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The day began with the Bank of Canada rate announcement:
The Bank of Canada today maintained its target for the overnight rate at 1 ¾ per cent. The Bank Rate is correspondingly 2 per cent and the deposit rate is 1 ½ per cent.
The global economic expansion is moderating largely as expected, but signs are emerging that trade conflicts are weighing more heavily on global demand. Recent encouraging developments at the G20 meetings are a reminder that there are upside as well as downside risks around trade policy. Growth in major advanced economies has slowed, although activity in the United States remains above potential.
Oil prices have fallen sharply since the October Monetary Policy Report (MPR), reflecting a combination of geopolitical developments, uncertainty about global growth prospects, and expansion of U.S. shale oil production. Benchmarks for western Canadian oil – both heavy and, more recently, light – have been pulled down even further by transportation constraints and a buildup of inventories. In light of these developments and associated cutbacks in production, activity in Canada’s energy sector will likely be materially weaker than expected.
The Canadian economy as a whole grew in line with the Bank’s projection in the third quarter, although data suggest less momentum going into the fourth quarter. Business investment fell in the third quarter, in large part due to heightened trade uncertainty during the summer. Business investment outside the energy sector is expected to strengthen with the signing of the USMCA, new federal government tax measures, and ongoing capacity constraints. Along with strong foreign demand, this increase in productive capacity should support continued growth in exports.
Household credit and regional housing markets appear to be stabilizing following a significant slowdown in recent quarters. The Bank continues to monitor the impact on both builders and buyers of tighter mortgage rules, regional housing policy changes, and higher interest rates.
Inflation has been evolving as expected and the Bank’s core measures are all tracking 2 per cent, consistent with an economy that has been operating close to its capacity. CPI inflation, at 2.4 per cent in October, is just above target but is expected to ease in coming months by more than the Bank had previously forecast, due to lower gasoline prices. Downward historical revisions by Statistics Canada to GDP, together with recent macroeconomic developments, indicate there may be additional room for non-inflationary growth. The Bank will reassess all of these factors in its new projection for the January MPR.
Weighing all of these developments, Governing Council continues to judge that the policy interest rate will need to rise into a neutral range to achieve the inflation target. The appropriate pace of rate increases will depend on a number of factors. These include the effect of higher interest rates on consumption and housing, and global trade policy developments. The persistence of the oil price shock, the evolution of business investment, and the Bank’s assessment of the economy’s capacity will also factor importantly into our decisions about the future stance of monetary policy.
So they’re still saying that the policy rate will rise, but there is a significant note of caution about how soon it will be. It’s a pity, of course, that the press release does not report the voting results and the reason for any dissents there might be, but Canadian policy makers are not brave enough to take a public stand contrary to consensus. Maybe we need better quality policy makers.
The IAIS has released its November / December 2018 newsletter, which reiterates its intentions regarding ICS 2.0:
In a session moderated by Secretary General Jonathan Dixon, the Chairs of the Policy Development, Macroprudential, and Implementation and Assessment Committees [Elise Liebers, Alberto Corinti and Jose (Pepe) Lopez Hoyo, respectively] provided updates on key IAIS initiatives within their respective areas, including revisions to the ICPs and ComFrame, along with progress in developing ICS Version 2.0, and the holistic framework for systemic risk. These projects are all on track, with delivery slated for year-end 2019.
Assiduous Readers will remember that ICS 2.0 is the critical standard relating to (among many other things) loss absorbency of preferred shares and therefore Deemed Maturities.
Money came into the Canadian bond market, with the Government of Canada 5-year yield (GOC-5) falling 6bp to 2.08%. And so …
… the Canadian preferred share market was hammered big-time today.
TXPR touched a new 52-week low of 626.20 before closing at 626.40, down a stunning 1.47% (on a price basis) on the day. Volume was high in the context of the last thirty days, but nothing spectacular. Not bad for a day when the US was closed though, and all the highly paid Bay Street professionals were doing their Christmas shopping!
