The NVCC rules for bank capital, which would have a dramatic effect on the preferred share market, were first discussed in PrefLetter in January of 2011. When the official approach became known the following month, there was much more to discuss!
Look for the research link!
Take a look at a comment Jerome made this morning in his “testimony” . . . and tell me honestly; can anyone in their right mind consider any kind of fixed income investment at this time, . . . when the Chair of the FOMC is capable of unleashing this kind of off the cuff remark, totally oblivious to the potential economic fallout, and consequences of such an irresponsible comment??
“June 22 (Reuters) – Federal Reserve Chair Jerome Powell on
Wednesday said he would not take any specific size of rate hike
“off the table” as the central bank works to contain inflation.
Asked by a member of the Senate Banking Committee if the Fed
could raise rates by as much as 100 basis points at once, Powell
said he would never take anything off the table, and officials
will make whatever moves are needed to restore price stability.”
can anyone in their right mind consider any kind of fixed income investment at this time
Floaters, if one has a big heart and certain anatomical parts made of steel.
Let them take prime to say 6% or even higher. Based on current prices, why would you not take nearly 8% dividends? And if bond market cooperates, there’s a wild card that certain issuers might consider redemption of these, if people continue to be totally scared of holding these.
Remember, the floaters adjust based on the price and not on yield.
So imagine prime upto 6.5% and bond yields staying where they are. And floater prices where they are. In that scenario, either the price of floaters rises and their yield is pushed down or they are redeemed.
Yea skeptical; I’ve been gauking at these floating prefs for the reasons you mention, and a few more . . . but, look at TRP.PR.H today . . . down over a year’s worth of dividends (on just a single 100 lot trade) . . . but it confirms that the “get me out of here” mindset is still very strong. EMA.PR.A, a 2025 reset down by more than 2 year’s worth of dividends on a small trade as well. And I’m pretty sure James is checking his bomb blast file for tomorrow’s pic du jour already.
The kind of comments that Powell made today (and guaranteed 1000% that Tiff will be just as extreme when he hikes in a few weeks) . . . this kind of “I’m going to kill you” mantra that the central bankers absolutely adore doing is what will continue to hammer everything that pays dividends or interest . . . until they just . . . stop. And that only happens once they’ve succeeded in swinging the pendulum way into recession territory. In the meantime, it almost seems like all these regional Fed Presidents just like to hear themselves talk . . . and see how badly they can affect the markets.
For those reasons . . . I think people need to just hold their noses, and stay on the sidelines. idk, maybe I need to lighten up a bit (but I don’t think I will just yet lol!)
“but, look at TRP.PR.H today . . . down over a year’s worth of dividends (on just a single 100 lot trade)”
Benjamin Graham is rolling over in his grave. For anyone with the willingness and ability to hold TRP.PR.H (or any other tradeable security with underlying – or intrinsic – value), these are buying days. Just exactly what signal would we wait on the sidelines for?
I’d like to live in ratchetrick’s world where I was smarter than all the central bankers on earth and could go in and out of cash perfectly.
It’s not hard to be smarter than most central bankers by the looks of it! What signal? Well . . . if you buy something today, and it’s 5% cheaper tomorrow, you certainly missed the signal.
How about this: wait until a week, or maybe a bit more goes by where the general pref market (or the major indexes) lose their dramatic daily volatility. And if there’s a reason for that to have happened . . . like . . . hmmmm . . . WTI at or below $90/bbl . . . or maybe product starts moving out of China . . . or the Ukraine conflict ends . . . or, and this is a good one . . . the CPI indexes start to recede . . . something that could actually end the inflation/recession “scare” that is now front and centre on the table, neatly arranged and maintained by the central bankers of the world . . . then you have your signal.
If you actually believe these are buying days, you better be prepared to trade aggressively . . . then you can go in and out of cash effectively, not “perfectly” lol
‘How about this: wait until a week, or maybe a bit more goes by where the general pref market (or the major indexes) lose their dramatic daily volatility. And if there’s a reason for that to have happened . . . like . . . hmmmm . . . WTI at or below $90/bbl . . . or maybe product starts moving out of China . . . or the Ukraine conflict ends . . . or, and this is a good one . . . the CPI indexes start to recede . . . something that could actually end the inflation/recession “scare” that is now front and centre on the table, neatly arranged and maintained by the central bankers of the world . . . then you have your signal.”
Exactly. No plan here. Just a loose list of what ifs. Good luck to anyone following this oracle into a self-wrecked portfolio.
Geez stusclues . . . do I have to spell it out for you? Try this:
Our CPI came out today at 7.7% . . . massive. Prefs are getting trashed. Big surprise. But that report was referencing May, when crude was pushing through $120/bbl. June’s what matters now, and that crude price has dropped about 20% since May. Therefore, since oil seems to be the main tangible cause for the immediate inflation situation, it would be logical to presume that the June CPI will be vastly improved over today’s report. That report comes out on July 20, about a week after Tiff’s big 75bp hike horror will be on the back burner. What do you think will happen to prefs on July 20? Exactly, it’ll be a James rainbow pic to see the next day.
