Canadian inflation is quiescent:
Canada’s annual inflation rate stayed at 1.2 per cent, matching the previous month and May for the lowest level in more than two years.
…
For the annual inflation rate, the agency said an increase in prices for gasoline and electricity were the main contributors, but they were offset by declines in the cost of purchasing motor vehicles and women’s clothing.
…
The Bank of Canada’s core rate, which measures underlying price pressures by excluding volatile items such as gasoline, declined three-tenths of a point to 1.3 per cent.
This has led to calls for a rate cut:
There could be several causes of these low bond yields – and none of them are pleasant. It may be that bond markets expect the Bank of Canada to undershoot its 2 per cent inflation target for the foreseeable future. It may be that alternative investments in Canada are such losing propositions that people are willing to accept low or even negative real returns. Finally, there may be a flight to quality here, with Canada being seen as a safe haven in a world full of economic turmoil. It is likely a combination of all three.
Bond markets are screaming loud and clear that worldwide demand remains low, and, in the medium-term, inflation is likely to stay under the Bank of Canada’s target. On Tuesday, the Bank of Canada will be giving its interest rate announcement. Given the current economic data and low inflation, the prudent move for Mark Carney is to lower the overnight rate by 25 basis points.
Top-producing brokers in the US are dancing as fast as they can:
Many senior advisers at brokerage arms of major banks say they are considering jumping ship for the first time, frustrated by problems plaguing their parent companies, from credit rating downgrades to staff cutbacks to bothersome technology changes.
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So far in 2012, advisers who managed nearly $50-billion (U.S.) in client assets have left top U.S. brokerages Morgan Stanley Wealth Management and Bank of America Merrill Lynch, an already high figure that is expected to grow, industry experts say.Twelve teams that each managed more than $1-billion in client assets have moved in 2012. In a typical year, fewer than a handful of teams that size switch firms, experts said.
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Late last year, when Bank of America’s stock price plunged, UBS Wealth Management Americas offered Merrill advisers signing bonuses that were about 30 per cent higher than normal, said financial services recruiter Alan Reed. UBS added at least 24 veteran Merrill Lynch advisers who managed roughly $4.4-billion in client assets..
Meanwhile, these super-brokers may have a wonderful fourth quarter:
Sell.
That’s the message from some financial advisers, who are telling wealthy clients that the remainder of 2012 amounts to a last-chance sale on federal tax rates. Taxes are set to rise in January in the U.S., pushing the top rate on dividends to 43.4 percent from 15 percent and the top rate on capital gains to 23.8 percent from 15 percent.
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Federal taxes on ordinary income will rise to as much as 39.6 percent from 35 percent. Long-term capital gains rates will increase to a maximum 20 percent from 15 percent, plus an additional 3.8 percent for high-income earners as a result of the 2010 health-care law.The opportunity for individuals to transfer up to $5.12 million — or $10.24 million for couples — free of estate taxes and gift taxes also is set to expire at the end of the year and drop to $1 million. Legislation enacted in 2010 raised the lifetime estate-and-gift-tax exclusion for 2011 and 2012.
IIROC has found another opportunity for expansion:
Canada’s securities industry regulator is calling for tougher oversight of the Canadian version of Libor.
In an emailed statement, a spokesperson for the Investment Industry Regulatory Organization of Canada (IIROC) said that while it isn’t aware of any problems with the Canadian Dealer Offered Rate, or Cdor, “[r]ecent experiences with LIBOR have pointed to a need for increased scrutiny of such survey-based reference rates.”
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[IIROC vice president of public affairs] Ms. [Lucy] Becker said that when IIROC’s review is complete — she did not say when that might happen — the results will be submitted to “relevant stakeholders” including Canadian regulators and government agencies.
It’s a big market:
Essentially a Canadian version of Libor, the Canadian Dealer Offered Rate is the rate at which Canadian banks lend to one another based on bid prices for bankers’ acceptances.
The bankers’ acceptance market itself is relatively small, but Cdor is used as a benchmark for a whole raft of loans, floating rate notes, interest rate swaps and derivatives that are the life-blood of this country’s financial market. In total we’re talking about $6-trillion dollars worth on any given day, according to Louis Gagnon, a finance professor at Queen’s University’s School of Business and a former risk manager at Royal Bank of Canada.
