{"id":14132,"date":"2011-02-17T23:03:38","date_gmt":"2011-02-18T03:03:38","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=14132"},"modified":"2011-02-17T23:03:38","modified_gmt":"2011-02-18T03:03:38","slug":"february-17-2011","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=14132","title":{"rendered":"February 17, 2011"},"content":{"rendered":"

There’s an interesting claim of regime switching in stock-bond correlations<\/a>:<\/p>\n

Based on his analysis of data over the past 20 years, the tipping point is a yield of about 4 per cent.<\/p>\n

When the 10-year government bond yield is below that threshold, bond yields and the S&P\/TSX composite index tend to move together, with a positive correlation of 0.49, strategist with UBS Securities Canada] Mr. [George] Vasic found. That\u2019s to be expected, because very low bond yields are usually associated with sluggish or recessionary conditions, and when the economy starts to improve, yields and stocks both rise.<\/p>\n

However, when bond yields are between 4 per cent and 6 per cent, stocks and bond yields tend to move in opposite directions, with a correlation of negative 0.56. In other words, when yields are already high and climbing, the stock market starts to feel the brunt of rising interest rates. (A correlation of 1 represents a perfect positive relationship, while negative 1 indicates a perfect inverse relationship.) <\/p><\/blockquote>\n

One thing that is well known is that correlation signs reverse in times of financial stress; it’s unclear whether this is anything new.<\/p>\n

Prices slid somewhat in the Canadian preferred share market today, with PerpetualDiscounts down 7bp, FixedResets losing 6bp and DeemedRetractibles off 8bp. Volatility was low, with only one issue in the Performance highlights. Volume was heavy.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices<\/strong>
Values are provisional and are finalized monthly<\/td>\n<\/tr>\n
Index<\/td>\nMean
Current
Yield
(at bid)<\/td>\n		Median
YTW<\/td>\n		Median
Average
Trading
Value<\/td>\n		Median
Mod Dur
(YTW)<\/td>\n		Issues<\/td>\nDay’s Perf.<\/td>\nIndex Value<\/td>\n<\/tr>\n
Ratchet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0476 %<\/td>\n2,397.3<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.73 %<\/td>\n3.44 %<\/td>\n16,753<\/td>\n19.13<\/td>\n1<\/td>\n0.0000 %<\/td>\n3,600.1<\/td>\n<\/tr>\n
Floater<\/td>\n2.50 %<\/td>\n2.26 %<\/td>\n48,511<\/td>\n21.58<\/td>\n4<\/td>\n-0.0476 %<\/td>\n2,588.5<\/td>\n<\/tr>\n
OpRet<\/td>\n4.82 %<\/td>\n3.70 %<\/td>\n60,009<\/td>\n2.22<\/td>\n8<\/td>\n-0.0579 %<\/td>\n2,389.9<\/td>\n<\/tr>\n
SplitShare<\/td>\n5.35 %<\/td>\n0.78 %<\/td>\n270,715<\/td>\n0.81<\/td>\n4<\/td>\n-0.0940 %<\/td>\n2,467.3<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0579 %<\/td>\n2,185.3<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.74 %<\/td>\n5.51 %<\/td>\n122,037<\/td>\n1.08<\/td>\n9<\/td>\n0.1214 %<\/td>\n2,034.8<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.55 %<\/td>\n5.62 %<\/td>\n129,236<\/td>\n14.35<\/td>\n15<\/td>\n-0.0708 %<\/td>\n2,107.8<\/td>\n<\/tr>\n
FixedReset<\/td>\n5.24 %<\/td>\n3.77 %<\/td>\n180,063<\/td>\n3.03<\/td>\n54<\/td>\n-0.0631 %<\/td>\n2,260.8<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n5.20 %<\/td>\n5.26 %<\/td>\n396,341<\/td>\n8.26<\/td>\n53<\/td>\n-0.0799 %<\/td>\n2,084.7<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n
Performance Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nChange<\/td>\nNotes<\/td>\n<\/tr>\n
PWF.PR.I<\/td>\nPerpetual-Premium<\/td>\n1.03 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2011-05-30
\nMaturity Price : 25.25
\nEvaluated at bid price : 25.45
\nBid-YTW : 4.17 %<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n
Volume Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nShares
Traded<\/td>\n		Notes<\/td>\n<\/tr>\n
BAM.PR.B<\/td>\nFloater<\/td>\n114,005<\/td>\nDesjardins crossed 45,000 at 18.97, then sold 50,000 to CIBC at 18.98.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2041-02-17
\nMaturity Price : 18.95
\nEvaluated at bid price : 18.95
\nBid-YTW : 2.79 %<\/td>\n<\/tr>\n
RY.PR.I<\/td>\nFixedReset<\/td>\n79,945<\/td>\nTD crossed blocks of 20,000 and 49,700, both at 25.95.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-03-26
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.95
\nBid-YTW : 3.66 %<\/td>\n<\/tr>\n
BAM.PR.M<\/td>\nPerpetual-Discount<\/td>\n69,545<\/td>\nDesjardins crossed blocks of 23,500 and 35,000, both at 21.25.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2041-02-17
\nMaturity Price : 21.26
\nEvaluated at bid price : 21.26
\nBid-YTW : 5.68 %<\/td>\n<\/tr>\n
BNS.PR.M<\/td>\nDeemed-Retractible<\/td>\n63,671<\/td>\nTD crossed 25,000 at 24.02; RBC crossed the same number at the same price.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.01
\nBid-YTW : 5.03 %<\/td>\n<\/tr>\n
SLF.PR.A<\/td>\nDeemed-Retractible<\/td>\n56,567<\/td>\nDesjardins crossed 45,000 at 23.75.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.69
\nBid-YTW : 5.50 %<\/td>\n<\/tr>\n
RY.PR.F<\/td>\nDeemed-Retractible<\/td>\n49,700<\/td>\nTD crossed 39,200 at 23.85.
\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.82
\nBid-YTW : 5.04 %<\/td>\n<\/tr>\n
There were 51 other index-included issues trading in excess of 10,000 shares.<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n
Wide Spread Highlights<\/strong><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nQuote Data and Yield Notes<\/td>\n<\/tr>\n
BAM.PR.H<\/td>\nOpRet<\/td>\nQuote: 25.27 – 25.90
\nSpot Rate : 0.6300
\nAverage : 0.4569<\/p>\n

