Fed Vice Chairman Stanley Fischer reiterated Fed caution:
When it comes to describing how the Federal Reserve will exit the zero-rate era, “liftoff” is all wrong, says Vice Chairman Stanley Fischer.
The term, dear to investors and headline writers, “is the most misleading word you can imagine,” he said on Monday in Toronto.
“Liftoff says we’re going straight up with the interest rate,” Fischer said during a question-and-answer session after a speech on financial crises. “Well, we’re going up with the interest rate, then along, and then another little jump. That’s not liftoff, that’s crawling.”
His remarks underline a theme hammered home by Fed officials in recent weeks: They won’t follow a predictable path in raising rates, and instead will be guided by the latest economic data.
This is a nice try – a very nice try – but only one shift? Regrettably, it belongs in the “stunt” category:
After Starboard Value took over the board of Darden Restaurants Inc., the hedge fund wanted its newly minted directors to have a feel for the business. So it put them to work.
Every board member worked a night in a restaurant, said Starboard Chief Executive Officer Jeff Smith, who also is Darden’s chairman. Smith said he waited on tables and served food in the kitchen.
“It was not undercover — everyone knew,” Smith said in an interview on Bloomberg Television’s “Market Makers” with Stephanie Ruhle and Erik Schatzker. “It was an amazing experience. We felt we could not make the decisions without knowing what was happening in the restaurants.”
Hopefully, the directors are spending a lot of time in the restaurants, talking to staff, even if they’re not trying to prove they’re mennathepeople.
I have more education complaints, this time about attracting foreign students to Canada:
Canadian officials are finding it difficult to keep up with the increasing demand from international students, leading to waiting times for visas that are weeks longer than those in Britain or the United States, and reducing the program’s competitiveness.
The lengthy timelines are contained in a report from Citizenship and Immigration Canada (CIC), obtained by The Globe and Mail through freedom of information legislation. While the federal government wants to double the number of students from abroad by 2022, it has not provided sufficient resources to process the increased numbers, the report says. CIC blames this “lack of coordination” between federal departments for an increase of 30 per cent in processing times for study permits and a doubling of the time for temporary resident visas.
…
The report also recommends clarifying what role international students play in Canada’s overall immigration strategy. The goal of doubling student numbers was set by a 2012 panel as a way to fill labour-market shortages and increase global economic links. But those economic needs can’t be met without government co-ordination, said the panel’s chair.
Foreign students are great! They pay high fees (and therefore probably come from reasonably well-off families), they may well immigrate – with Canadian qualifications, which will help get a first job – and if they don’t immigrate, then they’ll at least live their lives not only knowing that we don’t all live in igloos, but (with luck) having a soft spot for us. I cannot understand why this programme is understaffed.
It was another disappointing day for the Canadian preferred share market, with PerpetualDiscounts down 2bp, FixedResets losing 19bp and DeemedRetractibles off 1bp. The lengthy Performance Highlights table is dominated by losing FixedResets. Volume was 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 23.50 to be $1.10 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $0.68 cheap at its bid price of 24.76.
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 23.60 to be $0.64 rich, while MFC.PR.G, resetting at +290bp on 2016-12-19, is bid at 25.01 to be $0.69 cheap.
Click for Big
The cheapest issue relative to its peers is BAM.PF.B, resetting at +263bp on 2019-3-31, bid at 22.90 to be $0.43 cheap. BAM.PF.G, resetting at +284bp 2020-6-30 is bid at 24.91 and appears to be $0.56 rich.
Click for Big
FTS.PR.H, with a spread of +145bp, and bid at 16.06, looks $0.92 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 21.79 and is $0.47 rich.
Click for Big
Investment-grade pairs predict an average three-month bill yield over the next five-odd years of about 0.50%, and are very nicely clustered today. On the junk side, four pairs are outside the range of the graph: FFH.PR.E / FFH.PR.F at -1.02%; AIM.PR.A / AIM.PR.B at -0.91%; BRF.PR.A / BRF.PR.B at -1.83%; and FFH.PR.C / FFH.PR.D at +1.00%.
