TXPR closed at 632.49, up 0.52% on the day. Volume today was 2.39-million, about the median of the past 21 trading days. Today’s performance, the fifth consecutive gaining day, regains lost ground all the way back to April 25.
CPD closed at 12.54, up 0.53% on the day. Volume was 124,810, near the median of the past 21 trading days.
ZPR closed at 10.485 down 0.10% on the day. Volume of 163,920 was a little below the median of the past 21 trading days.
Five-year Canada yields were down to 2.78% today.
It is interesting to note that the three month bill yield has declined to 1.44%; I suspect it’s a flight to quality, but still indicates a strong conviction that we will see a 50bp hike at the beginning of June, with probably more to come in mid-July.
The FOMC hiked its policy rate 50bp:
Although overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong. Job gains have been robust in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.
The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain. The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in conjunction with this statement.
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; James Bullard; Esther L. George; Patrick Harker; Loretta J. Mester; and Christopher J. Waller. Patrick Harker voted as an alternate member at this meeting.
This move has been so thoroughly discounted that the announcement was actually good for equities:
Stocks on Wall Street had their best day since 2020 on Wednesday, after Jerome H. Powell, the Federal Reserve chair, said that central bankers weren’t considering exceptionally large increases in interest rates, calming investors who had begun to worry that the fight against inflation might push the economy into a recession.
The S&P 500 rose 3 percent, the biggest jump since May 2020, spiking after Mr. Powell’s comment. Earlier on Wednesday, the Fed said it would lift interest rates by half a percentage point, an increase that was widely expected, and that it plans to shrink its bond holdings.
Bond yields, a proxy for investor expectations about interest rates, ticked lower. The yield on 10-year Treasury notes fell eight basis points, or 0.08 percentage points, to 2.92 percent.
PerpetualDiscounts now yield 5.83%, equivalent to 7.58% interest at the standard equivalency factor of 1.3x. Long corporates now yield 4.85%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has reverted to 275bp from the 320bp reported April 27.
| 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 | 3.80 % | 4.48 % | 23,787 | 18.50 | 1 | -1.0000 % | 2,538.5 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5278 % | 4,860.7 |
| Floater | 4.24 % | 4.27 % | 50,222 | 16.84 | 3 | -0.5278 % | 2,801.2 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2706 % | 3,557.9 |
| SplitShare | 4.78 % | 5.00 % | 33,923 | 3.30 | 8 | -0.2706 % | 4,248.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2706 % | 3,315.2 |
| Perpetual-Premium | 5.93 % | 5.97 % | 62,855 | 13.94 | 1 | -0.5600 % | 2,941.7 |
| Perpetual-Discount | 5.74 % | 5.83 % | 63,968 | 14.14 | 35 | -0.1041 % | 3,232.8 |
| FixedReset Disc | 4.55 % | 5.89 % | 138,611 | 14.00 | 59 | 0.6885 % | 2,552.0 |
| Insurance Straight | 5.68 % | 5.79 % | 103,660 | 14.20 | 20 | 0.2256 % | 3,158.7 |
| FloatingReset | 4.72 % | 4.97 % | 68,103 | 15.53 | 2 | 2.5625 % | 2,663.9 |
| FixedReset Prem | 5.04 % | 4.66 % | 141,913 | 2.11 | 9 | -0.0132 % | 2,615.4 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.6885 % | 2,608.7 |
| FixedReset Ins Non | 4.55 % | 6.12 % | 84,525 | 14.07 | 15 | 0.5607 % | 2,635.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.N | FixedReset Ins Non | -6.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 6.61 % |
| IFC.PR.G | FixedReset Ins Non | -5.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.38 Evaluated at bid price : 21.69 Bid-YTW : 6.24 % |
| CM.PR.O | FixedReset Disc | -4.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.23 % |
| CU.PR.E | Perpetual-Discount | -3.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 20.19 Evaluated at bid price : 20.19 Bid-YTW : 6.08 % |
| IFC.PR.E | Insurance Straight | -2.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.94 Evaluated at bid price : 22.20 Bid-YTW : 5.92 % |
| BMO.PR.Y | FixedReset Disc | -2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 6.04 % |
| RS.PR.A | SplitShare | -1.76 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-12-31 Maturity Price : 10.00 Evaluated at bid price : 10.07 Bid-YTW : 5.15 % |
