Canadian inflation has hit a new high for this cycle:
Canadian inflation jumped to the highest rate in nearly four decades in June, although there are tentative signs that consumer price growth is close to topping out, offering relief to families.
The consumer price index (CPI) rose 8.1 per cent in June from a year earlier, up from 7.7 per cent in May, Statistics Canada said on Wednesday. It was the highest inflation rate since January, 1983. Financial analysts were expecting worse, with inflation climbing to 8.4 per cent.
The acceleration was mainly because of gasoline, Statscan said. Consumers paid 6.2 per cent more at the pump in June than May, and 55 per cent more on an annual basis.
However, crude oil has tumbled in recent weeks, which has started to reflect in retail pricing. The national average price for regular unleaded gas was $1.87 a litre on Tuesday, down from a peak of $2.15 in early June, according to data from Kalibrate Technologies.
Shelter and grocery costs grew at slightly slower annual rates in June, a potential sign of progress for cash-strapped household budgets. And excluding food and energy, core inflation rose 0.4 per cent in June, a slower pace than in recent months.
Britain is also suffering from high inflation:
Consumer prices in Britain rose 9.4 percent in June from a year earlier, intensifying the squeeze on household budgets as inflation continued to run at its fastest pace in 40 years.
Rising prices for food and motor fuels were the biggest reason for the jump in inflation in June, up from a 9.1 percent rate the month before, the Office for National Statistics said on Wednesday. Motor fuel prices have risen more than 40 percent over the past year, with gasoline and diesel prices setting record highs. In June, food and drink prices jumped nearly 10 percent from a year earlier, the biggest increase since 2009, with prices for milk, cheese and eggs rising notably over the past month. Household energy bills also remain a major source of soaring inflation.
With inflation at its highest level in four decades, households are feeling the pain acutely because pay increases are lagging far behind prices. Pay, after it was adjusted for inflation and excluding bonuses, fell 2.8 percent in March to May, compared with a year earlier, the statistics agency said on Tuesday. That’s the steepest decline in so-called real wages on record.
I was struck by the juxtaposition of two stories on the Globe’s website, the first, Toronto condo sellers are giving up on resistant buyers:
Struggling sellers in Toronto’s condo market are bringing a wave of units for rent to the downtown core.
“We’ve started to shift a lot of sellers into the rental market,” says Christopher Bibby, broker with Re/Max Hallmark Bibby Group Realty.
Some frustrated owners are trimming their asking price and still not getting showings, says Mr. Bibby, who estimates that condo prices in the city have slipped between six and eight per cent since the peak in early spring
…
Mr. Bibby says he can understand why buyers are nervous when they are grappling with soaring inflation and a string of interest rate hikes by the Bank of Canada. Many are betting that home prices have farther to fall.
…
Condo sales in the Greater Toronto Area plunged 40 per cent in June compared with June, 2021, according to the Toronto Regional Real Estate Board, while the average price jumped 9.3 per cent in the same period.
… and the second was Toronto condo rents hit record high as renters face ‘extreme’ affordability challenge:
It’s a landlord’s market in Toronto once again. Condo rents hit a record high in the second quarter of this year, as soaring borrowing costs pushed residents into the rental market and more people flocked back to the city.
Across the Toronto region, the average monthly rent rose 17 per cent to $2,533 over the past four quarters, according to industry research firm Urbanation Inc., with rent for a typical studio condo climbing 25 per cent over that period.
…
According to Urbanation calculations, condo owners shouldered an average monthly cost of $3,125 during the second quarter, when mortgages had an interest rate of about 3 per cent. The average rent for a similar condo unit was $2,533. That means the average monthly rent was nearly $600 less than the average monthly ownership cost. And that was before last week’s massive one-percentage-point interest rate increase.Now, with mortgage rates near 5 per cent, Urbanation said condo owners are likely paying an average of $1,100 more a month than renters. “This will provide further fuel for the rental market as more first-time buyers become shut out of the ownership market,” the report said.
So the negative carry is getting negativer. Rents will come down once enough owners have capitulated and sold their investments at a loss to new owners who will have lower mortgage payments.
