Lots of demand for Treasuries:
Even with the end of unprecedented bond purchases from the Federal Reserve, demand for U.S. Treasuries looks as strong as ever.
Investors submitted bids for $5.54 trillion of government debt at auctions this year, or 3 times the amount sold, data compiled by Bloomberg show. The bid-to-cover ratio is higher than the 2.87 last year, when the Fed purchased more Treasuries than at any time since the central bank began quantitative easing in 2008, and has been exceeded only twice on record.
Bill Gross advocates loosening fiscal policy, as well as monetary:
Such is the dilemma facing central bankers (and supposedly fiscal authorities) in 2014 and beyond: How to create inflation. They’ve made a damn fine attempt at it – have they not? Four trillion dollars in the U.S., two trillion U.S. dollar equivalents in Japan, and a trillion U.S. dollars coming from the ECB’s Draghi in the eurozone. Not working like it used to, the trillions seem to seep through the sandy loam of investment and innovation straight into the cement mixer of the marketplace. Prices go up, but not the right prices. Alibaba’s stock goes from $68 on opening day to $92 in the first minute, but wages simply sit there for years on end. One economy (the financial one) thrives while the other economy (the real one) withers.
Perhaps sooner rather than later, investors must recognize that modern day inflation, while a necessary condition for survival, is not a sufficient condition for increasing wealth at a rate necessary to satisfy future liabilities associated with education, health care, and a satisfactory retirement. The real economy needs money printing, yes, but money spending more so, and that must come from the fiscal side – from the dreaded government side – where deficits are anathema and balanced budgets are increasingly in vogue. Until then, Grant’s deflation remains a growing possibility – not the kind that creates prosperity but the kind that’s the trouble for prosperity.
I can tell you one group that is all in favour of FX trading hysteria:
Legal expense at JPMorgan in the [quarterly] period was $1.01 billion, tied “in large part” to the currency investigations, Chief Financial Officer Marianne Lake said on Oct. 14.
Loblaw Companies, proud issuer of L.PR.A, has been confirmed by DBRS as Pfd-3:
The confirmations reflect the closing of the acquisition of Shoppers as well as acceptable operating performance in a difficult competitive environment in the core food retail business. In addition, the rating action reflects DBRS’s expectation that the Company will continue with its deleveraging plan set at the time of the Shoppers acquisition, which should result in credit metrics considered acceptable for the current rating by the end of 2015. Loblaw’s ratings continue to be supported by its strong business profile, featuring industry-leading size, scale and market positions in retail and pharmacy across Canada. The ratings incorporate the intense competition in the food retail industry in Canada and the expected decline in financial leverage in the near to medium term, subsequent to the acquisition of Shoppers.
George Weston Limited, proud issuer of WN.PR.A, WN.PR.C, WN.PR.D and WN.PR.E, has been confirmed at Pfd-3 by DBRS:
The confirmations reflect Weston’s stable balance-sheet debt levels despite pressure on the Weston Foods bakery business from higher commodity costs, and the confirmation of the ratings of Loblaw Companies Limited (Loblaw; see separate press release). Weston’s ratings continue to be based on its strong brands, efficient operations and its ownership interest in Loblaw. The ratings also reflect the Weston Foods segment’s exposure to volatile input costs and the mature nature of the bakery industry.
…
Weston’s financial profile is expected to remain relatively stable going forward based on the Company’s ownership interest in Loblaw, its cash on hand and its stable balance-sheet debt levels. DBRS believes that Weston will continue to use cash on hand and free cash flow generated to invest in growth and/or increase returns to shareholders over the longer term. Weston is likely to remain relatively conservative in the medium term particularly while Loblaw’s leverage remains high resulting from the acquisition of Shoppers Drug Mart Corporation. In the medium term, Weston’s ownership interest in Loblaw could return to above the 50% level as Loblaw is likely to use free cash flow to complete share repurchases once Loblaw completes its deleveraging plan. Over the longer-term DBRS notes that a positive rating action at Loblaw would not necessarily result in a corresponding rating action to Weston.
