August 13, 2019

Hostilities cooled in the trade war:

The Trump administration on Tuesday delayed imposing a 10 per cent import tariff on laptops, cellphones, video game consoles and a wide range of other products made in China, in an abrupt pullback from a hard line stance on Chinese trade.

The U.S. Trade Representative’s Office action was published just minutes after China’s Ministry of Commerce said Vice Premier Liu He conducted a phone call with U.S. trade officials.

The delay in the tariffs that had been scheduled to start next month provides some relief to retailers. Although most stores would have stocked their holiday merchandise before the earlier September deadline, some might have faced the tariffs for fill-in orders late in the holiday shopping season.

“We’re doing this for the Christmas season, just in case some of the tariffs would have an impact on U.S. customers” President Donald Trump told reporters as he prepared to depart from New Jersey for an event in Pittsburgh.

For what it’s worth, I will note that Trump has an election to fight next year – and the concept of ‘voting with your pocketbook’ is so well-known it’s trite. So I believe that Trump will win a headline concession from China (never mind all the fine print), declare victory and lift the tariffs well before the election. I’d be hesitant to estimate a probability for that scenario, though!

The Treasury market, though, ignored my prating as usual and flattened:

The U.S. Treasury yield curve hit its flattest level in more than 12 years on Tuesday, suggesting increased market anxiety over the state of the economy amid trade war concerns and global political tensions.

The spread between U.S. 2-year and 10-year note yields, a closely watched metric for recession signals, declined to 0.6 basis point, the narrowest since June 2007, according to Refinitiv data. The last time this yield curve inverted was also in June 2007 in the midst of the U.S. sub-prime mortgage crisis

Despite weak signals from the yield curve, U.S. yields rose across the board on Tuesday after the Trump administration delayed imposing a 10% import tariff on laptops, cellphones, video game consoles and a wide range of other products made in China. Analysts said the U.S. move served to ease trade tensions between the two world’s largest economies, at least for now.

U.S. two-year and 10-year note yields hit session highs after the trade news, while those on 30-year bonds rallied from more than three-year lows. Traders earlier were bracing for 30-year yields sinking to a record low below 2.08%.

The Labor Department said the U.S. consumer price index climbed 0.3% last month, lifted by gains in the cost of energy products and a range of other goods. Excluding the volatile food and energy components, the CPI gained 0.3% after rising by the same margin in June.