PerpetualDiscounts now yield 6.07%, equivalent to 7.89% interest at the standard equivalency factor of 1.3x. Long corporates now yield 5.26%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed slightly (and perhaps spuriously) to 265bp from the 270bp reported July 13.
| 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 | -0.3096 % | 2,474.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3096 % | 4,745.2 |
| Floater | 6.39 % | 6.45 % | 41,037 | 13.25 | 3 | -0.3096 % | 2,734.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0052 % | 3,471.9 |
| SplitShare | 4.90 % | 5.60 % | 45,228 | 3.14 | 8 | 0.0052 % | 4,146.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0052 % | 3,235.0 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0931 % | 2,844.3 |
| Perpetual-Discount | 5.99 % | 6.07 % | 69,799 | 13.81 | 34 | -0.0931 % | 3,101.6 |
| FixedReset Disc | 4.89 % | 6.52 % | 112,536 | 13.46 | 56 | -0.8957 % | 2,411.9 |
| Insurance Straight | 5.99 % | 6.07 % | 82,198 | 13.79 | 18 | -0.0081 % | 3,003.3 |
| FloatingReset | 6.87 % | 7.05 % | 43,959 | 12.47 | 2 | -0.8341 % | 2,508.8 |
| FixedReset Prem | 5.06 % | 5.18 % | 128,023 | 3.09 | 10 | -0.4504 % | 2,574.3 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.8957 % | 2,465.4 |
| FixedReset Ins Non | 4.89 % | 6.88 % | 54,881 | 12.98 | 14 | -0.7768 % | 2,494.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PF.F | FixedReset Disc | -7.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 8.01 % |
| TD.PF.J | FixedReset Disc | -5.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 21.62 Evaluated at bid price : 22.01 Bid-YTW : 6.60 % |
| BMO.PR.Y | FixedReset Disc | -4.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 6.76 % |
| RY.PR.H | FixedReset Disc | -4.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 20.27 Evaluated at bid price : 20.27 Bid-YTW : 6.48 % |
| MFC.PR.K | FixedReset Ins Non | -3.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 6.88 % |
| CM.PR.O | FixedReset Disc | -2.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 6.40 % |
| PWF.PR.P | FixedReset Disc | -2.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 13.70 Evaluated at bid price : 13.70 Bid-YTW : 7.49 % |
| BMO.PR.W | FixedReset Disc | -2.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 20.38 Evaluated at bid price : 20.38 Bid-YTW : 6.41 % |
| CCS.PR.C | Insurance Straight | -2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.95 % |
| PWF.PF.A | Perpetual-Discount | -2.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 18.57 Evaluated at bid price : 18.57 Bid-YTW : 6.09 % |
| CM.PR.Q | FixedReset Disc | -2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 6.56 % |
| TD.PF.L | FixedReset Prem | -2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 23.67 Evaluated at bid price : 24.02 Bid-YTW : 6.55 % |
| TD.PF.A | FixedReset Disc | -1.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 6.47 % |
| TD.PF.B | FixedReset Disc | -1.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 20.01 Evaluated at bid price : 20.01 Bid-YTW : 6.52 % |
| MFC.PR.Q | FixedReset Ins Non | -1.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 6.71 % |
| SLF.PR.G | FixedReset Ins Non | -1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 14.25 Evaluated at bid price : 14.25 Bid-YTW : 7.12 % |
| TRP.PR.A | FixedReset Disc | -1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 15.02 Evaluated at bid price : 15.02 Bid-YTW : 8.02 % |
| BNS.PR.I | FixedReset Disc | -1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 23.07 Evaluated at bid price : 23.50 Bid-YTW : 5.87 % |
| MFC.PR.F | FixedReset Ins Non | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 14.00 Evaluated at bid price : 14.00 Bid-YTW : 7.19 % |
| IFC.PR.E | Insurance Straight | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 21.52 Evaluated at bid price : 21.52 Bid-YTW : 6.11 % |
| NA.PR.G | FixedReset Disc | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 22.57 Evaluated at bid price : 23.02 Bid-YTW : 6.33 % |
| CU.PR.C | FixedReset Disc | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 6.72 % |