DBRS confirmed Weston at Pfd-3:
DBRS has today confirmed the ratings of the Notes & Debentures of George Weston Limited (Weston or the Company) and the Issuer Rating at BBB, the Preferred Shares at Pfd-3 and the Commercial Paper at R-2 (high), all with Stable trends. The confirmation of the ratings is based on the stable operating performance of Weston Bakery, the stable ratings of Loblaw Companies Limited (Loblaw; see separate press release), in which Weston holds a 63% stake, and the Company’s significant cash resources, which are expected to be used toward growth opportunities. The ratings continue to be supported by the Company’s strong brands and above-average operating efficiency, while reflecting the volatile input cost environment and the mature nature of the bakery industry.
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DBRS believes that Weston has the ability to maintain its current BBB rating and a financial profile commensurate with the current rating category (i.e., ultimate gross debt-to-EBITDA of up to 2.5 times (x) or net debt-to-EBITDA of up to 2.0x).DBRS will continue to monitor Weston’s decisions on the deployment of its remaining cash, cash equivalents and short-term investments, and will assess the potential impact on the Company’s credit risk profile at such time.
As for the short-term rating, Weston’s liquidity profile remains commensurate with the R-2 (high) rating category, based on its long-term rating, positive free cash flow generating capacity, high level of cash and marketable investments, and manageable debt and maturity schedule.
The credit risk profile of Loblaw remains relatively stable, with a long-term rating of BBB and short-term rating of R-2 (middle). The ratings for Weston at BBB and R-2 (high) reflect its operating businesses and financial risk profile, both on a stand-alone basis, as well as consolidated with its ownership interest in Loblaw. As such, if there is any change in Loblaw’s ratings, it will not necessarily affect the ratings of Weston.
DBRS confirmed Loblaw at Pfd-3, proud issuer of L.PR.A:
DBRS has today confirmed Loblaw Companies Limited’s (Loblaw or the Company) Issuer Rating, Medium-Term Notes and Debentures ratings at BBB, its Cumulative Redeemable Second Preferred Shares, Series A rating at Pfd-3, and its Commercial Paper rating at R-2 (middle). All trends remain Stable. The confirmation of the ratings is based on Loblaw’s stable financial profile, while recognizing that the Company’s earnings profile will remain under pressure in the near to medium term due to intensifying competition combined with a difficult consumer environment. The ratings continue to be supported by Loblaw’s strong market position, large scale, national diversification, and industry-leading private labels. The ratings also reflect the high level of and intensifying competition in food retailing, particularly with the emergence of new non-traditional players (i.e., Wal-Mart Stores, Inc. (Wal-Mart) and Target Corporation (Target)), and high levels of union penetration.
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DBRS believes that Loblaw will maintain a financial profile commensurate with the current rating based on the Company’s free cash flow generating capacity and moderate debt levels. Cash flow from operations should continue to track operating income and decline modestly to the $1.3 billion to $1.4 billion range in 2012 and 2013, while capex requirements should remain at elevated levels through 2013 and begin to moderate somewhat thereafter. Dividend policy is expected to remain consistent with recent practice, which DBRS expects should result in free cash flow before changes in working capital in the range of breakeven to $150 million. Therefore, while the Company has the potential to improve its credit metrics by applying free cash flow and cash-on-hand to debt reduction, DBRS believes that Loblaw may use these sources of cash to invest in growth and/or return value to shareholders over the longer term. As such, DBRS expects that balance sheet-debt levels and key credit metrics should remain in a range acceptable for the current rating category.
