January 31, 2024

There were no surprises from the Fed:

Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated since early last year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller.

PerpetualDiscounts now yield 6.56%, equivalent to 8.53% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.21% on 2024-1-30 and since then the closing price has changed from 14.97 to 15.10, an increase of 87bp in price, with a Duration (BMO doesn’t specify Modified or Macaulay – I will assume the former) of 12.24 implying a decrease of 7bp in yield to 5.14%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed to 340bp from the 350bp reported January 24.

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 0.2580 % 2,253.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.2580 % 4,321.9
Floater 10.81 % 11.05 % 34,367 8.73 2 0.2580 % 2,490.7
OpRet 0.00 % 0.00 % 0 0.00 0 0.1022 % 3,417.8
SplitShare 4.93 % 7.25 % 50,888 1.94 7 0.1022 % 4,081.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1022 % 3,184.6
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.0560 % 2,678.9
Perpetual-Discount 6.41 % 6.56 % 50,496 13.14 34 -0.0560 % 2,921.3
FixedReset Disc 5.59 % 7.51 % 120,807 12.23 59 -0.2712 % 2,362.2
Insurance Straight 6.24 % 6.42 % 68,690 13.29 20 0.3113 % 2,903.9
FloatingReset 10.08 % 10.43 % 29,307 9.17 5 0.0334 % 2,664.8
FixedReset Prem 6.88 % 6.35 % 174,281 3.32 1 0.1569 % 2,538.2
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 -0.2712 % 2,414.7
FixedReset Ins Non 5.42 % 7.34 % 100,613 12.51 14 -0.3228 % 2,623.3
Performance Highlights
Issue Index Change Notes
BMO.PR.W FixedReset Disc -8.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 17.75
Evaluated at bid price : 17.75
Bid-YTW : 8.07 %
IFC.PR.A FixedReset Ins Non -5.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 7.34 %
NA.PR.W FixedReset Disc -4.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 7.87 %
CU.PR.H Perpetual-Discount -3.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 20.40
Evaluated at bid price : 20.40
Bid-YTW : 6.44 %
TD.PF.A FixedReset Disc -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 7.18 %
SLF.PR.J FloatingReset -1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 15.97
Evaluated at bid price : 15.97
Bid-YTW : 10.43 %
BMO.PR.T FixedReset Disc -1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 7.33 %
BN.PF.I FixedReset Disc -1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 8.60 %
BN.PF.H FixedReset Disc -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 22.06
Evaluated at bid price : 22.35
Bid-YTW : 8.35 %
CU.PR.G Perpetual-Discount 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 17.96
Evaluated at bid price : 17.96
Bid-YTW : 6.27 %
SLF.PR.C Insurance Straight 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 5.89 %
BMO.PR.E FixedReset Disc 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 23.16
Evaluated at bid price : 24.96
Bid-YTW : 6.36 %
CU.PR.F Perpetual-Discount 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 18.00
Evaluated at bid price : 18.00
Bid-YTW : 6.26 %
FTS.PR.I FloatingReset 2.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 16.35
Evaluated at bid price : 16.35
Bid-YTW : 10.33 %
IFC.PR.I Insurance Straight 2.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 21.60
Evaluated at bid price : 21.60
Bid-YTW : 6.34 %
CU.PR.D Perpetual-Discount 3.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 19.37
Evaluated at bid price : 19.37
Bid-YTW : 6.33 %
BN.PR.X FixedReset Disc 3.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 15.45
Evaluated at bid price : 15.45
Bid-YTW : 8.52 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.C FixedReset Prem 319,588 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2027-11-15
Maturity Price : 25.00
Evaluated at bid price : 25.54
Bid-YTW : 6.35 %
TD.PF.I FixedReset Disc 171,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2027-10-31
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 6.45 %
TD.PF.C FixedReset Disc 169,530 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 19.85
Evaluated at bid price : 19.85
Bid-YTW : 7.24 %
TD.PF.J FixedReset Disc 163,181 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 21.64
Evaluated at bid price : 21.95
Bid-YTW : 7.02 %
CM.PR.S FixedReset Disc 159,225 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 21.75
Evaluated at bid price : 21.75
Bid-YTW : 6.94 %
TD.PF.B FixedReset Disc 151,288 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 6.81 %
TD.PF.M FixedReset Disc 130,025 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 24.01
Evaluated at bid price : 24.66
Bid-YTW : 7.22 %
NA.PR.S FixedReset Disc 106,881 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 20.55
Evaluated at bid price : 20.55
Bid-YTW : 7.30 %
There were 21 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PF.A FixedReset Disc Quote: 20.10 – 23.45
Spot Rate : 3.3500
Average : 2.4753

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 7.18 %

BMO.PR.W FixedReset Disc Quote: 17.75 – 19.45
Spot Rate : 1.7000
Average : 1.0554

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 17.75
Evaluated at bid price : 17.75
Bid-YTW : 8.07 %

IFC.PR.A FixedReset Ins Non Quote: 17.90 – 19.40
Spot Rate : 1.5000
Average : 1.0220

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 7.34 %

BIP.PR.E FixedReset Disc Quote: 21.20 – 22.01
Spot Rate : 0.8100
Average : 0.4993

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 7.91 %

MIC.PR.A Perpetual-Discount Quote: 19.01 – 19.80
Spot Rate : 0.7900
Average : 0.5099

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 19.01
Evaluated at bid price : 19.01
Bid-YTW : 7.21 %

GWO.PR.Y Insurance Straight Quote: 18.11 – 19.00
Spot Rate : 0.8900
Average : 0.6360

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-01-31
Maturity Price : 18.11
Evaluated at bid price : 18.11
Bid-YTW : 6.30 %

2 Responses to “January 31, 2024”

  1. […] continue to yield more, in general, than PerpetualDiscounts; on January 31, I reported median YTWs of 7.51% and 6.56%, respectively, for these two indices; compare with mean […]

  2. […] PerpetualDiscounts now yield 6.55%, equivalent to 8.52% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.23% on 2024-2-6 and since then the closing price has changed from 15.08 to 15.06, an increase of 13bp in price, with a Duration (BMO doesn’t specify Modified or Macaulay – I will assume the former) of 12.23 implying a decrease of 1bp in yield to 5.22%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed to 330bp from the 340bp reported January 31. […]

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