March 9, 2023

Banks don’t compete on price. They do, however, compete by regulation:

The federal banking watchdog has launched a formal review of cash exchange-traded funds, one of Canada’s most popular retail investments, amid a Bay Street spat that stems from surging demand for them.

The Office of the Superintendent of Financial Institutions, which regulates banks, launched its review in the fall and is studying any liquidity concerns posed by these ETFs, according to three financial industry sources. The Globe and Mail is not identifying the sources because they were not authorized to speak publicly about the matter.

This access has rankled some banks, according to the sources, because ETFs that offer premium rates to retail clients are likely to lure away customers from banks, hitting that sector’s profits.

Royal Bank of Canada RY-T -0.63%decrease
does not provide funding for any cash ETFs, and Toronto-Dominion Bank TD-T -1.45%decrease
has only minimal exposure. Both banks have blocked access to these funds on their online retail investing platforms.

BoC Senior Deputy Governor Carolyn Rogers reminds us that the policy rate ‘pause’ may be temporary:

“If we continue to see the above-average wage growth that we’ve been seeing in Canada without stronger growth in productivity, it will be difficult to bring inflation all the way down to 2 per cent,” Ms. Rogers said in a speech to the Manitoba Chambers of Commerce.

The central bank’s decision to hold its overnight rate at 4.5 per cent on Wednesday marked a turning point after eight consecutive rate hikes. However, Ms. Rogers emphasized that this is a “conditional pause,” and that the bank could restart its rate-hike campaign if inflation and economic growth don’t slow as quickly expected.

“We’ll need to see more evidence to fully assess whether monetary policy is restrictive enough to return inflation to 2 per cent,” she said.

Markets were unkind to banks today:

Wall Street’s three major stock indexes closed lower on Thursday, with bank stocks creating the biggest drag while investors also worried that Friday’s jobs report could spur more aggressive interest rate hikes from the Federal Reserve. The Canadian benchmark stock index also fell and closed at its lowest level in nearly two months.

The S&P 500′s bank index finished down 6.6% after hitting its lowest level since mid-October. Investors fled the sector after tech-industry lender SVB Financial Group launched a share sale to shore up its balance sheet due to declining deposits from startups struggling for funding.

This is due, apparently, to problems at a techno-bank:

The S&P 500 bank index was down 4.6% on Thursday as investors grew wary of the entire sector after SVB Financial Group’s share sale announcement and crypto bank Silvergate’s decision to wind down operations.

Shares in SVB, whose operating segments include Silicon Valley Bank, led declines, with a drop of 43.8% to $150.62 after it announced the $1.75 billion share sale late on Wednesday as it battles cash burn due to declining deposits from startups struggling with a venture capital funding drought.

The second biggest decliner in the S&P 500 index was another San Francisco-based bank, First Republic, which was off 14.1% after hitting its lowest level since October 2020. Also Zion Bancorp, down 8.2%.

The SPDR S&P regional banking ETF was down 6.0% after hitting its lowest point since January 2021.