It was a mildly positive day for the Canadian preferred share market, with PerpetualPremiums up 11bp, FixedResets gaining 2bp and DeemedRetractibles flat. Volatility was non-existent. Volume was heavy, with the TXPR Revision effective at Monday’s opening.
| 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 | 0.3406 % | 2,468.6 |
| FixedFloater | 4.24 % | 3.57 % | 32,727 | 18.23 | 1 | -0.0892 % | 3,795.7 |
| Floater | 2.97 % | 2.99 % | 64,065 | 19.76 | 3 | 0.3406 % | 2,665.5 |
| OpRet | 4.62 % | 2.98 % | 59,062 | 1.39 | 4 | 0.0191 % | 2,569.3 |
| SplitShare | 5.39 % | 4.77 % | 71,334 | 4.50 | 3 | -0.0262 % | 2,846.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0191 % | 2,349.4 |
| Perpetual-Premium | 5.28 % | 1.73 % | 85,823 | 0.35 | 27 | 0.1129 % | 2,306.6 |
| Perpetual-Discount | 5.02 % | 4.92 % | 45,188 | 15.49 | 4 | -0.1538 % | 2,577.9 |
| FixedReset | 4.97 % | 3.02 % | 184,882 | 3.83 | 73 | 0.0206 % | 2,441.3 |
| Deemed-Retractible | 4.94 % | 3.56 % | 132,870 | 1.15 | 47 | 0.0033 % | 2,380.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| No individual gains or losses exceeding 1%! | |||
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| GWO.PR.Q | Deemed-Retractible | 327,372 | Added to TXPR. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 4.73 % |
| ENB.PR.N | FixedReset | 209,883 | Added to TXPR. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-10-19 Maturity Price : 23.26 Evaluated at bid price : 25.50 Bid-YTW : 3.82 % |
| HSB.PR.C | Deemed-Retractible | 186,442 | Deleted from TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-11-18 Maturity Price : 25.50 Evaluated at bid price : 25.60 Bid-YTW : 3.40 % |
| ENB.PR.P | FixedReset | 171,702 | Added to TXPR. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-10-19 Maturity Price : 23.21 Evaluated at bid price : 25.36 Bid-YTW : 3.71 % |
| GWO.PR.G | Deemed-Retractible | 160,492 | Deleted from TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 4.60 % |
| CU.PR.E | Perpetual-Premium | 159,753 | Added to TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 26.49 Bid-YTW : 4.20 % |
| TD.PR.P | Deemed-Retractible | 139,100 | Deleted from TXPR YTW SCENARIO Maturity Type : Call Maturity Date : 2012-12-01 Maturity Price : 26.00 Evaluated at bid price : 26.18 Bid-YTW : -2.22 % |
| CM.PR.M | FixedReset | 133,006 | Deleted from TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.74 Bid-YTW : 2.40 % |
| IFC.PR.A | FixedReset | 132,965 | TD crossed blocks of 50,000 and 27,200 at 25.35. RBC crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 3.61 % |
| FTS.PR.H | FixedReset | 131,587 | Added to TXPR. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-10-19 Maturity Price : 23.61 Evaluated at bid price : 25.50 Bid-YTW : 2.77 % |
| IAG.PR.C | FixedReset | 122,340 | Deleted from TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 3.08 % |
| GWO.PR.M | Deemed-Retractible | 114,068 | Deleted from TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.45 Bid-YTW : 4.99 % |
| RY.PR.D | Deemed-Retractible | 110,243 | Deleted from TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.86 Bid-YTW : 3.64 % |
| NA.PR.M | Deemed-Retractible | 108,575 | Added to TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-15 Maturity Price : 26.00 Evaluated at bid price : 27.00 Bid-YTW : -1.70 % |
| RY.PR.N | FixedReset | 100,010 | TD crossed 25,500 and 48,100 at 26.75. Scotia crossed 16,600 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.69 Bid-YTW : 1.88 % |
| There were 44 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BNA.PR.D | SplitShare | Quote: 26.60 – 26.99 Spot Rate : 0.3900 Average : 0.2993 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 25.98 – 26.28 Spot Rate : 0.3000 Average : 0.2203 YTW SCENARIO |
| GWO.PR.L | Deemed-Retractible | Quote: 26.41 – 26.67 Spot Rate : 0.2600 Average : 0.1818 YTW SCENARIO |
| BAM.PR.O | OpRet | Quote: 25.36 – 25.59 Spot Rate : 0.2300 Average : 0.1561 YTW SCENARIO |
| PWF.PR.M | FixedReset | Quote: 25.83 – 26.09 Spot Rate : 0.2600 Average : 0.1913 YTW SCENARIO |
| BAM.PR.Z | FixedReset | Quote: 26.19 – 26.37 Spot Rate : 0.1800 Average : 0.1202 YTW SCENARIO |