The BoC maintained the policy rate:
The Bank of Canada today maintained its target for the overnight rate at 1 ¾ percent. The Bank Rate is correspondingly 2 percent and the deposit rate is 1 ½ percent.
Evidence has been accumulating that ongoing trade tensions are having a material effect on the global economic outlook. The Bank had already incorporated such negative effects in previous Monetary Policy Reports (MPR) and in this forecast has made further adjustments in light of weaker sentiment and activity in major economies. Trade conflicts between the United States and China, in particular, are curbing manufacturing activity and business investment and pushing down commodity prices.
Policy is responding to the slowdown: central banks in the US and Europe have signalled their readiness to provide more accommodative monetary policy and further policy stimulus has been implemented in China. In this context, global financial conditions have eased substantially. The Bank now expects global GDP to grow by 3 percent in 2019 and to strengthen to around 3 ¼ percent in 2020 and 2021, with the US slowing to a pace near its potential. Escalation of trade conflicts remains the biggest downside risk to the global and Canadian outlooks.
Following temporary weakness in late 2018 and early 2019, Canada’s economy is returning to growth around potential, as expected. Growth in the second quarter appears to be stronger than predicted due to some temporary factors, including the reversal of weather-related slowdowns in the first quarter and a surge in oil production. Consumption is being supported by a healthy labour market. At the national level, the housing market is stabilizing, although there are still significant adjustments underway in some regions. A material decline in longer-term mortgage rates is supporting housing activity. Exports rebounded in the second quarter and will grow moderately as foreign demand continues to expand. However, ongoing trade conflicts and competitiveness challenges are dampening the outlook for trade and investment. The Bank projects real GDP growth to average 1.3 percent in 2019 and about 2 percent in 2020 and 2021.
Inflation remains around the 2 percent target, with some recent upward pressure from higher food and automobile prices. Core measures of inflation are also close to 2 percent. CPI inflation will likely dip this year because of the dynamics of gasoline prices and some other temporary factors. As slack in the economy is absorbed and these temporary effects wane, inflation is expected to return sustainably to 2 percent by mid-2020.
Recent data show the Canadian economy is returning to potential growth. However, the outlook is clouded by persistent trade tensions. Taken together, the degree of accommodation being provided by the current policy interest rate remains appropriate. As Governing Council continues to monitor incoming data, it will pay particular attention to developments in the energy sector and the impact of trade conflicts on the prospects for Canadian growth and inflation.
As usual, there was no record published of the votes, let alone a brief summary of any reasons for dissent. In order to get that, you need competence and confidence as qualities of your committee members.
Gundy’s trying to bring back preferred securitis:
CIBC World Markets Corp. says a new type of bond has opened up the debt markets to mid-sized companies seeking to issue debt without diluting existing shareholders’ stakes.
The listed bonds, which were pioneered by CIBC, are similar to convertible debentures in that they trade on an exchange, making them more accessible to yield-hungry retail investors looking to invest in familiar names. But unlike convertible bonds, these offerings can’t be converted into equity, nor do they come with warrants attached, so current shareholders won’t experience dilution.
CIBC has done four such deals in recent months, and the bank predicts more to come. The latest, a $100-million bought deal for Fiera Capital Corp. bearing a 5.6-per-cent interest rate, started trading last week.
…
Referred to as senior subordinated unsecured debentures, the bonds rank below bank debt but above some types of capital markets debt, Mr. Swan said.
Exchange-traded bonds are hardly novel, but they get full marks for trying to reintroduce them. It would be nice to see a return of the preferred securities market, but maybe that comes later. I am not permitted to link directly to the Fiera Capital issue’s prospectus, since the regulators believe that access to public documents is too precious for the public to have convenient access, but go to SEDAR and search for “Fiera Capital Corporation (formerly Fiera Sceptre Inc.) Jun 18 2019 15:42:29 ET Preliminary short form prospectus – English PDF 264 K”
PerpetualDiscounts now yield 5.53%, equivalent to 7.19% interest at the standard equivalency factor of 1.3x. Long corporates now yield 3.42%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 375bp, significantly narrower than the 385bp reported July 3.
