A nice piece in the Globe today about Canada’s rentier economy:
We have to think about what most people rely on nowadays to support themselves and secure their futures. And the answer is assets – housing assets in particular. It’s no longer our salaries or incomes, nor even our pensions. Rather, Canada has become an asset-based economy in which it’s now a viable choice to buy a house far above your income threshold and sit tight – renting out rooms to pay the mortgage you can’t afford on your own income alone – waiting for its value to appreciate.
But there are perils to relying on this sort of economy for our future. An asset-based economy is underpinned by continuous asset price inflation alongside the suppression of income inflation, meaning a rising debt-to-income ratio is built in.
Another example of the asset based nature of our economy is the banks.
The banks now basically control the entire Canadian financial system – rather than simply being an important part of it – with their oligopoly protected from foreign competition by legislation and, to a slightly lesser extent, from new domestic competition by regulation.
A huge chunk of the Toronto Stock Exchange index is comprised of banks. with over 35% of the S&P/TSX 60 index being financial players; compared to less than 15% of the S&P 500.
And, I suggest, any attempt to introduce any real competition to the Canadian financial system – loosening Bank Act restrictions of foreign ownership and restricting bank encroachment on asset management and insurance – would be met by howls of outrage from the rent-seekers who invest in them.
And it appears that Mohamed A. El-Erian is as concerned as I am (see September 20) about the Fed response to the repo blip (from his Facebook page):
The longer this continues, and it will for now, the more it will be seen by investors as (pick your term):
- stealth QE,
- QE lite,
- backdoor QE,
- etc….
The big question is whether, for markets conditioned and empowered to believe they can force the hands of the Federal Reserve, this will be seen as a prelude to the formal resumption of a QE program.
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| 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 | 1.5575 % | 1,932.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.5575 % | 3,545.4 |
| Floater | 6.24 % | 6.39 % | 51,847 | 13.35 | 4 | 1.5575 % | 2,043.2 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1297 % | 3,377.2 |
| SplitShare | 4.67 % | 4.61 % | 55,914 | 4.01 | 7 | -0.1297 % | 4,033.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1297 % | 3,146.8 |
| Perpetual-Premium | 5.61 % | -18.22 % | 67,565 | 0.09 | 6 | 0.1772 % | 2,990.1 |
| Perpetual-Discount | 5.41 % | 5.56 % | 65,088 | 14.50 | 28 | 0.0950 % | 3,171.0 |
| FixedReset Disc | 5.56 % | 5.51 % | 175,427 | 14.39 | 73 | 0.0672 % | 2,062.6 |
| Deemed-Retractible | 5.22 % | 5.80 % | 75,332 | 7.90 | 27 | 0.0047 % | 3,152.9 |
| FloatingReset | 4.56 % | 6.73 % | 60,503 | 7.95 | 3 | -0.4924 % | 2,336.9 |
| FixedReset Prem | 5.24 % | 3.92 % | 127,961 | 1.58 | 14 | 0.0028 % | 2,586.5 |
| FixedReset Bank Non | 1.98 % | 4.28 % | 84,939 | 2.28 | 3 | 0.0974 % | 2,661.7 |
| FixedReset Ins Non | 5.51 % | 8.07 % | 105,684 | 7.91 | 21 | -0.2886 % | 2,095.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.J | FloatingReset | -1.84 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.77 Bid-YTW : 11.13 % |
| IAF.PR.G | FixedReset Ins Non | -1.58 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.70 Bid-YTW : 7.69 % |
| SLF.PR.G | FixedReset Ins Non | -1.47 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 12.76 Bid-YTW : 10.73 % |
| MFC.PR.H | FixedReset Ins Non | -1.40 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.41 Bid-YTW : 7.03 % |
| IAF.PR.I | FixedReset Ins Non | -1.36 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.90 Bid-YTW : 7.96 % |
| PWF.PR.P | FixedReset Disc | -1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 12.36 Evaluated at bid price : 12.36 Bid-YTW : 6.03 % |
| BAM.PR.X | FixedReset Disc | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 12.70 Evaluated at bid price : 12.70 Bid-YTW : 6.16 % |
| MFC.PR.C | Deemed-Retractible | -1.00 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.75 Bid-YTW : 6.87 % |
| CU.PR.D | Perpetual-Discount | 1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 22.93 Evaluated at bid price : 23.22 Bid-YTW : 5.31 % |
| BAM.PR.B | Floater | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 10.86 Evaluated at bid price : 10.86 Bid-YTW : 6.39 % |
| GWO.PR.R | Deemed-Retractible | 1.11 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.80 Bid-YTW : 5.98 % |
| CM.PR.R | FixedReset Disc | 1.18 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 21.40 Evaluated at bid price : 21.40 Bid-YTW : 5.58 % |
| SLF.PR.I | FixedReset Ins Non | 1.33 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2030-01-31 Maturity Price : 25.00 Evaluated at bid price : 18.25 Bid-YTW : 7.93 % |
| HSE.PR.C | FixedReset Disc | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 16.61 Evaluated at bid price : 16.61 Bid-YTW : 6.85 % |
| TD.PF.A | FixedReset Disc | 1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 17.15 Evaluated at bid price : 17.15 Bid-YTW : 5.38 % |
| BAM.PF.J | FixedReset Disc | 1.78 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 23.20 Evaluated at bid price : 24.62 Bid-YTW : 4.76 % |
| BAM.PR.K | Floater | 2.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 10.80 Evaluated at bid price : 10.80 Bid-YTW : 6.43 % |
| PWF.PR.A | Floater | 2.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 11.90 Evaluated at bid price : 11.90 Bid-YTW : 5.89 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.M | FixedReset Disc | 95,395 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 5.55 % |
| PVS.PR.E | SplitShare | 69,750 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.46 Bid-YTW : 4.97 % |
| CU.PR.I | FixedReset Prem | 66,500 | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.71 Bid-YTW : 2.31 % |
| TD.PF.E | FixedReset Disc | 45,650 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 19.45 Evaluated at bid price : 19.45 Bid-YTW : 5.52 % |
| BNS.PR.Y | FixedReset Bank Non | 39,200 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.44 Bid-YTW : 3.43 % |
| HSE.PR.G | FixedReset Disc | 35,800 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2049-09-23 Maturity Price : 17.50 Evaluated at bid price : 17.50 Bid-YTW : 7.05 % |
| There were 23 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CM.PR.Q | FixedReset Disc | Quote: 17.93 – 18.49 Spot Rate : 0.5600 Average : 0.3832 YTW SCENARIO |
| CM.PR.P | FixedReset Disc | Quote: 16.14 – 16.61 Spot Rate : 0.4700 Average : 0.3103 YTW SCENARIO |
| BNS.PR.Y | FixedReset Bank Non | Quote: 24.44 – 24.86 Spot Rate : 0.4200 Average : 0.3041 YTW SCENARIO |
| BMO.PR.C | FixedReset Disc | Quote: 22.00 – 22.30 Spot Rate : 0.3000 Average : 0.1983 YTW SCENARIO |
| MFC.PR.H | FixedReset Ins Non | Quote: 20.41 – 20.74 Spot Rate : 0.3300 Average : 0.2305 YTW SCENARIO |
| TRP.PR.F | FloatingReset | Quote: 13.25 – 13.51 Spot Rate : 0.2600 Average : 0.1724 YTW SCENARIO |