CPD closed at a new 52-week low of 12.47, down 1.89% on the day. Volume was above average in the context of the last thirty days, but the lowest this week.
ZPR touched a new 52-week low of 10.145 before closing at 10.15, down a horrific 2.03% on the day. Volume was the third-highest of the past thirty days, exceeded only by November 30 and November 16.
PerpetualDiscounts now yield 5.94% (!), equivalent to 7.72% at the standard equivalency factor of 1.3x. Long corporates now yield about 4.10%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 360bp (!), a significant widening from the 350bp reported November 28.
| 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 | -3.7409 % | 2,497.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -3.7409 % | 4,583.3 |
| Floater | 4.65 % | 5.08 % | 37,730 | 15.28 | 4 | -3.7409 % | 2,641.3 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2562 % | 3,163.5 |
| SplitShare | 4.65 % | 5.39 % | 84,984 | 4.63 | 7 | -0.2562 % | 3,777.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2562 % | 2,947.6 |
| Perpetual-Premium | 5.60 % | 6.05 % | 130,243 | 13.78 | 2 | -0.0796 % | 2,854.8 |
| Perpetual-Discount | 5.76 % | 5.94 % | 72,143 | 13.91 | 33 | -0.1946 % | 2,861.9 |
| FixedReset Disc | 5.10 % | 5.76 % | 189,934 | 14.28 | 66 | -1.8405 % | 2,196.6 |
| Deemed-Retractible | 5.55 % | 7.77 % | 95,057 | 5.16 | 27 | -0.3129 % | 2,847.6 |
| FloatingReset | 4.12 % | 5.32 % | 35,590 | 2.99 | 7 | -0.5728 % | 2,492.2 |
| FixedReset Prem | 5.19 % | 4.50 % | 288,586 | 2.31 | 14 | -0.4050 % | 2,494.0 |
| FixedReset Bank Non | 2.98 % | 4.19 % | 120,707 | 2.93 | 6 | -0.2546 % | 2,562.4 |
| FixedReset Ins Non | 5.04 % | 8.29 % | 127,478 | 5.18 | 22 | -1.6664 % | 2,229.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| NA.PR.S | FixedReset Disc | -5.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.48 Evaluated at bid price : 19.48 Bid-YTW : 5.97 % |
| BAM.PR.K | Floater | -5.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 13.83 Evaluated at bid price : 13.83 Bid-YTW : 5.08 % |
| BAM.PR.C | Floater | -4.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 13.80 Evaluated at bid price : 13.80 Bid-YTW : 5.09 % |
| CM.PR.P | FixedReset Disc | -4.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.16 Evaluated at bid price : 19.16 Bid-YTW : 5.81 % |
| MFC.PR.K | FixedReset Ins Non | -4.23 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.26 Bid-YTW : 9.44 % |
| BAM.PR.Z | FixedReset Disc | -4.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 6.46 % |
| TRP.PR.D | FixedReset Disc | -4.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 17.23 Evaluated at bid price : 17.23 Bid-YTW : 6.75 % |
| CM.PR.Q | FixedReset Disc | -4.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.01 Evaluated at bid price : 21.01 Bid-YTW : 5.83 % |
| MFC.PR.L | FixedReset Ins Non | -4.07 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.92 Bid-YTW : 10.77 % |
| TD.PF.B | FixedReset Disc | -3.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 5.76 % |
| BAM.PF.E | FixedReset Disc | -3.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 6.48 % |
| CM.PR.R | FixedReset Disc | -3.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 22.29 Evaluated at bid price : 22.87 Bid-YTW : 5.85 % |
| TRP.PR.C | FixedReset Disc | -3.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 13.63 Evaluated at bid price : 13.63 Bid-YTW : 6.59 % |
| BAM.PF.A | FixedReset Disc | -3.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 6.42 % |
| IFC.PR.A | FixedReset Ins Non | -3.57 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.02 Bid-YTW : 10.99 % |
| BAM.PR.T | FixedReset Disc | -3.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 16.89 Evaluated at bid price : 16.89 Bid-YTW : 6.46 % |
| BAM.PR.B | Floater | -3.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 13.80 Evaluated at bid price : 13.80 Bid-YTW : 5.09 % |
| BAM.PF.B | FixedReset Disc | -3.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.15 Evaluated at bid price : 19.15 Bid-YTW : 6.42 % |
| BAM.PF.F | FixedReset Disc | -3.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.63 Evaluated at bid price : 19.63 Bid-YTW : 6.56 % |
