{"id":33489,"date":"2016-08-12T21:26:13","date_gmt":"2016-08-13T02:26:13","guid":{"rendered":"http:\/\/prefblog.com\/?p=33489"},"modified":"2016-08-12T21:26:13","modified_gmt":"2016-08-13T02:26:13","slug":"august-12-2016","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=33489","title":{"rendered":"August 12, 2016"},"content":{"rendered":"

American preferreds are doing really well<\/a>:<\/p>\n

A kind of buying panic has broken out. The iShares U.S. Preferred Stock exchange-traded fund, which seeks to track the market, has taken in $2.2 billion in new money so far this year. Historically, the price of preferred stocks almost never rises, with virtually all their return coming from the fixed dividend rates they offer; this year, however, nearly half the 7% total return of the S&P preferred index has come from climbing prices.<\/p>\n

To see why overheating could be a risk, it helps to understand more about how preferred stocks work<\/a>.
…<\/b>
There\u2019s another concern. At the end of last year, the iShares fund held more than 10% of the total outstanding value of 37 of its holdings. As of Aug. 10, according to FactSet, the fund owns more than 10% of the outstanding value of 185 of its holdings. (It has a total of 293 positions.) That\u2019s a lot of any market for a single fund to control in such a hurry.<\/p>\n

Take a recent study by Fed economist Jeremy Nalewaik, who found that while inflation expectations and actual inflation were closely connected prior to the mid-1990s, the relationship has deteriorated markedly since then.<\/p><\/blockquote>\n

The hardest thing to deal with in investment management is regime switching<\/a>:<\/p>\n

\u201cMovements in inflation expectations now appear inconsequential since they no longer have any predictive content for subsequent inflation realizations,\u201d Nalewaik wrote.<\/p>\n

He cites as a potential explanation for this a hypothesis offered in a 2000 paper co-authored by Yellen\u2019s husband, Nobel prize-winner George Akerlof, who wrote that \u201cwhen inflation is low, it may be at most a marginal factor in wage and price decisions, and decision-makers may ignore it entirely.\u201d<\/p>\n

Akerlof\u2019s and Nalewaik\u2019s research jibe nicely with ideas that St. Louis Fed President James Bullard has injected into the debate on the rate-setting Federal Open Market Committee this year.<\/p>\n

Bullard stopped submitting longer-run economic forecasts when the latest round of policy makers\u2019 projections was compiled in mid-June, stating in a June 30 speech that \u201cthe timing of a switch to an alternative regime is viewed as not forecastable, and so we simply forecast that the current regime will persist.\u201d<\/p>\n

Nalewaik suggests that a return to a world in which inflation expectations and actual inflation become more tightly linked, as they were before the mid-1990s, may not be in the cards.<\/p><\/blockquote>\n

There are concerns that Gilts are distorting the global bond market<\/a>:<\/p>\n

The rally in gilts has been extraordinary, with the yield on the U.K.\u2019s longest-dated bond, the 2068 maturity, almost halving from 2% on the day of the referendum to 1.06% on Thursday.<\/p>\n

The price of the bond is up 53% this year, the sort of gains usually produced by risky stocks, not rock-solid government paper. (Its performance roughly equals the gains of sixth-best stock in the S&P 500, Range Resources.)<\/p>\n

\u201cThis is not normal,\u201d said Mike Amey, who manages sterling bond portfolios for fund manager Pimco. He called the speed of the move \u201ceye-popping.\u201d<\/p>\n

The 18.8% two-month return on the 30-year gilt has been bettered only during the rescue of hedge fund Long-Term Capital Management in 1998, according to Thomson Reuters data since the late 1980s.<\/p>\n

