TXPR closed at 548.04, down 0.51% on the day. Volume today was 918,780, third-lowest of the past 21 trading days.
CPD closed at 10.82, down 1.19% on the day. Volume was 73,500, above the median of the past 21 trading days.
ZPR closed at 8.97, down 0.99% on the day. Volume was 197,250, above the median of the past 21 trading days.
Five-year Canada yields up a bit to 3.01% today.
Bonds were basically quiet:
The Bank of Canada did not hike interest rates earlier this month because it wanted to see more evidence of the effects of previous monetary tightening on growth and inflation, a summary of deliberations from the policy meeting showed.
Canadian inflation excluding food and energy costs is expected to remain above 3% until the fourth quarter of this year, the median forecast of seven economists surveyed by Reuters showed, which could dash hopes of an early BoC shift to cutting interest rates.
Canadian government bond yields were higher across the curve, recouping some of the previous day’s decline. The 10-year rose 3.9 basis points to 2.849%. (Reporting by Fergal Smith)
Prof Claudia Buch, Vice-President of the Deutsche Bundesbank, gave a speech:
Spring has come, but whether the crypto-asset winter is over remains to be seen. Those who see crypto-assets mainly as a conduit for illegal and gambling activities would certainly hope that turbulent spells in markets for crypto-assets have provided a salutary lesson. Those who see productive potential in these new technologies would hope that these episodes help separate the wheat from the chaff.
Which of those views prevails is an open issue. Whether crypto-assets that promise to improve the provision of financial services ultimately deliver on those promises crucially depends on the regulatory response. Which services are useful, how market structures evolve, whether new entrants are able to challenge the incumbents, what risks are associated with this – all this is shaped by regulations that apply to crypto markets.
Today, I would like to focus on the financial stability implications of crypto-assets. So far, the crypto market has been small. Market capitalisation of crypto-assets stands around 0.2% of global financial assets.
However, if there is one thing we’ve learnt from the past, it is that even seemingly small pockets of distress can breed financial crises. Crypto-assets promise innovative ways of providing financial services, just as the securitisation of financial assets did in the 1990s. Securitisation was an innovation considered to improve the allocation of risks in the financial system. It, too, started small in the 1980s, only to grow to an annual issuance volume of approximately half of outstanding mortgage and consumer loans in 2007. Similarly, the US mortgage market was considered to be of relatively minor importance – only to send shockwaves through the global financial system in 2007-08.
Here’s an opinion on economic forecasting from former chief economist of ATB Financial Todd Hirsch:
No one knows this better than economists. I’ve spent most of the past three decades working on teams within various think tanks, companies and banks, trying to forecast the economy. And I’ve concluded that it’s a waste of time. Why?
First, we’re getting worse at it. The problem isn’t faulty mathematical models or econometric techniques. Rather, the problem is the growing number of things that hit us from out of the blue – the so-called “black swan” events that are, by definition, unforeseeable.
No one in 2019 predicted a pandemic. No one in 2021 predicted a massive ground war in Europe. No one in 2022 predicted a series of bank failures. (Yes, of course, some experts had warned of all of these things, but they were nowhere on economists’ radar.) The frequency of these sorts of events is growing at an alarming rate.
…
The idea that anyone can predict GDP growth to a tenth of a percentage point is hubris. A better strategy would be to prepare for any possibility. That, to a certain degree, is what economic forecasters do when we apply a “high, low and base-case” probability to a range of scenarios.But by assigning one scenario the “base-case,” we’re still trying to convince ourselves that we can get the forecast correct. And that leads us right back to the start, where we lull ourselves into a false confidence.
Prepare for any outcome. Plan around multiple scenarios. Be ready to react swiftly as economic situations change. Don’t become complacent, thinking you know what’s going to happen.
I like this guy!
The New York Fed has updated its Corporate Bond Market Distress Index:
Corporate bond market functioning moved closer to historical norms over the month of April, with the end-of-month market-level CMDI above its historical median.
Market functioning in both the high-yield and investment-grade sectors remained roughly flat over the course of the month.
Looks like another scandal is brewing with construction loans:
The lawsuit claims StateView – founded in 2010 by brothers Dino and Carlo Taurasi with friend and chief financial officer Daniel Ciccone – repeatedly deposited cheques written on the RBC accounts into the TD accounts, and the Canadian Clearing and Settlement Systems (which handles transactions between financial institutions) conditionally credited the value of the cheques to the TD account “pending final settlement.”
