So, good news today on Canadian inflation:
The year-over-year inflation rate of 2 per cent in August is precisely in line with what the Bank of Canada wants to see. So why will no one be celebrating outside the downtown Ottawa offices of the central bank?
Reason One: Food inflation is still running a bit hot. Prices at grocery stores and restaurants came in at 2.7 per cent in August.
Reason Two: Shelter inflation hit 5.3 per cent last month, a reminder that mortgage interest remains a big contributor to overall increases in the cost of living. Mortgage rates have been falling steadily, though.
…
Now for some inflation positives: In the Statistics Canada report on the job market for August, hourly wages were up 5 per cent on a year-over-year basis after a 5.2-per-cent gain in July.
So, the markets reacted a bit:
The Canadian dollar fell to 73.42 cents US as the 830 am ET inflation report was released, from 73.63 prior. Canada’s two-year bond yield eased a little bit – by a couple basis points. That’s relatively stable, and may have also been influenced by a stronger-than-expected U.S. retail sales report released at the same time.
The swaps market, which captures market bets on future monetary policy moves, suggests roughly 50/50 odds on whether it will be a 25 or 50 basis point cut by the BoC on Oct. 23, according to LSEG data.
Regardless, almost 75 basis points of rate cuts are priced into the market by the end of this year. By December of next year, the overnight rate is seen by markets as reaching 2 per cent.
Swaps market pre-announcement
Swaps market post-announcement
| 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 | 0.8826 % | 2,179.9 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.8826 % | 4,181.0 |
| Floater | 9.88 % | 9.94 % | 81,815 | 9.65 | 2 | 0.8826 % | 2,409.6 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4074 % | 3,565.0 |
| SplitShare | 4.67 % | 5.19 % | 34,846 | 1.08 | 4 | 0.4074 % | 4,257.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4074 % | 3,321.7 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1343 % | 2,928.3 |
| Perpetual-Discount | 5.88 % | 6.02 % | 56,825 | 13.83 | 31 | -0.1343 % | 3,193.2 |
| FixedReset Disc | 5.46 % | 6.57 % | 116,082 | 13.01 | 58 | -0.1895 % | 2,673.0 |
| Insurance Straight | 5.80 % | 5.80 % | 66,351 | 14.22 | 20 | -0.7686 % | 3,121.7 |
| FloatingReset | 8.25 % | 8.27 % | 32,709 | 11.14 | 2 | 0.1035 % | 2,774.2 |
| FixedReset Prem | 6.43 % | 5.51 % | 220,901 | 13.62 | 7 | 0.2841 % | 2,575.9 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1895 % | 2,732.3 |
| FixedReset Ins Non | 5.17 % | 5.89 % | 97,343 | 14.10 | 14 | -0.0441 % | 2,841.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BN.PR.X | FixedReset Disc | -10.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 15.21 Evaluated at bid price : 15.21 Bid-YTW : 7.55 % |
| GWO.PR.G | Insurance Straight | -8.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.32 Evaluated at bid price : 20.32 Bid-YTW : 6.43 % |
| MFC.PR.N | FixedReset Ins Non | -4.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 6.17 % |
| ENB.PF.E | FixedReset Disc | -2.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 17.17 Evaluated at bid price : 17.17 Bid-YTW : 7.77 % |
| SLF.PR.C | Insurance Straight | -2.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 5.53 % |
| CU.PR.D | Perpetual-Discount | -2.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 6.04 % |
| SLF.PR.D | Insurance Straight | -2.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.21 Evaluated at bid price : 20.21 Bid-YTW : 5.53 % |
| BIP.PR.E | FixedReset Disc | -1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 22.43 Evaluated at bid price : 23.08 Bid-YTW : 6.46 % |
| POW.PR.G | Perpetual-Discount | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 22.88 Evaluated at bid price : 23.15 Bid-YTW : 6.16 % |
| BN.PR.N | Perpetual-Discount | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 6.19 % |
| BN.PF.C | Perpetual-Discount | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.00 Evaluated at bid price : 20.00 Bid-YTW : 6.09 % |
| BN.PR.M | Perpetual-Discount | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 19.70 Evaluated at bid price : 19.70 Bid-YTW : 6.06 % |
| BN.PR.K | Floater | 1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 11.41 Evaluated at bid price : 11.41 Bid-YTW : 9.98 % |
| BN.PF.I | FixedReset Disc | 2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 22.50 Evaluated at bid price : 23.00 Bid-YTW : 6.95 % |
| MFC.PR.F | FixedReset Ins Non | 2.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 16.35 Evaluated at bid price : 16.35 Bid-YTW : 6.07 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.C | Insurance Straight | 132,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.21 Evaluated at bid price : 20.21 Bid-YTW : 5.60 % |
| MFC.PR.B | Insurance Straight | 126,475 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 20.62 Evaluated at bid price : 20.62 Bid-YTW : 5.68 % |
| CM.PR.Q | FixedReset Disc | 86,475 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 23.48 Evaluated at bid price : 24.06 Bid-YTW : 5.65 % |
| NA.PR.C | FixedReset Prem | 61,300 | YTW SCENARIO Maturity Type : Call Maturity Date : 2027-11-15 Maturity Price : 25.00 Evaluated at bid price : 26.30 Bid-YTW : 5.48 % |
| ENB.PR.P | FixedReset Disc | 42,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.97 % |
| BIP.PR.F | FixedReset Disc | 26,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-09-17 Maturity Price : 22.18 Evaluated at bid price : 22.76 Bid-YTW : 6.47 % |
| There were 13 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.G | Insurance Straight | Quote: 20.32 – 22.35 Spot Rate : 2.0300 Average : 1.1552 YTW SCENARIO |
| BN.PR.X | FixedReset Disc | Quote: 15.21 – 17.00 Spot Rate : 1.7900 Average : 1.1258 YTW SCENARIO |
| CU.PR.G | Perpetual-Discount | Quote: 19.55 – 20.93 Spot Rate : 1.3800 Average : 0.7886 YTW SCENARIO |
| PVS.PR.I | SplitShare | Quote: 24.85 – 25.85 Spot Rate : 1.0000 Average : 0.5669 YTW SCENARIO |
| MFC.PR.N | FixedReset Ins Non | Quote: 20.40 – 21.28 Spot Rate : 0.8800 Average : 0.5342 YTW SCENARIO |
| CU.PR.D | Perpetual-Discount | Quote: 20.50 – 21.50 Spot Rate : 1.0000 Average : 0.6640 YTW SCENARIO |