The current issue of IMF’s F&D magazine is devoted to globalization this week:
Mounting disillusionment with globalization has consequences. Yale’s Pinelopi Goldberg concludes that protectionism would make the world less resilient and more conflict-prone. Dartmouth’s Doug Irwin says history shows industrial policies and subsidies could leave countries worse off. Growing global tensions, notes the IMF’s Michele Ruta, may push regional trade alliances toward less integration and more discrimination. And smaller economies may be sidelined as the world fragments into rival trading blocs. Some will find it advantageous to remain nonaligned, says Oxford’s Ngaire Woods.
But the IMF’s Kristalina Georgieva and the World Trade Organization’s Ngozi Okonjo-Iweala appeal to countries to keep faith in trade as a transformative force that has lifted many millions out of poverty and call for a strengthening of multilateral institutions. Other contributors advocate for a new political consensus to resolve competing demands on the global trading system, taking into account structural changes in the global economy.
Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, gave a short speech at a Fed Listens event:
In the near term, higher interest rates intended to lower inflation work most directly in the housing market. While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation.
The pandemic abruptly changed the lives of most Americans and their families, and it fed a surge of demand for those who sought larger homes. It ushered in a wave of homebuilding and renovation that was a significant contributing factor for inflation and supply chain challenges. Much of that initial inflation has moderated, but it will be important to understand the long-term effect of the pandemic environment on household formation and housing demand going forward.
Christine Lagarde, President of the European Central Bank, gave a speech titled The Fight Against Inflation:
Underlying inflation refers to the slow-moving part of inflation which, when temporary shocks have faded, will persist into the medium term. Therefore, by looking at underlying inflation, we can be more confident that inflation is on the right path. And it has an important benefit – measures of underlying inflation can be observed in real time.
However, there is no clear evidence that underlying inflation has peaked. To date, all measures monitored by the ECB are still strong. And whether they remain so will depend mainly on the balance between two forces: energy prices and wages.
On the one hand, as energy is an important input into every economic activity, the sharp rise in energy prices last year has fed through to all prices – including those that make up our various measures of underlying inflation.
But energy prices have dropped considerably since then, which should have the opposite effect. HICP energy inflation in Germany fell from 44.2% in September 2022 to 9.4% in April 2023.This decline in energy costs for both consumers and producers should, in turn, limit firms’ ability to further raise profit margins, which has been a key factor driving recent price pressures in the euro area.
Consumers are less likely to accept disproportionate price rises when they know that firms are saving on their energy bills.
On the other hand, mounting wage pressures are becoming a more important driver of inflation. So far, workers have faced a significant loss from the erosion in overall labour income caused by the energy crisis. In the euro area, real wages at the end of last year were still around 4 percentage points below prepandemic levels.
But labour markets across the euro area are tight and workers have considerable bargaining power, which they are starting to use to recoup these losses. This is especially visible here in Germany, where labour shortages reached historic highs in the second half of last year, leading to strong wage agreements in many sectors. Wage growth in Germany increased from 3.9% in the fourth quarter of last year to 5.1% in the first quarter of this year.
To be clear: a period of catch-up wage growth need not cause unduly persistent inflation over time – if the costs of the energy shock are ultimately shared in a balanced way between firms and workers. But if we start to see what I have called “tit-for-tat” inflation – with both parties trying to offset any real income losses – we could see a negative spiral taking hold.
The ECB cannot allow this to happen. And since profits are ultimately influenced by the business cycle, it is our responsibility to restrict demand enough to prevent such a spiral. That should, in turn, lead to slower margin growth and lower wage demands while reducing pressure in the labour market.
But to gauge whether rates are sufficiently restrictive, we need to know how much traction our policy tightening is having – and is likely to have – on spending in the economy.
That is why policy transmission is the third element we are looking at.
