{"id":22976,"date":"2013-09-04T21:44:32","date_gmt":"2013-09-05T01:44:32","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=22976"},"modified":"2013-09-04T21:44:32","modified_gmt":"2013-09-05T01:44:32","slug":"september-4-2013","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=22976","title":{"rendered":"September 4, 2013"},"content":{"rendered":"

For all the tapering talk, Canadian policy rates aren’t changing any time soon<\/a>:<\/p>\n

he Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1\/4 per cent and the deposit rate is 3\/4 per cent.
\nThe global economy continues to expand broadly as expected, but its dynamic has moderated. In the United States, the process of normalization of long-term interest rates has begun in the context of stronger private domestic demand. Recent data, however, point to slightly less momentum overall than anticipated. In Europe, there are early signs of a recovery, and Japan\u2019s situation remains promising. In a number of emerging market economies, financial volatility has increased, adding uncertainty to growth prospects, although China continues to grow at a solid pace. Commodity prices have been relatively stable, with geopolitical stresses putting some upward pressure on global oil prices.<\/p>\n

Uncertain global economic conditions appear to be delaying the anticipated rotation of demand in Canada towards exports and investment. While the housing sector has been slightly stronger than anticipated, household credit growth has continued to slow and mortgage interest rates are higher, pointing to a continued constructive evolution of household imbalances. Looking through the choppiness of the recent data, the level of Canada\u2019s GDP is largely consistent with the Bank\u2019s July forecast. The output gap is expected to begin to narrow in 2014.<\/p>\n

Inflation in Canada remains subdued. With inflation expectations well-anchored, both core and total CPI inflation are expected to return slowly to 2 per cent as the output gap closes.<\/p>\n

Against this backdrop, the Bank has decided to maintain the target for the overnight rate at 1 per cent. As long as there is significant slack in the Canadian economy, the inflation outlook remains muted, and imbalances in the household sector continue to evolve constructively, the considerable monetary policy stimulus currently in place will remain appropriate. Over time, as the normalization of these conditions unfolds, a gradual normalization of policy interest rates can also be expected, consistent with achieving the 2 per cent inflation target.<\/p><\/blockquote>\n

There’s a new report on Canada’s competitiveness<\/a> that’s a bit of a joke:<\/p>\n

Switzerland and Singapore top the list of most competitive countries in the world in a global ranking that puts Canada in a distant 14th position.<\/p>\n

Finland, Germany and the United States round out the top five of this year’s most competitive nations on the World Economic Forum\u2019s annual list, released Wednesday in Geneva. Canada\u2019s ranking was the same as last year. Back in 2009, Canada sat in ninth position.
…<\/b>
Canada fares well in education, efficient financial and labour markets, and its strong institutions. But several factors keep it out of the top 10, among them innovation and business sophistication, where Canada has tumbled to 25th in the rankings.
…<\/b>
The most challenging areas for doing business in Canada both relate to innovation: Access to financing and insufficient capacity to innovate. This country could boost its competitiveness by focusing on innovation \u2013 encouraging more spending on research and development, supporting governments\u2019 use of Canadian advanced technology, and boosting collaboration between universities and industry on R&D, the Conference Board said.<\/p><\/blockquote>\n

Oh yeah, government programmes are going to boost innovation, right. Just like this innovative scheme<\/a>:<\/p>\n

Another witness at the Charbonneau inquiry, engineer Patrice Mathieu, testified on Wednesday that a bid-rigging system also existed in the Quebec City region after 2004. He added that the federal government\u2019s multibillion-dollar infrastructure program was \u201cmanna\u201d in the second half of the 2000s, when major firms were colluding to split public projects among themselves.<\/p><\/blockquote>\n

If the government wants to encourage innovation, it will reduce its programmes, not increase them. Stop mollycoddling the banks, the chicken and egg farmers, the potash cartel, the telecom cartel … open up the country to competition and give people the choice of competing through innovation or starving to death.<\/p>\n