| BMO.PR.S | FixedReset Disc | -3.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 5.71 % |
| BAM.PR.R | FixedReset Disc | -3.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 16.70 Evaluated at bid price : 16.70 Bid-YTW : 6.50 % |
| MFC.PR.Q | FixedReset Ins Non | -2.99 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.50 Bid-YTW : 9.54 % |
| BMO.PR.W | FixedReset Disc | -2.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.66 Evaluated at bid price : 19.66 Bid-YTW : 5.64 % |
| MFC.PR.N | FixedReset Ins Non | -2.81 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.35 Bid-YTW : 10.32 % |
| BMO.PR.Y | FixedReset Disc | -2.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.08 Evaluated at bid price : 21.08 Bid-YTW : 5.75 % |
| TD.PF.C | FixedReset Disc | -2.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 5.67 % |
| NA.PR.W | FixedReset Disc | -2.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 18.92 Evaluated at bid price : 18.92 Bid-YTW : 5.91 % |
| MFC.PR.M | FixedReset Ins Non | -2.67 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.59 Bid-YTW : 10.18 % |
| HSE.PR.C | FixedReset Disc | -2.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 18.98 Evaluated at bid price : 18.98 Bid-YTW : 6.97 % |
| MFC.PR.F | FixedReset Ins Non | -2.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 15.10 Bid-YTW : 12.33 % |
| RY.PR.H | FixedReset Disc | -2.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.22 Evaluated at bid price : 20.22 Bid-YTW : 5.55 % |
| SLF.PR.G | FixedReset Ins Non | -2.47 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.58 Bid-YTW : 10.90 % |
| BAM.PF.G | FixedReset Disc | -2.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 6.47 % |
| TD.PF.A | FixedReset Disc | -2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 5.57 % |
| SLF.PR.J | FloatingReset | -2.31 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 16.52 Bid-YTW : 10.74 % |
| MFC.PR.J | FixedReset Ins Non | -2.29 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.90 Bid-YTW : 8.27 % |
| BIP.PR.E | FixedReset Disc | -2.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.72 Evaluated at bid price : 20.72 Bid-YTW : 6.24 % |
| TD.PF.D | FixedReset Disc | -2.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.79 % |
| HSE.PR.E | FixedReset Disc | -2.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.11 Evaluated at bid price : 20.11 Bid-YTW : 7.06 % |
| PWF.PR.A | Floater | -2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 3.86 % |
| BMO.PR.T | FixedReset Disc | -2.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.58 Evaluated at bid price : 19.58 Bid-YTW : 5.71 % |
| IFC.PR.C | FixedReset Ins Non | -2.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.64 Bid-YTW : 8.88 % |
| MFC.PR.R | FixedReset Ins Non | -2.04 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-03-19 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 6.12 % |
| RY.PR.Z | FixedReset Disc | -2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.24 Evaluated at bid price : 20.24 Bid-YTW : 5.50 % |
| CM.PR.S | FixedReset Disc | -1.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 5.75 % |
| NA.PR.C | FixedReset Disc | -1.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 22.07 Evaluated at bid price : 22.55 Bid-YTW : 5.98 % |
| EMA.PR.H | FixedReset Disc | -1.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 22.56 Evaluated at bid price : 23.50 Bid-YTW : 5.21 % |
| TD.PF.E | FixedReset Disc | -1.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.38 Evaluated at bid price : 21.70 Bid-YTW : 5.73 % |
| HSE.PR.G | FixedReset Disc | -1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.33 Evaluated at bid price : 20.33 Bid-YTW : 6.94 % |
| TRP.PR.A | FixedReset Disc | -1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 15.39 Evaluated at bid price : 15.39 Bid-YTW : 6.65 % |
| MFC.PR.I | FixedReset Ins Non | -1.71 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.64 Bid-YTW : 8.29 % |
| IFC.PR.E | Deemed-Retractible | -1.70 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.02 Bid-YTW : 7.93 % |
