The Bank of Canada maintained its policy rates:
The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds.
Both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR), with activity bouncing back as countries lift containment measures. The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.
The rebound in the United States has been stronger than expected, while economic performance among emerging markets has been more mixed. Global financial conditions have remained accommodative. Although prices for some commodities have firmed, oil prices remain weak.
In Canada, real GDP fell by 11.5 percent (39 percent annualized) in the second quarter, resulting in a decline of just over 13 percent in the first half of the year, largely in line with the Bank’s July MPR central scenario. All components of aggregate demand weakened, as expected.
As the economy reopens, the bounce-back in activity in the third quarter looks to be faster than anticipated in July. Economic activity has been supported by government programs to replace incomes and subsidize wages. Core funding markets are functioning well, and this has led to a decline in the use of the Bank’s short-term liquidity programs. Monetary policy is working to support household spending and business investment by making borrowing more affordable.
Household spending rebounded sharply over the summer, with stronger-than-expected goods consumption and housing activity largely reflecting pent-up demand. There has also been a large but uneven rebound in employment. Exports are recovering in response to strengthening foreign demand, but are still well below pre-pandemic levels. Business confidence and investment remain subdued. While recent data during the reopening phase is encouraging, the Bank continues to expect the recuperation phase to be slow and choppy as the economy copes with ongoing uncertainty and structural challenges.
CPI inflation is close to zero, with downward pressure from energy prices and travel services, and is expected to remain well below target in the near term. Measures of core inflation are between 1.3 percent and 1.9 percent, reflecting the large degree of economic slack, with the core measure most influenced by services prices showing the weakest growth.
As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. To reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at the current pace. This QE program will continue until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective.
BMO finally announced its LRCN issue which was discussed here yesterday:
Bank of Montreal (TSX:BMO, NYSE:BMO or the “Bank”) today announced the offering of C$1.25 billion of non-viability contingent capital (“NVCC”) Additional Tier 1 (AT1) Limited Recourse Capital Notes, Series 1 (the “LRCNs”).
The LRCNs will bear interest at a rate of 4.300 per cent annually, payable semi-annually, for the initial period ending November 26, 2025. Thereafter, the interest rate on the LRCNs will reset every five years at a rate equal to the prevailing 5-year Government of Canada Yield plus 3.938 per cent. The LRCNs will mature on November 26, 2080. The expected closing date of the offering is September 16, 2020.
Concurrently with the issuance of the LRCNs, the Bank will issue NVCC Non-Cumulative 5-Year Fixed Rate Reset First Preferred Shares, Series 48 (“Preferred Shares Series 48”) to be held by Computershare Trust Company of Canada as trustee for a newly formed trust (the “Limited Recourse Trust”). In case of non-payment of interest on or principal of the LRCNs when due, the recourse of each LRCN holder will be limited to that holder’s proportionate share of the Limited Recourse Trust’s assets, which will consist of Preferred Shares Series 48 except in limited circumstances.
The Notes may be redeemed at the option of the Bank, with the prior written approval of the Superintendent of Financial Institutions (Canada), in whole or in part, on not less than 15 nor more than 60 days’ prior notice, every five years during the period from October 26 to and including November 26, commencing in 2025.
Net proceeds from this transaction will be used for general banking purposes.
DBRS rated a CIBC LRCN Issue at BBB(high):
DBRS Limited (DBRS Morningstar) assigned a provisional rating of BBB (high) with a Stable trend to Canadian Imperial Bank of Commerce’s (CIBC or the Bank) NVCC Additional Tier 1 (AT1) Limited Recourse Capital Notes Series 1 (the Capital Notes). DBRS Morningstar assigned the rating equal to the Bank’s Intrinsic Assessment of AA (low) less four rating notches, which is consistent with DBRS Morningstar’s standard notching for capital instruments with contingent risks and its ratings for the Bank’s NVCC Preferred Shares. This is one notch below the rating of CIBC’s NVCC Subordinated Debt.
DBRS Morningstar notes that the Capital Notes were granted Tier 1 capital treatment by the Office of the Superintendent of Financial Institutions.
… while S&P rates them at BB+:
S&P Global Ratings today said it assigned its ‘BB+’ issue-level rating to Canadian Imperial Bank of Commerce’s (CIBC; A+/Stable/A-1) Canadian dollar-denominated Additional Tier I Limited Recourse Capital Notes. Under this structure, a trust has been established where the bank is the sole beneficiary. Investors of the notes will have recourse only to the assets held by the trust. At the same time, S&P Global Ratings assigned its ‘BB+’ issue-level rating to the bank’s preferred shares, which will reside in the trust.
