There is now a negative policy rate in Sweden:
Sweden’s central bank cut its main interest rate below zero and unveiled additional measures designed to jolt the largest Nordic economy out of a deflationary spiral.
The Riksbank lowered its repo rate to minus 0.10 percent from zero. A cut had been predicted by six of the 18 economists surveyed by Bloomberg, while the remainder forecast no change.
The bank said it will also make policy “more expansionary” by “soon” buying 10 billion kronor ($1.2 billion) in government bonds with maturities of one to five years. The rate will remain at minus 0.10 percent until underlying inflation is close to 2 percent, which the bank predicts will happen in the second half of 2016, the bank said.
…
The bank, led by Governor Stefan Ingves, last year reversed course and scrapped a policy of keeping rates up to guard against a build-up in household debt. The reluctance to ease in the face of slowing inflation and high unemployment was characterized as “sadomonetarist” by Nobel laureate Paul Krugman.
…
The bank said it sees its repo rate at minus 0.11 percent in the second quarter and minus 0.12 percent in the first quarter next year, signaling the chance for more cuts.While inflation and unemployment, currently at about 7 percent, exceeded the central bank’s forecast at its December meeting, waning expectations for price growth combined with monetary easing elsewhere in the world have added to pressure on Sweden to cut rates.
The central bank in neighboring Denmark has lowered its main rate four times this year to minus 0.75 percent. That’s the same level as the Swiss National Bank, which is trying to fight capital flows after abandoning its euro cap. Adding to pressure to ease is the ECB’s decision to start an unprecedented bond-purchase program.
Swedish two-year inflation expectations fell to 1.1 percent in December from 1.4 percent in September, according to a survey by TNS Sifo Prospera of labor market participants, purchasing managers and money market players. Consumer prices fell an annual 0.3 percent in December. The Riksbank targets 2 percent.
There is still hope on the Greek tragedy:
Greece and Germany are pursuing a deal on the conditions required to continue the Greek bailout as each side signals a willingness to compromise, according to government officials taking part in the talks.
Germany won’t insist that all elements of Greece’s current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece’s budget surplus requirement and conditions to sell off government assets.
For its part, Greece is prepared to commit to a primary budget surplus, as long as it’s lower than the current 4 percent of gross domestic product, according to Greek government officials. Prime Minister Alexis Tsipras’s coalition also might be willing to compromise on privatizations, one of the officials said. All the officials asked not to be named because the deliberations are private and ongoing.
You know what this country needs? More economic stimulus, that’s what this country needs:
Building an opera house to stimulate an economy may be an odd idea — though not necessarily a bad one. In fact, more than 200 years after they were built, opera houses in Germany may still be helping their local economies.
That’s the conclusion of a new study by economists in Germany and the U.K. that found that cultural amenities such as a place to enjoy Wagner’s Ring Cycle are an important component in decisions by high-skilled workers about where to live.
Clusters of skilled workers also have positive knock-on effects on the local economy because their productivity tends to increase the output of companies, boosting the efficiency and wages of less-skilled local employees, the authors said.
Sounds better than kids at school sucking arse:
It can start with a visit to a secluded island off Colombia, like the sojourn that more than half of Stanford’s incoming MBAs spent last August. Or a weekslong trek in Australia and New Zealand, another in Dubai and Abu Dhabi, a foray to Thailand’s bays, and a stop in Munich for Oktoberfest—excursions taken this academic year by students at the University of Pennsylvania’s Wharton School. Plus countless ski trips—to resorts in Park City, Utah, Aspen, Colorado, and Lake Tahoe—that draw students for a weekend off, or more, from their studies at elite MBA programs across the country.
Travel to far-flung destinations and to swanky enclaves closer to home has become a hallmark of elite U.S. business schools, where the point of two years on campus can seem to be to spend as much time away from campus as possible. The better the school, apparently, the higher the premium on travel and fun: Students at top-tier business schools spend thousands of dollars each year on discretionary expenses and tend to spend considerably more than their peers at lower-ranked schools, according to Bloomberg Businessweek data.
Building friendships with the next generation of executives may be a worthy investment, but it’s not cheap.
You’d think more of them would have learned from stories about the ‘fast set’ in English university novels, but think again! The closest a millennial gets to literature is a video about a cat named Tom Jones, intensive research convincing them that it was named after a singer.
It was a positive day for the Canadian preferred share market, with PerpetualDiscounts winning 18bp, FixedResets up 11bp and DeemedRetractibles gaining 2bp. The performance highlights table is short, by recent standards. Volume was below average.
For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.
Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread
Here’s TRP:
Click for Big
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.70 to be $0.87 rich, while TRP.PR.C, resetting 2016-1-30 at +154, is bid at 17.00 to be $0.50 cheap.
Click for Big
Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).
Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.70 to be $0.60 rich, while MFC.PR.H, resetting at +313 on 2017-3-19 is bid at 26.08 to be $0.37 cheap.
Click for Big
The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.67 to be $0.50 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.71 and appears to be $0.84 rich.
Click for Big
This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.72, looks $0.96 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.54 and is $1.03 rich.
Click for Big
All the break-even rates are scattered around negative 10bp – the market has started believing the deflation story again!
On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:
Click for Big
Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?
| 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 | -0.3445 % | 2,195.0 |
| FixedFloater | 4.34 % | 3.49 % | 20,238 | 18.43 | 1 | 0.3666 % | 4,074.4 |
| Floater | 3.28 % | 3.48 % | 63,088 | 18.54 | 4 | -0.3445 % | 2,333.4 |
| OpRet | 4.04 % | 1.54 % | 98,905 | 0.34 | 1 | 0.0000 % | 2,757.5 |
| SplitShare | 4.26 % | 3.67 % | 29,185 | 3.55 | 5 | 0.1230 % | 3,205.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,521.4 |
| Perpetual-Premium | 5.32 % | -7.16 % | 57,391 | 0.08 | 24 | 0.0767 % | 2,516.9 |
| Perpetual-Discount | 4.95 % | 4.91 % | 140,715 | 15.29 | 10 | 0.1766 % | 2,793.7 |
| FixedReset | 4.37 % | 3.36 % | 199,804 | 17.12 | 79 | 0.1118 % | 2,448.3 |
| Deemed-Retractible | 4.90 % | -0.49 % | 107,333 | 0.12 | 39 | 0.0232 % | 2,651.0 |
| FloatingReset | 2.49 % | 2.94 % | 83,200 | 6.41 | 7 | 0.2297 % | 2,310.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.G | FixedReset | -3.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.10 Bid-YTW : 6.01 % |
| GWO.PR.N | FixedReset | -1.76 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.01 Bid-YTW : 5.39 % |
| SLF.PR.A | Deemed-Retractible | -1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.88 % |
| SLF.PR.B | Deemed-Retractible | -1.18 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.05 Bid-YTW : 4.87 % |
| BAM.PR.B | Floater | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-12 Maturity Price : 14.35 Evaluated at bid price : 14.35 Bid-YTW : 3.51 % |
| MFC.PR.N | FixedReset | -1.17 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.51 Bid-YTW : 3.80 % |
| IFC.PR.A | FixedReset | 1.37 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.77 Bid-YTW : 5.31 % |
| TRP.PR.A | FixedReset | 2.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-12 Maturity Price : 20.23 Evaluated at bid price : 20.23 Bid-YTW : 3.50 % |
| MFC.PR.L | FixedReset | 2.92 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 3.59 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BAM.PR.K | Floater | 71,586 | RBC bought 56,600 from National at 14.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-12 Maturity Price : 14.17 Evaluated at bid price : 14.17 Bid-YTW : 3.55 % |
| BNS.PR.O | Deemed-Retractible | 40,975 | RBC crossed 15,100 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-14 Maturity Price : 25.75 Evaluated at bid price : 26.10 Bid-YTW : -8.83 % |
| TD.PF.C | FixedReset | 39,140 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-12 Maturity Price : 23.08 Evaluated at bid price : 24.77 Bid-YTW : 3.10 % |
| FTS.PR.M | FixedReset | 26,880 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-12 Maturity Price : 23.14 Evaluated at bid price : 24.91 Bid-YTW : 3.29 % |
| ENB.PR.F | FixedReset | 25,239 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-12 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 4.07 % |
| BNS.PR.P | FixedReset | 22,800 | TD crossed 20,000 at 25.32. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 2.90 % |
| There were 24 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.S | Deemed-Retractible | Quote: 26.15 – 27.32 Spot Rate : 1.1700 Average : 0.6996 YTW SCENARIO |
| MFC.PR.N | FixedReset | Quote: 24.51 – 24.99 Spot Rate : 0.4800 Average : 0.3448 YTW SCENARIO |
| CU.PR.D | Perpetual-Premium | Quote: 25.35 – 25.67 Spot Rate : 0.3200 Average : 0.2081 YTW SCENARIO |
| SLF.PR.A | Deemed-Retractible | Quote: 24.95 – 25.25 Spot Rate : 0.3000 Average : 0.2022 YTW SCENARIO |
| SLF.PR.D | Deemed-Retractible | Quote: 24.04 – 24.31 Spot Rate : 0.2700 Average : 0.1967 YTW SCENARIO |
| SLF.PR.B | Deemed-Retractible | Quote: 25.05 – 25.30 Spot Rate : 0.2500 Average : 0.1770 YTW SCENARIO |
Think you put the BAM chart in twice, rather than the FTS chart in the second instance… in the unsettled reset discussion?
Oops! Fixed!