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How Jay Powell explains the bond market: Morning Brief – Yahoo Canada Finance

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This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Thursday, July 29, 2021

Things happen in markets, according to the Fed chair

The Federal Reserve wrapped up its latest two-day policy meeting on Wednesday, and offered investors a few surprises. 

As Yahoo Finance’s Brian Cheung notes, the Fed’s statement and subsequent press conference from Fed chair Jerome Powell “hinted that the U.S. economic recovery is getting closer to a place where it may not need as much monetary support.” 

But that day is not today. 

So dedicated Fed-watchers now turn their attention to the Jackson Hole Economic Symposium later next month, and await Powell’s comments on when (and if) the central bank might begin altering its pace of asset purchases. 

And while most of the questions Powell faced Wednesday revolved around inflation and how long transitory pricing pressures might last, woven into this conversation was a discussion of what’s been gnawing at the Treasury market over the last several weeks. 

When the Fed released its June policy statement on June 16 and released a projection for future interest rates that was more aggressive than investors had anticipated, the 10-year Treasury yield was sitting near 1.6%. As of Wednesday, the 10-year yield was just below 1.3%. 

And this move lower in Treasury yields has coincided with a resurgence in the big cap tech trade, a fade in the re-opening trade, and plenty of investor discomfort in both the equity and fixed income markets over the last several weeks. 

“In terms of what’s been happening in bond markets, I don’t think there’s a real consensus on what explains the moves between the last [Fed] meeting and this meeting,” Powell said Wednesday. 

“We’ve seen long-term yields go down significantly,” Powell added. “Some of it is a fall in real yields, which may have been connected to, some speculate…sentiment around the spread of the Delta variant and concerns about growth.”

The 10-year real yield, which reflects what investors expect the inflation-adjusted return on a 10-year note purchased today will be over the next 10 years, is currently near a record low of around -1.1%. But as Powell noted, there is also plenty about the recent move in Treasury yields that cannot — and perhaps need not — be explained.

“And there are also so-called technical factors,” Powell said, “which is where you put things that you can’t quite explain. I don’t see in any of that that there is anything that really challenges the credibility of our framework.” 

And in this response, we think Powell outlines how deciphering financial market moves involves a balance of prescription and description. It is descriptive to note that Treasury yields have declined in the last two months with some real yields falling to record lows. 

Offering a prescription — or a unified, definitive account of why such-and-such happened — will always prove more elusive. And may end up being flat out incorrect. 

Investors focused on timing swings in markets and profiting from these changes through time will, of course, have stories to tell about what is moving where and why. These stories are what keep the lights on at Yahoo Finance, and elsewhere across the financial world. 

But Powell’s vantage point on markets is one that allows the Fed chair to note changes in prices and monitor situations carefully. And as Powell said Wednesday, “we’re prepared to use our tools as appropriate.” 

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

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What to watch today

Economy

  • 8:30 a.m. ET: Initial jobless claims, week ended July 24 (385,000 expected, 419,000 during prior week)

  • 8:30 a.m. ET: Continuing claims, week ended July 17 (3.192 million expected, 3.236 million during prior week

  • 8:30 a.m. ET: GDP annualized, quarter-on-quarter, second quarter (8.5% expected, 6.4% in first quarter)

  • 8:30 a.m. ET: Personal consumption, second quarter (10.5% expected, 11.4% in first quarter)

  • 8:30 a.m. ET: Core personal consumption expenditures, quarter-over-quarter, second quarter (6.0% expected, 2.5% in first quarter)

  • 8:30 a.m. ET: Pending home sales, month-on-month, June (0.5% expected, 8.0% in May)

Earnings

Pre-market

  • 6:00 a.m. ET: Overstock.com (OSTK) is expected to report adjusted earnings of 67 cents per share on revenue of $767.6 million 

  • 6:15 a.m. ET: Hilton Worldwide Holdings (HLT) is expected to report adjusted earnings of 39 cents per share on revenue of $1.43 billion

  • 6:30 a.m. ET: Merck & Co (MRK) is expected to report adjusted earnings of $1.32 per share on revenue of $11.20 billion

  • 6:30 a.m. ET: Keurig Dr. Pepper (KDP) is expected to report adjusted earnings of 37 cents per share on revenue of $3.06 billion