YTW SCENARIO
\nMaturity Type : Soft Maturity
\nMaturity Date\t: 2012-03-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.27
\nBid-YTW : 5.47 %<\/td>\n<\/tr>\n

ELF.PR.F<\/td>\nDeemed-Retractible<\/td>\nQuote: 22.45 – 22.92
\nSpot Rate : 0.4700
\nAverage : 0.3352<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.45
\nBid-YTW : 6.74 %<\/td>\n<\/tr>\n

BAM.PR.J<\/td>\nOpRet<\/td>\nQuote: 26.80 – 27.00
\nSpot Rate : 0.2000
\nAverage : 0.1327<\/p>\n

YTW SCENARIO
\nMaturity Type : Soft Maturity
\nMaturity Date\t: 2018-03-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.80
\nBid-YTW : 4.36 %<\/td>\n<\/tr>\n

BAM.PR.R<\/td>\nFixedReset<\/td>\nQuote: 25.80 – 26.14
\nSpot Rate : 0.3400
\nAverage : 0.2794<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-07-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.80
\nBid-YTW : 4.89 %<\/td>\n<\/tr>\n

PWF.PR.M<\/td>\nFixedReset<\/td>\nQuote: 26.71 – 27.00
\nSpot Rate : 0.2900
\nAverage : 0.2352<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-03-02
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.71
\nBid-YTW : 3.71 %<\/td>\n<\/tr>\n

POW.PR.D<\/td>\nPerpetual-Discount<\/td>\nQuote: 23.00 – 23.24
\nSpot Rate : 0.2400
\nAverage : 0.1855<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2041-02-17
\nMaturity Price : 22.79
\nEvaluated at bid price : 23.00
\nBid-YTW : 5.49 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

There’s an interesting claim of regime switching in stock-bond correlations: Based on his analysis of data over the past 20 years, the tipping point is a yield of about 4 per cent. When the 10-year …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-14132","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/14132","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14132"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/14132\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14132"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14132"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14132"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}