US Producer Prices came in high:
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, offering more evidence of the economy’s resilience despite tighter monetary policy.
Other data on Thursday showed monthly producer prices increasing by the most in seven months in January as the cost of energy products surged. Even stripping out food and energy, prices for the so-called core goods recorded their biggest gain since last May.
…
A second report from the Labor Department on Thursday showed the producer price index for final demand rebounded 0.7% in January, the largest increase since June, after decreasing 0.2% in December. The rise was led by a 1.2% advance in goods prices, which followed a 1.4% decline in December.A 6.2% jump gasoline prices accounted for nearly a third of the increase in goods. There were also increases in prices for residential natural gas, diesel fuel, jet fuel, soft drinks and motor vehicles.
But fresh and dry vegetable prices tumbled 33.5%. Excluding food and energy, core goods prices shot up 0.6%. That was the biggest increase in core goods prices in eight months and followed a 0.2 gain in December. Services increased 0.4%, matching December’s gain.
In the 12 months through January, the PPI increased 6.0% after advancing 6.5% in December. Economists had forecast the PPI climbing 0.4% and rising 5.4% year-on-year.
Federal Reserve Bank of Cleveland President Loretta Mester talked tough:
The Fed “has come an appreciable way in bringing policy from a very accommodative stance to a restrictive one, but I believe we have more work to do,” Mester said in a speech text. “At this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5 per cent and hold it there for some time to be sufficiently restrictive to ensure that inflation is on a sustainable path back to 2 per cent,” she said.
…
Mester, who does not have a vote on the Federal Open Market Committee this year, noted she would have been open to a larger rate rise at the gathering. “Setting aside what financial market participants expected us to do, I saw a compelling economic case for a 50-basis-point increase, which would have brought the top of the target range to 5 per cent,” she said.
Tiff Macklem is fairly upbeat:
The Canadian economy may be on track for a recession this year, but it won’t feel as severe as other downturns the country has experienced over the past few decades, according to Bank of Canada Governor Tiff Macklem.
“It’s not going to feel great. But it is not going to feel like what people think of when you say the word recession,” Mr. Macklem said in an appearance before the House of Commons finance committee on Thursday. “You say recession, they think big job losses, very, very painful.”
…
“But this is still going to be a pretty healthy labour market,” Mr. Macklem said. “This is not going to feel like the kind of recessions that we had in ‘08, or ‘81 or ‘91.”Mr. Macklem reiterated that the Bank of Canada does not expect to raise interest rates further, despite a stronger-than-expected January jobs report published on Friday. But he said he’s willing to hike rates again if inflation does not drop as much as the bank is forecasting. The bank has raised its policy interest rate to 4.5 per cent from 0.25 per cent since March.
The Globe highlighted some Senate fluff:
A Senate committee is calling for greater parliamentary oversight of the Bank of Canada as well as increased transparency, wading into a debate around central bank independence at a moment of heightened political interest in monetary policy.
The Senate committee on banking, commerce and the economy published a report on Wednesday looking at the causes of high inflation and the state of the economy. The report did not make any formal recommendations, but it did suggest that parliamentarians should spend more time looking at monetary policy issues.
“What is evident is the need for enhanced Parliamentary oversight over the deployment of fiscal and monetary tools, particularly in times of crisis and uncertainty,” the report said.
“The Bank of Canada should be more transparent and periodically make public its assessment of the effect of its interventions on inflation and on the evolution of key economic indicators,” it added.
Well, I went to the committee’s report page and got a copy of the report The State of the Canadian Economy and Inflation. It’s garbage. You saw that line in the Globe’s report, “A Senate committee is calling for greater parliamentary oversight of the Bank of Canada”? You know what the Committee’s report says?:
What is evident is the need for enhanced Parliamentary oversight over the deployment of fiscal and monetary tools, particularly in times of crisis and uncertainty.
That’s not a headline. That’s not an introductory sentence. That’s the whole damn thing; there’s not a single sentence in the report that specifies what so-called enhancements are evidently needed; there’s not a single sentence in the report that provides any support for the assertion. Garbage.
The rest of the fluff is along the same lines. There are some fairly big names being interviewed by the committee, but they simply provide unsupported and unchallenged assertions about their views on the economy, BoC policy, whatever. There’s nothing of any substance in the piece, nothing referenced, nothing challenged. Garbage.
The Boston Fed has released a study of forecasting of the ‘shelter’ component of the US CPI:
According to the authors’ forecast, CPI shelter will increase 5.9% from September 2022 to September 2023 and 3.9% over the ensuing 12 months. By contrast, from 2000 through 2019, CPI shelter rose an average of 2.7% annually.
