CU Inc. has announced:
it will issue $200,000,000 of 4.094% Debentures maturing on October 19, 2054, at a price of $100.00 to yield 4.094%. This issue was sold by RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., TD Securities Inc., Scotia Capital Inc. and CIBC World Markets Inc. Proceeds from the issue will be used to finance capital expenditures, to repay existing indebtedness, and for other general corporate purposes of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.
CIU.PR.A is trading in-line with the CU PerpetualDiscounts at about 5.12%, which is an interest-equivalent 6.66%, meaning that the Seniority Spread for CIU is about 256bp, in line with the index averages. Which is always nice to confirm on an individual company basis!
I think Parakeet Poloz has been told to stop providing forward guidance. He’s listed as the author of a BoC Discussion Paper, Integrating Uncertainty and Monetary Policy-Making: A Practitioner’s Perspective:
This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making. The sort of post-crisis uncertainty that central banks are dealing with today is more profound than that which is typically subjected to rigorous analysis and does not lend itself easily to formal modelling. As a practical matter, the policy-maker is dependent on macro models to develop a coherent monetary policy plan, and this burden of coherence means that fundamental uncertainty must be incorporated explicitly into the policy formulation process. As suggested here, doing so transforms policy formulation from an exercise in reverse engineering to one of risk management, one consequence of which is to inject a little more realism about uncertainty into the policy narrative, while trusting markets to wrestle with the data flow and deliver two-way trading. The evolution is likely to be a long one—researchers are encouraged to keep focusing on developing a practical understanding of how the economy works, one that admits that rules around economic behaviour are not cast in stone, but are almost certainly subject to variation through time and events.
…
Helping people to appreciate the underlying reality and the limitations of our craft without invalidating our core value proposition is a challenging task. More importantly, the business of central banking is being reinvented in real time in reaction to these realities. At the Bank of Canada, some of the key manifestations of this evolution, as I have tried to motivate above, are:
(i) explicitly building forecast ranges or scenario modelling around key assumption variables, such as potential output, the neutral interest rate and the world price of oil, into our public policy dialogue;
(ii) pointing to key elements of fundamental uncertainty, analyzing the associated policy risks carefully and openly, and laying out complementary research as we learn more about those risks;
(iii) investing more in consultations with Canadian business people and financial market participants, both in the form of surveys and in frank, face-to-face conversations around alternative interpretations of the macroeconomic data;
(iv) bringing a more fulsome narrative to the policy decision-making process, based on a risk-management framework rather than the more conventional policy engineering model; and,
(v) bringing to the table more research on real-financial linkages and financial stability risks to generate a richer set of considerations that influence day-to-day policy thinking.
If the Parakeet and his masters want to emphasize the uncertainty of forecasting, they would be much better advised to appoint strong, independently minded people to the rate-setting committee, publicizing the dissenting votes with a brief rationale, and encouraging members of the committee to make speeches giving their views. Just like the FOMC. And, as I’ve noted before, I feel quite certain that a lot of these dissenting speeches are orchestrated … ‘Bob, I don’t think you’re right on this one, but you might be! Why not highlight that in a speech so the possibility gets some discussion?’
There were good Canadian jobs numbers:
Canada’s jobs numbers have followed a perfect pattern this year, with gains one month followed by losses the next.
September was no different. The country added a better-than-expected 74,100 jobs last month and – in a complete reversal of the prior month – most of the gains were in full-time positions, and in the private sector.
To put things in a longer-term perspective, employment has grown by a still-muted average of 13,000 jobs per month in the past year. But last month’s increase was an improvement in the jobs picture.
David Parkinson snipes in the Globe:
Statscan reports the “standard error” for the overall survey at 28,500. That means that statistically speaking, 68 per cent of the time the actual monthly job-change figure will be within a range of 28,500 plus or minus the figure Statscan reports; the other 32 per cent of the time, it will be a figure outside that range.
The standard error on the private-sector employment figure is 38,200, while for self-employment it’s 25,900.
What this means is that big numbers in the survey need to be taken with a grain of salt.
But anyway … jobs? Schmobs!:
Now, as longer-run inflation expectations erode in financial markets, the Federal Open Market Committee is shifting its focus toward prices after putting its main emphasis on jobs for months. Several officials worried that “inflation might persist below” the committee’s target for “quite some time,” minutes from the Sept. 16-17 meeting said.
Too-low inflation “is getting to be a real issue again,” said former Fed Governor Laurence Meyer. With inflation at 1.5 percent according to the Fed’s preferred index, Meyer said FOMC policy makers aren’t likely to raise interest rates, even if the economy approaches full employment, defined as a jobless rate of 5.2 percent to 5.5 percent. Unemployment was 5.9 percent last month.
…
Policy makers including regional Fed Presidents William Dudley of New York, Charles Evans of Chicago and Narayana Kocherlakota of Minneapolis have in recent days all mentioned below-target inflation as a risk that weighs against raising interest rates too soon.
