November 15, 2022

TXPR closed at 551.73, up 0.72% on the day. Volume today was 2.24-million, second-highest of the past 21 trading days.

CPD closed at 10.89, down 0.28% on the day. Volume was 165,340, highest of the past 21 trading days by a wide margin.

ZPR closed at 9.14, down 0.44% on the day. Volume was 287,130, second-highest of the past 21 trading days.

Five-year Canada yields were off a touch to 3.32% today.

Equities had a good day, attributed to the US PPI number:

U.S. and Canadian main stock indexes gained on Tuesday, shaking off an unconfirmed report of Russian missiles crossing into Poland that sparked volatility, as investors seized on softer-than-expected inflation data that raised hopes of a pullback in rate hikes by the U.S. Federal Reserve. Energy and tech stocks led the advance in Toronto.

Equities were boosted by Tuesday’s inflation report that showed producer prices rising 8% in the 12 months through October against an estimated 8.3% rise.

The gains built on a rally that kicked off late last week by a cooler-than-expected report on consumer prices.

Criticism of COVID spending is mounting, together with that of loose fiscal policy:

The most important source of Canada’s inflation is simple: Starting in 2020, the government borrowed more than $700-billion, and mostly handed it out. People spent it, driving up prices.

It was, of course, proper for the government to help people and businesses gravely hurt during the COVID-19 pandemic. And debts and deficits do not automatically cause inflation – Canada can borrow an immense amount without an impact on the price level if the government has a believable plan for repayment.

But the government had gone too far in borrowing and spending, without such a plan. People try to get rid of public debt, pushing up prices until its real value is back to what people think the government will repay.

Fiscal and monetary policy are related. The key to untangling the current mess is acknowledging that the government cannot borrow more without causing more inflation.

The COVID boost in bank deposits will be remembered:

Some of Canada’s major banks have pegged excess savings over the past two years – that is, savings above typical levels – at roughly $300-billion.

But there’s a difference between excess savings and available cash. The latter sum is much smaller. After all, people have put large chunks of their savings to work in various ways. Some of the money has gone toward reducing non-mortgage debt, some toward homes that have soared in price, and some toward stocks that, until recently, were also riding a dizzying rally.

Where the leftover money will be spent, and how quickly, is anyone’s guess. The Bank of Canada estimates that $40-billion in excess savings will be spent by the end of 2024, but doesn’t attach much confidence to that forecast. There is undeniable upside to higher spending, but also risk. For instance, if Canadians splash out in the coming months, that could give an unhelpful boost to inflation, already running at a three-decade high.

But housing continues to cool:

The number of resales rose 1.3 per cent from September to October, according to the Canadian Real Estate Association (CREA). That was the first rise in monthly sales since February, when Canada’s central bank was about to embark on its campaign to slash the supply of cheap money.

At the same time, the national home price index fell 1.2 per cent to $777,200 from September to October after removing seasonal influences, according to CREA. That was the smallest monthly drop since June, though the eighth consecutive month of price declines.

Over all, October’s activity was 15 per cent below the prepandemic monthly average.

It’s tough to make money nowadays! Even the ability to print money ain’t what it used to be:

The Bank of Canada will report its first financial loss in its 87-year history in the coming weeks, a development that risks further denting the central bank’s reputation and inviting more political scrutiny over its purchases of government bonds during the COVID-19 pandemic.

In recent months, the bank’s aggressive push to increase interest rates has created a mismatch on its balance sheet. It is now paying a higher interest rate on its liabilities – mostly deposits by Bay Street banks held at the central bank – than it is earning on its assets. That’s generating net interest losses, which will begin showing up in the bank’s third-quarter financial statements, expected later this month.

The central bank is expecting total losses of between $5-billion and $6-billion over the next few years, spokesperson Paul Badertscher said in an e-mail. “Roughly estimated, the bank should return to positive net interest income sometime in 2024 or 2025,” he added.

