|Bid||0.00 x 900|
|Ask||78.79 x 800|
|Day's Range||78.19 - 78.93|
|52 Week Range||66.42 - 79.93|
|Beta (5Y Monthly)||1.11|
|PE Ratio (TTM)||12.83|
|Forward Dividend & Yield||3.19 (4.07%)|
|Ex-Dividend Date||Jan. 30, 2020|
|1y Target Est||N/A|
A dividend-growth strategy using Bank of Montreal (TSX:BMO)(NYSE:BMO) and Telus Corporation (TSX:T)(NYSE:TU) can take the stress out of retirement planning.
(Bloomberg Opinion) -- Federal Reserve officials have made clear that if all goes according to plan in 2020, it’ll be a rather quiet year. They expect to hold the fed funds rate, the central bank’s key lending benchmark, steady throughout the next 12 months.It’s true that on that front, they won’t have much to discuss when they gather this week for the two-day Federal Open Market Committee in Washington. The Fed will stick to its current range of 1.5% to 1.75%. Chair Jerome Powell will reiterate that the economy is in a “good place” and that it would take a material change to the outlook to even consider moving in either direction anytime soon.There’s still a chance for some fireworks, however, especially after Minneapolis Fed President Neel Kashkari caused a stir this month by publicly calling out “QE conspiracists,” or those who argue that the central bank’s purchase of Treasury bills is no different from typical quantitative easing and responsible for the rally in U.S. stocks.The problem with that framing, of course, is Dallas Fed President Robert Kaplan said just two days earlier that balance-sheet expansion was partly why asset prices are higher, calling the current program “a derivative of QE.” He added: “Growth in the balance sheet is not free. There is a cost to it.” Bloomberg TV’s Jonathan Ferro asked the “QE-or-not-QE” question to a range of high-profile executives in Davos, Switzerland, last week. Many, including Morgan Stanley Chief Executive Officer James Gorman, sided with Kaplan.Powell won’t be able to dodge this question. In December, there was still no clarity about the outcome of the U.S.-China trade war, while at the same time a potential year-end crunch in the repo market was top of mind for bond traders. Both of those risks are now gone. Instead, the most-pressing question for investors is whether a 15% surge in the S&P 500 Index and massive tightening of high-yield spreads since early October are sustainable or just a setup for a reversal once the Fed winds down its balance-sheet expansion. The Fed’s predicament is that its current bill-buying program truly isn’t QE, at least not in a traditional sense. But as Bloomberg News’s Elena Popina succinctly put it, which was the trigger for Kashkari’s tweet: “The Debate Over Whether to Call It QE Is Over, and the Fed Lost.”NatWest Markets strategist Blake Gwinn summed it up like this in a Jan. 24 report:We generally find the bill purchases to be lacking in most of the typical ways we think about balance sheet expansion providing “easing.” That being said, this could be one of those scenarios where if enough people believe a relationship exists (or at least avoid positioning against it) that relationship becomes real. This is why we think a slowing of the Fed’s bill purchases could eventually still lead to a modest equity selloff – not because there is any direct link between those purchases and equity valuations or flows, but simply because enough investors believe it should be bad for stocks.It’s hard to overstate what a tricky position this is for the Fed. It’s not that officials are necessarily opposed to higher risk-asset prices, but they don’t want markets to be entirely dependent on whether or not they’re increasing the level of bank reserves. Kaplan said he hopes they can find a way to temper balance-sheet growth. History has shown that it could go rather smoothly, as when former Fed Chair Janet Yellen equated a runoff of maturing debt to “watching paint dry,” or it can cause an uproar, like the 2013 “taper tantrum.”As if there weren’t already enough scrutiny over the Fed’s balance sheet, the central bank also has a decision to make on the other rate it controls — the interest on excess reserves, or IOER. Strategists at Barclays Plc, BMO Capital Markets, Citigroup Inc. and TD Securities all expect policy makers to raise it by 5 basis points this week, while Morgan Stanley thinks it’s too soon. Overall, about a third of economists surveyed by Bloomberg predict a boost. To many casual observers, this question might seem like inside baseball. Indeed, until 2008, IOER wasn’t a part of the Fed’s monetary policy toolkit. And even in the years after the financial crisis, no one seemed to pay it much mind anyway, given that short-term rates were pinned near zero. It has only been in the past few years, when the Fed gradually raised interest rates and then swiftly dropped them, that it has drawn more attention.However, the