The Bank of Canada rate announcement was today:
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.
Global economic growth has slowed by more than the Bank forecast in its January Monetary Policy Report (MPR). Ongoing uncertainty related to trade conflicts has undermined business sentiment and activity, contributing to a synchronous slowdown across many countries. In response, many central banks have signalled a slower pace of monetary policy normalization. Financial conditions and market sentiment have improved as a result, pushing up prices for oil and other commodities.
Global economic activity is expected to pick up during 2019 and average 3 ¼ per cent over the projection period, supported by accommodative financial conditions and as a number of temporary factors weighing on growth fade. This is roughly in line with the global economy’s potential and a modest downgrade to the Bank’s January projection.
In Canada, growth during the first half of 2019 is now expected to be slower than was anticipated in January. Last year’s oil price decline and ongoing transportation constraints have curbed investment and exports in the energy sector. Investment and exports outside the energy sector, meanwhile, have been negatively affected by trade policy uncertainty and the global slowdown. Weaker-than-anticipated housing and consumption also contributed to slower growth.
The Bank expects growth to pick up, starting in the second quarter of this year. Housing activity is expected to stabilize given continued population gains, the fading effects of past housing policy changes, and improved global financial conditions. Consumption will be underpinned by strong growth in employment income. Outside of the oil and gas sector, investment will be supported by high rates of capacity utilization and exports will expand with strengthening global demand. Meanwhile, the contribution to growth from government spending has been revised down in light of Ontario’s new budget.
Overall, the Bank projects real GDP growth of 1.2 per cent in 2019 and around 2 per cent in 2020 and 2021. This forecast implies a modest widening of the output gap, which will be absorbed over the projection period.
CPI and measures of core inflation are all close to 2 per cent. CPI inflation will likely dip in the third quarter, largely because of the dynamics of gasoline prices, before returning to about 2 per cent by year end. Taking into account the effects of the new carbon pollution charge, as well as modest excess capacity, the Bank expects inflation to remain around 2 per cent through 2020 and 2021.
Given all of these developments, Governing Council judges that an accommodative policy interest rate continues to be warranted. We will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive. In particular, we are monitoring developments in household spending, oil markets, and global trade policy to gauge the extent to which the factors weighing on growth and the inflation outlook are dissipating.
As usual, there was no reporting of the vote or of dissenting opinions because our illustrious masters do not feel any need for accountability.
The dovish stance hurt the loonie:
The Canadian dollar fell to a nearly four-month low against its broadly stronger U.S. counterpart on Wednesday, as investors raised bets on a Bank of Canada interest rate cut this year after the central bank slashed its economic growth outlook.
Canada’s central bank held its benchmark interest rate steady at 1.75 per cent as expected but removed wording about the need for future rate hikes and lowered its growth forecast for 2019 to 1.2 per cent from 1.7 per cent.
…
Chances of an interest rate cut by December rose to 65 per cent from 57 per cent before the policy announcement, data from the overnight index swaps market showed.At 4:03 p.m., the Canadian dollar was trading 0.5 per cent lower at 1.3484 to the greenback, or 74.16 U.S. cents. The currency touched its weakest intraday level since Jan. 3 at 1.3522.
… and the GOC five-year yield dropped 7bp to 1.50%.
PerpetualDiscounts now yield 5.49%, equivalent to 7.14% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.78%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 335bp, a significant widening from the 325bp reported April 17.
