The European inflation report was mixed:
Consumer prices in the 20 countries that use the euro as their currency rose at an annual rate of 8.5 percent in February, down slightly from January’s rate of 8.6 percent. Year-over-year rates have been declining since reaching a peak 10.6 percent in October.
But some of the largest economies showed troubling increases, and core inflation — a measure that excludes the most erratic categories like food and energy — rose to a record high of 5.6 percent in February, from 5.3 percent.
Interesting things are happening with mortgages:
New data from CIBC show that $52-billion worth of mortgages – the equivalent of 20 per cent of the bank’s $263-billion residential loan portfolio – were in a position where the borrower’s monthly payment was not high enough to cover even the interest portion of the loans. The bank has allowed these borrowers to stretch out the length of time it takes to pay off the loan, which is known as the amortization period. As well, borrowers are adding unpaid interest onto their original loan or principal.
…
CIBC’s filing, for the first quarter that ended in January, is the only one to provide increased transparency on the impact of higher interest rates on its variable-rate portfolio. The same filing said that in the fourth quarter, $39-billion worth of mortgages were negatively amortizing. That grew to $52-billion in the first quarter, said the footnote in the filing. Last summer, the bank said its borrowers were not yet putting unpaid interest onto the principal.
…
The most recent quarterly filings from the big banks show that a chunk of their mortgage loans have amortization periods of more than 30 years.At BMO, the proportion of residential mortgages with amortization periods longer than 30 years reached 32.4 per cent in January. At CIBC, the percentage was 30 per cent. At TD it was 29.3 per cent and at Royal Bank of Canada, it was 25 per cent, according to their regulatory filings.
BIS has released a bulletin by Sarah Bell, Michael Chui, Tamara Gomes, Paul Moser-Boehm and Albert Pierres Tejada titled Why are central banks reporting losses? Does it matter?:
Key takeaways
- • Rising interest rates are reducing profits or even leading to losses at some central banks, especially those that purchased domestic currency assets for macroeconomic and financial stability objectives.
- • Losses and negative equity do not directly affect the ability of central banks to operate effectively.
- • In normal times and in crises, central banks should be judged on whether they fulfil their mandates.
- • Central banks can underscore their continued ability to achieve policy objectives by clearly explaining the reasons for losses and highlighting the overall benefits of their policy measures.
Central banks can mitigate the risk of misperception through effective communication to their stakeholders. They can clarify the context for potential losses, noting how the measures were undertaken to ensure price and economic stability over the medium and long-term for the benefit of households and businesses, which incidentally boosted economy-wide income and hence the overall tax base. In their public communications, central banks can prepare stakeholders for losses at the outset of policy interventions, explaining that APPs or other programmes carry financial risk. And they can reiterate these messages when losses are imminent, explaining how central bank finances work and that losses are not relevant for policy. Several central banks have already done so when publishing their recent financial statements or through other public communications.11
To conclude, a central bank’s credibility depends on its ability to achieve its mandates. Losses do not jeopardise that ability and are sometimes the price to pay for achieving those aims (Nordstrom and Vredin (2022)). To maintain the public’s trust and to preserve central bank legitimacy now and in the long run, stakeholders should appreciate that central banks’ policy mandates come before profits.
| 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 | -0.1127 % | 2,556.4 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1127 % | 4,903.1 |
| Floater | 8.82 % | 9.02 % | 52,139 | 10.26 | 2 | -0.1127 % | 2,825.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5415 % | 3,351.7 |
| SplitShare | 5.02 % | 6.81 % | 52,595 | 2.75 | 7 | -0.5415 % | 4,002.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5415 % | 3,123.0 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0304 % | 2,756.6 |
| Perpetual-Discount | 6.19 % | 6.32 % | 65,909 | 13.38 | 35 | 0.0304 % | 3,005.9 |
| FixedReset Disc | 5.41 % | 7.74 % | 85,570 | 11.74 | 61 | -0.0846 % | 2,270.2 |
| Insurance Straight | 6.13 % | 6.20 % | 90,119 | 13.70 | 20 | -0.8750 % | 2,929.5 |
| FloatingReset | 9.89 % | 10.13 % | 34,220 | 9.52 | 2 | -0.3134 % | 2,581.9 |
| FixedReset Prem | 6.52 % | 6.35 % | 203,324 | 3.98 | 2 | 0.1569 % | 2,370.1 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0846 % | 2,320.6 |