TD alleges that before the transfer cleared, however, StateView moved the conditionally credited money out – either to a different account at another bank, or wire transferred it to a third party – and then stopped payment on the original RBC cheques. To avoid detection of this scheme, called cheque-kiting, TD further alleges StateView processed a large volume of “sham transactions” between other TD accounts.
…
In the wake of TD’s filings, StateView is facing demands for repayment from at least two other lenders that could see an unfinished townhouse project (Nao Towns Phase II in Markham, Ont., with 96 units) pushed into insolvency.
…
StateView also has several Ontario projects under construction, sold out or “fully reserved” that may now be subject to reorganization of StateView’s debts. Those include: High Crown Estates in King City (48 units), MiNu Towns in Markham (147 units), On the Mark in Markham (164 units), Elia Collection in Newmarket (72 units), Queen’s Court in Brampton (82 towns and detached homes), Elm & Co. in Stouffville (202 units) and BEA Towns in Barrie (218 units).
PerpetualDiscounts now yield 6.23%, equivalent to 8.10% interest at the standard equivalency factor of 1.3x. Long corporates yielded 4.97% on 2023-4-21 and since then the closing price has changed from 15.25 to 15.31, an increase of 39bp in price, with a Duration of 12.34 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies a decrease in yield of about 3bp since 4/21 to 4.94%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened to about 315bp from the 300bp reported April 19.
| 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 | 0.1249 % | 2,311.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1249 % | 4,433.1 |
| Floater | 9.75 % | 9.93 % | 58,823 | 9.57 | 2 | 0.1249 % | 2,554.8 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0427 % | 3,361.1 |
| SplitShare | 5.00 % | 7.13 % | 44,209 | 2.60 | 7 | 0.0427 % | 4,013.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0427 % | 3,131.8 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2268 % | 2,760.8 |
| Perpetual-Discount | 6.18 % | 6.23 % | 53,119 | 13.61 | 34 | -0.2268 % | 3,010.6 |
| FixedReset Disc | 5.72 % | 7.58 % | 89,630 | 12.15 | 63 | -0.7294 % | 2,156.4 |
| Insurance Straight | 6.08 % | 6.16 % | 72,749 | 13.67 | 19 | -0.3906 % | 2,957.3 |
| FloatingReset | 10.39 % | 10.87 % | 51,900 | 8.87 | 2 | -0.2699 % | 2,399.3 |
| FixedReset Prem | 6.91 % | 6.50 % | 322,172 | 12.89 | 1 | 0.1181 % | 2,340.3 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.7294 % | 2,204.3 |
| FixedReset Ins Non | 5.97 % | 7.38 % | 71,218 | 12.05 | 11 | -0.1389 % | 2,336.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BMO.PR.Y | FixedReset Disc | -3.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 18.04 Evaluated at bid price : 18.04 Bid-YTW : 7.59 % |
| RY.PR.M | FixedReset Disc | -3.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.43 Evaluated at bid price : 17.43 Bid-YTW : 7.57 % |
| RY.PR.N | Perpetual-Discount | -2.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.18 Evaluated at bid price : 21.18 Bid-YTW : 5.79 % |
| IFC.PR.C | FixedReset Disc | -2.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 7.53 % |
| GWO.PR.P | Insurance Straight | -2.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.41 Evaluated at bid price : 21.41 Bid-YTW : 6.39 % |
| GWO.PR.G | Insurance Straight | -2.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.08 Evaluated at bid price : 21.08 Bid-YTW : 6.25 % |
| CM.PR.P | FixedReset Disc | -2.39 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.13 Evaluated at bid price : 17.13 Bid-YTW : 7.60 % |
| BNS.PR.I | FixedReset Disc | -2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 6.63 % |
| CU.PR.C | FixedReset Disc | -2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 19.35 Evaluated at bid price : 19.35 Bid-YTW : 7.16 % |
| FTS.PR.M | FixedReset Disc | -1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 16.86 Evaluated at bid price : 16.86 Bid-YTW : 8.18 % |
| CM.PR.O | FixedReset Disc | -1.96 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.53 Evaluated at bid price : 17.53 Bid-YTW : 7.57 % |
| RY.PR.Z | FixedReset Disc | -1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.41 Evaluated at bid price : 17.41 Bid-YTW : 7.53 % |
| RY.PR.J | FixedReset Disc | -1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 7.45 % |
