PrefBlog

TXPR closed at 580.54, up 0.76% on the day. Volume today was 1.82-million, well above the median of the past 21 trading days.

CPD closed at 11.55, up 0.78% on the day. Volume was 92,520, well below the median of the past 21 trading days.

ZPR closed at 9.59, up 0.63% on the day. Volume was 205,840, below the median of the past 21 trading days.

Five-year Canada yields were down 10bp to 3.16% today.

The omniscient pundits tell us:

U.S. stocks ended up sharply on Wednesday, with the S&P 500 and Nasdaq gaining more than 1% each as investors were optimistic ahead of an inflation report that could give the Federal Reserve room to dial back on its aggressive interest rate hikes. The TSX rose to its highest level in more than five weeks, led by a 2% jump in the real estate sector, attracting buyers as U.S. and Canadian bond yields declined.

The much-anticipated report due on Thursday is projected by economists polled by Reuters to show U.S. consumer prices grew 6.5% year-on-year in December, moderating from a 7.1% rise in November.

Benchmark stock indexes are up this year after falling sharply last year. Hopes that the Fed could soon ease back on its aggressive tightening after raising the federal funds rate seven times in 2022 have boosted the market in recent sessions, even as comments by some Fed officials have supported the view that the central bank needs to remain vigilant about raising rates to fight inflation.
…
Canadian and U.S. government bond yields fell across a flatter curve. The 10-year was down 11.2 basis points at 3.008%, its lowest level since Dec. 21. That helped to give a boost to the real estate sector, made up of relatively high yielding securities that struggle when yields rise on competing investments in the bond market.

PerpetualDiscounts now yield 6.21%, equivalent to 8.07% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.11% on 2023-1-6 and since then the closing price has changed from 15.04 to 15.19, an increase of 100bp in price, with a Duration of 12.24 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies a decline in yield of about 8bp since 1/6 to 5.05%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has declined to about 300bp from the 330bp reported January 4.

This entry was posted on Wednesday, January 11th, 2023 at 10:11 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.