Tapering chatter has been fueled by the Beige Book<\/a>:<\/p>\n

Americans spending more on cars and housing helped the economy maintain a \u201cmodest to moderate\u201d pace of expansion from early July through late August, even as borrowing costs increased, the Federal Reserve said today.<\/p>\n

Consumers spent more on travel and tourism while manufacturing expanded \u201cmodestly,\u201d the Fed said today in its Beige Book business survey, which is based on anecdotal reports from its 12 regional banks. Hiring \u201cheld steady or increased modestly.\u201d
\nThe Federal Open Market Committee is debating whether growth is sufficient to fuel steady improvement in the job market and warrant tapering the Fed\u2019s $85 billion in monthly bond buying. Speculation the FOMC will dial down purchases at its Sept. 17-18 meeting has roiled financial markets, pushing up U.S. bond yields and contributing to the worst rout in the currencies of developing nations in five years.
…<\/b>
U.S. stocks and Treasury yields maintained gains after release of the report. The Standard & Poor\u2019s 500 Index (SPX) advanced 0.8 percent to 1,652.99 at 2:18 p.m. in New York trading. The yield on the benchmark 10-year Treasury increased 0.03 percentage point to 2.89 percent.<\/p><\/blockquote>\n

Assiduous Reader KB was kind enough to send me a link with pricing information on the TD Market Growth GICs<\/a>, unlike the rest of you bums who couldn’t be bothered:<\/p>\n

5 year\tMinimum Return is 5.10%(4)
\nMaximum Return\u2020 is 20%(2)<\/p>\n

[Footnotes] (2) Maximum Return is equivalent to the total return over the term of the investment (i.e. not an annualized rate).
\n(4) Actual return is 1.00% per annum, compounded annually, payable at maturity (equivalent to 5.10% total return)<\/i><\/p><\/blockquote>\n

There’s supposed to be another footnote (marked with a dagger) with respect to the definition of Maximum Return, but this has been omitted with TD’s usual efficiency.<\/p>\n

OK, anyway, who are the option specialists here? Who wants to take a stab at valuing the put and call required to make this thing work? Basically, you’re selling a straddle, right? Within the bounds of the possible return, it looks like they pay 100% of the applicable index<\/a>, although TD does not specify whether they mean total return index or price index … which kinda makes a difference, eh?<\/p>\n

An otherwise boring account of Gensler’s battle for turf at the CFTC<\/a> had an interesting aside:<\/p>\n

Even that success may have unintended consequences. Some finance scholars, Wall Street banks and Gensler himself have warned that concentrating trades at a few big clearinghouses that settle trillions of dollars in deals creates a new risk –a potential too-big-to-fail powder keg when the next crisis hits.<\/p><\/blockquote>\n

Yep. That’s in addition to the moral hazard of unlimited guarantees being given for the Bank of Downtown Plottsville’s derivatives trading.<\/p>\n

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 13bp, FixedResets gaining 8bp and DeemedRetractibles up 27bp. BAM issues were prominent on both sides of the relatively lengthy (considering the overall move) Performance Highlights table, but mainly the downside. Volume was well above average.<\/p>\n