| TRP.PR.B | FixedReset Disc | -1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 12.85 Evaluated at bid price : 12.85 Bid-YTW : 6.57 % |
| BIP.PR.F | FixedReset Disc | -1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.38 Evaluated at bid price : 21.65 Bid-YTW : 5.91 % |
| RY.PR.S | FixedReset Disc | -1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.93 Evaluated at bid price : 22.45 Bid-YTW : 5.21 % |
| RY.PR.M | FixedReset Disc | -1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 5.69 % |
| PVS.PR.D | SplitShare | -1.49 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2021-10-08 Maturity Price : 25.00 Evaluated at bid price : 24.38 Bid-YTW : 5.47 % |
| W.PR.K | FixedReset Prem | -1.46 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-01-15 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 5.63 % |
| RY.PR.J | FixedReset Disc | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.35 Evaluated at bid price : 21.65 Bid-YTW : 5.62 % |
| EMA.PR.F | FixedReset Disc | -1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 18.98 Evaluated at bid price : 18.98 Bid-YTW : 6.39 % |
| CM.PR.O | FixedReset Disc | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 5.73 % |
| TRP.PR.K | FixedReset Disc | -1.33 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-05-31 Maturity Price : 25.00 Evaluated at bid price : 24.52 Bid-YTW : 5.57 % |
| BIP.PR.A | FixedReset Disc | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 7.08 % |
| W.PR.M | FixedReset Prem | -1.27 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-15 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 5.75 % |
| CU.PR.D | Perpetual-Discount | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 5.83 % |
| NA.PR.E | FixedReset Disc | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 5.92 % |
| GWO.PR.H | Deemed-Retractible | -1.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.50 Bid-YTW : 8.66 % |
| TRP.PR.J | FixedReset Prem | -1.18 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-31 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 5.30 % |
| PWF.PR.Q | FloatingReset | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 18.04 Evaluated at bid price : 18.04 Bid-YTW : 4.62 % |
| PWF.PR.Z | Perpetual-Discount | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.51 Evaluated at bid price : 21.51 Bid-YTW : 6.07 % |
| SLF.PR.H | FixedReset Ins Non | -1.12 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.60 Bid-YTW : 9.14 % |
| IAG.PR.G | FixedReset Ins Non | -1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.65 Bid-YTW : 7.89 % |
| PWF.PR.T | FixedReset Disc | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.38 Evaluated at bid price : 21.65 Bid-YTW : 5.34 % |
| BMO.PR.E | FixedReset Disc | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 22.31 Evaluated at bid price : 23.05 Bid-YTW : 5.36 % |
| POW.PR.D | Perpetual-Discount | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 21.24 Evaluated at bid price : 21.24 Bid-YTW : 5.99 % |
| TD.PF.I | FixedReset Disc | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 22.57 Evaluated at bid price : 23.40 Bid-YTW : 5.42 % |
| MFC.PR.B | Deemed-Retractible | -1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.60 Bid-YTW : 9.36 % |
| GWO.PR.Q | Deemed-Retractible | -1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.60 Bid-YTW : 7.96 % |
| BAM.PF.I | FixedReset Disc | -1.00 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-03-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 5.53 % |
| TRP.PR.F | FloatingReset | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 15.72 Evaluated at bid price : 15.72 Bid-YTW : 5.76 % |
| W.PR.H | Perpetual-Discount | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 23.48 Evaluated at bid price : 23.75 Bid-YTW : 5.87 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.C | FixedReset Disc | 78,300 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 22.91 Evaluated at bid price : 24.00 Bid-YTW : 5.54 % |
| RY.PR.W | Perpetual-Discount | 64,425 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 23.67 Evaluated at bid price : 23.94 Bid-YTW : 5.14 % |
