PrefBlog

Taper? Schmaper!:

Treasuries rose the most in almost two weeks, pushing the 10-year note yield further below the level when the Federal Reserve voted last month to taper its bond purchases, as economic reports showed an uneven economic expansion.

The benchmark yield reached a seven-week low as an emerging-market currencies selloff amid slowing economic growth and rising social tension stoked demand for safety. Continuing jobless claims rose last week more than forecast, a manufacturing gauge unexpectedly fell this month, pushing yield further below where it stood after the central bank announced Dec. 18 it would reduce its bond purchases to $75 billion per month from $85 billion amid signs of improved economic growth.

Much handwringing over the loony:

The Canadian dollar weakened to the lowest in 4 1/2 years against its U.S. counterpart after Poloz left the main interest rate unchanged yesterday and said the strength of the currency is hurting exporters. Hedge funds and other large speculators have already amassed near-record bets this year for the local dollar to decline as Canada’s trade deficit came in nine times wider than forecast and a report showed the country shed jobs in December.

The drop pushed the currency below the median forecast of C$1.10 per U.S. dollar for the end of the year in a Bloomberg survey of 63 contributors, suggesting strategists will be revising estimates lower. While some investors speculated that the central bank would signal a bias toward easing policy, Poloz said his next rate move depends on how economic data change the balance of risks to the world’s 11th-largest economy.
…
Canada’s dollar, often called the loonie for the aquatic bird on the C$1 coin, fell as much as 0.8 percent today to C$1.1174, the lowest level since July 2009, and was at C$1.1117 as of 8:48 a.m. in Toronto. That added to its 1.1 percent slide yesterday. Fair value is around C$1.15, according to [Deutsche Bank global head of Group of 10 foreign exchange Alan] Ruskin.

The loonie is the worst performer during the past one and six months against a basket of nine developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, with declines of 4.9 percent and 8.3 percent. Even so, the Canadian currency is still about 11 percent overvalued compared with its U.S. peer, according the Organisation for Economic Cooperation and Development’s purchasing-power data.

It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 28bp, FixedResets gaining 14bp and DeemedRetractibles up 26bp. An average-sized Performance Highlights table has a preponderance of winning PerpetualDiscounts. Volume was high.

This entry was posted on Thursday, January 23rd, 2014 at 11:03 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.