The Canadian preferred share market was on fire today, with PerpetualDiscount winning 54bp and both FixedResets and DeemedRetractibles up 18bp. Volatility was suitably high. Volume was 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 | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3426 % | 2,522.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3426 % | 3,994.1 |
| Floater | 2.99 % | 3.11 % | 63,496 | 19.44 | 4 | 0.3426 % | 2,681.9 |
| OpRet | 4.02 % | -1.88 % | 102,785 | 0.08 | 1 | 0.1965 % | 2,748.7 |
| SplitShare | 4.27 % | 3.89 % | 69,226 | 3.78 | 5 | 0.0922 % | 3,168.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1965 % | 2,513.4 |
| Perpetual-Premium | 5.46 % | -3.75 % | 69,519 | 0.08 | 19 | 0.2460 % | 2,472.7 |
| Perpetual-Discount | 5.16 % | 5.08 % | 101,808 | 15.26 | 16 | 0.5389 % | 2,642.4 |
| FixedReset | 4.18 % | 3.61 % | 167,734 | 6.46 | 74 | 0.1775 % | 2,577.0 |
| Deemed-Retractible | 4.98 % | 1.58 % | 99,933 | 0.16 | 41 | 0.1830 % | 2,590.1 |
| FloatingReset | 2.55 % | -4.71 % | 67,848 | 0.08 | 6 | 0.1110 % | 2,554.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.B | FixedReset | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-03 Maturity Price : 18.69 Evaluated at bid price : 18.69 Bid-YTW : 3.86 % |
| PWF.PR.R | Perpetual-Premium | 1.00 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.16 Bid-YTW : 4.70 % |
| BNS.PR.Z | FixedReset | 1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 3.20 % |
| PWF.PR.L | Perpetual-Discount | 1.08 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 4.34 % |
| BAM.PF.C | Perpetual-Discount | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-03 Maturity Price : 21.63 Evaluated at bid price : 21.96 Bid-YTW : 5.58 % |
| PVS.PR.D | SplitShare | 1.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.50 Bid-YTW : 4.99 % |
| BAM.PF.D | Perpetual-Discount | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-03 Maturity Price : 21.87 Evaluated at bid price : 22.20 Bid-YTW : 5.57 % |
| MFC.PR.C | Deemed-Retractible | 1.46 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 5.64 % |
| MFC.PR.F | FixedReset | 1.54 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.10 Bid-YTW : 4.16 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| GWO.PR.P | Deemed-Retractible | 115,317 | RBC crossed 106,200 at 26.05. YTW SCENARIO Maturity Type : Call Maturity Date : 2020-03-31 Maturity Price : 25.25 Evaluated at bid price : 26.11 Bid-YTW : 4.76 % |
| TRP.PR.C | FixedReset | 39,908 | Nesbitt crossed 34,400 at 21.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-03 Maturity Price : 21.35 Evaluated at bid price : 21.65 Bid-YTW : 3.63 % |
| NA.PR.W | FixedReset | 38,050 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-03 Maturity Price : 23.15 Evaluated at bid price : 25.02 Bid-YTW : 3.71 % |
| ENB.PR.F | FixedReset | 32,282 | Scotia crossed 25,000 at 24.85. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-11-03 Maturity Price : 23.24 Evaluated at bid price : 24.85 Bid-YTW : 4.01 % |
| TD.PF.A | FixedReset | 31,531 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 3.61 % |
| CM.PR.E | Perpetual-Premium | 24,380 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-03 Maturity Price : 25.00 Evaluated at bid price : 25.24 Bid-YTW : -5.23 % |
| There were 21 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRP.PR.E | FixedReset | Quote: 25.32 – 26.98 Spot Rate : 1.6600 Average : 0.8947 YTW SCENARIO |
| CU.PR.G | Perpetual-Discount | Quote: 22.45 – 23.00 Spot Rate : 0.5500 Average : 0.3262 YTW SCENARIO |
| NEW.PR.D | SplitShare | Quote: 32.53 – 33.25 Spot Rate : 0.7200 Average : 0.5820 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 26.56 – 26.88 Spot Rate : 0.3200 Average : 0.2155 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 21.51 – 21.86 Spot Rate : 0.3500 Average : 0.2490 YTW SCENARIO |
| TRP.PR.B | FixedReset | Quote: 18.69 – 18.90 Spot Rate : 0.2100 Average : 0.1292 YTW SCENARIO |