In the spring of 2020, the Bank of Canada began buying massive quantities of government bonds from investors, first to help shore up financial markets, then as part of a QE program aimed at lowering interest rates to stimulate the economy during the pandemic.

It paid for these assets, previously owned by commercial banks and other investors, by creating “settlement balances” – a type of electronic money similar to reserves in other central banking systems. These settlement balances are essentially deposits that belong to commercial banks, and the Bank of Canada pays interest on them equal to its benchmark overnight rate.

These transactions radically transformed the bank’s balance sheet. At first the arrangement was profitable. The bank was bringing in revenue from its expanded bond holdings while only paying 0.25 per cent to commercial banks on their deposits. It made around $4.7-billion in profit over the past two fiscal years, which it sent to the federal government.

However, the calculus changed dramatically as the bank increased its overnight rate to fight inflation. It is now paying an overnight rate of 3.75 per cent on roughly $200-billion worth of settlement balances. Meanwhile, the weighted-average yield of government bonds the bank bought during the pandemic is only 0.65 per cent, according to Mr. Badertscher. That’s a money-losing formula.

And the New York Fed’s Center for Microeconomic Data published the Quarterly Report on Household Debt and Credit:

Total household debt rose by $351 billion, or 2.2 percent, to reach $16.51 billion in the third quarter of 2022, according to the latest Quarterly Report on Household Debt and Credit. Mortgage balances—the largest component of household debt—climbed by $282 billion and stood at $11.67 trillion at the end of September. The 15 percent year-over-year increase in credit card balances marked the largest in more than twenty years. The share of current debt transitioning into delinquency increased for nearly all debt types, following two years of historically low delinquency transitions.

Mortgage balances shown on consumer credit reports increased by $282 billion during the third quarter of 2022 and stood at $11.67 trillion at the end of September, up by $1 trillion since the previous year. Balances on home equity lines of credit (HELOC) increased by $3 billion, the second consecutive quarterly increase after years of declining balances; the outstanding HELOC balance stands at $322 billion. Credit card balances saw a $38 billion increase since the second quarter, a 15% year-over-year increase marked the largest in more than 20 years. Credit card balances are nearing their pre-pandemic levels, after sharp declines in the first year of the pandemic. Auto loan balances increased by $22 billion in the third quarter, continuing the upward trajectory that has been in place since 2011. Other balances, which include retail cards and other consumer loans, increased by $21 billion, following the $25 billion increase last quarter. Offsetting these increases, student loan balances contracted slightly, and now stand at $1.57 trillion, down from the second quarter of 2022. In total, non-housing balances grew by $66 billion.

I expected some entertainment value from the Musk takeover of Twitter, but reality is surpassing expectations!:

Mr. Musk’s team was asked to comb through messages in Twitter’s internal chat platform and make a list of employees who were insubordinate, people briefed on the plan said. They also sorted through employees’ tweets, looking for criticism. Those deemed rule breakers received emails around 1:30 a.m. Pacific time on Tuesday, notifying them that they were fired, according to emails viewed by The Times.

Several Twitter employees who shared news of Mr. Frohnhoefer’s firing in internal chats were cut, said six people familiar with events. They were told that they had been terminated for “violating company policy,” according to emails seen by The Times.