PerpetualDiscounts now yield 5.78%, equivalent to 7.51% interest at the standard equivalency factor of 1.3x. Long corporates<\/a> now yield about 4.8%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 270bp, a slight (and perhaps spurious) decline from the 275bp reported August 28<\/a>.<\/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-0.8169 %<\/td>\n2,581.5<\/td>\n<\/tr>\n
FixedFloater<\/td>\n4.33 %<\/td>\n3.64 %<\/td>\n35,517<\/td>\n18.06<\/td>\n1<\/td>\n0.0456 %<\/td>\n3,831.5<\/td>\n<\/tr>\n
Floater<\/td>\n2.60 %<\/td>\n2.91 %<\/td>\n69,720<\/td>\n19.89<\/td>\n5<\/td>\n-0.8169 %<\/td>\n2,787.3<\/td>\n<\/tr>\n
OpRet<\/td>\n4.64 %<\/td>\n2.96 %<\/td>\n66,749<\/td>\n0.78<\/td>\n3<\/td>\n0.1162 %<\/td>\n2,618.6<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.75 %<\/td>\n4.89 %<\/td>\n54,363<\/td>\n4.11<\/td>\n6<\/td>\n-0.4722 %<\/td>\n2,946.8<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.1162 %<\/td>\n2,394.4<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.91 %<\/td>\n5.84 %<\/td>\n100,084<\/td>\n4.52<\/td>\n2<\/td>\n0.1193 %<\/td>\n2,246.3<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.66 %<\/td>\n5.78 %<\/td>\n128,454<\/td>\n14.18<\/td>\n36<\/td>\n-0.1336 %<\/td>\n2,293.0<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.92 %<\/td>\n3.83 %<\/td>\n242,307<\/td>\n3.86<\/td>\n85<\/td>\n0.0787 %<\/td>\n2,454.9<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n5.18 %<\/td>\n4.92 %<\/td>\n196,580<\/td>\n6.95<\/td>\n43<\/td>\n0.2701 %<\/td>\n2,350.3<\/td>\n<\/tr>\n<\/table>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\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.A<\/td>\nFloater<\/td>\n-3.95 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 23.30
\nEvaluated at bid price : 23.58
\nBid-YTW : 2.21 %<\/td>\n<\/tr>\n
CGI.PR.D<\/td>\nSplitShare<\/td>\n-2.63 %<\/td>\nYTW SCENARIO
\nMaturity Type : Soft Maturity
\nMaturity Date\t: 2023-06-14
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.10
\nBid-YTW : 4.21 %<\/td>\n<\/tr>\n
CIU.PR.C<\/td>\nFixedReset<\/td>\n-1.50 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 22.48
\nEvaluated at bid price : 23.01
\nBid-YTW : 3.68 %<\/td>\n<\/tr>\n
TRP.PR.B<\/td>\nFixedReset<\/td>\n-1.47 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 21.43
\nEvaluated at bid price : 21.43
\nBid-YTW : 3.89 %<\/td>\n<\/tr>\n
PWF.PR.R<\/td>\nPerpetual-Discount<\/td>\n-1.31 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 23.81
\nEvaluated at bid price : 24.18
\nBid-YTW : 5.74 %<\/td>\n<\/tr>\n
BAM.PR.N<\/td>\nPerpetual-Discount<\/td>\n-1.24 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 19.95
\nEvaluated at bid price : 19.95
\nBid-YTW : 6.07 %<\/td>\n<\/tr>\n
BAM.PF.C<\/td>\nPerpetual-Discount<\/td>\n-1.22 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 20.26
\nEvaluated at bid price : 20.26
\nBid-YTW : 6.11 %<\/td>\n<\/tr>\n
BAM.PR.M<\/td>\nPerpetual-Discount<\/td>\n-1.19 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 19.99
\nEvaluated at bid price : 19.99
\nBid-YTW : 6.06 %<\/td>\n<\/tr>\n
CU.PR.C<\/td>\nFixedReset<\/td>\n1.13 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-06-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.16
\nBid-YTW : 3.85 %<\/td>\n<\/tr>\n
BAM.PR.Z<\/td>\nFixedReset<\/td>\n1.18 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.80
\nBid-YTW : 4.23 %<\/td>\n<\/tr>\n
BAM.PR.T<\/td>\nFixedReset<\/td>\n1.24 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 23.07
\nEvaluated at bid price : 24.40
\nBid-YTW : 4.43 %<\/td>\n<\/tr>\n
BMO.PR.K<\/td>\nDeemed-Retractible<\/td>\n1.27 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-11-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.50
\nBid-YTW : 4.65 %<\/td>\n<\/tr>\n
BNS.PR.N<\/td>\nDeemed-Retractible<\/td>\n1.55 %<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2017-01-27
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.60
\nBid-YTW : 4.66 %<\/td>\n<\/tr>\n
MFC.PR.K<\/td>\nFixedReset<\/td>\n1.79 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.40
\nBid-YTW : 4.28 %<\/td>\n<\/tr>\n
BAM.PF.B<\/td>\nFixedReset<\/td>\n1.88 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 22.93
\nEvaluated at bid price : 24.45
\nBid-YTW : 4.57 %<\/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
BNS.PR.T<\/td>\nFixedReset<\/td>\n127,002<\/td>\nRBC crossed 100,000 at 25.75. Nesbitt bought 20,000 from Desjardins at 25.71.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2014-04-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.71
\nBid-YTW : 2.64 %<\/td>\n<\/tr>\n
POW.PR.A<\/td>\nPerpetual-Discount<\/td>\n106,670<\/td>\nNesbitt crossed 100,000 at 24.21.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 23.95
\nEvaluated at bid price : 24.20
\nBid-YTW : 5.87 %<\/td>\n<\/tr>\n
POW.PR.C<\/td>\nPerpetual-Discount<\/td>\n102,817<\/td>\nNesbitt crossed 100,000 at 24.91.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 24.64
\nEvaluated at bid price : 24.90
\nBid-YTW : 5.91 %<\/td>\n<\/tr>\n
ENB.PR.Y<\/td>\nFixedReset<\/td>\n102,340<\/td>\nNesbitt crossed 40,000 at 23.88.
\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 22.65
\nEvaluated at bid price : 23.82
\nBid-YTW : 4.42 %<\/td>\n<\/tr>\n
BMO.PR.K<\/td>\nDeemed-Retractible<\/td>\n80,976<\/td>\nNesbitt crossed 30,000 at 25.60; RBC crossed 50,000 at the same price.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2016-11-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.50
\nBid-YTW : 4.65 %<\/td>\n<\/tr>\n
BMO.PR.R<\/td>\nFixedReset<\/td>\n70,900<\/td>\nRecently exchanged issue<\/a>.
\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-08-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.01
\nBid-YTW : 2.57 %<\/td>\n<\/tr>\n
There were 45 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
TCA.PR.X<\/td>\nPerpetual-Discount<\/td>\nQuote: 49.01 – 49.99
\nSpot Rate : 0.9800
\nAverage : 0.7360<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 48.47
\nEvaluated at bid price : 49.01
\nBid-YTW : 5.78 %<\/td>\n<\/tr>\n

