The BoC continued to hold 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.
Recent Canadian economic data are in line with the projections in the Bank’s April Monetary Policy Report (MPR), with accumulating evidence that the slowdown in late 2018 and early 2019 is being followed by a pickup starting in the second quarter. The oil sector is beginning to recover as production increases and prices remain above recent lows. Meanwhile, housing market indicators point to a more stable national market, albeit with continued weakness in some regions.
Continued strong job growth suggests that businesses see the weakness in the past two quarters as temporary. Recent data support a pickup in both consumer spending and exports in the second quarter, and it appears that overall growth in business investment has firmed. That said, inventories rose sharply in the first quarter, which may dampen production growth in coming months.
The global economy is also evolving largely as expected since April, although the recent escalation of trade conflicts is heightening uncertainty about economic prospects. In addition, trade restrictions introduced by China are having direct effects on Canadian exports. In contrast, the removal of steel and aluminum tariffs and increasing prospects for the ratification of CUSMA will have positive implications for Canadian exports and investment.
Inflation has evolved in line with the Bank’s April projection. The Bank expects CPI inflation to remain around the 2 per cent target in the coming months. Core inflation measures all remain close to 2 per cent.
Overall, recent data have reinforced Governing Council’s view that the slowdown in late 2018 and early 2019 was temporary, although global trade risks have increased. In this context, the degree of accommodation being provided by the current policy interest rate remains appropriate. In taking future policy decisions, Governing Council will remain data dependent and especially attentive to developments in household spending, oil markets and the global trade environment.
It’s too bad that the names of those voting in favour of the hold were not released and neither were the names and summarized rationales for those voting against. Only confident Central Banks with committees comprised of stellar people who can make a living doing something else publish such information.
The “global trade risks” mentioned in the final paragraph were blamed for today’s horrible equity performance:
Fears that an escalating trade war between the United States and China will slash global economic growth pulled world stock markets down to near two-and-a-half-month lows on Wednesday and continued to feed a rally in safe-haven government bonds.
German bond yields fell deeper into negative territory and inched toward record lows of minus 0.2 per cent. Ten-year U.S. Treasury note yields dropped to 20-month lows, having fallen almost 30 basis points this month.
Chinese newspapers warned on Wednesday that Beijing could use rare earths to strike back at the United States after U.S. President Donald Trump remarked he was “not yet ready” to make a deal with China over trade. China was the source of 80 per cent of the rare earths imported by the United States between 2014 and 2017.
The prospect of a prolonged standoff between the world’s two biggest economies and the likelihood of Europe and Japan getting dragged in have raised investor concerns about global growth.
…
Canada’s main stock index fell on Wednesday as the Bank of Canada held interest rates steady as expected.The Toronto Stock Exchange’s S&P/TSX Composite index was unofficially down 165.99 points, or 1.02 per cent, at 16,131.47
On a brighter note, Candeal reported the 5-Year Canada yield unchanged at 1.47% today.
DBRS has been sold to Morningstar:
Canadian debt rating agency DBRS Ltd. is falling into the hands of U.S. investment research firm Morningstar Inc., marking its second ownership change in five years and the largest deal in Morningstar’s history.
Founded by Canadian Walter Schroeder and based in Toronto, DBRS was first sold in 2014 to two private equity firms, Carlyle Group and Warburg Pincus, for a reported US$500-million. Five years later, the private equity owners are selling DBRS to Morningstar for US$669-million.
Returns for the two private equity firms were not disclosed, and the sale price does not include any dividends that DBRS may have paid out over the past five years.
Carlyle and Warburg Pincus both declined to comment.
The Bank of Nova Scotia is redeeming some expensive Tier 1 Capital:
Scotiabank (BNS: TSX, NYSE) today announced that Scotiabank Tier 1 Trust, a closed-end trust wholly owned by The Bank of Nova Scotia, intends to redeem all outstanding 7.802% Scotiabank Tier 1 Securities – Series 2009-1 due June 30, 2108 (the “Scotia BaTS III Series 2009-1”) for 100% of their principal amount, together with accrued and unpaid interest to the redemption date. The redemption will occur on June 30, 2019. Formal notice will be delivered to Scotia BaTS III Series 2009-1 holders in accordance with the terms of the offering.
Scotia BaTS III Series 2009-1 constitute Additional Tier 1 capital of the Bank. The principal amount of Scotia BaTS III Series 2009-1 is currently $650,000,000. The redemption of the Scotia BaTS III Series 2009-1 will be financed out of the general funds of Scotiabank Tier 1 Trust.
