January 15, 2025

The US inflation numbers had something for everyone!

Consumer prices rose more quickly in December, the latest sign that the Federal Reserve’s fight against inflation may have stalled.

The Consumer Price Index rose 0.4 percent from November, and was up 2.9 percent from a year earlier, the Labor Department said on Wednesday. It was the fastest one-month increase in overall prices since February, driven in part by another sharp rise in the price of eggs and other groceries.

The “core” measure of inflation, which strips out volatile food and fuel prices to give a better sense of the underlying trend, was more encouraging: The index rose 3.2 percent from a year earlier after three straight months of 3.3 percent gains. Forecasters had not expected core inflation to slow.

Inflation in housing — by far the biggest monthly expense for most families, and one of the most stubborn categories of consumer prices — has finally begun to ease: Shelter prices were up 4.6 percent in December from a year earlier, the smallest 12-month increase in nearly three years.

PerpetualDiscounts now yield 6.03%, equivalent to 7.84% interest at the standard equivalency factor of 1.3x. Long corporates yielded 4.62% on 2025-1-14 and since then the closing price of ZLC changed from 15.02 to 15.19, a total return of +1.13%, implying a decrease in yields (assuming that the “Duration” of 12.66 reported by BMO is Modified Duration) of about 9bp to 4.53%. Therefore, the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened slightly (and perhaps spuriously) to 330bp from the 325bp reported January 8.

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 0.4729 % 2,330.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.4729 % 4,470.3
Floater 7.48 % 7.76 % 32,682 11.65 4 0.4729 % 2,576.3
OpRet 0.00 % 0.00 % 0 0.00 0 0.0149 % 3,638.3
SplitShare 4.76 % 4.49 % 46,468 0.16 8 0.0149 % 4,344.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0149 % 3,390.0
Perpetual-Premium 0.00 % 0.00 % 0 0.00 0 0.3314 % 2,902.4
Perpetual-Discount 5.92 % 6.03 % 58,809 13.88 32 0.3314 % 3,164.9
FixedReset Disc 5.33 % 6.64 % 98,696 12.84 50 0.4954 % 2,855.4
Insurance Straight 5.89 % 5.98 % 66,505 13.94 21 0.6707 % 3,076.0
FloatingReset 6.27 % 6.41 % 40,110 13.28 3 -0.2882 % 3,425.1
FixedReset Prem 5.69 % 5.50 % 162,890 3.36 12 0.2203 % 2,588.7
FixedReset Bank Non 0.00 % 0.00 % 0 0.00 0 0.4954 % 2,918.8
FixedReset Ins Non 5.12 % 6.06 % 74,361 13.70 14 0.6158 % 2,949.3
Performance Highlights
Issue Index Change Notes
CCS.PR.C Insurance Straight -4.37 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 6.02 %
GWO.PR.Q Insurance Straight -4.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 6.30 %
PWF.PR.Z Perpetual-Discount -3.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.41
Evaluated at bid price : 20.41
Bid-YTW : 6.34 %
IFC.PR.F Insurance Straight -2.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.67
Evaluated at bid price : 22.10
Bid-YTW : 6.04 %
GWO.PR.L Insurance Straight -1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 23.20
Evaluated at bid price : 23.50
Bid-YTW : 6.06 %
SLF.PR.G FixedReset Ins Non 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 17.83
Evaluated at bid price : 17.83
Bid-YTW : 6.37 %
PWF.PR.K Perpetual-Discount 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.57
Evaluated at bid price : 20.57
Bid-YTW : 6.04 %
FTS.PR.H FixedReset Disc 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 17.00
Evaluated at bid price : 17.00
Bid-YTW : 6.77 %
BN.PR.B Floater 1.22 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 12.45
Evaluated at bid price : 12.45
Bid-YTW : 7.76 %
POW.PR.C Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 24.05
Evaluated at bid price : 24.30
Bid-YTW : 6.00 %
ENB.PF.G FixedReset Disc 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 7.42 %
BN.PF.E FixedReset Disc 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 6.79 %
MFC.PR.L FixedReset Ins Non 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 22.36
Evaluated at bid price : 23.08
Bid-YTW : 5.95 %
ENB.PR.H FixedReset Disc 1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.86
Evaluated at bid price : 20.86
Bid-YTW : 6.72 %
CU.PR.H Perpetual-Discount 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 22.22
Evaluated at bid price : 22.50
Bid-YTW : 5.91 %
MFC.PR.F FixedReset Ins Non 1.71 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 17.80
Evaluated at bid price : 17.80
Bid-YTW : 6.20 %
ENB.PR.D FixedReset Disc 1.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 19.36
Evaluated at bid price : 19.36
Bid-YTW : 7.26 %
BIP.PR.A FixedReset Disc 2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 23.80
Evaluated at bid price : 24.52
Bid-YTW : 6.81 %
IFC.PR.E Insurance Straight 2.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 22.04
Evaluated at bid price : 22.50
Bid-YTW : 5.81 %
FTS.PR.K FixedReset Disc 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.06
Evaluated at bid price : 21.06
Bid-YTW : 6.40 %
CU.PR.E Perpetual-Discount 2.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.93 %
BN.PR.X FixedReset Disc 2.97 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 17.67
Evaluated at bid price : 17.67
Bid-YTW : 7.03 %
FTS.PR.J Perpetual-Discount 2.98 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.11
Evaluated at bid price : 21.11
Bid-YTW : 5.71 %
MFC.PR.B Insurance Straight 3.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.35
Evaluated at bid price : 20.35
Bid-YTW : 5.78 %
IFC.PR.C FixedReset Ins Non 3.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.67
Evaluated at bid price : 22.10
Bid-YTW : 6.32 %
BN.PR.T FixedReset Disc 7.64 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 18.73
Evaluated at bid price : 18.73
Bid-YTW : 7.05 %
SLF.PR.D Insurance Straight 22.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 19.84
Evaluated at bid price : 19.84
Bid-YTW : 5.66 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.W FixedReset Prem 306,500 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-02-15
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 3.81 %
CU.PR.J Perpetual-Discount 79,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.06
Evaluated at bid price : 20.06
Bid-YTW : 6.02 %
GWO.PR.I Insurance Straight 61,300 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 19.36
Evaluated at bid price : 19.36
Bid-YTW : 5.87 %
MFC.PR.L FixedReset Ins Non 59,781 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 22.36
Evaluated at bid price : 23.08
Bid-YTW : 5.95 %
GWO.PR.N FixedReset Ins Non 54,850 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 16.68
Evaluated at bid price : 16.68
Bid-YTW : 6.49 %
FTS.PR.M FixedReset Disc 50,084 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.37
Evaluated at bid price : 21.37
Bid-YTW : 6.68 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BN.PF.G FixedReset Disc Quote: 21.70 – 24.60
Spot Rate : 2.9000
Average : 1.5889

