PrefBlog

November 19, 2024

Written by

jiHymas

in

Canadian inflation is reported to have ticked up a little in October:

The Consumer Price Index rose at an annual rate of 2 per cent in October, up from 1.6 per cent in September, Statistics Canada said Tuesday in a report. Financial analysts were expecting an upturn to 1.9 per cent.

The inflation rate was guided higher by less flattering year-over-year calculations for gasoline prices and hefty increases in property taxes. On a monthly basis, the CPI rose 0.4 per cent.
…
But Tuesday’s report also showed that core measures of inflation – which strip out volatile movements in the CPI – heated up last month, an unwelcome development. This could prompt the BoC to shift back to rate cuts of a quarter-percentage-point after its half-point reduction in October.
…
Property taxes rose 6 per cent in October, year-over-year, up from 4.9 per cent in 2023 and the largest increase since 1992. Statscan makes an annual update to its property tax numbers in every October CPI report.

How market bets and economist views for future BoC rate cuts have shifted after today’s inflation data

Over all, housing inflation is trending lower. Shelter prices rose 4.8 per cent in October, year-over-year, compared with 5 per cent in September. Mortgage interest cost increases are slowing as the BoC cuts interest rates, and rents rose by an annual 7.3 per cent, down from 8.2 per cent in September. Still, national rents have jumped 25 per cent since the end of 2019, underscoring the financial headwinds facing millions of Canadians.

… and then:

Implied probabilities in swaps markets now suggest a 72 per cent chance of a 25 basis point cut on Dec. 11, and a 28 per cent chance that the bank will follow up with another jumbo 50 basis point cut, according to LSEG data.

Just prior to the inflation data, markets were pricing in 61 per cent odds of the 25 basis point cut.


Pre-Announcement

Post-Announcement

Interesting to see that the projected 2025-12-10 rate has ticked up to 2.81% from 2.78%.

Fairfax issues single-handedly lifted the market today, following reported reports (thanks, IrateAR!) that FFH will be issuing an LRCN-like sub-debt issue. We’ll see what gets reported tomorrow.

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 0.5104 % 2,160.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.5104 % 4,143.3
Floater 8.81 % 9.34 % 30,611 10.02 4 0.5104 % 2,387.8
OpRet 0.00 % 0.00 % 0 0.00 0 -0.5372 % 3,611.0
SplitShare 4.78 % 4.97 % 61,446 2.12 6 -0.5372 % 4,312.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.5372 % 3,364.6
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.2400 % 2,816.6
Perpetual-Discount 6.11 % 6.28 % 47,474 13.47 31 0.2400 % 3,071.4
FixedReset Disc 5.49 % 6.88 % 91,259 12.60 58 1.0107 % 2,691.1
Insurance Straight 5.96 % 6.12 % 59,710 13.65 21 0.7645 % 3,037.6
FloatingReset 6.90 % 6.77 % 33,191 12.72 2 8.3092 % 3,151.0
FixedReset Prem 6.39 % 5.54 % 169,957 3.70 7 -0.3247 % 2,590.7
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 1.0107 % 2,750.9
FixedReset Ins Non 5.20 % 6.28 % 72,253 13.40 14 0.5046 % 2,826.4
Performance Highlights
Issue Index Change Notes
PVS.PR.K SplitShare -4.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2029-05-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.73 %
TD.PF.I FixedReset Prem -1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2027-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.71
Bid-YTW : 5.41 %
IFC.PR.A FixedReset Ins Non -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 6.51 %
BN.PF.B FixedReset Disc 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.51
Evaluated at bid price : 20.51
Bid-YTW : 7.32 %
PVS.PR.G SplitShare 1.24 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-02-28
Maturity Price : 25.00
Evaluated at bid price : 25.31
Bid-YTW : 3.98 %
MFC.PR.M FixedReset Ins Non 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 21.74
Evaluated at bid price : 22.15
Bid-YTW : 6.28 %
ENB.PR.H FixedReset Disc 1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 19.92
Evaluated at bid price : 19.92
Bid-YTW : 6.92 %
BN.PR.K Floater 1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 11.43
Evaluated at bid price : 11.43
Bid-YTW : 9.34 %
FFH.PR.M FixedReset Disc 1.34 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.03
Bid-YTW : 6.67 %
MFC.PR.Q FixedReset Ins Non 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 22.97
Evaluated at bid price : 24.15
Bid-YTW : 6.01 %
CU.PR.D Perpetual-Discount 1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.10
Evaluated at bid price : 20.10
Bid-YTW : 6.13 %
PWF.PR.Z Perpetual-Discount 1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.64
Evaluated at bid price : 20.64
Bid-YTW : 6.31 %
IFC.PR.G FixedReset Ins Non 1.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 22.98
Evaluated at bid price : 24.18
Bid-YTW : 6.01 %
BIP.PR.A FixedReset Disc 2.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 21.69
Evaluated at bid price : 22.10
Bid-YTW : 7.53 %
BN.PR.M Perpetual-Discount 2.55 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 18.91
Evaluated at bid price : 18.91
Bid-YTW : 6.39 %
FFH.PR.K FixedReset Disc 4.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 22.90
Evaluated at bid price : 23.65
Bid-YTW : 6.82 %
FFH.PR.D FloatingReset 5.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 24.61
Evaluated at bid price : 25.13
Bid-YTW : 6.77 %
FFH.PR.C FixedReset Disc 6.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 24.13
Evaluated at bid price : 25.05
Bid-YTW : 6.32 %
FFH.PR.F FloatingReset 11.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 19.84
Evaluated at bid price : 19.84
Bid-YTW : 7.34 %
FFH.PR.I FixedReset Disc 13.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 21.33
Evaluated at bid price : 21.33
Bid-YTW : 6.86 %
FFH.PR.E FixedReset Disc 13.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.15
Evaluated at bid price : 20.15
Bid-YTW : 6.60 %
FFH.PR.G FixedReset Disc 14.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 6.88 %
GWO.PR.T Insurance Straight 18.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 6.40 %
Volume Highlights
Issue Index Shares
Traded		 Notes
FFH.PR.D FloatingReset 228,320 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 24.61
Evaluated at bid price : 25.13
Bid-YTW : 6.77 %
TD.PF.A FixedReset Disc 117,604 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 22.20
Evaluated at bid price : 22.87
Bid-YTW : 5.77 %
FFH.PR.G FixedReset Disc 100,846 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 6.88 %
FFH.PR.I FixedReset Disc 100,742 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 21.33
Evaluated at bid price : 21.33
Bid-YTW : 6.86 %
NA.PR.S FixedReset Disc 87,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 23.15
Evaluated at bid price : 24.85
Bid-YTW : 5.71 %
FTS.PR.H FixedReset Disc 75,500 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 15.48
Evaluated at bid price : 15.48
Bid-YTW : 7.28 %
There were 22 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.K FixedReset Ins Non Quote: 24.39 – 25.88
Spot Rate : 1.4900
Average : 0.8468

