{"id":50720,"date":"2019-09-20T20:01:00","date_gmt":"2019-09-21T00:01:00","guid":{"rendered":"https:\/\/prefblog.com\/?p=50720"},"modified":"2025-11-17T20:04:15","modified_gmt":"2025-11-18T01:04:15","slug":"september-20-2019","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=50720","title":{"rendered":"September 20, 2019"},"content":{"rendered":"

The recent<\/a> US repo-market disruption continues to attract attention<\/a>:<\/p>\n

\n

The Federal Reserve plans to pour cash into the U.S. banking system through early October in a bid to avert another market disruption, but analysts see the need for the central bank to come up with longer-term fixes.
…<\/b>
Repo rates hit 10 per cent on Tuesday, propelling other short-term rates sharply higher.<\/p>\n

Analysts blamed huge cash demand to pay for quarterly corporate taxes and the prior week\u2019s US$78-billion worth of coupon-bearing Treasury supply for the market ruction.<\/p>\n

They also attributed the decline of excess reserves, to about US$1.4-trillion from US$2.3-trillion in 2017, to the Fed\u2019s reduction of its bond holdings.
…<\/b>
Since Tuesday, the Fed has held four rounds of repo operations, with banks and dealers borrowing from the central banks with their Treasuries and other bonds as collateral.<\/p>\n

On Friday, the New York Fed, which implements the central bank\u2019s market actions, said it will conduct more repo operations into October.
…<\/b>
While repo operations are expected to provide a temporary patch, analysts said the Fed needs to offer more permanent solutions.<\/p>\n

\u201cThe underlying conditions that gave rise to the funding stress are still in place,\u201d said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.<\/p>\n

Other analysts said policy-makers should consider launching a standing repo facility and\/or increasing purchases of Treasuries.<\/p>\n<\/blockquote>\n

I don’t think much of the proposed solutions in the final quoted paragraph. Both represent the Fed printing money.<\/p>\n

The rationale behind the current bloated balance sheet of the Fed is that we are continuing to recover from the Credit Crunch. There was a huge shock to the system, so the Fed boosted the money supply, fine, I get it. But making this monetary expansion permanent – or even hinting that it could be permanent – looks like an open invitation to galloping inflation.<\/p>\n

Look at the stresses that caused the episode! Tax payments and a big Treasury auction! Not at all unusual and totally forseeable. And yet the repo rate spiked to 10%.<\/p>\n

Either the Fed screwed up by implementing ‘quantitative tightening’ too rapidly, or the financial system has become addicted to having all that cheap cash around. The first is an easy fix, the second is a little scary …. beating an addiction usually results in pain, as Canadian mortgage borrowers found out in 1981<\/a>.<\/p>\n

And through it all, Canadians are keeping up with the Joneses in the traditional way<\/a>:<\/p>\n

\n

Canadian homeowners who accessed their home equity through a loan or refinancing helped fuel household spending in recent years, according to research by staff at the Bank of Canada.
…<\/b>
In 2017, the researchers found Canadian homeowners extracted $89-billion in home equity through these two methods, with more money \u2013 $49-billion \u2013 coming through HELOCs.<\/p>\n

Borrowers used that money to pay for big-ticket items, such as cars and furniture, or to fund renovations, among other things, according to the research, which suggests this \u201chas likely contributed materially\u201d to this kind of spending in Canada in recent years.<\/p>\n

The researchers found that by the end of 2017, this equity extraction could have added two per cent to consumer spending on durables and semidurables (goods that include cars and furniture), as well as 11 per cent to renovation spending.<\/p>\n

The report found that translated into a 0.5-per-cent impact on the GDP level.<\/p>\n<\/blockquote>\n