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 0.6232 % 2,327.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.6232 % 4,464.4
Floater 8.60 % 8.75 % 44,739 10.55 2 0.6232 % 2,572.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.8413 % 3,342.7
SplitShare 5.09 % 6.99 % 42,174 2.83 8 0.8413 % 3,991.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.8413 % 3,114.6
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.8783 % 2,572.4
Perpetual-Discount 6.62 % 6.76 % 78,489 12.84 34 0.8783 % 2,805.1
FixedReset Disc 5.50 % 7.71 % 85,557 12.03 63 -0.3301 % 2,190.4
Insurance Straight 6.52 % 6.74 % 79,448 12.79 18 0.3766 % 2,759.9
FloatingReset 9.20 % 9.78 % 38,588 9.64 2 1.0032 % 2,533.2
FixedReset Prem 6.73 % -3.77 % 400,931 0.08 1 0.0000 % 2,342.6
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 -0.3301 % 2,239.0
FixedReset Ins Non 5.46 % 7.81 % 44,397 11.89 14 -0.0823 % 2,300.7
Performance Highlights
Issue Index Change Notes
TD.PF.D FixedReset Disc -5.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 8.05 %
BMO.PR.F FixedReset Disc -2.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 22.61
Evaluated at bid price : 23.02
Bid-YTW : 7.29 %
TRP.PR.G FixedReset Disc -2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 16.40
Evaluated at bid price : 16.40
Bid-YTW : 8.58 %
MFC.PR.J FixedReset Ins Non -1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 20.11
Evaluated at bid price : 20.11
Bid-YTW : 7.54 %
IFC.PR.I Perpetual-Discount -1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 6.53 %
RY.PR.H FixedReset Disc -1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 7.73 %
TD.PF.J FixedReset Disc -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 7.09 %
TRP.PR.B FixedReset Disc -1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 11.35
Evaluated at bid price : 11.35
Bid-YTW : 9.02 %
BIP.PR.E FixedReset Disc -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 7.83 %
CM.PR.P FixedReset Disc -1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.01
Evaluated at bid price : 17.01
Bid-YTW : 7.89 %
MFC.PR.K FixedReset Ins Non -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 18.36
Evaluated at bid price : 18.36
Bid-YTW : 7.66 %
TRP.PR.C FixedReset Disc -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 12.20
Evaluated at bid price : 12.20
Bid-YTW : 8.67 %
TRP.PR.A FixedReset Disc -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 14.26
Evaluated at bid price : 14.26
Bid-YTW : 8.84 %
RY.PR.S FixedReset Disc -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 20.27
Evaluated at bid price : 20.27
Bid-YTW : 7.02 %
CM.PR.Y FixedReset Disc -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 23.55
Evaluated at bid price : 23.92
Bid-YTW : 7.11 %
TD.PF.L FixedReset Disc -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 22.86
Evaluated at bid price : 23.30
Bid-YTW : 7.02 %
RS.PR.A SplitShare 1.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-12-31
Maturity Price : 10.00
Evaluated at bid price : 9.45
Bid-YTW : 7.46 %
MFC.PR.F FixedReset Ins Non 1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 12.76
Evaluated at bid price : 12.76
Bid-YTW : 8.24 %
CU.PR.H Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 19.79
Evaluated at bid price : 19.79
Bid-YTW : 6.67 %
BAM.PR.K Floater 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 12.16
Evaluated at bid price : 12.16
Bid-YTW : 8.75 %
GWO.PR.H Insurance Straight 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 18.21
Evaluated at bid price : 18.21
Bid-YTW : 6.78 %
IFC.PR.K Perpetual-Discount 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 20.38
Evaluated at bid price : 20.38
Bid-YTW : 6.55 %
SLF.PR.J FloatingReset 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 15.50
Evaluated at bid price : 15.50
Bid-YTW : 9.05 %
BAM.PR.M Perpetual-Discount 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 6.72 %
BAM.PF.C Perpetual-Discount 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.98
Evaluated at bid price : 17.98
Bid-YTW : 6.87 %
PVS.PR.I SplitShare 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-10-31
Maturity Price : 25.00
Evaluated at bid price : 24.20
Bid-YTW : 6.33 %
TD.PF.A FixedReset Disc 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.27
Evaluated at bid price : 17.27