| CM.PR.S | FixedReset Disc | -1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.75 Evaluated at bid price : 21.75 Bid-YTW : 6.56 % |
| BN.PF.A | FixedReset Disc | -1.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 18.32 Evaluated at bid price : 18.32 Bid-YTW : 8.32 % |
| TRP.PR.B | FixedReset Disc | -1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 10.70 Evaluated at bid price : 10.70 Bid-YTW : 9.32 % |
| BMO.PR.T | FixedReset Disc | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 7.66 % |
| RY.PR.S | FixedReset Disc | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 19.95 Evaluated at bid price : 19.95 Bid-YTW : 6.87 % |
| BMO.PR.S | FixedReset Disc | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 18.12 Evaluated at bid price : 18.12 Bid-YTW : 7.51 % |
| TD.PF.A | FixedReset Disc | -1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.15 Evaluated at bid price : 17.15 Bid-YTW : 7.58 % |
| TD.PF.B | FixedReset Disc | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.24 Evaluated at bid price : 17.24 Bid-YTW : 7.63 % |
| RY.PR.O | Perpetual-Discount | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.55 Evaluated at bid price : 21.55 Bid-YTW : 5.69 % |
| NA.PR.W | FixedReset Disc | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 7.77 % |
| TD.PF.D | FixedReset Disc | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 18.20 Evaluated at bid price : 18.20 Bid-YTW : 7.53 % |
| FTS.PR.H | FixedReset Disc | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 12.51 Evaluated at bid price : 12.51 Bid-YTW : 8.42 % |
| TD.PF.J | FixedReset Disc | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.94 Evaluated at bid price : 22.44 Bid-YTW : 6.50 % |
| POW.PR.B | Perpetual-Discount | 1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.75 Evaluated at bid price : 22.00 Bid-YTW : 6.13 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.I | FixedReset Disc | 50,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 23.13 Evaluated at bid price : 24.80 Bid-YTW : 6.19 % |
| BN.PF.C | Perpetual-Discount | 40,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 18.79 Evaluated at bid price : 18.79 Bid-YTW : 6.54 % |
| RY.PR.O | Perpetual-Discount | 35,789 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 21.55 Evaluated at bid price : 21.55 Bid-YTW : 5.69 % |
| TD.PF.E | FixedReset Disc | 34,120 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 18.51 Evaluated at bid price : 18.51 Bid-YTW : 7.45 % |
| TD.PF.K | FixedReset Disc | 29,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 20.89 Evaluated at bid price : 20.89 Bid-YTW : 6.84 % |
| RY.PR.Z | FixedReset Disc | 24,398 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-26 Maturity Price : 17.41 Evaluated at bid price : 17.41 Bid-YTW : 7.53 % |
| There were 10 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.T | FixedReset Disc | Quote: 17.22 – 19.27 Spot Rate : 2.0500 Average : 1.2434 YTW SCENARIO |
| BIP.PR.E | FixedReset Disc | Quote: 21.86 – 22.94 Spot Rate : 1.0800 Average : 0.6584 YTW SCENARIO |
| MFC.PR.M | FixedReset Ins Non | Quote: 16.85 – 17.50 Spot Rate : 0.6500 Average : 0.4309 YTW SCENARIO |
| RY.PR.M | FixedReset Disc | Quote: 17.43 – 18.02 Spot Rate : 0.5900 Average : 0.3866 YTW SCENARIO |
| CM.PR.Q | FixedReset Disc | Quote: 17.83 – 18.95 Spot Rate : 1.1200 Average : 0.9397 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 18.91 – 19.58 Spot Rate : 0.6700 Average : 0.5152 YTW SCENARIO |
“Here’s an opinion on economic forecasting from former chief economist of ATB Financial Todd Hirsch … I like this guy!”
Me too. Interesting to note, for “progressive” conservatives, that Todd is advising Alberta’s NDP, not the UCP, in the upcoming provincial election.
[…] Spread (between long-term corporate bonds and interest-equivalent PerpetualDiscounts) was 315bp as of 2023-4-26 (chart end-date 2023-4-14) […]
[…] PerpetualDiscounts now yield 6.24%, equivalent to 8.11% interest at the standard equivalency factor of 1.3x. Long corporates yielded 4.87% on 2023-4-28 and since then the closing price has changed from 15.38 to 15.47, an increase of 59bp in price, with a Duration of 12.42 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies a decrease in yield of about 5bp since 4/28 to 4.82%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened to about 330bp from the 315bp reported April 26. […]
[…] yields up a bit to 3.03% today. I’ve been following the Stateview fiasco, (first discussed April 26) with great interest (published April […]