PerpetualDiscounts now yield 5.48%, equivalent to 7.12% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.66%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 345bp, a slight (and perhaps spurious) widening from the 340bp reported May 22.
| 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 | -0.3328 % | 2,036.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3328 % | 3,736.2 |
| Floater | 5.77 % | 6.11 % | 55,116 | 13.64 | 3 | -0.3328 % | 2,153.2 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0171 % | 3,306.2 |
| SplitShare | 4.70 % | 4.70 % | 77,215 | 4.27 | 7 | -0.0171 % | 3,948.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0171 % | 3,080.7 |
| Perpetual-Premium | 5.54 % | 4.91 % | 84,270 | 1.81 | 12 | 0.0132 % | 2,946.8 |
| Perpetual-Discount | 5.45 % | 5.48 % | 73,854 | 14.65 | 20 | -0.0684 % | 3,097.9 |
| FixedReset Disc | 5.43 % | 5.50 % | 151,928 | 14.68 | 63 | -0.9017 % | 2,112.5 |
| Deemed-Retractible | 5.23 % | 5.87 % | 97,023 | 8.00 | 27 | 0.0744 % | 3,083.7 |
| FloatingReset | 4.00 % | 4.44 % | 46,665 | 2.56 | 4 | -0.4504 % | 2,390.8 |
| FixedReset Prem | 5.13 % | 3.97 % | 228,376 | 2.11 | 21 | -0.0595 % | 2,580.3 |
| FixedReset Bank Non | 1.98 % | 4.06 % | 138,893 | 2.58 | 3 | -0.2501 % | 2,641.6 |
| FixedReset Ins Non | 5.18 % | 7.05 % | 104,500 | 8.19 | 22 | -0.6827 % | 2,196.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.I | FixedReset Ins Non | -4.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.17 Bid-YTW : 7.26 % |
| BMO.PR.Y | FixedReset Disc | -2.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 5.49 % |
| BAM.PR.R | FixedReset Disc | -2.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 14.80 Evaluated at bid price : 14.80 Bid-YTW : 6.36 % |
| CM.PR.Q | FixedReset Disc | -2.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 5.56 % |
| NA.PR.G | FixedReset Disc | -2.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 20.76 Evaluated at bid price : 20.76 Bid-YTW : 5.40 % |
| RY.PR.J | FixedReset Disc | -2.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.57 Evaluated at bid price : 19.57 Bid-YTW : 5.42 % |
| CM.PR.S | FixedReset Disc | -2.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 5.30 % |
| BAM.PR.T | FixedReset Disc | -2.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 15.05 Evaluated at bid price : 15.05 Bid-YTW : 6.35 % |
| MFC.PR.I | FixedReset Ins Non | -2.17 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.79 Bid-YTW : 7.19 % |
| MFC.PR.N | FixedReset Ins Non | -2.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 17.31 Bid-YTW : 8.18 % |
| SLF.PR.G | FixedReset Ins Non | -2.09 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.05 Bid-YTW : 9.43 % |
| BAM.PF.E | FixedReset Disc | -2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 16.20 Evaluated at bid price : 16.20 Bid-YTW : 6.41 % |
| TD.PF.D | FixedReset Disc | -1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 20.52 Evaluated at bid price : 20.52 Bid-YTW : 5.22 % |
| TD.PF.E | FixedReset Disc | -1.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 5.22 % |
| NA.PR.E | FixedReset Disc | -1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.25 Evaluated at bid price : 19.25 Bid-YTW : 5.50 % |
| RY.PR.M | FixedReset Disc | -1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.27 Evaluated at bid price : 19.27 Bid-YTW : 5.33 % |
| BAM.PF.F | FixedReset Disc | -1.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.78 Evaluated at bid price : 17.78 Bid-YTW : 6.25 % |
| TD.PF.I | FixedReset Disc | -1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 21.87 Evaluated at bid price : 22.20 Bid-YTW : 5.11 % |
| TD.PF.A | FixedReset Disc | -1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.75 Evaluated at bid price : 17.75 Bid-YTW : 5.34 % |
| BAM.PF.G | FixedReset Disc | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.77 Evaluated at bid price : 17.77 Bid-YTW : 6.24 % |
| BMO.PR.S | FixedReset Disc | -1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.88 Evaluated at bid price : 17.88 Bid-YTW : 5.39 % |
| TD.PF.C | FixedReset Disc | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.71 Evaluated at bid price : 17.71 Bid-YTW : 5.36 % |
| BAM.PF.H | FixedReset Prem | -1.33 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 4.75 % |