main function of IOER is to keep the fed funds rate within the set target range. It failed to do that during the repo market meltdown in mid-September, raising uncomfortable questions for the Fed about losing control of monetary policy. Since then, the rate has been stable, though close to the bottom of the range. Thus, the potential need for a 5-basis-point increase.Again, this is mostly technical. As RBC Capital Markets strategists put it in a Jan. 23 note:It is certainly possible they adjust [IOER] at the coming meeting, though the timing and adjustment itself is largely irrelevant insofar as economic implication are concerned. More logically, the Fed could make this technical adjustment once the bulk of the current asset purchase program ($60b/month in T-bills) ends and reserves are deemed to be “very ample” again. The market could view this as some modest de-facto tightening after the Fed added significant liquidity to the system.I’d argue that Fed officials are desperate for bond traders to not overthink any tweak to IOER, which is why they might opt to get it out of the way now. It already feels daunting enough for the central bank to end its bill-buying effort. Adding any sort of rate increase after that would make it that much harder. As it stands, most economists surveyed by Bloomberg see the Fed halting its bill purchases by June after first tapering them.All of these decisions will matter, even if the headline fed funds rate doesn’t change. This quiet year could very well start off with a bang. To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Q1 2020 is the time to take a deeper look at 5 of my top picks: Cargojet Inc. (TSX:CJT), Bank of Montreal (TSX:BMO)(NYSE:BMO), Killam Apartment Real Estate Investment Trust (TSX:KMP.UN), Newmont Corporation (TSX:NGT), and Pembina Pipeline Corporation (TSX:PPL)(NYSE:PBA).
Bank of Montreal stock and Canadian National Railway stock are ideal stocks for the RRSP. Your dividends from the stocks will prevent you falling into a tax trap due to untimely withdrawals.
TORONTO — The Centre for Addiction and Mental Health and the Bank of Montreal are partnering to help companies to address mental health issues in the workplace.They say improving workplace mental health can help reduce costs and result in higher performance and lower absenteeism.In a report, CAMH makes five key recommendations for businesses.The playbook calls on companies to create a long-term, organization-wide mental health strategy and institute mandatory mental health leadership training.The report also suggests developing tailored mental health supports, prioritizing and optimizing a return-to-work checklist and tracking progress of the strategy.CAMH estimates the economic burden of mental illness in Canada at $51 billion annually.This report by The Canadian Press was first published Jan. 23, 2020.Companies in this story: (TSX:BMO) The Canadian Press
(Bloomberg) -- Netflix Inc.’s latest earnings report spurred mixed feelings across Wall Street as growth overseas was offset by a slowdown in the U.S. amid rising competition from Walt Disney Co., Apple Inc. and more forthcoming launches.Needham Co. believes the spike in streaming rivals will increase Netflix’s churn and customer acquisition costs, most likely lowering the lifetime value per subscriber as growth overseas isn’t equivalent to that domestically. Netflix would need to “add four $3-per-month subscriptions in India to offset each U.S. subscriber lost,” Laura Martin, TMT analyst at Needham, wrote in a note.Shares in Netflix fell as much as 3.7% on Wednesday morning, the most in 10 weeks, before trimming some of that decline. The stock has fluctuated since the streaming service reported Tuesday post-market.Analysts remained generally positive about the results and, despite first-quarter guidance missing estimates, believe the forecast appeared to be cautious. Netflix added 8.3 million subscribers internationally in the fourth quarter to surpass 100 million paid memberships outside of the U.S. for the first time.“Netflix is taking a conservative tone to start the year, with the assumption of slight headwinds,” wrote Raymond James’s Justin Patterson. “This reflects content timing, a competitive launch in Europe, and working through 2019’s U.S. churn,” he added.Stifel analyst Scott W. Devitt also said Disney+ appeared to have a less meaningful impact in available international markets than in the U.S. Still, the analyst cautioned about potential effects of the broader rollout of Disney+ in the EMEA region toward the end of the first quarter.Here’s what Wall Street is saying:Morgan Stanley, Ben SwinburneOverweight, price target $400Update reinforces bullish long-term view and, going forward, analyst expects 90% of global paid net additions to come from outside the U.S., amid continued elevated domestic churn.Notes