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.41
Evaluated at bid price : 21.70
Bid-YTW : 6.88 %

CU.PR.H Perpetual-Discount Quote: 22.50 – 24.96
Spot Rate : 2.4600
Average : 1.7444

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 22.22
Evaluated at bid price : 22.50
Bid-YTW : 5.91 %

SLF.PR.E Insurance Straight Quote: 19.00 – 20.71
Spot Rate : 1.7100
Average : 1.3250

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 19.00
Evaluated at bid price : 19.00
Bid-YTW : 5.98 %

GWO.PR.H Insurance Straight Quote: 20.50 – 21.70
Spot Rate : 1.2000
Average : 0.8170

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.50
Evaluated at bid price : 20.50
Bid-YTW : 5.98 %

CCS.PR.C Insurance Straight Quote: 21.00 – 21.96
Spot Rate : 0.9600
Average : 0.7164

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 6.02 %

GWO.PR.Q Insurance Straight Quote: 20.65 – 21.70
Spot Rate : 1.0500
Average : 0.8099

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2055-01-15
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 6.30 %

12 Responses to “January 15, 2025”

  1. Frank says:

    Hello,
    I own CVE.PR.A and CVE.PR.G that I bought back when it was Husky energy. CVE.PR.C was redeemed not too long ago and it was a +3.13%. I suspect my CVE.PR.G at + 3.52% will also be reddem on June 30th. What I don’t understand is my CVE.PR.A is now trading at a current yield of 2.91% and reset yield of 5.51% It seam to me the yield is way too low for such a DBRS PFD-3H rating. In your opinion, is it that the market thinks it will be redeem at reset date in March 2026? Doesn’t make much sens to me to redeem a +1.73 pref share. I am missing something ?

