The blame game has begun:
India central bank Governor Raghuram Rajan warned of a breakdown in global policy coordination after the Federal Reserve further cut stimulus, weakening emerging-market currencies from the rupee to the Turkish lira.
Rajan, a former chief economist at the International Monetary Fund, called for greater cooperation among policy makers weeks before finance chiefs from the world’s top developed and emerging markets gather in Sydney.
…
The Fed shouldn’t be blamed for turmoil in emerging markets, former Fed Governor Randall Kroszner, a professor at the University of Chicago where Rajan once lectured, said on Bloomberg Radio’s “The Hays Advantage.”“Countries that are being hit tend to be ones that have high current-account deficits, high fiscal deficits and relatively high inflation, and the challenge is brought on by their own domestic policies,” Kroszner said. “It’s unfair to say it’s all the Fed’s fault.”
…
In 2011, Rajan co-authored a report that called for the creation of an International Monetary Policy Committee composed of representatives from major central banks that would regularly report on the aggregate consequences of individual central bank policies. Central banks from bigger countries should be encouraged to internalize the spillover effects of their policies, it said.Rajan said yesterday developed countries might not like adjustments emerging markets take to cope with the outflows, without elaborating on specific measures. His surprise Jan. 28 move to raise the benchmark repurchase rate by a quarter point – – adding to increases of 50 basis points since he took over the Reserve Bank of India in September — was to stem consumer-price inflation running at close to 10 percent, he said.
Some economists are taking a stab at quantifying the effects of quantitative easing:
The economists, Jing Cynthia Wu and Fan Dora Xia, used a concept known as the “shadow rate” to gauge the impact of quantitative easing and the Fed’s forward guidance on the likely path of interest rates.
Their findings: as of December, Fed policy was the equivalent of cutting the benchmark interest rate to minus 1.98 percent, according to Wu at the University of Chicago Booth School of Business and Xia at the University of California at San Diego.
Fan Dora Xia’s web page also shows his estimates for the ECB (-0.24% as of 2013-05-31) and the UK (-3.06% as of 2013-10-31).
Meanwhile, Argentinian bonds are doing what Argentinian bonds do best:
Argentine dollar bonds tumbled the most in emerging markets on concern government measures from devaluation to rate increases aren’t enough to improve the country’s deteriorating debt payment capacity.
Argentine government dollar bonds due 2015 fell 3.88 cents on the dollar to 85.75 cents, driving yields up to 19.12 percent, the highest since June 2012.
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Argentina is losing foreign currency reserves at the fastest pace in more than a decade as estimated 28 percent inflation and currency controls spur capital flight. The funds, which the country relies on to pay debt and finance energy imports, dropped to a seven-year low of $28.3 billion. The government devalued the peso 15 percent last week and raised benchmark interest rates as much as 6 percentage points. The moves, coupled with less risk appetite for emerging market assets, haven’t settled investor concerns.
The Canadian preferred share market closed the month on a happy note, with PerpetualDiscounts winning 20bp, FixedResets gaining 5bp and DeemedRetractibles up 8bp. BAM Floating Rate issues were notable on the downside of a relatively lengthy Performance Highlights table. Volume was above average.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | -1.2602 % | 2,417.2 |
| FixedFloater | 4.60 % | 3.85 % | 29,343 | 17.75 | 1 | -2.2254 % | 3,688.9 |
| Floater | 3.09 % | 3.11 % | 70,844 | 19.44 | 3 | -1.2602 % | 2,609.9 |
| OpRet | 4.61 % | 0.45 % | 76,810 | 0.16 | 3 | 0.0384 % | 2,680.4 |
| SplitShare | 4.87 % | 4.96 % | 60,404 | 4.38 | 5 | 0.0806 % | 3,010.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0384 % | 2,451.0 |
| Perpetual-Premium | 5.61 % | 2.56 % | 112,971 | 0.09 | 13 | 0.0214 % | 2,334.6 |
| Perpetual-Discount | 5.55 % | 5.61 % | 167,591 | 14.47 | 25 | 0.1960 % | 2,392.3 |
| FixedReset | 4.88 % | 3.71 % | 219,552 | 4.47 | 84 | 0.0508 % | 2,485.7 |
| Deemed-Retractible | 5.13 % | 4.16 % | 169,474 | 1.97 | 42 | 0.0773 % | 2,415.7 |
| FloatingReset | 2.67 % | 2.59 % | 194,252 | 4.64 | 6 | 0.0335 % | 2,440.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CIU.PR.C | FixedReset | -3.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 20.11 Evaluated at bid price : 20.11 Bid-YTW : 3.87 % |
| BAM.PR.G | FixedFloater | -2.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 21.43 Evaluated at bid price : 20.65 Bid-YTW : 3.85 % |
| BAM.PR.C | Floater | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 3.11 % |
| BAM.PR.B | Floater | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 17.03 Evaluated at bid price : 17.03 Bid-YTW : 3.10 % |
| BAM.PR.K | Floater | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 3.13 % |
| TRP.PR.C | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 21.63 Evaluated at bid price : 22.05 Bid-YTW : 3.69 % |
| PWF.PR.K | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 22.52 Evaluated at bid price : 22.80 Bid-YTW : 5.45 % |
| GWO.PR.N | FixedReset | 1.27 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.36 Bid-YTW : 4.32 % |
| CIU.PR.A | Perpetual-Discount | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 22.00 Evaluated at bid price : 22.00 Bid-YTW : 5.32 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.Z | FixedReset | 481,090 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 23.14 Evaluated at bid price : 24.98 Bid-YTW : 3.75 % |
| TRP.PR.E | FixedReset | 85,205 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 23.05 Evaluated at bid price : 24.80 Bid-YTW : 3.98 % |
| TD.PR.E | FixedReset | 82,372 | TD crossed 70,000 at 25.23. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.24 Bid-YTW : 2.23 % |
| HSB.PR.C | Deemed-Retractible | 76,395 | Canaccord sold 10,000 to Scotia at 25.25 and another 20,000 to TD at the same price. TD crossed 25,000 at the same price again. RBC crossed 14,000 at 25.29. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.24 Bid-YTW : 3.83 % |
| PWF.PR.S | Perpetual-Discount | 62,908 | Nesbitt crossed 55,700 at 22.69. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-01-31 Maturity Price : 22.27 Evaluated at bid price : 22.58 Bid-YTW : 5.33 % |
| MFC.PR.H | FixedReset | 56,800 | TD crossed 50,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-03-19 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 3.24 % |
| There were 40 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.G | FixedFloater | Quote: 20.65 – 21.81 Spot Rate : 1.1600 Average : 0.6692 YTW SCENARIO |
| CIU.PR.C | FixedReset | Quote: 20.11 – 21.00 Spot Rate : 0.8900 Average : 0.5632 YTW SCENARIO |
| BAM.PR.T | FixedReset | Quote: 23.76 – 24.07 Spot Rate : 0.3100 Average : 0.1988 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 25.51 – 25.80 Spot Rate : 0.2900 Average : 0.1975 YTW SCENARIO |
| GWO.PR.F | Deemed-Retractible | Quote: 25.52 – 25.79 Spot Rate : 0.2700 Average : 0.1920 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 22.63 – 22.90 Spot Rate : 0.2700 Average : 0.1955 YTW SCENARIO |