The authors base their forecast of rapidly rising CPI shelter on two trends: (1) Although market-rent growth has slowed recently, it was substantially faster than CPI-shelter growth throughout 2021 and the first half of 2022, and (2) CPI shelter usually catches up with market rents.
The authors explain that CPI shelter tends to lag market rents because of the way that the U.S. Bureau of Labor Statistics constructs CPI shelter. The BLS gathers information for the index through its Consumer Price Index Housing Survey. The survey measures average rental prices for all renters – new and existing – whereas market rents measure only rental prices for new tenants. The authors note that landlords tend to raise the rents of current tenants slowly, so an index that includes current tenants’ rents is going to be lower than one that excludes them.
…
If CPI shelter does increase 5.9% from September 2022 to September 2023, as the authors forecast, and 3.9% over the ensuing 12 months, the headline CPI will be 1% higher over the first 12-month period and 0.4% higher from September 2023 to September 2024 compared with what it would be if shelter prices grew at the pre-pandemic pace of 2.7%. The core CPI will be 1.3% and 0.5% higher.
And there’s data from the New York Fed’s Household Debt and Credit Report:
Total household debt rose by $394 billion, or 2.4 percent, to $16.90 trillion in the fourth quarter of 2022, according to the latest Quarterly Report on Household Debt and Credit. Credit card balances increased by $61 billion to reach $986 billion, surpassing the pre-pandemic high of $927 billion; mortgage balances rose to $11.92 trillion, auto loan balances to $1.55 trillion, and student loan balances to $1.60 trillion. The share of current debt transitioning into delinquency increased for nearly all debt types.
And, finally, a complaint about reporting:
An IT failure at Lufthansa stranded thousands of passengers and forced flights to Germany’s busiest airport to be cancelled or diverted on Wednesday, with the airline blaming botched railway engineering works that damaged broadband cables.
More than 200 flights were cancelled in Frankfurt, a vital international transit hub and one of Europe’s biggest airports, a spokesperson for operator Fraport said.
Lufthansa later said all its IT systems were up and running again and that it expected Frankfurt flights to return to normal on Thursday.
…
Lufthansa and Germany’s national train operator blamed the problem on third-party engineering works on a railway line extension that took place on Tuesday evening, when a drill cut through a Deutsche Telekom fibre optic cable bundle.
I can’t really do better than to copy-paste my comment on the Globe’s site:
Details are missing here.
We are being told that one cut in one cable caused this system crash. Where’s the redundancy? The whole point of the Internet is to ensure that networks operate with absolutely minimal exposure to single point failure – and if this cable wasn’t part of the Internet, what system was it part of? Who tried to reduce expenses and promote efficiency by building a shoddy system that could be brought to its kness by one cut in one cable?
| 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 | 0.4851 % | 2,588.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4851 % | 4,963.9 |
| Floater | 8.71 % | 8.90 % | 51,583 | 10.41 | 2 | 0.4851 % | 2,860.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2578 % | 3,428.4 |
| SplitShare | 4.90 % | 6.51 % | 55,758 | 2.76 | 7 | 0.2578 % | 4,094.2 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2578 % | 3,194.5 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3215 % | 2,827.1 |
| Perpetual-Discount | 6.03 % | 6.09 % | 73,969 | 13.77 | 37 | -0.3215 % | 3,082.9 |
| FixedReset Disc | 5.29 % | 7.31 % | 88,294 | 12.33 | 59 | 0.0052 % | 2,304.8 |
| Insurance Straight | 5.91 % | 6.06 % | 93,562 | 13.76 | 20 | -0.5329 % | 3,036.9 |
| FloatingReset | 9.66 % | 10.22 % | 39,549 | 9.28 | 2 | 0.3114 % | 2,614.3 |
| FixedReset Prem | 6.39 % | 6.40 % | 204,766 | 4.02 | 2 | -0.8264 % | 2,376.3 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0052 % | 2,356.0 |
| FixedReset Ins Non | 5.21 % | 6.95 % | 48,640 | 12.55 | 14 | 0.0727 % | 2,477.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.E | Insurance Straight | -8.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 18.26 Evaluated at bid price : 18.26 Bid-YTW : 6.27 % |