In accordance with our criteria for hybrid and other capital instruments, the rating reflects our analysis of the proposed instrument, and our assessment of CIBC ‘a-‘ stand-alone credit profile (SACP).
And the National Bank issue announced September 1 (discussed September 2) has closed and its DBRS rating has finalized.
PerpetualDiscounts now yield 5.33%, equivalent to 6.93% interest at the standard equivalency factor of 1.3x. Long corporates now yield 2.97%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed sharply to 395bp from the 415bp reported September 2.
| 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 | 0.0388 % | 1,673.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0388 % | 3,070.1 |
| Floater | 4.99 % | 5.07 % | 60,641 | 15.28 | 3 | 0.0388 % | 1,769.3 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0906 % | 3,534.7 |
| SplitShare | 4.81 % | 4.56 % | 41,436 | 3.67 | 7 | 0.0906 % | 4,221.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0906 % | 3,293.5 |
| Perpetual-Premium | 5.36 % | 4.72 % | 76,038 | 2.73 | 17 | 0.0140 % | 3,116.7 |
| Perpetual-Discount | 5.26 % | 5.33 % | 84,874 | 14.86 | 17 | 0.2399 % | 3,472.5 |
| FixedReset Disc | 5.44 % | 4.21 % | 125,158 | 16.29 | 68 | -0.2553 % | 2,098.2 |
| Deemed-Retractible | 5.06 % | 4.93 % | 113,530 | 15.13 | 27 | 0.5800 % | 3,423.6 |
| FloatingReset | 2.85 % | 2.42 % | 50,460 | 1.37 | 3 | 0.0224 % | 1,803.0 |
| FixedReset Prem | 5.28 % | 4.63 % | 230,936 | 0.90 | 11 | 0.0433 % | 2,606.8 |
| FixedReset Bank Non | 1.95 % | 2.49 % | 135,675 | 1.37 | 2 | 0.0202 % | 2,837.2 |
| FixedReset Ins Non | 5.70 % | 4.40 % | 92,356 | 16.25 | 22 | -0.3427 % | 2,112.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.G | FixedReset Ins Non | -3.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 10.00 Evaluated at bid price : 10.00 Bid-YTW : 4.47 % |
| BAM.PF.I | FixedReset Disc | -3.69 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.08 Evaluated at bid price : 23.50 Bid-YTW : 5.18 % |
| BIP.PR.A | FixedReset Disc | -2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 5.81 % |
| MFC.PR.G | FixedReset Ins Non | -2.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 4.36 % |
| TRP.PR.G | FixedReset Disc | -2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 14.26 Evaluated at bid price : 14.26 Bid-YTW : 5.87 % |
| BAM.PF.G | FixedReset Disc | -2.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 15.38 Evaluated at bid price : 15.38 Bid-YTW : 5.33 % |
| IFC.PR.G | FixedReset Ins Non | -1.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 18.01 Evaluated at bid price : 18.01 Bid-YTW : 4.56 % |
| NA.PR.E | FixedReset Disc | -1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.24 % |
| CM.PR.S | FixedReset Disc | -1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 18.76 Evaluated at bid price : 18.76 Bid-YTW : 4.10 % |
| CM.PR.P | FixedReset Disc | -1.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 17.51 Evaluated at bid price : 17.51 Bid-YTW : 4.21 % |
| BAM.PF.F | FixedReset Disc | -1.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 16.51 Evaluated at bid price : 16.51 Bid-YTW : 5.27 % |
| TD.PF.D | FixedReset Disc | -1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 4.06 % |
| BAM.PF.A | FixedReset Disc | -1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 17.45 Evaluated at bid price : 17.45 Bid-YTW : 5.25 % |
| BMO.PR.T | FixedReset Disc | -1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 17.00 Evaluated at bid price : 17.00 Bid-YTW : 4.16 % |
| BMO.PR.W | FixedReset Disc | -1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 4.03 % |
| SLF.PR.I | FixedReset Ins Non | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 18.30 Evaluated at bid price : 18.30 Bid-YTW : 4.30 % |
| BAM.PF.J | FixedReset Disc | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 22.73 Evaluated at bid price : 23.33 Bid-YTW : 5.15 % |
| IAF.PR.B | Deemed-Retractible | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 22.44 Evaluated at bid price : 22.70 Bid-YTW : 5.06 % |
| RY.PR.J | FixedReset Disc | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 3.93 % |
| BIP.PR.B | FixedReset Disc | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.35 Evaluated at bid price : 24.25 Bid-YTW : 5.64 % |
| MFC.PR.F | FixedReset Ins Non | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 10.07 Evaluated at bid price : 10.07 Bid-YTW : 4.45 % |
| TRP.PR.A | FixedReset Disc | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 12.20 Evaluated at bid price : 12.20 Bid-YTW : 5.31 % |
