Fed policy? Here’s the dovish view:
Federal Reserve Governor Lael Brainard counseled continued prudence in tightening monetary policy, even as she said the economy is making gradual progress toward achieving the central bank’s goals.
“The case to tighten policy preemptively is less compelling” in an environment where declining unemployment has been slow to spur faster inflation, Brainard said Monday, according to the text of her prepared remarks in Chicago. She made no reference to a specific meeting of the policy-setting Federal Open Market Committee.
…
In Monday’s speech, Brainard highlighted five major reasons for caution: inflation is less responsive to labor-market improvement than in the past, labor-market slack seems to persist, financial transmission from foreign markets is strong and poses a risk, and the interest rate where policy moves from easy to tight is lower than in the past — and is likely to stay there for some time. Her final point is that monetary policy is less able to respond to negative shocks than to a quick pickup in demand.Despite that cautious view, Brainard also pointed to recent developments that show the economy is moving toward achieving the Fed’s goals of maximum employment and 2 percent inflation. She said the job market is making progress and getting closer to full employment and the Fed has “seen signs of progress on our inflation mandate.”
And a hawkish view:
Federal Reserve Bank of Atlanta President Dennis Lockhart repeated his call for a “serious discussion” about raising interest rates at the U.S. central bank’s meeting later this month, even after some recent disappointing economic indicators.
“Notwithstanding a few recent weak monthly reports — from the Institute for Supply Management, for example — I am satisfied at this point that conditions warrant that serious discussion,” Lockhart said Monday in Atlanta.
…
“After relatively weak growth over the first half of the year, I expect a stronger second half,” Lockhart said to the National Association for Business Economics, citing the bank’s estimate. Third-quarter growth was tracking at 3.3 percent on Friday, according to the Atlanta Fed’s tracking estimate.The economy is “making progress” toward full employment, Lockhart said, though progress in moving inflation toward the 2 percent goal may have stalled.
“The inflation data overall have not been suggesting disinflation or deflation, but the flat trend line is enough below target that, in my opinion, the shortfall cannot be considered immaterial,” he said. “I find this to be an awkward state of affairs.”
And a market view:
U.S. stocks rebounded after the biggest rout since June wiped about $500 billion from the value of equities, the dollar fell and Treasuries erased losses as the Federal Reserve’s Lael Brainard remained dovish in her approach to tighter monetary policy. Emerging-market assets slumped.
The S&P 500 Index jumped the most in two months after sinking 2.5 percent Friday, holding gains after Brainard urged “prudence” in removing accommodation. The dollar fell for the first time in four sessions as the odds for a rate hike next week slid to 22 percent. Ten-year Treasuries remained little changed, with yields near 1.68 percent. Shares in Europe and Asia, which were closed Friday when the selloff began, dropped Monday. Emerging-market equities tumbled 2 percent, while oil rebounded past $46 a barrel.
In a sign of the times, rent control may be coming to the San Francisco bay area:
The concept of rent control, once found mostly in large cities, is spreading to the Bay Area’s suburbs, even though virtually every economist thinks it’s a bad idea.
Six Bay Area cities have measures on the November ballot that would protect existing tenants from the stratospheric rent increases that are a result of job growth far outstripping housing creation.
…
A 2012 survey by the University of Chicago’s Booth School of Business asked respected economists if they agreed that rent-control ordinances in cities such as New York and San Francisco have improved the quantity and quality of affordable rental housing over the past three decades. Eighty-one percent disagreed, 2 percent agreed and 9 percent were uncertain or had no opinion.In 2013, Peter Tatian of the Urban Institute reviewed academic research on rent control and found “very little evidence that rent control is a good policy.” The strongest finding of one comprehensive survey was that “tenants in noncontrolled units pay higher rents than they would without the presence of rent control; one reason being that landlords need to make up the difference for lower rents in controlled units.”
…
In a report issued in February, California’s Legislative Analyst’s Office warned that rent control could encourage property owners to cut back on maintenance and repairs. “Over time, this can result in a decline in the overall quality of a community’s housing stock,” it said.
There’s a certain amount of agitation in Vancouver for more rent control:
Since 2002, British Columbia has had a two-tiered system where fixed-term renters get no protection, while those who rent month-to-month do. The legislation restricts landlords with monthly renters to a set annual increase. This year, the cap is 2.5 per cent.
