There are rising expectations for low rates forever:
Just six months ago, money market traders expected the Federal Reserve to raise interest rates by the end of 2013. Now, they see borrowing costs staying at record lows for about three more years as the economic outlook worsens.
Bond market measures from overnight index swaps, which indicate no increase in the federal funds rate until mid-2015, to a 62 percent decline in a measure of volatility in government bonds signal that rates will stay near zero for longer. The gap between two- and five-year Treasury yields, which decreases when traders expect benchmark rates to remain subdued, is more than 50 percent narrower than its average since 2008.
It was an off day for the Canadian preferred share market, with PerpetualPremiums and FixedResets down 7bp, while DeemedRetractibles lost 9bp. Volatiltiy was average, all on the downside. Volume continued at holiday levels.
| 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 | 0.6532 % | 2,420.4 |
| FixedFloater | 4.52 % | 3.88 % | 35,161 | 17.52 | 1 | -1.8692 % | 3,519.1 |
| Floater | 3.01 % | 3.06 % | 52,909 | 19.51 | 3 | 0.6532 % | 2,613.4 |
| OpRet | 4.65 % | 3.20 % | 59,626 | 0.78 | 4 | -0.5531 % | 2,539.1 |
| SplitShare | 5.47 % | 4.89 % | 74,124 | 4.61 | 3 | -0.0665 % | 2,802.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5531 % | 2,321.8 |
| Perpetual-Premium | 5.29 % | 3.79 % | 90,607 | 1.05 | 28 | -0.0694 % | 2,278.9 |
| Perpetual-Discount | 4.93 % | 4.99 % | 98,633 | 15.40 | 3 | -0.0830 % | 2,535.6 |
| FixedReset | 4.99 % | 3.09 % | 165,280 | 4.08 | 70 | -0.0730 % | 2,421.3 |
| Deemed-Retractible | 4.95 % | 3.64 % | 122,853 | 1.95 | 46 | -0.0909 % | 2,366.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| FTS.PR.E | OpRet | -2.16 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-06-01 Maturity Price : 25.75 Evaluated at bid price : 26.26 Bid-YTW : 2.19 % |
| BAM.PR.G | FixedFloater | -1.87 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-09-10 Maturity Price : 21.75 Evaluated at bid price : 21.00 Bid-YTW : 3.88 % |
| HSB.PR.D | Deemed-Retractible | -1.15 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.25 Evaluated at bid price : 25.70 Bid-YTW : 4.33 % |
| TRP.PR.A | FixedReset | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-09-10 Maturity Price : 23.69 Evaluated at bid price : 25.52 Bid-YTW : 3.22 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.B | Deemed-Retractible | 277,305 | Nesbitt crossed blocks of 227,300 (nice ticket!) and 47,900, both at 24.40. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.39 Bid-YTW : 5.13 % |
| CIU.PR.B | FixedReset | 113,500 | National crossed blocks of 82,000 and 26,700. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 27.00 Bid-YTW : 2.08 % |
| PWF.PR.M | FixedReset | 62,000 | TD crossed 62,000 at 26.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 3.39 % |
| MFC.PR.B | Deemed-Retractible | 52,706 | Nesbitt crossed 47,900 at 23.86. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.78 Bid-YTW : 5.33 % |
| MFC.PR.G | FixedReset | 42,829 | RBC sold 13,200 to Nesbitt at 25.70, then crossed 15,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 3.68 % |
| MFC.PR.H | FixedReset | 37,900 | RBC crossed 20,000 at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 3.82 % |
| There were 16 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.M | Perpetual-Discount | Quote: 24.15 – 24.50 Spot Rate : 0.3500 Average : 0.2175 YTW SCENARIO |
| HSB.PR.D | Deemed-Retractible | Quote: 25.70 – 26.11 Spot Rate : 0.4100 Average : 0.2800 YTW SCENARIO |
| IAG.PR.F | Deemed-Retractible | Quote: 26.07 – 26.49 Spot Rate : 0.4200 Average : 0.2910 YTW SCENARIO |
| FTS.PR.E | OpRet | Quote: 26.26 – 26.59 Spot Rate : 0.3300 Average : 0.2108 YTW SCENARIO |
| PWF.PR.M | FixedReset | Quote: 26.05 – 26.40 Spot Rate : 0.3500 Average : 0.2503 YTW SCENARIO |
| IAG.PR.C | FixedReset | Quote: 25.86 – 26.23 Spot Rate : 0.3700 Average : 0.2893 YTW SCENARIO |