Bloomberg has a story headlined TIPS’ Yields Show Fed Has Lost Control of Inflation::
“The way TIPS are trading now, investors believe headline inflation will stay lofty and are willing to give up the real yield for that,” said Brian Brennan, a money manager who helps oversee $11 billion in fixed-income assets at T. Rowe Price Group Inc. based in Baltimore. Prices for the securities indicate “a real concern of a recession and high headline inflation,” he said.
This is the type of boneheaded analysis that is rife now that the smiley-boy salesmen have taken over the industry completely. If the driver of these real yields is inflation, then why is the 30-year Treasury bond yielding less than 4.5%?
As Accrued Interest points out, Treasury yields are being driven by fear, with investors piling into government guaranteed debt for the simple reason that they want to protect their capital. TIPS are simply maintaining a spread to nominals – an increasing spread, to be sure; inflation fears are part of the picture as I have previously discussed, but to ascribe the entire move to this is … boneheaded. Sorry folks, I just can’t think of any other word.
PerpetualDiscounts got smacked again today, on extremely light volume – all eyes, yet again, were on the equity markets and wondering if the music would stop with EVERYBODY holding the hot potato. BCE issues did very well – it appears that there are some who took the unsuccessful bondholders’ lawsuit a lot more seriously than I did.
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 | 5.50% | 5.52% | 32,606 | 14.64 | 2 | +0.8109% | 1,088.6 |
Fixed-Floater | 4.76% | 5.57% | 63,718 | 14.78 | 8 | +1.1067% | 1,043.2 |
Floater | 4.72% | 4.79% | 86,094 | 15.78 | 2 | +0.6984% | 868.2 |
Op. Retract | 4.84% | 3.62% | 73,774 | 2.74 | 15 | -0.1461% | 1,044.8 |
Split-Share | 5.34% | 5.68% | 97,706 | 4.04 | 14 | -0.2302% | 1,030.2 |
Interest Bearing | 6.21% | 6.64% | 67,951 | 4.22 | 3 | -0.2713% | 1,080.0 |
Perpetual-Premium | 5.76% | 5.63% | 285,094 | 8.77 | 17 | -0.0144% | 1,022.8 |
Perpetual-Discount | 5.46% | 5.52% | 263,316 | 14.62 | 51 | -0.4534% | 942.8 |
Major Price Changes | |||
Issue | Index | Change | Notes |
FBS.PR.B | SplitShare | -2.5641% | Asset coverage of just under 1.5:1 as of March 6, according TD Securities. Now with a pre-tax bid-YTW of 6.28% based on a bid of 9.50 and a hardMaturity 2011-12-15 at 10.00. |
SLF.PR.D | PerpetualDiscount | -1.8310% | Now with a pre-tax bid-YTW of 5.33% based on a bid of 20.91 and limitMaturity. |
SLF.PR.A | PerpetualDiscount | -1.4286% | Now with a pre-tax bid-YTW of 5.39% based on a bid of 22.08 and a limitMaturity. |
BMO.PR.J | PerpetualDiscount | -1.4112% | Now with a pre-tax bid-YTW of 5.61% based on a bid of 20.26 and a limitMaturity. |
ELF.PR.F | PerpetualDiscount | -1.3453% | Now with a pre-tax bid-YTW of 6.13% based on a bid of 22.00 and a limitMaturity. |
CM.PR.E | PerpetualDiscount | -1.3158% | Now with a pre-tax bid-YTW of 5.91% based on a bid of 24.00 and a limitMaturity. |
IAG.PR.A | PerpetualDiscount | -1.3133% | Now with a pre-tax bid-YTW of 5.48% based on a bid of 21.04 and a limitMaturity. |
RY.PR.C | PerpetualDiscount | -1.2471% | Now with a pre-tax bid-YTW of 5.43% based on a bid of 21.38 and a limitMaturity. |
BNS.PR.N | PerpetualDiscount | -1.2245% | Now with a pre-tax bid-YTW of 5.49% based on a bid of 24.20 and a limitMaturity. |
WFS.PR.A | SplitShare | -1.2036% | Asset coverage of just under 1.8:1 as of February 29, according to Mulvihill. Now with a pre-tax bid-YTW of 6.14% based on a bid of 9.85 and a hardMaturity 2011-6-30 at 10.00. |
RY.PR.G | PerpetualDiscount | -1.1699% | Now with a pre-tax bid-YTW of 5.38% based on a bid of 21.12 and a limitMaturity. |
CM.PR.H | PerpetualDiscount | -1.1628% | Now with a pre-tax bid-YTW of 5.73% based on a bid of 21.25 and a limitMaturity. |
RY.PR.E | PerpetualDiscount | -1.1531% | Now with a pre-tax bid-YTW of 5.30% based on a bid of 21.43 and a limitMaturity. |
MFC.PR.A | OpRet | -1.1453% | Now with a pre-tax bid-YTW of 4.09% based on a bid of 25.03 and a softMaturity 2015-12-18 at 25.00. |
SLF.PR.C | PerpetualDiscount | -1.1268% | Now with a pre-tax bid-YTW of 5.30% based on a bid of 21.06 and a limitMaturity. |
BNS.PR.L | PerpetualDiscount | -1.0295% | Now with a pre-tax bid-YTW of 5.40% based on a bid of 21.15 and a limitMaturity. |
NA.PR.L | PerpetualDiscount | -1.0078% | Now with a pre-tax bid-YTW of 5.66% based on a bid of 21.61 and a limitMaturity. |
BCE.PR.A | FixFloat | +1.0417% | |
BCE.PR.C | FixFloat | +1.0417% | |
FTU.PR.A | SplitShare | +1.2360% | Asset coverage of just under 1.5:1 as of February 29, according to the company. Probably a little under 1.4:1 now, given poor performance this month of US Financials. Now with a pre-tax bid-YTW of 7.88% based on a bid of 9.01 and a hardMaturity 2012-12-1 at 10.00. |
BCE.PR.B | FixFloat | +1.6518% | |
BCE.PR.G | FixFloat | +1.9108% | |
BCE.PR.Z | FixFloat | +2.0408% | |
BCE.PR.I | FixFloat | +2.0842% |
Volume Highlights | |||
Issue | Index | Volume | Notes |
NA.PR.L | PerpetualDiscount | 51,515 | TD crossed 48,300 at 21.75. Now with a pre-tax bid-YTW of 5.66% based on a bid of 21.61 and a limitMaturity. |
BNS.PR.O | PerpetualPremium | 21,239 | Now with a pre-tax bid-YTW of 5.64% based on a bid of 25.11 and a limitMaturity. |
TD.PR.P | PerpetualDiscount | 13,607 | Now with a pre-tax bid-YTW of 5.46% based on a bid of 24.32 and a limitMaturity. |
PWF.PR.H | PerpetualPremium | 11,500 | Now with a pre-tax bid-YTW of 5.82% based on a bid of 25.00 and a limitMaturity. |
CM.PR.I | PerpetualDiscount | 11,478 | Now with a pre-tax bid-YTW 5.81% based on a bid of 20.52 and a limitMaturity. |
There were three other index-included $25-pv-equivalent issues trading over 10,000 shares today.
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