that local originals were the most popular titles in 2019 in countries including India, Japan, Turkey, Sweden and the U.K.Guidance for nearly $1 billion in free cash flow improvement begins the path toward positive free cash flow and reinforces confidence in the earnings outlook.Piper Sandler, Michael OlsonOverweight, price target $400Netflix reported a “strong” fourth quarter thanks to international subscriber additions, though its first-quarter outlook was below consensus and “likely conservative.”Domestic streaming net subscriber additions were below the Street, likely due to the combination of elevated churn from pricing changes applied earlier in the year and new competition from Disney and Apple.Loup Ventures, Gene Munster“A mixed bag,” with domestic competition demonstrated by U.S. churn but with outperformance at the international business, leaving Netflix’s underlying growth opportunity intact.Also notes that from next year, consumers will have to make more thoughtful streaming decisions as promotional pricing from Apple TV+ and Disney+ comes to an end.“Including video offerings with other paid products and services creates a temporary perception of value in the minds of consumers and an opportunity for video providers to hook viewers, but, eventually, that perception changes.”BMO Capital Markets, Daniel SalmonOutperform, price target $440While U.S. churn remained slightly elevated after a price increase and competitive launches, “solid” growth in U.S. subscribers pushes back materially on the most bearish views.Combined with better-than-expected results in non-U.S. subscribers, BMO says that story remains “firmly intact” for growth investors, whereas free cash flow guidance for 2020 coming in better-than-expected should support interest from GARP (growth at a reasonable price) investors as Netflix makes the free cash flow turn.Bernstein, Todd JuengerOutperform, raises price target to $423 from $415International net paid adds accelerated in every region to a new fourth-quarter all-time high, beat the guide, and beat Bernstein’s estimate and consensus. Since international is where all the total addressable market and future growth lies, says Juenger, “perhaps we should just end this report right here.”“Imagine how differently this EPS report might have been received if Netflix had found an additional 200,000 U.S. net adds.” Netflix still grew in the U.S., Juenger wrote.Netflix’s U.S. subscribers “responded to the Disney+ launch by watching more Netflix.”“With very little new original Disney+ content over the next several quarters, we think consumers will be reinforced in their appreciation of Netflix’s unique value proposition: ‘always something new to watch.’”Citigroup, Jason BazinetNeutral, price target $325Citigroup expects the stock to trade flattish as the better EPS outlook is offset by the lower-than-expected net add guidance.“All told, while the firm delivered a solid set of 4Q19 results and issued 1Q20 EPS guidance above expectations, we suspect that management’s 1Q20 net add guidance is less robust than the market expected.”Needham, Laura MartinUnderperform rating“U.S. subscribers historically have been 3x more profitable than international subs. This gap is widening, and India highlights this problem.”Going forward, Netflix will aggregate low return on investment (ROI) international subs with U.S. subscribers, which masks Netflix’s true ROI trends. Management must add four $3-per-month subscriptions in India to offset each U.S. subscriber lost.Needham expects rising U.S. competition to increase Netflix’s churn and customer acquisition costs, which should lower the company’s lifetime value per subscriber versus historical levels, and put downward pressure on valuation multiples.RBC Capital Markets, Mark MahaneyOutperform, price target $420“We are incrementally positive. In a year when Netflix had two hands tied behind its back (material price increases and pullback in marketing spend), it managed to add almost as many global paid subs in FY19 as in FY18.”“That said, the ‘churn coast’ is not yet clear in the U.S., with domestic adds slowing, as Netflix felt roughly equal impacts from last year’s price increase and new competitive launches.”Evercore ISI, Vijay JayantIn-line, price target $300“With the service likely having reached ‘peak net adds’ we remain cautious on longer-term ARPU and margin trends and view the risk/reward tradeoff as fair at best at current valuations.”“While bulls will point to a better content slate in the 2Q as a means of making up any 1Q shortfall, we are less convinced given a flurry of competitive launches as a headwinds to consider and believe it likely that 2018 will ultimately represent peak net additions for the company.”Raymond James, Justin PattersonStrong buy, price target $415“Netflix is taking a conservative tone to start the year, with the assumption of slight headwinds on UCAN and international markets.”