May 29, 2024

Equities got whacked today, attributed to a weak bond market:

In afternoon trading, the benchmark U.S. 10-year yield was up 7.2 basis points to 4.613% after earlier hitting 4.638%, the highest level since May 1.

The move in U.S. Treasuries pressured Canadian yields higher, even though swaps markets continue to price in about 60% odds the Bank of Canada will cut interest rates next week. The Canada five-year bond yield, followed particularly closely because of its impact on fixed mortgage rates, rose to as high as 3.848% – coming within a mere 6 basis points of hitting fresh highs of the year.

Minneapolis Fed President Neel Kashkari said in an interview with CNBC late on Tuesday that the U.S. central bank should wait for significant progress on inflation before cutting interest rates. He added that the Fed could potentially even raise rates if inflation fails to come down further.

His comments, which had pushed yields higher, echoed remarks from other Fed officials, including Governor Christopher Waller.

Meanwhile, the sale of $44 billion in U.S. seven-year debt Wednesday resulted in a high yield of 4.65%, higher than the expected rate at the bid deadline, suggesting that investors sought a premium to purchase the note. The bid-to-cover ratio, a measure of demand was 2.43, lower than last month’s 2.48 and the average of 2.55. The seven-year note sale, which followed equally lackluster auctions of U.S. two-year and five-year notes on Tuesday, raised concerns about future demand for government debt.

All ten major sectors on the Toronto market lost ground, including a decline of 2.39% for heavily-weighted financial.

PerpetualDiscounts now yield 6.51%, equivalent to 8.46% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.13% on 2024-5-24 and since then the closing price of ZLC has changed from 14.88 to 14.59, a decrease of 195bp in price, implying an increase of yields of 16bp (BMO reports a duration of 12.35, but don’t disclose whether this is Macaulay or Modified; I will assume Modified) to 5.29%. Therefore, the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed to 315bp from the 345bp reported May 22.

