The New York Fed has released the August 2022 Survey of Consumer Expectations:
The main findings from the August 2022 Survey are:
Inflation
- Median one- and three-year-ahead inflation expectations continued their steep declines in August: the one-year measure fell to 5.7% from 6.2% in July, while the three-year measure fell to 2.8% from 3.2%. The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) increased to a new series high at the one-year horizon but decreased at the three-year horizon.
- Median five-year-ahead inflation expectations, which have been elicited in the monthly SCE core survey on an ad-hoc basis since the beginning of this year and were first published in July 2022, also declined to 2.0% from 2.3%. Disagreement across respondents in their five-year-ahead inflation expectations also declined in August.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased at the short-term horizon and was unchanged at the medium-term horizon.
- Median home price expectations declined sharply by 1.4 percentage points to 2.1%, its lowest reading since July 2020, and falling below pre-pandemic levels. The decline was broad based across demographic groups and geographic regions. Home price expectations have now fallen by nearly two-thirds since the April 2022 reading of 6.0%.
Expectations about year-ahead price changes fell by 1.4 percentage points for gas (to 0.1%), 0.8 percentage point for food (to 5.8%), and 0.3 percentage point for rent (to 9.6%). The median expected change in the cost of medical care rose by 0.1 percentage point (to 9.3%) and was unchanged for college education at 8.4%.
The New York Fed also published a piece on how quantitative tightening works:
Consistent with the plans announced in May, the Fed is reducing its balance sheet by redeeming securities up to certain monthly limits, known as caps (redemption is the process of allowing securities to mature without reinvestment). The caps ensure that runoff occurs in a predictable manner over time. For the first three months of runoff from June to August, caps allowed for runoff of up to $30 billion in Treasury securities and up to $17.5 billion in agency mortgage-backed securities (MBS) and agency debt each month. Starting this month, the caps increase to levels of $60 billion and $35 billion, respectively. In other words, the Fed had been reducing its securities holdings by up to a total of $47.5 billion each month from June through August, and starting in September, the maximum monthly reduction will be $95 billion. The Fed will reinvest any maturing amounts above the monthly caps by reinvesting at auctions for Treasury securities or by purchasing securities in the secondary market in the case of agency MBS.
…
In most months, coupon securities will make up most of the redemptions (dark blue bars). Periodically, Treasury bills (dark red bars) will also be redeemed when aggregate coupon maturities are less than the cap. Proceeds from maturing Treasury securities (light blue and light red bars) in excess of the cap will continue to be reinvested into new securities at U.S. Treasury auctions.
The Fed’s treasury holdings can be tracked with the weekly H.4.1 release, which currently shows a balance of 8,393-billion, compared to the 2019 year-end figure of 3,745-billion. The difference in 4,648-billion, so at a rate of 100-billion per month, they’ll be tightening for the next 4-years-odd. At that rate, the gnomes of monetary policy will have repaired the pandemic damage long before the clowns of fiscal policy!
And here’s a Facebook comment on UK yields:
A full point on a long bond. In a week. That’s a loss in excess of 20%. In a week.
Reuters provides a bit more colour:
Yields on British government debt surged to new multi-year highs on Tuesday, led by 20 and 30-year bonds, adding to their steep climb since finance minister Kwasi Kwarteng announced sweeping tax cuts last week.
Thirty-year gilt yields soared to their highest since 2002, ending the session a whisker below 5%, roughly double their level in August and up by almost half a percentage point on Tuesday alone.
Yields on 20-year gilts were up by 35 basis points while the 10-year gilt extended its climb and remained on course for its biggest rise in any month since at least 1957.
Returns demanded by investors from holding government bonds in many rich economies have risen swiftly in recent weeks on worries about surging inflation.”
But the jump has been particularly sharp in Britain where new Prime Minister Liz Truss has promised to end the economic policy “orthodoxy” by cutting taxes in an attempt kick-start growth, adding to the country’s already high debt levels.
Tuesday’s rise in British gilt yields accelerated around the time the Bank of England’s chief economist, Huw Pill, said the BoE was likely to deliver a “significant policy response” to the government’s huge tax cuts but should wait until its next scheduled meeting in November.
Some investors and economists have said the British central bank should hold an emergency meeting now and deliver a big interest rate hike to prop up the value of the pound and avoid further inflation pressure.
Interest rate swaps now price in only a modest chance of an emergency BoE rate hike in the next few weeks, but suggest the BoE will raise rates to 3.5% or even 3.75% at its next meeting, up from 2.25% now. Bank Rate is seen reaching 6% by March next year.
TXPR was down again today, but only by about 16bp. These days, I guess that counts as a win!
