Looks like there’s some support for my view that public dissent is good policy:
The central bank’s governing council was created to reassure the public that setting interest rates in Canada wasn’t a one-man show. Yet the bank kept on speaking with one man’s voice: the governor’s. The institution likes it this way. Too much loose talk only creates confusion. The best way for the central bank’s junior players to stay on message is to limit their public appearances. Timothy Lane, a former IMF official who has been on the governing council since 2009, gave three speeches last year, according to the Bank of Canada’s website. Agathe Côté, a 30-year veteran of the Bank of Canada, has given seven speeches in three years as the governing council’s only woman. The public has heard from Lawrence Schembri once in the 11 months that he’s been a member of the policy committee.
…
In Wrong: Nine Economic Policy Disasters and What We Can Learn from Them, economics professor Richard Grossman chronicles the human cost of ideological blindness. There is no cure for the affliction, but Prof. Grossman argues forcefully that the kind of debate that goes on at the Fed is the best way to avoid mistakes that result in stubborn, arrogant and ill-informed thinking. Prof. Grossman actually uses Canada’s central bank as a counterpoint. He shares a conversation he had with a Fed economist, who, after visiting Canada to present new research, complained of a “Bank of Canada view,” rather than a free-flowing exchange of ideas.
It won’t happen. The feds have gotten far too fond of having the BoC as just another department of the Ministry of Finance. It will take another disaster – on the scale (domestically speaking) of Nixon / Burns – before the public pressures the politicians towards the view that Central Bank independence isn’t just a feel-good catchphrase. And right now, the trend is in the other direction; What Debt made public his most recent instructions:
“So look, it’s not a reason to panic; in fact, we’ve actually seen Canadian debt beginning to level off. But we would obviously encourage people to look at their debt levels carefully. Eventually, it may not be for two, three years, but eventually interest rates will start to rise. And Canadians should ask themselves serious questions about if interest rates came up significantly, would I still be able to afford my debt payments?”
In more ways than one! Inflation is not the problem:
Central banks in the U.S., Japan and the euro area face inflation levels under their targets while trying to accelerate growth with policies including benchmark interest rates near zero and bond-buying programs. Lagarde said that while “the deep freeze is behind,” world growth remains “too low, too fragile and too uneven,” with some 200 million people needing employment.
“The world could create more jobs before we would need to worry about the global inflation genie coming out of its bottle,” [International Monetary Fund Managing Director Christine] Lagarde said in a speech at the National Press Club in Washington today. “With inflation running below many central banks’ targets, we see rising risks of deflation, which could prove disastrous for the recovery.”
Speaking of ethics, we are now increasing our reliance on paid informants:
The federal Conservatives are following through on a budget promise to set up the snitch hotline.
People who report major international tax evasion over $100,000 can get a share of the money recovered.
Be the first kid on your block to denounce his parents!
And in today’s mixed-up world, nobody knows or cares about the difference between trading as principal or agent:
Front running occurs when someone with advance knowledge of another market participant’s plan to make a sizable transaction puts an order in first, often profiting from a market move that can occur once the big trade has gone through.
Wrong. For it to be front running, you need to have obtained the information while acting as a fiduciary. And guess what? Institutional desks trade as principals. The current fashion for turning them into order-takers will have a severely negative influence on the market. But who cares, as long as it happens after the next election?
It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 22bp, FixedResets off 2bp and DeemedRetractibles down 9bp. Volatility was muted. Volume was on the high side of average.
PerpetualDiscounts now yield 5.67%, equivalent to 7.37% interest at the standard 1.3x equivalency factor. Long corporates now yield about 4.7%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 265bp, a significant widening from the 255bp reported January 8.
| 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 | -0.3900 % | 2,545.8 |
| FixedFloater | 4.46 % | 3.70 % | 32,880 | 18.03 | 1 | -0.9767 % | 3,803.2 |
| Floater | 2.94 % | 2.95 % | 66,943 | 19.86 | 3 | -0.3900 % | 2,748.7 |
| OpRet | 4.62 % | 0.07 % | 77,291 | 0.08 | 3 | 0.0128 % | 2,674.6 |
| SplitShare | 4.84 % | 4.69 % | 64,667 | 4.42 | 5 | 0.2969 % | 3,029.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0128 % | 2,445.6 |
| Perpetual-Premium | 5.63 % | 3.68 % | 128,248 | 0.13 | 13 | -0.0460 % | 2,321.2 |
| Perpetual-Discount | 5.63 % | 5.67 % | 165,300 | 14.42 | 25 | -0.2159 % | 2,357.3 |
| FixedReset | 4.95 % | 3.49 % | 219,560 | 3.44 | 82 | -0.0178 % | 2,485.7 |
| Deemed-Retractible | 5.15 % | 4.37 % | 164,309 | 1.99 | 42 | -0.0931 % | 2,401.7 |
| FloatingReset | 2.60 % | 2.31 % | 222,027 | 4.32 | 5 | -0.0712 % | 2,473.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.F | FixedReset | -1.73 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.11 Bid-YTW : 4.86 % |
| MFC.PR.B | Deemed-Retractible | -1.41 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.95 Bid-YTW : 6.85 % |
| ENB.PR.Y | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-15 Maturity Price : 22.61 Evaluated at bid price : 23.71 Bid-YTW : 4.31 % |
| GWO.PR.N | FixedReset | 1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.01 Bid-YTW : 4.61 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.Y | FixedReset | 72,557 | Added to TXPL. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-15 Maturity Price : 22.61 Evaluated at bid price : 23.71 Bid-YTW : 4.31 % |
| IAG.PR.G | FixedReset | 64,670 | Nesbitt crossed 49,800 at 25.89. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.82 |
| BNS.PR.O | DeemedRetractible | 55,350 | RBC crossed two blocks of 25,000 each, both at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-14 Maturity Price : 26.00 Evaluated at bid price : 26.05 Bid-YTW : -0.01 % |
| TD.PR.Z | FloatingReset | 51,750 | Added to TXPR. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 2.34 % |
| PWF.PR.K | Perpetual-Discount | 41,244 | Scotia crossed blocks of 10,300 and 25,000, both at 22.35. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-15 Maturity Price : 21.92 Evaluated at bid price : 22.22 Bid-YTW : 5.57 % |
| RY.PR.C | Deemed-Retractible | 39,355 | RBC crossed 25,000 at 26.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-11-24 Maturity Price : 25.00 Evaluated at bid price : 25.29 Bid-YTW : 4.35 % |
| There were 38 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.F | FixedReset | Quote: 22.11 – 22.59 Spot Rate : 0.4800 Average : 0.3093 YTW SCENARIO |
| MFC.PR.B | Deemed-Retractible | Quote: 20.95 – 21.27 Spot Rate : 0.3200 Average : 0.2214 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 21.88 – 22.30 Spot Rate : 0.4200 Average : 0.3243 YTW SCENARIO |
| TD.PR.G | FixedReset | Quote: 25.22 – 25.44 Spot Rate : 0.2200 Average : 0.1269 YTW SCENARIO |
| BAM.PR.T | FixedReset | Quote: 23.70 – 23.99 Spot Rate : 0.2900 Average : 0.2068 YTW SCENARIO |
| POW.PR.C | Perpetual-Premium | Quote: 25.12 – 25.34 Spot Rate : 0.2200 Average : 0.1508 YTW SCENARIO |