And the stock market blew us another raspberry:
The Standard & Poor’s 500 Index (SPX) posted the biggest weekly drop in two years as concern about chipmaker earnings fueled a rout across the technology industry.
The Dow Jones Industrial Average (INDU) erased gains for the year as Intel Corp., Microsoft Corp. and Cisco Systems Inc. fell more than 3.5 percent. Microchip Technology Inc. tumbled 12 percent said quarterly revenue was crimped by a decline in China sales and warned of an industry correction. Juniper Networks Inc. sank 9.1 percent after reporting preliminary results that missed its own forecast.
The S&P 500 lost 1.2 percent to 1,906.09 as of 4 p.m. in New York. The index fell 3.1 percent for the week, the biggest drop since May 2012.
…
European Central Bank President Mario Draghi clashed with Germany’s finance minister yesterday over the steps needed to revive growth in the euro area, while Federal Reserve officials have said the U.S. economy may be at risk from a global slowdown.The S&P 500 has fallen for the past three weeks, the longest run since January. It’s down 5.2 percent from a record on Sept. 18, trimming its gain for the year to 3 percent.
The Canadian preferred market declined today, with PerpetualDiscounts down 5bp, FixedResets losing 9bp and DeemedRetractibles off 3bp. Losing FixedResets dominated the Performance Highlights table. Volume was very low.
| 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 | 3.09 % | 3.07 % | 23,169 | 19.52 | 1 | 1.6736 % | 2,704.9 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2923 % | 4,086.5 |
| Floater | 2.91 % | 3.08 % | 61,768 | 19.54 | 4 | 0.2923 % | 2,743.9 |
| OpRet | 4.04 % | 2.08 % | 109,999 | 0.08 | 1 | -0.0788 % | 2,732.5 |
| SplitShare | 4.29 % | 4.06 % | 85,520 | 3.85 | 5 | 0.0364 % | 3,153.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0788 % | 2,498.6 |
| Perpetual-Premium | 5.49 % | 0.40 % | 77,349 | 0.09 | 18 | 0.1054 % | 2,452.4 |
| Perpetual-Discount | 5.33 % | 5.15 % | 96,621 | 15.07 | 18 | -0.0502 % | 2,588.0 |
| FixedReset | 4.23 % | 3.69 % | 167,525 | 16.49 | 75 | -0.0925 % | 2,547.2 |
| Deemed-Retractible | 5.03 % | 2.59 % | 100,736 | 0.46 | 42 | -0.0258 % | 2,558.9 |
| FloatingReset | 2.55 % | -0.48 % | 63,281 | 0.09 | 6 | -0.0522 % | 2,551.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.A | FixedReset | -1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 21.70 Evaluated at bid price : 22.10 Bid-YTW : 3.89 % |
| TRP.PR.C | FixedReset | -1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 3.73 % |
| FTS.PR.H | FixedReset | -1.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 20.28 Evaluated at bid price : 20.28 Bid-YTW : 3.73 % |
| MFC.PR.F | FixedReset | -1.47 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.05 Bid-YTW : 4.65 % |
| BAM.PR.E | Ratchet | 1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 23.89 Evaluated at bid price : 24.30 Bid-YTW : 3.07 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| NA.PR.W | FixedReset | 185,568 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 23.05 Evaluated at bid price : 24.73 Bid-YTW : 3.73 % |
| MFC.PR.M | FixedReset | 94,096 | Scotia crossed 67,000 at 25.23. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-12-19 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 3.83 % |
| TD.PF.A | FixedReset | 75,330 | Nesbitt crossed 67,200 at 25.10. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 23.19 Evaluated at bid price : 25.11 Bid-YTW : 3.63 % |
| BAM.PF.G | FixedReset | 62,600 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 23.14 Evaluated at bid price : 25.05 Bid-YTW : 4.28 % |
| TD.PF.B | FixedReset | 58,643 | RBC crossed 25,000 at 25.05; Scotia crossed 20,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-10-10 Maturity Price : 23.19 Evaluated at bid price : 25.04 Bid-YTW : 3.65 % |
| GWO.PR.N | FixedReset | 42,509 | Nesbitt crossed 35,000 at 21.82. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.77 Bid-YTW : 4.55 % |
| There were 17 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: 22.05 – 22.80 Spot Rate : 0.7500 Average : 0.4689 YTW SCENARIO |
| TRP.PR.C | FixedReset | Quote: 21.01 – 21.35 Spot Rate : 0.3400 Average : 0.2254 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 25.80 – 26.21 Spot Rate : 0.4100 Average : 0.3157 YTW SCENARIO |
| SLF.PR.B | Deemed-Retractible | Quote: 23.51 – 23.77 Spot Rate : 0.2600 Average : 0.1796 YTW SCENARIO |
| CU.PR.G | Perpetual-Discount | Quote: 22.17 – 22.40 Spot Rate : 0.2300 Average : 0.1581 YTW SCENARIO |
| SLF.PR.D | Deemed-Retractible | Quote: 22.04 – 22.28 Spot Rate : 0.2400 Average : 0.1721 YTW SCENARIO |