The result has been that falling gilt yields have taken over from Japanese government bonds in exerting downward pressure on Treasurys and other global bond markets.<\/p><\/blockquote>\n\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-0.4258 %<\/td>\n1,688.2<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.4258 %<\/td>\n3,084.0<\/td>\n<\/tr>\n
Floater<\/td>\n4.86 %<\/td>\n4.60 %<\/td>\n81,392<\/td>\n16.08<\/td>\n4<\/td>\n-0.4258 %<\/td>\n1,777.3<\/td>\n<\/tr>\n
OpRet<\/td>\n4.84 %<\/td>\n2.42 %<\/td>\n50,342<\/td>\n0.08<\/td>\n1<\/td>\n0.0000 %<\/td>\n2,847.0<\/td>\n<\/tr>\n
SplitShare<\/td>\n5.04 %<\/td>\n4.74 %<\/td>\n106,164<\/td>\n2.26<\/td>\n5<\/td>\n0.1985 %<\/td>\n3,414.5<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n0.1985 %<\/td>\n2,664.1<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.44 %<\/td>\n-12.81 %<\/td>\n73,821<\/td>\n0.09<\/td>\n12<\/td>\n-0.1350 %<\/td>\n2,705.4<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.10 %<\/td>\n4.99 %<\/td>\n105,264<\/td>\n14.97<\/td>\n26<\/td>\n-0.1068 %<\/td>\n2,915.1<\/td>\n<\/tr>\n
FixedReset<\/td>\n4.89 %<\/td>\n4.09 %<\/td>\n152,705<\/td>\n7.16<\/td>\n89<\/td>\n-0.2012 %<\/td>\n2,085.9<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n4.96 %<\/td>\n-0.01 %<\/td>\n120,194<\/td>\n0.09<\/td>\n32<\/td>\n-0.1627 %<\/td>\n2,814.3<\/td>\n<\/tr>\n
FloatingReset<\/td>\n2.88 %<\/td>\n4.11 %<\/td>\n34,635<\/td>\n5.11<\/td>\n11<\/td>\n-0.2195 %<\/td>\n2,202.4<\/td>\n<\/tr>\n<\/table>\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
BAM.PR.Z<\/td>\nFixedReset<\/td>\n-1.74 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 19.80
\nEvaluated at bid price : 19.80
\nBid-YTW : 4.67 %<\/td>\n<\/tr>\n
SLF.PR.J<\/td>\nFloatingReset<\/td>\n-1.47 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 13.40
\nBid-YTW : 10.32 %<\/td>\n<\/tr>\n
BAM.PR.X<\/td>\nFixedReset<\/td>\n-1.21 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 13.93
\nEvaluated at bid price : 13.93
\nBid-YTW : 4.51 %<\/td>\n<\/tr>\n
BAM.PF.G<\/td>\nFixedReset<\/td>\n-1.15 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 21.41
\nEvaluated at bid price : 21.41
\nBid-YTW : 4.31 %<\/td>\n<\/tr>\n
BAM.PF.E<\/td>\nFixedReset<\/td>\n-1.14 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 19.98
\nEvaluated at bid price : 19.98
\nBid-YTW : 4.30 %<\/td>\n<\/tr>\n
SLF.PR.A<\/td>\nDeemed-Retractible<\/td>\n-1.09 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2025-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.44
\nBid-YTW : 5.19 %<\/td>\n<\/tr>\n
CM.PR.Q<\/td>\nFixedReset<\/td>\n-1.08 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 21.11
\nEvaluated at bid price : 21.11
\nBid-YTW : 4.08 %<\/td>\n<\/tr>\n
W.PR.H<\/td>\nPerpetual-Discount<\/td>\n-1.03 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 24.82
\nEvaluated at bid price : 25.04
\nBid-YTW : 5.55 %<\/td>\n<\/tr>\n
TRP.PR.A<\/td>\nFixedReset<\/td>\n1.46 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 15.25
\nEvaluated at bid price : 15.25
\nBid-YTW : 4.40 %<\/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
BIP.PR.C<\/td>\nFixedReset<\/td>\n139,090<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-09-30
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.37
\nBid-YTW : 5.09 %<\/td>\n<\/tr>\n
BMO.PR.T<\/td>\nFixedReset<\/td>\n125,320<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 19.00
\nEvaluated at bid price : 19.00
\nBid-YTW : 3.94 %<\/td>\n<\/tr>\n
FTS.PR.M<\/td>\nFixedReset<\/td>\n46,767<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 20.25
\nEvaluated at bid price : 20.25
\nBid-YTW : 4.07 %<\/td>\n<\/tr>\n
RY.PR.Q<\/td>\nFixedReset<\/td>\n33,975<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-05-24
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.90
\nBid-YTW : 3.73 %<\/td>\n<\/tr>\n
BNS.PR.G<\/td>\nFixedReset<\/td>\n32,300<\/td>\nYTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-07-25
\nMaturity Price : 25.00
\nEvaluated at bid price : 27.01
\nBid-YTW : 3.78 %<\/td>\n<\/tr>\n
BNS.PR.Z<\/td>\nFixedReset<\/td>\n28,841<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2022-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 20.60
\nBid-YTW : 5.88 %<\/td>\n<\/tr>\n
There were 25 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
CU.PR.I<\/td>\nFixedReset<\/td>\nQuote: 26.45 – 26.89
\nSpot Rate : 0.4400
\nAverage : 0.2788<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2020-12-01
\nMaturity Price : 25.00
\nEvaluated at bid price : 26.45
\nBid-YTW : 3.01 %<\/td>\n<\/tr>\n

W.PR.H<\/td>\nPerpetual-Discount<\/td>\nQuote: 25.04 – 25.40
\nSpot Rate : 0.3600
\nAverage : 0.2312<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 24.82
\nEvaluated at bid price : 25.04
\nBid-YTW : 5.55 %<\/td>\n<\/tr>\n

CM.PR.Q<\/td>\nFixedReset<\/td>\nQuote: 21.11 – 21.49
\nSpot Rate : 0.3800
\nAverage : 0.2896<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 21.11
\nEvaluated at bid price : 21.11
\nBid-YTW : 4.08 %<\/td>\n<\/tr>\n

BIP.PR.B<\/td>\nFixedReset<\/td>\nQuote: 25.81 – 26.14
\nSpot Rate : 0.3300
\nAverage : 0.2540<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2020-12-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.81
\nBid-YTW : 4.87 %<\/td>\n<\/tr>\n

VNR.PR.A<\/td>\nFixedReset<\/td>\nQuote: 18.50 – 18.95
\nSpot Rate : 0.4500
\nAverage : 0.3750<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 18.50
\nEvaluated at bid price : 18.50
\nBid-YTW : 4.71 %<\/td>\n<\/tr>\n

TRP.PR.D<\/td>\nFixedReset<\/td>\nQuote: 18.11 – 18.38
\nSpot Rate : 0.2700
\nAverage : 0.1951<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2046-08-12
\nMaturity Price : 18.11
\nEvaluated at bid price : 18.11
\nBid-YTW : 4.32 %<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

American preferreds are doing really well: A kind of buying panic has broken out. The iShares U.S. Preferred Stock exchange-traded fund, which seeks to track the market, has taken in $2.2 billion in new money …<\/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-33489","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/33489","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=33489"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/33489\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}