? I guess it depends how far away you are from the glass.
The US Treasury market did homage to the Fed statement as well, falling a bit – not much – as traders appeared to take the view that the expected rate cut will take longer to arrive than expected. Torn between the domestic equity market and the Treasury market, Canadian bonds declined a bit, but nothing to write home about.
The knock-on effects of tighter credit in the wake of the sub-prime frenzy are showing amongst those firms attempting to finance share buy-backs in the bond market. Bear Stearns, which has been caught up in this debacle more than it would probably like to, has indicated it will not be buying back shares, has paid up big-time to get some five-year money to reduce dependence on the money-market, and gotten rid of a high-ranking executive. Sounds like they’re taking things seriously!
The Fed statement today was notable for more than the usual reasons. There was a rare mention of the global economy, and its role in buying American stuff rather than selling cheap stuff to Americans. There is some further comment to the effect that American productivity growth is slowing. Meanwhile, there are rumblings that maybe Greenspan should be blamed for sub-prime and that US officials think the market is always perfect.
All in all, an interesting day!
Not the most active of days in the preferred share market, but at least trading was more inspired than it was Friday. InterestBearing issues did well and the PerpetualDiscount index continued what has been a fairly steady grind upwards since mid-July.
A number of Pfd-3 and worse issues did horribly, with YPG.PR.B, for instance, hitting a new low. It can only be detected over long periods of time … but yes, the preferred market does eventually reflect the bond market! YPG.PR.B now yields 6.48% based on a bid of 22.60 and a softMaturity 2017-6-29 at 25.00 … not bad! At a conversion factor of 1.4, that’s equivalent to interest of over 9% …. but it’s a Pfd-3(high). Suitable only in very sparing quantities!
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30 | |||||||
| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | 4.81% | 4.85% | 27,128 | 15.86 | 1 | +0.2482% | 1,036.4 |
| Fixed-Floater | 4.97% | 5.01% | 129,589 | 14.17 | 8 | -0.0460% | 1,023.7 |
| Floater | 4.91% | 0.39% | 72,604 | 8.06 | 4 | -0.8811% | 1,040.9 |
| Op. Retract | 4.83% | 4.04% | 82,423 | 3.32 | 16 | +0.0513% | 1,023.0 |
| Split-Share | 5.03% | 4.57% | 105,271 | 3.91 | 15 | -0.1268% | 1,047.1 |
| Interest Bearing | 6.25% | 6.70% | 62,501 | 4.63 | 3 | +0.7609% | 1,032.4 |
| Perpetual-Premium | 5.52% | 5.20% | 102,767 | 5.65 | 24 | -0.0325% | 1,024.5 |
| Perpetual-Discount | 5.08% | 5.11% | 310,171 | 15.04 | 39 | +0.0904% | 976.0 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| BAM.PR.K | FixFloat | -2.8306% | |
| BSD.PR.A | InterestBearing | +1.0870% | Continuing the recovery from Thursday’s loss. Now with a pre-tax bid-YTW of 7.42% based on a bid of 9.30 and a hardMaturity 2015-3-31 at 10.00. |
| RY.PR.E | PerpetualDiscount | +1.1008% | Now with a pre-tax bid-YTW of 4.91% based on a bid of 22.96 and a limitMaturity. |
| FIG.PR.A | InterestBearing | +1.1244% | Now with a pre-tax bid-YTW of 6.56% (as interest) based on a bid of 9.91 and a hardMaturity 2014-12-31 at 10.00. |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| BMO.PR.I | OpRet | 75,550 | Scotia crossed 74,200 at 25.00. Now with a pre-tax bid-YTW of 4.07% based on a bid of 25.00 and a call 2007-12-25 (give or take a few days!) at 25.00. |
| BAM.PR.H | OpRet | 50,691 | Desjardins crossed 50,000 at 26.70. Now with a pre-tax bid-YTW of 3.04% based on a bid of 26.69 and a call 2008-10-30 at 25.75. It would appear that there are some who feel the privilege of early call will not be exercised! |
| GWO.PR.F | PerpetualPremium | 50,570 | Desjardins crossed 49,700 at 26.85. Now with a pre-tax bid-YTW of 3.52% based on a bid of 26.83 and a call 2008-10-30 at 26.00. Another bet on call-waiving! |
| CM.PR.I | PerpetualDiscount | 18,710 | Now with a pre-tax bid-YTW of 5.12% based on a bid of 23.11 and a limitMaturity. |
| BCE.PR.A | FixFloat | 18,298 | Scotia bought 10,000 from National Bank at 24.49. |
There were twelve other $25-equivalent index-included issues trading over 10,000 shares today.