| GWO.PR.G | Insurance Straight | -1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.94 Evaluated at bid price : 22.17 Bid-YTW : 5.93 % |
| RY.PR.J | FixedReset Disc | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.32 Evaluated at bid price : 21.62 Bid-YTW : 5.95 % |
| BAM.PR.C | Floater | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 13.11 Evaluated at bid price : 13.11 Bid-YTW : 4.31 % |
| TD.PF.I | FixedReset Disc | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.69 Evaluated at bid price : 24.41 Bid-YTW : 5.96 % |
| IFC.PR.F | Insurance Straight | -1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.02 Evaluated at bid price : 23.45 Bid-YTW : 5.70 % |
| BAM.PR.E | Ratchet | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 25.00 Evaluated at bid price : 17.82 Bid-YTW : 4.48 % |
| GWO.PR.N | FixedReset Ins Non | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 14.21 Evaluated at bid price : 14.21 Bid-YTW : 6.39 % |
| BAM.PF.G | FixedReset Disc | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 6.59 % |
| NA.PR.W | FixedReset Disc | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 5.98 % |
| MFC.PR.K | FixedReset Ins Non | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.29 Evaluated at bid price : 21.57 Bid-YTW : 5.88 % |
| MFC.PR.M | FixedReset Ins Non | 1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 6.12 % |
| TD.PF.C | FixedReset Disc | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.78 % |
| PWF.PR.T | FixedReset Disc | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.17 Evaluated at bid price : 21.17 Bid-YTW : 6.06 % |
| TRP.PR.G | FixedReset Disc | 1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 6.22 % |
| MFC.PR.F | FixedReset Ins Non | 1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 6.15 % |
| BIP.PR.E | FixedReset Disc | 1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 24.25 Evaluated at bid price : 24.70 Bid-YTW : 5.92 % |
| BAM.PF.B | FixedReset Disc | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.03 Evaluated at bid price : 21.03 Bid-YTW : 6.44 % |
| BAM.PF.F | FixedReset Disc | 1.69 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 6.54 % |
| RY.PR.O | Perpetual-Discount | 1.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.22 Evaluated at bid price : 23.67 Bid-YTW : 5.16 % |
| CU.PR.J | Perpetual-Discount | 1.89 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 5.79 % |
| CU.PR.G | Perpetual-Discount | 1.93 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 5.66 % |
| SLF.PR.J | FloatingReset | 1.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 15.80 Evaluated at bid price : 15.80 Bid-YTW : 4.54 % |
| TD.PF.A | FixedReset Disc | 2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 5.77 % |
| RY.PR.S | FixedReset Disc | 2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.65 Evaluated at bid price : 24.00 Bid-YTW : 5.39 % |
| MFC.PR.I | FixedReset Ins Non | 2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.65 Evaluated at bid price : 24.45 Bid-YTW : 5.85 % |
| PWF.PF.A | Perpetual-Discount | 2.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 5.52 % |
| BMO.PR.S | FixedReset Disc | 2.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.52 Evaluated at bid price : 21.90 Bid-YTW : 5.72 % |
| TRP.PR.B | FixedReset Disc | 2.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 13.50 Evaluated at bid price : 13.50 Bid-YTW : 6.79 % |
| GWO.PR.P | Insurance Straight | 2.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.63 Evaluated at bid price : 23.90 Bid-YTW : 5.71 % |
| BAM.PR.X | FixedReset Disc | 2.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 18.20 Evaluated at bid price : 18.20 Bid-YTW : 6.47 % |
| MFC.PR.J | FixedReset Ins Non | 2.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 22.80 Evaluated at bid price : 23.39 Bid-YTW : 5.85 % |
| TRP.PR.D | FixedReset Disc | 2.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 19.26 Evaluated at bid price : 19.26 Bid-YTW : 6.62 % |
| TRP.PR.F | FloatingReset | 3.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 17.02 Evaluated at bid price : 17.02 Bid-YTW : 4.97 % |
| BNS.PR.I | FixedReset Disc | 3.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.42 Evaluated at bid price : 23.80 Bid-YTW : 5.52 % |
| GWO.PR.S | Insurance Straight | 3.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 22.26 Evaluated at bid price : 22.70 Bid-YTW : 5.84 % |
| PWF.PR.P | FixedReset Disc | 3.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 15.01 Evaluated at bid price : 15.01 Bid-YTW : 6.44 % |