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| 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 | 0.0000 % | 2,422.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 4,646.9 |
| Floater | 7.57 % | 7.61 % | 50,009 | 11.81 | 2 | 0.0000 % | 2,678.0 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -2.4454 % | 3,300.9 |
| SplitShare | 5.16 % | 6.44 % | 32,418 | 3.02 | 7 | -2.4454 % | 3,942.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -2.4454 % | 3,075.7 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3726 % | 2,650.7 |
| Perpetual-Discount | 6.42 % | 6.63 % | 69,576 | 13.09 | 33 | -0.3726 % | 2,890.5 |
| FixedReset Disc | 5.10 % | 7.07 % | 89,915 | 12.75 | 54 | 0.1852 % | 2,323.8 |
| Insurance Straight | 6.40 % | 6.49 % | 80,803 | 13.26 | 19 | 0.1660 % | 2,809.7 |
| FloatingReset | 8.57 % | 8.86 % | 36,205 | 10.53 | 2 | 0.6557 % | 2,491.8 |
| FixedReset Prem | 5.36 % | 7.03 % | 102,414 | 12.56 | 9 | 0.1116 % | 2,463.0 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1852 % | 2,375.4 |
| FixedReset Ins Non | 5.50 % | 7.65 % | 46,294 | 12.21 | 13 | -0.5813 % | 2,344.9 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PVS.PR.G | SplitShare | -19.76 % | YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2026-02-28 Maturity Price : 25.00 Evaluated at bid price : 19.70 Bid-YTW : 12.94 % |
| BAM.PR.M | Perpetual-Discount | -4.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.15 Evaluated at bid price : 17.15 Bid-YTW : 6.98 % |
| BAM.PF.I | FixedReset Prem | -2.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 21.99 Evaluated at bid price : 22.48 Bid-YTW : 7.48 % |
| PWF.PR.G | Perpetual-Discount | -2.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 22.01 Evaluated at bid price : 22.25 Bid-YTW : 6.75 % |
| CU.PR.G | Perpetual-Discount | -2.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.31 Evaluated at bid price : 17.31 Bid-YTW : 6.59 % |
| BAM.PF.J | FixedReset Disc | -2.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 21.96 Evaluated at bid price : 22.50 Bid-YTW : 7.27 % |
| TRP.PR.G | FixedReset Disc | -1.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 18.37 Evaluated at bid price : 18.37 Bid-YTW : 7.83 % |
| PWF.PR.E | Perpetual-Discount | -1.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.85 Evaluated at bid price : 20.85 Bid-YTW : 6.73 % |
| CU.PR.C | FixedReset Disc | -1.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.30 Evaluated at bid price : 20.30 Bid-YTW : 7.06 % |
| BAM.PR.T | FixedReset Disc | -1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 14.45 Evaluated at bid price : 14.45 Bid-YTW : 8.89 % |
| PWF.PR.K | Perpetual-Discount | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 18.82 Evaluated at bid price : 18.82 Bid-YTW : 6.71 % |
| BAM.PR.Z | FixedReset Disc | -1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.06 Evaluated at bid price : 20.06 Bid-YTW : 8.01 % |
| MFC.PR.M | FixedReset Ins Non | -1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.22 Evaluated at bid price : 17.22 Bid-YTW : 8.06 % |
| PVS.PR.H | SplitShare | -1.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2027-02-28 Maturity Price : 25.00 Evaluated at bid price : 24.05 Bid-YTW : 5.79 % |
| PWF.PR.R | Perpetual-Discount | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.92 Evaluated at bid price : 20.92 Bid-YTW : 6.71 % |
| MFC.PR.N | FixedReset Ins Non | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.17 Evaluated at bid price : 17.17 Bid-YTW : 7.93 % |
| BAM.PF.C | Perpetual-Discount | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 18.04 Evaluated at bid price : 18.04 Bid-YTW : 6.77 % |
| PWF.PR.H | Perpetual-Discount | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 21.74 Evaluated at bid price : 21.99 Bid-YTW : 6.66 % |
| MFC.PR.L | FixedReset Ins Non | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.20 Evaluated at bid price : 17.20 Bid-YTW : 7.92 % |
| GWO.PR.N | FixedReset Ins Non | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 12.95 Evaluated at bid price : 12.95 Bid-YTW : 7.81 % |
| RY.PR.N | Perpetual-Discount | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 22.00 Evaluated at bid price : 22.00 Bid-YTW : 5.64 % |
| SLF.PR.H | FixedReset Ins Non | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 16.20 Evaluated at bid price : 16.20 Bid-YTW : 7.61 % |
| PWF.PR.F | Perpetual-Discount | -1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.08 Evaluated at bid price : 20.08 Bid-YTW : 6.67 % |
| PWF.PR.Z | Perpetual-Discount | -1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.18 Evaluated at bid price : 20.18 Bid-YTW : 6.51 % |
| MFC.PR.K | FixedReset Ins Non | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 18.49 Evaluated at bid price : 18.49 Bid-YTW : 7.65 % |
| CU.PR.E | Perpetual-Discount | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 19.11 Evaluated at bid price : 19.11 Bid-YTW : 6.50 % |