Yet landlords who have the benefit of long-term tenants get the added bonus of being able to set whatever price they want when the term is up. It can lead to gouging, particularly now when the vacancy rate in Vancouver is virtually zero.
It means that renters are left with a lousy choice: Take a short-term rental and risk being asked to leave with only 30 days’ notice or sign a lease and risk having the rent skyrocket at the end of the term.
In Toronto, of course, rent control was introduced in the ’80s by Bill Davis (under election pressure from the NDP) and construction of rental apartment buildings basically halted. There have been a few buildings lately, but it’s my understanding that these developments only make sense if you can get a package of land from the city on sweetheart terms.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | 0.3594 % | 1,680.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3594 % | 3,069.1 |
| Floater | 4.89 % | 4.67 % | 88,614 | 16.00 | 4 | 0.3594 % | 1,768.8 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1904 % | 2,878.1 |
| SplitShare | 5.06 % | 4.68 % | 76,054 | 2.20 | 5 | -0.1904 % | 3,437.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1904 % | 2,681.7 |
| Perpetual-Premium | 5.50 % | 4.61 % | 69,354 | 1.99 | 12 | 0.0130 % | 2,675.5 |
| Perpetual-Discount | 5.13 % | 5.17 % | 99,053 | 14.91 | 26 | -0.3426 % | 2,896.6 |
| FixedReset | 5.00 % | 4.48 % | 149,903 | 6.96 | 91 | -0.1558 % | 2,030.5 |
| Deemed-Retractible | 5.02 % | 4.84 % | 118,742 | 3.23 | 32 | -0.2526 % | 2,796.9 |
| FloatingReset | 2.82 % | 4.01 % | 27,894 | 5.02 | 12 | -0.0393 % | 2,204.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.N | FixedReset | -1.75 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.01 Bid-YTW : 9.98 % |
| CCS.PR.C | Deemed-Retractible | -1.75 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.17 Bid-YTW : 5.50 % |
| MFC.PR.F | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 13.31 Bid-YTW : 10.79 % |
| GWO.PR.I | Deemed-Retractible | -1.23 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.45 Bid-YTW : 6.07 % |
| BAM.PF.A | FixedReset | -1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-12 Maturity Price : 19.17 Evaluated at bid price : 19.17 Bid-YTW : 4.94 % |
| FTS.PR.J | Perpetual-Discount | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-12 Maturity Price : 23.27 Evaluated at bid price : 23.71 Bid-YTW : 5.02 % |
| SLF.PR.J | FloatingReset | 1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.74 Bid-YTW : 11.04 % |
| FTS.PR.H | FixedReset | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-12 Maturity Price : 13.75 Evaluated at bid price : 13.75 Bid-YTW : 4.07 % |
| SLF.PR.I | FixedReset | 2.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.29 Bid-YTW : 7.93 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.H | FixedReset | 627,315 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.48 Bid-YTW : 4.50 % |
| TD.PF.G | FixedReset | 126,300 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.77 Bid-YTW : 3.98 % |
| TRP.PR.J | FixedReset | 96,400 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-31 Maturity Price : 25.00 Evaluated at bid price : 26.36 Bid-YTW : 4.29 % |
| W.PR.M | FixedReset | 88,047 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 4.83 % |
| CM.PR.P | FixedReset | 78,030 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-12 Maturity Price : 18.30 Evaluated at bid price : 18.30 Bid-YTW : 4.30 % |
| NA.PR.A | FixedReset | 70,808 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-08-15 Maturity Price : 25.00 Evaluated at bid price : 26.32 Bid-YTW : 4.53 % |
| There were 30 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| SLF.PR.I | FixedReset | Quote: 18.29 – 19.16 Spot Rate : 0.8700 Average : 0.5486 YTW SCENARIO |
| GWO.PR.M | Deemed-Retractible | Quote: 26.01 – 26.52 Spot Rate : 0.5100 Average : 0.3865 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 14.01 – 14.39 Spot Rate : 0.3800 Average : 0.2629 YTW SCENARIO |
| RY.PR.W | Perpetual-Discount | Quote: 25.01 – 25.23 Spot Rate : 0.2200 Average : 0.1292 YTW SCENARIO |
| W.PR.K | FixedReset | Quote: 25.62 – 25.92 Spot Rate : 0.3000 Average : 0.2119 YTW SCENARIO |
| GWO.PR.I | Deemed-Retractible | Quote: 22.45 – 22.77 Spot Rate : 0.3200 Average : 0.2377 YTW SCENARIO |