The other CPI factor is the USA number that comes out a week earlier on July 13 . . . it should be improved as well . . . so the uptick might start a little earlier than one might expect.
Either way . . . buying time for prefs imo would be near the end of the first week of July. There’s a plan. You’re welcome. (and you guys don’t need to be so nasty . . . it’s a “blog”, remember? lol)
“…you guys don’t need to be so nasty”
I don’t think it’s nasty :-).
I must say I’m with Stusclues on this one.
It’s always easy to come up with a list of what if’s and all sorts of oracular pronouncements, but it’s also prudent to temper that with a healthy dose of skepticism and (perhaps even more importantly) flavour that with a healthy sense of one’s own fallibility.
just been catching up on the day’s action. out all day… that’ CPI number was fantastic. odds are now being placed on a 100 bpts hike by the bank of Canada. that would definitely make things interesting.
ratchetrick – trp.pr.h may have dropped 53 cents today, but that may very well be the spread on that pref. it’s actually HIGHER than it was 6 months ago, and 9 months ago. it’s actually fairly stable considering how infrequently it trades… so, i’m not sure what you’re trying to point out about that pref.
a lot of these shares are so thinly traded, the market maker takes advantage of the seller or buyer. you may see a posted bid/ask spread and after you put in an order, they move it on you. if someone put in a sell order the night before as a market order, there’s no question he got taken advantage of. my god. it was 100 shares today. days go by when it doesn’t trade.
“Wednesday’s report will incorporate used car prices for the first time, and will give more weight to gasoline in the basket of goods and services, under a methodological change announced earlier this week.” https://www.bnnbloomberg.ca/inflation-is-on-track-to-hit-7-3-in-canada-highest-since-1983-1.1780489
Anybody else finds the timing suspiciously convenient to provide more weight in the CPI to two components that have most likely just peaked? What’s next? Adding house price in the CPI? I am sure CPI will go down, not sure it will be for the right reasons…
(and you guys don’t need to be so nasty . . . it’s a “blog”, remember? lol)
It’s not just a “blog”, ratchetrick it’s James Hymas’ blog. When you spout disinformation and gibberish, expect to get called on it.
It’s also a blog that has one less contributor now. Best of luck to everyone!
James:
CIBC today announced redemption of CM.PR.R on 29 July.
Cheers!
P.S. Bye bye to RachetRick!
It’s also a blog that has one less contributor now.
Well, I don’t think it’s the first time you’ve left the blog, ratchetrick – and not the second or third, either.
[…] first two articles in the series are available HERE and […]
Any thoughts as to the rationale for the big drop in the BoC 5yr rate today? Would have thought that it would be heading up on the prospect of outsized rate hikes.
Any thoughts as to the rationale for the big drop in the BoC 5yr rate today?
Treasury yields. See HERE.
So despite the fact that interest rates may be heading up, investors are willing to forfeit yield for the sake of perceived reduced risk?
investors are willing to forfeit yield for the sake of perceived reduced risk?
Assuming that the explanation provided is correct, then some investors believe (today) that rising policy rates – and other factors – will be so successful in their task of demand-destruction that a recession will be triggerred and that market rates will fall; or, at least, change in such a way that they will make more money (or lose less) by buying longer term assets now.
We’ll see. Remember that the bond market is excitable.
Thank you very much for your thoughts.
Yet another day when pretty much all the prefs suffer… no matter their structure (rate reset, perpetuals, term preferred).
RR because yields fall due to the fear of recession presumably and perpetuals do not benefit from the fall in yields.
I guess it’s also because of the possibility of a recession and maybe higher spreads even for strong investment grade issues.
Challenging period.
The bond market is trying to call out the central banks’ bluff here. They have been printing money ceaselessly for nearly two decades and the mechanism has been used as a panacea for all ills affecting the economy. For a long time it seemed to them and (Canadian RE owners as well as crypto, startup people) that they had discovered a perpetual machine. But entropy, second law of thermodynamics etc.
so let’s say in another few months, the economic output falls dramatically, everything slows down but inflation remains at 5% or higher?
Which way are the central banks going to lean? One path goes towards continued asset devastation and eventual deflation but the other one leads to a banana republic of high inflation and money printing.
Bernanke et.al, the helicopter drop architect infamously boasted that containing inflation was a 15 minute fix. We will just move some levers and the problem will be fixed.
The worst thing is that everyone including the economists, central bankers and politicians will continue to double down on all the things that got us here.
For those who missed this golden nugget of Bernanke
https://pbs.twimg.com/ext_tw_video_thumb/1458615779126132739/pu/img/EFNTnhdfuRL3KKr8?format=jpg&name=900×900
at least TRP.PR.H was up today 22 cents, almost gaining back half the 53 cent losses from yesterday.
I think the problem skeptical is that in 2008/2009 central banks got away with QE with little impact to the average voter. I think the problem now is that many have convinced themselves that inflation and our pending economic slowdown are related solely to Russia and China and will thus pass as these issues are resolved.