  • 6:30 a.m. ET: Valero Energy (VLO) is expected to report adjusted earnings of 13 cents per share on revenue of $21.47 billion 

  • 7:00 a.m. ET: Altria Group (MO) is expected to report adjusted earnings of $1.17 per share on revenue of $5.34 billion 

  • 7:00 a.m. ET: Molson Coors Beverage Co (TAP) is expected to report adjusted earnings of $1.33 per share on revenue of $2.80 billion 

  • 7:00 a.m. ET: T Rowe Price Group (TROW) is expected to report adjusted earnings of $3.20 per share on revenue of $1.91 billion 

  • 7:00 a.m. ET: Comcast Corp (CMCSA) is expected to report adjusted earnings of 66 cents per share on revenue of $27.18 billion

  • 7:00 a.m. ET: Yum! Brands (YUM) is expected to report adjusted earnings of 96 cents per share on revenue of $1.48 billion 

  • 7:05 a.m. ET: Citrix Systems (CTXS) is expected to report adjusted earnings of $1.22 per share on revenue of $838.7 million 

  • 7:10 a.m. ET: S&P Global Inc (SPGI) is expected to report adjusted earnings of $3.29 per share on revenue of $2.00 billion

  • 7:30 a.m. ET: Intercontinental Exchange (ICE) is expected to report adjusted earnings of $1.16 per share on revenue of $1.71 billion 

  • 7:30 a.m. ET: Albertsons Co (ACI) is expected to report adjusted earnings of 67 cents per share on revenue of $20.44 billion 

  • 8:00 a.m. ET: Mastercard (MA) is expected to report adjusted earnings of $1.75 per share on revenue of $4.38 billion 

  • 8:15 a.m. ET: PG&E (PCG) is expected to report adjusted earnings of 27 cents per share on revenue of $5.13 billion 

  • Before market open: The Carlyle Group (CG) is expected to report adjusted earnings of 61 cents per share on revenue of $665.00 million

Post-market

  • 4:00 p.m. ET: Amazon (AMZN) is expected to report adjusted earnings of $15.75 per share on revenue of $115.06 billion

  • 4:00 p.m. ET: T-Mobile (TMUS) is expected to report adjusted earnings of 50 cents per share on revenue of $19.37 billion

  • 4:00 p.m. ET: Skyworks Solutions (SWKS) is expected to report adjusted earnings of $2.14 per share on revenue of $1.10 billion 

  • 4:00 p.m. ET: Gilead Sciences (GILD) is expected to report adjusted earnings of $1.75 per share on revenue of $6.06 billion

  • 4:05 p.m. ET: Upwork (UPWK) is expected to report adjusted earnings of 1 cent per share on revenue of $120.20 million 

  • 4:10 p.m. ET: World Wrestling Entertainment (WWE) is expected to report adjusted earnings of 24 cents per share on revenue of $259.08 million 

  • 4:10 p.m. ET: Twilio (TWLO) is expected to report adjusted losses of 14 cents per share on revenue of $598.69 million 

  • 4:10 p.m. ET: Pinterest (PINS) is expected to report adjusted earnings of 13 cents per share on revenue of $562.17 million 

  • 4:10 p.m. ET: Mohawk Industries (MHK) is expected to report adjusted earnings of $3.68 per share on revenue of $2.75 billion 

  • 4:10 p.m. ET: Spirit Airlines (SAVE) is expected to report adjusted losses of 79 cents per share on revenue of $818.00 million

  • 4:20 p.m. ET: United States Steel (X) is expected to report adjusted earnings of $2.91 per share on revenue of $4.59 billion

Top News

Fed says US economy making progress as central bank ponders pullback [Yahoo Finance]

Robinhood IPO: Shares priced and set to trade Thursday [Yahoo Finance]

McDonald’s Q2 earnings, sales jump on chicken sandwiches, promotions [Yahoo Finance]

Facebook’s online ad spending, recovery drive Q2 earnings beat [Yahoo Finance]

U.S. Senate advances roughly $1 trillion bipartisan infrastructure bill [Reuters]

Yahoo Finance Highlights

Pfizer: ‘No issues’ in testing for COVID-19 kid vaccine as Delta variant rises

China’s Big Tech crackdown is about protecting the Communist Party

These were America’s biggest consumer complaints of 2020

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

The Canadian Press. All rights reserved.

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