Canadian inflation is quiescent:
Statistics Canada reported Wednesday that the consumer price index (CPI) 12-month inflation rate was just 0.1 per cent in August, the second straight month at that low level, amid slumping prices for air travel and at the gas pumps. On a month-over-month basis, the index actually fell 0.1 per cent in August from July.
…
However, the central bank’s three measures of “core” inflation – aimed at filtering out transitory price swings in segments of the CPI – look healthier than the pandemic-distorted CPI number, averaging 1.7 per cent, up from 1.6 per cent in July.
…
The pandemic’s impacts on the inflation picture were most evident in prices for two key consumer products that typically rise in the summer due to high demand: Airline tickets were down 16 per cent in August compared with a year earlier, while gasoline was down 11 per cent.Statscan said that excluding gasoline – a major component of the CPI – year-over-year inflation was 0.6 per cent in August, down from 0.7 per cent in July.
And the FOMC issued a statement after its meeting:
The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.
The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have picked up in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Loretta J. Mester; and Randal K. Quarles.
Voting against the action were Robert S. Kaplan, who expects that it will be appropriate to maintain the current target range until the Committee is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals as articulated in its new policy strategy statement, but prefers that the Committee retain greater policy rate flexibility beyond that point; and Neel Kashkari, who prefers that the Committee to indicate that it expects to maintain the current target range until core inflation has reached 2 percent on a sustained basis.
So, not much change in Fed monetary policy, as expected; and as usual the most interesting part of the release is the list of dissenters and their rationale.
PerpetualDiscounts now yield 5.31%, equivalent to 6.90% interest at the standard equivalency factor of 1.3x. Long corporates now yield 2.88%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened slightly (and perhaps spuriously) to 400bp from the 395bp reported September 9.
| 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 | -0.8682 % | 1,661.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.8682 % | 3,049.3 |
| Floater | 5.12 % | 5.13 % | 61,572 | 15.31 | 3 | -0.8682 % | 1,757.3 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1412 % | 3,535.9 |
| SplitShare | 4.81 % | 4.35 % | 43,258 | 3.65 | 7 | -0.1412 % | 4,222.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1412 % | 3,294.6 |
| Perpetual-Premium | 5.35 % | 4.88 % | 79,790 | 6.84 | 17 | 0.1469 % | 3,120.8 |
| Perpetual-Discount | 5.23 % | 5.31 % | 94,008 | 14.93 | 17 | 0.1887 % | 3,504.0 |
| FixedReset Disc | 5.43 % | 4.19 % | 126,115 | 16.36 | 68 | 0.2272 % | 2,106.1 |
| Deemed-Retractible | 5.03 % | 4.88 % | 114,225 | 15.10 | 27 | 0.1340 % | 3,448.2 |
| FloatingReset | 2.86 % | 2.53 % | 49,518 | 1.35 | 3 | 0.1344 % | 1,801.7 |
| FixedReset Prem | 5.26 % | 4.49 % | 257,451 | 0.88 | 11 | 0.1655 % | 2,616.9 |
| FixedReset Bank Non | 1.95 % | 2.43 % | 127,509 | 1.35 | 2 | 0.1212 % | 2,838.9 |
| FixedReset Ins Non | 5.73 % | 4.45 % | 85,877 | 16.18 | 22 | 0.3249 % | 2,109.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.G | FixedReset Ins Non | -3.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 9.98 Evaluated at bid price : 9.98 Bid-YTW : 4.48 % |
| BAM.PF.I | FixedReset Disc | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 23.60 Evaluated at bid price : 24.00 Bid-YTW : 4.99 % |
| TD.PF.A | FixedReset Disc | -1.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 17.55 Evaluated at bid price : 17.55 Bid-YTW : 4.08 % |