| BIP.PR.A | FixedReset Disc | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.86 Evaluated at bid price : 17.86 Bid-YTW : 8.99 % |
| CM.PR.Y | FixedReset Prem | 1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 23.50 Evaluated at bid price : 23.85 Bid-YTW : 7.14 % |
| GWO.PR.G | Insurance Straight | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 19.90 Evaluated at bid price : 19.90 Bid-YTW : 6.58 % |
| CU.PR.I | FixedReset Prem | 1.18 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-12-01 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 4.84 % |
| MFC.PR.B | Insurance Straight | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 18.58 Evaluated at bid price : 18.58 Bid-YTW : 6.32 % |
| CM.PR.P | FixedReset Disc | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 19.80 Evaluated at bid price : 19.80 Bid-YTW : 6.83 % |
| CCS.PR.C | Insurance Straight | 1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.75 Evaluated at bid price : 20.75 Bid-YTW : 6.07 % |
| NA.PR.S | FixedReset Disc | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 20.26 Evaluated at bid price : 20.26 Bid-YTW : 7.09 % |
| CM.PR.O | FixedReset Disc | 1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 19.53 Evaluated at bid price : 19.53 Bid-YTW : 7.05 % |
| SLF.PR.J | FloatingReset | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 15.00 Evaluated at bid price : 15.00 Bid-YTW : 8.42 % |
| TRP.PR.E | FixedReset Disc | 1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 16.42 Evaluated at bid price : 16.42 Bid-YTW : 8.52 % |
| TRP.PR.A | FixedReset Disc | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 14.85 Evaluated at bid price : 14.85 Bid-YTW : 8.52 % |
| TRP.PR.B | FixedReset Disc | 1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 12.00 Evaluated at bid price : 12.00 Bid-YTW : 8.62 % |
| CM.PR.T | FixedReset Prem | 1.80 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 23.29 Evaluated at bid price : 23.70 Bid-YTW : 6.94 % |
| ELF.PR.H | Perpetual-Discount | 1.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 21.81 Evaluated at bid price : 22.05 Bid-YTW : 6.36 % |
| CU.PR.J | Perpetual-Discount | 1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 18.86 Evaluated at bid price : 18.86 Bid-YTW : 6.38 % |
| TD.PF.B | FixedReset Disc | 2.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 7.05 % |
| BAM.PF.H | FixedReset Prem | 2.32 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-12-31 Maturity Price : 25.00 Evaluated at bid price : 24.30 Bid-YTW : 5.98 % |
| TRP.PR.D | FixedReset Disc | 2.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 16.80 Evaluated at bid price : 16.80 Bid-YTW : 8.51 % |
| CU.PR.F | Perpetual-Discount | 2.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.78 Evaluated at bid price : 17.78 Bid-YTW : 6.41 % |
| CM.PR.Q | FixedReset Disc | 3.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 6.65 % |
| CU.PR.H | Perpetual-Discount | 3.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 6.27 % |
| IFC.PR.C | FixedReset Disc | 4.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.08 Evaluated at bid price : 17.08 Bid-YTW : 7.92 % |
| RS.PR.A | SplitShare | 7.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-12-31 Maturity Price : 10.00 Evaluated at bid price : 9.80 Bid-YTW : 6.34 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| NA.PR.C | FixedReset Disc | 96,979 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 24.04 Evaluated at bid price : 24.97 Bid-YTW : 6.97 % |
| GWO.PR.I | Insurance Straight | 63,533 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 6.37 % |
| TD.PF.I | FixedReset Disc | 45,650 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 23.88 Evaluated at bid price : 24.95 Bid-YTW : 6.55 % |
| POW.PR.C | Perpetual-Discount | 16,795 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 22.01 Evaluated at bid price : 22.25 Bid-YTW : 6.53 % |
| PVS.PR.K | SplitShare | 16,500 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2029-05-31 Maturity Price : 25.00 Evaluated at bid price : 22.20 Bid-YTW : 6.64 % |
| PWF.PR.S | Perpetual-Discount | 16,069 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2052-09-27 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 6.62 % |
| There were 8 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PVS.PR.G | SplitShare | Quote: 19.70 – 24.25 Spot Rate : 4.5500 Average : 2.4597 YTW SCENARIO |
| MFC.PR.L | FixedReset Ins Non | Quote: 17.20 – 18.60 Spot Rate : 1.4000 Average : 0.9393 YTW SCENARIO |
| TD.PF.J | FixedReset Disc | Quote: 22.22 – 23.48 Spot Rate : 1.2600 Average : 0.8603 YTW SCENARIO |
| PWF.PR.T | FixedReset Disc | Quote: 18.27 – 19.44 Spot Rate : 1.1700 Average : 0.7754 YTW SCENARIO |
| CCS.PR.C | Insurance Straight | Quote: 20.75 – 23.47 Spot Rate : 2.7200 Average : 2.3423 YTW SCENARIO |
| MFC.PR.I | FixedReset Ins Non | Quote: 22.28 – 23.29 Spot Rate : 1.0100 Average : 0.6422 YTW SCENARIO |
[…] … it seems like only yesterday that I was marvelling about a full point move in long-bond yields in a mere […]