PrefBlog

Surprise, surprise, the BoC maintained the overnight rate (emphasis added):

In Canada, the slowdown in the second half of 2012 was more pronounced than the Bank had anticipated, owing to weaker business investment and exports. Caution about high debt levels has begun to restrain household spending. The Bank expects economic growth to pick up through 2013. Business investment and exports are projected to rebound as foreign demand strengthens, uncertainty diminishes and the temporary factors that have weighed on resource sector activity are unwound. Nonetheless, exports should remain below their pre-recession peak until the second half of 2014 owing to a lower track for foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar. Consumption is expected to grow moderately and residential investment to decline further from historically high levels. The Bank expects trend growth in household credit to moderate further, with the debt-to-income ratio stabilizing near current levels.

Relative to the October MPR, Canadian economic activity is expected to be more restrained. Following an estimated 1.9 per cent in 2012, the economy is expected to grow by 2.0 per cent in 2013 and 2.7 per cent in 2014. The Bank now expects the economy to reach full capacity in the second half of 2014, later than anticipated in the October MPR.

Core inflation has softened by more than the Bank had expected, with more muted price pressures across a wide range of goods and services, consistent with the unexpected increase in excess capacity. Total CPI inflation has also been lower than anticipated, reflecting developments in core inflation and weaker-than-projected gasoline prices. Total CPI inflation is expected to remain around 1 per cent in the near term before rising gradually, along with core inflation, to the 2 per cent target in the second half of 2014 as the economy returns to full capacity and inflation expectations remain well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. While some modest withdrawal of monetary policy stimulus will likely be required over time, consistent with achieving the 2 per cent inflation target, the more muted inflation outlook and the beginnings of a more constructive evolution of imbalances in the household sector suggest that the timing of any such withdrawal is less imminent than previously anticipated.

Portugal has re-entered the bond market:

Portugal sold €2.5-billion ($3.3-billion) of bonds on Wednesday, marking the country’s first long-term debt issue since it was bailed out in 2011 and putting it on track for a full market return that may open its way to more aid.

The Oct. 2017 bond was sold for a yield of 4.891 per cent and 93 per cent of it was snapped up by foreign investors, Treasury Secretary Maria Luis Albuquerque said. Demand reached €12-billion.
…
The issue was a reopening of its 4.35-per-cent October 2017 bond, first launched in 2007 as a 10-year benchmark.

Portugal last paid 6.4 per cent to sell five-year bonds in a placement before its bailout two years ago. Its outstanding 2017 debt was yielding 4.93 per cent in the secondary market on Wednesday, the lowest level since late 2010.

I am sometimes asked why I don’t use on-line banking. Here’s another reason:

It’s unclear precisely how much money the alleged conspirators managed to rob, but in court documents, prosecutors put the losses at “tens of millions of dollars.”
…
Brian Krebs, an online security expert and former journalist for The Washington Post, described Wednesday’s cases as “very significant.” The virus involved is “one of the most advanced malware threats ever deployed,” he said. What’s more, one of the individuals charged – Mr. Calovskis – was “a major player in the cyber crime underground.”

For many unwitting victims, the virus arrived in the form of a seemingly innocuous PDF file attached to an e-mail. Once opened, U.S. authorities said, the virus would collect personal information like user names and passwords for online bank accounts and relay that data to servers controlled by the conspirators.

It was another mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 5bp, FixedResets off 5bp and DeemedRetractibles flat. Volatility was average, but comprised entirely of FixedReset losers. Volume continued high.

PerpetualDiscounts now yield 4.88%, equivalent to 6.34% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.25%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 210bp, a slight (and perhaps spurious) widening from the 205bp reported January 16.

This entry was posted on Wednesday, January 23rd, 2013 at 11:09 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.