PrefBlog

TXPR closed at 560.23, up 2.32% on the day. Volume today was 1.64-million, below the median of the past 21 trading days.

CPD closed at 11.12, up 2.96% on the day. Volume was 130,080, below the median of the past 21 trading days.

ZPR closed at 9.28, up 2.88% on the day. Volume was 294,780, above the median of the past 21 trading days.

Five-year Canada yields were down a bit to 3.30% today.

The pundits tell us the Fed Minutes played a role today:

The S&P 500 finished higher on Wednesday but below its session peak after volatile trading following the release of minutes from the Federal Reserve’s last meeting, which showed officials laser-focused on controlling inflation even as they agreed to slow their interest rate hiking pace. Canada’s main stock index rose to its highest closing level in nearly three weeks, helped by gains for gold mining shares.

Officials at the Fed’s Dec. 13-14 policy meeting agreed the U.S. central bank should continue increasing the cost of credit to control the pace of price increases, but in a gradual way intended to limit the risks to economic growth.
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Also on Wednesday, Minneapolis Fed President Neel Kashkari stressed the need for continued rate hikes, setting out his own forecast that the policy rate should initially pause at 5.4%.
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Market participants now see a 68.8% chance of a 25 basis points rate hike from the Fed in February, but still see rates peaking just below 5% by June. They are also placing better than 50% odds that the Bank of Canada will hike rates in this country by a further 25 basis points later this month.

Earlier in the day, data showed U.S. job openings falling less than expected in November as the labour market remains tight, giving the Fed cover to stick to its monetary tightening campaign for longer. Other data showed manufacturing contracted further in December.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 145.06 points, or 0.75%, at 19,588.83, its highest closing level since Dec. 15.
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The Dow Jones Industrial Average rose 133.4 points, or 0.4%, to 33,269.77; the S&P 500 gained 28.83 points, or 0.75%, to 3,852.97; and the Nasdaq Composite added 71.78 points, or 0.69%, to 10,458.76.

PerpetualDiscounts now yield 6.47%, equivalent to 8.41% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.30% on 2022-12-30 and since then the closing price has changed from 14.72 to 14.92, an increase of 136bp in price, with a Duration of 12.15 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies a decline in yield of about 11bp since 12/30 to 5.19%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has been steady at about the 330bp reported December 28.

This entry was posted on Wednesday, January 4th, 2023 at 7:33 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.