The source paper is titled Home Equity Extraction and Household Spending in Canada<\/a>, by Anson T. Y. Ho, Mikael Khan, Monica Mow and Brian Peterson.<\/p>\n\n\n\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-0.3196 %<\/td>\n1,902.5<\/td>\n<\/tr>\n
FixedFloater<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.3196 %<\/td>\n3,491.0<\/td>\n<\/tr>\n
Floater<\/td>\n6.33 %<\/td>\n6.44 %<\/td>\n53,638<\/td>\n13.29<\/td>\n4<\/td>\n-0.3196 %<\/td>\n2,011.9<\/td>\n<\/tr>\n
OpRet<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0507 %<\/td>\n3,381.6<\/td>\n<\/tr>\n
SplitShare<\/td>\n4.66 %<\/td>\n4.48 %<\/td>\n55,721<\/td>\n4.02<\/td>\n7<\/td>\n-0.0507 %<\/td>\n4,038.4<\/td>\n<\/tr>\n
Interest-Bearing<\/td>\n0.00 %<\/td>\n0.00 %<\/td>\n0<\/td>\n0.00<\/td>\n0<\/td>\n-0.0507 %<\/td>\n3,150.9<\/td>\n<\/tr>\n
Perpetual-Premium<\/td>\n5.61 %<\/td>\n-16.80 %<\/td>\n66,658<\/td>\n0.09<\/td>\n6<\/td>\n-0.0130 %<\/td>\n2,984.9<\/td>\n<\/tr>\n
Perpetual-Discount<\/td>\n5.41 %<\/td>\n5.53 %<\/td>\n65,854<\/td>\n14.51<\/td>\n28<\/td>\n0.1357 %<\/td>\n3,168.0<\/td>\n<\/tr>\n
FixedReset Disc<\/td>\n5.56 %<\/td>\n5.63 %<\/td>\n169,607<\/td>\n14.27<\/td>\n73<\/td>\n0.2267 %<\/td>\n2,061.2<\/td>\n<\/tr>\n
Deemed-Retractible<\/td>\n5.22 %<\/td>\n5.79 %<\/td>\n77,966<\/td>\n7.91<\/td>\n27<\/td>\n0.2755 %<\/td>\n3,152.7<\/td>\n<\/tr>\n
FloatingReset<\/td>\n4.53 %<\/td>\n6.70 %<\/td>\n61,298<\/td>\n8.00<\/td>\n3<\/td>\n0.2369 %<\/td>\n2,348.4<\/td>\n<\/tr>\n
FixedReset Prem<\/td>\n5.24 %<\/td>\n3.99 %<\/td>\n128,893<\/td>\n1.59<\/td>\n14<\/td>\n0.1004 %<\/td>\n2,586.4<\/td>\n<\/tr>\n
FixedReset Bank Non<\/td>\n1.98 %<\/td>\n4.31 %<\/td>\n87,959<\/td>\n2.28<\/td>\n3<\/td>\n-0.4844 %<\/td>\n2,659.2<\/td>\n<\/tr>\n
FixedReset Ins Non<\/td>\n5.50 %<\/td>\n8.18 %<\/td>\n106,232<\/td>\n7.87<\/td>\n21<\/td>\n-0.0760 %<\/td>\n2,101.8<\/td>\n<\/tr>\n<\/table>\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
HSE.PR.A<\/td>\nFixedReset Disc<\/td>\n-2.18 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 11.20
\nEvaluated at bid price : 11.20
\nBid-YTW : 7.04 %<\/td>\n<\/tr>\n
PWF.PR.P<\/td>\nFixedReset Disc<\/td>\n-1.80 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 12.52
\nEvaluated at bid price : 12.52
\nBid-YTW : 6.16 %<\/td>\n<\/tr>\n
PWF.PR.A<\/td>\nFloater<\/td>\n-1.36 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 11.60
\nEvaluated at bid price : 11.60
\nBid-YTW : 6.04 %<\/td>\n<\/tr>\n
HSE.PR.C<\/td>\nFixedReset Disc<\/td>\n-1.27 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 16.37
\nEvaluated at bid price : 16.37
\nBid-YTW : 7.11 %<\/td>\n<\/tr>\n
SLF.PR.G<\/td>\nFixedReset Ins Non<\/td>\n-1.15 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2030-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 12.95
\nBid-YTW : 10.69 %<\/td>\n<\/tr>\n
IFC.PR.G<\/td>\nFixedReset Ins Non<\/td>\n-1.07 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2030-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 18.55
\nBid-YTW : 8.19 %<\/td>\n<\/tr>\n
BAM.PR.X<\/td>\nFixedReset Disc<\/td>\n1.10 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 12.84
\nEvaluated at bid price : 12.84
\nBid-YTW : 6.27 %<\/td>\n<\/tr>\n
CM.PR.Q<\/td>\nFixedReset Disc<\/td>\n1.12 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 18.08
\nEvaluated at bid price : 18.08
\nBid-YTW : 5.97 %<\/td>\n<\/tr>\n
BIP.PR.F<\/td>\nFixedReset Disc<\/td>\n1.29 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 21.67
\nEvaluated at bid price : 22.00
\nBid-YTW : 5.81 %<\/td>\n<\/tr>\n
TRP.PR.B<\/td>\nFixedReset Disc<\/td>\n1.39 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 10.95
\nEvaluated at bid price : 10.95
\nBid-YTW : 6.33 %<\/td>\n<\/tr>\n
GWO.PR.T<\/td>\nDeemed-Retractible<\/td>\n1.63 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2030-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 23.73
\nBid-YTW : 5.83 %<\/td>\n<\/tr>\n
BAM.PF.B<\/td>\nFixedReset Disc<\/td>\n2.30 %<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 17.33
\nEvaluated at bid price : 17.33
\nBid-YTW : 6.12 %<\/td>\n<\/tr>\n
CCS.PR.C<\/td>\nDeemed-Retractible<\/td>\n2.32 %<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2030-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 24.21
\nBid-YTW : 5.42 %<\/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
PWF.PR.P<\/td>\nFixedReset Disc<\/td>\n386,800<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 12.52
\nEvaluated at bid price : 12.52
\nBid-YTW : 6.16 %<\/td>\n<\/tr>\n
TD.PF.I<\/td>\nFixedReset Disc<\/td>\n72,500<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 20.93
\nEvaluated at bid price : 20.93
\nBid-YTW : 5.47 %<\/td>\n<\/tr>\n
SLF.PR.H<\/td>\nFixedReset Ins Non<\/td>\n56,067<\/td>\nYTW SCENARIO
\nMaturity Type : Hard Maturity
\nMaturity Date\t: 2030-01-31
\nMaturity Price : 25.00
\nEvaluated at bid price : 15.60
\nBid-YTW : 9.20 %<\/td>\n<\/tr>\n
CM.PR.Q<\/td>\nFixedReset Disc<\/td>\n33,500<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 18.08
\nEvaluated at bid price : 18.08
\nBid-YTW : 5.97 %<\/td>\n<\/tr>\n
RY.PR.Z<\/td>\nFixedReset Disc<\/td>\n32,334<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 17.25
\nEvaluated at bid price : 17.25
\nBid-YTW : 5.44 %<\/td>\n<\/tr>\n
BAM.PR.X<\/td>\nFixedReset Disc<\/td>\n30,150<\/td>\nYTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 12.84
\nEvaluated at bid price : 12.84
\nBid-YTW : 6.27 %<\/td>\n<\/tr>\n
There were 27 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.D<\/td>\nPerpetual-Discount<\/td>\nQuote: 22.99 – 23.48
\nSpot Rate : 0.4900
\nAverage : 0.3015<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 22.71
\nEvaluated at bid price : 22.99
\nBid-YTW : 5.37 %<\/td>\n<\/tr>\n