| TD.PF.L | FixedReset Disc | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 22.98 Evaluated at bid price : 24.20 Bid-YTW : 4.02 % |
| TRP.PR.B | FixedReset Disc | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 8.85 Evaluated at bid price : 8.85 Bid-YTW : 4.69 % |
| NA.PR.E | FixedReset Disc | -1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 4.24 % |
| IAF.PR.I | FixedReset Ins Non | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 4.27 % |
| MFC.PR.J | FixedReset Ins Non | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 18.10 Evaluated at bid price : 18.10 Bid-YTW : 4.45 % |
| CU.PR.C | FixedReset Disc | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 16.19 Evaluated at bid price : 16.19 Bid-YTW : 4.38 % |
| BAM.PR.Z | FixedReset Disc | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 16.90 Evaluated at bid price : 16.90 Bid-YTW : 5.22 % |
| MFC.PR.N | FixedReset Ins Non | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 16.25 Evaluated at bid price : 16.25 Bid-YTW : 4.49 % |
| SLF.PR.J | FloatingReset | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 9.69 Evaluated at bid price : 9.69 Bid-YTW : 4.02 % |
| IFC.PR.I | Perpetual-Premium | 1.75 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2029-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 5.08 % |
| TRP.PR.A | FixedReset Disc | 1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 12.00 Evaluated at bid price : 12.00 Bid-YTW : 5.42 % |
| IFC.PR.F | Deemed-Retractible | 1.81 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-09-30 Maturity Price : 25.25 Evaluated at bid price : 25.30 Bid-YTW : 5.19 % |
| BAM.PR.R | FixedReset Disc | 1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 13.15 Evaluated at bid price : 13.15 Bid-YTW : 5.10 % |
| BAM.PR.T | FixedReset Disc | 2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 13.30 Evaluated at bid price : 13.30 Bid-YTW : 5.19 % |
| BAM.PF.A | FixedReset Disc | 2.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 17.61 Evaluated at bid price : 17.61 Bid-YTW : 5.08 % |
| TD.PF.J | FixedReset Disc | 3.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 4.02 % |
| MFC.PR.I | FixedReset Ins Non | 4.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 18.88 Evaluated at bid price : 18.88 Bid-YTW : 4.44 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.G | FixedReset Prem | 74,500 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.35 Bid-YTW : 4.32 % |
| BAM.PF.A | FixedReset Disc | 68,629 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 17.61 Evaluated at bid price : 17.61 Bid-YTW : 5.08 % |
| SLF.PR.C | Deemed-Retractible | 34,142 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 22.69 Evaluated at bid price : 22.98 Bid-YTW : 4.84 % |
| BMO.PR.B | FixedReset Prem | 32,600 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : 4.27 % |
| IFC.PR.I | Perpetual-Premium | 31,923 | YTW SCENARIO Maturity Type : Call Maturity Date : 2029-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.56 Bid-YTW : 5.08 % |
| TRP.PR.D | FixedReset Disc | 28,850 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2050-09-16 Maturity Price : 14.00 Evaluated at bid price : 14.00 Bid-YTW : 5.42 % |
| There were 18 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| EIT.PR.A | SplitShare | Quote: 25.39 – 27.00 Spot Rate : 1.6100 Average : 0.9645 YTW SCENARIO |
| NA.PR.E | FixedReset Disc | Quote: 18.90 – 19.50 Spot Rate : 0.6000 Average : 0.4050 YTW SCENARIO |
| BAM.PF.I | FixedReset Disc | Quote: 24.00 – 24.67 Spot Rate : 0.6700 Average : 0.4971 YTW SCENARIO |
| TD.PF.A | FixedReset Disc | Quote: 17.55 – 18.00 Spot Rate : 0.4500 Average : 0.2909 YTW SCENARIO |
| BIK.PR.A | FixedReset Disc | Quote: 25.01 – 25.55 Spot Rate : 0.5400 Average : 0.3822 YTW SCENARIO |
| BAM.PF.B | FixedReset Disc | Quote: 15.65 – 16.19 Spot Rate : 0.5400 Average : 0.3935 YTW SCENARIO |