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 -0.5732 % 2,500.6
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.5732 % 4,796.2
Floater 9.01 % 9.27 % 49,593 10.02 2 -0.5732 % 2,764.1
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2390 % 3,337.8
SplitShare 5.04 % 6.90 % 51,231 2.73 7 -0.2390 % 3,986.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2390 % 3,110.0
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.3277 % 2,750.9
Perpetual-Discount 6.20 % 6.35 % 67,877 13.35 35 0.3277 % 2,999.7
FixedReset Disc 5.50 % 7.87 % 88,888 11.72 61 -0.3334 % 2,235.3
Insurance Straight 6.22 % 6.22 % 86,140 13.62 20 -0.7790 % 2,886.5
FloatingReset 9.83 % 10.11 % 35,802 9.53 2 0.2208 % 2,578.6
FixedReset Prem 6.56 % 6.42 % 214,108 3.96 2 0.1182 % 2,359.0
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 -0.3334 % 2,284.9
FixedReset Ins Non 5.34 % 7.44 % 72,054 12.02 13 -0.0456 % 2,431.5
Performance Highlights
Issue Index Change Notes
GWO.PR.L Insurance Straight -18.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 7.77 %
BN.PF.A FixedReset Disc -4.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 20.30
Evaluated at bid price : 20.30
Bid-YTW : 8.13 %
GWO.PR.N FixedReset Ins Non -3.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 12.50
Evaluated at bid price : 12.50
Bid-YTW : 8.52 %
TD.PF.B FixedReset Disc -2.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 8.29 %
BIP.PR.E FixedReset Disc -2.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 21.57
Evaluated at bid price : 21.91
Bid-YTW : 7.53 %
BN.PF.F FixedReset Disc -1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 17.04
Evaluated at bid price : 17.04
Bid-YTW : 9.25 %
CM.PR.T FixedReset Disc -1.61 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 23.25
Evaluated at bid price : 23.76
Bid-YTW : 7.19 %
BN.PF.H FixedReset Disc -1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 22.61
Evaluated at bid price : 23.25
Bid-YTW : 7.89 %
TRP.PR.B FixedReset Disc -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 11.18
Evaluated at bid price : 11.18
Bid-YTW : 9.64 %
PVS.PR.J SplitShare -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2028-02-29
Maturity Price : 25.00
Evaluated at bid price : 21.80
Bid-YTW : 7.58 %
MIC.PR.A Perpetual-Discount -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 20.44
Evaluated at bid price : 20.44
Bid-YTW : 6.76 %
BN.PR.K Floater -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 13.02
Evaluated at bid price : 13.02
Bid-YTW : 9.27 %
PVS.PR.H SplitShare -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2027-02-28
Maturity Price : 25.00
Evaluated at bid price : 22.56
Bid-YTW : 7.64 %
BIK.PR.A FixedReset Disc -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 23.26
Evaluated at bid price : 23.80
Bid-YTW : 7.83 %
GWO.PR.M Insurance Straight 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 22.93
Evaluated at bid price : 23.20
Bid-YTW : 6.26 %
PWF.PR.H Perpetual-Discount 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 22.66
Evaluated at bid price : 22.90
Bid-YTW : 6.36 %
PWF.PF.A Perpetual-Discount 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 18.48
Evaluated at bid price : 18.48
Bid-YTW : 6.18 %
PWF.PR.Z Perpetual-Discount 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 20.60
Evaluated at bid price : 20.60
Bid-YTW : 6.35 %
GWO.PR.S Insurance Straight 1.41 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 20.83
Evaluated at bid price : 20.83
Bid-YTW : 6.32 %
BIP.PR.F FixedReset Disc 1.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 8.30 %
IFC.PR.K Perpetual-Discount 1.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 21.47
Evaluated at bid price : 21.75
Bid-YTW : 6.15 %
MFC.PR.M FixedReset Ins Non 1.66 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 17.74
Evaluated at bid price : 17.74
Bid-YTW : 8.06 %
TRP.PR.E FixedReset Disc 1.96 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 15.60
Evaluated at bid price : 15.60
Bid-YTW : 9.24 %
CU.PR.H Perpetual-Discount 4.52 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 6.16 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.J FixedReset Ins Non 154,800 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 21.87
Evaluated at bid price : 22.34
Bid-YTW : 6.96 %
CU.PR.J Perpetual-Discount 142,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 19.07
Evaluated at bid price : 19.07
Bid-YTW : 6.28 %
IAF.PR.I FixedReset Ins Non 76,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2023-04-30
Maturity Price : 25.00
Evaluated at bid price : 24.93
Bid-YTW : 4.70 %
BMO.PR.W FixedReset Disc 60,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 17.42
Evaluated at bid price : 17.42
Bid-YTW : 8.10 %
CU.PR.G Perpetual-Discount 51,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 18.51
Evaluated at bid price : 18.51
Bid-YTW : 6.13 %
CM.PR.O FixedReset Disc 46,460 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 18.16
Evaluated at bid price : 18.16
Bid-YTW : 7.92 %
There were 6 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.L Insurance Straight Quote: 18.25 – 22.79
Spot Rate : 4.5400
Average : 2.4810

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 18.25
Evaluated at bid price : 18.25
Bid-YTW : 7.77 %

BN.PF.A FixedReset Disc Quote: 20.30 – 23.00
Spot Rate : 2.7000
Average : 1.7509

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 20.30
Evaluated at bid price : 20.30
Bid-YTW : 8.13 %

BIP.PR.E FixedReset Disc Quote: 21.91 – 23.00
Spot Rate : 1.0900
Average : 0.6515

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 21.57
Evaluated at bid price : 21.91
Bid-YTW : 7.53 %

BN.PF.H FixedReset Disc Quote: 23.25 – 24.00
Spot Rate : 0.7500
Average : 0.4848

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 22.61
Evaluated at bid price : 23.25
Bid-YTW : 7.89 %

BIP.PR.F FixedReset Disc Quote: 19.50 – 21.94
Spot Rate : 2.4400
Average : 2.1758

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 8.30 %

SLF.PR.J FloatingReset Quote: 15.61 – 16.23
Spot Rate : 0.6200
Average : 0.4438

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2053-03-09
Maturity Price : 15.61
Evaluated at bid price : 15.61
Bid-YTW : 9.64 %

Leave a Reply

You must be logged in to post a comment.