“This reflects content timing, a competitive launch in Europe, and working through 2019’s U.S. churn.”(Adds share move in third paragraph, Needham and Raymond James comments to second and fifth, and more commentary in analyst section after BMO.)\--With assistance from Lisa Pham and William Canny.To contact the reporters on this story: Joe Easton in London at firstname.lastname@example.org;Kit Rees in London at email@example.com;Kamaron Leach in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Beth Mellor at email@example.com, Celeste Perri, Jeremy R. CookeFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- U.S. Treasuries are stuck in the biggest rut in months, with yields plying tight ranges and a round of central-bank meetings ahead unlikely to offer a lasting jolt.Volatility in the world’s borrowing benchmark is the lowest since May, and the 10-year Treasury yield is hovering mere basis points above its average since July. That’s even after absorbing the following this month: a flareup in Mideast tensions, the signing of a long-awaited U.S.-China trade deal, confirmation that American inflation remains tame amid solid growth, and a record-setting run in stocks.Traders hoping for a catalyst to shake the bond world out of its doldrums may focus on central-bank decisions by month-end from Japan, Canada, the euro region, the U.S., and the U.K. However, all but possibly the Bank of England are seen as staying on hold.A variety of offsetting forces are “taking the malaise in Treasuries and apathy expressed in rates toward the end of last year and pulling them into 2020,” says Scott Kimball, a portfolio manager for the fixed-income unit of BMO Global Asset Management. “It has to be a pretty big catalyst to break through in either direction.”The 10-year Treasury yields about 1.82%. Its six-month average: 1.77%. Its climb to this month’s peak of 1.94% drew eager buyers, and it hasn’t been below 1.7% in that period.Of the major central banks convening by the end of January, Kimball sees the Federal Reserve as having the most market-moving risk because of the chance officials could offer a surprisingly hawkish view, given the strength of the economy. Traders expect that policy makers’ next rate move, if any, will probably be a cut later this year.The Fed’s signaling that it intends to keep rates steady, even after the U.S.-China trade deal, is supporting all assets, including Treasuries, says Jason Ware, managing director and head of institutional trading at 280 Securities.“Unless the Fed becomes more hawkish, it’s status quo for the immediate future: Low volatility and high valuations on assets,” he said. “We’re probably not going to get anything that’s going to create volatility in this next round of meetings.”What to WatchIn a holiday-shortened week, highlights in the economic figures include housing data, as the Fed’s communications blackout begins before its Jan. 28-29 meeting.Here’s the economic calendar:Jan. 22: MBA mortgage applications; Chicago Fed national activity index; FHFA house price index; existing home salesJan. 23: Jobless claims; Bloomberg consumer confort; leading index; Kansas City Fed manufacturing indexJan. 24: Markit U.S. purchasing managers’ indexesThere are no Fed speechesAnd the auction schedule:Jan. 21: $42 billion of 13-week bills; $36 billion of 26-week billsJan. 23: 4-, 8-week bills; 10-year TIPS reopeningTo contact the reporter on this story: Vivien Lou Chen in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, Mark Tannenbaum, Debarati RoyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The Federal Reserve Bank of New York on Tuesday announced plans to conduct repurchase agreement operations through until at least Feb. 13, although the size of term operations will be trimmed to $30 billion from the start of next month. The central bank did not elaborate on plans beyond that.The move extends a program that has been in place since it stepped in to combat funding-market turmoil in September, but indicates the central bank may have one eye on the exit.It announced plans to conduct a series of term repo operations from Jan. 16 through Jan. 30 of $35 billion apiece, in line with the most recent similar actions. Those scheduled from Feb. 4 to Feb. 13 will have a maximum offering size of $30 billion. The newly scheduled operations will provide liquidity through to Feb. 27. The maximum size of the central bank’s daily overnight operations, meanwhile, will be kept steady at $120 billion. These are slated to continue until Feb. 13, according to the New York Fed.