| RY.PR.Z | FixedReset Disc | 63,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.24 Evaluated at bid price : 20.24 Bid-YTW : 5.50 % |
| RY.PR.H | FixedReset Disc | 62,800 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.22 Evaluated at bid price : 20.22 Bid-YTW : 5.55 % |
| MFC.PR.O | FixedReset Ins Non | 53,900 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-06-19 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 4.69 % |
| BMO.PR.S | FixedReset Disc | 48,491 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2048-12-05 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 5.71 % |
| There were 64 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TD.PF.B | FixedReset Disc | Quote: 19.60 – 20.24 Spot Rate : 0.6400 Average : 0.4127 YTW SCENARIO |
| BAM.PR.C | Floater | Quote: 13.80 – 14.56 Spot Rate : 0.7600 Average : 0.5361 YTW SCENARIO |
| NA.PR.S | FixedReset Disc | Quote: 19.48 – 20.02 Spot Rate : 0.5400 Average : 0.3405 YTW SCENARIO |
| IFC.PR.E | Deemed-Retractible | Quote: 22.02 – 22.50 Spot Rate : 0.4800 Average : 0.3112 YTW SCENARIO |
| EMA.PR.H | FixedReset Disc | Quote: 23.50 – 24.00 Spot Rate : 0.5000 Average : 0.3345 YTW SCENARIO |
| BMO.PR.S | FixedReset Disc | Quote: 20.00 – 20.49 Spot Rate : 0.4900 Average : 0.3253 YTW SCENARIO |
PerpetualDiscounts now yield 5.94%
Yet in the table it shows PerpetualDiscounts yielding 5.74%
Is it because the yield in commentary corresponds to all perpetuals, including scraps? And the ones in table correspond only to your index?
Similarly, the yield comparison with Long corporates. Do the long corporate include all investment grade corporate (BBB Low and up) or is it just those corporates that are included in your index (and thus have higher rating)?
Thanks much!
Yet in the table it shows PerpetualDiscounts yielding 5.74%
Actually, the table shows that PerpetualDiscounts have a Mean Current Yield (at bid) of 5.76% and a Median YTW of 5.94%, as advertised.
I use the YTW as it is more accurate than the Current Yield. For an individual PerpetualDiscount issue, YTW and Current Yield will be closely related, but with a difference between them related to the timing of the relevant ex-dividend and dividend-pay dates. This difference may be derived with a neat little bit of algebra I published in PrefLetter some years ago.
Both my tables and commentary reflect issues in my indices only.
For details of bond index construction, see the FTSE methodology. The critical part is section 4.0, Eligibility Criteria.
Hi James, a new commenter. I just want to say thanks for your regular posts. This is the only place I know of anywhere where there is regular commentary on the Canadian preferred market specifically.
My non-equity holdings are about 2/3rds Canadian bonds and 1/3rd Canadian preferred shared. Obviously a painful period now for preferred shares, and one that doesn’t really make sense given no significant macro-economic changes or material credit changes in the last two months. When preferred shares do worse than common shares overall and when interest rates are generally rising, that is baffling.
At least I can come to this blog and read your commentary and look at new picture of an explosion after another 1% or more daily drop.
I think the market is aggressively pricing in a pause or reversal of BOC’s recent rate hikes. Things will alter dramatically for low reset preferreds should that happen. If GOC falls to sub 1 per cent in the coming months, things will get very interesting. We already have a pancake like yield curve, though there’s no inversion yet here.
Hi James, a new commenter. I just want to say thanks for your regular posts.
No problem – and welcome to the blog!
When preferred shares do worse than common shares overall and when interest rates are generally rising, that is baffling.
It has been a grim few months. But enduring the volatility is a large part of why we’re paid so much to hold the things!
I think the market is aggressively pricing in a pause or reversal of BOC’s recent rate hikes.
Very aggressively!