Bid-YTW : 7.80 %
TD.PF.C FixedReset Disc 1.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.37
Evaluated at bid price : 17.37
Bid-YTW : 7.77 %
CU.PR.G Perpetual-Discount 1.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.06
Evaluated at bid price : 17.06
Bid-YTW : 6.63 %
BAM.PF.D Perpetual-Discount 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 18.27
Evaluated at bid price : 18.27
Bid-YTW : 6.83 %
PVS.PR.J SplitShare 1.56 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2028-02-29
Maturity Price : 25.00
Evaluated at bid price : 22.75
Bid-YTW : 6.67 %
PWF.PR.Z Perpetual-Discount 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 19.30
Evaluated at bid price : 19.30
Bid-YTW : 6.75 %
POW.PR.B Perpetual-Discount 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 19.88
Evaluated at bid price : 19.88
Bid-YTW : 6.83 %
POW.PR.A Perpetual-Discount 1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 20.83
Evaluated at bid price : 20.83
Bid-YTW : 6.82 %
FTS.PR.J Perpetual-Discount 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 18.78
Evaluated at bid price : 18.78
Bid-YTW : 6.47 %
BAM.PR.N Perpetual-Discount 1.88 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.89
Evaluated at bid price : 17.89
Bid-YTW : 6.76 %
CU.PR.F Perpetual-Discount 2.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.29
Evaluated at bid price : 17.29
Bid-YTW : 6.54 %
PVS.PR.G SplitShare 2.15 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2026-02-28
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 6.99 %
BAM.PF.I FixedReset Disc 2.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 21.68
Evaluated at bid price : 22.02
Bid-YTW : 7.65 %
FTS.PR.F Perpetual-Discount 2.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 6.45 %
CIU.PR.A Perpetual-Discount 2.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.09
Evaluated at bid price : 17.09
Bid-YTW : 6.76 %
BIP.PR.B FixedReset Disc 2.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 22.14
Evaluated at bid price : 22.55
Bid-YTW : 8.23 %
MIC.PR.A Perpetual-Discount 2.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 7.44 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.I FixedReset Ins Non 245,475 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 21.93
Evaluated at bid price : 22.42
Bid-YTW : 6.96 %
IFC.PR.A FixedReset Ins Non 83,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.33
Evaluated at bid price : 17.33
Bid-YTW : 7.41 %
MFC.PR.M FixedReset Ins Non 63,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.61
Evaluated at bid price : 17.61
Bid-YTW : 7.85 %
BMO.PR.T FixedReset Disc 60,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 16.85
Evaluated at bid price : 16.85
Bid-YTW : 7.99 %
TD.PF.C FixedReset Disc 53,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.37
Evaluated at bid price : 17.37
Bid-YTW : 7.77 %
BMO.PR.W FixedReset Disc 44,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.15
Evaluated at bid price : 17.15
Bid-YTW : 7.82 %
There were 36 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: 15.30 – 19.40
Spot Rate : 4.1000
Average : 2.8969

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 15.30
Evaluated at bid price : 15.30
Bid-YTW : 8.96 %

TD.PF.C FixedReset Disc Quote: 17.37 – 19.13
Spot Rate : 1.7600
Average : 1.0538

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.37
Evaluated at bid price : 17.37
Bid-YTW : 7.77 %

PVS.PR.H SplitShare Quote: 22.50 – 24.25
Spot Rate : 1.7500
Average : 1.2499

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2027-02-28
Maturity Price : 25.00
Evaluated at bid price : 22.50
Bid-YTW : 7.78 %

TD.PF.A FixedReset Disc Quote: 17.27 – 18.48
Spot Rate : 1.2100
Average : 0.7356

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.27
Evaluated at bid price : 17.27
Bid-YTW : 7.80 %

TD.PF.B FixedReset Disc Quote: 17.34 – 18.50
Spot Rate : 1.1600
Average : 0.6987

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.34
Evaluated at bid price : 17.34
Bid-YTW : 7.86 %

TD.PF.D FixedReset Disc Quote: 17.50 – 19.44
Spot Rate : 1.9400
Average : 1.5187

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2052-11-15
Maturity Price : 17.50
Evaluated at bid price : 17.50
Bid-YTW : 8.05 %

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