Powell spoke on quantitative tightening today:
Federal Reserve Chair Jerome Powell on Tuesday suggested the central bank is nearing a point where it will stop reducing the size of its bond holdings, but gave no long-run indication of where interest rates are heading.
Speaking to the National Association for Business Economics conference in Philadelphia, Powell provided a dissertation on where the Fed stands with “quantitative tightening,” or the effort to reduce the more than $6 trillion of securities it holds on its balance sheet.
While he provided no specific date of when the program will cease, he said there are indications the Fed is nearing its goal of “ample” reserves available for banks.
“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell said in prepared remarks. “We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision.”
…
On a related matter, Powell noted concerns over the Fed continuing to pay interest on bank reserves.The Fed normally remits interest it earns from its holdings to the Treasury general fund. However, because it had to raise interest rates so quickly to control inflation, it has seen operating losses. Congressional leaders such as Sen. Ted Cruz, R-Texas, have suggested terminating the payments on reserves.
However, Powell said that would be a mistake and would hinder the Fed’s ability to carry out policy.
“While our net interest income has temporarily been negative due to the rapid rise in policy rates to control inflation, this is highly unusual. Our net income will soon turn positive again, as it typically has been throughout our history,” he said. “If our ability to pay interest on reserves and other liabilities were eliminated, the Fed would lose control over rates.”
| 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 | 6.65 % | 7.10 % | 24,631 | 13.38 | 1 | 0.0000 % | 2,428.3 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0510 % | 4,583.3 |
| Floater | 6.29 % | 6.58 % | 54,936 | 13.09 | 3 | 0.0510 % | 2,641.4 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4735 % | 3,673.9 |
| SplitShare | 4.75 % | 4.41 % | 67,710 | 3.32 | 5 | 0.4735 % | 4,387.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4735 % | 3,423.3 |
| Perpetual-Premium | 5.51 % | 1.03 % | 79,777 | 0.08 | 7 | -0.0965 % | 3,082.4 |
| Perpetual-Discount | 5.62 % | 5.66 % | 45,231 | 14.42 | 26 | -0.1804 % | 3,354.5 |
| FixedReset Disc | 6.00 % | 6.06 % | 107,306 | 13.67 | 30 | 0.0408 % | 3,044.4 |
| Insurance Straight | 5.52 % | 5.56 % | 54,900 | 14.54 | 22 | -0.6240 % | 3,297.1 |
| FloatingReset | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0408 % | 3,621.7 |
| FixedReset Prem | 5.65 % | 4.90 % | 129,746 | 2.79 | 22 | -0.0673 % | 2,626.2 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0408 % | 3,112.0 |
| FixedReset Ins Non | 5.30 % | 5.41 % | 53,113 | 14.47 | 15 | -1.5915 % | 3,021.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IFC.PR.A | FixedReset Ins Non | -23.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 6.84 % |
| PWF.PR.S | Perpetual-Discount | -8.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 19.96 Evaluated at bid price : 19.96 Bid-YTW : 6.04 % |
| GWO.PR.H | Insurance Straight | -6.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 6.06 % |
| PWF.PR.E | Perpetual-Discount | -3.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 23.17 Evaluated at bid price : 23.47 Bid-YTW : 5.87 % |
| SLF.PR.C | Insurance Straight | -2.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 5.32 % |
| MFC.PR.C | Insurance Straight | -2.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 21.16 Evaluated at bid price : 21.16 Bid-YTW : 5.38 % |
| CCS.PR.C | Insurance Straight | -2.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 21.97 Evaluated at bid price : 22.20 Bid-YTW : 5.67 % |
| POW.PR.D | Perpetual-Discount | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 22.11 Evaluated at bid price : 22.33 Bid-YTW : 5.62 % |
| POW.PR.G | Perpetual-Discount | -1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 24.23 Evaluated at bid price : 24.53 Bid-YTW : 5.73 % |
| PWF.PR.R | Perpetual-Discount | -1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 23.65 Evaluated at bid price : 23.92 Bid-YTW : 5.76 % |
| IFC.PR.E | Insurance Straight | -1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 23.48 Evaluated at bid price : 23.75 Bid-YTW : 5.51 % |
| PWF.PR.K | Perpetual-Discount | -1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 21.75 Evaluated at bid price : 22.00 Bid-YTW : 5.63 % |
| GWO.PR.L | Insurance Straight | 1.00 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-11-13 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 0.98 % |
| BN.PR.M | Perpetual-Discount | 1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 5.97 % |
| PVS.PR.L | SplitShare | 2.40 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.01 Bid-YTW : 4.70 % |
| PWF.PR.L | Perpetual-Discount | 4.94 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 22.49 Evaluated at bid price : 22.75 Bid-YTW : 5.61 % |
| FTS.PR.F | Perpetual-Discount | 6.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 23.14 Evaluated at bid price : 23.40 Bid-YTW : 5.30 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.M | FixedReset Prem | 120,000 | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-11-24 Maturity Price : 25.00 Evaluated at bid price : 25.10 Bid-YTW : 3.12 % |
| IFC.PR.C | FixedReset Ins Non | 56,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 23.40 Evaluated at bid price : 23.96 Bid-YTW : 5.53 % |
| ENB.PR.P | FixedReset Disc | 55,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 21.28 Evaluated at bid price : 21.56 Bid-YTW : 6.36 % |
| CU.PR.C | FixedReset Disc | 43,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 23.36 Evaluated at bid price : 23.76 Bid-YTW : 5.48 % |
| MFC.PR.M | FixedReset Ins Non | 26,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2055-10-14 Maturity Price : 22.87 Evaluated at bid price : 24.08 Bid-YTW : 5.41 % |
| TD.PF.E | FixedReset Prem | 15,600 | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-11-30 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 4.56 % |
| There were 7 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| See TMX DataLinx: ‘Last’ != ‘Close’ and the posts linked therein for an idea of why these quotes are so horrible. | ||
| Issue | Index | Quote Data and Yield Notes |
| IFC.PR.A | FixedReset Ins Non | Quote: 16.75 – 21.95 Spot Rate : 5.2000 Average : 2.8878 YTW SCENARIO |
| PWF.PR.S | Perpetual-Discount | Quote: 19.96 – 22.24 Spot Rate : 2.2800 Average : 1.3080 YTW SCENARIO |
| GWO.PR.H | Insurance Straight | Quote: 20.20 – 22.45 Spot Rate : 2.2500 Average : 1.5810 YTW SCENARIO |
| MFC.PR.F | FixedReset Ins Non | Quote: 17.98 – 19.90 Spot Rate : 1.9200 Average : 1.5231 YTW SCENARIO |
| GWO.PR.G | Insurance Straight | Quote: 23.50 – 25.00 Spot Rate : 1.5000 Average : 1.1428 YTW SCENARIO |
| PWF.PR.E | Perpetual-Discount | Quote: 23.47 – 24.59 Spot Rate : 1.1200 Average : 0.7696 YTW SCENARIO |