“This is consistent with our assumption that the Fed will back off slowly and make sure not to rock the funding boat,” said BMO rate strategist Jon Hill.The Fed has been conducting repo offerings and Treasury-bill purchases in a bid to keep control of short-term interest rates and bolster bank reserves. That has calmed markets since the September spike that took overnight repo rates as high as 10% and helped to quell concerns about a potential cash crunch at the end of December 2019.In the minutes from December Federal Open Market Committee released last week, Lorie Logan, manager, of the System Open Market Account, said January’s calendar could reflect a “gradual reduction” in offerings, though indicated that some repos might be needed at least through April, when tax payments will reduce reserve levels.“We had thought the Fed would proceed in a very gradual manner in which they’re trying to do no harm and that’s exactly what they’re doing,” said Mark Cabana, head of U.S. interest rate strategy at Bank of America. He also raised the possibility that the Fed might tweak its interest on excess reserves rate, which could have knock-on effects for repo operation rates and usage.Some in the market have already been speculating about the possibility of a move in IOER, one of the tools that the central bank uses to help control its main benchmark, the fed funds rate. The effective fed funds rate, which the Fed focuses on to implement monetary policy, has moved closer to the lower bound of its target range, increasing the prospect that the central bank will adjust IOER.If the central bank opts to raise IOER, that should also lift the rate on the repo operations as well, according to Cabana.The Fed also announced Tuesday that it planned to keep unchanged the pace of Treasury purchases it conducts. The central bank will buy $60 billion a month of Treasury bills for reserve management and $20 billion a month of Treasuries of various types for reinvestment purchases, according to the New York branch’s website.(Updates throughout, adds comment.)\--With assistance from Emily Barrett and Debarati Roy.To contact the reporter on this story: Alexandra Harris in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Benjamin Purvis at email@example.comFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Gold futures declined, extending its retreat from a six-year high last week as the soon-to-be clinched U.S.-China trade pact undercuts the case for havens. Palladium hit a fresh record.Comex gold have lost about 1% this week and analysts including those at ABN Amro Bank NV and BMO Capital Markets predict prices may decline further ahead of the signing on Wednesday. The shift has been reflected in an outflow of holdings from exchange-traded funds, which fell more than 20 tons over the four sessions to Monday, the most in a four-day period since November. “Investors who bought gold for the trade uncertainty will likely take profit,” said ABN Amro strategist Georgette Boele.Gold futures, which briefly rose above $1,600 an ounce last week during the U.S.-Iranian standoff, lost ground for a second session, with the February contract falling 0.4% to settle at $1,544.60 an ounce at 13:30 on the Comex in New York.Prices could decline toward $1,525 or even lower as risk-on sentiment returns to the market, said BMO analyst Colin Hamilton.The recent declines come after the rally had pushed the metal’s 14-day relative-strength index to levels that signaled the advance could run out of steam.“The gold price is no longer overbought as it seems,” Carsten Fritsch, an analyst at Commerzbank, said by phone Tuesday. “We’re still in correction mode after the very strong increase early in the year and in late 2019.” That correction is being driven by continued bullish sentiment across the financial markets amid anticipation of the phase-one trade deal between the U.S and China, he said.In other precious metals, silver also declined on the Comex, while palladium and platinum rose on the New York Mercantile Exchange. In the spot market, palladium gained for a ninth session, hitting a fresh record of $2,191.64 an ounce.\--With assistance from Justina Vasquez and Maria Elena Vizcaino.To contact the reporters on this story: Elena Mazneva in London at firstname.lastname@example.org;Ranjeetha Pakiam in Singapore at email@example.comTo contact the editors responsible for this story: Lynn Thomasson at firstname.lastname@example.org, Joe Richter, Christine BuurmaFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