| 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 | -0.2174 % | 2,080.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2174 % | 3,817.3 |
| Floater | 5.65 % | 5.97 % | 51,561 | 13.93 | 3 | -0.2174 % | 2,199.9 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2081 % | 3,282.4 |
| SplitShare | 4.88 % | 4.69 % | 71,829 | 3.80 | 8 | -0.2081 % | 3,919.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2081 % | 3,058.5 |
| Perpetual-Premium | 5.59 % | -11.96 % | 90,832 | 0.09 | 10 | 0.0742 % | 2,952.9 |
| Perpetual-Discount | 5.41 % | 5.49 % | 80,801 | 14.61 | 23 | -0.0529 % | 3,106.6 |
| FixedReset Disc | 5.24 % | 5.38 % | 184,980 | 14.93 | 61 | -0.1243 % | 2,198.0 |
| Deemed-Retractible | 5.23 % | 5.81 % | 97,161 | 8.11 | 27 | 0.0878 % | 3,075.8 |
| FloatingReset | 4.25 % | 4.36 % | 54,326 | 2.66 | 5 | -0.2486 % | 2,404.8 |
| FixedReset Prem | 5.07 % | 3.80 % | 283,293 | 2.20 | 23 | 0.0792 % | 2,587.1 |
| FixedReset Bank Non | 1.97 % | 3.95 % | 146,788 | 2.67 | 3 | 0.0278 % | 2,646.0 |
| FixedReset Ins Non | 5.00 % | 6.92 % | 103,670 | 8.24 | 22 | -0.1117 % | 2,253.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TD.PF.C | FixedReset Disc | -2.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 18.23 Evaluated at bid price : 18.23 Bid-YTW : 5.33 % |
| BAM.PR.X | FixedReset Disc | -1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 14.05 Evaluated at bid price : 14.05 Bid-YTW : 5.91 % |
| PWF.PR.Q | FloatingReset | -1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 14.02 Evaluated at bid price : 14.02 Bid-YTW : 5.87 % |
| MFC.PR.F | FixedReset Ins Non | -1.73 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.76 Bid-YTW : 8.85 % |
| RY.PR.J | FixedReset Disc | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 20.49 Evaluated at bid price : 20.49 Bid-YTW : 5.28 % |
| TRP.PR.G | FixedReset Disc | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 6.01 % |
| RY.PR.M | FixedReset Disc | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 20.21 Evaluated at bid price : 20.21 Bid-YTW : 5.18 % |
| MFC.PR.J | FixedReset Ins Non | -1.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.54 Bid-YTW : 6.92 % |
| EIT.PR.A | SplitShare | -1.12 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2024-03-14 Maturity Price : 25.00 Evaluated at bid price : 24.83 Bid-YTW : 5.11 % |
| BAM.PR.K | Floater | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 11.62 Evaluated at bid price : 11.62 Bid-YTW : 6.02 % |
| BAM.PF.I | FixedReset Prem | 1.02 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-03-31 Maturity Price : 25.00 Evaluated at bid price : 24.70 Bid-YTW : 5.39 % |
| IFC.PR.G | FixedReset Ins Non | 1.18 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.55 Bid-YTW : 6.96 % |
| NA.PR.S | FixedReset Disc | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 18.57 Evaluated at bid price : 18.57 Bid-YTW : 5.43 % |
| NA.PR.C | FixedReset Disc | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 22.13 Evaluated at bid price : 22.60 Bid-YTW : 5.44 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BMO.PR.F | FixedReset Prem | 120,855 | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 4.88 % |
| BMO.PR.S | FixedReset Disc | 102,565 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 19.16 Evaluated at bid price : 19.16 Bid-YTW : 5.24 % |
| VNR.PR.A | FixedReset Prem | 80,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 23.27 Evaluated at bid price : 24.89 Bid-YTW : 4.41 % |
| RY.PR.W | Perpetual-Discount | 78,171 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-05-24 Maturity Price : 25.00 Evaluated at bid price : 24.92 Bid-YTW : 3.94 % |
| SLF.PR.A | Deemed-Retractible | 66,336 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.13 Bid-YTW : 6.31 % |
| CU.PR.D | Perpetual-Discount | 48,300 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-04-24 Maturity Price : 22.38 Evaluated at bid price : 22.78 Bid-YTW : 5.44 % |
| There were 46 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| HSE.PR.E | FixedReset Disc | Quote: 20.40 – 21.04 Spot Rate : 0.6400 Average : 0.4152 YTW SCENARIO |
| TD.PF.C | FixedReset Disc | Quote: 18.23 – 18.79 Spot Rate : 0.5600 Average : 0.3695 YTW SCENARIO |
| HSE.PR.G | FixedReset Disc | Quote: 20.01 – 20.57 Spot Rate : 0.5600 Average : 0.3978 YTW SCENARIO |
| BIP.PR.E | FixedReset Disc | Quote: 21.81 – 22.35 Spot Rate : 0.5400 Average : 0.3783 YTW SCENARIO |
| EMA.PR.F | FixedReset Disc | Quote: 18.73 – 19.42 Spot Rate : 0.6900 Average : 0.5328 YTW SCENARIO |
| BMO.PR.Z | Perpetual-Discount | Quote: 25.01 – 25.40 Spot Rate : 0.3900 Average : 0.2414 YTW SCENARIO |