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 -2.3654 % 2,286.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 -2.3654 % 4,384.5
Floater 10.53 % 10.86 % 66,502 8.81 1 -2.3654 % 2,526.8
OpRet 0.00 % 0.00 % 0 0.00 0 0.3267 % 3,462.0
SplitShare 4.86 % 6.49 % 31,099 1.36 8 0.3267 % 4,134.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3267 % 3,225.8
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 -0.0018 % 2,714.0
Perpetual-Discount 6.32 % 6.51 % 51,207 13.14 27 -0.0018 % 2,959.5
FixedReset Disc 5.22 % 7.06 % 122,758 11.91 54 0.1963 % 2,610.6
Insurance Straight 6.21 % 6.38 % 60,398 13.28 21 -0.5553 % 2,922.8
FloatingReset 8.90 % 9.08 % 27,646 10.22 2 -0.4674 % 2,845.2
FixedReset Prem 6.92 % 6.45 % 209,713 3.05 2 -0.3718 % 2,534.7
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.1963 % 2,668.5
FixedReset Ins Non 4.99 % 6.78 % 96,802 12.97 14 -0.1691 % 2,848.9
Performance Highlights
Issue Index Change Notes
MFC.PR.N FixedReset Ins Non -5.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 20.12
Evaluated at bid price : 20.12
Bid-YTW : 7.36 %
CCS.PR.C Insurance Straight -3.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 19.61
Evaluated at bid price : 19.61
Bid-YTW : 6.50 %
BN.PR.B Floater -2.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 11.97
Evaluated at bid price : 11.97
Bid-YTW : 10.86 %
GWO.PR.N FixedReset Ins Non -1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 14.98
Evaluated at bid price : 14.98
Bid-YTW : 7.83 %
FFH.PR.I FixedReset Disc -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 18.60
Evaluated at bid price : 18.60
Bid-YTW : 8.42 %
BN.PF.B FixedReset Disc -1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 8.05 %
BN.PR.R FixedReset Disc -1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 16.62
Evaluated at bid price : 16.62
Bid-YTW : 8.51 %
FFH.PR.G FixedReset Disc -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 18.11
Evaluated at bid price : 18.11
Bid-YTW : 8.32 %
BN.PR.T FixedReset Disc -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 16.58
Evaluated at bid price : 16.58
Bid-YTW : 8.53 %
MFC.PR.I FixedReset Ins Non 1.20 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2027-09-19
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 6.52 %
BN.PR.M Perpetual-Discount 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 18.40
Evaluated at bid price : 18.40
Bid-YTW : 6.59 %
BIP.PR.A FixedReset Disc 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 21.48
Evaluated at bid price : 21.48
Bid-YTW : 8.29 %
PVS.PR.G SplitShare 1.24 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2026-02-28
Maturity Price : 25.00
Evaluated at bid price : 24.45
Bid-YTW : 6.21 %
CU.PR.G Perpetual-Discount 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 17.90
Evaluated at bid price : 17.90
Bid-YTW : 6.33 %
FFH.PR.C FixedReset Disc 1.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 22.08
Evaluated at bid price : 22.70
Bid-YTW : 7.59 %
FTS.PR.G FixedReset Disc 1.82 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 7.03 %
IFC.PR.A FixedReset Ins Non 1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 6.86 %
MFC.PR.Q FixedReset Ins Non 2.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 22.96
Evaluated at bid price : 24.25
Bid-YTW : 6.35 %
BN.PR.Z FixedReset Disc 11.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 21.50
Evaluated at bid price : 21.50
Bid-YTW : 7.77 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.A FixedReset Disc 224,369 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 22.92
Evaluated at bid price : 23.73
Bid-YTW : 6.26 %
PWF.PR.R Perpetual-Discount 71,400 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 21.37
Evaluated at bid price : 21.37
Bid-YTW : 6.53 %
IFC.PR.A FixedReset Ins Non 60,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 6.86 %
BMO.PR.T FixedReset Disc 60,100 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 23.51
Evaluated at bid price : 24.46
Bid-YTW : 6.07 %
BMO.PR.W FixedReset Disc 59,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 23.08
Evaluated at bid price : 23.86
Bid-YTW : 6.18 %
MFC.PR.F FixedReset Ins Non 52,436 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 16.98
Evaluated at bid price : 16.98
Bid-YTW : 7.00 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.N FixedReset Ins Non Quote: 20.12 – 21.35
Spot Rate : 1.2300
Average : 0.8072

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 20.12
Evaluated at bid price : 20.12
Bid-YTW : 7.36 %

PVS.PR.F SplitShare Quote: 24.81 – 25.81
Spot Rate : 1.0000
Average : 0.5897

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 24.81
Bid-YTW : 6.77 %

CCS.PR.C Insurance Straight Quote: 19.61 – 20.26
Spot Rate : 0.6500
Average : 0.4248

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 19.61
Evaluated at bid price : 19.61
Bid-YTW : 6.50 %

PVS.PR.G SplitShare Quote: 24.45 – 25.00
Spot Rate : 0.5500
Average : 0.3938

YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2026-02-28
Maturity Price : 25.00
Evaluated at bid price : 24.45
Bid-YTW : 6.21 %

BIP.PR.E FixedReset Disc Quote: 22.30 – 22.89
Spot Rate : 0.5900
Average : 0.4379

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 21.91
Evaluated at bid price : 22.30
Bid-YTW : 7.68 %

BN.PR.T FixedReset Disc Quote: 16.58 – 17.06
Spot Rate : 0.4800
Average : 0.3690

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-05-29
Maturity Price : 16.58
Evaluated at bid price : 16.58
Bid-YTW : 8.53 %

One Response to “May 29, 2024”

  1. […] Seniority Spread (between long-term corporate bonds and interest-equivalent PerpetualDiscounts) was 315bp on 2024-5-29 a significant narrowing from the 345bp on 2024-5-1 (chart end-date 2024-5-10) […]

Leave a Reply

You must be logged in to post a comment.