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(Bloomberg) -- Gold prices fell after President Donald Trump said Iran “seems to be standing down,” easing fears of further hostilities that spurred the metal’s earlier rally.Trump said no Americans were harmed by an Iranian missile attack on U.S. bases in Iraq early Wednesday. Iran’s restraint and Trump’s measured remarks in response suggest a path toward easing tensions with Tehran, which surged after the killing of a top general, Qassem Soleimani.The precious metal earlier climbed above $1,600 an ounce, extending its rally to a six-year high, after Iran launched more than a dozen missiles at U.S.-Iraqi airbases. Palladium also soared to a fresh record.Read the latest news and updates on Iran hereGold’s decline “is a reaction to the Iranian attack that now appears clearly to be a de-escalation, and Trump’s team seems to be clearly reading it that way,” said Tai Wong, the head of metals derivatives trading at BMO Capital Markets.Gold futures for February delivery fell 0.9% to settle at $1,560.20 an ounce at 1:30 p.m. on the Comex in New York, snapping a 10-day advance with the largest drop in a month. A Bloomberg Intelligence gauge of big producers of the precious metal fell 1%.“Gold essentially responded to risk-off environments,” Bart Melek, head of commodity strategy at TD Securities, said by phone on Wednesday, before Trump’s statement. “No American lives were lost, and the president was quite clear that if American lives were lost we would retaliate.”Bullion’s blistering start to the year has been driven by the rising hostilities in the Middle East. Before that, the metal was already rallying as the Federal Reserve eased policy last year, governments added gold to reserves, and holdings in exchange-traded funds rose.Silver futures also fell on the Comex, while platinum slid on the New York Mercantile Exchange. Palladium futures rose 2.3% to $2,061.40 an ounce after reaching $2,068.50, a record for a most-active contract.\--With assistance from Yvonne Man, Ranjeetha Pakiam and Elena Mazneva.To contact the reporter on this story: Justina Vasquez in New York at email@example.comTo contact the editors responsible for this story: Luzi Ann Javier at firstname.lastname@example.org, Joe RichterFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
Toronto-Dominion (TD) and Canadian Imperial Bank of Commerce (CM) will likely incur restructuring charges in fiscal 2020 to drive earnings growth, while other Canadian banks might not.
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story...
(Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.William Dudley, who used to oversee the Federal Reserve’s interaction with financial markets, said the central bank should introduce a long-discussed but never implemented tool to ensure U.S. cash markets remain calm.In a column published Monday by Bloomberg Opinion, the Fed Bank of New York’s former president recommended creating a standing repurchase-agreement facility, joining a chorus of proponents. It should be open, he argued, to a broad set of counterparties and accept Treasury and agency mortgaged-backed securities as collateral.“Such a facility would effectively cap repo rates,” Dudley wrote. “It would also address the potential problem of the Fed providing liquidity to primary dealers but primary dealers not lending the funds to other market participants that might need short-term repo financing.”Fed Needs to Look Forward, Not Retreat to the Past: Bill DudleyA standing repo facility would let participants convert securities into cash on demand, helping keep short-term rates stable by limiting the potential for sudden cash shortages.Dudley proposed other overhauls to the Fed’s monetary policy toolkit, including “de-emphasizing the federal funds rate” as the central bank’s main policy benchmark. His contribution to the debate comes as John Williams, who succeeded Dudley in 2018, and other central bankers contemplate how to keep short-term funding markets under control following the chaos seen in mid-September.Rates for repurchase agreements, which surged to 10% from around 2% during the turmoil, have since returned to normal, but not without major Fed intervention. And it remains unclear whether the central bank can extract itself without problems resurfacing. Dudley, for his part, isn’t worried about larger implications.“The spike in the fall was not a ‘canary in the coal mine’ signaling bigger problems in the financial system,” Dudley wrote. “Instead, it reflects the difficulty in forecasting the demand for reserves given the changes in regulations.”The Fed’s authority to pay interest on reserves allows it to maintain control of short-term interest rates even with a lot of excess reserves, Dudley wrote. This is “far better” than the pre-financial-crisis rate-control regime of that saw the Fed having to intervene via open-market operations on a high-frequency basis, he said in an interview on Bloomberg Radio. A standing repo facility will improve the new regime, and the Fed could communicate more clearly about it, he said.