The federal budget came out today:
One major change is C$7.2 billion ($5.7 billion) less infrastructure spending through 2019, an amount that has been allocated to other departmental spending.
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On a cumulative basis, including risk buffers worth C$3 billion annually, deficits over the six years including 2017-18 are projected to total C$98 billion. That’s little changed from the October forecast.
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The government has implemented a watered-down version of reforms for “tax planning.’’
•On passive investment, the new system only gradually reduces access to the small business tax rate for corporations with significant passive investment.
•Measures will limit tax advantages that larger Canadian- controlled private corporations can obtain by accessing refundable taxes on dividends.
•The two changes combined, including new restrictions on so- called income sprinkling announced last year, will add C$925 million to government coffers annually by 2022.
•The Trudeau government is also promising new rules to prevent banks and other financial institutions “from gaining a tax advantage by creating artificial losses.’’ The move will create C$560 million annually by 2022.
•A tax increase on tobacco is worth C$1.5 billion over six years, and levies on cannabis are expected to generate C$690 million over six years after it is legalized this summer.
•Canada has also taken a C$2.1 billion hit over six years from lost tariffs due to the Trans-Pacific Partnership agreement.
I’m not happy about the continuing deficit. Government finances should be managed to break even on a through-the-cycle basis, which means that right now we should be running a small but increasing surplus.
I’m also not happy about the Inefficent Business Tax Subsidy; although there has been some progress, the legions of well-connected doctors and lawyers retain their special tax bolthole:
The budget unveiled new details on the taxation of passive investment income inside private corporations.
When companies earn between $50,000 and $150,00 in a given year from passive investments, a reduced amount of their active business income will be eligible for the small business tax rate, which will be 9 per cent in 2019. (The upper limit for business income that can be taxed at the small business rate is $500,000.) The reduction will occur on a straight-line basis, with eligible income decreasing by $5 for every $1 of passive income above the $50,000 threshold.
Companies exceeding $150,000 in passive income will no longer be eligible for the small business tax rate. Those with passive income under $50,000 will not be affected, as was mentioned in a revised proposal.
Davies Ward Phillips & Vineberg LLP has published a more detailed commentary.
In order to pay for this well-deserved reward for those old-stock Canadians who, by dint of hard work, integrity, stick-to-it-ivness and the fact that mommy and daddy were doctors and lawyers, have become doctors and lawyers, the practice of tax surcharges that increase the effective marginal tax rate on plebian scum have been retained:
Click for Big
See that? The benefits claw-back represents an increase to the posted effective marginal tax rate of 14% immediately, planned to decline (precipitously!) to 12% in the future. From this one programme alone. Yes, sir, it’s very important to destroy incentive to pick up that extra shift, accept that extra responsibility, move to a new province to get that slightly better job! They can have a little extra welfare money, as long as they don’t get too uppity.
| 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 | -2.3024 % | 2,984.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -2.3024 % | 5,476.7 |
| Floater | 3.33 % | 3.56 % | 96,734 | 18.33 | 4 | -2.3024 % | 3,156.2 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2356 % | 3,150.5 |
| SplitShare | 4.71 % | 4.07 % | 62,806 | 3.33 | 5 | -0.2356 % | 3,762.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2356 % | 2,935.5 |
| Perpetual-Premium | 5.45 % | 4.97 % | 74,861 | 14.38 | 20 | -0.0819 % | 2,826.5 |
| Perpetual-Discount | 5.41 % | 5.45 % | 84,676 | 14.71 | 14 | -0.1391 % | 2,941.9 |
| FixedReset | 4.25 % | 4.58 % | 166,316 | 5.87 | 102 | 0.0592 % | 2,520.6 |
| Deemed-Retractible | 5.15 % | 5.74 % | 92,622 | 5.71 | 28 | -0.0992 % | 2,907.5 |
| FloatingReset | 2.94 % | 2.91 % | 37,023 | 3.70 | 10 | 0.0129 % | 2,769.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.B | Floater | -2.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 17.09 Evaluated at bid price : 17.09 Bid-YTW : 3.57 % |
| BAM.PR.K | Floater | -2.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 17.15 Evaluated at bid price : 17.15 Bid-YTW : 3.56 % |
| BAM.PR.C | Floater | -2.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 17.10 Evaluated at bid price : 17.10 Bid-YTW : 3.57 % |
| PWF.PR.A | Floater | -1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 21.22 Evaluated at bid price : 21.22 Bid-YTW : 2.86 % |
| MFC.PR.F | FixedReset | -1.31 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.77 Bid-YTW : 7.46 % |
| MFC.PR.G | FixedReset | -1.30 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-12-19 Maturity Price : 25.00 Evaluated at bid price : 24.38 Bid-YTW : 4.56 % |
| TRP.PR.H | FloatingReset | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 16.96 Evaluated at bid price : 16.96 Bid-YTW : 3.48 % |
| BAM.PF.J | FixedReset | -1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 4.94 % |
| BAM.PF.F | FixedReset | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 23.64 Evaluated at bid price : 24.84 Bid-YTW : 4.89 % |
| TRP.PR.B | FixedReset | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 4.60 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.A | FixedReset | 346,550 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 23.13 Evaluated at bid price : 23.53 Bid-YTW : 4.52 % |
| RY.PR.H | FixedReset | 311,298 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 23.12 Evaluated at bid price : 23.55 Bid-YTW : 4.52 % |
| NA.PR.A | FixedReset | 279,625 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-08-15 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 4.05 % |
| PWF.PR.T | FixedReset | 176,575 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-02-27 Maturity Price : 24.30 Evaluated at bid price : 24.73 Bid-YTW : 4.46 % |
| SLF.PR.E | Deemed-Retractible | 160,500 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.55 Bid-YTW : 7.24 % |
| SLF.PR.D | Deemed-Retractible | 128,499 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.44 Bid-YTW : 7.27 % |
| BMO.PR.C | FixedReset | 114,865 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.29 Bid-YTW : 4.23 % |
| There were 26 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PF.E | FixedReset | Quote: 23.75 – 24.37 Spot Rate : 0.6200 Average : 0.4490 YTW SCENARIO |
| BAM.PR.B | Floater | Quote: 17.09 – 17.54 Spot Rate : 0.4500 Average : 0.2949 YTW SCENARIO |
| TRP.PR.H | FloatingReset | Quote: 16.96 – 17.55 Spot Rate : 0.5900 Average : 0.4442 YTW SCENARIO |
| EIT.PR.A | SplitShare | Quote: 25.12 – 25.82 Spot Rate : 0.7000 Average : 0.5655 YTW SCENARIO |
| MFC.PR.R | FixedReset | Quote: 25.55 – 25.90 Spot Rate : 0.3500 Average : 0.2185 YTW SCENARIO |
| BAM.PF.J | FixedReset | Quote: 25.02 – 25.40 Spot Rate : 0.3800 Average : 0.2494 YTW SCENARIO |