December 16, 2020

Today’s FOMC Statement contained no surprises:

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 continued to recover but remain well below their levels at the beginning of the year. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, 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, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. These asset purchases help foster smooth market functioning and 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; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.

The New York Times reports:

[Jerome H. Powell, Chair,] used his post-meeting remarks to paint a picture of a bifurcated economy, one in which many businesses and households face acute economic pain in the near-term, coupled with the expectation that the economy would snap back once vaccines were widely available — a development that he guessed could come about as soon as midyear.

The United States could then see a long period of unbroken growth, Mr. Powell predicted, signaling that he and his colleagues were prepared to leave rates low for years on end as they try to return the labor market and broader economy to full strength.

Despite that upgrade [in projected 2021 economic growth], the median Fed official continued to project interest rates near-zero through the end of 2023, demonstrating the central bank’s plan to move glacially coming out of the crisis.

PerpetualDiscounts now yield 5.04%, equivalent to 6.55% interest at the standard equivalency factor of 1.3x. Long corporates now yield 2.80%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained steady at the 375bp reported December 9.

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 -0.4787 % 1,896.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4787 % 3,479.1
Floater 4.58 % 4.56 % 50,811 16.32 2 -0.4787 % 2,005.0
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1263 % 3,610.3
SplitShare 4.80 % 4.46 % 44,382 3.83 9 -0.1263 % 4,311.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1263 % 3,364.0
Perpetual-Premium 5.33 % 3.24 % 77,228 0.08 19 0.0474 % 3,201.1
Perpetual-Discount 4.97 % 5.04 % 75,284 15.44 12 0.1541 % 3,695.1
FixedReset Disc 5.01 % 3.91 % 149,918 17.18 56 0.4511 % 2,329.1
Insurance Straight 5.01 % 4.55 % 90,624 4.03 22 0.1150 % 3,591.4
FloatingReset 1.96 % 1.49 % 44,028 1.11 3 0.2782 % 1,859.1
FixedReset Prem 5.16 % 3.42 % 221,565 0.67 22 -0.0143 % 2,673.4
FixedReset Bank Non 1.93 % 1.81 % 185,545 1.11 2 0.0200 % 2,878.6
FixedReset Ins Non 5.06 % 3.87 % 87,097 17.29 22 0.1869 % 2,415.3
Performance Highlights
Issue Index Change Notes
MFC.PR.K FixedReset Ins Non -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 18.55
Evaluated at bid price : 18.55
Bid-YTW : 3.92 %
BIP.PR.E FixedReset Disc -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 22.97
Evaluated at bid price : 23.75
Bid-YTW : 5.24 %
GWO.PR.H Insurance Straight -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 24.16
Evaluated at bid price : 24.41
Bid-YTW : 4.97 %
SLF.PR.I FixedReset Ins Non 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 21.01
Evaluated at bid price : 21.01
Bid-YTW : 3.80 %
SLF.PR.C Insurance Straight 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 24.21
Evaluated at bid price : 24.50
Bid-YTW : 4.54 %
BIP.PR.A FixedReset Disc 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 19.40
Evaluated at bid price : 19.40
Bid-YTW : 5.16 %
MFC.PR.N FixedReset Ins Non 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 19.18
Evaluated at bid price : 19.18
Bid-YTW : 3.84 %
MFC.PR.G FixedReset Ins Non 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 21.50
Evaluated at bid price : 21.85
Bid-YTW : 3.83 %
BIP.PR.F FixedReset Disc 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 22.88
Evaluated at bid price : 23.81
Bid-YTW : 5.32 %
TRP.PR.G FixedReset Disc 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 16.70
Evaluated at bid price : 16.70
Bid-YTW : 5.11 %
TRP.PR.F FloatingReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 11.30
Evaluated at bid price : 11.30
Bid-YTW : 4.54 %
RY.PR.Z FixedReset Disc 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 3.47 %
RY.PR.H FixedReset Disc 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 20.60
Evaluated at bid price : 20.60
Bid-YTW : 3.50 %
NA.PR.W FixedReset Disc 1.73 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 18.82
Evaluated at bid price : 18.82
Bid-YTW : 3.92 %
TD.PF.A FixedReset Disc 1.85 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 20.40
Evaluated at bid price : 20.40
Bid-YTW : 3.54 %
BMO.PR.Y FixedReset Disc 1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 21.16
Evaluated at bid price : 21.16
Bid-YTW : 3.72 %
GWO.PR.N FixedReset Ins Non 2.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 11.08
Evaluated at bid price : 11.08
Bid-YTW : 3.92 %
BAM.PF.B FixedReset Disc 2.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 17.55
Evaluated at bid price : 17.55
Bid-YTW : 4.72 %
NA.PR.E FixedReset Disc 2.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 20.71
Evaluated at bid price : 20.71
Bid-YTW : 3.91 %
BAM.PR.X FixedReset Disc 3.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 12.42
Evaluated at bid price : 12.42
Bid-YTW : 4.58 %
BAM.PR.R FixedReset Disc 6.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 14.96
Evaluated at bid price : 14.96
Bid-YTW : 4.59 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.S FixedReset Disc 98,440 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 20.32
Evaluated at bid price : 20.32
Bid-YTW : 3.65 %
TRP.PR.C FixedReset Disc 81,898 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 10.64
Evaluated at bid price : 10.64
Bid-YTW : 4.69 %
TRP.PR.B FixedReset Disc 67,836 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 9.35
Evaluated at bid price : 9.35
Bid-YTW : 4.58 %
RY.PR.Z FixedReset Disc 58,504 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 3.47 %
IFC.PR.I Perpetual-Premium 47,891 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2029-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 4.84 %
TD.PF.H FixedReset Prem 45,500 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.43
Bid-YTW : 3.57 %
There were 54 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.E FixedReset Disc Quote: 15.15 – 16.03
Spot Rate : 0.8800
Average : 0.5271

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 15.15
Evaluated at bid price : 15.15
Bid-YTW : 5.02 %

TRP.PR.B FixedReset Disc Quote: 9.35 – 10.00
Spot Rate : 0.6500
Average : 0.4019

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 9.35
Evaluated at bid price : 9.35
Bid-YTW : 4.58 %

MFC.PR.H FixedReset Ins Non Quote: 22.50 – 23.52
Spot Rate : 1.0200
Average : 0.8593

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 21.94
Evaluated at bid price : 22.50
Bid-YTW : 3.98 %

CM.PR.Y FixedReset Prem Quote: 25.25 – 25.73
Spot Rate : 0.4800
Average : 0.3363

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 23.38
Evaluated at bid price : 25.25
Bid-YTW : 4.16 %

BMO.PR.T FixedReset Disc Quote: 19.52 – 20.00
Spot Rate : 0.4800
Average : 0.3454

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 19.52
Evaluated at bid price : 19.52
Bid-YTW : 3.67 %

BMO.PR.S FixedReset Disc Quote: 20.32 – 20.65
Spot Rate : 0.3300
Average : 0.2083

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2050-12-16
Maturity Price : 20.32
Evaluated at bid price : 20.32
Bid-YTW : 3.65 %

Leave a Reply

You must be logged in to post a comment.