BAM.PF.J<\/td>\nFixedReset Disc<\/td>\nQuote: 24.19 – 24.70
\nSpot Rate : 0.5100
\nAverage : 0.3288<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 23.02
\nEvaluated at bid price : 24.19
\nBid-YTW : 4.86 %<\/td>\n<\/tr>\n

EML.PR.A<\/td>\nFixedReset Ins Non<\/td>\nQuote: 25.50 – 25.85
\nSpot Rate : 0.3500
\nAverage : 0.2117<\/p>\n

YTW SCENARIO
\nMaturity Type : Call
\nMaturity Date\t: 2021-04-17
\nMaturity Price : 25.00
\nEvaluated at bid price : 25.50
\nBid-YTW : 4.16 %<\/td>\n<\/tr>\n

TRP.PR.G<\/td>\nFixedReset Disc<\/td>\nQuote: 17.44 – 17.89
\nSpot Rate : 0.4500
\nAverage : 0.3121<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 17.44
\nEvaluated at bid price : 17.44
\nBid-YTW : 6.40 %<\/td>\n<\/tr>\n

RY.PR.J<\/td>\nFixedReset Disc<\/td>\nQuote: 18.46 – 18.81
\nSpot Rate : 0.3500
\nAverage : 0.2411<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 18.46
\nEvaluated at bid price : 18.46
\nBid-YTW : 5.78 %<\/td>\n<\/tr>\n

BAM.PF.E<\/td>\nFixedReset Disc<\/td>\nQuote: 15.95 – 16.29
\nSpot Rate : 0.3400
\nAverage : 0.2321<\/p>\n

YTW SCENARIO
\nMaturity Type : Limit Maturity
\nMaturity Date\t: 2049-09-20
\nMaturity Price : 15.95
\nEvaluated at bid price : 15.95
\nBid-YTW : 6.41 %<\/td>\n<\/tr>\n<\/table>\n

Update, 2019-9-25, referred to in comments<\/b>: From the report Combatting Money Laundering in BC Real Estate<\/a>:<\/p>\n

\"launderingflows_190925\"<\/a>
Click for Big<\/i><\/div>\n

… and from a blog<\/a> (I couldn’t find an actual Bank of Canada chart with this information, but this chart looks right):<\/p>\n

\"canadian-households-total-mortgage-oustanding\"<\/a>
Click for Big<\/i><\/div>\n","protected":false},"excerpt":{"rendered":"

The recent US repo-market disruption continues to attract attention: The Federal Reserve plans to pour cash into the U.S. banking system through early October in a bid to avert another market disruption, but analysts see …<\/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-50720","post","type-post","status-publish","format-standard","hentry","category-market-action"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/50720","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=50720"}],"version-history":[{"count":1,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/50720\/revisions"}],"predecessor-version":[{"id":50721,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/50720\/revisions\/50721"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=50720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=50720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=50720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}