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 | -1.4746 % | 2,227.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -1.4746 % | 3,895.1 |
| Floater | 3.45 % | 3.50 % | 56,594 | 18.45 | 3 | -1.4746 % | 2,368.2 |
| OpRet | 4.44 % | -14.24 % | 29,960 | 0.09 | 2 | 0.0395 % | 2,782.9 |
| SplitShare | 4.59 % | 4.47 % | 68,554 | 3.33 | 3 | -0.2005 % | 3,250.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0395 % | 2,544.7 |
| Perpetual-Premium | 5.45 % | 3.99 % | 61,593 | 0.41 | 19 | 0.0434 % | 2,520.7 |
| Perpetual-Discount | 5.08 % | 5.06 % | 115,767 | 15.38 | 14 | -0.0151 % | 2,764.7 |
| FixedReset | 4.44 % | 3.76 % | 264,096 | 16.58 | 86 | -0.1933 % | 2,386.7 |
| Deemed-Retractible | 4.98 % | 3.41 % | 107,115 | 0.88 | 34 | -0.0059 % | 2,635.8 |
| FloatingReset | 2.43 % | 2.91 % | 54,502 | 6.14 | 8 | -0.0907 % | 2,336.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.B | FixedReset | -3.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 14.71 Evaluated at bid price : 14.71 Bid-YTW : 3.73 % |
| TRP.PR.A | FixedReset | -2.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 3.78 % |
| SLF.PR.G | FixedReset | -2.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.63 Bid-YTW : 7.19 % |
| FTS.PR.H | FixedReset | -1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 16.06 Evaluated at bid price : 16.06 Bid-YTW : 3.70 % |
| BAM.PR.K | Floater | -1.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 14.38 Evaluated at bid price : 14.38 Bid-YTW : 3.50 % |
| ENB.PR.F | FixedReset | -1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 4.65 % |
| ENB.PR.B | FixedReset | -1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 4.53 % |
| TRP.PR.F | FloatingReset | -1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 18.72 Evaluated at bid price : 18.72 Bid-YTW : 3.33 % |
| BAM.PR.C | Floater | -1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 14.30 Evaluated at bid price : 14.30 Bid-YTW : 3.52 % |
| ENB.PR.J | FixedReset | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 4.54 % |
| BAM.PR.B | Floater | -1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 14.75 Evaluated at bid price : 14.75 Bid-YTW : 3.41 % |
| ENB.PR.Y | FixedReset | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 18.46 Evaluated at bid price : 18.46 Bid-YTW : 4.70 % |
| CU.PR.D | Perpetual-Discount | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 24.14 Evaluated at bid price : 24.60 Bid-YTW : 4.98 % |
| ENB.PR.P | FixedReset | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 4.60 % |
| ENB.PR.H | FixedReset | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 4.53 % |
| IAG.PR.G | FixedReset | -1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.82 Bid-YTW : 3.95 % |
| BAM.PR.X | FixedReset | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 18.21 Evaluated at bid price : 18.21 Bid-YTW : 4.07 % |
| BAM.PF.F | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 23.03 Evaluated at bid price : 24.50 Bid-YTW : 3.97 % |
| GWO.PR.S | Deemed-Retractible | 1.28 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 4.60 % |
| BAM.PF.C | Perpetual-Discount | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 22.23 Evaluated at bid price : 22.58 Bid-YTW : 5.45 % |
| MFC.PR.F | FixedReset | 1.40 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.10 Bid-YTW : 6.40 % |
| GWO.PR.N | FixedReset | 1.53 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.30 Bid-YTW : 6.69 % |
| MFC.PR.L | FixedReset | 1.72 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 4.15 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CU.PR.F | Perpetual-Discount | 174,900 | Desjardins crossed 166,700 at 22.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 22.29 Evaluated at bid price : 22.65 Bid-YTW : 4.97 % |
| MFC.PR.A | OpRet | 100,240 | Called for redemption 2015-6-19. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-07-19 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 3.19 % |
| ENB.PR.D | FixedReset | 29,342 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 18.68 Evaluated at bid price : 18.68 Bid-YTW : 4.56 % |
| SLF.PR.G | FixedReset | 26,478 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.63 Bid-YTW : 7.19 % |
| BAM.PR.T | FixedReset | 24,862 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-06-01 Maturity Price : 21.49 Evaluated at bid price : 21.85 Bid-YTW : 3.85 % |
| BNS.PR.Z | FixedReset | 24,065 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.73 Bid-YTW : 3.33 % |
| There were 30 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| POW.PR.A | Perpetual-Premium | Quote: 25.54 – 26.49 Spot Rate : 0.9500 Average : 0.5414 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 18.32 – 18.99 Spot Rate : 0.6700 Average : 0.4250 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 19.41 – 19.93 Spot Rate : 0.5200 Average : 0.3772 YTW SCENARIO |
| VNR.PR.A | FixedReset | Quote: 24.10 – 24.56 Spot Rate : 0.4600 Average : 0.3233 YTW SCENARIO |
| TRP.PR.B | FixedReset | Quote: 14.71 – 15.13 Spot Rate : 0.4200 Average : 0.3101 YTW SCENARIO |
| ENB.PR.J | FixedReset | Quote: 20.30 – 20.60 Spot Rate : 0.3000 Average : 0.2103 YTW SCENARIO |