The BoC kept the overnight rate low, with a fairly gloomy outlook:
Inflation in Canada remains low. Core inflation is expected to stay well below 2 per cent this year due to the effects of economic slack and heightened retail competition, and these effects will persist until early 2016. However, higher consumer energy prices and the lower Canadian dollar will exert temporary upward pressure on total CPI inflation, pushing it closer to the 2 per cent target in the coming quarters. We expect total CPI inflation will remain close to target throughout the projection, even as upward pressure from energy prices dissipates, because the impact of retail competition will gradually fade and excess capacity will be absorbed.
…
The Bank continues to expect Canada’s real GDP growth to average about 2 1/2 per cent in 2014 and 2015 before easing to around the 2 per cent growth rate of the economy’s potential in 2016. Competitiveness challenges continue to weigh on Canadian exporters’ ability to benefit from stronger growth abroad. However, a range of export subsectors have been growing in line with fundamentals, which suggests that as the U.S. recovery gathers momentum and becomes more broadly-based, many of our exports will benefit. The lower Canadian dollar should provide additional support. We continue to believe that rising global demand for Canadian goods and services, combined with the assumed high level of oil prices, will stimulate business investment in Canada and shift the economy to a more sustainable growth track.
…
In sum, the Bank continues to see a gradual strengthening in the fundamental drivers of growth and inflation in Canada. This view hinges critically on the projected upturn in exports and investment. With underlying inflation expected to remain below target for some time, the downside risks to inflation remain important. At the same time, the risks associated with household imbalances remain elevated. The Bank judges that the balance of these risks remains within the zone for which the current stance of monetary policy is appropriate and therefore has decided to maintain the target for the overnight rate at 1 per cent. The timing and direction of the next change to the policy rate will depend on how new information influences the balance of risks.
… so the loony got knocked:
The Canadian dollar touched the lowest level in more than a week after the Bank of Canada said its next move on interest rates could be up or down as a forecast pickup in business investment has been slow to materialize.
I saw some husked corn for sale at my favourite greengrocer today; but was told that it was from the US so it will be all dried out. Geez, we can get Chilean apples; why can’t we get Brazilian corn?
It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 11bp, FixedResets gaining 1bp and DeemedRetractibles up 8bp. Brookfield’s floaters got whacked – probably on the BoC announcement – but otherwise volatility was minimal. Volume was low; all the highlights are FixedResets.
| 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 | -1.1125 % | 2,402.9 |
| FixedFloater | 4.68 % | 4.23 % | 34,104 | 17.98 | 1 | 0.6951 % | 3,665.4 |
| Floater | 3.03 % | 3.15 % | 51,027 | 19.37 | 4 | -1.1125 % | 2,594.4 |
| OpRet | 4.36 % | -4.59 % | 33,497 | 0.13 | 2 | 0.0194 % | 2,694.2 |
| SplitShare | 4.81 % | 4.37 % | 62,595 | 4.24 | 5 | 0.0238 % | 3,087.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0194 % | 2,463.6 |
| Perpetual-Premium | 5.55 % | -5.26 % | 108,806 | 0.09 | 13 | 0.0091 % | 2,384.3 |
| Perpetual-Discount | 5.42 % | 5.40 % | 115,367 | 14.60 | 23 | 0.1087 % | 2,484.7 |
| FixedReset | 4.68 % | 3.65 % | 195,634 | 4.19 | 79 | 0.0077 % | 2,529.9 |
| Deemed-Retractible | 5.03 % | -0.82 % | 147,382 | 0.13 | 42 | 0.0767 % | 2,491.9 |
| FloatingReset | 2.64 % | 2.41 % | 189,387 | 4.26 | 5 | 0.0557 % | 2,481.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.K | Floater | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-16 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 3.18 % |
| BAM.PR.B | Floater | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-16 Maturity Price : 16.65 Evaluated at bid price : 16.65 Bid-YTW : 3.17 % |
| BAM.PR.C | Floater | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-16 Maturity Price : 16.77 Evaluated at bid price : 16.77 Bid-YTW : 3.15 % |
| GWO.PR.I | Deemed-Retractible | 1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.10 Bid-YTW : 6.03 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.A | FixedReset | 154,340 | RBC crossed blocks of 50,000 and 100,000, both at 23.53. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-16 Maturity Price : 22.85 Evaluated at bid price : 23.50 Bid-YTW : 3.81 % |
| TD.PR.G | FixedReset | 131,900 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 4.63 % |
| MFC.PR.L | FixedReset | 105,350 | Scotia crossed 45,000 and 50,000, both at 24.78. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.78 Bid-YTW : 4.04 % |
| BNS.PR.X | FixedReset | 80,700 | Nesbitt crossed 75,000 at 24.99. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 4.42 % |
| BMO.PR.O | FixedReset | 60,040 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 1.70 % |
| BAM.PR.T | FixedReset | 49,150 | RBC crossed 39,200 at 24.88. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-16 Maturity Price : 23.28 Evaluated at bid price : 24.71 Bid-YTW : 4.02 % |
| There were 18 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| ELF.PR.G | Perpetual-Discount | Quote: 21.47 – 22.14 Spot Rate : 0.6700 Average : 0.4575 YTW SCENARIO |
| BAM.PF.B | FixedReset | Quote: 24.80 – 25.06 Spot Rate : 0.2600 Average : 0.1688 YTW SCENARIO |
| BAM.PR.R | FixedReset | Quote: 25.33 – 25.58 Spot Rate : 0.2500 Average : 0.1650 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 22.15 – 22.50 Spot Rate : 0.3500 Average : 0.2651 YTW SCENARIO |
| MFC.PR.B | Deemed-Retractible | Quote: 22.51 – 22.78 Spot Rate : 0.2700 Average : 0.1899 YTW SCENARIO |
| CIU.PR.C | FixedReset | Quote: 20.89 – 21.16 Spot Rate : 0.2700 Average : 0.1899 YTW SCENARIO |