The FOMC Statement did not contain any major surprises:
Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually.
…
Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.
…
Increases in the prices of energy and other commodities have pushed up inflation in recent months. The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations.
…
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
It was a good day for the Canadian preferred share market, with PerpetualDiscounts up 11bp, FixedResets gaining 5bp and DeemedRetractibles winning 9bp. Volatility remained low, but volume was pretty good.
PerpetualDiscounts now yield 5.58%, equivalent to 7.25% interest at the standard equivalency factor of 1.3x. Long Corporates remain at about 5.5% (maybe a little less) so the pre-tax interest-equivalent spread (also called the Seniority Spread) is now about 175bp, with all numbers unchanged from the April 20 values.
| 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 | 0.2375 % | 2,421.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2375 % | 3,642.4 |
| Floater | 2.49 % | 2.26 % | 35,055 | 21.63 | 4 | 0.2375 % | 2,614.9 |
| OpRet | 4.92 % | 3.58 % | 57,224 | 2.05 | 8 | -0.0289 % | 2,410.7 |
| SplitShare | 5.20 % | -2.04 % | 84,665 | 0.63 | 6 | 0.0607 % | 2,498.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0289 % | 2,204.3 |
| Perpetual-Premium | 5.80 % | 5.60 % | 125,026 | 6.13 | 8 | -0.0099 % | 2,049.6 |
| Perpetual-Discount | 5.57 % | 5.58 % | 133,772 | 14.40 | 16 | 0.1132 % | 2,123.4 |
| FixedReset | 5.18 % | 3.45 % | 210,159 | 2.90 | 57 | 0.0459 % | 2,291.1 |
| Deemed-Retractible | 5.28 % | 5.23 % | 298,094 | 8.11 | 53 | 0.0852 % | 2,076.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Deemed-Retractible | -1.68 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.02 Bid-YTW : 6.79 % |
| BAM.PR.T | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-04-27 Maturity Price : 22.95 Evaluated at bid price : 24.55 Bid-YTW : 4.81 % |
| RY.PR.L | FixedReset | 1.15 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-26 Maturity Price : 25.00 Evaluated at bid price : 26.50 Bid-YTW : 3.26 % |
| SLF.PR.E | Deemed-Retractible | 1.54 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.15 Bid-YTW : 6.60 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.R | FixedReset | 88,816 | Nesbitt crossed 42,000 at 26.10; Desjardins crossed 30,000 at 26.10 and 10,200 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-25 Maturity Price : 25.00 Evaluated at bid price : 26.10 Bid-YTW : 3.32 % |
| BAM.PR.B | Floater | 68,757 | Nesbitt crossed two blocks of 25,000 each, both at 19.05. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-04-27 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 2.77 % |
| BMO.PR.Q | FixedReset | 47,010 | Nesbitt bought 11,500 from anonymous at 24.93. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 3.91 % |
| MFC.PR.D | FixedReset | 37,634 | RBC crossed 28,800 at 27.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.44 Bid-YTW : 3.67 % |
| SLF.PR.F | FixedReset | 35,501 | Desjardins crossed 10,000 at 27.05; Nesbitt crossed 18,300 at 27.07. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 27.01 Bid-YTW : 3.56 % |
| CM.PR.K | FixedReset | 34,335 | TD crossed 24,900 at 26.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.60 Bid-YTW : 3.32 % |
| There were 38 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IAG.PR.A | Deemed-Retractible | Quote: 21.02 – 21.63 Spot Rate : 0.6100 Average : 0.3830 YTW SCENARIO |
| GWO.PR.H | Deemed-Retractible | Quote: 22.05 – 22.57 Spot Rate : 0.5200 Average : 0.3678 YTW SCENARIO |
| MFC.PR.C | Deemed-Retractible | Quote: 20.82 – 21.08 Spot Rate : 0.2600 Average : 0.1841 YTW SCENARIO |
| FTS.PR.G | FixedReset | Quote: 26.35 – 26.99 Spot Rate : 0.6400 Average : 0.5668 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 25.41 – 25.79 Spot Rate : 0.3800 Average : 0.3076 YTW SCENARIO |
| TD.PR.C | FixedReset | Quote: 26.46 – 26.75 Spot Rate : 0.2900 Average : 0.2220 YTW SCENARIO |
Hello James,
What do you think of the FED and Bernanke’s speech? Personnally, I am getting more and more concerned by their downplaying the actual inflation. The USD is falling off the cliff and the U.S keep issuing debt like crazy (that the Fed buys). Even S&P putting a negative outlook on the US debt rating was received as if this was meaningless while similar news about Portugal or Spain last Summer would escalate the yield of their sovereign debts. Why is anyone holding / buying U.S bonds nowadays (other than the FED). Am I the only one having nightmares of skyrocketting interest rates?
Disclosure (confession): I am long holding HTD, a reverse ETF betting against US treasuries.
[…] now yield 5.4%, so the pre-tax interest-equivalent spread is now 180bp, a little wider than the April 27 figure of […]