“The markets and the Fed need to embrace a modern operating framework,” said BMO strategist Jon Hill, who supports the idea of a standing facility. It’s worth pausing and studying to make sure we get it right, but the Fed needs to decide on some of these big questions.”Dudley isn’t the only person to endorse a standing repo facility. Two other former Fed officials, Brian Sack and Joseph Gagnon, wrote in a September blog post that one should be implemented, continuing a campaign they began years ago when they worked at the central bank. Less than two weeks after the mid-September repo turmoil, former Minneapolis Fed President Narayana Kocherlakota endorsed the idea in a Bloomberg Opinion column.“Pointing out that the old system is bad isn’t that ground-breaking,” said Blake Gwinn, a rates strategist at NatWest Markets. “The Fed committed to an ample reserves regime a long time ago. Now it’s a question of how you can most efficiently do that.” Gwinn said he’s not convinced that a standing repo facility is necessary and that he’s “lukewarm” about the prospect.Current Fed policy makers have discussed the merits of such a tool, and it was brought up at the December Federal Open Market Committee meeting as something to discuss at a future gathering.“That’s an intriguing idea,” said Cleveland Fed President Loretta Mester, speaking Friday about a standing repo facility during a Bloomberg TV interview. “I would be supportive of the Fed really doing the hard work to assess whether that’s needed going forward,” she added. “But, at this point, we can take our time there, because things do seem to be settled down in those markets.”The Fed’s overnight repo operation on Monday saw its highest usage since Dec. 5, although that was due to runoff in term offerings and it remained well below the maximum offering level. Overnight repo rates, meanwhile were around 1.55%/1.52% in the New York afternoon, ICAP data showed. Tuesday will see both term and overnight actions from the central bank.(Updates with operation details, repo levels.)To contact the reporters on this story: Alexandra Harris in New York at email@example.com;Matthew Boesler in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, ;Alister Bull at firstname.lastname@example.org, Nick BakerFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
(Bloomberg) -- Stock bulls are facing their first big test of 2020, and seem to be emerging unscathed.After one of the best years for risk assets in decades, investors spent the fourth quarter unraveling safety trades that dominated 2019 and piling on risk. But with geopolitical uncertainty quickly rearing up to test their mettle, some began to wonder whether that rotation was premature.There’s certainly a fresh backdrop for this bunch of newly rejiggered portfolios. Just weeks ago, the low-volatility stock trade was losing its allure, flows into fixed-income funds were slowing in relation to equities, and everyone seemed to be rushing into shares that should outperform in an economic rebound. A U.S. airstrike that killed a top Iranian commander has altered the calculus behind that shift, but -- for now -- investors are holding the course.“People aren’t changing their investment theses based on it,” JJ Kinahan, chief market strategist at TD Ameritrade, said by phone. “They’re going to wait it out a little bit and see what the next escalation point, if there is one, is.”Despite the fiery rhetoric, market reaction so far has been contained. The benchmark’s fallen about half a percentage point from its record highs, after a year in which the S&P 500 Index gained almost 30%. A rebound in economic growth and corporate profits is still widely expected, but with billions of dollars recently shifting from defense to offense, the stakes are high.Investors poured $90 billion into equity ETFs in the three months ended December, the most in two years and more than twice the amount that flocked to bond funds, Bloomberg Intelligence data show. That brought total inflows for stock exchange-traded funds to $161 billion in 2019, and ended three quarters in which debt demand topped appetite for equities.Sector funds tracking technology and energy experienced their best three-month periods since 2016, taking in more cash than any other industry. Meanwhile, bond proxies including consumer staples and utilities ETFs, suffered their first quarter of outflows since the start of 2018.“We’ve gone from ultimate bearishness to essentially euphoria in the last few months,” Mike Dowdall, a portfolio manager at BMO Global Asset Management, which oversees $260 billion, said late December. “It’s a little bit surprising.”Perhaps more surprising is that investors seem to be maintaining their appetite for risk this year, even as tensions in the Middle East ratchet higher.Funds buying oil, energy stocks, gold or Treasuries -- which could all benefit from escalation -- have seen little additional interest. Instead, economically-sensitive areas of the stock market garnered attention, with investors pouring $700 million into the $11.8 billion Industrial Select Sector SPDR Fund on Friday, the most for any day since 2016.Granted, that ETF holds defense stocks alongside machinery companies, but investors also flocked to consumer discretionary and financial funds last week. The SPDR S&P 500 ETF Trust -- the world’s largest ETF -- meanwhile saw inflows of $4.6 billion.