| 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 | 0.0877 % | 1,965.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0877 % | 3,606.2 |
| Floater | 6.06 % | 6.22 % | 37,451 | 13.59 | 4 | 0.0877 % | 2,078.3 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0791 % | 3,335.0 |
| SplitShare | 4.67 % | 4.69 % | 80,100 | 4.16 | 7 | -0.0791 % | 3,982.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0791 % | 3,107.4 |
| Perpetual-Premium | 5.63 % | -18.38 % | 58,422 | 0.09 | 7 | 0.0113 % | 2,974.0 |
| Perpetual-Discount | 5.47 % | 5.53 % | 63,658 | 14.59 | 25 | 0.1045 % | 3,110.6 |
| FixedReset Disc | 5.37 % | 5.34 % | 164,541 | 14.81 | 69 | -0.5239 % | 2,140.4 |
| Deemed-Retractible | 5.23 % | 5.90 % | 71,541 | 8.00 | 27 | 0.0918 % | 3,107.8 |
| FloatingReset | 4.04 % | 4.34 % | 43,317 | 2.47 | 4 | 0.0000 % | 2,362.6 |
| FixedReset Prem | 5.14 % | 3.69 % | 172,281 | 1.94 | 17 | -0.0756 % | 2,591.4 |
| FixedReset Bank Non | 1.99 % | 4.34 % | 104,473 | 2.47 | 3 | -0.1814 % | 2,641.7 |
| FixedReset Ins Non | 5.22 % | 7.47 % | 93,605 | 8.04 | 22 | -0.1787 % | 2,182.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PF.A | FixedReset Disc | -2.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 19.17 Evaluated at bid price : 19.17 Bid-YTW : 6.05 % |
| BIP.PR.A | FixedReset Disc | -2.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 18.86 Evaluated at bid price : 18.86 Bid-YTW : 6.79 % |
| TD.PF.D | FixedReset Disc | -1.90 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 20.17 Evaluated at bid price : 20.17 Bid-YTW : 5.33 % |
| NA.PR.G | FixedReset Disc | -1.89 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 5.37 % |
| IAF.PR.B | Deemed-Retractible | -1.79 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.41 Bid-YTW : 6.56 % |
| SLF.PR.I | FixedReset Ins Non | -1.71 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.92 Bid-YTW : 7.56 % |
| RY.PR.M | FixedReset Disc | -1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 19.60 Evaluated at bid price : 19.60 Bid-YTW : 5.33 % |
| SLF.PR.B | Deemed-Retractible | -1.60 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.15 Bid-YTW : 6.35 % |
| NA.PR.C | FixedReset Disc | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 21.48 Evaluated at bid price : 21.84 Bid-YTW : 5.55 % |
| CM.PR.R | FixedReset Disc | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 21.41 Evaluated at bid price : 21.75 Bid-YTW : 5.54 % |
| BMO.PR.E | FixedReset Disc | -1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 5.24 % |
| BAM.PF.B | FixedReset Disc | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 5.97 % |
| TRP.PR.E | FixedReset Disc | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 16.25 Evaluated at bid price : 16.25 Bid-YTW : 6.01 % |
| TRP.PR.G | FixedReset Disc | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 18.51 Evaluated at bid price : 18.51 Bid-YTW : 6.09 % |
| TD.PF.J | FixedReset Disc | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 21.17 Evaluated at bid price : 21.17 Bid-YTW : 5.13 % |
| PWF.PR.P | FixedReset Disc | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 13.26 Evaluated at bid price : 13.26 Bid-YTW : 5.80 % |
| CM.PR.P | FixedReset Disc | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 17.30 Evaluated at bid price : 17.30 Bid-YTW : 5.48 % |
| TD.PF.K | FixedReset Disc | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 20.72 Evaluated at bid price : 20.72 Bid-YTW : 5.17 % |
| BMO.PR.W | FixedReset Disc | -1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 17.42 Evaluated at bid price : 17.42 Bid-YTW : 5.48 % |
| MFC.PR.I | FixedReset Ins Non | -1.17 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.36 Bid-YTW : 7.60 % |
| CU.PR.C | FixedReset Disc | -1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 17.85 Evaluated at bid price : 17.85 Bid-YTW : 5.46 % |
| CM.PR.S | FixedReset Disc | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 19.26 Evaluated at bid price : 19.26 Bid-YTW : 5.34 % |
| TRP.PR.D | FixedReset Disc | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 5.86 % |
| BMO.PR.C | FixedReset Disc | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 22.48 Evaluated at bid price : 23.05 Bid-YTW : 5.26 % |
| GWO.PR.G | Deemed-Retractible | 1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 5.90 % |
| IFC.PR.F | Deemed-Retractible | 1.04 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.25 Bid-YTW : 5.74 % |
| CU.PR.G | Perpetual-Discount | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 5.42 % |
| SLF.PR.C | Deemed-Retractible | 1.42 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.46 Bid-YTW : 6.36 % |
| TRP.PR.A | FixedReset Disc | 1.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 14.25 Evaluated at bid price : 14.25 Bid-YTW : 6.12 % |
| EMA.PR.F | FixedReset Disc | 1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 17.51 Evaluated at bid price : 17.51 Bid-YTW : 6.06 % |
| SLF.PR.G | FixedReset Ins Non | 1.45 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 14.00 Bid-YTW : 9.66 % |
| BAM.PF.E | FixedReset Disc | 1.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 16.85 Evaluated at bid price : 16.85 Bid-YTW : 6.15 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.H | FixedReset Prem | 208,665 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 4.26 % |
| TRP.PR.D | FixedReset Disc | 81,597 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 5.86 % |
| BIP.PR.C | FixedReset Prem | 58,100 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 5.45 % |
| BMO.PR.F | FixedReset Disc | 41,872 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 23.19 Evaluated at bid price : 25.05 Bid-YTW : 5.05 % |
| SLF.PR.B | Deemed-Retractible | 39,500 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.15 Bid-YTW : 6.35 % |
| TD.PF.A | FixedReset Disc | 38,903 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-07-10 Maturity Price : 18.04 Evaluated at bid price : 18.04 Bid-YTW : 5.25 % |
| There were 16 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IAF.PR.B | Deemed-Retractible | Quote: 21.41 – 22.12 Spot Rate : 0.7100 Average : 0.5346 YTW SCENARIO |
| SLF.PR.B | Deemed-Retractible | Quote: 22.15 – 22.60 Spot Rate : 0.4500 Average : 0.2776 YTW SCENARIO |
| PVS.PR.F | SplitShare | Quote: 25.22 – 25.60 Spot Rate : 0.3800 Average : 0.2507 YTW SCENARIO |
| TD.PF.D | FixedReset Disc | Quote: 20.17 – 20.60 Spot Rate : 0.4300 Average : 0.3087 YTW SCENARIO |
| GWO.PR.F | Deemed-Retractible | Quote: 25.70 – 26.10 Spot Rate : 0.4000 Average : 0.2844 YTW SCENARIO |
| PWF.PR.P | FixedReset Disc | Quote: 13.26 – 13.78 Spot Rate : 0.5200 Average : 0.4146 YTW SCENARIO |