BAM.PR.G<\/td>\nFixedFloater<\/td>\nQuote: 21.92 – 22.65
\nSpot Rate : 0.7300
\nAverage : 0.6059<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2043-09-04
\nMaturity Price : 22.38
\nEvaluated at bid price : 21.92
\nBid-YTW : 3.64 %<\/td>\n<\/tr>\n

CGI.PR.D<\/td>\nSplitShare<\/td>\nQuote: 24.10 – 24.44
\nSpot Rate : 0.3400
\nAverage : 0.2294<\/p>\n

YTW SCENARIO
\nMaturity Type : Soft Maturity
\nMaturity Date\t: 2023-06-14
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.10
\nBid-YTW : 4.21 %<\/td>\n<\/tr>\n

IAG.PR.E<\/td>\nDeemed-Retractible<\/td>\nQuote: 25.23 – 25.57
\nSpot Rate : 0.3400
\nAverage : 0.2334<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.23
\nBid-YTW : 5.88 %<\/td>\n<\/tr>\n

MFC.PR.J<\/td>\nFixedReset<\/td>\nQuote: 25.05 – 25.34
\nSpot Rate : 0.2900
\nAverage : 0.2032<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2018-03-19
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.05
\nBid-YTW : 3.93 %<\/td>\n<\/tr>\n

GWO.PR.N<\/td>\nFixedReset<\/td>\nQuote: 22.39 – 22.89
\nSpot Rate : 0.5000
\nAverage : 0.4180<\/p>\n

YTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 22.39
\nBid-YTW : 4.55 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

For all the tapering talk, Canadian policy rates aren’t changing any time soon: he Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank …<\/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-22976","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/22976","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=22976"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/22976\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=22976"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=22976"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=22976"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}