“The escalation of tensions with Iran warrants close watching,” said Sandip Bhagat, Whittier Trust’s chief investment officer, citing its potential impact on oil prices and global growth. “Even as uncertainty dissipated on several fronts in late 2019, the early days of 2020 have now seen an unexpected spike in geopolitical risks.”While gold prices have jumped in recent days, cash has yet to flood back into ETFs that own the precious metal. Going into the year, appetite for the safety of gold ETFs had soured, with funds tracking the commodity losing cash in the fourth quarter for the first time in over a year.Still, after weeks of underperformance, Todd Rosenbluth, director of ETF research at CFRA Research, sees potential upside for some more conservative strategies, such as those that pick low-volatility stocks.The firm’s equity analysts hold a year-end price target for the S&P 500 of 3,435. That would imply a gain of roughly 6%, far short of last year’s performance, and potentially a boon for funds like the $37 billion iShares Edge MSCI Min Vol USA ETF, which trades under the ticker USMV.“Given a lower expected return, we think investors will continue to focus on ways to reduce their equity risk profile and USMV is built to do just that,” according to Rosenbluth.(Updates market move in fifth paragraph.)To contact the reporter on this story: Sarah Ponczek in New York at email@example.comTo contact the editors responsible for this story: Jeremy Herron at firstname.lastname@example.org, Rachel Evans, Rita NazarethFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
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(Bloomberg) -- Gold climbed to a three-month high to clinch its best annual performance since 2010, as a weaker dollar helped cap a year marked by global economic jitters and trade frictions.Bullion has gained 19% this year as central banks globally embraced looser monetary policy to boost growth. Brexit, unrest in regions from Chile to Hong Kong and buying sprees from key central banks and exchange-traded funds have also helped support prices.Spot gold climbed as much as 0.7% to $1,525.38 an ounce on Tuesday, the highest since Sept. 25. It traded at $1,520.13 at 1:40 p.m. in New York. Gold futures for February delivery rose 0.3% to settle at $1,523.10 on the Comex. The Bloomberg Dollar Spot Index fell for a fourth straight session.The metal managed to hold on to gains even after President Donald Trump said he will sign the first phase of a trade deal with China on Jan. 15, easing uncertainty that has fueled haven demand for bullion.“It is not really a surprise” especially after headlines yesterday that China’s Vice-Premier Liu He is coming to Washington to sign the so-called phase-one trade deal, said Tai Wong, the head of metals derivatives trading at BMO Capital Markets.Still, some analysts doubt that gold’s strength will stick next year and JPMorgan Asset Management cautioned that bullion may not offer sound portfolio protection.“There are very few certain environments in which gold does well, and it’s not necessarily the case that 2020 won’t be any of those,” Hannah Anderson, a global market strategist at JPMorgan, said in an interview with Bloomberg TV. “In the next downturn, I do believe that bonds still could be defensive assets.”JPMorgan has come out this month to make the case for a risk-on investment allocation for 2020 as the global economy gathers momentum in the wake of the recent slowdown. On Tuesday, data showed China’s manufacturing sector continued to expand output in December, adding to evidence that the world’s second-largest economy is stabilizing.Commentary out of China and the U.S. suggest that both countries are committed to their phase-one trade pact. However, haven asset demand in 2020 could be supported by other brewing global tensions, DailyFX strategist David Song said in a note.“The threat of a U.S.-EU trade war may become a greater concern,” he said.In other precious metals, silver has risen 15% this year, poised for its best performance since 2010. Platinum is up 22%, its biggest annual gain since 2009, while top-performer palladium is set to end 2019 with an annual gain of 54%.\--With assistance from Selina Wang, David Ingles, Karolina Miziolek and Yvonne Yue Li.To contact the reporters on this story: Ranjeetha Pakiam in Singapore at email@example.com;Elena Mazneva in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Phoebe Sedgman at email@example.com, ;Lynn Thomasson at firstname.lastname@example.org, Liezel Hill, Luzi Ann JavierFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.