Inflation isn’t quite dead yet:
Some closely watched measures of consumer price growth unexpectedly rose at an accelerated rate in December, showing that inflation is proving tough to tame and potentially complicating matters for the Bank of Canada as it considers when to lower interest rates.
The Consumer Price Index (CPI) rose at an annual pace of 3.4 per cent last month, up from 3.1 per cent in November, Statistics Canada said Tuesday in a report. This result was heavily influenced by what economists refer to as base effects: a tumble in gasoline prices a year ago created an unflattering base for year-over-year comparisons – hence the increase in the annual inflation rate.
Although this uptick was in line with expectations on Bay Street, several measures of core inflation – which strip out volatile movements in the CPI – raised eyebrows among financial analysts. The Bank of Canada’s preferred measures rose at an average annual rate of 3.65 per cent, from 3.55 per cent in November. Analysts were expecting a reading of 3.35 per cent.
In particular, housing prices continue to be a source of financial strain. They rose 6 per cent in December from a year earlier. Rents are generating lots of inflationary pressure, as people – including a surge of international students and other temporary residents – vie for units in short supply.
Shock and consternation followed:
Pre-inflation-announcement market:
Post-inflation-announcement market:
| 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 | 0.5727 % | 2,206.0 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5727 % | 4,231.1 |
| Floater | 11.04 % | 11.23 % | 42,216 | 8.64 | 2 | 0.5727 % | 2,438.4 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1143 % | 3,410.2 |
| SplitShare | 4.94 % | 7.44 % | 47,794 | 1.98 | 7 | -0.1143 % | 4,072.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1143 % | 3,177.5 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0163 % | 2,672.5 |
| Perpetual-Discount | 6.43 % | 6.54 % | 52,282 | 13.16 | 34 | 0.0163 % | 2,914.2 |
| FixedReset Disc | 5.67 % | 7.37 % | 109,999 | 12.34 | 59 | 0.4584 % | 2,313.5 |
| Insurance Straight | 6.29 % | 6.46 % | 71,061 | 13.26 | 20 | 0.2580 % | 2,880.8 |
| FloatingReset | 10.61 % | 10.88 % | 33,721 | 8.84 | 5 | -0.7478 % | 2,555.2 |
| FixedReset Prem | 5.89 % | 6.38 % | 145,654 | 3.36 | 2 | 0.0000 % | 2,529.2 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4584 % | 2,364.8 |
| FixedReset Ins Non | 5.52 % | 7.08 % | 93,461 | 12.64 | 14 | -0.0300 % | 2,573.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| FFH.PR.C | FixedReset Disc | -3.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.56 Evaluated at bid price : 19.56 Bid-YTW : 8.23 % |
| BN.PF.I | FixedReset Disc | -2.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.55 Evaluated at bid price : 19.55 Bid-YTW : 8.73 % |
| FFH.PR.F | FloatingReset | -2.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 16.51 Evaluated at bid price : 16.51 Bid-YTW : 11.33 % |
| GWO.PR.N | FixedReset Ins Non | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 14.01 Evaluated at bid price : 14.01 Bid-YTW : 7.62 % |
| IFC.PR.G | FixedReset Ins Non | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 21.45 Evaluated at bid price : 21.45 Bid-YTW : 6.96 % |
| FFH.PR.G | FixedReset Disc | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 16.23 Evaluated at bid price : 16.23 Bid-YTW : 8.59 % |
| FFH.PR.D | FloatingReset | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 10.44 % |
| MFC.PR.J | FixedReset Ins Non | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 22.18 Evaluated at bid price : 22.75 Bid-YTW : 6.64 % |
| FTS.PR.M | FixedReset Disc | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 18.35 Evaluated at bid price : 18.35 Bid-YTW : 7.89 % |
| BMO.PR.T | FixedReset Disc | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.37 Evaluated at bid price : 19.37 Bid-YTW : 7.21 % |
| BN.PR.K | Floater | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 11.43 Evaluated at bid price : 11.43 Bid-YTW : 11.23 % |
| PWF.PR.Z | Perpetual-Discount | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.54 % |
| SLF.PR.H | FixedReset Ins Non | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 18.68 Evaluated at bid price : 18.68 Bid-YTW : 6.81 % |
| CCS.PR.C | Insurance Straight | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 6.48 % |
| CM.PR.O | FixedReset Disc | 1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.31 Evaluated at bid price : 19.31 Bid-YTW : 7.23 % |
| TD.PF.C | FixedReset Disc | 1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.14 Evaluated at bid price : 19.14 Bid-YTW : 7.17 % |
| PWF.PR.P | FixedReset Disc | 1.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 14.37 Evaluated at bid price : 14.37 Bid-YTW : 7.87 % |
| TD.PF.A | FixedReset Disc | 1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.96 Evaluated at bid price : 19.96 Bid-YTW : 6.89 % |
| TD.PF.B | FixedReset Disc | 1.82 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 6.73 % |
| RY.PR.H | FixedReset Disc | 3.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.83 Evaluated at bid price : 19.83 Bid-YTW : 7.06 % |
| CU.PR.I | FixedReset Disc | 3.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 22.56 Evaluated at bid price : 22.90 Bid-YTW : 7.40 % |
| TD.PF.E | FixedReset Disc | 4.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 7.37 % |
| BMO.PR.W | FixedReset Disc | 5.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 7.33 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.B | FixedReset Disc | 262,917 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 6.73 % |
| TD.PF.A | FixedReset Disc | 144,306 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 19.96 Evaluated at bid price : 19.96 Bid-YTW : 6.89 % |
| TD.PF.L | FixedReset Disc | 51,550 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 23.75 Evaluated at bid price : 24.60 Bid-YTW : 6.68 % |
| BN.PF.G | FixedReset Disc | 45,630 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 16.67 Evaluated at bid price : 16.67 Bid-YTW : 8.87 % |
| PWF.PR.T | FixedReset Disc | 44,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 7.13 % |
| PWF.PR.P | FixedReset Disc | 40,929 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-01-16 Maturity Price : 14.37 Evaluated at bid price : 14.37 Bid-YTW : 7.87 % |
| There were 16 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BMO.PR.W | FixedReset Disc | Quote: 18.90 – 24.50 Spot Rate : 5.6000 Average : 3.2885 YTW SCENARIO |
| CU.PR.E | Perpetual-Discount | Quote: 19.76 – 22.12 Spot Rate : 2.3600 Average : 1.3369 YTW SCENARIO |
| FFH.PR.D | FloatingReset | Quote: 20.30 – 22.61 Spot Rate : 2.3100 Average : 1.3080 YTW SCENARIO |
| GWO.PR.S | Insurance Straight | Quote: 20.56 – 21.78 Spot Rate : 1.2200 Average : 0.7631 YTW SCENARIO |
| RY.PR.H | FixedReset Disc | Quote: 19.83 – 20.99 Spot Rate : 1.1600 Average : 0.7645 YTW SCENARIO |
| BN.PF.I | FixedReset Disc | Quote: 19.55 – 20.38 Spot Rate : 0.8300 Average : 0.5650 YTW SCENARIO |