  2. DrT says:

    I too am befuddled with the run up. I (profitably) played some of the other ex-Husky prefs for redemption but now am out of all of them. In a world of cheap prefs, this is almost a short for risk management.

  3. Habsfan says:

    Going into 2025 I am holding about 80% perpetuals and 20% Resets in my pref share portfolio. My big-picture assumption is that BOC rates will gradually go lower for a while, thus the tilt towards perpetuals. Do some of you have differing thoughts?

  4. Nestor says:

    Habsfan, i’m on the other end of the spectrum. Zero perpetuals.

    In the short term, BOC rates may come down a little. Maybe. And that’s fine. However, i think (my) big picture as you put it, rates will head higher over the next 5-10 years. Maybe longer. I don’t think it’s unreasonable to see 5 year canada rates at 7.5% within that time frame.

    So, i’m sticking to fixed resets and floaters.

  5. Nestor says:

    and yes, i really have no idea in the end. lol. but i still find floaters and fixed resets a better value that perpetuals. so, simply on that basis, i’m sticking with them.

    as for rates going higher, just being a gypsy, and guessing… nobody knows.

  6. niagara says:

    I am with Nestor on this, though 7.5% of the 5yr GoC seems a stretch, but who knows?

    We saw huge rate increases in 2022-2024, yet the US and, to a lesser extent, Canadian economies did ok. People and companies have adjusted to the higher rates. So, I think that we may see slightly lower central bank rates this year, but after that, rate hikes.

    Of course, the coming tariff wars will be a big variable. So too is the exponentially rising US government debt.

    But what do I know? As a great man once said, “I know nothing, nothing!”

  7. skeptical says:

    At 7% or even 5% rates, the annual US debt payments would amount to about $2 trillion(roughly 40 trillion deficit). That’s about 40% of their budget.
    Closer home, the debt situation is more manageable, but less than savoury.
    In the US, Lots of corporate and households refinanced at 1% or lower rates during the pandemic. That will obviously come off in the next few years. We’ll see the resilience of things then.

    In the meantime, Bank of Canada is ending its QT program and about to begin market intervention in buying securities/assets in the next few months.

    https://www.bankofcanada.ca/2025/01/the-end-of-quantitative-tightening-and-what-comes-next/

    With inflation that was 4 decades high, the 5 year could not reach 4.5% in Canada.

    What’s the path to higher rates? More inflation? Higher deficits?
    More deficits? After a certain points, deficits pull down growth-China, Japan, EU, South Korea?

    Again, nobody knows but it’s a stimulative exercise.

  8. brian says:

    FWIW… I’m about 70% r-r / 30% perpetual.
    I believe in trying to cover all the bases, so whether interest rates go up or down, I’ll hopefully be OK.

    Another tip… James is kind enough to reveal the monthly “MAPF Portfolio Composition” and you could do a lot worse than just following his lead!

  9. Nestor says:

    so. i have a question.

    who loaning the Canadian government 5 year money at 3% when they can get 4.43% on US money. or even 3 month money at a massive discount to US money?

    why would you do it?
    especially with the loonie in free fall?

  10. Habsfan says:

    Thanks team, lots of helpful perspective. I don’t go too far down the rabbit hole with my thinking, that just gives me a headache. But it seems to me neither Canada nor the US can afford to have rates go much higher than they are.

    Agreement on resets as maybe better value. Certainly some nice 7%+ yields that don’t reset until 2029. On the other hand my ‘keep it simple’ template loves the straightforwardness of perpetuals. Thanks again!

  11. DrT says:

    I’m in the zero perpetuals camp. Canada is the innocent bystander in the room. At some point the US has to inflate away the debt, disown the debt, or reinvent the debt, and the long duration holders will be bagholders. The solution is always to print more money. Long gold, and waiting for a currency bounce to get more long gold.

  12. […] PerpetualDiscounts now yield 6.03%, equivalent to 7.84% interest at the standard equivalency factor of 1.3x. Long corporates yielded 4.80% on 2025-1-21 and since then the closing price of ZLC changed from 15.50 to 15.38, a total return of -0.77%, implying an increase in yields (assuming that the “Duration” of 12.49 reported by BMO is Modified Duration) of about 6bp to 4.86%. Therefore, the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed sharply to 300bp from the 330bp reported January 15. […]

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