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 23.04
Evaluated at bid price : 24.39
Bid-YTW : 5.78 %
PVS.PR.K SplitShare Quote: 24.00 – 25.10
Spot Rate : 1.1000
Average : 0.6038

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2029-05-31
Maturity Price : 25.00
Evaluated at bid price : 24.00
Bid-YTW : 5.73 %
ENB.PF.C FixedReset Disc Quote: 18.22 – 19.00
Spot Rate : 0.7800
Average : 0.5584

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 18.22
Evaluated at bid price : 18.22
Bid-YTW : 7.93 %
BN.PF.J FixedReset Disc Quote: 22.91 – 23.45
Spot Rate : 0.5400
Average : 0.3619

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 22.37
Evaluated at bid price : 22.91
Bid-YTW : 6.91 %
BN.PF.B FixedReset Disc Quote: 20.51 – 21.34
Spot Rate : 0.8300
Average : 0.6641

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 20.51
Evaluated at bid price : 20.51
Bid-YTW : 7.32 %
BN.PF.G FixedReset Disc Quote: 19.42 – 19.94
Spot Rate : 0.5200
Average : 0.3922

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2054-11-19
Maturity Price : 19.42
Evaluated at bid price : 19.42
Bid-YTW : 7.64 %

Comments

8 responses to “November 19, 2024”

  1. prefman

    Fairfax now has a press release:

    https://www.fairfax.ca/press-releases/fairfax-launches-c700-million-senior-notes-offering-11-19-2024/

    If Fairfax can get these rates is there a chance ALL Fairfax preferred shares get called? C, D & M will certainly get called… but even the lowest series F why pay 216 + ~300 = 516 = 5.16 dividend when you can pay that or less as interest instead?

    Another question Fairfax had a normal course issuer bid for preferreds… any info on how much they bought from this mechanism… great way to add to common shareholder equity.

    Also odd this new came out from Moody’s before the Fiarfax release. Given the statement re redemption of preferreds … shouldn’t there have been a trading halt before this new came out?

  2. niagara

    I find this rather humourous:
    “As of the date of this press release, Fairfax has not made any determination as to the specific series of Preferred Shares to be redeemed, nor the amount, timing or method of repayment. Any redemption of Preferred Shares will be subject to market conditions. Any proceeds not used to redeem Preferred Shares will be used for general corporate purposes.”

    They have decided on anything? Just throwing darts at a board?

  3. IrateAR

    prefman – The market certainly seems to think there’s at least a chance. The debt appears to just be regular notes so prefs have the advantage of being lower in capital structure, counting partially as equity for credit ratings etc.

    I don’t believe they’ve bought any prefs in the NCIB. Certainly not recently. Kind of baffling as to why not.

    niagara – Lol yes. I guess they want to keep options open but it sounds funny. “We’re raising $700m within two weeks of the redemption deadline. Will we call those? Haven’t really thought about it.”

  4. DR

    “kind of baffling”

    understatement of the year. that all these issuers have neglected buybacks, especially on the 3 big meltdowns of the pref mkt, in favour of redeeming at par at a later date when these “lazy” switch opportunities present themselves is the bain of my existence.

  5. DR

    bane…

  6. DR

    while i’m at it…further to my comments about canada’s on other thread…

    we were 160 thru UK and AUS in 30s (not the 100-125 range i blanketed the curve with)

    long canada’s are a farce relatively speaking so kudos to FFH

  7. FFH Issues Senior Debt, Will Redeem Some Prefs, Maybe « PrefBlog

    […] had a huge effect on the market yesterday – when word of the marketting for this issue got out – when most of the FFH preferreds […]

  8. December 6, 2024 « PrefBlog

    […] It’s interesting to see the decline in the projected December, 2025, rate from 2.74% to 2.61%. This contrasts with the 2.81% post-inflation level on November 19. […]

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