| MFC.PR.Q | FixedReset Ins Non | 4.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 22.70 Evaluated at bid price : 23.20 Bid-YTW : 5.82 % |
| IAF.PR.B | Insurance Straight | 4.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.65 Evaluated at bid price : 21.90 Bid-YTW : 5.30 % |
| IAF.PR.I | FixedReset Ins Non | 4.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 23.29 Evaluated at bid price : 23.87 Bid-YTW : 5.86 % |
| BAM.PR.T | FixedReset Disc | 5.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 6.54 % |
| BAM.PR.Z | FixedReset Disc | 10.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 22.10 Evaluated at bid price : 22.74 Bid-YTW : 6.39 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| GWO.PR.Y | Insurance Straight | 332,350 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 19.76 Evaluated at bid price : 19.76 Bid-YTW : 5.77 % |
| CM.PR.R | FixedReset Disc | 146,600 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-07-31 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.75 % |
| TRP.PR.B | FixedReset Disc | 125,820 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 13.50 Evaluated at bid price : 13.50 Bid-YTW : 6.79 % |
| TRP.PR.C | FixedReset Disc | 110,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 14.15 Evaluated at bid price : 14.15 Bid-YTW : 6.77 % |
| RY.PR.Z | FixedReset Disc | 29,712 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 21.39 Evaluated at bid price : 21.39 Bid-YTW : 5.73 % |
| TRP.PR.E | FixedReset Disc | 28,527 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-05-04 Maturity Price : 19.15 Evaluated at bid price : 19.15 Bid-YTW : 6.54 % |
| There were 14 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: 21.69 – 23.75 Spot Rate : 2.0600 Average : 1.2506 YTW SCENARIO |
| CM.PR.O | FixedReset Disc | Quote: 20.00 – 22.00 Spot Rate : 2.0000 Average : 1.3225 YTW SCENARIO |
| MFC.PR.N | FixedReset Ins Non | Quote: 18.70 – 20.58 Spot Rate : 1.8800 Average : 1.2187 YTW SCENARIO |
| NA.PR.S | FixedReset Disc | Quote: 20.50 – 23.00 Spot Rate : 2.5000 Average : 1.9702 YTW SCENARIO |
| CU.PR.E | Perpetual-Discount | Quote: 20.19 – 21.80 Spot Rate : 1.6100 Average : 1.0931 YTW SCENARIO |
| BAM.PF.B | FixedReset Disc | Quote: 21.03 – 22.90 Spot Rate : 1.8700 Average : 1.3695 YTW SCENARIO |
There was an unexpected element of euphoria with the 50bp hike yesterday, almost certainly related to the reality that a 75bp hike was not executed as many market participants anticipated. Bond yields actually dropped in a knee-jerk reaction to this “positive surprise”. Fast forward not quite 24 hours, and the market joy of yesterday, has promptly been replaced by the sober reality that additional 50bp hikes are virtually guaranteed. The only unknown is when this hike happy attitude will peak . . . or if it will trigger recession as a consequence of the inflation issue being addressed in this way. Bond yields are up 10+bp across the board, and equity markets have resumed the capitulation response that vanished, if only for about two hours. I think it’s very important to keep market reality in focus, and not allow oneself to get caught up in the daily noise created by often exaggerated media expliques.
ratchetrick – good thoughts.
Even though rates are rising and could benefit rate resets and floaters, we must be cognizant of the market risk and credit deterioration. Both these could poison an otherwise salubrious market for preferreds. And of course, the anguish of holding perpetuals will continue while rates rise.
so, Dow down 1300, and the Nasdaq down a stunning 750, or almost 6%. Bond yields flying high, with the 30 year now over 3%. Reportedly, all because of the rapid rise in borrowing costs. The good news is all this market pain will quickly be offset by lower fuel prices, cheaper groceries, and affordable housing . . . because Jerome & Tiff have clearly stated that predictable goal as the end game of their hyper-hiking policy! ~sigh~ I’ve heard it said that when one believes everyone else is stupid, then it is he who is probably not that smart. As Bill Murray said in Stripes after seeing his girlfriend walk out forever, “and then depression set in” . . . lol
[…] PerpetualDiscounts now yield 5.91%, equivalent to 7.68% interest at the standard equivalency factor of 1.3x. Long corporates now yield 4.86%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened slightly (and perhaps spuriously) to 280bp from the 275bp reported May 4. […]