| PWF.PR.R | Perpetual-Discount | -5.73 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 6.50 % |
| PWF.PR.P | FixedReset Disc | -3.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 13.33 Evaluated at bid price : 13.33 Bid-YTW : 8.14 % |
| BN.PF.G | FixedReset Disc | -3.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 16.40 Evaluated at bid price : 16.40 Bid-YTW : 8.73 % |
| BIP.PR.F | FixedReset Disc | -2.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 7.45 % |
| MFC.PR.C | Insurance Straight | -1.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 5.88 % |
| POW.PR.D | Perpetual-Discount | -1.77 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 6.01 % |
| MIC.PR.A | Perpetual-Discount | -1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 20.05 Evaluated at bid price : 20.05 Bid-YTW : 6.86 % |
| POW.PR.A | Perpetual-Discount | -1.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 22.77 Evaluated at bid price : 23.05 Bid-YTW : 6.15 % |
| MFC.PR.I | FixedReset Ins Non | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 22.58 Evaluated at bid price : 23.52 Bid-YTW : 6.59 % |
| BIK.PR.A | FixedReset Prem | -1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 24.31 Evaluated at bid price : 24.70 Bid-YTW : 7.37 % |
| FTS.PR.G | FixedReset Disc | -1.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 18.16 Evaluated at bid price : 18.16 Bid-YTW : 7.50 % |
| PWF.PR.O | Perpetual-Discount | -1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 6.22 % |
| GWO.PR.L | Insurance Straight | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 6.17 % |
| TRP.PR.A | FixedReset Disc | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 14.81 Evaluated at bid price : 14.81 Bid-YTW : 8.58 % |
| SLF.PR.J | FloatingReset | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 15.95 Evaluated at bid price : 15.95 Bid-YTW : 9.59 % |
| MFC.PR.J | FixedReset Ins Non | 1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 22.13 Evaluated at bid price : 22.75 Bid-YTW : 6.61 % |
| NA.PR.G | FixedReset Disc | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 21.79 Evaluated at bid price : 22.25 Bid-YTW : 6.82 % |
| BN.PR.N | Perpetual-Discount | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 6.27 % |
| MFC.PR.K | FixedReset Ins Non | 1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 19.73 Evaluated at bid price : 19.73 Bid-YTW : 7.10 % |
| PVS.PR.K | SplitShare | 2.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2029-05-31 Maturity Price : 25.00 Evaluated at bid price : 22.70 Bid-YTW : 6.46 % |
| IFC.PR.F | Insurance Straight | 6.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 21.74 Evaluated at bid price : 22.05 Bid-YTW : 6.10 % |
| BN.PF.C | Perpetual-Discount | 6.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 19.63 Evaluated at bid price : 19.63 Bid-YTW : 6.29 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.Z | FixedReset Disc | 53,225 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 18.32 Evaluated at bid price : 18.32 Bid-YTW : 7.39 % |
| BMO.PR.T | FixedReset Disc | 46,208 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 18.07 Evaluated at bid price : 18.07 Bid-YTW : 7.47 % |
| NA.PR.C | FixedReset Prem | 25,272 | YTW SCENARIO Maturity Type : Call Maturity Date : 2027-11-15 Maturity Price : 25.00 Evaluated at bid price : 25.70 Bid-YTW : 6.40 % |
| TD.PF.K | FixedReset Disc | 19,640 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 6.96 % |
| TRP.PR.D | FixedReset Disc | 18,400 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 8.46 % |
| CM.PR.S | FixedReset Disc | 14,146 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-16 Maturity Price : 22.77 Evaluated at bid price : 22.77 Bid-YTW : 6.44 % |
| There were 4 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| SLF.PR.E | Insurance Straight | Quote: 18.26 – 20.40 Spot Rate : 2.1400 Average : 1.2503 YTW SCENARIO |
| PWF.PR.R | Perpetual-Discount | Quote: 21.40 – 22.85 Spot Rate : 1.4500 Average : 0.8743 YTW SCENARIO |
| MFC.PR.M | FixedReset Ins Non | Quote: 18.50 – 20.10 Spot Rate : 1.6000 Average : 1.0771 YTW SCENARIO |
| CU.PR.H | Perpetual-Discount | Quote: 20.57 – 22.62 Spot Rate : 2.0500 Average : 1.6684 YTW SCENARIO |
| BIP.PR.F | FixedReset Disc | Quote: 21.10 – 21.94 Spot Rate : 0.8400 Average : 0.5711 YTW SCENARIO |
| BN.PF.G | FixedReset Disc | Quote: 16.40 – 17.13 Spot Rate : 0.7300 Average : 0.4726 YTW SCENARIO |