| TD.PF.B | FixedReset Disc | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 17.81 Evaluated at bid price : 17.81 Bid-YTW : 4.03 % |
| MFC.PR.I | FixedReset Ins Non | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 4.28 % |
| CU.PR.I | FixedReset Disc | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.87 Evaluated at bid price : 24.75 Bid-YTW : 4.52 % |
| BIK.PR.A | FixedReset Disc | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.27 Evaluated at bid price : 24.90 Bid-YTW : 5.81 % |
| GWO.PR.G | Deemed-Retractible | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 24.55 Evaluated at bid price : 24.80 Bid-YTW : 5.24 % |
| GWO.PR.H | Deemed-Retractible | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.43 Evaluated at bid price : 23.72 Bid-YTW : 5.11 % |
| BAM.PR.T | FixedReset Disc | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 13.67 Evaluated at bid price : 13.67 Bid-YTW : 5.14 % |
| SLF.PR.D | Deemed-Retractible | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 22.28 Evaluated at bid price : 22.55 Bid-YTW : 4.93 % |
| SLF.PR.C | Deemed-Retractible | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 22.21 Evaluated at bid price : 22.48 Bid-YTW : 4.94 % |
| MFC.PR.C | Deemed-Retractible | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 22.71 Evaluated at bid price : 22.95 Bid-YTW : 4.91 % |
| GWO.PR.P | Deemed-Retractible | 1.20 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-10-09 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : -7.92 % |
| PWF.PR.T | FixedReset Disc | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 16.40 Evaluated at bid price : 16.40 Bid-YTW : 4.64 % |
| TD.PF.L | FixedReset Disc | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.11 Evaluated at bid price : 24.50 Bid-YTW : 3.95 % |
| GWO.PR.T | Deemed-Retractible | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 24.32 Evaluated at bid price : 24.81 Bid-YTW : 5.18 % |
| SLF.PR.B | Deemed-Retractible | 1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 24.22 Evaluated at bid price : 24.48 Bid-YTW : 4.90 % |
| MFC.PR.M | FixedReset Ins Non | 1.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 16.73 Evaluated at bid price : 16.73 Bid-YTW : 4.44 % |
| CU.PR.C | FixedReset Disc | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 16.00 Evaluated at bid price : 16.00 Bid-YTW : 4.43 % |
| BIP.PR.F | FixedReset Disc | 1.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 21.84 Evaluated at bid price : 22.15 Bid-YTW : 5.76 % |
| MFC.PR.Q | FixedReset Ins Non | 2.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 4.32 % |
| BAM.PR.X | FixedReset Disc | 2.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 11.45 Evaluated at bid price : 11.45 Bid-YTW : 4.94 % |
| CCS.PR.C | Deemed-Retractible | 3.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 5.32 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.H | FixedReset Prem | 405,040 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.79 Evaluated at bid price : 25.05 Bid-YTW : 4.54 % |
| RY.PR.W | Perpetual-Premium | 288,100 | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-10-09 Maturity Price : 25.00 Evaluated at bid price : 25.09 Bid-YTW : 3.14 % |
| TD.PF.H | FixedReset Prem | 163,075 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 23.88 Evaluated at bid price : 25.05 Bid-YTW : 4.47 % |
| BNS.PR.F | FloatingReset | 150,700 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.72 Bid-YTW : 2.42 % |
| RY.PR.C | Deemed-Retractible | 68,387 | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-10-09 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 3.66 % |
| TD.PF.J | FixedReset Disc | 54,090 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-09 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 3.94 % |
| There were 23 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.J | FixedReset Ins Non | Quote: 16.07 – 18.65 Spot Rate : 2.5800 Average : 2.0412 YTW SCENARIO |
| BAM.PF.I | FixedReset Disc | Quote: 23.50 – 24.50 Spot Rate : 1.0000 Average : 0.5777 YTW SCENARIO |
| TRP.PR.A | FixedReset Disc | Quote: 12.20 – 12.99 Spot Rate : 0.7900 Average : 0.4871 YTW SCENARIO |
| BAM.PR.X | FixedReset Disc | Quote: 11.45 – 12.50 Spot Rate : 1.0500 Average : 0.7522 YTW SCENARIO |
| CM.PR.O | FixedReset Disc | Quote: 17.50 – 18.17 Spot Rate : 0.6700 Average : 0.4310 YTW SCENARIO |
| NA.PR.E | FixedReset Disc | Quote: 18.90 – 19.50 Spot Rate : 0.6000 Average : 0.3763 YTW SCENARIO |