| 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 | 0.2261 % | 2,129.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2261 % | 4,084.7 |
| Floater | 10.58 % | 10.85 % | 22,928 | 8.79 | 2 | 0.2261 % | 2,354.0 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0799 % | 3,338.2 |
| SplitShare | 5.04 % | 7.26 % | 40,073 | 2.54 | 7 | 0.0799 % | 3,986.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0799 % | 3,110.4 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5147 % | 2,665.9 |
| Perpetual-Discount | 6.40 % | 6.54 % | 41,155 | 13.08 | 34 | 0.5147 % | 2,907.1 |
| FixedReset Disc | 6.02 % | 8.62 % | 81,174 | 11.08 | 63 | 0.4794 % | 2,069.9 |
| Insurance Straight | 6.37 % | 6.41 % | 60,018 | 13.38 | 19 | 0.8612 % | 2,823.2 |
| FloatingReset | 11.25 % | 11.63 % | 46,474 | 8.48 | 2 | 0.2822 % | 2,307.5 |
| FixedReset Prem | 7.00 % | 7.02 % | 302,204 | 12.35 | 1 | -0.2385 % | 2,309.0 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4794 % | 2,115.9 |
| FixedReset Ins Non | 6.12 % | 7.62 % | 84,942 | 11.76 | 11 | 0.3713 % | 2,277.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.P | FixedReset Disc | -1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 11.62 Evaluated at bid price : 11.62 Bid-YTW : 9.72 % |
| BN.PF.I | FixedReset Disc | -1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 9.23 % |
| BIP.PR.A | FixedReset Disc | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.25 Evaluated at bid price : 16.25 Bid-YTW : 10.24 % |
| BIP.PR.F | FixedReset Disc | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.79 Evaluated at bid price : 18.79 Bid-YTW : 8.63 % |
| BN.PR.N | Perpetual-Discount | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.41 Evaluated at bid price : 17.41 Bid-YTW : 6.97 % |
| CU.PR.G | Perpetual-Discount | 1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 6.13 % |
| PWF.PR.G | Perpetual-Discount | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.71 Evaluated at bid price : 23.00 Bid-YTW : 6.49 % |
| POW.PR.A | Perpetual-Discount | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 21.49 Evaluated at bid price : 21.75 Bid-YTW : 6.54 % |
| BMO.PR.W | FixedReset Disc | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.24 Evaluated at bid price : 16.24 Bid-YTW : 8.75 % |
| RY.PR.J | FixedReset Disc | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.60 Evaluated at bid price : 17.60 Bid-YTW : 8.46 % |
| BMO.PR.S | FixedReset Disc | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 8.54 % |
| GWO.PR.H | Insurance Straight | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.85 Evaluated at bid price : 18.85 Bid-YTW : 6.44 % |
| RY.PR.O | Perpetual-Discount | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 21.41 Evaluated at bid price : 21.41 Bid-YTW : 5.77 % |
| FTS.PR.G | FixedReset Disc | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 8.40 % |
| BMO.PR.E | FixedReset Disc | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.60 Evaluated at bid price : 20.60 Bid-YTW : 7.68 % |
| TRP.PR.A | FixedReset Disc | 1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 13.05 Evaluated at bid price : 13.05 Bid-YTW : 10.06 % |
| IFC.PR.G | FixedReset Ins Non | 1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 7.58 % |
| BN.PR.Z | FixedReset Disc | 1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.80 Evaluated at bid price : 18.80 Bid-YTW : 8.74 % |
| BN.PF.D | Perpetual-Discount | 1.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.79 Evaluated at bid price : 17.79 Bid-YTW : 7.04 % |
| PWF.PR.O | Perpetual-Discount | 1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.09 Evaluated at bid price : 22.37 Bid-YTW : 6.56 % |
| FTS.PR.H | FixedReset Disc | 1.69 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 12.00 Evaluated at bid price : 12.00 Bid-YTW : 9.56 % |
| BIK.PR.A | FixedReset Disc | 1.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.80 Evaluated at bid price : 23.40 Bid-YTW : 7.97 % |
| FTS.PR.M | FixedReset Disc | 1.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 9.03 % |
| BMO.PR.F | FixedReset Disc | 1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.88 Evaluated at bid price : 23.44 Bid-YTW : 7.52 % |
| BN.PR.R | FixedReset Disc | 1.93 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 12.70 Evaluated at bid price : 12.70 Bid-YTW : 10.49 % |
| BN.PR.M | Perpetual-Discount | 2.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 6.93 % |
| BN.PF.A | FixedReset Disc | 2.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 17.90 Evaluated at bid price : 17.90 Bid-YTW : 9.30 % |
| TRP.PR.E | FixedReset Disc | 2.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 14.50 Evaluated at bid price : 14.50 Bid-YTW : 10.03 % |
| RY.PR.N | Perpetual-Discount | 3.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.75 % |
| GWO.PR.P | Insurance Straight | 3.73 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 6.49 % |
| SLF.PR.C | Insurance Straight | 6.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 6.14 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.D | FixedReset Disc | 135,947 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 14.66 Evaluated at bid price : 14.66 Bid-YTW : 10.16 % |
| BN.PF.J | FixedReset Disc | 79,400 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 8.03 % |
| MFC.PR.L | FixedReset Ins Non | 42,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 15.51 Evaluated at bid price : 15.51 Bid-YTW : 9.13 % |
| TD.PF.A | FixedReset Disc | 41,800 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 16.30 Evaluated at bid price : 16.30 Bid-YTW : 8.70 % |
| TD.PF.M | FixedReset Disc | 36,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 22.53 Evaluated at bid price : 23.01 Bid-YTW : 7.67 % |
| TD.PF.K | FixedReset Disc | 28,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-06-01 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 7.59 % |
| There were 4 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CU.PR.C | FixedReset Disc | Quote: 17.89 – 22.72 Spot Rate : 4.8300 Average : 2.6873 YTW SCENARIO |
| TRP.PR.E | FixedReset Disc | Quote: 14.50 – 17.45 Spot Rate : 2.9500 Average : 1.7124 YTW SCENARIO |
| BMO.PR.Y | FixedReset Disc | Quote: 16.88 – 19.05 Spot Rate : 2.1700 Average : 1.3007 YTW SCENARIO |
| MFC.PR.M | FixedReset Ins Non | Quote: 15.75 – 17.50 Spot Rate : 1.7500 Average : 1.0374 YTW SCENARIO |
| BN.PF.G | FixedReset Disc | Quote: 14.26 – 16.00 Spot Rate : 1.7400 Average : 1.0275 YTW SCENARIO |
| FTS.PR.J | Perpetual-Discount | Quote: 19.23 – 20.60 Spot Rate : 1.3700 Average : 0.8917 YTW SCENARIO |