| FixedReset Ins Non | 5.29 % | 7.26 % | 63,369 | 12.19 | 13 | 0.2179 % | 2,455.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PVS.PR.I | SplitShare | -4.78 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-10-31 Maturity Price : 25.00 Evaluated at bid price : 22.71 Bid-YTW : 8.69 % |
| CU.PR.F | Perpetual-Discount | -2.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 6.30 % |
| BN.PF.B | FixedReset Disc | -1.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.11 Evaluated at bid price : 18.11 Bid-YTW : 8.62 % |
| BIP.PR.E | FixedReset Disc | -1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 22.17 Evaluated at bid price : 22.82 Bid-YTW : 7.23 % |
| IFC.PR.E | Insurance Straight | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 6.24 % |
| IFC.PR.A | FixedReset Ins Non | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.21 Evaluated at bid price : 18.21 Bid-YTW : 7.26 % |
| BMO.PR.W | FixedReset Disc | -1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 17.48 Evaluated at bid price : 17.48 Bid-YTW : 8.08 % |
| SLF.PR.D | Insurance Straight | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.58 Evaluated at bid price : 18.58 Bid-YTW : 6.00 % |
| RY.PR.H | FixedReset Disc | -1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 17.95 Evaluated at bid price : 17.95 Bid-YTW : 7.95 % |
| MFC.PR.B | Insurance Straight | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 19.17 Evaluated at bid price : 19.17 Bid-YTW : 6.09 % |
| SLF.PR.E | Insurance Straight | -1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 6.03 % |
| BIP.PR.A | FixedReset Disc | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 9.20 % |
| PWF.PF.A | Perpetual-Discount | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.20 Evaluated at bid price : 18.20 Bid-YTW : 6.27 % |
| TRP.PR.G | FixedReset Disc | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 8.55 % |
| PWF.PR.K | Perpetual-Discount | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.27 % |
| IFC.PR.K | Perpetual-Discount | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 21.47 Evaluated at bid price : 21.75 Bid-YTW : 6.14 % |
| PVS.PR.J | SplitShare | 1.13 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2028-02-29 Maturity Price : 25.00 Evaluated at bid price : 22.45 Bid-YTW : 6.87 % |
| MFC.PR.K | FixedReset Ins Non | 1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 7.38 % |
| SLF.PR.G | FixedReset Ins Non | 1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 13.16 Evaluated at bid price : 13.16 Bid-YTW : 8.54 % |
| TD.PF.D | FixedReset Disc | 1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 7.70 % |
| BMO.PR.E | FixedReset Disc | 1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 21.39 Evaluated at bid price : 21.69 Bid-YTW : 7.25 % |
| GWO.PR.Y | Insurance Straight | 1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 6.09 % |
| MFC.PR.I | FixedReset Ins Non | 1.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 22.51 Evaluated at bid price : 23.38 Bid-YTW : 6.76 % |
| POW.PR.B | Perpetual-Discount | 2.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 6.33 % |
| IAF.PR.B | Insurance Straight | 2.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 5.82 % |
| IFC.PR.C | FixedReset Disc | 3.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.30 Evaluated at bid price : 18.30 Bid-YTW : 7.74 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| IAF.PR.I | FixedReset Ins Non | 211,400 | YTW SCENARIO Maturity Type : Call Maturity Date : 2023-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.91 Bid-YTW : 4.64 % |
| GWO.PR.L | Insurance Straight | 32,450 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 22.27 Evaluated at bid price : 22.54 Bid-YTW : 6.26 % |
| TRP.PR.E | FixedReset Disc | 28,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 15.86 Evaluated at bid price : 15.86 Bid-YTW : 9.10 % |
| RY.PR.S | FixedReset Disc | 25,395 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 7.30 % |
| BMO.PR.S | FixedReset Disc | 24,723 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 7.95 % |
| BMO.PR.E | FixedReset Disc | 23,577 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-03-02 Maturity Price : 21.39 Evaluated at bid price : 21.69 Bid-YTW : 7.25 % |
| There were 6 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PVS.PR.I | SplitShare | Quote: 22.71 – 24.00 Spot Rate : 1.2900 Average : 0.7492 YTW SCENARIO |
| CU.PR.J | Perpetual-Discount | Quote: 19.25 – 23.50 Spot Rate : 4.2500 Average : 3.8378 YTW SCENARIO |
| CU.PR.F | Perpetual-Discount | Quote: 18.00 – 19.50 Spot Rate : 1.5000 Average : 1.2058 YTW SCENARIO |
| PWF.PR.S | Perpetual-Discount | Quote: 19.16 – 20.00 Spot Rate : 0.8400 Average : 0.6568 YTW SCENARIO |
| PWF.PR.G | Perpetual-Discount | Quote: 23.62 – 24.20 Spot Rate : 0.5800 Average : 0.4148 YTW SCENARIO |
| BN.PF.A | FixedReset Disc | Quote: 21.00 – 21.90 Spot Rate : 0.9000 Average : 0.7580 YTW SCENARIO |