5 Responses to “May 16, 2022”

1. ratchetrick says:

   May 17, 2022 at 7:50 am

   I continue to be wowed by the resiliance not only of pref yields, but bond yields as well. The June 15 meeting is currently projected for an 81% probability of a 50bp hike, and a 19% probability of a 75bp hike. Yet, fixed income refuses to sell off, and yields remain stubbornly low. I can only presume it’s the “safe haven” aspect of this investment class, with the assorted macro issues not letting up, that keeps this floor under prices. Here’s my question, then . . . is it possible that central bank rates could actually exceed bond yields? Normally, a ridiculous idea . . . but it’s starting to look like there’s enough support for fixed income, and enough “rate hike madness”, to actually accomplish this. In the meantime, congratulations to holders of all these fixed income classes . . . what a performance (so far, anyway!)

2. niagara says:

   May 17, 2022 at 8:27 am

   And another one gone, and another one gone, another one bites the dust.

   IAF.PR.G is being redeemed:

   https://ia.ca/newsroom/2022/may/iafg-announces-the-issuance-of-a-redemption-notice-to-holders-of-non-cumulative-5-year-rate-reset-class-a-preferred-shares-series-g

3. niagara says:

   May 17, 2022 at 2:21 pm

   ratchetrick, central bank rates could easily exceed bond yields, it has happened many time in the past. There is no rule that says the yield curve needs to be upward sloping.

   Here are a couple of thoughts on the “low” bond yields is, in addition to your “safe haven” view: 1) that the bond market has already sold off dramatically since March (on March 4, the 5yr GOC was yielding 1.46%, it is not 2.86%….140bps higher)…so the market is pausing a bit to see how economic data turns out over the next month or two; 2) the market may believe that the central banks will, in the efforts to curb inflation, crush consumer demand and cause a significant recession, thereby capping the rate hike cycle.

   My personal view is that, after this current pause, bond yields will go higher. That is assuming that the equity market does not completely crumble or no extreme events occur. How much higher? No clue. I know nothing, nothing!

4. skeptical says:

   May 17, 2022 at 2:26 pm

   I know nothing, nothing!
   Internalizing this is the key.

5. ratchetrick says:

   May 18, 2022 at 7:47 am

   niagara . . . some good thoughts! ty!

   as far as declaring, “I know nothing, nothing” goes; perhaps you should consider a professional career as a financial analyst . . . (knowing nothing seems to be the first qualification for that trade lol!)