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 0.0686 % 1,891.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0686 % 3,470.1
Floater 6.32 % 6.48 % 39,727 13.16 4 0.0686 % 1,999.8
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0678 % 3,335.2
SplitShare 4.67 % 4.74 % 66,893 4.07 7 -0.0678 % 3,982.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0678 % 3,107.6
Perpetual-Premium 5.61 % -13.06 % 53,256 0.09 9 0.0219 % 2,987.8
Perpetual-Discount 5.45 % 5.53 % 56,892 14.64 25 -0.0458 % 3,127.6
FixedReset Disc 5.71 % 5.41 % 147,511 14.87 66 0.4569 % 2,038.4
Deemed-Retractible 5.24 % 5.96 % 64,179 7.89 27 0.0443 % 3,110.9
FloatingReset 4.59 % 7.05 % 63,340 7.99 3 0.2993 % 2,308.6
FixedReset Prem 5.16 % 4.40 % 164,425 1.92 21 0.0150 % 2,579.7
FixedReset Bank Non 1.99 % 4.30 % 84,377 2.39 3 0.0699 % 2,648.4
FixedReset Ins Non 5.45 % 8.00 % 97,150 7.99 21 -0.0338 % 2,089.3
Performance Highlights
Issue Index Change Notes
IFC.PR.G FixedReset Ins Non -3.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.46
Bid-YTW : 8.16 %
TRP.PR.B FixedReset Disc -2.76 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 10.21
Evaluated at bid price : 10.21
Bid-YTW : 6.15 %
SLF.PR.I FixedReset Ins Non -1.85 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.57
Bid-YTW : 7.61 %
CU.PR.H Perpetual-Discount -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 23.74
Evaluated at bid price : 24.20
Bid-YTW : 5.42 %
IAF.PR.G FixedReset Ins Non -1.57 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.45
Bid-YTW : 7.10 %
TRP.PR.D FixedReset Disc -1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 15.26
Evaluated at bid price : 15.26
Bid-YTW : 6.09 %
BMO.PR.Z Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 24.03
Evaluated at bid price : 24.50
Bid-YTW : 5.10 %
NA.PR.E FixedReset Disc 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 5.42 %
RY.PR.M FixedReset Disc 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 17.81
Evaluated at bid price : 17.81
Bid-YTW : 5.38 %
CCS.PR.C Deemed-Retractible 1.24 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.43
Bid-YTW : 5.40 %
TRP.PR.A FixedReset Disc 1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 12.81
Evaluated at bid price : 12.81
Bid-YTW : 6.22 %
TD.PF.J FixedReset Disc 1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 20.34
Evaluated at bid price : 20.34
Bid-YTW : 5.05 %
HSE.PR.A FixedReset Disc 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 11.21
Evaluated at bid price : 11.21
Bid-YTW : 6.52 %
BAM.PR.Z FixedReset Disc 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 17.77
Evaluated at bid price : 17.77
Bid-YTW : 6.13 %
CM.PR.S FixedReset Disc 2.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 17.85
Evaluated at bid price : 17.85
Bid-YTW : 5.43 %
HSE.PR.G FixedReset Disc 2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 17.75
Evaluated at bid price : 17.75
Bid-YTW : 6.77 %
BMO.PR.C FixedReset Disc 2.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 21.56
Evaluated at bid price : 21.95
Bid-YTW : 5.16 %
HSE.PR.C FixedReset Disc 2.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 16.78
Evaluated at bid price : 16.78
Bid-YTW : 6.59 %
IFC.PR.C FixedReset Ins Non 2.96 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.05
Bid-YTW : 8.47 %
CM.PR.P FixedReset Disc 3.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 16.24
Evaluated at bid price : 16.24
Bid-YTW : 5.38 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.A FixedReset Disc 77,207 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 17.04
Evaluated at bid price : 17.04
Bid-YTW : 5.10 %
BAM.PR.X FixedReset Disc 73,815 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 12.51
Evaluated at bid price : 12.51
Bid-YTW : 6.01 %
RY.PR.J FixedReset Disc 61,939 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 18.35
Evaluated at bid price : 18.35
Bid-YTW : 5.39 %
MFC.PR.J FixedReset Ins Non 59,176 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.51
Bid-YTW : 8.06 %
BAM.PF.G FixedReset Disc 52,826 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 16.50
Evaluated at bid price : 16.50
Bid-YTW : 6.28 %
TD.PF.B FixedReset Disc 43,107 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 17.38
Evaluated at bid price : 17.38
Bid-YTW : 5.13 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IFC.PR.G FixedReset Ins Non Quote: 18.46 – 19.49
Spot Rate : 1.0300
Average : 0.6139

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.46
Bid-YTW : 8.16 %

BIP.PR.C FixedReset Prem Quote: 24.95 – 25.33
Spot Rate : 0.3800
Average : 0.2615

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-09-30
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 5.81 %

BAM.PR.R FixedReset Disc Quote: 14.39 – 14.69
Spot Rate : 0.3000
Average : 0.1905

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 14.39
Evaluated at bid price : 14.39
Bid-YTW : 6.09 %

CU.PR.H Perpetual-Discount Quote: 24.20 – 24.55
Spot Rate : 0.3500
Average : 0.2510

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 23.74
Evaluated at bid price : 24.20
Bid-YTW : 5.42 %

CU.PR.C FixedReset Disc Quote: 16.45 – 16.73
Spot Rate : 0.2800
Average : 0.1844

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 5.45 %

EMA.PR.H FixedReset Disc Quote: 24.52 – 24.83
Spot Rate : 0.3100
Average : 0.2146

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-08-13
Maturity Price : 23.07
Evaluated at bid price : 24.52
Bid-YTW : 4.94 %

3 Responses to “August 13, 2019”

  1. Jingaly says:

    Question for James please: can you repost a link to an analysis you did on determining the break even 5yr GC value where an investor would be indifferent between two issues: one with a min rate floor guarantee and the other with none? I think this was in the comments section a few months ago. Thanks very much.

  2. jiHymas says:

    can you repost a link to an analysis you did on determining the break even 5yr GC value where an investor would be indifferent between two issues: one with a min rate floor guarantee and the other with none?

    Do you mean this comment?

  3. Jingaly says:

    Yes thank you!!!

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