| MFC.PR.M | FixedReset Ins Non | -1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 18.33 Evaluated at bid price : 18.33 Bid-YTW : 7.22 % |
| TRP.PR.B | FixedReset Disc | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 12.04 Evaluated at bid price : 12.04 Bid-YTW : 8.07 % |
| BMO.PR.S | FixedReset Disc | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 6.29 % |
| BAM.PR.M | Perpetual-Discount | 1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.07 % |
| TRP.PR.G | FixedReset Disc | 1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 7.34 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.R | FixedReset Disc | 539,447 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-08-30 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 4.66 % |
| TD.PF.L | FixedReset Prem | 105,281 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 23.67 Evaluated at bid price : 24.02 Bid-YTW : 6.55 % |
| TRP.PR.D | FixedReset Disc | 58,708 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 16.99 Evaluated at bid price : 16.99 Bid-YTW : 7.88 % |
| CM.PR.T | FixedReset Prem | 56,041 | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.99 Bid-YTW : 5.18 % |
| BAM.PF.A | FixedReset Disc | 41,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-07-20 Maturity Price : 21.43 Evaluated at bid price : 21.75 Bid-YTW : 6.93 % |
| BMO.PR.F | FixedReset Prem | 39,429 | YTW SCENARIO Maturity Type : Call Maturity Date : 2024-05-25 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 4.99 % |
| There were 14 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.M | FixedReset Ins Non | Quote: 18.33 – 21.50 Spot Rate : 3.1700 Average : 2.1111 YTW SCENARIO |
| BAM.PF.F | FixedReset Disc | Quote: 18.00 – 19.47 Spot Rate : 1.4700 Average : 0.9442 YTW SCENARIO |
| TD.PF.J | FixedReset Disc | Quote: 22.01 – 23.30 Spot Rate : 1.2900 Average : 0.7863 YTW SCENARIO |
| RY.PR.H | FixedReset Disc | Quote: 20.27 – 21.24 Spot Rate : 0.9700 Average : 0.5595 YTW SCENARIO |
| BMO.PR.Y | FixedReset Disc | Quote: 19.85 – 20.85 Spot Rate : 1.0000 Average : 0.7037 YTW SCENARIO |
| TRP.PR.A | FixedReset Disc | Quote: 15.02 – 16.00 Spot Rate : 0.9800 Average : 0.7157 YTW SCENARIO |
Either the ‘inflation’ theory is wrong or the bond market is wrong. Both 30 year and 5 years below 3%….in the face of highest inflation in the last 40 years.
And it seems interesting that all the central banks were asleep at the wheel with highest ever asset price increases in a decade. Yet they are panicking over a $1 increase in price of eggs. Something is wrong in what’s being measured, the structure of the economy and the transmission mechanism.
It looks like some economics textbooks will have to be rewritten…more differential equation garbage to create credentialed phd economists with even fancier forecasts totally divorced from reality.
James:
BMO.PR.D to be redeemed 25 Aug 2022
https://money.tmx.com/en/quote/BMO/news/4511365183024553/Bank_of_Montreal_to_Redeem_NonCumulative_5Year_Rate_Reset_Class_B_Preferred_Shares_Series_42_NonViability_Contingent_Capital_NVCC
Cheers!
[…] to Assiduous Reader CanSiamCyp for bringing the redemption to my attention, and for previously bringing the OTC issue to my […]
” Either the ‘inflation’ theory is wrong or the bond market is wrong. ”
the problem is we’ve had manipulated markets for so long, things don’t work as they should any more.
i’ve always had a problem with CPI. it seemed manipulated to me. doesn’t measure asset prices. so, it’s all fine and dandy when stocks, bonds and real estate go up, but hey, if wages move up, its the end of the world. we have to kill the economy to suppress demand. we don’t actually want the masses getting raises. we just want boards and ceo’s of airline companies borrowing money to buy stock and give themselves bonuses and when they get into trouble, the masses can bail them out.
seems about right to me.
[…] PerpetualDiscounts now yield 6.19%, equivalent to 8.05% interest at the standard equivalency factor of 1.3x. Long corporates now yield 4.84%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has skyrocketted to 321bp from the 265bp reported July 20. […]