| NA.PR.S | FixedReset Disc | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.77 Evaluated at bid price : 17.77 Bid-YTW : 5.59 % |
| MFC.PR.J | FixedReset Ins Non | -1.27 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.14 Bid-YTW : 6.99 % |
| TD.PF.J | FixedReset Disc | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 5.19 % |
| EMA.PR.F | FixedReset Disc | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 5.83 % |
| BIP.PR.F | FixedReset Disc | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 6.31 % |
| BMO.PR.D | FixedReset Disc | -1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 21.42 Evaluated at bid price : 21.76 Bid-YTW : 5.33 % |
| CU.PR.H | Perpetual-Discount | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 23.85 Evaluated at bid price : 24.30 Bid-YTW : 5.41 % |
| BAM.PR.K | Floater | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 11.38 Evaluated at bid price : 11.38 Bid-YTW : 6.18 % |
| BIP.PR.D | FixedReset Disc | -1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 22.33 Evaluated at bid price : 22.80 Bid-YTW : 5.81 % |
| CM.PR.R | FixedReset Disc | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 21.75 Evaluated at bid price : 22.01 Bid-YTW : 5.48 % |
| TD.PF.B | FixedReset Disc | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 5.36 % |
| BMO.PR.C | FixedReset Disc | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 22.62 Evaluated at bid price : 23.30 Bid-YTW : 5.12 % |
| TRP.PR.E | FixedReset Disc | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 16.50 Evaluated at bid price : 16.50 Bid-YTW : 5.92 % |
| IFC.PR.G | FixedReset Ins Non | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.41 Bid-YTW : 7.05 % |
| TD.PF.K | FixedReset Disc | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 20.48 Evaluated at bid price : 20.48 Bid-YTW : 5.27 % |
| EIT.PR.B | SplitShare | 1.01 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2025-03-14 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 4.70 % |
| HSE.PR.C | FixedReset Disc | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 6.63 % |
| BIK.PR.A | FixedReset Prem | 1.17 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.85 Bid-YTW : 5.31 % |
| HSE.PR.G | FixedReset Disc | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.54 Evaluated at bid price : 19.54 Bid-YTW : 6.51 % |
| IAF.PR.I | FixedReset Ins Non | 1.38 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.03 Bid-YTW : 6.16 % |
| GWO.PR.S | Deemed-Retractible | 1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.75 % |
| PWF.PR.T | FixedReset Disc | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 5.41 % |
| HSE.PR.E | FixedReset Disc | 2.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 19.65 Evaluated at bid price : 19.65 Bid-YTW : 6.53 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.B | FixedReset Disc | 170,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 11.86 Evaluated at bid price : 11.86 Bid-YTW : 5.88 % |
| CU.PR.D | Perpetual-Discount | 160,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 22.31 Evaluated at bid price : 22.66 Bid-YTW : 5.42 % |
| CU.PR.H | Perpetual-Discount | 111,260 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 23.85 Evaluated at bid price : 24.30 Bid-YTW : 5.41 % |
| TRP.PR.C | FixedReset Disc | 106,300 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 12.84 Evaluated at bid price : 12.84 Bid-YTW : 5.84 % |
| BMO.PR.F | FixedReset Prem | 73,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 23.18 Evaluated at bid price : 25.05 Bid-YTW : 4.98 % |
| HSE.PR.C | FixedReset Disc | 48,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-05-29 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 6.63 % |
| There were 34 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 Ins Non | Quote: 19.17 – 19.95 Spot Rate : 0.7800 Average : 0.4711 YTW SCENARIO |
| NA.PR.G | FixedReset Disc | Quote: 20.76 – 21.34 Spot Rate : 0.5800 Average : 0.3969 YTW SCENARIO |
| PWF.PR.A | Floater | Quote: 13.06 – 13.62 Spot Rate : 0.5600 Average : 0.4182 YTW SCENARIO |
| BAM.PR.R | FixedReset Disc | Quote: 14.80 – 15.16 Spot Rate : 0.3600 Average : 0.2435 YTW SCENARIO |
| SLF.PR.G | FixedReset Ins Non | Quote: 14.05 – 14.46 Spot Rate : 0.4100 Average : 0.3076 YTW SCENARIO |
| CU.PR.C | FixedReset Disc | Quote: 17.60 – 17.99 Spot Rate : 0.3900 Average : 0.2925 YTW SCENARIO |